Federal Court affirms invalidity of Competition Notice

The Australian Competition and Consumer Commission is disappointed by final orders handed down today by the Federal Court which affirmed that the ACCC was not entitled to issue the Part A Competition Notice in December 2005.

The Competition Notice alleged that Telstra had acted anti-competitively by raising the wholesale price of its Home Access line rental service.

On 5 April 2007, Justice Bennett found that the Competition Notice differed from the Consultation Notice in respect of two matters held to be of substance. She found that, as Telstra was not given details of those matters when the ACCC consulted with it, Telstra was not afforded procedural fairness.

The ACCC sought to uphold the majority of the Competition Notice to preserve the ability of affected third parties to seek damages against Telstra based on those parts in the period before the ACCC implemented a solution through direct regulation. The ACCC's competition concerns relating to pricing of wholesale line rental were effectively addressed by the ACCC with direct regulation of the service under Part XIC of the Act in July 2006.

In making final orders today, the court found that severance was not appropriate and therefore quashed the Competition Notice.

"While the ACCC of course accepts the findings of the Federal Court, the decision does highlight substantial procedural difficulties for the ACCC in the competition notice regime and in quickly addressing competition concerns in the telecommunications industry," ACCC Chairman, Mr Graeme Samuel, said.

The ACCC is concerned that the decision may encourage the recipient of a notice to challenge procedural aspects instead of addressing the substantive underlying conduct.

Background

Section 151AK, contained in Part XIB of the Trade Practices Act 1974, specifies that a carrier or carriage service provider must not engage in anti-competitive conduct – this is known as the competition rule. Anti-competitive conduct includes taking advantage of a substantial degree of power in a telecommunications market with the effect or likely effect of substantially lessening competition.

Section 151AKA(8) specifies that the ACCC may issue a Part A Competition Notice if the ACCC has reason to believe that the carrier or carriage service provider concerned has engaged, or is engaging, in at least one instance of anti-competitive conduct of that kind.

In December 2005, Telstra raised the price of its Home Access product, which is an input used by Telstra's wholesale customers to provide line rental and local call services to consumers. The price increase resulted in Telstra's retail prices for the line rental component for the majority of its fixed voice products being below Telstra's wholesale price for line rental. The Competition Notice alleged that this action had the effect or likely effect of substantially lessening competition in one or more telecommunications markets.

On 12 April 2006, the ACCC issued a Part A Competition Notice to Telstra in relation to its decision to raise its wholesale price for Home Access. The Notice came into force on 13 April 2006 and was to remain in effect until 12 April 2007. On 5 April 2007, the Federal Court found that the ACCC had not accorded procedural fairness in the issuing of this Competition Notice.