Australian Competition and Consumer Commission Chairman Rod Sims will provide an overview of ACCC priorities in an address to the Law Council of Australia’s AGM in Sydney on Friday evening.
In relation to infrastructure regulation, the ACCC is a multi-sector regulator working on issues relating to water, communications, wheat ports and rail infrastructure. In its regulatory work, the ACCC is concerned with facilitating enhanced competition, in upstream or downstream markets, and our regulatory objective is to work in the long term interests of consumers or end users. Mr Sims outlined the main priorities in each sector that the ACCC regulates.
Mr Sims recalled his comments from last year’s Law Council conference where he said that the ACCC would take a "proactive approach to our competition enforcement cases so that we are sure they focus on important theories of harm and produce the most beneficial outcomes for competition and consumers."
"We have been investigating a number of potential cases which involve sections 45, 46 or 47, including some allegations of a substantial lessening of competition. I am hoping that our strategic approach will increasingly give us a higher return than previously and that it will be a matter that we can discuss at next year’s workshop.”
Mr Sims observed that this strategic approach appears to be working. "In my first year at the ACCC, we instituted proceedings in one competition case (against Flight Centre); in my second year there have been five cases; there will likely be more over the coming year," he said.
Consumer protection enforcement by the ACCC has been made much more effective by the introduction of the Australian Consumer Law and sanctions such as $1.1 million civil pecuniary penalties and banning orders, as well as the flexibility of infringement notices. In the past two years, the courts have ordered pecuniary penalties in 33 cases with penalties totaling almost $22 million. To date, more than 100 infringement notices have been issued, some comprising multiple notices to a single company reflecting a range of contraventions, with over $620,000 in penalties paid.
However, Mr Sims warned: “The ACCC sometimes finds that when companies realise we are serious about following through with litigation they offer to change their behaviour and introduce or enhance a compliance program, as long as we do not litigate. This often applies, for example, in consumer issues. However there is a potential moral hazard if our approach was to drop the matter merely because the relevant behaviour ceases.”
“Companies could get the message that they can push and even cross the boundaries with impunity knowing all they need do is cease the alleged offending behaviour and promise to behave better in future when we knock on their door. They gain benefit from the offending behaviour; the ACCC, in effect, becomes their internal compliance department,” Mr Sims said.
“There are numerous times when we judge it appropriate to cease our investigation when the offending behaviour ceases. However, it is a mistake for companies to expect this. Where, for example, we see the behaviour as calculated, or where it includes conduct that has previously been the subject of warnings, litigation will often follow.”
Referring to the ACCC’s experience in reviewing mergers, Mr Sims commented that merger parties sometimes argue that the ACCC is required to establish that specific outcomes would occur before it can conclude that a merger was likely to result in a substantial lessening of competition.
Mr Sims said: “Our main focus [in merger reviews] will be on a real world understanding of market structure and import competition, entry barriers, countervailing power and the overall competition process. We will focus on commercial incentives and what drives companies operating in the real world, rather than on complex theories and detailed modelling where the results are driven from some clear and some not so clear assumptions. The latter can be useful tools, but they will usually not determine the competition assessment.”
Product safety issues that have the potential to cause serious harm to consumers remain a priority for the ACCC. The product safety regime covers many everyday items from babies’ dummies and bicycles through to the labelling on cosmetics and trolley jacks. The ACCC has received and assessed in excess of 3000 reports related to the safety of unregulated consumer products in the past year.
The ACCC also continues to participate in regional workshops to increase the capacity of consumer and competition regulation in the region, including running some of the first ASEAN workshops on consumer protection with our Korean and US counterparts.
“The ACCC has recently been welcomed into regional forums for planning the development of effective regional competition regulation and cooperation. The ACCC will continue our efforts to maximise our engagement with the Asian region,” Mr Sims said.
The Chairman's speech is available at http://www.accc.gov.au/media/speeches.