Check against delivery

There have been a number of highlights for the ACCC since my address last year to this great workshop.

We are progressing criminal cartel matters well. We have now seen two guilty pleas in the vehicle shipping cartel cases, and a third prosecution was commenced last week.

We also have four other contested cartel prosecutions continuing. Three are before the Local or Magistrates Court in committal proceedings in the ACT, NSW and Victoria. One is before the Federal Court in Victoria.

We also have a range of significant investigations in the pipeline, some of which we believe could lead to the first case under the new section 46 before the end of the year.

I am still amazed at the broad range of cases we take on: from the current Port of Newcastle litigation to the recent Birubi outcome, in a case involving the representation of inauthentic Indigenous art.

We have also not shied away from the more complex cases with less clear-cut outcomes. We have appealed from the first instance judgments in our Kimberly Clark ’flushable’ wipes case, and in our case against Woolworths’ claims regarding the compostability and biodegradability of disposable picnic products.

These are matters of significance to a large number of consumers and present important environmental issues. They also serve the purpose of seeking to clarify important aspects of the Australian Consumer Law (ACL), including in the case of the Woolworths’ appeal, the issue of what constitutes a representation as to a future matter.

Increasingly we are challenged by international businesses that dispute our capacity to hold them to account under Australian law for harm they are doing to Australians. Often they have no physical presence in Australia, nevertheless their businesses take large amounts of Australian consumers’ money offshore.

Entities that carry on business in Australia, and affect Australian consumers, are subject to the Competition and Consumer Act 2010 (CCA), including the ACL. So we have been active in pursuing remedies against these businesses within our jurisdiction.

A case in point is the case we brought against Viagogo, an online ticket reselling platform based in Switzerland that facilitates the resale of tickets for Australian events.

Viagogo initially argued that it did not carry on business in Australia and that, being based in Switzerland, it was only subject to Swiss consumer laws and the oversight of Swiss government agencies.

We effected service of the originating court documents in Switzerland in accordance with the Federal Court Rules and the Hague Convention, as Viagogo would not accept service, and didn’t have a corporate presence or lawyers in Australia.

Ultimately, Viagogo abandoned its argument of ‘not carrying on business in Australia’ at trial. The Federal Court found that Viagogo made a number of false or misleading representations when reselling entertainment, music and live sport event tickets. The matter is still to be set down for a hearing on penalty and other relief.

We also commenced proceedings earlier this year against Sony Europe, alleging false and misleading representations about consumer rights regarding faulty video games. This matter is still before the court.

To repeat: if you do business in Australia you must comply with Australian law, wherever you are based. We are prepared to take action in these matters, although we acknowledge that in some cases this may present evidence gathering challenges. 

To help us in that challenge, we have been very active in strengthening cooperation both within the International Competition Network (ICN), the OECD and within the International Consumer Protection and Enforcement Network (ICPEN) to build multi-lateral cooperation and mutual assistance between agencies.

The ACCC also continues to consider multi-sided platforms that we believe seek to take advantage of information asymmetries.

This year we instituted proceedings against an online travel aggregator website, Trivago, alleging it engaged in misleading conduct and made misleading representations.

We allege Trivago presented its website as an impartial and objective price comparison service that would help consumers identify the cheapest prices for hotel rooms, when in fact Trivago’s website prioritised advertisers who were willing to pay it the highest cost per click fee. We allege genuine consumer choice was distorted as a result. This matter is still before the court.

While I think the ACCC does as much, or perhaps more, enforcement than our limited resources allow, the common refrain from consumers and small business is for more enforcement.

Indeed, deciding which cases to take, and which we do not have the resources to take, are the most difficult choices we at the ACCC face.

I often hear debates about under versus over enforcement. I remain convinced our economy would benefit from more enforcement.

As I never tire of saying, our market economy delivers great outcomes, but only if the CCA is well enforced.

Further, there is increasing discourse about the damage caused by companies engaging in conduct that harms consumers, and the drag on productivity from companies actively seeking to increase economic rents, in particular.

Economic rents, of course, are profits that are much larger than a competitive economy will deliver.

There are growing concerns, for example, about behaviours designed to secure or protect market power through erecting barriers to competition, rather than the pursuit of profits through developing better products.

With these thoughts very much in mind, today I will discuss the following.

  • the importance of market studies
  • achieving penalties that will deliver effective deterrence
  • reassessing our merger regime, and
  • unconscionable versus unfair conduct.

1. The importance of market inquiries and studies

It is important the ACCC continues to improve its understanding of industry practices. To stay informed, we regularly undertake in-depth market, sector or industry reviews.

Before talking about market studies in detail, however, I want to make one point very clearly.

The ACCC must be, is, and always will be, at its heart, an enforcement agency.

This focus on enforcement drives our market studies, in two ways in particular.

First, trying to promote competition and consumer outcomes is what we are about in our enforcement work. Market studies also have this focus, but in an ex ante way.

Second, our approach to market studies is one of investigation. This drives the effectiveness of our market studies, and drives the power of any findings and recommendations.

These studies are vital tools that enhance our effectiveness through close examination of a market and are able to uncover market failures with both a competition and consumer lens.

I think this is no better illustrated then in our recent Digital Platform Inquiry. Our market study provided us with the very broad focus this sector needed, and the factual foundation for our recommendations. I am looking forward to tomorrow’s panel session on this topic.

The powers that the ACCC uses to conduct market studies were inherited from the Prices Surveillance Authority and were designed for price monitoring. These include the ability, when an inquiry has been directed by the Treasurer, to examine people and require production of information and evidence from parties supplying the relevant goods or services in a market study.

However we do not have the ability to compulsorily require such information to be produced by:

  • parties who acquire those goods or services
  • parties who supply or acquire related goods or services, or
  • third parties who may hold information highly relevant to the issues under consideration in the market study.

Whether it be to uncover important market failures, or provide evidence-based advice to the Federal Government for possible competition policy and legislative change, it is important to conduct these studies as effectively and efficiently as possible, and not be constrained by artificial historical limitations.

Consistent with some of the discussion at last year’s Law Council event, we believe it is time to develop market studies powers specifically designed for the job, and that includes the investigative tools used by the most sophisticated competition agencies globally.

2. Achieving penalties that will deliver effective deterrence

The ACCC’s desire for more significant penalties as an active deterrent for both companies and individuals, has been a long standing one.

In 2018 the OECD conducted some comparative research on penalties imposed in competition law cases in Australia. That research found that Australian penalties were considerably lower than would be expected in other comparable jurisdictions for similar conduct.

That is starting to change.

Since the OECD research was published, the ACCC has continued its push for more sizable penalties for substantial businesses in competition cases.

We think we are starting to have some momentum now.

In some important cases the courts have imposed substantial penalties. For example, in the Yazaki case, the total penalty imposed was increased to $46 million on appeal to the Full Federal Court.

Another example is the penalty imposed in relation to the last two airlines involved in the Air Cargo cartel proceedings. A penalty of $19 million was ordered against Garuda and $15 million for Air NZ, although the quantum of the Garuda penalty has been appealed.

Finally, the Federal Court, in imposing criminal fines in the aforementioned two shipping cartel prosecutions has ordered fines of $25 million for NYK and $34.5 million for K-line.

The NYK fine incorporated a significant discount for their plea and cooperation. Justice Wigney who ordered the conviction stated that 'but for the early plea and past and future cooperation, the fine would have been $50 million'.

Justice Wigney also said in his judgment that the 'cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment' because 'it is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australian, that anti-competitive conduct will not be tolerated and will be dealt with harshly'.

These sentencing remarks from Justice Wigney, and the fines imposed, are important because they take account of the need to adequately deter cartels while also having regard to the varying levels of cooperation and a plea of guilty. Each party faced maximum fines of around $100 million.

The K-Line and NYK prosecutions followed investigations in which the ACCC worked very closely with other agencies including the US Department of Justice, the Canadian Competition Bureau and the Japan Fair Trade Commission.

An aspect of Justice Wigney’s sentencing remarks that will be very relevant as the ACCC continues to work closely with overseas agencies was his consideration of the fines and penalties imposed on NYK and K-line in other jurisdictions.

In brief, he had regard to what had been done in the other jurisdictions but, in the circumstances of each case, he decided not to reduce the fine he imposed to any significant degree.

A further example of progress on increasing penalties, this time in a consumer case, is the record penalties totalling $18 million ordered in November 2018 against We Buy Houses Pty Ltd and its sole director, Rick Otton, for making false or misleading representations about how people could create wealth through buying and selling real estate.

Penalties of $12 million were imposed against We Buy Houses, and $6 million against Mr Otton personally, which are the highest ever imposed for contraventions of the ACL, by a corporation and an individual respectively.

The decision in the Birubi case to order a penalty of $2.9 million against a company in liquidation further signals the Court’s willingness to impose significant penalties to send a message to the market that certain practices won’t be tolerated.

And these consumer law penalties were ordered are under the old penalty regime.

In August 2018, maximum penalties for breaches of the ACL increased from $1.1 million for companies to the greater of $10 million, three times the value of the benefit received; or, where the benefit cannot be calculated, 10 per cent of turnover in the preceding 12 months.

Penalties against individuals for ACL breaches also increased from $220,000 to $500,000 per breach.

I have been involved in many internal discussions about what penalty the ACCC should seek in cases. It has become clear to me that arriving at the right penalty through ‘intuitive’ or ‘instinctive synthesis’ is more an art than science; ultimately it is a matter of judgement to determine what will achieve specific and general deterrence.

As an economist I have found the process a little baffling, though I suspect most of you also often find penalty determinations mysterious.

The OECD research highlighted that in most comparable jurisdictions there are guidelines assisting the relevant authorities to come up with appropriate penalties in prosecutorial systems, and determine penalties in administrative decision making systems.

We have decided to issue some guidelines to assist in our internal deliberations on what level of penalties we should seek in civil cases.

These guidelines will assist the ACCC to develop submissions on penalties in both competition and consumer cases. In criminal proceedings the guidelines will help us to arrive at what we consider is the appropriate range.

The guidelines will not bind the ACCC, but our intention is to make them public so that parties and their representatives can better understand and anticipate where we might land in negotiations leading to agreed penalties.

We will also be seeking comments on our draft guidelines from the Law Council. We expect that you will find them a useful tool as well.

We hope they lead to a clearer articulation of the case for higher penalties to deter larger businesses from taking the risk of breaching the CCA. At the same time, we will continue to seek penalties against small businesses that are appropriately proportionate to achieve deterrence.

3. Reassessing our merger regime

With progress continues on increasing penalties, our focus is also turning to whether the current merger regime is fit for purpose either in law, or, in practice.

Two years ago I spoke to this conference about the increasing focus on evidence in merger cases. I started with the premise that as Australian markets are becoming increasingly concentrated, there is growing community expectation that the ACCC should oppose more acquisitions as the consequences of market power from increased concentration are exposed.

I don’t think you need to look beyond electricity generation markets to see the impact of increased concentration, including the impact of the acquisition we attempted to block.

At that time I noted challenges the ACCC had faced in opposing mergers and the critique often made that the ACCC needed to improve the evidence it presents in these matters. I foreshadowed that we would be stepping up our use of compulsory information gathering powers ultimately to aid in presentation of evidence to the court.

We have done this, I must say with criticism at times from advisers, and this has placed us in a much better position to oppose mergers we consider will lessen competition to the detriment of consumers and the economy.

However, our informal merger review process also relies on full and frank voluntary disclosure by the merger parties. We are finding that, on occasions, the submissions we receive from merger parties and their lawyers underplay the degree of overlap and market dynamics, in some cases to the extent of being potentially misleading.

This is in no one’s interest. It exposes the merger parties and their lawyers, leads to delays and undermines the informal process. We will continue to remind parties of their obligations when we identify these issues.

But it is becoming increasingly clear that addressing these issues will not be enough to correct the setting in the merger regime law.

Surely there is a problem when no contested merger hearing in the last 20 years has resulted in the Court or Tribunal blocking the merger?

Our recent experience in the Pacific National/Aurizon rail case is a good example. The Court permitted the acquisition by Pacific National of the Acacia Ridge Terminal in Brisbane, relying on behavioural undertakings, but indicated that if it had not been for the undertakings it would found a breach of section 50. I won’t say more about this matter that is now subject to appeal, but we think it clearly points to a deeper problem with the current merger regime, either in law or in its application.

This is not a new whim or knee-jerk reaction, by the way.

In my speech to this group two years ago I noted the differences with regimes outside Australia. I noted our impression that US courts usually placed little weight on the testimony of merger party executives unless supported by documents pre-dating the proposed merger.

Their reliance on the rebuttable presumption has courts starting with the basic premise that increased concentration will cause a lessening of competition. With all due respect, we don’t feel this starting point exists in the Australian regime.

I therefore welcome the discussion tomorrow about whether the merger regime in Australia remains fit for purpose.

We don’t have a complete view of what change needs to look like but we are firming in our view that change is needed.

I won’t steal any more of Stephen Ridgeway’s thunder and am sure many of you will assist the debate over the course of the conference and beyond.

But I have one final merger regime comment. There has been much discussion about our decision not to approve the TPG/Vodafone merger. Mobile communication, of course, is already, and will increasingly be, one of the most important sectors of our economy.

I will say no more as it is before the Court but I cannot resist mentioning a news headline from when the ACCC decided not to oppose the merger between TPG and iiNet; 'The ACCC has killed off Australia’s broadband competition', it read.

4. Unconscionable versus unfair conduct

One of the key purposes of the Competition and Consumer Act is to ‘promote fair trading’.  It does this through various provisions of the Australian Consumer law including the specific sections that address unfair contract terms (UCT) in business-to- consumer and business-to-business standard form contracts. 

The reforms to the ACL dealing with unfair contract terms have proved to be a significant improvement in the law. 

However, we continue to argue for reform to prohibit unfair contract terms and introduce penalties for breaches of such a prohibition. It is not sufficient that such terms are merely voidable by court order.

The UCT provisions are supplemented by prohibitions in the ACL against unconscionable conduct, and of course provisions addressing misleading conduct and misrepresentations.

Even with this suite of laws, the ACCC is concerned that gaps remain in the Australian Consumer Law which mean that the law does not adequately deal with many problems caused by a growing number of unfair commercial practices.

We saw this vividly in the Digital Platform Inquiry where we identified a number of examples of conduct which we considered to be detrimental to consumers and might not be effectively addressed or neatly fit under existing provisions.

In the context of digital platforms, like Google and Facebook, this arises very often with disparate bargaining positions involving fast moving technology and data, all very much in the control of the provider. The services provided are increasingly comprising an important, or even must-have, parts of daily life for many consumers. In combination, and absent further protections, we are concerned these combine to be a recipe for unfair behaviour to the detriment to consumers.

The types of conduct we saw included:

  • changes to terms without reasonable notice, including in subscription arrangements that automatically renew
  • business practices dissuading consumers from exercising their rights or requiring the provision of unnecessary information, or
  • obtaining consent to a wide variety of practices through very long contracts that most of us will never read.

More recently, we have been considering the role of providers to protect users from scams using their platforms, and whether failure to take sufficient steps to mitigate might be best dealt with through a provision on fairness.

We have ultimately recommended that reforms be progressed to introduce a prohibition on unfair practices, noting the current work on the issue as part of the Consumer Affairs Australia and New Zealand (CAANZ) process.

The President of the Victorian Court of Appeal, Justice Chris Maxwell, recently gave a fascinating speech on the role of judges in dealing with unfairness and unconscionable conduct in commercial cases.

Justice Maxwell recognised that a determination about whether business conduct is unconscionable or unfair has a moral dimension. He then asked whether it is appropriate for a judge to be the moral arbiter of business dealings and whether judges have the requisite skills to be a ‘moral reasoner’.

For reasons that are well worth detailed consideration, he concluded that it was appropriate and that judges generally have the required skills, which they acquire in a range of work, including sentencing criminal cases.

Justice Maxwell quoted Edelman J from the recent ASIC v Kobelt decision by the High Court. In that case, Justice Edelman observed ‘in the last two decades Parliament has repeatedly amended the statutory proscription against unconscionable conduct in continued efforts to require courts to take a less restrictive approach’.

Justice Maxwell then asked,

Now, if that is right, why are courts taking a restrictive approach? Are we not understanding, recognising, and enforcing the moral aspirations of this law? Are we not recognising that Parliament wants these provisions to apply with real force? Are the courts still being too restrictive? Or is the problem with the standard?

I respectfully echo all these questions asked by his Honour.

I also strongly endorse the conclusion that Justice Maxwell reached, which was that:

Adoption of fairness as a test might not be conducive to greater certainty. But it would certainly promote better understanding by all concerned — and, it might be hoped, higher standards of conduct — if we had a prohibition on conduct which was 'in all the circumstances, unfair'.


Looking forward, the ACCC has a number of advanced, important investigations into key areas of the economy: franchising, manufacturing, retail sector, conduct impacting Indigenous consumers, digital platforms, and car retailing.

The number of active investigations currently underway signifies continuing concerns about the willingness of many major business to comply with Australia’s competition and consumer law.

That is why the ACCC will continue to be a strong enforcer of the law.

Thanks for your time this afternoon.