In an important development in the application of the Trade Practices Act 1974 to Government-owned businesses and to exclusive distribution systems, the Australian Competition and Consumer Commission has accepted court-enforceable undertakings from Golden Casket Lottery Corporation Limited.
Following a complaint by a Brisbane suburban newsagency, the ACCC alleged that Golden Casket's decision in July 2001 to reject the newsagency's application for an on-line betting licence placed Golden Casket at risk of breaching section 46* of the Act. Golden Casket had advised the ACCC it rejected the application largely due to its concern that the establishment of a Golden Casket lottery agency in the Victoria Point Shopping Centre would 'cannibalise' the sales of an existing Golden Casket lottery agency in the area.
The ACCC expressed concern that Golden Casket has a substantial degree of power in the Queensland market for the supply of lottery operating services and used that power to protect the existing agent from competition. In particular, the ACCC was concerned that Golden Casket had not given adequate consideration to whether having two agencies in the same area would be viable and potentially more profitable for Golden Casket.
It is not a requirement for a Golden Casket agent to be a newsagent. However, the vast majority of Golden Casket agencies are newsagents including the two agencies at the centre of this matter. In December 1997, in a move towards a more competitive newsagency system, consistent with that required by the Australian Competition Tribunal, the ACCC revoked a previous authorisation that had allowed Queensland newsagencies to operate within a system of exclusive 'territories'. The ACCC also substituted a further authorisation until 1 February 2001, to allow the industry a transition period to adjust to the changes. In the present matter, the newsagency applying for the Golden Casket agency was within the area that would have been considered part of the 'zone' for the existing newsagency under the old Queensland Newsagents Federation Code of Ethics.
Golden Casket has acknowledged that the rejection of the agency application in this instance is at risk of breaching section 46 of the Act. Accordingly, Golden Casket has offered court-enforceable undertakings to address the ACCC's concerns and to ensure future applications for Golden Casket agencies will not be rejected for a substantial purpose of preventing an applicant from competing with an existing Golden Casket agency in breach of section 46, for example in circumstances where the appointment of the new agency would result in significant incremental lottery sales for Golden Casket.
As part of its court-enforceable undertaking, Golden Casket has also agreed to:
- review and, if necessary amend, its agency selection criteria to ensure they do not contain factors which, if relied upon in determining whether to accept agency applications, could place Golden Casket at risk of breaching section 46
- continue to make its selection criteria publicly available
- ensure that market analysis undertaken for the purpose of assessing the impact of the appointment of a proposed agent will be of a standard reasonably suitable for its intended purpose
- develop a public complaints-handling process
- upgrade its Trade Practices Compliance Program.
"The ACCC recognises that Golden Casket applies numerous commercial criteria when assessing applications for lottery agencies, including the impact of a new agency on the existing surrounding agents as small businesses and the operational effectiveness of its network", ACCC Chairman, Professor Allan Fels, said today.
"However, it is important that Golden Casket is aware of its obligations under the Trade Practices Act 1974 and that it applies its selection criteria in a manner which is consistent with the requirements of section 46.
"In this respect, when assessing applications for lottery agencies, Golden Casket must not place undue emphasis on the impact of a new agency on existing surrounding agents in circumstances where its network viability would be improved with the addition of new agencies. This ensures a fair go for small businesses trying to compete for the sale of lottery products and at the same time promotes better service for consumers and better access to those products.
"Golden Casket's recognition that its action in this instance placed it at risk of contravening the Act should alert other Government-owned businesses that their business activities are caught by the Act", Professor Fels said.
"The ACCC welcomes the court-enforceable undertakings provided by Golden Casket and acknowledges the high level of cooperation it has provided in resolving this matter".
*Section 46 prohibits a corporation that has a substantial degree of power in a market from taking advantage of that power for the purpose of:
- eliminating or substantially damaging a competitor of the corporation or of a body corporate that is related to the corporation in that or any other market
- preventing the entry of a person into that or any other market
- deterring or preventing a person from engaging in competitive conduct in that or any other market.