ACCC & AER annual report 2016-17

Other work promoting competition

We use our expertise to advise on and advocate for competition in Australia, working with government and other organisations and agencies on legislative or policy reforms affecting competition law.

Internationally we work with counterpart agencies, collaborating, sharing information and working to improve competition and consumer protection practices. We also advise on competition regimes, particularly in the Asia-Pacific region.

Key matters where we sought to promote competition or worked to improve the competitive environment, either domestically or internationally, include the following.

Agriculture sector engagement and enforcement

Addressing competition and consumer issues in the agriculture sector was one of our 2016–17 priorities.

The ACCC’s Agriculture Unit undertook a range of activities to increase our engagement and enforcement activities in the agriculture sector. This included:

  • conducting a market study of Australia’s cattle and beef industry. Our final report on the market study (see page 60), released on 7 March 2017, included recommendations for improvements to cattle market reporting, the transparency and independence of carcass grading, competition among buyers of cattle, and measures aimed at reducing the potential for anti-competitive conduct in the industry
  • releasing a report, Perspectives in horticulture and viticulture: industry views on competition and fair trading issues. This report outlines competition and fair trading issues raised in a series of regional workshops run by the ACCC throughout Australia in 2016
  • commencing a 12-month inquiry into the competitiveness of prices, trading practices and the supply chain in the Australian dairy industry. The inquiry involves extensive public consultation with farmers and businesses at all levels of the dairy supply chain. It is conducted under Part VIIA of the Act, which means the ACCC has power to compel the production of relevant information and documents. We are required to report the inquiry findings to the Treasurer by 1 November 2017
  • assessing standard-form contracts across agricultural industries. The findings of this assessment were incorporated in the ACCC publication Unfair terms in small business contracts. The aim of this project was to educate and promote compliance with the new business-to-business unfair contract terms law, which commenced on 12 November 2016
  • engaging with peak organisations to help educate growers and traders of horticultural produce about their rights and obligations under the revised Horticulture Code of Conduct, which came into effect on 1 April 2017
  • engaging with farmers and others from the agriculture sector on their properties and at saleyards, wholesale markets, field days and other events across Australia
  • conducting meetings of the ACCC Agriculture Consultative Committee
  • investigating possible contraventions of the Act in various agriculture markets, including working with ACCC enforcement and merger teams on their investigations. This included matters in the dairy, horticulture, and cattle and beef industries. For details, refer to the outline on page 127 of the dairy industry case involving Murray Goulburn Cooperative Co. Limited.

Harper review

The Competition Policy Review (Harper review), which delivered its final report in 2015, was the first major review of competition policy in Australia for 20 years. In 2016–17 we continued to engage with stakeholders as we supported and prepared for the implementation of legislative changes arising from the Harper recommendations. For details, refer to page 112.

Residential mortgage products price inquiry

On 9 May 2017 the Treasurer, the Hon Scott Morrison MP, directed the ACCC to conduct an inquiry into residential mortgage products. As part of this inquiry, the ACCC can compel the banks affected by the major bank levy to explain any changes or proposed changes to fees, charges or interest rates in relation to residential mortgage products. The inquiry relates to prices charged until 30 June 2018. This inquiry will be the first task of the ACCC’s new Financial Sector Competition Unit, which has funding of $13.2 million over four years from 2017–18 and an additional $1.2 million in 2017–18 for this inquiry.

A report will be delivered to the Treasurer at the conclusion of the inquiry.

Financial sector

In addition to its inquiry into residential mortgage products, the ACCC is engaging with the Productivity Commission over the next year to look into competition issues in the financial sector. In 2016–17 we established a Financial Sector Competition Unit to undertake this task and conduct the required market studies.

This inquiry, along with other market studies—such as those of agriculture and new car retailing—continues the important role the ACCC plays in improving the transparency of Australia’s markets.

Dairy inquiry

The ACCC is conducting an inquiry into the competitiveness, trading practices, and transparency of the Australian dairy industry. On 27 October 2016, the Treasurer, the Hon Scott Morrison MP, issued a notice requiring the ACCC to hold an inquiry into the competitiveness of prices, trading practices and the supply chain in the Australian dairy industry. Public forums took place in February and March 2017 in a variety of locations. Summaries of issues raised at those in Bunbury, Hahndorf and Burnie were published in April 2017. The ACCC must submit its report following the inquiry to the Treasurer before 1 November 2017.

Cattle and beef market study

On 7 March 2017, the ACCC released the final report of its cattle and beef market study.

This study, which began on 5 April 2016, examined the dynamics of the cattle and beef industry in a context broader than the specific provisions of the Act, including competition and transparency issues, and impediments to efficiency at various stages of the supply chain.

It was a self-initiated study, which meant that the ACCC did not have powers to compel provision of information and documents; instead we relied on the voluntary provision of information by market participants and interested parties.

The report detailed issues that need to be addressed to improve competition along the domestic supply chain, including:

  • lack of transparency and competitiveness in price reporting
  • lack of trust in the cattle carcass grading system
  • concerns about anti-competitive conduct in cattle sales.

The ACCC made 15 key findings and recommendations about improving transparency, competition and efficiency in the industry. For example, we recommended:

  • that cattle processors publish prices offered for cattle, to reduce information asymmetry and increase producers’ ability to compare offers
  • that historical price data be made more accessible so that producers can make better informed decisions
  • that the industry prioritise the introduction of objective carcass-grading technology, increase random auditing of grading results, provide more education about the grading process and develop an independent dispute resolution system
  • more detailed reporting of purchases at saleyards and the introduction of a register that will disclose bidders’ interests before auction, to increase transparency, reduce conflicts of interest and discourage anti-competitive behaviour.

The report advocated that industry take responsibility for implementing these changes, overseen by the Red Meat Advisory Council, and report progress annually to state, territory and federal agriculture ministers.

We are monitoring the progress of the industry in implementing the recommendations in the final report. We understand that some progress has already been made. In particular:

  • Meat and Livestock Australia has updated its website to make it easier to compare historical prices of cattle
  • AUS-MEAT, the industry body responsible for accrediting Australian abattoirs and overseeing meat standards, has provided workshops and training material to help producers understand the factors that directly influence the price paid for cattle in direct-to-abattoir sales
  • Meat and Livestock Australia has announced that it will invest up to $10 million to co-fund the installation of DEXA objective measurement systems in red meat processing plants, in response to requests to accelerate the adoption of the technology.1

We will continue to work with the Red Meat Advisory Council, seeking regular updates on the progress of all of the recommendations.

New car retailing industry

Market study

Each year we conduct a strategic review to determine the focus of our compliance and enforcement activities for the upcoming year. In the 2016 strategic review we determined that new car retailing, including responses by retailers and manufacturers to consumer guarantee claims, would be a priority area for the ACCC in 2016–17. We reflected this in our 2017 Compliance and Enforcement Policy.

On 17 June 2016 we announced that we would undertake a market study into the new car retailing industry. In 2016–17 this study examined whether industry practices are consistent with what we would expect from a competitive market. In particular, it looked at practices relating to:

  • consumer guarantees, warranties and new cars
  • fuel consumption, carbon dioxide (CO2) and noxious emissions, and car performance
  • access to repair and service information and data.

The study explores the broad structure and operation of the new car retailing industry, assessing whether market characteristics—including new car buyer behaviours and expectations—are conducive to competition. It is informed by a range of enforcement, education and research projects focusing on key competition and consumer issues that may be present or emerging in the industry.

On 17 October 2016 the ACCC published its new car retailing industry market study issues paper and invited submissions from the public. Submissions, including consumer and small business responses to a streamlined questionnaire, were published on the ACCC’s website in December 2016 (www.accc.gov.au/newcars).

On 13 December 2016 the ACCC hosted a new car retailing stakeholder forum in Melbourne. The forum was attended by representatives from industry (including manufacturers, dealers, repairers and parts retailers), consumer groups and relevant government departments and agencies.

To inform the study, we have continued to engage with key stakeholders to collect and discuss relevant matters, including attending workshop site visits.

The draft and final reports are due to be released in the second half of 2017. A roundtable will be held with key stakeholders following the release of the draft report.

Action on consumer issues

We instituted proceedings against Audi Aktiengesellschaft, Audi Australia Pty Ltd and Volkswagen Aktiengesellschaft in respect of allegations of misleading representations in relation to diesel vehicle emission claims.

For details of ACCC cases, refer to page 84.

Electricity supply and prices inquiry

In May 2017 the ACCC released an issues paper for its inquiry into retail electricity supply and prices in Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT. The paper set out the key issues that the ACCC will focus on during the inquiry. The ACCC sought submissions by the end of June from interested parties. We will hold public forums in a number of locations to speak with customers directly about their concerns and experiences. We will also engage with industry directly and use compulsory information-gathering powers as required to access information that is not publicly available.

Further information about the forums will be published on the ACCC’s website in the coming months. The issues paper and terms of reference are available on our website.2

Communications sector market study

In September 2016 the ACCC undertook a market study into the communications sector. The purpose of the market study is to ensure that the implications of developments in the communications sector are well understood, to identify issues that prevent relevant markets from delivering economically efficient and competitive outcomes in the interests of consumers, and to identify options, if required to address these issues. A draft report will be issued in October 2017 and a final report in early 2018.

New role conducting gas inquiry

On 19 April 2017, the Treasurer directed the ACCC to hold an inquiry for improving the transparency of gas supply in Australia. The ACCC is required to monitor:

  • the pricing and availability of offers to supply gas
  • the volumes of gas supplied or available for current or future supply
  • the pricing, volume and availability of gas for domestic supply compared to the pricing, volume and availability of gas for export
  • the pricing, volume and availability of other goods or services, such as goods or services for drilling for, storing or processing gas, that enable, assist or facilitate the supply of gas or gas transportation services in Australia.

The ACCC will submit interim reports no less frequently than every six months and provide information to the market as appropriate, with a final report due by 30 April 2020.

Contributions to gas market reform

At the same time, the ACCC will continue to work with Dr Michael Vertigan to refine longer term transparency measures to address the current opaqueness in the gas market and support longer term market stability in the domestic supply and consumption of gas. The scope of this work will cover the full supply chain, including producers, transporters and retailers. Aspects of this work follows from the ACCC’s inquiry into east coast gas markets, conducted in 2015–16.

In April 2017 the ACCC provided a submission to the Gas Market Reform Group strongly supporting a proposed information disclosure and commercial arbitration framework for gas pipelines. The ACCC also provided submissions to the review of the gas pipeline coverage test in October and November 2016.

Insurance in Northern Australia

In May 2017, the Australian Government directed the ACCC to hold an inquiry into the supply of residential building, contents and strata insurance products to consumers in Northern Australia. Official notice of the inquiry, including the terms of reference, was gazetted on 14 June 2017.

The ACCC’s inquiry will explore in detail consumer, regulatory and competition issues identified in previous inquiries. It will focus in particular on cost drivers of insurance premiums, and transaction costs and information issues experienced by consumers. The inquiry will also monitor the activities of the insurance industry in Northern Australia over three financial years to 30 November 2020, which will help inform its findings.

Award-winning competition advocacy

In March 2017 the ACCC received an international award from the World Bank Group (WBG) and the International Competition Network (ICN) for its role in elevating competition policy to the national economic agenda.

The ACCC won the award for its advocacy work in promoting pro-competition measures when governments are privatising public assets. We have been advocating that, when privatising infrastructure assets, governments should not restrict future competition to these assets, and that infrastructure monopolies need appropriate upfront regulation.

The ACCC was awarded the top prize in the category ‘Levelling the playing field through competitive neutrality or by elevating competition policy to the economic policy agenda’.

In giving the award to the ACCC, the ICN and WBG noted that:

even in the absence of a formal mandate, the ACCC advocated for the inclusion of pro-competition measures in the privatization of the ports of Melbourne, Darwin as well as the Utah Point Bulk Handling Facility at Port Hedland. These measures strengthen pricing regimes as well as more transparent and competitive privatization procedures. The advocacy initiative of ACCC reduces the likelihood of monopoly pricing post privatization and ensures continued access to the ports”.

The Chairman of the ACCC accepted the prize at an ICN meeting in Portugal in May 2017.

Medical and health sector

In 2016–17, after an ACCC investigation, several major IVF clinics agreed to make changes to claims published on their websites about their success rates for clinical pregnancy. The ACCC’s investigation followed a complaint from the Australian Health Practitioner Regulation Agency.

The ACCC was concerned that website content from all major Australian IVF clinics made success rate comparisons without adequate disclosure about, or qualification of, the nature of the data or graphics used to make the claim.

Also, some IVF clinics used technical terms that may be misleading to consumers without further clarification or explanation. For example, some IVF clinics used ‘clinical pregnancy rate’ data to compare their success rates where that data reflected the clinic’s success in creating an embryo rather than live births. These comparisons were sometimes accompanied by photographs of newborn babies.

The ACCC considered that this was likely to give consumers a misleading impression about the rate of live births achieved by the clinic.

As part of its investigation, the ACCC worked with the Fertility Society of Australia, the IVF industry’s peak body, to improve industry-wide awareness of, and compliance with, the Australian Consumer Law. The Fertility Society of Australia is continuing to work with industry participants to improve transparency about success rate claims and comparisons.

International collaboration on competition

The ACCC collaborates with international counterparts through forums such as the International Competition Network (refer to page 109) and the Competition Law Implementation Program in South-East Asia (refer to page 107).