The 2009–10 financial year marked important milestones for the Australian Consumer and Competition Commission (ACCC) and Australian Energy Regulator (AER), with the enactment of significant legislation in both competition and consumer law, and the expansion of the AER's roles in electricity and gas distribution and regulation and gas market monitoring and enforcement.
With the passage of the Australian Consumer Law (ACL), consumers will have the same protections and expectations of business conduct wherever they are in Australia. Similarly, businesses will have the same rights and responsibilities wherever they operate.
Criminalisation of cartel conduct became law on 24 July 2009. This means that all subsequent cartel conduct will in the first instance be investigated on the basis of criminal prosecution, which brings Australia into line with the toughest approaches in the world. Domestically, it means that serious cartel conduct may attract harsh penalties, including imprisonment.
Together these legislative amendments amount to the most significant changes to competition and consumer law since the enactment of the Trade Practices Act 1974.
The ACL provides the ACCC with a suite of new enforcement tools and remedies that provide a modern, flexible and genuinely national regulatory system. The main changes include:
With the stronger cartel laws now in place, the ACCC is taking a tougher approach on penalties and making full use of the civil and criminal regimes available under the Trade Practices Act. Australian companies need to think seriously about the risks of engaging in anti-competitive conduct—not only might they lose their executives involved in cartel conduct to jail for a number of years, but they might also have to pay up to three times the benefit gained from any anti-competitive conduct.
Changes to the Franchising Code of Conduct which come into effect from July 2010 mean that prospective franchisees will have relevant information to help them make informed decisions before entering into an agreement. The dispute resolution procedures under the code have also been strengthened, and franchisors are required to make clear what obligations the franchisee has in terms of future capital expenditure and whether there are any requirements to pay a franchisor's legal costs. The ACCC has funded a free online education program administered by Griffith University which aims to help prospective franchisees make an informed decision about buying a franchise.
The government has recognised the need for a streamlined access regime to provide timely access to regulated services. An effective regulatory regime promotes competition and investment by offering industry participants certainty and timely, efficient access to services.
Regulated access has been integral to the development of competition in the telecommunications sector. The government has announced that the ACCC has a substantial regulatory role in the transition to the National Broadband Network (NBN). Changes to the existing regime are currently before parliament. The ACCC recognises the need to be a responsive regulator in a changing environment.
The AER is now responsible for the economic regulation of all network businesses within the national gas and electricity markets. There is also now a single market operator (the Australian Energy Market Operator) across gas and electricity. While the transition to national energy market regulation has taken some time, the benefits of coherence are starting to be apparent. There is ample evidence that the new regulatory framework has been delivering the substantial investment programs that are needed in some networks.
The Water Charge (Termination Fees) Rules 2009 and Water Market Rules 2009 for the Murray‑Darling Basin took effect from June 2009. Their application has resulted in changes to the business practices of irrigation infrastructure operators. These changes are designed to facilitate the efficient functioning of water markets and promote the economically efficient use of water resources and infrastructure assets. The ACCC has been actively involved in the implementation of these rules with a range of stakeholders. In general, market participants have adjusted well. The ACCC is in the process of establishing its monitoring framework, which will provide data on compliance with both sets of rules.
In 2009–10 the ACCC took on additional responsibilities as a result of legislative changes or references from parliament, and continued to achieve successful outcomes for Australia's 22 million consumers.
The principles of confidentiality, timeliness, consistency, fairness and transparency are deeply embedded in the ACCC's culture.
On 22 May 2010 the term of the AER's inaugural chairman and board member, Mr Steve Edwell, concluded. The AER and ACCC acknowledge the significant contribution and leadership provided by Mr Edwell, and are grateful for the solid foundation he built over five years. Mr Andrew Reeves was appointed AER chairman on 19 July 2010 for a three‑year period.
In August 2009 Dr Jill Walker began a five-year appointment as a commissioner of the ACCC. Dr Walker is the chair of the ACCC's Mergers Review Committee and a member of the Enforcement Committee and the Adjudication Committee. She brings to the ACCC a wealth of experience in the fields of trade practices and antitrust economics.
The ACCC has increased its engagement with international competition and consumer protection agencies. As the world's economies continue to interact in ever more complex ways, the need for international cooperation escalates. In 2009–10 the ACCC held the chair of the International Consumer Protection Enforcement Network and staged two global conferences of regulators and other agencies addressing cross-border issues relevant to many millions of consumers around the world.
The ACCC also continued to participate actively in the International Competition Network, looking at the development and enhancement of coherent approaches to competition law around the world—particularly in the areas of cartels and mergers.
The dividends from this level of cooperation are already clear. A number of cases run in Australian courts in 2009–10 were strengthened as a result of international cooperation. One of these involved an international cartel between four multinationals for the supply of marine hose—piping used in oil and gas operations. Penalties in Australia in this case totalled over $8 million, which contributed to a total penalty figure for cartels in 2009–10 of over $10 million.
In 2009–10 the ACCC was very active in directly addressing consumer and business needs through:
The product safety role of the ACCC is now one of national leadership and coordination, with the completion of the Council of Australian Governments (COAG) reform project to establish a consistent national approach to product safety. This process included rationalising 177 different product standards and bans into a set of 57 regulations, significantly simplifying the product safety system nationally.
The ACCC is always sensitive to the implications of its processes and determinations, and adapts its approach to strike a good balance between the imperatives of business, the welfare of consumers (the agency's fundamental mandate) and rigorous enforcement of the law as entrusted to it by parliament.
The ACCC continues to take a strategic approach to enforcement of the Trade Practices Act, focusing on activities which will deliver the widest possible benefit to Australian consumers, and which address particularly egregious breaches.
In addition to the case load, in 2009–10 the ACCC took a sectoral approach and secured important court enforceable undertakings in two areas of national consumer significance:
The ACCC's activities to disrupt and prosecute the proponents of scams increased in 2009–10, and its leadership of the Australasian Consumer Fraud Taskforce brought law enforcement and consumer agencies together in more coordinated efforts. Scams continue to proliferate, however, especially through online channels. The ACCC provides a constant flow of information on scams to make Australians aware of emerging tactics both in Australia and overseas. The ACCC has developed and maintains the SCAMwatch website, which has over 36 000 'hits' a month.
The ACCC conducted communication campaigns through the media and industry bodies on new laws requiring retailers and suppliers to provide better consumer information to improve comparison and decision making.
Under the mandatory unit pricing code, supermarkets and grocers are required to show prices by unit, allowing consumers to more easily compare prices.
Under the new component pricing laws, companies selling goods and services must now prominently display one total price. The ACCC used its new powers under the ACL for the first time issuing infringement notices to a number of cafés which had failed to comply with the code.
In 2009–10 the ACCC took a number of successful actions against businesses dealing unconscionably with other businesses or with consumers. These cases are important in combating particularly oppressive business practices which go beyond the bounds of robust competition.
In 2009–10 the ACCC considered a number of particularly complex mergers with national and international relevance. These included:
Through its authorisation role, the ACCC ensures that competition law does not prevent businesses from entering into cooperative arrangements that are in the public interest. This is an extremely diverse area of the ACCC's work, with decisions relating to liquor accords, aviation alliances, collective bargaining by primary producers and payment systems, to name a few.
In 2009–10 the ACCC played a central part in efforts to reduce bottlenecks in Australia's infrastructure and logistics by authorising a number of arrangements for improving ship queue management and access to port terminals.
The economic regulation of gas and electricity transmission and distribution networks is a key function of the AER, which made numerous determinations in 2009–10, including:
The AER actively monitored and enforced market rules—which are essential for the efficient and secure operation of the markets—and investigated alleged non-compliance with the rules by gas and electricity market participants. This included targeted reviews of the rules and reviews of energy market participants' compliance systems. The outcomes of these investigations and other enforcement activities were published in detailed reports.
In July 2009, the AER instituted Federal Court proceedings against Stanwell Corporation Limited for alleged contraventions of the National Electricity Rules. The AER has alleged that Stanwell did not make several of its offers to generate electricity on 22 and 23 February 2008 'in good faith', contrary to clause 3.8.22A of the National Electricity Rules. Federal Court proceedings ended in July 2010 and parties are awaiting the judgment.
To promote greater understanding of energy market operations, the AER continued publishing weekly electricity and gas market analysis reports, and published the State of the energy market report 2009.
Throughout the year the AER continued to work with the Ministerial Council on Energy and the other energy market institutions, the Australian Energy Market Commission (AEMC) and the AEMO, to help achieve energy market objectives. It provided submissions, information and advice on market conditions and the operation of the regulatory frameworks.
The AER also worked closely with gas market stakeholders in preparation for new roles (scheduled to commence later in 2010) in monitoring the gas short-term trading markets. In preparation for taking on new roles in retail market regulation, it established the AER Consumer Consultative Committee and began preliminary consultation on the guidelines that will be required under the proposed National Energy Retail Law.
The AER's review of the rates of return that should apply to energy network businesses has delivered assurance for the sector in a time of global financial uncertainty. The regulatory process has approved substantial investment in the electricity networks, and the onus is now on the networks to deliver. Every dollar of capital and operating expenditure is paid for by energy customers, and it is part of the regulator's role to ensure they receive value for money.
The second formal monitoring report on prices, costs and profits in the petrol industry was submitted to the government in December 2009. The report concluded that the most important influences on domestic retail prices were movements in the international price of refined petroleum and the exchange rate of the Australian dollar against the US dollar. In terms of profitability in the downstream sector, the ACCC estimated that net profit on petrol averaged 3.1 cents per litre in the seven years to 2008–09. In May 2010 the government directed the ACCC to undertake formal monitoring for a further 12 months, to 2010–11.