ACCC's enforcement and compliance policy update 2022-23

Speakers: 
Mr Rod Sims, Chair
Conference: 
Committee for Economic Development of Australia (CEDA)
3 March 2022

ACCC Chair Rod Sims addressed the Committee for Economic Development of Australia (CEDA) to discuss the ACCC's enforcement and compliance policies for 2022-23.

Transcript: 

Check against delivery

Thank you to CEDA for again allowing me to use this venue to announce the ACCC’s enforcement and compliance policies for 2022-23. This is the eleventh time I have done this; I deeply appreciate CEDA’s willingness to host this annual event.

In my first address to CEDA in 2012 I stressed the importance of the ACCC communicating to the Australian public about ‘the breadth and depth of issues on our plate’.

I believe that just by identifying and communicating our areas of focus we change behaviour, which is why this event is an important part of our approach to addressing competition and consumer issues.

The ACCC’s role, simply put, is to make markets work for consumers now and in the future. Not by overriding markets, but by maintaining and promoting competition and fixing market failure where we can, and by protecting the interests and safety of consumers in the support of a fair marketplace.

Like the rest of the world the focus of our work has been severely disrupted by the COVID-19 pandemic. The ACCC has had to be flexible throughout the pandemic, and we have tried to adjust the focus of our work to ensure there is no diminishing of consumer rights while maintaining competition.

Early in 2020, the ACCC received and granted, within a short period, an unprecedented number of applications for authorisations by businesses seeking exemptions to coordinate activity to meet the challenges arising from the pandemic. As these exemptions began expiring in 2021 some parties decided not to seek re-authorisation as the economy started to transition out of various lockdowns.

Although the pandemic continues to impact our economy and society, we do expect reduced need for cooperation among competitors in response to COVID-related issues. The ACCC will, however, continue to be ready to consider urgent exemption applications.

The ACCC’s enforcement and compliance priorities for 2022-23 represent an exciting and important set of issues. For the first time, we are aligning our priorities with the financial year. We will continue to announce these at the start of each calendar year and give immediate focus, placing business and stakeholders on notice of our interest, and initiate implementation. This approach will better allow a transition from priorities finishing to commencing. We have used our usual consultative process to establish them and I am delighted to announce them today. I will also touch on other issues that will be occupying the ACCC in the year ahead.

Consumer and fair trading priorities

These reflect what we are seeing now, and the issues we think will grow in importance.

Consumer and fair trading issues in relation to environmental claims and sustainability

Many consumers are increasingly considering the environmental impact of the products and services they buy. We are hearing growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on these consumer preferences.

‘Greenwashing’ is a concern for both consumers and businesses. Consumers are often unable to determine the veracity of a product’s green credentials, reducing their confidence in the market. And businesses incurring the costs of genuine environmentally friendly manufacturing processes face unfair competition from those businesses making misleading green claims without incurring the same costs.

The ACCC’s focus on environmental claims and sustainability won’t be limited to consumer goods.

We will also be looking at claims made in the manufacturing and energy sectors; we are hearing about some business seeking to gain an advantage by making misleading claims about the carbon neutrality of their production processes.

Many of these businesses operate within a range of regulatory frameworks requiring accounting of offsets, reporting and disclosure. The ACCC will be working closely with other regulators, in particular ASIC and the Clean Energy Regulator, to identify which of us is appropriate to deal with issues. Where businesses have engaged in false, misleading or deceptive conduct we will act.

Consumer and fair trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy

Well-functioning online markets are key to a modern economy. To realise the full benefit, consumers must be confident to engage with online businesses. Consumers are facing a growing number of manipulative or ‘dark pattern’ techniques to exploit or pressure them.

These techniques include false scarcity reminders such as low-stock warnings, false sales countdown timers, targeted advertising utilising consumers’ own data to exploit their individual characteristics, pre-selected add-ons and design interfaces that discourage unsubscribing.

Think for a moment also about how easy it is to subscribe to something and then how difficult it often proves to unsubscribe.

Other practices that seek to distort or disregard consumer choice in the digital economy include manipulation of online reviews and search results, and social media influencers who don’t disclose they are paid to promote the products they are pitching. All these practises direct consumers towards certain products rather than organic search results that best match their search terms.

We have been successful in proceedings against Trivago for its misleading manipulation of search results and against Google for misleading consumers about its collection of personal data. We currently have important cases against each of Google and Facebook under the ACL in court for allegedly misleading consumers as to the use of their personal data.

While we will continue to take enforcement action where we see companies engaging in these concerning practices, we are concerned that some of the manipulative techniques being used online are unlikely to be covered by existing provisions.

The ACCC considers that introducing a prohibition on unfair practices, to apply economy wide, is necessary to ensure that consumers are not harmed by such practices, and well as to address other manipulative practices across the economy.

Consumer and fair-trading issues arising from the COVID-19 pandemic

COVID-19 continues to cause disruption to the travel and events sectors, leading to cancellations, and difficulties for consumers to obtain remedies and refunds.

During the initial stages of the pandemic the ACCC received complaints from Australian consumers seeking information about their rights and assistance in obtaining refunds for various services. The ACCC had to act quickly; we worked directly with over 100 companies to facilitate refunds and improve communication practices. Millions of dollars were refunded and hundreds of thousands of consumers benefitted directly as a result of our intervention.

The recent Omicron wave of the pandemic again led to many consumers being out of pocket for cancelled flights and other events. The issues have also shifted slightly. We are now seeing problems arising from those consumers who accepted credit vouchers as a result of cancelled flights now struggling to redeem those vouchers.

The recent disruption in the supply of rapid antigen tests is a further example of the ACCC needing to quickly shift focus to a new challenge arising from the pandemic.

Our Infocentre received up to 450 consumer contacts each day, and around three times the usual daily number of written contacts. In response, the ACCC established a team to seek information from over 60 businesses to understand their prices, stock levels and, importantly, what they were telling their customers about the shortage and pricing of the tests. Our public explanation of our findings helped put some firms on notice, and it provided clarity on the issue for both businesses and consumers.

We will adapt and react with the same speed as new issues arise.

The ACCC will also continue to work with industry to ensure a return in consumer confidence, particularly in hard hit sectors like travel.

Consumer issues arising from the pricing and selling of essential services, with a focus on energy and telecommunications

The ACCC continues to hear concerns about the lack of transparency in agreements between essential service providers and small businesses and consumers, misleading advertising claims, and recurring mis-selling of essential service products. Many stakeholders noted that consumers experiencing disadvantage and vulnerability are disproportionately impacted by this conduct.

The ACCC has taken numerous cases against telecommunication and energy companies for making false and misleading representations. There needs to be a better response from the firms in these sectors and it’s clear from the complaints we are hearing and the Ombudsman‘s reports that more work is required.

In addition, the energy sector is subject to major changes. The ACCC will continue our close monitoring of the sector; the energy transition must not be used to artificially raise prices to consumers.

Improving industry compliance with the consumer guarantees with a focus on high value goods including motor vehicles and caravans

Non-compliance with consumer guarantees continues to be the issue most reported to the ACCC by consumers, particularly in relation to motor vehicles and caravans.

A key issue is that dealers cite difficulties in being indemnified by manufacturers as the reason for their reluctance to provide consumer guarantee remedies. The imbalance in the relationship between motor vehicle dealers and manufacturers, and the unwillingness of individual dealers to deviate from the manufacturers’ wishes, means many consumers are not getting the remedies they are entitled to.

While the ACCC has taken enforcement action against various car manufacturers we still receive high volumes of complaints about this sector. We continue to advocate for law reform in this key area of consumer protection to make non-compliance with meeting consumer guarantee obligations illegal. Also, just as important, is to make it illegal for a manufacturer to not indemnify a supplier that does give a consumer a remedy.

These two reforms would, in our view, greatly improve compliance with the consumer guarantees.

Ensuring small businesses receive the protections of the competition and consumer laws, including in agriculture and franchising

To ensure that small businesses receive the protections available under the competition and consumer laws it is important they know their rights when dealing with larger businesses. We will continue to update and promote our online resources on key consumer protections for small businesses, including business-to-business unfair contract terms, industry codes and consumer guarantees.

In the agriculture sector, one focus in the coming year will be ensuring compliance with the codes of conduct, including in the dairy and horticulture sectors. We have taken several enforcement actions under these codes in recent years and will continue to closely scrutinise compliance. 

In the franchising sector, we continue to see franchisees being harmed by conduct that potentially breaches both the franchising code and the Australian Consumer Law (ACL).

Litigation is an important part of our response to these issues. We currently have an important action against the Retail Food Group in court and have recently been successful in cases against Jump Swim and courier business Megasave.

Franchising is a business model where the franchisor dominates the relationship. We will continue to promote our educational work to make sure that franchisees and prospective franchisees make informed decisions about the risks unique to this business.

And where we see unlawful conduct by larger businesses is causing significant harm to small businesses, we will take enforcement action.

Competition priorities

The year 2021 was yet another big year for our competition enforcement program. We have had a number of important matters progress before the Court, with some success, and other matters not go our way. That is to be expected considering the complexity of the law we enforce, but it does not dampen our resolve.

Of note, the NSW Ports case has raised critical competition issues. I admit to being surprised that this case did not go our way at first instance, and our appeal was recently heard by the Full Federal Court. Regardless of the ultimate outcome in that matter, we consider there were clear and significant competition issues here, as the Port of Newcastle was effectively prevented from developing a container port that would compete with Port Botany. When the result of the appeal is known we will consider whether we need to reassess our competition laws in the light of the court’s consideration of them.

Cartel conduct of course remains a critical component of our competition portfolio, and an enduring priority. I have commented recently on the ANZ Bank cartel, which didn’t end as we had envisaged. We have had some more recent success in our cartel program, including guilty pleas in two matters, one in the pharmaceutical sector, and one in money remittance. All told, we currently have 6 cartel matters before the Court, and a number of other cartel investigations on foot.

Beyond cartel conduct, we have a healthy program of competition enforcement work, with 4 matters currently before the Federal Court, including an important case, decided just last month, where the Court found that both the CFMMEU and Hutchinson had engaged in a boycott. This case reflects the priority we have given to commercial construction in recent years and has clear implications for the way the construction sector operates in Australia. I hope these lessons are learnt by all involved.

In recent times, we have highlighted as a priority both competition issues in digital platforms, and those involving financial services; two sectors where we continue to see a real need for our attention, and where we have important investigations underway. Further to those, we have identified two additional new competition priorities.

Our first new competition priority is competition issues in global and domestic supply chains, particularly where they are disrupted by the COVID-19 pandemic.

Competition issues in global and domestic supply chains, particularly where they are disrupted by the COVID-19 pandemic

The importance of effective and competitive supply chains has been more evident than ever during the pandemic.

The effects of COVID-related staff shortages, port congestion and transport interruptions have disrupted the supply of many retail goods from fresh food and groceries to clothing and medications. These disruptions have unfortunately led to higher freight rates, and so higher prices for consumers. 

These issues are not unique to Australia. I was pleased to announce recently that the ACCC has joined with our fellow competition authorities in the US, the UK, Canada and New Zealand to form a ‘five eyes’ working group. This international group will share intelligence and work together to detect any attempts by businesses to use the pandemic conditions as a veil for illegal conduct, such as collusion, in our global supply chains. 

Where we see businesses taking advantage of the situation to fix prices or share markets, we will not hesitate to act.

Exclusive arrangements by firms with market power that impact competition

Our second new competition priority will see us focus on exclusive arrangements by firms with market power that impact competition.

One feature of markets that sometimes raise barriers to businesses, both small and big, is exclusive supply or acquisition arrangements. Of course, exclusive agreements are common in the commercial world. In many cases they are benign and indeed, can sometimes help firms to offer a better product more efficiently.

However, we are seeing examples in Australia of large and powerful firms engaging in exclusionary behaviour that materially impacts competition. We are particularly concerned about firms with market power restricting access to bottleneck goods or services impacting the ability of competitors or new entrants to compete. So called ‘most favoured nation clauses’ that prevent competitors from offering a better deal to consumers can also raise concerns.

We have several investigations underway to address this concern. Our current court action against Peters ice cream is one such case and relates to the alleged potential harm from exclusive distribution contracts. We will look to leverage our current work and undertake proactive enquiries to identify and address conduct of concern across several sectors.

Promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services

As I said, we will also continue our focus on competition issues in financial services and sharpen that focus particularly on issues relating to payment services.

Our work in financial services includes collaborating with the Council of Financial Regulators to examine emerging issues relating to de-banking, digital currency and cross-border payments. Co-operation with these agencies is critical to ensure any interventions that government and regulators make are targeted and effective. 

We will have a particular focus on the issue of competition in payments services. Australian consumers are increasingly using payment cards when buying goods or services, and COVID-19 has accelerated the shift from cash to card payments. The importance of competition in card payment markets is therefore vital to both businesses and consumers alike, and vigorous competition in payments services markets is critical if we are to get the full benefits of innovation and efficiency across the economy. 

One of the core issues affecting competition in the payments markets is ‘least cost routing’ which enables businesses to choose which network will process their debit card transactions, and which now make up around 75 percent of all card payments in Australia.

In March 2021, we accepted a court enforceable undertaking from Visa to address concerns we held that Visa may have limited competition in relation to debit card acceptance through its dealings with large merchants. We will continue to investigate similar allegations of anti-competitive conduct designed to limit the take-up of ‘least cost routing’ by other market participants. 

The proportion of payments made through digital wallets on mobile devices has also increased during COVID and we are looking at several issues regarding competition in relation to these mobile digital wallet services.

We are considering whether there are competition concerns in Apple’s practice of restricting third party access to near field communication technology on its mobile devices, and the terms it imposes for use of Apple Pay by third parties. 

Enforcement issues relating to digital platforms

We actively use our enforcement tools when we see conduct by the digital platforms that we consider breaches the existing Competition and Consumer Act 2010 (CCA) and ACL. We are already looking at issues relating to payments, search, apps and adtech.

However, the ACCC is increasingly concerned about the ability of enforcement action to address the systemic competition and consumer concerns we have identified in digital platform markets.

Investigation and court proceedings are lengthy and necessarily retrospective, seeking to address harms after they have occurred. Further, in order to successfully prosecute a case, we often must narrow the allegation and ignore broader concerns with conduct. This is particularly problematic in digital platform cases where the market power is entrenched and multi-faceted. There is risk that the ACCC, like our overseas counterparts, is effectively engaging in a ‘whack a mole’ strategy, attempting to remedy one manifestation of anti-competitive conduct while even more problematic conduct surfaces elsewhere.

The ACCC is now considering more broadly whether there is a need for further regulatory tools and on Monday this week we released a Discussion Paper on various options for so-called ex ante laws.

This topic will be the subject of a report the ACCC will provide to the Treasurer in September this year. Importantly, the reform considered in that report will address consumer protection as well as competition concerns. 

The very preliminary options for reform identified in that discussion paper draw heavily from overseas proposals and indeed overseas legislation which has already been enacted.

Both the UK and the European Union have well developed proposals to place specific obligations on the largest digital platforms to prevent them engaging in anti-competitive conduct and address the consequences of their market power.

Germany has already implemented law reform which places specific obligations on those platforms found to occupy a position of paramount significance. Japan also implemented law reform last year placing specific obligations on certain digital platforms aimed at increasing transparency and ensuring effective dispute resolution.

The US also has a series of bills in both Congress and Senate that propose specific obligations on major digital platforms.

While our recommendations will reflect on the best course for Australian consumers and businesses, the ACCC is very aware of the benefits of global alignment for all stakeholders and is working internationally to help achieve this.

Product safety

We continue to build on the successful product safety initiatives of recent years that have seen the successful finalisation of Australia’s biggest recall, Takata airbags, and the introduction of world-leading new safety standards for quad bikes and button batteries.

In October last year, the fitting of operator protection devices to quad bikes, which will reduce the risk of rollover deaths and injuries, became mandatory and the ACCC will focus on compliance through education and court action if needed.

The new button batteries standards will commence in June this year, applying to around 30 million products supplied each year. These world-first standards will improve safety in the design of products containing button batteries, the packaging of button batteries, as well as the warning requirements alerting consumers to the risks.

These initiatives follow the successful implementation of the Takata airbag compulsory recall that required vehicle manufacturers to replace 4 million airbags in 3 million vehicles in 3 years. By the end of last year, virtually 100 percent of these vehicles were accounted for.

The ACCC will focus on several product safety areas:

  • we will continue to advocate for the introduction of a general safety provision that prohibits the supplying of unsafe products to consumers. Most consumers think there is a law that requires goods they buy to be safe, when there is no such protection. Australia is lagging many other countries, including most OECD members, which already have this law in place
  • we support the Government’s initiative to make mandatory standards under the ACL more flexible. This will ensure continued consumer protection and reduce compliance costs for Australian businesses. This initiative should also include being able to freely access Australian Standards referenced in legislative instruments, including mandatory ACL safety standards and information standards. Businesses should not have to pay to access the very law they are required to comply with
  • communication with businesses needs to be an integral part of our product safety work. For instance, our recent market research shows about one in two businesses do not see consumer safety as their responsibility. And more than half do not know they need to submit a recall notice to the ACCC when they identify a hazardous product.

So, we will be looking to develop resources and communicate more effectively to assist businesses to provide better guidance for suppliers about recall responsibilities. We have recently released some comprehensive guidance for businesses on their obligations to report on any injuries arising from products they supply. 

In June, the ACCC will announce its annual product safety priorities in more detail at the National Consumer Congress. I anticipate that several of our current priorities will continue, and we will consider adding other important product safety issues like children’s products and tackling the emerging safety risks associated with lithium-ion batteries.

Infrastructure

The ACCC has before it a wide range of important infrastructure work, as follows.

NBN

With the national broadband network now fully built, mid last year we commenced an extensive process of consultation aimed at developing a future NBN regulatory framework. In December, we shared what we consider to be a number of key outcomes vital to the framework’s development.

These include: ensuring the NBN Co has the opportunity to earn the minimum revenues needed to meet its legitimate financing objectives; protection of NBN end-users from price shocks, and from prices higher than necessary in future years; ensuring any regulatory framework provides incentives for NBN Co to operate efficiently and be able to promote the use of the NBN; ensuring NBN access seekers have greater certainty over the costs and making sure there is a clear and robust quality framework so access seekers and end-users know what to expect from NBN services.

These outcomes will be critical to our consideration of NBN Co’s proposed variation to its Special Access Undertaking, once lodged.

Regional telecommunications

Mobile and broadband telecommunications services are essential to the lives of residents and businesses in rural and regional areas. We will continue to act where claimed mobile coverage areas or internet speeds are not delivered.

We have been considering the recently released findings of the 2021 Regional Telecommunications Independent Review Committee, given the importance of effective telecommunications networks to customers outside our major cities. One area of particular focus is improving the information available to customers in rural and remote areas, particularly in terms of how it helps them compare coverage and quality of services offered by different providers.

Our first Mobile Infrastructure Report, released late last year, looked at the mobile infrastructure and coverage maps of the three mobile network operators. This is to be an annual report and we will be exploring ways to improve the accuracy and comparability of these maps in future reports.

We are all aware of the recent agreement between TPG and Telstra to share regional mobile infrastructure. This will require extremely close examination by the ACCC to examine its implications for mobile pricing and coverage. The agreement raises complex issues. 

Airlines and airports

It is not only travellers who have felt the impact of the pandemic. The aviation sector itself has been particularly hard-hit. Our monitoring and reporting activities on both airports and airlines, undertaken as separate but related processes, shine a light on the challenges the sector faces.

Later this month, we will release the latest of our series of annual reports examining the prices, costs and profits of airports in Brisbane, Sydney, Melbourne and Perth. We do this to provide transparency over their operations and to see how they are using their monopoly position.

We also monitor domestic airline activity to identify any behaviour within the industry that may be damaging competition. Our quarterly airline competition reports since 2020 highlight the volatility created by the pandemic but also opportunities. We have seen the regional operator Rex expand into capital city routes, including those connecting Sydney, Melbourne and Brisbane, and new entrant Bonza announcing new leisure routes. We are particularly focused on monitoring Rex’s and Bonza’s ability to access permanent slots at Sydney Airport.

We will also be watching to see that Qantas and Virgin do not fly new routes to damage competition.

Insurance monitoring

We will also be watching to see that the benefits from the introduction of a government reinsurance pool are realised by those it was designed to help. This reinsurance pool was developed to improve accessibility and affordability of insurance for households and small businesses in cyclone-prone areas across Northern Australia. Where necessary we will call out any conduct we consider is contrary to the pool’s intended objectives.

Mergers

For a few years I have been voicing concerns about the adequacy of the merger control regime in Australia. We are concerned about the regime’s ability to ensure relevant transactions are subject to the appropriate level of scrutiny so that we can prevent anti-competitive mergers.

In my speech last year to the Law Council of Australia I spelled out the ACCC’s concerns about increasing concentration and the challenges raised by the current informal system and the mergers test. I outlined our reform proposals to better ensure that merger control in Australia is fit for purpose and in line with international best practice. The speech was intended to trigger a much-needed debate on these issues, and I am pleased that the discussion has begun.

Continuing the discussion on these issues will remain a priority for the ACCC in 2022-23. Both the new Chair and the new Commissioner joining the ACCC have a great depth of experience on mergers. They will bring valuable insights and perspectives to the debate.

Ultimately, however, it will be a matter for government to determine what the next steps are. I have enjoyed being involved in kicking off the debate and will follow this with great interest once I have left the ACCC.

The practical challenges that we are increasingly facing with the informal system were recently highlighted in the Virtus/Adora merger. The merger parties decided to proceed with the transaction shortly after notifying us, and before we completed our review. We acted quickly, and successfully obtained an interlocutory injunction restraining the acquisition until the conclusion of court proceedings.

This was a very significant outcome given it is our first successful injunction since 1994 to restrain a merger. However, being forced to take urgent court proceedings added significant timing pressure, additional cost and complexity to this matter for both the ACCC and the merger parties. As Justice O’Bryan noted: ‘the inconvenience or loss could have been mitigated to a considerable extent if the parties had taken the step of consulting with the ACCC before entering into an unconditional agreement’.

Looking forward, Australia like many countries, is experiencing a significant surge in merger and acquisition (M&A) activity. This is resulting in high numbers of merger notifications to the ACCC. In 2021, 472 mergers were notified to the ACCC, up 41% on the previous year. The number of mergers considered by the ACCC in 2021 was 63% higher than the average over the last five years.

While we have been able to deal with over 90% as pre-assessments, which is a quick triage process, we are also seeing an increase in the number and complexity of recent public reviews commenced. These have involved important sectors including ports, container handling equipment and services, rail transport, aviation, health and pharmaceuticals. We are currently not seeing any signs that the M&A surge is on the decline.

A significant proportion of this latest surge involves global mergers, often involving very significant transaction values. Thanks to the good working relationships we have developed with our counterparts overseas we are able to liaise closely with these agencies and exchange information as necessary.

Summary

The ACCC’s compliance and enforcement work is not limited to the priorities I have mentioned today. While the ACCC cannot pursue all matters that come to our attention, we are an evidence-based agency and will exercise discretion to direct resources to matters that provide the greatest overall benefit for the consumer and competition.

I am, of course, shortly departing the ACCC, and this will be my last speech as ACCC Chair to many of you. The near 11 years have gone so quickly. I want to thank all in the competition and consumer community for your insights, your dedication to making our market economy work as it should and for your friendship. While we did not always agree, differences were discussed with respect and goodwill.

I will maintain an interest in competition and consumer issues at a policy level, so our paths may continue to cross.

Thank you.