ACCC takes action over alleged attempted cartel for National Gallery of Australia tender

Source: Australian Competition and Consumer Commission

The ACCC has instituted civil proceedings in the Federal Court against Delta Building Automation Pty Ltd (Delta) and its sole director, Timothy Davis, for involvement in an alleged attempt to rig a bid in connection with a tender conducted by the National Gallery of Australia in Canberra.

The alleged attempted cartel conduct occurred in late 2019, and relates to a tender for the replacement and ongoing maintenance of a building management system at the National Gallery.

The National Gallery was not involved in or aware of the alleged conduct at the time, and did not suffer any loss. 

Delta is a company which designs, installs and maintains building management systems which manage equipment in large buildings.

The ACCC alleges that Mr Davis, acting on behalf of Delta, attempted to make, or attempted to induce the making of, an arrangement or understanding with a competitor to engage in bid rigging. 

Specifically, it is alleged that the attempt was made during a meeting at a Canberra café in December 2019 between Mr Davis and a representative of a competitor. The ACCC alleges that at the meeting, Mr Davis attempted to fix the price of bids to be submitted by Delta and its competitor in response to the National Gallery’s building management system tender or to ensure that Delta was more likely to be successful in winning the tender.

“The alleged cartel behaviour, involving an attempt to bid rig with a competitor in respect of bids for the tender of a government institution like the National Gallery of Australia, is of particular concern as it had the potential to impact the cost to taxpayers,” ACCC Chair Rod Sims said.

Ultimately, the proposed arrangement or understanding was not made, which the ACCC alleges was because the competitor rejected Delta and Mr Davis’ approach. 

“It is illegal for any corporation to make or attempt to make cartel arrangements with its competitors. Cartel arrangements usually drive up prices to the detriment of consumers or other businesses and organisations, and are strictly prohibited,” Mr Sims said.

The ACCC is seeking declarations, pecuniary penalties, injunctions and costs, as well as an order disqualifying Mr Davis from managing a company, and orders for compliance training.

The case will be listed before the Federal Court at a date to be set.

Background

A building management system is a computer-based system installed in buildings to manage and monitor a building’s equipment such as air-conditioning, ventilation, lighting, and power systems.

Delta Building Automation Pty Ltd is part of a group of companies (the Delta Group) which operate as the Australian exclusive distributor for the Delta Controls brand of building management systems. The Delta Group designs, installs and maintains building management systems and operates in most states and the ACT.

Mr Davis is a director of each company in the Delta Group.

Note for editors

Cartel behaviour, which involves businesses agreeing to act together instead of competing fairly breaches the Competition and Consumer Act. Cartel conduct can involve price fixing, bid rigging, market sharing, and controlling the amount of goods or services available.

Anyone concerned about an issue in the construction industry can anonymously report a construction sector issue to the ACCC’s Commercial Construction Unit. Anyone with information about any cartel conduct in another industry can anonymously report cartel conduct via the ACCC website.

Anyone who thinks they may be involved in cartel conduct can also apply for immunity from prosecution in exchange for helping with the ACCC’s investigations by contacting the ACCC cartel immunity hotline on (02) 9230 3894.  

Telstra to pay $50m penalty for unconscionable sales to Indigenous consumers

Source: Australian Competition and Consumer Commission

The Federal Court today ordered that Telstra pay $50 million in penalties for engaging in unconscionable conduct when it sold mobile contracts to more than 100 Indigenous consumers across three states and territories, in proceedings brought by the ACCC. 

Telstra admitted that between January 2016 and August 2018, it breached the Australian Consumer Law and acted unconscionably when sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple post-paid mobile contracts which they did not understand and could not afford.

“Sales staff in these Telstra-branded stores used unconscionable practices to sell products to dozens of Indigenous customers who, in many cases, spoke English as a second or third language,” ACCC Chair Rod Sims said.

“This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”

“Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them,” Mr Sims said.

“The $50 million penalty imposed against Telstra is the second highest penalty ever imposed under the Australian Consumer Law. This is appropriate given the nature of the behaviour by Australia’s biggest telecommunications company, which was truly beyond conscience,” Mr Sims said.

In some cases, sales staff at the licensed stores failed to properly explain the potential costs of the contract to the consumers and falsely represented that consumers were receiving products for ‘free’.

In many instances, sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment process could purchase post-paid mobile products. This included falsely indicating that a consumer was employed when they were not.

Telstra has since taken steps to waive the debts, refund money paid and put in place measures to reduce the risk of similar conduct in the future.

In addition to the remedies ordered by the Federal Court, the ACCC has accepted a court-enforceable undertaking from Telstra in which Telstra undertakes to provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline, and enhance its digital literacy program for consumers in certain remote areas.

“We expect much better behaviour from large businesses like Telstra,  but all businesses in Australia have a responsibility to ensure sales staff are not breaching consumer law by manipulating or tricking consumers into buying products or services they do not need or cannot afford,” Mr Sims said.

Telstra admitted liability, cooperated with the ACCC’s investigation and made joint submissions with the ACCC to the Court in relation to penalty and other orders. 

Background

On 26 November 2020, the ACCC instituted Federal Court proceedings against Telstra for admitted unconscionable conduct in the sale of post-paid mobile products to Indigenous consumers. 

Telstra is Australia’s largest retail supplier of mobile telephones and telephony and data services for mobile telephones and tablets, which offers pre-paid and post-paid services to its customers. It is a publicly listed company, incorporated in Australia.

Telstra operates stores across Australia, including stores operated by independent licensees which sell Telstra products and services on behalf of Telstra through Telstra-branded stores.

The admitted unconscionable conduct occurred at licensed stores in Alice Springs, Casuarina and Palmerston (NT), Arndale (SA), and Broome (WA).

Consumers from remote Indigenous Australian communities located near these stores were affected by the alleged conduct, including the regions surrounding Darwin, the islands off Northern Territory, the Kimberley region and the Anangu Pitjantjatjara Yankunytjatjara Lands (APY Lands) in central Australia.

Vali gas joint venture participants granted authorisation for joint marketing

Source: Australian Competition and Consumer Commission

The ACCC has granted authorisation for Vintage Energy Ltd (ASX: VEN), Metgasco Ltd (ASX: MEL) and Bridgeport (Cooper Basin) Pty Ltd, a wholly owned subsidiary of New Hope Corporation Limited (ASX: NHC), to enter into joint gas marketing arrangements.   

Vintage, Metgasco and Bridgeport are joint venture partners at the Vali field, a new gas field in the early stages of development, located in the Queensland Cooper/Eromanga Basin. None of the parties currently produce or sell natural gas.

The ACCC’s authorisation enables the parties to jointly market gas produced from the Vali field for five years and, within this period, to enter into gas supply agreements with customers on common terms and conditions (including price) for terms of up to 15 years. Without authorisation, these joint marketing arrangements would risk breaching competition laws.

“The ACCC considers that joint marketing is likely to result in public benefits by enabling earlier development of the Vali field to bring this new gas supply to the market sooner,” ACCC Chair Rod Sims said.

“Current estimates suggest the annual production from the Vali field will be approximately 0.5 per cent of the annual domestic gas demand in the east coast market. Given the small amount of gas relative to the size of the overall market, this proposed joint marketing is unlikely to adversely affect competition.”

A copy of the ACCC’s determination is available on the ACCC public register at Vintage Energy Ltd – Vali Gas Joint Venture

Background

Vintage Energy Ltd operates the Authority to Prospect 2021 (ATP 2021) Vali field, and holds 50 per cent interest in the ATP 2021 Joint Venture.

Metgasco Ltd and Bridgeport (Cooper Basin) Pty Ltd, each hold 25 per cent interest in the ATP 2021 Joint Venture.

Under the joint venture agreement between the parties, Bridgeport may reserve 50 per cent of its share of gas for sale to Brickworks Limited.

Based on current information, the annual gas production (from the Patchawarra formation) in the Vali field will be equal to approximately 0.5 per cent of the annual domestic gas demand in the east coast market, and less than 0.2 per cent when LNG export demand is included with domestic demand.

On 29 January 2021, the ACCC granted interim authorisation to allow the parties to begin jointly marketing and entering into conditional gas supply agreements with customers for the sale of gas from the Vali field, and supplying minor quantities of gas from the Vali field to customers for a short period until 31 December 2021.

On 26 March 2021, the ACCC issued a draft determination proposing to authorise the parties’ proposed joint marketing arrangements in respect of the Vali field. 

Both decisions are available on the ACCC public register.

Notes to editors

ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

Broadly, the ACCC may grant an authorisation when it is satisfied that the likely public benefit from the conduct outweighs any likely public detriment.

NIB to continue to notify consumers of health insurance changes which increase out-of-pocket expenses

Source: Australian Competition and Consumer Commission

The ACCC and NIB Health Funds Limited (NIB) have agreed to the ACCC’s Federal Court proceedings against NIB being discontinued after NIB committed to continue to provide advance notice to its members of policy changes which are likely to result in higher out-of-pocket expenses for consumers.

In these proceedings, the ACCC had alleged NIB engaged in misleading or deceptive conduct, unconscionable conduct and made false or misleading representations by failing to inform policy holders of its decision to remove coverage for certain eye procedures from its ‘MediGap Scheme’ in 2015. It was alleged that, as a result, NIB members who had undergone certain eye procedures were likely to incur increased out-of-pocket expenses. NIB had not given its members advance notice of the changes.

NIB has since addressed the ACCC’s concerns and, for the past four years, has been notifying members of changes that negatively affect their benefits ahead of the changes taking affect.

NIB also provided compensation to a number of consumers affected by the conduct who had to pay out-of-pocket expenses when receiving eye treatments they had previously undergone with no gap fees.

The ACCC filed its case against NIB in May 2017 but the trial was deferred until mid-2021, initially because the Full Federal Court was considering an appeal in respect of the ACCC’s case against Medibank which dealt with related but distinct issues, and subsequently because of pandemic-related delays.

“Given the passage of time since this case was commenced, NIB’s changed notification practice during that time and the improvements made across the industry as a result of the ACCC’s interventions in the sector, we believe it is no longer in the public interest to continue proceedings against NIB,” ACCC Chair Rod Sims said.

“We are pleased the industry has significantly changed practices since 2015 to ensure greater transparency for consumers, including NIB’s change of its approach and commitment to continue informing customers about changes that may affect their out–of-pocket expenses for ongoing treatment ahead of the changes occurring.”

In 2015-18, consumer issues in the health sector including the private health insurance industry were an enforcement priority for the ACCC, resulting in enforcement action taken against several private health insurers in 2016 and 2017.

The ACCC’s actions involving Australian Unity, NIB and Medibank Private sought to ensure Australian consumers are treated fairly and are adequately informed about policy changes affecting their private health insurance coverage.

“We are pleased that our enforcement actions in this sector have led to substantial changes in the health insurance industry with improved transparency for consumers,” Mr Sims said.

Background

NIB has operated its ‘MediGap Scheme’ since at least 2000. Under the scheme, participating doctors received an additional payment, above the Medicare schedule fee, from NIB while policy holders were guaranteed not to incur any out-of-pocket expenses for services provided under the scheme.

In May 2017, the ACCC instituted Federal Court proceedings against NIB, alleging it contravened the ACL when it failed to notify members in advance of its decision to remove certain eye procedures from its ‘MediGap Scheme’.

The trial in the NIB case had been set down for June 2018, but was vacated while the Court considered the ACCC’s appeal in the Medibank matter to the Full Federal Court. It was delayed again in December 2020 due to restrictions arising from the COVID-19 pandemic and was set down for hearing in June 2021.

The ACCC’s proceedings against Medibank started in June 2016 and were dismissed in August 2017. The Full Federal Court dismissed the ACCC’s appeal in December 2018.

On 2 November 2017, the ACCC accepted a court-enforceable undertaking from Australian Unity to pay compensation to members who held couple and family policies in 2015 that were likely to have been misled about the dental benefits they could claim from their policy.

On 16 July 2020, in another ACCC enforcement proceeding, the Federal Court ordered Medibank Private Limited trading as ‘ahm Health Insurance’ to pay $5 million in penalties for making false representations to members about the benefits offered by their ahm health insurance policies.

ACCC consults on proposed Woolworths undertaking for PFD acquisition

Source: Australian Competition and Consumer Commission

The ACCC is seeking views on a proposed undertaking offered by Woolworths (ASX: WOW) and PFD Food Services in relation to Woolworths’ proposed acquisition of 65 per cent of PFD.

In response to the ACCC’s statement of issues outlining preliminary competition concerns, Woolworths and PFD have offered a draft behavioural undertaking designed to maintain a degree of separation and independence between Woolworths and PFD for three years after the acquisition, but the duration could be shorter in certain circumstances.

“The release of an undertaking for public consultation should not be viewed as a sign that we will ultimately accept it, or any other form of undertaking,” ACCC Chair Rod Sims said.

The companies have indicated that the temporary measures in the draft undertaking are designed to preserve the current market dynamics and enable market participants, such as independent suppliers, to continue to do business with Woolworths and PFD independently.  The companies consider that this will allow the market to adjust to Woolworths and PFD ceasing to be independent of each other.

“We are seeking feedback from market participants about whether the proposed behavioural undertaking is likely to address competition concerns raised by Woolworths’ acquisition of PFD,” Mr Sims said.

The proposed undertaking would place obligations on PFD’s board and governance structure and impose confidentiality protocols regarding certain supplier information. These obligations are intended to last three years, unless certain early termination clauses are triggered. These early termination clauses are generally dependent on PFD’s CEO. For example, if PFD’s CEO ceases to be involved in the day to day management of PFD on a full time basis the three year period could end earlier.

PFD would also be required to implement a charter in dealing with suppliers which reflects certain principles of the Food and Grocery Code of Conduct and which would be in place for five years. Any changes to the charter would need to be approved by the ACCC and PFD would be required to provide suppliers with advanced notice of any changes.

“The undertaking is behavioural in nature and imposes obligations on the companies to act in certain ways and not undertake certain actions. It will be important to get feedback from market participants on whether the undertaking provides a sufficient remedy to address the competition concerns,” Mr Sims said.

Anyone wishing to make submissions should do so by 9am on 19 May 2021. The proposed date for the ACCC’s final decision is 10 June 2021.

More information is available on the ACCC website here: Woolworths Group Limited – PFD Food Services Pty Limited.

Background:

Woolworths is a large food retailer listed on the ASX. Woolworths also operates the online business Woolworths at Work, which supplies to commercial customers and Woolworths AGW which provides wholesale food distribution to a petrol and convenience chain.

PFD is a privately owned wholesale food distributor supplying food products and distribution services. PFD operates a national network of warehouses and a fleet of delivery vehicles. PFD distributes to food service businesses such as restaurants and cafés, franchised quick service restaurants, hotels and clubs and other businesses.

On 15 December 2020, the ACCC released a statement of issues which raised concerns that the proposed acquisition may increase Woolworths’ upstream buyer power, lessen competition in wholesale food distribution and allow Woolworths to foreclose competitors that are supplied by PFD.

ACCC seeks leave to appear in Epic v Apple appeal

Source: Australian Competition and Consumer Commission

The ACCC has sought leave to appear at the hearing of Epic Games, Inc’s appeal to the Full Federal Court against an earlier Court decision to stay Epic’s proceedings against Apple Inc.

The ACCC seeks the Court’s leave to appear as an ‘amicus curiae’ (‘friend of the Court’), or to intervene as a non-party, to make submissions to the Full Court about the public policy in favour of disputes involving Australia’s competition laws being heard and determined by Australian courts.

Epic instituted proceedings in the Federal Court of Australia against Apple in November 2020, making allegations that Apple had engaged in anti-competitive conduct in breach of the Competition and Consumer Act (CCA) in relation to the App Store.

Apple sought a stay of these proceedings on the grounds that the commercial agreement between Apple and Epic requires all disputes between the parties to be determined in courts in the Northern District of California in the United States.

On 9 April 2021, Justice Perram granted the stay of the proceedings sought by Apple, on the basis that he did not consider Epic had shown there were strong reasons not to grant the stay. In reaching this conclusion, he indicated that he was troubled by the outcome, which would result in Epic’s claims under Australian competition law being determined by a foreign court.

Epic has appealed from that decision, and an expedited hearing before the Full Federal Court has been fixed for 9 June 2021.

“The ACCC has taken the unusual step of seeking leave to appear in this appeal because the stay application raises significant public policy issues about which, as the statutory agency responsible for administering Australia’s competition law, we believe we can be of assistance to the Court,” ACCC Chair Rod Sims said.

“This is a case filed in an Australian Court involving Australian consumers and raising significant issues under Australia’s competition laws. We believe it is in the public interest for significant competition law cases such as this case to be determined by Australian courts, given the outcome of such cases can have significant implications for the broader Australian economy.”

If granted leave to appear, the ACCC would not become a party to the proceedings, but would make submissions on limited issues.

The ACCC’s application for leave to appear is in respect of the appeal from the stay ordered by Justice Perram. At this stage, the ACCC has not sought leave to appear in the substantive proceedings in which Epic alleges that Apple has contravened the CCA.

Background

In November 2020 Epic instituted proceedings against Apple in Australia in relation to the removal of its game, Fortnite, from the Apple App Store. Epic alleges that Apple has breached the CCA by not allowing alternative app stores on its iOS operating system for Apple mobile devices, and by charging app developers a 30 per cent commission on in-app purchases of digital content.

Epic separately instituted proceedings against Apple in the US in August 2020 and the three week trial in the proceedings began on 3 May 2021.

The ACCC is seeking leave to appear as ‘amicus curiae’ (or ‘friend of the Court’) or alternatively leave to intervene as a non-party to the appeal. An amicus is a person who assists the court on particular points of law in a case, and who is not a party to the proceedings.

Further information about the ACCC guidelines on intervening in private proceedings is available on the ACCC website.

The ACCC recently released its second interim report as part of its inquiry into markets for the supply of digital platform services. It provides in-depth consideration of competition and consumer issues associated with the two key app marketplaces used in Australia, the Apple App Store and the Google Play Store.

ACCC proposes to deny Qantas/Japan Airlines coordination proposal

Source: Australian Competition and Consumer Commission

The ACCC is proposing to deny authorisation for Qantas (ASX:QAN) and Japan Airlines to coordinate flights between Australia and Japan for three years under a proposed five year joint business agreement.

“An agreement for coordination between two key competitors breaches competition laws. The ACCC can only authorise these agreements if the public benefits from the coordination outweigh the harm to competition,” ACCC Chair Rod Sims said.

“At this stage we do not consider that Qantas and Japan Airlines’ proposal passes that test.”

Before the COVID-19 pandemic, Qantas and Japan Airlines were the only two airlines offering direct flights between Melbourne and Tokyo. They were also two of only three airlines, the other being All Nippon Airways, offering direct flights between Sydney and Tokyo.

“The airline and tourism sectors have been severely impacted by the COVID-19 pandemic. Protecting competition in the airline industry is critical to ensuring recovery in the tourism sector, once international travel restrictions ease,” Mr Sims said.

“This proposed coordination would appear to undermine competition significantly by reducing the prospect of a strong return to competition on the Melbourne – Tokyo and Sydney – Tokyo routes when international travel resumes.”

“Granting this authorisation would seem to eliminate any prospect of Qantas and Japan Airlines competing for passengers travelling between Australia and Japan, as they did before the COVID-19 pandemic. This elimination of competition would benefit the airlines at the expense of consumers,” Mr Sims said.

The ACCC considers that Qantas and Japan Airlines combining their operations would also make it more difficult for another airline to seek to launch flights on these routes.

“We took into account that there may be some short term benefits from the proposed agreement such as allowing Qantas and Japan Airlines to more quickly reinstate flights between Australia and Japan. Our current view is that these are outweighed by the severe harm to competition.

“We have been willing to be flexible in granting limited exemptions from competition law during this time of severe economic impact on the travel sector due to COVID-19. However we must ensure that this doesn’t open the door to anticompetitive agreements that significantly harm competition in the medium to long term.”

The ACCC is seeking submissions from interested parties in response to this draft determination by 27 May 2021 and will make a final decision after consideration of those submissions. The draft determination and more information on how to make a submission are available on the ACCC public register at Qantas and JAL.

Background:

ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

Broadly, the ACCC may grant an authorisation when it is satisfied that the likely public benefit from the conduct outweighs any likely public detriment.

In April 2021, the ACCC released a report regarding the approach the ACCC took to authorising competitor collaborations in the context of COVID-19: COVID-19-related authorisations.

The ACCC re-authorised the alliance between Qantas and American Airlines for a further five years on 25 March 2021.

While Qantas and Japan Airlines’ application is seeking authorisation for three years, the ACCC understands their proposed joint business agreement is for five years. If authorisation is granted in respect of the proposed joint business agreement, the remaining two years of the agreement would be subject to regulatory approval.

Proposal to reauthorise QLD LNG producers to coordinate gas plant maintenance

Source: Australian Competition and Consumer Commission

The ACCC is proposing to reauthorise Australia Pacific LNG Pty Ltd, Gladstone LNG, and the Queensland Curtis LNG Project to discuss and coordinate their maintenance schedules, maintenance providers, and maintenance techniques for another five years.

The proposed reauthorisation would mean that all three applicants can coordinate when and how maintenance of their gas plants occur, and when their facilities will be taken offline. The ACCC is now consulting on the draft determination.

“Coordinating the maintenance undertaken at these facilities will reduce the likelihood of major disruptions to domestic gas markets, which could occur if multiple maintenance events cause more than one facility to be taken offline at the same time,” ACCC Chair Rod Sims said.

The LNG producers’ facilities convert natural gas into LNG for export.  Each LNG facility is connected to gas wells in the Surat and Bowen basins of Queensland. However, they also purchase gas in nearby wholesale markets.

When any of the applicants’ LNG facilities are offline, they may redirect their gas to wholesale markets for sale. The LNG facilities use very large quantities of gas and can have significant effects on the market price when their facilities are offline.

The ACCC first authorised maintenance schedule coordination in 2016, with a condition requiring that applicants publicly disclose information they share between themselves. The ACCC proposes to reauthorise the arrangements subject to the same condition to ensure the applicants do not have an information advantage.

“The condition allows all market participants to know when maintenance is going to occur and to make sure that they are not exposed to unnecessary risk,” Mr Sims said.

In seeking reauthorisation, the LNG producers suggested that the condition would not be required once an expected package of transparency measures is implemented under the National Gas Law. The transparency measures will likely be implemented during the five year period of reauthorisation and will require LNG producers to provide detailed information, including forecast maintenance events in the coming 12 months.

However, coordination by the LNG producers about maintenance plans more than 12 months into the future would not be reported under the National Gas Law, and that this could be detrimental for other market participants.

“At this stage we consider that all information shared amongst producers should be disclosed to the rest of the market, including information that relates to activity beyond 12 months,” Mr Sims said.

“We consider it is important that the existing reporting condition continue to apply, even though the LNG producers may be required to report some of this information following anticipated changes to the National Gas Law.”

The ACCC invites submissions on the draft determination and proposed condition by 25 May 2021. The ACCC will then make its final decision.

Further information on how to make a submission is available at Australia Pacific LNG Pty Limited & Ors.

Notes to editors

ACCC authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

Broadly, the ACCC may grant an authorisation when it is satisfied that the likely public benefit from the conduct outweighs any likely public detriment.

As the Applicants’ existing authorisation expires on 6 May 2021, the ACCC has also decided to grant interim authorisation, subject to the same condition as in 2016, to enable the arrangements to continue while the ACCC is considering the substantive application.

More information on the National Gas Law and National Gas Rules can be sought from The Australian Energy Market Commission (AEMC).

Background:

In 2016, wholesale gas traders raised concerns that coordination between LNG producers would allow producers to trade advantageously in gas markets, because each would know when maintenance is going to occur.

To address this, the ACCC imposed a condition of authorisation requiring the LNG producers to publicly disclose maintenance schedule information that they share with each other. The condition was formulated following consultation with the LNG producers and market participants including gas retailers.

New gas transparency measures which would require the applicants to report scheduled maintenance events, as currently takes place under the condition, are expected to be introduced under the National Gas Law by the end of 2022.

TasPorts declared to have misused its market power

Source: Australian Competition and Consumer Commission

The Federal Court has declared by consent that Tasmanian Ports Corporation Pty Ltd engaged in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in northern Tasmania, in proceedings brought by the ACCC.

The Court declared that TasPorts had breached section 46 of the Competition and Consumer Act (CCA) by imposing a new port access charge on one of its customers, Grange Resources Ltd, after Grange notified TasPorts that it was going to switch to Engage Marine Tasmania Pty Ltd, a new provider of towage and pilotage services.

TasPorts did not have a legal right to impose the new port charge, and sought to impose the charge without conducting a full assessment of the cost of providing access services to Grange. There was a real commercial likelihood that if Grange agreed to pay the port charge, this would have the effect of raising Grange’s future costs of acquiring services from Engage Marine.  

“This is an important decision because port services play a pivotal role for the Tasmanian economy, and this is the first time a corporation has been declared to have breached the revised misuse of market power law,” ACCC Chair Rod Sims said.

TasPorts has also provided the ACCC with a court-enforceable undertaking, requiring it to ensure that Engage Marine has access to berth space for tug boats at Inspection Head in northern Tasmania on reasonable commercial terms, and that charges imposed by TasPorts on Grange for regulatory functions at Port Latta are reasonable. Importantly, the undertaking also provides that TasPorts will spend at least $1 million on the wharf infrastructure at Inspection Head.

In the circumstances, the ACCC agreed not to press for a penalty order.

“Accepting this consent outcome ensures towage customers in northern Tasmania will receive the benefits from competition quickly. This competition should make a real difference at Tasmanian ports, ultimately to the benefit of consumers,” Mr Sims said.

“Businesses with substantial market power have a special responsibility when deciding how to respond to competitive threats. If they respond in a competitive way, for example by offering customers better products at better prices, they will not face the risk of enforcement action. However, when they hinder a competitor from competing on its merits, the ACCC will not hesitate to take enforcement action,” Mr Sims said.

The Court also ordered TasPorts to pay a contribution to the ACCC’s costs.

TasPorts’ undertaking is available at Tasmanian Ports Corporation Pty Limited.

Background

TasPorts is a corporation wholly owned by the State of Tasmania. It owns and operates the majority of ports in Tasmania and performs a range of port and marine operations at ports around Tasmania. Before Engage Marine entered the market, TasPorts was the sole supplier of pilotage and towage services at all major ports in Tasmania.

Grange is a publicly listed mining company which operates the Savage River iron ore mine and exports iron ore from Port Latta in northern Tasmania. Grange owns and operates the port infrastructure at Port Latta.

Engage Marine is a marine services company based in Western Australia. Engage Marine provides marine services, primarily towage services, in a number of ports around Australia, including Port Latta in northern Tasmania. 

The ACCC instituted proceedings against TasPorts in December 2019.

Notes to editors

This is the first finding of a contravention of section 46 of the CCA since it was amended in 2017 in response to the Harper Review of Australia’s competition laws.

The previous law specified that a firm with substantial market power could not take advantage of that power for certain specific anti-competitive purposes. The new law focusses instead on the impact of a firm’s conduct on the competitive process. It prohibits a firm with substantial market power from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition.

Further details on how the ACCC considers section 46 operates are set out in the ACCC’s Guidelines on Misuse of Market Power.

When businesses are concerned that their proposed conduct may give rise to a breach of the competition provisions of the CCA, but they consider their conduct would result in public benefit, they can seek authorisation from the ACCC. Authorisation provides protection against legal action for future conduct that might breach the competition provisions of the CCA, including section 46 which prohibits misuse of market power.

Before it can grant an authorisation, the ACCC must be satisfied that the proposed conduct is not likely to substantially lessen competition or is likely to result in a net public benefit.

Better access to servicing and repairs needed in agricultural machinery markets

Source: Australian Competition and Consumer Commission

Purchasers of agricultural machinery would benefit from more independent competition in servicing and repair markets, the ACCC has concluded, after conducting a detailed study of agricultural machinery markets in Australia.

The report, released today, looks at a range of competition and fair trading issues in markets for the direct sale of agricultural machinery, as well as for after-sales services, such as repairs. The report also makes a number of recommendations aimed at improving competition and access by purchasers to after-sales services.

The ACCC’s study involved consultation with agricultural machinery purchasers, manufacturers and the retailing and repair industry, including a survey of purchasers.

Modern tractors, harvesters and other agricultural machinery use complex computerised systems that involve embedded software and specific tools and parts. While this technology has increased productivity, it has also meant that access to this software, tools and parts is needed to repair the machinery. These are often held or controlled by manufacturers, limiting the ability of independent repairers to do the work.

The report finds that the restricted access to software tools, technical information, and service manuals and parts held by manufacturers is limiting competition in repair markets. It also finds that warranties can limit competition by discouraging the use of independent repairers.  

“Competition in after-sales markets would be improved if independent repairers had access to software, tools and parts on fair and reasonable commercial terms. This is an important issue that runs across a number of industries, both in Australia and overseas,” ACCC Deputy Chair Mick Keogh said.

The ACCC has recommended that agricultural machinery be considered for future inclusion in the motor vehicle service and repair information sharing scheme.

The report also recommends that agricultural machinery be included in any broader ‘right to repair’ scheme introduced in Australia. In particular, the ACCC believes that future right to repair legislation could include requirements for manufacturers to: grant access to diagnostic software tools and parts to independent repairers on commercially reasonable terms; have a sufficient supply of parts readily available in Australia for a defined period from the date of the sale agreement; and provide purchasers with information about how long a certain software system will be supported.

A key emerging issue in the report is the control over, and use of, data.

“Our survey findings indicate that many purchasers of agricultural machinery don’t understand the circumstances under which manufacturers can collect, share and use the data generated by their machines,” Mr Keogh said.

The ACCC also found that many warranties have significant limitations, including their short duration which can often be limited to one or two years.

“The survey we conducted showed that purchasers often don’t understand the terms of warranties when they buy agricultural machinery, which involves a significant investment,” Mr Keogh said.

The ACCC has therefore made recommendations about the information that manufacturers and dealers should provide to purchasers about warranties, dispute resolution, and issues such as data rights and use. To support this, the ACCC will develop materials to assist purchasers to understand their business and consumer rights in relation to agricultural machinery.

The full report is available at Agricultural machinery market study – final report.

The ACCC has also published the results of the agricultural machinery market study purchaser survey, available at Agricultural machinery: after-sales markets.

Background

In February 2020, the ACCC released a discussion paper focussing on concerns about manufacturer warranties and the servicing and repair of agricultural machinery, along with an online survey seeking farmers’ feedback about their experiences.

The ACCC sought information from a wide range of sources to inform the report. As this was a self-initiated market study, the ACCC did not have powers to compel information from parties. However, the ACCC received 44 submissions and 335 survey responses as part of this study.