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The ACCC’s 2012 Objectives

On 20 February 2012 Rod Sims, the Chairman of the Australian Competition and Consumer Commission (ACCC), delivered a speech to the Australia-Israel Chamber of Commerce outlining the ACCC’s objectives for 2012. According to Sims, “the online world will be front and centre of our focus in 2012.”1 Specifically, he stated:

… we all know (the online world) … is growing exponentially with some fascinating effects where, for example, established businesses with otherwise high entry barriers can now be challenged. We must ensure this can be done without established companies breaching the Act to protect themselves from competition from these new and emerging online players.

Sims alluded to the now well-established phenomenon of online business and the increasing difficulties associated with competition in markets that exist in both the traditional retail space and the online retail space. The rapid evolution of e-commerce has created seemingly limitless opportunities for online entrepreneurs who would otherwise not have the capital to acquire a physical retail store. But the rise of new players will challenge the dominance of the old, so consequently, the scope for competition has expanded, and with this increased competition has come a new wave of concerns regarding anti-competitive conduct.

The Legal Framework

In his speech, Sims does not say what action the ACCC might look to take to protect against anticompetitive conduct.

Part IV of the Competition and Consumer Act 2010 (Cth) (the CCA) prohibits various anti-competitive practices, but the ACCC’s recent activities in the online retailing space seem to have focussed on s 48 of the CCA which prohibits a supplier from imposing a minimum resale price upon a reseller (resale price maintenance).2 While a supplier may recommend a minimum resale price for goods,3 to mandate that goods are not to be sold below a specified price constitutes resale price maintenance and is a breach of the CCA.

In one case, AquaDepot Imports (AquaDepot) admitted to engaging in resale price maintenance by stating to its retailers that if the company’s aquarium products were sold at a price lower than 5–10 per cent below the recommended retail price then the company would cease to supply the retailer. When the online retailer ignored this pricing stipulation AquaDepot stopped supplying the retailer.4

Most recently, in January 2012 the ACCC commenced Federal Court proceedings against Eternal Beauty Products Pty Ltd alleging that it had attempted to force online retailers to sell Eternal Beauty products at a specified minimum price.5

Parties that engage in resale price maintenance can potentially attract large pecuniary penalties under s 76 of the CCA. In the case of a corporation the pecuniary penalty is capped at the greatest of the following: $10 million, 3 times the total value of the benefit the corporation obtained, or 10% of the corporation’s annual turnover.6 In the case of an individual the pecuniary penalty is capped at $500,000.00,7 and the individual may be disqualified from managing a corporation.8 In addition, damages,9 injunctive remedies,10 and remedial orders11 are available.

Moreover, the ACCC has not been shy about utilising the full extent of s 76 and has secured penalties against infringing parties which range between $200,000.0012 to more than $1 million.13 In addition, it is not uncommon for infringing parties to be required to provide court-enforceable undertakings relating to things like corrective notices and trade practices compliance training.

Other provisions within Pt IV of the CCA which may be used by the ACCC in combating anti-competitive behaviour in the online retail space would include ss 46 (misuse of market power) and 47 (exclusive dealing).

The Productivity Commission

Online retailers claim that the ACCC’s focus regarding resale price maintenance is imperative. In its submission to the Productivity Commission in June 2011, eBay alleged that there was “… evidence of suppliers and manufacturers attempting to stifle online retail through restrictive trade practices.”14 The “explosive allegation” (as The Age called it)15 claimed that “certain unnamed Australian retailers had engaged in anticompetitive behaviour to limit the availability of products at online sites.”Managing Director of eBay (Australia and New Zealand) Deborah Sharkey was quoted in the article as saying that “The highly concentrated Australian retail environment means that such behaviour can create considerable pressure on distributors and sellers, who have limited other retail distribution channels locally.”

The Productivity Commission in its 2011 report entitled “Commonwealth, Economic Structure and Performance of the Australian Retail Industry” recognised that the behaviour described by eBay “may indicate anti-competitive conduct” and, consequently, referred eBay’s submission to the ACCC.16 Presumably, this referral provided momentum for the ACCC’s “front and centre” focus on the online world in 2012.

A Toothless Tiger?

Notwithstanding the ACCC’s stated objectives, the pressing question is whether the ACCC will take a hard-line approach to anti-competitive behaviour in the context of the online space and how effective can it be, particularly given that online activity can be hard to investigate and it’s relatively easy to “phoenix” online business.

Consequently, questions will no doubt be raised by business about the focus now being placed by the ACCC on anti-competitive behaviour in relation to online retailers. However, if the ACCC’s previous approach, as indicated in the resale price maintenance cases and the penalties which have been imposed, is anything to go by, seemingly the ACCC will be enthusiastic in its defence of small online retailers in 2012.

Notwithstanding the enthusiasm with which the ACCC may approach the matter, the applicability of the CCA provisions becomes inherently more complicated in the online world due to jurisdictional issues (i.e. to what extent, if any, does the CCA apply to overseas traders?). Sections 5(1) and 5(2) of the CCA provide for this, in part, by extending the application of Pt IV of the Act to conduct engaged in outside of Australia if the party engaging in the conduct is “carrying on business within Australia.” In fact, the courts have interpreted this phrase to specifically include internet businesses based overseas but which can be accessed by consumers in Australia.17

However, whether the CCA applies and whether its provisions are enforceable are two different questions. The principle that “the courts of one country will not enforce the penal… laws of another”18 complicates the enforceability of the CCA in respect to online commerce. Nonetheless, the ACCC does appear to have strong associations with corresponding international regulators and has, in fact, had some success in enforcing action against overseas-based traders.19 On this basis, despite the obvious difficulties associated with ACCC prosecutions of overseas online retailers, it appears that such prosecutions might have more bite than one would expect.

The New World

The “threat” of online competition is no longer a concern of the future—online competition is now a fact of life. While competition is unquestionably beneficial for consumers and indeed, necessary for business development as a whole, it also invites aggressive anticompetitive behaviour. While it is yet to be seen whether the ACCC will take a forceful approach to online anti-competitive behaviour, given the continuous expansion of retail online, it is difficult to see how such an issue could not be given primacy by the ACCC for some years to come.

Authors: Tanya Bunney and Abbey Richards

Contact

Melbourne
Dan Pearce, Partner
T: +61 (0)3 9321 9840
E: dan.pearce@holdingredlich.com.au

Sydney
Ian Robertson, Partner
T: +61 (0)2 8083 0401
E: ian.robertson@holdingredlich.com.au

Brisbane
Toby Boys, Partner
T: +61 (0)7 3135 0649
E: toby.boys@holdingredlich.com.au

The material contained in this publication is no more than general comment. Readers should not act on the basis of the material without taking professional advice relating to their particular circumstances.

Footnotes:


  1. Rod Sims, “Enduring Perspectives and 2012 Objectives” (Speech delivered at the Australia-Israel Chamber of Commerce Conference, Melbourne, 20 February 2012), 6.
  2. See further Pt VIII of the Competition and Consumer Act 2010 (Cth).
  3. Section 97 of the Competition and Consumer Act 2010 (Cth).
  4. Following an investigation by the ACCC, Graeme Faulkner and Philip Wu, trading as AquaDepot Imports, provided a court enforceable undertaking to the ACCC which provided that AquaDepot would, among other things, send a letter to retailers informing them that they are free to set retail prices for AquaDepot products, place a corrective notice on the AquaDepot website, and attend trade practices compliance training annually for three years.
  5. The matter has been filed in the Federal Court of Australia’s Fast Track List in Melbourne. Orders were made on 20March 2012 which, among other things, set down a two day trial commencing on 12 June 2012.
  6. Section 76(1A)(b) of the Competition and Consumer Act 2010 (Cth).
  7. Section 76(1B)(b) of the Competition and Consumer Act 2010 (Cth).
  8. Section 86E of the Competition and Consumer Act 2010 (Cth).
  9. Section 82 of the Competition and Consumer Act 2010 (Cth).
  10. Section 80 of the Competition and Consumer Act 2010 (Cth).
  11. Section 87 of the Competition and Consumer Act 2010 (Cth).
  12. Australian Competition and Consumer Commission (ACCC) v Telwater Pty Ltd [2009] FCA 263; BC200901829.
  13. Australian Competition and Consumer Commission (ACCC) v Chaste Corp Pty Ltd (in liq) [2005] FCA 1212; BC200506448.
  14. The Allen Consulting Group (on behalf of eBay), Submission No 101 to the Commonwealth Government, Economic Structure and Performance of the Australian Retail Industry, Productivity Commission Inquiry Report, June 2011, vi.
  15. Eli Greenblat, “Big retailers bullying online stores, claims eBay”, The Age (online), 5 September 2011, .
  16. Commonwealth, Economic Structure and Performance of the Australian Retail Industry, Productivity Commission Inquiry Report (2011) No 56, 151.
  17. See for example, Australian Competition and Consumer Commission v Hughes (2002) ATPR 41-863; [2002] FCA 270; BC200200884.
  18. Australian Competition and Consumer Commission (ACCC) v Yellow Page Marketing BV (No 2) (2011) 195 FCR 1; [2011] FCA 352; BC201102241 at 77.
  19. See the discussion of enforcing Australian laws in foreign jurisdictions and the ACCC’s engagement with overseas regulators in Ch 5: “Consumer Protection” in Commonwealth, Economic Structure and Performance of the Australian Retail Industry, Productivity Commission Inquiry Report (2011) No 56, 151.

 

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