AUSTRALIAN COMPETITION AND CONSUMER COMMISSION - Maddocks
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AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Contents Penalties and criminal prosecutions - the year that was 2 Major developments and 2018 enforcement priorities 3 Consumer protection 5 Record penalties 5 ACCC v We Buy Houses — Record penalty 5 ACCC v Ford — New car retailing and previous record penalty 6 Online marketplace 7 ACCC v Meriton — Customer reviews manipulated 7 ACCC v Trivago — Comparison sites under scrutiny 8 ACCC v Service Seeking — Alleged false reviews caught out 8 Online marketplace - Preliminary report released 8 Broadband speed and performance claims 9 ACCC v MyRepublic — Fine point disclaimers 9 ACCC v Aussie Broadband — Congestion free 9 ACCC v Australian Private Networks — Final broadband speed proceedings? 9 Consumer guarantees 10 ACCC v Apple Inc — ‘Errors’ and eligibility for remedies 10 ACCC v Jetstar Airways — ‘Non-refundable’ airfares 10 Australian airlines review refund policies 10 Product safety 11 Takata airbag recall 11 ACCC v Thermomix — Injury risk kept secret 12 Protection of vulnerable consumers 12 Truth in advertising 13 ACCC v Telstra — Not so premium billing 13 ACCC v GAIA — ‘Organic’ claims 13 ACCC v Heinz — Unhealthy food/healthy penalty 14 ACCC v Pental — Unflushable wipes 14 ACCC v Click Energy — Discounts and savings 15 ACCC v Medibank — Unfair conduct not unconsionable 16 Protection of small businesses 17 Unfair contract terms 17 ACCC v Servcorp — Unreasonable and unilateral 17 ACCC v Mitolo — Alleged unfair terms 18 ACCC v Visy and Suez — Price increase and penalty clauses 18 Compliance with the Franchising Code of Conduct 19 ACCC v Geowash — Alleged serious misrepresentations 19 ACCC v Luxottica — Transparency of business structure and marketing funds 19 ACCC v Husqvarna — Definition of ‘franchise agreement’ 20 ACCC v Ultra Tune — The new year starts with a bang 20 Cartels and misuse of market power 21 Misuse of market power 21 Cartel conduct 21 ACCC v Country Care Group — First criminal prosecution 21 ACCC v Yazaki — Record penalty under the CCA 21 ACCC v Flight Centre — The push for higher penalties 22 ACCC v Pfizer — Market power and patent owners 22 ACCC v Pacific National and Aurizon — Alleged substantial lessening of competition 23 ACCC v Cryosite — Blood feud 23 Industry studies 24 Analysis and 2019 predictions 25 Contributors 27 Contact Us 28 1 2018 IN REVIEW ACCC MADDOCKS.COM.AU
Penalties and criminal prosecutions
- the year that was
If any clear theme emerges from a review of the Australian Competition and Consumer Commission’s (ACCC)
enforcement activity in 2018, it would have to be ‘penalties’. In 2018, the ACCC had a laser-like focus on pushing
the boundaries on penalties and in 2018 we saw another record set for the highest ever penalty for breaches of the
Australian Consumer Law (ACL). The ACCC’s efforts in the Courts to increase penalties were also complemented
by it securing legislative reform to increase penalties for future ACL breaches. The ACCC had commented for some
time that ACL penalties needed to be higher and not be seen as merely the ‘cost of doing business’.
The other notable development was the commencement of the first cartel proceeding in Australia against an
individual. While previous years have seen the ACCC seek and obtain criminal prosecutions against a number of
companies, the business community has waited almost 10 years for the first prosecution against an individual. As
the matter is before the Courts, the ACCC has been uncharacteristically (but appropriately) quiet on developments
in this case. Despite this, the outcome of the proceeding is definitely something to watch out for in 2019.
In this publication, we take a look at the ACCC’s leading cases in 2018 and consider how well the ACCC performed
against its 2018 enforcement priorities. As always, the ACCC was very active in pursuing those priorities (in the
2017/18 financial year the ACCC commenced 18 court cases and concluded 108 in-depth investigations). Having
said that, there were a few key areas of focus where we expected to see more cases before the Courts or ACCC
intervention (including for misuse of market power and in the area product safety) and so we predict these will
continue to be a priority for the ACCC in 2019.
Shaun Temby
Partner
Dispute Resolution & Litigation
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 2
Major developments and 2018
enforcement priorities
While not strictly related to enforcement action, one of the corporation is found guilty of an offence under the ACL,
major developments this pastyear, which supports and they can face the following penalties:
will strengthen the ACCC’s enforcement role, was the • for an individual – up to $500,000
amendments to the Competition and Consumer Act 2010
• for a company – the greater of:
(Cth) (CCA) in which the penalties for breaches of the
–– $10 million, or
ACL were significantly increased. This change followed
years of commentary by both ACCC Chair, Mr Rod Sims, –– if the Court can determine the value of the benefit
and the courts, that consumer law penalties were too low obtained from the offence (either directly or indirectly)
– three times the value of the benefit, or
and could be regarded by larger companies as ‘merely the
cost of doing business’. –– if the Court cannot determine the benefit – 10 percent of
the annual turnover of the corporation and related bodies
According to Rod Sims at the time Parliament passed corporate (there are some exceptions which apply).
these changes,
Consequently, we can expect the ACCC to push for
“We have strongly advocated for higher significantly higher penalties for ACL breaches and
maximum penalties to enable courts to impose for penalties for these breaches to increase over time.
more substantial penalties. Penalties need to
hit the bottom line so they are not simply seen
as the cost of doing business. Perhaps more
important, penalties need to be high enough to Stronger penalties required for
be noticed by boards and senior managers so Franchising Code of Conduct
that compliance with the law is a higher priority.
Increased penalties will help to deter large
In a speech to the Franchise Council of Australia in
companies from breaching consumer laws. This
October 2018, ACCC Deputy Chair, Mr Mick Keogh,
is a profound change that I believe will improve
stated that Australia’s Code needs strengthening to better
corporate behaviour significantly, and so improve protect franchisees, including significantly increased
the Australian economy and how it works for penalties for Code breaches, and requiring improved and
consumers”. more meaningful information disclosure to franchisees.
In addition, in 2018 the ACCC focussed its advocacy According to Mr Keogh, these changes, in combination with
work on pushing for stronger penalties for breaches of the stronger unfair contract terms laws, would help to improve
ACL, in particular, for breaches of the unfair contract terms the operations of franchise businesses in Australia. In his
provisions and the Franchising Code of Conduct (Code). speech, Mr Keogh also recognised the importance of
franchisees doing their due diligence, including by seeking
independent advice before investing in a franchise.
Consumer law penalties Mr Keogh stated:
On 23 August 2018, Federal Parliament passed “It is in the interests of all involved in the sector
amendments to the CCA that align the penalty regime for to have a clear understanding of what is required
ACL breaches with the significantly higher penalties that by law, so that businesses focus on becoming
apply for breaches of the competition provisions in Part more competitive and growing market share,
IV of the CCA. To date, the highest penalty imposed for rather than being tempted to take shortcuts that
competition law breaches is $46 million (in the ACCC’s will ultimately damage the business, but also the
cartel proceedings against Yazaki) while the highest reputation of the franchise sector as a whole.”
penalty imposed for ACL breaches is $12 million (handed
down in 2018 against We Buy Houses Pty Ltd).
Under the amended legislation, if an individual or
3 2018 IN REVIEW ACCC MADDOCKS.COM.AU
Major changes needed to get rid of Criminal prosecution
unfair contract terms 2018 also saw the first criminal prosecution of an
Australian corporation and individual under the criminal
On 31 August 2018, Rod Sims addressed the Council cartel provisions of the CCA. Following an investigation
of Small Business Organisations Australia National Small by the ACCC, in February 2018, criminal charges were
Business Summit 2018, advocating that there is a strong laid against The Country Care Group Pty Ltd (Country
case to both strengthen the law and introduce penalties for Care), its Managing Director, Robert Hogan, and a
breaking it. In particular, Mr Sims said this will be the next former employee, Cameron Harrison. Given the criminal
major law change sought by the ACCC noting: nature of the proceedings, their precise current status
“The regime has two significant flaws: first, unfair is unknown. However, it will be interesting to see how
contract terms are not illegal, and second the Australian Courts deal with complex economic issues in a
ACCC cannot seek penalties when the court criminal context for this first time. We will provide a further
has declared an unfair contract term void, nor update when any further information comes to hand.
can we issue infringement notices for contract
terms that are likely to be unfair.”
Enforcement priorities
Inquiry into the Franchising Code and As it does every year, in February 2018, the ACCC
Oil Code released its enforcement priorities for 2018. In summary,
those priorities were:
On 22 March 2018, the Senate referred an inquiry into • consumer protection, particularly in the following areas:
the operation and effectiveness of the Code to the –– motor vehicles and new car retailing
Parliamentary Joint Committee on Corporations and –– consumer issues concerning the use of digital platforms
Financial Services. The terms of reference also cover the and consumer data (ie the online marketplace)
Oil Code of Conduct and business-to-business unfair –– broadband speed and performance claims
contract term legislation. On 11 May 2018 the ACCC
–– systemic issues involving large or national traders
made a submission to the inquiry. avoiding or misrepresenting consumer guarantee
The key recommendations in the ACCC’s submission rights
were that: –– ensuring better product safety outcomes for consumers
in the online marketplace
• infringement notices and civil pecuniary penalties should
be made available for all breaches of the Code and the –– (as is always the case) the protection of vulnerable
Oil Code and the quantum of penalties currently available consumers
should be increased; and • protecting small businesses through:
• civil pecuniary penalties should be available for breaches –– taking action against companies utilising unfair
of unfair contract term legislation and the threshold for contract terms
the up-front value of the contract as well as the threshold
–– raising compliance with the Code
to be considered a small business be reviewed.
• misuse of market power and cartel conduct.
The final report from the Committee is expected in early
2019. Following publication of the report, we can expect to
see continued ACCC advocacy in this area. Whether the
Commission has yet made the case for these changes or In the 2017/18
if it’s still too soon to be talking about penalising a concept
as vague as ‘fairness’ is still to be seen.
financial year, the
ACCC secured nearly
$170 million
in penalties for breaches
of competition and
consumer law
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 4
Consumer protection
2018 saw record penalties awarded in the consumer protection space and the ACCC take significant action against
businesses to ensure they comply with their obligations in the online marketplace.
Record penalties
ACCC v We Buy Houses In November 2018, in proceedings brought by the ACCC, the Federal Court
imposed record penalties totalling $18 million against We Buy Houses Pty
Record penalty
Ltd (We Buy Houses) and its sole director, Rick Otton, for making false or
misleading representations.
The penalties of $12 million imposed against We Buy Houses, and $6 million
imposed against Mr Otton personally, were in response to free seminars, paid
‘boot camps’ and mentoring programs that made false or misleading claims to
vulnerable consumers about creating wealth through buying and selling real
estate. In particular, the programs asserted that people could buy a house for
as little as $1 without the need for a deposit or bank loan. The Court found
these (and other similar) representations were false and misleading.
In the 2017/18 financial
year, the ACCC obtained
$48.7 million
in penalties from litigated
consumer protection matters
5 2018 IN REVIEW ACCC MADDOCKS.COM.AU
ACCC v Ford In April 2018, in what was (then) a new record penalty, the Ford Motor Company
of Australia Ltd (Ford) was ordered to pay $10 million in penalties after the
New car retailing and previous
Federal Court declared it engaged in unconscionable conduct in connection
record penalty
with its handling of customer complaints about PowerShift Transmission (PST)
vehicles.
Ford and its dealers received numerous complaints from customers about
issues with PST vehicles including excessive clutch shudder and excessive
transmission noise. However, despite knowing that the above issues were
symptoms of quality issues with the transmission, Ford often attributed the
symptoms to the customers’ driving style. Further, Ford knew the issues would
appear intermittently but still required customers to demonstrate the issues on
demand in order for repairs to be undertaken.
In addition, Ford largely refused to refund affected customers and essentially
told consumers that refunds and replacement vehicles were not an option,
when they may have been legally entitled to those remedies under the ACL.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 6
In the 2017/18 financial
year, the ACCC obtained
$120.1 million
in penalties from litigated
competition matters
Online marketplace
The ACCC has continued to take steps to ensure that companies operating predominantly in the online environment
comply with their obligations under the ACL.
In July 2018, the Federal Court ordered that Meriton Property Services Pty Ltd
ACCC v Meriton
(Meriton), a provider of serviced apartment accommodation, pay $3 million in
Customer reviews penalties for manipulating reviews on the TripAdvisor website, in breach of the ACL.
manipulated
Meriton utilised TripAdvisor’s ‘Review Express’ service, which requires
participating accommodation providers to provide TripAdvisor with the email
addresses of recent customers (who have consented to having their information
shared). TripAdvisor emails the customers to request that they submit a review
of their experience with their accommodation provider.
In an effort to suppress any negative reviews, Meriton management instructed
staff to alter or omit the email addresses of those customers who were expected
to provide a negative review, so that the requests for a review did not reach
these customers. Meriton’s reviews on ratings on TripAdvisor were therefore
positively skewed.
At the time the decision was handed down, ACCC Commissioner Sarah Court
said that,
“people often make purchasing decisions for accommodation
based on the rankings and reviews they read on third party sites
like Trip Advisor. Manipulating these reviews is misleading to
potential customers, who deserve the full picture when making a
booking decision.”
7 2018 IN REVIEW ACCC MADDOCKS.COM.AU
ACCC v Trivago In August 2018, the ACCC instituted proceedings in the Federal Court against
Trivago N.V. (Trivago) alleging that it made misleading hotel pricing representations
Comparison sites under
in its television advertising and on its website, in breach of the ACL.
scrutiny
Trivago is effectively a search engine that aggregates online hotel offers from online
travel agents, hotel chains and independent hotels. According to the ACCC, its
main source of revenue is the cost-per-click (CPC) payments it receives, where
advertisers are charged a fee each time a user clicks on one of their offers.
The ACCC alleges that:
• From at least December 2013, Trivago ran TV advertisements presenting its
website as an impartial and objective price comparison service that would
help consumers identify the cheapest prices for hotel rooms when, in fact,
Trivago’s website highlighted and prioritised advertisers who were willing to
pay the highest cost per click fee to Trivago.
• Because of the design of Trivago’s website and the representations made,
consumers were unable to make a genuine choice about a hotel price due to these
misleading impression created by the Trivago website. In particular, consumers
may have formed the incorrect impression that Trivago’s highlighted deals were
the best price they could get at a particular hotel, when that was not the case.
• Trivago’s online strike-through price comparisons were false or misleading
because they often compared an offer for a standard room with an offer for a
luxury room at the same hotel, creating a false impression of savings offered
for the standard room.
Trivago is defending the proceedings. We understand that the proceedings
were unable to be settled in a mediation in late 2018 and the ACCC must file
its evidence in chief by 17 May 2019.
In December 2018, the ACCC announced it had commenced proceedings against
ACCC v Service Seeking
Service Seeking Pty Ltd (an online tasking platform) for engaging in misleading or
Alleged false reviews caught decpetive conduct regarding the customer reviews published on its website. The
out ACCC alleges that the company set up a ‘Fast Feedback’ system whereby the
businesses who provided services through the website could write their own reviews
on behalf of their customers and send them to those customers by email. If the
customers did not respond within three days, the ACCC alleges that the review was
automatically published on the businesses’ profile on Service Seeking’s website.
The ACCC alleges that this conduct breached the ACL by misleading
consumers, as at least 80% of the ‘Fast Feedback’ reviews were not written
by or approved by customers. Service Seeking must file its response to the
ACCC’s claim by 13 March 2019.
Online marketplace - Preliminary report released
On 10 December 2018, the ACCC released its preliminary report into Google, Facebook and Australian news and advertising.
The report contained 11 preliminary recommendations and eight areas for further analysis as the inquiry continues. In particular,
the report detailed the ACCC’s concerns regarding the market power held by Google (in online research, search advertising
and news referral) and Facebook (in social media, display advertising and online news referral) and the resulting ability of those
businesses to monetise their content. The ACCC is seeking feedback on the report by 15 February 2019.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 8
Broadband speed and performance claims
In 2017, the ACCC took action against many of the major players in Australia and secured penalties or undertakings to
clarify their promotion of data limits and broadband speeds. While the ACCC had indicated that this would continue to
be a focus in 2018, the ACCC did not commence a large amount of proceedings in this space, which we think suggests
that its attention might move elsewhere in 2019. By the end of 2018, with the commencement of proceedings against
Australian Private Networks in December, it appears that the ACCC might have wrapped up its long period of scrutiny
of broadband speed representations.
In July 2018, the ACCC issued NBN provider MyRepublic Pty Ltd with
ACCC v MyRepublic
infringement notices requiring it to pay penalties totalling $25,200 for alleged
Fine point disclaimers false or misleading representations about its NBN service performance. In
particular, the company made a number of representations about its broadband
speeds and the ACCC was concerned that the fine print disclaimers on its
website were not prominent enough.
In September 2018, in response to concerns raised by the ACCC, NBN provider
ACCC v Aussie Broadband
Aussie Broadband removed statements across its advertising which described
Congestion free its broadband services as ‘congestion-free’. ‘Congestion’ occurs in broadband
networks when demand from users exceeds available capacity and this results
in slower speeds for customers particularly at peak times between 7pm and
11pm. The ACCC was concerned that Aussie Broadband’s statements might
lead consumers to believe that Aussie Broadband’s services would not ever
experience congestion, when that was not the case.
In December 2018 the ACCC instituted proceedings against internet provider
ACCC v Australian Private
Australian Private Networks Pty Ltd (trading as Activ8me) for allegedly making
Networks
false or misleading representations in advertisements that consumers could
Final broadband speed access speeds of up to 100Mbps for $59.95 a month with no setup fee when
proceedings? this was not the case. Activ8me also told consumers that they would receive
unlimited data when in fact Activ8me could suspend access or charge more for
data use it deemed ‘unreasonable’.
This action followed the issuing of an infringement notice to Activ8me earlier
in the year.
9 2018 IN REVIEW ACCC MADDOCKS.COM.AUConsumer guarantees
In June 2018, Apple was ordered by the Federal Court to pay penalties of $9
ACCC v Apple Inc
million for making false or misleading representations to consumers about their
‘Errors’ and eligibility for rights under the ACL.
remedies
‘Error 53’ notifications appeared on some iPhones and iPads after users
installed an updated to the ‘iOS’ software on their device. This error effectively
disabled the affected devices. Apple admitted that, after consumers sought the
company’s assistance, Apple made representations to at least 275 affected
Australian customers that if their device had been repaired by a third-party,
they were not eligible for a remedy. These representations were made on the
Apple US website, by staff in Apple Australia stores and by telephone customer
service representatives from February 2015 to February 2016.
In effect, the Court held that the mere fact that a device had been repaired
by someone other than Apple did not, and could not, result in the consumer
guarantee provisions ceasing to apply and accordingly the resignations were
false or misleading.
In December 2018, the ACCC instituted proceedings against Jetstar
ACCC v Jetstar Airways
Airways Pty Ltd (Jetstar), alleging that the airline made false or misleading
‘Non-refundable’ airfares representations on its website that some fares were not refundable and that
consumers could only get a refund if they purchased a more expensive fare. As
part of the proceedings, Jetstar admitted that these representations were made
and that they constituted false representations about consumer guarantee
rights, in breach of the ACL. Jetstar also admitted that its terms and conditions
contained representations that consumer guarantees under the ACL did not
apply to its flight services.
The ACCC and Jetstar have jointly submitted to the Federal Court that Jetstar
should be ordered to pay a $1.95 million penalty.
Australian airlines review refund policies
In December 2018, the ACCC announced that it had accepted court-enforceable undertakings from each of Qantas,
Virgin, Jetstar and Tigerair which requires all of those airlines to review their refund policies, compliance programs,
websites and booking system. The ACCC was concerned that each airline had made false or misleading representations
on their websites that misled consumers about their rights to refunds and resupply in the event of significant flight delays
or cancellations.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 10Product safety
Takata airbag recall
In February 2018, following the ACCC’s investigation and a long-running voluntary recall, the Assistant Minister to the
Treasurer, the Hon Michael Sukkar issued a compulsory recall notice for vehicles containing faulty Takata airbags. The
ACCC’s safety investigation established that, due to the composition of the propellant in the airbags (when combined
with factors such as age or exposure to high temperatures) the deployment of those airbags may result in sharp metal
fragments shooting from the airbag, hitting vehicle occupants. More than 350,000 faulty Takata airbags were replaced
in the quarter following 1 July 2018, equal to more than 3,000 replacements each day.
In the 2017/18 financial year,
the ACCC published 591
voluntary recall notices
11 2018 IN REVIEW ACCC MADDOCKS.COM.AUIn April 2018, the Federal Court ordered Thermomix Australia Pty Ltd
ACCC v Thermomix
(Thermomix) to pay penalties totalling $4,608,500 for making false or
Injury risk kept secret misleading representations and misleading the public (through silence)
regarding a known safety issue affecting its TM31 appliance. Specifically, the
Court found that from July 2014, Thermomix knew that there was a potential
risk of injury with the product but it continued to supply and promote it until
September 2014. It also failed to notify consumers of the safety issue until 23
September 2014.
The Federal Court also found that Thermomix had made false or misleading
representations to a number of consumers about their consumer guarantee
rights, namely that either refunds or replacements were not available to them or,
in one case, that their entitlement to a refund or remedy was conditional on the
consumer signing a non-disclosure agreement.
Protection of vulnerable consumers
The record penalty obtained by the ACCC in its proceedings against We Buy Houses Pty Ltd (as noted on page 5)
was a terrific result and shows that companies who take advantage of vulnerable consumers will certainly pay the
price. In 2018, the ACCC continued to have success in this field, with the Federal Court finding in September that
yet another training college (this time, Cornerstone Investments Pty Ltd trading as Empower Institute) had engaged in
unconscionable and misleading or deceptive conduct, and made false or misleading representations when enrolling
consumers into diploma courses. This is the latest in a long line of training colleges who have engaged in similar conduct
and have similarly been dragged over the coals by the ACCC. The ACCC recently announced it was seeking a record
penalty against Cornerstone Investments Pty Ltd.
Further, while the ACCC was unsuccessful in an appeal by Unique International College Pty Ltd in September, in arguing that
that institution engaged in a system of unconscionable conduct, the Federal Court previously found in the ACCC’s favour for a
more narrow course of conduct. The Federal Court is currently determining what relief to award in those proceedings.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 12Truth in advertising
Truth in advertising was and remains a priority area for the ACCC with a focus on ensuring that consumers are not misled
and that honest traders are not put at a competitive disadvantage. However, in both 2017 and 2018, the ACCC also
prioritised matters where large companies engage in national conduct that could potentially result in greater consumer
detriment from their actions and there is a likelihood that the conduct of larger businesses can influence the behaviour
of other market participants.
ACCC v Telstra In April 2018, following action by the ACCC, the Federal Court imposed penalties
of $10 million against Telstra for making false or misleading representations
Not so premium billing
to customers regarding its third-party billing service, ‘Premium Direct Billing’
(PDB).
The ACCC alleged that Telstra did not adequately inform customers that PDB
was set up as a default on mobile phone accounts and customers were billed
even where they had unknowingly purchased digital content, such as games
and ringtones. According to a report it provided to the ACCC, Telstra has since
refunded $9.3 million to 72,000 customers, in addition to at least $5 million
paid during the operation of PDB.
Telstra has ceased the PDB service entirely and has said it will review any
further complaints in light of this action and in good faith.
ACCC v GAIA In June 2018, the ACCC imposed a $37,800 penalty (by way of an infringement
notice) against skin care company ‘GAIA Skin Naturals’ relating to its Natural
‘Organic’ claims
Baby Bath & Body Wash, Baby Shampoo and Baby Moisturisers products (the
products) for alleged false or misleading representations. The ACCC took
issue with GAIA using the label ‘Pure, Natural, and Organic’ on the products
when, in fact, the products contained two synthetic chemical preservatives
(among their organic ingredients). At the centre of the ACCC’s decision to
impose a penalty was its concern that GAIA may have misled consumers into
believing that they were mistakenly paying a premium to purchase organic
products free from synthetic chemicals.
13 2018 IN REVIEW ACCC MADDOCKS.COM.AUACCC v Heinz In 2016, the ACCC instituted proceedings against Heinz, alleging that images
and statements on its ‘Shredz’ products represented to consumers that they
Unhealthy food/healthy
were a healthy and nutritious food for young children when this was objectively
penalty
not the case (given the product was approximately two-thirds sugar). The Court
found that the combination of imagery and words on the packaging, including
prominent pictures of wholesome fresh fruit and vegetables and statements
such as ‘99 percent fruit and veg’, conjured up the impressions of nutritiousness
and health.
In August 2018, the Federal Court of Australia ordered Heinz to pay penalties
totalling $2.25 million for making the misleading health claim. Further, the Court
found that Heinz nutritionists ought to have known that, given the product was
approximately two-thirds sugar, a representation that the product was beneficial
to health of children was misleading.
In the 2017/18 financial
year, the ACCC commenced
18 court cases
ACCC v Pental In April 2018, in proceedings instituted by the ACCC, the Federal Court
ordered Pental Ltd and Pental Products Pty Ltd (together, Pental) to pay
Unflushable wipes
penalties totalling $700,000 and implement a compliance program for false and
misleading representations about its White King ‘flushable’ toilet and bathroom
cleaning wipes. Between February 2011 and July 2016, the packaging and
promotional materials for the wipes advertised them as ‘flushable’ and stated
that they would disintegrate like toilet paper. Pental has admitted that these
representations were false.
The ACCC has separate ongoing proceedings against Kimberly-Clark Australia
Pty Ltd (Kimberly-Clark) regarding its ‘flushable’ personal hygiene wipes that
were marketed and supplied between May 2013 and May 2016. Kimberly-Clark
is defending the claims.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 14ACCC v Click Energy In July 2018, the ACCC instituted proceedings in the Federal Court against
Amaysim Energy Pty Ltd (trading as Click Energy) (Click Energy) alleging it
Discounts and savings
made false or misleading marketing claims about discounts and savings that
Victorian and Queensland customers could obtain.
The ACCC alleges that Click Energy represented to consumers that they could
get discounts of between seven and 29 percent off Click Energy’s energy
charges if they paid their bills on time. In actuality, the ACCC alleges that these
supposed ‘discounts’ were higher than Click Energy’s standing offer rates and
accordingly, the representations were false or misleading.
Click Energy also represented that consumers would save an estimated amount
if they switched providers, which the ACCC alleges is false or misleading as
Click Energy had no proper basis for these representations.
At the time, Chairman of the ACCC, Rod Sims commented that,
“We believe that Click Energy’s conduct is among the worst
practices we see in retail electricity marketing. We allege that
consumers were misled about discounts and savings, with some
consumers not getting any discount or savings at all.”
15 2018 IN REVIEW ACCC MADDOCKS.COM.AUACCC v Medibank In December 2018, the Full Federal Court dismissed the ACCC’s appeal
regarding Medibank Private Limited (Medibank). The ACCC had alleged at
Unfair conduct not
trial that Medibank made false, misleading or deceptive representations and
unconsionable
engaged in unconscionable conduct in its failure to notify its members of its
decision to limit benefits for in-hospital pathology and radiology services. The
Full Federal Court found that, while Medibank had acted unfairly, its conduct fell
short of the threshold for unconscionable conduct.
In the 2017/18 financial year,
the ACCC concluded 108
in-depth investigations
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 16Protection of small businesses
Unfair contract terms
Following its successful B2B action in 2017 against JJ Richards, the ACCC has continued its hunt for companies that
include unfair terms in their standard form contracts. A clear picture is emerging of the types of terms that are of interest
to the ACCC, including terms which: permit unilateral termination of a contract; permit unilaterial variations to a contract;
and unreasonably permit one party to limit their liability under the contract.
ACCC v Servcorp In July 2018, the Federal Court declared by consent that 12 terms in standard
form contracts used by two Servcorp Ltd subsidiaries (Servcorp) were unfair
Unreasonable and unilateral
and therefore void.
Among the terms declared to be unfair were those that had the effect of:
• automatically renewing a customer’s contract, unless the customer had opted
out, and allowing Servcorp to then unilaterally increase the contract price
• permitting Servcorp to unilaterally terminate a contract
• unreasonably limiting Servcorp’s liability or imposing unreasonable liability
on the customer
• penalising a customer if it convinces another customer of Servcorp to move
to a competitor.
Servcorp was also required to implement a compliance program to ensure it
did not contravene the legislation in future, and pay the ACCC’s costs in the
proceeding, fixed at $150,000.
In the 2017/18 financial year, the
ACCC progressed or completed
eight market studies
17 2018 IN REVIEW ACCC MADDOCKS.COM.AUACCC v Mitolo In June 2018, the ACCC instituted proceedings against the largest potato
wholesaler in Australia, Mitolo Group Pty Ltd and a related entity (Mitolo)
Alleged unfair terms
claiming, among other things, that terms in its standard form contracts with
potato farmers were unfair contract terms. Among the terms of concern in
Mitolo’s agreements were provisions that allowed Mitolo to:
• unilaterally determine or vary the price Mitolo paid farmers for potatoes
• unilaterally vary other contractual terms
• declare potatoes as ‘wastage’ without a mechanism for review
• prevent farmers from selling potatoes to alternative purchasers.
The parties will convene for a second attempt at mediation in February 2019.
ACCC v Visy and Suez In December 2018, the ACCC announced that, following an investigation into
the use of unfair contract terms in the waste management industry, Visy Paper
Price increase and penalty
Pty Ltd (trading as Visy Recycling), Cleanaway Pty Ltd and Suez Recycling
clauses
& Recovery Pty Ltd had voluntarily reviewed and amended potentially unfair
contract terms in their standard form contracts.
Of particular note, all three companies agreed to amend their price variation
and liquidated damages clauses that previously allowed them to unilaterally
increase their prices (in specified circumstances) and impose penalties on
customers who wanted to exit their contracts before the end of the term.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 18Compliance with the Franchising Code of Conduct
ACCC v Geowash In 2017, the ACCC was granted leave to commence proceedings against
Geowash Pty Ltd (subject to deed of company arrangement) (Geowash), a
Alleged serious
former national franchisor that marketed and sold hand car wash franchises
misrepresentations
between 2013 and 2016.
The ACCC alleged that Geowash made false or misleading representations to
prospective franchisees on its website that:
• they could make revenues of $70,216 and estimated profits of $30,439 in an
average 28-day period, when Geowash did not have reasonable grounds for
making those representations
• Geowash had a commercial relationship or affiliation with companies such as
Nissan, Kia, Renault, Audi, Emirates, Shell, Hertz, Holden, Ikea, and Thrifty,
when it did not.
The ACCC also alleged that Geowash directed a substantial part of
franchisee funds for purposes not permitted under the franchise agreement
and did not disclose to franchisees, including payment of commissions to the
directors. Geowash and its directors deny the allegations.
The substantive hearing took place in June and September 2018 and judgment
has been reserved.
ACCC v Luxottica In September 2018, following an ACCC investigation, Luxottica Franchising
Australia (Luxottica), the franchisor of eyewear retailers OPSM and Laubman
Transparency of business
and Pank, voluntarily committed to change its marketing fund financial statement
structure and marketing funds
and disclosure document to be more transparent about the structure and
operation of its franchise system.
The ACCC’s investigation found that those documents were unlikely to
comply with the Code. In particular, Luxottica’s marketing fund statement did
not provide information about how much money the Luxottica associate that
operated the corporate stores paid for marketing, or what marketing services
were purchased using money contributed by company-owned stores.
Further, the statement did not disclose enough specifics about marketing expenses,
such as which brands (OPSM or Laubman and Pank) the marketing funds were
being spent on, or in what geographic locations the advertising was run.
Luxottica’s disclosure document was also unlikely to comply with the Code as
it did not identify the Luxottica associate that operated the corporate stores
or that this associate managed the marketing for all corporate-owned and
franchised stores.
19 2018 IN REVIEW ACCC MADDOCKS.COM.AUACCC v Husqvarna In August 2018, the ACCC accepted a court enforceable undertaking from
Husqvarna Australia Pty Ltd (Husqvarna), a supplier of outdoor power
Definition of ‘franchise
products, after it admitted it likely misled its franchisees when it stated that the
agreement’
Code did not apply to their contracts.
Husqvarna effectively told its dealers that their dealership agreements were
not franchising agreements and were therefore not subject to the Code. An
agreement will be covered by the Code if it meets the definition of ‘franchise
agreement’, regardless of whether or not it is called a ‘franchise agreement’.
The ACCC was concerned that, by claiming that the dealership agreements
were not franchising agreements, Husqvarna likely gave dealers the impression
that they were not entitled to protections under the Code. Husqvarna
acknowledged its representations were likely to be misleading and in breach
of the ACL.
ACCC v Ultra Tune Although slightly outside the scope of this ‘2018 in review’ article, it would be
remiss of us not to mention the ACCC’s success in its proceedings against Ultra
The new year starts with a
Tune, handed down in the early days of 2019. These were the first proceedings
bang
that the ACCC has brought against a franchisor alleging a breach of the Code
obligation to act in good faith in business dealings with franchisees.
The Federal Court found that Ultra Tune breached this obligation and made
false or misleading representations to a prospective franchisee about the price
of a franchise, the ongoing rent of the premises, and the age of the franchise.
It also found that Ultra Tune breached the Code in the way it dealt with its
marketing fund statements and then attempted to cover up all of its conduct by
relying on documents which were not provided to the franchisee.
For its trouble, Ultra Tune has been ordered to pay a penalty of $2.6 million for
what Justice Bromwich described as ‘a most serious and fundamental breach
of the Franchising Code.’ Is this the ‘big scalp’ the ACCC has been searching
for? One thing is for sure, franchisors now need to be on heightened alert and
ensure they strictly comply with the Code.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 20Cartels and misuse of market power
Misuse of market power
Although the ACCC announced that the amendments to the Competition and Consumer Act 2010 (Cth), which came
into force in November 2017 (implementing the Harper Report recommendations), would be a major focus for the ACCC
in 2018, the ACCC is yet to take any major steps in this space. This is to be expected, given that investigations of this
kind take time. As a result we expect this area to be an ongoing focus for the ACCC in 2019.
Cartel conduct
ACCC v Country Care Group As noted above, in February 2018, following an investigation by the ACCC, criminal
charges were laid against The Country Care Group Pty Ltd (Country Care), its
First criminal prosecution
Managing Director, Robert Hogan, and a former employee, Cameron Harrison.
This marks the first criminal prosecution of an Australian corporation under the
criminal cartel provisions of the CCA. It is alleged that Country Care, a Mildura-
based company, engaged in cartel conduct involving assistive technology
products used in rehabilitation and aged care, including beds and mattresses,
wheelchairs and walking frames.
ACCC v Yazaki In December 2012, the ACCC instituted proceedings against Yazaki Corporation
(Yazaki), a Japanese company, and its Australian subsidiary, Australian Arrow
Record penalty under the CCA
Pty Ltd alleging that the companies engaged in cartel conduct in the supply
of wire harnesses to Toyota and its related entities in Australia between 2003
and at least late 2009. The ACCC’s action followed similar enforcement action
against Yazaki and other cartel participants by competition regulators in the US,
Canada, and Japan.
In November 2015, the Federal Court found that Yazaki engaged in collusive
conduct with its competitor and that the conduct breached the CCA, even
though much of the conduct occurred in Japan. The Court imposed penalties
of $9.5 million against Yazaki.
The ACCC appealed the decision because it believed that the penalties
imposed were insufficient to adequately deter Yazaki or other businesses from
engaging in cartel conduct in the future. It submitted to the Court that Yazaki
should be ordered to pay a penalty of between $42 million and $55 million to
reflect both the size of Yazaki’s operations and the very serious nature of its
collusive conduct.
In May 2018, the Full Federal Court ordered Yazaki to pay increased penalties
of $46 million. This is the highest penalty ever imposed under the CCA. Yazaki
then sought special leave to appeal to the High Court, which was refused.
21 2018 IN REVIEW ACCC MADDOCKS.COM.AUACCC v Flight Centre In April 2018, the Full Federal Court ordered Flight Centre to pay penalties
totalling $12.5 million for attempting to induce three international airlines to
The push for higher penalties
enter into price-fixing arrangements between 2005 and 2009. Under the
arrangement, each airline would agree not to offer airfares on its own website
that were lower than those offered by Flight Centre.
In March 2014, the Federal Court imposed a penalty of $11 million against Flight
Centre. Flight Centre appealed the liability finding and the ACCC appealed the
$11 million penalty orders because it considered that the penalty would not
send a strong deterrence message to Flight Centre and other businesses. In
May 2014, the Full Federal Court found that Flight Centre’s conduct did not
breach the CCA.
The ACCC sought special leave to appeal and, in December 2016, the High
Court allowed the ACCC’s appeal. The matter was remitted to the Full Federal
Court and, in April 2018, the Full Federal Court ordered an increase in penalties
payable by Flight Centre to $12.5 million.
ACCC v Pfizer In early 2012, Pfizer offered significant discounts and the release of rebates
accrued on previous sales of Lipitor to pharmacies. Pfizer’s offer was
Market power and patent
conditional upon pharmacies acquiring a minimum volume of Pfizer’s generic
owners
atorvastatin and agreeing to restrict their re-supply of competing generic
atorvastatin products. The ACCC alleged that Pfizer misused its market power
resulting from its position as the patent holder of atorvastatin to prevent or deter
competition from other suppliers selling generic products to pharmacies. The
ACCC also alleged Pfizer’s conduct was exclusive dealing conduct with the
purpose of substantially lessening competition in the market for atorvastatin.
On 19 October 2018, the High Court dismissed the ACCC’s application for
special leave to appeal the Full Federal Court decision in a case against Pfizer
Australia Pty Ltd (Pfizer). While the Full Federal Court found that Pfizer took
advantage of its substantial market power, it didn’t agree with the ACCC’s
allegation that Pfizer had acted for the purpose of substantially lessening
competition or deterring or preventing competitors from competing.
The ACCC sought special leave to appeal to the High Court, which was refused
on 19 October 2018.
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 22ACCC v Pacific National and On 19 July 2018, the ACCC instituted proceedings in the Federal Court
Aurizon against Pacific National and Aurizon for allegedly reaching an understanding in
relation to Aurizon’s intermodal business that had the purpose and/or would be
Alleged substantial lessening
likely to have the effect of substantially lessening competition in the supply of
of competition
intermodal and steel rail linehaul services. Late last year, upon opening its
case, the ACCC indicated it would drop a number of the allegations against
the parties, including that they reached any understanding or agreement for a
prescribed purpose. The ACCC formally made those changes to its claim in
February 2019, but continues to allege that the parties’ agreement will lead to
a substantial lessening of competition and is seeking declarations, pecuniary
penalties, orders restraining Pacific National from acquiring the Acacia Ridge
Terminal and Aurizon’s Queensland intermodal business, and costs. Pacific
National and Aurizon are defending the proceedings which are scheduled to
resume on 12 February 2019.
ACCC v Cryosite On 12 July 2018, the ACCC instituted proceedings in the Federal Court against
Cryosite Limited (Cryosite) for alleged cartel conduct in its entry into an asset
Blood feud
sale agreement with Cell Care Australia Pty Ltd (Cell Care).
In June 2017, Cryosite signed an agreement to sell its assets in its cord blood
and tissue banking business to Cell Care. Prior to this, Cryosite and Cell Care
were the only private suppliers of cord blood and tissue banking services in
Australia. The stem cells in cord blood and tissue, which are collected at the
birth of a child and then stored, can be used in the treatment of certain blood
disorders. The asset sale agreement required Cryosite to refer all customer
enquiries to Cell Care after the agreement was signed but before the acquisition
was completed.
The ACCC alleges this amounts to cartel conduct (in particular, gun jumping)
because it restricted or limited Cryosite’s supply of cord blood and tissue
banking services and allocated potential customers from Cryosite to Cell Care.
The ACCC is seeking declarations, pecuniary penalties, a compliance training
program and costs.
Cryosite is defending the proceedings.
23 2018 IN REVIEW ACCC MADDOCKS.COM.AUIndustry studies
In 2018, the ACCC continued its work in relation to a number of market studies and inquiries:
The communications sector market study final report
was released in April 2018. The report included 28
recommendations and actions on competition and
consumer issues. It highlighted encouraging progress
on issues such as NBN speeds, competition and
work towards improved service standards.
In March 2018, the ACCC issued its interim report
for the Residential Mortgage Products Price Inquiry,
which is monitoring the prices charged by the five
banks affected by the Government’s Major Bank
Levy. The interim report revealed signs of less than
vigorous price competition, especially between the
big four banks.
In April 2018, the ACCC issued the final report for
our Residential Mortgage Products Price Inquiry.
The inquiry examined the competitiveness of
prices, trading practices and the supply chain in
the Australian dairy industry. The report made eight
recommendations for improved transparency and
the allocation of risk in the commercial relationships
between Australian dairy processors and farmers.
In June 2018, the ACCC provided an updated
report to the Treasurer on their inquiry into the
supply of residential building (home), contents
In the 2017/18 financial
and strata insurance products to consumers in
northern Australia. The report contains preliminary
observations about the northern Australia insurance
year, the ACCC assessed
market drawn from public consultation and
information gathered from insurers. 281 mergers
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 24Analysis and 2019 predictions
We set out below our thoughts as to how the ACCC performed against its 2018 enforcement priorities and our views
on what lies ahead for 2019.
Consumer protection Consumer guarantees
As with every year, the ACCC was very busy in this area 2018 saw less prosecutions than we expected in this
in 2018. 2019 will not be any different and we predict area. Given that businesses still regularly fall foul of these
that the ACCC will be aggressively pushing for increased provisions, it will be an ongoing priority for the ACCC.
penalties throughout the year and with a particular focus
on the online marketplace (in particular, price comparison
sites) and the failure of retailers and manufacturers to
comply with Australia’s consumer guarantee regime. Product safety
This was arguably another quiet area for the ACCC in 2018.
Following their usual pattern, once the ACCC has completed
Motor vehicles its industry engagement, we can expect to see some
prosecutions in 2019, particularly against online retailers.
With the Takata airbag recall ongoing and the decision in
the ACCC’s proceedings against Ford handed down, the
motor vehicle sector took up a fair degree of the ACCC’s
time this year. However, we think that current structural Protecting vulnerable consumers
changes happening in the sector mean that the sector will
continue to be a focus for the ACCC for the foreseeable This has been an ongoing priority for the ACCC for some
future and we anticipate at least one prosecution in this time and will always be a part of the ACCC’s ‘business as
sector in 2019. usual’. Although we didn’t address this issue in detail, in
2018 the ACCC continued its work in this area, continuing
its investigations and prosecutions of training colleges who
have engaged in unconscionable conduct and misleading
Broadband speed and performance or deceptive conduct. Expect to see the ACCC identify one
or more new communities of vulnerable consumers being
claims targeted by opportunistic and unscrupulous businesses.
By the end of 2017, the ACCC had taken action against
many of the major players in Australia and secured penalties
or undertakings to clarify promotion of data limits and
broadband speeds. Apart from the ACCC’s ongoing
proceedings against Australian Private Networks, we expect
that the ACCC’s attention will move elsewhere in 2019.
25 2018 IN REVIEW ACCC MADDOCKS.COM.AUUnfair contract terms Misuse of market power
Curiously, while the ACCC regularly states that this area is As set out above, although publicly there may have been
very problematic, the number of proceedings commenced little evidence of the ACCC taking any major steps in this
tends to contradict this assertion. It could be that the area, investigations of this kind take time and we expect
ACCC’s extensive education program is succeeding in this area to be an ongoing focus for the ACCC in 2019,
driving market changes, or possibly the ACCC may be with possibly a prosecution or two towards the end of the
deterred from taking action in any but the most extreme year or (more likely) in 2020.
cases due to the fact that there are (presently) no penalties
for breaches of these provisions. Based on the public
comments made by ACCC personnel last year, we expect
that we will see a big push for legislative reform in this area Cartel conduct
in 2019. In particular, a push for penalties to further deter
businesses from attempting to rely on unfair contract terms. With a record penalty and the first criminal prosecution,
2018 was a big year for cartel prosecutions. Consistent
with previous years, 2018 also saw a small number of new
proceedings commenced. The big news in 2019 will be how
Franchising Code of Conduct the Courts and the ACCC deal with criminal prosecutions,
including the ongoing Country Care proceedings.
We’ve been saying for the last year or two that the ACCC has
been searching for a big name scalp. Was Ultra Tune the big
scalp the ACCC has been searching for? It certainly should
send some shock waves through the sector given the size of A busy year ahead
some of the penalties and the approach taken by the Court to
disclosure obligations under the Code. Given the completion On 26 February 2019, the ACCC will formally release its
of the Senate Inquiry and the publication of its report early in enforcement priorities for the year. With the result of the
2019, we predict this will be an ongoing area of focus for the parliamentary review into franchising due early in 2019 and
ACCC, as it looks to prosecute a big brand national or multi- the ongoing effects of the Banking Royal Commission still
national franchise systems in 2019 to bolster its arguments yet to be fully realised, 2019 is shaping up to be another
for further legislative reform in this area. very busy year for the ACCC.
In the 2017/18
financial year, the
ACCC received 12.4
million website views
MADDOCKS.COM.AU 2018 IN REVIEW ACCC 26Contributors
Shaun Temby
Partner
Dispute Resolution & Litigation
Shaun is experienced in competition and consumer law South Wales and Western Australia, Shaun has unique
advice and litigation, and property disputes, including experience resolving Competition and Consumer Act
retail and commercial leasing matters, and large-scale 2010 investigations and prosecutions.
commercial and contractual disputes.
Shaun regularly acts for clients at all levels of the franchising
With an in-depth understanding of competition and and consumer markets sector across Australia. He is
consumer law, Shaun regularly acts for clients in matters highly regarded for his legal knowledge, strategic advice
involving restrictive trade practices, and the Australian and negotiating skills.
Consumer Law. Having acted for the ACCC in both New
Christopher Marsh
Senior Associate
Dispute Resolution & Litigation
Christopher specialises in competition and consumer to franchisors on compliance with the Franchising Code of
law advice and litigation and advising clients on general Conduct and disputes with franchisees.
contractual and commercial disputes.
Christopher also has significant experience assisting
Christopher’s practice has a strong focus on the clients in investigations by the Anti-Dumping Commission.
franchising industry, where he acts for and provides advice
27 2018 IN REVIEW ACCC MADDOCKS.COM.AUContact Us
Shaun Temby Greg Hipwell
Partner Partner
61 2 9291 2287 61 3 9258 3354
shaun.temby@maddocks.com.au greg.hipwell@maddocks.com.au
Timothy Atkin Gina Wilson
Partner Partner
61 2 9291 6248 61 3 9258 3005
timothy.atkin@maddocks.com.au gina.wilson@maddocks.com.au
Brendan Coady Christopher Marsh
Partner Senior Associate
61 2 9291 6258 61 2 9291 6196
brendan.coady@maddocks.com.au christopher.marsh@maddocks.com.au
Robert Gregory
Partner
61 3 9258 3770
robert.gregory@maddocks.com.au
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Disclaimer
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