Transcript
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Acknowledgement of country
I wish to acknowledge the Traditional Custodians of the land we are meeting on today, the Gadigal people of the Eora nation.
I pay my respects to them and their cultures and to their Elders past, present and emerging. I acknowledge their continuing connection to the land, sea and community.
I would also like to acknowledge and pay my respects to Aboriginal and Torres Strait Islander people who are attending today’s event.
Introduction
I am delighted to speak to you today about the ACCC’s outlook and priorities in competition law enforcement.
Our priorities are guided by the legislative purpose to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection and reflect the current issues impacting the Australian economy, consumers and businesses. The present key issues of cost of living pressures, the price of essential services including energy and telecommunications, the integrity of environmental and sustainability claims, ever increasing losses to scams, consumer and fair trading harms from manipulative marketing practices in the digital economy and the always high risk to markets, business rivals and consumers from anti-competitive conduct, strongly feature in our priorities.
Our outlook in respect of these priorities recognises that in the current economic and social circumstances of rising cost of living, Australian consumers are even more vulnerable to the effects of anti-competitive conduct that reduce competition in the supply of essential services, restrict entry or expansion of competitors, reduce choice and contribute to price escalation pressures. As the competition and consumer regulator it is more important than ever, in Professor Maureen Brunt’s words ‘to keep our eyes on the ultimate objective, namely the protection of the consumer by means of an efficient competitive process’.
In this speech, I will outline our recent experience and outlook for our cartel program, in terms of both civil and criminal proceedings, and address our enforcement focus on anti-competitive conduct more broadly.
Second, I will outline our broad compliance and enforcement perspectives in respect of the transformation to a more sustainable economy.
Finally, our work in the energy sector has taken a lot of our focus in recent months, and I will use this opportunity to discuss the competitive conditions we are observing and their importance in the context of changing regulatory frameworks.
Cartels
When Minister Bowen, then Minister for Competition Policy and Consumer Affairs, gave the second reading speech in December 2008 for the bill that criminalised cartel conduct and established parallel criminal and civil prohibitions, he stated “Cartels are widely condemned as the most egregious forms of anti-competitive behaviour. At its heart a cartel is an agreement between competitors not to compete. Cartel conduct harms consumers, businesses and the economy by increasing prices, reducing choice and distorting innovation processes.” This widely acknowledged intrinsic harm is why our work in cartels remains an enduring priority.
We place great importance on detecting and deterring such conduct.
Our cartel program is both proactive and reactive. Proactively we screen data to identify market sectors with behaviours indicative of cartel conduct and analyse industries to identify those with high risk factors which may result in anti-competitive conduct. We also are engaging with industry and public sector organisations about the risks and indicia of cartel conduct in procurement.
In addition, we receive information about potential cartel behaviour through immunity applications, whistleblower contacts, referral from other agencies and our Infocentre contacts and we reactively engage with those and decide what to investigate and what enforcement action to take, if warranted.
On 30 June this year will mark 20 years since the ACCC first launched a cartel leniency policy. Over those 20 years it has had various reviews and name changes, however, the ‘ACCC immunity and cooperation policy for cartel conduct’ remains one of our key strategies for detecting and dismantling cartels.
Cartels generally involve covert conspiracies, and the ACCC immunity policy provides an incentive for those with knowledge and information about these acts to come forward. Without this policy and its incentive of immunity from prosecution, detection of such covert actions would be more difficult.
Applications under the ‘Immunity Policy’ have led us to undertake numerous in-depth cartel investigations, civil litigation, and criminal prosecutions, which shows how important this policy is as a detection tool. We are pleased that, over the past 6 months, we have experienced an increase in applications under our Immunity Policy; and we look forward to reporting on any public outcomes from those investigations in the future.
You will no doubt be aware that every 4 to 5 years or so we review the Immunity Policy to ensure that it continues to be relevant and effective.
We have recently commenced this review process again. We will consult with all stakeholders interested in the Immunity Policy and will ensure that the views received are considered in the review process.
We are keen to know what is and isn’t working for practitioners, as we want to ensure the policy continues to achieve its goals and strongly encourage you to engage with this review process. Whether you may have represented applicants under the policy, or defendants or respondents in any of our investigations, we are keen to hear about your experience, and your observations on the policy in practice.
Our capacity to refer for criminal prosecution or to commence civil cartel proceedings provides flexibility that can respond to the seriousness and nature of the conduct and provide a combination of punitive and deterrent enforcement measures. We acknowledge that in such a complex, highly contested and, in respect of criminal prosecution, still developing, area of law that we have had some mixed results in the program.
However, in the past 6 to 8 months we (and the CDPP) have achieved a number of important enforcement outcomes, in both the civil and criminal spheres. The cases have spanned all four forms of cartel conduct, price fixing, bid rigging, market allocation and output restrictions, and multiple industrial sectors, including professional services, manufacturing, construction services and professional services:
- In mid-April, the Federal Court imposed penalties in civil cartel proceedings the ACCC brought against an architectural firm, ARM Architecture and its former managing director, after they admitted they had engaged in cartel conduct by attempting to rig bids for the tender for a building project at Darwin’s Charles Darwin University.
The Federal Court imposed penalties of $900,000 against ARM Architecture and $75,000 against its former MD, Anthony John Allen.
Mr Allen was also ordered to seek to have an educative notice published on the website of the Architects Registration Board of Victoria. In the educative notice, Mr Allen will outline his mistakes in engaging in the conduct and urge others to learn from his mistake and the personal consequences it had for him. - In December last year, the Federal Court handed down judgment in the ACCC’s favour in the civil cartel case brought against steel manufacturer BlueScope and a former executive. The Court held that BlueScope and its formal general manager of sales attempted to induce entry by its competitors into agreements to fix and/or raise the level of pricing for flat steel products. This was an important decision which has the potential to strengthen the ACCC’s position in future cases of attempted cartel conduct, Judgment on penalty and other relief sought by the ACCC is pending.
- Last November, the Federal Court ordered in civil proceedings that the overhead crane company NQ Cranes pay a $1 million penalty for entering into a cartel agreement with a competitor that had the purpose of allocating overhead crane service customers in parts of Queensland and the Newcastle region.
- Also that month, the Federal Court sentenced a family-owned Australian pharmaceutical company, Alkaloids of Australia, and its former export manager for engaging in criminal cartel conduct, following a prosecution by the CDPP. The accused had pleaded guilty to and admitted offences in respect of price fixing, bid rigging, output restriction and market allocation in relation to certain pharmaceutical ingredients. The company was fined nearly $2 million, and the individual was sentenced to two years and eight months' imprisonment (served as an intensive corrections order which includes 400 hours of community service).
- In September last year, four individuals were sentenced to suspended prison terms in the Vietnamese money remittance matter, and the money remittance business Vina Money was fined $1 million for criminal price fixing.
- Waste companies Bingo Industries (and its former CEO) and Aussie Skips (and its former CEO) have all entered guilty pleas regarding a price fixing arrangement for demolition waste services in Sydney which the CDPP first took to court last August. Sentencing has not yet occurred.
The ACCC has several other cartel matters currently before the courts that are still awaiting resolution:
- Late last year, the ACCC commenced civil action against Queensland-based mining equipment and technology company Qteq, and its executive chairman for alleged bid rigging and market sharing conduct in the oil and gas services industry.
- In February this year we instituted civil proceedings against technology company, Swift Networks, for alleged bid rigging and price fixing when tendering to supply equipment and services to five Pilbara mining village sites.
In addition to referrals of conduct for investigation by domestic law enforcement agencies, we receive referrals and assistance from international antitrust agencies. We pursue international cooperation and capacity building in cartel detection, investigation and enforcement both bilaterally, in individual investigations and multilaterally through bodies such as the OECD and the International Competition Network.
Together with the Five Eyes competition authorities the US Department of Justice, the FTC, the Canadian Competition Bureau, NZ Commerce Commission and UK CMA, we have a particular focus on cartel detection, data analytical tools and a focus on potential collusion in global supply chains given the pandemic-induced disruptions, increased freight rates and price of goods for consumers. Our shared objective is to expand and improve our detection and investigation tools and techniques to better detect, dismantle and deter cartel behaviour.
Anti-competitive conduct
Action against anti-competitive conduct that has the purpose or likely effect of substantially lessening competition in breach of s45, 46 or 47 is another enduring ACCC priority. This past year the ACCC has pursued enforcement outcomes in respect of alleged contraventions of each of these Part IV prohibitions in sectors including financial services, telecommunications, food distribution and turf breeding and marketing.
The ACCC has taken proceedings against Mastercard alleging contraventions of sections 46, 47 and/or 45. The case is currently before the Federal Court, with a hearing set down for 2024. In this case, we allege that Mastercard engaged in anti-competitive conduct in response to the RBA’s least cost routing initiative with the purpose of deterring merchants from processing significant debit card volumes through the eftpos network, even though eftpos was often the lowest cost provider.
This enforcement action is but one aspect of the broader work we will be undertaking in accordance with our focus on competition issues in the financial services sector.
We also concluded an investigation into alleged anti-competitive conduct in the telecommunications sector. Last year we investigated competition concerns that Telstra acted to delay access by its competitor Optus to a spectrum licence that Optus had just acquired in an auction. The ACCC was concerned the conduct would hinder Optus’ plans to roll out its 5G network nationally.
Following a rapid and intense investigation, we were concerned that these actions had the substantial purpose or had the likely effect of substantially lessening competition in the retail mobile market in potential contravention of s46 of the Act. To resolve these concerns, the ACCC accepted a court-enforceable undertaking from Telstra, which effectively unwound the restrictions and allowed Optus to make its application for early access and progress its 5G rollout.
While we think carefully about any offer of a court-enforceable undertaking to resolve a competition concern as serious as this, in this case we valued the opportunity to promptly support competition in the emerging 5G market and considered it was the best enforcement outcome in the circumstances.
Our enforcement priorities also include exclusive arrangements by firms with market power that impact competition. We continue to have concerns about the competitive harm that can be caused when traders who have market power use exclusive arrangements, which can increase barriers to entry or lead to the anti-competitive foreclosure of rivals.
The successful case against Peters Ice Cream provides an example. In that case, in March 2022, the Federal Court ordered Australasian Food Group, trading as Peters Ice Cream, to pay a $12 million penalty for anti-competitive conduct in relation to the distribution of ice creams sold in petrol stations and convenience stores. Peters admitted it had obtained a food distribution service from PFD on the condition that PFD would not sell or distribute certain competitors’ ice cream products in various areas around Australia without Peter’s consent and that this had the likely effect of substantially lessening competition.
Following another detailed investigation, the ACCC accepted a court enforceable undertaking from Lawn Solutions Australia Group Pty Ltd (LSA), to address concerns that it may have engaged in a concerted practice by communicating with turf growers and resellers about the prices of turf. The communications which raised these concerns included the circulation of price surveys with requests that growers and resellers set their prices in line with LSA’s RRPs. LSA acknowledged the ACCC’s concerns that its conduct had the capacity to suppress or hinder price competition in the retail supply of turf.
Each of these anticompetitive conduct cases are examples where the alleged restraints or impediments to the competitive process have the real prospect of diminishing workable competition in markets, with consequent consumer harm.
Sustainability
Let me now come to the second issue I want to raise with you today, our work on sustainability and its connection with work to protect competition in emerging markets.
Many businesses in Australia and around the world are taking steps to reduce their greenhouse gas emissions in response to government requirements and demands from financiers, insurers, investors and consumers. Steps to decarbonise and develop market-based responses to climate change are rapidly emerging. As an economic regulator, this has already – and will continue to – impact many areas of the ACCC’s work.
We have recently established a Sustainability Taskforce within the ACCC to provide expert input on issues related to sustainability across all the ACCC’s functions. This will ensure an integrated and consistent whole of agency approach and seek to ensure competition and consumer protection issues are front of mind in sustainability-related policy and business decision making.
In this context, concerns about misleading green claims or “greenwashing” will continue to be a strong focus for the ACCC.
We have several investigations underway that relate to false and misleading representations in relation to environmental and sustainability claims by businesses. In addition, we are focused on compliance work, developing tools like published guidelines for business informed by our recent internet sweep of environmental claims.
However, sustainability issues for the ACCC extend well beyond greenwashing. There are many other aspects of our work in which these issues will need to be considered
As the transition to a more sustainable economy occurs, new markets will emerge. This may include markets for electric vehicles and associated charging infrastructure, markets associated with the hydrogen economy and markets designed to promote the protection of biodiversity. The ACCC believes the role of competition issues being actively identified and addressed in this transformation could be profound. This will ensure that emerging markets are set up from the outset to function with integrity and in a pro-competitive, pro-consumer manner.
We will be closely monitoring for indications of illegal collusion as the economic transition unfolds. Collusion distorts market incentives and investment signals, and in turn hinders the development of market-based responses to environmental challenges.
There are already some international examples of concerning conduct. In the UK, the Competition and Markets Authority has accepted commitments from several companies to address competition concerns about exclusive arrangements for the supply of electric vehicle charge points. The New Zealand Commerce Commission issued public warnings last October about an attempted customer allocation agreement in the sustainable packaging industry.
We will also watch closely to ensure that markets do not develop in ways that lead to anti-competitive levels of concentration. Particularly in emerging markets, we need to be aware of the risk that network effects – within industries which we may not yet understand well – could lead to ‘winner takes all’ outcomes as the industry develops.
In existing markets, we may also see the number of firms reduce as industries go through periods of significant change. Regardless of how it occurs, high levels of concentration raise risks of unilateral and coordinated effects that can harm Australian consumers.
When assessing mergers, the ACCC will also need to consider new theories of harm associated with the transition to a low-carbon economy. For example, consolidation within emerging green industries may lead to pro-competitive efficiencies and economies of scale that make nascent industries viable. On the other hand, environmental credentials and sustainable innovation may become increasingly important drivers of competition, and we may see risks to competition arising from mergers between key ‘green competitors’ or ‘killer acquisitions’ of nascent firms that remove the potential for increased competition.
Notwithstanding the potential for anti-competitive conduct, we recognise that as industries decarbonise or look to achieve other environmental outcomes, there will be times when it is more efficient and effective for companies to work together.
Industry collaboration between competitors can help remove first mover disadvantage and free-rider problems, which could lead to significant environmental and economic benefits for the Australian and global population
Internationally, many competition regulators have released guidance about how they will treat agreements between competitors aimed at promoting environmental sustainability in the context of exemptions to cartel laws. In Europe in particular, there has been some debate between regulators as to how regulators will assess the ‘consumer benefits’ associated with reductions in greenhouse gas emissions or other environmental protection.
In Australia we have the authorisations framework already in place to deal with exemptions from cartel laws. Our authorisation regime enables us to take real, verifiable and significant environmental benefits into account as part of the ‘net public benefit’ test and as such we are well placed to consider applications by business and industries to seek an exemption from our competition laws on the basis of necessary coordination to achieve sustainability goals.
Indeed, there are several examples where the ACCC has already granted authorisation to horizontal agreements between actual or potential competitors that will result in environmental benefits. This includes product stewardship schemes that impose an industry levy to fund the proper disposal, or reuse, of products at the end of life, as well as joint tendering by local councils to acquire recycling services.
In this regard, as in other aspects, we expect businesses to substantiate their environmental and sustainability claimed benefits and we will test them publicly.
Gas
Another key focus of our work in the past year has been in energy markets, in particular gas. Domestically and globally, the impacts of the war in Ukraine, sanctions and what Europeans describe as President Putin’s weaponising of energy have caused substantial shifts in supply relationships, and record high energy prices and price volatility. The resulting disruption to global gas markets is sustained and appears likely to continue into the medium-term.
In response, given the importance of gas to Australian industry, gas powered generation and households, late last year the Federal government introduced an emergency price cap on the sale of wholesale gas by producers and commenced consultation on a mandatory gas code of conduct.
The government legislated for the ACCC to enforce the cap, and directed the ACCC to continue our monitoring and reporting on the conduct of gas market participants.
We published interim compliance and enforcement guidelines for the price cap in January and began consultation with industry to clarify areas of uncertainty. The ACCC has provided advice to government as it has developed the proposed mandatory gas code of conduct.
In the coming year we will prioritise compliance with the price cap and, once developed, the code. We expect this important work to account for a substantial share of our compliance and enforcement effort in the energy sector.
The advice given to government throughout this process has been informed by the ACCC monitoring work over a number of years and the assessment of competitive conditions in the East Coast gas market. Our 2021-22 review of upstream competition in the East coast gas market found that the upstream market was highly concentrated and that competition between gas producers was not effective. It also found that a range of structural factors may be affecting competition and the timeliness of supply.
The consultation paper recently released by the government in respect of the proposed mandatory gas code of conduct references the ACCC’s observation of producer concentration and the importance of more effective competition and producer diversity for improving price and other supply outcomes for buyers. In our view, measures to improve competition are critically important to help address concerns as to sufficiency of supply at reasonable prices for the domestic market.
There are measures that could reduce infrastructure, regulatory and capital barriers faced by producers. One way to do that would be by introducing a third-party access regime for upstream infrastructure and facilitating a more coordinated approach to the development of new transport pipelines.
These measures would likely increase competition by reducing barriers for new entrants to enter the market, develop new gas fields and compete effectively.
We also found in our review that joint ventures, joint marketing and exclusivity arrangements may be contributing to the lack of effective upstream competition in the East coast.
We encourage gas producers to obtain advice on the legality of any current or prospective cooperative arrangements with potential competitors.
That said, in the current exceptional international environment, improvement in competitive conditions and federal and state regulatory frameworks need to work together to support the availability and affordability of domestic gas supply.
Conclusion
Each of us here today shares a deep interest in competition law and practice. I have sought to address in this speech some of the current critical economic, political and social issues that frame our use of competition law, together with consumer protection law, to achieve our statutory objectives.
Thank you for your time and for your abiding interest in competition law and compliance with the law.
I look forward to your questions and the discussion on these issues.