It’s all happening in Australian competition law.
In the last blog post I noted that the Harper reforms to Australia’s competition law had commenced. That was six months ago. I’ve fallen a tad behind on the blog … here’s a brief re-cap of key events over the past six months, with some more detailed posts to follow over the next few weeks:
Digital Platform Inquiry
On 4 December 2017 the Australian Treasurer, Scott Morrison, directed the ACCC to conduct an inquiry into digital platforms. The Ministerial Direction was made under s 95H(1) of the Competition and Consumer Act; that provision states, in part, that the Minister may require the ACCC to ‘hold an inquiry into a specified matter or specified matters’. The impetus for the ministerial direction was political (a deal to get media reforms through the Senate), but regardless of the motives, the ACCC was given responsibility for the inquiry, with an obligation to report by 3 June 2019 (preliminary report expected 3 December 2018).
On 26 February the ACCC released an issues paper in relation to its Digital Platform Inquiry and submissions have now been published. Two public forums have also been held.
For more detail on the terms of reference, links to submissions and related media see my Digital Platforms page.
Detergent cartel case dismissed … and revived
In 2016 Colgate and Woolworths admitted involvement in a cartel involving the price of laundry detergents. PZ Cussons (Cussons), who the ACCC also alleged was involved, contested the claims. On 22 December 2017 Cussons succeeded in having the case against them dismissed. Justicy Wigney held the ACCC had not discharged its burden of proving, on the balance of probabilities, that the respondent had entered into the claimed arrangement or understanding.
On 20 February 2018 the ACCC announced it was appealing the Cussons decision to the Full Federal Court. The hearing is expected to take place over 2-3 days in late August.
First criminal charges against Australian company and individual
On 15 February 2018 criminal cartel charges were laid against The Country Care Group Pty Ltd, its Managing Director and a former employee. The charges represent the first criminal prosecution of an Australian corporation and the second criminal prosecution of a cartel (the first being NYK) under the criminal cartel provisions of the Competition and Consumer Act.
The matter was originally listed for the Mildura Magistrate’s Court, but it was later ordered that the committal hearing take place in the Melbourne Magistrates’ Court. The committal mention was listed to take place this morning (6 June).
Prysmian loses cartel appeal
On 13 March 2018 the Full Federal Court dismissed an appeal by Prysmian Cavi E Sistemi SRL against a 2016 ruling that it had engaged in cartel conduct in relation to the supply of high voltage land cables.
OECD Pecuniary Penalties Report
On 26 March 2018 the OECD released its report, Pecuniary Penalties for Competition Law Infringements in Australia. The report, prepared by Pedro Caro de Sousa, Sean Ennis and Semin Park, of the OECD’s Competition Division, compares pecuniary sanctions for competition law infringements in Australia to that of other major OECD jurisdictions.
The report concludes that ‘Australia is an outlier’ in relation to ‘how low the pecuniary penalties it imposes are by comparison to all other systems’. Several possible explanations for this are discussed. In particular, the report details the different approach Australia takes to determining pecuniary penalties when compared with other jurisdictions. It recommends Australia consider action to ‘ensure pecuniary penalties better deter anticompetitive conduct’ (p 8)
For the report and related media see my Pecuniary penalties report page.
Flight Centre penalty increase
The OECD Report preceded a raft of penalty related news. The first was the Full Federal Court ordering Flight Centre to pay penalties of $12.5 million for attempting to induce international airlines to enter price fixing agreements. The substantive price fixing claim went all the way to the High Court, which found by majority that there was a contravention. When the matter first went to trial a penalty of $11m was imposed – so a little bit of an increase by the Full Federal Court. More details here.
Another guilty plea for criminal cartel conduct
On 5 April 2018 Kawasaki Kisen Kaisha (K-line), a Japan-based shipping company, entered a guilty plea in relation to criminal cartel conduct. This represented the second guilty plea in relation to criminal cartel conduct, with Nippon Yusen Kabushiki Kaisha (NYK) pleading guilty in 2016 and receiving a $25m fine in 2017. A sentencing hearing is scheduled for 15-16 November.
Highest ever cartel penalty
On 16 May 2018 the Full Federal Court handed down its decision in the ACCC’s appeal against Yazaki’s $9.4 penalty for cartel conduct. It won … big time. The penalty was increased to $46m, the highest ever imposed in Australia for cartel conduct. Part of the reason for the increase was that the Full Federal Court found that the maximum penalty (based on annual turnover) was higher than had been found by the Full Court. This turned on the statutory construction of s 76(5) of the Act, dealing with the definition of ‘annual turnover’ for the purpose of determining maximum penalty available per cartel contravention.
The fine was certainly high by Australian standards – exceeding the previous highest (Visy) by $10m (and just slightly exceeding the previous maximum if you take account of inflation). Yazaki could still seek leave to appeal to the High Court – we’ll find out this week whether they decide to seek special leave.
However, the ‘relative’ smallness of the fine was highlighted by the fact that the Commonwealth Bank of Australia this week reached agreement with AUSTRAC (Australia’s financial intelligence agency) to pay a $700m penalty relating to serious breaches of anti-money laundering and counter-terrorism financing laws. How did the market respond? The share price went up … the market apparently thought the fine would be higher (see this piece in the AFR by Christopher Joye). Incidentally, the theoretical maximum fine was $1 trillion, so it could have been worse …
Pfizer appeal … finally
On 25 May 2018, almost two and a half years after the appeal was heard, the Full Court of the Federal Court handed down its decision. The ACCC originally instituted proceedings in February 2014 and decided on 25 February 2015. The appeal was heard in November 2015.
The ACCC had alleged misuse of marker power and exclusive dealing by Pfizer in relation to the supply of atorvastatin to pharmacies. It failed at trial, with the court finding no substantial market power at the relevant time and no prohibited ‘purpose’ as then required by s 46 and as required to satisfy the exclusive dealing claim (although s 47 prohibits exclusive dealing having the purpose or effect of substantially lessening competition, the ACCC had only argued the purpose limb).
The Court dismissed the ACCC’s appeal against the trial judgment. It did, however, find that Pfizer had substantial market power – the appeal failed on the purpose element.
The ACCC has said it is ‘carefully considering the judgment‘, with ACCC Chairman, Rod Sims, noting that the ‘The ACCC brought this appeal because it was concerned that Pfizer’s use of its market position as supplier of the top selling branded atorvastatin immediately before generic products were able to enter the market harmed the competitive process and therefore consumers …’
See case page … there will be a more detailed blog post on this one when time allows …
Unlockd sues Google
Hot on the heals of the Pfizer appeal decision came word that Unlockd was suing Google, alleging anti-competitive and unconscionable behaviour. The conduct complained of involves threats by Google to block Unlockd’s apps. Justice Moshinsky last week issued a temporary order (until 29 June 2018 or as further ordered) stopping Google from blocking Unblockd (I love that sentence). See this item by Misa Han at the AFR for some background, including similar proceedings in the UK.
The matter is listed for a directions hearing before Justice Middleton on Friday.
Historically private actions in s 46 (misuse of market power) cases have produced some of the most interesting case law. Assuming it proceeds, the case will be the first involving the modified s 46 (effects test) provision – certainly one to watch.
Banks banks and more banks: criminal cartel charges laid
In early February the Productivity Commission issued a draft report on competition in the Australian Financial System. Amongst other things it argued that competition in the financial system was ‘without a champion among the existing regulators’. Since then the Banking Royal Commission (established in December, with hearings commencing on 13 March this year) has dominated headlines.
Most recently (yesterday: 5 June 2018) it was announced that criminal charges had been laid against Citigroup Global Markets Australia Pty Limited (Citigroup), Deutsche Bank Aktiengesellschaft (Deutsche Bank) and Australia and New Zealand Banking Group Ltd (ANZ) as well as several senior executives. The charges follow investigation of cartel offences by the ACCC. They had been foreshadowed in a series of media releases by the the ACCC last Friday, which in turn had followed disclosures by the ACCC to the Australian Stock Exchange.
The ACCC has stated that the charges involve:
alleged cartel arrangements relating to trading in ANZ shares held by Deutsche Bank and Citigroup. ANZ and each of the individuals are alleged to have been knowingly concerned in some or all of the alleged conduct. The cartel conduct is alleged to have taken place following an ANZ institutional share placement in August 2015
The matter is listed for mention on 3 July. There’s plenty of media on this!
I’ll post more details on some of these items soon.
There’s also been plenty of merger, authorisation and other regulatory news throughout this year – you can find it on my news page here.