The ACCC’s draft merger guidelines
The ACCC has released new draft merger guidelines outlining its current approach to assessing mergers. Freehills has prepared a summary of the more significant aspects of these guidelines.
Borders acquisition cleared by ACCC
The ACCC has released a public competition assessment confirming that it will not oppose the sale of Borders Australia to the owner of Angus & Robertson bookstores, A&R Whitcoulls Group Holdings.
The ACCC considered the proposed merger after it received an informal merger clearance application from the companies involved. An informal clearance is not legally binding—it indicates the ACCC does not consider that the proposed merger breaches section 50 of the Trade Practices Act 1974 (Cth) and does not intend to challenge the proposed merger in the courts.
In reaching its decision to grant informal clearance, the ACCC considered the effect of the merger on competition in both the retail and wholesale book markets.
The retail market
A&R Whitcoulls proposed to purchase Borders’ 22 Australian stores, bringing the total number of bookstores owned by A&R Whitcoulls to over 200. The ony other national player, Dymocks, has 74 stores.
The ACCC was concerned about the competitive effect of the proposed merger on the retail book market. Angus & Robertson currently price many books above the recommended retail price. The ACCC noted the potential for this pricing policy to be extended to the Borders stores and for Borders’ existing discounts and other promotional offers to be reduced or cancelled.
However, the ACCC concluded that the proposed merger would not substantially lessen competition in the retail market. In particular, the ACCC considered that competition from existing retail chains—and to a lesser extent, department stores, discount book stores and independent book retailers—would limit the merged entity’s ability to raise prices above the competitive level.
The wholesale market
The ACCC noted concerns from publishers and distributors that the proposed merger would reduce competition in the market for the wholesale supply of books. It was argued that the increase in A&R Whitcoull’s negotiating power and the reduction in wholesale customers, resulting from the merger of two of the three national book chains, would mean less variety in store and fewer books being published.
The ACCC accepted that the proposed merger is likely to have some impact on publishers’ local publishing activities, but concluded that it would not lead to substantial consumer detriment. In particular, it noted that the merged entity would still require a sufficient number, range and quality of books to satisfy demand, and that 70 per cent of books will continue to be bought by other retailers.
A Federal Court decision has called into question the ACCC’s ability to prevent private litigants from accessing witness statements and other documents relating to immunity applicants following an ACCC investigation.
The ACCC has not yet lost its fight. The court has invited the parties to the proceeding, including the ACCC, to make submissions on an implied undertaking given to the court before deciding whether to order the release of the documents.
Background
In the course of a private damages action, Cadbury Schweppes (Cadbury) has sought access to 117 documents prepared during the ACCC’s investigation into the Visy/Amcor price fixing cartel. The ACCC argued that the documents are protected by legal professional privilege and/or public interest immunity.
Legal professional privilege
The Federal Court held that legal professional privilege existed and had not been waived in relation to only six of the documents that Cadbury sought. The other 111 documents had been filed with the court and served on Visy during the ACCC’s proceedings against Visy, but had not been read in court. The court held that any legal professional privilege existing in these documents had been waived when they were filed and served on Visy.
Public interest immunity
The ACCC argued that eight of the 111 documents noted above, comprising witness proofs summarising statements made by Amcor employees, were also subject to public interest immunity. It argued that Cadbury should not be given access because if access was granted, future immunity applicants would be reluctant to come forward. This could affect the ACCC’s ability to investigate and prosecute cartels.
The court rejected this argument. It stated that a potential immunity applicant knows, or should know, that his or her statements will be used by the ACCC to prosecute other parties. In the absence of a reasonable expectation of confidentiality the court held that there was no public interest in protecting the documents. The court also noted an equal, if not more compelling, public interest in allowing private parties to benefit from the ACCC’s investigations in subsequent damages actions.
Visy’s implied undertaking to the court
Despite the above, the court declined to order disclosure of the documents to Cadbury at this stage. When the documents were filed and served on Visy, there was an implied undertaking to the court that Visy would not use those documents except in relation to those proceedings. This undertaking can be overridden or the court can release a party from the undertaking in special circumstances. The court invited the parties to make submissions on this matter before making a final decision.
Green Marketing and the Trade Practices Act 1974 (Cth)
The ACCC has released a guideline for businesses about their obligations under the Trade Practices Act 1974 (TPA) when making environmental claims about their products.
The guideline recommends that marketers carefully consider the ‘overall impression’ that the product and advertising creates, rather than focusing just on the words used to sell the product. Care should be taken that claims about environmental benefits are accurate, can be substantiated, are sufficiently specific, use clear language and do not overstate the true benefit offered.
According to Graeme Samuel, the guideline can be summed up in two words; ‘be honest’. As the following cases show, this advice applies equally to other types of marketing claims.
Prouds Jewellers: savings claims
Advertisers presenting a ‘was’ price and a ‘now’ price must ensure that the sale item advertised was available at the ‘was’ price for a ‘period of substance’ immediately prior to the sale in question.
This advice follows a Federal Court finding that Prouds Jewellers engaged in misleading or deceptive conduct by advertising ‘Was/Now’ prices for certain items in its ’Summer of Love‘ and ’Love You Mum‘ 2006 catalogues.
The court found that 17 items under scrutiny had not been for sale at the ‘was’ price in the period leading up to the catalogue sales. In the case of five of those items, they were last offered for sale at the ‘was’ price three weeks prior to the catalogue sale.
Justice Moore stated that the catalogues were misleading because:
the hypothetical consumer would have seen the two prices (the ‘was’ price and the ‘now’ price) in juxtaposition and, in the context of considering what savings might be achieved…would have been led to believe that the ‘was’ price was the price at which the items could…have been bought immediately before the sale.
According to Justice Moore, if the ‘was’ price advertised had been the price at which the items had been offered for sale for the whole of the two months immediately prior to the sale, the ‘was’ price would not have been misleading. However, readers should not consider that two months will always suffice, it will depend on the facts in each case. Whatever the timeframe, Justice Moore noted that it:
must represent a period of substance…If the period was unduly short, then the publication of the ‘was’ price in the context of dual pricing would remain misleading or deceptive.
A controversial press release issued by the United Kingdom’s competition regulator, the Office of Fair Trading (OFT), may have jeopardised its investigations into an alleged price-fixing cartel in the dairy industry.
The press release issued in September 2007 stated ’we believe supermarkets have been colluding to put up the price of dairy products’. It went on to acknowledge that its investigations were not complete, and that it was not yet in a position to determine if the law had been breached.
Many of the parties involved in the investigation have subsequently settled with the OFT, agreeing to fines of over £120million. Tesco and WM Morrisons have continued to deny any wrongdoing.
WM Morrisons has sought, and Justice Davis in the High Court has granted leave for, a judicial review of the OFT’s conduct in this matter. WM Morrisons has also decided to sue the OFT for libel over the comments.
In granting leave for judicial review, Justice Davis noted that this matter illustrated the ‘dangers of bodies such as the [OFT] engaging in public relations exercises designed or calculated to attract potentially sensationalist publicity via the media’.
Government appoints Patrick Walker as Petrol Commissioner
Patrick Walker has been appointed to the ACCC as the Petrol Commissioner. Mr Walker was previously Western Australia’s Consumer Affairs and Prices Commissioner, and the man behind the state’s Fuelwatch initiative.
Formal powers to monitor petrol prices were granted to the ACCC late last year after it provided its final report to the government following a six month inquiry into the petrol industry. The ACCC’s final report was discussed in our February newsletter.
The Petrol Commissioner will oversee the ACCC’s work in this area. Its monitoring activities will cover both the wholesale and retail markets for petrol, diesel and LPG.
Removalists free to collectively bargain with railway
A group of independently owned removalist businesses notified the ACCC of a proposal to collectively negotiate with Pacific National. The negotiation would involve the terms and conditions of their agreement for rail freight services, including provisions for an annual volume growth rebate.
The ACCC has not objected to the notification lodged, thereby giving the group immunity from the operation of the Trade Practices Act 1974 (Cth) in relation to that agreement. The notification process for collective bargaining was introduced in January 2007.
The ACCC released a Guide to the Collective Bargaining Notifications to educate small businesses about the process in January 2008.
Microsoft fined by European Commission
The European Commission (EC) has fined Microsoft € 899 million for not complying with a court order made in March 2004, after it was found to have abused its dominant position in the market. The order required Microsoft to disclose interface documentation allowing non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers at a reasonable price.
The fine followed a finding by the EC that the royalties charged prior to 22 October 2007 for access to Microsoft’s interoperability information were not reasonable. The EC was satisfied however that the terms of access adopted after that date were reasonable and that Microsoft is now complying with the 2004 court order.
More information
For information regarding possible implications for your business, contact a member of the Competition & Market Regulation team.