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Further revelations were made in the ongoing Amcor–Visy saga. The two companies were in the federal court on 13 March as Visy tried to obtain access to transcripts of interviews by investigators of Amcor executives. It was revealed through Visy’s cross-examination of the Australian Competition and Consumer Commission’s (ACCC) general counsel, Robert Alexander, that Amcor barely obtained immunity from being prosecuted for its cartel involvement. A former Amcor executive, James Hodgson, sought immunity from the ACCC one day after Amcor had done so. Only the first informer is entitled to immunity under the ACCC’s immunity policy released in August 2005 (see May 2006
Competition Law Update).
This development highlights the importance of being the first to seek immunity under the ACCC policy.
Visy was unsuccessful in its attempts to gain access to the transcripts. Access to the documents could have assisted Visy in showing that Amcor had exaggerated allegations about the cartel to gain immunity from prosecution. The ACCC claimed that the documents were subject to legal professional privilege as they concerned the contemplation of legal action (see the Australian Financial Review, 14 March 2007; The Age, 30 March 2007).
The Federal Court has imposed a penalty of $120,000 on IPM Operation and Maintenance Loy Yang Pty Ltd (IPM) for engaging in conduct in contravention of sections 45E and 45EA of the Trade Practices Act 1974 (TPA). Although IPM cooperated with the Australian Competition and Consumer Commission (ACCC), its penalty was only $5,000 less than the penalty of its uncooperative counterpart, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) (see our February 2007 Competition Law Update).
IPM, the operator of the Loy Yang B power station in Victoria, breached the TPA by entering into an arrangement with the CEPU that included a provision preventing IPM from engaging electrical contractors who did not have an enterprise agreement with the CEPU. As soon as the ACCC advised IPM that its conduct might have breached the TPA, IPM promptly ceased to require that its electrical contractors have enterprise agreements with the CEPU. IPM cooperated with the ACCC investigation, and acknowledged liability early in the proceedings. The CEPU, on the other hand, did not.
In imposing the penalty on IPM, the Federal Court explicitly considered IPM’s cooperation, as well as the numerical parity of the penalty with the CEPU’s penalty. It decided that the $120,000 penalty was appropriate, even though the CEPU only received a $125,000 penalty. This was because:
- IPM breached two provisions of the TPA, whereas the CEPU breached only one, and
- IPM was penalised as a party principal, whereas the CEPU was penalised as an accessory.
It is also important to note that the TPA has rarely been enforced against trade unions, and the $125,000 penalty imposed against the CEPU was a record-setting penalty.
Does cooperation with the ACCC does pay? It is worth noting that IPM’s penalty was nowhere near the maximum that could have been imposed ($1.5 million).
On 8 March 2007, the Australian Competition and Consumer Commission (ACCC) announced that it would not object to the proposed sale of Patrick Bass Strait Shipping and Tasmanian Freight Forwarding businesses to the Chas Kelly Transport Group, one of Tasmania’s major transport companies.
Toll Holdings Ltd (Toll) had agreed to divest these businesses as part of its undertakings to the ACCC in connection with Toll’s acquisition of Patrick Corporation Ltd in March 2006 (see our April 2006 Competition Law Update).
The undertakings provided that the ACCC could object to a purchaser proposed by Toll of Patrick Bass Strait Shipping and Tasmanian Freight Forwarding businesses if the sale to that party was likely to result in a substantial lessening of competition in relevant markets. After scrutinising the proposed sale, the ACCC did not believe that the sale to the Chas Kelly Transport Group would be likely to result in a substantial lessening of competition.
Toll’s proposed divestiture to meet its obligations to the ACCC comes on the tail of comments by the ACCC Chairman, Graeme Samuel, indicating that the ACCC has adopted a much tougher stance in ensuring businesses comply with merger undertakings. Businesses that fail to honour commitments to the ACCC may be forced to divest key assets for as little as one dollar. Toll has escaped this fate.
Meanwhile, Toll has sought a variation to other portions of its undertakings to the ACCC, a move which has not been made any easier in the face of the ACCC’s public comments regarding its tougher stance. After extensive submissions to the ACCC, Toll has been forced to offer a revised variation, requiring Toll to complete a series of preliminary steps before the ACCC will be in a position to accept it. Toll has advised that it expects to complete the preliminary steps by 13 April 2007.
The airline industry is starting to heat up, with a number of developments taking place in recent weeks that will see a significant influx in competition on various routes.
Middle Eastern agreement boosts capacity
Most notably, Emirates Airline and Etihad Airways have achieved a significant breakthrough in negotiations with the Federal Government. Dubai-based Emirates and United Arab Emirates based Etihad Airways will offer 56 extra flights to Australia per week by March 2011. Increased flights will open up the European route to the foreign players through the Middle East.
Melbourne and Brisbane airports had been vocal in raising concerns regarding the limited number of flights entering Australia, given that so much traffic is currently directed through Sydney. The increased flight numbers awarded to Emirates and Etihad is likely to ease some of that concern by increasing the number of flights landing in Melbourne and Brisbane.
New age of competition
The agreement comes a week after the government’s granting of increased landing rights to Qatar Airways. In addition, Virgin Blue has also announced its intention to increase competition on the Sydney to Los Angeles route by flying 10 times a week to the United States from the second half of 2008.
Consumers stand to be the biggest beneficiaries of the government’s policy, with the prospect of lower fares on international travel.
The recent decisions are indicative of the brave new world for the airline industry. The government’s moves are in line with global movements that have seen the Canadian, United States and European Union governments opening up their skies.
Mr Graeme Samuel, Chairman of the Australian Competition and Consumer Commission (ACCC), conceded that there is room for improvement to the consumer protection provisions of the Trade Practices Act 1974. In his address to the National Consumer Congress 15 March 2007, Mr Samuel suggested potential advancements including:
- civil pecuniary penalties
- consumer redress, and
- uniformity of fair trading laws.
According to Mr Samuel, the ability to gain civil pecuniary remedies ‘would significantly enhance the ability of the ACCC to obtain effective outcomes and provide a higher degree of deterrence’. Mr Samuel expressed the view that the ACCC needs to be able to seek court orders to acquire consumer redress for large numbers of consumers, to act as a consumer champion. This would ‘increase deterrence against wrongdoing, and provide consumers the ability to gain redress.’
Mr Samuel acknowledged that despite the benefits of uniformity of fair trading laws, ‘in practice uniformity has been difficult to achieve’. He described the need for uniformity as ‘becoming more urgent.’
He noted that the consumer protective provisions do not operate in a vacuum. The competition provisions are also ‘regulatory tools designed to enhance consumer welfare’. According to Mr Samuel, ‘what is on offer is an improved, better coordinated and stronger protection regime. At the centre of the changes the winners will of course be all Australian consumers—as they should be.’ (see The foundations of good consumer protection policy, Graeme Samuel, 15 March 2007. Also, for a related article, see our March 2007 Competition and Market Regulation Update).
United Kingdom / United States extradition for price fixing to be appealed to the House of Lords
The British High Court has agreed that Ian Norris, former chief executive of Morgan Crucible, may appeal his case to the House of Lords, the highest court in the United Kingdom.
Mr Norris faces possible extradition to the United States over participation in a price cartel for a period from 1989 to 2000. The High Court decided in January 2007 that the District Court Judge was correct in deciding that extradition should go ahead. The High Court recently ‘certified’ five points of law as being of public importance which the House of Lords might like to examine.
Mr Norris may appeal directly to the House of Lords on these issues.
One of the questions of law highlighted by the court is whether the offence of price fixing is indictable under the English criminal offence of ‘conspiracy to defraud’. This issue is likely to be the focus of the House of Lords should it agree to hear the case. If price fixing is indictable then the alleged conduct by Mr Norris may be considered a crime in the United Kingdom as well as in the United States and he could be extradited for trial in the United States where jail terms for executives are common for breaches of antitrust law.
Mr Norris denies allegations that he was involved in illegally fixing prices of instruments used to power trains under an alleged cartel arrangement involving Morgan Crucible (see our February 2007 Competition Law Update).
The government’s media reforms commenced on 4 April 2007. The reforms include a Digital Action Plan, relaxation of laws dealing with cross-media transactions, and removal of specific newspaper and television foreign ownership rules (see our April 2006 Competition Law Update).
The reforms have been widely touted as paving the way for significant merger activity and possibly for further concentration in the media industry (see November 2006 Competition Law Update).
Senate concerns relating to diversity had led to modifications to the initial bill (see October 2006 Competition Law Update).
If the predicted wave of merger activity eventuates, the Australian Competition and Consumer Commission’s (ACCC’s) paper on media mergers issued on 9 August 2006 will be put to the test.
However, Minister for Communications, Information Technology and the Arts, Senator Helen Coonan recently stated that the reforms will ‘encourage greater competition and allow media companies to achieve economies of scale and scope, while maintaining the diversity of Australia’s media landscape’ (The Age, 30 March 2007).
On 3 April 2007 the Antitrust Modernisation Commission (AMC), United States of America released a report and recommendations to the President of the United States and Congress. The commission had been established in 2002 to ‘study the United States antitrust laws and to determine whether they should be modernised’.
At a time when Australia is considering proposed amendments to its Trade Practices Act 1974 (and some changes have already been introduced), the report of the AMC is very modest.
Its major recommendation is to repeal the often criticised Robinson/Patman Act which was enacted in 1936 and which, in essence, deals with price discrimination and related practices (the Australian Trade Practices Act 1974 originally had a section which dealt with price discrimination—section 49—which was repealed some years ago).
Apart from some minor changes occasioned by the inconsistent application of certain judicial decisions, the thrust of the AMC recommendations was basically to leave things as they are.
Recognising the need for greater United States cooperation with overseas jurisdictions, the AMC encouraged the Federal Trade Commission and the Department of Justice which both deal with the subject matter of mergers, to try to rationalise the way in which merger regulation is pursued in the United States.
By and large, however, no significant changes to the legislation are recommended—‘steady as she goes’ appears to be the considered view of this strong body of experts.
One interesting recommendation which will not go unnoticed in Australia was to encourage the Department of Justice and the Federal Trade Commission to give greater emphasis to efficiency issues in evaluating whether mergers breached the United States antitrust laws. Of course, in the United States, there is a much more stringent and formalised system of merger review than currently applies in Australia, although the new formal merger review process introduced on 1 January 2007, if used widely, may well bring Australian practice more into line of what has been occurring in the United States.
In this month’s update we take a look at some of the following competition and market regulation developments in brief:
- The Australian Competition and Consumer Commission (ACCC) has been alerted by AGL Wholesale Gas Limited of an access dispute with the East Australian Pipeline Limited relating to access to parts of the Moomba to Sydney gas pipeline.
- The Federal Court found that the ACCC was not permitted to issue a particular Competition Notice to Telstra in April 2006. The ACCC had issued a Consultation Notice to Telstra in December 2005 due to Telstra increasing its wholesale prices for line rental. In April 2006, the ACCC issued a Competition Notice to Telstra which contained some information which was not in the Consultation Notice. The Federal Court held that the ACCC was not allowed to issue the Competition Notice due to differences between it and the Consultation Notice.
- A number of telecommunications access disputes involving Telstra have recently been notified to the ACCC, notably involving Netspace Pty Ltd, TGP Internet Pty Ltd, and Network Technologies (Aust) Pty Ltd.
- Foxtel has become the first company to register a special access undertaking with the ACCC. The undertaking relates to its digital Pay TV set top unit service. Under the undertaking, independent providers of digital content channels may use Foxtel’s digital set top units to directly offer their channels to Foxtel customers.
- The Supreme Court of Queensland Court of Appeal recently dismissed an appeal against a District Court judge’s finding of liability for misleading or deceptive conduct pursuant to section 52 of the Trade Practices Act. The conduct related to purchase of a health products business (see Wright v Rare Import Export Co Pty Ltd [2007] QCA 089).
- The ACCC’s crackdown on resale price maintenance continues. Firstly, a penalty of $125,000 was ordered by the Federal Court of Australia against Tooltechnic Systems, an importer of power tools, for resale price maintenance in 2001 and 2002. Secondly, Jaggad Pty Ltd, a sports clothing manufacturer has given the ACCC a number of court-enforceable undertakings precluding it from establishing minimum resale prices for Jaggad Apparel.
More information
For information regarding possible implications for your business, contact a member of the Competition & Market Regulation team.