Australia: Competition review: October 2014/1

RECENT MERGER DEVELOPMENTS

ACCC will not oppose Expedia's proposed acquisition of Wotif

On 2 October 2014, the ACCC announced that it will not oppose the proposed acquisition of Wotif.com Holdings Ltd (Wotif) by Expedia, Inc (Expedia).

Expedia is a global online travel agency (OTA) and its portfolio of brands includes Expedia.com and Hotels.com. Wotif is an Australian-based OTA that is predominantly active in the supply of online accommodation booking services. Its brands include Wotif.com and lastminute.com.au. As such, the primary area of overlap between Expedia and Wotif is in online accommodation booking services. This proposed acquisition involves two of the three largest OTAs in Australia, with the other being The Priceline Group (Booking.com and Agoda).

In its earlier Statement of Issues, the ACCC outlined its preliminary concern that the proposal may result in a substantial lessening of competition in the supply of online distribution/booking of Australian accommodation. However, in addressing this concern, the ACCC found that there has been considerable change in the competitive dynamics of the online accommodation distribution market in recent years, including:

• new entry by a number of competitors and business models, including The Priceline Group's Booking.com website, which has become the largest OTA in Australia; and
• the increasing importance of metasearch sites such as TripAdvisor and Google Hotels Finder, which aggregate the offers of hotels and numerous OTAs.

The ACCC will outline the reasons for its decision in more detail in a forthcoming Public Competition Assessment.

ACCC will not oppose Coles' proposed acquisition of three Supa IGA stores in WA

On 18 September, the ACCC announced that it will not oppose the proposed acquisition of three Progressive Supa IGA supermarkets by Coles at Bunbury Forum, Dianella and Halls Head in Western Australia. The ACCC did not consider that the proposed acquisition would substantially lessen competition in the relevant markets because:

• in the absence of the proposed acquisition:
• • Progressive would be likely to exit the market at the expiry of its current lease at each target store;
  • no alternative purchasers were likely to acquire the store before the expiry of the lease; and
  • no other independent supermarket was likely to be established at the target site;
• post merger, Coles' supermarkets in each relevant local market would continue to remain constrained by Woolworths and at least one large competitive independent offer;
• Aldi would be likely to enter some of the local markets in the coming years as part of its expansion into WA;
• the Coles owned liquor outlets in the Halls Head local market for the retail supply of takeaway packaged liquor faced competition from four Woolworths and five independent bottleshops operating under various banner groups; and
• the volume of groceries and liquor sold through the three target stores are such that the transfer of these three supermarkets (and one liquor licence) would be unlikely to have a substantial impact on competition in the state-wide retail or wholesale markets with respect to supermarkets and/or liquor.

RECENT ENFORCEMENT DEVELOPMENTS

Zen Telecom ordered to pay $225,000 for telemarketing breaches of the Australian Consumer Law

On 30 September 2014, the Federal Court ordered Zen Telecom Pty Ltd (Zen) to pay pecuniary penalties of $225,000 for engaging in misleading conduct and making false and misleading representations, by representing in telemarketing calls that it was acting on behalf of Telstra or a business associated with Telstra, when in fact it did not have any affiliation or connection to Telstra.

The Court also found that Zen breached the unsolicited consumer agreement provisions of the Australian Consumer Law (ACL) by:

• failing to provide consumers with:
• • a copy of their contract within five business days;
  • an agreement that clearly stated Zen's address and informed consumers of their cooling off rights; and
  • a notice to cancel the contract; and
• supplying services to consumers during the 10 day cooling off period.

The Court also ordered Zen to pay the ACCC's costs, establish an ACL compliance program and publish corrective notices on Zen's websites and in daily papers across Australia.

Pirovic ordered to pay $300,000 penalty for misleading 'free range' egg claims

On 23 September 2014, the Federal Court ordered by consent that Pirovic Enterprises Pty Ltd (Pirovic), pay a pecuniary penalty of $300,000 for engaging in misleading conduct and making misleading representations in its labelling and promotion of eggs. From January 2012 until January 2014, Pirovic used egg cartons which included the words 'Free Range' and images of hens on open pasture.

In doing so, Pirovic represented to consumers that the eggs were produced by hens which were able to move about freely on an open range each day, and that most of the hens did in fact do so on most days. However, as Pirovic admitted, most of its hens did not move about freely on an open range on most days due to:

• the stocking densities inside the barns where the hens were housed;
• the flock sizes inside those barns; and
• the number, size and placement and operation of the physical openings to the open range.

The Court also ordered that Pirovic contribute $25,000 to the ACCC's costs and establish, maintain and administer an ACL compliance program for three years.

Safe Breast Imaging ordered to pay $200,000 penalty for false representations

On 16 September 2014, Safe Breast Imaging (SBI) was ordered to pay a penalty of $200,000 for making false representations about its breast imaging services. Joanne Firth, the sole company director of SBI, was also ordered to pay a penalty of $50,000 for her involvement and has been disqualified from managing corporations for four years.

In March this year, during proceedings commenced by the ACCC, the Court found that SBI had falsely represented that breast imaging using SBI's Multifrequency Electrical Impedance Mammograph (MEM device) could provide an adequate scientific basis for:

• assessing whether a customer was at risk from breast cancer;
• the level of that risk; and
• assuring a customer that they do not have breast cancer.

The Court also found that SBI had falsely represented that there was a scientific basis for claiming that the MEM device could be used as a substitute for mammography.

ACCC takes action against Woolworths for unsafe products

On 17 September 2014, the ACCC commenced proceedings in the Federal Court against Woolworths Limited (Woolworths) alleging that it made false or misleading representations about:

• the safety of three home-brand products: a deep fryer, a drain cleaner and safety matches; and
• the weight capacity of certain chairs and stools, which the ACCC alleges cannot withstand the maximum weight load indicated on packaging.

The ACCC also alleges that Woolworths failed to file mandatory reports required by the ACL once it had become aware that serious injury or illness may have been caused by certain products.

Of note is the fact that the ACCC alleges that safety representations were made by Woolworths by the mere act of offering the products for sale (both before and after Woolworths became aware of potential safety issues). Woolworths has now recalled these products.

ACCC begins criminal prosecution against Michael Anthony Boyle for allegedly providing false or misleading evidence

On 16 September 2014, the ACCC commenced criminal proceedings against Michael Boyle for allegedly providing false or misleading evidence to the ACCC during an examination under section 155(1)(c) of the Competition and Consumer Law 2010 (Cth) (Act), where Mr Boyle was required to appear before the ACCC to give evidence. The examination was conducted in the course of the ACCC's investigation into Sensaslim Australia Pty Ltd (Sensaslim).

The ACCC alleges that Mr Boyle's false or misleading evidence related to the identity of Sensaslim officers, the Sensaslim product and the "business opportunity" offered by Sensaslim. In particular, the ACCC alleges that Mr Boyle knowingly gave false or misleading evidence about Peter Foster's involvement with Sensaslim.

RECENT ACCC DEVELOPMENTS

Harper Competition Review Draft Report

On 22 September 2014, the Draft Report of the 'root and branch' review of the Act was released. The proposed recommendations of the Harper Review panel (Panel) are far reaching, touching on all areas of Australia's economy, including:

• seeking to simplify the Act and enhancing its effectiveness by:
• • reformulating the prohibition against misuse of market power;
  • simplifying the cartel conduct provisions and broadening the joint venture exemption; and
  • repealing the existing price signalling laws that only apply to the banking sector and instead extending the current provisions to prohibit 'concerted practices' that have the purpose or likely effect of substantially lessening competition;
• providing for sectoral reform to generate further competition to the taxi industry, pharmaceutical retailing, shipping, planning and zoning laws, retailing more generally, and allow for greater choice in the delivery of human services; and
• the establishment of a new body to undertake market studies, a new national access and pricing regulator and potentially new governance arrangements for the ACCC.

The Panel identified three major forces affecting the Australian economy that will influence whether Australia's competition policies, laws and institutions are fit for purpose – the rise of Asia and other emerging economies, Australia's ageing population and new technologies.

The Panel will now engage further on the Draft Report through public forums, and further written submissions and feedback from interested parties. Submissions are due by 17 November 2014.

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