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‘We like punishment’, ACCC warns larger businesses

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‘We like punishment’, ACCC warns larger businesses

Rod Sims

The ACCC boss has said that his agency wants larger penalties against companies that stifle competition or mislead consumers and small businesses, while outlining the watchdog’s compliance focus for 2019.

Speaking at a CEDA business luncheon in Sydney, ACCC chair Rod Sims said the regulator believes that tough penalties that provide adequate deterrence are the best means at ensuring compliance with competition and consumer laws.

“Punishment will move the culture,” he said emphatically.

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According to Mr Sims, businesses aren’t, in most cases, wilfully breaking the law, but that incentivisation of staff to make sales combined with penalties often viewed as loose change to large companies are not enough to ensure they comply.

Mr Sims said that in some recent cases against major listed corporates, the penalties secured by the ACCC as a result of legal action for non-compliance have done nothing to the share price, and that brokers and share traders have even shrugged them off as being immaterial to the bottom line.

“The end objective is no cases [being prosecuted], because we’ve deterred everybody [from non-compliance],” he said.

It follows a funding boost for the agency, announced by the federal government in the Mid-Year Economic and Fiscal Outlook (MYEFO).

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Below is an overview of the ACCC’s main focus areas for 2019 — some of which are aimed at benefitting SMEs, while others may result in enforcement action for SMEs:

Criminal cartels and collusion

The regulator continues to aim for two or three criminal cartel prosecutions each year, as part of its deterrence push.

Substantial lessening of competition

Alongside cartels is conduct which substantially lessens competition within a given industry or market, with Mr Sims stating that the ACCC is doing “a lot of work” in this field, with some 46 cases already under investigation.

He pointed to the final report of the banking royal commission, which portrayed a distinct lack of competition within the finance industry, particularly between the major banks, which he labelled as “a fairly cosy oligopoly”.

Mr Sims said that the ACCC has a continuing mandate to conduct market studies in the finance, and particularly banking, sector with a view to making formal recommendations to the government.

Commercial construction sector

According to the ACCC chairman, who has recently been given a third term in the posting, the commercial construction sector has a range of issues he deemed “unfair” and “anti-competitive” in need of regulatory attention and intervention.

He said that such issues are perhaps more prevalent in construction than any other Australian industry.

Consumer loyalty schemes

Noting that such schemes are quite “ubiquitous” in the modern marketplace, Mr Sims said that the ACCC will be looking closely at both how businesses are using the data gathered and the level of transparency and disclosure of this usage, the overall customer benefits and also whether they adversely impact on competition.

Consumer guarantees

“We’re just getting too many complaints, particularly among the large retailers,” said Mr Sims, which those complaints prompting the commission to delve into how retailers and manufacturers are presenting and acting on legislated guarantees and warranties.

Of particular focus is high-value products, electrical goods and white goods, as well as new cars.

Social media advertising

A new area of investigation for the ACCC in 2019 will be the advertising practices employed by businesses on social media platforms.

“We feel that is something we need to start having a look at,” Mr Sims said.

Of concern to the regulator are “subscription traps”, where services may be offered for free, but consumers end up being charged one way or another, often after an introductory free period.

Complexity of energy, telco plans

Despite previous action by the ACCC aimed at providing greater transparency on exactly what customers are paying for, Mr Sims said that many contracts and plans in both sectors remain deliberately opaque and complex, keeping customers in the dark about what they are really paying for.

Greater scrutiny of franchising sector

Noting recent actions against Ultra Tune and Geowash for misleading franchisees, Mr Sims said that deceptive conduct in the franchising space “can ruin people’s lives” because of the size of their investment in buying and building a business.

As such, Mr Sims reiterated a warning issued in early February that the ACCC will be taking a closer look over the franchise sector to ensure that franchisees are getting what they paid for.

Unfair contracts

The ACCC continues to receive many complaints that either directly relate to unfair contracts, or where such contracts and terms are the root cause of a dispute between a large business and an SME, Mr Sims said.

Most prevalent in such cases is the agriculture sector.

The issue will continue to be a key focus for the ACCC, both in enforcement of existing rules and in advocating for the government to outlaw such contracts and attached hefty penalties in a bid to eradicate most, if not all, of them. The federal opposition has already flagged that it plans to do exactly that should it win the May election.

Product safety

The Takata airbags recall, which has affected dozens of makes and models of vehicles, occupied more of the ACCC’s time than any other issue in 2018, Mr Sims said, and it remains an ongoing focus.

But he also flagged quad bikes as another product type to be investigated for safety issues, given that they are the cause of a number of deaths in Australia each year.

Market studies

Court enforcement serves to penalise businesses doing the wrong thing, but doesn’t necessarily drive compliance, Mr Sims said.

As such, the ACCC will continue to deliver market studies, exploring common competition and consumer issues and present the finalised reports for public awareness and debate and for use in determining appropriate legislative and regulatory responses.

Such studies “go hand in glove” with enforcement action, he said.

Market studies currently underway or planned for 2019 will look at:

  • Insurance in northern Australia
  • Financial services – initially foreign exchange fees, before gradually working through the wider finance system over the next two to three years
  • Agriculture – with a current focus on the wine sector
  • Electricity affordability – a detailed seven-year inquiry
  • Gas supply
  • Digital platforms – draft recommendations were released in December, with the ACCC to now undertake consultation over the next six months before delivering a final set of recommendations
  • A look at the introduction of a consumer data right, enabling people to seamlessly compare and switch service providers in banking, followed by energy; telecommunications is proposed to follow

Addressing ‘excessive bias towards consolidation’

According to Mr Sims, Australia has a disproportionate focus on business consolidation, which helps foster oligopolies and duopolies and in turn raises competition concerns.

“All companies want less competition — they’d be mad if they didn’t,” he acknowledged.

But he suggested that more balance is needed when it comes to competition and consumer laws, as well as enforcement of those laws, as well as the powers of the ACCC to monitor and take action that ultimately lessens competition.

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