Alert | Finance sector price signalling prohibitions start today (6 June 2012)

6 June 2012

A reminder that the long-anticipated law against 'price signalling' under the Competition and Consumer Act comes into force today, Wednesday 6 June 2012.

The laws apply to the deposit taking and lending activities of authorised deposit taking institutions.

From today, the ACCC will monitor the financial sector for breaches of the price signalling rules and is unlikely to apply a period of 'enforcement grace' given the law's extended consultation period.

What conduct will be illegal?

An authorised deposit taking institution will breach the price signalling laws if it makes:

  • a private disclosure to competitors concerning a price, discount, allowance, rebate or credit in relation to its deposit taking or advance activities (other than disclosures made in the ordinary course of business) or
  • any disclosure (private or public) about price, discounts, allowances, rebates or credits in relation to deposit taking or advance activities, the capacity to supply or acquire, or commercial strategy in relation to those activities, where the disclosure has the purpose of substantially lessening competition.

Exceptions

General exceptions include communications solely between related bodies corporate, where the disclosure was authorised by or under a law (including ASX continuous disclosure obligations), or where formally authorised by, or notified to, the ACCC.

Additional exceptions for private disclosures to competitors include supply or acquisition between the parties, disclosures between joint venture participants, disclosures to 'unknown competitors' and disclosures concerning the acquisition of shares or assets.

Specific exceptions also apply to disclosures between commercial lenders for the purposes of providing (or considering whether to provide) lending or credit services to a third party, between a credit provider and a provider of a credit service, and between credit providers in certain insolvency contexts.

Penalties

A breach of the price signalling prohibitions will attract (civil) penalties of up to the greater of $10 million, three times the value of the benefit gained, or 10% of annual group turnover.

Next steps

  • Carefully consider how the price signalling rules will apply to an institution's deposit taking and lending activities.
  • Conduct ongoing assessments to determine where authorisation and/or notification may be required to continue current (or implement new) commercial strategies.
  • Take extra care to ensure that public statements about price or strategy are limited to legitimate customer communications. Consider developing a specific disclosure protocol for senior executives and officers.

More information

Read our previous Alerts on the price signalling laws:

Author(s) Richard Murphy, Geoff Carter