Alert – Price signalling Bill introduced to Parliament

29 March 2011

Following the release of an Exposure Draft for consultation in December 2010 (see our article 'Anti-competitive price signalling – implications beyond the banking sector'), on 24 March 2011 the Competition and Consumer Amendment Bill (No.1) 2011 (the Bill) was introduced into the House of Representatives.

Although the substantive prohibitions against 'price signalling' incorporated in the Bill are consistent with those set out in the Exposure Draft, the Government has made a number of amendments in response to concerns expressed by both the business and legal community in order to:

  • expand the exceptions applicable to the prohibitions, and
  • streamline the procedures available to apply for an exemption from the Australian Competition and Consumer Commission (the ACCC) on net public benefit grounds.

What is anti-competitive price signalling?

The proposed 'price signalling' prohibitions in the Bill apply to targeted classes of goods and services to be prescribed by regulations and are not limited to a particular sector, such as the banking sector. The proposed regulations are not yet available.

The Bill specifically prohibits a disclosure of information if:

  • it is a private disclosure to competitors and the information relates to a price, discount, allowance, rebate or credit in relation to the prescribed class of goods or services which are supplied or acquired (or likely to be supplied or acquired) by the corporation or person in a market, or
  • it is made for the purpose of substantially lessening competition in a market and the information relates to one or more of the following:

    • a price, discount, allowance, rebate or credit in relation to the prescribed classes of goods or services supplied or acquired (or likely to be supplied or acquired) by the corporation or person
    • capacity or likely capacity of the corporation or person to supply or acquire the prescribed classes or goods or services, or
    • any aspect of the commercial strategy that relates to the prescribed classes of goods or services.

A 'private disclosure to competitors' occurs if the disclosure is to one or more competitors or potential competitors of the corporation or person in the market, and is not to any other person.

Exceptions

The proposed laws have undergone some changes since the Exposure Draft was released. Some of the major changes are to the exceptions.

Under the Bill, the prohibitions on 'price signalling' do not apply to disclosures of information:

  • that are due to an accident, the default of a person other than the corporation or person, or some other cause beyond the control of the corporation or person (this exception was contained in the Exposure Draft)

  • authorised by or under a law of the Commonwealth, a State or a Territory where the disclosure occurs within 10 years after the amending legislation receives royal assent (this exception was contained in the Exposure Draft)

  • to related bodies corporate and not to any other person (this exception was contained in the Exposure Draft)

  • in relation to collective bargaining, if a collective bargaining notification to the ACCC is in force and the disclosure is only made to one or more of the parties or proposed parties to the relevant contract, and is either required by the contract or proposed contract or is made in the course of contract negotiations (this exception has been added since the Exposure Draft was released)

  • that are made in the course of engaging in conduct that has been authorised by the ACCC on public benefit grounds (this exception was contained in the Exposure Draft although it has been made more explicit in the Bill)

  • that comprise conduct covered by an exclusive dealing notification to the ACCC that is in force (this exception has been added since the Exposure Draft was released), and

  • that are made for the purpose of complying with the continuous disclosure requirements of the Corporations Act 2001 (this exception has been added since the Exposure Draft was released).

There are additional exceptions in the Bill to the prohibition on private disclosure to competitors in relation to a supply or acquisition for the purpose of re-supply, disclosures to 'unknown competitors', disclosures between joint venture participants, and disclosures in connection with the acquisition of shares or assets. These exceptions were included in the Exposure Draft.

The conduct prohibited by the Bill can also now be either authorised by, or notified to, the ACCC. The Bill provides that the streamlined 'notification' procedure will be available, under which if conduct that is otherwise prohibited is notified to the ACCC and the ACCC does not object, the notifier is protected from having action taken against them for breach of the prohibitions. Other changes have been made to expand the anti-avoidance provision, and also to clarify that mere receipt of information that contravenes either of the prohibitions does not make the recipient knowingly concerned in, or party to, the contravention.

The increase in the range of exceptions to the prohibitions is unlikely to assuage the full range of concerns expressed by those who made submissions on the Exposure Draft.

Implications

Treasurer Wayne Swan MP told Parliament that he introduced the Bill in order 'to crack down on anticompetitive price signalling and to get a better deal for consumers in the banking system'. If passed, the new laws would only apply initially to the banking sector, following advice from the ACCC that there was strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition.

However, there is scope to extend the application of the prohibitions to other industries through the making of regulations. There are no restrictions in the Bill on the suppliers, industries, businesses or circumstances to which the prohibitions may be extended.

It would therefore be prudent for corporations in all industries, but especially concentrated industries, to review the context in which disclosures to competitors are made.