The Year Ahead What to expect in Competition and Consumer law in 2023 in Australia
20 March 2023
20 March 2023
In this newsletter we set out what we expect to see in Australian competition and consumer law in 2023-2024. In addition to the ACCC's new priorities, we summarise the status of important legislative reform proposals and current and emerging issues. With issues ranging from merger reform, to unfair contracts, greenwashing to minority interests, the ACCC's remit and influence is larger than ever.
|Merger Reform – "when not if"
Despite a change of Chair in 2022, the ACCC has doubled-down on its call for reforms to the informal merger regime in Australia. In September 2022, new ACCC Chair Ms Gina Cass-Gottlieb re-confirmed the ACCC's position that the lack of a mandatory-suspensory regime places the ACCC at a disadvantage and does not protect competition. The ACCC is engaging with Government on this topic and expects to release further details within a month. At the same time, the ACCC is also examining issues in relation to acquisitions by digital platforms and small acquisitions by large companies that increase already high market concentration (sometimes referred to as "creeping acquisitions").
It remains to be seen whether Labor Treasurer, Jim Chalmers' "values-based capitalism" is supportive of merger reform. The Government has so far been silent on the issue, though Assistant Minister for Competition, Dr Andrew Leigh, seems likely to be supportive. While the precise shape of merger reform is (as yet) unclear, with a Federal Labor Government in power the appropriate question seems to be "when?", rather than "if".
|Minority interests an emerging target
The ACCC has signalled it will carefully scrutinise transactions involving parties with commonly held or managed minority interests. Chair of the ACCC, Gina Cass-Gottlieb, has said acquisitions of minority interests by private equity firms or managed funds are an "emerging issue" as concerns have been raised due to the risk of concerted practices and the '"chilling effect" on competition. In addition to developing its own thinking in this area, the ACCC is also engaging with international regulators.
In March 2022, the House of Representatives Standing Committee on Economics released a Report on the Implications of Common Ownership and Capital Concentration in Australia. That Committee recommended the introduction of an explicit legislative requirement for the ACCC to actively monitor the extent of common ownership in Australian markets and that the ACCC be empowered to take common ownership into account when assessing merger applications. In November 2022, Government consulted on the prospect of creating a register of beneficial ownership, which would make ultimate ownership more transparent.
The ACCC's thinking on this topic will continue to be revealed as it reviews mergers and acquisitions which raise these issues. At this stage it has not proposed any specific guidelines on the subject, so it will be vital to closely review any Statements of Issues and/or Public Competition Assessments to understand its approach and any nuances. Government consultation on the public register of beneficial ownership has closed and the Government is considering the submissions made by stakeholders.
|Expansion of unfair contract terms to take effect
Late last year Federal Parliament passed reforms that significantly expanded the unfair contract terms (UCT) regime. The changes expanded the scope of "small businesses" that will be covered by the UCT protections and made unfair contract terms illegal in standard form consumer and small business contracts. The reforms will come into effect in November 2023. Once in effect, maximum penalties of the greater of $50 million, three times the benefit or 30% of turnover during the "breach turnover period" (which may be longer than 12 months) will apply to each contravention, with each individual unfair term in a contract in principle constituting a separate contravention. Please see our previous publication for further details.
The UCT changes (including penalties) will come into force on 9 November 2023. The ACCC has encouraged businesses to engage with it to raise any ambiguities and issues before it moves to an investigation and enforcement phase in November 2023.
|Regulators focus on greenwashing / sustainability claims
The ACCC continues to ramp up its enforcement activities and targeting of corporate "greenwashing". "Greenwashing" is conduct by businesses which falsely promotes "green" / environmental credentials, such as sustainability and carbon neutrality. The ACCC recently conducted an internet sweep of 247 Australian businesses across different industries and found that over half raised greenwashing concerns. Concerns included using vague language such as "environmentally friendly", "green" or "sustainable" without scientific evidence to support their claims.
We expect regulators to continue to focus on greenwashing in the remainder of 2023. The ACCC has announced it has several active investigations underway in the packaging, consumer goods, food manufacturing and medical devices sectors for alleged misleading environmental claims. The ACCC has also announced that it will conduct a range of education activities and will update economy-wide guidance material around the middle of the year, as well as guidance for specific sectors. ASIC has also foreshadowed further greenwashing cases in 2023.
|Regulation of digital platforms taking shape
In Interim Report No. 5 of its Digital Platform Services Inquiry, the ACCC called for a new regulatory regime to address perceived challenges in tackling competition and consumer issues posed by digital platforms. The ACCC recommended service-specific codes of conduct be introduced and apply to designated digital platforms, to address issues such as self-preferencing and tying, data advantages, fairness, transparency and more. The Government conducted a consultation on the ACCC's recommendations, which concluded in mid-February 2023.
The Government is now considering the submissions it received in response to the consultation and developing its response to the Interim Report No. 5.
The ACCC's Digital Platform Services Inquiry is ongoing and will continue until 2025. Its next report (the sixth interim report), due by 31 March 2023, will focus on potential competition and consumer issues in the provision of social media services to consumers and businesses by social media platforms.
|Employee non-compete and no-poach clauses in the spotlight
The intersection of competition law and employment issues has not been an area of significant interest for the ACCC, most likely due (at least in part) to the carve out of certain employment related terms from the application of the competition law rules as a result of the exemption contained in section 51(2) of the Competition & Consumer Act. However, that may be about to change. Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh has confirmed that he has asked the Australian Competition and Consumer Commission and Treasury for advice on the competitive impacts of employee non-compete clauses and any action the Australian Government should take in response. This is an area that has attracted significant attention from international competition regulators in recent years, with a number of companies facing investigations and proceedings overseas for alleged anti-competitive employee wage-fixing and non-solicit arrangements.
While it is early days, it is possible that the Government may have its sights set on this as another area of reform.
|Unfair practices still perceived as a gap
The ACCC is continuing its push for a new economy-wide prohibition on unfair practices, in order to plug perceived gaps in the current law and bring Australia into line with other jurisdictions. The ACCC has cited various examples of unfair practices in support of its arguments. These include online service providers making it difficult for consumers to cancel subscriptions, click-wrap consents, excessive tracking of data and the use of dark patterns.
The Government is currently taking initial steps to assess the appropriateness of a general provision against unfair trading practices – what it will ultimately decide remains unclear.
|New ACCC 2023-2024 Compliance and Enforcement Priorities
In addition to its enduring priorities such as pursuing cartel conduct, the ACCC has announced the following compliance and enforcement priorities for 2023-2024:
Authors: Alyssa Phillips, Partner; Peter Armitage, Partner; Ross Zaurrini, Partner; Melissa Fraser, Partner; Justin Jones, Partner, Tihana Zuk, Partner; Angie Ng, Partner; and Amanda Tesvic, Expertise Counsel.
With thanks to Flavio Booth for his contribution.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.