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Competition Law, Consumer Rights and The Changing Tertiary Marketplace: What Does It Mean For Australian Universities? Dr Michael Schaper, ACCC Deputy.

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Presentation on theme: "Competition Law, Consumer Rights and The Changing Tertiary Marketplace: What Does It Mean For Australian Universities? Dr Michael Schaper, ACCC Deputy."— Presentation transcript:

1 Competition Law, Consumer Rights and The Changing Tertiary Marketplace: What Does It Mean For Australian Universities? Dr Michael Schaper, ACCC Deputy Chair Universities Australia plenary meeting Tuesday 28th October2014 Newcastle


3 In a deregulated domestic market, what happens if…
Institutions decided to jointly set common prices? Two universities decided to merge? 2 or more universities decided to rationalise language courses and “share out” courses? Universities Australia or the Go8 publishes a RRP list of degree prices? Particular disciplines restrict admission applications across the country? A student complains that the content and delivery of a course isn’t as they were promised?

4 Outline 1. The ACCC What we do
Current involvement with tertiary sector 2. The Competition & Consumer Act 2010 Cartels Misleading and deceptive conduct Pricing Other potentially relevant provisions 3. Looking Forward Seeking exemptions Industry associations/representative groups Current relevant reviews and inquiries

5 1. The ACCC: What We Do National regulator: oversees laws on consumer protection, fair competition, product safety, infrastructure access Also regulates some specific industries (energy, telecommunications), industry codes (franchising, horticulture) and price monitoring (airports, postage, stevedoring) An independent statutory agency within the Treasury portfolio 7 Commissioners (statutory appointments), 700 staff, offices in each state and territory Dual educative and enforcement function Enforcement agency … does not set policy Does not provide private rulings: need your own independent advice

6 Legal Framework Principal legislation: Competition & Consumer Act 2010 (previously known as Trade Practices Act 1974). Includes the Australian Consumer Law Laws apply across the country Apply to all activities “in trade or commerce” – legal structure is usually irrelevant Covers both goods and services Activities of government often exempt Generally cannot impose penalties: court-based litigation (but can issue infringement notices)

7 Current Involvement With Tertiary Sector
Graduate program Commissioned and pro-bono research Academic involvement in ACCC Consultative Committees Online programs for business schools Online programs for franchising Tertiary Education Network Occasional decisions affecting institutions


9 Competition & Consumer Law Tertiary Program
Launched November 2013 For business schools, media, marketing Each module stands alone Assumes no prior knowledge from lecturers or students Can be used in a variety of teaching environments (lecture, online delivery, group work, etc) Suitable for UG, PG, exec. education Designed to be ‘slotted’ into existing units Currently used in 7 universities (RMIT, Newcastle, UNSW, UWA, QUT, Curtin, Monash) Source: Michael Schaper Business Deans Presentation November 2013

10 Occasional Dealings With Tertiary Sector …
2000: UTas refunds - GST costing methodology 2001: Court action against Australian Early Childhood College 2002: JCU - enrolment policy for student association 2012: La Trobe – third line forcing notification for international student accommodation 2009, current: ANU (and 9 other universities): authorisation for common interviews for medical schools

11 2. Key Provisions In A Deregulated Marketplace
Price-fixing Cartel-like arrangements Misleading or deceptive conduct Pricing & selling practices Unfair contract terms Obtaining exemptions (“authorisations”)

12 Price-Fixing & Cartels (section 45)
Arise when firms agree to act together instead of competing Can be a contract, arrangement or understanding Major enforcement priority for the ACCC (highly anti-competitive, inflate prices, minimise choice for consumers and stifle innovation) Many possible forms of cartel conduct: price fixing sharing markets/dividing up markets rigging bids controlling output or limiting amounts of goods/services available Exceptions for joint ventures; not intended to capture R&D Source: Michael Schaper Industry Briefing April 2014 Steep penalties: For individuals - maximum 10 years jail, fines of up to $340,000 (criminal offence), $500,000 (civil). Corporations - $10 million OR 3xtotal value of the benefits obtained OR 10% of turnover.

13 Alleged Egg Cartel Attempt
Current case: ACCC alleging Australian Egg Corporation Ltd and others attempted to induce members to enter into an arrangement to cull hens or dispose of eggs – so as to reduce the amount of eggs available. “The ACCC is concerned that the alleged attempt sought to obtain agreement by egg producers to reduce supply, which if successful could have impacted on egg prices paid by consumers” ACCC Chairman Rod Sims Source: News Release: The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against: the Australian Egg Corporation Limited (AECL); Mr James Kellaway, the managing director of AECL; two egg producing companies, Ironside Management Services Pty Ltd (trading as Twelve Oaks Poultry) (Twelve Oaks Poultry) and Farm Pride Foods Limited (Farm Pride); Mr Jeffrey Ironside, a director of AECL and Twelve Oaks Poultry; and Mr Zelko Lendich, a director of AECL and a former director of Farm Pride. The ACCC alleges that AECL and the other corporate and individual respondents attempted to induce egg producers who were members of AECL to enter into an arrangement to cull hens or otherwise dispose of eggs, for the purpose of reducing the amount of eggs available for supply to consumers and businesses in Australia. It is not alleged that this attempt to make a cartel arrangement involving Australian egg producers was successful. AECL is an industry corporation that collects levies for promotional activities and research and development activities from member egg producers. At the relevant time, AECL had between 100 and 150 egg producer members. The ACCC alleges that from November 2010, in AECL member publications, the AECL board (which included Mr Kellaway, Mr Ironside and Mr Lendich) encouraged its members to reduce egg production, in order to avoid oversupply which would affect egg prices. It is also alleged that, in February 2012, AECL held an ‘Egg Oversupply Crisis Meeting’ attended by egg producers in Sydney, where it allegedly sought a coordinated approach by egg producers to reducing the supply of eggs, in response to a perceived oversupply of eggs. Mr Kellaway and Mr Lendich both attended and spoke at this meeting, which was chaired by Mr Ironside. “Retail egg sales, one of many sales channels, were valued at over $566 million in 2012* and eggs are a staple food product for Australian consumers. Indeed, egg consumption per capita has increased in the past 10 years leading to an increase in the demand for producers’ eggs. The ACCC is concerned that the alleged attempt sought to obtain agreement by egg producers to reduce supply, which if successful could have impacted on egg prices paid by consumers,” ACCC Chairman Rod Sims said. “Detecting, stopping and deterring cartels operating in Australian markets remain an enduring priority for the ACCC, because of the ultimate impact of such anti-competitive conduct on Australian consumers who will pay more than they should for goods.” “Industry associations need to be conscious of competition compliance issues when they bring competing firms together. Today’s action sends a clear message that attempts by industry associations to coordinate anti-competitive behaviour by competitors will not be tolerated,” Mr Sims said. The ACCC is seeking declarations, injunctions, pecuniary penalties, orders that AECL, Farm Pride and Twelve Oaks establish and maintain a compliance program and that Mr Kellaway, Mr Ironside and Mr Lendich attend compliance training, an adverse publicity order and a community service order against AECL, disqualification orders against Mr Kellaway, Mr Ironside and Mr Lendich, and costs. Background The 2012/13 AECL annual report* indicates that the egg industry in Australia in 2012: produced 397 million dozen eggs (of which million dozen was sold in the grocery/retail market); consisted of 301 egg farms; had a gross value for egg production at farm gate of $583.4 million per annum for 2011/12; and had a gross value for egg production at market for 2012 of $1.672 billion

14 Tasmanian Salmon Growers
2002: Tasmanian Atlantic salmon industry was in financial difficulty; supply was outstripping demand. Tasmanian Atlantic Salmon Growers Association decided that if all members culled stocks by around 10%, this would meet demand and avoid further price falls. It sought legal advice but did not correctly brief its lawyers. Growers discussed, approved and circulated proposed plan. ACCC investigated; the cull stopped. Due to state of the industry, fact that legal advice had been sought, and cooperation shown, ACCC did not pursue penalties. Instead obtained court orders for an industry-wide legal compliance training program and stop on future culls. Source: Tasmanian Atlantic salmon growers In 2002 the Tasmanian Atlantic salmon industry was in financial difficulty and decided that supply was outstripping demand. The industry association, the Tasmanian Atlantic Salmon Growers Association (TSGA), decided that if all members culled stocks by around 10 per cent, this would meet demand and avoid further price falls. It sought legal advice but did not correctly brief its lawyers. The advice that the cull would not breach competition laws was consequently flawed. After a meeting of growers approved the plan, agreements were circulated. One member, Tassal, subsequently culled its stocks. The ACCC investigated and the cull was stopped. Due to the parlous state of the industry and the fact that legal advice had been sought and cooperation shown, the ACCC chose not to pursue penalties. It instead obtained court orders that the industry establish a trade practice compliance training program and stop any future culls

15 “The law of unforeseen consequences might have led to four NSW universities coming to an informal agreement with their state health minister not to increase enrolments of international medicine students. “…NSW universities have, since 2012, agreed to keep international enrolments at their current levels. “But a NSW Health spokesman denied the existence of any agreement, adding that international medical enrolments had continued to increase, as had domestic enrolments.” Source: The Australian 25 June 2014

16 What Is Misleading Or Deceptive Conduct?
Essentially, it is leading a consumer into error. Can include activities or behaviour such as: Lying Leading customers to a wrong conclusion Creating a false impression Leaving out (or hiding) important information Making false or inaccurate claims (including employment opportunities) Reduce the risk of misleading consumers: Sell goods and services only on their merits Be honest about what you say and do Look at the overall impression of your advertisement – what will a typical customer think or believe? Penalties of up to $220,000 (individuals), $1.1 million (corporations) Misleading and deceptive conduct—whether it actually misleads or is likely to mislead—is prohibited by the ACL. When you are advertising travel, it is important that the overall impression created by your ad is an accurate one. This includes any representations, written or pictorial, about the price, inclusions and exclusions, restriction on dates of travel, departure airports and any other essential information. These rules apply to not only the advertisement itself but also any other representations you make to a consumer when they are considering purchasing travel. This may include, for example, negotiations that are made in person. What is misleading or deceptive conduct? Misleading or deceiving someone is leading them into error (or being likely to) and includes conduct such as: • lying • leading to a wrong conclusion • creating a false impression • leaving out (or hiding) important information • making false or inaccurate claims. Whether you intend to do this or not is irrelevant—the prohibition can be breached by both deliberate and inadvertent conduct. It is also very broad in scope and will be determined largely on a case-by-case basis. The following checklist will assist you to limit your likelihood of misleading or deceiving consumers.

17 ACCC v Taxsmart Alleged false, misleading or deceptive job ads for graduate accountant positions to attain a tax agent licence and subsequently operate a Taxsmart franchise. ACCC alleged graduates were induced to pay upfront sums on the unfulfilled promise they would receive experience to obtain registration and operate a Taxsmart franchise. In May 2014, court orders were made by consent. Taxsmart was ordered to repay fees to five former franchisees and provide enforceable undertakings. TAXSMART NEWS RELEASE Taxsmart to repay franchise fees for misleading conduct 16 May 2014 The Federal Court of Australia has ordered by consent that Taxsmart Group Pty Ltd, Taxsmart Franchising Pty Ltd and Resultsmart Pty Ltd (together, Taxsmart) repay $260,400 in franchise fees to five former Taxsmart franchisees following proceedings brought by the Australian Competition and Consumer Commission (ACCC). The Court also declared that Taxsmart engaged in misleading or deceptive conduct when it represented that Taxsmart was offering a graduate program and 12 months of employment to accounting graduates that would enable them to satisfy the requirements for registration as a tax agent. The Court declared that Taxsmart did not have reasonable grounds for making this representation because: Taxsmart had not made proper enquiries or adequately considered whether the graduate program would enable graduates, with no prior experience in tax accounting, to satisfy the legal requirements for registration as a tax agent; and the graduate program was not capable of enabling graduates with no previous work experience in tax accounting to satisfy the legal requirements for tax agent registration. “This outcome should remind all businesses of their obligation to ensure that they have reasonable grounds for making any representations about future matters,” ACCC Commissioner Sarah Court said. “A tax agent licence is lucrative to accountants as it allows them to complete tax returns for a fee without relying on a supervising agent to authorise the return,” Ms Court said. “These graduates paid significant franchise fees, relying on the representation made by Taxsmart that they would satisfy the requirements for registration as a tax agent, when in fact they would not meet those requirements through the graduate program.” The Court also declared that Taxsmart’s sole director at the time of the conduct, Mr Scott Andrews, aided and abetted Taxsmart in engaging in the misleading and deceptive conduct and is jointly liable for the repayment of the franchise fees. The Court accepted undertakings from Taxsmart and Mr Andrews that they would not, for a period of three years, make the same or similar representation or make offers of employment contingent on the payment of a fee. The Court also ordered that Taxsmart and Mr Andrews pay a contribution to the ACCC’s costs in the amount of $10,000.

18 “Greg Craven, Vice-Chancellor of Australian Catholic University, is an outspoken critic of the tertiary admissions racket. “…Direct offers, he argues, are completely lacking in transparency…the former constitutional lawyer even reckons such behaviour is in contravention of the Trade Practices Act [sic]. “…It’s a fundamental issue of transparency and consumer protection.”

19 Component Price Advertising
Prices displayed by a business must be clear, accurate and not misleading to consumers. You should always display the total price of a product or service. Organisations must not promote or state a price that is only part of the cost, unless you also prominently advertise the single (total) price. The single price means the minimum total cost that is able to be quantified (or calculated) at the time of making the claim or statement. The single price is calculated by adding up each of the price components that you are able to quantify when you make the price representation; for example, any tax, duty, fee, levy or charge imposed on you A prominent single price is one that: stands out so it can easily be seen by a consumer is clear, eye-catching and very noticeable. Example: A travel business advertises an overseas package holiday (fights and accommodation) for $1990. In fine print at the bottom, it states this price excludes airport taxes. These are known costs totalling $250, and should therefore be part of the total price. The total price of the holiday ($2240) should have been displayed as prominently as the $1990 package price, because the total price was quantifiable. While what is "prominent" may vary on a case-by-case basis, you should consider factors such as the size, placement, colour and font of the price, as well as the background of the advertisement. For example, if a single price is smaller or in a colour that is harder to read than any component price, then this is likely to mean it is not as prominent.

20 A Problematic Example The advertisement uses component pricing and does provide a single price. However, because of the size, font, style, background and placement of the total ($3099)—it is not able to be as easily identified as the most prominent component ($799) and is unlikely to comply with the component pricing rules. The disclaimer stating that the price applies per person twin share and the airfare quoted is for departure from Sydney is also likely to raise other broader concerns, for example under the ACL’s prohibition on misleading and deceptive conduct. It does not matter that the component amounts of the ‘Get hot in Hawaii’ package vary in terms of colour, font size etc. It is the most prominent component which is to be used as the point for comparison. The disclaimers also need to be readily and clearly identifiable by a consumer.

21 iiNet has paid an infringement notice of $102,000 to the Australian Competition and Consumer Commission in relation to an advertisement for its Naked DSL Service. The ACCC had reasonable grounds to believe the advertisement failed to prominently state the total minimum price payable for the service. This is the first infringement notice to be paid by a publicly listed company for an alleged breach of the Australian Consumer Law. The advertisement, which was displayed on the rear of a bus in metropolitan Sydney between at least 20 February 2013 and 11 March 2013, displayed the monthly price of iiNet’s Naked DSL Service of $59.95.The advertisement also displayed the total minimum price of the service. However the ACCC considered that the total minimum price was not displayed in a prominent way. Under the Australian Consumer Law, an advertisement that promotes the monthly price of a service must also prominently state the quantifiable total minimum price for that service. In this instance the total minimum price comprised $59.95 for each month for 24 months plus a $79.95 connection fee amounting to a total price of $1, “Businesses need to take into account the context in which their advertisements appear. If the total minimum price is not prominent or cannot be easily seen, businesses run the risk of being in breach of the Australian Consumer Law,” ACCC Chairman Rod Sims said. “This outcome is consistent with the continuing consumer protection work in the telecommunications sector, which is currently a priority for the ACCC.” The payment of an infringement notice is not an admission of a contravention of the Australian Consumer Law. The ACCC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

22 Unfair Contract Terms (ACL s.23)
Protects consumers from unfair terms in circumstances where they have little or no opportunity to negotiate with the business Standard form consumer contracts cannot contain terms that: cause a significant imbalance in consumer’s rights (compared to the business); are not reasonably necessary to protect the business’s interests; and cause any detriment to the consumer ACCC has previously examined airline tickets, gym memberships, etc Remedy: Unfair term is void (treated as though it never existed). Contract will continue to bind the affected parties to the extent that the contract is capable of operating without the unfair terms.

23 Other Potentially Relevant Provisions
Mergers & acquisitions (s.50): ACCC can seek court orders to prohibit acquisitions that result in a substantial lessening of competition in the market. Misuse of market power (s.46): Organisations with substantial market power cannot take advantage of this power for the purpose of eliminating or damaging competitors, or preventing new entrants into a market. Exclusive dealing (s.47): Restrictions on another party’s freedom to deal. Usually only illegal if they substantially lessen competition. Crucial issues: what is a market? is a student a consumer?

24 Exemptions Businesses that wish to engage in certain anti-competitive conduct can seek an exemption from the ACCC (‘authorisation’ or ‘notification’) Can be sought for conduct that may breach many of the competition provisions, including: Cartels Collective bargaining (see next slide) Exclusive dealing Imposing minimum resale prices Exemption provides protection from legal action under the Act Public process – external stakeholders consulted Granted when the public benefit outweighs the public detriment, including from any lessening of competition. Source Michael Schaper 101 industry briefing

25 Collective Bargaining
As the Act generally requires businesses to act independently of their competitors, the following conduct may breach the law: Collective bargaining: several competitors negotiate with a supplier or customer over common terms, conditions and prices Collective boycott: several competitors jointly agree not to acquire from/supply to a business unless it accepts the terms and conditions they offer But in some circumstances, allowing these arrangements may be in the public interest The Act allows ACCC to grant legal protection (“authorisation” or “notification”) in certain situations. Source Michael Schaper 101 industry briefing

26 Role of Industry Associations
Industry and professional associations must ensure their membership criteria, voluntary codes and advice to members comply with the Competition and Consumer Act. Benchmarking and information sharing OK: but only provide industry pricing information as a recommendation/guide Ensure prices you recommend are developed on the basis of costing or other calculations by an outside party Ensure members must independently determine their own prices and negotiate their own contracts Ensure membership rules/sanctions are transparent and applied equally Check that industry codes/rules are not overly restrictive and do not have the effect of limiting competition. Source: Professional associations should take the following steps to ensure they are operating within the law: 1.check that any self regulation codes, restrictions and sanctions are transparent, comply with the Act and do not impede competition 2.only provide industry pricing information as a recommendation or guide. Never impose these through disciplinary actions against members as this could be seen as restricting trade or fixing prices 3.ensure that any prices you recommend are developed on the basis of costing or other calculations by an outside party and that individual members have had a direct hand in these calculations 4.ensure that members understand they must independently determine their own prices and negotiate their own contracts. This may mean educating members on how to calculate and set prices their own prices and conduct their own negotiations 5.ensure membership rules are transparent and applied equally to all potential members, including substantiating reasons for accreditation or qualification requirements 6.check that the rules are not overly restrictive and do not have the effect of limiting competition.

27 More Information Helpline Website Tertiary Program

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