The Australian Competition Authority provides interim authorisation to allow the Australian Banking Association and banks to work together

There is no automatic ’public interest’ exemption to our competition law, although there are effective and timely mechanisms that can be used to ensure legal protection for business and their staff in implementing COVID-19 responses. Our team outlines key considerations and options for managing cartel risk to ensure businesses can respond rapidly in the best interests of their customers and the community in a legally compliant way.

Businesses are being called on by Government, regulators and our community to co-ordinate their activities in various, unprecedented ways to assist in responding to the COVID-19 health emergency. In doing so, cartel provisions of our competition law still apply.

One of the features of the global and domestic responses to the COVID-19 health emergency has been the need for rapid changes to business practices involving high degrees of co-ordination of supply chains to support health and economic interventions. The pace and scale of these interventions has been unprecedented and businesses have had far less time than usual to consider legal compliance, with the focus rightly being on playing a constructive role in ensuring the health and wellbeing of our population. There is, however, no automatic exemption to Australian cartel laws based on public interest arguments, so businesses still need to be aware of the legal position, types of conduct raising risks and the best approach to managing cartel risks.

The legal position

The legal position remains that, absent a relevant exemption, defence or authorisation, any of the following types of arrangements or underst andings between competitors remain a criminal offence under the Competition and Consumer Act 2010:

  • Price Fixing
  • Dividing or allocating customers, suppliers or territories
  • Rigging bids
  • Restricting the production, supply or acquisition of goods / services.

Types of conduct raising risks

Many desirable COVID-19 responses require, in the short term, much higher levels of co-ordination of conduct between competitors that in a ’business as usual’ scenario where competitors make decisions and act at arms-length from each other. Co-ordination of activities is occurring both via formal and informal Government or regulatory directions or requests, as well as the product of business or community initiated responses. What many of the responses have in common is that co-operation is being substituted for competition between businesses in the public interest. For example, restricting the sale or rationing the quantity, of specific goods and services, restrictions on the manner in which goods and services are supplied, where they are supplied, or to whom they are supplied, and the co-ordination of many procurement activities. On their face, many of these responses can, prima facie, amount to cartel offences if entered into between competitors.

So what can business do to manage these risks but still play their part in the COVID-19 response?

Approach to managing cartel risks

In approaching this issue, there are a number of practical steps businesses can take. We suggest the following:

  • Consider whether a cartel risk actually arises. Are you being asked to co-ordinate the supply or acquisition of goods or services with a competitor to fix prices, divide markets, rig bids or restrict output? Unilateral decisions to take particular actions that are not the result of communication and agreement with a competitor are not cartel conduct. For example, an individual voluntary decision to ration a critical supply in a manner consistent with a Government recommendation will not amount to cartel conduct. Businesses should not unnecessarily avoid or delay taking unilateral decisions to act in the public interest in their COVID-19 responses due to unwarranted cartel conduct concerns. Alternatively, are you simply complying with a law or direction from the Government or a relevant authority in taking the relevant action? If this is the case, even if your competitors are also required to take the same or similar action, it cannot without more amount to cartel conduct.
  • If a cartel risk may arise, are there ways that you implement your COVID-19 responses in a way that does not cause concern? For example, can the response be implemented without having to discuss and agree with a competitor on an action that amounts to price fixing, market division, big rigging or a restriction of output? Alternatively, if that is not feasible, can the Government or a relevant authority be asked to consider using a lawfully binding power to compel you or your competitors to take the action or coordinate your conduct? In this context, the action would usually be regarded as being the result of that Government requirement or direction, not an illegal agreement or arrangement with a competitor. In some cases it may be that a Government direction is not on its own sufficient, or that the COVID-19 response would be even more effective if competitors could engage in further co-ordination of activities to give effect to the Government direction. In that case, seeking authorisation from the Australian Competition and Consumer Commission (ACCC) is an option that may be considered (see below).
  • If a cartel risk applies and there is no obvious exemption or defence applicable, it is possible to apply to the ACCC for authorisation of conduct if it would result in a ’net public benefit’ (ie if the public benefit is likely to outweigh any anti-competitive detriment). While obtaining final ACCC authorisation takes a number of months, the ACCC has discretion to grant ’interim authorisation’ to permit conduct to occur before a decision on final authorisation is reached.

Given the extraordinary circumstances the community faces, the ACCC has been gearing up to process COVID-19 related urgent interim authorisation applications in much shorter time frames to reflect the rapid and urgent responses that are being required. This is a welcome development. If the circumstances warrant, it is possible that the ACCC may be able to process and make decisions on appropriate interim authorisation applications in as little as 48 hours or potentially even a shorter period.

For example, the ACCC today granted interim authorisation to an urgent application to allow the Australian Banking Association (ABA) and banks to work together to implement a small business relief package which permits the deferral of principal and interest repayments for loans to small businesses in all sectors impacted by the COVID-19 pandemic. The application was filed last night (Thursday 19 March) and interim authorisation was granted by the ACCC today (Friday 20 March).

The types of interim authorisations that are likely to be granted on an urgent basis to facilitate coordinated responses to COVID-19 issues would include applications that, for example:

  • Do not go further than necessary to achieve the public benefit – it may be difficult, for example, to convince the ACCC of the necessity for conduct involving price fixing;
  • Are voluntary and do not compel third parties that have not consented to engage in the conduct;
  • Are directed towards things such as continuity of supply chains or parity of access to critical goods and services or protection and aid to the most vulnerable members of the community to COVID-19 related impacts;
  • Are temporary and appropriately limited in time;
  • Cannot easily be achieved through alternative means not requiring co-ordination between competitors;
  • Would give rise to relatively obvious and meaningful public benefit or benefits.

The ACCC has confirmed that these urgent interim authorisation applications to allow firms to coordinate some conduct during the crisis will be an ’important priority’, and has urged parties to engage with the ACCC as early as possible if they anticipate submitting such an application.

PDF Version

Authors

  • Minter Ellison (Melbourne)
  • Minter Ellison (Melbourne)

Quotation

Geoff Carter, Miranda Noble, The Australian Competition Authority provides interim authorisation to allow the Australian Banking Association and banks to work together, 20 March 2020, e-Competitions March 2020, Art. N° 93926

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