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In brief

Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 - amendments to the joint venture exception

Last minute amendments were made to the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill (Bill), before it was scheduled to be debated in the Senate on 14 May 2009.

The amendments are intended to address initial concerns that the joint venture exception would have disadvantaged certain types of legitimate joint ventures as the original wording of the Bill limited the exception to only those cartel provisions contained in a ‘contract’, rather than those contained within ‘arrangements or understandings’.

The latest amendments provide that the exception will also now apply to arrangements and understandings where the parties to the joint venture agreement can prove that, when the arrangement or understanding was made or arrived at, they intended the arrangement or understanding to be a contract and reasonably believed that the arrangement or understanding was a contract, notwithstanding that, as a matter of law, they had failed to make a contract. Additionally, the civil offence exception requires the parties to prove that, when the arrangement or understanding was given effect to, each party reasonably believed it was a contract.

The amendments also inserted explanatory notes into the Bill to clarify the inter-relationship between the joint venture exceptions and other provisions contained in the Bill.

Market, what market?

On 2 April 2009, Emirates and Singapore Airlines challenged the validity of several ACCC’s section 155 notices before the Federal Court.

The airlines argued that there was no market in Australia for the supply of inbound international air cargo services as the marketing, negotiation, setting of rates and contracting for inbound air cargo services occurs entirely outside of Australia.

The Federal Court held that as the business of an international airline included unloading cargo, booking flight services and dealing with complaints at the destination point, it could not be considered that all competitive activity between airlines offering air cargo services takes place at the point of origin of the cargo.

The Federal Court adopted a broad view of what might be considered "competitive activity in Australia". On the basis of the reasons provided by Justice Middleton, the only circumstances where the ACCC's compulsory information gathering powers may be curtailed would be when there is conclusive evidence that the relevant conduct only involves the supply and acquisition of services outside Australia.

In other airline news, the ACCC has instituted proceedings in the Federal Court against Cathay Pacific Airways. The ACCC alleges that between 2000 and 2006, Cathay Pacific entered into over 70 arrangements or understandings with other international air cargo carriers for the purpose of fixing the fuel surcharge price.

Cathay Pacific is the eighth airline to be the subject of ACCC proceedings for fuel surcharge price fixing. The total pecuniary penalties to date ordered against respondent airlines in these related matters is $41 million.

Black and Decker “Made in Australia”

The ACCC reported in April that Black & Decker has supplied a sanding product incorrectly labelled as 'Made in Australia'. The packaging on some of its Powerfile sanding belts were labelled 'Made in Australia' when in fact the belts were made in Germany.

The material to make the belts was originally sourced from Australia but was later sourced from Germany. Despite quality control processes put in place to resolve previous concerns raised by the ACCC, Black & Decker failed to detect the change to the sourcing of the materials used in the manufacture of the sanding belts.

The TPA provides a two step test which allows goods to be represented as being made in a specified country:

  • 1) the goods must have been substantially transformed in the country that is the subject of the claim; and
  • 2) 50 per cent or more of the cost of production or manufacture of the goods must has occurred in that country.

As well as removing the belts from sale, Black & Decker will extend the court enforceable undertaking provided to the ACCC to resolve a similar matter in 2006. The 2006 undertaking followed concerns that Black & Decker been representing certain of its sanding sheets were 'Made in Australia' when in fact the sheets were made in India.

The ACCC’s Graeme Samuel said traders need to continually ensure statements made about their goods are true and correct. "This vigilance is not a one off process but requires traders to be pro-active and to monitor and scrutinise statements about their products”.

“Publisher’s defence” clarified by the High Court

In March 2009, the High Court handed down a decision clarifying the application of the “publisher’s defence” to a breach of section 52 of the TPA.

The case concerned two episodes of the television show, Today Tonight, depicting a property investment scheme called ‘Wildly Wealthy Women’. According to the broadcast, the business offered to train women to make money out of property investment and made several misleading representations including those relating to the success of the business’ principals. The segments were organised by a marketer, who had made an arrangement with Wildly Wealthy Women to receive a commission for every woman who signed up as a result of this broadcast.

Section 65A of the TPA, also known as the ‘publisher’s defence’, provides a general exemption to most of the media, as publishers of news and current affairs, for publishing misleading or deceptive material.

The High Court found that the exemption conferred by section 65A does not apply to situations in which a media outlet publishes material which is subject to an arrangement with a third party and which endorses the misleading representations of that third party into the publication.

Channel Seven, in breaching section 52 of the TPA, was not allowed to rely upon the publisher’s defence due to the ‘arrangement’ with the marketer in question, which meant the publication was not at arm’s length.

ACCC v Pratt - admissibility of evidence

In December 2005, the ACCC instituted civil proceedings against Visy and its senior executives, including Mr Richard Pratt, for Visy’s involvement in a cartel. The proceedings were concluded in November 2007 on the basis of a Statement of Agreed Facts in which Visy conceded that it had engaged in the alleged conduct.

On 19 June 2008, criminal proceedings were commenced against Mr Pratt for alleged contraventions of section 155(5) of the TPA. Section 155(5) prohibits giving false and misleading information under a section 155 notice.

One of the key arguments put forward Pratt’s defence team was that four crucial documents that had been the subject of the civil proceedings, including the Statement of Agreed Facts, were inadmissible in the criminal proceedings because they did not constitute an acceptance of truth, but were merely something for the civil court to act upon.

On 27 April 2009, Justice Ryan held that the admissibility of the documents depended on whether they contained representations by Mr Pratt of a fact “tending to establish” what the ACCC was seeking to prove in the criminal proceedings. His Honour concluded that none of the documents, including the Statement of Agreed Facts, contained representations in the sense necessary for them to constitute evidence of an admission. Following this decision, the DPP withdrew its criminal prosecution of Mr Pratt on the grounds that it was against public interest given Mr Pratt’s ill health.

First licence under the Water Industry Competition Act 2006

On 7 May 2009, the NSW Government issued the first licence under the Water Industry Competition Act 2006 (NSW) to Veolia Water, opening Sydney’s water network to private competition. The licence permits Veolia Water to construct, maintain and operate a new recycled water plant at Fairfield as part of the Rosehill Recycling Scheme that will initially provide 4.3 billion litres of recycled water a year to industrial and irrigation customers in Western Sydney.

A second licence has also been issued to Aquanet Sydney, a division of Jemena, to allow the high-quality recycled water to be transported to users through a network of retrofitted gas pipes.

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  • Peter Yeldham - Senior Associate | Email
 

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