On 14 February, Gilbert + Tobin hosted a panel discussion with ACCC Chair Gina Cass-Gottlieb, head of Gilbert + Tobin’s Competition, Consumer + Market Regulation practice Elizabeth Avery, Chair of the Consumers’ Federation of Australia Gerard Brody, and a virtual foreword from Assistant Minister for Competition, Charities and Treasury the Hon Dr Andrew Leigh MP.
The topic of discussion was the role of fairness in competition and consumer law. The panellists considered whether Australia should legislate a new prohibition against unfair trading practices, as the ACCC has recommended.
We would like to thank Ms Cass-Gottlieb, Mr Brody and Dr Leigh for their valuable contributions to the panel.
Below is a recap of the key takeaways from the session.
The start of the unfairness debate in Australia
The idea of a prohibition on unfair conduct is not new. It was first recommended in 1997 by the Reid Committee . The ACCC has renewed a push for legislating an unfair trading practices prohibition, most recently in September 2022 where its Digital Platform Services Inquiry Interim Report on regulatory reform raised concerns about problematic conduct both online and offline that may not be effectively addressed by the Australian Consumer Law (ACL) (for analysis of the Interim Report, see ACCC designs Australia’s future framework for regulating digital platforms).
The ACCC, Consumers’ Federation of Australia, and G+T perspectives on unfair trading practices
The panellists provided differing opinions on the need for, and potential scope of, an unfair trading practices prohibition in Australia.
The ACCC has recently been at the forefront of advocating for an unfairness prohibition in Australia. Ms Cass-Gottlieb reinforced the Commission’s position during the panel discussion. She highlighted that “We feel and we see the evidence of it daily, that the current prohibitions [in the Competition and Consumer Act] are insufficient to provide the protection that is currently needed by consumers” , particularly in the age of the digital economy.
Similarly, Gerard Brody said that the ACL’s current regime, particularly the misleading or deceptive conduct and unconscionable conduct prohibitions, do not address endemic business practices that may not involve misleading representations or fail to meet the high threshold of unconscionability.
G+T Partner Elizabeth Avery rather argued that, while fairness is certainly a core value of Australian society, prohibiting unfairness is embedded in the existing provisions of the Competition and Consumer Act. Aspects of unfairness were addressed in the new, broader prohibition on misuse of market power, prohibitions on misleading and deceptive conduct, unconscionability and unfair contracts, rather than needing to introduce a whole new prohibition.
There are real questions about the extent to which any new prohibition is needed, beyond the significant array of legislative tools the ACCC already has at its disposal.
On this point, Ms Cass-Gottlieb agreed that “our existing competition law can embrace much of the community concerns, without needing an unfair practices prohibition to do all the work.”
Ms Avery outlined that introducing a legislative standard of ‘fairness’ would introduce uncertainty for clients who otherwise comply with the legislative prohibitions due to an additional ill-defined standard. While some other jurisdictions (such as the US and South Africa) may have stand-alone prohibitions, those prohibitions needed to be seen in their historical and political context and could not simply be grafted into Australian law.
Ms Avery particularly warned against the risk of a vague unfairness regime chilling competition. As the High Court has recognised, competition is often described as a ruthless process, where competitors compete aggressively against each other to deliver better quality products at cheaper prices. Overlaid with an uncertain unfairness standard, there is a risk that competitors could pull their punches to avoid the penumbra of a risk that their activities are prosecuted as unfair.
Should unfair or unconscionable practices be the standard?
In discussing whether the standard of unconscionability was affording the necessary protections to consumers, the conversation covered recent decisions such as ACCC v Mazda [2021] FCA 1493 and ASIC v Kobelt [2019] HCA 18 (for analysis of the case, see Fair shake: Prohibiting unfair practices in Australia). Ms Cass-Gottlieb argued that the lack of intervention in business conduct had the potential to create a “race to the bottom” where businesses implement the minimum standards necessary to avoid enforcement action, but these standards still fall below what will sufficiently protect consumers.
Mr Brody and Ms Cass-Gottlieb agreed that instead of focusing on whether conduct is unconscionable - which is conduct that is so far outside the norms of accepted business conduct - the focus should be on whether the conduct distorts consumer choice or is confusing.
Community and judiciary understandings of “unfairness”
Ms Avery noted that the decision in Kobelt was split, with the minority clearly recognising the unconscionability of Mr Kobelt’s conduct, which suggested that issue was more to do with judicial attitudes than whether the conduct was described as unconscionable or unfair.
Further, a subsequent decision of the Full Federal Court in ACCC v Quantum Housing Group [2021] FCAFC 40, had no difficulty in finding a scheme was unconscionable where it sufficiently departed from acceptable business practices as to be “against or offends conscience” . This decision was now widely followed and indicated that the bar to finding unconscionability was not as high as the Kobelt decision could suggest.
While recognising the inherent difficulty in interpreting what exactly constitutes ‘unfairness’ with reference to community standards, Ms Cass-Gottlieb argued that a legislative change will have the purpose of “direct[ing] judges to think in a different fashion” about what constitutes anticompetitive conduct. Ms Cass-Gottlieb recognised the active role that the ACCC would have to play in shaping the understanding and interpretation of ‘unfairness’ in both the community and the judiciary.
As the legal standard of unfairness is identified and clarified, Ms Cass-Gottlieb said that the ACCC would take a proportionate approach to investigation and enforcement appropriate to the nature of the conduct and the consumer harm it may cause. The ACCC would also issue guidance around the specific practices which it considered likely to contravene a fairness standard.
How will the unfair trading practices prohibition affect mergers?
Ms Cass-Gottlieb did not give insight into whether or when the economy-wide review of the Australian merger regime that the ACCC also recommended in its September 2022 report would begin. However she did note that the unfair trading practices prohibition would not function as an “overlay” in the context of mergers. There, the focus would continue to be on competition, though this would be interpreted relatively broadly:
The Commission is certainly asking itself in the context of merger matters, the extent to which service differentiation, product differentiation, reflecting the purchasing choices of local suppliers, is an aspect of dynamic competition We will continue to ask what, in terms of mergers, is the likely competitive effective, but we will not restrict to views of substantial lessening of competition purely to price competition and efficiency.
Where does the Government stand on prohibiting unfairness?
According to Dr Andrew Leigh, the Government is currently taking steps towards assessing the appropriateness of an unfairness prohibition in the Australian context:
The [existing Australian] competition law has the capacity to embrace much of the community concern, without considering that an unfair trading practices prohibition is going to do the work.
The Government has taken steps in an effort to strengthen Australia’s competition laws, recently introducing higher penalties for anticompetitive conduct and making unfair contract terms illegal. Where Government’s consultation on unfair trading practices will lead remains to be seen.
For a more detailed discussion of the role of fairness in competition and consumer law, see our recent publication: ‘The Role of Fairness in Competition and Consumer Law: All Sides of the Story ’