New Australian price disclosure prohibitions take effect in June

Australia’s parliament has passed the Competition and Consumer Amendment Act (No. 1), which introduces two new prohibitions into the Competition and Consumer Act 2010: a prohibition on private disclosures of price information to competitors (except in certain circumstances); and a prohibition on public disclosures of information about prices, capacity or strategy that have the purpose of substantially lessening competition.

The prohibitions are intended to apply only to the banking sector initially, and will take effect on 6 June.

Scope of prohibitions

The new prohibitions will only apply to conduct concerning goods or services prescribed by regulation (“prescribed products”), and the commonwealth government has released draft regulations for this purpose. Under the draft regulations, the prohibitions would apply to goods and services provided by certain banking businesses – specifically, businesses that are “authorised deposit-taking institutions” under the Banking Act 1959 – which consist, to any extent, of: taking money on deposit (other than as part-payment for identified goods or services); or making advances of money.

The prohibitions apply to suppliers and acquirers of prescribed products, which means that purchasers of prescribed products may risk contravening the prohibition. The government has received public submissions on the draft regulations, but has not yet released the final regulations.

Private disclosure prohibition

The act prohibits corporations and individuals from making private disclosures of information relating to pricing of prescribed products that the discloser supplies or acquires in a market, to a competitor in that market, if the disclosure is not made in the ordinary course of business.

These disclosures are prohibited even where the information disclosed is otherwise available. This prohibition applies where a discloser uses an intermediary to facilitate the disclosure, or also discloses the information to a person who is not a competitor, for the purposes of avoiding the prohibition.

The limitation of this prohibition to disclosures that are not made in the ordinary course of businesses should provide some comfort to business that legitimate commercial disclosures will not be unlawful. Businesses should give careful consideration to the meaning and scope of the phrase “ordinary course of business” when considering whether a disclosure risks contravening this prohibition.

Public disclosure prohibition

The act prohibits corporations and individuals from disclosing information relating to:

• a price for, or a discount, allowance, rebate or credit in relation to, prescribed products supplied or acquired by the discloser;
• the discloser’s capacity to supply or acquire prescribed products; or
• any aspect of the commercial strategy of the discloser that relates to the prescribed products;
• disclosing information where a substantial purpose of the disclosure is to substantially lessen competition in a market.

The disclosure may be found to have been made for the relevant purpose even where there were other purposes for the disclosure, and the purpose may be inferred from the circumstances surrounding the disclosure.

Recipients of information

The prohibitions apply to disclosing, rather than receiving, information. Recipients of information will not contravene the prohibitions, or be considered to be a party to a disclosure if they “merely” receive information. However, more positive conduct such as taking active steps to obtain such information from a competitor might make an individual or company liable for being knowingly concerned in or party to unlawful disclosure.

Penalties

Maximum penalties are: for companies, the greatest of A$10 million (US$10 million), three times the value of the benefits of the contravention (if ascertainable), and 10% of group turnover in the 12 months before the contravention (if the value of the benefits is not ascertainable); and for individuals up to A$500,000.

Exceptions

There are exceptions to the public and private disclosure prohibitions for: disclosures between related bodies corporate; disclosures made for the purpose of complying with continuous disclosure obligations; certain disclosures made in the context of collective bargaining, or authorised by law (if they occur within 10 years of the date on which the bill introducing the amendments received royal assent).

There are further exceptions to the private disclosure prohibition for certain disclosures made:

• between existing or proposed joint venture participants;
• in the context of: supply or acquisition arrangements between discloser and recipient; share or asset sale arrangements; or a financier deciding whether to take measures to avoid the risk of a borrower becoming insolvent, or to return a borrower to solvency;
• in the situation where two corporations are providing loans or credit to the same borrower, and the information relates to the loans or credit;
• between a credit provider and a person who provides a credit service within the meaning of the National Consumer Credit Protection Act 2009, where the disclosure is made in their capacities as credit provider and provider of a credit service.

In addition, private disclosures are not actionable if the discloser did not know that the recipient was a competitor.

What can be done to prepare?

Businesses that may be subject to the new prohibitions should do the following:

• Review disclosures about price, capacity and strategy. Identify who is responsible for preparing and making the disclosures.
• Identify the purposes of disclosures. Businesses must be able to justify disclosures, including in response to an investigation.
• Consider whether disclosures fall within an exception.
• Determine what action may be required.