Competition Law, Consumer Rights and The Changing Tertiary

Marketplace: What Does It Mean For Australian Universities?

Dr Michael Schaper, ACCC Deputy Chairmichael.schaper@accc.gov.au

Universities Australia plenary meetingTuesday 28th October2014

Newcastle

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?

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

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

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)

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

www.ccaeducationprograms.org

Competition & Consumer LawTertiary 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)

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

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”)

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

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.

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

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.

“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.”

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)

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.

“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.”

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.

A Problematic Example

Unfair Contract Terms (ACL s.23)

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.

• 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

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?

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.

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.

Role of Industry AssociationsIndustry 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.

More InformationHelpline 1300 302 021

Website www.accc.gov.au

Twitter @ACCCgovau

Tertiary Programwww.ccaeducationprograms.org