Australian Competition and Consumer Commission



|[pic] |COSBOA National Small Business Summit |

| |ACCC Small Business Report Card |

| | |

| |1 August 2012, Melbourne |

| |Rod Sims, Chairman |

Introduction

It is a pleasure to be here. The COSBOA Summit is a very important event on the small business calendar.

Today marks a personal milestone – the first year anniversary in my role as Chairman of the Australian Competition and Consumer Commission (ACCC).

The competition and consumer landscape is constantly changing, presenting new opportunities and challenges for small business. The ACCC plays a key role in informing small businesses about their rights and obligations under the Competition and Consumer Act 2010, and in protecting small businesses against unfair practices.

The basic philosophy of the ACCC is that we would much rather have businesses understand and comply with the Act, than have to take action to try to rectify a breach.

Today I want to address three issues

1. First, I will provide you with an update on carbon price claims and the ACCC's role and give you some preliminary observations on the response from small business.

2. In September last year, I said I would be listening to small business and ensuring we understand each other. It is important we let each other know where we stand. So today, secondly, I will provide you with an update on some of the ACCC's priority areas.

3. Last time we met, I also said small business is a key consumer group which the ACCC seeks to assist. Continuing down that path, I will give you a picture of some of our recent outcomes which have benefitted small businesses.

I will finish by releasing the latest snapshot of the ACCC's work with small business.

1. Update on carbon price claims

First to carbon.

Last time I looked at the COSBOA website I saw an image of man chomping down on his desk under the carbon headline with the text 'mainly because we do not like the unknown.'

One thing small businesses do know is where they stand with the ACCC when it comes to carbon price claims. This is partly due to the work and cooperation behind the scenes by COSBOA and other industry representatives.

The ACCC has been very clear from the outset. It is business as usual. You are free to increase your prices as you see fit. However, if you make claims about the impact of the carbon price these claims need to be truthful and have a reasonable basis.

As we have said all along a business that makes a good faith, reasonable approach to calculating the carbon price for their business has nothing to fear.

While the ACCC does not have a formal price monitoring role, and is not responsible for calculating what the carbon price will be for business, we are actively reviewing claims to ensure that they are not misleading or deceptive. These powers are not new. In fact the laws against misleading and deceptive have been in place for decades.

The ACCC carbon price claims hotline, 1300 303 609, and online carbon price claim form, make it easier for business to complain if they suspect false price claims or have a question.

The ACCC has received just over 2000 carbon price complaints and enquiries between 1 July 2011 and 30 July 2012.

The majority of contacts have been about general price increases, not specific complaints about carbon price misrepresentation. This is especially the case with electricity complaints where cost increases reviewed by the ACCC have been of the order expected. The sectors that continue to record the most complaints are the energy, landfill, refrigerants, and building and construction sectors.

The ACCC is engaging with businesses and their industry associations everyday. I am pleased to say that, for the most part, businesses understand their obligations and have performed very well when making claims about price increases attributed to the carbon price.

The ACCC's initial education focus is, of course, shifting towards one of dealing with possible non-compliance including an enforcement response. Indeed, we have already resolved a couple of matters.

As you would have seen from the Retail Food Group / Brumby's outcome, the ACCC seeks compliance with the law, not to necessarily impose penalties. Most of the ACCC's effectiveness comes from steps that stop short of court action. I think you will agree the court enforceable undertaking is an appropriate and proportionate resolution of the Brumby’s matter.

Just today, the ACCC has announced that GFC Berwick Pty Ltd, trading as Genesis Fitness Club has paid an infringement notice in the amount of $6,600 in relation to carbon price claims made about the cost of gym membership fees.

In April 2012, the fitness club sent a letter to over 2,000 of its members promoting a ‘RATE FREEZE’ offer, which would allow members to avoid an estimated 9-15% increase to their membership fees due to the carbon price by extending their gym memberships for a period of 12 months, or extend their contracts for two or three years at a reduced membership rate.

This raised concerns for the ACCC as the representation enticed members to sign lengthy contract extensions on the basis of false claims about the impact of carbon pricing. When approached, the fitness club could not provide any information that provided a reasonable basis for the claims made.

As part of the resolution of this matter, the CEO of Belgravia Health & Leisure Group Pty Ltd’s Genesis Division wrote to all affected members on behalf of GFC Berwick offering them the opportunity to withdraw from the contract extensions at no cost.

This is a good outcome for consumers that may have been misled by the claim.

Finally, I encourage you to sign-up and take part in the ACCC carbon claims small business webinar hosted by ACCC deputy chair Michael Schaper. If don’t get a chance to catch him at drinks, the webinar is a perfect opportunity where you can put your questions direct to Michael.

2. Update on some of the ACCC priority areas

Some may say the ACCC's plate is pretty full, whereas others may say we just have a big plate. In any case, it is important that we understand each other and this means knowing what's in front of us.

In February this year, the ACCC released its compliance and enforcement policy which identified priority areas. There are two issues on that list that I would like to address today, because I know they are of much interest to small businesses. They are:

• competition and consumer issues in highly concentrated sectors, in particular in the supermarket and fuel sectors, and

• conduct that may impede emerging competition involving online traders.

Concentrated sectors

Supermarket supplier issues are often the first thing people want to ask about.

It is well known that the ACCC is looking at concerns raised about the way in which the major supermarket chains deal with their suppliers. The ACCC has been engaging with suppliers and representative groups on these issues and has encouraged anyone with concerns to contact us.

At this stage, I can report the ACCC’s consideration of these matters is progressing well with the benefit of information that has been provided to date.

There are two sets of issues. First, the potential for unconscionable conduct in relation to general dealings between the supermarkets and their suppliers. Second, concerns over the misuse of market power, particularly in relation to private label products.

Separately, the retail sector is under constant scrutiny in terms of mergers and acquisitions. If you look at the ACCC’s mergers register you will notice several reviews which involve ‘small retail acquisitions’ in the liquor, grocery and home improvement sectors.

With repeated transactions in local markets we believe our processes can be

streamlined. This can, however, only occur with appropriate notification, co-operation

and upfront information. The ACCC is negotiating with Wesfarmers and Woolworths on this.

Petrol and shopper dockets

Earlier this year, the ACCC announced an investigation into price information sharing arrangements in the retail petrol industry. As we said at the time, investigations of this nature are complex and generally involve extensive evidence gathering followed by much legal and economic analysis. Given this, the ACCC anticipates this investigation will take some time.

Put supermarkets and petrol together and you get shopper dockets. The ACCC is currently assessing whether competition issues arise from the extended frequency, duration and quantum of shopper docket discounts offered by Coles and Woolworths Caltex. The ACCC is working with industry participants to gather information to assist with assessing whether competition issues arise. Again, the ACCC anticipates this assessment will take some time.

That said, we appreciate the assistance and cooperation of the many industry participants on these matters.

Online

After supermarkets, the online market place is a constant talking point for small business. It is also an important area of scrutiny for the ACCC.

Recent reports suggest that in 2012, 9.6 million Australians aged over 15 years will make online shopping purchases. (source: PwC and Frost & Sullivan Australian online shopping market and digital insights July 2012).

The digital economy can provide lower prices, innovative business models and other potential benefits, including immediacy, convenience, and a wider range of choice. Our aim is to make sure those benefits are maximised.

The ACCC has stepped-up its focus on the online and digital economies with particular attention to ensuring competition law is applied. As in the "bricks and mortar" economy, businesses that are trading online are required, by law, to ensure they don’t engage in anti-competitive practices, such as price-fixing or misusing market power.

The ACCC has had some recent successful outcomes worth noting. Last year, Ticketek was ordered to pay a penalty of $2.5 million for taking advantage of its market power to deter or prevent a newly-established online competitor. This case underlines the need for businesses to ensure they aren’t engaging in anti-competitive practices in order to stop or obstruct an online competitor.

Another feature of cyberspace is that consumers are often dealing with foreign or multi-national companies. The recent case involving Apple Pty and its iPad claims highlights that the Australian Consumer Law applies to all companies wherever they are based which trade in Australia, be it online or traditionally.

3. Enforcement outcomes which have benefited small businesses.

What has the ACCC done to benefit small businesses in the past six months? First let me start with this scenario, which I'm sure you can all relate to.

You get a call out of the blue. The caller on the other end sounds knowledgeable enough. He tells you all about workplace safety laws which requires you to display a certain safety chart. What happens next? You want to do the right thing... but you don’t have the time to check... the guy on the phone happens to be selling the exact safety chart you need?

I can tell you now, there was no legal requirement to display the chart. It was all part of a sales pitch directly aimed at busy small businesses.

One company has provided court enforceable undertakings to not make misrepresentations about workplace safety laws and another company is facing allegations in the Federal Court of misleading conduct and coercion in relation to its alleged sales practices.

This is an example where the ACCC has taken action to directly protect small businesses. Let me share a couple of other examples where the benefits to small business are not always immediately apparent.

Premium claims

Businesses often make claims about products in an attempt to get a selling advantage. They might say the product is sourced from a place which carries some extra prestige or meets a standard of quality or was produced in a certain way.

Basically, it is what we call a premium claim. You want to give the impression that your product has some kind of added benefit when compared to similar products. That's fine if you can substantiate the claim. Any premium claim you make about a product must be accurate and truthful.

But who loses out if the premium claim is false? What if the meat is not sourced from King Island? What if the eggs aren't free range? What if the 'extra virgin' olive oil can’t be shown to be of that quality?

Obviously, the consumer is at a loss because they don’t get what they paid for. Businesses doing the right thing also lose out because they are not competing on equal terms. The point I'm making is that many of the ACCC's consumer enforcement outcomes benefit small business.

A couple of the cases to come across our desk in relation to premium claims in the past six months include:

• A Victorian butcher falsely claiming that its meat was sourced from Tasmania's King Island. The Federal Court imposed a penalty of $50,000.

• A company which made misleading 'extra virgin' claims when selling batches of an inferior olive oil product. This company paid two infringement notices totalling $13,200.

If you need further proof that misleading and deceptive conduct is something that concerns small businesses look no further than our complaint data.

In the past six months, more than 600 complaints have been made by small business to the ACCC about misleading conduct and false representations.

Closing remarks

The ACCC remains keen to continue working with SMEs and their representatives, through a range of channels including our longstanding Small Business Consultative Committee and Franchising Consultative Committees.

The ACCC will continue to emphasise that the Competition and Consumer Act gives

businesses not just responsibilities but rights as well. I thank COSBOA and other state small business agencies for their work in making sure the ACCC's information gets to the people who need to know – you, the hard working small business owners.

Let me finish with the official launch of the January – June 2012 ACCC's Small Business and Industry Codes snapshot. This report, which I know you will find useful, encapsulates many of issues I have spoken about today... and more.

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