Competition and consumer news

 
A week of interesting court decisions under the Competition and Consumer Act 2010 (Cth) (CCA).
  • Cartel whistleblower immunity does not necessarily confer anonymity
  • Narrow market definition stymies ACCC’s attempt to thwart Metcash bid for Franklins.
ACCC attempt to keep identity of whistleblower confidential fails
Readers of this update will know that the ACCC operates an immunity policy for cartel whistleblowers.  Recipients are entitled to immunity from prosecution and penalty – quite a drawcard when the penalties for cartel conduct include significant financial penalties and jail terms.
 
However, does the bestowal of immunity entitle the recipient to anonymity?  At first glance the answer to this might appear to be an obvious ‘yes’, given the potential ramifications whistleblowers may face when spilling the beans on illegal cartel conduct.  Public interest immunity may preserve anonymity, but only on certain occasions.
 
The ACCC is currently pursuing an alleged cartel involving overseas suppliers of electrical cables for a project in the Snowy Mountains Scheme.  In order to seek leave to serve the pleadings on the respondents overseas, the ACCC filed affidavits with the Federal Court setting out the evidence gathered.  However those affidavits contained information, including the redacted identity of the individual informant, which had been provided to the ACCC on a confidential basis. 
 
The overseas suppliers sought access the confidential information contained within the affidavits as well as seeking to have the service of the pleadings set aside.  The ACCC and the whistleblowers, concerned that publicising the informant’s identity would make him susceptible to personal prosecution in other jurisdictions, were unsuccessful in their attempt to prevent this disclosure. 
 
Ultimately, Lander J held that although there is “without question public interest in encouraging informers to come forward”,[1] this had to be balanced against the competing public interest in ensuring that the alleged cartelists could adequately prepare their case against the ACCC.  The case for maintaining his anonymity based on public interest immunity was not made out.
 
As with many contested matters, the facts of this case may stand on their own.  Here, the Court was persuaded that the public interest in keeping the informant’s identity confidential was outweighed by the opposing considerations because the same alleged cartel was also being investigated by antitrust authorities overseas.  As it was likely that his identity was already known in those jurisdictions - and, consequently, to the alleged cartel participants in these proceedings – confidentiality was nearly a moot point.
 
However, it does highlight the importance of crafting a strategy for interacting with the ACCC from the outset of a matter that will maximise the likelihood of confidentiality being maintained.
 
See ACCC v Prysmian Cavi E Sistemi Energia SRL [2011] FCA 938.
 
Metcash/Franklins merger challenge
 
In July 2010, independent grocery wholesaler Metcash Trading Ltd agreed to purchase all the shares in Interfrank Group Holdings Pty Ltd (Franklins) from Pick n Pay Retailers (Pty) Ltd, subject to the acquisition being approved by the ACCC.  However, when the ACCC advised the parties in November 2010 that it would oppose the transaction, Metcash and Pick n Pay decided to proceed anyway.  The ACCC immediately filed proceedings in the Federal Court alleging that the transaction would contravene section 50 of the Competition and Consumer Act 2010 (Cth) (CCA).
 
Section 50 of the CCA provides that a corporation shall not acquire shares or assets of another corporation where the acquisition will have the effect or likely effect of substantially lessening competition in a market.
 
The ACCC alleged that the acquisition would have the effect or likely effect of substantially lessening competition in a market for the wholesale supply of packaged groceries to independent supermarket retailers in NSW and the ACT.  The ACCC’s counterfactuals (the projection of what the market would look like if the transaction did not go ahead) were based upon a third party or parties acquiring all or most of the Franklins stores.
 
Metcash and Pick n Pay disagreed with the ACCC’s market definition, arguing it was too narrow and that a national (or at least NSW and ACT) market including the vertically integrated retailers and independent wholesalers exists.  It also disagreed with the ACCC’s counterfactuals, arguing that if the transaction did not proceed, the stores would be sold off to Coles or Woolworths, another independent retailer or closed altogether.
 
In short, the Federal Court agreed with Metcash and Pick n Pay.  Justice Emmett was not persuaded that the market was so narrow as to be restricted only to the wholesale supply of packaged groceries to independent retailers.  He also found that the ACCC’s proffered counterfactuals were based on pure speculation and there was no real chance that they would come to pass.
 
As to the effect of the transaction, Emmett J concluded that rather than lessening competition, the transaction would be quite likely to strengthen the ability of the independent retailers to compete with the larger supermarket chains.
 
The decision has been the subject of intense debate and discussion; however the ACCC’s new Chairman Rod Sims has been waxing philosophical about the Commission’s litigation program, publicly stating that its current near 100% litigation success rate is far too high and that it will be less risk averse in its choice of matters to litigate in the future.
Perhaps this suggests a disinclination to appeal this decision, but one thing seem to be certain – there are likely to be more section 50 challenges and test cases under the CCA in the near future.
 
See ACCC v Metcash Trading Ltd [2011] FCA 967.
 
If you have any queries about these cases or the impact that the judgments may have, contact Merridy Woodroffe (Special Counsel – Competition and Regulation) on 02 9931 4760.

[1] at [182].
This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.
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This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.