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Consumer Protection & Anti-competitive conduct in Telecommunications

Part V & Part XIB of the Trade Practices Act 1974

Australian Communications and Media Authority & International Telecommunication Union

International Training Program 2006

By Kate Michalak

Communications GroupCompliance Section

Australian Competition and Consumer Commission

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Part V – Consumer Protection Telecommunications (1)

Part V of the Trade Practices Act contains

provisions aimed at protecting consumers against unfair trade practices

The main provisions relate to misleading and deceptive conduct.

Conduct can be in relation to:- Price- Product performance- Future supply and use of goods or services- Standards, quality, etc

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Part V – Consumer Protection Telecommunications (2)

In addition to acting on complaints received from consumers and competitors, the ACCC monitors advertising in newspapers, magazines and on the internet.

If the ACCC considers conduct is misleading or deceptive, it may institute either criminal or civil proceedings.

Penalties include corrective advertising, injunctions, damages and fines.

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Part V – Consumer Protection Telecommunications (3)

Disclaimers, qualifications and ‘small print’ are frequently used in advertising/marketing telecommunications services.

The ACCC considers that terms such as

‘unlimited’ and ‘free’ should mean exactly that.

For example, if an internet service provider advertises a broadband plan as ‘unlimited’ to attract customers and then imposes a download limit – this is likely to be misleading or deceptive.

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Part V – Consumer Protection Telecommunications (4)

Example of Part V enforcement action: Unauthorised customer transfer (‘slamming’) of

fixed telephony services by One.Tel and Primus Complaints received Investigation by ACCC s.87B undertakings Payment of $500,000 to a fund administered

by the ACCC to raise consumer awareness about churning.

Part XIB & Anti-competitive Conduct in

Telecommunications (1) The ACCC has an important role in ensuring

markets are competitive. Part XIB establishes powers with respect to

‘anti-competitive conduct’ in relation to telecommunications markets.

The provisions are similar to the ACCC’s more general competition law powers under Part IV of the Trade Practices Act.

Part XIB & Anti-competitive Conduct in

Telecommunications (2) Essentially, a carrier or carriage service

provider (CSP) engages in anti-competitive conduct if it takes advantage of a substantial degree of market power with the purpose, effect or likely effect of substantially lessening competition.

This is known as ‘the competition rule’.

Part XIB - Anti-competitive conduct in

Telecommunications (3) Anti-competitive conduct also includes the anti-competitive practices proscribed by Part IV of the Trade Practices

Act:- boycotts- misuse of market power- exclusive dealing- resale price maintenance

Central concept to anti-competitive conduct: substantial lessening of competition (SLC) Does the conduct have the effect or likely effect of substantially lessening, hindering or preventing competition in

a telecommunications market?

If the ACCC finds anti-competitive conduct it may issue a 'competition notice'. A competition notice states that a carrier or CSP is engaging in anti-competitive conduct and sets out particulars.

Part XIB - Anti-competitive Conduct in

Telecommunications (4) The SLC test: How and to what extent would there have

been competition in the market but for the conduct, assess what is left and determine what has been lost in relation to what would have been – Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238.

If ACCC is of the view that SLC exists, the ACCC may issue a Competition Notice to the carrier or CSP informing them that they are engaging in anti-competitive conduct and in breach of the competition rule.

The Competition Notice sets out particulars of the contravention.

Part XIB – Anti-competitive conduct in

Telecommunications (5) 2 types of Competition Notice can be issued –

Part A and Part B

Part A Competition Notice:

- Need ‘reason to believe’ that Carrier or Carriage Service Provider is engaging in anti-competitive conduct

- Must issue Consultation Notice first and consider submission

- Once a Part A Competition Notice is in force substantial potential penalties accrue.

Part XIB – Anti-competitive conduct in

Telecommunications(6) When Part A Competition Notice in force:

- third party rights activated, can take legal action for damages based on Notice.

Part B Competition Notice:- need ‘reason to believe’ that the carrier has or is committing the contravention- is prima facie evidence of matters in the Notice if legal proceedings arise

- reverses burden of proof- can be issued once proceedings in place.

Part XIB – Anti-competitive Conduct in

Telecommunications (7) Pecuniary penalties can be ordered by Federal

Court for breach of the competition rule (as can injunctions and damages).

Penalties apply for each contravention. If the breach continued for over 21 days – the

sum of $31M and $3M for each day over 21 days.

Otherwise – the sum of $10M and $1M for each day that the conduct occurred.

Part XIB – Anti-competitive Conduct in

Telecommunications (8) Vertical price squeezes are a common example

of alleged anti-competitive conduct in telecommunications markets.

A vertical price squeeze is a form of anti-competitive ‘low’ pricing.

A vertical price-squeeze occurs when a vertically integrated firm uses its market power over the supply of a key input (in the upstream market) to reduce the margin available to competitors to whom it supplies the key input but also competes against in the downstream retail market.

Part XIB – Anti-competitive Conduct in

Telecommunications (9) The rival can be disadvantaged by the vertically

integrated access provider lowering the retail price, increasing the wholesale price or both.

The ACCC conducts imputation analysis to test for vertical price squeeze behaviour.

Could an access seeker enter the market successfully if it paid the access provider’s access price and had the same costs?

Imputation testing is currently only applied to Telstra.

Imputation reports are released on a quarterly basis.

Enforcement -v- Compliance (1)

Key Strategies:

Balance enforcement and compliance

Compliance is the ultimate objective

Enforcement action taken where a serious or blatant breach of the Act has occurred.

Enforcement -v- Compliance (2)

Tiered Approach: Educate and inform – compliance programs. Where education not effective, ACCC may seek

court enforceable undertakings and/or remedies.

If company continues to breach TPA, the ACCC may commence proceedings in the Federal Court.

Enforcement -v- Compliance (3)

The ACCC does not:

Intervene in private contractual disputes. Look into billing disputes. Regulate pricing of telecommunications

services and products. Administer compliance with industry codes.

ACCC - Communications Compliance

Any questions?

Our website: www.accc.gov.au

See ‘Telecommunications’, ‘NewsCentre’, ‘Publications’

Our infocentre: 1300 302 502.