IMPORTANT NOTICE

This publication is under review following recent amendments to the Trade Practices Act 1974 (the Act).

Amending legislation

Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009This legislation amended the Act to introduce new cartel provisions and associated criminal penalties. The following forms of cartel conduct are prohibited by the new provisions:

price fixing•

restricting outputs in production or supply chains•

allocating customers, suppliers or territories•

bid-rigging.•

A civil prohibition will operate in relation to the same forms of cartel conduct.

Under the legislation it is a criminal offence for a corporation to make or to give effect to a contract, arrangement or understanding that contains a cartel provision. Any person knowingly concerned in the cartel conduct will also commit a criminal offence and be liable to imprisonment for up to 10 years.

The per se prohibition on price fixing contained in ss. 45 and 45A of the Act has been repealed and replaced by the new cartel provisions.

The legislation exempts certain joint ventures from the criminal offence and civil prohibition.

Also included in the legislation are provisions that:

enhance the ACCC’s capacity to conduct search warrants•

set out a new regime to enhance confidentiality of cartel •information provided to the ACCC

enable telephone interception to be used for investigation •of the cartel offence.

More informationMore information about these changes is available on the ACCC website (accc.gov.au) or by contacting the ACCC Infocentre on 1300 302 502.

July 2009

IMPORTANT NOTICE

What will stay in the TPA and what will go?The per se prohibition on price fixing contained in ss. 45 and 45A of the TPA has been repealed and replaced by the new cartel provisions. Conduct that was captured by s. 45A will be captured by the new provisions.

Section 45 of the TPA otherwise remains and will continue to prohibit a CAU that contains an exclusionary provision or provisions that have the purpose, effect or likely effect of substantially lessening competition. The prohibition of exclusionary provisions by ss. 45 and 4D is retained as a backstop for the new cartel provisions, primarily because the new cartel provisions do not capture the same breadth of conduct as s. 4D.

With the repeal of s. 45A, the joint venture defence for price fixing, s. 76D, is also repealed. A new joint venture exception has been introduced for the cartel offence and civil prohibition.

How liability will be determined

The cartel offenceThe prosecution will need to prove the charge beyond reasonable doubt and a unanimous jury verdict is required.

The civil prohibitionThe prosecution will need to establish the contravention on the balance of probabilities.

Accessorial liability, attribution of liabilityA new head of accessorial liability will be created: ‘attempts to contravene’ (paragraph 79(1)(aa)).

The TPA will continue to permit the state of mind and/or conduct of a director, employee or agent to be attributed to that person’s employer via s. 84.

The penalties

IndividualsFor individuals, the cartel offence is punishable by imprisonment of up to 10 years and/or fines of up to $220 000 per contravention.

Under the civil prohibition, individuals may be liable to a pecuniary penalty of up to $500 000 per contravention.

CorporationsFor corporations, the fine or pecuniary penalty for each contravention of the cartel offence or civil prohibition (whichever applies) will not exceed the greater of:

$10 000 000•

three times the total value of the benefits obtained by one or •more persons reasonably attributable to the commission of the offence/act or omission in contravention of the civil prohibition

where those benefits cannot be fully determined, 10 per cent of •the corporate group’s annual turnover in the 12-month period when the offence/contravention occurred.

Other forms of relief relating to the cartel offence and civil prohibition include injunctions, orders disqualifying a person from managing corporations and community service orders.

Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009

The Parliament of Australia has passed the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (the Act), which amended the Trade Practices Act 1974 (TPA) to provide criminal penalties for cartel conduct

The main provisions of the Act commence on 24 July 2009. The Act contains criminal penalties for proscribed forms of cartel conduct.

A civil prohibition will operate in relation to the same forms of cartel conduct.

Also included in the Act are provisions that:

enhance the ACCC’s capacity to conduct search warrants•

enhance confidentiality of information provided to the ACCC in •relation to cartel conduct

enable telephone interception to be used for investigation of the •cartel offence.

The mechanics—how the Act does itThe Act provides for a civil cartel prohibition and a criminal cartel offence. Both are centred upon the existence of a cartel provision within a contract, arrangement or understanding (CAU).

The definition of ‘cartel provision’ includes four varieties of cartel conduct:

price fixing•

output restrictions•

allocating customers, suppliers or territories•

bid-rigging. •

The definition of cartel provision also requires that at least two of the parties to the agreement as to price, output restrictions etc. be persons who are, or are likely to be, in competition with each other.

As did s. 45A of the TPA (now repealed), the cartel provision addresses price-fixing agreements on a ‘purpose’ or ‘effect’ basis. It remains the case that the prohibition on cartel conduct in the form of output restrictions, allocation of customers and bid-rigging is based on purpose.

A company will have contravened the civil prohibition if it makes a CAU containing a cartel provision with its competitor or if it gives effect to the cartel provision.

The element that distinguishes the cartel offence from the civil prohibition in the Act is the need to establish certain fault elements under the Criminal Code Act 1995. An overview of the application of those fault elements is provided below:

Making a CAU containing a cartel provisionIt will be necessary to establish that an individual or corporation intended to enter into a CAU and that they knew or believed the CAU contained a cartel provision.

Giving effect to a cartel provisionIt will be necessary to establish that an individual or corporation knew or believed a CAU contained a cartel provision and that they intended to give effect to that cartel provision.

Other new provisions

Investigative powers that can only be used criminallyTelephone interception and surveillance device warrants can be sought for investigation of the cartel offence and accessorial liability in relation to that offence.

Investigative powers that can be used both civilly and criminallyOther investigative powers for cartel conduct, such as TPA search warrants and s. 155 notices, can be used for both civil and criminal investigations.

Search warrantsThe ACCC’s ability to conduct search warrants has been enhanced by the Act, particularly in relation to seizure of electronic information.

Other amendments include:

capacity to seize material relating to obstruction during a search •warrant

permitting Australian Federal Police assistance to the ACCC in •the execution of search warrants

allowing temporary exit of premises being searched and •resumption of the search

extending the period of time a seized article may be retained •from 60 to 120 days

the ability for a magistrate in any state or territory to issue a •warrant that can be exercised across Australia.

Section 155A change in the wording of s. 155 means that documents produced to the ACCC by an individual under paragraph 155(1)(b) can be used against that individual in criminal proceedings.

If the material already exists, it can be used against the individual in criminal proceedings. A corporation has no right against self-incrimination.

Protected cartel informationA new regime has been created to enhance confidentiality of cartel information provided to the ACCC. It is based on the concept of protected cartel information—that is, information given in confidence to the ACCC about a potential breach of the cartel offence or civil prohibition.

In certain circumstances the ACCC will be able to disclose protected cartel information and the court will also be able to compel the ACCC to provide such information. The test used by the ACCC and the court will be the same.

The regime provides for restrictions upon use of the information in secondary proceedings.

Exceptions to the new cartel regimeCertain exceptions exist to the new cartel regime. Broadly, they relate to:

conduct subject to a collective bargaining notice•

conduct subject to authorisation•

joint ventures•

agreements between related bodies corporate•

collective acquisition of goods or services•

‘anti-overlap’ provisions.•

Collective bargaining noticesSection 44ZZRL provides that if you have a collective bargaining notice in place, businesses will be exempt from the cartel offence and civil prohibition insofar as the conduct is in relation to:

price fixing•

restricting outputs•

allocating customers, suppliers or territories•

but • not bid-rigging.

AuthorisationAuthorisation is available for conduct in relation to:

price fixing•

restricting outputs•

allocating customers, suppliers or territories•

bid-rigging•

if the public benefit from the conduct would outweigh any public detriment.

Joint venturesAn exception to the cartel offence and civil prohibition has been created for joint ventures. The party claiming the joint venture exception will need to ensure that the portion of their agreement that would otherwise attract attention as a cartel provision is contained in a contract.

The party will also need to ensure that:

the cartel provision is for the purposes of a joint venture •

the joint venture is for joint production or supply.•

The joint venture exception extends to a situation where a person has an arrangement or understanding, but intended it to be, and reasonably believed it was, a contract.

Agreements between related bodies corporateMuch like the existing exception in subs. 45(8), s. 44ZZRN ensures that agreements solely between related bodies corporate will not fall within the cartel offence or civil prohibition.

Collective acquisition of goods or servicesMuch like the existing exception in subs. 45A(4), s. 44ZZRV ensures that there is an exception to the cartel offence and civil prohibition (for price fixing) for the collective acquisition of goods or services and/or the joint advertising of the price for the re-supply of the collectively acquired goods or services.

Anti-overlap provisionsMuch like the existing ‘anti-overlap’ provisions in subss. 45(5) to (7), the new provisions governing cartel conduct will not apply to conduct captured by ss. 45B (covenants), 48 (resale price maintenance), 47 (exclusive dealing), 49 (dual-listed companies) and 50 (acquisition of shares or assets).

More informationMore information about these changes is available on the ACCC website (accc.gov.au) or by contacting the ACCC Infocentre on 1300 302 502.

July 2009

Contracted employmentservices and the TradePractices Act

September 1997

© Commonwealth of Australia 1997

ISBN 0 642 24915 6

This work is copyright. Apart from any use as permitted underthe Copyright Act 1968, no part may be reproduced by anyprocess without prior permission from the AustralianGovernment Publishing Service. Requests and inquiriesconcerning reproduction and rights should be addressed tothe Manager, Commonwealth Information Services,Australian Government Publishing Service, GPO Box 84,Canberra ACT 2601.

Important noticeThe information contained in this publication is not legaladvice and should not be relied upon as such. All care hasbeen taken in its preparation but readers should note that it isintended to provide a general understanding of the subjectmatter only. Readers should also note that it reflects the lawand legislation as it stands at the date of publication.

Preface

This guide has been prepared by the Australian Competitionand Consumer Commission to assist current and prospectiveparticipants in the emerging competitive market forgovernment funded employment services. The Commissionwishes to acknowledge the contribution of the EmploymentServices Regulatory Authority in the production of this guide.

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Contents

Preface ........................................................................iii

Background ...................................................................1

Important message about the application of theTrade Practices Act to employment services ................ 2

The Australian Competition and ConsumerCommission ............................................................... 2

The Trade Practices Act and the employmentservices market............................................................. 4

Competition...................................................................4Competition in a ‘market’............................................4Agreements between firms ..........................................5Price fixing ..................................................................6Primary boycotts .........................................................6Secondary boycotts .....................................................6Misuse of market power ..............................................7Exclusive dealing.........................................................8Joint ventures ..............................................................9Mergers and acquisitions.............................................9Penalties and remedies under the competitionprovisions of the Trade Practices Act ........................ 10

Authorisation and notification......................................10Public benefit ............................................................10Authorisation.............................................................11Notification ..............................................................12

Consumer protection provisions...................................13Misleading representations in advertising andservice descriptions .................................................. 13Penalties and remedies under the consumerprotection provisions of the Trade Practices Act ....... 14Warranties.................................................................14

Unconscionable conduct .............................................15

How do you know if your conduct is illegal? .............. 15

Avoiding trade practices problems ...............................16

How the Australian Competition and ConsumerCommission works ..................................................... 18

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How to make a complaint or inquiry.........................18What happens when the ACCC believesthat the law has been broken? .................................. 18More information ......................................................19

Australian Competition and Consumer Commissioncontacts and offices ....................................................21

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Background

In August 1996 the Minister for Employment, Education,Training and Youth Affairs (DEETYA), Senator theHonourable Amanda Vanstone, announced a range ofmeasures to alter the delivery of employment services tounemployed Australians. The Minister’s statement,Reforming Employment Assistance, forecast a competitivemarket for service provision. The corporatisation of publicsector provision of services and the separation of the publicprovider from the purchaser (DEETYA) were also announced.

In July 1997, the Minister announced some significantrefinements to these proposals, notably the integration oflabour exchange, job search assistance and some intensiveemployment assistance. In other respects, however, theintent of the reforms remained. These policy statementsheralded the contracting of a wide range of employmentservices from the private and community sector as well asfrom the Public Employment Placement Enterprise (PEPE).Job seekers are referred to contracted providers by theCommonwealth Service Delivery Agency (CSDA).

These reforms build on competition in the provision of casemanagement services to job seekers in the market regulatedby the Employment Services Regulatory Authority (ESRA). Inthe new market, DEETYA will purchase services fromcontracted providers and the regulation of trade practicesmatters will be the responsibility of the AustralianCompetition and Consumer Commission.

The market for employment services is characterised by therebeing only one purchaser, DEETYA. The suppliers are whollyGovernment funded and services are provided free of chargeto job seekers. Nevertheless, providers should recognise thattheir behaviour is constrained by the same legislation asapplies to more traditional trading and commercial activities.

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Important message about theapplication of the Trade Practices Act toemployment services

The market for employment services is subject toCommonwealth legislation on the operation of markets andbusinesses engaged in trade or commerce. In particular, theTrade Practices Act 1974 applies. The precise nature andextent of coverage by the Act of the new market has not beentested by the courts. A number of significant legal issues, suchas the definition of the market and the legal nature of theactivities engaged in by providers, are therefore yet to beclarified by legal precedents.

This guide should be read in that context. Its task is to drawthe attention of both existing participants and potentialmarket entrants to the need for compliance with the Act andto provide examples of where compliance may be in doubt. Itis just a summary of some of the basic information and doesnot cover the whole of the Act. It is not a substitute forprofessional legal advice.

The guide generalises about the application of the Act. Of theprovisions referred to, some have exceptions or importantqualifications. In most cases the particular circumstances ofthe conduct need to be taken into account when determiningthe application of the Act to that conduct.

The Australian Competition and ConsumerCommission

The Commission is a Commonwealth statutory authorityresponsible for ensuring compliance with the Trade PracticesAct and for administering the Prices Surveillance Act 1983.The Commission’s objectives include:

� improving competition and efficiency in markets;

� fostering adherence to fair trading practices inwell-informed markets;

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� promoting competitive pricing wherever possible andrestraining price rises in markets where competition isless than effective; and

� informing the community at large about the TradePractices Act and the Prices Surveillance Act and theirspecific implications for business and consumers.

The Commission has power to:

� grant immunity from legal proceedings for somearrangements which might otherwise beanti-competitive under its authorisation andnotifications powers;

� investigate complaints about competition andconsumer matters; and

� initiate legal action when there has been a possiblebreach of the Trade Practices Act.

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The Trade Practices Act and theemployment services market

The broad objective of the Trade Practices Act, referred to ins. 2, is to allow each business to compete on its merits, makingits own decisions and treating consumers fairly. It does this inthree main ways:

� encouraging competition in Australian markets byprohibiting anti-competitive conduct which is illegalper se (such as illegal price agreements);

� encouraging competition in Australian markets byprohibiting anti-competitive conduct which is illegalwhen it substantially lessens competition (such asmarket sharing agreements); and

� prohibiting unfair trading practices. Examples includemisleading claims or statements and unethical sellingpractices.

Provided the rules of the Act are not broken businesses are notrestricted from making the deals that suit them. Neither arethey protected from deals that don’t work out as expected.Both the consumer and competition provisions of the Actapply to contracted employment service providers in theconduct of their business, and may also apply to governmentbodies who engage in business.

Competition

Competition in a ‘market’Part IV of the Act deals with the competitive behaviour ofcorporations in a ‘market’ and it may not always be an easymatter to define the market. In a legal sense the market maydepend on the type of service being offered. For instance, amarket may be well defined in terms of the service to beprovided and the location in which it is provided. However,where the content of the service to be delivered is less closelydefined and can be offered across regions, it may be moredifficult to define the market in which the provider operates.

For legal purposes, the definition of the market affectswhether or not a provider has operated in a way which isanti-competitive. For instance, if the market is geographically

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large only very large organisations will have a substantialdegree of market power; if the market is small, a smallorganisation could have substantial market power. In bigmarkets most organisations will not be in a position to misusemarket power which is illegal under the Act (see Misuse ofmarket power). In small markets many organisations mayneed to ensure that they don’t misuse the substantial marketpower they might possess.

The markets in the employment services field have not yetbeen defined by a court. Providers may need to seek legaladvice in cases in which the legality of their conduct relies onthe definition of the market.

Agreements between firmsAn agreement, arrangement or understanding which has thepurpose or effect, or likely effect, of substantially lesseningcompetition is prohibited under s. 45.

‘Substantially lessening competition’ is sometimes a difficultconcept to understand. It is apparent when the ability of apurchaser to choose among alternative suppliers issignificantly diminished. An example or two may help.

Prior to tendering, representatives of a group of potentialcontracted providers in a region meet to discuss how theywill maximise their chances of having continuingbusiness. They agree that they will each tenderseparately, on the way in which they will tender, and thatthey will sub-contract the work from all the successfultenders to each other so that they all have continuingbusiness. They communicate their intention to potentialproviders from outside the region and say that the markethas been ‘sewn up’.

Prior to tendering, representatives of a group of potentialcontracted providers in a region meet to discuss how theywill maximise their chances of all having continuingbusiness. They agree that they will each tender in such away that they will avoid competition between them andreduce the choice of the purchaser.

In these cases the behaviour may substantially lessencompetition and therefore be illegal. However, it should be

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noted that the behaviour may be capable of being authorisedby the Commission (see Authorisation and notification).

Price fixingSection 45A in effect makes price fixing or price maintainingagreements unlawful per se regardless of whether theyinvolve a substantial lessening of competition.

Any agreement between you and one or more of yourcompetitors on the price you intend to charge is illegal. In thecase of the employment services market this includes anagreement about the price submitted at tender. Suchagreements do not have to be in writing. It could even be justa ‘nod and wink’ understanding that can take place anywhere— in the pub, on the golf course, or at an association meetingor social occasion. It’s the fact that decisions are being madecollectively (and not individually) that matters. Whentendering to provide services, tenderers should treat theirtender price as commercially confidential information.Simply agreeing with your competitors to fix prices is illegal,regardless of whether the agreement is put into place.

Primary boycottsAn arrangement, understanding or contract betweencompetitors which limits the provision of services to aparticular class of people, or the acquisition of goods orservices from a class of people is illegal under s. 45. This mayoccur in the employment services market where providersagree to reduce the services they offer to job seekers (e.g.hours during which services will be offered). It might alsooccur when contracted providers agree to limit dealings withparticular service providers.

Secondary boycottsThe secondary boycott provisions (ss 45D, 45E) prohibitpersons acting together to hinder third persons from dealingwith a fourth person, where at least one of the third or fourthpersons is a trading, financial or foreign corporation. Forexample, a group of employment service providers mightattempt to impede or obstruct the CSDA from referring jobseekers to a competing provider. This is illegal under the Act.

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Misuse of market powerSection 46 prohibits a corporation which has a substantialdegree of power in a market from using that power to:

� get rid of competitors or to prevent others from enteringthe market or any other market; or

� engaging in anti-competitive conduct in that or anyother market.

The section is concerned with the protection of thecompetitive process — not necessarily with the protection ofcompetitors per se. The more competitive the market thegreater the damage likely to be suffered by less efficientparticipants. The Act is not concerned with vigorouscompetition, but with anti-competitive behaviour. Vigorouscompetition has never been seen as wrong. It is when marketpower is used to reduce competition that s. 46 may apply. Forthe behaviour to be illegal the corporation must have asubstantial degree of market power and use the power for ananti-competitive purpose. Misuse of market power mightoccur as follows.

An organisation with a substantial degree of marketpower provides services in a range of locations, some ofwhich are more costly to provide. It tenders to provideservices at the same cost in each location, calculating thatit will be able to offset losses in the high cost locationswith profits in the low cost locations. The organisationdecides that it will carry losses in high cost localities for aslong as necessary to ensure that other organisations inthose localities fail or are dissuaded from tendering.

An employment services provider enters into anagreement with a local TAFE in a locality where there areno other training providers. The substance of theagreement is that the TAFE will provide training to jobseekers referred by the provider, but will not providetraining to other job seekers. This may be a misuse ofmarket power if the provider has sufficient market share tomake the proposition attractive to the TAFE.

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Exclusive dealingSection 47 prohibits some business arrangements that imposerestrictions on another’s freedom to choose with whom, or inwhat, it deals. Most forms of exclusive dealing are onlyprohibited if their effect is to substantially lessen competitionin a market.

It is prohibited, where the effect is to substantially lessencompetition, to supply goods or services on condition that thepurchaser:

� will not acquire, or will limit the acquisition of, goodsor services from a competitor of the supplier; or

� will not resupply, or will resupply only to a limitedextent, goods to particular persons, or a particular classof persons, or in a particular place or places.

A supplier may not refuse to supply goods or services becausethe intending purchaser will not comply with theseconditions. It is likewise prohibited for a purchaser to imposesuch conditions on a supplier of goods or services.

An example of the above forms of exclusive dealing whichmight occur in the employment services market follows.

A provider of one form of employment service providesthe service to an employer on the basis that the employerwill not acquire other services from another nominatedprovider, thereby removing the employer’s choice ofproviders for other services. This is known as tying orfull-line forcing and is prohibited where it substantiallylessens competition in a market.

Where there is a requirement that a third person’s goods orservices be taken, it is not necessary to show that the practiceresults in a substantial lessening of competition. This istermed ‘third line forcing’ and is illegal per se. In other cases itis necessary to prove that competition has been substantiallyreduced.

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Examples of third line forcing that the Commission hasstopped include:

� a lender who, as a condition of loans, requiredborrowers to take out loan insurance with a nominatedinsurance company;

� a car dealer who, as a condition of sales or as acondition of getting attractive trade-ins or discounts,required intending purchasers to take out a loan from anominated lender; and

� a quarry company, whose manager offered cartagework to people on condition that they purchased atruck from a specified dealer, which paid the manager a‘spotter’s fee’.

The following is an example of third line forcing which mightoccur in the employment services market.

A provider of one form of employment service providesthe service to a job seeker on the basis that the job seekerwill acquire other services from another nominatedprovider only, thereby removing the job seeker’s choiceof providers for that service.

Exclusive dealing arrangements (including third line forcing)may be protected from challenge through the notificationprocess. Protection for third line forcing is also availablethrough authorisation (see Authorisation and notification).

Joint venturesIn some circumstances a joint venture may substantiallylessen competition and lead to a breach of s. 45. However,joint ventures and acquisitions may be authorised by theCommission in some circumstances (see Authorisation andnotification).

Mergers and acquisitionsSection 50 prohibits mergers and acquisitions which have theeffect or are likely to have the effect of substantially lesseningcompetition in a market. However, mergers and acquisitionsmay be authorised by the Commission in some circumstances(see Authorisation and notification).

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Penalties and remedies under the competitionprovisions of the Trade Practices ActVarious penalties and remedies are available in the FederalCourt for breaches of Part IV of the Act. These include:monetary penalties of up to $10 million for companies and$500 000 for individuals; injunctions; damages; divesture ofshares or assets illegally acquired or a declaration that a sharetransaction is void in the case of a prohibited merger; andancillary orders. The Commission can seek monetarypenalties, injunctions or divesture in relation to mergers.Individuals and corporations may, through a private action,seek injunction, damages or one of the ancillary orders; anddivesture in relation to mergers.

Authorisation and notificationAll the conduct discussed in the previous section, exceptmisuse of market power (s. 46), can be exempted from the lawif there is associated countervailing public benefit.

Under the authorisation and notification provisions of the Actthe Commission has power to grant immunity from legalproceedings for some arrangements or conduct that mightotherwise breach the restrictive trade practices provisions.

Public benefitIn previous matters the Commission and the AustralianCompetition Tribunal (the authority to which authorisationdecisions by the Commission can be appealed) haverecognised the following as public benefits:

� fostering business efficiency, especially when thisresults in improved international competitiveness;

� industry rationalisation resulting in more efficientallocation of resources and in lower or contained unitproduction costs;

� promotion of competition in industry;

� promotion of equitable dealings in the market;

� assistance to efficient small business, for exampleguidance on costing and pricing or marketing initiativeswhich promote competitiveness;

� industrial harmony;

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� improvement in the quality and safety of goods andservices and expansion of consumer choice; and

� supply of better information to consumers and businessto permit informed choices in their dealings.

AuthorisationAmongst other things, authorisation is available for:

� anti-competitive agreements (s. 45);

� primary boycotts (s. 45);

� price agreements (s. 45A);

� secondary boycotts (ss 45D – 45E);

� anti-competitive exclusive dealing arrangements (s. 47);

� exclusive dealing involving third line forcing (s. 47);and

� mergers leading to a substantial lessening ofcompetition in a market (ss 50 – 50A);

but not for:

� misuse of market power (s. 46).

Application for authorisation must be made by a party to thearrangement or a party engaging in the conduct in question.A fee of $7500 applies to most applications for authorisation,with each additional related authorisation applicationattracting a fee of $1500. Applications for authorisation ofmergers and acquisitions attract a fee of $15 000. Providerswho are parties to an arrangement may share the cost ofauthorisation.

The Commission’s statutory function in considering anapplication for authorisation is to apply one of two tests,depending on the conduct in question.

� For an agreement that may substantially lessencompetition, the applicant must satisfy the Commissionthat the agreement results in a benefit to the public thatoutweighs any anti-competitive effect.

� For primary and secondary boycotts, third line forcingand mergers, the applicant must satisfy the Commissionthat the conduct results in a benefit to the public suchthat it should be allowed to occur.

Except for mergers, the Commission must publish a draftdetermination and provide the opportunity for a conference

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of interested parties before making a final decision whether togrant authorisation. The immunity conferred by authorisationoperates only from the time the Commission grants finalauthorisation. Depending upon the nature of the conduct inquestion and its effects upon the market, authorisation may begranted for a specified period. The immunity ceases after thattime expires and it is then open to the applicant to seek a newauthorisation. The Commission may also grant authorisationsubject to other conditions as a means of ensuring that publicbenefits outweigh anti-competitive detriments. Or it maygrant authorisation unconditionally. Section 101 of the Actprovides that review of an authorisation determination maybe sought by applying to the Australian CompetitionTribunal. The Commission has the power, under s. 91(4) ofthe Act, to review and revoke authorisations.

NotificationExclusive dealing conduct (except third line forcing) gainsimmediate and automatic immunity from legal proceedingsunder the Act when notification of it is given to theCommission. Immunity for third line forcing comes into forceat the end of a prescribed period (14 days) from the time theCommission receives the notice. If the application iswithdrawn during the 14 days, or if the Commission advisesparties that the notification will not stand, then immunitydoes not take effect when the 14 day period has elapsed.

That immunity remains unless revoked by the Commission. Itcannot be revoked unless the Commission finds that:

� the conduct (other than third line forcing) substantiallylessens competition within the meaning of s. 47; and

� any public benefit flowing from the conduct isoutweighed by the lessening of competition.

In the case of third line forcing, immunity cannot be revokedunless the Commission finds that the public benefit from theconduct does not outweigh the public detriment from theconduct.

Notifications (other than third line forcing) attract a fee of$2500, with each additional related notification attracting afee of $500. Third line forcing notifications attract a fee of$1000, with additional third line forcing notificationattracting a fee of $500.

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Consumer protection provisions

Misleading representations in advertising andservice descriptionsImaginative promotion of services is a normal part ofattracting clients to your business. However, when youadvertise or talk with clients you must take care that eachrepresentation is factually correct. The only exception is‘puffery’ or self-evident exaggeration, such as ‘whiter thanwhite’ or ‘the best thing since sliced bread’, where it isunlikely that any customer would take the claims seriously.

You must also be careful that the overall impression youcreate about the services you provide is not misleading. Inother words, it is not sufficient that each representation istechnically or narrowly correct. It is just as important to lookat the overall impression created in the minds of averageconsumers in the target audience by all the representationstogether.

Even silence can be misleading when it is clear that yourcustomer has the wrong idea about the service and is relyingon your advice. Predictions can also be misleading if there isno reasonable basis for making them.

Special care must be taken when you refer to:

� characteristics of the service that will probably be veryimportant to your clients;

� your competitors’ services or business; and

� characteristics of the service that are subject tovariation.

Section 53B of the Act was inserted to specifically prohibit thepublication of employment advertisements which are false ormisleading. In the context of the employment servicesmarket, providers should be aware that they are providingservices to a highly vulnerable group of consumers who mayhave limited ability to test the representations made byproviders. Representations such as ‘we will get you a job’ or‘we place all our job seekers’ will have particular appeal tojob seekers; even though they might appear to be puffery to anemployed person. A high standard of clarity and integrityshould be adopted in all communications with job seekers.

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All information for job seekers, whether on paper or inelectronic form, should be current and accurate.

Penalties and remedies under the consumerprotection provisions of the Trade Practices ActBreaches of Part V of the Act can attract a range of penaltiesand remedies. These include: monetary penalties of up to$200 000 for companies and $40 000 for individuals;injunctions to prevent the prohibited conduct continuing orbeing repeated or to require that some action be taken;damages; corrective advertising; and ancillary orders.

12 tips for avoiding misleading representations and productdescriptions

Do

� give current and correct information

� give all the relevant facts

� make sure that the overall impression is correct

� avoid ambiguous statements

� back up claims with facts

� note important limitations or exemptions

� correct misunderstandings

Do not

� guess the facts

� leave relevant information out

� use unnecessary technical jargon

� make promises you can’t keep

� make predictions without a reasonable basis

WarrantiesIf a service provider chooses to give a voluntary expresswarranty (or guarantee), then the law requires that person orbusiness to honour it. In addition, warranties are imposed bythe Act and some State and Territory fair trading laws. Withsome exceptions relating to purchases by businesses, thesewarranties cannot be excluded or modified by serviceproviders. Importantly, they apply in addition to anyvoluntary express warranty.

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The implied warranties provided by the Act include awarranty that services will be carried out with due care andskill. The remedy when implied warranties are not met willdepend on the circumstances but can include: damages, suchas performing the services again; compensation for anyconsequential loss or damage including transport, travellingor freight charges, loss of use of the product, loss of time andlegal costs; and monetary penalties for misleading consumersabout their warranty rights. A more complete explanation ofthe implied warranties provided by the Act is given in theCommission’s leaflet Warranties and Refunds.

Unconscionable conductPart IVA of the Act prohibits unconscionable conduct in bothcommercial dealings and in consumer transactions. Theterm unconscionable conduct has evolved through commonlaw and refers to the following circumstances:

� one party to a transaction suffering from a specialdisability or disadvantage in dealing with the otherparty;

� the disability was sufficiently evident to the strongerparty; and

� the stronger party took unfair or unconscionableadvantage of its superior position or bargaining powerto obtain a beneficial bargain.

How do you know if your conduct is illegal?The summary of illegal activities above provides a goodstarting point against which to test your behaviour. However,in individual cases it may often be difficult to determinewhether your proposed conduct is in fact illegal. It may be,for instance, that the market is so large that you have littlemarket power, that your conduct has not substantiallylessened competition, or that your proposed conduct isvigorously competitive, but not anti-competitive.

In cases where you think your proposed conduct may beillegal you should seek professional legal advice.Alternatively, you may contact the Commission for anexplanation as to how the Trade Practices Act is relevant toyour business, although the Commission does not provide

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legal advice. A list of contacts can be found at the end of thisguide.

Avoiding trade practices problemsAll businesses should have programs and systems in place toensure that they and their staff comply with the TradePractices Act. The Commission sells, at low cost, acomprehensive multimedia trade practices compliancetraining package called Best & Fairest. Best & Fairest issuitable for either self-instruction or for use as a teachingresource by an instructor/teacher. A large number ofbusinesses, both big and small, have now introducedcompliance training based on Best & Fairest.

There are private commercial operators who provide similarinformation and training services. Australian Standards hasdeveloped a standard on best practices for complianceprograms (DR 97019). The final version of this standardshould be available in the last quarter of 1997. Both the draftand the final standard can be obtained from AustralianStandards’ offices in each capital city listed in the whitepages.

In general, compliance programs should have the followingkey features:

� clearly communicated and genuine commitment tocompliance by senior management of the organisation;

� appointment and full resourcing of an important andinfluential senior manager as the person responsible forcompliance;

� procedures and systems for the identification andmanagement of the particular compliance risks andneeds created by the organisation;

� embedding and reinforcing of compliance within theorganisation by (among other measures);

� incorporating compliance principles into theeveryday practices and procedures of theorganisation;

� training all relevant staff; and

� following up on reported breaches of thecompliance principles;

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� assignment of personal responsibility to line managersfor compliance in their areas of authority;

� encouragement of staff to report and discuss perceivedcompliance problems with the compliance officer;

� documentation of the handling of all compliancematters which arise and are considered;

� adoption of fair and effective techniques of complainthandling relating to the question of compliance; and

� review and improvement of the compliance program atregular intervals.

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How the Australian Competition andConsumer Commission works

How to make a complaint or inquiryYou can contact the Commission’s office in your State orTerritory by telephone, fax, letter or in person. The numbersand addresses are at the end of this guide. You don’t have togive your name, although that might limit the help theCommission can give you. There is no fee or charge formaking a complaint or inquiry. If you would feel morecomfortable speaking in a language other than English,Commission staff can arrange for the help of the TelephoneInterpreter Service.

Commission staff are available to listen to your inquiries andcomplaints during usual office hours. While they cannot givelegal advice in the same way as a solicitor, they can explainyour rights and obligations under the Act, and how theCommission is likely to react to particular business practices.You should expect to be asked questions about the operationof your business, for example about prices, advertising andbusiness conversations. The Commission may need to seebusiness records such as invoices and letters that are relevantto your complaint.

If the Commission cannot help you, it will usually suggest theappropriate government department for you to contact orsuggest other options that may be available. In the end, alldecisions as to what you do will be yours.

What happens when the ACCC believes that thelaw has been broken?When a business has broken the Trade Practices Act, theCommission can take legal action. It can also settle the matterwithout going to court in some circumstances. TheCommission is more likely to settle without going to court ifthe business concerned:

� cooperates with it by compensating people who havebeen affected by the illegal conduct; and

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� undertakes to change its management practices andimprove staff training to ensure that there are no furtherbreaches of the law.

The Commission has the power to accept court enforceableundertakings under s. 87B of the Act. These undertakings arean alternative to litigation in appropriate circumstances andplay an important and expanding role in the Commission’senforcement strategy. These undertakings are in effectpromises regarding future conduct.

If a breach of the Act is proven in court, orders that can beimposed include those discussed above (see Penalties andremedies).

If the conduct has badly affected consumers, orders forcompensation can be greater than the monetary penalties.

While the Commission does not normally seek publicityduring an investigation, the media is often interested andsometimes reports on investigations it feels is of concern orinterest to the public. The Commission usually issues a mediarelease when a case is concluded in court or settled withoutgoing to court.

Legal costs can be much higher than the monetary penaltiesimposed. And under our legal system the unsuccessful partyusually has to pay most of the winner’s legal costs as well as itsown.

It is worth noting that it is not only the Commission that cantake court proceedings. Your competitors can, yourcustomers can, and you can. Of course in practice mostbreaches do not end up in court. The threat of legal action isusually sufficient to make wayward businesses play by therules.

More informationMore detail on particular parts of the Trade Practices Act isavailable from the range of booklets and guides published bythe Commission. Some of these are available free whileothers may be purchased from Commission offices, orobtained from the ACCC website.

You can also contact your State or Territory consumer affairsagency. As well, in some States and Territories there are small

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business advice agencies that may be able to provide adviceor assistance.

If you are a member of an industry organisation it may be ableto help you better understand how the Act applies toproblems in your type of business. It may even be able toprovide advice on how to avoid problems in the first place,and how to properly resolve problems if they do occur.

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Australian Competition and ConsumerCommission contacts and offices

General Manager: Hank Spier (02) 6264 2924

Mergers and Asset Sales Senior Assistant Commissioner:David Smith (02) 6264 2900

Adjudication Senior Assistant Commissioner:John O’Neill (02) 6264 2863

Enforcement and Regional CoordinationFirst Assistant Commissioner:Glen Barnwell (02) 6264 2896

Complaints number: (02) 6264 1166

Consumer Protection and Compliance StrategiesSenior Assistant Commissioner:Delia Rickard (02) 6264 2804

Corporate Planning and ResourcesSenior Assistant Commissioner:Helen Lu (02) 6264 2884

Micro Economic ReformFirst Assistant Commissioner:Joe Dimasi (03) 9290 1814

Market ReformSenior Assistant Commissioner:Michael Rawstron (02) 6264 2862

Transport and other Government BusinessSenior Assistant Commissioner:Trevor Lee (03) 9272 3715

Media liaison: Lin Enright (02) 6264 2808

General publication queries: Robert Booth (02) 6264 2805

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ACT (national office)Yellow Building, BenjaminOfficesCnr Chan Street & Benjamin WayBELCONNEN ACT 2617PO Box 19,BELCONNEN ACT 2616Tel: (02) 6264 1166Fax: (02) 6264 2803

New South WalesLevel 5, Skygardens77 Castlereagh StreetSYDNEY NSW 2000GPO Box 3648,SYDNEY NSW 2001Tel: (02) 9230 9133Fax: (02) 9223 1092

VictoriaLevel 35, The Tower360 Elizabeth StreetMELBOURNE VIC 3000GPO BOX 520J,MELBOURNE VIC 3001Tel: (03) 9290 1800Fax: (03) 9663 3699

Tamworth39 Kable AvenueTAMWORTH NSW 2340PO Box 2071,TAMWORTH NSW 2340Tel: (067) 61 2000Fax: (067) 61 2445

Queensland10th Floor, AAMI Building500 Queen StreetBRISBANE QLD 4000PO Box 10048Adelaide Street Post Office,BRISBANE QLD 4000Tel: (07) 3835 4666Fax: (07) 3832 0372

Western AustraliaLevel 3, East Point Plaza233 Adelaide TerracePERTH WA 6000PO Box 6381,EAST PERTH WA 6892Tel: (09) 325 3622Fax: (09) 325 5976

TownsvilleLevel 6,Commonwealth Bank BuildingFlinders MallTOWNSVILLE QLD 4810PO Box 2016,TOWNSVILLE QLD 4810Tel: (077) 71 2712Fax: (077) 21 1538

South Australia1st Floor, ANZ House13 Grenfell StreetADELAIDE SA 5000GPO Box 922,ADELAIDE SA 5001Tel: (08) 8205 4242Fax: (08) 8410 4155

TasmaniaGround Floor,Marine Board BldMorrison StreetHOBART TAS 7000GPO Box 1210,HOBART TAS 7001Tel: (03) 6234 5155Fax: (03) 6234 7796

Northern TerritoryLevel 8,National Mutual Centre9–11 Cavenagh StDARWIN NT 0800PO Box 3056,DARWIN NT 0801Tel: (08) 8943 1499Fax: (08) 8943 1455

ACCC home page

The Commission has its own Internet home page whichincludes media releases and some publications.

The address is: http://www.accc.gov.au

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