Can the ACCC tame the internet?

The competition regulator is on the warpath and the likes of HP, Apple and Google better pay attention or risk paying a hefty price.

Australia’s online economy, so often cited as a cause for concern amongst traditional retail businesses, is posing new challenges to regulators as well.

In a recent speech, ACCC Chairman Rod Sims said the online economy posed the ‘biggest regulatory challenges of a generation’. The high number of recent actions by the competition and consumer regulator against many high profile companies in the technology space is a timely reminder of the breadth activities that are regulated under the Competition and Consumer Act 2010 (Cth).

Recent investigations and prosecutions from the ACCC bear out the new heightened interest from Rod Sims in the digital economy and the technology sector more generally.

Broadly speaking there are two areas of primary interest to the ACCC: the protection of consumers’ rights and ensuring that markets remain competitive for Australian businesses. Significantly, the ACCC has started to demonstrate an increased willingness to pursue both goals in largely online-centric sectors.

The ACCC has in recent years been armed with stronger legislation to enforce consumer rights. Consumer protections in Australia, both online and otherwise, have gone through a quiet overhaul in recent years via the introduction of the Australian Consumer Law (ACL).

This has been coupled with the change in ACCC policy which followed Rod Sims’ chairmanship, perhaps best illustrated by the pronouncement that the ACCC’s previously high success rate had resulted from an overly cautious approach to running court proceedings and lack of appetite to run test cases.

The ACL is at the heart of a prosecution recently undertaken by the ACCC against hardware giant HP. In that case, the ACCC has alleged that HP has engaged in misleading or deceptive conduct by making false or misleading representations to consumers in relation to consumer guarantee rights available to consumers – a part of the ACL that only came into full effect at the beginning of the year.

HP is also alleged to have made representations that it was not liable to indemnify retailers if those retailers provided consumers with a refund or replacement without HP’s prior authorisation, when HP was in fact required to do so under the ACL.

More than $18 million in fines have been issued for breaches of the ACL since its gradual implementation in 2010. In just six cases this year, more than $1 million of fines have been handed down.

An examination of other household names that have been pursued by the ACCC for consumer breaches in recent times suggests the regulator will not be scared off by the large, transnational nature of a business, having pursued the likes of Apple and Google (with the latter still appealing the case in the High Court).

In the Google case, the ACCC successfully won a Federal Court judgement involving the highly sophisticated Google AdWords service in a case that is being watched closely in jurisdictions around the world because of its technical complexity and legal nuance. In that case, the judgement (currently under appeal) found that search engine operators were themselves equally liable for misleading and deceptive conduct as the advertisers that they service.

Moving forward, it is the as yet untapped scope for higher fines that should encourage diligence law within a large company stem from a systemic compliance failure, meaning the ACCC will in this area. A single breach of the ACL can reap a fine of up to $1.1m. Often breaches of consumer quite commonly pursue multiple breaches against a company at once.

Similarly the ACCC is asserting itself more often when dealing with alleged anti-competitive behaviours by companies with an online presence.

Last year, the ACCC took action against Ticketek for deterring or preventing a newly established, smaller operator from providing its competing service. Ticketek was ultimately fined $2.5 million by the Federal Court for misusing its market power.

That trend has continued this year with the ACCC recently commencing proceedings against Flight Centre for allegedly attempting to induce airlines to agree to stop directly offering and booking their own international airfares (including over the internet) at prices less than what Flight Centre offered.

On latest data, the ACCC is currently working on 35 separate investigations for breaches of competition law. Rod Sims has warned that the ACCC is taking a keen interest in technology vendors believed to be acting anti-competitively or in collusion with others to keep prices high. Given recent comments, it seems reasonable to assume that IT providers and digital businesses are amongst the subjects of active investigation.

The high-profile and prolific number of ACCC prosecutions in recent years suggests that regulators are rapidly coming to grips with the nuances and challenges of the technology sector.

These risks can be mitigated by implementing a culture of competition and consumer law compliance.  The risks of contravening the Competition and Consumer Act can be managed if compliance is regarded as a business priority; not an afterthought.

Practically, this will mean a new emphasis on items like terms and conditions statements, website content as well as senior management and employee training. Regulators are increasingly comfortable with the new economy, and industry participants will to some extent need to play catch up or risk being caught out by a highly-focused ACCC. 

Ben Hamilton is the lead partner of Hall and Wicox Lawyer's intellectual property and technology practices.