TECH DEALS: ACCC turns up the heat

After taking Google and Apple to task the regulator has its sights on HP. Meanwhile, James Packer backed online retailer Catch Group enters the takeaway food sector with EatNow.

The Australian Competition and Consumer Commision (ACCC) has had some notable stoushes against the like of Google and Apple, and the regulator has now added another industry heavyweight to that list. The third inductee is Hewlett Packard (HP) whose wholly owned local subsidiary, HP Australia, has fallen foul of the regulator for allegedly giving consumers misleading advice about warranties and customers’ rights.

According to the ACCC, HP Australia informed customers who purchased faulty products that their only means of recourse was limited to measures at HP's own discretion.

HP’s local subsidiary allegedly set its own “express manufacturer’s warranty” period and then attempted to charge consumers to have their device repaired if it fell outside of the range of this “express” period.  It also allegedly told online shoppers that they could not return goods purchased from the online store without the explicit permission of the company.

As things stand, HP is clearly at odds with the customer rights regarding refunds and replacements stipulated in consumer law. While HP has said that it will conduct a thorough review of the situation, the regulator is seeking a number of court orders against HP Australia and the prospect of a very hefty fine looms large. 

Melbourne based commercial law firm Hall & Wilcox’s partner Ben Hamilton says that HP may have to pay penalties to the tune of one million dollars. According to Hamilton, the ACCC isn’t in the habit of making allegations without merit and HP’s alleged lack of compliance puts the tech giant in a delicate situation.

He adds that as imports spike for the Christmas consumer electronics rush, it’s a risky period generally for IT suppliers as the Australian Consumer Law flies under the radar of these companies generally.

Most importantly, Hamilton says that the manner in which this episode is resolved will be closely watched by the broader hardware sector. The one thing that is already apparent is the ACCC’s aggressive intent and its desire to exert its regulatory muscle in the consumer tech space.

Victories over Google and Apple have gone a long way in fortifying the ACCC’s resolve and Hamilton says that there is little doubt the regulator has increased its scrutiny of tech companies, especially when it comes to matters of compliance and misrepresentation. Apple opted to pay the $2.25 million, plus the $300,000 court costs, for its 4G snafu with the new iPad earlier this year and I suspect HP will most likely chose to settle with the ACCC rather than fight the regulator in court.

The Adwords argy-bargy between Google and the ACCC is still alive and regardless of the final outcome the regulator, under the tenure if Rod Sims, has already made its point. 

Given the pervasiveness of technology in the lives of everyday Australians it’s natural for the regulatory bodies to ensure that they are ahead of the curve, especially when considering the implications of new technology. The ACCC’s action against HP is the latest sign of the regualtor's vigilance and its commitment to keeping the tech giants on their toes.

Telstra's Trading Post deal raises red-flag

Meanwhile, the ACCC has also flagged competition concerns about Carsales.com’s proposed acquisition of Trading Post from Telstra.

Carsales.com and Telstra announced the deal in August and under the proposed arrangement, Carsales.com’s latest classified business unit - quicksales.com.au – would licence, power and operate Telstra’s TradingPost site.

However, as far as the regulator is concerned the deal could diminish competition in the online automotive classifieds market. The ACCC has released a statement of issues (SOI) outlining its concerns with the deal and said that it was seeking more information on a number of issues which have arisen from the ACCC's review to date. The ACCC will be taking further submissions from the market in response to the statement of issues until November 2. The final decision will be deferred until November 29.

Catch Group nets another site

Local online retailer the Catch Group is making a habit of hitting the headlines on a regular basis and the $600 million outfit, which already runs daily deals site Catch of The Day, group-buying site Scoopon, and grocery retailer GroceryRun, has now made a foray into the takeaway food segment.

The retail group has been on a roll of sorts since welcoming a consortium of heavyweight investors including, hedge fund Tiger Global Management, James Packer's Consolidated Press Holdings and Seek chief executive Andrew Bassat in May last year. The company picked up daily deal wine site, vinomofo.com in April and followed that up with an entery into the mums and bubs market with Mumgo.com in June this year. Now the retail group has set its sights on the takeaway sector with the purchase of EatNow. While detractors may raise questions about how long Catch can realistically maintain this sort of growth, the retailer’s chief executive Paul Reining says the move was a logical one.

According to Reining, the retailer had already developed a substantial network of restaurants, which engage with Catch on the deals site Scoopon, so a move to develop an online food ordering and delivery service made a lot of sense.  

“From day one this means we have the partner network in place, a potential customer base of over 2.5 million members to market the service to, as well as a strong social media community to build buzz and awareness, all of which provide a powerful advantage when entering any new category,” Reining said.

In a way the entry of the likes of Groupon and Living Social in the local market has been a boon for Catch as their involvement has driven greater consumer awareness about the sector. However, Reining says that the US players haven’t so far been unable to replicate their domestic model effectively in the Australian market and are yet to fully streamline viable customer service structures. It’s a gradual process and Reining says it’s an area where Catch enjoys a substantial advantage.

“At the end of the day, we’re retailers and providing good customer service while keeping our suppliers happy are our main priorities,” Reining said.

He is also quick to point out that his rapid ascension from CFO to CEO, within four months of joining the group last year, has instilled an even greater sense of fiscal discipline which is underpinning the retailer’s growth trajectory.

“For every business we start or develop there are 10 other opportunities that we consider,” Reining says.

What’s interesting is that Catch is increasingly showing the signs of a company that is moving up the maturity curve, where entering new market verticals doesn’t necessarily mean developing a site from scratch. The Vinomofo, Mumgo and the EatNow deals highlight that the retailer is now just as likely to leverage its existing strength to bring new platforms under the Catch banner.

According to Reining, there is plenty of talent out there looking to make the most of the changing customer behaviour and mobility by developing platforms that connect customers to services.

In fact, the telcos are already showing signs that this is a space they are keen to get involved. Telstra’s applications and ventures group recently invested in online restaurant reservations group Dimmi, while Singtel bought food review site Eatability for $6.2 million in July.

Reining reckons telcos are probably better placed to harness the synergies of such moves than the media companies (Nine, Ten) but at the end of the day none of them can devote the sort of energy a pure retail player, especially one backed up by a well-connected bunch of investors, can. Another big plus for the business is that Reinings’ fiscal discipline is a perfect foil to the exuberance of Catch co-founders Gabby and Hezi Liebovich, who are both far more comfortable developing new ideas and opportunities, than being weighed down by the operational side of things.

The arrangement is evidently working for the group and with new opportunities in the horizon and a market value of $600 million a float seems a logical outcome. However, Reining says that it’s not on the radar for now, what’s much more likely is perhaps a few more additions to Catch Group’s rapidly growing portfolio.