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Topic 7 The Telecommunications Regulatory Role of the ACCC

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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 Group
                   Compliance Section
     Australian Competition and Consumer Commission
                                                                1
  Part V – Consumer Protection
    Telecommunications (1)
pPart V of the Trade Practices Act contains
 provisions aimed at protecting consumers
 against unfair trade practices
p The main provisions relate to misleading and
 deceptive conduct.
p Conduct can be in relation to:
  - Price
  - Product performance
  - Future supply and use of goods or services
  - Standards, quality, etc
                                                 2
  Part V – Consumer Protection
    Telecommunications (2)
pIn addition to acting on complaints received
 from consumers and competitors, the ACCC
 monitors advertising in newspapers,
 magazines and on the internet.

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

p Penalties include corrective advertising,
 injunctions, damages and fines.                     3
  Part V – Consumer Protection
    Telecommunications (3)
p Disclaimers, qualifications and ‘small print’
 are frequently used in advertising/marketing
 telecommunications services.

pThe ACCC considers that terms such as
 ‘unlimited’ and ‘free’ should mean exactly that.

p 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.                                    4
  Part V – Consumer Protection
    Telecommunications (4)
Example of Part V enforcement action:
p Unauthorised customer transfer (‘slamming’)
 of fixed telephony services by One.Tel and
 Primus
p Complaints received
p Investigation by ACCC
p s.87B undertakings
p Payment of $500,000 to a fund administered
 by the ACCC to raise consumer awareness
 about churning.                              5
Part XIB & Anti-competitive Conduct in
       Telecommunications (1)
 p The ACCC has an important role in ensuring
   markets are competitive.
 p Part XIB establishes powers with respect to
   ‘anti-competitive conduct’ in relation to
   telecommunications markets.
 p 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)

 p 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.
 p This is known as ‘the competition rule’.
Part XIB - Anti-competitive conduct in
       Telecommunications (3)
p 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
p Central concept to anti-competitive conduct:
  substantial lessening of competition (SLC)
p Does the conduct have the effect or likely
  effect of substantially lessening, hindering or
  preventing competition in a
  telecommunications market?
Part XIB - Anti-competitive Conduct in
       Telecommunications (4)
 p   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.

 p   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.

 p   The Competition Notice sets out particulars of the
     contravention.
Part XIB – Anti-competitive conduct in
       Telecommunications (5)
 p   2 types of Competition Notice can be issued –
     Part A and Part B

 p   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)
   p When Part A Competition Notice in force:
      - third party rights activated, can take
        legal action for damages based on
        Notice.
   p 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)
 p Pecuniary penalties can be ordered by Federal
   Court for breach of the competition rule (as
   can injunctions and damages).
 p Penalties apply for each contravention.
 p If the breach continued for over 21 days – the
   sum of $31M and $3M for each day over 21
   days.
 p Otherwise – the sum of $10M and $1M for
   each day that the conduct occurred.
Part XIB – Anti-competitive Conduct in
       Telecommunications (8)
 p Vertical price squeezes are a common example
   of alleged anti-competitive conduct in
   telecommunications markets.
 p A vertical price squeeze is a form of anti-
   competitive ‘low’ pricing.
 p 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)
 p The rival can be disadvantaged by the
   vertically integrated access provider lowering
   the retail price, increasing the wholesale price
   or both.
 p The ACCC conducts imputation analysis to test
   for vertical price squeeze behaviour.
 p Could an access seeker enter the market
   successfully if it paid the access provider’s
   access price and had the same costs?
 p Imputation testing is currently only applied to
   Telstra.
 p Imputation reports are released on a quarterly
   basis.
     Enforcement -v- Compliance (1)
Key Strategies:

p   Balance enforcement and compliance

p   Compliance is the ultimate objective

p   Enforcement action taken where a serious or
    blatant breach of the Act has occurred.
  Enforcement -v- Compliance (2)

Tiered Approach:
p Educate and inform – compliance programs.
p Where education not effective, ACCC may seek
  court enforceable undertakings and/or
  remedies.
p If company continues to breach TPA, the ACCC
  may commence proceedings in the Federal
  Court.
    Enforcement -v- Compliance (3)

The ACCC does not:

p Intervene in private contractual disputes.
p Look into billing disputes.
p Regulate pricing of telecommunications
  services and products.
p Administer compliance with industry codes.
    ACCC - Communications Compliance

p   Any questions?

p   Our website: www.accc.gov.au

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


p   Our infocentre: 1300 302 502.

				
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