Issue 21 APRIL 2007

URGE TO MERGE new rules as takeovers boom

BEaTinG ThE chEaTs•MEdia in ThE spOTliGhT•is ThE pRicE RiGhT?

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© Commonwealth of Australia 2007ISSN 1443–0681Produced by the ACCC 04/07Print Post approved PP255003/04404

EdiTORial

Australia’s competition laws have been on the verge of change for several years, with legislative amendments seemingly just around the corner.

After much debate in Parliament and the broader community, the first of those changes indicated by the government have arrived, bringing with them significant implications for the way many Australian companies do business. The changes, which came into force on 1 January this year, will potentially affect large corporations and filter through to small businesses seeking a stronger voice when dealing with their larger customers.

In this edition of ACCC update we take a look at how the changes to the Trade Practices Act could affect the different corners of Australia’s business community, and what is still on the government’s agenda for further reform.

Trade practices experts give their views on what the new merger rules are likely to mean for big business, while South Australian dairy farmer David Basham offers a personal perspective on his experience of getting together with other producers in his area to negotiate a better price for their milk products.

We also take a look at the introduction of significant changes in the regulation of petrol retailing and the horticulture industry, and the increasingly important role the ACCC will have in monitoring mergers in the media sector.

A new set of labelling guidelines for the food and beverage industry have also been created to improve information for consumers trying to find the real health or ethical benefits of the goods they buy in our supermarkets.

Issue 21 | APRIL 2007

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CONTENTS

Being smart about your new franchisechecklist before signing a lease agreement

Editorial • 2

Small business receives a boost • 4

Opening the gate to better prices • 6

The urge to merge • 8

Crackdown on the cheats • 11

Warning! Label may contain misinformation • 12

Jargon buster • 14

Food for thought • 15

ACCC takes central role in media mergers • 16

Oilcode • 18

Setting your prices effectively • 19

Recent releases: publications from the ACCC • 20

ACCC contacts • 23

cover story page 8

ChaNgES TO mErgEr law

In response to global

trends, which saw a

record $4.83 trillion in

international mergers,

merger activity hit new

heights in Australia in

2006 thanks in part to a

number of landmark deals.

�� �

THE InTroducTIon of the Trade Practices Legislation Amendment Act brings with it significant changes that affect the way small businesses deal with their customers and suppliers.

Under the Trade Practices Act it is generally considered illegal for competitors to agree on prices or other conditions of trade. Allowing competitors to work together in this way removes the incentive to innovate and work harder to appeal to their customers. It also generally leads to higher prices and poorer services.

However, there are times when allowing small businesses to act together as a collective can benefit the wider public. For example, allowing a group of farmers to negotiate collectively for a better deal on transporting or processing their produce may lead to lower prices for their customers by the time the produce arrives on shelves.

This process, known as collective bargaining, has traditionally been permitted by the ACCC when it is regarded to be in the public interest.That process of authorisation will continue, but from the start of 2007 a new process of notifying the regulator of such arrangements has come into effect. The aim of the changes is to make it easier for groups of small business owners to access the advantages of collective bargaining without running the risk of breaching Australia’s competition laws.

Under the changes, businesses wanting to negotiate with suppliers or customers as a group can notify the ACCC of their intentions and receive protection from legal action under the Act.

The ACCC then has 28 days to consider the notification, and if it does not object, the immunity is extended for three years. Of course, the ACCC can review a notification during this period if concerns arise.

In announcing the new provisions as part of the larger package of reform to the Trade Practices Act, Treasurer Peter Costello and Minister for Small Business and Tourism, Fran Bailey, said the changes were aimed squarely at improving the system for small businesses. In a joint statement they said:

The [changes] will bring significant benefits to small business, including an easier notification system for collective bargaining for small businesses, making this process simpler and less costly.

The new notification process limits the size of arrangements. This means that the total value of the relevant transactions each member of the group expects to make over 12 months must not exceed $3 million. However, in recognising that some small businesses have high turnover with low profit margins, the government has indicated that special thresholds above the general $3 million limit may be available in industries such as farm equipment sales, car sales or petrol station retailing.

Small businesses wanting to learn more about how to take advantage of the new collective bargaining arrangements should consult the ACCC’s guide to collective bargaining notifications which outlines the issues and procedures businesses need to consider. The booklet is available online from the ACCC website along with other information on collective bargaining and general small business information.

The ACCC is keen to help small business groups that want to take advantage of the new process and encourages those interested to discuss the process with the ACCC. •

There are times

when allowing

small businesses

to act together

as a collective

can be to the

benefit of the

wider public.

Small BUSINESS rECEIVES a BOOST

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As THE worsT drought in living memory started to bite hard for South Australia’s dairy farmers, access to new markets for their milk became an urgent priority for many struggling to keep their businesses afloat.

Despite two large milk processors competing in the region, farmers had become frustrated by the prices for their milk being lower than those received by farmers in other states, especially neighbouring Victoria.

‘It was becoming an issue of survival for many of us,’ says Mount Compass dairy producer, David Basham.

Through Australian Dairy Farmers Ltd Mr Basham and neighbouring farmers had become aware of the collective bargaining process open to small businesses and decided to try and get a better deal by forming a negotiating group. He said:

It started as just a group of 10 of us wondering what we were going to be able to do. We invited others to a public meeting and ended up packing the public hall.

By acting under the ADF umbrella authorisation, the farmers were able to form a collective bargaining group to look beyond their local area for a new processor interested in the large volume of milk they collectively produced.

By presenting as a large group the farmers were able to secure a deal with a Victorian processor who agreed to take the milk at the same price it was offering to its Victorian dairy farmers.

The deal negotiated with the Victorian processor not only increased the prices paid to the members of the group, it created a spin-off benefit for those who were not part of the agreement. Mr Basham said:

In the end the two [South Australian-based] processors lifted their prices paid in response. I would say with the increased pressure from the drought, that extra income has made the difference between surviving and not surviving for some of those farmers.

The process had been remarkably quick and it was likely the farmers would again seek to negotiate as a group when it came time to agree on terms and conditions with processors.

My advice however, is don’t just focus on prices. [For collective bargaining to work] there needs to be something in it for both parties. You need to be responsible, you need to be a well respected group and you need to act ethically. •

OpENINg ThE gaTE

TO BETTEr prICES

‘It started as just

a group of 10 of

us wondering

what we were

going to be able

to do. we invited

others to a public

meeting and

ended up packing

the public hall.’

� ��� �� �

In 2004 the ACCC took steps to improve its informal clearance process through adopting many measures that increased the transparency of the process, its timeliness and efficiency, and the certainty and predictability of its decision making. These improvements have led to the informal clearance process becoming significantly more attractive for business.

Following the Dawson review the government proposed changes to the existing merger law which incorporated many of the review’s recommendations. These included a new voluntary formal merger approvals process administered by the ACCC (reviewable by the tribunal) and the requirement that applications for merger authorisations be made directly to the tribunal rather than the ACCC for adjudication.

The original draft legislation met with significant opposition both in parliament and among several small business groups. The primary concern was that the changes would hand more power to larger companies and make it easier for them to merge as a result of their ability to bypass the ACCC in seeking authorisations for mergers.

While the ACCC is no longer the decision maker for merger authorisation applications, it has been given a central role before the

tribunal where anti-competitive mergers may be argued under an authorisation application in the public’s interest.

The ACCC will provide a report to the tribunal of its assessment of the application which the tribunal will take into account in its determination. The ACCC will also have the power to appear before the tribunal in hearings and submit evidence as well as cross-examine witnesses.

The informal path for having mergers assessed will remain, and is a route likely to remain popular despite the option of now seeking formal clearance, according to ACCC general manager for mergers and acquisitions, Tim Grimwade. He says:

It is widely expected both within and outside the Commission that the informal system will remain the dominant clearance process due to improvements that have occurred in the last two years that have made it more responsive and reactive. Generally it is a more flexible system for most applicants.

There is a high level of engagement and informal exchange between commission officers and applicants. Formal clearance processes won’t have the same level of informal engagement and will not allow the confidential consideration of

proposals. The operation of the formal clearance process depends on the receipt of a detailed set of answers to a prescribed set of questions and the application of a certain and consistent process within a prescribed timeframe of 40 business days. The informal process is more flexible and can be more responsive to the particular transaction at hand—for example, by enabling decisions to be made on mergers that aren’t likely to raise competition concerns in significantly less time than 40 business days.

Freehills partner Professor Bob Baxt, a former chairman of the Trade Practices Commission and currently chair of the Law Council of Australia’s Trade Practices Committee agrees.

Professor Baxt says the informal system has been greatly improved and streamlined in recent years, addressing many of the concerns identified in the 2003 Dawson review. He also sees an increase in civil penalties for contravention of the competition provisions of the Act as one of the other significant changes to be introduced with the start of the new legislation:

I think we will also see the courts starting to hand down more serious penalties in this area.

In 2005, a year dominated by advances in technology, broadband speeds and the rise of blogging, the New Oxford American Dictionary named ‘podcasting’ as its word of the year.

In Australia 2006 may come to be known as the year when ‘mergers’ became one of the country’s most popular terms.

In response to global trends, which saw a record $4.83 trillion in international merger deals, merger activity hit new heights in Australia in 2006 thanks in part to a number of landmark deals.

According to a report by international research and business services company Thomson Financial, the value of Australian mergers increased by 56 per cent during 2006, up to a total value of more than $208 billion.

That report, released in January, showed that many of those deals were larger than their historical predecessors, including some greater than $1 billion such as the $11.1 billion bid for Qantas by a consortium of overseas and local investors or the $7.9 billion acquisition of insurer Promina Group by rival Suncorp.

As the regulator responsible for assessing mergers on competition law grounds, the ACCC also carried out record numbers of merger assessments during the year.

There was a 44 per cent increase in assessments in the 2005–06 financial year compared to the previous 12 months, with indications that the trend is likely to continue well into 2007.

But the arrival of the new year also brought with it significant changes to the way mergers can be assessed and permitted to proceed.

On 1 January a new merger assessment regime came into effect that is likely to affect both large and small businesses, as well as the competition regulator and the Australian Competition Tribunal. It provides another option for those businesses looking to merge (along with certain changes to the existing regime).

In October 2006 the Commonwealth Government succeeded in passing through Parliament a suite of changes to the Trade Practices Act responding to earlier criticisms about the process of clearing or rejecting mergers. Those changes contained in the Trade Practices Legislation Amendment Bill, known also as the Dawson Bill, were originally proposed in a review of the competition provisions of the Trade Practices Act chaired by former High Court judge, Sir Daryl Dawson, in 2003.

ThE UrgE TO mErgE

changes to

Australia’s

merger laws in

2007 represent

the most profound

shift in more than

30 years.

10 111010 1110 11

BusInEssEs caught breaching the Trade Practices Act with anti-competitive behaviour could face stiff new penalties introduced early in 2007.

Currently, corporations can be penalised up to $10 million for serious breaches of the Act. Despite the high cost of the maximum penalty, for some businesses this alone may not be enough to offset the gain from illegally squeezing competitors out of a market.

Under the changes introduced to the Act, corporations can now be penalised $10 million, three times the value of the gain from the breach, or if the gain can’t be accurately

estimated 10 per cent of the turnover of the body corporate and all related bodies.

The new changes allow for much more significant financial penalties to be inflicted on individuals or corporations that go out of their way to significantly breach the Act and attempt to stifle competition.

As well as providing a far greater incentive for big business to comply with the Act, it is expected to provide additional protection for small businesses which are often the victims of anti-competitive or other unfair behaviour by larger competitors. •

Mr Grimwade believes the new formal process may appear attractive for international mergers where parties and their financiers demand the sort of regulatory certainty and more concrete timelines they see in formal clearance regimes that they confront elsewhere in the world where regulatory approval is compulsory.

Dave Poddar, a partner with Mallesons Stephen Jaques and a non-government attorney adviser to the International Competition Network, has been involved in numerous major mergers and acquisitions in the financial services, manufacturing, retail, transport and other industry sectors.

He says the certainty provided under the new formal clearance system will be attractive to some businesses, but the current informal system should remain the preferred approach by Australian companies. He also says that:

The formal merger process will be likely to be limited to a small number of highly complex transactions. It will be a lengthy and very public process and it will take time for people to find their feet with it. The informal process is working very well and while it is administered by the ACCC in a flexible and facilitative fashion, has

many advantages over the formal merger control regimes administered overseas.

Nonetheless, the new formal merger process in Australia will provide an alternative for some parties and provides an additional element that the transaction is now ‘formally’ cleared by the regulator and then immune from challenge by third parties.

With the new systems yet to be tested, he says many businesses will be very interested to see how effective they are when compared to the existing merger clearance routes.

I think we will see a bedding down period of maybe a year or so. The private sector will see this as having a lot of benefits, but it will take a while for both the private sector and the regulator to get some experience with it.

Both processes need to also be looked at in context. The Australian merger control processes are among the best in the world and highly rated overseas. The ACCC mergers staff are extremely professional and focus on the competition issues, so it’s a system that works well and we should be proud of it. •

with the new

systems yet to

be tested, many

businesses will be

very interested to

see how effective

they are when

compared to the

existing merger

clearance routes.

ThE uRgE TO mERgE (continued)

The new changes

allow for much

more significant

financial penalties

to be inflicted

on individuals or

corporations.

CraCkdOwN ON ThE ChEaTS

1212 13

Of course, some terms by their very nature are ambiguous and should therefore be used with caution or avoided altogether. Terms such as ‘locally produced’ can mean many things to many people, and descriptions such as ‘fresh’ or ‘natural’ are also broadly open terms.

That said, there are certain general expectations customers would have when buying products labelled as ‘fresh’ or ‘locally produced’.

Items that have been frozen for instance, would seem to have a tenuous claim on the ‘fresh’ tag. There are four broad categories that food producers need to consider when they describe or depict their products.

1. FOOd TypE ASSuRAnCE CLAimSThese include descriptions such as vegan, kosher or halal.

2. pROduCTiOn, pROCESS OR pREpARATiOn CLAimSsimilar to assurance claims, process claims include terms such as ‘organic’, ‘free range’, ‘chilled’ or ‘concentrated’.

3. ORigin CLAimSThe desire to support producers in the local region can be a deciding factor for many shoppers, making it important for producers to clearly identify what they are talking about when branding their products as ‘local’.

4. FOOdS ThAT mEET A STAndARd OR STyLEThis includes common claims such as ‘fresh’, ‘pure’, ‘trim’, ‘genuine’ and ‘real’. while often thrown around in advertising, these terms should not be used simply as embellishments, and must be backed with some form of substantiation.

The guideline contains practical examples designed to help companies give the best, most accurate information possible to their customers. Copies of Food and beverage industry: Food descriptors guideline to the Trade Practices Act are available by calling the ACCC Infocentre or as a download from the ACCC website. •

While it can be difficult to predict all possible implications food labels may have, there are a couple of general rules that could keep you out of dangerous territory.

Avoid targeting specific customers. A product may be designed to appeal to a particular group, for example, well educated consumers with a good understanding of complex nutritional language. However, if it is also likely to be bought by more vulnerable consumers or those with poor language skills, then those customers could be misled.

Steer clear of ambiguous terms when possible, especially if there is a potential for them to be misleading (such as pasteurised orange juice described as ‘fresh’).

When making claims about the nutritional value of foods, ensure it is based on current scientific evidence.

Don’t use pictures of food that is not an actual ingredient, even if it is flavoured similarly. Also, be aware of the possibility of conveying the impression that a picture may suggest a certain food is more than just a minor ingredient.

Be aware that caveats, disclaimers or other qualifying statements may not be enough to prevent customers being misled if the overall impression remains unchanged.

IT’s no sEcrET that many purchases by today’s consumers are strongly influenced by a desire to find healthy products, goods that support local producers or food that is prepared in a particular way.

Most producers and sellers in the industry recognise this growing trend and many tailor their products and packaging to cater to that demand.

But some attempts to capitalise on the popularity of healthy eating or ethically approved foods can confuse or mislead shoppers. This is not always deliberate; it can simply be through an honest misunderstanding or carelessness when labelling products.

In an attempt to set a few basic benchmarks for producers and suppliers, the ACCC has released a food descriptors guideline. The guideline attempts to outline some of the most common areas of concern in food and beverage labelling while providing producers and packagers with some direction to help them comply with Australia’s consumer protection laws.

Food Standards Australia/New Zealand is responsible for providing consumers with adequate information about the foods available for sale, but the ACCC also has a role in preventing all businesses in Australia from misleading or deceiving their customers. This includes the food and beverage industry, which must comply with the Trade Practices Act.

A number of food and beverage producers have found themselves facing court action over the years as the result of ACCC action.

One common misconception is that a producer must knowingly be in breach of the law before they can be penalised. This is not necessarily the case.

The overall impression a product conveys can also be more important than individual details on a label. Even if a label makes qualifying statements, it may still be misleading in the eyes of a court if the overall impression could convey a misleading message.

It may sound trivial, but apparently minor issues such as whether a food contains a particular type of fruit depicted on the label or whether it is simply flavoured to taste like it can be enough to lead to a breach of the law.

12 13

wArnIng! lABEl mAy conTAIn

mIsInformATIon

some attempts

to capitalise on

the popularity of

healthy eating

or ethically

approved foods

can confuse or

mislead shoppers.

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collEcTIvE BArgAInIng is a term used to describe a group of competing small businesses that get together to negotiate with a supplier or customer. Those negotiations can include issues such as the supply of a service, (for example, broadcasting racing television into pubs and clubs) or the price paid to the businesses for taking their goods (for example, the price paid to dairy farmers by a milk processor) (see p. 6).

Under most circumstances allowing competing businesses to get together to discuss prices or make other arrangements would be bad for the public as a whole and is therefore illegal under the Trade Practices Act—it is competition that drives those businesses to offer better prices or more services than their rivals to attract customers.

COllECTIVE BargaININg

However, there are times when allowing competing small businesses to negotiate collectively can in fact lead to better outcomes for all.

Businesses that want to collectively bargain must formally notify the ACCC of their intentions before doing so, otherwise they may risk breaching the Trade Practices Act.

The ACCC has several publications on what to consider before deciding to form a collective bargaining group, and has recently released a guide to the latest changes to the scheme introduced at the beginning of this year. That information is available on the ACCC website or by calling the small business helpline. •

collective

bargaining is

a term used to

describe a group

of competing

small businesses

that get together

to negotiate with

a supplier or

customer.

JargonBusterJargonBuster

fruIT And vEgETABlE farmers can look forward to increased certainty over the prices they receive for their produce with the introduction of a mandatory code of conduct for the horticulture industry.

The code, to be administered by the ACCC and effective from 14 May 2007, is designed to ensure fair dealings between growers and wholesale traders and to put an end to informal or handshake agreements. The code requires the parties to enter into formal agreements and is designed to offer greater transparency throughout the horticulture industry.

The code applies to all unprocessed fruit and vegetables, mushrooms, nuts, herbs and other edible plants. All written agreements made after 15 December 2006 will be covered by the code.

fOOd fOr ThOUghTWhen traders negotiate with growers they will be required to make the terms and conditions of their arrangements publicly available and the two will only be able to trade in produce if they have a signed horticulture produce agreement in place.

This means that a wholesaler must agree to accept produce supplied by a grower under such an agreement, unless there is a specific clause in the agreement allowing the wholesaler to reject goods from the grower.

Traders will also be required by law to pay for the goods they receive within a specified time, otherwise growers will be permitted to refuse to supply further goods until outstanding debts are paid.

The new code also establishes a dispute resolution service—a feature which has been particularly successful under the Franchising Code of Conduct.

If growers and traders are not able to resolve their disputes within three weeks, either party can take the matter to the Horticulture Mediation Adviser, who will appoint a professional mediator to attempt to work through the problems.

To help producers and traders adjust to the new code, the ACCC has made a range of information available on its website. Information is also available by contacting the ACCC Infocentre. •

fruit and

vegetable farmers

can look forward

to increased

certainty over

the prices they

receive for their

produce with the

introduction of a

mandatory code

of conduct for

the horticulture

industry.

1� 1�1�1� 1�1� 1�

every potential merger is assessed on its individual merits with protecting overall competition and choice as our goal, we will be able to do the greatest service to the Australian public as a whole.

The legislation also contains a number of new safeguards designed to address concerns raised about threats to diversity in the media. These will be administered by the Australian Communications and Media Authority.

A five–four voices rule comes into effect, restricting the minimum number of different media voices in metropolitan Australia to five, and four in rural or regional Australia.

Media companies are also restricted to owning no more than two of the three dominant media platforms in a market of television, newspapers or radio.

The changes will require the ACCC and ACMA to work in close cooperation to ensure smooth and timely assessments of merger proposals in the media sector as they arise.

The two agencies have already begun tightening the already close cooperative working relationship established shortly after ACMA’s creation.

They will update each other when appropriate to ensure strong information sharing and minimal overlap. Both agencies will also be closely monitoring requests to businesses for assistance or information to avoid over-burdening the private sector when assessing merger proposals. •

cHAngEs to Australia’s media ownership laws are carving out an increased role for the ACCC in the area as it prepares for potential shifts in the sector.

The recently declared legislation brings with it a number of sweeping reforms to the controls of foreign and cross-media ownership restrictions that appear likely to increase merger activity in the sector.

The legislation softens many of the previous restrictions that prevented owners of one form of media owning a controlling stake in another and may open up the possibility of mergers going ahead that may previously have been unallowable.

While some of the existing barriers to mergers have been removed, Minister for Communications, Senator Helen Coonan, said the ACCC would play an important role under the new regime in ensuring competition in the sector was protected.

Section 50 of the Trade Practices Act becomes an increasingly important test that media mergers need to pass before they are allowed to proceed. Section 50 prevents mergers going ahead in any sector if they appear likely to result in a substantial lessening of competition.

ACCC Chairman Graeme Samuel recently told a gathering of media industry experts that s. 50 had proven to be an effective tool in many sectors over the past three decades and would be capable of ensuring competition was not wiped out in the Australian media under the rules. He also said:

I believe this important and very flexible test (s. 50 of the Act) has been largely overlooked in the rush to analyse how the new media rules will affect plurality of opinion and overall choice for consumers.

By adapting our approach to keep abreast of changes in the industry we are trying to monitor, and ensuring each and

aCCC TakES CENTral rOlE IN mEdIa mErgErS

The legislation

softens many

of the previous

restrictions that

prevented owners

of one form of

media owning a

controlling stake

in another

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SETTINg yOUr prICES EffECTIVEly

EvEryonE lovEs a bargain, except some distributors of so-called premium or exclusive products. But does having a premium product give suppliers the right to tell small retailers selling their goods how much they can charge customers?

As a small business, you retain the right to set prices at whatever level you choose. A supplier may recommend a price, but ultimately it is up the retailing business to decide what it sells for. When that recommendation turns to overt pressure, small businesses should complain to the ACCC, as the supplier may be breaching the Act with their heavy-handed behaviour. The practice of dictating minimum prices to retailers is known as resale price maintenance and is prohibited under s. 48 of the Trade Practices Act.

Offering discounts is one of the fundamentals of good competition in the marketplace—if businesses are vigorously competing by trying to offer customers a lower price, then ultimately that benefits the shopping public.

Manufacturers and suppliers work hard to build and protect the reputation of their goods. But a number of recent court cases have shown that some businesses go too far, sometimes to the point of threatening retailers to maintain their product’s status. The retailer, often a small business, can become the victim of heavy-handed behaviour from suppliers for simply trying to be competitive and offering their customers a good deal.

Recently two Adelaide stockists of Bamix and Magimix brand kitchen products found themselves under threat from their supplier for offering discounted prices to their customers.

The Federal Court was told the supplier, Cambur Industries, had tried to prevent retailers from selling the kitchen products at a lower price than that specified by the supplier, who had made it known that they would stop supplying products to the retailers if they continued selling the kitchenware at the lower price.

One of the arguments often used by suppliers for asking that sellers don’t go below a minimum price is that selling an item cheaply damages the brand’s reputation or premium image. The Federal Court has already demonstrated it takes a dim view of that argument, as demonstrated by the Cambur case. Cambur was ordered to pay $280 000 for breaching the Trade Practice Act, but it is far from the only case. In addition to any penalty imposed, suppliers may also be required to inform

customers that they broke the law by trying to keep prices at a higher level.

The ACCC has also recently launched legal action against several Jurlique companies, alleging they attempted to induce retailers not to discount their skin care, cosmetic and herbal products.

The ACCC has already taken several suppliers to court for trying to put an artificial floor under the price of their goods or products ranging from golf clubs and paragliders to digital set-top boxes and computer parts.

The ACCC can provide more detail and advice on what is likely to be considered reasonable business dealings. It also has a number of publications available on resale price maintenance as well as other issues that can arise between suppliers and sellers and can assist if you feel your business has been the victim of bullying by another company or supplier. Information is available on the ACCC website or by calling the small business helpline. •

To date the

Accc has taken

a number of

suppliers to court

for trying to put

an artificial floor

under the price

of their goods

or products.

AccEss To petroleum products and certainty over price is set to improve for fuel retailers, with the introduction of the Oilcode on 1 March 2007.

Like the Horticulture Code (effective from 14 May this year), the Oilcode is a mandatory code of conduct designed to improve formal dealings between wholesale suppliers and retailers in the petroleum retail industry.

The Oilcode replaces two petroleum retailing Acts and introduces several conditions designed to provide fair access and clearer pricing for all those selling petrol products in the Australian market.

Under the Oilcode, those retailers who operate under a fuel reselling agreement will be given a disclosure document by the supplier before entering into such agreements. This disclosure document must include relevant information to help the prospective retailer to make an informed decision.

Prospective retailers will also be required to seek professional legal, accounting and business advice or waive their right to seek that advice before entering into an agreement with suppliers.

The Oilcode also affords protection to those who buy declared petroleum products at a spot sale without a fuel reselling agreement.

OIlCOdE

The oilcode

is a mandatory

code of conduct

designed to

improve formal

dealings between

wholesale

suppliers and

retailers in the

petroleum retail

industry

Those customers without fuel reselling agreements will still be able to buy declared petroleum products at the wholesale (also known as terminal gate) price.

Customers will have rights under the code which will require wholesale suppliers to post a daily terminal gate price that does not include discounts or extra amounts. Those discounts or other amounts should be displayed separately.

Wholesale suppliers will also not be able to refuse to supply fuel to retailers without a reasonable cause, such as having a low supply or reasonably believing that the customer is unable to pay for the fuel.

As part of the legislation, a dispute resolution service will be available as a low cost and quick alternative to the courts for settling disputes between parties.

The ACCC will enforce the new mandatory code under the Trade Practices Act and will also be active in informing oil companies and petrol retailers of their rights and obligations under the Oilcode and the Act.

The ACCC has published a guide to the Oilcode for those seeking extra information. This publication along with other useful information is available from the website on www.accc.gov.au/industrycodes or by calling the small business helpline. •

20 212020 2120 21

Oilcode compliance manual

A compliance manual for participants in the downstream petroleum retail industry with guidance on how to comply with the Oilcode. This guide will also help industry participants establish a framework for an effective compliance program which sets out minimum business conduct and disclosure requirements under the Oilcode.

$50 for book (hard copy)

141pp, 2007, ISBN 1 921227 57 5

rECENT rElEaSES fOr CONSUmErS

Know how to complain: stand up for your consumer rights

A guide for consumers on their consumer rights; steps to take to resolve a dispute with a business; the ACCC’s role and contact details; and other agencies and dispute resolution schemes that can help.

DL brochure, 2006, ISBN 1 921227 31 1

fOr Small BUSINESSBeing smart about your new franchise and your retail lease

A checklist for franchisees to use before signing a franchising retail lease agreement. This brochure also provides information on your rights and obligations under the Trade Practices Act and the Franchising Code of Conduct.

8pp DL brochure, 2006

TradE praCTICES aCTFood and beverage industry: food descriptors guideline to the Trade practices Act

A trade practices perspective on industry representations about food and beverage products. This guide will help food and beverage businesses understand the law as it generally applies to this area. It gives examples of the types of claims businesses can, and cannot, make about their products and the context(s) in which such claims can be made.

22pp, 2006, ISBN 1 921227 09 5

aUThOrISaTIONS aNd NOTIfICaTIONS

Authorisations and notifications— a summary

A key aim of the Trade Practices Act is to prevent anti-competitive conduct and encourage competition and efficiency in business. However, in certain circumstances the ACCC can grant immunity from legal action for anti-competitive conduct. Businesses may obtain immunity by applying for an ‘authorisation’ or submitting a ‘notification’ with the ACCC.

34pp, 2007, ISBN 1 921227 40 0

INdUSTry COdES Of CONdUCT

The guide to the horticulture Code for growers and wholesale traders in the horticulture industry

The Horticulture Code is a mandatory industry code of conduct that has the force of law and will come into effect on 14 May 2007. This guideline provides information to industry participants in the horticulture industry about the Horticulture Code.

25pp, 2007, ISBN 1 921227 36 2

An overview of the horticulture Code

An overview of the Horticulture Code for participants in the horticulture industry.

2pp, 2007, ISBN 1 921227 35 4

An overview of the Oilcode for fuel resellers

An overview of the Oilcode for fuel resellers who buy and onsell declared petroleum products in the petroleum retail industry. Fuel resellers can include distributors, retailers, franchisees, commission agents, independent chains and independent operators who buy and on-sell declared petroleum products in the downstream petroleum retail industry.

2pp, 2006, ISBN 1 921227 30 3

The guide to the Oilcode for industry participants in the downstream petroleum retail industry

The guide offers comprehensive information for industry participants in the downstream petroleum retail industry and aims to provide participants with a guide to their rights and responsibilities under the Oilcode.

34pp, 2006, ISBN 1 921227 26 5

The Oilcode—how does it affect you?

An educational DVD presentation outlining the key features of the Oilcode, including terminal gate pricing, supply, fuel re-selling agreements and dispute resolution. Hosted by ACCC Commissioner John Martin.

DVD

Authorisationsand notifi cationsA summary

January 2007

Food and beverage industryFood descriptors guideline to the Trade Practices Act

Pure

Fresh NaturalNatural

Pure

Fresh Natural

PureNatural

NaturFres

NaturalFresh Pure

November 2006

Being smart about your new franchisechecklist before signing a lease agreement

Collective bargaining notifications— a summary

Recent changes to the Trade Practices Act have made it easier and faster for small businesses to engage in collective bargaining. This summary guide provides a brief overview of these changes.

4pp, 2007, ISBN 1 921227 58 3

guide to collective bargaining notifications

This guideline is targeted mainly at small businesses considering whether to participate in collective bargaining arrangements. It details new ACCC processes for obtaining protection for such arrangements.

40pp, 2006, ISBN 1 921227 10 9

Collective bargaining notifi cations—a summary

Recent changes to the Trade Practices Act 1974 have made it easier and faster for small businesses to engage in collective bargaining. This summary guide provides a brief overview of these changes and their potential benefi ts for small businesses.

What is collective bargaining? Collective bargaining occurs when two or more competitors in an industry agree to negotiate terms and conditions (which can include price) with a supplier or a customer (also known as the ‘target’).

In this context, a collective boycott occurs when a group of competitors agrees not to acquire goods or services from, or not to supply goods or services to, a business with whom the group is negotiating, unless the business accepts the terms and conditions offered by the collective bargaining group.

www.accc.gov.au

Guide to collective bargaining notifi cationsJANUARY 2007

CCHCCCCThe guide to the Horticulture Code for growers and wholesale traders

in the horticulture industry

DRAFT

ILLOILILILILThe guide to the Oilcodefor industry participants in the

downstream petroleum retail industry

guide to exclusive dealing notifications

This guide has been produced to help people better understand the approach the ACCC will take when considering exclusive dealing notifications. It replaces the ACCC’s Guide to authorisation and notification for third line forcing conduct (1998).

34pp, 2006, ISBN 1 921227 39 7

Authorisation - new processes from 2007

This publication sets out the practical implications of the changes to the authorisations process for potential applicants, parties affected by a non-merger authorisation application and the ACCC.

6pp, 2007, ISBN 1 921227 13 3

Authorisation—new processes from 2007

Recent amendments to the Trade Practices Act 1974 (the Act) have introduced a six-month time limit for the ACCC’s consideration of non-merger authorisation applications and provided the ACCC with the discretion to waive, in whole or in part, the lodgment fee for applications for non-merger authorisation.

The Trade Practices Regulations 1974 were also amended to introduce a new lodgment fee for applications for revocation and substitution and to provide new lodgment forms to apply for minor variation, revocation, and revocation and substitution of authorisations.

This publication sets out the practical implications of these changes to the authorisation process for potential applicants, parties affected by an authorisation application and the ACCC.

Under the amended authorisation process, it is important that applicants and interested parties submit complete information by the deadlines set by the ACCC. The ACCC will be limited in its

ability to take into account late information and will not be able to accept substantial amendments to applications after they have been lodged.

Why has the Trade Practices Act been amended?

The amendments to the Act arise from the recommendations of the Review of the competition provisions of the Trade Practices Act (Dawson review), which reported to the government in January 2003.

During the Dawson review, concerns were raised about the length and cost of the authorisation process.

In response to these concerns, it was recommended that the Act be amended to include a time limit of six months for the ACCC to consider the applications for non-merger authorisations. It was also recommended that the ACCC be given the discretion to waive the application fee for non-merger authorisations.

www.accc.gov.au

JANUARY 2007

Guide to exclusive dealing notifi cations

January 2007

DRAFT

An overview of the Horticulture Code

Application of the Horticulture CodeThe Horticulture Code applies to the trade of horticulture produce between growers and wholesale traders (traders).

Horticulture produce is de ned as unprocessed fruit, vegetables (including mushrooms and other edible fungi), nuts, herbs and other edible plants. Horticulture produce does not include nursery products.

The term ‘unprocessed’ is not de ned in the code. The meaning of unprocessed will be determined by the circumstances of each case. The ordinary meaning of unprocessed is produce that has not been converted, altered or modi ed in some way for the purpose of making it into a new form.

Any written agreement between a grower and a trader for horticulture produce entered into on or after 15 December 2006 will be subject to the code from 14 May 2007.

The Horticulture Code does not apply if a grower and trader entered into a written agreement before 15 December 2006. If, however, the agreement was entered into before 15 December 2006 and is later varied on or after 14 May 2007, the Horticulture Code will apply to any trade that takes place after the agreement is varied. An agreement will be varied if it is amended, extended or transferred.

The Horticulture Code requires that traders deal with growers either as an agent on behalf of a grower or as a merchant.

An agent is a person who facilitates the sale of horticulture produce on behalf of a grower for a commission or fee.

A merchant is a person who buys a grower’s horticulture produce to resell that produce.

The term trader refers to both agents and merchants. The Horticulture Code does not apply to a merchant who exports or retails the produce even if that merchant buys produce directly from a grower.

Terms of tradeUnder the Horticulture Code all traders have to make a document publicly available setting out the general terms on which they will trade with growers.

Horticulture produce agreementsA trader and a grower may only trade in horticulture produce if they enter into a horticulture produce agreement. The Horticulture Code does not allow a trader to trade as both an agent and a merchant under the one agreement.

This agreement must be written and signed by all parties to the agreement. If the trader’s general terms of trade con ict with a speci c horticulture produce agreement, the agreement will prevail.

Trader obligations A trader must:• accept horticulture produce delivered under a horticulture

produce agreement unless a circumstance speci ed in the agreement arises that allows the trader to reject the produce

• exercise all reasonable care and skill in handling and storing produce owned by a grower while it is under the trader’s control

• pay the grower for produce delivered under the agreement within the period speci ed in the agreement. If the trader fails to pay the amount required under the agreement the grower may suspend any further deliveries under the agreement until the amount owed is paid and/or cancel the agreement, after giving written notice of the intention to do so.

Ownership of produceOwnership of horticulture produce under a horticulture produce agreement passes:• in an agent transaction—directly from the grower to the

third party buyer once the produce is sold by the agent • in a merchant transaction—from a grower to a merchant

on delivery of the produce to the merchant.

The term ‘delivery’ is not de ned in the code. The meaning of delivery will be determined by the circumstances of each case and in particular the terms of the agreement reached by the parties. The parties may choose to agree on what will constitute delivery in their particular circumstances and include this in their Horticulture Produce Agreement. Where the parties de ne ‘delivery’ in their agreement,

CHHCCThe Horticulture Code is a mandatory industry code of conduct that has the force of law and will come into effect on 14 May 2007.

DRAFT

This guide sets out:> your rights as a consumer

> the steps you should take if you want to resolve a dispute with a business

> the ACCC’s role and contact details

> other agencies and dispute resolution schemes that can help

Know how to complainStand up for your consumer rights

. The ACCC encourages vigorous

ILLOOIIIILLLLOILCODE COMPLIANCE MANUAL

The Oilcode—how does it affect you?

This DVD presentation, hosted by ACCC commissioner John Martin, has been produced as part of the ACCC’s responsibility to educate industry participants in the downstream petroleum retail industry. Current and potential participants in the industry are encouraged to view this DVD for a broad overview of the purpose and features of the Oilcode.

The Australian Government implemented the Trade Practices (Industry Codes—Oilcode) Regulations 2006 (the Oilcode) on 1 March 2007. The Oilcode is a mandatory industry code prescribed under the Trade Practices Act 1974, which means it has the force of law. The Oilcode helps industry participants to make more informed business decisions, improve transparency in wholesale pricing, allow access for all customers to declared petroleum products, and provide access to a cost-effective and timely dispute resolution scheme as an alternative to litigation.The Australian Competition and Consumer Commission promotes compliance with the Oilcode through education, information and, when necessary, enforcement action for breaches of the Oilcode.

The Oilcode—how does it affect you?

For more informationACCC Infocentre 1300 302 502www.accc.gov.auDuration approx.

16 mins 30 secs

© Commonwealthof Australia 2006

ISBN 1 921227 29 XProduced by the ACCC Publishing Unit 11/06.

Objectives of the OilcodeThe Oilcode aims to help industry participants make more informed business decisions, improve transparency in wholesale pricing and provide access to declared petroleum products at a published terminal gate price. The Oilcode also aims to improve the operating environment for industry participants by providing access to a cost-effective and timely dispute resolution scheme as an alternative to litigation.

Who does the Oilcode apply to?Broadly, the Oilcode applies to all wholesalers and fuel resellers who are involved in the sale, supply or purchase of declared petroleum products—for example unleaded petrol and diesel. However, it does not apply to fuel re-selling agreements of fewer than 30 000 litres per month.

What are your rights and obligations under the Oilcode?Depending on your business arrangements, as a fuel reseller you have certain rights and obligations under the Oilcode.

Fuel resellers with fuel re-selling agreements

Most fuel resellers will have a fuel re-selling agreement with a supplier. For example, franchisees and commission agents usually have formal fuel re-selling agreements.

Under the Oilcode, fuel resellers with fuel re-selling agreements have certain rights regarding:• Disclosure

• A disclosure document and a copy of the Oilcode must be given to a fuel reseller proposing to enter, renew or extend a fuel re-selling agreement at least 14 days before that event.

• Fuel resellers must be informed of any materially relevant facts about fuel reselling agreements (for example certain court proceedings) within 14 days after the supplier becomes aware of it.

• A copy of a current disclosure document must be given to a fuel reseller within 14 days after a written request to the supplier, as long as only one request has been made within 12 months.

• A copy of any lease of premises and annual nancial statements regarding a marketing or other cooperative fund under the agreement must be provided to a fuel reseller.

• Advice• Before entering a fuel re-selling agreement, a fuel reseller

must obtain legal, accounting, business advice, be given advice from a relevant trade association, or be informed that they should obtain such advice. A statement must then be provided by the fuel reseller to the supplier indicating that they have either obtained such advice or decided not to seek it.

• Cooling-off period• A fuel reseller may terminate a fuel re-selling agreement

within seven days after entering the agreement or payment of money, whichever is the earlier. If the fuel reseller chooses to exercise their cooling-off rights, they must be given a refund minus any reasonable expenses incurred by the supplier within 14 days.

• Tenure• Fuel re-selling agreements entered before the

commencement of the Oilcode retain the duration of the original agreement.

• Fuel re-selling agreements entered after the commencement of the Oilcode must have:— a duration of at least ve years— an option to extend the agreement for at least a

further four years if the agreement requires the fuel reseller to buy fuel from a certain supplier and the retail site is owned or leased by the supplier.

An overview of the Oilcode for fuel resellers

Fuel resellers should be aware of their rights and obligations under the Trade Practices (Industry Codes—Oilcode) Regulations 2006 (the Oilcode). Fuel resellers can include distributors, retailers, franchisees, commission agents, independent chains and independent operators who buy and on-sell declared petroleum products in the downstream petroleum retail industry.

The Oilcode is a mandatory code that has the force of law and forms part of the Downstream Petroleum Reform Package which comes into effect on 1 March 2007. The package includes the:• repeal of the Petroleum Retail Marketing Sites Act 1980• repeal of the Petroleum Retail Marketing Franchise Act 1980 • prescription of the mandatory Oilcode under s. 51AE of the Trade Practices Act 1974.

Publications from the Australian competition

and consumer commission.

To order call 1300 302 502

or view online at www.accc.gov.au

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Issue 21 APRIL 2007

URGE TO MERGE new rules as takeovers boom

BEaTinG ThE chEaTs•MEdia in ThE spOTliGhT•is ThE pRicE RiGhT

SUBSCrIBE TO aCCC UpdaTESubscribe to ACCC update for the latest news from the Australian Competition and Consumer Commission. ACCC update is a quarterly magazine.

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Being smart about your new franchisechecklist before signing a lease agreement

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accc cOnTacTs

ACT (national office)

GPO Box 3131 Canberra ACT 2601

Tel: (02) 6243 1111 Fax: (02) 6243 1199

New South Wales

GPO Box 3648 SYDNEY NSW 2001

Tel: (02) 9230 9133 Fax: (02) 9223 1092

Victoria

GPO Box 520 MELBOURNE VIC 3001

Tel: (03) 9290 1800 Fax: (03) 9663 3699

South Australia

GPO Box 922 ADELAIDE SA 5001

Tel: (08) 8213 3444 Fax: (08) 8410 4155

Queensland

PO Box 10048 Adelaide Street Post Office BRISBANE QLD 4000

Tel: (07) 3835 4666 Fax: (07) 3832 0372

North Queensland

PO Box 2016 TOWNSVILLE QLD 4810

Tel: (07) 4729 2666 Fax: (07) 4721 1538

Western Australia

PO Box 6381 EAST PERTH WA 6892

Tel: (08) 9325 0600 Fax: (08) 9325 5976

Tasmania

GPO Box 1210 HOBART TAS 7001

Tel: (03) 6215 9333 Fax: (03) 6234 7796

Northern Territory

GPO Box 3056 DARWIN NT 0801

Tel: (08) 8946 9666 Fax: (08) 8946 9600

Infocentre 1300 302 502 Small business helpline 1300 302 021 Website www.accc.gov.au For other business information www.business.gov.au

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