All banks should be aware of the impending laws relating to anti-competitive price signalling and information disclosures. The new laws stem from the Government's Competitive and Sustainable Banking System package announced in December 2010, and will be implemented by amendments to the Competition and Consumer Act 2010 (Act). They will come into force on 6 June 2012.

Why?

The Act already provides for a prohibition on cartel conduct. In order to prove cartel conduct, there must be a contract, arrangement or understanding between the parties to the conduct. The Australian courts have interpreted this to require evidence of a "meeting of minds" between the parties as well as a commitment to certain conduct.

Concerns have been expressed that price signalling and information disclosures can, of themselves,  have a similar effect to cartel conduct whilst falling short of meeting the requirements of a contract, arrangement or understanding.  

Petrol prices and the setting of interest rates by banks have faced particular media scrutiny and accusations of anti-competitive price signalling. The new laws are structured so that they only apply to those industries identified in the accompanying Regulations. For now, this is limited to banking businesses which both take deposits and make advances.

What?

The amendments to the Act will prohibit banks from making:

• a private disclosure of pricing information to a competitor where doing so is not in the ordinary course of business, or
• a disclosure of pricing information, the capacity to supply or acquire goods or services or details of that business’s commercial strategy in relation to goods or services, if the purpose of the disclosure is to substantially lessen competition in a market.  

Private Disclosure

The Act takes the view that private disclosures of price information are the type most likely to be anti-competitive. This prohibition covers deliberate disclosures to one or more competitors and not to anyone else (e.g. a member of the general public). This is an automatic breach of the Act and not subject to a lessening of competition test.

The term “ordinary course of business” is not, however, defined as it will depend upon the circumstances of the disclosure (and will no doubt be the subject of much legal argument).

Other Disclosure

The Act provides that a wider range of disclosures, both private and public, will breach the Act if the conduct in question was engaged in for a purpose (of which there may be a number) of substantially lessening competition.

This part of the Act outlines a range of non-exhaustive factors that the Court may consider for the purpose of ascertaining whether the disclosures have the purpose of substantially lessening competition:

• whether the disclosure was a private disclosure to competitors
• the degree of specificity of the information
• whether the information relates to past, current of future activities
• how readily available the information is to the public, and
• whether the disclosure is part of a pattern of disclosures. 

Exceptions

The new law acknowledges that certain disclosures are necessary and includes exceptions from the prohibitions.

The following disclosures are exceptions from the private disclosure and substantial lessening of competition prohibitions, being those:

• authorised by law
• between related bodies corporate
• in relation to a collective bargaining notice
• covered by an authorisation or notification (for which you can apply under the Act), or
• made to comply with continuous disclosure obligations. 

The following disclosures are only exceptions from the private disclosure prohibition, being those:

• to an acquirer or supplier of goods and services
• to an unknown competitor
• for the purposes of a joint venture or syndicate
• for the provision of loans etc. to the same person
• between a credit provider and a provider of credit services
• made in connection with an acquisition of shares or assets, or
• relating to the insolvency of a borrower or guarantor.

These types of disclosures will be prohibited if they are engaged in for the purpose of substantially lessening competition.

Summary 

The new law would appear to reflect the authorities’ frustration at not having the power to take action against what has been perceived to be collusion amongst the “Big Four” banks when setting interest rates (particular those charged for residential mortgages). 

Banks will need to be particularly careful as to how they communicate and substantiate interest rate changes. The ACCC has broad investigative powers and it will no doubt be keen to use them in this context.