ANZ price fixing decision rejects 'artificial or theoretical constructs'

ANZ's win on appeal in a price fixing case brought by the Australian Competition and Consumer Commission has helped clarify the law on price fixing where it involves an agent or distributor selling products or services similar to those offered direct to consumers by its principal, according to a legal commentator.

"The decision emphasises that competition must be real and properly based, not an artificial or theoretical construct," Clayton Utz partner Michael Corrigan said in a commentary.

Earlier this month the Full Federal Court dismissed an appeal by the ACCC against an earlier decision of the Court that dismissed price fixing allegations against ANZ.

The ACCC took ANZ to court in 2007, claiming that it breached the price fixing provisions of the Trade Practices Act (now the Competition and Consumer Act) when it made an agreement with a broker, Mortgage Refunds, to limit the amount of the refund it could offer customers on ANZ loans.

The ACCC said ANZ would only accredit Mortgage Refunds to sell ANZ mortgages if it agreed to limit refunds to A$600. The alleged intention of this agreement was to allow ANZ branches to match the refund deal.

In 2013 the Federal Court ruled in ANZ's favour. The ACCC's case was based on a view that ANZ and Mortgage Refunds were competitors but the court rejected this argument. It said ANZ did not participate in the market for the provision of loan arrangement services (the market in which Mortgage Refunds operates).

The ACCC launched its appeal in 2013. In a judgment handed down on Friday the Full Court of the Federal Court said it agreed with the ruling in the original decision that ANZ branches did not supply loan arrangement services and that ANZ did not compete with independent mortgage brokers.

Corrigan said: "The Full Court emphasised the need to apply commercial reality to the arrangements. Market definitions must be based on, amongst other things, a careful evaluation of the evidence concerning the nature and character of the goods or services, the circumstances in which they are supplied or acquired and the interactions between the relevant suppliers and acquirers of the products."

The critical question in the ANZ matter was whether ANZ and the broker competed in a market for the supply of "loan arrangement services."

"The agent and the principal must be offering competing services. A central issue is substitutability in a real-world commercial sense," Corrigan said.

"ANZ only provided advice and assistance in respect of its own products. Brokers provide advice and assistance in relation to many different loan products from many different loan providers. The services provided by bank branches were not considered to compete with the services provided by mortgage brokers.

"Parties involved in alleged price fixing must be in competition with each other in relation to the supply of the products or services to which their arrangement relates.

"The Court found that it was contrived and artificial to characterise the provision of advice and assistance in relation to loan products as the provision of services in a market separate and distinct from the market for the supply of the loan products themselves."