Harper says scrap the price signalling rule

The final report of the Competition Policy Review has recommended that the prohibition on price signalling in the Competition and Consumer Act, which applies only to banks, be scrapped and be replaced by a more general "concerted practices" provision.
 
The Review, which was chaired by Deloitte partner Ian Harper, said that anti-competitive price signalling did not need a separate division in the Act and could be addressed by extending section 45 to cover "concerted practices that have the purpose, effect or likely effect of substantially lessening competition."

The price signalling law, which was introduced in 2012, prohibits banks disclosing prices to competitors in private, where doing so is not in the ordinary course of business. It also prohibits public or private disclosure that is for the purpose of "substantially lessening competition".

When the law was introduced the Australian Competition and Consumer Commission provided examples of the sort of conduct that would raise concern. These included a bank devising a campaign to signal its intention not to raise rates, as a way of testing competitors' willingness to do the same.

In another example, a bank executive announces at an industry conference that the bank would be reluctant to lift rates beyond that of the Reserve Bank cash rate change, but if others did they would be prepared to follow.

The Harper Review said: "The panel considers that, in their current form, the prohibitions against price signalling in the CCA do not strike the right balance in distinguishing between anti-competitive behavior and pro-competitive conduct.

"Being confined to a single industry, the current provisions are also inconsistent with the principle that the CCA should apply to all business generally."

The reference to "concerted practices" means "jointly arranged or carried out or co-ordinated". The report said: "The expression 'concerted practice with one or more persons' conveys that the impugned practice is neither unilateral conduct nor mere parallel conduct by market participants.

"The panel proposes that such conduct would only be prohibited if it can be shown that the concerted practice has the purpose, effect or likely effect of substantially lessening competition."

The Review pointed to concerted practices provisions prohibiting anti-competitive disclosure of information in United States, Canadian, United Kingdom and European Union laws.

It said that, based on submissions, "no-one seems happy with the provisions in the current form". There were calls for repeal, modification or extension of the provisions to all sectors of the economy.

Australian Bankers Association chief executive Steven Munchenberg said he welcomed the recommendation but was keen to see the detail in any "concerted practices" amendment.

The Review said: "Public disclosure of prices is a common business practice by which businesses communicate with a broad customer base and help consumers make informed choices. For this reason, the current public disclosure price signalling laws may over-capture pro-competitive or benign conduct.

"The difficulties in defining the circumstances in which disclosure of price information is pro-competitive or benign, and the circumstances in which it is likely to be harmful to competition, have resulted in a complex set of provisions."