Even if you educate your staff regularly on compliance with the Trade Practices Act 1974 (TPA) and have lawyers review all your communications rigorously, that’s no guarantee that your company will never be the subject of a complaint to the Australian Competition and Consumer Commission (ACCC). When that happens, some companies make fundamental mistakes. Other mistakes raise more subtle issues. So, if you are investigated by the ACCC, what should you do? Or, to look at it another way, what should you not do?
1. Being needlessly aggressive
Be firm in your dealings with the ACCC, but needless aggression is not helpful. Rather than intimidating an ACCC investigator into backing off, it is more likely to push them to ask more questions and request additional information.
Investigators have two universal traits: suspiciousness and stubbornness. (I say this as a former ACCC investigator). If you are needlessly aggressive, you will simply arouse the investigator’s suspicions that your company is hiding something. If an investigator forms this opinion, it may take a long time for them to change their mind.
2. Attacking the credibility of complainant
Whether the identity of the complainant is known or just suspected, companies often devote considerable effort to explaining how a complainant has a score to settle and is unreliable or dishonest. This is a waste of time. The ACCC receives a significant portion of its evidence from disgruntled former employees who have a score to settle with their former employer and is used to assessing their credibility.
Unless you can provide some fairly hard evidence about their lack of reliability, it is doubly useless. ACCC investigators have to determine the honesty and likely reliability of prospective witness in court. Be wary of making such claims because they are more likely to increase an investigator’s suspicions that your company has something to hide.
3. Not properly responding to ACCC information requests
It is surprising how often companies do not respond properly to the ACCC’s information requests. Often companies don’t respond fully to questions or do not respond to some questions at all.
Possibly, the company does not understand the ACCC’s questions or it rushed its response. However, an investigator may interpret this failure as a sign that the company has something to hide or is not taking the issue seriously.
If you do not fully understand the ACCC’s questions, call the ACCC contact officer to discuss them. The questions might not have been clearly expressed. It is also important that the person from your company who will prepare the information speaks directly to the ACCC contact officer (in the presence of your legal adviser if need be) so nothing is lost in translation.
You should never feel pressured to provide information voluntarily to the ACCC before it is ready. Sometimes inadequate responses to ACCC questions stem from the company rushing to collect and provide information. If your company is struggling to collect all the requested information by the due date, you should call the ACCC and propose a staged delivery of information. The ACCC investigator’s main concern is to ensure that they have enough information to keep the investigation moving forward. An investigator would prefer to get some information quickly, rather than waiting months for complete production.
Finally, be careful to ensure the accuracy and completeness of the information provided voluntarily to the ACCC. It is a criminal offence to provide false, misleading or incomplete information to the ACCC. This offence carries a maximum penalty of 12 months imprisonment (s 137.1 of the Criminal Code).
4. Arguing few customer complaints in mitigation
Many companies argue that the complaints received by the ACCC comprise a very small proportion of their total number of customer inquiries and sales. This is a bad strategy for a number of reasons.
First, in consumer protection circles it is often argued that an absence of complaints can be good evidence that a deception is effective. Customers do not complain about a misleading representation if they do not know it is misleading. A good example is a representation that your company offers the lowest prices. Customers will not complain unless they have compared prices and subsequently realised that your company is not offering the lowest prices. Obviously there are other types of misrepresentations which will be discovered quickly by the consumer, such as bogus free offers.
Second, many consumers often do not complain even if they are misled. Either they never get around to complaining or they blame themselves for having been taken in. In addition, the fact that a customer does not complain to the ACCC does not mean that they have not complained to their family and friends.
Finally, a claim that only a few customers have complained sends the wrong message to the ACCC. It suggests that your company does not value the concerns of a section of its customer base, however small. It also suggests that your company may be taking a cost/benefit approach to dealing with customer complaints.
Instead of dismissing complaints as a minority of customers, carefully investigate each of the complaints and explain to the ACCC the reason for each complaint. The main focus of your internal investigation is to satisfy the ACCC that the complaints are not symptomatic of a wider problem within the organisation, but represent isolated incidents.
5. Being too reactive in dealing with the ACCC about its media release
Many companies neglect the issue of the ACCC media release until the very end of the investigation. Then they seek a range of concessions from the ACCC such as the right to agree the content of the media release, the right to edit the media release or the opportunity to provide comments on the media release before it is issued. However, the ACCC will rarely compromise the integrity of its media release.
Consider other ways to influence both the content of the ACCC media release and its impact. The way your company responds to the ACCC during the investigation will have a bearing on the content of the media release. Obviously if your company has not cooperated with the investigation, it can hardly expect praise. But if your company cooperates in a timely way it is entitled to have that acknowledged.
The ACCC media release concerning GIO’s refund of GST payments on car leases is a good example of the ACCC acknowledging the cooperation of a company. GIO made sure it commenced the process of providing refunds prior to the issue of the media release so that it would get positive comments from the ACCC.
Make sure you contact the ACCC in writing before the end of the investigation requesting that it mention in its media release the cooperation your company provided during the investigation. Emphasize the benefits to the ACCC of this approach. If the ACCC praises your company for constructively resolving a problem, this will provide an incentive for other companies to come forward to resolve their own problems (as happened following the GIO media release referred to above).
Your company should also ensure that it has a contact person available for reporters to call when an investigation is resolved and the ACCC media release is issued. It would be very unfortunate to have a report in the newspapers the day after the ACCC media release along the lines that ‘the Managing Director of XYZ Pty Ltd was unavailable for comment.’ Your company should provide the ACCC investigator with the name, position and contact details of the relevant person and ask that this information be provided to the ACCC’s Media Unit. When reporters call the ACCC for further information about its media release, the Media Unit will be in a position to provide these details.
Finally, it is surprising how few companies issue media releases themselves following an ACCC media release. The ACCC announcement will rarely cover all issues which are important to your company. For example your media release could reassure customers that the TPA problems have been fixed and that they were not systemic but isolated.
If your company was particularly strategic you could issue your own media release before the ACCC issued its media release. By taking this approach, you will more or less guarantee that the ACCC media release does not get much coverage. However, be aware that if you adopt this approach, it may upset the ACCC.
6. Saying that everybody else is doing it
The effect of this statement on an investigator is clear. They immediately get much more excited about the investigation as they realise they are now dealing with a broad industry problem rather than an isolated incident. Also, the fact that many companies in an industry engage in the same conduct makes the investigation a much higher priority.
Clearly, if it’s true, your company should advise the ACCC as early as possible that the alleged conduct is common in the industry. However, you should try to turn this to your advantage. To do this, you need to be aware of some of the enforcement philosophies of regulators such as the ACCC. In taking enforcement action, a regulator will try to achieve both specific and general deterrence. As it cannot take on every case, it has to select the cases which will best achieve both goals.
Accordingly, there are three broad enforcement approaches. The ACCC may pursue a case against:
- the market leader because a successful outcome will achieve general deterrence by getting smaller players to fall into line
- the company which is engaging in the most blatant conduct in breach of the TPA, as the ACCC is likely to both win this case and get the most extensive remedies or
- the company which has a history of similar conduct, as this may provide an opportunity to secure the most severe sanctions such as a criminal conviction.
If the ACCC approaches your company about an issue which is a widespread industry problem, try to persuade the ACCC to pursue somebody else. For example, if you are the market leader, you may want to suggest to the ACCC that it focus its efforts on another company which is engaging in more blatant conduct or is a repeat offender. Alternatively, if you are a repeat offender you may try to focus the ACCC on a company which is engaging in more blatant conduct. However, if your company is engaging in the most blatant conduct, I suggest you give up as soon as possible.
7. Not using a lawyer who specialises in the Trade Practices Act
While it may come as a surprise, many companies use lawyers who have little or no knowledge or experience of the TPA or the ACCC. The TPA is a specialised area and companies should retain a specialist lawyer to represent them. The exception to this may be straightforward instances of misleading and deceptive conduct.
However, in all other matters, your company should ensure its lawyer has appropriate experience. Ask your lawyer for details of the trade practices matters they have managed and then check to see how successful they have been. You would probably want to know whether your lawyer had lost every trade practices case that they had run.
8. Being too reactive about remedies
Companies often err in being too reactive in terms of the remedies required to fix a contravention of the TPA. They often provide masses of information to the ACCC voluntarily, but may never suggest remedies to the ACCC to resolve the problem. Rather, they will wait for the ACCC to propose a remedies package which may contain all manner of elaborate remedies, many of which are not acceptable to the company. Then the company will spend weeks trying to whittle down the ACCC’s proposals to something it can live with.
Instead, try to get on the front foot by proposing a range of remedies to the ACCC at an early stage. By doing this, you will shift the onus to the ACCC to explain to your company why the remedies you have proposed are inadequate and why additional or more elaborate remedies are needed. You should try to set the agenda on appropriate remedies, rather than allow the ACCC to do it.
9. Not implementing remedies immediately
Many companies are willing to implement remedies from an early stage in the investigation, but don’t do so because they think it is better to wait for ACCC approval. By not implementing the remedies you are happy to implement immediately, your company runs the risk of the ACCC upping the ante and proposing additional and more elaborate remedies.
If you acknowledge that there is a need to take remedial steps, you should implement these steps immediately even if the investigation is still ongoing. There are a number of strategic benefits from taking this pre-emptive approach in dealing with the ACCC.
First, your company will show the ACCC that it responded positively to the concerns at the earliest possible stage. Second, this will reduce the likelihood that the ACCC will make demands for additional or more elaborate remedies. In other words, the ACCC will be in the position of having to explain why the measures you have already implemented did not fix the problem. Finally, if your company has already implemented a range of remedies, there is less likelihood that the ACCC will press for a court enforceable undertaking, as there will be few, if any, remedies left to implement.
10. Agreeing to a section 87B undertaking too readily
Thebiggest mistake a company can make is to agree to a s87B undertaking too readily. Section 87B is an administrative tool which permits the ACCC to accept undertakings from companies to settle investigations, including consumer protection, restrictive trade practices and merger investigations. Though a s87B undertaking is not approved or otherwise brought to the attention of the Federal Court when it is executed, it can be enforced in the Federal Court if its terms are breached.
Many companies don’t understand that when they sign a s87B undertaking, they are exposed to a range of broad and open-ended remedies if the undertaking is breached. The court can order the company in breach of the undertaking to:
- pay to the Commonwealth the amount of any financial benefit obtained directly or indirectly and reasonably attributable to the breach and /or
- compensate any other person who has suffered loss or damage as a result of the breach.
An order to pay the Commonwealth the amount of the financial benefit obtained could be a significant sum of money, for example, all the revenue that a misleading advertising campaign has generated.
In dealing with the ACCC, companies should seek to enter into a dialogue about the reasons why it is seeking a s87B undertaking. The ACCC usually tries to resolve investigations in one of three ways: an administrative undertaking, a s87B court enforceable undertaking, or through court action. The ACCC will generally take court action if:
- a company refuses to provide remedies to resolve a TPA problem
- the contravention is considered to be particularly blatant or
- the company is a repeat offender.
However, the basis for an ACCC decision to seek a s87B undertaking is often far from clear. Some people see the s87B undertaking as constituting a greater punishment than an administrative undertaking. There are strong grounds for arguing that a s 87B undertaking should only be sought if the ACCC has genuine concerns that your company cannot be trusted to comply with the terms of an administrative undertaking.
The best way for you to reduce the likelihood of the ACCC requiring a s 87B undertaking is to start implementing corrective remedies prior to the settlement of the investigation. Your company will thus be able to counter any claims by the ACCC that a s87B undertaking is required because it cannot be trusted to implement the agreed remedies.
A further benefit of implementing remedies at an early stage is that you will remove much of the ACCC’s leverage in the settlement negotiations. The main leverage which the ACCC has in seeking a s87B undertaking is that it will commence legal proceedings unless your company agrees to the undertaking. However if some of the proposed remedies have already been implemented, there is very little justification for the ACCC to go to court to get the balance of the remedies it is seeking.
Michael Terceiro’s expertise comes from having run a large number of investigations and court cases during his time at the ACCC. He has extensive experience in resolving Trade Practices problems in a manner acceptable to the ACCC and the business involved.