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• Do companies, especially smaller companies, fully understand what Part VB will mean for their cost accounting and pricing methods? There should be no illusion that, if Part VB is to be taken as seriously as is plainly intended by the government, the pass through principle means that all companies will require precise techniques of measurement and the systems required to charge prices that reflect the new tax savings component. For most companies this will require significant changes to accounting processes and a dependency on costing data from suppliers who also need to modify their accounting processes.

• Type A interpretations of s 44ZZW(c)
  A1 A disclosure will be in the ordinary course of business if it is of a kind that regularly or frequently occurs in businesses generally
  A2 … regularly or frequently occurs in businesses in the same market as that to which the disclosure relates
  A3 … regularly or frequently occurs in businesses supplying or acquiring Division IA goods or services of the type covered by a regulation under s 44ZZT that applies to the defendant
  A4 … regularly or frequently occurs in the defendant’s business.
• Type B interpretations of s 44ZZW(c)
  B1  A disclosure will be in the ordinary course of business if it has a legitimate business justification
  B2  A disclosure will be in the ordinary course of business if is consistent with acceptable business practice in the sense that it is not anti-competitive, unlawful (putting s 44ZZW aside) or unethical

• The exclusion has no cogent policy foundation. It is a last-minute political compromise and a concession to those who criticised s 44ZZW for overreach and the exceptions to s 44ZZW for being too limited or impractical.
• The exclusion raises major unresolved issues of statutory interpretation and does not achieve commercial certainty. The wording ‘ordinary course of business’ appears in many different statutory contexts and the case law does not indicate any satisfactory answers as to how this slogan is to be interpreted in the context of s 44ZZW(c). Nor does purposive interpretation yield any workable solutions (none of the Type A or Type B interpretations indicated above is satisfactory). The underlying problem is that, since s 44ZZW(c) lacks a cogent policy foundation, it is rudderless.

• Bank A offers a “hot daily interest rate” to new customers (NC) upon request. NC asks Bank A for
  a quote in writing because Bank B has insisted upon that before discussing a competitive rate with
  NC any further. The quote by Bank A is disclosed to NC for the substantial purpose of NC disclosing the information to Bank B. There is no exception (other than the highly bureaucratic option of notification) for private disclosure to a competitor via a customer for the purpose of enabling the customer to compare prices and choose the best price. The EM (see para 1.43 and Example 1.3) evades this issue.

• The CEO of Bank A invites the CEO of Bank B to consider the possibility of increasing its home loan interest rates. The disclosure occurs over lunch in a hotel. The disclosure is recorded by U, an ACCC undercover agent sitting at the next table. The disclosure here is not limited to competitor B but is made to another person who is not a competitor and hence is not a private disclosure as defined by s 44ZZV(1). The disclosure is not accidental etc under s 44ZZU(4) assuming that the CEO of A is aware of U’s presence but is indifferent about U being within earshot because he doubts that U will understand the significance of what is being said. Nor is the situation covered by the anti-avoidance provision in s 44ZZV(2) because the purpose of the CEO of A is not to avoid the application of s 44ZZW. U’s skilful undercover work will thus turn off per se liability under s 44ZZW and require proof under s 44ZZX that Bank A had a SLC purpose.
• As in the situation above, except that the disclosure of price-related information is overheard not by U but by Graeme, a passing waiter. The CEO of A is aware that Graeme is listening but doesn’t care for the same reason as above. Presumably s 44ZZX applies but not s 44ZZW.
• As in the first situation above, except that the disclosure of price-related information is recorded by a video security camera and the recording is monitored in real time by the hotel. The CEO of A is aware that the conversation is likely to be monitored live but doesn’t care for the same reason as above. Presumably s 44ZZX applies but not s 44ZZW.

Amending the CCA Bill to avoid these particular outcomes may be possible but the process of amendment would need to be perpetual in order to cover myriad other possible comparable situations.

• The CEO of bank A phones the CEO of bank B and says: “We think that your interest rates generally are too high. We will undercut you and knock you for six.” This criticism by the CEO of bank A is a manifestation of aggressive competition. Remarkably, however, it is a private disclosure about the price for services charged or to be charged by bank B and therefore is caught by s 44ZZW unless notified to the ACCC.
• C and D are economists employed by competing banks E and F. They meet at a restaurant to discuss the interest rates that their banks and other Australian banks charged at various stages of the Great Depression. Their purpose is to compile the information for a forthcoming book, ‘The Great Crash: The Australian Banking Experience’, that they are co-authoring. C, D, E and F contravene s 44ZZW unless they make a successful notification to the ACCC. They have made a private disclosure to a competitor about a price charged as interest for the supply of services in the market. It is irrelevant under the wording of s 44ZZW that the disclosure relates to prices charged around 80 years ago. (This example is based on one given by Peter Heerey QC at a recent seminar in Sydney on the CCA Bill)

1. the CCA Bill focuses on information disclosure instead of the relevant harm or danger, which is collusion between competitors or unjustified coordination of their conduct in the market
2. the focus on information disclosure instead of on collusion or unjustified coordination of market conduct is inconsistent with the approach taken in major jurisdictions with extensive experience of information exchanges between competitors and how best to regulate them (eg US, EU, UK, Japan, Korea)
3. the focus on information disclosure rather than on collusion and coordination of market conduct is not supported by the economic literature on oligopolistic conduct, information exchanges or facilitating practices
4. the approach taken in the CCA Bill is not based on any persuasive analysis of the perceived weaknesses in the present law or the best means of overcoming those weaknesses
5. the CCA Bill adopts a sector-specific approach that is discriminatory and devoid of rational or workable criteria for determining whether or not any particular sector warrants subjection to prohibitions against information disclosure
6. the prohibitions are over-reaching – they apply in many situations where the conduct is pro-competitive or harmless
7. the prohibitions and the exceptions to them create considerable uncertainty for those seeking to comply with the law
8. no attempt has been made to reconcile and align the prohibitions against unilateral disclosure of information with the prohibition against misuse of market power under s 46
9. much doubt surrounds the efficacy of the prohibitions under the CCA Bill given the difficulties of proving contravention and the vulnerability of the prohibitions and exceptions to loopholes (eg via continuous disclosure)
10. the CCA Bill relies heavily on authorisation and notification as ways of minimising the hazards of overreach and uncertainty but these mechanisms are bureaucratic, impractical, often unworkable and inconsistent with the approach taken in major jurisdictions (most notably the US, EU, UK)
11. the process adopted for the development of the CCA Bill has been rushed, less than transparent (eg key legal advices to Treasury have not been have not been made available to the public), unresponsive to many of the understandable concerns made in submissions to Treasury and governed by political opportunism and propaganda.

It is intriguing how Australia alone has wound up with such mindless proposed legislation. Looking ahead, the way out of the mess is not to compound the errors of the CCA Bill by making more knee-jerk amendments or engaging in further propaganda but to drop the Bill and make a fresh and principled start that is in fact consistent with EU and US law.

• Assume that bank A notifies bank B that the rate of interest for funds offered by super fund C and super fund D are the result of price fixing between C and D and gives B the evidence it has of that price fixing. A and B are in the process of negotiating separate loans from C and are about to enter into loan agreements. In this situation A has disclosed price-related information to B, a competitor in relation to the acquisition of funds from C. There is no cartel provision in any contract, arrangement or understanding between A and B and hence they are not liable for breach of s 44ZZRF or s 44ZZRJ. However, A would be liable under s 44ZZW for disclosing price-related information to a competitor unless it had previously made an effective notification to the ACCC under s 44ZZY(5). The position would be the same if A had told the ACCC separately about the price fixing and its relevance to the interest rate about to be charged by C and D before disclosing that information to B: see s 44ZZU(3). The position would also be the same if A had informed the ACCC at the same time as the disclosure of the information to B in an attempt to get around the per se s 44ZZW prohibition by making a non-private disclosure: under s 44ZZU(2)(a) and s 4F(1) the disclosure to the ACCC would be disregarded because it was made for the substantial purpose of avoiding the application of s 44ZZW. As a matter of competition policy, notification under s 44ZZY(5) is necessary as an escape route in such a case because the s 44ZZW prohibition is drafted in sweeping terms that: (a) have no cogent underlying economic rationale; and (b) defy attempts to draft workable exceptions.
• Assume next that bank A announces in the media that it intends to offer a new rate on home loans in 4 weeks time and that it is able to do so because it has managed to secure large parcels of funds from offshore at very favourable rates. A’s substantial purposes in making this announcement are: (1) to increase its market share by attracting new customers after giving them sufficient notice to be able to switch from their existing loans; and (2) to put pressure on its competitors and to drive as many as possible of them out of the home loan business. A has not discussed its plans in private with any competitors and there is no contract, arrangement or understanding between any of them. In this case A would be liable for disclosing price-related information for the purpose of substantially lessening competition in the market for home loans. Given purpose (1) and the fact that competition and consumer welfare are likely to be increased in the short term, there is no compelling economic rationale for subjecting A to liability in such a case. Note that notification is not an escape route here – to be valid, a notification must relate to conduct prohibited by s 44ZZW (s 93(3A)) and the conduct here is prohibited only under s 44ZZX. To get off the hook, A would need to apply for and be granted an authorisation.

• ‘A key point .. is .. that the provisions in the Exposure Draft are very different .. from the prohibitions that exist in the United States, under section 1 of the Sherman Act; under the EU competition laws; and under the United Kingdom competition laws. Contrary to the statements or suggestions made by representatives of the
  ACCC this morning, the Exposure Draft provisions do not simply reflect the law in those jurisdictions—they are fundamentally different. That is because they focus on unilateral information disclosure and move radically away from a key requirement of collusion or, as under the present law, a requirement of a contract arrangement or understanding. .. that is the fundamental error of the exposure draft prohibitions.’

• Lexpert Publications and Brent Fisse applied for AAT review of Treasury and ACCC decisions about FOI requests made in March 2007.
• The Treasury material sought is the report of the Working Party on criminalisation of cartel conduct in April 2004. The ACCC material sought was a copy of a supplementary submission made by the ACCC to the Dawson Committee in 2002 and referred to in the Dawson Committee’s Report. See Application for AAT Review of FOI Decisions by Treasury and the ACCC June 2007 (2 mb).
• On 24 August 2007 Gilbert + Tobin were advised by the AGS that the ACCC had decided to release the information sought from them. The documents were made available on 4 October 2007. They reveal some remarkable indadequacies. For the documents and introductory comments see ACCC Supplementary Submissions to Dawson Committee 2002 (1 mb).
• On 10 August 2007 the applicants were advised by Treasury that the Secretary of the Treasury was giving active consideration to issuing a certificate under section 36(3) of the FOI Act and asked for a submission on that question within 2 weeks. See Submission to Secretary of Treasury 24 August 2007 (564 kb). The expectation was that a decision on the section 36(3) certificate issue would be made within 2 weeks after receipt of our submission. Eventually, in a letter dated 5 November 2007, we were advised that a decision had been made: (a) not to issue a conclusive certificate; and (b) to release some additional pages from the Working Party Report.
• The AAT review (hearing on 19 February 2008) did not succeed. See AAT Decision 10 April 2008. An appeal against that decision to the Federal Court was heard by the Full Federal Court in September 2008 but failed – see Fisse v Secretary, Department of the Treasury [2008] FCAFC 188 (11 December 2008) at http://www.austlii.edu.au/au/cases/cth/FCAFC/2008/188.html.
• The Working Party Report might have shed some light on the many issues about cartel criminalisation in Australia that have never been adequately discussed in any other public official document; for particulars of the many shortfalls in publicly available information about important issues, see Fisse Affidavit in AAT Proceedings. See also Fisse AFR op-ed 26 October 2007. For the heavily redacted Stasi-style version of the Report released by Treasury in response to the first FOI application, see Working Party Report on Criminal Penalties for Cartel Behaviour (2004) (3.2mb). A satirical version, ‘The Working Party Report on Cartel Criminalisation: Transcription from Air Costello’s Balloon Flight Recorder’, is in preparation.
• An application for the Working Party Report was made to Treasury on 1 Nov 2010 under the amended FOI Act. Treasury thereupon released the document on 2 December 2010. The Report is remarkable in several respects. It includes a recommendation that notification of a contract, arrangement or understanding to the ACCC be a defence in criminal proceedings for cartel conduct and another that secrecy be an element of the cartel offence proposed. Those recommendations are highly problematic and were not accepted by the Government. Instead, the Government of the time switched to making dishonesty an element of the proposed offence. Treasurer Costello’s Press Release of 2 February 2005 announcing that the Government would introduce criminal penalties for serious cartel behaviour with a dishonesty-based cartel offence seems calculated to conceal the fact that the Government departed significantly from the solutions proposed by the Working Party. Nor did Treasury subsequently reveal the true background in its discussion paper in January 2008 when an exposure draft bill was released by the Labor Government (see http://www.treasury.gov.au/contentitem.asp?ContentID=1330&NavID=). No phoenix could ever emerge from these ashes but forensic pathologists may find traces of DNA scattered throughout the Working Party Report, as reproduced here in full with the copyright permission of the Commonwealth. As at 21 March 2011 the Working Party Report had not been published by Treasury; for example, it is not included in the list of Working Papers published on the Treasury website.