ACCC – Page 9 – Digital Finance Analytics (DFA) Blog

Apple hits back against banks

Even if the Australian Competition and Consumer Commission (ACCC) authorises collective negotiations between a group of banks and Apple over the use of the Apple Pay platform, the iPhone maker says that it “will not and cannot” agree to the conditions likely to be sought by the banks.

Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank and Westpac last month applied to the ACCC for authorisation to collectively negotiate with mobile wallet providers, with the application naming Apple’s service as well as Google Pay and Samsung Pay.

The banks argue that Apple, Google and Samsung are potentially in a position to negotiate terms for use of their mobile wallets that “likely to result in reduced competition and innovation, and increased risk in the security and transparency of mobile payments.”

Currently in Australia only American Express and ANZ customers offer Apple Pay support for their customers, but worldwide more than 3000 issuers support the platform, according to Apple.

Apple says that based on the banks’ application to the ACCC, the applicants will not agree to support Apple Pay unless it allows them to charge consumers for the use of the platform, it provides access to the iPhones Near Field Communications (NFC) antenna, and it agrees to security guidelines drafted by the applicants that will only apply to third party mobile wallets (not the banks’ own offerings).

These terms will “undermine the availability, security and privacy our customers expect when using Apple devices to make payments,” Apple argues in a submission to the ACCC. The submission follows on from an interim submission that “strongly urged” the ACCC to reject the banks’ application.

Apple says that it has attempted to negotiate agreements with each of the applicant banks bar one (which was not willing to sign a confidentiality agreement). The inability of the banks to reach agreement with Apple “demonstrates that each individual applicant bank possesses a significant amount of bargaining power against Apple,” the iPhone maker argues.

“As each of the banks has individually resisted serious engagement with Apple for the past two years, collectively negotiating will further entrench the applicant banks’ position by ensuring that all of them can only advance in lockstep with the slowest, least willing member,” the submission argues.

“The applicant banks would know that they can continue to hold out without the threat that one of their competitors will introduce Apple Pay for their customers, which could result in the loss of some customers who will switch banks in order to access Apple Pay.”

Apple in its submission takes particular umbrage to banks seeking access to the iPhone’s NFC capabilities.

“This is not open to negotiation with any bank,” the company argues. “Apple designs its products to provide very secure experiences, especially where payments are concerned. Apple has been able to provide the required level of security with tight integration of hardware, software, and services such as Apple Pay. Apple does not provide banks access to the NFC radio because doing so would undermine the security our customers expect when using Apple devices to make payments.”

As justification, the submission cites examples of security vulnerabilities in Android.

Apple adds that just because it will not support use of NFC by third parties, there are alternative technologies that can be used for contactless payments, for example QR codes.

“Apple’s desire to protect the integrity of its own proprietary hardware installed within its own devices is not anticompetitive,” the submission argues. “It is not ‘exclusive dealing’ conduct to which Australian competition law applies.

“What the applicant banks are seeking is the right to impose a collective boycott for the purpose of putting pressure onto Apple to grant them access to proprietary hardware and software. Apple has invested significant financial and other resources developing a simple and convenient mobile wallet service with the highest security and privacy protections available. This is also the basis on which Apple seeks to differentiate its mobile wallet from those offered by other mobile wallet providers.”

The full submission is available online.

Current Retail Petrol Margins Highest for Years – ACCC

The Australian Competition and Consumer Commission’s latest report on the Australian petroleum industry shows that average petrol prices in 2015–16 were at their lowest levels since 2002. However, gross retail margins also increased to their highest levels, indicating that the full benefits of lower international crude oil and refined petrol prices are not being passed on to motorists.

The average price for petrol in the five largest cities (i.e. Sydney, Melbourne, Brisbane, Adelaide and Perth) in 2015–16 was 121.7 cents per litre (cpl). This was the lowest annual average since 2001–02 in real terms (adjusted for inflation). Gross retail margins, the difference between retail prices and published wholesale prices, in the five largest cities increased by 1.2 cpl on the previous quarter, and averaged 11.2 cpl in 2015–16, the highest level since the ACCC began monitoring them in 2002.

“We remain concerned about the petroleum industry’s high gross retail margins, which indicate motorists are not reaping the full benefits of lower international crude oil and refined petrol prices,” ACCC Chairman Rod Sims said.

“Bowser prices for motorists last year were the lowest they’ve been on average for 14 years, but this report suggests that in order for there to be more competitive pressure on retailers, consumers need to shop around and reward those offering the best-priced fuel.”

Since 20 May 2016, motorists have been able to access near real‑time petrol price information through the MotorMouth smartphone app, which is one of a number of fuel price apps currently available to consumers. This is a result of court enforceable undertakings received by the ACCC in December 2015 from data provider Informed Sources and four major petrol retailers to make public information previously only available to them.

“Some motorists have been quick to take advantage of these petrol price apps and are already using them to ensure they are getting the best price when they fill up. This improved price transparency puts pressure on retailers to offer competitive prices or risk customers driving to a petrol station that does,” Mr Sims said.

“We encourage people who are concerned about petrol prices to take advantage of these apps. Motorists have the ability to drive competition in the fuel sector literally in their hands.”

The ACCC’s recently released Launceston regional petrol market study found an increase in price transparency was a key driver of increasing competition in the Launceston market. The ACCC completed a study into the Darwin market in December 2015 and is continuing regional petrol market studies in Armidale and Cairns.

“We know that price competition works to bring down retail margins. We have seen this in Launceston, where prices and margins have been lower following discount schemes and better price transparency,” Mr Sims said.

The ACCC’s quarterly report found that petrol prices in the five largest cities in the June quarter 2016 were 118.0 cpl, an increase of 7.0 cpl from the previous quarter.

Background

Since 2014 the ACCC has collected retail petrol prices for all capital cities and over 190 regional locations across Australia.

The figures above show the components of Australian petrol prices in the five largest cities in 2014–15 and 2015–16. In 2015–16 the relative contribution of ‘other costs and margins’ (which includes both retail and wholesale costs and margins) increased to 17 per cent of the average retail petrol price. While the international price of refined petrol (Mogas 95) remained the largest contributor to the average bowser price, its relative contribution decreased to 42 per cent in 2015–16.

Other findings of the report

Both crude oil prices and international refined petrol prices were at their lowest levels for over 10 years in 2015–16. The decline in crude oil prices from mid-2014 to early-2016 was influenced by weaker international economic conditions, and global oil production significantly exceeding consumption.

Prices in Brisbane continue to be relatively high. In the June quarter 2016 average retail prices in Brisbane were 122.2 cpl, which was 5.2 cpl higher than the other four largest cities. The ACCC has noted in the past that high relative retail prices in Brisbane are likely to reflect inadequate competition at the retail level.

Following the ACCC report into the Darwin petrol market, petrol prices in Darwin have been relatively low. In the June quarter 2016 prices in Darwin were 2.0 cpl lower than those across the five largest cities. This is the lowest quarterly average Darwin price relative to the five largest cities since the March quarter 2000 (the earliest date for which the ACCC has data).

As with petrol prices, diesel and LPG prices were at relatively low levels in 2015–16. The annual average retail diesel price in the five largest cities in 2015–16 was 121.0 cpl, which was 19.4 cpl lower than 2014–15. This was the lowest annual average price since 1998–99 in real terms. The annual average retail LPG price in the five largest in 2015–16 was 64.2 cpl. This was 6.5 cpl lower than 2014–15, and the lowest annual average price since 2004–05 in real terms.

ACCC continues its review of banks’ application for authorisation to collectively bargain with Apple

The Australian Competition and Consumer Commission says it is continuing to assess the applications for authorisation by the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank after deciding not to grant the banks’ request for interim authorisation at this early stage of its assessment process.

The banks wish to engage in collective negotiation and boycott activities with Apple in relation to its e-commerce Apple Pay platform and with other third party wallet providers in Australia.

“The ACCC has considered interim authorisation within a short timeframe at the request of the applicants. However, given the complexity of the issues and the limited time available, the ACCC has decided not to grant interim authorisation at this time. The ACCC requires more time to consult and consider the views of industry, consumers, and other interested parties,” ACCC Chairman Rod Sims said.

In deciding not to grant interim authorisation, the ACCC took into account the potential for continuing effects on competition in the market, the extent of urgency for the request, any possible harm to the applicants or other parties if interim authorisation is granted or denied, and possible public benefits and detriments.

“The entire ACCC authorisation process usually takes up to six months, including the release of a draft decision for consultation before making a final decision. We expect to release a draft decision in October 2016. The ACCC’s decision not to grant interim authorisation at this time is not indicative of whether or not a draft or final authorisation will be granted,” Mr Sims said.

The banks, together with other participating card issuers, are seeking authorisation to collectively negotiate and boycott on a range of issues. One of these issues relates to the banks’ ability to utilise Near Field Communication hardware on Apple devices to enable contactless payments to be made through the banks’ own digital wallets.

A digital wallet is an application that can allow consumers to tap and pay using their phone and can store other information, such as loyalty or membership cards. Other issues for collective negotiations include appropriate industry standards for digital wallets and the banks’ ability to pass on any fees charged by a third party digital wallet provider.

Background

On 26 July 2016, the applicants sought authorisation on behalf of themselves and potentially other credit and debit card issuers to engage in limited collective negotiation with Apple and other providers of third-party mobile wallet services.

The applicants also sought authorisation to enter into a limited form of collective boycott in relation to a third-party mobile wallet provider while collective negotiations with that provider are ongoing.

The applicants sought a decision on interim authorisation within 28 days of lodging their application.

Notes to editors

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010 (Cth). Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment.

About the authorisation process

Where urgent interim authorisation has been requested, the ACCC aims to make a decision on it within 28 days. When granted, the applicants can engage in the conduct while the substantive application is considered by the ACCC.

Generally, the ACCC can grant authorisation if it is satisfied that the public benefit from the conduct outweighs any public detriment, including any lessening of competition.

The statutory period for the assessment of an authorisation is six months (unless extended by a maximum of an additional six months).

The ACCC is required to publish a draft decision (‘determination’) in relation to an application. This is usually 3-4 months after receiving an application.

The ACCC will conduct public consultation with interested parties both before and after a draft determination.

Applicants or interested parties may call a ‘conference’ following a draft determination which is an opportunity for applicants and interested parties to make oral submissions to the ACCC about the draft decision.

The ACCC will generally release its final decision (‘determination’) 5-6 months after receiving an application.

Further information about the applications for authorisation is available on the authorisations register: Bendigo and Adelaide Bank & Ors – Authorisation – A91546 & A91547

Apple rejects banks’ ploy for access to iPhone NFC capabilities

From Computerworld.

Apple says it “strongly urges” the Australian Competition and Consumer Commission (ACCC) to reject an application from three of the four major banks that would see them able to band together in order to negotiate access to the company’s digital wallet system.

Last month the Commonwealth Bank of Australia, National Australia Bank and Westpac, as well as Bendigo and Adelaide Bank, applied to the ACCC for the right to engage in collective negotiations over, and potentially boycott, third-party digital wallets including Apple Pay, Google Pay and Samsung Pay.

One bugbear of the banks outlined in their application is the refusal of Apple to open up access to the iPhone’s NFC antenna in order for third party iOS applications to be used for contactless payments.

So far ANZ is the only one of Australia’s big four banks to strike a deal to offer Apple Pay to its customers. “Apple has struggled to negotiate agreements with the Australian Banks and only recently signed an agreement with ANZ,” Apple said in a response lodged with the ACCC that was first noted by the AFR.

The other banks “based on their limited understanding of the offering… perceive Apple Pay as a competitive threat”, Apple argued.

The goal of the banks banding together “is to force Apple and other third party providers to accept their terms, allow them to charge consumers that choose to use Apple Pay, and force Apple to undermine the security of its mobile payment service by opening access to the NFC antenna, placing at risk the consumer experience of a simple, secure, and private way to make payments in store, within applications or on the web.”

Apple said it could not identify any public benefits that could arise from the banks being authorised to engage in a collective boycott.

The banks’ application to the ACCC notes: “Some issuers in other countries have expressed concern that Apple has not allowed other mobile payment apps to use the iPhone’s NFC payment functionality…”

“Providing simple access to the NFC antenna by banking applications would fundamentally diminish the high level of security Apple aims to have on our devices,” Apple argued in response.

Privatisation is lifting prices and hurting the economy

From SmartCompany.

The privatisation of public assets is “severely damaging” the Australian economy by lifting prices and hampering productivity, according to Australian Competition and Consumer Commission chair Rod Sims.

Speaking at the Melbourne Economic Forum on Tuesday, Sims urged Australian governments to put an end to explicitly trying to maximise proceeds from the sale of public assets, something the competition boss says is causing him to become increasingly “exasperated”.

“I think a sharp uppercut is necessary and that’s why I’m saying: stop the privatisation,” Sims said, according to Fairfax.

It’s a view shared by Peter Strong, chief executive of the Council of Small Business of Australia, who told SmartCompany Sims’ comments are “spot on”.

“Governments need to stop and have a look at what their role is, “ Strong says.

“Privatisation should make markets more efficient.”

Sims said recent sales of government-owned ports and electricity infrastructure, as well as the deregulation of the vocational education sector, has caused him to change his views on the effects of privatisation on the economy.

“I’ve been a very strong advocate of privatisation for probably 30 years; I believe it enhances economy efficiency,” Sims said at the forum.

“I’m now almost at the point of opposing privatisation because it’s been done to boost proceeds, it’s been done to boost asset sales and I think it’s severely damaging our economy.”

Sims told the forum that the privatisation of electricity infrastructure in Queensland and New South Wales has caused consumer prices to almost double over five years.

“When you meet people in the street and they say ‘I don’t want privatisation because it boost prices’ and you dismiss them … recent examples suggest they’re right,” he said.

“The excessive spend on electric poles and wires has damaged our productivity. The higher energy price we’re getting from some gas and electricity policies are damaging some of the our productive sectors.”

Sims also highlighted the privatisation of ports, including Port Botany and Port Kembla in NSW and the Port of Melbourne, which he said has created monopolistic circumstances.

Strong adds the operation of airports to the list of sectors where there is potential for a large, private operators to control the market with little competition.

“An example of why [Sims] is right is the second airport in Sydney,” Strong says, referring to Sydney Airport Corporation, the operator of the Sydney Airport, having the right of first refusal to develop the Western Sydney airport site.

“Where’s the competition?”

Strong says the presence of oligopolies, or markets that are dominated by a small number of firms, can have detrimental effects on small businesses operating in the same space.

While Australian governments have in recent times spoken about the need for innovation in the economy, Strong points to figures from the OECD in 2014 that found Australian SMEs were ranked fifth out of 29 OECD countries in terms of innovation, while large Australian businesses were ranked the 21st most innovative out of 32 OECD nations.

“I believe the reason why big businesses aren’t innovative is because they have no need to be; they have market dominance so there is no motivation,” Strong says.

Consumer Choice and Third-party Mobile Wallets

A group of Australian financial institutions have lodged an application with the Australian Competition and Consumer Commission (ACCC) seeking authorisation to enter joint negotiations with providers of third-party mobile wallets according to NAB. The application cites three digital wallets in particular: Apple Pay, Android Pay and Samsung Pay.

Through joint negotiations, the applicants want to ensure that Australian consumers can make payments easily through their choice of mobile wallet providers, have access to the latest developments in contactless payment technology, and can benefit from common security standards across the mobile payment system.

The applicants believe consumers will benefit if they can choose the best mobile wallet that suits their own needs using their own devices. That way all consumers could have access to new features, apps and technologies developed by the makers of different mobile wallets.

“This is about providing Australians with real choice and better outcomes. If successful, the application would have tremendous benefits for the entire Australian mobile payments landscape including for public transport fares, airlines, ticketing, store loyalty and rewards programs and many more applications yet to be developed,” said Novantas Senior Advisor Lance Blockley, on behalf of the applicants.

The application lodged by Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank and Westpac is subject to authorisation by the ACCC. A notable absence from the list of applicants is ANZ which is the first Australian bank to offer support for Apple Pay.

The application does not request authorisation to enter joint negotiations on the amount of fees or charges, meaning financial institutions are responsible for individually negotiating contractual arrangements with wallet providers. The period of authorisation sought is three years.

Australia is at the forefront of contactless card payments, which have been well accepted by consumers and merchants. The negotiations, if successful, will ensure that consumers and merchants can be confident that Australia has a competitive, innovative and transparent system of mobile payments, including third-party wallets. With major public transport systems in Australia soon to begin trials of open loop contactless payment technology, the time is pressing for consumers to be offered a choice of mobile wallet providers.

If the application is granted, other businesses and institutions can join negotiations if they believe it would benefit their customers.

The application to the ACCC can be accessed here.

Small business concerns continue to rise – ACCC

The ACCC says small business enquiries and complaints to the national competition agency continue to grow, topping more than 7,600 contacts in the first half of 2016.

“We’re continuing to see an increasing number of contacts from the Australian SME sector. These contacts have been particularly concerned about misleading conduct by other firms, consumer guarantees, and agricultural issues,” ACCC Deputy Chairman Dr Michael Schaper said.

The ACCC’s six-monthly Small Business In Focus report #12 has been released today, providing an update on key developments in the small business, franchising, and agriculture sectors.

For the first time, information on the agriculture sector has been included. The ACCC received more than 200 agriculture-related enquiries and complaints, principally focussed on potential misleading conduct or false representations made by other business operators.

Other key developments in the last six months are also highlighted in the report:

there have been more than half a million visits to the ACCC’s business web pages;

the ACCC continues to receive reports of losses to scams targeting small businesses, with $1.6m lost;

new rules for country of origin labelling have commenced (Country of origin food labelling laws);

Coles, Woolworths, and Aldi are now required to comply with the entire Food and Grocery Code

there were more than12,000 users of the ACCC’s online education programs.

“The number of small businesses contacting the ACCC with concerns has risen steadily over the past few years. The current review of the Australian Consumer Law (ACL) provides a valuable opportunity for small business to speak up and ensure that their concerns are taken into account during that process,” Dr Schaper said.

“Concerns about changes to new credit card surcharging laws in September, and new changes to the ACL that will extend protections from unfair contract terms in business-to-business dealings in November are expected to generate significant interest from the Small Business community.”

The ACCC has prepared advice for small business on the new credit card surcharging laws (Excessive payment surcharges) and new Unfair Contract Term protections (Business-to-business unfair contract terms).

Small Business in Focus is available at: Small business in focus – 1 January 2016 to 30 June 2016

ACCC commences inquiry into regulation of wholesale ADSL service

The Australian Competition and Consumer Commission has today commenced a public inquiry into whether the wholesale asymmetrical digital subscriber line (ADSL) service should continue to be regulated.

The ACCC first declared access to the wholesale ADSL service in February 2012. The ACCC is required to review the declaration before it expires in February 2017.

ADSL technologies provide high speed fixed-line broadband services over copper networks. ADSL services are currently the dominant fixed-line broadband technology in Australia.

“A number of changes have occurred since the wholesale ADSL service was first declared in 2012, including the progressive rollout of the National Broadband Network,” ACCC Commissioner Roger Featherston said.

“This inquiry will assist the ACCC in determining whether continued declaration of the wholesale ADSL service is in the long-term interests of end users.”

The discussion paper issued today seeks submissions on a range of issues relevant to the inquiry. Submissions are invited by 29 July 2016. The submissions will inform the ACCC’s decision-making.

The wholesale ADSL service discussion paper is available at wholesale ADSL declaration inquiry 2016 webpage.

The ACCC expects to finalise its decision in early 2017 before the current declaration expires.

Background:

The ACCC can declare a service if it is satisfied that doing so would promote the long-term interests of end users. Once a service is declared, a network owner must provide access to the service upon request and where commercial agreement cannot be reached the ACCC must determine regulated price and non-price terms. Declaration ensures all service providers have access to the infrastructure they need to supply competitive communications services to end-users.

ACCC Warns SME’s of Australian Business Funding Centre “Government grants” website

The Australian Competition and Consumer Commission has issued a Public Warning Notice about the conduct of Australian Business Funding Centre Pty Ltd (also known as Australian Business Financing Centre or ABFC) which operates the website www.australiangovernmentgrants.org.

The ACCC alleges that ABFC website, and its sales representatives, purport to offer access to an online database of the Australian government grants and loans available to small businesses. Small business owners paid fees ranging from $497 to $701 to access the database, only to find there were no suitable grants or that they were ineligible for grants listed.

The Public Warning Notice alleges ABFC has made false or misleading representations about the service’s capability and quality, and the role the service has played in assisting small businesses gain government grant funding.

The website also prominently features a range of “success stories” from actual Australian small businesses, but when those businesses were contacted by the ACCC, they said the stories were used without their permission and that they had not obtained any government funding via ABFC.

“The ACCC is issuing a warning in relation to ABFC’s conduct including its australiangovernmentgrants.org website. We are very concerned that small businesses are paying ABFC for a service that does not provide the information and assistance they are have paid for,” ACCC Acting Chair Dr Michael Schaper said.

“Similar websites targeting small businesses in other countries have also come to the attention of regulatory authorities in New Zealand and Canada.”

“Small businesses should take care when assessing offers to assist them in obtaining government grants. The bottom line is that information relating to government grants is generally available free of charge from a variety of state and federal resources online,” Dr Schaper said.

The ACCC says despite the australiangovernmentgrants.org including an Australian address, it is operated by ABFC’s sole director who is based overseas.

Legitimate information about government grants can be obtained for free at www.business.gov.au and other websites ending with .gov.au.

The Public Warning notice is available here: Australian Business Funding Centre Pty Ltd (also known as Australian Business Finance Centre or ABFC)

ACCC to Commence Excessive Card Surcharge Compliance Role

The Australian Competition and Consumer Commission has said it will begin enforcing the ban on excessive surcharges for large merchants on 1 September 2016.

Earlier today, the Reserve Bank of Australia Payments System Board (PSB) published its Standard which relates to surcharges by merchants when charging customers for the use of a credit or debit card. Surcharges will be excessive where they exceed the permitted cost of acceptance, as defined in the Standard.

“In short, the new provisions will limit the amount businesses can surcharge customers for use of payment methods such as most credit and debit cards. The limit will be linked to the direct costs of the payment method such as bank fees and terminal costs,” ACCC Chairman Rod Sims said.

The Standard defines what businesses are able to include in setting a surcharge and sets out a two-staged implementation, with the ban commencing on 1 September 2016 for ‘large merchants’ and 1 September 2017 for all other merchants.

The Standard defines a ‘large merchant’ to be one that satisfies at least two of the following requirements: it has a consolidated gross revenue of $25 million or more, the value of its consolidated gross assets is $12.5 million or more, or it employs 50 or more employees.

The Standard will apply to six card systems – EFTPOS, Debit MasterCard, MasterCard Credit, Visa Debit, Visa Credit and American Express cards issued by Australian banks.

“The ACCC is finalising online guidance material for consumers and businesses, which will provide further information on the ACCC’s enforcement role, what businesses need to do in order to comply, and how consumers can make complaints if they believe a business has charged a payment surcharge that is excessive,” Mr Sims said.

“We will focus on education and awareness in the early stages but won’t turn a blind eye to possible breaches, particularly for those large businesses clearly on notice of these changes.”

The ban has no effect on businesses that choose not to impose a payment surcharge, such as the many businesses in Australia that incorporate payment system costs into their overall prices.

Material on the RBA’s website provides detailed information for businesses about the Standard, including how businesses can identify and quantify those costs that can be passed on to a consumer as a surcharge.