ACCC’s steely resolve against BlueScope a win for consumers

Steelmaking at Port Kembla.

Australian steel consumers have scored a significant victory after decades of strongarm tactics from the steel monopoly inflating downstream prices, with the Federal Court backing Australian Competition and Consumer Commission claims that BlueScope had attempted to induce price-fixing agreements.

The letter of the law is more specific, but the reality is that by using Australian dumping controls (and threats to use them) to limit imports, BlueScope – dating back to its days as BHP Steel and before that as John Lysaght – attempted to control the market and, in the process, damn downstream users to higher prices.

This was backed by market controls over how much steel independent distributors can import before losing access to BlueScope product.

Friday’s decision should serve as a warning to Australian companies that even attempting to fix prices has serious legal consequences, not to mention the widespread damage to the rest of the economy from blatant market manipulation.

The ACCC was not so successful in the Google decision, handed down on Friday by Justice David Yates. He ruled that Google did not mislead consumers in its privacy policy changes after its DoubleClick acquisition.

The ACCC had said Google misled Australian consumers in obtaining their consent to expand the scope of personal information that Google could collect and combine with consumers’ internet activity for use in targeted advertising, among other things.

It alleged Google used newly combined information from its existing search engine with data from DoubleClick to improve the commercial performance of its advertising businesses.

This, it said, was done without proper consent after the deletion of opt-in privacy clauses in the use of DoubleClick.

Justice Yates rejected the argument, saying: “To be clear, the evidence is that, before the June 2016 Privacy Update, Google did not associate DoubleClick cookie information with personally identifiable information in account holders’ Google accounts.”

The decision is a blow to the ACCC, which was expecting to win the consumer protection action. It will no doubt harden its push for so-called ex ante – or before the event – legislation to control the digital platforms.

Justice Michael O'Bryan. Illustration: Sturt Krygsman

Still, the BlueScope decision by Justice Michael O’Bryan is an important win for the ACCC. While potentially subject to appeal, it sets an important milestone to be used against other dominant suppliers in the Australian market.

The case concerned attempts to fix prices, not actual agreements, which raises some uncertainty. But it is important for the ACCC to take such actions to lessen the consequences of actual agreements. In a statement, ACCC enforcement chief Liza Carver said: “If successful, these attempts would have resulted in agreements between competitors which reduced price competition in the Australian flat steel market and increased prices for flat steel products which are widely used in Australia.”

BlueScope was attempting to induce importers and distributors to adopt a suggested list price or face dumping complaints.

BHP steel offshoots BlueScope and InfraBuild account for 83 per cent of all dumping cases and 71 per cent of import duties in place.

The two companies have exploited the rules against unfair trading even though at times they are caught in the crossfire – with InfraBuild, then trading as steel long products company OneSteel, one of distributors shown the suggested BlueScope price lists.

BlueScope has also paid duty on imports from its own mill in Vietnam, imposed because of its own dumping complaints.

Separately, steel some importers are also celebrating a recent change in dumping administration to drop the floor price levels below which duty is paid.

The Australian Steel Association (ASA) had argued that, with market prices due to fall in coming months, a set floor price would hurt industry.

Ironically, next week the ACCC has a scheduled education session with the ASA on the operation of the competition law.

The key legal issue included the level of intent and whether it can be found to breach the law, with no agreements.

Justice O’Bryan said: “In my view a person may be found to have attempted to induce a counterparty to reach a price-fixing understanding notwithstanding that the person never expressly asked the counterparty for a commitment with respect to the counterparty’s prices.”

BlueScope argued for a narrow definition, which in Justice O’Bryan’s view “has the effect of substituting the word ‘commitment’ in place of the word ‘understanding’ in the Act.”

“The parties have, by words or conduct, aroused an expectation in each that they will conduct themselves in accordance with the subject matter of the arrangement or understanding,” he added.

An implicit agreement suffices.

His 453-page judgment, which was handed down on Friday – some 13 months after the last day of hearings – was bound by the facts of the case.

This, added to Justice O’Bryan’s own reputation as one of the standout competition lawyers in the country, makes the expected appeal a difficult task.

The case was against BlueScope and then executive Jason Ellis, who is the son of former BHP chair Jerry Ellis and at the time (2013-14) reported to present BlueScope boss Mark Vassella.

Vassella in turn reported to now Commonwealth Bank chair Paul O’Malley.

Justice O’Bryan said Vassella was well briefed on Ellis’s strategy but noted “the evidence does not support the further finding that Mr Vassella was aware that, as part of the benchmarking strategy, BlueScope was attempting to induce distributors, or Wright Steel, to reach a price fixing understanding with BlueScope in relation to their prices. “

This effectively clears Vassella but underlines the sometimes thin line between strongarm tactics and breaching the law.

Justice O’Bryan said “the evidence concerning Mr Vassella’s knowledge was sparse”, but noted “Mr Ellis gave evidence in relation to the presentation on April 14, 2014, which I accept, that Mr Vassella was aware of the benchmarking strategy and that Mr Ellis had explained to Mr Vassella what the benchmarking strategy was. Mr Ellis also sought Mr Vassella’s approval to discuss anti-dumping and Mr Vassella gave his approval.”

Ellis has already been convicted for “inciting the obstruction of an ACCC investigation, as a result of his conduct encouraging two other BlueScope employees to give false information and evidence to the ACCC during its investigation of the cartel conduct”.

Justice O’Bryan said: “From the totality of the evidence given by Mr Ellis in the proceeding, I formed the impression that Mr Ellis was an unreliable, unsatisfactory and, in some respects, dishonest witness.”

Success in the case vindicates former ACCC chief Rod Sims, who decided to take the action at a time when the regulator’s competition case record was mixed.

It also vindicates steel importers and distributors like Griff Wright, who took the complaint to the ACCC in the first place after being approached by BlueScope.

Justice O’Bryan noted: “BlueScope’s proposal, whatever its ultimate characterisation under the Act, was rebuffed because the counterparties believed that the proposal would or might involve a contravention of the law. In other instances, the proposal was ignored because the competitive pressure from imported steel made BlueScope’s proposal commercially unviable,” he added.

At the time steel prices were low in the wake of the GFC.