CHAIR—The hearing will resume and we now turn to the examination of Treasury estimates. The first Treasury agency is the Australian Competition and Consumer Commission. I welcome to the table Mr Samuel and officers of the commission. Mr Samuel, do you have an opening statement?

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Mr Samuel—I would not disappoint you! I am going to focus my opening remarks on two areas: the first will relate to the commission’s recent enforcement and court actions and the process of enforcement, and then I want to provide some comments on the developments that have taken place in more recent times in our assessment of merger proposals.

Since the ACCC’s last appearance before the committee, our 2005-06 annual report has been tabled. There are some interesting statistics in that in the context of our enforcement activities. What they demonstrate is that there has been an increase in the number of activities that we are actively resolving—that is, enforcement issues that are being resolved—and at the same time there is a significant increase in the focus on resolving matters by the use of Trade Practices Act section 87B court-enforceable undertakings as distinct from litigation.

There are currently 34 matters before the courts, including one matter before the High Court that relates to Baxter Healthcare. In 2005-06—so, the financial year ended—a total of 68 enforcement matters were resolved where action was taken through either court action or a section 87B undertaking. In terms of litigation, the number of court matters where litigation was instituted numbered 14, and the number of 87B undertakings accepted was 54. Eighty-seven per cent of all those matters related to part V of the TPA, and of course the balance of them, 13 per cent, were part IV matters. Those statistics on the surface actually do not paint any picture at all. They simply provide a snapshot of what has occurred through the 2005-06 year.

Just to give you an example, in the first quarter—or, indeed, to date—of the 2006-07 year, there are a total of 26 enforcement matters which have been resolved either through court action or through section 87B undertakings. That is 26 for the first three or four months of this year as distinct from 68 for the whole of last year. In litigation terms we have instituted seven court proceedings, which is 50 per cent of the total number of litigation proceedings instituted last year, and undertakings amount to 19. Eighty-one per cent of the matters where action has been taken in the current year were TPA part V matters.

Let me give you what we call our ‘funnel numbers’, that is the funnel from matters, calls and emails being received from the infocentre through to, if you like, resolution through litigation, that is commencement litigation or undertakings. In the 2005-06 year, there were 75,319 calls and emails received by the infocentre. That is probably one of the highest levels of recent times. Of those, 47,112 matters were entered into our TrackIt system. The balance of the matters is normally resolved very quickly through the initial phone call that has been received in the infocentre. On many occasions they will not be matters that are to be dealt with by the ACCC but they are referred to other agencies or other organisations that may be better suited to deal with the matters. Of these matters, 4,292 were the subject of initial investigations, 160 were the subject of in-depth investigations and then, as I mentioned before, 14 were the subject of first instance litigation and 54 were the subject of undertakings.

We have dealt quite effectively in the administrative manner with a number of matters that had some quite widespread issues concerning consumers. Let me just give a couple of examples and they will perhaps paint a picture as to why we are focused on dealing with matters either administratively or by means of undertakings. Many of you will be aware that BP Australia joined, what I may call, ‘shopper docket’ schemes just recently and provided a promotion which used signage above some roadside petrol price displays at their service stations. The signage contained large lettering noting the five per cent off petrol and five per cent off everything offer. It indicated at the foot of the signage that certain conditions applied. These included that consumers must obtain a BP Citibank Mastercard before being entitled to the discounts. We at the commission were concerned about the small size of the print that referred to the terms and conditions. The matter was raised with BP at the highest of levels. They responded promptly and adopted a larger font in their advertisement to ensure consumers are not confused. That was an administrative settlement that had widespread significance to consumers around Australia that may have been confused by the lettering and the advertising that appeared on their board displays.

Then there are real or true tone operators, that is, those who are offering so-called true tones for mobile phones. We have become aware that a large number of traders are marketing what they call real or true tones in a way that may mislead consumers into believing they are buying a ring tone of their favourite artist singing, but they are really downloading a cover version performed by unknown or sound-alike artists. In most cases the conduct of concern involved the use of well-known artists’ names and/or images next to the song titles. Without an effective disclaimer we believe that such conduct is likely to lead consumers to conclude that the name or the pictured artist performed the ring tone song. We wrote to the operators of more than 20 sites, both locally and internationally including Europe and the United Kingdom, to advise them of our concerns and placed them on notice, and in most cases the matter was rectified very quickly.

Just to give some statistical information: our past three annual reports have shown that in the 2003-04 year we concluded 52 court cases—that is the litigation is concluded—in 2004-05 there were 39; and in 2005-06 there were 23. The litigation continuing at the end of the year in 2003-04 was 43; in 2004-05 it was 26; in 2005-06 it was 30; and in terms of undertakings accepted, in 2003-04 there were 33, in 2004-05 there was a big jump to 55, and then in 2005-06 there were 54.

It is clear that there has been a shift in the composition of our enforcement outcomes. We are accepting more section 87B undertakings than perhaps was the case in the past. There are very good reasons for this and perhaps I should explain what they are. The use of 87B undertakings often leads to a more efficient and timely outcome for consumers when the outcome is broadly the same as could be achieved through litigation. Our guiding benchmark is that if we are going to accept 87B undertakings we want to achieve at least as much as we would otherwise be able to achieve through litigation, and in many instances we can achieve more. Most importantly, we can achieve it in a timely fashion, which we are finding difficult to achieve through the court process, and I will have more to say about that in a couple of moments.

Secondly, the Medibank Private decision, which we have discussed previously in Senate estimates hearings, means that the ACCC cannot obtain refunds for consumers who have been damaged particularly in relation to part 5 consumer protection matters through court based outcomes unless we take a representative action, and the process for doing that is very complex indeed.

The result of our use of 87B undertakings is that we can, through quickly resolving matters, reduce the extent of consumer harm or detriment. There has been a fundamental cultural shift within the organisation in terms o