ACCC Electricity report details affordability, competition issues

We know from our surveys that many households are under intense pressure thanks to rising costings of living and flat wages. Higher electricity prices are one of the main causes.

Now the ACCC has published a preliminary report into the electricity market highlighting significant concerns about the operation of the National Electricity Market, which is leading to serious problems with affordability for consumers and businesses. They say residential prices have increased by 63 per cent on top of inflation since 2007-08. The main reason customers’ electricity bills have gone up is due to higher network costs. Higher wholesale costs during 2016-17 contributed to a smaller $167 increase in bills.

Consumers and businesses are faced with a multitude of complex offers that cannot be compared easily. Many of these issues arise from unnecessarily complex and confusing behaviour by electricity retailers.

This suggests the current Government focus on supply related issues is myopic, and this alone cannot solve the issues in the system, many of which are simply stemming from poor company behaviour.  And, by the way, this mirrors the issues in the UK, where similar behaviour also exists!

The Retail Electricity Pricing Inquiry preliminary report details the ACCC’s initial assessment of information it has gathered including documents and data from industry, consumers, businesses, representative groups and other government and non-government organisations.

The inquiry received over 150 submissions since it began in April. The ACCC heard directly from consumers, businesses and other stakeholders at public forums in Adelaide, Brisbane, Melbourne, Sydney, and Townsville.

“It’s no great secret that Australia has an electricity affordability problem. What’s clear from our report is that price increases over the past ten years are putting Australian businesses and consumers under unacceptable pressure,” ACCC Chairman Rod Sims said.

“Consumers have been faced with increasing pressures to their household budgets as electricity prices have skyrocketed in recent years. Residential prices have increased by 63 per cent on top of inflation since 2007-08.”

The main cause of higher customer bills was the significant increase in network costs for all states other than South Australia. In South Australia, generation costs represented the highest increase. There was a much larger increase in the effect of retail costs in Victoria than in other states. Retail margins increased significantly in NSW, but decreased in others.

“The main reason customers’ electricity bills have gone up is due to higher network costs, a fact which is not widely recognised. To a lesser extent, increasing green costs and retailer costs also contributed,” Mr Sims said.

“We estimate that higher wholesale costs during 2016-17 contributed to a $167 increase in bills. The wholesale (generation) market is highly concentrated and this is likely to be contributing to higher wholesale electricity prices,” Mr Sims said.

The ACCC estimates that in 2016-17, Queenslanders will be paying the most for their electricity, followed by South Australians and people living in NSW. Victorians will have the lowest electricity bills. This is due to a range of factors including usage patterns in various states, including the prevalence of gas usage in Victoria in particular.

The closure of large baseload coal generation plants has seen gas-powered generation becoming the marginal source of generation more frequently, particularly in South Australia. Higher gas prices have contributed to increasing electricity prices.

The ‘big three’ vertically integrated gentailers, AGL, Origin, and EnergyAustralia, continue to hold large retail market shares in most regions, and control in excess of 60 per cent of generation capacity in NSW, South Australia, and Victoria making it difficult for smaller retailers to compete.

The ACCC has heard many examples of the difficulties that consumers and small businesses face in engaging with the retail electricity market and the particular difficulties faced by vulnerable consumers.

“Consumers and businesses are faced with a multitude of complex offers that cannot be compared easily. There is little awareness of the tools available to help consumers make informed choices or seek assistance if they are struggling to pay their electricity bills,” Mr Sims said.

“Many of these issues arise from unnecessarily complex and confusing behaviour by electricity retailers, and in some cases this appears to be designed to circumvent existing regulation.”

“There is much ill-informed commentary about the drivers of Australia’s electricity affordability problem. The ACCC believes you cannot address the problem unless you have a clear idea about what caused it.”

“Armed with the clear findings on the causes of the problem, the ACCC will now focus on making recommendations that will improve electricity affordability across the National Electricity Market,” Mr Sims said.

Increased generation capacity (particularly from non-vertically integrated generators), preventing further consolidation of existing generation assets, and improving the availability and affordability of gas for gas fired generation, could all help to take the pressure off retail electricity bills.

The ACCC will also seek to identify ways to mitigate the effect of past decisions around network investments on retail electricity prices, noting that many past decisions  are ‘locked-in’ and will burden electricity users for many years to come.

The ACCC will consider steps that can be taken to reduce complexity and improve consumers’ ability to engage with the retail electricity market and switch suppliers.

“We will provide recommendations for reform in our final report, which will be provided to the Treasurer in June 2018,” Mr Sims said.

In part based on our findings, the Federal Government has already taken some steps towards improving electricity affordability, including obtaining commitments from some retailers to move consumers off high standing offers or expired benefit offers, and the proposed removal of limited merits review of AER decisions.

In addition, the ACCC’s preliminary report contains some recommendations that could be immediately implemented by governments:

  • Provide additional resourcing to the AER’s Energy Made Easy price comparison website as a tool to assist consumers in comparing energy offers
  • State and territory governments should review concessions policy to ensure that consumers are aware of their entitlements and that concessions are well targeted and structured to benefit those most in need.
  • Improvements to the AER’s ability to effectively investigate possible breaches of existing regulation, for example the power to require individuals to appear before it and give evidence. Consideration should also be given to the adequacy of existing infringement notices and civil pecuniary penalties to deter market participants from breaching existing regulations.



The ACCC’s preliminary findings are that, on average across the NEM, a 2015-16 residential bill was $1,524 (excluding GST). This average residential bill was made up of:

  • network costs (48 per cent)
  • wholesale costs (22 per cent)
  • environmental costs (7 per cent)
  • retail and other costs (16 per cent)
  • retail margins (8 per cent).

In real terms, average residential bills increased by around 30 per cent (on a dollars per customer basis) between 2007-08 and 2015-16. Average residential prices (as measured by cents per kWh measure) have increased by 47 per cent in real terms during the same period.

After considering wholesale price increases in 2016-17, the ACCC estimates that average bills in dollars per customer increased in real terms by 44 per cent since 2007-08, while prices in cents per kWh have increased in real terms by 63 per cent.

See report: Retail Electricity Pricing Inquiry preliminary report

For more information: Electricity supply prices inquiry

Card Surcharge Changes Started

ACCC says that from tomorrow, every business across Australia will be banned from charging customers excessive surcharges for using certain types of EFTPOS, Mastercard, Visa and American Express cards to make payments.

The excessive surcharging ban has applied to large businesses since September last year and now extends to all businesses that are either based in Australia or use an Australian bank. The ban does not affect businesses that choose not to apply a surcharge to payments.

The ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

Payment types that are not covered by the ban include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

“The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs. For example, if a business’s cost of acceptance for Visa Credit is 1.5 per cent, consumers can only be charged a surcharge of 1.5 per cent on payments made using a Visa credit card,” ACCC Deputy Chair Dr Michael Schaper said.

“Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider.”

If businesses want to set a single surcharge across multiple payment methods, the surcharge must be set at the level of the lowest cost method, not an average. For example, if a business’s cost of acceptance for Visa Debit is 1 per cent, for Visa Credit is 1.5 per cent, and for American Express is 2.5 per cent, the single surcharge would be 1 per cent as that is the lowest of all payment methods.

“Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods. You can’t use an average of all payment methods or you will land yourself in trouble,” Dr Schaper said.

Businesses should have received merchant statements from their financial institutions in July setting out their cost of acceptance for each payment method.

The RBA indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5 per cent, by credit card 1-1.5 per cent and for American Express cards around 2-3 per cent. The ACCC has found that some merchants have incurred higher costs than these but any surcharge level imposed by merchants cannot be higher than the costs incurred by them for accepting that payment method.

“If businesses are unsure about their cost of acceptance, they should contact their financial institutions,” Dr Schaper said.

Beware high risk, no reward investment scams

A timely reminder from the ACCC.

The ACCC is warning the community to watch out for investment scammers who promise the world but leave their victims with broken dreams and empty bank accounts.

“In the first half of 2017, Australians have reported losing over $13 million to investment scams to the ACCC’s Scamwatch website, making it the most profitable of all the current scams. It is likely that losses are much higher as many victims do not report scams or contact other authorities,” ACCC Deputy Chair Delia Rickard said.

Men are almost twice as likely to be targeted by investment scams and lose significantly more money than women. People aged 45 to 64 most commonly fall victim.

“These scams typically start with a phone call out of the blue. The scammers are sophisticated, convincing and persistent, which is why we sadly see people lose large amounts of money to them. They are also delivered through unsolicited emails, online forums and social media,” Ms Rickard said.

“Scammers use high pressure tactics to sell you a financial opportunity that is ‘not to be missed’, involves high and quick returns for low risks, and needs to be acted on quickly or you will miss out.”

“Whatever your motive is for the investments you make, do your research and never invest money with someone who has contacted you out of the blue, no matter who they say they are, how much money they promise you or the urgency with which they’re trying to make you act. They seem too good to be true because they are,” Ms Rickard said.

Common investment scams:

  • Unsolicited phone calls & emails offering investment opportunities with high returns. They can involve multiple calls, with multiple people who speak in investment jargon and provide you with access to professional looking websites and documents. Your initial investment may seem to show promising results quickly but soon your money and the scammer disappear and you have lost everything.
  • Unsolicited calls from scammers offering to roll your superannuation funds into a self-managed fund that will help you reduce your tax and provide great investment opportunities. In reality they are just stealing your superannuation funds.
  • Binary options trading that involve predicting the movements of commodity, asset or index prices over a short time. If you agree they direct you to a website with a login, account details and a trading platform. They appear to put your money into the account and demonstrate a number of successful trades to encourage you to invest greater sums. Then your money begins to disappear and so too does the scammer.

Protect yourself:

  • Hang up or hit delete on all cold calls and emails offering unsolicited advice on investing.
  • Visit the Australian Securities and Investments Commission’s MoneySmart (link is external) website to check companies you shouldn’t deal with and ASIC’s professional registers to see if someone you are dealing with has an Australian Financial Services License.
  • Block the scammer on your social media accounts so they can’t contact your family and friends.
  • Conduct thorough research before making any investment.
  • Never commit to any investment at a seminar – always get independent financial advice.

Businesses lost an average of $10,000 to scams in 2016 – ACCC

Nearly 6000 businesses reported being targeted by scams in 2016 according to the Australian Competition and Consumer Commission’s Targeting Scams report, with losses totalling around $3.8 million, an increase of almost 31 per cent.

The highest losses were to computer hacking, fake investment schemes and buying and selling scams, according to reports made to Scamwatch over the past year.

“As recent events with the WannaCry ransomware scam demonstrates, businesses can be just as vulnerable to scams as anyone else in the community,” ACCC Deputy Chair Dr Michael Schaper said.

“Unfortunately ransomware scams like WannaCry targeting businesses are not uncommon – we’re seeing steep increases in scammers contacting businesses to swindle them out of their money with varying types of scams. Small businesses with fewer than 20 staff are in particular the most vulnerable to scammers and accounted for nearly 60 per cent of reported losses.”

“The vast majority (85 per cent) of scammers make contact with businesses via email or phone, so it’s important for any business to be aware that these scams are out there in the community and to scrutinise any requests they receive for payment or sensitive information,” Dr Schaper said.

Scamwatch reports the top three scams business should be aware of are:

  • Ransomware – these scams trick a victim into downloading a virus that infects computer systems and prevents user access until payment is made to unlock it. In 2016, reports indicate that there was an increase in ransomware emails to businesses, purportedly from legitimate companies such as Australia Post or a utility provider.
  • Business email compromise scams – these are a form of hacking scam that operate by the scammer obtaining access to a business’ email address. The scammer will then send an email (purportedly from senior management) to the business’ suppliers advising of new payment arrangements and requesting a wire transfer to the new account.
  • Investment scams – these scams are promoted as business opportunities (for example sports investment or stock broker scams, superannuation schemes or managed funds) and promise inflated returns but are, in reality, nothing more than a method used to drain a business of its funds.

“Attacks on businesses where scammers try to trick, deceive or manipulate businesses into sending money or divulging confidential information continue to increase in both frequency and sophistication,” Dr Schaper said.

“These scams often result in one-off losses that a business can recover from. However, hacking, malware and targeted phishing now present significant financial and reputational risks to business.”

Protect your business

There are practical steps all businesses can take to protect themselves from scams:

  • always scrutinise new requests for any payment and have a clearly defined process for verifying and paying accounts and invoices.
  • regularly back-up your computer’s data on a separate hard drive so this can be easily re-installed if your computer is infected by malware or ransomware.
  • ensure your computer has a firewall and up-to-date anti-virus and anti-spyware software

ACCC To Inquire Into Residential Mortgage Pricing

In the budget, the liabilities levy as we reported will create a 5% problem for the banks in terms of earnings, and as a result they will likely seek to recover these costs by repricing.

However the budget statement also said:

To facilitate the introduction of the levy, the Australian Competition and Consumer Commission (ACCC) will undertake a residential mortgage pricing inquiry until 30 June 2018.

As part of this inquiry, the ACCC will be able to require relevant ADIs to explain changes or proposed changes to residential mortgage pricing, including changes to fees, charges, or interest rates by those ADIs.

So something of a cat and mouse game, as lenders continue to adjust mortgage pricing thanks to changing capital weights, risks and funding.

Or you could look at it as a signal of market failure, insufficient competition requiring additional regulatory intervention. It is an acknowledgement of the market power of the big players!

The Free Market And Competition

Rod Sims, ACCC Chairman spoke at the Competition Law Conference 2017.

He argued that competition law and the work of the ACCC is essential to maintaining faith in Australia’s free market system. He also highlights that penalties actually imposed here in Australia are stunningly lower than those in other comparable jurisdictions.

It is an important time to be talking about competition. Competition law and policy are essential underpinnings of our free market economy. We are, however, in the midst of a crisis of faith in free markets which should, and I know does, worry us all. Today I want to make four points, as follows.

  • First, I will briefly outline the loss of faith in the free markets and why this should concern us all
  • Second, I will briefly discuss how some prominent economists have seen the role of competition policy and law in our market economy through time, and today
  • Third, I will explain why effective enforcement of the Competition and Consumer Act (CCA) is so important to people having faith in free markets, and
  • Fourth, I will suggest how we can improve the effectiveness of the CCA, particularly through higher penalties for competition law breaches.

Of specific interest was his comments on the low typical fines imposed on corporates, such that there may be little financial incentive to do the right thing.

The ACCC is very concerned that penalties imposed by Australian Courts in both competition and consumer cases historically have not been sufficiently high to deter contraventions, particularly in cases involving larger businesses.

On the consumer side, the ACCC strongly welcomes the current Australian Consumer Law Review. This review acknowledges that the maximum penalties for breaches of consumer law are inadequate. They are too low to provide a powerful deterrent effect, and this is particularly the case for breaches by large corporate players that are unlikely to be deterred by a maximum penalty of $1.1 million per contravention.

The ACL Review recommends that the ACL penalties be comparable to competition law penalties that also operate across the economy. There appears to be no policy reason for the maximum penalties under the ACL being lower than those available for breaches of competition laws.

As one example, we were pleased late last year when Nurofen maker, Reckitt Benckiser, had its penalty increased by the appeal court from $1.75 million to $6 million, after it was found that the original penalty could not be viewed as substantial or as achieving deterrence.

The Court held that the penalty imposed by the first instance judge of $1.75 million was “manifestly inadequate”, and that a penalty at that level “would reinforce a view that the price to be paid for the contraventions was an acceptable business strategy, and was no more than a cost of doing business.”

Perhaps had competition law penalties been available to the court we could have seen a penalty many times higher than the amount awarded to act as specific deterrents to large, multinational companies such as Reckitt Benckiser.

I suggest, although we have no way of knowing, that the vast majority of Australians would consider a $60 million penalty more appropriate as a specific deterrent for Reckitt Benckiser, which is a large multinational company.

Turning now to competition law, we have a very different story. The penalties available in Australia are broadly in line with international trends. However, penalties actually imposed here in Australia are stunningly lower than those in other comparable jurisdictions.

The key reason for this is that Australian competition law penalties were only brought into line with those overseas in 2009. From that date Australian courts now have been able to impose penalties of up to 10% of turnover where, as is usual, the benefits obtained from the illegal activity cannot be calculated.

For a company that, say, has an Australian turnover of $1 billion, the maximum penalty per contravention can now be $100 million, rather than $10 million as it was before this change was introduced in 2009.

While we are only now encountering cases where the relevant behavior occurred post 2009, the Parliament has clearly spoken. It now wants higher competition penalties as, I suspect, does the average Australian.

As with the Nurofen case in consumer law, the courts also seem to be focusing on the level of deterrence required. In his judgment on our proceedings against ANZ Bank and Macquarie Bank last December, Justice Wigney expressed reservations about the amount of the penalty that was by agreement jointly submitted to the court.

He said that the penalties were “at the very bottom of the range of agreed penalties” and that he would have ordered a much higher penalty had there been no agreed penalty. He also said:

“A very sizable penalty is plainly required to deter a financial institution of the size of ANZ from engaging in such conduct again. Equally, a very sizeable penalty is required to deter institutions in positions similar to ANZ who might be tempted to engage in similar contravening conduct”.

Clearly the size of the company does matter when having regard to the level of penalty required to achieve specific and general deterrence.

The ACCC has been for some time giving this issue careful thought. In particular we have had regard to the way in which other countries quantify their penalties in order to achieve deterrence.

In December 2016, for example, Australia participated in a Global Forum on competition hosted by the OECD. A key issue discussed was sanctions in competition cases. The research revealed that most other OECD jurisdictions, including the US, UK and the EU have very transparent methodologies for determining penalties.

In the United States, Europe and the UK the methodology used to determine penalties includes the calculation of a ‘base fine’. This is usually done by reference to a set percentage (between 10% and 30%) of the relevant turnover of the business being penalised. The turnover figure is often the turnover of the firm in the jurisdiction concerned but sometimes it is the relevant global turnover of the firm.

Commonly once the base fine is calculated, it is increased having regard to duration of the conduct and numbers of contraventions, and other aggravating factors. Mitigating factors are then applied which reduce the fine before a final figure is determined.

An important difference between our approach and that of other overseas jurisdictions is that our Courts do not start the exercise of determining penalties by calculating a base figure calculated by reference to turnover of the firm.

If the base penalty approach was applied in Australia, firms with smaller turnover might end up with similar fines to those currently imposed, but importantly firms with substantially larger turnovers would generally end up with much higher penalties.

As an example, Professor Caron Beaton-Wells of the University of Melbourne has used the USA methodology to calculate that in the Visy case, instead of the penalty of $33m imposed then by the Court, the starting figure would have been $212 million, with potential to increase above that level. Under the EC’s 2006 Guidelines, Visy’s base figure would have been even higher.

In the ACCC’s view, penalties imposed under the CCA need to be many times higher than they are now to have a sufficient deterrent effect on larger firms. The current ACL Review has recommended such higher penalties for consumer law breaches; and we, the ACCC, must work with the courts to give effect to Parliament’s clear intention of a step change in penalties for competition law breaches by larger companies.

Apple Pay may have won the battle but it may not win the war

From The Conversation.

The Australian Competition and Consumer Commission’s (ACCC) decision to deny some of Australia’s major banks the ability to collectively bargain with Apple and boycott Apple Pay, might have opened a whole new door for digital wallets in Australia.

The banks wanted to bargain with Apple for access to the Near-Field Communication controller in iPhones, enabling them to offer their own integrated digital wallets to iPhone customers. This would have been in competition with Apple’s digital wallet, but without using Apple Pay.

A digital wallet is essentially an app on a mobile phone that can provide some of the same functions as a physical purse or wallet. This includes making payments in-store and storing information such as loyalty program points.

In the example of Apple Pay, it used a digital wallet to allow customers to use their phones like “tap-and-go” bank cards. Mobile payments can also be made via wearable devices, such as the Apple Watch and various fitness devices.

Part of the ACCC’s rationale in deciding on the banks/Apple case was that, “digital wallets and mobile payments are in their infancy and subject to rapid change”. So the ACCC is uncertain as to how competition will develop in this space.

The Australian market for digital wallets

Recent research from the Reserve Bank of Australia (RBA) confirmed the use of mobile payments accounted for only around 1% of the number of point-of-sale transactions over the week of the survey, which was conducted in November 2016. By contrast, the same research revealed that the share of the number of payments made using credit and debit cards had increased to 52%, driven by the use of these payments cards for lower value transactions.

This has been facilitated by the rapid adoption of contactless payments by both consumers and merchants and according to the RBA’s research, in 2016 around one-third of all point-of-sale transactions were conducted using contactless cards.

According to the Australian Payments Clearing Association by 2016, 77% of Australians owned a smartphone and yet mobile payments at the point-of-sale remain relatively rare.

The very success of contactless payment cards in Australia means that consumers do not see what extra advantage there is in mobile payments. Tap-and-go is increasingly available for even relatively low value transactions at the point-of-sale. Financial institutions have been speedy to issue such cards to their customers and this is matched by merchant’s adoption of the terminals to facilitate these payments.

For mobile payments to become significantly more attractive than contactless card payments, it would require the wallets to have additional functionality to appeal to consumers. Examples of this include: the ability to use mobile payment devices on mass transit journeys, to hold loyalty program points, to verify identity and enabling person-to-person transactions.

This breakthrough in functionality for digital wallets could come from another direction, other than the current mobile payments options of Apple Pay, Android Pay and Samsung Pay. Indeed, China provides an alternative example of how digital wallets can be developed, that will in retrospect make the ACCC’s decision on Apple Pay, rather passe.

Tap-and-go payments are popular in Australia so digital wallets will have to offer more than contactless payments. David Crosling

Digital wallet companies expanding from China

According to Chinese government statistics, about 750 million Chinese had moved online by 2016, with 95% of them accessing the internet via their smartphones. China’s digital payments market was by then nearly 50 times greater than that in the United States.

This is partly explained by the lack of other viable alternatives in China for non-cash payments. Credit card penetration is low compared to other developed markets, debit cards are not contactless and hence require authentication at the point-of-sale.

China appears to have jumped directly from cash to mobile payments and hence missed the step into payment cards, particularly credit cards, to which the Chinese consumers appear to have a cultural aversion.

The use of digital wallets in China is being driven by the success of the so-called financial technology firms in China, particularly Alibaba and Tencent. These companies have a vast and protected domestic market at their disposal and an almost complete absence of data regulations.

These companies have been able to move on from offering just instant messaging platforms, to being payment providers via Alipay and WeChatPay, respectively. These apps on a smartphone allows consumers to scan a QR code from a merchants point-of-sale terminal or smartphone, to complete a transaction.

Person-to-person transfers can also be done through these apps. Chinese company Tencent’s WeChat was originally a social media platform, but it has now expanded to include payments services, music streaming, taxi booking, photo sharing and a news service, to name only a few functions.

Its over 800 million worldwide active users now have fewer and fewer reasons to leave its integrated full platform of services. WeChatPay is also increasingly accepted by bricks and mortar merchants in China.

And now WeChat is planning to expand its services into the UK and Europe and is also looking to enter markets in the United States and Southeast Asia. Part of the company’s planned expansion is driven by the ever-increasing flow of Chinese overseas tourists.

This flow was 120 million in 2015 and forecast to be 220 million by 2025. Australia is already a popular destination for Chinese tourists, many of whom will be users of WeChatPay.

Who is to say that Facebook and/or Amazon will not follow Tencent’s path into digital wallets? While Apple Pay may have won the battle against some of Australia’s banks, it may lose the war against the providers of digital wallets, such as Tencent and Alibaba.

Author: Steve Worthington, Adjunct Professor, Swinburne University of Technology

Citibank refunds $5 million in credit card international transaction fees

ASIC says Citigroup Pty Limited (Citibank) has refunded approximately $5 million to around 230,000 customers, for failing to properly disclose that credit card international transaction fees apply to Australian dollar transactions where the merchant uses an entity based overseas to process its transactions.

In early 2016, Citibank began charging international transaction fees for Australian dollar transactions made with merchants located overseas or where the merchant uses a foreign bank or entity to process transactions. This applied to Citibank-branded and white-labelled credit cards, including Virgin Money, Bank of Queensland and Suncorp Bank cards. While Citibank amended its disclosure about the changes to the fees, it failed to properly disclose that Australian dollar transactions processed by an entity outside Australia attracted the fees.

This may have led customers to believe that international transaction fees would be charged only when a transaction was made in a foreign currency or with an overseas merchant. For Citibank-issued credit cards, Australian dollar transactions with an Australian website where the merchant uses a foreign bank or entity to process transactions – attract international transaction fees.

Citibank has identified impacted customers of Citibank-branded and Citibank partner-branded credit cards, and has refunded customers with the amount of the fee charged plus interest. Citibank has also updated its disclosure to clearly state that Australian dollar transactions – where the merchant uses a foreign bank or entity to process transactions – will also attract international transaction fees.

Citibank will also refund over $48,000 to 30,174 Virgin Money credit card customers for charging an incorrect percentage amount of the international transaction fee. This error resulted in customers being overcharged by 0.1% of the transaction value.

This follows similar concerns with Westpac’s credit cards, which resulted in 820,000 customers being refunded approximately $20 million in September 2016.

ASIC Deputy Chairman Peter Kell said, ‘Financial product issuers must take care to provide clear disclosure to help consumers understand all circumstances where fees will be charged.’

ASIC’s warning to consumers

ASIC continues to warn consumers to be mindful when making credit card transactions, because transactions in Australian dollars with overseas merchants, or processed by an entity outside Australia (that is, the merchant’s financial institution or payment provider) can attract foreign transaction fees.

This is particularly important in an on-line shopping environment because foreign transaction fees may apply where a merchant’s website has an Australian address (domain name) or where a foreign merchant advertises and invoices prices in Australian dollars.

Consumers should check with the merchant whether the transaction they make is with an overseas-based merchant or processed overseas. Consumers with queries or concerns about the charging of credit card foreign transaction fees should contact their credit card issuer.

ASIC has published guidance for consumers about the charging of international transaction fees by credit card issuers on its MoneySmart website.


A foreign transaction fee is a fee charged by many credit card providers for transactions – including purchases and cash advances:

  • that are converted from a foreign currency to the Australian dollar; or
  • that are made in Australian dollars with merchants and financial institutions located overseas; or
  • that are made in Australian dollars (or other currencies) that are processed outside Australia.

A foreign transaction fee is generally calculated as a percentage of the Australian dollar value of the transaction (typically up to 3.5%). Credit card schemes (such as Visa, MasterCard and American Express) have different rules about foreign transaction fees and the percentage fees will vary depending on the card scheme.

In September 2016, Westpac refunded approximately $20 million to around 820,000 customers for not clearly disclosing the types of credit card transactions that attract foreign transaction fees (see 16-298MR).

Not all cards impose foreign transaction fees. For consumers who make frequent overseas purchases, it is worth shopping around for a card that offers no foreign transaction fees.

ACCC denies authorisation for banks to collectively bargain with Apple and boycott Apple Pay

The Australian Competition and Consumer Commission has issued a determination denying authorisation to the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank (the banks) to collectively bargain with Apple and collectively boycott Apple Pay.

“The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments. We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets,” ACCC Chairman Rod Sims said.

The banks sought authorisation to bargain with Apple for access to the Near-Field Communication (NFC) controller in iPhones, and reasonable access terms to the App Store. This access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple’s digital wallet, without using Apple Pay.

“While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits would be outweighed by detriments,” Mr Sims said.

The banks argued that access to the NFC controller on iPhones would enable them to offer competing wallets on the iOS platform which would lead to the following public benefits:

  • increased competition and consumer choice in digital wallets and mobile payments in Australia
  • increased innovation and investment in digital wallets and other mobile applications using NFC technology
  • greater consumer confidence leading to increased adoption of mobile payment technology in Australia.

The ACCC accepted that Apple providing the banks access to the iPhone NFC controller is likely to lead to increased competition in mobile payment services and that this was a significant public benefit. However, the ACCC considered the likely distortions to and reductions in competition caused by the conduct would also be significant. Three likely detriments in particular stood out.

“First, Apple and Android compete for consumers providing distinct business models. If the Applicants are successful in obtaining NFC access, this would affect Apple’s current integrated hardware-software strategy for mobile payments and operating systems more generally, thereby impacting how Apple competes with Google,” Mr Sims said.

“Second, digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. There is also a range of alternative devices being released that allow mobile payments; for example, using a smartwatch or fitness device. It is therefore uncertain how competition may develop.”

“Access to the NFC in iPhones for the banks could artificially direct the development of emerging markets to the use of the NFC controller in smartphones. This is likely to hamper the innovations that are currently occurring around different devices and technologies for mobile payments,” Mr Sims said.

The conduct is also likely to reduce the competitive tension between the banks in the supply of payment cards.

“Finally, Apple Wallet and other multi-issuer digital wallets could increase competition between the banks by making it easier for consumers to switch between card providers and limiting any ‘lock in’ effect bank digital wallets may cause,” Mr Sims said.

The ACCC consulted with consumers, financial institutions, retailers and technology companies in reaching its decision.

The Final Determination is available here: Bendigo and Adelaide Bank & Ors – Authorisation – A91546 & A91547


A ‘digital wallet’ is an app on a mobile device that can provide a number of the same functions as a physical wallet, including the ability to make payments in-store and storing other information, such as loyalty or membership cards. A ‘mobile payment’ is a payment performed in-store using a digital wallet.

On 19 August 2016 the ACCC decided not to grant interim authorisation to the applicants.

On 29 November 2016, the ACCC published a draft determination proposing to deny authorisation.

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. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit resulting from the conduct outweighs any public detriment.

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

ACCC takes action against Aveling homes over online review websites

The Australian Competition and Consumer Commission says it has instituted proceedings in the Federal Court against Aveling Homes Pty Ltd (Aveling), a Perth-based home building company, for alleged misleading conduct and false or misleading representations.

The alleged conduct is in relation to review websites Aveling created for its businesses, Aveling Homes and the First Home Owner’s Centre.

The ACCC alleges that Aveling created review websites that represented they were independent of Aveling, and that the appearance, layout and features gave consumers the overall impression that they were affiliated with an independent third party consumer review website, Product Review, when this was not the case.

The ACCC also alleges that the review websites were deliberately managed by Aveling to ensure a favourable overall impression, by obscuring or removing unfavourable reviews.

“We believe the potential for harm from the conduct alleged in this case is significant, as buying or building a home is one of the biggest purchasing decisions for Australians,” ACCC Deputy Chair Dr Michael Schaper said.

“Online reviews are increasingly being relied on by consumers and they should be able to trust that those reviews are independent, unbiased and accurately reflect the range of consumer feedback received.”

The ACCC also alleges that Aveling’s marketing manager, Sean Quartermaine, was knowingly concerned in Aveling’s conduct.

The ACCC is seeking declarations, pecuniary penalties, injunctions, corrective notices, a compliance program, findings of fact and costs.


Until 1 February 2017, Aveling also operated the brand ‘First Home Owners Centre’.

The ACCC’s allegations concern conduct and representations made on four Aveling websites: (link is external) (the Aveling Homes website); (link is external) (the Aveling Homes review website); (link is external) (the First Home Owners Centre website); and (link is external) (the First Home Owners Centre review website).

This is the second action taken by the ACCC in relation to online reviews. In November 2016, the ACCC instituted proceedings against Meriton Property Services Pty Ltd

Figure 1: (as at 11 June 2016)