Antitrust Alert: Will Australia Parliament Computer Inquiry Lead to New Competition Law?
This week, the Australian Parliament launched an Inquiry into why computer software and hardware may cost more in Australia than some believe it does in the U.K. or U.S. The risk is that the Inquiry could lead to a reintroduction of an economically damaging prohibition against price discrimination. This is also of concern internationally because, in the past, peculiar Australian legislative initiatives have subsequently been adopted in European countries and then the US.
Below we also provide background to the software and hardware pricing issue and information about Legal Professional Privilege and Parliamentary Privilege in connection with such Inquiries.
The current controversy over software and hardware pricing in Australia started when the Productivity Commission (a quasi-judicial independent commission that undertakes economic research and policy) observed that Australian computer product prices appeared to be higher than in other developed, English-speaking countries. The Commission could not identify any satisfactory explanation, such as the need to tailor products to local needs, the costs of complying with differential or consumer protection laws, or exchange rate movements.
Parliamentarians involved have made statements that suggest they have already concluded that there are is a relevant problematic price differences, even before the inquiry has commenced its fact finding task. The debate further has suggested that this "price discrimination" may require a legislative remedy.
Australia law previously prohibited price discrimination, but the rule was repealed in 1995. Economists generally agree that price discrimination should not itself be of concern unless there is an anticompetitive effect. It is actually beneficial to permit price discrimination, especially for firms with high fixed infrastructure costs or to compensate for investment in innovations and upgrades. Price discrimination enables such firms to recoup more of the costs of such investments from customers that benefit most from them.
The main reason for the law’s repeal was that, unlike the U.S. and European equivalent prohibitions against price discrimination, in Australia price differences for equivalent transactions were illegal regardless of whether there was an anticompetitive effect. At the time the prohibition was removed, the Government noted that truly anticompetitive price discrimination was already prohibited by the general prohibition against misuse of market power.
Since that time, concerns over alleged differential pricing of copyrighted material have been a thorny issue, both within the country and between the Australian Government and its trading partners. Concerns over international price differences for recorded music and software resulted in parallel importation of these items being permitted. There has been strong local opposition to these sorts of initiatives by Australian artists and creators and, in some cases, other countries have viewed these initiatives as significantly undermining the rigor of intellectual property protection, and the U.S. placed Australia on its Intellectual Property Watch-list for a time.
This Inquiry’s terms of reference include a consideration of how to remedy the perceived problem of higher Australian prices. A particularly concerning aspect of this Parliamentary Inquiry is that the current controversy persists even in circumstances where parallel importation, at least for software, is already possible. Instead, the language used by the Parliamentarians in establishing this inquiry specifically invokes the statutory language of the old Australian prohibition against price discrimination. Hopefully the rigors of the Parliamentary Inquiry process will ensure that precipitous response is not adopted.
Legal protections for information provided to Parliamentary Inquiries
Businesses that are requested to respond to the Parliamentary Inquiry may seek advice on the possibility that information they provide may be disclosed. Clients are often familiar with the general concept of legal professional privilege and how the details of such protections can vary between jurisdictions. Less well known is the concept of Parliamentary Privilege and how these two privileges interact.
The public policy reason for affording legal professional privilege protection is that it enables clients to seek full and frank advice on how to best comply with the law without the fear that such advice will become discoverable in a court proceeding. The protection also applies to documents prepared in contemplation of litigation. A key condition is that the client keeps the advice confidential.
Parliamentary Inquiries’ powers vary among countries and even between individual committees, but usually they have the power to ‘cut through’ the protection afforded by legal professional privilege and compel the production of privileged material. In most cases, Parliament recognizes the importance of the policy purpose behind legal professional privilege and the power to compel production is not exercised. Further, the courts will usually accept that legal professional privilege is not waived when confidentiality was lost when a client complies with a compulsory production process.
A completely separate privilege exists in relation to Parliamentary Inquiries. To ensure that information is provided to Parliament, and that Parliamentary debates can occur without fear of reprisals, information submitted to a Parliamentary Inquiry is generally protected by Parliamentary Privilege. This means that a person is immune from legal action in respect of lodging the submission or any statements contained in it. If a submission is authorized for publication, its distribution also is immune from legal action.
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Nicolas J. (Nick) Taylor