Economy

Is predatory pricing bill a paper tiger?… Domain name ploy hits wall… Myer site sale… Household debt through roof.. Govt tough on foreign worker abuse… Do not keep calling… Telstra mobile relaunch… Free web from Dodo…

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Fielding’s predatory pricing bill: Smokes and mirrors, or shield for SMEs?

Competition law experts are divided over whether proposed laws by Family First Senator Stephen Fielding will be effective in providing SMEs with better protection from predatory pricing.

Business groups such as the National Association of Retail Grocers of Australia and the Service Station Association have strongly backed the bill introduced into Federal Parliament by Fielding on Monday.

But law firm Addison’s competition law partner Kathryn Edghill says the bill amounts to little more than “smoke and mirrors”.

“It won’t be the panacea that SMEs think it will be, even if it passed,” Edghill says. “It doesn’t change the fundamental issue, which is finding the line where a product’s price is unreasonably low. That is incredibly difficult and will continue to involve lawyers and accountants for a long time. There is just no easy fix for that.”

In essence, predatory pricing occurs where a dominant business in a market sector lowers the price of its product to unsustainable levels in an attempt to damage its competitors.

Courts dealing with predatory pricing must judge the actual cost of products or services by looking at a vast range of factors including rental, labour, transport and the benefits of mass production – a highly complex task that Edghill says will continue to be a problem under Fielding’s proposals.

“It’s a really difficult thing to fix with legislation and this bill,” Edghill says. “While it might be good window dressing, it won’t substantially change the position of SMEs that face predatory pricing.”

Although several other competition lawyers have told SmartCompany they share Edghill’s view, one who disagrees is Van Moulis, a competition law expert from McMahons National Lawyers.

Moulis, who recently successfully defended one of the service stations prosecuted for cartel behaviour by the Australian Competition and Consumer Commission, says Fielding’s bill is good for SMEs.

“The bill provides a much clearer definition of what predatory pricing is by reference to relatively user friendly concepts, and that is a good improvement, which will provide much clearer guidance for the courts,” Moulis says.

SMEs would also benefit from a provision that means they only have to prove that market bullying has had the “effect” of lessening competition, rather than the current “purpose” based test, Moulis says.

But there is one big hurdle SMEs will continue to face – the massive cost of litigation. “You’re looking at upwards of $250,000 to go to court on these issues, there is no guarantee of success, and if you lose the costs are even higher, so the whole process can be financially ruinous for SMEs,” Moulis says.

– Mike Preston

 

Domain name trouble

Want to get rich quick? Register well-known internet names and then sell them off to the highest bidder. That was the strategy behind a host of registrations, but it appears to be backfiring.

Australian student Aaron Johnson, who had registered YouTube in Australia, has been redirecting thousands of unique visitors who came to the site every day to his own site, The Australian Financial Review reports.

He has been forced to hand over the domain name after received a threatening letter from YouTube lawyers who have registered the trademark in Australia.

Lawyers warn that it is dishonest and illegal to register well-known company brand names with the intention of profiting from them, and in disputes often domain names are handed back to the trademark holder.

– Amanda Gome

 

Myer building sold

Commonwealth Bank’s retail property trust and giant Singapore investor GIC will pay almost $600 million for the Myer trophy site in Bourke Street Melbourne. The private equity firm Newbridge Capital that bought Myer from Coles a year ago, looks set to make a tidy $300 million profit according to a report in The Australian newspaper.

Over the next five years the site will be revamped to include a giant glass dome on top.

– Jacqui Walker

 

Household debt goes through the roof

Big mortgages and maxed-out credit cards are forcing Australians to spend more of their income paying interest on their debts than ever before, new Reserve Bank of Australia figures show.

The average household spent a record 11.9% of their total income on debt repayments in March 2007, the figures show, up from 11.6% in the December 2006 quarter.

Bigger credit card repayments are the main reason for the increase. Australians now owe a record $39.6 billion on their credit cards, with the average unpaid credit card balance increasing 8.5% over the year to March to a record $2139 per person.

Household income devoted to mortgage repayments also increased to 9.6%, up 0.3% on the previous quarter.

– Mike Preston

 

Government gets tough on foreign worker abuses

Proposed laws to increase financial penalties for employers who abuse workers imported into Australia under skilled migration laws were introduced into Federal Parliament yesterday.

Businesses face penalties of up to $66,000 per breach if they fall foul of the complex migration laws – see our top story about the penalties and how to avoid them.

Meanwhile, the Australian Chamber of Commerce and Industry has called on the Federal Government to introduce a new visa category to allow employers to import unskilled foreign workers, The Australian Financial Review reports today.

ACCI says many businesses are suffering because they cannot find Australians to fill unskilled job vacancies.

– Mike Preston

 

Do not keep calling!

Some telemarketers have kept on ringing. When people have protested that they put their names on the Do Not Call Register the first day it was up, the telemarketers have pointed out that the grace period means they still cannot be fined.

That ends next week. Veronica Scott, senior associate in communications at Minter Ellison, says that businesses can be fined from 30 June onwards.

She says clients are still trying to come to terms with the rules, with the main questions being asked around inferred consent and expressed consent.

Expressed consent given by a client to be rung even when their number is on the list, expires after three months unless it is clearly stated otherwise. Inferred consent is a more murky area depending on the relationship the business had with the client previously.

For example if a client makes an appointment every year to get their eyes checked, it is reasonably assumed to be inferred consent, she says.

“Other questions being asked by companies is the necessity to have a list washed every single time they call. Businesses will need to have complete databases that have all this information with the last person of contact, why they were contacted, whether their number is on the register and whether there is a contract.”

She says companies are asking about alternative methods of communications such as direct mail. “But you have to be very careful with email and SMS because of spam laws.”

She says letters are the last frontier. “But you also have to look at what is the most effective way to communicate and ask how can I phone or email without breaking the law.”

– Amanda Gome

 

Telstra to relaunch its mobile strategy

Australian telco Telstra is about to relaunch its mobile telephone retailing strategy, reports The Australian Financial Review.

Under the new plan, to be lead by Andy Ellis, formerly of British home entertainment retailer Dixons, Telstra has opened 70 new shops over 10 months, giving it a national network of 300 shops.

Telstra’s contract with Crazy John’s is terminated from 30 June. The main resellers will be Fone Zone, JB Hi-Fi, Mr Digital and PrePaid Partners.

– Jacqui Walker

 

Dodo offers internet for free

Telco Dodo has announced plans to provide free internet access for customers of its telephone service, which has a minimum cost of $32.90 a month; download limits would apply.

Dodo, which relies on wholesale access via PowerTel, Singtel Optus and Telstra, has rejected suggestions that the decision could deliver the sort of problems “dot-com” groups such as FreeISP, FreeNet, FreeOnline, Global Freeway and GoConnect had in the past.

– Jacqui Walker

 

Economy round up

The Australian dollar just can’t quite seem to make the magical US85c mark. At 12.15pm, the dollar is trading at US84.69c, not far from the 18-year high of US84.77c achieved in June this year, but not quite up around the US85c mark.

Our cousins across the Tasman did better yesterday. The Kiwi reaching a 22-year high of 76.6c against the US dollar.

The S&P/ASX 200 is down slightly to 6366.4 at 12.15pm, down 0.3% on yesterday’s close.

– Mike Preston

 

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