Corrs In Brief: Price Signalling and Information Disclosure Prohibitions - some implications for the banking sector

The proposed Competition and Consumer Amendment Bill (No. 1) 2011 (Bill) sets out the Federal Government’s price signalling policy which has, among other things, the purpose of preventing “banks from engaging in anticompetitive price signalling that is designed to keep interest rates higher than they would otherwise be”.

The concerns relating to syndicated loans and workouts have now been largely addressed although there are still some consequences for the wholesale banking sector. The Bill has passed the House of Representatives, and comes back to the Senate in mid August 2011, and is likely to be passed. It will then apply about six months after that time.

The Competition and Consumer Act 2010 (Act) prohibits deals between competitors forming cartels to fix price. The Bill introduces two new prohibitions:

• a corporation must not make a private disclosure of pricing information to competitors (private disclosure prohibition); and
• a corporation must not disclose information relating to price, capacity or commercial strategy for the purpose of substantially lessening competition (purpose prohibition).

This note focuses on the private disclosure prohibition – as its impact is more immediate and it is an outright prohibition – rather than where liability is subject to a test that depends on its effect on competition.

The actual scope of the application of this prohibition to the banking sector is at this stage is unclear. The amendments brought about by the Bill will only apply to a business or class of product identified in regulations. The banking sector will be the only industry targeted in the first set of regulations, however these have not been released.