This is a service specifically targeted at the needs of busy non-executive Directors. We aim to give you a ‘heads up’ on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this edition, we discuss the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022, which received Royal Assent, the Federal Court’s imposition of $33.5 million in penalties on Telstra, Optus and TPG for misleading statements, and the Origin Energy Limited bid which, if successful, will be Australia’s largest ever private equity deal.
In Over the Horizon, we discuss the liquidity crunch impacting the FTX cryptocurrency exchange and the resulting calls for increased regulatory oversight of digital assets. Finally, we consider whether the release of CPI data in the United States may point towards easing worldwide inflation.
GOVERNANCE & REGULATION
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 receives Royal Assent. On 9 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) received Royal Assent after being passed by both houses of Parliament. The Bill introduces significant changes to the unfair contract term provisions contained in the Australian Consumer Law (ACL). Under the existing regime, only a person who suffers loss resulting from an unfair contract term is entitled to receive compensation for their loss. In contrast, the new regime will see corporations and individuals who make, rely on, or purport to rely on an unfair contractual term be liable for financial penalties under the ACL. These penalties have also been greatly expanded, with the maximum penalty for individuals increasing from $500,000 to $2.5 million. Businesses will commit a separate offence in respect of each unfair contract term identified in a ‘small business contract’ or ‘standard form contract’. A ‘small business contract’ extends to businesses with less than 100 employees (increased from 20 employees) or a turnover of less than $10 million. A ‘standard form contract’ now expressly includes where the other party is provided with an opportunity to negotiate insignificant changes, to choose from a range of specified options, or for a party to a different contract to enter negotiations in respect of the terms of the other contract. The changes will come into effect after 12 months, providing a ‘grace period’ for businesses to ensure that their standard form and small business contracts comply with the amendments. Directors of “as a service” companies and others who interact routinely with small business and consumers on the basis of standard form contracts will need to consider appropriate risk management measures around the proposed legislation. See Parliament of Australia website and G+T Knowledge Article.
Federal Court imposes $33.5 million in penalties on Telstra, Optus and TPG for misleading statements regarding NBN speeds. The Federal Court has issued penalties of $15 million, $13.5 million and $5 million to Telstra Corporation Ltd, Optus Internet Pty Limited and TPG Internet Pty Ltd respectively, after they each admitted to making false or misleading representations in relation to maximum NBN speeds. The Australian Competition and Consumer Commission (ACCC) commenced proceedings in August 2021 in relation to promises made by the three companies that they would inform customers within a reasonable timeframe if the customers were unable to reach the speed they were paying for on their NBN connections. Each company admitted their statements were false or misleading since they did not have adequate systems, processes and policies in place that would enable them to perform their promises. The promises affected nearly 120,000 customers in total. ACCC Commissioner Liza Carver stated that the penalties ‘reflect the seriousness of the breaches of consumer laws by these large and sophisticated businesses that should be better informed about their obligations towards their customers’. See ACCC media release.
$18.4bn Origin Energy buyout poised to be Australia’s largest ever PE deal. On 10 November 2022, Origin Energy Limited (Origin) announced that it had received an indicative, conditional and non-binding proposal from a consortium led by Brookfield Asset Management Inc. (Brookfield) to acquire all the issued share capital in Origin by way of a scheme of arrangement at a price of $9.00 cash per share. The proposal is subject to a number of conditions, including due diligence, agreement to enter scheme implementation, as well as unanimous board recommendation to vote in favour of the proposal. If the scheme of arrangement proceeds, Origin is expected to split its electricity generation and gas export businesses as it plans to transition away from fossil fuels. Stewart Upson, Brookfield’s Asia Pacific CEO, highlighted his belief that the energy transition in Australia is ‘a once-in-a-generation investment opportunity but that investment needs to be accelerated materially in order to meet Australia’s legislated climate goals’. The proposal comes after Brookfield’s failed attempt to acquire AGL Energy Ltd in February 2022.
OVER THE HORIZON
FTX cryptocurrency exchange liquidity crisis another case for regulatory clarity. The fourth largest cryptocurrency exchange in the world, FTX, has been hit with a ‘liquidity crunch’ following a mass sell-off by its customers in the last week. Binance, the world’s largest digital asset exchange by volume, announced on 6 November 2022 that it would be selling their entire holding of FTT, FTX’s native token, prompting an instant price crash, and a run on the FTX platform. Further, the balance sheet of Almeda Research, FTX founder Sam Bankman-Fried’s trading and venture firm, was leaked to the public. The balance sheet evidenced concerning borrower-collateral links to the FTT token and raised questions regarding a less-than-arm’s-length relationship between the two companies. On 9 November 2022, Binance signed a non-binding offer to purchase FTX, subject to due diligence. However, Binance withdrew its offer less than 24 hours later citing ‘news reports regarding mishandled customer funds and alleged US agency investigations’. While the cryptocurrency community is notoriously anti-regulation, these events have increased calls for greater regulatory oversight and investor protection. White House Press Secretary Karine Jean-Pierre stated on 10 November 2022, that the FTX crash ‘underscores [regulatory] concerns and highlights why prudent regulation of cryptocurrencies is indeed needed’. A global push for increased regulatory oversight in relation to cryptocurrencies and other digital assets may be necessary, particularly if prices across the market continue to drop. These developments justify ASIC’s recently announced focus on crypto-assets as a regulatory priority in the 2023 financial year.
US CPI data points towards easing inflation. On 10 November 2022, the United States Labor Department published CPI data showcasing a larger than expected drop in consumer inflation in October 2022. The report resulted in a sharp increase in stock prices, particularly in the US, reflecting investor sentiment that the US Federal Reserve may slow down its recent history of punishing interest rate increases when it reviews the Federal Funds Rate next month. This is the first strong indication that inflation in the US, and perhaps worldwide, has peaked. All eyes are now on the US Federal Reserve, and the world waits to see whether it will ease its cycle of tightening monetary policy.