The ACCC has granted interim authorisation allowing retailers to collectively bargain with landlords about rent relief during the COVID-19 pandemic.

The interim authorisation, granted to the Australian Retailers Association and its current and future members, will also allow retailers to share information relevant to the negotiations including in relation to requests by landlords for certain information as part of considering and negotiating support to be provided in the context of COVID-19.

“We see a clear public benefit in allowing retailers to work together in the negotiations with landlords as it will help those tenants who are experiencing financial hardship during this pandemic to reach a fair outcome,” ACCC Chair Rod Sims said.

“We need to maintain strong competition in the retail sector and supporting these businesses will help with economic recovery once the pandemic subsides.”

The authorisation is voluntary and temporary, and does not include individual tenants exchanging information about the amount of their rent or any rent incentives they were previously granted. 

It is planned that the proposed co-operation will have regard to the proposed mandatory Code of Conduct which sets out the good faith leasing principles applicable between landlords and small and medium shopping centre tenants.

“As with all of the temporary arrangements that industries are looking to implement as a means to deal with the COVID-19 issues they are facing, we will keep under consideration when they are no longer necessary,” Mr Sims said.

Having granted interim authorisation for the arrangements, the ACCC will now seek feedback on the application for final authorisation which is sought for a period of 12 months from the date of authorisation.

More information, including the ACCC’s interim authorisation decision, is available at Australian Retailers Association.

Background

The Australian Retailers Association is Australia’s largest retail industry association and provides advice, education and advocacy for its approximately 7,500 members.

On 3 April 2020 the ACCC granted interim authorisation allowing shopping centres to co-operate to support retail tenants financially impacted by COVID-19.

Notes to editors

ACCC 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.

Section 91 of the Act allows the ACCC to grant interim authorisation when it considers it is appropriate. This allows the parties to engage in the proposed conduct while the ACCC is considering the merits of the substantive application.

The ACCC may review a decision on interim authorisation at any time, including in response to feedback raised following interim authorisation.

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

Maintaining profits was a major consideration for the big four banks as they weighed whether to reduce mortgage rates in line with Reserve Bank of Australia cash rate cuts during 2019, the ACCC has found.

The ACCC’s Home Loan Price Inquiry interim report, released today, shows that the big four banks considered various factors as they decided whether to pass on the RBA’s June, July and October 2019 rate cuts. But recovering profits was central to their decisions to not always fully pass through the lower rates to mortgage customers.

“The banks were attempting to shore up their profitability during a period of low interest rates,” ACCC Chair Rod Sims said.

“It was their strong preference, after the RBA’s cuts, not to further reduce the rates customers were earning on some deposit products as they approached zero per cent.”

“The banks’ reluctance to cut these deposit rates led them to anticipate lower profits, which they aimed to recover by not always fully passing through cash rate cuts to their mortgage customers,” Mr Sims said.

The ACCC’s analysis also found that the big four banks benefitted from a sustained decrease in their funding costs during much of 2019. While headline rates for owner-occupier home loans with principal and interest repayments fell overall during 2018 and 2019, the banks’ funding costs fell even more over the same period.

“We recognise that much has changed in the economic and funding environment since last year. The COVID-19 pandemic has shifted priorities and the banks are playing an important role in supporting the economy,” Mr Sims said.

“However, the inquiry findings shed an important light on bank decision making and raise questions about whether the banks could, at the time, have passed on a higher proportion of those RBA cash rate cuts to their mortgage customers.”

The ACCC’s Home Loan Price Inquiry interim report also shows that although average interest rates charged by the big four banks on home loans fell during 2019, a lack of price transparency and higher interest rates for existing loans continued to cost customers.

The interim report examines home loan prices charged by the big four banks between 1 January 2019 and 31 October 2019. It found that home loan pricing practices continue to make it difficult for consumers to compare different mortgage products.

Headline rates did not accurately reflect the price most big four bank customers actually paid for their home loans, because the overwhelming majority of customers received discounts, including opaque discretionary discounts.

“Given the economic disruption, uncertainty and job losses stemming from the COVID-19 pandemic, many consumers may not be inclined to shop around and ask for discounts from their banks right now,” Mr Sims said.

“However, our analysis shows how that even a small further reduction in interest rates could potentially save thousands of dollars over the life of a mortgage. Consumers should consider this carefully when it is time to re-engage with their lender.”

For example, a customer with an average-sized new, owner-occupier, principal and interest mortgage of $386,000 could save about $5000 on interest payments in the first year if they went from having no discount to receiving the big four banks’ average discount of 128 basis points.

At the end of September, customers with new owner-occupier loans with principal and interest repayments were paying, on average, 26 basis points less than customers with existing loans. The difference was usually even more significant for customers with older loans.

The ACCC’s final report, scheduled for release later this year, will consider barriers to consumers switching to alternative home loan suppliers.

Further information at Home loan price inquiry

Background

On 14 October 2019, the Treasurer, the Hon. Josh Frydenberg MP, issued a direction to the ACCC to conduct an inquiry into the market for the supply of home loans. The specific matters the ACCC was directed to take into account included:

• prices charged for home loans since 1 January 2019, including:
  • the difference between advertised interest rates and interest rates paid by customers
  • the difference between interest rates paid by new and existing customers
  • home loan suppliers’ pricing decisions following changes in the RBA’s target for the cash rate, including the extent to which changes were due to suppliers’ cost of funds and the timing of the suppliers’ announcements
• impediments to consumers refinancing to alternative home loan suppliers.

The interim report focuses on the first issue regarding the prices charged for home loans between 1 January 2019 and 31 October 2019 by the big four banks, which account for close to 80 per cent (by value) of home loans held by authorised deposit-taking institutions in Australia. The final report will consider the second issue, impediments to consumer switching.

The big four banks are Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank, and Westpac Banking Corporation.

In preparing the interim report, the ACCC used its compulsory information gathering powers to obtain information and documents from the big four banks, and supplemented its analysis with data supplied by the RBA and the Australian Prudential Regulation Authority. 

The findings in the report reinforce and build on those in the ACCC’s earlier Residential Mortgage Price Inquiry.