Industry Super Australia (ISA) has raised the spectre of third line forcing under the Competition and Consumer Act in its campaign against the major banks cross-selling and bundling superannuation products.
The ISA has specifically referenced third-line forcing in its submission to the Australian Bankers Association (ABA) Review into Commissions and Payments in the retail banking system stating that the Competition and Consumer Act outlaws “third line forcing”, where a company supplies goods or services — including discounts — on conditions that restrict the buyer’s freedom to choose with whom, in what or where they deal.
It said that those who established the superannuation guarantee recognised that “third line forcing” by banks was a risk, setting out clear rules in Section 68A of the Superannuation Industry (Supervision) Act 1994 prohibiting fund trustees from offering certain inducements to employers on the condition that their employees would join the fund.
“However, despite the prohibition from such inducements there is no civil penalty for breach of Section 68A of the Act to deter this behaviour,” ISA said.
Further, it claimed that employees had little practical recourse if their employer was persuaded to switch their super to a bank-owned superannuation fund.
The ISA was arguing that there were problems with enforceability and that the scope of Section 68A was too narrow.
It said it had put forward a number of solutions including reforms to the current prohibition to ensure that it was effective, including the introduction of civil penalties for breaches of the bank bundling prohibition in the SIS Act to ensure regulators were properly equipped to keep financial institutions accountable.
“It is also necessary to examine whether the ban on receiving conflicted remuneration needs to be expanded to ensure that it captures monetary and non-monetary payments between employers, banks, related entities, consulting firms, and service providers in the context of selection of default funds,” the ISA submission said.
