COMPETITION AND CONSUMER ACT 2010

UNDERTAKING TO THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION GIVEN FOR THE

PURPOSES OF SECTION 87B

BY

OTIC ON AUSTRALIA PTY LIMITED

ACN: 061969006

PERSONS GIVING THIS UNDERTAKING

1. This Undertaking is given to the Australian Competition and Consumer Commission (ACCC) by Oticon Australia Pty Limited (Oticon Australia) of 4111 Talavera Road, North Ryde NSW 2113 for the purposes ofs. 87B of the Competition and Consumer Act 2010 (the Act).

BACKGROUND

2. Oticon Australia is an Australian subsidiary of William Demant Holdings AJS (WDH) which is engaged in the wholesale and retail sales of hearing instruments in Australia.

3. In the wholesale division, Oticon Australia sells hearing instruments to independent distributors who resell the instruments onto end consumers.

4. In the retail division, Oticon Australia owns the distribution channels and retails hearing instruments directly to end consumers through Audio Clinic and Western Hearing Services.

5. Following the receipt of a complaint, the ACCC conducted an investigation into an allegation of resale price maintenance against Oticon Australia. The ACCC was concerned that Oticon Australia had imposed unfavourable terms and conditions on two of its customers when it became aware that they were advertising hearing aids at prices lower than those recommended by Oticon Australia.

6. In particular, in September 2011 Oticon Australia agreed to supply hearing aids to a retailer on condition that the retailer sell Oticon Australia hearing aids at prices closer to Oticon Australia's recommended retail prices.

7. Also in September 2011, Oticon Australia offered to supply hearing aids to another retailer on the condition that it would sell at a price within 15% of Oticon Australia's recommended retail prices.

8. The ACCC considers that, by engaging in the conduct described above, Oticon Australia has engaged in resale price maintenance in contravention of section 48 of the Act in that Oticon Australia in relation to two of its customers, treated those customers less favourably, for the reason that those customers had advertised or were likely to advertise or sell Oticon Australia's products at prices less than a price specified by Oticon Australia, being Oticon Australia's recommended retail prices ("the ACCC's concerns").

9 . Oticon Australia acknowledges the ACCC's concerns and accepts that by engaging in the conduct described above, it has contravened section 48 of the Act.

10. The ACCC acknowledges that Oticon Australia has co-operated in the investigation and resolution ofthis matter and that it has voluntarily taken preliminary steps to address the ACCC's concerns, including:

(a) investigating the ACCC's complaint and disclosing to the ACCC the results of its investigations;

(b) informing the two customers that Oticon Australia's recommended retail price list for Oticon Australia's products is a recommendation only and there is no obligation to comply with the recommendation in that price list;

(c) writing to all of its customers informing them that any recommended retail prices communicated by Oticon Australia to its customers is a recommendation only; and

(d) by engaging advisors to assist in the development of a competition and consumer compliance program which has already been implemented and introduced.

In response to the ACCC's concerns, Oticon Australia has offered to give this Undertaking in the terms set out below to the ACCC. The ACCC has agreed to accept this Undertaking under section 87B of the Act.

COMMENCEMENT OF UNDERTAKING

11. This Undertaking comes into effect when:

(a) the Undertaking is executed by Oticon Australia; and

(b) the ACCC accepts the Undertaking so executed.

12. Upon the commencement of this Undertaking, Oticon Australia undertakes to assume the obligations set out in paragraphs 14-16 below.

UNDERTAKINGS

13. Oticon Australia undertakes, for the purposes of section 87B of the Act, that it will, for a period of3 years from the date of this Undertaking coming into effect, whether by itself, its directors, servants or agents or otherwise howsoever, refrain from:

(a) making it known to Oticon Australia's customers that Oticon Australia will not supply Oticon Australia's products to the customers unless the customers agree not to sell or advertise those products at a price less than a price specified by Oticon Australia;

(b) inducing or attempting to induce Oticon Australia's customers not to sell or advertise Oticon Australia's products at prices less than a price specified by Oticon Australia; and

(c) withholding the supply of Oticon Australia's products from its customers, or offering less favourable terms of supply, for the reason that the customer has not agreed not to sell or advertise those products at a price or at prices lower than Oticon Australia's recommended retail prices or has sold, or is likely to sell or advertise those products at a price or at prices less than Oticon Australia's recommended retail prices.

COMPLIANCE PROGRAM

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14. Oticon Australia undertakes, for the purposes of section 87B of the Act that it will:

(a) within 3 months of this undertaking coming into effect, cause a review of its existing Competition and Consumer Act Compliance Program by a suitably qualified compliance professional or legal practitioner with expertise in trade practices issues to provide a Certificate of Compliance to the ACCC certifying that it meets the requirements set out in paragraphs 1-9 of Annexure A;

(b) maintain and continue to implement the Competition and Consumer Act Compliance Program for a period 00 years from the date ofthis Undertaking coming into effect;

(c) ensure that within three months of the commencement of this Undertaking, all relevant employees and officers of Oticon Australia engaged in the wholesale sale of hearing aid instruments to customers, will complete a Competition and Consumer Act compliance training course which covers the resale price maintenance provisions of the Act if they did not attend the training course conducted on 14 August 2012;

(d) ensure that its Competition and Consumer Act training course is rolled out to all future relevant Oticon Australia employees within six months of the commencement of their employment with Oticon Australia; and

(e) ensure that the training referred to above is administered by suitably qualified, compliance professional or legal practitioner with expertise in the Act.

COMPLIANCE PROGRAM AUDIT

15. Oticon Australia undertakes, for the purposes of section 87B of the Act that it will cause, at its own expense, an independent audit of its compliance program to be conducted annually for a period of three years. The audit will be carried out by a suitably qualified compliance professional, being a person who is not a direct servant or agent of Oticon Australia and being a lawyer or other compliance professional acceptable to the ACCC. The auditor shall review and report on the matters outlined in Annexure A.

ACKNOWLEDGMENTS

16. Oticon Australia acknowledges that:

(i) the ACCC will make this Undertaking publicly available including by publishing it on the ACCC's public register of s. 87B Undertakings on its website;

(ii) the ACCC will, from time to time, make public reference to the Undertaking including in news media statements and in ACCC publications; and

(iii) this Undertaking in no way derogates from the rights and remedies available to any other person arising from the alleged conduct.

EXECUTED BY

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OTICON AUSTRALIA PTY LIMITED ACN: 061 969006 by JASON GOWIE, Director being duly authorised to sign on behalf of the company

===~~~~ ............. . Director

This .. .JQ!!::'..: ..... day of December 2012.

ACCEPTED BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION PURSUANT TO SECTION 87B OF THE COMPETITION AND CONSUMER ACT 2010 •

...... ~:,.~ ................... . Rodney Graham Sims Chairman ~

This ....... .l.~ ........... day Of ... (k.~ .... .2012.

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ANNEXURE A

Competition and Consumer Act Compliance Program

The Competition and Consumer Act Compliance Program (Compliance Program) established by Oticon Australia Pty Limited (Oticon Australia) must comply with each of the following requirements:

1. By no later than 3 months after the date of this undertaking coming into effect Oticon Australia will have appointed a director or senior manager of the business, whose responsibilities are to include the development, implementation and maintenance of the Compliance Program, and who reports directly to the company Board or governing body (Compliance Officer).

2. By no later than 3 months after the date of this undertaking coming into effect Oticon Australia will have appointed a qualified, internal or external compliance professional with expertise in trade practices issues (Compliance Advisor), for the purposes set out in paragraph 3.

3. By no later than 3 months after the date of this undertaking coming into effect Oticon Australia will have instructed the Compliance Advisor to conduct a Competition and Consumer Act risk assessment (Risk Assessment) in accordance with (a) - (d) below:

(a) identify the areas where Oticon Australia is at risk of breaching Part N of the Competition and Consumer Act 2010 (Act), in particular section 48;

(b) assess the likelihood of these risks occurring and the consequences of the risks to the business operations to Oticon Australia should they occur;

(c) identify where there may be gaps in Oticon Australia's existing procedures for managing these risks; and

(d) provide recommendations for action having regard to the assessment.

4. By no later than 4 months after the date of this undertaking coming into effect Oticon Australia will have issued a policy statement outlining Oticon Australia's commitment to Competition and Consumer Act compliance (Compliance Policy). Oticon Australia will ensure the Compliance Policy:

(a) is written in plain language;

(b) contains a statement of commitment to compliance with the Competition and Consumer Act 2010;

(c) contains a requirement for all staff to report any compliance related issues and Competition and Consumer Act compliance concerns to the Compliance Officer;

(d) contains a guarantee that whistieblowers will not be prosecuted or disadvantaged in any way and that their reports will be kept confidential and secure; and

(e) contains a clear statement that Oticon Australia will take action internally against any persons who are knowingly or recklessly concerned in a contravention of the Act and will not indemnify them.

5. Oticon Australia will ensure the Compliance Program includes:

(a) a complaints handling system capable of identifying, classifying, storing and where necessary, referring internal and external Competition and Consumer Act complaints; and

(b) whistleblower protection mechanisms to protect those coming forward with Competition and Consumer Act complaints.

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6. Oticon Australia will ensure the Compliance Program includes a requirement for regular (at least once a year) and practical Competition and Consumer Act training for all directors, officers and employees of Otic on Australia whose duties could result in them being concerned with conduct that may contravene section 48 ofthe Act. The training program will be designed to ensure the employees' awareness of the responsibilities and obligations in relation to section 48 of the Act. Oticon Australia must ensure that the training is conducted by suitably qualified compliance professionals or legal practitioners with expertise in competition and consumer law.

7. Oticon Australia will ensure the Compliance Program includes a requirement that awareness of competition and consumer law compliance issues forms part of the induction of all new directors, officers and employees whose duties could result in them being concerned with conduct that may contravene section 48 of the Act.

8. Oticon Australia will ensure that the Compliance Officer reports to Oticon Australia's Board and/or senior management meetings every 6 months on the continuing effectiveness of the Compliance Program.

9. Oticon Australia will at its own expense within three months of the date of this undertaking coming into effect, cause to be produced and provided to the ACCC copies of each of the documents constituting the Compliance Program. Oticon Australia will implement promptly and with due diligence any recommendations the ACCC may make that are reasonably necessary to ensure that Oticon Australia maintains and continues to implement the Compliance Program in accordance with this undertaking.

10. Oticon Australia shall, at its own expense, for three years following the commencement date of this undertaking, cause annual reviews of the Compliance Program (Reviews) to be carried out in accordance with each of the following requirements:

(a) the Review should be broad and rigorous enough to provide Oticon Australia and the ACCC with supportable verification that Oticon Australia has in place a program that complies with each of the requirements detailed in paragraphs 1-9 above and to provide the Review reports and opinions detailed at point 1 O( e) below;

(b) Oticon Australia shall ensure that the Reviews are carried out by a suitably qualified, independent compliance professional with expertise in competition and consumer law (Reviewer). The Reviewer will qualify as independent on the basis that he or she:

(i) did not design or implement the Compliance Program;

(ii) is not a present or past staff member or director of Oticon Australia;

(iii) has not acted and does not act for Oticon Australia in any competition and consumer law related matters;

(iv) has not and does not act for or consult to Otic on Australia or provide other services on competition and consumer law related matters other than Compliance Program reviewing; and

(v) has no significant shareholding or other interests in Oticon Australia.

(c) Otic on Australia shall use its best endeavours to ensure that the Reviews are conducted on the basis that the Reviewer has access to all relevant sources of information in Oticon Australia's possession or control, including without limitation:

(i) enquiries of any officers, employees, representatives, agents and stakeholders of Oticon Australia;

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(ii) Oticon Australia's records, including the company's complaints register/reports and any documents relevant to the Oticon Australia training or induction program; and

(iii) documents created by Oticon Australia's consultants and legal practitioners for use in the Otic on Australia Compliance Program.

(d) Otic on Australia shall ensure that the first Review is completed within one year and one month of this undertaking coming into effect and that each subsequent Review is completed within one year thereafter;

(e) Oticon Australia shall use its best endeavours to ensure that the Reviewer sets out the findings of the Review into two separate reports as outlined below:

(i) Company Compliance Program Review Report (to be provided to Oticon Australia), which will provide particular and specific information regarding the performance of the Compliance Program including:

• if, and to what extent, the Compliance Program includes all the elements detailed in paragraphs 1-9 above;

• if, and to what extent, the Compliance Program adequately covers the parties and areas identified in the initial Risk Assessment;

• if, and to what extent, the competition and consumer law training is effective;

• if, and to what extent, Oticon Australia's complaints handling system is effective; and

• recommendations for rectifying any identified deficiencies that the Reviewer thinks are reasonably necessary to ensure that Oticon Australia maintains and continues to implement the Compliance Program in accordance with the requirements of this undertaking.

(ii) ACCC Compliance Program Review Report (to be provided to the ACCC), which will supply particular and specific information regarding the scope of the Review and the effectiveness of the Compliance Program including:

• details of the evidence gathered and examined during the Review;

• the name and relevant experience of the person appointed as the company Compliance Officer;

• the Reviewer's opinion on whether Oticon Australia has in place an effective Compliance Program that complies with the requirements detailed in paragraphs 1-9 above;

• actions recommended by the Reviewer to ensure the continuing effectiveness of the Oticon Australia Compliance Program;

• confirmation that any actual and potential inadequacies in Oticon Australia's Compliance Program have been brought to

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the attention of the Compliance Officer and the governing body;

• confirmation that the Reviewer has revisited any actual and potential inadequacies in Oticon Australia's Compliance Program identified in the previous ACCC Compliance Review Report, and assessed how they have been addressed by Oticon Australia;

• any reservations that the Reviewer might have about the reliability and completeness of the information to which the Reviewer had access in the conduct and reporting of the Review; and

• any comments or qualifications concerning the Review process that the Reviewer, in his or her professional opinion, considers necessary.

(f) Oticon Australia will use its best endeavours to ensure that the Review Reports are completed and provided to Oticon Australia within two months of each Review.

(g) Otic on Australia will retain the Company Compliance Program Review Report and cause the ACCC Compliance Program Review Report to be provided to the ACCC within 14 days of its receipt from the Reviewer.

(h) Oticon Australia shall implement promptly and with due diligence any recommendations made by the Reviewer or required by the ACCC, that are reasonably necessary to ensure that Oticon Australia maintains and continues to implement the Compliance Program in accordance with the requirements of this undertaking.

11. Oticon Australia shall, at its own expense, if requested by the ACCC, provide copies of documents and information in respect of matters which are the subject of the Compliance Program.

12. In the event the ACCC has sufficient reason to suspect that the Compliance Program is not being implemented effectively, Oticon Australia shall, at its own expense and if requested by the ACCC, cause an interim or additional Review to be conducted and cause the resulting Review Report to be provided to the ACCC.

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