ACCC to crack down on cartel conduct

By Reshma Farrer

The chairman of the Australian Competition and Consumer Commission (“ACCC”), Rod Sims, has indicated that 2018 will involve the competition watchdog pursuing criminal cartel cases against a number of Australian businesses.
It is expected that Mr Sim will conduct three to four domestic-based criminal cartel actions in 2018 against companies of varying sizes.

Division 1 of Part IV of the Competition and Consumer Act 2010 (Cth) deals with cartel conduct. In simple terms, cartel conduct involves two or more competitors agreeing to act together instead of competing with each other. Competitors may agree to price-fix (agreeing on their pricing structure), market share (dividing the market between each other), bid rigs (deciding beforehand which company shall win a bid) or boycott (refusing to supply or acquire goods or services from a third party).

Unlike other provisions of the Act, if a business engages in cartel conduct it could be exposed to criminal as well as civil penalties. Under the Act, corporations could face fines of up to $10 million or three times the value of benefits obtained or 10 percent of the corporation’s annual turnover over a 12-month period – whichever is greater. Individuals who are involved in cartel conduct, such as senior executives, could face up to 10 years in jail or fines of up to $420,000.

The ACCC established a team to target cartel conduct in 2009 but it was only in 2017 that the ACCC successfully prosecuted its first criminal cartel case against Nippon Yusen Kabushiki Kaisha (“NYK”), a Japanese shipping company which was fined $25 million for agreeing with competing shipping companies that no entity would attempt to change its market share or win existing business from each other. The fine NYK received could have been as great as $50 million, but it was discounted by 50 percent because of the company’s early guilty plea and cooperation with the ACCC.

Cartels are often very hard to detect, and so to aid in investigation and prosecution, the ACCC and the Commonwealth Director of Public Prosecutions (CDPP) have developed an “immunity and cooperation policy”. In broad terms, this means that if a company or individual that is involved in cartel conduct is the first to confess their involvement to the ACCC or CDPP, they could escape prosecution. In this way, the ACCC and CDPP can unearth cartels and potential offenders are given the opportunity to avoid the severe penalties attached to cartel conduct.

The ACCC recommends seeking independent legal advice and notifying it if you are invited to join an arrangement that appears to be a cartel, or if you are dealing with a business that you believe to be engaging in this conduct. Please contact Peter North, Director of the Business Practice Group, or Caroline James, Lawyer, if you need advice on your obligations under the Competition and Consumer Act.