This country-specific Q&A provides an overview to cartels laws and regulations that may occur in Australia.
This Q&A is part of the global guide to Cartels. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/cartels/
What is the relevant legislative framework?
Australia’s competition legislation is the Competition and Consumer Act 2010 (Cth) (CCA). The cartel provisions are contained in Part IV, Division I of the CCA.
Cartel conduct is prohibited per se, regardless of competitive effects. The CCA establishes corresponding civil liability provisions and criminal offences for making, or giving effect to, a contract, arrangement or understanding (CAU) between competitors or potential competitors containing a “cartel provision”.
A provision of a CAU will be a “cartel provision” if it is between two or more parties who are actual or potential competitors in relation to the supply, acquisition or production of the relevant goods or services and the provision has either:
- the purpose or effect of fixing, controlling or maintaining the price of goods or services supplied by any or all of the parties; or
- the purpose of:
- preventing, restricting or limiting the production, capacity, supply or acquisition of goods or services by any or all of the parties;
- allocating customers or territories supplied by any or all of the parties; or
- rigging bids.
The criminal cartel offences have an additional “fault element” requiring proof that the accused had the requisite knowledge or belief of the essential elements of the offence. The offence must be established beyond reasonable doubt. (By comparison, civil liability requires the elements to be established on the (lower) balance of probabilities.)
There are a number of exceptions to cartel conduct, including for or in relation to:
- joint ventures;
- related bodies corporate;
- the acquisition of shares or assets;
- conduct that constitutes exclusive dealing or resale price maintenance;
- collective bargaining conduct notified to the Australian Competition & Consumer Commission (ACCC) (not bid-rigging);
- conduct subject to a grant of authorisation; and
- the collective acquisition of goods or services (exception applies to price fixing only).
The CCA also contains other exceptions which apply to but are not specific to cartel conduct, including for acts or things specifically authorised by Commonwealth or State laws, provisions for the conduct of partnerships, certain employment conditions, and provisions relating exclusively to the export of goods of services (but only if full particulars are provided to ACCC within 14 days of the CAU).
Part X of the CCA enables parties to international liner cargo shipping conference agreements to obtain partial and conditional exemptions from the cartel provisions. To benefit from the exemption, the relevant conference agreements must be registered.
To establish an infringement, does there need to have been an effect on the market?
No, cartel conduct is prohibited per se, irrespective of competitive effect.
Does the law apply to conduct that occurs outside the jurisdiction?
Yes, the cartel provisions apply to conduct outside Australia in certain circumstances:
- the cartel conduct must be in “trade or commerce within Australia or between Australia and places outside Australia”; and
- for conduct outside Australia, the cartel provisions apply to:
- either body corporates incorporated or registered within Australia or “carrying on business” within Australia; or
- Australian citizens; or
- persons ordinarily resident within Australia or “otherwise connected with” Australia
Which authorities can investigate cartels?
The ACCC is responsible for investigating cartel conduct managing the immunity/leniency processes and instituting civil cartel proceedings. The Commonwealth Director of Public Prosecutions (CDPP) prosecutes criminal cartels.
The ACCC refers serious cartel conduct to the CDPP for consideration for criminal prosecution in accordance with an Memorandum of Understanding (MOU) between the two agencies.
The Australian Federal Police (AFP) may also execute search warrants to obtain evidence in criminal cartel investigations.
What are the key steps in a cartel investigation?
The conduct of a cartel investigation is a matter for the ACCC as the responsible investigating authority. There are no legislative or other prescribed timeframes for an investigation (other than the 6 year time limit for the ACCC to commence proceedings to recover a civil penalty). Cartel investigations are typically protracted and often last years.
The ACCC gathers evidence voluntarily or through its compulsory information gathering and search and seizure powers (see 2.3 below).
Following an investigation, the ACCC may:
- refer serious cartel conduct to the CDPP. It is a matter for the CDPP to determine whether to commence a criminal prosecution;
- initiate civil proceedings in the Federal Court seeking penalties and other orders;
- resolve less serious conduct by accepting court enforceable undertakings or through engagement and negotiation where the party may commit to do various things to address the conduct and ensure it does not recur; or
- take no further action (such as for technical contraventions).
What are the key investigative powers that are available to the relevant authorities?
The CCA invests the ACCC with significant investigatory powers.
Under s155 of the CCA, the ACCC may issue a notice to a person if they have “reason to believe” that the person is capable of providing information, documents or evidence relating to a matter that constitutes, or may constitute, a contravention of the CCA.
Specifically, the ACCC can issue three types of s155 notices: notices to furnish information, produce documents, or require a person to appear before the ACCC to give evidence, orally or in writing.
It is an offence to fail to comply with a s155 notice or knowingly providing false or misleading information in response to a s155 notice. In ACCC v Rana  FCA 372, the defendant was sentenced to gaol for refusing to comply, and aiding and abetting the failure a company he controlled to fail to comply, with a s155 notice.
Since 1 January 2007, the ACCC has had the power to obtain a search warrant authorising it to enter specified premises and seize documents and things, including electronic equipment and data storage devices, in relation to alleged contraventions of the CCA.
An executing officer may make copies of evidential material and/or seize things. They may also require a person to answer questions or produce evidential material. A failure to comply with any such requirement is a criminal offence.
If a warrant is valid, an occupier must provide reasonable facilities and assistance. An occupier is entitled to observe the search being conducted, receive a receipt of each document or thing seized and request a copy of the material seized.
In criminal investigations, the AFP may also obtain a warrant under the Crimes Act 1914 (Cth) (Crimes Act). The ACCC (together with the AFP) can also obtain a warrant allowing the interception of telephone communications or the installation of listening/surveillance devices.
On what grounds can legal privilege be invoked to withhold the production of certain documents in the context of a request by the relevant authorities?
Information or documents subject to legal professional privilege do not need to be disclosed to the ACCC under a s155 notice or search warrant.
Broadly, in Australia, legal professional privilege applies to confidential communications between a client and a lawyer (generally including in-house counsel and lawyers qualified outside the jurisdiction), and in some circumstances, a client or its lawyer and a third party, and confidential documents, where the communication is made or the document was prepared for the dominant purpose of the client being provided with or obtaining legal advice, or use in existing or anticipated litigation.
What are the conditions for a granting of full immunity? What evidence does the applicant need to provide? Is a formal admission required?
Under the ACCC’s Immunity and Cooperation Policy for Cartel Conduct, an immunity applicant (corporation or individual) will be eligible for and granted conditional civil immunity if the applicant:
- is the first party to seek immunity for the cartel;
- is or was a party to a cartel;
- admits its conduct may constitute a contravention of the CCA and the admissions are a truly corporate act (corporations only);
- has not coerced others to participate in the cartel;
- has ceased or indicates it will cease its involvement in the cartel;
- has at all times provided full, frank and truthful disclosure, and cooperated fully and expeditiously when making the application, and undertakes to continue to cooperate fully throughout the ACCC’s investigation and any ensuing court proceedings.
Further, at the time of the application, the ACCC must not have received written legal advice that it has reasonable grounds to institute proceedings in relation to the cartel.
If a corporation qualifies for conditional civil immunity, it may also seek derivative immunity for related corporate entities and/or for its current or former directors, officers and employees who were involved in the cartel conduct. The conditions attaching to derivative immunity are the same as those for immunity.
If it considers the conditions for immunity as satisfied, the ACCC will recommend to the CDPP that it grant criminal immunity. The CDPP will make its own decision on such a recommendation. If the CDPP considers the criteria for immunity are met, it will provide a “letter of comfort” to the applicant that it intends to grant criminal immunity. Before commencing any prosecution, the CDPP will then provide the applicant with a written undertaking granting criminal immunity.
What level of leniency, if any, is available to subsequent applicants and what are the eligibility conditions?
Parties not eligible for “first in” immunity may seek to cooperate with the ACCC. However, there are no pre-determined discount levels or ranges that apply. It is a matter for the Courts to determine the appropriate penalty or fine, having regard to the extent of any discount for cooperation. The ACCC or CDPP will set out in submissions to the Court any cooperation provided by a party and their assessment of the extent and value of the cooperation.
The Immunity Policy sets out the factors the ACCC/CDPP will consider in assessing the cooperation of a party, such as whether the party approached the ACCC in a timely manner (civil) and whether the party has pleaded guilty (criminal). The ACCC or CDPP may also require the cooperating party to make admissions, agree to a statement of facts, and/or provide evidence in proceedings.
Are markers available and, if so, in what circumstances?
Yes, to obtain a marker, the applicant must describe the cartel conduct in sufficient detail to enable the ACCC to confirm no other corporation or individual has obtained a marker or applied for immunity in respect of the cartel. Subject to this requirement, a marker can be requested on a hypothetical, anonymous basis.
If a marker is placed, it preserves the recipient’s “first in” status for a defined period.
What is required of immunity/leniency applicants in terms of ongoing cooperation with the relevant authorities?
To maintain civil or criminal immunity, a corporation or individual must provide full, frank and truthful disclosure and cooperate fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing court proceedings. Conditional immunity will only become final after the resolution of any ensuing proceedings against cartel participants who do not have conditional immunity.
Does the grant of immunity/leniency extend to immunity from criminal prosecution (if any) for current/former employees and directors?
If a corporation qualifies for civil/criminal immunity, it may also seek derivative immunity for current and former directors, officers and employees who were involved in the cartel conduct. The application must specify the relevant individuals for whom derivative immunity is sought. An individual may also apply for civil or criminal immunity if he or she was a director, officer or employee of a corporation that is or was a party to a cartel.
Is there an ‘amnesty plus’ programme?
Where a party is cooperating with the ACCC in respect of a cartel, discovers a second, unrelated cartel, the party may apply for conditional immunity in respect of the second cartel and seek “amnesty plus” for the first cartel.
Under “Amnesty plus”, either the ACCC will recommend to the Court a further reduction in the civil penalty for the first cartel or the CDPP will advise the Court of the full extent of the party’s cooperation so as to be taken into account in sentencing.
Eligibility for “Amnesty plus” requires the party to be cooperating with the ACCC for the first cartel and have conditional immunity for the second.
Does the investigating authority have the ability to enter into a settlement agreement or plea bargain and, if so, what is the process for doing so?
In civil cases, parties are able to agree on the appropriate penalty to be imposed and make submissions to the Court accordingly. The Court is not a “rubber stamp” but will give deference to the parties’ agreement. In criminal sentencing, a prosecutor cannot agree on or even offer an opinion as to the appropriate range. In both cases, ultimately it is for the Court to determine the appropriate penalty/fine.
Civil proceedings can be settled at any time prior to judgment. The parties will usually file with the Court an agreed statement of facts and may also file joint submissions on penalty. In criminal proceedings, a settlement will usually involve agreement as to the charges to which the defendant will plead guilty, agreeing the parameters for settlement where permissible, and filing an agreed statement of facts.
In both civil and criminal matters, hybrid settlements, where some but not all aspects are agreed or settled, are possible.
What are the key pros and cons for a party that is considering entering into settlement?
Possible advantages of settlement include a reduction in the penalty/fine, potentially significant saving of costs, time and resources, greater scope to shape and limit the facts and evidence forming part of the settlement, and greater (but not absolute) certainty as to penalty and to a lesser extent, the fine.
Possible disadvantages of settlement include making admissions, reputational damage, greater risk of new third party damages or impacting existing actions, limited or no scope to appeal, and disclosure of certain settlement material such as an agreed statement of facts.
What is the nature and extent of any cooperation with other investigating authorities, including from other jurisdictions?
The ACCC is authorised to provide information obtained under a s155 notice to an Australian and/or foreign government body (the latter includes an agency of a foreign government) if the Chairperson is satisfied the information will assist that body to perform or exercise any of its functions or powers.
The ACCC has also a number of arrangements with overseas competition agencies in relation to competition law enforcement activities. In addition, the Governments of Australia and the United States have an agreement under which the parties assist one another and cooperate on a reciprocal basis in providing or obtaining antitrust evidence.
In the context of an immunity application, unless required by law, the ACCC will not share confidential information provided by an immunity applicant with other regulators without consent, but will as a matter of course request confidentiality waivers for each jurisdiction in which the applicant has or intends to seek immunity or leniency. The ACCC typically adopts the same approach for cooperating parties. The ACCC may regard a failure to provide waivers as a failure to provide full cooperation.
There are also limited circumstances in which information (even protected information) can be disclosed, including, for example, where the Chairperson is satisfied that the disclosure can assist other government agencies/bodies.
What are the potential civil and criminal sanctions if cartel activity is established?
For corporations, the maximum civil penalty or criminal fine per contravention / offence is the greater of:
- A$10 million;
- three times the total value of the benefits that have been obtained by one or more persons that are “reasonably attributable” to the conduct; or
- if the court cannot determine the total value of those benefits, 10% of the annual turnover of the corporate group during the 12 months preceding the conduct.
For individuals, maximum criminal sanctions are A$420,000 fine, 10 years’ imprisonment, or both. The maximum civil penalty is $500,000 per contravention.
The CCA prohibits corporations indemnifying officers for pecuniary penalties and legal costs incurred in defending proceedings, in which the officer is found to be liable for a penalty.
The ACCC can also seek a range of other orders against corporations and individuals including injunctions and disqualifying/banning individuals from managing corporations.
What factors are taken into account when the fine is set? In practice, what is the maximum level of fines that has been imposed in the case of recent domestic and international cartels?
The relevant factors the Court must have regard to in determining the appropriate civil penalty include:
- the nature and extent of the conduct;
- any loss or damage suffered;
- the circumstances in which the conduct took place;
- any previous findings regarding the same or similar conduct;
- the size and degree of market power of the company;
- the deliberateness of the conduct;
- whether the conduct was at the direction of senior management;
- the company’s culture of CCA compliance;
- the extent of cooperation; and
- specific and general deterrence.
In criminal matters, an offender is to be sentenced in accordance with the Crimes Act (Part 1B). In particular, the sentence imposed must be of a “severity appropriate in all the circumstances of the offence”, and the Court must take into account the matters in s16A(2) (among others).
In CDPP v NYK  FCA 1516, the Court found the factors identified in civil penalty cases bear also upon criminal sentencing and most are, in any event, replicated in some way in the relevant considerations set out in the Crimes Act. Some of the specific factors in s16A(2) include the degree to which the person has shown contrition, if the person has pleaded guilty to the charge; the degree of cooperation with law enforcement agencies in the investigation of the offence or other offences, the need for adequate punishment, and the offender’s prospects of rehabilitation.
In practice, the highest penalty awarded in Australia to date was A$46m imposed on Yazaki Corporation in May 2018 for civil cartel conduct involving the coordination of quotes with a competitor for the supply of wire harnesses used in the manufacture of certain Toyota vehicles supplied in Australia. The only criminal fine imposed in Australia is A$25m against Nippon Yusen Kabushiki Kaisha (NYK), a Japanese shipping company, for cartel conduct in relation to the supply of shipping services to Australia. At the time of writing, a co-accused, Kawasaki Kisen Kaisha Ltd, is awaiting sentence.
Are parent companies presumed to be jointly and severally liable with an infringing subsidiary?
There is no presumption of parental joint and several liability, however, if a corporation is a party to a CAU, related bodies corporate are taken to be a party to that CAU.
Are private actions and/or class actions available for infringement of the cartel rules?
Yes, private or class actions are available against cartel participants for damages as well as other relief. The ACCC may also make an application on behalf of other persons who have suffered loss or damage as a result of cartel conduct.
What type of damages can be recovered by claimants and how are they quantified?
The CCA does not provide any guidance as to how damages are to be quantified. While the cases state the measure of damages is similar to those recoverable under the common law in tort (that is, to put the person in the position they would have been in had the cartel conduct not occurred), damages are not confined to those recoverable in tort.
On what grounds can a decision of the relevant authority be appealed?
First instance decisions of the Federal Court (single judge) can be appealed to the full Federal Court (usually three judges) on errors of law such as where the Court has applied an incorrect legal principle or findings of fact could not be supported by the evidence.
Full Federal Court decisions can be appealed to the High Court, with leave. The High Court will only hear cases of significant importance, such as on new points of law, or to resolve questions of law decided inconsistently by lower courts, or matters of public importance.
In criminal cases, appeals must only involve questions of law, unless leave is granted, except in very limited circumstances.
What is the process for filing an appeal?
An appeal can be initiated by either party within 21 days of the decision by filing a notice outlining the grounds of appeal.
What are some recent notable cartel cases (limited to one or two key examples, with a very short summary of the facts, decision and sanctions/level of fine)?
In December 2017, the Federal Court dismissed the ACCC’s civil case against PZ Cussons Australia alleging Cussons had arrived at an understanding with two other laundry detergent manufacturers (Colgate-Palmolive and Unilever, the latter an immunity applicant) to cease supplying standard concentrate laundry detergents in early 2009, and thereafter only supply ultra concentrates. Supermarket retailer Woolworths and a former Colgate executive were also alleged to have been knowingly concerned in the conduct. In 2016, Colgate and later Woolworths admitted to the conduct, with the Court imposing penalties of $18m and $9m respectively.
The ACCC’s case against Cussons was circumstantial. The ACCC relied on a pattern of behaviour (meetings) and parallel conduct to draw inferences of an understanding. However, the Court found that most meetings did not involve direct communications between suppliers, and further, the communications tended to evidence no agreement was reached. The Court also found the communications were entirely explicable on economic grounds and would have likely occurred in the absence of any CAU. The ACCC has appealed. At the timing of writing, judgment is reserved.
What are the key recent trends (e.g. in terms of fines, sectors under investigation, applications for leniency, approach to settlement, number of appeals, etc.)?
Criminal cartels remain a key ACCC enforcement priority in 2019. The ACCC expects decisions by the CDPP on three criminal referrals this year, and the ACCC’s stated aim is to have two to three criminal investigations conclude and prosecutions commence each year.
Criminal prosecution of individuals and seeking jail sentences for cartel conduct is a key priority for the ACCC. Following investigating by the ACCC, the CDPP is criminally prosecuting a number of banks and their officers in relation to allegations of cartel conduct in connection with a capital raising. The ACCC continues to seek, and the Court is increasingly willing, to impose higher penalties for anti-competitive conduct including cartels. ACCC Chair Rod Sims has repeatedly stated that penalties should be much higher and above $A100m in appropriate cases.
What are the key expected developments over the next 12 months (e.g. imminent statutory changes, procedural changes, upcoming decisions, etc.)?