OECD kpcdb

1. Scope

Division 1 of Part IV of the CCA sets out prohibition of cartel conducts. Division 1 prohibits businesses from making or giving effect to a contract, arrangement or understanding that contains “cartel provisions”, i.e. provisions relating to price-fixing, restricting outputs in the production and supply chain, market sharing, and bid-rigging, by parties that are or would otherwise be in competition with each other.

 

Division 2 of Part IV sets out prohibition of other anti-competitive agreements. Division 2 prohibits contracts, arrangements or understandings that are likely to substantially lessen competition in a market, even if that conduct does not meet the stricter definitions of other anti-competitive conduct such as cartels.

 

Per se illegality applies to the arrangements that are most likely to cause competitive harm, such as agreements that fix prices, restrict output, rig bids or share markets.

 

The ACCC regards cartel conduct as so detrimental to consumer welfare and the competitive process that cartels will always be a priority (ACCC’s Compliance and Enforcement Policy).

 

Vertical agreements that have the purpose, effect or likely effect of substantially lessening competition, for instance third-line forcing, are prohibited under the generic heading “Exclusive Dealing” of Section 47. Resale price maintenance is prohibited under Section 48.

2. Assessment

The authorisation provisions of the CCA allow the ACCC to grant legal protection for potentially anticompetitive conduct when the public benefit outweighs the public detriment, including any lessening of competition.

 

Horizontal agreements may be permitted on efficiency grounds where the ACCC is satisfied the public benefit stemming from the conduct outweighs the public detriment (Part VII of the CCA). Formal authorisation must be sought before engaging in the conduct. Decision on the public benefits and detriments likely to result from the conduct is made through a public consultation. Final decision by the ACCC is made within six months of receiving a complete application.

 

As in the case of horizontal agreements, when notified in advance, the ACCC may authorise certain vertical agreements on public benefit grounds under Part VII.

3. Remedies and sanctions

Sanctions on restrictive trade practices prohibited under Part IV of the CCA are administrative in nature (see Section I.4 above on Remedies and Sanctions).

 

However, in respect of cartel conduct, Australia has since 2009 a parallel regime of civil contraventions and criminal offences. Individuals engaged in a cartel could face pecuniary penalties (civil) or fines (criminal), including:

 

a)  up to 10 years in jail and/or fines of up to AUD360,000 per criminal cartel offence

b)  a pecuniary penalty of up to AUD500,000 per civil contravention

 

In cases where pecuniary penalties are imposed upon individuals, Section 77A foresees that corporations are prohibited from indemnifying, through direct or indirect means, their officers, employees or agents against upon whom said penalties have been imposed.

 

Businesses engaged in a cartel may face a maximum pecuniary penalty or fine for each civil contravention or criminal cartel offence of whichever will be greater:

 

a)  AUD10 million

b)  three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention

c)  where benefits cannot be fully determined, 10% of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.

 

Compliance programmes are also used as part of the ACCC’s enforcement activities. Under Section 87B, the ACCC may accept formal written undertakings in the exercise of its powers under the CCA. As part of these undertakings, the ACCC requires, in many cases, the business to implement a compliance programme designed to prevent breaches of the CCA occurring in the future. If a term of an undertaking under Section 87B is breached, the Federal Court may make enforcement and compensation orders.

 

Criminal prosecutions may only be undertaken by the Commonwealth (federal) Director of Public Prosecutions (CDPP). The CDPP is an independent prosecution service which prosecutes alleged offences against Australian federal (Commonwealth) law. The ACCC works with the CDPP in relation to the criminal prosecution of cartel conduct.

 

The ACCC has signed in 2014 a Memorandum of Understanding with the Commonwealth Director of Public Prosecutions regarding Serious Cartel Conduct. The ACCC is more likely to refer a criminal matter to the CDPP for consideration for prosecution where: the conduct was covert; the conduct could or did cause large scale or serious economic harm; the conduct was longstanding or could have a significant impact on the market; the conduct could or did cause significant detriment to the public, or significant loss or damage to customers of the participants; the participants were involved in previous cartel conduct; senior representatives within the relevant corporation(s) were involved in authorising or participating in the conduct; the Government, and thus taxpayers, were victims (even where the value of affected commerce is relatively low); or the conduct involved the obstruction of justice or other collateral crimes.

 

In the last five years, sanctions and/or remedies have been imposed on both horizontal and vertical anti-competitive agreements.

4. Leniency

Parties to a cartel conduct may seek both civil and criminal immunity. The ACCC and the Commonwealth Director of Public Prosecutions (CDPP) are responsible for granting civil immunity and criminal immunity, respectively.

 

The ACCC immunity and co‑operation policy for cartel conduct 2014 sets out the ACCC’s policy in relation to applications for immunity from ACCC-initiated civil proceedings. In order to be eligible for the civil immunity, a business must be the first to come forward, admitting that its conduct constitutes a contravention of the CCA and must not have coerced others to participate in the cartel.

 

The ACCC can deny access to confidential cartel information provided under a leniency application, although access can subsequently be ordered by the Court where, having weighed the competing interests, the balance lies in favour of disclosure.

 

The ACCC and the CDPP have agreed on procedures to facilitate the granting of civil immunity and criminal immunity at the same time. Where the ACCC decides that the applicant satisfies the conditions for immunity, it may make a recommendation to the CDPP that criminal immunity be granted to the applicant. However, the CDPP exercises an independent discretion in granting immunity from prosecution.

 

Amnesty Plus: If a party is co‑operating with the ACCC in relation to one cartel and discovers a second cartel that is independent and unrelated to the first cartel, and receives conditional immunity for the second cartel, that applicant may seek “amnesty plus” in respect of the first cartel conduct. Amnesty plus is a recommendation by the ACCC to the court for a further reduction in the civil sanctions (including penalty) in relation to the first cartel. If the first cartel is being dealt with as a criminal matter, the CDPP will advise the court of the full extent of the party’s co‑operation so that it will be taken it into account for sentencing purposes. A party will be eligible for amnesty plus if it: (a) is a co‑operating party in the first cartel investigation, and (b) receives conditional immunity for the second cartel. The criteria for immunity and the process for recognising co‑operation by that party with the ACCC or CDPP contained in the Policy will apply to a party seeking amnesty plus.