It is common practice for contractors to enter into joint venture arrangements (JVs) when working on major infrastructure/construction projects. However amendments to the Trade Practices Act 1974 (Cth) (TPA) introducing new criminal offences and civil penalty provisions for cartel conduct came into effect on 24 July 2009.
In short, the amendments prohibit any contract, arrangement or understanding (CAU) between competitors that contain a 'cartel provision'. A cartel provision is one that has:
- the purpose or effect of fixing, controlling or maintaining prices for goods or services, or
- the purpose of preventing, restricting or limiting output, market sharing or bid rigging,where at least two of the parties to the CAU that contains the provision are in competition (or are likely to be in competition).
The TPA previously made an exception to prohibitions on cartel conduct for JVs, but following the amendments this exception has been significantly narrowed and will only apply where the contravening arrangement is the subject of and expressly dealt with in sufficient detail in a contract and where the activity is for the production and/or supply of goods or services. Informal arrangements and any other forms of agreement (for example Heads of Agreement, MOU or even Deeds) will not in themselves be sufficient.
Even if the exception applies, if a CAU has the purpose or effect of substantially lessening competition then it may still contravene section 45 of the TPA, and so still be subject to civil prosecution.
In respect of JVs, the amendments to the TPA mean that if you are party to any current or proposed JV you should seek legal advice regarding the application of the new cartel provisions and, in particular, whether the prerequisites to the joint venture exception are satisfied
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
