Australia: Australia – No Safe Harbour for Cartel Offenders

Commercial Litigation & Dispute Resolution Update
Last Updated: 16 August 2010
Article by Monique Nymeyer

On 27 July 2010 a federal jury in Philadelphia, United States convicted Ian Norris, the former CEO of The Morgan Crucible Company plc, of conspiring with others to obstruct justice. The conviction was celebrated by the United States Department of Justice, who have been pursuing Mr Norris since 2004 on charges of price-fixing and obstructing justice in connection with the Department of Justice's antitrust investigation of price fixing in the carbon products industry.


The Morgan Crucible Company, with its headquarters located in Windsor, England, manufactured and sold carbon products to customers in the United States. Mr Norris was Chairman of the Carbon Division from 1986 – 1998, and the appointed CEO for the period 1998 – 2002. The United States' indictment against Mr Norris related to conduct stretching back as early as late 1989 and continuing through to May 2000, during which time Mr Norris and co-conspirators "engaged in a combination and conspiracy to suppress and eliminate competition" by fixing the prices of carbon products sold in the United States and elsewhere.

The prosecution of Mr Norris required his extradition from the United Kingdom under bilateral extradition arrangements between the United States and the United Kingdom. Extradition proceedings were commenced in the courts of the United Kingdom. The extradition of Mr Norris required the United States to satisfy the "dual criminality" requirement prescribed by the UK-US extradition regime; in other words, to demonstrate that there were comparable criminal offences under United Kingdom law.

In 2008, Mr Norris successfully defeated the United States' attempt to extradite him on the price-fixing charges. However, in February 2010 the House of Lords unanimously dismissed Mr Norris' appeal against the Court's decision to allow extradition to face the related obstruction of justice charges, which eventually led to the verdict against Mr Norris entered on 27 July 2010.

Extradition arrangements between the United States and Australia

Australia and the United States have executed an extradition treaty known as the Extradition (United States of America) Regulations (EUSAR). The treaty builds upon the general extradition provisions set out in Australia's Extradition Act 1988 (EA). Under Article II of the EUSAR, the countries have agreed that an extraditable offence includes an offence against both the laws of Australia and the United States for which the maximum penalty is imprisonment for a period of not less than 12 months.

There are a multitude of criminal offences which would qualify an Australian individual as eligible for extradition to the United States in circumstances similar to that of Mr Norris. As an example, the general offence of perverting the course of justice in s319 of the Crimes Act 1900 (NSW) may be considered proportionate to the charges brought against Mr Norris for obstructing justice under United States law.

The Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009

The significance of Australia and the United States' extradition arrangements has been increased with the introduction of the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 ("the Amendment").

The Amendment altered the Trade Practices Act 1974 to include criminal penalties for cartel conduct. Division 1 of the Amendment sets out the civil prohibitions and criminal offences relating to such conduct, targeting the inclusion of cartel provisions within a contract, arrangement or understanding. Section 44ZZRA provides a simplified outline of the relevant provisions, stating:

"A corporation must not make, or give effect to, a contract, arrangement or understanding that contains a cartel provision.

A cartel provision is a provision relating to:

a. price-fixing; or

b. restricting outputs in the production and supply chain; or

c. allocating customers, suppliers or territories; or

d. bid-rigging;

by parties that are, or would otherwise be, in competition with each other."

Sections 44ZRF and 44ZRG of the Amendment make it a criminal offence to make or to give effect to a contract or arrangement which includes a cartel provision respectively.

For individuals, the cartel offence is punishable by imprisonment of up to ten years and/or fines of up to $220,000 per contravention. Under the civil prohibition, individuals may be liable to a pecuniary penalty of up to $500,000 per contravention.

For corporations, both offences are punishable on conviction by a fine not exceeding the greater of the following:

  1. $10,000,000;
  2. if the court can determine the total value of the benefits that:

    1. have been obtained by one or more persons; and
    2. are reasonably attributable to the commission of the offence;
    3. three times that total value;
  3. if the court cannot determine the total value of those benefits – 10% of the corporation's annual turnover during the 12-month period ending at the end of the month in which the corporation committed, or began committing, the offence.

Significance of the Norris verdict for Australian company officers

Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division, stated the 27 July 2010 Norris verdict

"...sends a message that corporate leaders must promote a culture of law abiding conduct within their companies or be prepared to face stiff prison sentences. The antitrust division will remain vigilant in protecting the integrity of its criminal investigations from obstruction in order to effectively carry out its mandate to protect American businesses and consumers from price-fixing cartels."

In circumstances where an Australian individual is charged under United States law for a price-fixing offence, the cartel offences in the Amendment are likely to qualify the charges as those which may be considered an extraditable offence under the EUSAR and the EA.

Australian corporations operating overseas must be mindful of the criminal cartel provisions and the potential liability for price-fixing conduct both within, and outside of Australia's borders. Such behaviour also exposes individual company officers to the risk of overseas imprisonment and considerable financial penalties.

For more information, please contact:


John Dalzell

t (02) 9931 4755


Snezana Vojvodic

t (02) 9931 4993


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.

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