The role of immunity as a prosecutorial tool in criminal cartel offences in the United Kingdom and Australia
A prohibition on agreements, arrangements or understandings or other forms of collusive behaviour between competitors involving price fixing, market sharing, output restrictions and tender or bid rigging (cartel conduct) is a staple of competition regulation across the globe. Criminalisation of cartel conduct, however, is not yet universal, and inevitably provokes debate about the application of criminal law principles to what some regard as a somewhat less reprehensible "economic" crime.
That debate has been aired in connection with the standard of dishonesty as it applies to the cartel offence under section 188 of the United Kingdom's Enterprise Act 2002. In his paper "How Dishonesty Killed the Cartel Offence"1, Dr Andreas Stephan argues convincingly that, if not dead, the UK cartel offence in its current form is seriously ill and perhaps best served by euthanasia.
This paper does not address the role of dishonesty in prosecution of criminal cartel conduct (which does not apply under the criminal cartel conduct provisions of the Australian Competition and Consumer Act 2010) but looks at the role in such prosecutions of policies implemented by United Kingdom and Australian competition regulators by which immunity from prosecution for cartel conduct is available to cartelists who satisfy certain criteria (immunity policies). It does so in the context of the highly publicised May 2010 dismissal of the case brought by the United Kingdom Office of Fair Trading (OFT) against four British Airways executives for price fixing of passenger fuel surcharges on long haul flights2 (BA case), and poses the question: can the immunity policies of the United Kingdom and Australia be effectively and fairly used to support criminal cartel prosecutions?
In considering the role of the Australian and United Kingdom immunity policies in the prosecution of criminal cartel conduct, this paper:
- identifies important similarities and differences between the policies of the two jurisdictions;
- discusses, briefly, the theoretical role of immunity policies;
- summarises the stated reasons for the collapse of the BA case and the role of the United Kingdom immunity policy in it; and
- discusses what the author perceives to be inherent tensions between the role of immunity policies and the conduct of a criminal prosecution.
Immunity Policies in Australia and the United Kingdom – some important similarities and differences
Cartel conduct in Australia and the United Kingdom is subject to both civil and criminal sanctions, with criminal sanctions in both jurisdictions being confined to serious or hard core cartel conduct. In the United Kingdom criminal sanctions apply only to individuals, whereas in Australia a corporation may also be guilty of an offence.
Similarly, competition regulators in both Australia and the United Kingdom have implemented policies by which immunity from prosecution for cartel conduct is available to cartelists who satisfy certain criteria.
In Australia, that policy is the Immunity Policy for Cartel Conduct, July 2009, which is administered by the Australian Competition and Consumer Commission (ACCC). In terms of criminal cartel conduct, immunity from prosecution requires the ACCC's recommendation for immunity to the Commonwealth Director of Public Prosecutions (CDPP) and the CDPP's independent exercise of its discretion to grant such immunity under section 9(6D) of the Director of Public Prosecutions Act 1983 (Cth).
In the United Kingdom, the OFT administers two separate policies, one in respect of immunity from, or a reduction in, civil penalties for breach of Chapter 1 of the Competition Act 19983, and the other in respect of immunity from criminal prosecution for individuals for breach of section 188 of the Enterprise Act 2002. The latter takes the form of a "no- action" policy4 which is given statutory recognition under section 190 (4) of the Enterprise Act.
In terms of immunity from criminal prosecution for cartel conduct, the Australian and United Kingdom policies each contain the following similar core requirements5:
- an admission by the immunity applicant of participation in a cartel which breaches the relevant law (in Australia this requirement extends only to admission that participation "may constitute a contravention or contraventions of the Competition and Consumer Act"6, whereas in the United Kingdom the admission must be of participation in the criminal offence7);
- an obligation on the immunity applicant to provide full disclosure 8 to the regulator (in Australia, this requirement of "full, frank and truthful" disclosure includes providing full details of all known facts relating to the cartel conduct9 , whereas in the United Kingdom the obligation is to provide all information available to the applicant regarding the existence and activities of the cartel10); and
- an obligation on the immunity applicant to cooperate fully on a continuous basis with the regulator throughout the course of its investigations and any proceedings, until their conclusion11.
Similarly, the immunity policies of each jurisdiction contain provisions allowing for the revocation of immunity in certain circumstances. In Australia, revocation can occur at any time for failure to comply with any of the requirements of immunity or for providing information which is false or misleading12. In the United Kingdom, revocation can occur if the immunity applicant ceases to satisfy, in whole or in part, any of the conditions of the grant of immunity or knowingly or recklessly provides false or misleading information to the regulator.13
There are, however, significant differences between the two policies which, for reasons described later in this paper, may have an impact on the efficacy of the use of the policies as a prosecutorial tool. Of particular significance are the following differences:
- the requirement under the Australian policy that the grant of immunity requires not just satisfaction of the ACCC's requirements under the Immunity Policy for Cartel Conduct, July 2009 but also that the CDPP be satisfied, using its independent discretion exercised in accordance with the Prosecution Policy of the Commonwealth14, that immunity should be granted;
- the fact that the grant of immunity has no statutory basis in Australia, whereas in the United Kingdom section 190(4) of the Enterprise Act empowers the OFT to issue "no-action" letters;
- the existence of provisions dealing with "protected cartel information"15 in the Australian Competition and Consumer Act 2010 which attempt to regulate the circumstances in which such information can be disclosed to a Court, or to a party to Court proceedings in which the ACCC is not a party;
- the limitation on the ability of the ACCC to use information provided to it by an immunity applicant where immunity is revoked to use in or for "obstruction proceedings", being proceedings for obstruction of a Commonwealth official by reason of the provision of false and misleading information or documents16. The OFT has no such limitation and may rely on the information in a subsequent prosecution of the immunity applicant17; and
- the fact that, in Australia, criminal prosecutions will only be undertaken by the CDPP, whereas in the United Kingdom the OFT has a choice to prosecute itself or refer the matter to the Serious Fraud Office.
The role of immunity policies – the theory
A review of the immunity policies of Australia and the United Kingdom, and comments made by the ACCC and OFT in respect of the same, demonstrates that the regulators consider the policies to have three major roles, namely:
- as a tool for detection of cartels (and with it, the procuring of evidence18);
- to deter would-be cartelists from engaging in cartel conduct; and
- as a tool to assist in the prosecution of cartelists (and the securing of convictions19).
In the second reading speech for the Bill introducing the criminal cartel offence in Australia (the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008), reference was made to the twin purposes of deterrence and detection which it was believed would be enhanced by the introduction of the offence. The ACCC's view that the roles of detection and deterrence are heightened when criminal sanctions are involved is recognised in its Immunity Policy Interpretation Guidelines July 2009 (at paragraph 9) and has also been expressly stated in its submission to an Australian Senate Economics Committee inquiry into the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 200820.
The OFT, on the other hand, states, at paragraph 3.1 of its policy, that:
"The interests of customers and end-consumers in ensuring that such practices are detected and brought to an end outweigh the policy objectives of imposing penalties on those individuals who have committed an offence but who cooperate fully with the OFT and, where appropriate, any other competition authorities".
Much has been written about the success of immunity policies, generally, and in each of the United Kingdom and Australia in particular,in terms of detection and deterrence21. It is not the intention in this paper to enter into the debate as to the success or otherwise of such policies in achieving those aims. Until the BA case, however, their role in securing prosecutions in criminal cartel cases was untested. The BA case demonstrates that application of immunity policies will be problematic in securing criminal prosecutions. The question for the regulators/prosecutors, immunity applicants and cartel participants, and their advisers, is: can those problems be overcome, or are there tensions between the grant of immunity and the administration of justice which make immunity policies inherently unsuitable as a prosecutorial tool?
The BA case
The withdrawal by the OFT, and subsequent dismissal by the Court, of the criminal prosecution against the four British Airways executives followed the discovery, late in the day, of "a substantial volume of electronic material, which neither the OFT nor the defence had previously been able to review."22
In its press release issued on the day the criminal case against the four British Airways executives was dismissed, the OFT stated that the collapse of the trial raised "a number of issues as regards the way in which the OFT interacts with leniency applicants and their advisers".23 While acknowledging partial responsibility for the failure to disclose the material, and stating that it was "taking steps to amend its published guidance on its immunity policy", the OFT stated that it was reviewing the role played by the immunity applicant and its advisers in light of the "obligations to provide the OFT with continuous and complete cooperation" and hinted that it may have consequences for the applicant's immunity status.
If the BA case has dealt a mortal blow to the UK cartel offence, the OFT press release suggests that the blow was delivered through inadequacies in the application of the immunity policy, which were peculiar to that case and were, in part, due to the OFT's inexperience in criminal procedure. Such an assessment, however, ignores the inherent tensions between use of a policy to provide immunity to a cartelist who is willing to blow the whistle on its fellow cartelists and the need to establish the offence in relation to those fellow cartelists, to the criminal standard. Those tensions, and the balancing act which is needed to ensure that the rights of both parties are sufficiently protected are explored further below.
The moral dilemma
The pursuit of a criminal prosecution of a cartelist based on the evidence of a fellow cartelist to whom immunity from prosecution has been given presents a moral conundrum, in that both parties are morally culpable but only one will pay the criminal price. As Dr Stephan notes, one of the aims of criminal sanctions is to "ensure that the right people are punished"24, but some question "the fairness of punishing only half the perpetrators so severely"25.
Should it come as any surprise, then, that the material produced by a "self-confessed criminal by definition"26 will invite scrutiny of the closest kind and any deficiency, even if it does not "fundamentally undermine the prosecution's case"27, will cause the prosecution to falter, if not fail? That this is especially the case, given the difficulties which, as Dr Stephan and others point out,the public has in accepting the criminality of cartel conduct28, demonstrates one of the limitations in use of immunity policies as a prosecution tool.
Looking at it from another moral perspective, Clare Montgomery QC, one of the counsel in the BA case, highlighted one of the difficulties of reliance on an immunity policy in a criminal prosecution, when she addressed the jury in the BA case, saying that "the UK regulator's policy of offering immunity to the first party to confess to an illegal and dishonest cartel may prompt false confessions of guilt"29. That this was reported under the headline "OFT immunity policy means truth unclear" is a stark reminder that findings of guilt and immunity policies do not necessarily make good bedfellows.
Obtaining the evidence – can an immunity policy reliably provide it?
Under the immunity policies of both Australia and the United Kingdom the requirements of full, frank and truthful disclosure and ongoing complete cooperation should, in theory, be able to be relied upon to arm prosecutors with much of the necessary evidentiary materials to prosecute the case, including materials to which the defence is entitled. If the BA case demonstrates anything, it is that this theory did not work in practice. To that end, the OFT, while laying some of the blame at the foot of the immunity applicant, has also has acknowledged shortcomings in the way in which it sought to obtain that evidence from the immunity applicant. It could be tempting, therefore, to put the collapse of the BA case down to a unique set of circumstances, the lessons from which should ensure that it will never be repeated. But is there a more fundamental problem with reliance on an immunity applicant to satisfy the prosecution's evidentiary burden?
One difficulty, which a simplistic view of the BA case ignores, is that an immunity applicant is not the regulator/prosecutor, nor will it, or its advisers, necessarily be privy to decisions taken by the prosecution as to how the case is run or to the demands made by the defence. Put simply, the immunity applicant is not, should not, and cannot be, the arbiter of what evidence is required to satisfy the prosecution's obligations. In this regard, notwithstanding its obligations to provide all information it holds relevant to the cartel, the immunity applicant is in the prosecutor's hands. The regulator/prosecutor, on the other hand is not armed with, and does not necessarily know what, or how much the immunity applicant knows or should know about the cartel. This knowledge imbalance creates a tension because neither party knows what it doesn't know.
It is not too hard to envisage a situation where an immunity applicant, in its haste to secure immunity occasioned by the need to be first to the gate, hands over to, or otherwise provides the regulator with access to, everything which it is aware or believes is relevant to the cartel for which immunity has been granted, only for both parties to subsequently discover that some other material is relevant or potentially relevant. Questions of timing of commencement of the prosecution have the potential to impact on the disclosure provided by an immunity applicant. For large organisations with extensive electronic records, interrogation of the same may take not just time, but considerable effort in refining the forensic searches necessary to ensure production of all relevant or potentially relevant information. This is time which an immunity applicant will rarely have before seeking immunity. Time, however, is more likely to be in the control of the prosecutor, at least as far as commencement of proceedings against the defendant cartelist is concerned.
Ultimately, it must be the prosecutor's role to obtain the necessary evidence and, it must be up to it to satisfy itself, not only that all relevant information has been disclosed, but that all necessary information has been requested from the immunity applicant before it commences proceedings. If that presents a difficulty for the prosecutor, it is one which cannot be laid solely at the immunity applicant's feet. If an immunity policy is to be used as a prosecutorial tool, a request for information from an immunity applicant, which in turn causes it to further interrogate its records, is, and should be part of the immunity process at work. A failure to request information by the regulator/prosecutor before commencing criminal proceedings is as much a failure of its application of the immunity policy as would be any failure of an immunity applicant to produce such information. In the context of a criminal trial this may mean that the prosecutor itself must interrogate the immunity applicant's records.
Giving a prosecutor a wide ranging power to obtain access to, and interrogate records held by an immunity applicant, pursuant to a discretionary policy, without an express statutory right to do so and the consequent protections afforded to the party whose records are being accessed30 , is something which should not be granted lightly. In Australia, the concept of "protected cartel information" and the protections from disclosure contained in sections 157B and 157C of the Competition and Consumer Act 2010 go some way to affording an immunity applicant protection where its records are provided pursuant to a grant of immunity but it does not solve the underlying problem of how the prosecutor can, and should, obtain the necessary evidentiary material to support its case, including from the immunity applicant.
While there would be nothing to prevent a regulator from using its statutory powers to compel production from an immunity applicant in the context of a prosecution, an acknowledgment that this will occur should be made as part of the immunity policy so that potential applicants can make informed choices as to whether to seek immunity and so open themselves up to the more certain possibility of exercise such powers.
How far should the obligation on the immunity applicant to disclose information and documents for use in a criminal prosecution go?
The use of information and evidence from an immunity applicant in a criminal trial has the potential to raise issues of competing interests, the resolution of which can have profound effects for either or both of the immunity applicant and the defendant.
On one hand, the defendant, who faces gaol sentences (of up to 10 years in Australia and up to 5 years on indictment in the United Kingdom) is entitled to disclosure of the prosecution's case against him or her as well as any information in relation to the credibility of the prosecution witnesses, and any material that was gathered in the course of the investigation but is not used in the prosecution's case and either runs counter to the prosecution case (i.e. points away from the defendant having committed the offence) or might reasonably be expected to assist the defendant in advancing a defence.31 That the administration of justice dictates that a defendant should not be denied all of the rights and protections that the law provides requires no justification.
On the other hand, how far should a prosecutor or a Court go to ensure that this entitlement of the defendant is fulfilled? Should an immunity applicant be required to disclose information which, although relevant, it would otherwise not be required to disclose, such as communications which are the subject of legal professional privilege32, or information which, if disclosed, would prejudice its rights to immunity in other jurisdictions, and thus potentially expose it to criminal prosecution in such other jurisdictions (and potentially prejudice investigations of regulators in those other jurisdictions)?
While these questions may seem theoretical, the fact that the immunity policies of both Australia and the United Kingdom require full, frank and complete disclosure with no reference to any exemptions from disclosure makes it a very real possibility that, in fulfilling its obligations, a prosecutor could insist on disclosure of information which any other party, other than an immunity applicant, could resist, or which would place the immunity applicant in jeopardy in other jurisdictions.
The ramifications of such insistence by a prosecutor on disclosure by an immunity applicant should not be under estimated. The ability to obtain legal advice without fear of its disclosure is fundamental to the success of an immunity policy, as it is often that advice which results in the application being made in the first place. This is especially the case where the immunity applicant is required to admit to a criminal offence (or in the case of Australia, admit that the conduct may be an offence). Navigating the many issues which can arise in the context of an immunity application, such as the form in which the original proffer is given, to questions of how to balance the obligation to keep the fact of the application secret with disclosure obligations to shareholders and stock exchanges, requires that immunity applicants be able to seek and obtain legal advice free of fear of disclosure. This is not a case of an immunity applicant being "rewarded or encouraged by reduced exposure or enhanced protection"33 but simply a case of maintenance of a protection afforded by law. If this right is threatened there must be a real likelihood that immunity becomes less attractive to cartelists and, with it, a reduction in the roles of detection and deterrence.
Similarly, such insistence, where it involved disclosure of the fact of immunity applications in other jurisdictions would also be likely to undermine the cooperation between regulators in investigating and prosecuting cartels, which plays such an important part in global cartel enforcement.34 The inherent tension between balancing these competing rights and achieving fairness for all is another reason why reliance on immunity policies as a prosecutorial tool is fraught with difficulty.
The right to revoke immunity
The threat of revocation of immunity which may arise where a criminal prosecution fails for some deficiency in an immunity applicant's cooperation raises important questions about the efficacy of immunity policies as a prosecution tool.
If procedural fairness requires a level of disclosure to the defence, then procedural fairness should also require that an immunity applicant who gives prosecution evidence is not placed in a less favourable position than it would have been had it been the defendant in those proceedings. While the Australian policy would not permit the ACCC to use information provided to it by an immunity applicant whose immunity has been revoked, in a prosecution of that applicant for breach of the cartel conduct provisions of the Competition and Consumer Act 2010, no such safeguard exists in the United Kingdom policy and the OFT is free to use such information for the purposes of a cartel prosecution.
In circumstances where revocation may take place at any time, including during or after a criminal trial in which the immunity applicant's information and evidence is used, and where there is, or is likely to be, no ability to seek a merits or judicial review of the decision to revoke35 , an immunity applicant could easily find itself in a worse position than it would have been in, had it not sought immunity and had it been prosecuted for cartel conduct.
There can be little doubt that immunity policies are both a powerful tool in a regulator's armoury against cartels and a welcome "get out of jail free card " for cartelists who are prepared to admit their involvement and assist in bringing their fellow cartelist to account. Such policies, however, have limitations and this is nowhere more apparent than in their use as a prosecutorial tool.
If there are lessons to be learned from the collapse of the BA case, it is not that the regulator may have been incompetent or that the immunity applicant may have failed to meet its obligations under the immunity policy, but that use of immunity policies to provide the evidence to support a criminal prosecution is fraught with difficulties and is likely to lead to unsatisfactory results for all concerned whether they be regulators/prosecutors, immunity applicants, or defendants. While the Australian immunity policy and the legislative framework dealing with protected cartel information may address some of the difficulties which became so apparent in the BA case, the underlying tensions remain. It remains to be seen how Australian Courts will deal with these tensions, should a criminal prosecution be launched which is reliant on the evidence of an immunity applicant.
1 Criminal Law Review, Vol. 6, pp. 446-455, 2011
2 R v Burns and ors
3 Found in Section 3 of the OFT's "Guidance as to the appropriate amount of a penalty", December 2004.
4 Found in the OFT's "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003
5 This review does not capture every similarity in the policies.
6 Paragraphs 8(a)(ii) and 17(a)(ii) of the ACCC's Immunity Policy for Cartel Conduct, July 2009.
7 Paragraph 3.3, "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003 8 Paragraphs
8 (a) (vii) and 17 (a)(vi) of the ACCC's Immunity Policy for Cartel Conduct, July 2009 and paragraph 3.3 of the OFT's "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003.
9 See paragraphs 77 and 80 of the ACCC's Immunity Policy Interpretation Guidelines, July 2009
10 Paragraph 3.3, "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003
11 See paragraph 78 of the ACCC's Immunity Policy Interpretation Guidelines, July 2009 and paragraph 3.3 of the OFT's "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003
12 See paragraph 12 of the ACCC's Immunity Policy for Cartel Conduct, July 2009 and paragraph 5.1.2 of Annexure B to the Prosecution Policy of the Commonwealth.
13 Paragraph 3.11 of the OFT's "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003
15 Defined in section 157B of the Competition and Consumer Act 2010 as information which relates to a breach of the criminal and civil cartel conduct provisions, which was given to the ACCC in confidence.
16 Under section 155(5) of the Competition and Consumer Act 2010 or sections 137.1, 137.2 and 149.1 of the Criminal Code 1995 (Cth)
17 Paragraph 3.12 of the OFT's "The Cartel Offence. Guidance on the issue of no-action letters for individuals", April 2003
18 Lawrence, O'Kane & ors, Hardcore Bargains: What Could Plea Bargaining Offer in UK Criminal Cartel Cases,  Comp Law 17 at 22.
21 See, for example, "How to get out of a cartel" at http://www.accc.gov.au/content/index.phtml/itemId/1010906.
22 Press release issued by the OFT on 10 May 2010 "OFT withdraws criminal proceedings against current and former BA executives"
24 A Stephan, "How Dishonesty Killed the Cartel Offence" , op cit, at page 2.
25 Ibid, at page 10
26 Lawrence, O'Kane & ors, supra, at 24
27 OFT's press release, supra.
28 A Stephan, "Survey of Public Attitudes to Price-Fixing and Cartel Enforcement in Britain"  5(1) Comp. Law Review, pp 123-145
29 Reported in an article by Emma Sadowski on 30 April 2010 – see http://www.cityam.com/news-and-analysis
30 As is the case, for example, with the exercise of powers under section 155 and the protections contained in section 155AAA of the Competition and Consumer Act 2010
31 See, for example, the CDPP's Statement on Prosecution Disclosure
32 In Australia, the principle of legal professional privilege protects communications prepared for the dominant purpose of obtaining legal advice or use in anticipated litigation, from disclosure to the ACCC under its compulsory powers32
33Beaton-Wells, C, "Forks in the Road: Challenges Facing the ACCC's Immunity Policy for cartel Conduct (part 1)  UMelbLRS 7 (in the context of third party damages claims against whistleblowers)
34 As is frequently recognised by regulators, see, for example, the comments of Scott Hammond, Director of Criminal Enforcement at the American Bar Association's Antitrust Section Spring Meeting in Washington DC, 2 April 2003
35 In Australia, at common law, a decision whether or not to prosecute will not be reviewable unless it is an abuse of process. Under judicial review legislation, such decisions will not be reviewable if they are not "an ultimate or operative determination" – see, for example, Re Toll and Australian Securities Commission (1993) 29 ALD 42, paragraph 16, 415-416, referred to in the Australian Law Reform Commission Report: "Principled Regulation; Federal Civil and Administrative Penalties, Report 95" at [23.2] to [23.36].
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