Cartel conduct must have occurred within a market which,
at least partly, was an Australian market.
In a decision that could have implications for future
cross-border cartel cases, the Federal Court of Australia has
dismissed the ACCC's case for contraventions of the Competition
and Consumer Act against Air New Zealand and Garuda, two airlines
who refused to compromise the long-running cargo investigation in
Australia (Australian Competition and Consumer Commission v Air New
Zealand Limited  FCA 1157).
Cartel conduct must occur within an Australian market
At the heart of the Court's decision was its finding that
the ACCC failed to prove that the conduct alleged occurred in an
Australian market. Without this proof, the conduct fell outside the
The conduct identified by the ACCC case were arrangements to
adopt various fuel and other surcharges for the provision of air
cargo services for inbound freight into Australia. Justice Perram
held that the relevant conduct occurred outside of Australia at the
port of origin where the customers, shippers and freight forwarders
accepted the rates and surcharges of the various airlines carrying
cargo into Australia.
Although the airlines' services were delivered or provided
both at the port of origin and at port of destination (within
Australia through cargo handling and ground handling services on
arrival ), Justice Perram held that the relevant area of
competition over rates and surcharges was confined to the port of
origin, and beyond the reach of Australian law.
In this sense the Competition and Consumer Act requires more
than an "effects test" – that is, showing cartel
conduct merely had an effect on an Australian market or prices
won't be enough. The conduct must have occurred within
a market which, at least partly, was an Australian
Justice Perram also rejected the ACCC's alternative argument
that inflating the cost of air cargo in Australia had flow-on
effects to increase the cost of good in downstream markets for the
goods in Australia. That case was not sufficiently supported on the
evidence before the Court to bring the conduct within an Australian
In other respects Justice Perram made clear that, had he found
there was a relevant market in Australia affected by the conduct
before him, the ACCC would have succeeded.
Cartel conduct outside Australia can still be within an
This does not mean that overseas cartel conduct can never be a
breach of the Competition and Consumer Act.
The Court's finding can be contrasted with other cases where
parties engaged in cartel conduct outside Australia but this
directly had an effect on prices or competitive conduct (eg.
bidding) within Australian domestic markets.
But conduct in a foreign market will not be enough. For example,
imagine cartel conduct which occurred offshore and inflated the
price of TV screens made in Asia, which were then fitted into
televisions and imported into Australia as finished goods. The
Court's finding suggests that that conduct could not be pursued
under Australian law – even if the collusion affecting the
screen components meant that Australian buyers ultimately paid more
for the finished goods.
Where does this leave cartel enforcement?
Since 2009, the ACCC has recovered fines of more than A$98
million from many other airlines through various settlements. Most
airlines chose not to contest allegations for collusion over fuel
surcharges and other charges for transporting air cargo into
Australia dating back to 2006 or earlier.
Airlines who agreed to pay these significant fines have no scope
to reopen those settlements. Unfortunately, the high stakes
involved in major cartel investigations, and uncertainty in the
law, will always make the decision whether or not to settle a very
Assuming the decision is not overturned on any appeal, the next
question is whether the ACCC will support amending the Competition
and Consumer Act's focus on Australian markets.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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