Australia: Anti-Cartel Laws

Since our last E-Alert in relation to the Trade Practices Amendment (Cartel Conduct and other Measures) Bill 2008 ("Bill"), the Australian Competition and Consumer Commission ("ACCC") and the Commonwealth Director of Public Prosecutions ("CDPP") have issued their final Memorandum of Understanding in relation to "serious cartel conduct" ("MOU") and, on 3 December 2008, the Bill was introduced into the House of Representatives and received its second reading speech.

The anti-overlap provisions are now included in the Bill

In our E-Alert dated 20 November 2008, we informed you that the Bill proposes to create two new criminal offences and two new civil cartel offences in Part IV of the Trade Practices Act 1974 (Cth) ("Act").

We also raised concerns in relation to the Bill's lack of "anti-overlap" provisions which could have meant that many common commercial arrangements would breach the new cartel provisions. The amended Bill addresses these concerns by including exceptions that apply to the cartel criminal offences and civil penalty prohibitions to reflect the existing anti-overlap provisions.

How will the ACCC and the CDPP work together?

On 1 December 2008, the ACCC and the CDPP issued the MOU. The MOU applies to serious cartel conduct including price fixing, market sharing, output control and bid rigging. It is proposed that the MOU will be executed after the Bill receives Royal Assent and before the commencement of the new offences introduced by the Bill.

The role of the ACCC is to investigate cartel conduct, gather evidence, manage the immunity process in consultation with the CDPP and refer serious cartel conduct to the CDPP for consideration of prosecution.

The CDPP is responsible for prosecuting offences under the Act in accordance with the Prosecution Policy of the Commonwealth ("Prosecution Policy"). The CDPP can also bring proceedings under the Proceeds of Crime Act 1987 and Proceeds of Crime Act 2002.

What sort of cartel conduct will be investigated?

The MOU notes that not all ACCC investigations concerning cartel conduct will result in enforcement action or referral to the CDPP. The ACCC will not ordinarily refer relatively minor cartel conduct to the CDPP for consideration for prosecution. The MOU sets out the relevant considerations, which include the duration of the cartel, the detriment to the public, prior cartel involvement by the parties, the value of affected commerce (over $1M in a 12 month period) and the value of bids (more than $1M within a 12 month period).

When will the CDPP prosecute?

The CDPP will make its decision to prosecute in accordance with the Prosecution Policy and the Prosecution Policies Annexure ("Annexure"). The MOU provides that the CDPP will consider the impact of the cartel on the market, the scale of detriment caused to consumers or the public and whether any of the cartel members have previously been found by a court to have engaged in cartel conduct.

The Annexure is a new document which outlines the CDPP's policy in relation to immunity from prosecution for serious cartel offences. The Annexure provides that the CDPP will decide whether to grant immunity from prosecution based on the criteria in the ACCC's immunity policy ("Immunity Policy").

When will immunity be granted?

The Immunity Policy contains the ACCC's criteria for immunity. In order to be eligible for immunity, it is mandatory that the corporation or individual:

  1. was a party to the cartel or was a director, officer or employee of a party;
  2. admits that their conduct may constitute a contravention of the Act;
  3. was the first to apply for immunity in respect of the cartel (i.e. "first in the door");
  4. co-operates with the ACCC's investigation;
  5. is not the clear leader of the cartel and did not coerce other parties into the cartel;
  6. is no longer involved, or will cease to be involved, in the cartel;
  7. undertakes to provide full disclosure and co-operation; and

at the time of the application for immunity, the ACCC has not received written legal advice that it has sufficient evidence to commence proceedings in relation to the cartel.

Who decides whether immunity is granted?

The ACCC will receive and manage requests for immunity in relation to both criminal and civil proceedings. For civil proceedings, the ACCC will decide whether or not to grant immunity in accordance with the Immunity Policy. In relation to criminal proceedings, the ACCC will make recommendations to the CDPP based on the ACCC's assessment as to whether the application for immunity meets the criteria as set out in the Immunity Policy. The CDPP will make the decision as to whether to grant immunity from criminal proceedings in accordance with the Prosecution Policy, the Annexure (which includes the criteria of the Immunity Policy) and the ACCC's recommendation.

This means that it is possible that the ACCC may grant immunity from civil proceedings and recommend to the CDPP that immunity be granted from criminal proceedings, yet the CDPP can still pursue criminal proceedings. The MOU and the Annexure assert that it is in the public interest to offer immunity from prosecution to a person who exposes the illegal conduct (i.e. a "whistleblower") provided that person fully co-operates with the ACCC and the CDPP.

The "prisoner's dilemma" – should I blow the whistle?

There are significant risks in applying for immunity given the applicant must admit to its conduct and fully cooperate with the ACCC, despite the possibility that the ACCC, the CDPP or both may refuse the application and commence proceedings against the applicant. There is also the risk that the applicant is not first in the door or that the ACCC has written legal advice in relation to the cartel. Then again, parties potentially face greater risks in not admitting their conduct and the ACCC and the CDPP may commence proceedings based on evidence from a whistleblower or otherwise.

Seek advice before it's too late

As noted in our previous E-Alert, individuals convicted of a criminal cartel offence would face a maximum penalty of 10 years imprisonment and a fine of up to $220,000. If you are party to a contract, arrangement or understanding not to compete, by manipulating prices, sharing a market, restricting supply or rigging a tender process, then your conduct would be likely to be a criminal offence under the new cartel provisions. In these circumstances, you should seek legal advice immediately as this is a complex area of the law and your actions can have serious consequences.

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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