This Friday 24 July 2009, will see significant amendments to the
Trade Practices Act come into effect that re-write the
rules for many joint ventures and other arrangements between
competitors. With criminal prosecutions and possible prison
sentences at stake, all corporate counsel and senior managers
should familiarise themselves with these changes.
In short, the new cartel legislation provides that any
arrangement between competitors that has the purpose or effect of
fixing prices (for sales or purchases), sharing markets,
controlling output and co-operating on bids is a criminal offence.
Even where the necessary intent is absent, severe civil penalties
may still be imposed on companies and individuals.
Clients should also be aware that the legal definition of
"competitor" is often significantly broader than what
most commercial people consider to be the case for their business.
Moreover, it is not necessary that your company be one of the
competitors: a tripartite agreement in which only two parties are
competitors will still result in liability for the third
Most importantly, the long-established exception for joint
ventures has been significantly narrowed. It will apply
only where the contravening arrangement is the
subject of and expressly dealt with in a contract. Informal
arrangements and any other forms of agreement, be they Heads of
Agreement, MOUs or even Deeds, will not in themselves be
sufficient. Moreover, there is even a degree of risk attached to
pre-contractual negotiations, as they themselves may be viewed as
While these changes have been greatly criticised for making many
common commercial arrangements a potential criminal offence, it is
vital that all businesses be aware of the issue and how to manage
Businesses must now ask themselves the following question:
Are you party to any current or
proposed commercial arrangement that involves two or more parties
in the same or similar industries that is either:
not documented at all;
documented in any form other than valid binding contract; or
documented in a contract but omits or insufficiently deals with
terms about pricing (on sales or acquisitions), customers,
suppliers, marketing or sales regions, output control or bidding on
Clients are strongly advised to seek urgent legal advice if the
answer to this question is anything other than a confident
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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Two recent cases - by competition authorities in China and in South Africa -.are interventions against excessive pricing.
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