Australia: Industry meetings with competitors: minimising the potential for a breach of Australian competition laws

Koyo Australia was recently fined $2 million for price fixing offences under the Australian competition law.¹ The penalty imposed on Koyo illustrates the risks that can arise out of industry association meetings, whether those meetings are formal or informal.

Koyo supplied bearing products to customers in Australia for automotive and industrial use.

Between 2000 and 2011, senior executives from Koyo and two of its competitors in the Australian bearings market met regularly over dinner as a group that they named "the Southern Cross Association".

These meetings were established as a confidential forum in which the participants were able to exchange sales information and, on occasion, discuss and share confidential information about each of their pricing plans in the Australian bearings market.

At the centre of these proceedings were agreements made in 2008 and 2009 following such meetings, where Koyo and their two competitors each agreed to implement an increase in the sales prices for bearing products.

While there may have been compelling commercial factors underpinning the need for price increases, including increases in the price of raw materials, cost, insurance and freight, as well as currency fluctuations, the understandings reached between the competitors at these meetings meant that the conduct amounted to a breach of the Trade Practices Act 1974 (TPA) (now the Competition & Consumer Act 2010) (CCA).

Under section 45A of the TPA, it was an offence to make or give effect to a contract, arrangement or understanding with the purpose, effect or likely effect of fixing, controlling or maintaining the price at which one or more of the competitors were to supply their products. Section 45A has since been superseded by the cartel conduct provisions of the CCA which provide for a similar offence.

At the time proceedings were commenced, the ACCC and Koyo had reached agreement on the relevant facts and admissions by Koyo as to contraventions of the TPA. They had also reached agreement on the orders that the ACCC was seeking from the Court, and to which Koyo was prepared to consent.

The Court was satisfied that these orders, including the proposed $2 million penalty, were appropriate. The Court determined that the fine was an appropriate deterrent in light of the serious contraventions of the TPA, but also acknowledged Koyo's cooperation in voluntarily approaching the ACCC about the issue and admitting the contraventions of the TPA.

This matter highlights the risks that can arise where competitors meet to discuss sales and pricing information.

In this case, the meetings were part of an informal association, in which discussions took place over dinner. It is important to recognise that, formal industry association meetings, while not so covert, can give rise to similar risks.

Wherever and whenever competitors meet to discuss "the industry", care must be taken to minimise the risk of a breach, or an alleged breach, of the CCA and, in particular, the cartel conduct provisions that deal with issues like price fixing, market sharing and bid rigging.

Steps that may be taken by business operators which may help reduce this risk, include:

• Ensuring that representatives attending such meetings are well trained in the boundaries of acceptable behaviour set by the CCA.
• Instructing representatives to excuse themselves from any meeting that may be straying into conduct that may infringe the CCA, and to request that their absence be minuted.
• Asking for and reviewing a copy of the meeting agenda in advance to determine whether there are any discussions planned in high-risk areas.
• Reviewing a copy of the minutes of each meeting to identify whether any breaches of the CCA may have occurred by any of the attendees. Where the minutes do not accurately reflect the discussion, business operators should seek advice on whether it is appropriate to insist on a correction. If there is a concern that a breach may actually have occurred, business operators should seek advice as to the implications and appropriate next steps.
• Providing for such meetings to be held in a formal, corporate setting. While this will not in itself prevent a breach of the CCA, people are less likely to let down their guard than at a convivial dinner.

Industry association meetings are common. They can be a useful way for industry participants to develop the industry, innovate and ultimately deliver improved value to consumers. However, there are always risks when competitors meet to discuss their business and those risks need to be managed appropriately. Koyo's experience is a clear illustration of what can go wrong where those risks were not managed appropriately.

Footnote

¹Australian Competition and Consumer Commission v Koyo Australia Pty Ltd [2013] FCA 1051.

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