Australia

Settlement availability and process

Competition enforcement proceedings involving the Australian regulator, the Australian Competition and Consumer Commission (ACCC), can be resolved through a number of different avenues. A competition conduct settlement may range from an informal administrative resolution to a court-enforceable undertaking, through to a court-imposed sanction following the parties putting an agreed position to the court.

Relevant regulatory bodies

The relevant decision-making bodies may include the ACCC, the Commonwealth Director of Public Prosecutions (CDPP) or the Federal Court of Australia (the Court).

In Australia the competition regulator is responsible for investigating breaches of the competition prohibitions (contained in Part IV of the Competition and Consumer Act 2010 (Cth) (the Act)) but does not have the power to make any finding that a person has contravened the Act nor to impose sanctions. Rather, the ACCC may commence civil court proceedings and the Court, if satisfied that a contravention has occurred, may impose a range of sanctions including civil pecuniary penalties.

All competition prohibitions may be enforced civilly, and cartel conduct may be enforced through either civil or criminal proceedings. The CDPP is the authority responsible for prosecuting criminal Commonwealth offences including criminal cartel enforcement proceedings. The ACCC may investigate and then refer cartel conduct to the CDPP, who will make an independent decision under the Prosecution Policy of the Commonwealth whether to commence a criminal prosecution.^[2] If a corporation or individual is guilty of a cartel offence, the Court may make a range of orders that may include fines or a term of imprisonment.

Forms of resolution and applicable processes

The ACCC’s approach to enforcement action, including settlements, is informed by its Compliance and Enforcement Policy and Priorities (the Enforcement Policy),^[3] Cooperation Policy for Enforcement Matters (the Cooperation Policy)^[4] and immunity and cooperation policy for cartel conduct (the Immunity Policy).^[5] The form of resolution that may be reached with the ACCC can include:

• an informal administrative resolution;
• a court-enforceable undertaking given by the corporation to the ACCC; or
• a joint proposal by the corporation and the ACCC to the Court seeking the imposition of particular civil enforcement sanctions.

Criminal cartel prosecutions raise particular considerations, which are discussed in more detail below.

Administrative resolutions

The ACCC may elect to resolve a competition investigation through an informal ‘administrative resolution’. There are no prescribed forms or requirements for administrative resolutions, which may simply involve a written commitment from the corporation under investigation or, in some cases, a signed agreement between the corporation and the ACCC. The ACCC may accept an administrative resolution in a broad range of circumstances, including where the ACCC considers the potential risk from the conduct is low.^[6]

Court-enforceable undertakings

The ACCC has a broad discretion to accept written undertakings in connection with its powers and functions under the Act.^[7] In the enforcement context, the ACCC may accept an undertaking where it considers a formal resolution is warranted and an undertaking is an appropriate alternative to a court-based outcome. A decision to accept an undertaking can only be made by the ACCC commissioners, rather than ACCC staff including members of a case team.

The ACCC will only accept a court-enforceable undertaking where it considers a corporation has, or is likely to have, contravened the Act.^[8] When deciding between an undertaking and court proceedings, the ACCC will have regard to which enforcement process will provide the best outcome in terms of ongoing compliance and redress for affected parties.^[9] The ACCC’s Undertaking Guideline sets out a number of non-exhaustive factors that the ACCC will consider when making this assessment, which include the nature and seriousness of the conduct, the ability of an undertaking to provide redress to affected parties and whether there is a history of complaints or enforcement action in relation to the corporation or industry more broadly.^[10]

The ACCC may raise the prospect of accepting an undertaking to resolve an investigation but cannot require a party to offer one. It is a matter for the corporation under investigation to determine whether and on what terms it is willing to offer an undertaking and for the ACCC to decide whether it is willing to accept any such offer. There is no prescribed form for such undertakings; however, the ACCC’s Undertaking Guideline contains a template and a framework for common elements of such undertakings.

The acceptance of an undertaking under Section 87B of the Act will generally mark the conclusion of an investigation. However, it is possible for the ACCC to accept an undertaking but continue to investigate and potentially commence court proceedings in relation to the same or related matters.^[11] In addition, it is possible for the ACCC to accept an undertaking under the Act in conjunction with a resolution of court proceedings.^[12]

If an undertaking is breached, the ACCC may commence enforcement proceedings seeking an order from the Court, which may include a direction to comply with the undertaking, to pay to the Commonwealth an amount up to any financial benefit attributable to a breach or to pay compensation to affected parties.^[13] In such proceedings, the ACCC must establish a breach of the undertaking but is not required to establish an underlying contravention of the Act.

Civil court sanctions

The ACCC and parties can jointly propose a court-imposed sanction, such as a civil penalty, on an agreed basis. However, the Court is not bound to accept an agreed penalty.^[14] Nevertheless, Australian courts recognise that there is an ‘important public policy involved in promoting predictability of outcome in civil penalty proceedings’ and that:

Subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and . . . highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty.^[15]

In determining whether an agreed penalty is appropriate, the Court will have regard to whether the proposed penalty is one that achieves the object of deterrence in light of all relevant matters, including factors discussed below.^[16]

A court-based settlement may be negotiated at any stage, but will generally occur after the ACCC has commenced court proceedings. In many civil proceedings the Court orders the parties to engage in a mediation process. Settlement negotiations generally involve ACCC case officers or its legal representatives, but the terms of any agreed orders must be endorsed by the ACCC’s commissioners. The ACCC’s position in relation to an appropriate sanction is ultimately guided by the penalty factors applied by the Court, which are also reflected in its Cooperation Policy and, in relation to civil cartel proceedings, the cooperation provisions of its Immunity Policy. Recently, the Court has queried the sufficiency of penalties agreed between the ACCC and a corporation in a number of consumer law proceedings, in relation to which the ACCC is also the regulator.^[17]

Criminal cartel proceedings

The position in relation to criminal cartel enforcement actions is different in a number of important respects. Critically, it is not open for the CDPP and a defendant to reach agreement on a sanction to propose to the Court. Determining a sentence in a criminal proceeding is a ‘uniquely judicial exercise’ for a judge alone.^[18]

While a prosecutor may make submissions on legal and factual issues, including in relation to relevant aggravating and mitigating circumstances and the type of sentence it considers appropriate, it is not for the prosecution to make a submission about the particular sanction that should be imposed, nor can the parties bind the Court by any agreement in this respect.^[19] However, a defendant may make submissions about the appropriate sanction and the prosecutor may make submissions in response without proposing an alternative sentence.^[20]

It remains open for the CDPP and a defendant to negotiate the scope of conduct to which a defendant will plead guilty. This may, for example, involve the defendant pleading guilty to one ‘rolled-up’ charge involving conduct that might otherwise involve multiple contraventions or episodes of criminality. A rolled-up charge may reduce the maximum potential sanction as the defendant will be sentenced on the basis of the maximum penalty that applies to one contravention rather than the aggregated total that might otherwise apply to multiple contraventions.^[21] The CDPP and defendant may also agree upon facts that are relevant to the elements of the offence and to the Court’s sentencing discretion.

Ultimately, the Court will determine a sentence that ‘is of a severity appropriate in all the circumstances of the offence’, having regard to a broad range of prescribed factors.^[22]

Submissions, admissions and factual disclosure requirements

The requirements relating to submissions, admissions and factual disclosures vary depending upon the form of resolution.

Administrative resolutions

Given the informal nature of administrative resolutions, they may not require an admission of contravention, although they usual contain an acknowledgment of the ACCC’s concerns. The ACCC may, but will not necessarily, publicise the fact of the resolution by issuing a media release or by otherwise publicly referring to the matter.^[23]

Court-enforceable undertakings

The ACCC maintains a public register of undertakings given to it under Section 87B of the Act, and will issue a media release when it accepts such an undertaking.^[24] This is consistent with the ACCC’s view that such undertakings should be a matter of public record.^[25] Although there is no prescribed form for such undertakings, they will generally include a number of common elements, including a high-level summary of the conduct of concern, an acknowledgement or admission that the conduct of concern constitutes or was likely to constitute a contravention and the specific obligations that the corporation has assumed to resolve the investigation.^[26]

While an admission of contravention may not strictly be required, the ACCC will generally not accept an undertaking that contains a denial that the corporation has contravened the Act.^[27] To the extent that it is necessary or desirable to include confidential information in an undertaking, the ACCC may maintain confidentiality over parts of an undertaking that contain commercially sensitive information.

Civil court sanctions

Settlement of civil proceedings requires the Court to be satisfied that there is a sufficient factual and legal foundation for the proposed orders. This will necessarily involve an admission of a contravention and for the Court to be provided with details of the contravention and other matters. Typically, the factual foundation for a resolution will be supported by a statement of agreed facts filed by the parties, but may be supplemented by additional evidence of matters not the subject of agreement.^[28] The parties will also generally file joint submissions with the Court, which outline an agreed position in relation to the existence of a contravention and the appropriateness of the proposed relief. The matter may also be listed for hearing in relation to the appropriateness of the proposed orders and for the Court to deliver judgment. The Court will typically publish reasons for its decision including the factual and legal basis of its orders.

Due to the public nature of litigation, facts relating to a civil settlement with the ACCC will generally be publicly available as follows:

• a non-party may be able to access documents that have been filed in the Court registry, subject to the rules of the Court or any orders made in a proceeding such as confidentiality orders; ^[29]
• any hearing before the Court, which will generally take place in open court and will be accessible to the public; or
• publication of the Court’s reasons for judgment, and any subsequent media release by the ACCC.^[30]

A party may apply to the Court for a suppression or non-publication order to prevent the disclosure of confidential or sensitive information.^[31] However, the Court must be satisfied that such an order is ‘necessary to prevent prejudice to the proper administration of justice, not merely desirable’.^[32] It has been held that ‘mere embarrassment, inconvenience, annoyance or unreasonable or groundless fears will not suffice’.^[33] Commercially sensitive information has been the subject of such orders in recognition that litigation should not be a ‘vehicle for advantaging or prejudicing trade rivals’^[34] and that there is an interest in encouraging compliance with compulsory notices and the voluntarily disclosure of confidential and sensitive information to the ACCC during negotiations.^[35]

Criminal cartel proceedings

An accused who pleads guilty to criminal cartel conduct necessarily admits the elements of the offence.^[36] Factual information relevant to the Court’s sentencing discretion will also be provided to the Court, which, similar to a civil proceeding, may be provided in a statement of agreed facts supplemented by additional evidence in relation to matters not the subject of agreement. A guilty plea may be publicly disclosed at the time it is entered, and relevant facts may also be disclosed through non-party access to documents filed with the Court,^[37] the sentencing hearing, the Court’s reasons for judgment and any media release issued by the ACCC. The above comments relating to suppression and non-publication orders also apply in relation to criminal cartel proceedings.

Remedies, commitments and cooperation for settling conduct investigations

The types of remedies, commitments or cooperation to be expected when settling competition investigations vary depending upon the type of enforcement action pursued by the ACCC.

Administrative resolution

An administrative resolution will typically involve a written commitment to refrain from engaging in the conduct in question,^[38] but may also involve remedies and commitments of the same nature discussed below in relation to court-enforceable undertakings.

Court-enforceable undertakings

In negotiating a court-enforceable undertaking, the ACCC’s broad objectives are to ensure the conduct in question is terminated, redress is made available to adversely affected parties and compliance measures are implemented in addition to considerations of general education and deterrence.^[39]

The remedies and commitments that may be included in a court-enforceable undertaking to the ACCC include:^[40]

• commitments to cease the conduct in question and refrain from recommencing it. This may include a high-level undertaking to refrain from similar conduct in future, and commitments relating to specific steps that the corporation will take to address the ACCC’s concerns. By way of example, the types of commitments that have been accepted by the ACCC include:
  • undertakings by the participants in a petroleum and gas production joint venture to transition from a joint marketing arrangement to separately market gas produced through their joint venture;^[41]
  • undertakings by the provider of a retail price information exchange service and a number of retail petrol suppliers not to acquire or supply any petrol price information exchange service unless the information is also made available to consumers and third-party organisations (e.g., third-party information service providers, consumer organisations, research organisations) on reasonable commercial terms;^[42]
  • an undertaking from a taxi payment processor to allow rival payment processors to access systems enabling them to process cards on their own in-taxi payment terminals. This undertaking included a commitment to negotiate with third parties in good faith, execute agreements with such third parties and to provide access where the third party demonstrated an ability to comply with the terms of the agreement;^[43] and
  • an undertaking from a kitchenware wholesale distributor to write to retailers informing them that they are free to set their own minimum retail prices;^[44]
• a redress scheme, where appropriate. This may take the form of compensation or reimbursement for consumers or businesses that are adversely affected by the conduct in question;
• reporting requirements. The ACCC may require the corporation to provide a report or supporting documentation to verify that it has satisfied its obligations under the undertaking;
• implementation of compliance measures to reduce the risk of the corporation engaging in future breaches of the Act. This can involve an undertaking to implement a competition law training and compliance programme; and
• an acknowledgement that the undertaking will be made publicly available and referred to in public statements, and in no way derogates from the rights and remedies available to any person arising from the conduct in question.

Civil court sanctions

The primary form of relief in an ACCC enforcement proceeding is the imposition of a civil penalty. The maximum penalty that the Court may impose upon a corporation for each contravention is the greatest of A$10 million, three times the benefit attributable to the contravention or (if the value of the benefit can be ascertained) 10 per cent of the respondent’s annual turnover in Australia. The maximum penalty for an individual involved in a contravention is A$500,000 for each relevant act or omission. The highest competition law penalty to date is A$46 million.^[45]

The Court will consider whether a penalty that is jointly proposed by the ACCC and a respondent is an appropriate outcome. The Court will consider whether the proposed penalty achieves the object of deterrence having regard to all relevant matters, including the following:

• the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;
• the circumstances in which the act or omission took place;
• whether the person has previously been found by a court to have engaged in any similar conduct;
• the size of the contravening company;
• the degree of power the company has, as evidenced by its market share and ease of entry into the market;
• the deliberateness of the contravention and the period over which it extended;
• whether the contravention arose out of the conduct of senior management or at a lower level;
• whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programmes and disciplinary or other corrective measures in response to an acknowledged contravention; and
• whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention.^[46]

Other forms of relief that the Court may order in a civil competition enforcement matter include:

• declarations outlining the substance of the admitted contravention;^[47]
• injunctions, which are typically directed at restraining repetition of the contravening conduct;^[48]
• non-punitive orders such as an order requiring a training or compliance programme to be established or modified, or for corrective advertising to be published;^[49]
• an order disqualifying an individual who has contravened or been involved in a contravention from managing corporations for a period of time;^[50]
• an order directed towards compensating persons who have suffered loss or damage as a result of a contravention;^[51] and
• a contribution towards the ACCC’s legal costs.^[52]

Criminal cartel proceedings

Where a corporation pleads guilty to a criminal cartel offence, the maximum fine for each offence mirrors the maximum penalty for civil contraventions. Individuals who are guilty of a cartel offence may be sentenced to a term of imprisonment of up to 10 years or a fine of up to 2,000 penalty units (currently A$444,000).

The Court will have regard to a broad range of factors when determining an appropriate sentence, including a number of factors that are set out in Section 16A of the Crimes Act. The prescribed factors relevantly include whether the defendant pleaded guilty, cooperated with law enforcement agencies and has shown contrition.^[53] The factors discussed above in the context of civil penalties may also be applied in criminal cartel sentencing.^[54]

Of particular relevance, a guilty plea and cooperation with the ACCC and CDPP may result in a material discount to the sentence that would otherwise have been imposed. This is illustrated by the sentences imposed on two shipping companies that pleaded guilty for their participation in a global cartel in relation to ocean shipping services supplied to major vehicle manufacturers.

• Nippon Yusen Kabushiki Kaisha (NYK) received a 50 per cent discount for its early plea of guilt and its past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation.^[55] NYK’s cooperation concerned both its own offending and the offending of others that otherwise may not have been discovered by the ACCC.^[56] In addition, NYK gave an undertaking to assist in future prosecutions. Ten per cent of the discount related to this future cooperation.^[57]
• Kawasaki Kisen Kaisha Ltd (K-Line) received a 28 per cent discount for its cooperation, assistance, plea of guilty and the contrition and remorse reflected in the cooperation.^[58] In determining this discount, the Court noted that K-Line’s plea of guilty was entered after a lengthy committal process and its trial was set down for hearing, and that K-Line’s cooperation was less extensive than NYK’s.^[59]

In a criminal cartel proceeding, the Court may also grant injunctions and make related civil orders (other than civil penalties) of the kind discussed above.^[60]

Partial settlements

Partial settlements are available for multiparty conduct investigations, and involve some special considerations, particularly in the context of related Court-based action.

Timing of agreed orders

If the ACCC commences court proceedings against multiple parties, it is open for a party to negotiate a resolution with the ACCC while the proceedings continue in relation to any other parties.

The Court may defer making some or all of the orders jointly proposed by the ACCC and a respondent until the liability of the remaining respondents for a contravention of the Act is resolved. In particular, where the agreed orders involve declaratory relief, the Court may make orders relating to civil penalties and other relief but consider it desirable to defer making the proposed declaration, particularly where it refers to the remaining respondents who have not admitted or been found to have contravened the Act.^[61] Alternatively, the Court may defer making any orders having regard to factors such as whether determining the agreed orders may delay the contested trial, the practicability of severing the proceedings, the potential for inconsistent verdicts, the efficient use of court resources and the interests of the admitting respondent in having their proceedings finalised as soon as practicable.^[62]

In circumstances where the Court has deferred making any agreed orders and the remaining respondents successfully contest liability, a question may arise as to whether the Court should act upon the admissions. For example, the Court may consider it inappropriate to act on the admissions if there is reason to question the correctness of the admitted facts.^[63] It will depend upon the circumstances of each case.

Cooperation including provision of further evidence

As noted above, the extent of a party’s cooperation is a relevant factor in determining an appropriate penalty. The timing of any admission or guilty plea is relevant in this respect. The ACCC may also agree to a higher discount in relation to an agreed penalty where a party provides valuable evidence, including evidence relating to other parties. By way of example, in a proceeding against one participant in the global Air Cargo cartel, the ACCC submitted that a 20 per cent discount should be given for the respondent’s assistance, which included providing access to overseas witnesses where the information obtained from those witnesses would not have been obtained in the absence of cooperation.^[64] Similarly, in criminal proceedings, the degree to which the defendant has cooperated with law enforcement agencies in the investigation of its co-offenders is taken into consideration when the Court determines the appropriate ‘discount’ for cooperation.^[65]

Dealing with the enforcer or regulator when negotiating settlement

The ACCC is a mature and confident regulator with a preparedness to pursue strong enforcement action, including litigation where it considers financial sanctions to be warranted. It is therefore important to have regard to the ACCC’s processes and policies, including its enforcement priorities and the outcomes in any relevant analogous cases. Further, settlement is likely to require admissions and factual concessions and those will be made publicly available.

Notes