Australia: Cartels

Key points

Australia has a parallel regime of civil prohibitions and criminal offences for cartel conduct that took effect on 24 July 2009. Prior to this regime, Australian laws prohibited cartel conduct on a civil basis only.

Australia’s parallel regime of civil prohibitions and criminal offences for cartel conduct is administered by the Australian Competition and Consumer Commission (ACCC), except for criminal prosecutions, which may only be undertaken by the Commonwealth Director of Public Prosecutions (DPP).

The civil prohibitions have been actively prosecuted by the ACCC.

The Federal Court of Australia has imposed significant civil penalties on companies and individuals that have engaged in cartel conduct, most notably in relation to the Australian domestic cardboard box cartel, for which a civil penalty of A$36 million was imposed on a single company, and the airfreight industry, for which a total of A$98.5 million in civil penalties have been imposed on 13 cartel members.

The maximum term of imprisonment for an individual who engages in criminal cartel conduct is 10 years for each offence.

While the DPP has not yet commenced a criminal prosecution for cartel conduct, the ACCC remains committed to pursuing investigations on a criminal basis, with ACCC chairman Rod Sims stating in November 2015 that Australia’s first criminal cartel case will likely be commenced in the first half of 2016.¹ New cartel proceedings, which were initially investigated on a criminal basis, commenced in 2015 in relation to alleged bid rigging involving coal mining exploration licences in the New South Wales Bylong Valley, and are continuing before the courts.

The ACCC has established a serious cartel conduct unit that is focused on criminal cartel investigations and is working closely with the DPP.² ACCC chairman Rod Sims has stated that he considers criminal penalties to be ‘fundamental to the effective discovery and disruption of cartel conduct.’³

Australia has an Immunity and Cooperation Policy for Cartel Conduct (Immunity Policy), including an Amnesty Plus regime, which is similar to those in European and North American jurisdictions. The ACCC, which administers the policies, has close ties with other competition agencies in the Asia-Pacific region as well as in Europe and North America.

In addition to criminal fines, civil pecuniary penalties and disqualification orders, cartel conduct may result in follow-on actions for private damages. Class actions and litigation funding are entrenched features of Australia’s litigation landscape.

Prohibitions on cartel conduct

Under the parallel civil and criminal regimes, a corporation or individual must not make or give effect to a contract, arrangement or understanding (CAU) that contains a cartel provision.⁴

A cartel provision is defined by Australia’s Competition and Consumer Act 2010 (Cth) (the Competition and Consumer Act) as a provision of a CAU between actual or potential competitors that has:

• the purpose or likely effect of fixing, controlling or maintaining a price or a component of a price; or
• the purpose of:
• preventing, restricting or limiting production, capacity or supply;
• allocating customers, suppliers or territories; or
• rigging bids.⁵

While the criminal offences and civil penalty provisions are broadly similar, there are a number of important differences. In particular, criminal liability depends on the prosecution proving additional fault elements beyond reasonable doubt, namely an intention to make or give effect to the CAU and knowledge or belief that the CAU contains a cartel provision.

A recent policy review commissioned by Australia’s federal government (the Competition Policy Review) has made recommendations for the simplification of the cartel provisions including the removal of overly prescriptive and redundant provisions. It has also recommended a number of general changes to:

• extend the application of the cartel provisions (among others) to the activities of the Crown to the extent they are ‘in trade or commerce’; and
• limit the application of the cartel provisions to conduct affecting goods or services supplied or acquired in Australian markets.

The federal government has expressed its support for these recommendations and has indicated that it will prepare draft legislation and conduct further consultation on the changes in 2016.⁶

In addition to the general cartel prohibitions, the Competition and Consumer Act also includes price signalling prohibitions that presently only apply to services within the banking sector, although they can be extended to other industries by regulation (see below). No action has been taken in reliance on these provisions, and the federal government has accepted the recommendation of the Competition Policy Review that the current price signalling provisions be replaced by an extension of the general prohibition on CAUs containing a provision with a purpose or effect of substantially lessening competition to cover concerted practices.

Defences

There are some exceptions to the prohibition on cartel conduct, including for contractual joint ventures,⁷ agreements solely between related bodies corporate,⁸ and conduct that has been authorised on public benefit grounds by the ACCC.⁹

There are also anti-overlap provisions that provide that where cartel conduct also constitutes resale price maintenance or exclusive dealing, or where a cartel agreement provides, directly or indirectly, for the acquisition of shares or assets, the conduct will not be subject to the parallel civil and criminal regime of prohibitions on cartel conduct. The federal government has also accepted the Competition Policy Review’s recommendations to:¹⁰

• broaden the current joint venture exemption; and
• simplify the resale price maintenance and exclusive dealing exemptions.

This is on the basis that conduct falling within the exceptions remains subject to scrutiny under other provisions of the Competition and Consumer Act.

Contract, arrangement or understanding

A key concept in the definition of cartel conduct is that of a ‘contract, arrangement or understanding’ (CAU). While none of these terms are defined in the Competition and Consumer Act, for a CAU to be established the courts have required there to be a meeting of the minds (by way of some communication) and a commitment by one or more parties to act in a certain way. It is insufficient that parties merely hold independent beliefs, or if there is a mere hope that something will be done.

Where there is little or no direct evidence of the alleged CAU, an arrangement or understanding can be inferred from conduct and the circumstances, including parallel conduct, joint action, collusion, similar pricing structures, or opportunities for the parties to reach an understanding.¹¹ Proceedings commenced by the ACCC in 2014 against Informed Sources and petrol retailers in relation to the pricing of petrol in Melbourne, which settled in December 2015, would have tested the extent to which the existing CAU provisions are already sufficient to capture price information sharing.

Jurisdiction

Australia’s prohibitions on cartel conduct are capable of applying to global cartels. They can apply where the cartel conduct is engaged in outside Australia by corporations incorporated in Australia, carrying on business in Australia, or registered as foreign corporations in Australia, or by individuals that are Australian citizens or ordinarily resident within Australia. There is also legislation in each state and territory that applies the cartel laws to persons that are otherwise connected with the particular state or territory.¹² The recent ACCC v Yazaki¹³ decision indicates that a connection that is insufficient to amount to ‘carrying on business’ may be captured by state or territory legislation, as long as it is a ‘real connection’.¹⁴

Further, the prohibitions on cartel conduct will apply in cases where the conduct can be said to occur ‘in’ Australia. For example, where a corporation is involved in communications targeted towards Australia or the implementation of a cartel agreement in Australia (including, but not limited to, responding to tenders or supplying goods or services in Australia), or where there is an Australian subsidiary or agent that implements its parent’s CAU on behalf of the parent so that the conduct can be said to be the conduct of the parent corporation in Australia. In ACCC v Yazaki, the court held that a direction from the Japanese parent company to the Australian subsidiary to submit prices in Australia constituted conduct in Australia.¹⁵

Action has been taken by the ACCC on many occasions in which it has obtained penalties against foreign-based cartel members for giving effect to a cartel in Australia, even though the CAU containing the cartel provision had been made outside Australia. For example, the ACCC has taken action against three foreign suppliers of high voltage underground and submarine cables for their involvement in a bid-rigging arrangement that affected a single Australian project. Of the three respondents, only one was registered in Australia as at the time of the conduct, but it was no longer registered when the proceedings were commenced.¹⁶

A number of recent cases have shed contrasting light upon the extraterritorial application of the old and new cartel provisions. In ACCC v Air New Zealand, a case under the previous regime, the court concluded that cartel conduct that diminished competition between airlines that occurred wholly outside Australia was not caught by the old cartel laws (despite finding that the elements of the contravention were otherwise established). This outcome resulted from the requirement under the previous regime that the relevant competition be between competitors in a ‘market in Australia’.¹⁷ Further, in the recent ACCC v Yazaki decision, a foreign corporation that engaged in cartel conduct in the supply of wire harnesses to customers in a number of countries, including Australia, was not captured by the old price-fixing provisions on the basis that the relevant ‘competitive activity’ did not occur in a market in Australia, but in Japan.¹⁸ Notwithstanding this, this conduct of the foreign corporation was captured by the current prohibition on making or giving effect to exclusionary provisions, a form of collusive conduct that was held to not require proof of a market in Australia.¹⁹ Further, under the current provisions, there is no explicit requirement for the conduct to have occurred in or have an effect on markets located within Australia. This position was affirmed in a recent private damages action, in which the court found that bid-rigging conduct amounted to a contravention of the Competition and Consumer Act, despite the conduct relating to the sale of a foreign corporation taking place overseas.²⁰

A recommendation was made by the Competition Policy Review to broaden the application of the Competition and Consumer Act to capture conduct by unregistered foreign companies, insofar as that conduct relates to trade or commerce in Australia or between Australia and places outside Australia. This removes the current requirement that the foreign company carry on business in Australia, making it easier for the ACCC to pursue companies engaging in global cartel conduct. The federal government has, however, since indicated that it does not support this proposal and that it will consider other ways to capture conduct that harms competition in Australia.

Another emerging issue is the possibility of extradition. In countries that have criminalised cartel conduct and have an extradition treaty with Australia, including the United States and United Kingdom, regulators will be able to seek extradition of individuals from Australia for the purposes of criminal cartel proceedings overseas. The DPP will be able to seek the extradition of individuals from overseas for the purposes of Australian criminal cartel proceedings.

International cooperation

A number of memoranda of understanding (MOUs) and international agreements form the basis for international cooperation between Australian authorities and authorities in other jurisdictions including China, New Zealand, the European Union, the United Kingdom, Canada, South Korea, Taiwan, Fiji, India, Japan, the Philippines and Papua New Guinea. Significantly, in November 2015 the ACCC entered into an MOU with China’s National Development and Reform Commission (NDRC), having signed an MOU with MOFCOM in 2014. The NDRC MOU is significant since it allows for the sharing of information and evidence between the two agencies on cartel investigations (subject to confidentiality and privacy obligations), resulting in increased enforcement potential for competition concerns that might otherwise be overlooked or not considered.

Australia has also signed a bilateral treaty on mutual antitrust enforcement with the United States, and provisions of the Australia–United States Free Trade Agreement require cooperation on investigation and enforcement matters. This allows for both Australia and the United States to exchange evidence and assist in enforcing each country’s competition laws.

The obligations set out in these treaties are supported by a number of pieces of domestic legislation, particularly the Mutual Assistance in Business Regulation Act 1992 (Cth) and the Mutual Assistance in Criminal Matters Act 1987 (Cth).

The ACCC is also empowered to share protected information with foreign antitrust authorities under section 155AAA(12)(n) of the Competition and Consumer Act. However, it is the ACCC’s policy to refrain from sharing information provided by cartel immunity applicants with regulators in other jurisdictions, without the consent of the applicant for immunity, unless required to do so by law.

As a whole, the treaties and MOUs serve to broaden the investigative reach of the ACCC and enhance cooperation with competition regulatory bodies of different jurisdictions. The ACCC has announced that other regional MOUs will be also be finalised in the near future.

Investigatory powers

The ACCC has robust investigatory powers. Section 155 of the Competition and Consumer Act gives the ACCC the power to require a person to provide information, produce documents or appear before it where it has reason to believe that they are capable of providing information or documents relating to a contravention or possible contravention of the Act. The person can be required to give evidence under oath or affirmation when they appear, and they cannot resist answering questions or providing documents on the basis that doing so may result in self-incrimination. In 2014–2015, the ACCC issued 303 section 155 notices.

Information obtained under the section 155 power is not admissible in evidence against the person in criminal proceedings, including for cartel conduct. However, recent cases have confirmed that examination transcripts and documents referred to during examinations can be obtained from the ACCC under court order for use in other civil cases.²¹ A person also does not have to provide documents that are subject to legal professional privilege.

In addition to its section 155 powers, the ACCC is able to obtain search warrants that empower it to enter and search premises unannounced and seize or make copies of material. It may also obtain telephone interception and surveillance warrants, but only for the purposes of investigating a criminal contravention of the Competition and Consumer Act.

The federal government has accepted proposals by the Competition Policy Review to increase the penalties for non-compliance with section 155 notices, and has also introduced legislation that would enable the ACCC to seek orders from a court directing compliance with a notice, the breach of which would be a contempt of court.

Challenges to the validity of section 155 notices are rarely successful. In 2014, the Full Federal Court unanimously upheld the validity of the exercise of the ACCC’s powers in issuing a section 155 notice in respect of bid-rigging conduct. The decision confirmed the broad nature of the power conferred upon the ACCC to issue a section 155 notice, emphasising that the notice need only specify a ‘matter’ which, after allowing for undiscovered facts, may amount to a contravention.²² In this case, the Full Court (upholding the first instance decision) concluded that the application for a mining exploration licence was part of a broader expression of interest process, by which an approval of a right to explore would be granted, and that conduct at any stage of that process was caught by the prohibitions on cartel conduct. Proceedings seeking civil penalties for cartel conduct have subsequently been commenced against the recipients of the notices.

Enforcement and penalties

Under the Competition and Consumer Act, both civil and criminal remedies are available for all breaches of the cartel provisions.

The ACCC has made public statements about its enforcement policy that suggest that, as a matter of policy, the enforcement procedures and penalties it seeks for cartel conduct will depend on the nature of the conduct in question. If the conduct is considered to be serious cartel conduct, the ACCC will seek to have the parties prosecuted criminally. Less serious conduct will be pursued under civil penalty provisions.

Serious cartel conduct

Conduct will be considered by the ACCC to be serious cartel conduct if it:

• was covert;
• caused, or has the potential to cause, large-scale or serious economic harm;
• was long-standing;
• had a significant impact on the market in which it occurred;
• caused, or could have caused, significant detriment to the public or a class of the public;
• caused, or could have caused, significant loss or damage to one or more customers of the alleged participants;
• involved senior representatives in authorising or participating in the conduct;
• involved a person or company that has previously been found to have participated in or has admitted to participating in a cartel;
• the government (and thus taxpayers) were victims; or
• involved the obstruction of justice or other collateral crimes.

Relationship between the ACCC and the DPP

An updated MOU was executed by the ACCC and the DPP in August 2014 to reflect the ACCC’s new Immunity Policy (see below) and set out how they will deal with serious cartel conduct. If the conduct is found to be serious, the ACCC will investigate it before referring it to the DPP, which will conduct any criminal prosecution. Any prosecution by the DPP is conducted in accordance with the Prosecution Policy of the Commonwealth. If the DPP decides not to prosecute, the ACCC may still decide to pursue civil penalties against the accused.

A criminal prosecution requires the proof of additional elements and the prosecution must meet a higher standard of proof (see above).

A limitation period of six years applies to civil contraventions but there is no limitation period for criminal contraventions.

ACCC’s guidelines

The ACCC has issued guidelines as to how it will conduct cartel investigations, as well as guides for consumers and businesses. The guidelines set out the basis on which it will determine matters to be serious cartel conduct appropriate for criminal investigation, and supplement the MOU between the ACCC and the DPP.

Penalties

There are differences in the penalties that may be imposed under the civil and criminal regimes. Under both the civil and criminal regimes, corporations face maximum fines and pecuniary penalties of the greater of:

• A$10 million;
• three times the gain from the cartel conduct; or
• where the gain cannot be ascertained, 10 per cent of the corporate group’s annual turnover attributable to Australia.

Individuals face up to 10 years in prison or fines of A$360,000, or both, under the criminal regime, and pecuniary penalties of up to A$500,000 under the civil regime.

The ACCC can also seek injunctions to restrain future breaches of the Competition and Consumer Act and may consider accepting undertakings in some circumstances. For much of 2015, the ACCC and respondents to enforcement proceedings were precluded from engaging in what had been a widely accepted practice of making submissions to the court (either jointly by agreement or independently) as to the appropriate quantum of penalty (whether as part of a settlement or otherwise), following a controversial Full Federal Court decision. In December 2015, the High Court overturned the decision and confirmed that the ACCC may agree a civil penalty with the person or corporation that has contravened the Act, and make submissions to the court in respect of those penalties, although the court must ultimately determine that the penalty is appropriate.

In determining the appropriate level of the penalty, courts will consider:

• the size of the company involved;
• the degree of the company’s market power;
• the nature and duration of the contravention;
• the nature and extent of the damage caused by the contravention;
• whether the company or individual has previously been found to have engaged in similar conduct;
• whether the company or individual has a corporate culture of compliance; and
• whether the company or individual cooperated with the ACCC’s investigation.

Recent penalty decisions continue to reflect the court’s commitment to deter future cartel conduct both by the companies in question and industry generally. In the Flight Centre case, the court accepted the importance of imposing a pecuniary penalty even where the underlying findings of liability were subject to a pending appeal, so as to effectively deter the party and operate a signal to the public of deterrence.²³ While penalty proceedings for cartel conduct were limited in number this year, judgments have continued to confirm that substantial discounts may be available for companies that cooperate early and assist substantially in resolving the matter at a lower cost to the court and community. Recent examples include:

• in proceedings relating to a forklift gas cartel, Speed-E-Gas received a 38 per cent reduction in penalty, with a penalty of A$5 million reduced to an agreed penalty of A$3.1 million, while in contrast, a lack of cooperation and a culture of non-compliance resulted in the court imposing an agreed penalty that was close to the full amount for Renegade (A$4.8 million reduced from A$5 million);²⁴ and
• in proceedings relating to the supply of ball and roller bearings, Koyo received a higher discount than fellow cartel member NSK (being ordered to pay a penalty of A$2 million rather than A$3 million) due in part to its greater assistance to the ACCC’s investigation, including early and voluntary contact with the ACCC, the provision of documents and useful witnesses such that it warranted a ‘meaningful’ discount.²⁵

While there have been no criminal prosecutions since the criminal regime commenced in 2009, from statements by the ACCC, the first criminal prosecution for cartel conduct appears to be imminent. The highest penalty imposed on a single corporation remains a penalty of A$36 million imposed on Visy for engaging in price fixing and market sharing in the cardboard-packaging industry in 2007. Two Visy executives were required to pay pecuniary penalties of A$1.5 million and A$500,000 respectively.

In the Flight Centre case, the ACCC had sought penalties based on the annual turnover of Flight Centre. However, the Federal Court concluded that the ACCC had not alleged material facts necessary to engage a maximum penalty greater than A$10 million per contravention. It had failed to plead or seek to establish that Flight Centre obtained a benefit reasonably attributable to the contraventions such that a greater (whether quantifiable or not) penalty could be imposed. In emphasising that the absence of such a pleading denied the company procedural fairness, the Court has put the ACCC on notice that any circumstance of aggravation in respect of penalty must be specifically pleaded.²⁶ While penalties of A$11 million were imposed for five contraventions, Flight Centre was successful on appeal to the Full Federal Court in overturning the first instance decision which had found that it had attempted to engage in anticompetitive conduct with three international airlines.²⁷

There have been some recent indications that the level of penalties being imposed by the courts may increase in the future. The ACCC has indicated on numerous occasions that it is committed to achieving higher penalties, and the Federal Court has remarked that ‘penalties in Australia are still something of a light touch notwithstanding the new penalty regime’.²⁸ It is expected that both the ACCC and the Court will seek to give effect to Parliament’s intention that the new penalty regime results in higher penalties.

Immunity and leniency

Given the ACCC’s commitment to criminal prosecution and higher penalties, the immunity and cooperation regimes managed by the ACCC are of increasing importance. In September 2014, the ACCC released an updated Immunity Policy relating to cartel conduct.

Most notably, the new Immunity Policy no longer contains an explicit disqualification for parties that are a ‘clear leader’ of a cartel. In practice, this means that initiating parties who formed the cartel, or parties leading the cartel, who previously were not eligible for immunity, may now apply. However, the requirement that the applicant be ‘first in’ is still present.

Secondly, the Immunity Policy further clarifies the relationship between immunities from civil and criminal sanctions. While all applications for both civil and criminal immunity must be made to the ACCC, there is a division of responsibility in relation to granting immunity. The ACCC will grant immunity from civil proceedings in accordance with its Immunity Policy. However, if the ACCC determines that the conduct in question amounts to serious cartel conduct (see above) and refers the matter to the DPP, it will also make a recommendation to the DPP in relation to immunity from criminal proceedings. In accordance with the Prosecution Policy of the Commonwealth, the DPP will take the ACCC’s recommendation into account, but possesses an independent discretion on whether to grant immunity from criminal prosecution. Under its new Prosecution Policy, the DPP will inform the parties of the conditions of immunity in writing. This is intended to create greater certainty for companies as to their criminal liability.

In addition to the first in requirement, other conditions for immunity include that:

• the ACCC does not already have enough evidence to commence a prosecution;
• the applicant did not coerce others to take part; and
• the applicant must admit its conduct and commit itself to full disclosure and cooperation with the ACCC throughout the investigation and any subsequent prosecutions.

The requirement of full cooperation places a heavy burden on immunity applicants and their employees. However, the consequence of gaining immunity is full immunity from ACCC-initiated civil proceedings and criminal proceedings undertaken by the DPP.

If a corporation is eligible for conditional immunity, it may also seek derivative immunity for related corporate entities, current and former directors, officers and employees. Derivative immunity also involves making admissions and committing to full, frank and truthful disclosure to the ACCC.

The Immunity Policy provides a detailed description of the ACCC’s marker system, which allows an applicant to hold its place in the ‘immunity queue’ for a limited period of time (usually 28 days), in order to allow it to complete internal investigations before perfecting its immunity application.

For those corporations and individuals who fail to ‘get in first’ and secure immunity, the ACCC’s Immunity Policy also provides a mechanism through which a cooperative party can receive more lenient treatment than would otherwise be the case. Factors indicating when leniency will be granted include the value and importance of the evidence provided, whether prompt and effective action was taken to terminate involvement in contravening conduct, and the applicant’s willingness to provide full and frank disclosure and cooperation.

The ACCC’s Immunity Policy also includes an Amnesty Plus regime for cartelists who are not eligible for immunity in a cartel already being investigated by the ACCC, but who provide the ACCC with evidence of a second cartel, of which the ACCC was not previously aware. If they satisfy the ACCC’s Amnesty Plus policy, they gain immunity from prosecution for the second cartel and a recommendation from the ACCC to the court for a further reduction in the civil penalty in relation to the first cartel. If the first cartel is being pursued as a criminal matter, the DPP will advise the court of the full extent of the cooperation provided.

The immunity regime has undoubtedly increased the effectiveness of ACCC investigations. Since 2009 (when the current Immunity Policy was implemented), the ACCC has received over 150 approaches seeking immunity under the policy. As at 30 September 2015, the ACCC had more than 12 cartel investigations underway, in addition to the 10 cartel matters before the court, many of which began as immunity applications.

One of the limitations of the immunity regime is that it does not limit the rights of injured third parties to launch proceedings to recover damages. The status of private actions for damages is explored below.

Private actions

Anyone who suffers loss or damage as a result of cartel conduct can recover the amount of their loss or damage in a private action. Private litigants can also obtain declarations, injunctions and ancillary orders.

The ACCC also has the power to commence representative proceedings on behalf of a group that has suffered loss or damage as a result of cartel conduct, although it is yet to use this power.

A limitation of six years applies to all civil actions for cartel conduct, starting from the point in time at which the cause of action accrues. While it is not settled law in Australia, arguably, the cause of action only accrues, and the loss or damage is only suffered, when the claimant becomes aware of the cartel.²⁹

Findings of fact in ACCC enforcement proceedings can in some circumstances be admissible as prima facie evidence of those facts in private proceedings. The federal government has also announced its support for a recommendation of the Competition Policy Review to permit the use of admissions made by the defendant in enforcement proceedings in follow-on cases to remove existing uncertainty as to whether only facts determined by a court after a contested hearing can be used as prima facie evidence in follow-on litigation.

Representative actions (or class actions) are ‘opt-out’ proceedings and there is a presumption that litigation will continue on a representative basis unless the respondent establishes that it would be inappropriate for claims to be pursued in this way. Recent private actions include:

• a class action in relation to the air cargo cartel. After more than seven years, the matter was settled on a commercial basis early in 2014 for A$38 million. The settlement was subsequently approved by the Federal Court (as is required for all class action settlements);
• in March 2013, the Federal Court ordered Bradken Limited to pay damages of US$25.3 million plus interest to Norcast SàrL in relation to a bid-rigging agreement between Bradken and Castle Harlan Inc relating to the sale of a Norcast subsidiary. The case was subsequently settled for an undisclosed sum following an appeal by Bradken; and
• in May 2011, settlement was approved for A$95 million in a class action against cardboard box manufacturers Amcor and Visy, with Amcor having to pay A$63.3 million and Visy having to pay A$31.7 million.³⁰

Damages awarded in private proceedings, including representative proceedings, are assessed on a compensatory basis. A claimant can only recover the amount of loss or damage suffered by them by reason of the cartel conduct. Punitive or exemplary damages are not awarded.

Price signalling

As part of its Competitive and Sustainable Banking System Package response to the global financial crisis, the federal government amended the Competition and Consumer Act to outlaw price signalling. The amendments took effect from June 2012 but to date, no cases have tested these provisions.

The price signalling prohibitions only apply to goods and services of the classes prescribed by regulation.³¹ At the time of writing, the prohibitions only apply to the activities of authorised deposit-taking institutions, as defined in the Banking Act 1959.³² Corporations in the banking industry are prohibited, per se, from making private disclosures to competitors of information relating to prices, rebates, allowances or credits in relation to the supply or acquisition of prescribed goods or services if the disclosure is not in the ordinary course of business.³³ Corporations in the banking sector are also prohibited from making disclosures (whether private or not) about prices, rebates, allowances, credits, the capacity of an organisation to acquire or supply prescribed goods or services, or the corporation’s commercial strategy in relation to the prescribed goods or services where the disclosure is made for the purpose of substantially lessening competition in a market.³⁴

There are a number of general defences that are applicable to both provisions, including that disclosure was:

• accidental;
• to a related body corporate;
• for the purpose of complying with continuous disclosure obligations; or
• authorised by law.

There are also defences that apply specifically to the per se prohibition, including that the information was disclosed to a joint venture partner, the disclosure is in connection with the acquisition of shares or assets, that the corporation did not and could not be expected to have known that the person to whom they disclosed information was a competitor, that the disclosure relates to a syndicated loan or that the disclosure was to a supplier or customer of the corporation and related to goods or services to be supplied to or acquired from that person.

Given the concern around other industries, such as the petrol sector, there is uncertainty as to how far the law will stretch in the future. As we note above, the federal government has also endorsed a proposal to repeal the price signalling provision and replace it with a European-style concerted practices provision.

Price signalling in other industries may still potentially be caught under the provisions of the Competition and Consumer Act relating to cartel conduct and other anticompetitive agreements, irrespective of whether a concerted practices provision is introduced.

Case law

With the air cargo class action settling in 2014, for the time being, the opportunity has been lost to clarify the law in a number of areas, including the availability of a pass-through defence under the Competition and Consumer Act. Pass-through is sought to be used by respondents in cartel class actions to restrict the quantum of damages claimed by applicants, to the extent that the applicants have passed on increased prices to their own customers. In the United States, respondents cannot rely on a pass-through defence in a claim for damages made from direct purchasers under federal law.

Judgments have been delivered in two cases involving allegations of price fixing between suppliers and their distributors: ACCC v Flight Centre Limited, which involves allegations of an attempt by the travel agent Flight Centre to induce Singapore Airlines, Malaysian Airlines and Emirates to enter into a price-fixing arrangement by no longer offering flights to customers at prices less than the net fare that the airlines made the flights available to Flight Centre, plus the commission or margin applied by Flight Centre; and ACCC v Australia and New Zealand Banking Group Limited, which involved allegations of price fixing between a bank and a mortgage broker in relation to refunds offered by the broker when promoting the bank’s mortgage products. While both cases were taken under Australia’s former cartel provisions, they both tested the application of Australia’s cartel laws to supplier-distributor relationships. At first instance, the court adopted differing approaches on the question of whether the respective companies were competing in the supply of services. However, the recent Full Federal Court appeal decisions in Flight Centre v ACCC³⁵ and ACCC v Australia and New Zealand Banking Group Ltd³⁶ provided welcome clarification on the circumstances in which suppliers and distributors will operate in competition with one another. It was held that Flight Centre did not compete in the supply of goods or services in the same market as the airlines.³⁷ Likewise, ANZ was held to not relevantly compete with the mortgage brokers.³⁸

It should be noted that the Full Federal Court emphasised that the substance of the relationship between the parties must be analysed before it can be concluded that they are not in competition with one another.³⁹ Further, it is not the case that there can never be competition between a manufacturer or product originator that has its own internal distribution division and the external distribution channels.⁴⁰ The ACCC has appealed the Flight Centre judgment to the High Court of Australia.

Reform

As noted above, the Competition Policy Review has made a number of recommendations for reform of the cartel provisions.⁴¹ The federal government has expressed its support for a large number of those recommendations and proposes to release draft legislation for consultation in 2016.⁴²

Notes

1. PaRR, ‘ACCC Anticipates Criminal Cartel Crackdowns – Chairman’ (19 November 2015).
2. Rod Sims, 'Priorities 2015', Committee for Economic Development of Australia, Sydney (19 February 2015).
3. ACCC Media Release 'Updated Immunity Policy to uncover cartel conduct', (10 September 2014) www.accc.gov.au/media-release/updated-immunity-policy-to-uncover-cartel-conduct.
4. Competition and Consumer Act 2010 (Cth) sections 44ZZRF, 44ZZRG, 44ZZRJ, 44ZZRK.
5. Id, section 44ZZRD.
6. Australian government, Australian Government Response to the Competition Policy Review (November 2015) at 23–24.
7. Competition and Consumer Act 2010 (Cth) sections 44ZZRO and 44ZZRP.
8. Id, section 44ZZRN.
9. Id, section 44ZZRM.
10. Australian government, Australian Government Response to the Competition Policy Review (November 2015) at 23–24.
11. TPC v David Jones (1986) 13 FCR 446.
12. See, for example, the Competition Policy Reform (Victoria) Act 1995 (Vic), section 8.
13. [2015] FCA 1304.
14. ACCC v Yazaki Corp (No 2) [2015] FCA 1304 at [375]-[376].
15. Id at [215]-[216].
16. See ACCC v Prysmian Cavi E Sistemi Energia SRL. (No.4) (2012) 298 ALR 251.
17. ACCC v Air New Zealand Ltd [2014] FCA 1157. As proceedings for the recovery of a pecuniary penalty must be commenced within six years of the conduct occurring, the impact of the previous regime and this judgment (which is under appeal with judgment reserved) will diminish from July 2015.
18. ACCC v Yazaki (No 2) [2015] FCA 1304 at [394].
19. Id at [383].
20. See Norcast S.ár.l v Bradken Ltd & Ors (No 2) [2013] FCA 235; while this first instance decision was appealed, the matter settled on a commercial basis before it was heard by the Full Court of the Federal Court of Australia.
21. Boral Resources (Vic) Pty Ltd v Construction, Forestry, Mining and Energy Union [2015] VSC 352.
22. Obeid v ACCC [2014] FCFCA 155.
23. Flight Centre Ltd v ACCC [2014] FCA 658.
24. ACCC v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135.
25. ACCC v NSK Australia Pty Ltd [2014] FCA 453.
26. ACCC v Flight Centre [2014] FCA 292 (under appeal).
27. Flight Centre Ltd v ACCC [2015] FCAFC 104.
28. ACCC v Bridgestone Corp [2010] FCA 584 at [49].
29. Energex Ltd v Alstom Australia Ltd (2004) 225 ALR 504 at 520-3.
30. Jarra Creek Central Packing Shed Pty Ltd v Amcor Limited [2011] FCA 671; Amcor/Visy Class Action Settlement Deed.
31. Competition and Consumer Act 2010 (Cth) section 44ZZT.
32. Id, section 48.
33. Id, section 44ZZW.
34. Id, section 44ZZX.
35. [2015] FCAFC 104.
36. [2015] FCAFC 103.
37. Flight Centre Ltd v ACCC [2015] FCAFC 104 at [160].
38. ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC at [151].
39. Flight Centre Limited v ACCC [2015] FCAFC 104 at [163].
40. ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC 103 at [297].
41. A copy of the final report is available at http://competitionpolicyreview.gov.au/final-report.
42. A copy of the federal government’s response is available at www.treasury.gov.au/PublicationsAndMedia/Publications/2015/CPR-response.