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Criminalising cartel conduct

Criminalising cartel conduct

cartel conduct

The federal government has moved closer to criminalising cartel conduct with the release on 11 January 2008 of the draft legislation.

This reform is a product of the 2003 Dawson’s review of the Trade Practices Act in 2003 which also led to an overhaul of the financial penalties. Until then, penalties were sometimes substantially less than the potential benefits from breaking the law. Consequently some companies, it is suggested, worked out the net benefit to the business after fines to determine whether to comply with the law. Now, the penalties for a corporation are greater of:

  • $10 million
  • 3 x the gain from the contravention, or
  • if the gain cannot be assessed, 10% of the annual turnover of the body corporate and related bodies corporate
  • and for an individual fines of up to $500,000.

Examples of cartel behaviour are when competitors reach an agreement, arrangement or understanding in relation to:

  • fixing prices (e.g. agreeing minimum prices)
  • carving up the market (eg. carving up market areas, segments or customers)
  • rigging bids

Under the current law this conduct is not a criminal offence but persons and companies that breach may pay the fines described above. As ‘civil’ charges, the ACCC only needs to prove the offence ‘on the balance of probabilities’.

How are the criminal charges different from the civil? Essentially, the individual or corporation must have theintention of dishonestly obtaining a benefit from a cartel provision.

The draft legislation, if enacted, retains the civil provisions but adds similar offences which are categorised as ‘criminal’. That means that the ACCC will need to prove the offences ‘beyond reasonable doubt’ as with other crimes. That’s a much harder burden of proof but if achieved, may result in:

  • imprisonment of up to 5 years for individuals;
  • a criminal record for both individuals and corporations; and
  • the financial penalties described above;
  • recovery of benefits as ‘proceeds of crime’.

The cartel conduct of Visy and Amcor was investigated and prosecuted under the current civil provisions of the Trade Practices Act. Consequently Visy negotiated a settlement with the ACCC under which it admitted unlawful conduct and paid a $36M fine. Under the proposed legislation, it’s entirely possible that Visy or Amcor executives would have been imprisoned.

So, with the likelihood that this legislation will be enacted, the stakes are higher and individuals are no longer just playing with Monopoly money. Criminal charges are likely and imprisonment is a very real possibility!

Senior management does not always have visibility into the conduct of its own employees. Consider the culture of your organisation and whether the decision makers have a good understanding of their competition law obligations. Bayston Group can help you develop a strategy that keeps the business’s focus on vigourous competition!