Table of Contents
- Cartel Conduct Provisions
- Price Fixing - Anti Competitive Conduct
- Price Fixing Examples in Australia
- Big Rigging - Cartels in Australia
- Big Ridding Examples in Australia
- Market Sharing - Cartel Conduct
- Criminal Penalties for Cartel Offence
- Legal Defences for Cartel Conduct
A cartel is a group of businesses that collaborate secretly to illegally dominate the market, limit the availability of goods and services, and ultimately increase their profits. This is while maintaining the appearance of competition. This undermines market competition, resulting in monopolisation of goods and services, higher prices for consumers, lower quality products and services, and a disadvantage for businesses that are trying to compete legitimately. There exist four categories of cartel activity.
- Fix prices – that is, price fixing, when competitors agree to set prices instead of competing with one another.
- Allocate market share – when competitors divide a market amongst themselves to avoid competition.
- Control output – when competitors agree to restrict the quantity or variety of goods and services offered.
- Collude on bids – also known as bid rigging – when suppliers coordinate and agree among themselves on the winning bidder and the price for a tender.
Cartel Conduct Provisions
Cartel behaviour is unlawful and is strictly prohibited. There are several cartel provision and laws governing such behaviour that are outlined in the Competition and Consumer Act 2010. This is applicable to all corporations and individuals in Australia engaged in such conduct.
However, it is not considered cartel behaviour if the companies involved in the collaboration are owned by the same entity.
The Australian Competition and Consumer Commission (ACCC) is responsible for overseeing, investigating, and enforcing violations of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL). As outlined in section 155 of the ACCC guidelines, the ACCC has the authority to demand that an individual provide information, documents, and evidence under oath or affirmation. It is mandatory for companies and individuals to comply with the ACCC, and noncompliance may result in severe penalties.
Typically, the ACCC will seek information through cooperative and voluntary means. However, the ACCC may also obtain information through the application of the section 155 (s.155) guidelines, which stipulate that failure to comply may lead to fines under the CCA that do not exceed $22,200 or 2 years imprisonment for individuals, or fines that do not exceed $111,000 for companies (as per ss. 155(5) and 155(6A) of the CCA and s. 4B(3) of the Crimes Act 1914 (Cth).
Price Fixing - Anti Competitive Conduct
Under Australian law, price fixing refers to an anti-competitive practice where two or more businesses agree to set prices for their products or services instead of competing against each other to offer the best price and quality. Price fixing is a violation of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL), which prohibits businesses from engaging in anti-competitive conduct that restricts or eliminates competition. The CCA makes it illegal for businesses to engage in price fixing, market sharing, output control, or bid rigging.
These activities are considered cartel conduct and can result in severe penalties, including hefty fines and imprisonment for individuals. The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing these laws and investigating and prosecuting instances of price fixing.
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Price Fixing Examples in Australia
There have been several instances of price fixing in Australia in the past. Some notable examples include:
- Visy Industries and Amcor – In 2007, Visy Industries and Amcor, two of the largest packaging companies in Australia, were found to have engaged in price fixing of cardboard boxes. The companies colluded to increase prices of cardboard boxes sold to major customers, including major supermarkets and fast food chains, resulting in inflated prices for consumers. The ACCC took legal action against the companies, resulting in fines of $36 million for Visy and $15 million for Amcor.
- Air cargo cartel – In 2008, the ACCC initiated an investigation into a global cartel involving a number of airlines, including Qantas, British Airways, and Cathay Pacific. The airlines were found to have engaged in price fixing of air cargo rates between 2002 and 2006, which affected the prices paid by businesses and consumers for the transportation of goods. The airlines were fined a total of $98 million.
- Laundry detergent cartel – In 2016, the ACCC commenced legal action against Colgate-Palmolive, Unilever, and Woolworths, alleging that they engaged in cartel conduct by agreeing to cease supplying ultra-concentrated laundry detergents and promoting regular concentrated detergents instead. This resulted in higher prices for consumers. The parties settled the case, with Colgate-Palmolive and Woolworths agreeing to pay a total of $18 million in penalties.
These are just a few examples of price fixing cases in Australia. The ACCC continues to monitor and investigate anti-competitive practices, including price fixing, to ensure that businesses operate fairly and consumers are not disadvantaged by anti-competitive behaviour.
Big Rigging - Cartels in Australia
Bid rigging, also known as collusive tendering, occurs when businesses secretly collude to determine the winner of a tender, while maintaining the appearance of genuine competition. This practice is carried out in order to drive up prices, allowing the businesses to increase their profits while also boosting the perceived market value of their work and company. Bid rigging goes against the very essence of competition, which should result in lower prices, higher quality, and better services for customers.
By working together, the competing companies can manipulate the process and gain an unfair advantage. Bid rigging has a negative impact on consumers, customers, and taxpayers, who may end up paying inflated prices for public services such as hospitals, public housing, and schools.
Big Ridding Examples in Australia
There have been several cases of bid rigging or collusive tendering in Australia. Some notable examples include:
- The Australian Competition and Consumer Commission (ACCC) found that construction companies CFMEU and John Holland colluded to manipulate the tender process for the $1.8 billion EastLink project in Melbourne. As a result, the companies were fined a total of $4.5 million in 2012.
- In 2018, the ACCC fined the construction company J Hutchinson $1.5 million for collusive tendering on three public contracts in South Australia. The company had been found to have made agreements with competitors to ensure they won specific contracts.
- In 2019, the ACCC fined three companies a total of $2.6 million for collusive tendering on a public project in Western Australia. The companies had shared confidential information and agreed to manipulate the tender process to ensure they won specific contracts.
- In 2020, the ACCC initiated proceedings against rail companies Pacific National and Aurizon for alleged bid rigging in relation to a tender for the transport of coal in Queensland. The companies were accused of colluding to exclude competitors from the tender process.
These examples demonstrate the seriousness of bid rigging in Australia and the importance of enforcing competition law to protect consumers and ensure a level playing field for businesses.
Market Sharing - Cartel Conduct
Market sharing is a form of collusion where businesses agree not to compete with each other for the same customers, products or services, or markets in order to increase their profits. This agreement can involve not competing for established customers, producing each other’s products or services, or entering into each other’s markets.
Market sharing reduces competition, increases prices, limits customer choice in terms of price, quality, and services, and is detrimental to consumers. Colluding businesses may use demographic information, geographic location, or specific product needs to differentiate between customers.
Criminal Penalties for Cartel Offence
Under the law, cartel activity is strictly prohibited and can result in both civil and criminal penalties. Corporations that engage in cartel conduct can be subject to fines and penalties for each criminal offence or civil contravention. Individuals involved in cartels may face serious consequences, including up to 10 years of imprisonment and fines of up to $440,000 for each criminal offence, as well as penalties of up to $500,000 for each civil contravention.
They may also be issued with injunctions to stop the conduct, be barred from managing corporations in future, or be required to perform community service orders. Corporations are prohibited from protecting their officers against loss or compensating them for legal costs or financial penalties resulting from cartel conduct.
Legal Defences for Cartel Conduct
Cartel conduct can result in criminal prosecution. That is, Australia has strict laws and regulations to prevent corporate cartel conduct, however, those accused of such behaviour may have defences available, such as the joint venture defence. A joint venture is a business agreement where multiple parties contribute equity, expenses, assets, and share revenue to develop an entity. Since all companies are equally invested in the project, some exceptions can be made regarding competition conduct.
The criteria to classify a venture as a joint venture are flexible, and the court has provided some guidelines, such as the joint venture defence being applicable, even if the contributions of each party have not yet begun. Unused ideas, assets, or skills contributed to the joint venture do not change the nature of the agreement, and the subjective view of each party is not the determining factor but is relevant and considered.
It is not necessary for all parties to carry out the joint venture’s main activity, and an alleged cartel can defend itself against accusations of substantially weakening competition by demonstrating that its purpose is to contribute to the establishment, viability, and success of the joint venture. Nonetheless, it is crucial to note that the joint venture defence is not always successful, and each case is evaluated on its individual facts and circumstances.
Lyons Law Group has experienced criminal defence lawyers if you or your company are prosecuted for cartel conduct. Our commitment is to defend your rights and interests with strong determination. Whether you are unfairly accused of anti-competitive conduct or a victim of an unjust legal decision, our legal expertise can assist in finding you a solution that restores justice.
