Proposed Amendments under the Trade Practices Act 1974 (Cth) dealing with Cartel Offences

History

The Bill appears to be a legislative response to the Visy Cartel case.² In that case, a penalty of $36 million was ordered by the Federal Court against Visy Board Pty Ltd and its director and owner, Mr Richard Pratt as a result of Visy Board engaging in price fixing and market sharing contraventions of the Trade Practices Act 1974 (Cth) with its rival, Amcor Limited.

In January 2008, the Commonwealth Government released an Exposure Draft Bill setting out a number of proposed amendments to the TPA in relation to criminalizing serious cartel conduct. The introduction of the Bill has not happened overnight. Readers may be familiar with the recommendations by the Dawson committee in 2003 that included, inter alia, criminal sanctions for serious cartel conduct including imprisonment.

However, numerous submissions were received and as a result, the Bill was revised.

Key parts of the proposed legislation 

The definition of a cartel provision is widely defined in the Bill as a provision in a contract, arrangement or understanding between two or more competitors which:

• has the purpose or effect of fixing, controlling or maintaining prices for goods or services supplied or acquired by any of the parties or prices for goods or services re-supplied by customers of one or more of the parties to the cartel;
• the purpose of directly or indirectly preventing, restricting or limiting the production of goods or the capacity to supply services, or of allocating customers or suppliers or territories or bid rigging.³

In each case, a corporation commits a criminal offence where the fault element of knowledge or belief is established.

The Government has decided to send a clear message about cartel conduct. The maximum penalties for the offences are:

• for an individual — a maximum term of imprisonment of ten (10) years and/or a maximum fine of $220, 000⁴; and
• for a corporation — a fine that is the greater of $10 million or three times the value the benefit from the cartel, or where the values cannot be determined, ten (10) percent of annual turnover.⁵

The penalties are some of the toughest in the Organisation for Economic Co-operation and Development (OECD) and are similar to jurisdictions such as the United States, the United Kingdom and Canada, where criminal sanctions for serious cartel conduct already exist.

The Government will introduce a parallel scheme which will impose civil penalties for serious cartel conduct that contain the same elements as the new criminal offences.⁶ Criminal offences, of course will require proof of the elements of the offence beyond a reasonable doubt. But the civil prohibition penalties require proof on the balance of probabilities.

Although the parallel criminal⁷ and civil prohibitions⁸ could give rise to double jeopardy concerns, the Government will also enable civil proceedings to be postponed until criminal proceedings are completed. If the defendant is convicted, the civil proceedings would be discontinued.

It is submitted that cartels are generally covert arrangements and discovery and proof of the existence of a cartel is certainly more difficult to investigate as opposed to uncovering other forms of corporate misconduct. Therefore, the proposed legislation continues provisions which facilitate proof of the existence of a cartel.⁹

Telephone Interception Powers 

The Government also has decided to amend the Telecommunications (Interception and Access) Act 1979 (Cth) to enable telecommunications interception powers to be used in addition to other available tools to investigate breaches of the cartel offences. Increasing the penalty for individuals to a ten (10) year jail term brings the cartel offences within the threshold requirements for accessing such powers.

Joint Venture Defence 

The Bill provides for in clause 44ZZRO for a defence to criminal and civil actions if:

• the parties to the contract are, or will be, carrying on a joint venture for the production or supply of goods or services; and
• the cartel provision is for the purposes of that joint venture.

It is noted, however that the existing exceptions under section 51 of the TPA will continue to operate.

As noted, the Bill is expected to be passed later this year or early 2009 and it will have a significant impact on individuals and corporations that engage in cartel behaviour.

Roly O’Regan

Footnotes 

1. The Bill can be accessed at www.treasury.gov.au . Readers may also be interested in reading the submissions received by the Government – www.treasury.gov.au/content
2. Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No3) (2007) 244 ALR 673 per Heerey J
3. Clause 44ZZRD of the Bill
4. Clause 44ZZRF(4) of the Bill
5. Clause 44ZZRF of the Bill
6. Clauses 44ZRJ and 44ZRK of the Bill
7. The Commonwealth Office of the Director of Public Prosecutions will be charged with the responsibility of prosecuting offenders.
8. The Australian Competition and Consumer Competition will continue to investigate serious cartel conduct.
9. This includes issuing section 155 notices requiring the production of documents, the furnishing of information, and/or the attendance of individuals for compulsory examination under oath.