Criminal cartel prosecutions in the Federal Court - Part 2
What is criminal cartel conduct?
This conduct can generally be described as when business competitors agree to act together instead of competing against each other to fix prices, share markets, rig bids, and/or to restrict outputs or limit the supply to potential consumers. There is usually an appearance of competition to mask the reality in order to manipulate the market to increase profit amongst the members. It has an effect on the economy generally and on other competitors and consumers specifically.
The best examples and most common types of cartel conduct include:
Price fixing – when competitors agree on a pricing structure rather than compete against each other. Fixing can include agreements to set a price, or a minimum price, making a formula for pricing and discounting a product or service, and agreements on allowances, rebates and credit;
Bid rigging – when suppliers communicate with each other and make an agreement between themselves about who will win a tender and the bid amounts. Bid rigging can take a number of forms; it can happen where competitors agree not to submit a tender so that the chosen competitor wins it, or particular terms and conditions are included in the bid knowing that the client will not accept it, or where a business withdraws their tender so that the agreed competitor wins it;
Market sharing - when competitors agree to divide up a market so participants are sheltered from competition. This type of conduct can include agreements to allocate customers based on a geographical or dividing up contracts by their value in a given area; and
Output restrictions – when participants in an industry make an agreement together to reduce or restrict supply of goods/services to increase or keep prices stable.
Penalties for criminal cartel offences
The penalties for criminal cartel conduct are serious. Individuals face a maximum penalty of 10 years imprisonment and/or a fine of $420,000. Corporations face penalties of up to $10 million dollars or three times the value of the benefit attributable to the contravention or 10% or annual turnover in preceding 12 months.
There have been very few finalised criminal cartel prosecutions in Australia, but recent results demonstrate how serious this type of conduct is taken by the courts. The Japanese company Kawasaki Kisen Kaisha Ltd (“K-Line”) pleaded guilty in the Federal Court to criminal cartel offences for engaging in cartel conduct with other shipping companies to fix prices on the transportation of vehicles in Australia between 2009 and 2012. K Line was fined $34.5 million.
The most interesting aspect of criminal cartel prosecutions is the “1st in gets immunity” policy. This policy, aimed at encouraging the reporting of criminal cartel conduct, allows a person (or corporation) who first reports criminal cartel conduct and admits their involvement, to be offered immunity from further prosecution. The Australian Competition and Consumer Commission (ACCC) actively encourages reporting of cartel conduct and applications for immunity.
In criminal cartel conduct, immunity can be given to a business or individual that reports first, irrespective of where that person falls within the hierarchy, that is, irrespective of whether they are the organiser or just a participant. This is obviously a very big carrot offered by the ACCC to encourage reporting of cartel conduct.
There are a number of conditions that the ACCC imposes when immunity is sought. it is important to obtain legal advice. Kingston Fox Lawyers can provide individuals or corporations with this advice, or alternatively, welcome consulting enquiries from law firms seeking advice on behalf of their clients from a criminal defence firm.
The increase in funding overall, combined with the anticipated increase in corporate crime prosecutions as a result of the Royal Commission into Misconduct in Banking, Superannuation and Financial Services Industry, suggests that criminal prosecutions in the Federal Court are set to increase.
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This is general information only and does not constitute legal advice.