i ENFORCEMENT POLICIES AND GUIDANCE
i Statutory framework
Australia’s competition law is contained in the Competition and Consumer Act 2010 (Cth)(CCA), and is administered by the Australian Competition and Consumer Commission (ACCC). The ACCC has powers to investigate and bring proceedings against parties that have engaged in cartel conduct, including the power to:
- a compel any person or company to provide information about a suspected breach of the CCA, including by providing documents or oral evidence;
- b obtain search warrants for company offices and the premises of company officers; and
- c facilitate surveillance of individuals, including phone taps, through collaboration with the Federal Police.
Cartel conduct in the CCA is divided into four categories, which are prohibited by Sections 44ZZRA to 44ZZRV. These provisions prohibit making or giving effect to a contract, arrangement or understanding between competitors, which has the likely effect of:
Cartel conduct constitutes both a civil and criminal offence under the CCA, and the CCA does not differentiate between differing degrees of cartel behaviour. However, under the Criminal Code Act 1995 (Cth), additional requirements need to be met in order to prosecute a criminal cartel offence, including the need to establish certain fault elements, prove the offence beyond reasonable doubt and, depending on the circumstances, obtain a unanimous jury verdict. While the ACCC investigates and litigates cartel conduct as a civil offence, it is the Commonwealth Director of Public Prosecutions (CDPP) that prosecutes criminal cartel offences. The ACCC and the DPP have signed a memorandum of understanding (MoU) that provides that the ACCC will refer cartel conduct that can cause large scale or serious economic harm to the CDPP for prosecution.
II COOPERATION WITH OTHER JURISDICTIONS
Cooperation between antitrust enforcement agencies of different countries has become increasingly important. Cross-border trade has increased and led to greater scope for international cartel conduct. For example, two treaties allow for assistance between Australia and the United States to exchange evidence and enforce their respective competition laws. These are the Australia United States Mutual Antitrust Enforcement Assistance Agreement, and the Agreement between the Government of Australia and the Government of the United States relating to cooperation and antitrust matters.
Additionally, the ACCC has also signed agreements and MoUs with numerous other antitrust agencies including in Canada, China, the European Union, India, Japan, New Zealand, Papua New Guinea, the Philippines, the Republic of Korea and the United Kingdom. These agreements aim to assist with cross-border investigations and assist other countries, particularly in the Asia-Pacific region, in building effective systems and appropriate frameworks for economic regulation.
i Information sharing
The ACCC regularly exchanges information with overseas agencies. In 2015, it exchanged information with foreign agencies and government bodies on 175 occasions, facilitated by agreements and MoUs with these agencies, and also bilateral waivers obtained from the affected parties. The ACCC has a standard non-negotiable disclosure consent form to allow for disclosure of confidential information to, among other entities, these foreign agencies and government bodies.
The CCA permits the ACCC to disclose ‘protected information’ to a foreign government body where the Chairman of the ACCC is satisfied that disclosure would assist the agency. Protected information is defined in Section 155AAA of the CCA to include information that was given in confidence to the ACCC, including by a foreign government body or obtained by the ACCC under compulsion. The Chairman is entitled to, in writing, impose conditions in relation to the disclosure of protected information.
In relation to its treatment of confidential personal information, under the Privacy Act 1988 (Cth), the ACCC is prohibited from disclosing personal information for a purpose other than the purpose for which it was collected, subject to the exceptions provided in the Privacy Principles.
Additionally, under the Leniency Policy, the ACCC will not share confidential information provided by an informant, or the identity of the informant, with other regulators without the informant’s consent. However, in international matters, it will seek to obtain the informant’s consent as a matter of course and request that the informant provide written consent to disclosure for each jurisdiction in which he or she intends to seek immunity or leniency for prohibited conduct.
ii Extradition requests
In Australia, extradition procedures are dictated by the Extradition Act 1988 (Cth). Australia accepts extradition requests from countries that have been declared as an extradition country. Regulations also make provisions for extradition procedures with countries with non-treaty extradition arrangements with Australia, including the United Kingdom and Japan.
For the Australian government to agree to an extradition request, the conduct in question must amount to an offence in both Australia and the foreign country. As cartel conduct constitutes a criminal offence under the CCA, there is scope for Australia to accept extradition requests for contravening conduct from foreign agencies
iii Extraterritorial discovery
Extraterritorial discovery constitutes the gathering of evidence for foreign proceedings and discovery, which is not permissible.
iii JURISDICTION LIMITATIONS, AFFIRMATIVE DEFENCES AND EXEMPTIONS
i Extraterritorial application of Australia’s competition laws
Section 5(1) of the CCA provides that Australia’s competition laws extend to the engaging of conduct outside of Australia. The laws extend to companies incorporated or carrying on business in Australia, Australian citizens or persons ordinarily resident in Australia. The laws also extend to suppliers of goods and services in relation to a misuse of market power and exclusive dealing.
Joint venture exemption
The CCA provides for exemptions from civil and criminal prohibitions for joint ventures.2 Those exemptions are currently defined narrowly and apply only where:
A review of Australia’s competition laws (the Harper Review) has recommended three changes to be made to the joint venture exemption. It should:
• relate to goods or services that are acquired, produced, supplied or marketed by or for the purposes of the joint venture;
• is reasonably necessary for undertaking the joint venture; or
• is for the purpose of the joint venture.
The Harper Review has recommended that the ACCC should have the power to issue block exemptions for conduct that is unlikely to substantially lessen competition or that it results in a net public benefit. This would bring Australia in line with other regimes such as the United Kingdom, United States and Singapore.
The ACCC has an Immunity and Cooperation Policy that grants full immunity from any civil enforcement action brought by the ACCC to the first individual or corporation that meet the criteria under the policy.3 That includes the ongoing cooperation and full disclosure of information relating to the alleged cartel.
The ACCC also accepts applications for criminal immunity and makes recommendations to the CDPP that an applicant be granted immunity pursuant to the Prosecution Policy of the Commonwealth.4 Such a recommendation will only be made where the individual or corporation first satisfies the criteria for a conditional immunity application under the ACCC’s Immunity and Cooperation Policy.
Future legal developments on cartel law in Australia
Apart from the statutory changes announced by the government implementing numerous recommendations made in the Harper Review, there are a few case developments in the future that will impact on Australia’s competition laws.
On 14 October 2016, the High Court of Australia granted special leave to hear two appeals from the Full Court of the Federal Court of Australia for claims made by the ACCC against Air New Zealand Ltd and PT Garuda Indonesia Ltd. The ACCC alleged both companies engaged in collusive behaviour by fixing surcharges on and fees on the carriage of air cargo from overseas to Australia. At first instance, the case was dismissed as the alleged collusive conduct was engaged in Indonesia and therefore no Australian market was involved.5
Upon appeal by the ACCC, the majority of the Full Court of the Federal Court of Australia held that the relevant market for the air cargo services from Hong Kong to Australian ports, involving airlines, freight forwarders, exporters and (at least) including some large shippers, were markets ‘in Australia’.6 This was essentially an adoption of a broader definition of the relevant market. It is expected that the High Court of Australia will hear the matter in 2017.
On 14 July 2016, the ACCC commenced its first criminal charge under Section 44ZZRG(1) of the CCA against Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company based on Japan. It alleged that NYK engaged in a cartel from July 2009 to September 2012. On 18 July 2016, NYK pleaded guilty to the charges of criminal cartel conduct and is scheduled to be sentenced for the criminal cartel charges on 11–12 April 2017.
iV LENIENCY PROGRAMMES
The ACCC first introduced a leniency programme in July 2003. The current policy, entitled ‘ACCC immunity and cooperation policy for cartel conduct’ (the Leniency Policy), was published in September 2014, and sets out the approach of the ACCC to cooperation by cartel participants. At the time of publication, the ACCC Chairman emphasised the utility of the Leniency Policy in detecting and prosecuting cartels:
Due to the difficulty in detecting cartels and the damage that cartels cause to competitors and consumers, identifying and prosecuting cartel conduct is an enduring priority for the commission ... This immunity policy and the threat of civil and criminal penalties are fundamental to the effective discovery and disruption of cartel conduct.7
The Leniency Policy offers two forms of leniency for cartel participants willing to assist the ACCC in its investigation:
A corporation that is or was party to a cartel (in either a primary or ancillary capacity) will be eligible for conditional civil immunity where it meets the following seven conditions:
An individual that was a director, officer or employee of a corporation that is or was party to a cartel may also apply for conditional immunity, subject to the same criteria (save for the requirement that the admissions are a true corporate act).
When determining whether to grant conditional immunity, the ACCC will interpret the Leniency Policy in favour of the applicant in the case of any ambiguity. Further, in rare and exceptional circumstances, the ACCC may grant immunity to an applicant that fails to meet the criteria (including second or subsequent applicants) under its cooperation policy (discussed in Section V.ii, infra) by not commencing civil proceedings against the applicant. The ACCC has not issued any guidance as to what constitutes ‘rare and exceptional circumstances’.
Under an agreement between the ACCC and the CDPP, if the ACCC considers that an applicant meets the criteria for conditional immunity, it may recommend to the CDPP that the applicant be granted immunity from criminal prosecution. The CDPP will then exercise independent discretion to assess whether the applicant meets the criteria under the Leniency Policy.
ii ‘Amnesty plus’ regime
A cartel participant who does not qualify for conditional immunity but who cooperates with the ACCC in relation to a cartel may discover a second, unrelated cartel. In such a case, that party may apply for conditional immunity for the second cartel as well as a recommendation by the ACCC to the court for a further reduction in penalty in relation to the original cartel.
iii Obtaining a marker
Corporations or individuals who intend to apply for immunity can request a marker from the ACCC. The marker will have the effect of preserving the applicant’s status as the first immunity applicant in respect of a cartel, giving it a limited period of time to gather the required information to satisfy the criteria for conditional immunity. To obtain a marker, the applicant must provide such a description of the cartel conduct as to allow the ACCC to confirm that no other party has applied for immunity or obtained a marker in respect of that cartel. If this standard is met, the request may be made on an anonymous basis.
If the applicant wishes to proceed with the immunity application after obtaining a marker, it must make a ‘proffer’ by providing the ACCC with a detailed description of the cartel conduct. The proffer may be made orally or in writing. If the ACCC is satisfied that the applicant has met the criteria for immunity, it will grant conditional immunity.
iv Duties of cooperation required for a grant of leniency
Once conditional immunity is granted, the applicant has on ongoing obligation to provide full, frank and truthful disclosure and to cooperate fully and expeditiously with the ACCC throughout its investigation and any subsequent court proceedings. The applicant must also keep its status as an immunity applicant and the details of any investigation or court proceedings confidential, unless otherwise required by law or with the ACCC’s written consent.
If the applicant complies with these obligations, conditional immunity will become final immunity upon the resolution of any proceedings against other cartel participants.
v Reductions in liability
The first applicant to meet the criteria in the Leniency Policy is completely immune to civil action by the ACCC, and potentially criminal prosecution by the CDPP, as discussed in subsection iii, supra. It should be noted, however, that immunity under the Leniency Policy is not a bar to private enforcement actions. The applicant may still be liable to compensate parties that suffered damages as a result of the cartel conduct.
A further benefit of conditional immunity for a corporation is that it may also seek derivative immunity for related corporate entities or current and former directors, officers and employees. A related corporate entity will be eligible for derivative immunity if, for all or part of the period of the cartel conduct, the corporation with conditional immunity held a controlling interest in the related corporate entity, or the related corporate entity held a controlling interest in the corporation, and the related corporate entity meets the criteria set out above. Individual directors, officers or employees will similarly qualify for derivative immunity if they meet the criteria for individual conditional immunity.
If an applicant fails to meet the criteria for conditional immunity, it may still receive leniency from the ACCC or the court if it cooperates in the ACCC’s investigation. There is no sliding scale for discounts awarded for cooperation, but, in civil proceedings, the ACCC will identify to the court any cooperation provided by a party and take this cooperation into account when making a recommendation as to a penalty or sanction. When assessing the extent and value of the cooperation, the ACCC will consider:
Ultimately, the penalty or sanction imposed on cartel participants will be determined by the court.
In criminal proceedings, the court will take into account the extent to which the defendant cooperated with law enforcement agencies when determining the appropriate sentence.
vi Discovery of surrendered materials by private litigants
As discussed in subsection v, supra, immunity under the Leniency Policy does not protect the applicant from private enforcement actions. There is a risk that information disclosed to the ACCC in support of an application for leniency may be discovered by parties to private litigation.
While the ACCC undertakes to ‘use its best endeavours to protect any confidential information provided by an immunity applicant’, this is subject to the protected cartel information provisions of the CCA. In particular, Section 157C provides that the ACCC is not required to make discovery of documents containing protected cartel information (defined as information relating to a cartel offence and given to the ACCC in confidence) to a party to actual or prospective court proceedings. However, the ACCC may disclose such information after considering matters, such as the fact that the information was provided in confidence, the safety of the informant, the fact that the disclosure may discourage future informants and the interests of the administration of justice.
i Statutory basis for and types of liability
Individuals and corporations face both civil and criminal liability under the CCA for their involvement in cartel conduct. The criminal and civil prohibitions are the same, save for an additional fault element of ‘knowledge or belief’ in relation to the criminal offence. The civil penalties for making, or giving effect to, a cartel provision are the same as those currently available for other contraventions of Part IV (‘restrictive trade practices’).
It is the CDPP that has the power to bring criminal indictments under the CCA. The ACCC will refer serious cartel matters to the CDPP.
ii Potential and typical remedies for cartel violations
Individuals face pecuniary penalties of up to A$500,000 per breach of the cartel prohibitions contained in Division 1, Part IV of the CCA.
In addition, individuals found to have committed a cartel offence may face criminal penalties of up to A$220,000 (per breach) or up to 10 years’ imprisonment.8 It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty.9
Penalties for corporations
The maximum fine or pecuniary penalty for a corporation (per criminal cartel offence or civil contravention, whichever applies) will be the greater of:
On application, the Federal Court may impose other penalties for cartel civil contraventions or criminal offences including:
The following recent penalties imposed for cartel conduct should provide an indication of a ‘typical penalty’ for a breach:
The ACCC is awaiting penalty outcomes in a number of cartel proceedings, including in proceedings against Yazaki Corporation relating to price-fixing of motor vehicle wire harnesses and in proceedings relating to the Air Cargo cartel. So far in the Air Cargo cartel proceedings the Court has ordered penalties against settling airlines totaling A$98.5 million, including A$20 million against Qantas in 2008, and over A$11 million against both Cathay Pacific and Singapore Airlines in 2012.
Criminal sanctions for serious cartel conduct were introduced in Australia in 2009; however, the first criminal cartel charges were only brought against Nippon Yusen Kabushiki Kaisha in July 2016, followed shortly by proceedings brought against Japanese-based company Kawasaki Kisen Kaisha.
As the above demonstrates, the ACCC is striving for tougher penalties and sending a clearer signal on cartel conduct.
iii Early resolution and settlement procedures
As it the case with most immunity programmes, in Australia, a party to a cartel must be the first party to approach the ACCC to obtain civil or criminal immunity (or both). However, where a party is not the first in, the ACCC’s cooperation policy contained in the ACCC Immunity and Cooperation Policy may be available.
The ACCC will assess the extent and value of the cooperation taking into account, among other things, the timing of the approach for cooperation, the significance of the evidence and whether the party has ceased involvement in the cartel. Ultimately, the penalty discount and other sanction the ACCC recommends to the court are solely at the discretion of the ACCC.
The ACCC frequently negotiates settlements with parties who have cooperated with an investigation, subject to court approval.
vi INVESTIGATIVE POWERS
The CCA contains multiple far-reaching powers that the ACCC can use for investigating and gathering evidence for investigations. The ACCC will always assess cartels as a priority.
Section 155 of the CCA is the ACCC’s most widely used mandatory information and evidence-gathering power. It gives the ACCC the power to require a person to provide information, documents or give evidence relating to a possible contravention, where the ACCC has reason to believe that a person is capable of doing so. Failure to comply with a notice is a criminal offence punishable by a fine or imprisonment,15 and there is no privilege against self-incrimination. Legal professional privilege in respect of documents is preserved.
The ACCC also has the option of seeking a warrant to conduct search and seizure operations (i.e., dawn raids). The ACCC does not generally comment on its use of search warranties, the ACCC most commonly uses them in cartel investigations. Further, the following factors indicate a likely increase in the occurrence of ‘search warranties’:
Vii PRIVATE ENFORCEMENT
i Private right of action
The CCA permits a private enforcement action in respect of a breach of the cartel provisions contained in Part IV, Division 1 of the CCA. Section 82 provides that any person who suffers loss or damage from a breach of the cartel provisions can bring a private claim for damages in the Federal Court against a party that engaged in, or was involved in, the contravening conduct. 16 Furthermore, under Section 80 a private litigant may seek an injunction restraining a party from engaging in conduct that constitutes an actual or attempted breach of the cartel provisions, or an attempt to aid, abet or induce a person to contravene the cartel provisions.17
Notwithstanding these statutory provisions, the number of private enforcement actions in Australia continues to lag behind other major jurisdictions.
ii Class actions
Australia has a well-developed class action regime that operates under Part VI of the Federal Court of Australia Act 1976 (Cth) (FCA). Under the FCA regime four cartel class actions have been commenced, all of which have settled. The most recent action, which settled for A$38 million, was brought against a number of airlines alleging the existence of a cartel to fix the price of air cargo services. 18
The FCA regime provides that a class action may be commenced only if:
In relation to the requirements for standing, under the FCA regime, a person who has a sufficient interest to commence a proceeding on his or her own behalf against another person will also have a sufficient interest to commence a class action proceeding.20
The FCA regime operates an ‘opt-out’ system, whereby all persons that satisfy the definition of the ‘class’ will be represented by the lead plaintiff in the proceedings, unless they opt out. However, in some cases the ‘class’ has been defined as those potential claimants that have arrangements with a certain litigation funder or engaged a particular law firm. In such instances, the definition of the ‘class’ becomes sufficiently narrow so that, in effect, potential claimants are required to opt in to the proceedings.
iii Calculation of damages
Damages under the CCA for a breach of the cartel provisions are compensatory in nature, and accordingly, a plaintiff may only recover actual loss or damage suffered.21 Punitive or exemplary damages are not available. Further, there is a causal requirement that the loss or damage was sustained by the other party’s contravention. Where a court determines that loss or damage has been incurred, the court will be required to quantify the loss, including where necessary by approximation or degree.
In Australia, as no action for damages arising from a breach of the cartel provisions has proceeded to judgment. Therefore, the precise methodologies by which the courts will calculate damages remains unclear. One key issue that is yet to be addressed in the cartel context is the potential availability of a pass-on defence, namely, a defence to a claim for loss or damage on the basis that the plaintiff passed through any increased costs associated with the cartel conduct to its own customers.22
iv Limitation periods
An action for damages in respect of a breach of the cartel provisions must be initiated within six years from the date on which the cause of action accrued. There is no settled position in the Australian courts as to when the cause of action will accrue in cartel cases. One argument is that the cause of action will only accrue when the plaintiff becomes aware that it has suffered loss or damage as a result of the cartel conduct. 23 However, on the other hand, it is argued that the cause of action accrues at the time the plaintiff suffers the loss, usually when the plaintiff purchases the goods or services. 24
v Jurisdiction and extraterritoriality
The CCA extends the operation of the cartel provisions to conduct engaged in outside Australia by companies incorporated or carrying on business in Australia, or Australian citizens or persons ordinarily residing in Australia.25 However, Section 5(3) requires that before conduct outside of Australia can be relied upon in private enforcement proceedings, written consent must be obtained from the Minister.26 The Harper Review recognised that such consent requirements pose ‘a material hurdle for private plaintiffs’ and recommended they be removed. 27
vi Interaction between government investigations and private enforcement
In Australia, the interaction between the public and private enforcement regimes can both facilitate and frustrate private actions. A private party is not precluded from commencing a private enforcement action where the ACCC or DPP has commenced or completed its own investigations. In fact, it is increasingly common for private enforcement actions to be triggered by high-profile ACCC proceedings.
Section 83 of the CCA provides that findings of fact made against the respondent in prior proceedings can be used as prima facie evidence of those facts in subsequent proceedings.28 Accordingly, rather than having to adduce its own evidence, a private litigant may rely on findings of fact made in a successful ACCC proceeding. However, the function of this provision may be undermined by the ACCC Immunity and Cooperation Policy, which encourages the ACCC and the respondent to settle proceedings by way of an agreed statement of facts and consent orders.29 It is unclear whether a private litigant can rely on Section 83 in relation to findings based on admissions in settled proceedings, as distinct from findings based on evidence. In addition, under Section 87B of the CCA, where a party has engaged in an alleged contravention of the CCA (including the cartel provisions), the ACC may accept a formal undertaking by the party. However, an undertaking does not require an admission that the party contravened the CCA, and accordingly cannot be relied upon under Section 83 by a private litigant.
Obtaining evidence is a significant challenge for private litigants. While the ACCC has wide-ranging investigative powers to gather evidence, it has adopted a highly restrictive stance on the disclosure of such information to private litigants. Under the CCA, where evidence is deemed to be ‘protected cartel information’, the ACCC has broad power to refuse to comply with a private litigant’s request for information.
VIII CURRENT DEVELOPMENTS
Finally, after years of continuing to prosecute cartels solely on a civil penalty basis against companies and individuals, 2016 has seen the first criminal cases brought to the courts. One international shipping company has pled guilty and charges have been laid against another concerning conduct that occurred between 2009 and 2012. Although these developments are significant, the ACCC and CDPP’s investigatory and prosecutorial work has not yet been tested through a full trial. Additionally, these initial cases only have corporate defendants so, even after a full trial, some important elements of the criminal system will remain untested.
1 Nicolas J Taylor is a partner and Prudence J Smith is of counsel at Jones Day.
2 Competition and Consumer Act 2010 (Cth), Sections 44ZZRO, 44ZZRP.
3 Australian Competition and Consumer Commission, ACCC Immunity and Cooperation Policy, September 2014.
4 Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, Annexure B: Immunity from Prosecution in Serious Cartel Offences, September 2014.
5 ACCC v. Air New Zealand Limited  FCA 1157, .
6 ACCC v. PT Garuda Indonesia Ltd  FCAFC 42, -.
7 Australian Competition and Consumer Commission, ‘Updated Immunity Policy to uncover cartel conduct’ (Media Release, MR 225/14, 10 September 2014), www.accc.gov.au/media-release/updated-immunity-policy-to-uncover-cartel-conduct.
8 CCA, Section 79.
9 CCA, Section 77A.
10 CCA, Section 80.
11 CCA, Section 82.
12 CCA, Section 86E.
13 CCA, Section 86C.
14 CCA, Section 87.
15 CCA, Section 155(7).
16 CCA, Section 82(1).
17 CCA, Section 80.
18 De Brett Seafood Pty Ltd v. Qantas Airways Ltd (No. 7)  FCA 979.
19 FCA, Section 33C.
20 FCA, Section 33D.
21 CCA, Section 82(1).
22 Beaton-Wells, ‘Private Enforcement of Competition Law in Australia – Inching Forwards’ (2016) 39 Melbourne University Law Review 681, 726.
23 Beaton-Wells, ‘Private Enforcement of Competition Law in Australia – Inching Forwards’ (2016) 39 Melbourne University Law Review 681, 693.
24 Beaton-Wells, ‘Private Enforcement of Competition Law in Australia – Inching Forwards’ (2016) 39 Melbourne University Law Review 681, 693.
25 CCA, Section 5(1).
26 CCA, Section 5(3). The definition of Minister is derived by reference to Section 19A of the Acts Interpretation Act 1901 (Cth). The Ministers ‘administering’ the CCA can be ascertained by reference to the Administrative Arrangements Order, made by Governor-General and notified in the Gazette. Ministerial appointments to administer particular portfolios are also made by the Governor-General and are notified in the Gazette, but a court would not normally require such details to be proven.
27 Beaton-Wells, ‘Private Enforcement of Competition Law in Australia – Inching Forwards’ (2016) 39 Melbourne University Law Review 681, 700.
28 CCA, Section 83.
29 ACCC, ‘ACCC Immunity and Cooperation Policy for Cartel Conduct’ (Policy Document, September 2014).