I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
The legislative framework supporting private antitrust enforcement rights was subject to a ‘root and branch’ review (the Harper Review) at the end of 2014 and in early 2015. The final report was released on 31 March 2015. The government subsequently expressed support for most of the Harper Review’s recommendations regarding competition policy and law in Australia. Following the re-election of the Turnbull government in July 2016, exposure draft legislation was released on 5 September 2016 proposing to implement the majority of the recommendations. This included a proposal to amend Section 83 of the Competition and Consumer Act 2010 (Cth) (CCA), which currently provides that a finding of any fact by a court made in an earlier proceeding can be used as prima facie evidence in subsequent proceedings. The proposed amendments would extend Section 83 to admissions made by a party in the earlier proceeding to assist private litigants in follow-on litigation.
In the event these proposals are enacted, they have the potential to significantly reshape both public and private competition law enforcement in Australia.
On 1 December 2016, the Australian government introduced the Competition and Consumer Amendment (Misuse of Market Power) Bill 2016, which proposes to give effect to the recommendations contained in the Harper Review regarding Section 46 of the CCA, which concerns the misuse of market power. These proposed amendments reframe Section 46 to introduce an ‘effects test’ and prohibit a firm with a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition. A further bill, covering the balance of the competition law reform proposals, is expected to follow shortly.
The other significant antitrust development in Australia in 2016 was the institution of the first criminal proceedings by the Commonwealth Director of Public Prosecutions (CDPP) under the CCA in relation to cartel conduct. Since the introduction of the criminal regime in the CCA in 2009, the national competition regulator, the Australian Competition and Consumer Commission (ACCC), has long signalled an intention to seek criminal prosecutions for serious cartel conduct. Following an investigation by the ACCC, the CDPP laid charges against Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company based in Japan, which pleaded guilty to criminal cartel conduct in the Federal Court on 18 July 2016. The proceeding has been listed for a sentencing hearing in early 2017. Whether this new paradigm for public cartel enforcement in Australia will have an impact on the volume of private antitrust follow-on actions in relation to cartel conduct, which has been relatively scarce in recent years, remains to be seen.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
The CCA, together with the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), provides the legislative framework for private antitrust litigation in Australia. Part IV of the CCA prohibits a broad range of anticompetitive conduct such as cartel conduct, third line forcing, resale price maintenance, misuse of market power and anticompetitive mergers and acquisitions. Any person who has suffered loss or damage, or is likely to suffer loss or damage, as a result of a breach of the prohibitions on anticompetitive conduct under the CCA can bring proceedings to recover that loss or damage under Section 82 of the CCA, or seek compensation or other orders to limit the loss or damage suffered or likely to be suffered as a result of the conduct, for example an order declaring the whole or part of a contract to be void. Private litigants can also seek injunctions in relation to a breach or proposed breach of the prohibitions on anticompetitive conduct, other than the prohibition on anticompetitive mergers and acquisitions. An action for damages or compensation or other orders may be commenced at any time within six years after the day on which the cause of action that relates to the conduct accrued.
Under Section 86(1) of the CCA, the Federal Court of Australia has jurisdiction to hear all civil proceedings arising under the CCA. Under Section 163 of the CCA, the Federal Court also has jurisdiction to hear prosecutions for offences under the CCA. The Federal Circuit Court has jurisdiction to hear misuse of market power cases and matters arising under industry codes registered under the CCA but cannot make an award for damages greater than A$750,000 under Section 86AA of the CCA. Private enforcement proceedings commenced or heard in the federal courts are subject to the Federal Court Rules 2011 (the Federal Court Rules). The CCA also confers limited jurisdiction for private antitrust enforcement on the several courts of Australian states, although in practice claims under the CCA are more commonly pursued in the Federal Court.
While a framework exists for private enforcement actions, including by making use of provisions in the CCA that allow for follow-on proceedings (discussed further in Section X, infra), such private enforcement actions are not common in Australia. This is likely due to the difficulties in assessing damages suffered as a result of anticompetitive conduct, the high cost of conducting proceedings in the Federal Court, and potentially a lack of effective compensation mechanisms such as treble damages, which in other jurisdictions are perceived to create incentives for private litigation.
The CCA contains a number of provisions that extend the prohibitions on anticompetitive conduct beyond Australia’s borders. Section 5(1) of the CCA extends the application of the prohibitions in Part IV of the CCA to conduct engaged in and outside Australia by bodies corporate incorporated or carrying on business in Australia, Australian citizens or persons ordinarily resident in Australia. Similarly, prohibitions on exclusive dealing and resale price maintenance are extended to any person outside Australia if that person is supplying goods or services to persons in Australia. Additionally, the misuse of market power prohibitions in the CCA are extended by virtue of Section 5(1A) of the CCA to New Zealand citizens, residents, bodies corporate and corporations carrying on business in New Zealand.
The extraterritorial effect of the CCA’s prohibitions against cartel conduct and the extraterritoriality provisions set out in Section 5 of the CCA were recently examined in Norcast S.ár.L v. Bradken Limited (No 2)  FCA 235, where the court found that cartel conduct in the form of bid rigging did not need to occur in Australia or relate to an Australian market for the court to have jurisdiction over the conduct in question. In that case, it was sufficient that the corporations involved in the bid rigging had practical links to Australia and that one of the participants was an Australian corporation.
At present, Section 5 of the CCA requires private parties to seek ministerial consent before relying on extraterritorial conduct in private competition law actions. In its final report, the Harper Review recommended that the government remove this requirement. Prior to publishing its response to the Harper Review (in which the government supported this change), the government introduced the Competition and Consumer Amendment (Deregulatory and other Measures) Bill 2015 into Parliament, which proposed to remove the written consent requirement. Although the Bill lapsed, it is expected that similar amendments will be incorporated into the government’s second bill covering the balance of the competition law reform proposals to be introduced in 2017.
The CCA permits a person (including a corporation) to seek damages, declarations that all or part of a contract is void, divestiture and other remedies if they have suffered loss or damage, or are likely to suffer loss or damage, as a result of conduct committed in contravention of Part IV of the CCA. Any person can seek an injunction in relation to a contravention or proposed contravention of Part IV of the CCA, other than in relation to a breach of the prohibition on anticompetitive mergers and acquisitions.
In relation to representative proceedings (also known as class actions), a person will have standing to commence proceedings as a representative applicant under the Federal Court Act where the person has sufficient interest to bring an action on his or her own behalf.
V THE PROCESS OF DISCOVERY
There are a range of processes for obtaining access to documents from opposing parties and non-parties in private enforcement actions in Australia.
Prior to commencing proceedings, a person can seek preliminary discovery to ascertain the identity or whereabouts of a prospective defendant or, more commonly in private competition enforcement actions, to determine whether or not to commence proceedings against a prospective defendant. In order to obtain preliminary discovery, the person must first make an application to the court. The court will only make an order for preliminary discovery to determine whether or not to commence proceedings if each of the following matters are satisfied: (1) the person reasonably believes that he or she may have the right to obtain relief from a prospective defendant; (2) the person has made reasonable inquiries but does not have sufficient information to decide whether to commence proceedings; (3) the prospective defendant is likely to have documents that are directly relevant to the question of whether the person has the right to obtain relief from the prospective defendant; and (4) the documents will assist with making the decision as to whether to bring proceedings.
In Australia there is no automatic right to discovery once proceedings have commenced. Rather, a party who wishes to obtain discovery from another party to the proceedings must first make an application to the court for an order that another party to the proceedings give discovery. A party to proceedings in the Federal Court must not apply for an order for discovery unless it will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible.2 In addition to discovery, parties to proceedings can also obtain specific documents from opposing parties without a court order by issuing a notice to produce. Notices to produce are more limited in scope than discovery.
A party to proceedings can also obtain documents from non-parties by seeking an order for non-party discovery or seeking leave from the court to issue a subpoena to produce documents. A party can also seek leave to issue a subpoena to a non-party requiring that person to attend court to give evidence.
However, there are limitations on the ability of a private litigant to obtain documents from the ACCC in proceedings to which the ACCC is not a party. In July 2009, the CCA was amended to enhance the protection afforded to information given in confidence to the ACCC that relates to a breach, or possible breach, of a cartel prohibition (protected cartel information).3 As a result of the amendments, the ACCC is not required to produce to a court or tribunal, or to give discovery or produce to a person, a document containing protected cartel information, or to disclose protected cartel information to a court or tribunal, except by leave of the court or tribunal.
VI USE OF EXPERTS
Expert evidence is commonly used in private competition enforcement actions in Australia. An expert may be appointed by the court to inquire into and report on any question or facts relevant to any question arising in a proceeding, or a party to a proceeding may call an expert to give expert evidence at a trial. The procedural rules vary depending on whether the expert is a court-appointed expert or an expert called by a party to the proceedings. In both cases, however, the expert is required to prepare a report outlining his or her opinion on the particular questions that he or she has been asked to opine on. The expert may then be required to give oral evidence at the hearing.
The role of an expert is to assist the court on matters relevant to his or her area of expertise. An expert’s paramount duty is to the court and not to the person who has retained him or her.4 Accordingly, experts appointed by parties to the proceedings are required to adhere to strict guidelines in the provision of their evidence, including in relation to the form of their report.
In Australia, it is common in antitrust enforcement actions involving multiple competing expert witnesses for expert evidence to be presented concurrently, otherwise known as a ‘hot tubbing’. This involves calling all of the experts to give evidence at the trial concurrently. Each expert presents his or her opinion and then each other expert is given an opportunity to respond. The judge will also ask questions of the experts and cross-examination of the experts by the parties may be permitted.
VII CLASS ACTIONS
In Australia, representative proceedings (or class actions) are governed by Part IVA of the Federal Court Act. To commence a representative proceeding in Australia, the following requirements must be met: (1) there must be at least seven persons who have claims against the same person or persons; (2) the claims of all these persons must arise out of the same, similar or related circumstances; and (3) the claims of all these persons must give rise to a substantial common issue of law or fact.
Generally there is no requirement for a person to give consent to be a group member of a representative proceeding and the courts operate on an ‘opt-out’ basis (i.e., the courts will fix a date by which group members of a representative proceeding can opt out of the representative action by giving notice in writing). In Australia, the representative applicant bears the costs burden in the proceedings. Group members are not required to contribute to the costs of the proceedings or to any costs orders made against the representative applicant in the proceedings. Accordingly, there is often very little incentive for group members to opt out of representative proceedings in Australia.
Once a representative proceeding has been commenced, it is subject to strict supervision by the court, and it cannot be settled or discontinued without the court’s approval. In addition, a representative applicant is unable to withdraw as the representative applicant without the leave of the court. This limits the parties’ flexibility in terms of alternative dispute resolution (ADR) processes and can hinder settlement efforts. Further information on the settlement processes for representative proceedings is set out in Section XII, infra.
VIII CALCULATING DAMAGES
Punitive and exemplary damages are not available as remedies for private enforcement actions in Australia. Rather, damages are assessed on compensatory principles. Defendants are jointly and severally liable (i.e., each person involved in the contravention that led to the litigant’s loss and damage is jointly and severally liable for that loss). Defendants may seek to join additional defendants involved in a contravention to the proceedings. Damages and compensation orders available under Sections 82 and 87 of the CCA are limited to only the actual amount of loss or damage suffered by the litigant from the contravention of the CCA. This is consistent with the general Australian approach of using damages and other forms of monetary compensation to restore a litigant to the position they would have enjoyed had the contravening conduct or breach not occurred. Therefore, when assessing damages in private antitrust enforcement actions, the courts do not consider any fines imposed on the respondent as part of public enforcement action taken by the ACCC.
If a court has ordered a defendant to pay a pecuniary penalty as a result of enforcement action by the ACCC and has also made a compensation order as a result of a private enforcement action, and the defendant lacks the financial resources to pay both, the court is required to give preference to the compensation order as required by Section 79B of the CCA. There is also a rebuttable presumption under Section 51A of the Federal Court Act that interest is payable on actions to recover any money (including any debt or damages or the value of goods) at such rates as the court considers fit.
IX PASS-ON DEFENCES
There is no established pass-on defence in Australia. The current relevance of passing on in Australia is limited to the assessment of damages under Section 82 of the CCA. As noted above, Australia’s damages regime is intended to compensate for actual loss or damage suffered. Damage awards may be reduced (or not awarded at all) if an individual has passed on some or all of that loss or damage to subsequent purchasers.
X FOLLOW-ON LITIGATION
There are currently no limitations on follow-on claims for private actions against parties who have been subject to public enforcement action. While the ACCC has an immunity policy for self-reporting cartelists which can grant immunity from criminal prosecution and ACCC-initiated civil proceedings for cartel conduct, this immunity cannot be granted in respect of private enforcement actions for the same cartel behaviour.
Under Section 83 of the CCA, findings of fact made in earlier proceedings including proceedings brought for contraventions of cartel conduct prohibitions, are prima facie evidence of those facts in later proceedings for damages or compensation orders. As outlined earlier in this chapter, the government has released draft legislation which gives effect to the Harper Review’s recommendation that Section 83 be extended to allow admissions of fact made by a party in the earlier proceeding to be used as prima facie evidence of those facts in later proceedings.
There have been limited recent follow-on proceedings in Australia in respect of cartel conduct. Follow-on proceedings that have been pursued and settled in the last five years include a cardboard packaging cartel (Jarra Creek Centra Packaging Shed Pty Ltd v. Amcor), a rubber chemicals cartel (Wright Rubber Products Pty Ltd v. Bayer AG [No 3]) and an air cargo cartel (De Brett Seafood Pty Ltd v. Qantas Airways Ltd).
Australian courts recognise legal professional privilege. A party to a private competition enforcement action will not be required to produce a privileged document to another party through compulsory court processes. A person is also not required to produce any document that would disclose information that is the subject of legal professional privilege to the ACCC during an investigation.
In Australia, there are two types of legal professional privilege: legal advice privilege and litigation privilege. Legal advice privilege extends to confidential communications between a lawyer and his or her client, or the contents of a confidential document prepared by the client, lawyer or another person, for the dominant purpose of the lawyer providing legal advice to the client. Litigation privilege extends to (1) a confidential communication between the client and another person, or between a lawyer acting for the client and another person, or (2) the contents of a confidential document that was prepared, for the dominant purpose of the client being provided with professional legal services in actual or anticipated legal proceedings.
XII SETTLEMENT PROCEDURES
Under Division 28.1 of the Federal Court Rules, the parties must consider options for ADR, including mediation, as soon as reasonably practicable. Prior to commencing proceedings in the Federal Court, the parties must file a ‘genuine steps statement’ where parties outline the steps that have been taken to resolve the dispute, and if no steps have been taken, why this is the case.5
If the parties consider that ADR is appropriate, an application may be made to the court seeking an order that the proceeding or relevant part of the proceeding be referred to an arbitrator, mediator or suitable person and that the proceedings be adjourned or stayed until that process concludes or is terminated. The Federal Court also has the discretion to order parties to attend ADR if it considers ADR appropriate.
The Federal Court, at its discretion, may award costs to the successful party on an ‘indemnity’ or ‘solicitor–client’ basis. An order for indemnity costs might be made where a party fails to accept an offer of settlement and subsequently achieves an outcome that is less favourable than the proposed settlement offer.
In representative proceedings, the Federal Court has a supervisory role in relation to class action settlements and parties must first obtain the Federal Court’s approval prior to settling the proceeding.6
The Federal Court has developed its own criteria for approving class action settlements.7 The parties will usually need to persuade the court that:
- a the proposed settlement is fair and reasonable, having regard to the claims made on behalf of group members bound by settlement; and
- b the proposed settlement has been undertaken in the interests of group members, as well as those of the representative applicant, and not just in the interests of the representative applicant and the defendant.
As discussed in Section XII, supra, it is a requirement of Division 28.2 of the Federal Court Rules that parties consider options for ADR as soon as reasonably practicable and each party must file a genuine steps statement.
A party may apply to the court for an order referring all or part of the proceedings to mediation or arbitration and to have the proceedings stayed. If the court orders that the parties proceed to arbitration, then either party may apply to the court to have an arbitrator appointed and make orders about how the arbitration is to be conducted including how the arbitrator’s fees will be paid and when the arbitration must be completed. If the arbitration is successful, the parties may apply to the court to make an order in the terms of the award set out by the arbitrator. In practice, arbitration is not widely used for private antitrust enforcement in Australia.
XIV INDEMNIFICATION AND CONTRIBUTION
A private litigant can bring a damages claim under Section 82 of the CCA against any person involved in the contravention that caused his or her loss or damage. Each person involved in the contravention will be jointly and severally liable for the loss or damage suffered as a result. In Australia, a private litigant is entitled to commence proceedings against a single defendant in circumstances where there are multiple potential defendants that would be jointly and severally liable for the loss or damage caused if joined to the proceedings.
XV FUTURE DEVELOPMENTS AND OUTLOOK
As noted above, the Harper Review Panel’s final report was released on 31 March 2015. This was the first comprehensive review of Australia’s competition framework since 2003. The government formally expressed its support (in full, in principle or in part) for 44 of 56 of these recommendations. In September 2016 the government released an Exposure Draft entitled Competition and Consumer Amendment (Competition Policy Review) Bill 2016. The Exposure Draft proposes to implement many of the recommendations. The proposed amendments include simplifying certain of the competition law provisions in Part IV of the CCA, including the provisions relating to the prohibition on cartel conduct which are currently characterised by undue prolixity and complexity.
The first key recommendation – amendments reframing Section 46 of the CCA to introduce an ‘effects test’ and prohibit a firm with a substantial degree of power in a market from engaging in conduct with the purpose, effect or likely effect of substantially lessening competition – was introduced to Parliament on 1 December 2016. The balance of the reforms are likely to be introduced in early 2017. These include proposed amendments to Section 83 of the CCA that will assist private litigants in follow-on litigation to be able to rely on admissions made by a party in earlier proceedings.
There are a number of other proposed reforms which, if implemented, will open up sectors of the economy to increased competition and are likely to have substantial and longer-term impacts. Whether these reforms will actually result in an increase of private antitrust enforcement in Australia is uncertain.
1 Tom Bridges is a partner at Webb Henderson.
2 Federal Court Rules, Rule 20.11.
3 Trade Practices Amendment (Cartel Conduct and other Measures) Bill 2008, Explanatory Memorandum, 87, [7.1].
4 See, for example, Federal Court of Australia, Practice Note GPN-EXPT.
5 Section 6 of the Civil Dispute Resolution Act 2011 (Cth).
6 Section 33V of the Federal Court Act.
7 Federal Court of Australia, Practice Note GPN-CA.