The Cartels and Leniency Review: Australia

Enforcement policies and guidance

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:

  1. compel any person or company to provide information about a suspected breach of the CCA, including by providing documents or oral evidence;2
  2. obtain search warrants for company offices and the premises of company officers;3 and
  3. facilitate surveillance of individuals, including phone taps, through collaboration with the Australian Federal Police.

In the CCA, there are four categories of cartel conduct that are prohibited by Section 45AD. These provisions prohibit making or giving effect to a contract, arrangement or understanding between competitors that has the purpose of or is likely to have had the effect of:

  1. price-fixing;
  2. market sharing;
  3. bid rigging; or
  4. preventing, restricting or limiting production, capacity or supply.

Cartel conduct constitutes both a civil and a criminal offence under the CCA, which does not differentiate between differing degrees of cartel behaviour. However, under the Criminal Code Act 1995 (Cth), additional requirements must 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 CDPP have signed a memorandum of understanding (MOU), which provides that the ACCC will refer cartel conduct that can cause large-scale or serious economic harm to the CDPP for prosecution.

Cooperation with other jurisdictions

Cooperation between antitrust enforcement agencies of different countries has become increasingly important. Cross-border commerce has increased and led to greater scope for international cartel conduct. Many of the cases pursued by the ACCC come as a result of international interagency cooperation.

For example, two treaties allow for assistance between Australia and the United States to exchange evidence and enforce their respective competition laws: the Australia United States Mutual Antitrust Enforcement Assistance Agreement, and the Agreement between the Commonwealth Government of Australia and the Government of the United States relating to cooperation and antitrust matters. In April 2019, the ACCC also signed a memorandum of cooperation with the United States Federal Bureau of Investigation in an attempt to strengthen efforts in combating cartels and other anticompetitive behaviour. Further, in September 2020 the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC), was signed virtually by the US Department of Justice, US Federal Trade Commission, the UK Competition and Markets Authority, the New Zealand Commerce Commission, the Competition Bureau Canada and the ACCC. The agreement came into effect on 2 September 2020 and facilitates the sharing of intelligence, case theories and investigative techniques. The agencies aim to improve the coordination of cross-border investigations.4

The ACCC has previously signed agreements and MOUs with 12 other antitrust agencies, including in China, the European Union, India, Japan, New Zealand and the United Kingdom. These agreements aim to assist with cross-border cooperation and joint investigations and assist other countries, particularly in the Asia-Pacific region, in building effective systems and appropriate antitrust regulatory frameworks.

The ACCC receives and makes requests outside these formal arrangements. For example, in 2019–2020, the ACCC engaged with counterparts in various European countries with which it has no formal understanding.5

Additionally, the ACCC engages with the Organisation for Economic Co-operation and Development (OECD), the International Competition Network (ICN) and the International Consumer Protection Enforcement Network (ICPEN), 'to address existing and emerging competition and consumer protection challenges and promote ACCC priorities'.6

Although covid-19 inhibited some of the ACCC's international engagement activates, it maintained its work with counterpart agencies with a focus on sharing best practices regarding competition issues emerging from the pandemic.7

i Information sharing

The ACCC very regularly exchanges information with overseas antitrust agencies, facilitated by agreements and MOUs with these agencies, and bilateral waivers obtained from the affected parties. The ACCC has a standard non-negotiable disclosure consent form to allow confidential information to be disclosed to, among other entities, these foreign agencies and government bodies.

The CCA permits the ACCC to disclose 'protected information' to a foreign government body when the chairman of the ACCC is satisfied that disclosure would assist the foreign government body. 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 chair is entitled to impose conditions, in writing, 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 that for which it was collected, subject to the exceptions provided in the Privacy Principles.

Additionally, under the Cartel Immunity and Cooperation Policy, the ACCC will not share (unless required by law) with other regulators any confidential information provided by an informant, or the identity of the informant, 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

Extradition procedures are dictated by the Extradition Act 1988 (Cth). Australia accepts extradition requests from countries that have been declared an extradition country. Regulations also make provisions for extradition procedures with countries that have 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.

Jurisdictional 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 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.

ii Extended meaning of party

Section 45AC of the CCA has the effect of deeming related bodies corporate to be parties to cartels in circumstances where any one related body corporate is a party to the cartel conduct. For example, this provision will draw an international parent company into an Australian proceeding against its subsidiary relating to domestic cartel conduct.

iii Joint venture exemption

The CCA provides for exemptions from civil and criminal prohibitions for joint ventures.8 Joint ventures contained in an arrangement or understanding (not simply contracts) and for the acquisition of goods or services (not just production or supply) are exempt from civil and criminal prohibition. However, the CCA imposes some additional requirements to qualify for the joint venture exemption.

For a production, supply or joint acquisition joint venture, the exception from the application of the cartel laws will be available to the extent that the cartel provision is reasonably necessary for undertaking the joint venture, and the joint venture is not carried out for the purpose of substantially lessening competition.

While the meaning of the term 'reasonably necessary' is as yet unclear in the context of the joint venture exception, the term imports a consideration of the purposes of the joint venture and whether the provision in question is reasonably necessary to attain the joint venture's purposes. If this could be achieved through less restrictive means, then the provision is unlikely to be considered reasonably necessary.9

iv Collective bargaining exemption

Collective bargaining refers to the practice of businesses congregating together to jointly negotiate with customers or suppliers over common issues. Protection from civil action is also granted to parties engaging in collective bargaining, where the public benefits outweigh the detriments to competition.10 This will require a notification to the ACCC.

In this respect, the CCA will be introducing a collective bargaining class exemption in early 2021,11 which will allow businesses with an aggregated turnover of less than A$10 million in the preceding financial year to collectively bargain with customers or suppliers. It will also allow franchisees and fuel retailers to collectively bargain with their franchisor or fuel wholesaler. Under this class exemption, businesses will not need to notify or seek authorisation from the ACCC.

v Anti-overlap provisions

The CCA provides exceptions to the cartel prohibitions in relation to provisions in contracts, arrangements or understandings that would otherwise also contravene:

  1. Section 47, which prohibits exclusive dealing that has the purpose, effect or likely effect of causing a substantial lessening of competition;12
  2. Section 48, which provides for a per se prohibition on resale price maintenance;13 or
  3. Section 50, which prohibits the acquisition of shares in a body corporate, or the acquisition of assets in a person, where the purpose, effect or likely effect of the acquisition is a substantial lessening of competition.14

This means that if there is a provision in the agreement that amounts to both cartel conduct and a breach of either Section 47, 48 or 50, the conduct will be tested under those provisions alone. This is particularly important in relation to share and asset acquisitions and conduct that also amounts to exclusive dealing as the anti-overlap provisions may enable potential cartel conduct to escape per se liability and be tested, instead, in accordance with the substantial lessening of competition test.

vi Additional exemptions

The CCA also provides exemptions where:

  1. the parties to the conduct are related bodies corporate;
  2. the conduct is a dual listed company arrangement;15
  3. the relevant provision of the contract, arrangement or understanding relates to the price for goods or services to be collectively acquired, or for the provision of joint advertising of the price for resupply of goods and services so acquired;16 or
  4. the conduct has been authorised by the ACCC.17

vii Immunities

The ACCC has an Immunity and Cooperation Policy (the Leniency Policy) that grants full immunity from any civil enforcement action brought by the ACCC to the first individual or corporation that meets the criteria under the policy.18 Subsequent persons or corporations cooperating with the ACCC may be granted leniency. The immunity can cover past and current directors, officers and employees who admit their conduct. The corporation must list all individuals seeking this derived immunity when making the application.19

The criteria for accepting immunity applications include continuing cooperation with the ACCC, ceasing involvement in the cartel and full disclosure of information concerning the alleged cartel. The immunity applicant must not have been the clear leader of the cartel or have coerced others to join. Further, an application for immunity will be rejected if the ACCC has already written advice that it has sufficient material to commence civil proceedings. It should further be noted that corporate immunity is conditional upon the admission of offending coming from the corporate entity itself, rather than isolated admissions of individual representatives.

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.20 Such a recommendation will be made only where the individual or corporation first satisfies the criteria for a conditional immunity application under the ACCC's Leniency Policy.

Leniency programmes

i Overview

The ACCC first introduced a leniency programme in July 2003. The current policy, referred to in Section III.vi as the 'Leniency Policy', was published in September 2019 and sets out the ACCC's approach to cooperation by cartel participants. The Leniency Policy came into effect on 1 October 2019 and now requires immunity applicants to enter a cooperation agreement that clearly sets out the steps required for conditional civil and criminal immunity under the policy. The new policy covers cartel conduct such as price-fixing, market sharing, bid rigging and customer allocation, but does not apply to anticompetitive concerted practices (these are not eligible for immunity).

At the time of publication of the Leniency Policy, ACCC chair Rod Sims emphasised the policy's utility in detecting and prosecuting cartels:

The immunity policy is one of our key strategies for detecting and dismantling cartels. We have been able to undertake numerous in-depth cartel investigations as a result of immunity applications under our policy. This policy, pro-active ACCC intelligence gathering and whistleblower reports, have resulted in multimillion dollar penalties against cartel members.21

In 2019–2020, the ACCC received 10 immunity applications.22 In contrast, during 2018–2019, the ACCC was approached by 12 cartel participants, granting six of them civil conditional immunity, with one participant also receiving criminal conditional immunity by the CDPP.23 In September 2019, the ACCC also launched an additional, completely anonymous method for persons to report cartel conduct. Whistle-blowers are able to contact the ACCC via an anonymous online portal, which encrypts the information so that their identity is anonymous to the ACCC.24

Applications for immunity (both civil and criminal immunity) are made to the ACCC. Upon receiving an application, the ACCC will assess it against the criteria in the Leniency Policy to determine whether it is eligible for conditional civil immunity, and if so, grant such immunity. Early in this stage, it will seek to enter a cooperation agreement with the applicant, setting out the cooperative steps an applicant agrees to undertake. The ACCC will not generally grant an immunity application if it is already in possession of evidence that is likely to establish a contravention of the CCA arising from the cartel conduct.

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.

Immunity is only available for the first eligible party to disclose the relevant cartel conduct. If a cartel participant fails to meet the criteria for conditional immunity, it may still receive leniency from the ACCC or the court if it cooperates with the ACCC's investigation.25

A corporation that is or was party to a cartel (in a primary or ancillary capacity) will be eligible for conditional civil immunity if it meets the following eight conditions:

  1. It admits that it engaged in cartel conduct may contravene the CCA.
  2. It is the first party to apply for immunity in respect of the cartel.
  3. It has not coerced others to participate in the cartel.
  4. It has ceased its involvement in the cartel, or undertaken to the ACCC that it will cease its involvement.
  5. Its admissions are a true corporate act, rather than isolated confessions of individual representatives.
  6. It has provided full, frank and truthful disclosure, and has cooperated fully and expeditiously while making the application, and undertakes to continue to do so throughout the investigation and any subsequent court proceedings.
  7. It has entered into a cooperation agreement.
  8. It agrees to maintain confidentiality about its status as an immunity applicant and details of the investigation unless compelled by law.

An individual who 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 (except 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 by not commencing civil proceedings against the applicant. The ACCC has not issued any guidance as to what constitutes 'rare and exceptional circumstances'.

At the end of the evidence gathering phase of the investigation, the ACCC will require the immunity applicant to certify in writing that it has fully complied with its obligations under the relevant cooperation agreement. Knowingly providing false or misleading information to the ACCC or CDPP is a serious criminal offence and could result in prosecution (as well as revocation of the immunity).

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 a description of the cartel conduct that allows 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 anonymously.

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. Early in the proffer stage, the applicant will be required to enter a cooperation agreement that outlines the initial cooperative steps the applicant agrees to undertake pursuant to its application. 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 an 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 confidential its status as an immunity applicant and the details of any investigation or court proceedings, unless otherwise required by law or with the ACCC's written consent.

If the applicant complies with these obligations (and certifies that it has done so in writing), 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 potential criminal prosecution by the CDPP, as discussed in Sections IV.i and IV.iii. 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 damage 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 conditions set out in Section IV.i. Individual directors, officers or employees will similarly qualify for derivative immunity if they meet the conditions for individual conditional immunity.

If an applicant fails to meet these conditions, 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:

  1. the timeliness of the cooperation;
  2. the significance of the evidence provided;
  3. whether the party provided full, frank and truthful disclosure and continued to cooperate fully and expeditiously;
  4. whether the party ceased its involvement in the cartel or indicated that it will cease its involvement;
  5. whether the party coerced any other party to participate in the cartel;
  6. whether the party acted in good faith in dealings with the ACCC; and
  7. in the case of individuals, whether the party agreed not to use the same legal representation as the corporation by which they are or were employed.

Ultimately, the penalty or sanction imposed on cartel participants will be determined by the court.

In criminal proceedings, when determining the appropriate sentence, the court will take into account the extent to which the defendant cooperated with law enforcement agencies.

vi Discovery of surrendered materials by private litigants

As discussed in Section IV.v, 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 such matters 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.

Penalties

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, except 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

Individuals face pecuniary penalties of up to A$500,000 per breach of the cartel prohibitions contained in Part IV, Division 1 of the CCA.26

In addition, individuals found to have committed a cartel offence may face criminal penalties of up to A$420,000 (per breach) or up to 10 years' imprisonment.27 It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty.28

The CCA prohibition against indemnification makes no distinction between claims for which no liability is found and claims for which liability is found in the same proceedings – meaning it is theoretically sufficient for the director to be found liable on one claim in a proceeding to trigger the prohibition on indemnification in respect of all legal costs – even those incurred in respect of claims for which no liability was found.

The complex and costly nature of litigation involving alleged contraventions of the cartel prohibitions serves to operate harshly or unfairly against officers involved. As a consequence, there is a risk that an officer may elect to settle with the ACCC, or give concessions, rather than fight any allegations for fear that they will personally be exposed to all costs in a civil hearing.

Finally, 'officer' has the meaning given to it under Section 9 of the Corporations Act 2001 (Cth), meaning employees and middle managers may not fall within the ambit of Section 77A of the CCA. Therefore, it appears that employees who do not fall within the definition of 'officer' can be indemnified by the company in relation to civil liabilities and legal costs.

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 the following amounts:

  1. A$10 million;
  2. three times the commercial gain derived from the anticompetitive activity; or
  3. where the amount of gain cannot be fully determined, 10 per cent of the group turnover in Australia in the preceding 12 months.29

Other remedies

On application, the Federal Court may impose other penalties for cartel civil contraventions or criminal offences, including:

  1. injunctions;30
  2. damages (to compensate persons who suffer loss and damage as a result) (six-year limitation period);31
  3. orders disqualifying a person from managing corporations;32
  4. non-punitive orders, such as community service orders, probation orders, orders for disclosure of information or orders requiring the offender to publish an advertisement on the terms specified in the order;33
  5. punitive orders, such as adverse publicity orders for breach of Section 45AF or 45AG;34 and
  6. the Court may make 'such orders as it thinks appropriate'. These orders may include voiding a contract or certain provisions of a contract, varying a contract or refusing to enforce all or any of the provisions of a contract.35

Typical penalty

It is only the court that can impose penalties and determine their value. The ACCC is able to, and does, agree with parties the amount of penalties that will be sought from the court. In 2015, the Full Federal Court ruled that joint submissions on penalties was not permitted, which put into doubt the ACCC's ability to make joint submissions in relation to pecuniary penalties. This doubt arose as a result of the High Court decision in Barbaro,36 in which the court held that the prosecution should not nominate a sentence range in criminal sentence proceedings.

The question of whether the reasoning in Barbaro applies to civil pecuniary penalties was appealed to the High Court,37 as was the question of whether parties could make joint submissions with regulators in relation to an agreed penalty or penalty range. The High Court unanimously held that Barbaro did not apply to civil pecuniary penalties and, accordingly, parties to civil proceedings are able to submit agreed penalties to the court. Whether the court accepts them is, of course, a different matter.

In March 2018, the Organisation for Economic Co-operation and Development released a report comparing the penalties for competition law infringements between Australia, the United Kingdom, Germany, Korea and the United States. The report found that Australian penalties were comparatively lower, both in terms of average and maximum penalty. In response, the ACCC released an annual report in October 2018 stating the ACCC will 'rethink its approach to assessing the penalties that it puts to the court for breaches of competition law'.38 This sentiment was carried through into the 2019 Annual Report, which stated, 'given the importance of significant penalties to deter unlawful conduct, the ACCC will continue to prioritise seeking higher penalties'.39 The ACCC's chair, Mr Rod Sims, has long been an advocate for tougher penalties and has called for penalties that punish and inflict 'financial pain' and are of a magnitude to effect a share price dip.40 A tougher approach is evident in the higher penalties sought in cases heard in 2018, 2019 and 2020.

The following recent penalties imposed for cartel conduct should provide an indication of a 'typical penalty' for a breach:

  1. in 2016, a fine of A$18 million was imposed on Colgate-Palmolive. A fine of A$9 million was imposed on Woolworths in the same matter;
  2. in December 2016, the Federal Court ordered ANZ Bank to pay penalties of A$9 million, and Macquarie Bank was ordered to pay penalties of A$6 million, for attempted cartel conduct in 2011 in relation to the benchmark rate for the Malaysian ringgit;
  3. in August 2017, the Federal Court imposed a penalty of A$25 million on NYK after it pleaded guilty to its involvement in a criminal cartel;
  4. in October 2017, the Full Federal Court upheld an ACCC appeal, imposing a A$20.6 million penalty against Cement Australia and its related companies for giving effect to anticompetitive agreements;
  5. in April 2018, Flight Centre was ordered to pay A$12.5 million in penalties for attempting to induce three international airlines to enter into price-fixing arrangements between 2005 and 2009;
  6. in May 2018, the Full Federal Court ordered Japanese company Yazaki Corporation to pay A$46 million for cartel conduct, following an appeal by the ACCC. This is the highest penalty ever handed down under the CCA;
  7. in May 2019, PT Garuda Indonesia Ltd was ordered to pay penalties of A$19 million for colluding on fees and surcharges for air freight services; and
  8. in August 2019, Kawasaki Kisen Kaisha Ltd was convicted of criminal cartel conduct for its part in a global shipping cartel, and ordered to pay a fine of A$34.5 million.

'day one' response

The CCA contains several 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. For example, in 2019–2020, the ACCC issued 375 Section 155 notices during its investigations of potentially infringing conduct.41 Section 155 gives the ACCC the power to require a person to provide information or documents, or to give evidence relating to a possible contravention, if 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,42 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).43 The ACCC does not generally comment on its use of search warrants, but they are most commonly used in cartel investigations. The ACCC is able to make copies of items, and can seize items where it has reasonable grounds to believe they contain or constitute evidence. Further, the following factors indicate a likely increase in the occurrence of search warrants:

  1. the focus of ACCC enforcement activities on detecting and prosecuting cartels;
  2. the criminalisation of cartels in Australia; and
  3. the increasing use of search warrants by regulators internationally.

Covid-19 has had an impact on ACCC investigations. The decision was made early in 2020 to minimise compulsory examinations, and, if deemed necessary, to administer these remotely via phone or video conference. It is also likely investigatory processes such as dawn raids were also suspended. Overall, the ACCC concluded fewer in-depth investigations in 2019–2020 due to covid-19. The annual target was 40, and only 28 were completed. This reflected 'disruption, resourcing and operational challenges' brought on by the global pandemic.44

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.45 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.46

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). Class actions can be used in all areas of law provided the legislative requirements are met, and overseas claims and precedents have driven product liability and cartel class actions in Australia.

Under the FCA regime, five cartel class actions have been brought, four of which have settled. The most recent settlement was for A$38 million in 2014, and was brought against a number of airlines alleging the existence of a cartel to fix the price of air cargo services.47

There is one major class action which is currently in progress. In May 2019, Maurice Blackburn lawyers launched a class action against UBS, Royal Bank of Scotland, JPMorgan, Citibank and Barclays, alleging illegal cartel conduct in the foreign exchange market between 2008 and 2013 (also known as the Foreign Exchange Cartel). The case is ongoing, and asserts that foreign exchange traders at the banks systematically manipulated foreign exchange rates for certain currencies during that period. Settlements in corresponding class actions in the United States and Canada have resulted in payments of over US$2.3 billion and C$107 million to date.48

The FCA regime provides that a class action may be commenced only if:

  1. seven or more persons have claims against the same person;
  2. the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and
  3. all the claims give rise to a substantial common issue of law or fact.49

In relation to the requirements for standing, under the FCA regime, any person can represent the class provided they are a member of the class and have a sufficient interest to commence a proceeding.50 A proceeding can be commenced by one or more of those persons as representing some or all of them.

The FCA regime operates an 'opt-out' system, whereby all persons who 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 who have arrangements with a certain litigation under or have 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.

The substantive cause of action defines the remedies available in an Australian class action. In contrast to US-style class actions, a single representative action can proceed, even where class members claim different remedies. Even if they must be separately assessed for each individual group member, class action plaintiffs can pursue damages awards. The court can even award damages at an aggregate level without specifying the amounts to be awarded to individual group members, but only when a reasonably accurate assessment of damages is possible.

While the Australian law recognises exemplary damages (the equivalent of US punitive damages), Australian courts rarely award them, and these awards tend to be for small amounts. In addition, they are not available as a remedy for a cartel offence under the CCA. Parties can also seek injunctive or declaratory relief through the class action mechanism, consistent with the equity powers or statutory authority of the court.

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.51 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, the precise methodologies by which the courts will calculate damages remain 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.52

iv Limitation periods

An action for damages in respect of a breach of the cartel provisions must be initiated within six years of 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.53 However, on the other hand, it is argued that the cause of action accrues at the time the plaintiff suffers the loss, which is usually when the plaintiff purchases the goods or services.54

v Interaction between government investigations and private enforcement

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 when the ACCC or CDPP 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.55 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.56 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, when a party has engaged in an alleged contravention of the CCA (including the cartel provisions), the ACCC 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.

Current developments

i 2020 enforcement priorities and the covid-19 pandemic

The 2020 Compliance and Enforcement Priorities published by the ACCC57 include (among other things) addressing competition and consumer issues in relation to the funeral services sector and digital platforms, as well as conduct affecting competition in the commercial construction sector. These priorities were published on 25 February 2020, before the effects of the covid-19 pandemic developed in Australia.

The covid-19 pandemic has had a profound disruptive effect on markets and businesses in Australia and throughout the world. While the ACCC's 2020 priorities remain in place, it has refocused its efforts to address those most relevant to competition and consumer issues arising from the pandemic.58 As a result, the ACCC response to the pandemic has been focused on two broad areas of work:

  1. the authorisation of crisis collaboration between competitors; and
  2. the establishment of a covid-19 task force to address consumer and small business issues arising out of the crisis.59

The ACCC can authorise conduct and provide statutory protection (including in relation to cartel conduct that would otherwise be prohibited under the CCA) when it is satisfied that the public benefit from the conduct outweighs any public detriment.60

In the context of the covid-19 pandemic, major authorisations during 2020 have included:

  1. cooperation between major supermarket chains to ensure consumer access to groceries and reduce strain on retail supply chains;61
  2. coordination between manufacturers of medicine and medical equipment, to support the supply of essential medicines62 and medical equipment63 during the pandemic; and
  3. allowing airline operators to coordinate their activities to ensure that regional routes remain serviced.64

Once these authorisations expire or are revoked by the ACCC, the conduct will no longer be subject to any statutory protection. As covid-19-related restrictions and economic burdens ease throughout 2021, there is likely to be some tension between businesses and regulators as the ACCC seeks to revoke authorisations and remove those benefits being enjoyed by businesses.

The ACCC has confirmed that any interim authorisations will not be extended any longer than necessary:

We are closely monitoring when to revoke any interim authorisations, including those granted because of the COVID-19 pandemic, and we expect them to cease when they are no longer appropriate. We also expect authorised parties to keep the ACCC updated of any relevant changes that impact their authorisation.

ii Increased international cooperation

In an August 2019 speech, ACCC Chair Rod Sims has acknowledged the challenges presented by international businesses disputing the ACCC's capacity to hold them to account under Australian law, and the evidence gathering challenges that may arise in respect of entities based overseas. In his speech, he flagged increased and ongoing cooperation with international agencies:

To help us in that challenge, we have been very active in strengthening cooperation both within the International Competition Network (ICN), the OECD and within the International Consumer Protection and Enforcement Network (ICPEN) to build multi-lateral cooperation and mutual assistance between agencies.65

The ACCC cooperates with other foreign regulators, and has specific provisions in the CCA which allow it to share certain confidential information with them.

The ACCC has entered cooperation agreements and memoranda of understanding with various foreign regulators and authorities in order to establish frameworks for notification, coordination and cooperation on consumer protection enforcement and cartel activities. There are arrangements in place with authorities from Canada, Japan, PNG, the Philippines, Korea, New Zealand, the United Kingdom, the United States, China, the European Commission, India, Fiji, Chinese Taipei, Korea and the OECD.

Recent agreements include:

  1. the 2019 Memorandum of Cooperation with the US Federal Bureau of Investigation, to combat cartels and other anti-competitive behaviour; and
  2. The 2020 Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC), signed by regulators in five countries (US, UK, New Zealand, Canada and Australia).

Announced on 3 September 2020, competition agencies across five countries agreed to share intelligence, case theories and investigative techniques to better coordinate investigations across international borders. The MMAC includes a template agreement that the agencies can use to establish cooperation arrangements.

ACCC chair Rod Sims noted: 'The global economy is increasingly interconnected and many large companies, especially in the digital economy, now operate internationally. Competition regulators have to work together to ensure the companies comply with competition and consumer laws' and that '[w]e expect this cooperation will particularly benefit our existing and future investigations of digital platforms, which are being closely watched by many agencies globally'.

The ACCC participates in many international forums and groups on the subject of competition, consumer protection and regulation, and was a founding member of the International Competition Network (ICN). The ACCC participates in the ICN Cartel Working Group, which seeks to address the challenges of anti-cartel enforcement, including the prevention, detection, investigation and punishment of cartel conduct.

iii Criminal cartel actions

After years of civil prosecutions, the CDPP's first successful criminal prosecution for cartel conduct was handed down in August 2017 against Nippon Yusen Kabushiki Kaisha (NYK) for its participation in a global shipping cartel.66 In early 2019, the ACCC indicated that cartel conduct would continue to be a priority, with a goal of 'two to three' investigations concluding and prosecutions commenced each year.67

Notably, the ACCC's new focus on targeting individuals represents a significant change in policy – in 2017, the ACCC chair Rod Sims stated: '[u]nfortunately, I fear that only jail sentences for individuals in prominent companies will help send the appropriate deterrence messages that cartels seriously damage competition and the enemy as a whole'. The ACCC will continue to focus on criminal cartel prosecutions during the next five years, and is likely to seek greater penalties than those handed down previously.

Indeed, prosecutions in respect of the global shipping cartel, which involved international shipping companies engaging in a cartel to fix prices on the transportation of goods to Australia, have resulted in large financial penalties. NYK was fined A$25 million in 2017, and another Japanese shipping company, K-Line, was similarly convicted of criminal cartel conduct and fined A$34.5 million in 2019 (the largest ever criminal sanction imposed under the CCA).68 A further criminal cartel prosecution has been brought against Norwegian-based global shipping company Wallenius Wilhelmsen Ocean AS (WWO), which pleaded guilty to the charges in June 2020.69 The case is awaiting sentencing.

Several criminal cartel proceedings brought by the CDDP are still before the courts.

In June 2018, the CDDP laid charges against four major Australian banks and several executives regarding alleged criminal cartel conduct in breach of the CCA (the share placement cartel). The alleged cartel behaviour relates to the A$2.5 billion sale in Australia of 80.8 million discounted shares to institutional investors in 2015. The parties have asserted that the use of underwriting syndicates has operated successfully without prosecution for decades. Accordingly, the case will have ramifications on market practice in the area of institutional placements and capital raisings. The case is still making its way through the lower courts in Sydney and is yet to be committed to trial.

In August 2018, the CDDP laid charges against the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) and its ACT Divisional Branch Secretary Jason O'Mara for alleged criminal cartel conduct. The conduct concerns alleged attempts to induce suppliers of steelfixing services and scaffolding services to reach cartel contracts, arrangements or understandings containing cartel provisions, for services provided to builders in the ACT in 2012 to 2013. The case is ongoing.

In March 2019, the Country Care Group Pty Ltd, its managing director and a former employee were committed to stand trial in the Federal Court of Australia following criminal cartel charges laid against them in 2018.70 The case is ongoing.

iv Criminal obstruction charges

In September 2020, a former general manager of sales and marketing at BlueScope Steel Limited pleaded guilty to charges brought by the CDDP in October 2019 for inciting the obstruction of a Commonwealth official in the performance of their functions. The charges relate to actions allegedly taken by the former general manager during an ACCC investigation into alleged cartel conduct against BlueScope Steel, and represented the first time that charges have been laid against an individual in relation to obstruction of an ACCC investigation.71 In December 2020, the Court imposed a sentence of eight months' imprisonment for inciting the obstruction of an ACCC investigation into alleged price-fixing by BlueScope with a release without entering custody, upon entering into a recognisance in the sum of A$1,000, on the condition of good behaviour for two years. The Court also ordered payment of a fine of A$10,000.72

v Other developments

On 4 September 2019, the Federal Court rejected the ACCC's appeal against a judgment in relation to alleged bid rigging conduct in a 2009 tender process undertaken by the NSW Department of Trade and Investment for exploration licences over coal tenements in NSW. The ACCC had alleged that Cascade Coal Pty Ltd entered a contract, arrangement or understanding with Loyal Coal Pty Ltd and its affiliated companies to withdraw from bidding, and in exchange, Cascade agreed to grant one of Loyal's affiliated companies an interest in the Mount Penny Coal release area, and to buy properties for an inflated value and take over the mortgage obligations.

The ACCC brought proceedings against Cascade and 10 other respondents including Loyal.

In 2016, Loyal admitted to breaching Australia's cartel laws and agreed to resolve the ACCC's proceedings against it by consent. In July 2018, the Federal Court dismissed the ACCC's application against Cascade and two individuals representing the property owners, and the ACCC subsequently appealed. The Court found that there had been no error of law, and the appeal was dismissed.

This represents one of many recent Court defeats for the ACCC, which has also lost recently in its attempts to block a major merger clearance between telecommunications companies and in attempts to penalise breaches of the Australian Consumer Law.73 This may lead to a reduced appetite to appeal Federal Court decisions.

In October 2020, the ACCC brought an action in the Federal Court against overhead crane company NQCranes Pty Ltd for an alleged market sharing cartel. The ACCC is seeking civil penalties, declarations and orders against NQCranes, alleging that it engaged in cartel conduct by entering a 'distributorship agreement' with a competitor containing a provision agreeing that the companies would not target each other's customers for overhead crane parts and servicing in Brisbane and Newcastle.74 The case is ongoing.

Footnotes

1 Prudence J Smith and Annie E Leeks are partners and Mitchell J O'Connell, Henry Baek and Daniel Faber are associates at Jones Day. The authors wish to thank Nicholas J Taylor, Matthew J Whitaker and Timothy K Atkins for their generous assistance in preparing previous versions of this chapter.

2 Section 155 of the CCA.

3 CCA, Part XID and Section 135A.

4 ACCC, 'Competition agencies to coordinate on cross-border investigations', 3 September 2020.

5 ACCC, 'ACCC Annual Report 2019-2020', October 2020, pp. 100–101.

6 ACCC, 'ACCC Annual Report 2019-2020', October 2020, p. 100.

7 ACCC, 'ACCC Annual Report 2019–2020', October 2020, p. 100.

8 CCA, Sections 45AO and 45AP.

9 See the courts' view on the term 'reasonably necessary' in Thomas v. Mowbray (2007) 233 CLR 307 at 332 and Brown v. Tasmania (2017) 261 CLR 328, at 336. Also see a similar position taken in many United States cases on the definition of 'reasonably necessary': Capital Imaging Assoc, PC v. Mohawk Valley Med Assoc, Inc, 996 F2d 537, 542-43 (2nd Circuit 1993); State Oil Co v. Kahn, 522 US 3, 10 (1997); and Timken Roller Bearing Co v. US, 341 US 593, 598 (1951).

10 CCA, Section 93AB.

11 Competition and Consumer (Class Exemption – Collective Bargaining) Determination 2020.

12 CCA, Section 45AR.

13 CCA, Section 45AQ.

14 CCA, Section 45AT.

15 CCA, Section 45AS.

16 CCA, Section 45AU.

17 CCA, Section 90.

18 ACCC, 'ACCC Immunity and Cooperation Policy for cartel conduct', 10 September 2019.

19 ACCC, 'Cartels – What you need to know – A guide for business', 6 August 2012.

20 Commonwealth Director of Public Prosecutions, 'Prosecution Policy of the Commonwealth, Annexure B: Immunity from Prosecution in Serious Cartel Offences', September 2014.

21 ACCC, 'Cartel immunity policy strengthened, whistleblowing tool launched' (media release 165/19, 6 September 2019), www.accc.gov.au/media-release/cartel-immunity-policy-strengthened-whistleblowing-
tool-launched.

22 ACCC and the Australian Energy Regulator, 'Annual Report 2019–20', October 2020, p. 12.

23 ACCC, 'ACCC Annual Report 2018–2019', October 2019, p. 41.

24 The online portal is accessible via: https://accc-cartels.whispli.com/cartels. The ACCC also provides a separate online portal for construction industry cartel cases, accessible via: https://app.whispli.com/accc-anonymously-report-a-construction-issue.

25 The ACCC's cooperation policy is set out in Section H of the Leniency Policy.

26 CCA, Section 76(1B)(b).

27 CCA, Section 79.

28 CCA, Section 77A.

29 CCA, Section 76(1A)(aa).

30 CCA, Section 80.

31 CCA, Section 82.

32 CCA, Section 86E.

33 CCA, Section 86C.

34 CCA, Section 86D.

35 CCA, Section 87.

36 Barbaro v. The Queen; Zirilli v. The Queen [2014] HCA 2, 12 February 2014.

37 Construction, Forestry, Mining and Energy Union v. Director, Fair Work Building Industry Inspectorate & Anor [2015] HCA 46 (2015) ALR476, 9 December 2015.

38 ACCC, 'ACCC Annual Report 2017-2018', October 2018, p. 61.

39 ACCC, 'ACCC Annual Report 2018-2019', October 2019, p. 39.

40 Clancy Yeates, ''We're into punishment': ACCC wants penalties with 'financial pain'', The Sydney Morning Herald, 26 February 2019.

41 ibid, p. 280.

42 CCA, Section 155(7).

43 CCA, Part XID.

44 ACCC, 'ACCC Annual Report 2019–2020', October 2020, p. 46.

45 CCA, Section 82(1).

46 CCA, Section 80.

47 De Brett Seafood Pty Ltd v. Qantas Airways Ltd (No. 7) [2015] FCA 979.

49 FCA, Section 33C.

50 FCA, Section 33D.

51 CCA, Section 82(1).

52 Caron Beaton-Wells, 'Private Enforcement of Competition Law in Australia – Inching Forwards?' (2016), Melbourne University Law Review Vol. 39, pp. 681, 726.

53 id., p. 693.

54 ibid.

55 CCA, Section 83.

56 ACCC, 'ACCC Immunity and Cooperation Policy for Cartel Conduct' (Policy Document, September 2014) (under review).

57 ACCC, '2020 Compliance and Enforcement Policy and Priorities', published 25 February 2020, available at https://www.accc.gov.au/publications/compliance-and-enforcement-policy.

58 ACCC, 'ACCC response to COVID-19 pandemic', 27 March 2020, https://www.accc.gov.au/media-release/accc-response-to-covid-19-pandemic.

59 ACCC, 'The very bad, and some good, from COVID-19', 5 May 2020, https://www.accc.gov.au/media-release/the-very-bad-and-some-good-from-covid-19.

60 CCA, Sections 88 and 90(7).

61 ACCC, 'Supermarkets authorised to continue cooperating on COVID-19 response', 3 September 2020, https://www.accc.gov.au/media-release/supermarkets-authorised-to-continue-cooperating-on-covid-19-response.

62 ACCC, 'Medicine manufacturers to coordinate on COVID-19 response', 3 April 2020, https://www.accc.gov.au/media-release/medicine-manufacturers-to-coordinate-on-covid-19-response.

63 ACCC, 'Cooperation to aid supply of COVID-19 medical equipment', 25 March 2020, https://www.accc.gov.au/media-release/cooperation-to-aid-supply-of-covid-19-medical-equipment.

64 ACCC, 'Virgin Australia and Alliance Airlines authorised to cooperate to support regional airline services', 19 November 2020, https://www.accc.gov.au/media-release/virgin-australia-and-alliance-airlines-
authorised-to-cooperate-to-support-regional-airline-services.

65 Mr Rod Sims, Chair, 'Address to the Law Council of Australia Competition Law Workshop 2019', 30 August 2019, https://www.accc.gov.au/speech/address-to-the-law-council-of-australia-competition-law-workshop-2019.

66 ACCC, 'NYK convicted of criminal cartel conduct and fined $25 million' (media release 126/17, 3 August 2017), www.accc.gov.au/media-release/nyk-convicted-of-criminal-cartel-conduct-and-fined-
25-million.

67 Rod Sims, '2019 Compliance and Enforcement Policy' (speech at the Committee for Economic Development Australia Conference, 26 February 2019) transcript available at: www.accc.gov.au/speech/
2019-compliance-and-enforcement-policy.

68 ACCC, 'K-Line convicted of criminal cartel conduct and fined $34.5 million', 2 August 2019, https://www.accc.gov.au/media-release/k-line-convicted-of-criminal-cartel-conduct-and-fined-345-million.

69 ACCC, 'Wallenius Wilhelmsen pleads guilty to criminal cartel conduct', 18 June 2020, https://www.accc.gov.au/media-release/wallenius-wilhelmsen-pleads-guilty-to-criminal-cartel-conduct.

70 ACCC, 'Country Care cartel case committed for trial in Federal Court' (media release 31/19, 13 March 2019), www.accc.gov.au/media-release/country-care-cartel-case-committed-for-trial-
in-federal-court.

71 ACCC, 'Ex BlueScope GM Jason Ellis pleads guilty to obstructing cartel investigation', 1 September 2020, https://www.accc.gov.au/media-release/ex-bluescope-gm-jason-ellis-pleads-guilty-to-obstructing-cartel-investigation.

73 See, for example Vodafone Hutchison Australia Pty Ltd v Australian Competition and Consumer Commission (ACCC) [2020] FCA 117 and Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd [2020] FCAFC 107.

74 ACCC, 'Action over alleged market sharing cartel in the overhead crane industry', 19 October 2020, https://www.accc.gov.au/media-release/action-over-alleged-market-sharing-cartel-in-the-overhead-crane-industry.

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