Transcript Enforcement action against cartel conduct

Enforcement action against
cartel conduct
An insight from the ACCC
Richard Fleming
Deputy General Manager
Compliance and Enforcement Policy
Implementation and Coordination
Enforcement and Compliance Division
[email protected]
Outline
Four areas:
• The ACCC role and our approach to
compliance and enforcement
• Cartel investigations and prosecutions
including immunity applications and
cooperation
• Recent cartel cases
• Some current issues & time for questions
ACCC Roles
Three broad roles:
• Regulated industries
• Protecting consumers (ACL)
• Protecting competition
ACCC & AER corporate plan can be
found at www.accc.gov.au
Compliance and enforcement
policy
The ACCC:
• Receives over 160,000
complaints and queries
• Initiates about 550
investigations
• Takes about 30 matters to
court
ACCC compliance and enforcement
policy can be found at www.accc.gov.au
Conduct always prioritised
Cartels
Anti-competitive agreements
Misuse of market power
Serious harm through unsafe products
“There are some forms of conduct that are so detrimental to consumer
welfare and the competitive process that the ACCC will always assess them
as a priority. These include cartel conduct and anti-competitive agreements,
and the misuse of market power. The ACCC will also always prioritise the
assessment of product safety issues which have the potential to cause
serious harm to consumers”
Compliance
A tiered approach
Education and outreach activities to encourage
voluntary compliance
Resolution tools outside of court
action
Civil and Criminal
Prosecutions
Education and outreach
• ACCC social media (YouTube, Twitter, Facebook)
• ACCC Shopper App – downloaded more than 7000
times
• General deterrent effect from court action for industry
• The Marker video (click for trailer opens browser)
ACCC’s approach to investigations
generally
Key principles
Transparency
(no private
deals)
Confidentiality
Consistency
Timeliness
Fairness
ACCC’s investigative tools
Requests for
information
Compulsory
information
gathering powers
(s155)
Search & stored
communications
warrants
Telephone
intercepts (with
AFP)
Investigation of cartel conduct
The ACCC will
investigate
The ACCC will seek
preliminary advice
from the CDPP
The ACCC will refer
a matter to the
CDPP for
consideration
The CDPP will
decide whether or
not to prosecute
Prosecuting cartel conduct – civil or
criminal?
Alleged
contravention
occurs on or after
24 July 2009
Serious Cartel
Conduct
What is Serious Cartel Conduct?
Conduct was
longstanding or had a
significant impact on the
market
Conduct caused, or
could cause, significant
public detriment
Value of affect
commerce exceeded or
would exceed $1m in a
year
One or more of the
alleged participants has
previously been found
by a court to have
participated in a cartel
Value of the bid or
series of bids exceed
$1m in a year
Civil AND criminal?
Dual track proceedings are available
Case by case consideration
Stay of concurrent civil proceedings
No pecuniary penalties against a person criminally convicted
Dual track proceedings are exceptions not the norm
The ACCC will not negotiate criminal
penalties
The ACCC will not put itself in a
position where there might be a
perception that it is using the
possibility of a referral of a matter
for consideration of criminal
prosecution to obtain cooperation
or resolution of civil proceedings
A person will not be permitted to
seek to ‘trade off’ a possible
criminal prosecution with civil
settlement
The matter will not progress civilly
unless the criminal aspect has been
finalised
The ACCC will only commence
negotiations for a resolution
regarding civil penalties after the
possibility of a criminal prosecution
is ruled out
ACCC investigation policies
For more information please visit www.accc.gov.au
How do you apply for immunity?
Request Marker (need to disclose little)
Proffer (need to disclose certain things to satisfy the policy)
ACCC makes decision regarding conditional civil immunity
ACCC makes recommendation to the CDPP
CDPP provides undertakings to the ACCC
ACCC informs applicant of outcome
Marker
Often is a phone call
Only need to provide
enough information to
determine availability
of a marker
Do not need to name
your client and can be
hypothetical
Proffer
Who the applicant is
The product
The names of the
other participants
The industry
The timing of the
alleged conduct
Specific information
such as instances of
alleged
contravention
Documents/evidence
ACCC’s decision
Party to a cartel
Admits conduct may contravene the CCA
First party to apply for immunity
Not clear leader and have not coerced others to join
Ceased or will cease involvement in cartel
Corporate admission
Undertakes to cooperate
ACCC has not received legal advice
CDPP’s decision
Based on the
Prosecution Policy
of the
Commonwealth
The ACCC’s
recommendation
Conditions of immunity
Confidentially
Cooperation
Case studies
• Currently, the ACCC has about 15 in-depth
investigations relating to cartel matters
• Past matters include:
– DRS – penalties of $1m
– Marine hose – penalties of about $8m
– Woollams – penalties of more than $1m
• Current matters include:
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Air cargo cartel
Renegade Gas & Supagas
Prysmian
Yazaki Corporation
Air cargo cartel
• Investigations commenced in 2006
– over 35 ACCC staff have worked on the matter
• Proceedings against 15 major airlines – 13 consented to
court ordered penalties totalling $98.5 million
• The HCA unanimously dismissed Garuda’s claim of
sovereign immunity
• Proceedings against Garuda and Air NZ ongoing
expected to conclude this year
Renegade Gas & Supagas
• Alleged cartel in connection to the supply of cylinder
forklift gas involving domestic parties
• Immunity application in early 2011 and an in-depth
investigation was commenced mid 2011
• Search warrant executed on alleged conspirators and
stored communications warrants also used
• Approaches under the ACCC’s cooperation policy by firm
and individuals. ACCC commenced proceedings on 23
August 2012 – the matter is ongoing
High voltage cables – Viscas & ors
• Alleged cartel conduct by suppliers of high voltage and
extra high voltage cables involving international parties
• Immunity application in mid-2009
• ACCC commenced proceedings late 2009
• Complex issues involving jurisdiction
– argument whether ACCC could serve overseas parties
• Viscas recently consented to court ordered penalty of
$1.35 million in respect of a single collusive tender in
2003 to supply Snowy Hydro Limited.
Methods of ensuring compliance
with anti-cartel laws
• Education, advice and persuasion
• Destabilising cartels
– Immunity policy
• Public enforcement
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Corporations vs individuals
Civil penalties vs Criminal sanctions
Other orders
Gaol
• Private enforcement
– Damages for cartel overcharge (10-30%)
• Optimal deterrence, over deterrence
Compliance vs deterrence
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What is the relationship?
Can you have one without the other?
Is compliance is an end state?
Is deterrence an incentive to change behaviour?
What motivates business?
• It is not from the benevolence of the butcher, the brewer,
or the baker that we expect our dinner, but from their
regard to their own interest.
Adam Smith, The Wealth of Nations: An Inquiry into the Nature &
Causes of the Wealth of Nations
• Focus on profit in a market economy: Individuals tend
to pursue what is in their own best interests. Accordingly,
businesses seek to benefit themselves and/or their
shareholders by maximizing profits.
Trade Practices Compliance
Manual
• This is an important document. It is essential that it be read and
understood by you. Visy Industries requires strict compliance with its
policy on the Trade Practices Act.
• Price fixing and market sharing are "strictly prohibited" and that
readers of the document "must never make (such) arrangements
with a competitor".
• Visy personnel should avoid all contact with competitors or their
employees other than contact approved by senior management or
Visy Industries’ Legal Counsel.
• All necessary contact with competitors should be conducted in
formal settings.
• “The Visy Trade Practices Compliance Manual might have been
written in Sanskrit for all the notice anybody took of it” [319]
“The law, and the way it is enforced, should convey to those
disposed to engage in cartel behaviour that the consequences of
discovery are likely to outweigh the benefits, and by a large margin.
Every day every man, woman and child in Australia would use or
consume something that at some stage has been transported in a
cardboard box. The cartel in this case therefore had the potential for
the widest possible effect.
The whole point of price fixing and market sharing is to obtain the
benefit of prices greater than those which would be obtained in a
competitive market.
The cartel…was run from the highest level in Visy, a very substantial
company. It was carefully and deliberately concealed. It was
operated by men who were fully aware of its seriously unlawful
nature.”
Justice Heerey, ACCC v Visy [2007] FCA 1617
Why criminalise cartel conduct?
• “This bill makes much needed changes to the Trade
Practices Act 1974 and will operate to deter cartel
conduct by widening the range of regulatory responses
available. Furthermore, it will bring Australia into line with
its major trading partners and developed nations. In the
international context, 15 OECD members, including the
United States, Canada and the United Kingdom, have
criminal sanctions for cartel conduct”
Minister Bowen - Second reading speech - Trade Practices Amendment
(Cartel Conduct and Other Measures) Bill 2008
Why criminalise cartel conduct?
• The bill has its origin in the 2003 Review of the
Competition Provisions of the Trade Practices Act,
chaired by Sir Daryl Dawson. The Dawson review
recognised growing international experience showing
that criminal sanctions are effective in deterring serious
cartel conduct. It recommended the introduction of
criminal penalties in Australia.
Minister Bowen - Second reading speech - Trade Practices Amendment
(Cartel Conduct and Other Measures) Bill 2008
Why criminalise cartel conduct?
• “The prospect of a jail term for committing a cartel
offence sends a clear message. Such a penalty has an
immediate deterrent effect for businesses, which might
otherwise dismiss fines imposed for a breach of
competition law as a mere cost of doing business.
• In troubling economic times, as competitors may
contemplate engaging in risky behaviour in order to
score a financial gain, the need for tough sanctions is
even more important.”
Minister Bowen - Second reading speech - Trade Practices Amendment
(Cartel Conduct and Other Measures) Bill 2008
Observations
• There is some evidence that risk of gaol + active and
effective enforcement does have an impact
• USDOJ have reported cartellists avoiding impact on US
commerce due to individual fear of jail sentences
• Some self reports to the ACCC have explicitly stated that
there has been no conduct that would impact on US
commerce
Developing issues
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International cooperation/the use of waivers
Overseas witnesses
Ongoing cooperation from applicants
Investigating international cartels
Immunity applicants involving international cartels
QUESTIONS ???
Immunity Hotline
+61 2 9230 3894
For more information visit www.accc.gov.au/cartels