Cartel behaviour is not the most widely discussed area of competition and consumer law (CCL), and according to research by University of Melbourne it is largely misunderstood by people operating in the business sector. However, cartels cause significant damage to the markets in which they operate. By participating in anti-competitive conduct, cartels drive prices higher, reduce available options and can lead to inferior product and services. Cartels can operate anywhere and in almost any industry; controlling a market for profit by stifling competition. This behaviour can represent a real threat to domestic and global economic growth.
Cartel conduct includes:
- Price fixing
- Market sharing and allocation
- Controlling output
- Bid rigging
ACCC enforcement of anti-cartel laws has had limited success, with only a handful of major cases brought over the last 35 years. The majority of cases have been brought against small to medium businesses and the average penalties are well below the statutory maximum. The most notable Australian case is the Visy / Amcor cartel case where Visy was fined $36 million, with a further $97 million paid out by Visy and Amcor to affected businesses in settlements. For a list of major ACCC cartel prosecutions, click here.
In 2009, Australia followed global trends to introduce heavy handed convictions for cartel offences, including criminal sanction and maximum jail sentences of 10 years. Under these changes, the ACCC were given greater investigatory powers, including the ability to tap phones.
The penalties for breach of anti-cartel laws currently include:
- For companies, the greater of:
- $10 million fine;
- 3 X the benefit gained from illegal conduct; or
- If either of the above cannot be calculated, 10% of company annual turnover.
- For individuals:
- A criminal record;
- Up to 10 years in prison; and / or
- A heavy financial penalty.
In 2010, the University of Melbourne carried out research into cartel behaviour. The research surveyed a group of 567 business people, representative of that sector. Key findings included:
- Only 42% knew agreeing on prices with competitors was illegal;
- Less than 50% knew a fine was available for this type of behaviour;
- Less than 25% knew jail for individuals was available as a sanction;
- Most people rated the likelihood of being caught for cartel conduct, facing enforcement action and being sentenced to jail as fairly low; and
- 29% responded that a hypothetical person would breach anti-cartel law despite the prospect of criminal sanction.
For the full article, click here.
ACCC Chairman Rod Sims acknowledges that the level of awareness about cartels is not where it should be. In response, the ACCC is now focused on conducting a major awareness-raising campaign. The centrepiece of the campaign is a film produced by the ACCC called “The Marker”. The film is a 15 minute piece that follows a person becoming involved in cartel conduct, who then uses the immunity policy offered by the ACCC for anti-cartel whistle blowers to remove themselves from the cartel. Mr Sims said the film was first distributed to the CEOs of Australia’s top companies, and is now being shared across all media channels. He said companies need to take steps to ensure employees understand what it is, why it’s damaging to the economy and that there are serious consequences for breaches of anti-cartel laws.
One of the first executives to receive the film, and share with his employees, was Alan Joyce, Qantas CEO. Qantas International Freight participated in international price fixing which ending up costing the company over $200 million, far more than any benefits gained through cartel conduct. The executives involved believed they were acting in the best interests of the company. An executive from Ireland involved in the cartel is now serving a 6 month jail term for his part in the cartel.
Education is the key to avoiding employee involvement in cartel conduct. Anti-cartel laws are a major part of CCL, and through compliance training your employees and directors will be made aware what constitutes illegal cartel conduct. “The Marker” is a great introduction to cartel conduct, however it is necessary that employers are able to demonstrate adequate employee training to regulators should an employee breach laws and company policies. CCL is a core area of compliance training, and should be included in every workplace compliance training program. By installing CCL in your company compliance program, you can avoid the penalties associated with an employee breach of anti-cartel laws.