The following is an excerpt from a speech by ACCC chairman, Graeme Samuel, on 29 April 2005 to the American Chamber of Commerce in Australia, Melbourne.
Cartels
In the very near future the risk benefit analysis for Australian businesses contemplating involvement in a cartel is about to get much tougher. No longer will the assessment be ‘will the gains from this cartel outweigh the financial penalty if I’m caught?’ After July it could well be ‘is my involvement in this cartel worth a lengthy jail term?’
Cartel behaviour is, in reality, a form of theft and little different from classes of corporate crime that already attract criminal sentences. The move by the Commonwealth to introduce criminal sanctions for hard core cartels recognises this and is a very welcome development.
Of course, such penalties only apply if you are caught, but anyone who has paid even the smallest attention to the media in recent months will know that is now a very real risk.
Just last month eight petrol companies in regional Victoria were fined $22.5 million for their involvement in a long-standing arrangement to fix retail petrol prices. Eight executives were also fined a total of more than $800 000, with two executives being fined $200 000 each for their involvement in the conduct.
George Weston Foods—where a former divisional chief executive telephoned a competitor seeking to fix the wholesale price of flour. Even though the competitor did not agree to the scheme, the intent alone was enough to earn George Weston a $1.5 million fine. We were alerted to this failed scheme via an anonymous tip-off.
Metro Bricks, which agreed in phone calls and meetings with its rival Midland Bricks simultaneously to lift the price of bricks by three per cent, and set a floor price for tender pricing for major builders (in Western Australia). Metro bricks was penalised $1 million.
The brick fix was exposed when Boral, the parent company of Midland, voluntarily came to the ACCC to take advantage of our leniency policy. In so doing, Midland escaped financial penalty while its co-conspirator copped a $1 million fine.
The leniency policy is proving extremely successful in stripping away the secrecy from cartels with the ACCC now having received 14 applications from cartel members keen to blow their whistle on their co-conspirators.
This is a pretty powerful deterrent to the formation of cartels, as it makes cartel members aware that no matter how good they are at covering their tracks and keeping their deliberations secret, there is now the ever present threat that one of their co-conspirators will turn them in.
Now, as pleased as the ACCC is by our recent successes against cartels the fact is we would much prefer that in all cases, the companies and executives involved had complied with the law in the first place, rather than have us act after the event and pursue those responsible.
That’s why I’m pleased to be here today to announce the ACCC’s cartels publication—the publication that tells you everything you ever wanted to know about cartels but were afraid to ask.
In plain English language it makes very clear to business:
exactly what sort of behaviour constitutes a cartel
how to protect yourself from those who may be fixing prices or rigging contracts
what to do if you think you are being ripped off by a cartel
what penalties you can expect if caught fixing prices or rigging bid
what to do if you are involved in a cartel and want to save yourself, and your company a massive fine and a possible jail term, by turning yourself and your co-conspirators in to the ACCC.
It’s a document which I think will be of great interest to every business in the country ahead of the new regime of criminal sanctions and massively increased fines.
It’s also a document which should leave you in no doubt about the determination of the ACCC to do all we can to eradicate the bid-rigging, price fixing and market sharing which is a cancer on our economy.
We are also working on two related publications which are specifically aimed at small business and consumer groups.
But, in the meantime, I’d advise every one of you to read our cartels publication very carefully, and put its advice into action to ensure your business doesn’t become a victim of this behaviour or a perpetrator.
Copies of this publication is available from the ACCC website, see: Cartels—What you need to know
