Generally speaking, a cartel is an anticompetitive arrangement between two or more businesses. Common forms of cartel conduct are:
price fixing is a common form of cartel conduct. It occurs when competing businesses make an agreement that has the purpose or effect of fixing, controlling or maintaining the price of goods or services
market sharing, which refers to agreements between competitors that divide up the market so that the participants are sheltered from competition
bid rigging, where two or more competitors agree they will not compete genuinely with each other for particular tenders, allowing one of the participants in the agreement to win the tender
output controls agreed on between companies can occur in the form of production or sales quota arrangements which involve an agreement between competitors to limit the volume of particular goods or services available on the market. They have the effect of inflating prices in the market.
This type of conduct, between otherwise competitive firms, is often referred to as a hard-core cartel and is illegal.
Cartels harm the Australian economy and public. Consumers, businesses and even governments can be forced to pay higher prices for goods and services. Cartels also distort economic markets, and serve to slow innovation – after all, companies charging supra-normal prices have little incentive to spend money on research and development.
Cartel conduct carries serious penalties under the Trade Practices Act 1974. For a breach by a corporation—a penalty of up to a maximum of:
$10 million, or
when the value of illegal benefit can be ascertained, three times the value of the illegal benefit, or
when the value of the illegal benefit cannot be ascertained, 10 per cent of the turnover in the preceding 12 months,
A civil penalty of up to $500 000 can be imposed on an individual.
In addition, sanctions against company directors and officers of a company (i.e. disqualification and a prohibition on indemnity for financial liability and legal costs) may also be imposed by the court.
Cartel conduct is considered to be so harmful that the Australian Government has announced its intention to introduce criminal sanctions for serious cartel conduct. These sanctions will include a possible jail sentence for individuals.
Small business may occasionally meet to agree on and discuss terms and conditions for the supply of goods or services. If these arrangements involve the price of goods or services, they are likely to breach the Act’s prohibition against price fixing. If competitors agree among themselves not to deal with a particular business, it is known as a ‘collective boycott’ and is strictly illegal.
The ACCC can ‘authorise’ parties to engage in collective negotiation and collective boycotts, but only if it would be in the public interest to do so. Authorisation provides protection from legal action under the Trade Practices Act.
There are also a number of steps that businesses can take to avoid being the victim of a cartel:
consider buying goods or services from alternative suppliers—the greater the number and variety of potential suppliers, the harder it is for them to collude
get quotes from several suppliers—refusal to supply or significant differences in price may indicate the existence of a cartel
take note of any unexpected or unjustified increases or changes in your suppliers’ prices, or if similar price changes are implemented by several suppliers. Contact the ACCC if you become concerned that changes in your suppliers’ prices suggest they are colluding
Don’t unnecessarily discuss details of your dealings with suppliers, or their identity, with other suppliers or potential suppliers.
If you are concerned that some of your business dealings may stray outside the law, contact the ACCC Infocentre for more information on the kinds of behaviour that may risk breaching the Act.
If you have been or are involved in cartel conduct, you should be aware that the ACCC may offer immunity to the first company or individual to report its involvement in that behaviour.
This means if you are the first person to approach the ACCC, and you comply with certain conditions under the ACCC’s immunity policy for cartel conduct, you can obtain immunity from court proceedings by the ACCC.
If you do not qualify for immunity, the ACCC can provide lenient treatment to businesses and individuals who come forward and cooperate in an investigation.
For further information, see ACCC Immunity Policy for Cartel Conduct
