ACCC welcomes record penalties against Visy: Calls for stronger cartel law
A record penalty of $36 million was ordered today against Visy Board Pty Ltd and its director and owner, Mr Richard Pratt, following findings by Justice Peter Heerey of the Federal Court that Visy Board had engaged in price-fixing and market-sharing contraventions of the Trade Practices Act 1974 with its rival, Amcor Limited.
This penalty incorporates a penalty against Mr Pratt for his role in approving the overarching understanding between Visy and Amcor.
The court also ordered separate penalties of $1.5 million on Visy Board's former CEO, Mr Harry Debney, and $500 000 on former Visy Board General Manager, Mr Rod Carroll, for their respective conduct in the contraventions by Visy Board.
The penalties plus payment of the ACCC's legal costs mean the bill will be well over $40 million. The record penalties followed a settlement agreement between the Australian Competition and Consumer Commission, Visy Board and the individual respondents.
Justice Heerey found the record penalties are "reflective of the fact that this must be, by far, the most serious cartel case to come before the Court in the 30 plus years in which price fixing has been prohibited by statute."
"This is one of the most serious, blatant cartels that the ACCC has litigated," Australian Competition and Consumer Commission Chairman, Mr Graeme Samuel, said today.
"It was a premeditated fraud on Australian consumers," he said. "Cartels are based upon greed. Companies and executives line their pockets by defrauding the community.
"Anyone in the past who has bought a block of chocolate or a piece of fruit packed in a box made by Visy or Amcor has probably been ripped off.
"As noted by Justice Heerey: '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 severity of the penalties reflects the court's view of the cynical and deliberate violations of the trust of the Australian community by those involved," Mr Samuel said. "This cartel was covert; it continued for about five years and distorted competition in an industry where Amcor and Visy dominated 90 per cent of the market. It impacted on the prices paid by business which use corrugated packaging, and the prices that ultimately you, as consumers, pay.
"The confirmation of today's record penalties has left the ACCC more determined than ever to pursue these difficult conspiracies."
Recent changes to the Trade Practices Act 1974 penalty regime means that perpetrators of price-fixing, market sharing and other anti-competitive arrangements are now exposed to paying a much higher price: three times the benefit to the company attributable to the conduct or, if that cannot be determined, ten per cent of the corporate group's annual turnover.
"We believe a large number of international and domestic cartels continue to this day having remained undetected for long periods of time. Only recently are some now surfacing.
"As Justice Heerey has found 'it is only individuals who can engage in the conduct which enables corporations to fix prices and share markets'," Mr Samuel said.
Justice Heerey further said that: 'Many countries with free market economies have recognised this reality by enacting laws which make cartel conduct by individuals subject to criminal sanctions, including imprisonment.'
Mr Samuel said Australia must fall in line with other like jurisdictions such as the United States, Canada and the United Kingdom by imposing criminal sanctions that include jail terms for executives who engage in cartel activities.
"A company can always look after an executive when it comes to money. A company can never look after an executive when it comes to taking away his or her liberty by a jail term."
Mr Samuel emphasised the importance of the ACCC's Immunity Policy in facilitating the ACCC's actions against this and other cartel activity. The ACCC's Immunity Policy replaced the ACCC's Leniency Policy, under which Amcor was granted immunity, on 5 September 2005.
"The ACCC's success in this particular matter can be largely attributed to the ACCC's Leniency Policy which encouraged Amcor and former Amcor executives to come forward and provide information and evidence with the incentive of complete immunity from any resultant action by the ACCC."
On 21 December 2005, the Australian Competition and Consumer Commission instituted proceedings in the Federal Court against Visy Board Pty Ltd and other companies in the Visy group in relation to contraventions of section 45 of the Trade Practices Act 1974.
Proceedings were also taken against Mr Richard Pratt, Chairman of the Visy Group; Mr Harry Debney, the Chief Executive Officer of the Visy Group; and Mr Rod Carroll, the former General Manager of Visy Board; for being knowingly concerned in or party to the contravening conduct by the Visy respondents.
Broadly, the ACCC alleged that between 2000 and late 2004 the above respondents entered into and gave effect to price-fixing and market-sharing arrangements with its principal competitor Amcor Ltd in the market for the supply of corrugated fibreboard packaging throughout Australia.
Amcor Ltd and its former senior executives received immunity from legal proceedings by the ACCC after the company came forward with information about the cartel in November 2004. The immunity was granted under the ACCC's 2003 Leniency Policy and was conditional upon continuing full cooperation from the company and executives in providing information to the ACCC about the alleged cartel.
