Generally speaking, a cartel is an anti-competitive arrangement between two or more competing businesses. Common forms of illegal cartel conduct are:
price fixing 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 refers to agreements between competitors that divide up the market so that the participants are sheltered from competition
bid rigging occurs 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 that 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.
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.
New laws passed by the Australian Parliament introduce new civil cartel prohibitions and, for the first time, a criminal cartel offence effective from 24 July 2009.
The civil cartel prohibition and the criminal cartel offence are centred upon the existence of a cartel provision within a contract, arrangement or understanding (CAU).
The definition of ‘cartel provision’ includes four types of cartel conduct:
price fixing
output restrictions
allocating customers, suppliers or territories
bid rigging.
The definition of cartel provision also requires that at least two of the parties to the cartel agreement be persons who are, or are likely to be, in competition with each other.
A company will have contravened the civil prohibition if it makes a CAU containing a cartel provision with its competitor, or if it gives effect to the cartel provision.
The element that distinguishes the cartel offence from the civil prohibition is the need to establish certain fault elements under the Criminal Code. An overview of the application of those fault elements is provided below:
Making a CAU containing a cartel provision
It will be necessary to establish that an individual or corporation intended to enter into a contract, arrangement or understanding and that she/he or it knew or believed the CAU contained a cartel provision.
Giving effect to a cartel provision
It will be necessary to establish that an individual or corporation knew or believed a CAU contained a cartel provision and that she, he or it intended to give effect to that cartel provision.
How will the ACCC approach investigations into cartel conduct?
The ACCC has released guidelines, which are attached below, as to how it will approach its investigation of cartels. These guidelines set out how the ACCC will investigate alleged cartel arrangements under the civil and criminal provisions in the Trade Practices Act and make decisions relating to referral of matters for possible criminal prosecution.
This document should be read with other relevant ACCC publications, including the ACCC immunity policy for cartel conduct and its memorandum of understanding (MOU) with the Commonwealth Director of Public Prosecutions (CDPP), which is attached below.
For corporations, the fine or pecuniary penalty for each contravention of the cartel offence or civil prohibition (whichever applies) will not exceed the greater of:
$10 000 000
three times the total value of the benefits obtained by one or more persons reasonably attributable to the commission of the offence/act or omission in contravention of the civil prohibition
where those benefits cannot be fully determined, 10 per cent of the corporate group’s annual turnover in a 12-month period when the offence/contravention occurred.
Some of the other forms of relief available in relation to the cartel offence and civil prohibition include injunctions, orders disqualifying a person from managing corporations and community service orders.
The law provides that if you have a collective bargaining notice in place, businesses will be exempt from the cartel offence and civil prohibition insofar as the conduct is in relation to:
There are 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 on 1300 302 502 for more information on the kinds of behaviour that may risk breaching the Trade Practices Act.
Immunity from proceedings and cooperation with the ACCC
If you have been or are involved in cartel conduct, you should be aware that immunity from proceedings may be available. 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.
