The Federal Court has today ordered by consent that NSK Australia Pty Ltd (NSK Australia) pay total penalties of $3 million for its involvement in cartel conduct in relation to the price of bearings in Australia, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).
The Court held that from at least 2000 to May 2011, the senior Japanese executives residing in Australia of NSK Australia and two other bearings companies, Nachi (Australia) Pty Ltd (Nachi Australia) and Koyo Australia Pty Ltd (Koyo Australia), met over dinner as a group which they called the ‘Southern Cross Association’. Meetings typically took place at Japanese restaurants in Sydney and Melbourne, where the participants discussed confidential information, including pricing plans.
Specifically, the Court held that on 14 May 2008 NSK Australia made and gave effect to an arrangement or understanding with Nachi Australia and Koyo Australia in which it shared its pricing plans at a Southern Cross Association meeting for the purpose of maintaining or controlling the price of bearings to their aftermarket customers. NSK Australia then proceeded to implement a 4% increase to these customers as discussed at this meeting, although the Court noted that it was not known whether NSK Australia would have maintained its planned 2008 price increase in any event.
The Court also held that in February 2009 NSK Australia made and gave effect to an arrangement or understanding with Nachi Australia and Koyo Australia in which it shared its pricing plans for aftermarket customers at a Southern Cross Association meeting. NSK Australia then proceeded to implement an already announced 10% increase to these customers with effect from February 2009.
The Court agreed with the ACCC that the contraventions were serious as they “involved a senior executive of A-NSK [NSK Australia] and the arrangements or understandings were implemented through a long-standing practice between A-NSK, Koyo Australia and Nachi Australia…”
“Cartels cheat consumers and other businesses. The ACCC will continue to tackle cartel conduct with the full force of the law.” ACCC Chairman Rod Sims said.
“Although the conduct involved in this case did not directly affect bearings used in the manufacture of vehicles, the conduct did affect the price of bearings used for aftermarket applications such as repairs to vehicles.”
Bearings are an essential component in mechanical items involving movable connections and have a wide range of uses, such as in motor vehicles, mining conveyors, household electrical items and farm machinery. The conduct in this case related to the prices offered to aftermarket customers, which included applications in the maintenance and repair of motor vehicles as well as household and industrial machinery.
For each year during the period from 2007 to 2011, the collective value of bearing products imported into the Australian bearings market by all manufacturers was approximately $370 million to $400 million. NSK Australia has a share of 10% to 13% of the Australian bearings market.
The Court also made orders restraining NSK Australia from engaging in similar cartel conduct for a period of 3 years and requiring it to implement a competition and consumer law compliance training program. NSK Australia received a significant discount in penalty for co-operating with the ACCC during the investigation.
The case was brought to the ACCC’s attention following other investigations arising out of the US Department of Justice’s investigation into auto-parts cartels. The ACCC thanks other international competition agencies, and in particular the US Department of Justice, for their assistance during this investigation.
On 18 October 2013, the Court handed down a pecuniary penalty of $2 million against Koyo Australia for its involvement in the bearings cartel.