ACCC appeals Cement Australia level of penalties

6 June 2016

The Australian Competition and Consumer Commission has filed a Notice of Appeal from the Federal Court’s penalty decision against Cement Australia Pty Ltd and related companies (together, Cement Australia) for breaches of the competition provisions of the Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) (the Act).

In a judgment handed down on 10 September 2013 by Justice Greenwood, the Federal Court found Cement Australia had engaged in numerous contraventions of section 45 of the Act, which prohibits entering into, and giving effect to, contracts and arrangements that have the purpose or effect of substantially lessening competition.

On 29 April 2016, the Federal Court delivered its penalty judgment in the matter (available to the parties only, due to confidentiality orders). On 16 May 2016, the Court published orders that imposed penalties totalling $18.6 million on Cement Australia. The Court has since set aside, by consent, one order imposing a penalty of $1.5 million, thereby reducing the total penalties imposed to $17.1 million. 

The ACCC had submitted to the Court that penalties of over $90 million were appropriate for the purpose of specific and general deterrence, taking into account the serious nature and extent of the conduct, the apparent benefit derived by Cement Australia from the contraventions, and the market harm caused.

“The ACCC will argue to the Full Court that the penalties imposed on Cement Australia are manifestly inadequate, and not of appropriate deterrent value,” ACCC Chairman Rod Sims said.

“The penalties imposed in competition cases are hugely important in deterring anti-competitive conduct. The ACCC considers it essential that penalties for anti-competitive conduct in breach of the law are fixed with a view to ensuring that they are not regarded by businesses as being an acceptable cost of doing business.”

“In this case Justice Greenwood found that the conduct deprived the market of engaging with a new entrant who would have provided competition that would compete away inefficient costs and service offerings, with a likely significant effect on prices,” Mr Sims said.

Background

The proceedings relate to contracts that were entered into by Cement Australia between 2002 and 2006 with four power stations in South East Queensland, to acquire flyash.  No allegations were made by the ACCC against the power stations.  Flyash is a by-product of burning black coal that can be used as a cheap substitute for cement in ready-mix concrete.

The ACCC first brought the proceedings in 2008 against five related corporate respondents; Cement Australia Pty Ltd (currently 50% owned by Holcim and 50% owned by the Heidelberg Cement’s subsidiary Hanson), Cement Australia Holdings Pty Ltd, Cement Australia Queensland Pty Ltd (formerly Queensland Cement Ltd), Pozzolanic Enterprises Pty Ltd and Pozzolanic Industries Pty Ltd.

Following a lengthy fully contested hearing, the Court found numerous contraventions of s45 of the Act by all companies but Cement Australia Holdings Pty Ltd. The ACCC had also alleged that this conduct amounted to a misuse of market power but Justice Greenwood dismissed this claim, because he found that the ACCC had not established that the Cement Australia companies were taking advantage of their substantial market power.

The ACCC also brought proceedings against two individuals. The case against one individual was dismissed, but declarations were made against Mr Christopher White (a manager in the Cement Australia flyash business during the relevant period) for his involvement in making the contravening contracts with the operator of the Swanbank power station in 2005.  A penalty of $20,000 was ordered against Mr White for his role in the conduct.  The ACCC is not appealing the penalty ordered against Mr White.

The Federal Court made declarations in March 2014. See also:

https://www.accc.gov.au/media-release/federal-court-declares-anticompetitive-conduct-by-cement-australia

https://www.accc.gov.au/media-release/186-million-penalties-ordered-against-cement-australia-companies-for-anti-competitive-flyash-agreements

Release number: 
MR 99/16
ACCC Infocentre: 

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