Cartels

About cartels

A cartel exists when businesses agree to act together instead of competing with each other.

Cartels cheat consumers and other businesses. They restrict healthy economic growth, drive up prices and reduce innovation and investment.

A cartel:

is made up of independent businesses
attempts to increase members’ profits while maintaining the illusion of competition
can involve businesses of any size, from small, local businesses to large corporations
can be local, national or international.

Cartel conduct is illegal and is strictly prohibited. The laws about cartel conduct are in the Competition and Consumer Act 2010, which applies to all corporations in Australia, as well as individuals involved in the conduct.

If the businesses acting together are owned by the same company, this is not a cartel.

Types of cartel activity

There are 4 types of cartel activity.

Cartel activity is when 2 or more competitors agree to:

fix prices - when competitors agree on pricing instead of competing against each other
market share - when competitors agree to divide a market between themselves so they don’t have to compete
control output - when competitors agree to limit the amount or type of goods and services available
rig bids - when suppliers discuss and agree among themselves who should win a tender, and at what price.

Price fixing

Price fixing happens when competitors agree on pricing instead of competing against each other.

The agreement or understanding can be about:

prices for selling or buying goods or services
minimum prices
a formula for pricing or discounting goods and services
rebates, allowances or credit terms.

A common misconception

Sometimes, businesses independently change their prices to match their competitors’ prices.

This can create price changes that may look like price fixing. However, this is unlikely to be illegal as long as each business is making independent decisions about its prices.

Price fixing agreements may be formal or informal. They may be written, verbal, or just a signal, like a ‘wink and a nod’.

Signs of possible price fixing include:

tenders or quotes are all much higher than expected
all suppliers raise prices at the same time and by more than what seems reasonable or can be explained by changes in the cost of inputs
prices submitted are much higher than previous tenders for similar products or services
prices drop markedly after a new supplier tenders. This may indicate that the existing suppliers have been colluding and the new supplier has forced them to compete.

Example of price fixing

A group of local builders decides to start meeting regularly at the pub. At their first meeting, they agree to increase their hourly rates to a certain amount for a trial period.

This is price fixing.

Market sharing

Market sharing happens when competitors agree to divide a market between themselves so they don’t have to compete. They may agree to:

avoid producing each others’ goods or services
serve different geographical areas
divide contracts by value
assign customers to each competitor, with an understanding not to win each other’s customers.

Bid rigging

Bid rigging, also known as collusive tendering, happens when suppliers discuss and agree among themselves who should win a tender, and at what price.

They may decide to take turns at winning tenders, giving each cartel member an agreed share of business. They may agree on a reward for the losing businesses, such as a guaranteed subcontracting role or a compensation payment.

To make sure that the agreed bidder wins, other cartel members may:

not bid at all
bid above an agreed amount
include terms and conditions that they know the client won’t accept
withdraw a winning bid.

Signs of possible bid rigging include:

regular suppliers decline to tender, for no obvious reason
bidders include unacceptable terms in their tenders
bidders sometimes bid low and sometimes bid high on the same type of product or service
the winning firm regularly subcontracts to competitors that submitted higher bids
one firm of professional advisers represents several of the businesses submitting tenders.

Example of bid rigging

Four foreign companies that supply rubber hosing agree to create a committee to allocate contracts in Australia. Each company appoints a member to the committee, which coordinates bidding and quoting. To hide its activity, the cartel uses codes, such as referring to the chosen winner as the ‘champion’.

This is bid rigging and market sharing. Even though the cartel is made up of foreign companies meeting overseas, it can be prosecuted in Australia.

Controlling output

Output restrictions happen when competitors agree to limit the amount or type of goods and services available. They do this to increase prices or stop them falling.

Businesses can independently reduce their output in response to demand, but it is illegal for competitors to agree to restrict output.

Protect your business from cartel activity

Businesses should take care to protect themselves from cartel activity among suppliers.

Businesses should also be careful not to be drawn into a cartel.

Avoid speaking to your competitors about customers and pricing, including bids for projects.
Never agree or even try to agree with a competing business on the prices you or they will charge or what discounts will be offered including in tenders or quotes for jobs.
Never limit the goods or services you or they supply or allocate customers or geographic areas.

If you are:

approached by another competing business to discuss arrangements about pricing, customers or bidding, don’t get involved and report it to the ACCC.
invited into an arrangement that seems like a cartel, seek independent legal advice. You should also report any suspicious activity to the ACCC.

Read our guidance

Cartels: deterrence and detection - a guide for government procurement professionals

This publication is to assist procurement professionals understand cartel behaviour.

Cartels: what you need to know - a guide for business

This guide is designed to give businesses an overview of the law in relation to cartel conduct as outlined in the Competition and Consumer Act 2010.

Penalties for cartel activity

Cartel activity is prohibited under the law. It is prohibited as a civil breach. It is also a criminal offence for individuals and for businesses.

Corporations can face fines and penalties for each criminal cartel offence or civil contravention.

Individuals involved in a cartel can face:

jail for up to 10 years
fines for each criminal cartel offence
penalties for each civil contravention
injunctions to stop the conduct
orders barring them from managing corporations in future
community service orders.

It's illegal for a corporation to protect its officers against loss, or to compensate or pay their legal costs or any financial penalty.

See fines and penalties for specific penalty information.

Our investigation powers

The ACCC has extensive powers to investigate cartels. We can:

compel a person or company to provide information about a suspected breach of the law. This includes providing documents and giving verbal evidence
seek a warrant to search company offices and the homes of company officers
partner with the Australian Federal Police, which can collect evidence using phone taps and other surveillance devices.

Apply for immunity

If you’re involved in a cartel and you are the first to report the cartel to the ACCC and cooperate with our investigations, you may be eligible for immunity from civil proceedings and criminal prosecution.

To apply for immunity, contact the ACCC Immunity Hotline:
Phone: 02 9230 3894
Email: cartelimmunity@accc.gov.au

For more information, see:

ACCC immunity and cooperation policy for cartel conduct

This policy sets out the ACCC’s approach to applications for immunity from proceedings initiated or authorised by the ACCC or the Office of the Commonwealth Director of Public Prosecutions (CDPP) in relation to cartel conduct, and how cooperation provided to the ACCC by cartel participants will be recognised.

ACCC immunity & cooperation policy frequently asked questions - May 2023 - cover image

ACCC immunity and cooperation policy: frequently asked questions

This document supplements the ACCC immunity and cooperation policy for cartel conduct – October 2019. The frequently asked questions may be amended from time to time to address issues that may arise in the application of the policy.

Report a cartel

The ACCC takes cartels very seriously. If you are aware of or suspect cartel conduct, report it to us.

Anyone can report possible cartel activity to the ACCC.

Report cartel activity to the ACCC

We have special arrangements for people who want to anonymously report cartel conduct to the ACCC.

We use a secure third-party platform that protects your identity. You stay completely anonymous when giving us a tipoff or having ongoing contact with the ACCC.

Report cartel activity to the ACCC and remain completely anonymous