Stopping anti-competitive conduct: Actions undertaken to achieve our purpose
Deliverable 1.1: Deliver outcomes to address harm to consumers and businesses resulting from anti-competitive conduct
Competition enforcement interventions
In 2017–18 the ACCC was involved in 19 court proceedings relating to competition enforcement.
These proceedings relate to competition matters in a range of industries, including construction, shipping, travel, pharmaceuticals and financial services. A complete list of completed and commenced proceedings is included in appendix 9.
Of the 19 competition enforcement proceedings:
- 15 cases were carried over from 2016–17
- four new cases were commenced during 2017–18
- seven cases were finalised
- 12 cases remained ongoing at the end of June 2018.
Cartel behaviour involves businesses agreeing with their competitors to fix prices, rig bids, share markets or restrict supply of products and services. By conspiring to control markets in these ways, a cartel protects and rewards its inefficient members while penalising honest, innovative and well-run companies.
The ACCC has extensive powers to investigate cartels. We can compel relevant individuals and companies to provide information or documents relating to suspected cartels and, under warrant, we can search company offices and the homes of company officers.
Companies and individuals, including cartel participants, help us to detect cartels. Under the ACCC Immunity and Cooperation Policy for Cartel Conduct, participants can apply for immunity from civil and criminal prosecution by reporting their own involvement in a cartel.
Table 3.3: Cartel immunity applications 2017–18
Notes: 1. Investigations continue regarding eight proffers; decisions pending.
2.Grants relate to three immunity recommendations made to the CDPP in 2016–17.
Case study: Enforcement action to remedy damage from a cartel—Yazaki Corporation and Australian Arrow Pty Ltd
In December 2012 the ACCC instituted proceedings against Yazaki Corporation, a Japanese company, and its Australian subsidiary, Australian Arrow Pty Ltd. This matter relates to cartel conduct in connection with the supply of wire harnesses to Toyota and its related entities in Australia between 2003 and at least late 2009.
Wire harnesses are electrical systems that facilitate the distribution of power and the sending of electrical signals to various components of a motor vehicle
The ACCC’s action follows similar enforcement action against Yazaki and other cartel participants by competition regulators in the US, Canada, and Japan. It arose from an immunity application which reported the conduct.
In November 2015 the Federal Court found that Yazaki Corporation engaged in collusive conduct with its competitor. The Court held that this conduct was in breach of the CCA and the Competition Code of Victoria (the Code). The Court found that Yazaki’s conduct was subject to the CCA and the Code, even though much of the conduct occurred in Japan. The Court imposed penalties of $9.5 million against Yazaki.
The ACCC noted it will seek to enforce Australian cartel laws to protect Australian consumers and industry, even when the collusive arrangements are made outside of Australia.
The ACCC appealed the decision because it believed that the penalties imposed were insufficient to adequately deter Yazaki or other businesses from engaging in cartel conduct in the future. It submitted to the Court that Yazaki should be ordered to pay a penalty of between $42 million and $55 million to reflect both the size of Yazaki’s operations and the very serious nature of its collusive conduct.
In May 2018 the Full Federal Court ordered Yazaki to pay increased penalties of $46 million. This is the highest penalty ever imposed under the CCA.
Yazaki has sought special leave to appeal to the High Court.
The ACCC brought Federal Court proceedings against businesses and related individuals for alleged cartel conduct in the supply of goods or services in Australia’s construction, shipping and transportation, and financial services sectors.
The following cases were commenced in 2017–18.
Table 3.4: Cartel conduct proceedings commenced
The following cases were ongoing in 2017–18.
Notes: 3. On 6 July 2018 (after the reporting period) the Federal Court dismissed the ACCC’s case with costs in a suppressed ruling. On 7 August 2018, the ACCC appealed this decision to the Full Federal Court.
4. On 8 August 2018 (after the reporting period) the High Court dismissed Prysmian’s appeal with costs.
The following cases were finalised in 2017–18. Refer to appendix 9 for details.
Anti-competitive agreements and practices
The CCA prohibits contracts, arrangements and understandings between two or more parties that aim to, or are likely to, substantially lessen competition, even where they do not amount to cartel conduct.
Case study: Action against anti-competitive conduct—Flight Centre Ltd
In April 2018, the Full Federal Court of Australia ordered Flight Centre to pay penalties totalling $12.5 million for attempting to induce three international airlines to enter into price-fixing arrangements between 2005 and 2009.
Under the arrangement, each airline would agree not to offer airfares on its own website that were lower than those offered by Flight Centre.
In March 2014 the trial judge imposed a penalty of $11 million against Flight Centre.
Flight Centre appealed the liability finding and the ACCC appealed the $11 million penalty orders because it considered that the penalty would not send a strong deterrence message to Flight Centre and other businesses. In May 2014 the Full Federal Court found that Flight Centre’s conduct did not breach the CCA.
The ACCC sought special leave to appeal and in December 2016 the High Court allowed the ACCC’s appeal. The matter was remitted to the Full Federal Court. In April 2018 the Full Federal Court ordered an increase in penalties to $12.5 million.
Flight Centre is Australia’s largest travel agency, with $2.6 billion in annual revenue. The ACCC will continue to argue for stronger penalties which it considers better reflect the size of the company, as well as the economic impact and seriousness of the conduct. Significant penalties act also as a general deterrent to other businesses that may be considering such conduct.
Case study: Action against anti-competitive conduct—Cement Australia Pty Ltd
The ACCC first brought the proceedings in 2008 against five related companies:
- Cement Australia Pty Ltd (currently 50 per cent owned by Holcim and 50 per cent owned by the Heidelberg Cement subsidiary Hanson)
- Cement Australia Holdings Pty Ltd
- Cement Australia Queensland Pty Ltd (formerly Queensland Cement Ltd (QCL))
- Pozzolanic Enterprises Pty Ltd
- Pozzolanic Industries Pty Ltd.
The proceedings related to contracts that were entered into between 2002 and 2006 with the operators of the Millmerran, Tarong, Tarong North and Swanbank power stations in South East Queensland to acquire flyash (it is noted that allegations were not made against the power stations). Flyash is a by-product of burning black coal at power stations, and can be used as a cheap partial substitute for cement in ready-mix concrete.
The Federal Court ordered penalties of $17.1 million against Cement Australia and its related companies. Justice Greenwood found that the conduct had the purpose and effect of preventing a competitor from entering the market by preventing them from obtaining direct access to a source of flyash in south-east Queensland. Justice Greenwood found that, because of this, the contracts had both the purpose and effect of substantially lessening competition.
However, in June 2016 the ACCC appealed the decision, submitting that penalties of over $90 million were appropriate as a specific and general deterrence, taking into account the serious nature and extent of the conduct, the apparent benefit that Cement Australia derived from the contraventions, and the market harm caused.
In October 2017, the Full Federal Court upheld the ACCC appeal and dismissed a cross-appeal by Cement Australia against the penalties imposed on Cement Australia Pty Ltd and its related companies. The Full Court ordered these companies to pay increased penalties totalling $20.6 million.
The penalties imposed on each of the Cement Australia companies were:
- $2.93 million against Pozzolanic Enterprises Pty Ltd
- $10.28 million against Cement Australia (Queensland Pty Ltd) (formerly QCL)
- $7.29 million against Cement Australia Pty Ltd
- $100 000 against Pozzolanic Industries.
The Full Court upheld the ACCC’s ground of appeal, which related to the imposition of a single penalty, jointly and severally, on two respondent companies involved in one contravention. In upholding this ground, the Full Court confirmed that ‘deterrence is the primary objective for the imposition of civil penalties’ and considered ‘that the imposition of a joint and several penalty would risk undermining this objective’.
The following cases were finalised in 2017–18.
The following s. 87B undertaking was accepted in 2017–18. Details of competition enforcement s. 87B undertakings are available in full on the undertakings public register on the ACCC website.
Misuse of market power
Until 5 November 2017 a misuse of market power was defined to occur where a business with substantial market power in a market used this power to:
- eliminate or substantially damage a competitor
- prevent another business from entering a market
- deter or stop another business from acting competitively in any market.
Since 6 November 2017 a misuse of market power occurs where a business with substantial power in a market engages in conduct that has the purpose, effect or likely effect of substantially lessening competition.
This behaviour is prohibited under the CCA.
Case study: Action for misuse of market power—Pfizer Australia Pty Ltd
In May 2018 the Full Federal Court of Australia dismissed an appeal by the ACCC against an earlier judgment in relation to Pfizer Australia Pty Ltd (Pfizer).
In February 2014 the ACCC instituted proceedings in the Federal Court, alleging that Pfizer breached the CCA by misusing its market power to prevent or deter competition from other suppliers selling generic atorvastatin products to pharmacies and engaged in exclusive dealing conduct for the purpose of substantially lessening competition when offering to supply atorvastatin to community pharmacies.
In 2015 the Court dismissed the ACCC’s application, finding that, while Pfizer had taken advantage of its market power by engaging in the alleged conduct, Pfizer’s market power was no longer ‘substantial’ at the time the offers were made.
The ACCC appealed the decision. The Full Federal Court dismissed the appeal. The ACCC has sought special leave to appeal to the High Court.
The following cases were ongoing in 2017–18.