ACCC & AER annual report 2017-18

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

Court proceedings

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.

Cartels

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

Financial year 2017–18

Number

Approaches

13

First-in approaches

12

Immunity application proffers

9

Proffers not resulting in conditional immunity

11

Civil conditional immunity granted

01

Criminal conditional immunity granted by CDPP upon ACCC recommendation

32

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.

Court cases

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

Australia and New Zealand Banking Group Ltd (ANZ) and others

Conduct

commenced

jurisdiction

5 June 2018

Downing Centre Local Court Sydney

It is alleged that ANZ and one of its employees were knowingly concerned in cartel arrangements involving trading in ANZ shares following an ANZ institutional share placement in August 2015.

Citigroup Global Markets Australia Pty Ltd and others

Conduct

commenced

jurisdiction

5 June 2018

Downing Centre Local Court Sydney

It is alleged that Citigroup and certain current and former employees engaged in cartel conduct involving trading in ANZ shares following an ANZ institutional share placement in August 2015.

Country Care Pty Ltd and others

Conduct

commenced

jurisdiction

14 February 2018

Magistrate’s Court of Victoria

It is alleged that Country Care and employees were engaged in cartel conduct involving assistive technology products used in rehabilitation and aged care, including beds and mattresses, wheelchairs and walking frames.

Deutsche Bank Aktiengesellschaft (Deutsche Bank) and others

Conduct

commenced

jurisdiction

5 June 2018

Downing Centre Local Court Sydney

It is alleged that Deutsche Bank and certain current and former employees were involved in cartel conduct involving trading in ANZ shares following an ANZ institutional share placement in August 2015.

The following cases were ongoing in 2017–18.

Table 3.5: Cartel conduct proceedings ongoing

Cascade Coal Pty Ltd and others3

Conduct

commenced

jurisdiction

25 May 2015

Federal Court Sydney

The ACCC alleges that Cascade and individuals engaged in bid rigging conduct involving mining exploration licences in the Bylong Valley, New South Wales (NSW).

Kawasaki Kisen Kaisha Ltd

Conduct

commenced

jurisdiction

2& November 2016

Federal Court Sydney

The ACCC alleges that Kawasaki engaged in cartel conduct concerning the international shipping of cars, trucks and buses to Australia between 2009 and 2012.

Oakmoore Pty Ltd

Conduct

commenced

jurisdiction

23 June 2016

Federal Court Brisbane

The ACCC alleges that Oakmoore engaged in cartel conduct in the supply of polycarbonate roof sheeting to retailers in Australia.

Prysmian Cavi e Sistemi Energia SRL (High Court appeal)4

Conduct

commenced

jurisdiction

10 April 2018

High Court of Australia

The ACCC alleges that Prysmian engaged in cartel conduct in the supply of high-voltage land cables to a Snowy Mountains Hydro Electric Scheme project.

PT Garuda Indonesia Ltd (High Court appeal)

Conduct

commenced

jurisdiction

status

18 April 2016

Federal Court Sydney

On 14 June 2017, the High Court dismissed the appeal by PT Garuda and other airlines and the matter was remitted to the Federal Court for consideration of penalty and other orders.

On 22 & 25 June 2018, the penalty hearing took place. The matter is now awaiting judgment.

The ACCC alleges that Garuda Indonesia engaged in cartel conduct involving price fixing of surcharges on air cargo services.

PZ Cussons Australia Pty Ltd (appeal)

Conduct

commenced

jurisdiction

20 February 2018

Full Federal Court Sydney

The ACCC alleges that Cussons was engaged in cartel and anti-competitive behaviour in supplying laundry detergent.

Yazaki Corporation and Australian Arrow Pty Ltd (High Court appeal)

Conduct

commenced

jurisdiction

status

13 June 2018

High Court of Australia

Following the Full Federal Court decision on 16 May 2018 and the $46 million penalty ordered against Yazaki, Yazaki and APL have filed an Application for Special Leave to appeal to the High Court.

The ACCC alleges that Yazaki engaged in price fixing and market sharing in relation to the supply of wire harnesses to Toyota.

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.

Table 3.6: Cartel conduct proceedings finalised

Air New Zealand Ltd

 

Conduct

commenced

concluded

jurisdiction

outcome

18 April 2016

27 June 2018

Federal Court Sydney

Penalties of $15 million.

The cartel conduct concerned price fixing of surcharges on air cargo services.

Australian Egg Corporation Ltd (AECL) and others

Conduct

commenced

concluded

jurisdiction

outcome

26 May 2014

25 September 2017

Federal Court Adelaide

The ACCC appeal was dismissed against AECL.

Penalty of $120 000, a compliance program, orders and a contribution to costs against Mr Lendich.

There was an alleged attempt by the company and individuals to induce members of the corporation into an arrangement for the purpose of reducing the available egg supply.

Nippon Yusen Kabushiki Kaisha Pty Ltd

Conduct

commenced

concluded

jurisdiction

outcome

14 July 2016

3 August 2017

Federal Court NSW Criminal Division

Fine of $25 million.

The cartel conduct concerned the international shipping of cars, trucks and buses into Australia between 2009 and 2012.

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’.

Court cases

The following cases were finalised in 2017–18.

Table 3.7: Anti-competitive agreements and practices proceedings finalised

Cement Australia Pty Ltd and others (appeal)

Conduct

commenced

concluded

jurisdiction

outcome

6 June 2016

5 October 2017

Full Federal Court

Penalties of $20.6 million.

The conduct concerned anti-competitive arrangements relating to flyash contracts between Cement Australia and power stations in south-east Queensland.

For details see the case study "Action against anti-competitive conduct—Cement Australia Pty Ltd".

Flight Centre Ltd

Conduct

commenced

concluded

jurisdiction

outcome

11 March 2016

4 April 2018

Full Federal Court

Penalties of $12.5 million.

The conduct concerned anti-competitive arrangements with three international airlines to eliminate differences in international airfares offered to customers.

For details see the case study "Action against anti-competitive conduct—Flight Centre Ltd".

Construction Forestry Mining and Energy Union (CFMEU)

Conduct

commenced

concluded

jurisdiction

outcome

20 November 2014

14 February 2018

Federal Court Melbourne

Penalty of $1 million.

This matter concerned secondary boycott conduct which hindered or prevented the acquisition of concrete from Boral and its subsidiary Alsafe.

Undertakings

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.

Table 3.8: Undertaking accepted in respect of anti-competitive agreements

BHP Billiton Petroleum (Bass Strait) Pty Ltd and Esso Australia Pty Ltd

s. 87B undertaking dated 18 December 2017

The ACCC accepted a court enforceable undertaking from BHP Billiton Petroleum (Bass Strait) Pty Ltd and Esso Australia Pty Ltd to separately market their share of gas produced under the Gippsland Basin Joint Venture from 1 January 2019.

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.

Court cases

The following cases were ongoing in 2017–18.

Table 3.9: Misuse of market power cases ongoing

Pfizer Australia Pty Ltd (High Court appeal)

Conduct

commenced

jurisdiction

22 June 2018

High Court of Australia

The ACCC alleges that Pfizer was involved in misuse of market power for the purpose of substantially lessening competition in relation to particular cholesterol-lowering products by offering to supply its originator brand of atorvastatin, Lipitor, and its own generic atorvastatin product to community pharmacies in early 2012.

For details see the case study "Action for misuse of market power—Pfizer Australia Pty Ltd".

Ramsay Health Care Australia Pty Ltd

 

commenced

jurisdiction

1 May 2017

Federal Court Sydney

The ACCC alleges that Ramsay Health Care was involved in anti-competitive conduct involving misuse of market power and exclusive dealing in the day surgery market in the Coffs Harbour region.

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