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Enforcement action against cartel conduct

Enforcement action against cartel conduct. An insight from the ACCC. Richard Fleming Deputy General Manager Compliance and Enforcement Policy Implementation and Coordination Enforcement and Compliance Division richard.fleming@accc.gov.au. Outline. Four areas:

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Enforcement action against cartel conduct

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  1. Enforcement action against cartel conduct An insight from the ACCC Richard Fleming Deputy General Manager Compliance and Enforcement Policy Implementation and Coordination Enforcement and Compliance Division richard.fleming@accc.gov.au

  2. Outline Four areas: • The ACCC role and our approach to compliance and enforcement • Cartel investigations and prosecutions including immunity applications and cooperation • Recent cartel cases • Some current issues & time for questions

  3. ACCC Roles Three broad roles: • Regulated industries • Protecting consumers (ACL) • Protecting competition ACCC & AER corporate plan can be found at www.accc.gov.au

  4. Compliance and enforcement policy The ACCC: • Receives over 160,000 complaints and queries • Initiates about 550 investigations • Takes about 30 matters to court ACCC compliance and enforcement policy can be found at www.accc.gov.au

  5. Conduct always prioritised “There are some forms of conduct that are so detrimental to consumer welfare and the competitive process that the ACCC will always assess them as a priority. These include cartel conduct and anti-competitive agreements, and the misuse of market power. The ACCC will also always prioritise the assessment of product safety issues which have the potential to cause serious harm to consumers”

  6. Compliance A tiered approach

  7. Education and outreach • ACCC social media (YouTube, Twitter, Facebook) • ACCC Shopper App – downloaded more than 7000 times • General deterrent effect from court action for industry • The Marker video (click for trailer opens browser)

  8. ACCC’s approach to investigations generally Key principles

  9. ACCC’s investigative tools

  10. Investigation of cartel conduct

  11. Prosecuting cartel conduct – civil or criminal?

  12. What is Serious Cartel Conduct?

  13. Civil AND criminal?

  14. The ACCC will not negotiate criminal penalties

  15. ACCC investigation policies For more information please visit www.accc.gov.au

  16. How do you apply for immunity?

  17. Marker

  18. Proffer

  19. ACCC’s decision

  20. CDPP’s decision

  21. Conditions of immunity

  22. Case studies • Currently, the ACCC has about 15 in-depth investigations relating to cartel matters • Past matters include: • DRS – penalties of $1m • Marine hose – penalties of about $8m • Woollams – penalties of more than $1m • Current matters include: • Air cargo cartel • Renegade Gas & Supagas • Prysmian • Yazaki Corporation

  23. Air cargo cartel • Investigations commenced in 2006 – over 35 ACCC staff have worked on the matter • Proceedings against 15 major airlines – 13 consented to court ordered penalties totalling $98.5 million • The HCA unanimously dismissed Garuda’s claim of sovereign immunity • Proceedings against Garuda and Air NZ ongoing expected to conclude this year

  24. Renegade Gas & Supagas • Alleged cartel in connection to the supply of cylinder forklift gas involving domestic parties • Immunity application in early 2011 and an in-depth investigation was commenced mid 2011 • Search warrant executed on alleged conspirators and stored communications warrants also used • Approaches under the ACCC’s cooperation policy by firm and individuals. ACCC commenced proceedings on 23 August 2012 – the matter is ongoing

  25. High voltage cables – Viscas & ors • Alleged cartel conduct by suppliers of high voltage and extra high voltage cables involving international parties • Immunity application in mid-2009 • ACCC commenced proceedings late 2009 • Complex issues involving jurisdiction – argument whether ACCC could serve overseas parties • Viscas recently consented to court ordered penalty of $1.35 million in respect of a single collusive tender in 2003 to supply Snowy Hydro Limited.

  26. Methods of ensuring compliance with anti-cartel laws • Education, advice and persuasion • Destabilising cartels • Immunity policy • Public enforcement • Corporations vs individuals • Civil penalties vs Criminal sanctions • Other orders • Gaol • Private enforcement • Damages for cartel overcharge (10-30%) • Optimal deterrence, over deterrence

  27. Compliance vs deterrence • What is the relationship? • Can you have one without the other? • Is compliance is an end state? • Is deterrence an incentive to change behaviour?

  28. What motivates business? • It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. Adam Smith, The Wealth of Nations: An Inquiry into the Nature & Causes of the Wealth of Nations • Focus on profit in a market economy: Individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits.

  29. Trade Practices Compliance Manual • This is an important document. It is essential that it be read and understood by you. Visy Industries requires strict compliance with its policy on the Trade Practices Act. • Price fixing and market sharing are "strictly prohibited" and that readers of the document "must never make (such) arrangements with a competitor". • Visy personnel should avoid all contact with competitors or their employees other than contact approved by senior management or Visy Industries’ Legal Counsel. • All necessary contact with competitors should be conducted in formal settings. • “The Visy Trade Practices Compliance Manual might have been written in Sanskrit for all the notice anybody took of it” [319]

  30. “The law, and the way it is enforced, should convey to those disposed to engage in cartel behaviour that the consequences of discovery are likely to outweigh the benefits, and by a large margin. Every day every man, woman and child in Australia would use or consume something that at some stage has been transported in a cardboard box. The cartel in this case therefore had the potential for the widest possible effect. The whole point of price fixing and market sharing is to obtain the benefit of prices greater than those which would be obtained in a competitive market. The cartel…was run from the highest level in Visy, a very substantial company. It was carefully and deliberately concealed. It was operated by men who were fully aware of its seriously unlawful nature.” Justice Heerey, ACCC v Visy [2007] FCA 1617

  31. Why criminalise cartel conduct? • “This bill makes much needed changes to the Trade Practices Act 1974 and will operate to deter cartel conduct by widening the range of regulatory responses available. Furthermore, it will bring Australia into line with its major trading partners and developed nations. In the international context, 15 OECD members, including the United States, Canada and the United Kingdom, have criminal sanctions for cartel conduct” Minister Bowen - Second reading speech - Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008

  32. Why criminalise cartel conduct? • The bill has its origin in the 2003 Review of the Competition Provisions of the Trade Practices Act, chaired by Sir Daryl Dawson. The Dawson review recognised growing international experience showing that criminal sanctions are effective in deterring serious cartel conduct. It recommended the introduction of criminal penalties in Australia. Minister Bowen - Second reading speech - Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008

  33. Why criminalise cartel conduct? • “The prospect of a jail term for committing a cartel offence sends a clear message. Such a penalty has an immediate deterrent effect for businesses, which might otherwise dismiss fines imposed for a breach of competition law as a mere cost of doing business. • In troubling economic times, as competitors may contemplate engaging in risky behaviour in order to score a financial gain, the need for tough sanctions is even more important.” Minister Bowen - Second reading speech - Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008

  34. Observations • There is some evidence that risk of gaol + active and effective enforcement does have an impact • USDOJ have reported cartellists avoiding impact on US commerce due to individual fear of jail sentences • Some self reports to the ACCC have explicitly stated that there has been no conduct that would impact on US commerce

  35. Developing issues • International cooperation/the use of waivers • Overseas witnesses • Ongoing cooperation from applicants • Investigating international cartels • Immunity applicants involving international cartels QUESTIONS ???

  36. Immunity Hotline +61 2 9230 3894 For more information visit www.accc.gov.au/cartels

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