On 5 May 2016, Loyal Coal Pty Ltd (Loyal) agreed to settle with the ACCC in proceedings for alleged collusive bid-rigging conduct in relation to tenders for mining exploration licences in NSW. This development came one day into the four-week hearing before the Federal Court.

The ACCC brought civil penalty proceedings against Loyal and 10 other respondents in May 2015 (as we posted about here), seeking civil penalties and declarations of contraventions by all respondents as well as disqualification orders against the individual respondents. The ACCC’s investigation followed ICAC’s Operation Jasper investigation into the same tenders. During the investigation, Moses and Paul Obeid unsuccessfully challenged the compulsory section 155 notices issued by the ACCC.

Loyal admits to breaching the prohibitions against exclusionary provisions

Loyal has admitted that in June 2009 it entered into, and gave effect to, an understanding with Cascade Coal Pty Ltd (Cascade) that:

  • Loyal would withdraw from the NSW Department of Primary Industry’s tender process (and not pursue competing bids) for coal exploration licences at Mount Penny and Glendon Brook in the Bylong Valley; and
  • in return, Cascade would grant a 25% interest in its Mount Penny coal release mining venture to Buffalo Resources Pty Ltd (Buffalo), a separate entity associated with the Obeid family.

Loyal has admitted that this conduct contravened the prohibition on exclusionary provisions in the Competition and Consumer Act 2010 (Cth) (CCA). A contract, arrangement or (or as in this case) understanding will contain an exclusionary provisions if it:

  • is between two or more parties that are competitive with each other; and
  • the provision has the purpose of preventing, restricting or limiting the supply or acquisition of goods or services to/from particular persons by parties to an agreement.

The relevant conduct by Loyal – making the understanding with Cascade and giving effect to it by withdrawing its Expression of Interests for the exploration licences – occurred before the current cartel laws came into effect on 24 July 2009.

In contrast, however the ACCC is pursuing Cascade for contravening both the cartel regime and as the exclusionary provision prohibitions. The ACCC alleges that, by conduct occurring between 2009 and 2012, Cascade gave effect to an understanding containing a cartel provision by engaging in “bid-rigging” as defined in s 44ZZRD(3)(c) of the CCA.

The terms of settlement are not yet known

According to the ACCC’s media release, the ACCC and Loyal will seek consent orders from the Federal Court to the effect that Loyal breached the CCA by making an understanding containing an exclusionary provision and giving effect to the exclusionary provision. The full terms of the settlement with Loyal, and the specific orders sought, are not yet public.

Parent trap

At the time of the relevant conduct in June 2009, Loyal was majority owned by members of the Obeid family. Three years later, Whitehaven Coal Limited (Whitehaven) acquired Loyal. Somewhat unusually, the ACCC expressly acknowledged in its media release that Whitehaven acquired its majority interest in Loyal “well after” the conduct occurred, and was not involved in or aware of the conduct.

The hearing continues…

The hearing against the other 10 respondents continues before Justice Foster for the remainder of the four weeks. It will be interesting to observe how Loyal’s admission will affect the ACCC’s case against Cascade, the Obeids and the other companies and individuals involved.

In interesting development, a key witness, Andrew Kaidbay, is overseas and cannot be located. Mr Kaidbay was a director of Loyal and Buffalo and associated with the Obeids. Mr Kaidbay was described by counsel for another respondent as a “centrally relevant figure”.

Adding to the peculiarities of this matter, Foster J adjourned the hearing last week for 3 hours to allow another witness time to get more sleep.