To take some examples, last year competition agencies in China and the USA secured fines against manufacturers for a cartel to fix the price of automotive and industrial bearings. In the USA, Japanese company NGK Spark Plug Co. Ltd agreed to plead guilty to price-fixing and bid-rigging and pay a $US52 million fine. In China, NSK Ltd. and NTN Corp were fined $US48 million for price fixing. In Australia the Australian Competition and Consumer Commission (ACCC) successfully concluded non-criminal action against NSK Australia Pty Ltd. Senior company executives based in Australia had met regularly, to discuss pricing plans with executives of two other bearings companies. In announcing the decision, the ACCC made the point that the cartel had been brought to the ACCC’s attention as a result of the US Department of Justice’s investigation into auto-parts cartels.
Consequently, it is clear that leniency regimes will remain of central importance to competition lawyers and their corporate clients. At last count over 50 agencies internationally had leniency or immunity policies. Although they have common threads each has its own peculiarities, making this area a minefield for the uninitiated and a complex web for even the most experienced competition lawyers. The ACCC was one of the first to introduce an immunity policy for cartels. Now that policy has been updated taking account of experience over the seven years since it was first introduced.
The Corporate Immunity Policy at a glance
Immunity is only available to the first corporation to seek immunity. This compares with, for instance, Japan, where immunity may be available for up to five corporations or corporate groups. In Australia, leniency may be available to others who cooperate, but unlike the position in South Korea, for instance, there is no set sliding scale fine reduction for the second cooperating corporation that seeks immunity.
Immunity will only be available if, at the time the application is made, the ACCC has not received written legal advice that it has reasonable grounds to institute proceedings arising from the cartel conduct.
If immunity is available, the corporation seeking immunity will receive conditional immunity if it:
- was a party to the cartel, in whatever capacity. This is a change. Previously, immunity was only available if the party seeking it was not the clear leader of the cartel;
- did not coerce others to participate in the cartel;
- admits that its conduct may constitute a contravention or contraventions of the cartel provisions and that admission is a truly corporate act (as opposed to isolated confessions of individual representatives);
- makes full and frank disclosure, providing the ACCC with all evidence and information available to it relating to the cartel;
- cooperates fully, on a continuous and expeditious basis, throughout the ACCC's investigation and any ensuing court proceedings; and
- it ceases its involvement in the cartel or indicates to the ACCC that it will cease its involvement in the cartel.
Previously there was a further requirement that, where possible, the corporation must also make restitution to third parties injured by its participation in the cartel. That requirement has been removed.
Conditional immunity, once granted, will only be maintained if the corporation continues to cooperate fully and expeditiously in the investigation and subsequent court action. This can be particularly challenging with cartels operating in more than one country, or where cooperation of past and present executives based outside Australia is sought.
Final immunity is only available after any court action against other cartel participants has been concluded, and then only if the corporation continues to:
- provide full, frank and truthful disclosure and cooperates fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing court action; and
- maintains confidentiality regarding its status as an immunity applicant and details of the investigation and any proceedings unless otherwise required by law or with the written consent of the ACCC.
As a practical matter, final immunity may only be available after a number of years.
Who grants immunity?
Australia has both civil and criminal sanctions for cartel conduct, although criminal action is reserved for the so called 'hard core' cartels. Civil immunity is granted by the ACCC and criminal immunity by the Commonwealth Director of Public Prosecutions, but all applications for immunity are handled by the ACCC.
A marker system operates in Australia. This allows those who need time to investigate whether or not immunity is required to seek a marker from the ACCC under which the lawyer for the corporation can obtain a position in the immunity queue. If a marker is obtained, it preserves, for a limited period, the recipient’s status as the first party to apply, or its position in the queue. Advancement in the queue will only occur if those earlier in the queue do not obtain conditional immunity.
In order to obtain a marker, the applicant's lawyer must provide a description of the cartel conduct in sufficient detail to allow the ACCC to confirm that no one else has applied for immunity or obtained a marker for the particular cartel, but subject to that requirement, a marker may be obtained on a hypothetical or anonymous basis.
Although cooperation may be in the form of oral proffers, given at least initially through the corporation's lawyer, the ACCC will take a record of the information proffered. Unless required to disclose the information by law, the ACCC will keep the information confidential. However, if the matter proceeds to court the availability of information to respondents, whether through discovery or by subpoena, will be a matter for the court.
Sharing information with other agencies
The general rule is that the ACCC will not share an immunity applicant’s confidential information or identity with other regulators without the applicant’s consent. However, for the purposes of international inter-agency cooperation, the ACCC will typically request a waiver for each jurisdiction in which the applicant has (or intends to) seek immunity. Although conditional immunity is not dependent on such waivers being provided, if an explanation of the reason for refusing a waiver is not given, that can place conditional immunity at risk if the ACCC concludes that the refusal is a failure to fully cooperate.
Where the cartel operated in more than one country:
- there is a high likelihood that the ACCC will cooperate with other competition agencies internationally investigating the same cartel. If the ACCC is satisfied that information provided to it will assist another competition agency exercise its powers, the ACCC has legal authority to provide information, including documents, to that agency although its practice to date has been not to do so without a waiver.
- extradition to another country is a possibility where, like Australia, the other country treats cartels as criminal offences.