Legislation and institutions

Relevant legislation

What is the relevant legislation?

Australia’s competition legislation is the Competition and Consumer Act 2010 (Cth) (CCA). The cartel provisions are contained in Part IV, Division 1.

Relevant institutions

Which authority investigates cartel matters? Is there a separate prosecution authority? Are cartel matters adjudicated or determined by the enforcement agency, a separate tribunal or the courts?

The Australian Competition and Consumer Commission (ACCC) investigates alleged cartel conduct and determines whether to bring civil proceedings. The ACCC can also refer serious cartel conduct to the Commonwealth Director of Public Prosecutions (CDPP) for criminal prosecution.

Ultimately, it is the Federal Court of Australia (or sometimes the Supreme Court of an Australian state in criminal cases) that determines whether there has been a contravention of the civil or criminal cartel provisions and the appropriate sanctions and penalties.

Changes

Have there been any recent changes, or proposals for change, to the regime?

The CCA was amended in November 2017 by the Competition and Consumer (Competition Policy Review) Amendment Act 2017 (CPR Amending Act). The CPR Amending Act:

  • clarifies that cartel conduct must take place in ‘trade or commerce’ (ie, within Australia or between Australia and places outside Australia);
  • repeals the per se prohibition on exclusionary provisions and expands the definition of ‘output restriction’ in the prohibition against cartel conduct to cover restrictions on acquisition (in addition to restrictions on production, capacity and supply); and
  • amends the joint venture (JV) exception to cartel conduct by:
    • extending the exception so it more clearly applies to JVs for the acquisition of goods or services (in addition to JVs for the production or supply of goods or services);
    • broadening the exception so it applies to a provision contained in an arrangement or understanding (in addition to a provision contained in a contract);
    • imposing additional requirements on the party wishing to rely on the exception. In addition to demonstrating that the cartel provision is ‘for the purposes of’ the JV, a party is now required to demonstrate that:
      • the cartel provision is reasonably necessary for undertaking the JV; and
      • the JV is not being carried on for the purpose of substantially lessening competition; and
    • increasing the standard of proof so a party wishing to rely on the exception must prove the relevant matters ‘on the balance of probabilities’ (previously, a party only needed to produce evidence of ‘a reasonable possibility’ that relevant matters exist).

Prior to its repeal, subsection 51(3) of the CCA provided a limited exemption for certain conduct relating to intellectual property rights, including conditional licensing and assignment of patents, registered designs, trademarks and copyright (Treasury Laws Amendment (2018 Measures No. 5) Act 2019). With effect from 13 September 2019, this exemption ceased. This means that conduct associated with intellectual property rights is treated in the same way as other conduct.

Substantive law

What is the substantive law on cartels in the jurisdiction?

It is a civil and criminal offence to make or give effect to a contract, arrangement or understanding between actual or potential competitors that contains a ‘cartel provision’. Cartel conduct is per se prohibited, regardless of the impact on competition.

A cartel provision is a provision that has:

  • the purpose or effect of fixing, controlling or maintaining the price of goods or services supplied by any or all of the parties; or
  • the purpose of:
    • preventing, restricting or limiting production, capacity, supply or acquisition of goods or services by any or all of the parties;
    • allocating customers or territories supplied by any or all of the parties; or
    • rigging bids.

To establish criminal liability, the elements of the offence must be proven to the criminal standard of beyond reasonable doubt. It is not necessary to show dishonesty or that the parties knew it was cartel conduct or illegal. However, there must be knowledge or belief of the relevant elements.

If a company is a party to a contract, arrangement or understanding containing a cartel provision, then related bodies corporate are also deemed to be a party to the contract, arrangement or understanding.

Application of the law and jurisdictional reach

Industry-specific provisions

Are there any industry-specific infringements? Are there any industry-specific defences or antitrust exemptions? Is there a defence or exemption for government-sanctioned activity or regulated conduct?

Prior to the CPR Amending Act coming into effect, there was a sector-specific prohibition relating to price signalling in the banking sector. However, the CPR Amending Act repealed these provisions, on the basis that they would be redundant following the introduction of a prohibition against concerted practices.

Part X of the CCA (which deals with competition in the international liner cargo shipping industry) contains partial exemptions from the cartel prohibitions for certain shipping conference agreements provided that these are registered with the Federal Department of Infrastructure and Regional Development.

There are no general exceptions for government-sanctioned activity except that the cartel prohibitions do not apply to conduct that is specifically authorised by federal or state legislation. In addition, certain government entities are only subject to the CCA insofar as they carry on business.

Application of the law

Does the law apply to individuals, corporations and other entities?

The prohibitions against cartel conduct apply to individuals, corporations and bodies politic. The CCA also applies to government entities to a certain extent, where they carry on a business.

Extraterritoriality

Does the regime apply to conduct that takes place outside the jurisdiction (including indirect sales into the jurisdiction)? If so, on what jurisdictional basis?

The cartel prohibitions apply to conduct that has taken place in trade or commerce within Australia or between Australia and places outside Australia. In addition, where the cartel conduct occurs outside Australia, the conduct only falls within the CCA if it is carried on by:

  • companies carrying on business within Australia;
  • Australian citizens; or
  • persons ordinarily resident in Australia.

The law in relation to carrying on business in Australia is complicated. However, it is quite likely that a foreign parent company will be considered to be carrying on business in Australia where an Australian subsidiary acts on its behalf as agent. Further, where a foreign company communicates by means of telecommunication such as fax, email, letter or telephone to officers of its Australian subsidiaries (and the communication was expected to be and was received in Australia), the conduct can be regarded as taking place in Australia.

Export cartels

Is there an exemption or defence for conduct that only affects customers or other parties outside the jurisdiction?

There is an exception for cartel provisions that relate exclusively to the export of goods or services from Australia. For the exception to apply, full and accurate details of the provision must be submitted to the ACCC within 14 days of the relevant contract, arrangement or understanding being entered into.

Investigations

Steps in an investigation

What are the typical steps in an investigation?

The ACCC is responsible for investigating both civil and criminal cartel conduct (although the decision to prosecute criminal cartel activity is a matter for the CDPP). The ACCC has significant discretion as to the timing and conduct of an investigation. Investigations may take months or years depending on the conduct being investigated.

Parties to the alleged conduct will usually be asked to provide information, produce documents and appear before the ACCC to answer questions. The ACCC may do this on a voluntary basis but will more typically use its evidence-gathering powers under section 155 of the CCA (see below).

Once the ACCC has obtained sufficient evidence, it will form a view as to whether a contravention has occurred. If the ACCC considers that there has been a contravention, it can:

  • refer the matter to the CDPP for possible criminal prosecution (serious cartel offences);
  • commence civil litigation in the Federal Court seeking penalties, injunctions and other remedies; or
  • in less serious cases, resolve the investigation by accepting commitments from the individual or company to cease the conduct and take steps to ensure that it does not recur. This could be in correspondence, by agreement or by way of an enforceable undertaking under section 87B of the CCA.

In practice, cartel matters are generally resolved through court proceedings.

The time between the commencement of an investigation and any court proceedings by the ACCC (or the CDPP) varies depending on the complexity of the investigation. Penalty proceedings may be brought at any time within six years after the contravention occurs. In practice, it is often several years before investigations are brought to their conclusion.

Investigative powers of the authorities

What investigative powers do the authorities have? Is court approval required to invoke these powers?

The ACCC has broad investigatory powers under the CCA.

Under section 155, where the ACCC has reason to believe that a person can provide information or documents relating to a possible contravention of the CCA, the ACCC can require that person to produce information or documents or appear before the ACCC to give evidence on oath or affirmation. The ACCC cannot issue a section 155 notice after it has instituted proceedings, unless it is seeking an interlocutory injunction. Failing to comply with a section 155 notice or providing false or misleading information is a criminal offence subject to fines (and prison terms for individuals). The ACCC is not required to obtain court approval before issuing a section 155 notice.

The ACCC also has the power to enter premises to conduct searches and to seize documents where the ACCC has reasonable grounds to believe that there is evidentiary material on the premises that is relevant to a contravention of the CCA. The ACCC must obtain a search warrant or the consent of the occupier before entering the premises.

In criminal cartel investigations conducted jointly by the ACCC and the Australian Federal Police (AFP), the AFP can apply for a warrant to intercept telephone conversations or place a listening device to record conversations. The ACCC can also apply for a warrant to access emails, text messages and such like stored on equipment operated by a telecommunications company or internet service provider in a criminal or civil investigation.

International cooperation

Inter-agency cooperation

Is there cooperation with authorities in other jurisdictions? If so, what is the legal basis for, and extent of, such cooperation?

The ACCC regularly coordinates with international agencies, including to assist in cross-border investigations.

The ACCC is a member of the International Competition Network, which provides competition authorities with an informal venue for maintaining regular contacts and addressing practical competition concerns. In addition, there are a number of formal agreements that provide for cooperation and communication between the ACCC and foreign regulators. For example, Australia is party to a treaty with the United States that allows both countries to cooperate, provide assistance and exchange information in competition law and antitrust enforcement actions. The ACCC is also party to a number of agreements and memoranda of understanding with various authorities including regulators in Canada, China, the European Union, Fiji, India, Japan, Korea, New Zealand, Papua New Guinea, Philippines, the United States and the United Kingdom.

The ACCC has a broad discretion to disclose protected information (ie, information provided to the ACCC in the course of an investigation) to foreign regulators and does not require a waiver to disclose the information. In practice, the ACCC usually requests a waiver from an immunity applicant before disclosing their information to a foreign regulator.

Interplay between jurisdictions

Which jurisdictions have significant interplay with your jurisdiction in cross-border cases? If so, how does this affect the investigation, prosecution and penalising of cartel activity in cross-border cases in your jurisdiction?

The ACCC regularly investigates and takes enforcement action in relation to alleged cartel conduct that has cross-border aspects. Recent examples include the ACCC’s proceedings against companies in the electrical cable, international shipping, international currency and air cargo industries.

International cooperation assists the ACCC with cross-border matters in a number of ways, most particularly through the exchange of information about the conduct of concern. This information may trigger the ACCC’s investigation in the first place or assist the ACCC to progress the investigation more efficiently than would otherwise have been possible.

Cartel proceedings

Decisions

How is a cartel proceeding adjudicated or determined?

Civil and criminal cartel cases are heard by the Federal Court of Australia (or sometimes the Supreme Court of a state or territory in criminal cases).

Civil proceedings are commenced when the applicant files an originating application. From there:

  • If the respondent does not admit liability and contests the matter, the case will go to a civil trial on liability. The usual pretrial steps will be undertaken, including exchange of relevant documents through discovery and filing of written evidence (usually through affidavits and supporting documentation). The matter then proceeds to a hearing where witnesses and experts may be subject to cross-examination and the parties make submissions in support of their case. If the court finds that the offences have been proved, it will make declarations of contravention, and a further hearing takes place to determine the appropriate penalty.
  • If the respondent admits liability, the parties will file an agreed statement of facts and admissions with the court and potentially also a suggested penalty (see further below).

Once the CDPP has decided to lay charges for a criminal cartel offence, an initiating process or summons is sent to the defendant and filed with the court. A committal hearing takes place in which the magistrate decides if there is sufficient evidence for the matter to proceed to a criminal trial. The CDPP then files an indictment listing the relevant charges. The CDPP may call witnesses and produce other forms of evidence during the trial. Following the delivery of the verdict, the judge will sentence the defendant. If the respondent pleads guilty and cooperates with the CDPP, the CDPP may require the party to file admissions, agree to a statement of facts or provide evidence in the trial of other cartel members.

Burden of proof

Which party has the burden of proof? What is the level of proof required?

The party alleging the cartel conduct has the burden of proving its case. In civil cases, the conduct must be proved on the balance of probabilities. In criminal cases the prosecution must prove its case beyond reasonable doubt.

Circumstantial evidence

Can an infringement be established by using circumstantial evidence without direct evidence of the actual agreement?

A contravention can be proved by direct evidence, circumstantial evidence or a combination of both. Arrangements and understandings can be inferred from circumstantial evidence; however, the requirement for there to be a consensus or a meeting of the minds must still be discharged. The party relying on circumstantial evidence must show that the circumstances give rise to a more probable inference of the existence of an arrangement or understanding than not.

Appeal process

What is the appeal process?

The full Federal Court (usually constituted of three judges) hears appeals on points of law from a decision of a single judge of the Federal Court. Parties may appeal full Federal Court decisions to the High Court if it grants special leave.

The ACCC or the defendant can initiate an appeal by filing a notice that outlines the relevant grounds of appeal. Appeals are confined to points of law and do not involve re-examination of the facts.

In criminal cartel cases, appeals must involve ‘a question of law alone’, otherwise leave must be granted by the court. Appeals must be allowed in certain circumstances, such as where there has been a substantial miscarriage of justice.

Sanctions

Criminal sanctions

What, if any, criminal sanctions are there for cartel activity?

For individuals, the maximum criminal penalty is 10 years’ imprisonment, a fine of A$420,000 per offence, or both. Individuals can also be subject to orders disqualifying them from managing a corporation, and community service orders.

For companies, the maximum fine for each criminal cartel offence is the greater of:

  • A$10 million;
  • three times the total benefits that have been obtained and are reasonably attributable to the commission of the offence; or
  • where the benefits cannot be determined, 10 per cent of the corporate group’s annual turnover connected to the supply of goods and services in Australia in the preceding 12 months.

The court can also impose injunctions.

There have been two criminal cartel convictions in Australia since the criminal provisions were introduced in 2009. In 2017, Japanese cargo shipping liner NYK pleaded guilty to criminal cartel conduct and was fined A$25 million. In 2018, another Japanese shipping company, Kawasaki Kisen Kaisha (K-Line), pleaded guilty to criminal cartel conduct and was fined A$34.5 million.

Criminal charges have also been laid against:

  • Wallenius Wilhelmsen Ocean AS, a Norwegian-based global shipping company;
  • Country Care Group, a manufacturer of healthcare equipment, as well as its managing director and a former employee;
  • Australia and New Zealand Banking Group, Citigroup and Deutsche Bank, as well as six senior executives from the banks; and
  • the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), as well as a divisional branch secretary.
Civil and administrative sanctions

What civil or administrative sanctions are there for cartel activity?

For individuals, the maximum civil penalty is A$500,000 per offence.

For companies, the maximum civil penalties are the same as for the criminal cartel provisions as outlined above.

In August 2019, the ACCC chairman stated that the ACCC’s desire for more significant penalties as an active deterrent for both companies and individuals, has been a long standing one..

The highest penalty imposed under the cartel laws was a A$46 million penalty paid by Japanese-based automotive parts supplier Yazaki Corporation, which was increased on appeal from an original penalty of A$9.5 million. The ACCC’s action followed similar enforcement actions against Yazaki and other cartel participants by competition regulators in the US and Japan.

The next highest penalty imposed under the cartel laws was a A$36 million fine paid by packaging company Visy in 2007 for civil contraventions in relation to a cartel involving rival packaging company Amcor. This was followed by a class action in which 4,500 businesses were awarded total damages of A$95 million against the companies.

Guidelines for sanction levels

Do fining or sentencing principles or guidelines exist? If yes, are they binding on the adjudicator? If no, how are penalty levels normally established? What are the main aggravating and mitigating factors that are considered?

Civil penalties

The court must consider all relevant matters when determining the appropriate pecuniary penalty. Relevant factors include:

  • the nature, extent, duration and deliberateness of the conduct;
  • any loss or damage caused by the conduct;
  • prior contraventions;
  • general and specific deterrence;
  • the size of the company and the degree of market power;
  • whether the conduct was carried out by senior management or at a lower level;
  • the corporate culture of the company, as evidenced by educational programmes and internal compliance measures; and
  • contrition and cooperation with the ACCC.
Criminal penalties

In sentencing offences for criminal cartel conduct, the court takes into account a range of factors including:

  • the nature and circumstances of the offence;
  • the extent to which the conduct was deliberate, systematic and covert;
  • the duration and scale of the offending conduct;
  • the seniority of the employees involved, corporate culture of the company and any compliance programmes;
  • the profit or benefit attributable to the conduct;
  • whether the offences constitute a single course of conduct;
  • the personal circumstances of any victim, and any loss or damage caused by the conduct;
  • any cooperation, including past and future cooperation, with the ACCC and law enforcement;
  • the degree to which the defendant has taken measures to ensure future compliance;
  • any contrition shown and the prospects of rehabilitation;
  • specific and general deterrence;
  • the need to adequately punish the defendant;
  • character and previous conduct; and
  • any early guilty plea.
Compliance programmes

Are sanctions reduced if the organisation had a compliance programme in place at the time of the infringement?

In Australia, one of the factors relevant to the court’s decision to impose civil penalties for an infringement of the CCA is whether the company has a corporate culture conducive to compliance with the CCA and takes corrective measures in response to an acknowledged contravention. Accordingly, the existence and scope of implementation of a compliance programme will be a relevant factor in considering the level of a civil penalty to be imposed on a company for a contravention of the CCA. There is no rule about the required components of the policy or the extent to which this will be taken account in setting or discounting the penalty (ie, the quantum or the percentage of any discount) - rather, the assessment will depend on the surrounding facts.

The court will examine whether there is a substantial compliance programme in place which was actively implemented and whether the implementation was successful (ie, whether the contravention was an isolated incidence). That is, was the compliance policy ‘one to which mere lip-service’ was paid. Other relevant factors include:

  • whether the programme was regularly updated and involved employees attending lectures or seminars in regular intervals including in the period covering the contravention;
  • whether the compliance programme required attendance by key staff involved in the contravention (ie, those with exposure to competition law risk);
  • evidence of lack of commitment by senior executives; and
  • whether the company voluntarily addressed any deficiencies in the compliance programme when the contravention came to its attention.

The factors applicable to the imposition of a criminal penalty for a contravention of the cartel prohibition do not explicitly include reference to a compliance programme or culture of compliance by the company. However, in the recent case of ACCC v Nippon Yusen Kabushiki Kaisha (NYK), NYK was fined $25 million for its involvement in an international cargo shipping cartel. The fine of $25 million incorporated a significant discount of 50 per cent which in part reflected the fact that NYK demonstrated that it had rehabilitated itself (or demonstrated prospects of rehabilitation) including by changing its corporate culture of compliance, showing contrition, demonstrating a commitment to comply fully with competition law and policy, and establishing systems, programmes and structures to prevent reoffending (eg, resignations and salary reductions for those involved in the contravention).

There is no regulation or case law precedent on the extent to which a compliance culture or programme will be relevant in determining third party damages actions in competition law cases.

Director disqualification

Are individuals involved in cartel activity subject to orders prohibiting them from serving as corporate directors or officers?

The CCA allows the court to make an order disqualifying an individual from managing a corporation when they have been involved in a cartel. Both the ACCC and the CDPP can seek the imposition of a disqualification order.

In assessing the length of the disqualification, the court will consider:

  • whether the conduct was of a serious nature (such as those involving dishonesty);
  • the likelihood that the individual will re-offend; and
  • the level of harm that may be caused to the public.
Debarment

Is debarment from government procurement procedures automatic, available as a discretionary sanction, or not available in response to cartel infringements?

Debarment is not a recognised sanction. However, if the ACCC applies to the court for an injunction, the court has broad powers to grant the injunction on any terms that the court determines to be appropriate. In addition, government procurement processes usually require disclosure of regulatory breaches or convictions and these matters will be taken into account by government in evaluating the suitability of bidders.

Parallel proceedings

Where possible sanctions for cartel activity include criminal and civil or administrative penalties, can they be pursued in respect of the same conduct? If not, when and how is the choice of which sanction to pursue made?

There are some limitations on the commencement of both criminal and civil proceedings for substantially the same conduct. These are:

  • the court cannot make a civil penalty order in relation to a contravention of the cartel provisions if the person has been convicted of a criminal offence constituted by substantially the same conduct; and
  • civil proceedings will be stayed if subsequent criminal proceedings are commenced in relation to substantially the same conduct.

However, even if a court has imposed a civil penalty against a person, criminal proceedings may still be commenced in relation to substantially the same conduct (although this is unlikely in practice).

Private rights of action

Private damage claims

Are private damage claims available for direct and indirect purchasers? Do purchasers that acquired the affected product from non-cartel members also have the ability to bring claims based on alleged parallel increases in the prices they paid (‘umbrella purchaser claims’)? What level of damages and cost awards can be recovered?

Private parties who have suffered loss or damage as a result of cartel conduct may bring an action (including a class action) for damages against the cartel participants. In addition, private parties may seek a range of other orders, such as injunctions.

The ACCC can also take a form of representative proceeding on behalf of private parties who have suffered loss or damage as a result of cartel conduct.

Most class actions in Australia have been settled so there is limited case law dealing with damages awards in this context.

Class actions

Are class actions possible? If so, what is the process for such cases? If not, what is the scope for representative or group actions and what is the process for such cases?

Class actions are an established and important part of the Australian legal landscape. There are a number of third-party litigation funders and a growing number of plaintiff class action legal practices.

In Australia, a class action can be commenced if:

  • there are seven or more persons with claims against the same person;
  • the claim is in respect of or arises out of the same, similar or related circumstances; and
  • the claim gives rise to one substantial common issue of law or fact.

Consent of the members of the class is not required to initiate a class action. However, members can opt out and bring their own action.

There have been a number of class actions brought following on from alleged cartel conduct, including in relation to the markets for vitamins, cardboard boxes and air cargo. Most class actions are settled.

As noted above, the ACCC can also bring representative actions for damages on behalf of people who have suffered loss or damage as a result of cartel conduct.

Cooperating parties

Immunity

Is there an immunity programme? If so, what are the basic elements of the programme? What is the importance of being ‘first in’ to cooperate?

The ACCC Immunity and Cooperation Policy sets out the ACCC’s policies in relation to applications for both civil and criminal immunity from ACCC-initiated civil proceedings and criminal prosecution. While the ACCC is only responsible for granting civil immunity (criminal immunity is a matter for the CDPP), the ACCC is the sole point of contact for applicants seeking civil or criminal immunity. Annexure B to the Prosecution Policy of the Commonwealth sets out the CDPP’s policy when considering an application for immunity from criminal prosecution.

Civil immunity

The criteria for conditional civil immunity are:

  • the applicant admits it is engaging in, or has engaged in, cartel conduct;
  • the applicant is the first party to apply for immunity in respect of the cartel;
  • the applicant has not coerced others to participate in the cartel;
  • the applicant has either ceased its involvement in the cartel or undertakes to the ACCC that it will cease its involvement in the cartel;
  • the applicant’s admissions are a truly corporate act (corporations only);
  • the applicant has provided full, frank and truthful disclosure, and has cooperated fully and expeditiously while making the application, including taking all reasonable steps to procure the assistance and cooperation of witnesses and to provide sufficient evidence to substantiate its admissions in paragraph (a), and agrees to continue to do so on a proactive basis throughout the ACCC’s investigation and any ensuing court proceedings;
  • the applicant has entered into a cooperation agreement, and
  • the applicant has maintained, and agrees to continue to maintain, confidentiality regarding its status as an immunity applicant, details of the investigation and any ensuing civil or criminal proceedings unless otherwise required by law or with the written consent of the ACCC.

Generally, the ACCC will not grant conditional immunity if, at the time an application is received, the ACCC is already in possession of evidence that is likely to establish at least one contravention of the CCA (whether civil or criminal), arising from the cartel conduct.

Conditional civil immunity will become final immunity after the resolution of any ensuing proceedings against the remaining cartel participants.

Criminal immunity

Where the ACCC considers that the applicant satisfies the conditions for civil immunity, it will make a recommendation to the CDPP that immunity from criminal prosecution also be granted to the applicant. The CDPP will exercise its own discretion when considering the recommendation.

Where the CDPP is satisfied that the applicant meets the criteria for criminal immunity (which are the same as the conditions for civil immunity), it will initially provide a letter of comfort to the applicant. This is generally provided at the same time as the ACCC grants conditional civil immunity. Prior to instituting a criminal prosecution against any member of the cartel who does not have immunity, the CDPP will then determine whether to grant to the applicant with a written undertaking that grants conditional immunity subject to the applicant providing ongoing cooperation through the criminal proceedings. Once these conditions are fulfilled by the immunity applicant, the immunity becomes final.

Subsequent cooperating parties

Is there a formal programme providing partial leniency for parties that cooperate after an immunity application has been made? If so, what are the basic elements of the programme? If not, to what extent can subsequent cooperating parties expect to receive favourable treatment?

Parties who are not eligible for ‘first-in’ immunity can nonetheless cooperate with the ACCC in relation to its investigations. The ACCC’s policy on cooperation is also set out in the ACCC Immunity and Cooperation Policy. While cooperation does not provide immunity from prosecution, it will typically result in more lenient treatment by the court (such as lower penalties). Unlike some jurisdictions, there are no pre-established discount levels.

Where the ACCC brings civil proceedings against parties to the cartel, the ACCC may require the cooperating party to make admissions, agree to a statement of facts or give evidence against the remaining cartel participants. Although the ACCC and the cooperating party may propose an agreed penalty to the court, and the ACCC will make submissions to the court regarding the party’s cooperation, the court must ultimately determine whether the penalty is appropriate in all the circumstances.

If a party cooperates with the ACCC during a criminal investigation and the CDPP brings criminal proceedings, the CDPP may require the cooperating party to make admissions, agree a statement of facts or give evidence against the remaining cartel participants. The CDPP will then make submissions to the sentencing court about the party’s cooperation. In sentencing the defendant, the court is required to take into account cooperation, any early guilty plea and the extent to which the defendant has demonstrated contrition for the offence. Ultimately, it will be for the court to determine the appropriate penalty or sentence, although the ACCC, the CDPP and the cooperating party can provide the court with a penalty range.

Going in second

How is the second cooperating party treated? Is there an ‘immunity plus’ or ‘amnesty plus’ option?

Civil and criminal immunity is only available to the first eligible party to disclose the conduct to the ACCC. However, if a party is not the first party to approach the ACCC, or does not meet the immunity criteria outlined above, that party may instead cooperate with the ACCC.

In addition, a party who is cooperating with the ACCC in relation to one cartel may apply for immunity in relation to a second unrelated cartel and seek ‘amnesty plus’ for the original cartel conduct. Amnesty plus is a recommendation by the ACCC to the court for a further reduction in the civil penalty in relation to the first cartel. In criminal proceedings, the CDPP will advise the court of the full extent of the party’s cooperation in relation to both cartels so that the cooperation is taken into account for sentencing purposes.

A party is eligible for amnesty plus if it:

  • is cooperating with the ACCC in respect of the first cartel investigation; and
  • it receives conditional immunity for the second cartel.
Approaching the authorities

Are there deadlines for initiating or completing an application for immunity or partial leniency? Are markers available and what are the time limits and conditions applicable to them?

The first step in an immunity application is to request a ‘marker’ from the ACCC. The marker preserves, for a limited period, the applicant’s status as the first party to seek immunity. The ACCC then allows the applicant a limited time in which to investigate the conduct and seek conditional immunity if necessary. The time limit of the marker will be specified by the ACCC at the time the marker is granted, and will vary depending on the circumstances.

The applicant will then prepare a ‘proffer’, which provides specific detail as to the type of evidence that can be provided to the ACCC to establish the existence of the cartel. If the ACCC is satisfied on the basis of the proffer that the applicant has met the eligibility criteria for conditional immunity, the application will be granted. Conditional immunity will become final immunity at the conclusion of any ensuing proceedings provided the applicant does not breach any conditions of immunity and maintains eligibility under the immunity policy.

Cooperation

What is the nature, level and timing of cooperation that is required or expected from an immunity applicant? Is there any difference in the requirements or expectations for subsequent cooperating parties that are seeking partial leniency?

To be eligible for criminal or civil immunity, the applicant must cooperate and provide full, frank and truthful disclosure in making the application and in any subsequent investigation or court proceedings. An immunity application should be made as soon as possible but can be made after the ACCC has commenced an investigation. An application for criminal immunity is made to the ACCC at the same time as the application for civil immunity and the ACCC is responsible for both the civil and criminal investigations.

If a party does not apply for immunity (or does not meet the criteria), the party may instead cooperate with the ACCC. It is a condition of the ACCC’s policy that cooperation be offered in a timely manner and that the party offers full, frank and truthful disclosure and cooperates on a continuing basis through the investigation and any proceedings. In criminal proceedings, cooperation and the timeliness of a guilty plea are taken into account by the court in sentencing the defendant.

Confidentiality

What confidentiality protection is afforded to the immunity applicant? Is the same level of confidentiality protection applicable to subsequent cooperating parties? What information will become public during the proceedings and when?

The ACCC will use its best endeavours to protect confidential information provided to it as part of an immunity application, including the immunity applicant’s details. The ACCC generally has a policy that it will accept confidential information from cooperating parties as well. However, once the ACCC commences proceedings, it will generally disclose to the other cartel participants all information and evidence that it is relying on to prove its case, which will include information and documents provided by the immunity applicant. Depending on the nature of this information, it is sometimes provided to external counsel subject to undertakings. Once proceedings are commenced, a party may also apply to the court seeking a confidentiality order. The court has a broad discretion to grant confidentiality orders and these are generally granted in relation to documents that are commercially sensitive and/or prejudicial to the interests of the party.

In addition, section 155AAA of the CCA grants the ACCC a broad discretion to disclose protected information in other circumstances, including:

  • by the ACCC in the performance of its duties or functions;
  • where the ACCC is required or permitted by law to make the disclosure (this includes where ordered by a court to disclose the information under subpoena, except in relation to ‘protected cartel information’);
  • to the minister, royal commission or designated government agencies; and
  • where disclosure is made to a foreign government agency to perform its functions.

In practice, the ACCC has been reluctant to release confidential information as it has been concerned that this could interfere with its immunity process. It will generally not disclose to an overseas regulator protected information received from an immunity applicant without the applicant’s consent but this does not prevent the ACCC from having discussions about conduct that does not involve the disclosure of the confidential information.

Additional measures are in place where the protected information relates to cartel conduct and is provided in confidence (protected cartel information). First, if the ACCC is party to proceedings, the ACCC is not required to produce protected cartel information to a court or tribunal except with leave of a court or tribunal. Second, if the ACCC is not a party to the proceedings (eg, a follow-on damages claim), the ACCC has a discretion to disclose protected cartel information. In exercising their discretion to disclose or order disclosure of protected cartel information, the court, tribunal or ACCC will have regard to:

  • the fact that the information was given to the ACCC in confidence and by an informant;
  • Australia’s relations with other countries;
  • the need to avoid disruption to national and international law enforcement efforts; and
  • whether disclosure would be in the interests of justice or securing effective performance of the tribunal’s or court’s functions.

Despite this, it is important to be aware that documents and information provided to the ACCC have the potential to be disclosed to third parties.

Settlements

Does the investigating or prosecuting authority have the ability to enter into a plea bargain, settlement or other binding resolution with a party to resolve liability and penalty for alleged cartel activity? What, if any, judicial or other oversight applies to such settlements?

Civil offences

The ACCC does not have the power to impose a penalty itself. If the respondent admits to cartel conduct, the ACCC must still bring proceedings in order for a penalty to be imposed. Reaching a settlement with the ACCC in these circumstances generally involves the ACCC and the respondent agreeing on a statement of facts and the scope of the respondent’s admissions. The ACCC and the respondent may also potentially agree on a penalty and make joint submissions to the court as to why that penalty is appropriate. The court will make declarations that cartel conduct occurred if it is satisfied that the agreed facts and admissions amount to cartel conduct under the CCA. The court will order the penalty proposed by the parties if satisfied that it is appropriate in all the circumstances.

Criminal offences

In criminal cases, the defendant can admit to cartel conduct and, together with the CDPP, file an agreed statement of facts and admissions with the court. However, unlike in civil cases, it is not appropriate that the defendant, ACCC and CDPP propose a fine to the court. They can provide a penalty range; however, the appropriate penalty is a matter for the court in its discretion. The court will take into account a range of factors in sentencing, including:

  • the degree to which the person has shown contrition;
  • whether the person has entered an early guilty plea; and
  • the degree to which the person has cooperated.
Corporate defendant and employees

When immunity or partial leniency is granted to a corporate defendant, how will its current and former employees be treated?

When a corporation seeks immunity, it may apply for derivative immunity for related companies or current and former directors, officers and employees of the corporation who were involved in the conduct.

Dealing with the enforcement agency

What are the practical steps for an immunity applicant or subsequent cooperating party in dealing with the enforcement agency?

See question 29.

Defending a case

Disclosure

What information or evidence is disclosed to a defendant by the enforcement authorities?

A party against whom civil legal proceedings have been commenced may apply to the ACCC to be given copies of all documents in the ACCC’s possession that tend to establish the case of the respondent in the proceeding, and that were not created by the ACCC itself or obtained from the respondent. This right enables the respondent to a cartel proceeding to obtain a brief of evidence in the ACCC’s possession containing documents held by the ACCC in relation to the respondent’s case.

In criminal proceedings, the prosecution owes a duty of disclosure to the court, not to the accused. However, common law principles require that defendants are entitled to know the case against them, including the evidence that will be adduced in support of the charges and any other material that may be relevant to the defence. These principles are supplemented by a range of state and territory legislation, which requires the prosecution to disclose certain material to defendants. The CDPP’s ‘Statement on Disclosure in Prosecutions by the Commonwealth’, sets out the materials that the CDPP will disclose to the defendant, in addition to those required to be disclosed under state or territory legislation.

In addition, the respondent enjoys the usual rights including legal professional privilege and, in criminal matters, the privilege against self-incrimination for individuals (see above).

Representing employees

May counsel represent employees under investigation in addition to the corporation that employs them? When should a present or past employee be advised to obtain independent legal advice or representation?

There is no absolute prohibition on counsel acting for both the employees and the corporation that employs them, unless there is a conflict of interest or the interests are adverse. In practice, many employees are separately represented, at least to an extent. Often, early in proceedings it is unclear what the involvement of an employee has been with the conduct under investigation. If proceedings are threatened, it will generally be advisable for employees to obtain separate legal counsel. Part of the ACCC’s assessment under its cooperation policy is whether individuals are separately represented.

Multiple corporate defendants

May counsel represent multiple corporate defendants? Does it depend on whether they are affiliated?

There is no absolute prohibition on counsel representing multiple corporate defendants and this may occur if the companies are related. However, in many cases, companies will need separate representation because there will be potential conflict issues.

Payment of penalties and legal costs

May a corporation pay the legal penalties imposed on its employees and their legal costs?

Civil penalties

A company must not indemnify a person against a civil liability or legal costs incurred in defending or resisting proceedings if the person incurred the liability as an officer of the company.

Criminal penalties

Under Australian corporations law, a company or related body corporate must not indemnify a person against any liability incurred as an officer of the company that is owed to someone other than the company or related body corporate and did not arise out of conduct in good faith. This prohibits indemnification of company officers for involvement in criminal cartel conduct.

A company or related body corporate is also prohibited from indemnifying a person against legal costs incurred in defending or resisting an action for liability incurred as an officer in criminal proceedings in which a person is found guilty. If the person is found not guilty, the company or related body corporate may indemnify the person for legal costs.

Taxes

Are fines or other penalties tax-deductible? Are private damages awards tax-deductible?

It is not possible to deduct an amount payable by way of penalty imposed under an Australian or foreign law.

Regarding private damages awards, in general, a loss or outgoing is deductible to the extent that it is incurred in gaining or producing assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, and is not a loss or outgoing of capital, or of a capital nature. If the payment of an award of private damages is not tax-deductible under general principles, the company would need to consider whether such a payment would be recognised for tax purposes in some other way (eg, whether it could give rise to a capital loss, or whether the company could deduct the amount over five years pursuant to the ‘black hole’ capital expenditure provisions in the Australian tax law).

International double jeopardy

Do the sanctions imposed on corporations or individuals take into account any penalties imposed in other jurisdictions? In private damage claims, is overlapping liability for damages in other jurisdictions taken into account?

Other than the relevant maximum penalty, courts are not constrained when imposing penalties or awarding damages. There is no general principle that precludes the imposition of penalties on a corporation or individual where the corporation or individual has already been subject to sanctions overseas. However, if penalties are to be imposed on the basis of the corporation’s annual turnover for the preceding 12 months, the court will disregard turnover in relation to goods or services supplied outside of Australia.

Getting the fine down

What is the optimal way in which to get the fine down?

Case law suggests that the key factors that could reduce the fine after the commencement of a cartel investigation include:

  • an early guilty plea by the contravener;
  • cooperating and assisting the authorities with their investigation; and
  • implementing a compliance programme with appropriate anti-trust compliance structures, guidelines and systems so as to prevent the repetition of any similar anticompetitive conduct.

Update and trends

Recent cases

What were the key cases, judgments and other developments of the past year?

Recent cases42 What were the key cases, judgments and other developments of the past year?

On 13 February 2019, the Federal Court of Australia imposed civil penalties of A$1.05 million on Cryosite Limited for engaging in cartel conduct. This was the first case brought by the ACCC alleging gun jumping in a merger, being the coordination of competitive conduct by merger parties prior to completion. The ACCC alleged that the asset-sale agreement, which required Cryosite to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was completed, amounted to cartel conduct. This was on the basis that the agreement restricted the supply by Cryosite of services that would compete with Cell Care, and resulted in the allocation of customers between Cryosite and Cell Care. When Cryosite announced the transaction to the ASX on 23 June 2017, it indicated that it had ceased marketing, selling, collecting and processing cord blood and tissue, choosing instead to sell its assets to Cell Care. Although the proposed acquisition of Cryosite by Cell Care was abandoned in January 2018, Cryosite did not re-enter the market, and retained the compensation it received from Cell Care to acquire the assets. The ACCC also alleged that Cryosite and Cell Care engaged in cartel conduct by agreeing that Cell Care would not:

  • market to Cryosite’s existing customers pre-completion; or
  • seek or accept an approach from any Cryosite customers who had had cord blood or tissue stored with Cryosite in the five years preceding completion of the proposed sale, with a view to convincing that person to obtain storage from Cell Care. This was a post-completion restraint.

On 2 August 2019, the Federal Court of Australia ordered Kawasaki Kisen Kaisha Ltd (K-Line) to pay a fine of A$35.5 million for criminal cartel conduct, the largest ever criminal fine being imposed under the CCA. The court also found that, but for K-Line’s early guilty plea and past cooperation, the fine would have been A$48 million. The significant sentencing discount demonstrates that an early guilty plea and cooperation are important factors that could reduce the fine when pleading guilty to cartel charges.

Regime reviews and modifications43 Are there any ongoing or anticipated reviews or proposed changes to the legal framework, the immunity/leniency programmes or other elements of the regime?

The ACCC has updated its Immunity and Cooperation Policy for cartel conduct that came into effect on 1 October 2019.

Under the revised policy, the applicant will be required to enter into a cooperation agreement which sets out steps that the applicant agrees to undertake to satisfy the obligations under the policy. In addition, the policy will no longer apply to parties engaged in concerted practices. As a result, if the ACCC forms the view that the conduct reported by an applicant is not cartel conduct but would otherwise be an anticompetitive concerted practice, conditional immunity would not be granted under the policy and the applicant would need to seek to cooperate under the ACCC Cooperation Policy for Enforcement Matters instead. In these circumstances, the ACCC may nonetheless use the information provided by the applicant in limited circumstances, including using the information provided indirectly to further its investigation and gather evidence that could be used against the applicant.