A recent decision of the Federal Court highlighted the risks when covertly buying your competitor’s subsidiary company. The decision could have implications in the way that acquisitions and tender processes are undertaken, especially when undisclosed bidders are involved.

Norcast v Bradken was the first case to apply new cartel laws, which extend the cartel provisions under the Competition and Consumer Act (Act) to conduct outside of a formal market. It is also a timely warning for those businesses engaging in mergers and acquisitions to tread carefully.



A company controlled by the Swiss private equity group Pala Investments. Norcast decided that it wanted to sell its subsidiary Norcast Wear Solutions (NWS), a Canadian mining-related company.


A company contracted by Norcast to undertake the sale process. UBS prepared documents and materials spruiking the sale.


An Australian mining-related company supplying goods and services relating to grinding mills. Considered to be a competitor to Norcast.

Castle Harlan

A US private equity investment firm. Engaged by Bradken to obtain information from UBS about the sale of NWS by Norcast.  


Bradken’s ultimate goal was to buy NWS. But how does Bradken do this when Norcast, it seems, does not want to sell to Bradken? This view was apparently formed as a result of some prior exchanges between Bradken and Norcast. So, Bradken engages Castle Harlan.

Bradken and Castle Harlan correspond about the sale, and eventually strike a deal - Castle Harlan will bid for NWS. They actively conceal Bradken’s involvement. Indeed, Castle Harlan even allegedly denies an enquiry from UBS that it plans to on sell NWS to Bradken.

Castle Harlan buys NWS for $190m. Within a day Castle Harlan on sells NWS to Bradken for just over $212m. Unsuprisingly, Norcast was upset.


Norcast filed proceedings alleging both contraventions of the cartel provisions, including bid rigging provisions, as well as misleading or deceptive conduct on the part of both Castle Harlan and Bradken. Norcast also alleged that Bradken’s CEO Brian Hodges and Chairman Nick Greiner (former Premier of New South Wales) were involved in those breaches.

Cartel provisions attract both criminal and civil sanctions. Interestingly, in this case, the ACCC did not get involved, leaving Norcast to proceed.

Bid rigging?

In addition to the general misleading or deceptive conduct provision, Norcast alleged bid rigging on the part of the Bradken and Castle Harlan. Bid rigging cartel provisions of the Act can be established where there is:

  • a contract arrangement or understanding between parties
  • at least two of those parties are in competition or likely to be in competition with each other in relation to the supply or acquisition of particular goods or services, and
  • a purpose of that contract arrangement or understanding is to ensure that in the event of a request for bids, one of the parties bids and the other party(ies) does not bid.


The Court found in favour of Norcast on each of its claims.

Norcast established that there were breaches of the bid rigging provisions. Whilst Castle Harlan put it in a bid, it did not matter that Bradken had not put in a bid with Norcast - only that Norcast’s request for bids existed.

It was irrelevant to the Court that Norcast or NWS were companies based overseas (whether in Canada or ultimately Switzerland). Bradken had put strong submissions on the lack of connection to Australia, given that it was only Bradken that was based here (and it had not put in any bid). The Court was not convinced.

The Court also found that it was at least possible with respect to the bidding of NWS that Bradken and Castle Harlan could have otherwise been in competition with each other. Bradken had argued that they could not have been in competition and further, they would not have been in competition with each other in Australia.


The Court found Castle Harlan’s and Bradken’s silence about their arrangements and the particular representations by Castle Harlan to Norcast regarding its intention and ability to fund the transaction constituted misleading or deceptive conduct.

Involvement of Greiner and Hodges

Greiner and Hodges were both found to be involved in the relevant conduct, that they aided and abetted or were otherwise knowingly concerned in the breaches of the Act by Bradken (and Castle Harlan). Accordingly, there is potential for them to be prosecuted by the ACCC, though that may be unlikely pending an appeal and considering that the conduct was a “one off”, as opposed to a course of conduct as was the case in other prosecutions (for example in Visy).


The Court calculated Norcast’s loss as $US22.4m, being the difference in the price paid to it by Castle Harlan and the amount Bradken paid Castle Harlan. Implicitly, according to the Court, Bradken would have paid Norcast $212.4m had it bid directly for NWS.


A wide interpretation was given by the Court to the bid rigging provisions of the Act. It was not a case, for example, where two parties agreed that one party would put in a lower bid on a tender and that perhaps on the next tender, the other party would put in the lower bid.

What is particularly interesting in this case is how the Court rationalised in a broad way the “competition” aspect as between Castle Harlan and Bradken. Sure, Bradken may be in competition with Norcast, however Castle Harlan is not exactly in the mining and grinding business. The Court found that Bradken and Castle Harlan were either “in competition” or “likely to be in competition”, at least with respect to this transaction. This is a likely point for the appeal which has been filed.

The other aspect of the decision which draws attention is the manner in which the Court interprets the relationship between Norcast and Bradken. Bradken perceived it was being excluded from the transaction based on some correspondence with Norcast. The Court effectively extended this perception to imply a term in the arrangement between Bradken and Castle Harlan that Bradken would not bid for NWS. However, why would such a term be necessary if Bradken thought it had no chance of getting NWS from Norcast?

If the Court’s findings are upheld on appeal the decision could have implications in the way that acquisitions and tender processes are undertaken, especially when undisclosed bidders are involved. An undisclosed principal and an agent/tendering party will need to ensure that there is no possibility that they are in competition with each other.

In the context of some tenders and auctions there may be a high risk of contravention of the Act as it may be easier to establish that two parties are “in competition” or “likely to be in competition”. This may be especially the case when dealing with the acquisition of real property. In many instances the use of undisclosed bidders is an appropriate way for a party to acquire goods or services in order to avoid the risk of paying too much for those goods or services. For the moment, businesses will have to be wary and review their strategies when engaging in mergers and acquisitions.