In three separate decisions in the space of two days, the Federal Court of Australia ordered two multi-national companies and a large Australian company to pay almost $40 million for engaging in cartel conduct, misleading advertising and misuse of market power respectively.
All legal proceedings were brought by the Australian regulator - the Australian Competition and Consumer Commission (ACCC).
Colgate-Palmolive fined $18 million for laundry detergent cartel
On 28 April 2016, the Federal Court ordered Colgate-Palmolive Pty Ltd (Colgate-Palmolive) to pay $18 million for entering into understandings with competitors to limit the supply and control the price of laundry detergent powders in contravention of competition laws.
Colgate-Palmolive admitted to the conduct in proceedings commenced by the ACCC against Colgate-Palmolive, PZ Cussons Australia Pty Ltd (Cussons), Woolworths Limited (Woolworths) and a sales director of Colgate-Palmolive. Unilever Australia Limited (Unilever) was also involved in the conduct but has been granted immunity under the ACCC’s Immunity Policy for Cartel Conduct.
Cussons and Woolworths are continuing to defend the case which will be heard June 2016.
Johnson Winter & Slattery is acting for Unilever.
Cement Australia fined $18.6 million for anti-competitive conduct
On 29 April 2016, the Federal Court ordered Cement Australia Pty Ltd and related companies (Cement Australia) to pay fines totalling $18.6 million for entering into, and giving effect to, arrangements that had the purpose or effect of substantially lessening competition in the market for supply of flyash in South East Queensland. The proceedings were fully contested by Cement Australia.
The relevant agreements prevented competitors entering the flyash supply market as they could not obtain viable access to flyash in the relevant area.
Whilst the proceedings resulted in significant fines being ordered, it has been reported that the ACCC was pushing for fines of $90million. The ACCC may therefore appeal the decision.
Reckitt Benckiser fined $1.7 million for misleading advertising
On 29 April 2016, the Federal Court ordered Reckitt Benckiser (Australia) Pty Ltd (Reckitt Benckiser) to pay penalties of $1.7 million for misleading advertising claims in relation to its Nurofen pain relief products.
In proceedings commenced by the ACCC, Reckitt Benckiser admitted that it made advertising claims that Nurofen Specific Pain products were formulated to treat a particular type of pain when in fact each product contained the same active ingredient and was no more effective than treating the type of pain described than any other Nurofen Specific Pain products.
As the ACCC sought penalties of at least $6 million, there is strong possibility that it will appeal the amount of the penalty on the grounds that it is too low.
Most significantly, Reckitt Benckiser is also facing a consumer class action for the relevant conduct. The class action was commenced prior to the penalty decision and seeks millions of dollars in refunds for affected consumers. It is one of the first class action cases in Australia for misleading advertising.
What you need to know
Push for bigger penalties in Australia
While the Colgate-Palmolive and Cement Australia penalties are the third and equal fourth largest for breaches of competition laws in Australia, they are relatively insignificant in comparison to penalties handed down in the EU and US for similar conduct.
Notably, some judges have expressed their concerns that the level of maximum penalties in Australia are not adequate to deter companies from engaging in such conduct and are simply viewed as the costs of doing business.
Rod Sims has reiterated those concerns by stating the following in relation to the penalties ordered against Cement Australia: “I’m afraid for companies of this size and the nature of the behaviour and the importance of it to the companies, I'm afraid $18 million could be seen as just the cost of doing business.”
The ACCC will accordingly continue to push for an increase in the maximum penalties for breaches of competition law in Australia which are currently the greater of $10 million, three times the gain derived from the illegal conduct or 10% of annual turnover in the 12 months preceding the year in which the breach occurred.
The ACCC will also seek legislative change to increase the maximum penalties for breaches of consumer laws.
Risk of class actions
The Reckitt Benckiser class action proceedings highlight that breaches of competition and consumer laws may not end with action by the regulator.
In addition to competitors or customers who have suffered loss bringing follow-on civil actions, plaintiff firms may also bring representative proceedings on behalf of end consumers. There have been several examples of this in Australia for competition and consumer law breaches but all actions have been settled by the relevant parties.