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Initiating an investigation
Who can initiate an investigation of potential cartel conduct?
The Australian Competition and Consumer Commission (ACCC) has the power to initiate an investigation in relation to cartel conduct. Following the investigation, the ACCC can initiate civil proceedings in the Federal Court for civil pecuniary penalties and other orders. The ACCC may also refer the matter to the Office of the Commonwealth Director of Public Prosecutions (CDPP) to consider whether to bring criminal proceedings.
If an investigation is initiated by complainants or third parties, what rights (if any) do they have?
Complainants or persons who may have suffered loss as a result of cartel conduct do not have any special rights in relation to ACCC investigations. Third parties may complain of cartel conduct to the ACCC, but the ACCC need not investigate or follow any formal process in relation to how the complaint is handled.
What obligations does a company have on learning that an investigation has commenced?
There is no obligation to cooperate with an ACCC investigation. However, companies are required to retain documents for prescribed periods. In some states, it may also be a criminal offence to destroy, conceal or otherwise interfere with a document that is likely to be required as evidence in a legal proceeding.
In addition, it is common for the ACCC to issue a statutory notice during investigations (referred to as a Section 155 notice) seeking information or documents. The ACCC can also issue a Section 155 notice requiring a person to attend the ACCC offices for an examination. Refusal or failure to comply with a Section 155 notice, or the provision of false or misleading information, is a criminal offence punishable by fines of up to A$4,200 and/or 12 months’ imprisonment for individuals, or fines of up to A$21,000 for companies.
What obligations does a company have if it believes that an investigation is likely?
See above in relation to when an investigation has commenced.
What are the potential consequences of failing to act or delaying action?
Delaying action or failing to act early in relation to an ACCC investigation may be harmful to a party's interests if the ACCC decides to take action later. Courts will also take into account any cooperation provided to the ACCC when considering penalties.
Formal stages of investigation
What are the formal stages of and approximate timeframe for investigations?
The ACCC has discretion in relation to both the timeframe and the conduct (including stages) of an investigation. Investigations may take months or even years depending on the nature of the conduct being investigated.
What investigative powers do the authorities have?
The most common investigatory tool used by the ACCC is its information-gathering power under Section 155 of the Competition and Consumer Act. Where the ACCC has reason to believe that a person can provide information or documents relating to a possible contravention of the act, it can require such person to provide information, produce documents or appear before the ACCC to give evidence orally under oath or affirmation. The ACCC cannot issue a Section 155 notice after it has instituted proceedings, except where it is seeking an interlocutory injunction.
The ACCC also has the power to enter premises (so-called 'dawn raids') to conduct searches and seize documents where it has reasonable grounds to believe that there is evidentiary material on the premises relevant to a contravention of the Competition and Consumer Act. The ACCC must obtain a search warrant or the occupier's consent before entering the premises.
The ACCC may also seek access to telephone interception and surveillance material collected by the Australian Federal Police or other interception agencies under a warrant issued by the Federal Court or the Australian Administrative Tribunal during investigation of cartel offences.
What is the geographic reach of public enforcement actions?
Section 155 notices can be issued to any person. If the recipient of a Section 155 notice is in Australia, the notice may compel the provision of any documents in the recipient's possession, power or control, which may extend to documents held outside Australia in certain circumstances. The ACCC may face practical and legal impediments in exercising its information gathering powers outside the jurisdiction.
When is court approval required to invoke these powers?
The ACCC is not required to obtain court approval before issuing a Section 155 notice.
Unless the ACCC obtains the occupier's consent, it must obtain a warrant from a magistrate before conducting a raid.
Are searches of business and personal premises authorised? If so, which bodies carry out searches and will they wait for legal advisers to arrive?
The ACCC may conduct searches of business or personal premises. Searches are carried out by members of the ACCC staff and potentially members of the Australian Federal Police or external consultants authorised by an ACCC inspector.
The Competition and Consumer Act imposes no legal requirement on the ACCC to wait for the occupier's legal advisers to arrive; however, in practice the ACCC may agree to wait a reasonable time.
What level of cooperation with the authorities is required and what are the consequences for failing to cooperate?
Parties subject to a raid must provide all reasonable facilities and assistance for the effective execution of the raid. Parties must also answer questions about and manage the production of evidential material to which the warrant relates. The consequences for failing to comply with these obligations are similar to those for failing to comply with a Section 155 notice.
Is in-house legal advice or attorney work product protected by the law of privilege? Does this extend to the advice of in-house counsel?
Documents and materials subject to a claim of legal professional privilege are protected from disclosure to the ACCC, including where they respond to the terms of a Section 155 notice or are seized pursuant to a search warrant. This principle extends to documents and materials made or received by in-house counsel.
Are any other limitations imposed on investigatory powers in order to safeguard the rights of those under investigation?
Where the ACCC issues a Section 155 notice, a person will not be excused from producing a document or furnishing information on the ground that he or she might be incriminated or exposed to a penalty. However, any potentially incriminating answer or information provided by the individual cannot be used against him or her in criminal proceedings – except in criminal proceedings for failing to respond to a Section 155 notice or providing false or misleading information.
What is the process for objecting to an authority’s exercise of its claimed powers?
A person may apply to the court for a declaration in relation to the validity of any act or thing done, proposed to be done or purporting to be done under the Competition and Consumer Act. However, such challenges are generally limited to judicial review of the ACCC's decision to exercise its power.
Further, if a person considers that he or she cannot comply with a request contained in a Section 155 notice – either in time or because the notice is unduly burdensome – her or she may request that the ACCC vary the notice. The Harper reforms introduced a ‘reasonable search’ defence, whereby parties would need to produce documents that they locate only after undertaking a reasonable search. A person must provide a written response to a Section 155 notice, including a description of the scope and limitations of the search, to avail themselves of this defence.
Publicity and confidentiality
What information about investigations will be made publicly available and at which stage(s) of the process?
The ACCC generally conducts investigations confidentially. However, it may publicly comment on an investigation which is already public and where it considers that it is in the public interest to comment. The ACCC may also comment in general terms on an investigation where it is requested to do so by Parliament (eg, at a Senate inquiry).
Is any information automatically confidential and is confidentiality available on request?
While confidentiality measures are in place, the circumstances in which the ACCC is entitled to disclose protected information (ie, information given to the ACCC in confidence, obtained under a Section 155 notice or given in confidence by a foreign government body) are broad. Such circumstances include where:
- the ACCC makes a disclosure in the performance of its duties or functions;
- the ACCC is required or permitted by law to make the disclosure (eg, when ordered by a court under subpoena, except in relation to protected cartel information (see below));
- disclosure is made to the minister, royal commission or designated government agencies to assist those agencies; and
- disclosure is made to a foreign government body or agency to perform or exercise its functions or powers.
Additional confidentiality measures are in place where the information relates to cartel conduct and is provided in confidence (referred to as 'protected cartel information'):
- If the ACCC is party to the proceedings, it is not required to produce protected cartel information to a court or tribunal, except with leave of a court or tribunal.
- If the ACCC is not a party to the proceedings (eg, a follow-on damages claim), it has discretion to disclose protected cartel information.
In exercising discretion to disclose or order disclosure of protected cartel information, the court, tribunal or ACCC will have regard to:
- the need to avoid disruption to national and international law enforcement efforts;
- whether information was given by an informant;
- the protection or safety of the informant or associates;
- the fact that disclosure of the information may discourage informants from giving information in the future; and
- whether disclosure would be in the interests of justice or securing effective performance of the tribunal's functions.
Once proceedings are issued, a party may apply to the court seeking a confidentiality order. The court has a wide discretion to grant confidentiality orders and these are generally granted in relation to documents that are commercially sensitive or prejudicial to the interests of certain parties.
Do the authorities in your jurisdiction cooperate with authorities in other jurisdictions?
The ACCC can and does coordinate its enforcement efforts with overseas regulators. It is a member of the International Competition Network, which provides competition authorities with an informal forum for maintaining regular contacts and addressing practical competition concerns.
Australia is party to a treaty with the United States, which 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 memoranda of understanding with various authorities, including regulators in Canada, New Zealand, the European Union, China, Korea and the United Kingdom. These memoranda of understanding provide for varying levels of cooperation and communication in respect of enforcement activities.
Do the relevant enforcement authorities request waivers so as to allow for increased cooperation with authorities in other jurisdictions? What are the consequences of declining to grant a waiver?
The ACCC has broad discretion to disclose protected information (see above) to foreign government bodies or agencies if it is satisfied that the information will assist them. Therefore, the ACCC need not obtain a waiver to disclose such information.
However, the ACCC's policy provides that – except as required by law – it will not share confidential information provided by an immunity applicant (including the applicant’s identity) with other regulators, without the applicant’s consent. The ACCC will seek consent to do so as a matter of course, particularly for international matters.
The ACCC's immunity policy provides that the applicant must explain why a waiver cannot be provided. Failure to provide a satisfactory explanation may be regarded as a failure to provide the full cooperation required to be eligible for immunity.
How is a cartel investigation resolved? Are settlements, plea bargains or other negotiated resolutions available?
While the ACCC and the CDPP have discretion to determine whether to bring proceedings, neither has the power to impose a penalty or fine. A penalty or fine can be imposed only by the court.
Cartel cases are generally resolved through the court system. However, the ACCC may agree to make joint submissions to the court, including submissions that the respondent should receive a lower penalty if the ACCC is satisfied that it has substantively cooperated. In civil matters, the ACCC may also agree on a penalty with the respondent to be proposed to the court. The court must then determine whether the penalty is appropriate in the circumstances.
Agreeing a penalty generally involves the ACCC and the respondent:
- agreeing to a statement of facts and the scope of admissions; and
- making joint submissions as to reasons why the penalty is appropriate.
However, the court may disregard these submissions and impose a penalty which is higher or lower than the range agreed (see below).
Sentences in criminal cases are at the discretion of the court. The court will take into account a range of factors, including:
- the degree to which the person has shown contrition and cooperated with law enforcement agencies during the investigation (see below); and
- whether the person has pleaded guilty to the charge in respect of the offence.
While in criminal cases it is not appropriate for the ACCC, the CDPP and the parties to agree a penalty and propose this to the court for approval, they can provide a penalty range.
What is the process for negotiating a settlement, plea bargain or other negotiated resolution? Do such resolutions require court or other approval?
If a settlement is not reached, what is the procedure for adjudicating a charge of cartel conduct?
If the respondent does not admit liability and contests the matter, the case will go to civil trial on liability. At trial, evidence will be admitted and submissions made by the parties.
In criminal cases, the defendant will be committed to stand trial and the matter may then be referred to a higher court for a criminal trial.
Which party must prove its case? What is the relevant standard of proof?
The party alleging the existence of the cartel conduct – usually the ACCC but occasionally a third party – bears the burden of proof. In civil matters, the applicant must prove its case on the balance of probabilities. In criminal trials, the standard is higher – the CDPP must prove its case beyond reasonable doubt.
Is there a hearing? If so, what is the process for submitting evidence and testimony?
Civil proceedings in the Federal Court are commenced when the applicant files an originating application.
Written evidence is usually submitted in affidavit form, including supporting documentation. A party can also issue a subpoena requiring a person to appear as a witness to give evidence or produce documents. A party can also apply to the court for the appointment of an expert (eg, an expert economist) to produce a report to be submitted to the court and used in evidence. Orders for discovery may also be made.
The matter will then proceed to a hearing, where witnesses and experts may be subject to cross-examination. The parties will also make written and oral submissions.
Once the CDPP has decided to lay charges for a criminal cartel offence, an initiating process or summons will be sent to the defendant and filed with the court. A committal hearing then takes place, in which a magistrate decides if there is sufficient evidence for the matter to proceed to a criminal trial. The CDPP will then file an indictment listing the relevant charges. During the trial, the CDPP may call witnesses and produce other forms of evidence. Following the delivery of the verdict, the judge will sentence the defendant – this may include a fine and/or term of imprisonment.
What are the accused’s procedural rights?
In civil proceedings, respondents may request copies of all documents in the ACCC's possession which tend to establish the respondent's case and were not created by the ACCC itself or obtained from the respondent.
In criminal proceedings, the CDPP owes a duty of disclosure to the court. Under common law principles, defendants are entitled to know the case against them, including the evidence that supports the charges and any other material relevant to the defence. These principles are supplemented by state and territory legislation, which requires the prosecution to disclose certain material to defendants. The Statement on Disclosure in Prosecutions by the Commonwealth sets out the CDPP's disclosure obligations, in addition to the requirements under state or territory legislation.
Respondents also enjoy any usual rights, including legal professional privilege and, in criminal matters, the privilege against self-incrimination for individuals (see above).
What is the appeal process?
Appeals from a single Federal Court judge can be heard by the full Federal Court – usually comprising three judges – on points of law. Parties may appeal full Federal Court decisions to the High Court if it grants permission. The special leave process involves assessing a number of relevant factors, including:
- the public importance of the case;
- any uncertainty in the area of law; and
- the administration of justice.
If the case is a criminal matter before the Supreme Court, appeals are heard by the appeals division or the full bench of the Supreme Court in that state. Parties can appeal further by applying for special leave to the High Court.
To what extent can the appeal body review the agency’s findings of fact, legal assessment and penalties?
The substantive proceeding is decided by the court, not the ACCC. Appeals of a court judgment are confined to points of law, not findings of fact – in relation to both the substantive proceeding and the penalties imposed.
Penalties for companies
What are the potential penalties for companies involved in a cartel?
Companies found to have engaged in cartel conduct face civil and/or criminal law penalties.
The maximum civil penalty or criminal fine for each contravention 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
- if the benefit cannot be determined, 10% of the corporate group’s annual turnover attributable to Australia.
If multiple contraventions have occurred, a penalty for each contravention may be applicable.
Are there guidelines in place for penalties? If not, how are penalties normally calculated?
The court determines whether penalties or other sanctions should be imposed and, if so, the quantum of these.
The court must have regard to all relevant matters when determining the pecuniary penalty to be imposed. While general and specific deterrence are key factors, the court will also have regard to:
- the nature, extent and timeframe of the conduct;
- loss or damage caused;
- the size of the company;
- the degree of market power;
- deliberateness of the conduct;
- the seniority of those involved;
- the company's corporate culture regarding compliance;
- the level of cooperation with the authorities;
- instances of prior contraventions; and
- the party’s financial position.
When imposing criminal penalties, the court will have regard to general and specific deterrence, as well as retribution and rehabilitation. During sentencing, the court must take into account a number of factors, including those considered under civil penalties (see above), as well as:
- whether the offence is part of a course of conduct;
- a guilty plea; and
- prospects for rehabilitation.
Do the authorities take into account any penalties imposed in other jurisdictions?
The court need not take into account any penalties imposed in other jurisdictions.
The Australian Competition and Consumer Commission (ACCC) has recently been seeking larger penalties for cartel conduct, partly because the fines imposed in other jurisdictions are significantly higher than those imposed in Australia.
How can a company mitigate its exposure to fines?
A company can seek to mitigate its exposure to penalties by cooperating with the ACCC during the investigation or seeking immunity in the first place.
The ACCC has a cooperation policy which outlines its position on cooperation by individuals and corporations in enforcement matters.
The ACCC will make submissions to the court identifying the extent and value of any cooperation provided by a party to the proceedings. In certain circumstances, the ACCC and other parties may propose an agreed civil penalty to the court. However, the appropriate penalty is ultimately a matter for the court to determine. In doing so, the court will consider the extent to which the respondent has cooperated with the ACCC.
The ACCC is responsible for granting civil immunity, which is available to the first eligible party to disclose the cartel conduct. The ‘first eligible party’ is the first to apply for immunity in respect of the cartel under the ACCC's immunity policy.
If the ACCC grants conditional immunity, the applicant must provide full, frank and truthful disclosure and cooperate fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing court proceedings. Conditional civil immunity will become final immunity after the resolution of any ensuing proceedings against the remaining cartel participants.
If a party cooperates with the ACCC during a criminal investigation, the ACCC may make a recommendation to the Office of the Commonwealth Director of Public Prosecutions (CDPP) regarding penalty discounts. Further, the CDPP may give concessions in exchange for a party's testimony in certain circumstances.
When determining the sentence, a court must take into account mitigating factors, including:
- contrition (eg, reparations);
- a guilty plea; and
- the level of cooperation.
The CDPP is responsible for granting criminal immunity. Although its decision will be based on a recommendation by the ACCC, it will exercise its own discretion when considering the recommendation.
The CDPP will grant criminal immunity where it considers that the applicant meets the criteria set out in Annexure B to the Prosecution Policy of the Commonwealth, which contains the CDPP immunity policy in relation to cartel conduct. This is the same criteria that the ACCC applies in civil cases when determining whether to grant civil immunity.
Before instituting criminal proceedings against the other cartel participants, the CDPP will provide to the applicant a letter of comfort and a written undertaking, granting immunity subject to fulfilment of ongoing obligations and conditions. Once these conditions have been fulfilled by the applicant, the immunity becomes final.
Penalties for individuals
What are the potential penalties for individuals involved in a cartel?
Individuals found to have engaged in cartel conduct face civil and/or criminal law penalties.
The maximum civil penalty is A$500,000 for each contravention. The maximum criminal penalty is 10 years’ imprisonment and/or fines of up to A$420,000 for each contravention.
Do the authorities take into account any penalties imposed in other jurisdictions?
The court need not take into account any penalties imposed on the respondent in other jurisdictions.
Is a company permitted to pay a penalty imposed on its employee?
A company must not indemnify a person against civil liability or legal costs incurred in defending or resisting proceedings in which he or she is found to have incurred such liability as a company officer.
A company must not indemnify a person against any liability incurred as a company officer that is owed to a party other than the company and did not arise out of conduct in good faith. This prohibits indemnification of company officers for involvement in cartel conduct.
A company also must not indemnify a person against legal costs incurred in defending or resisting an action for liability incurred as an officer in criminal proceedings in which he or she is found guilty.
Is a company permitted to continue to employ an employee involved in cartel conduct?
The Competition and Consumer Act does not expressly prohibit a company from continuing to employ an employee who has been involved in cartel conduct.
However, if the court is satisfied that the employee has contravened a cartel provision, it can make an order disqualifying that person from managing corporations for an appropriate period. In such cases, the company would no longer be able to employ the person in a management role.
Both the ACCC and the CDPP can apply for a disqualification order.
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