What, if any, criminal sanctions are there for cartel activity?
For individuals, the maximum criminal penalty is 10 years of imprisonment or a fine of A$440,000 per offence, or both. Individuals can also be subject to orders disqualifying them from managing a corporation and community service orders.
In October 2021, a manager of pharmaceutical ingredient company Alkaloids of Australia was the first individual to plead guilty to a criminal cartel charge since the criminal provisions were introduced in 2009. Sentencing for this individual is yet to take place.
In June 2022, four individuals involved with money transfer business Vina Money Transfer were the first individuals to be convicted for criminal cartel conduct in Australia, receiving varying terms of imprisonment ranging from nine months to two years and six months. All individuals were, however, immediately released on recognisance orders. The fifth individual involved in the case pleaded not guilty and charges were eventually dropped in September 2022.
For companies, the maximum fine for each criminal cartel offence is the greater of:
- A$50 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, 30 per cent of the corporation‘s adjusted turnover during the breach period of the offence.
The court can also impose injunctions.
There have been four criminal cartel convictions in Australia against corporations 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;
- in 2020, Wallenius Wilhelmsen Ocean AS, a Norwegian-based global shipping company, pleaded guilty to criminal cartel conduct and in 2021 was fined A$24 million; and
- in 2022, Vina Money Transfer pleaded guilty to criminal cartel conduct and was fined A$1 million.
Two corporations have pleaded guilty to criminal cartel conduct and the Federal Court is yet to hand down its judgment on the fines, including:
- pharmaceutical ingredient company Alkaloids of Australia, which pleaded guilty to criminal cartel conduct in November 2021; and
- waste management company Bingo Industries, which pleaded guilty to criminal cartel conduct in 2022.
Civil and administrative sanctions
What civil or administrative sanctions are there for cartel activity?
For individuals, the maximum civil penalty is A$2.5 million per offence.
For companies, the maximum civil penalties are the same as for the criminal cartel provisions.
The highest penalty imposed under the cartel laws was a A$46 million penalty paid by Japanese-based automotive parts supplier Yazaki Corporation in 2018, which was increased on appeal from an original penalty of A$9.5 million. The action of the Australian Competition and Consumer Commission (ACCC) followed similar enforcement actions against Yazaki and other cartel participants by competition regulators in the United States 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.
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, the 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.
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 contravention of the CCA. There is no rule about the required components of the policy or the extent to which this will be taken into 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 that was actively implemented and whether the implementation was successful (ie, whether the contravention was an isolated incidence – 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 training at 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 case of ACCC v Nippon Yusen Kabushiki Kaisha (NYK), NYK was fined A$25 million for its involvement in an international cargo shipping cartel. The fine of A$25 million incorporated a significant discount of 50 per cent that, 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 Commonwealth Director of Public Prosecutions 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 reoffend; and
- the level of harm that may be caused to the public.
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 often require disclosure of regulatory breaches or convictions and these matters may be taken into account by the 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).