Summary

The ACCC has brought the first ever criminal cartel proceedings against an Australian corporation, Country Care, and two individuals. This comes after ACCC Chairman Rod Sims announced that the regulator would likely be pursuing three to four domestic criminal cartel actions in 2018.

The Australian Competition and Consumer Commission ("ACCC") has brought criminal charges against The Country Care Group Pty Ltd ("Country Care"), its managing director, Robert Hogan, and a former employee, Cameron Harrison. 

This marks the first criminal prosecution of an Australian corporation under the criminal cartel provisions of the Competition and Consumer Act 2010 (Cth) ("Act") against individuals. The criminal cartel action against Country Care serves as a reminder to corporations and individuals of their obligations under the Act and the consequences of engaging in cartel conduct.

It is alleged that Country Care, a Mildura-based company, engaged in cartel conduct involving assistive technology products used in rehabilitation and aged care, including beds and mattresses, wheelchairs, and walking frames. 

These proceedings come after the ACCC successfully brought a prosecution under the criminal cartel provisions in 2017.

Cartel Conduct

The ACCC has extensive powers under the Act to investigate cartels. It can also refer serious cartel conduct to the Commonwealth Director of Public Prosecutions ("CDPP") for possible criminal prosecution under the Memorandum of Understanding between the CDPP and ACCC regarding Serious Cartel Conduct.

The Act prohibits cartels and makes it a criminal offence for businesses and individuals to participate in a cartel. A cartel exists when businesses act together rather than compete. Cartel conduct involves businesses engaging in price fixing, sharing markets, rigging bids, and/or controlling the output or limiting the amount of goods and services available to buyers. 

In the Act, there are both criminal and civil prohibitions against making a contract, arrangement, or understanding which contains a cartel prohibition and gives effect to a contract, arrangement, or understanding which contains a cartel prohibition.

There is an additional fault element of "knowledge or belief" in respect of the criminal offence. Knowledge is defined in the Criminal Code Act 1995 (Cth) ("Code"). A person has "knowledge of a circumstance or a result if he or she is aware that it exists or will exist in the ordinary course of events." The term "belief" remains undefined in the Code and the Act, however, case law suggests that in relation to criminal offences, it refers to a degree of awareness falling short of actual knowledge. 

Corporations found guilty of criminal cartel conduct are liable for a fine, which will be the greater of $10 million, and three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or, for a contravention where benefits cannot be fully determined, 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months. 

Individuals are liable for up to 10 years imprisonment and/or fines of up to $420,000 per criminal offence, and a financial penalty of up to $500,000 per civil breach.

Immunity Policy

However, corporations and individuals are able to seek both civil and criminal immunity in respect of cartel conduct. Immunity is granted conditionally and is only available to the first party that discloses the cartel conduct.

Civil Immunity

Corporations and individuals (directors, officers, and employees of the corporation) are assessed against separate criteria in the ACCC's immunity and cooperation policy for cartel conduct. 

Amongst other factors that need to be satisfied, applicants must:

1. Admit that their conduct in respect of the cartel may constitute a contravention of the Act;

2. Not have coerced others to participate in the cartel;

3. Provide full, frank, and truthful disclosure and cooperate fully and expeditiously throughout the ACCC's investigation and any ensuing proceedings; and

4. At the time the ACCC receives the application, the ACCC must have not received written legal advice that it has reasonable grounds to institute proceedings against the applicant relating to at least one contravention of the Act arising from the cartel conduct. 

A corporation is also able to seek derivative immunity for related corporate entities and/or for current and former directors, officers, and employees of the corporation who engaged in the cartel conduct.

The ACCC will grant final civil immunity where the applicant has:

1. Maintained the eligibility criteria for conditional immunity;

2. Provided full, frank, and truthful disclosure and cooperated fully and expeditiously throughout the ACCC's investigation; and

3. Maintained confidentiality regarding its status as an immunity applicant and the details of the investigation as well as any ensuing civil or criminal proceedings.

Criminal Immunity

After determining that the applicant has satisfied the conditions for conditional civil immunity under the policy, the ACCC is then able to make a recommendation to the CDPP that criminal immunity should be granted to the applicant. The CDPP exercises independent discretion when considering a recommendation by the ACCC. Immunity becomes final when the CDPP provides the applicant with a written undertaking and the applicant fulfils ongoing obligations and conditions.

Key Takeaways

1. The proceedings against Country Care highlight that the ACCC is seriously pursuing both corporations and individuals engaged in cartel conduct.

2. To avoid criminal prosecution and penalties, companies should review their conduct and seek legal advice to ensure they do not breach the criminal cartel provisions under the Act.

3. Companies should seek legal advice if they believe they have contravened the criminal cartel provisions.

4. Companies and individuals may be able to apply for immunity from proceedings if they satisfy the criteria outlined in the ACCC's immunity and cooperation policy for cartel conduct.