Synopsis

The Federal Government has recently amended the Trade Practices Act 1974 in order to criminalise what can broadly be described as cartel conduct. Previously, such conduct was subject to pecuniary penalties and private damages actions whereas now the sanctions include a maximum jail term of 10 years for individual offenders. Even though it was important to avoid engaging in unlawful behaviour before due to the heavy fines which could be imposed, the criminalisation of the relevant conduct introduces an even greater imperative for businessmen to understand the broad detail of the law in this area.

“Cartel Conduct” broadly covers the following activities when engaged in by people, two or more of whom are competitors:

  1. Price fixing;
  2. Output restrictions;
  3. Market allocation; and
  4. Bid rigging.

From an intellectual property point of view, these offences are important in the context of research and development collaborations, joint ownership agreements and licence agreements involving competitors where the price of inputs or outputs is agreed, field of use or geographic restrictions are imposed or joint proposals are put forward by consortia for funding or other purposes. Again, whilst the general prohibitions have arguably not altered substantially and, in fact, are narrower because of the mental element required to be approved in a criminal prosecution, the implications of breach are far more serious. In most cases, it will be the exceptions to otherwise unlawful conduct which will need to be relied upon in the intellectual property context.

The new offences in the Act are:

  1. to make a contract, arrangement or understanding which contains a cartel provision; or
  2. to give effect to a cartel provision.

In general terms, to constitute a criminal offence the person charged must be proven to have either:

  1. intended to make the contract arrangement or understanding and have known or believed that the contract arrangement or understanding contained a cartel provision; or
  2. in the case of giving effect to a cartel provision, intended to give effect to the cartel provision and have known that he, she or it was giving effect to a cartel provision.

The exceptions to a breach of the criminal provisions of the Act in respect of cartel conduct include the following:

  1. Where there is a notice in place relating to a collective bargaining agreement containing an exclusionary provision;
  2. Where the contract containing the cartel provision is made subject to an authorisation being granted by the ACCC;
  3. Where the only parties to the contract arrangement are understanding containing the cartel provision are related bodies corporate;
  4. Where a contract containing the cartel provision is for the purposes of a joint venture for the production and/or supply of goods or services carried on jointly by the parties either directly or through a jointly owned or controlled body corporate;
  5. Where the cartel provision relates to resale price maintenance (including the specifying of the maximum price at which goods or services are to be advertised, sold or supplied);
  6. Where the cartel provision amounts to exclusive dealing which would either not substantially lessen competition, is authorised or, in the case of third line forcing, is the subject of a notification;
  7. Where the cartel provision provides directly or indirectly for the acquisition of shares or assets;
  8. Where the cartel provision relates to the price of goods or services to be collectively acquired or the joint advertising of the price for the resupply of goods or services so acquired; and
  9. Where the intellectual property exemption in section 51(3) of the Act applies.

The nature of the new provisions and the consequences of breach also mandate that people should review any contracts, arrangements or understandings which involve competitors. In addition, employers owe a duty to their employees to ensure that their employees are aware of the criminal sanctions that can attach to individuals for breach of the criminal provisions. This would entail installing or updating a compliance program at the least.