This article is an extract from GTDT Market Intelligence Cartels 2022. Click here for the full guide.
1 What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
Enforcement of cartel conduct is an enduring priority for the Australian Competition and Consumer Commission (ACCC). There have been a number of civil and criminal cases instigated or continued during 2021.
While there has been no particular industry on which the ACCC has focused, in November 2021, the ACCC published a warning to public sector agencies to be alert to the potential for collusion between bidders during procurement processes. Specifically, the ACCC warned public procurement professionals against encouraging businesses to discuss their bids with each other, or to reach agreements on who will bid for particular tenders, because such conduct is likely to infringe the cartel laws. The warning also recommended a proactive review of procurement processes to identify and remedy any potentially anticompetitive elements of procurement procedures, policies and guidelines.
This warning came after the ACCC initiated civil proceedings in two bid rigging cases in 2021. In May 2021, the ACCC brought proceedings against Delta Building Automation Pty Ltd and its sole director, alleging their involvement in an attempt to bid rig a National Gallery of Australia tender. The matter is set down for a hearing in April 2022.
In October 2021, the ACCC initiated civil proceedings against First Class Slate Roofing and RAD Roofing Specialists (and their sole directors) alleging that the two Sydney-based roof tiling businesses rigged bids on two separate projects. The ACCC seeks penalties, declarations, injunctions and disqualification orders against the two sole directors.
In February 2022, the Federal Court delivered judgment in respect of civil proceedings instituted by the ACCC in December 2020 against construction company J Hutchinson Pty Ltd (Hutchinson) and the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU). The Court found that Hutchinson contravened the boycott provisions in agreeing to no longer acquire waterproofing services from a particular subcontractor and the CFMMEU was knowingly concerned in, or party to, those contraventions and induced Hutchinson’s conduct. The Court will decide on penalties and other orders in due course. The ACCC has described this as very serious conduct in the context of its foreshadowed submissions on appropriate penalty.
Criminal cartel enforcement also continued in 2021, with pharmaceutical ingredient company Alkaloids of Australia Pty Ltd and its former export manager pleading guilty to criminal cartel conduct. Sentencing has not yet occurred.
Criminal cartel enforcement has, however, been met with significant setbacks in 2021 and in 2022 at the time of writing.
In June 2021, a jury in the Federal Court acquitted the Country Care Group and its CEO and former employee of the eight criminal cartel charges brought against them. This was the first contested criminal cartel prosecution under the Competition and Consumer Act 2010 and the first to proceed to trial by jury.
The Commonwealth Director of Public Prosecutions (CDPP) also withdrew charges against the CFMMEU and its branch secretary in August 2021.
Finally, in February 2022, the CDPP withdrew all charges in the long-running criminal cartel case against Citigroup and Deutsche Bank and certain current and former employees (the Banking Cartel case). This followed the withdrawal of all charges against ANZ and its former treasurer in 2021. More detail on these cases is set out below.
2 What do recent investigations in your jurisdiction teach us?
ACCC investigatory processes
Witness credibility issues, including the implications of grants of immunity on witness evidence, contributed to the failed Country Care prosecution and the withdrawal of criminal cartel charges against the CFMMEU. Issues with the ACCC’s investigatory processes, including deficiencies with record keeping and the way in which witness statements were prepared, also came under sustained attack in the Banking Cartel case.
We expect that these matters will catalyse a further re-examination of the way in which the ACCC goes about cartel investigations and its evidence gathering procedures. This follows the ACCC’s adoption of new statement taking guidelines for criminal investigations in July 2021.
Another issue that emerged is the requirement for investigating and prosecuting agencies to ensure that disclosure obligations are properly complied with in criminal enforcement. This was particularly acute in the Banking Cartel case.
In that case, the immunity applicant, JPMorgan had conducted an internal investigation into the relevant issues before seeking immunity from the ACCC. JPMorgan claimed privilege over those internal investigation materials, which included early factual accounts from key witnesses in the prosecution. The ACCC and CDPP did not seek access to those materials from JPMorgan at any time prior to bringing the charges.
Some two and half years after charges were laid, the CDPP sought to require JPMorgan to provide disclosure of the factual accounts from its internal investigation. JPMorgan provided an oral summary of the factual accounts to the CDPP. The CDPP later sought to subpoena the underlying documents (file notes and draft witness statements) from JPMorgan.
JPMorgan was unsuccessful in maintaining a claim of privilege over the materials. The Court found that while the process of seeking immunity itself did not constitute a waiver of privilege by the immunity applicant, JPMorgan’s subsequent oral summary of the factual accounts constituted a waiver of privilege such that the documents had to be disclosed to the CDPP and accused.
Furthermore, the ACCC sought to maintain claims of privilege over a number of other important documents. Those claims were ultimately relinquished, but only after significant delay.
Obstruction of ACCC investigations
The ACCC has also shown that it will take action where its investigations are obstructed.
Jason Ellis, former GM at BlueScope Steel, received a suspended eight month sentence and a A$10,000 fine for his role in obstructing an investigation by the ACCC into the company and himself for alleged price-fixing.
3 How is the leniency system developing, and which factors should clients consider before applying for leniency?
The ACCC operates an Immunity and Cooperation Policy for Cartel Conduct (the Immunity Policy) as well as an anonymous online whistle-blower portal called ‘Whispli’.
Since the release of the updated Immunity Policy in October 2019, the ACCC’s annual reporting of immunity application statistics shows an increasing number of immunity applications. Between July 2020 and June 2021, there were 15 approaches to the ACCC for immunity, with 11 of these resulting in formal immunity application proffers. While two of these proffers did not result in conditional immunity, civil conditional immunity was granted in five and one criminal conditional immunity was granted by the CDPP upon ACCC recommendation. The ACCC’s annual reporting does not indicate the status of the three remaining proffers made in this period - they may still be under consideration by the ACCC or the CDPP.
The ACCC has not published any information about the impact of the ‘Whispli’ portal. We expect the ACCC to release statistics on the number of investigations generated by these contacts in future annual reports.
Under the ACCC’s Immunity Policy, the following factors are relevant to eligibility for immunity and what should be considered prior to an application being made:
- Immunity is only available for the first eligible party to disclose and admit cartel conduct, assuming other conditions are also met. This is irrespective of the level of culpability or the role that party has in the conduct. This incentivises clients to seek a marker as soon as possible if they believe they may have been involved in cartel conduct.
- An immunity applicant may need to conduct investigations into the relevant conduct before being in a position to assess whether there has been cartel conduct. One of the conditions that applies to immunity is that a corporation provide full, frank and truthful disclosure, and cooperates fully and expeditiously with an investigation and any subsequent court proceedings. This may extend to a request that the immunity waive privilege, including over internal investigation materials.
- If a corporation qualifies for conditional immunity, it should also consider whether it wishes to seek derivative immunity for related entities or current or former personnel of the corporation involved in the conduct.
The ACCC can only grant civil immunity under the Immunity Policy. The CDPP is responsible for granting criminal immunity, and would make an independent decision having regard to any ACCC recommendation.
While only one party can receive immunity under the Immunity Policy, the policy still encourages cooperation by other parties. The ACCC will assess the extent and value of cooperation provided by a party to determine whether and to what extent a discount on penalty and sanctions is appropriate.
4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making, and what are your experiences in this regard?
The enforcement model in Australia means that, unlike administrative law regimes, the ACCC is not the ultimate decision-maker for liability or penalty. Instead, the ACCC must institute civil proceedings in the courts, or refer criminal proceedings to the CDPP for prosecution.
For criminal cartel cases, there is no ability to resolve a prosecution by way of a negotiated outcome such as a deferred prosecution agreement or non-prosecution agreement. While such regimes are under consideration in Australia, it is not currently intended that they would cover cartel conduct.
Some level of plea bargaining (ie, reduced charges in exchange for a guilty plea) may be possible. However, in criminal proceedings the prosecution is unable to make submissions to the court on an appropriate sanction. It is a matter for the court to determine the appropriate sanction to be imposed on a party convicted of criminal cartel conduct, including the extent of any cooperation discount.
For these reasons, companies prosecuted for cartel conduct in Australia should expect to have less control over the process than they might otherwise have in jurisdictions where settlements of this kind are available, as in the United States and the United Kingdom.
In civil cartel cases, the ACCC may agree admissions, an agreed statement of facts and/or provide evidence in cartel proceedings in order to come to a quicker resolution of a matter. Generally speaking, cooperation will shorten the length of proceedings and, as a general principle, courts will afford more lenient treatment to cooperating parties. While the ACCC and the contravening party can make submissions about the appropriate penalty, including if that is agreed, the ultimate decision (including as to any penalty discount or other lenient treatment recommended by the ACCC) is that of the court.
5 Tell us about the authority’s most important decisions over the year. What made them so significant?
There were several decisions in key cartel cases in 2021, and anticipated significant decisions in 2022.
To date, no individuals have been sentenced in Australia for criminal cartel offences. This is anticipated to occur for the first time in early 2022.
In October 2021, the former export manager of Alkaloids of Australia Pty Ltd, a producer and supplier of pharmaceutical ingredients, became the first individual to plead guilty to criminal cartel conduct under the current criminal cartel laws. Mr Christopher Joyce pleaded guilty to or admitted guilt across 10 charges relating to price-fixing, bid rigging and market allocation cartel arrangements that he was involved in. The company pleaded guilty a month later. Both Mr Joyce and the company will be sentenced in early 2022.
Sentencing will also occur shortly in the prosecution of Vina Money Transfer Pty Ltd and five individuals charged with criminal cartel offences regarding the fixing of foreign exchange rates between Australian dollars and Vietnamese dong between 2012 and 2016. All accused except for two individuals have pleaded guilty. During the Federal Court sentencing hearing, Justice Abrahams said that she would consider analogous authorities for economic ‘white collar’ crimes with a similar maximum penalty (such as market manipulation, insider trading and fraud). The judgment on sentence is expected in March 2022.
Another sentencing judgment demonstrated that failure to assist and fully cooperate with the ACCC in its investigations can be costly. In the final sentencing decision concerning criminal cartel conduct by three shipping companies, Wallenius Wilhelmsen Ocean AS (WWO) received a A$24 million fine. The overall quantum of WWO’s penalty was comparatively less than those imposed upon Nippon Yusen Kabushiki Kaish, who were fined A$25 million (NYK), and Kawasaki Kisen Kaisha Ltd (K-Line), who were fined A$34.5 million. However, the Court noted WWO’s lack of cooperation such that the 20 per cent discount for its guilty plea was significantly smaller than for the other two companies (50 per cent for NYK and just over 28 per cent for K-Line), which had larger roles in the contravening conduct but had been more cooperative in the investigation.
6 What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
While there have been no recent challenges to the ACCC’s statutory powers to compel information and documents, the ACCC may be the subject of judicial review in exercising its statutory powers. This is a constitutionally entrenched right in Australia. The scarcity of these challenges is partially due to the court’s traditionally broad interpretation of the ACCC’s information collection powers. Further, the ACCC has well-established internal processes for amending potentially overly oppressive notices that could otherwise form the basis of a challenge.
7 How is private cartel enforcement developing in your jurisdiction?
Generally, it remains rare for private cartel enforcement to occur in Australia. Cartel matters are still litigated predominantly by the ACCC.
One exception is a rate rigging class action brought by Maurice Blackburn in May 2019, which is now anticipated to proceed following significant delays caused by the form of the applicant’s pleadings. The class action, which alleges a series of cartel agreements between investment banks to rig foreign exchange rates, was filed on behalf of foreign exchange customers who bought and sold currency between 1 January 2008 and 15 October 2013 and whose total value of transactions exceeded A$500,000. In October 2021, Beach J granted an application by lead applicant Wisbey & Associates to replead its case. The investment banks are anticipated to file their defences in February 2022.
8 What developments do you see in antitrust compliance?
The threat of potential criminal prosecution, class actions and follow-on damages claims and ever increasing cooperation between regulators nationally and globally has put a spotlight on antitrust compliance programmes. The ACCC announced on 18 February 2022, that a new working group made up of the ACCC, US Department of Justice and Federal Bureau of Investigation, Canadian Competition Bureau, NZ Commerce Commission and UK Competition and Markets Authority has been formed to share intelligence and identify behaviour that restricts competition in the supply and distribution of goods across jurisdictions.
Companies should ensure that their anti-trust compliance programmes are up to date and adequate to the task.
Further, as the economy emerges from the covid-19 pandemic and the ACCC authorisations cease to be necessary and applicable, companies should ensure that they have programmes in place to properly sever the cooperation permitted under those authorisations.
9 What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
March 2022 will bring an end to Rod Sims’ tenure as chair of the ACCC as he is replaced by Gina Cass-Gottlieb. Ms Cass-Gottlieb enters the role with over 25 years in private practice as a senior partner in competition and regulation. At the same time, Liza Carver will start as a Commissioner to the ACCC with the responsibility of Head of Enforcement.
These appointments may alter the ACCC’s enforcement priorities (to be published in March), but also its decisions as to which cases to investigate and litigate. This is particularly in the area of cartel enforcement given that the ACCC has said that it will reflect on lessons learned from the various failed criminal cartel prosecutions in 2021 and 2022 to date.
2022 is also a federal election year in Australia, with the election scheduled to occur no later than 21 May 2022. This might mean that any significant reforms under consideration in the antitrust space (eg, merger reforms and ex ante regulation of digital platforms) will not be tabled until after the election. If the election leads to a change in government, a new Labor government may articulate different priorities for law reform to those that have been pursued by the incumbent Liberal government.
The covid-19 pandemic and issues associated with it are likely to continue to play a role in cartel enforcement policy, discussed in further detail in question 10, below.
10 How has the covid-19 pandemic affected cartel enforcement in your jurisdiction?
In the first half of 2020, the ACCC responded to the covid-19 pandemic by facilitating the application by businesses for authorisations to engage in cooperative conduct where the benefits of that conduct outweighed the anticompetitive detriments. These tended to be for six to 12 months and were usually granted within a short time frame after application to facilitate the timely provision of essential goods, services or relief to the public.
In April 2021, the ACCC released a report on authorisations related to covid-19 noting that it had received a total of 33 applications for authorisations of collaborations. The ACCC authorised 28 of these applications, while the other five applications were withdrawn before final determination. The authorisations were made to address the following types of problems: coordination of capacity for provision of health services; the provision of essential items in light of disrupted global supply chains; disruptions to ordinary market conditions caused by restricted movement, including lockdowns (eg, increasing home delivery capacity for supermarkets, or allowing collaboration between telecommunications companies to ensure sufficient network capacity to meet changed demands); relief for financial difficulties directly caused by the economic and health disruptions; and more indirect consequences of the disruptions requiring a broad range of conduct to adequately address them (eg, collective bargaining by tenants with landlords).
The ACCC remained careful to prevent any opportunistic attempts to obtain cover for conduct not in the best interests of consumers and the community, including excluding agreements on price from the authorised conduct.
The Inside Track
What was the most interesting case you worked on recently?
Herbert Smith Freehills acted for Citigroup Global Markets Australia Pty Limited in the Banking Cartel case. That criminal cartel prosecution, which arose from a A$A2.5 billion equity placement, was abandoned by the CDPP in February 2022, more than three years after charges were laid in June 2018.
This landmark prosecution raised novel and complex issues. It is one of only a handful of criminal cartel proceedings brought in Australia to date and the first to consider the application of cartel laws to conduct in the financial markets. It was also only the second to test the Federal Court’s criminal procedures.
The matter concerned the circumstances surrounding an equity capital raising by ANZ conducted in August 2015, with Citi, Deutsche Bank and JPMorgan as underwriters. The CDPP initially alleged that the investment banks had entered into three separate cartels to the effect that they would not trade or would limit their trading in the ANZ shares, which the investment banks had taken up as underwriters following the capital raising.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
We consider that law reform is needed to clarify what constitutes serious or hardcore cartel conduct that is subject to criminal sanction.
When the criminal cartel provisions were introduced in 2009, submissions to the draft exposure legislation referred to the complexity of the drafting of the offence, and noted that, due to its lack of clarity, the new laws potentially caught ordinary commercial behaviour. Those observations proved prescient.
There remains a strong policy argument that criminal sanctions are appropriate for serious cartel conduct. However, what is needed to make those laws workable is a clear, simple definition of the offence, and a satisfactory means of distinguishing what is truly hardcore cartel conduct.
Until law reform is considered in this space, the ACCC and CDPP should take into account the complexity of the current laws when deciding whether to commence new prosecutions and the scope of those actions.