Making commercial and other arrangements with competitors is a normal part of business for many enterprises. Participation in industry groups, joint marketing, buying groups, joint ventures or the mere supply or acquisition of products and services are all common features of commerce.

From a regulatory perspective, however, there is a line to be drawn between legitimate commercial enterprise and anticompetitive collusion. While conceptually most of us know what a cartel is, where the line is drawn in respect of a particular transaction or arrangement can often be a difficult question. When exactly does legitimate cooperation become illegal collusion?

As most now know, Australia has recently introduced some of the strictest anti-cartel legislation in the world, backed up with some of the most severe penalties – including gaol – for offenders. What is perhaps not fully appreciated by business people and many of their advisers is that the laws regarding what is lawful and what is not have been entirely re-written. Without doubt, many arrangements that were lawful before the implementation of these reforms will now be illegal.

This guide seeks to introduce corporate counsel and senior executives to these laws and the ways in which their business may be affected. It also suggests ways to manage the risks of non-compliance and what to do in the event of a discovered breach.

Background

Restrictive Trade Practices - Part IV of the Trade Practices Act 1974 (TPA)

By way of a short refresher, it will be recalled that, until recently, Part IV of the TPA (entitled “Restrictive Trade Practices”) made only two specific references to horizontal arrangements between competitors. As it continues to do, section 45 prohibited any contract, arrangement or understanding (CAU) that contains an exclusionary provision or has the purpose or effect of substantially lessening competition. Insofar as horizontal arrangements are concerned:

  • an exclusionary provision was (and still is) loosely defined as a provision of a CAU between two or more competitors that has the purpose of preventing or limiting the supply or acquisition of goods or services to/from a person or persons (usually customers or suppliers);1 and
  • section 45A deemed any price fixing arrangements between competitors to have the proscribed purpose or effect of substantially lessening competition. This section has now been repealed.

The remaining provisions of the old Part IV mainly2 dealt with unilateral anticompetitive conduct (that is, misuse of market power3), vertical supply or acquisition arrangements4 and merger control.5 It was left to section 45 (and its requirement that there be a purpose or effect of substantially lessening competition) to regulate all other forms of arrangements between competitors. While s.45 still has effect, it is no longer the “front line” provision it once was.

The Cartel Laws

The amending Act6 divides the existing Part IV of the TPA into two Divisions:

  1. The new Division 1 is aptly headed “Cartel Conduct”.7
  2. Division 2 is headed “Other Provisions” and is comprised of the existing provisions, with amendments to reflect the specific Cartel Laws.

The new law provides that it is a criminal offence to:

  • make a CAU that contains a cartel provision;8 and
  • give effect to a cartel provision.9

The regime now also provides ostensibly parallel civil penalty provisions10 that prohibit the same conduct, save that it is not necessary to prove the fault or mental elements required by the criminal law.

Transitional arrangements inserted into the Trade Practices Act effectively provide that if a CAU was lawful under the old regime (e.g. agreement to restrict excess capacity but not causing a substantial lessening of competition) the actual CAU will still be lawful today, but giving effect to it now will be illegal.

A Cartel Provision

Whether being determined under the criminal offence or the civil prohibition provisions, the test for a “cartel provision” is the same.12 To amount to a cartel provision two elements must be satisfied:

First, the impugned provision of the CAU must have either:

  • the purpose or effect of fixing, controlling or maintaining prices (i.e. price-fixing) for goods acquired, supplied or to be resupplied;13 or
  • the purpose of preventing, restricting or limiting output (be it by way of production, capacity or supply), market sharing or bid rigging.14

Secondly, at least two of the parties to the CAU must be in competition with each other (or, at least, would be but for any CAU).15

Put simply, whereas only price-fixing and Exclusionary Provisions were per se civil penalty provisions under the old regime, the new law makes it a per se criminal offence (and a parallel civil prohibition) to engage in:

  • price-fixing;
  • collusive restricting of production, capacity or supply;
  • market sharing; or
  • bid rigging.

A number of important things should be noted about this.

  • First, there are a number of types of arrangements that you might previously have been advised were lawful (for example, because they did not substantially lessen competition) that are now criminal offences.
  • Secondly, the requirement that two or more parties be in competition with each other is in respect of the entire CAU and not only the provision being examined. This means that the impugned provision need not necessarily operate between the competitors. While some have argued that, as a matter of statutory construction, this was not the case under the former price fixing regime, the statute here is clear.

Example:

Take, for example, a tripartite agreement between parties A, B and C, each being retail sellers of doughnuts. A and B operate in the same shopping centre and are clearly competitors. C operates in a shopping centre on the other side of town and (for the purposes of this illustration, at least) is not a competitor of either. In their agreement all three parties agree to pool their buying power and collectively acquire their flour, sugar and oil from the one wholesaler.

If in the same agreement A and B were to agree on the price at which they will sell their doughnuts to the public (that is, engage in price fixing), C will also be liable for price fixing, as it is a party to an agreement that contains a cartel provision.

Moreover, even if A and C (as non-competitors) were to agree to fix prices (perhaps for consistency across their franchise), the arrangement will still be illegal: it has a provision the purpose of which is to fix prices and two of the parties to the arrangement are competitors.

  • Thirdly, the notion of who is party to a CAU has been extended to include any related body corporate to the corporation that actually enters into the CAU.16
  • Fourthly, it is quite possible that the definition of “competitor” has been broadened significantly. Outside the new Cartel Laws (and under the old price-fixing regime), competition is defined as being competition in a market17 and a “market” is, in turn, defined as being limited to a market in Australia.18 There is, however, no reference to any such limitation in the Cartel Laws. The only requirement is that competitors be in competition with each other for the supply or acquisition of goods or services, as appropriate in the context of the impugned provision.19

Subject to any judicial guidance on the jurisdictional reach of these provisions, it would appear that any company that produces, sells or acquires goods or services in an overseas market (or has the potential to do so) or has related companies that do so will have to make itself aware of:

  • its competitors in that foreign market and their respective related companies; and
  • what its own related companies are doing both domestically and overseas in terms of contracts, arrangements and understandings

Criminal or Civil Prosecution

There are two aspects to the question of whether a particular contravention will be prosecuted as a criminal offence or a civil penalty prohibition. One is legal and the other is a matter of administrative enforcement policy. The legal aspect is dealt with here. The policy factors are considered further below.

First, given that the conduct (or what criminal lawyers call the “physical element”) is the same in each case, the factor that distinguishes a criminal from a civil breach is that the criminal offence requires proof of a mental or “fault element” (what was once taught in Law Schools as mens rea).

In order to make out the offence, the prosecutor will need to prove beyond reasonable doubt that the individual or corporation involved:

  • Intended to make a CAU20 and had the knowledge or belief that it contained a cartel provision;21 or
  • Knew or believed the CAU contained a cartel provision22 and that it intended to give effect to the cartel provision.23

Where these fault elements are absent (or, at least, cannot be proved beyond reasonable doubt), the civil prohibition will still apply to the conduct. While a lack of intention, knowledge or belief may be a factor going to mitigation of the penalty, it is not a defence to the civil prohibitions. In any case, given the requirement for all offences other than price fixing that the provision have the proscribed purpose, proof of the mental element is unlikely to be problematic in practice.

Exceptions

Before looking at the following exceptions to the general prohibitions, it is worth noting that although they are styled “exceptions”, the Act considers many of them in the context of a prosecution and places the onus on the Respondent to raise them as an issue. This is a factor that should be considered from the outset when considering any arrangement to which an exception might need to be relied upon. Comprehensive, contemporaneous and properly admissible documentation will be essential.

Joint Ventures

One of the more significant effects of the amendments is in respect of joint ventures. Previously, the Act contained joint venture defences to the prohibitions on price fixing24 and exclusionary provisions25 if the provision was for the purposes of a joint venture and unlikely to have the effect of substantially lessening competition.

The new exception26 requires:

  • a contract containing a cartel provision, or at least that the parties intended that there be a contract and reasonably believed there was a contract;
  • the cartel provision is for the purposes of a joint venture;
  • the JV is for the production and/or supply of goods or services; and
  • the JV is carried on jointly by the parties to the contract or by means of joint ownership or control of a body corporate formed by the parties to carry on the activity.

So which activities of joint ventures are immune?

  • First, only those that are the subject of a contract – not an MOU or Heads of Agreement or even a deed (unless those documents also document an underlying contract at law). Certainly, informal arrangements will not be protected.
  • Secondly, the contract must record in sufficient detail the cartel provision. A JV agreement that, say, leaves operational decision making to a management committee may not be sufficient protection if the committee subsequently decides to restrict supply or fix prices.
  • Thirdly, it must be for the production and/or supply of goods or services. The exception does not apply to:
    • the joint acquisition of goods or services (although other exceptions may apply); and
    • JV’s that are not necessarily for production or supply. Very real questions arise with JV’s for, say, research, exploration and funding consortia where production or supply may not necessarily be contemplated.

Given the introduction of the offence of “attempt”, negotiations about a proposed joint venture that is not yet the subject of a contract can carry some risk. At the very least, before such negotiations are commenced it would be advisable to document as precisely as one can the intention to enter into a formal joint venture contract and set strict guidelines on how discussions about sensitive topics are to proceed.

It is our view that the prudent course is to document a binding contract to negotiate that provides that the parties will negotiate in good faith etc and includes a clause to the effect that each party agrees and acknowledges it has no intention of entering into any CAU unless and until a formal JV contract is executed and, where appropriate, ACCC authorisation or other clearance is obtained.

Even if the exception applies, if the contract (or any associated arrangement or understanding) has the purpose or effect of substantially lessening competition then it may still contravene section 45 and so still be subject to civil prosecution.

It is therefore essential to properly plan JV arrangements from the outset, formalise any arrangements and consider getting authorisation where appropriate.

Related Bodies Corporate27

As with the previously existing regime, CAUs solely between related bodies corporate are exempt.

Collective Acquisitions28

An exception to the cartel offences and civil prohibitions against price fixing exists for the collective acquisition of goods or services and the joint advertising of the price at which such goods are re-supplied. Buying groups, in particular, are therefore still permitted to agree collectively on the price at which particular goods or services will be acquired for the group. Only where there has been such a collective acquisition may they then agree on the price at which those goods or services may be advertised for resale.

Again, it is important to bear in mind that the exception operates only with respect to the cartel laws. If such collective acquisition and resale arrangements have the purpose or effect of substantially lessening competition, they will be unlawful (although not criminally) under section 45.

Notified Collective Bargaining29

What was intended to be a straightforward and accessible system for the notification of collective bargaining arrangements has not been used as widely as many had anticipated. Nonetheless, the collective bargaining notification regime has been amended to allow for immunity against the cartel offences, with the exception of bid rigging which is expressly excluded.30

Anti-overlap Provisions31

If it can be shown that the impugned provision is actually one that can be characterised as an anticompetitive covenant (on a title to land), resale price maintenance, exclusive dealing, a dual listed company arrangement or an anticompetitive merger or acquisition of shares or assets, the cartel and exclusionary provision laws do not apply.

While to date these so-called anti-overlap provisions have been intended to prevent double prosecution under the general prohibition against anticompetitive CAUs in s.45 and these specific instances, they take on a new significance in the context of a criminal trial. It is reasonable to expect that a defendant to a criminal prosecution may seek to argue that the conduct is exclusive dealing or resale price maintenance and thus “only” a civil contravention.

Authorisation

Of course, any anticompetitive conduct prohibited by the TPA may be authorised by the Australian Competition and Consumer Commission (save for a misuse of market power) where there is a public benefit that outweighs any anticompetitive effect.32 Newly inserted provisions make this clear with respect to all cartel provisions.33 That said, the circumstances under which conduct such as bid rigging would be authorised are difficult to imagine.

Noting the considerable potential for overreach of the new provisions, it is apparently Parliament’s intention that authorisation be used to legitimise otherwise benign commercial arrangements.34 The willingness of parties to adopt this route and the capacity of the ACCC to handle a potentially enormous increase in applications might be matters of concern.

Authorisation a Condition Precedent

As with the previous regime, an exception applies to any contract (and, again it must be a contract) that contains a cartel provision that is subject to a condition that the offending provision will not come into force unless and until an authorisation is granted – and the application for authorisation is then made within 14 days of the contract.35

Other Exceptions

The TPA also provides for a large number of miscellaneous exceptions,36 including:

  • conduct specifically authorised by legislation;
  • employment and contracts for service arrangements;
  • requirements of adherence to Australian Standards;
  • partnership arrangements;
  • protection of goodwill in respect of a sale of a business;
  • certain export arrangements where the parties have informed the ACCC of the arrangement;
  • concerted action taken by consumers of goods against suppliers; and
  • certain conditions imposed on intellectual property licences.

It should also be noted that some industries have specific regulatory regimes that apply to them either instead of or in addition to the cartel provisions. These include, international liner cargo shipping37 and telecommunications,38 respectively.

Penalties

Criminal Contravention

Corporations

The principal criminal penalty for corporations is a fine. A corporation convicted of a criminal cartel offence will face a fine of up to the greater of:

  • $10,000,000;
  • if the court can determine the total value of the benefits that:
  • have been obtained by one or more persons; and
  • are reasonably attributable to the commission of the offence;

3 times that total value;

  • if the court cannot determine the total value of those benefits—10 per cent of the corporation’s annual turnover during the 12 month period ending at the end of the month in which the corporation committed, or began committing, the offence.39

“Annual turnover” is defined as being the sum value of all supplies made by the entire corporate group of which the relevant corporation is a member during a 12 month period.40 It goes without saying that this is a potentially enormous sum.

Individuals

The penalties for individuals have been the subject of much public discussion and their value as a deterrent is very much at the crux of the reform agenda. An individual either committing or otherwise knowingly involved in a cartel offence will face imprisonment for up to 10 years or a fine of up to $220,000 or both.41

The Court is also empowered to make related orders42 such as injunctions and orders for community service, probation, disclosure of information, publishing of advertisements, adverse publicity, disqualification from managing corporations and payment of compensation.43

Civil Contravention

A corporation that has been found to have contravened a civil cartel prohibition faces the same formula for penalty set out above for a criminal contravention, although it is a pecuniary penalty rather than a fine.44 Nomenclature aside, the principal difference for a corporation is, of course, the stigma associated with a criminal offence. Possibly, the fact that the particular contravention is civil rather than a criminal offence may be reflected in the size of the penalty – although in which direction may be a matter for debate.

It is also worth noting that the pecuniary penalty formula is not identical to that applied for contraventions of the other prohibitions in Part IV – the former looks at the benefit received by one or more persons (potentially the whole cartel) whilst the latter pays regard only to the benefit received by the Respondent company.45

Interestingly, individuals subject to civil prosecution face a significantly higher maximum pecuniary penalty that they might have to pay as a criminal fine. Rather than the $220,000 for a criminal offence, civil breaches attract a maximum of $500,000. The Explanatory Memorandum to the amending Bill explains that the lower criminal figure is to maintain consistency with equivalent Commonwealth offences. One should also accept that the stigma and ancillary effects of a criminal conviction, as well as the prospect of a gaol term are also relevant considerations in making the fine less than half the civil penalty.

As with the criminal penalties, the Court is empowered to make the same range of ancillary orders set out above.

Application to individuals

The main criminal cartel offence provisions target corporations as the direct offender. However, natural persons will also be guilty of a criminal offence if

the relevant conduct falls within the newly expanded extended application provisions in section 6;46

  • or they:
  • attempt;
  • aid, abet, counsel or procure;
  • incite;
  • are directly or indirectly knowingly concerned in;
  • or conspire in

the commission of a criminal cartel offence.

Also, a non-corporate employer can be convicted of a criminal cartel offence on the basis of vicarious liability. The new Act attributes the state of mind of an employee or agent to the non-corporate employer.47 A non-corporate employer cannot be goaled on this basis but still faces conviction, fines, etc.

Individuals may also face direct liability for committing the parallel Code offences.

Further, now that cartel conduct is a criminal offence, countries with which Australia has an extradition treaty will be able to seek extradition of individuals for criminal cartel proceedings overseas, and vice versa.

Enforcement - Immunity

Balanced against the risk of gaol for individuals and criminal convictions for companies are the prospect of immunity from both the ACCC and the Commonwealth Director of Public Prosecutions. With the ACCC offering immunity to the “first through the door” only, individual and corporate cartel participants have a considerable incentive to inform on their co-conspirators. Given the difficulties of detecting cartels without the cooperation of an informant, it can be expected that many more ACCC investigations will be instigated following the “confessions” of a participant.

The ACCC and CDPP each have their own policies and regulatory frameworks in which they must operate. Importantly, the ACCC may grant immunity only in respect of civil penalty prosecutions. Only the CDPP decides whether or not to grant immunity from criminal prosecution. Notwithstanding a degree of liaison and cooperation, each is required to make its own independent decisions.

Note also that all immunity is conditional on the party fulfilling a number of on-going obligations.

  • The ACCC’s requirements – you must not be a ringleader; you must be first in and give full and frank disclosure and cooperate with the investigation; and the ACCC must not have received written legal advice that it has sufficient evidence to commence proceedings at the time of the application. If meeting these criteria, you may receive immunity from civil prosecution and penalty.
  • The CDPP requirements – it will act on an ACCC recommendation but must be independently satisfied having regard to the Prosecution Policy of the Commonwealth that the applicant should receive immunity; the applicant must provide full cooperation with the ACCC’s investigation and the CDPP’s prosecution and be willing to appear as witness.

Immunity can be revoked at any time if the applicant does not meet the conditions of immunity.

Investigation Process

Even where it has the assistance of an informant, it will not usually be possible for the ACCC to determine whether it will pursue criminal or civil prosecution at the initial stages of an investigation. The ACCC has stated that it will conduct its investigations in a manner that will preserve its capacity to seek criminal prosecution unless it has a clear indication that the matter will be prosecuted civilly. It may also conduct investigations with a dual track approach by having separate criminal and civil investigation teams, although it has stated that this will be an exception rather than the norm.

The ACCC retains its power to issue compulsory notices under s.155. Reflecting the greater seriousness with which the criminal offences are considered, however, the ACCC has been granted some additional investigative tools and has had a number of the existing investigative measures enhanced.

Telephone Interception

Possibly the most dramatic of additional weapons to the investigative armoury of the ACCC is the ability, in conjunction with the Australian Federal Police, to obtain a telephone interception warrant under the Telecommunications (Interception and Access) Act 1979 (TIA Act). Such a warrant permits officers of the AFP to “wire-tap” telephone calls.

An interception warrant may only be issued with respect to a “serious offence”, which is currently defined as being punishable by imprisonment for 5 years or more. With cartel offences punishable by up to 10 years in gaol, no legislative amendment was actually required to achieve this outcome. The TIA Act has nevertheless been amended to expressly include the two indictable cartel offences as serious offences in respect of which a warrant may be issued. While the E.M. states that this is to provide “certainty of application”, one cannot ignore the deterrent effect that the express provision may provide. Would-be price-fixers, for example, will be more reluctant to discuss their arrangements over the phone when they know there is a risk of the call being intercepted.

Entry and Search (“Dawn Raids”)48

Many of the existing entry and search powers of ACCC inspectors have also been enhanced. Rather than simply list these amendments, a general overview of the more salient powers may be useful.

The ACCC may:

  • with the occupier’s consent to enter: search the premises and electronic equipment and make copies of evidential material;
  • with a search warrant from a Magistrate: enter; search; make copies; take photographs or video recordings; seize evidence of an offence at risk of concealment or destruction; remove things (for up to 72 hours) to examine them to determine their forensic value; use force against things and have an AFP Officer assist and use reasonable force against persons and things;
  • with a specific search warrant from a Magistrate: require a person to assist in accessing computer data;

It is crucial that a suitably informed person, such as (but not necessarily) a lawyer be informed as soon as possible that a search is taking place. Even if they cannot attend the premises to monitor the search, they should be relied on to provide guidance and advice over the telephone.

Self Incrimination

Although this guide discusses some very real and serious exceptions, it is important to bear in mind that, generally speaking, an individual retains his/her privilege against self-incrimination.

Despite having compulsory interview powers under s.155, the ACCC often conducts “voluntary interviews”, which are formally recorded. Although anything said in such interviews can be used in evidence, this is a voluntary process. With the risk of gaol, individuals ought to get considered legal advice prior to agreeing to this process.

Alternatively, a person may be arrested or “taken in for questioning” by police. The investigators are obliged to follow normal criminal procedures in relation to records of interview which include the right to silence, a warning, the opportunity to obtain legal advice, etc.49 Again, an individual should take legal advice before agreeing to participate in a record of interview.

When questioned pursuant to a warrant or a s.155 Notice, an individual is not excused from answering a question or producing material on the ground that it may tend to incriminate them, expose them to a penalty50 or expose them to an order disqualifying them from managing a company.51

Importantly, however, the answer to a question is not admissible as evidence against the individual in criminal proceedings.52

Prosecution

Referral to CDPP

The ACCC is responsible for the investigation and evidence gathering, managing the immunity process in consultation with the CDPP and referring serious cartel conduct to the CDPP, who will be responsible for prosecuting the offences.

Which matters will be subject to referral? The two organisations have a Memorandum of Understanding, which states that the ACCC will distinguish between serious cartel conduct from that which is less serious in nature, including relatively minor conduct. In particular, it will be inclined to prosecute arrangements where it considers there is:

  • large scale or serious economic harm;
  • long standing conduct with significant impact;
  • significant detriment to the public or loss to customers;
  • previous convictions or admissions to cartel;
  • value of affected commerce $1m in 12 months;

Attempts to engage in a cartel or those shut down in early stages may still warrant prosecution if significant enough.

The Prosecution Policy of the Commonwealth states that criminal charges will not be laid simply because a prosecution is possible – the CDPP requires reasonable prospects of conviction and that a conviction is in the public interest.

The decision to prosecute is CDPP’s alone

The annexure to the CDPP Policy effectively says that although it’s the CDPP’s decision, it will be inclined to accept the ACCC’s recommendation.

But this will not stop the ACCC from investigating and causing significant and expensive disruption to your business. In our experience, ACCC investigations for these sorts of matters are, by their nature, very large, well resourced, highly intrusive, expensive and time consuming. They can continue for many months. Where there is an international aspect to it, these factors can be magnified.

There is also the prospect that dual criminal and civil proceedings may be instituted, although the double jeopardy rule applies. However, the rule applies in one direction only: whilst a criminal prosecution may not be followed by a civil proceeding by the ACCC, a civil proceeding may be followed by a criminal prosecution.53

Settlements

The ACCC will not engage in any discussions with parties as to settlement of civil proceedings until it has formed a view about how serious the conduct is and decided to either not refer to the CDPP, or received advice from the CDPP that a criminal prosecution shouldn’t be commenced.

The ACCC will not negotiate with parties seeking to ‘trade off’ a criminal prosecution for a civil settlement.

Where a criminal prosecution is commenced it can be expected that plea bargaining with the CDPP will be available in appropriate circumstances.

What to look out for

Your own internal investigation

In addition to the new legislative powers, the ACCC now has dedicated resources to conduct this sort of work. With so much at stake, and the likelihood of detection so high, it is our view that a more proactive approach must be taken by those responsible at companies, be they counsel or executives.

One needs to examine whether their business is party to:

  • any joint venture that is not (or is no longer) adequately documented;
  • any other arrangements with real or potential competitors that warrant closer scrutiny.

One also needs to look at the risk profile of their company. For example, one or more of the following (but by no means exhaustive) factors are often found where cartels have been detected:

  • no or an unreliable/out of date compliance program;
  • active industry associations;
  • regular team bidding on projects or other partnership arrangements (e.g. construction, development or capital funding industries);
  • sales driven market or industry;
  • deteriorating or difficult market conditions;
  • an “incestuous” industry where everyone knows everyone else and/or has worked for everyone else;
  • incentive structures for employees that also create incentives to collude; and/or
  • an assumption that everyone knows the rules and that the business has a culture of compliance – often based on the premise that the business has never been in trouble.

If you are in a “high risk” group, regular review of possible signs of collusions are warranted – unusually stable market share, stable profits in declining economic conditions, patterns of market allocation, patterns of regularly winning the same tenders and more effort going into some tenders than others are some examples. Information on cartel activity may also be uncovered in internal audits.

It is also a mistake to presume that illegal cartel activity is always performed by unscrupulous, dishonest or greedy personnel. Many prosecuted cartelists have maintained that they were only trying to bring some “sense” or “order” to the market, prevent closures or layoffs, or otherwise save the business or industry. A large proportion have also claimed that the arrangement was only ever intended to see the company through tough times and would be disbanded once things returned to “normal”.

In assessing information, take care of the documents you uncover and create. The ideal course is to have external lawyers conduct inquiries. Your competition lawyers should have expertise and experience in conducting sensitive investigations, including interviews of past and present employees. They will be able to prepare a candid and comprehensive report to your business that will also be the subject of legal professional privilege.

Weigh up your assessment of the evidence of a possible cartel violation and projection of potential exposure to civil and criminal sanctions and costs.

Decision to report to the ACCC

Be quick, but don’t panic. Engage an external lawyer to speak to the ACCC on a “hypothetical basis” to see if immunity is available, but without disclosing anything that may incriminate. Applying for a marker for immunity may also be an option if you cannot fulfil all the conditions of immunity straight away. Experienced competition lawyers should know and be known by senior ACCC personnel, so as to facilitate meaningful communications with the agency.

Leniency - if someone else has beat you to the ACCC, you can still obtain a reduced sentence or civil penalty by cooperating with the investigation and prosecution or revealing additional information about which the ACCC was unaware.

Note that by reporting in Australia you might have to consider reporting to regulators in other jurisdictions and to stock exchanges etc.

Gaining immunity or a reduction in penalty does not stop potential private civil actions from being brought. Amcor, for example, gained immunity from prosecution in the Visy cartel but is a respondent to a number of private suits and class actions. A properly managed strategy to minimise your exposure to damages is essential from the outset.

What to do now

Review all arrangements that may be considered joint ventures or other “at risk” agreements. Seek advice where necessary.

Ensure you have an up-to-date compliance program that includes training and reporting procedures. Remember that knowing the law is only part of the solution. Conduct doesn’t have to be illegal to attract attention and for every cartel that is prosecuted, the ACCC investigates many innocent businesses. A good compliance program will help employees to know how to conduct affairs so that they don’t attract undue scrutiny from the ACCC.

Conduct a risk assessment and, if appropriate, conduct further inquiries to uncover inappropriate or unlawful conduct.

Ensure relevant staff know what to do in the event of an ACCC investigation. Who does the receptionist call when the ACCC arrives with a warrant?