The ACCC has published an updated immunity and cooperation policy which offers businesses and individuals a strong incentive to report their involvement in cartel conduct in order to avoid the consequences of investigation and prosecution. Of course this updated policy will also mean that the risks of detection for cartel conduct are now greater than ever.
On 10 September 2014, the ACCC published its updated Immunity and Cooperation Policy for Cartel Conduct (Updated Immunity Policy) together with a companion Frequently Asked Questions (FAQ) document.
The ACCC has had an immunity program in place for over 10 years for cartel conduct. Under this program, individuals and businesses who report their involvement in cartel conduct are provided with complete immunity from prosecution provided that they are the first to report the cartel and they agree to fully cooperate with the ACCC’s investigation and ensuing legal proceedings.
The Updated Immunity Policy is the result of a review and consultation process which commenced in 2013.
Immunity program in context
Prioritisation of enforcement action against cartel conduct
Under the leadership of Chairman Rod Sims, the ACCC has shown itself to be increasingly committed to pursuing formal legal action and court-ordered penalties for cartel conduct and other conduct in breach of the Competition and Consumer Act 2010 (CCA).
In announcing the ACCC’s enforcement priorities for 2014, Rod Sims advised that the ACCC had 15 cartel investigations on foot and that he expected 2 to 3 of those cases to result in proceedings during the course of the year.
True to his word, in 2014 Sims has already instituted two sets of proceedings for attempted cartel conduct. The first, filed in May 2014, involved an alleged attempt by an industry body, the Australian Egg Corporation, and two egg producers to encourage members to reduce the supply of eggs in the marketplace. The second, filed in August 2014, involved an alleged attempt by OmniBlend Australia to enter into an agreement with a competitor to fix prices. In both cases, the ACCC is seeking civil penalties against both the concerned businesses and individual directors.
Relevance of immunity program to detection and prosecution of cartel conduct
Although there is no evidence to suggest that the above cases originated in immunity applications, it is clear from other cases and public statements that the ACCC views its immunity program as a key tool for the detection and prosecution of cartel conduct which would otherwise remain secret. Indeed, the ACCC claims to have received over 150 approaches since the immunity policy was first introduced, many of which have led to in-depth investigations and court proceedings.
The most recent example is the high profile case filed by the ACCC in December 2013 against Colgate-Palmolive for alleged cartel conduct in respect of laundry detergent products. This case began with an immunity application from Unilever, the co-party to the alleged conduct.
Relevance to you and your business
The CCA strictly prohibits competitors from entering into or giving effect to agreements containing cartel provisions. Since 2009, cartel conduct is subject to criminal, in addition to civil sanctions.
Businesses involved in cartel conduct face criminal fines and civil penalties of up to $10 million. Individuals face up to 10 years imprisonment and criminal fines of up to $340,000 or civil penalties of up to $500,000.Given the ACCC’s vigorous approach to enforcement action and the seriousness of consequences, it is important to be aware of the availability of immunity for cartel conduct in the unfortunate event that you or your business may one day need to make an application.
Key changes in Updated Immunity Policy
The Updated Immunity Policy does not introduce any major substantive changes to the existing immunity and cooperation program. Rather the changes are aimed at clarifying core concepts and making the process, and the underlying documents, simpler and more accessible to business.
Previously, applicants for immunity and cooperation had to consult 3 separate documents to determine their eligibility for the program. In a welcome improvement, the Updated Immunity Policy now combines the previous Immunity Policy and Interpretation Guidelines together with the relevant parts of the ACCC’s general Cooperation Policy into a single document.
In addition, the document as a whole is more user-friendly and clear in its drafting. The companion accompanying FAQ provides useful guidance to illustrate how the program operates in practice.
Streamlining processes for civil and criminal immunity applications
Although all applications for immunity from both civil and criminal prosecution for cartel conduct are initially processed by the ACCC, only the Commonwealth Director of Public Prosecutions (CDPP) can grant immunity from criminal prosecution.
Under the previous immunity program, the CDPP would only grant final immunity in the form of an undertaking not to prosecute pursuant the Director of Public Prosecutions Act. Given that this involves the exercise of a statutory power, there were concerns that decisions on immunity would not be communicated to applicants by the ACCC and CDPP in a timely and coordinated manner. To address these concerns, the Updated Immunity Policy, now states that the CDPP will issue an interim “letter of comfort” where it is satisfied that the applicant meets the criteria for immunity.
Removal of “clear leader” condition
Under the previous immunity policy, immunity was not available for persons who were the “clear leader” of a cartel or who had coerced others into participating in the cartel. During the consultation process, concerns were expressed that the “clear leader” criterion was difficult to assess and that it was an ambiguous term that could lead to confusion and uncertainty. The Updated Immunity Policy removes the clear leader criterion meaning that the relevant assessment will now focus only on coercion. The FAQ provides guidance on the types of conduct the ACCC will consider amount to coercion (See Q36).
Second and subsequent applicants: leniency and ‘Amnesty Plus’
The Updated Immunity Policy clarifies the leniency treatment that will be available to applicants who are not eligible for immunity because they are not “first-in” yet who continue to cooperate with the ACCC. The policy lists the factors that the ACCC will take into account in assessing the extent and value of the cooperation and in determining whether to reach an agreement on the level of penalties and other orders that the ACCC will seek from the Court. Unlike policies in other jurisdictions, however, it does not specific particular discounts or a range of discounts that will be available to cooperating parties.
Finally, the Updated Immunity Policy provides guidance and clarification on the availability and benefits of “Amnesty Plus”. This program is available to second and subsequent applicants who are cooperating with the ACCC in relation to a first cartel and who disclose the existence of a second and unrelated cartel. These applicants may seek conditional immunity for the second cartel and seek additional leniency, or “Amnesty Plus”, for their cooperation relating to the original cartel. The ACCC has now clarified that it will apply the criteria for obtaining conditional immunity in determining whether to grant Amnesty Plus to second and subsequent applicants.
The cartel provisions in the CCA are complex, wide reaching and subject to serious penalties. The Updated Immunity Policy offers a strong incentive to businesses and individuals to report their involvement in cartel conduct in order to avoid the consequences of investigation and prosecution by the ACCC or CDPP. What this also means of course is that the risks of detection for cartel conduct are now greater than ever.
If you suspect that you or your business may have been involved in cartel conduct, you should seek urgent advice and consider making an immunity application. Remember that as immunity is offered on a first-in basis, time is of the essence in determining whether to make an application so that you can avail yourself of protection before your competitor does.