Successful cartel prosecutions are as rare as hen’s teeth. The test for illegality is hard to meet, and in most cases you’ll only get circumstantial evidence of cartel conduct. The ACCC’s latest prosecution looked at whether an industry body was attempting to induce cartel conduct between its members.

The Australian Egg Corp (AECL) is an industry body for egg producers in Australia. A couple of years back, an oversupply of eggs threatened the industry. The AECL met with egg producers to propose that they cut back supply (e.g. cull some birds or donate eggs to the needy) to correct the problem.

The ACCC got wind of it and freaked out. To the naked eye it looked like the AECL was attempting to induce competing egg producers to collectively limit the supply of eggs. Which would be an illegal attempt to induce cartel conduct, of the market-rigging kind.

To make out its case, the ACCC needed to prove both mental and physical elements. The physical element requires a positive act – in this case the call to action directed to the egg producers. The mental element requires an intention to bring about behaviour that is prohibited.

In this case the AECL did want egg producers to take action to address the oversupply, but that was ok. The court didn’t accept that the AECL intended to induce co-operative action between the egg producers. The judge took the view that the egg industry was highly competitive, and that egg producers were inherently unlikely to cooperate and the AECL knew as much. So the likelihood was that it wasn't really expecting any co-ordinated action by the egg producers.

We disagree. We say that if the industry is competitive, the AECL could only have contemplated co-ordinated action. Individual action would be to the detriment of the individual egg producer in a competitive industry. The only way to motivate competitors to cut supply would be via assurances that everyone was doing likewise.

On our reading of the evidence, the decision looks a little shaky and we'll be expecting the ACCC to appeal. The egg pun danger meter will remain at Extreme for now.