On 24 October 2014, the Federal Court handed down penalties totalling $8.3 million to two companies and three individuals for engaging in cartel conduct with respect to the supply of LPG cylinders for use in forklifts (Forklift Gas).1 The judgment reflects both the increasing penalties sought by the ACCC in relation to cartel conduct and the substantial discount on penalties available to parties who cooperate with the Australian Competition and Consumer Commission (ACCC) in its investigation and prosecution of these matters.
Renegade and Speed-E-Gas are competitors in the supply of Forklift Gas in Sydney. The individual respondents were senior officers or sales staff employed by the companies during the relevant period and were all involved in the implementation of the conduct that was found to contravene the Competition and Consumer Act 2010 (the Act). The case followed an extensive investigation and the contraventions were not contested before the Court by any of the respondents.
The contravening conduct
According to the agreed statements of fact submitted to the Court by the parties, the companies reached an understanding not to actively poach each other’s customers, either by refraining from pursuing each other’s respective customer base or, where this had occurred, by allowing the other party to 'poach back' a volume equivalent to that poached in the first instance.
Determining the appropriate penalties
The ACCC submitted, and the Court agreed, that the appropriate penalty for the respondent corporations (before any discount) should be set at $5 million, which reflected (amongst other things):
- the seriousness of the conduct, and
- the scope of the affected market.2
The Court also acknowledged that the maximum penalty for individuals for a single course of conduct under the Act is $500,000.
The ACCC then submitted, and the Court accepted, that certain discounts should be applied to each of the Respondents, mostly according to the level of the parties’ cooperation with the ACCC during the investigation and settlement stages of the dispute.
Renegade received a penalty of $4.8 million, representing a 4% discount off the headline penalty. This limited discount reflected the company’s lack of cooperation with the ACCC throughout the investigation and subsequent litigation.
Speed-E-Gas received a penalty of $3.1 million (a substantial discount of 40% off the headline penalty), largely because of the nature, extent and earliness of its cooperation with the ACCC.
In terms of the individual respondents, Mr Berman received the highest penalty of $250,000. The Court considered this to be appropriate, taking into account the deliberateness of his conduct and the financial cost to Mr Berman for the order disqualifying him from managing any company for three years. The other individuals, Mr Smith and Mr Wilson each received penalties of $100,000 and $50,000 respectively, reflecting their roles and the extent and timing of their cooperation with the ACCC.
In applying the penalties, the Court indicated that its role was to strike a balance between ensuring that the penalty acted as a significant deterrent to others, while not being oppressive to each respondent.
In that light, it is interesting to note the very generous timeframe of up to 52 months for Renegade to pay its penalty and the fact that the size of Mr Berman’s penalty was also influenced by his capacity to pay a larger penalty.
Cooperation with the ACCC is key
The ACCC’s Immunity and Cooperation Policy for Cartel Conduct sets out the ACCC’s position regarding immunity or leniency following cooperation in enforcement matters.
The Policy recognises that cooperation can include complete or partial immunity or, as reflected in this case, a reduction in penalties in civil proceedings for breaches of the Act.3 The relevant factors that the ACCC will consider when determining whether to reach an agreement on civil penalties with a cooperating party include:
- the extent of their cooperation with the ACCC,
- whether there exists a culture of compliance (within a corporate respondent), and
- the deliberateness of the conduct and, where applicable, the size and power of the corporation.
The importance of cooperating with the ACCC from the early stages, and the substantial impact this can have on any penalty, is clear from this decision.