Prison sentences for cartel conduct are now a stark reality in Australia, with the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 set to become law in just weeks.

Having been passed by Federal Parliament earlier this week, the legislation criminalises price fixing, market sharing, bid rigging and arrangements to restrict output. It imposes gaol terms of up to 10 years and fines of up to $10m for corporations and $220,000 for individuals caught breaking the law. The amendments also enhance the ACCC’s investigatory powers, granting it the ability to use telephone interception powers in addition to other investigatory tools such as search warrants and compulsory notices.

The new criminal sanctions have been a long time coming. It was in 2003 that the Dawson review of the Trade Practices Act recommended that serious cartel conduct should be punishable as an offence and the legislation has gone through several iterations and much public scrutiny before finally being enacted this week.

The new law carries with it a number of uncertainties, particularly the operation of the law in respect of legitimate joint-ventures with competitors. This makes seeking informed legal advice from a competition specialist at the outset of any deal a priority.

The ACCC has already stated that it will not engage in civil settlement negotiations where criminal prosecution is available. It is therefore vital that corporate Australia is made aware that these offences will have application from the time the legislation comes into force, which is expected to be early August. While it does not apply retrospectively, the continuation of any existing cartel arrangements will be a criminal offence.

With the ACCC offering immunity only to the first party to inform it of illegal arrangements, existing cartel participants will now have a much greater incentive to report each other - no one is going to risk going to gaol in order to save others.

In this climate, corporate counsel and responsible executives need to actively scrutinise their organisation to satisfy themselves that illegal conduct is not taking place. Now, more than ever before, senior executives and corporate counsel must ensure that their business has a comprehensive and effective compliance regime in place that includes face-to-face training and counselling from an experienced competition law expert. Companies must commit themselves to ongoing and consistent efforts to develop a culture of compliance.