A clean record and cooperation with the ACCC might be helpful, but as Japanese electricity cable supplier Viscas discovered, penalties will still be imposed if you’ve been involved in cartel conduct.

On 5 April the Federal Court imposed a $1.35 million penalty on Viscas as part of a court-approved settlement between it and the ACCC.  The Court also ordered Viscas to pay a further $50,000 towards the ACCC’s costs in the case, which related to Viscas’ conduct in connection with a tender to supply the Snowy Hydro Project with electrical cables in 2003.

Drawing on a statement of agreed facts between the parties, the Federal Court accepted that Viscas was party to an agreement with a number of other Japanese and European electrical cable suppliers that dictated which of them was supposed to be the successful tenderer for the Snowy Hydro Project.  By an exchange of emails around the same time, those suppliers also agreed on pricing ‘guidance’ for their tenders, which was designed to ensure the selected tenderer’s pricing would be lower than that of all the others.

As a result, Viscas agreed with the ACCC that its conduct back in 2003 was in breach of both limbs of subsection 45(2) of the Trade Practices Act (as it then was).  Nowadays of course (since July 2009), the same type of conduct has the potential to attract criminal prosecution for bid rigging and price fixing under the cartel laws set out in Division 1 of Part IV of the Competition and Consumer Act 2010.

It’s worth noting too that the anti-competitive agreement was actually unsuccessful – the Snowy Hydro Project tender was eventually awarded to an independent cable supplier called Midland Metals.  In an interesting observation that might serve to illustrate the potentially adverse effects of cartel conduct, the Federal Court judgment of Justice Lander noted that Midland Metal’s pricing was half that quoted by the nominated tenderer, and less than a third of the price submitted by one of the parties who followed the price ‘guidance’.

Despite the lack of the cartel’s success, the nature of the conduct and the fact that a senior Viscas employee was involved led Justice Lander to the view that:

‘The conduct complained of was very serious. It involved a deliberate course of conduct by engaging in anti-competitive behaviour at the expense of customers in that market.”

In assessing whether the $1.35m penalty agreed between the parties was appropriate, Justice Lander’s approach followed a familiar path, quoting with approval the matters outlined by Justice French (as he then was) in the CSR case for assessing penalties for anti-competitive conduct.  In doing so, particular mention was made of Viscas’ cooperation with the ACCC, and the lack of any previous convictions or fines for anti-competitive behaviour.

However, Justice Lander also took the opportunity to address the policy objective behind punishing cartel behaviour, by first noting that it can be difficult to detect and then sounding a clear warning:

“When it is established, any penalty imposed should be significant so as to deter any other corporation engaged in trade and commerce from engaging in the same conduct.”

ACCC Chairman Rod Sims expressed a similar sentiment in his comments after the Viscas judgment was delivered:

“Cartels damage the economy, often raising prices for local businesses and consumers, and hurting those businesses that play by the rules. It is crucial for the ACCC to continue to tackle cartel conduct, whether Australian or foreign based with the full force of the law.”

The Chairman’s comments are consistent with a number of other recent public statements that indicate the prosecution of cartel behaviour remains a high priority for the ACCC, which means it’s unlikely Viscas will be the last company that is forced to reach for its chequebook, or worse, for engaging in cartel conduct.

In the mean time, proceedings against two other companies alleged to have been involved in the cartel with Viscas, Prysmian and Nexans, are continuing.