The Australian Federal Court recently found Yazaki Corporation guilty of engaging in collusive conduct with its main competitor in Japan in relation to the supply of wire harnesses to Toyota in Australia. This decision highlights the extra-territorial operation of Australia's competition laws and the significant implications for foreign corporations of contravening them.

In this eBulletin, we talk about the Federal Court's decision and what this means for international businesses in terms of anti-competitive behaviour and the severe penalties associated with cartel conduct. We also explain why consideration of Australia's competition laws is essential for any business dealing with Australian customers, and what needs to be done to manage compliance risks adequately.

Federal Court finding against Yazaki Corporation

In proceedings recently brought by the Australian Competition and Consumer Commission (ACCC), the Federal Court has found that Japanese company, Yazaki Corporation, breached the Competition and Consumer Act 2010 by engaging in collusive conduct.

The Court found that Yazaki entered into and/or gave effect to a number of arrangements with its main competitor in Japan in relation to the co-ordination of quotes for the supply of wire harnesses used in the manufacture of Toyota Camrys in Australia. The breaches dated back to 2003 and 2008.

The competition provisions in the Competition and Consumer Act extend to conduct that takes place outside Australia by bodies corporate incorporated or carrying on business in Australia. Yazaki is a Japanese corporation with no premises, offices or employees in Australia, and all of the relevant conduct took place in Japan. The issue then was whether Yazaki was itself carrying on business in Australia separately from its wholly owned subsidiary, Australian Arrow Pty Ltd.

The Court held that, in relation to the supply of wire harnesses to Toyota in Australia, Yazaki did carry on business in Australia, in parallel with its subsidiary. This was due to the degree of direction and control exercised by Yazaki over the supply of the wire harnesses to Toyota Australia. Yazaki was responsible for its relationship with Toyota internationally and product was supplied based on a global design and globally sourced through Toyota in Japan. In relation to the bidding process for the supply of wire harnesses for the Toyota Camry manufactured in Australia, the Court found that Yazaki had a substantial involvement, to the exclusion of its subsidiary.

The Court also found that Australian Arrow Pty Ltd, engaged in market sharing and price fixing conduct in 2002 with the local subsidiary of Yazaki's competitor.

The ACCC was not successful in all claims. The Court rejected the argument that Australian Arrow gave effect to the collusive arrangement entered into by Yazaki in Japan. It also found that there was no price fixing arrangement within the terms of the former price fixing provisions in the Competition and Consumer Act, as there was not the required market in Australia for supply of wireframes to Toyota.

A hearing on penalties is yet to take place.

Importance of Australian competition law compliance for international companies

The key lesson from this case is that international corporations doing business, whether directly or indirectly, in Australia need to be aware of Australian competition law and its extra-territorial operation.

Foreign companies that enter into cartel arrangements outside Australia may still fall foul of Australian laws if it can be demonstrated that they undertake some business in Australia. Further, the ACCC has indicated its willingness to take action against such companies. Following the Yazaki decision, the Chairman of the ACCC, Rod Sims, commented that:

“Even where collusive arrangements are made outside Australia, the ACCC will seek to enforce Australian cartel laws to protect Australian consumers and industry”

ACCC and JFTC Cooperation Arrangement

The ACCC’s action follows similar enforcement action against Yazaki and other cartel participants by competition regulators in the US, Canada, and Japan. According to the ACCC, it arose from an immunity application that reported the conduct.

As we have previously reported, the ACCC and the Japan Fair Trade Commission entered into a Cooperation Arrangement earlier this year. The Cooperation Arrangement enables the two agencies to freely exchange information and assist each other with investigations, promoting globalised cooperation in combatting anti-competitive conduct. Such arrangements make it more likely that anti-competitive conduct will be identified and prosecuted.

Implications of contravening Australian competition laws

The provisions of the Competition and Consumer Act which Yazaki was found to have contravened are still in force. Further, since 2009, the Act has contained enhanced measures to deal with cartel conduct, including criminal sanctions.

Penalties for contravention of the competition provisions in the Competition and Consumer Act can be severe.For corporations, the maximum penalty per offence is the greater of $10 million and three times the total value of the benefits obtained from the contravention or, where benefits cannot be fully determined, 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.

Individuals face penalties of A$500,000 and, in relation to cartel conduct, can face up to 10 years in jail and/or fines of up to A$360,000 per criminal cartel offence.