CDPP v Nippon Yusen Kabushiki Kaisha
Federal Court of Australia (criminal division), New South Wales Registry
[2017] FCA 876
Overview
Image source: By Amada44 (Own work) [GFDL or CC BY 3.0], via Wikimedia Commons
In 2016, following an investigation by the ACCC, the Commonwealth Department of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in contravention of the Competition and Consumer Act 2010.
The cartel operated from at least 1997, but it was the conduct from 2009 (after the criminal cartel laws entered force in Australia) that was the subject of the CDPP's action.
The cartel related to vehicles transported to Australia by NYK and other shippers. The CDPP has charged another shipper (Kawasaki Kisen Kaisha) with cartel conduct in respect of the same cartel.
On 18 July 2016 NYK pleaded guilty to the charges and on 3 August 2017 was convicted and ordered to pay a fine of $25million. This represents the first criminal fine after the (relatively) new criminal laws were introduced in 2009 and second highest monetary penalty for cartel conduct in Australia (after Visy at $36m). The fine incorporated a 50% discount for cooperation and an early guilty plea.
The fine imposed was at the top end of the fine range suggested by NYK as appropriate in this case (it suggested between $20-$25 million)
View court summary of the case
See also my blog on the decision
File details
| Prosecutor | Commonwealth Director of Public Prosecutions |
| Accused | Nippon Yusen Kabushiki Kaisha |
| File Number | NSD1143/2016 |
| Filing date | 14 July 2016 |
| Registry | NSW |
| Docket | Justice Wigney |
| Claim | Cartel conduct |
| Plea | NYK pleaded guilty on 18 July 2016. |
| Sentencing hearing | 11 April 2017 (judgment reserved) |
| Judgment | 3 August 2017 Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 |
| Penalty | Conviction and fine of $25 million (discounted by 50% for early guilty plea, cooperation and contrition) |
| Counsel for the Prosecutor | Ms S McNaughten SC with Dr RCA Higgins and Mr T Anderson |
| Solicitor for the Prosecutor | Commonwealth Director of Public Prosecutions |
| Counsel for the Accused | Mr T Game SC with Mr J Lockhart SC and Mr S Buchen |
| Solicitor for the Accused | HWL Ebsworth Lawyers |
Judgment
Court orders
1. Nippon Yusen Kabushiki Kaisha is convicted of intentionally giving effect to cartel provisions between about 24 July 2009 and about 6 September 2012, in Japan and elsewhere, in connection with the transport of vehicles to Australia, in an arrangement or understanding with others in relation to the supply of ocean shipping services, knowing or believing that the arrangement or understanding contained cartel provisions contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth).
2. Nippon Yusen Kabushiki Kaisha is fined the sum of $25,000,000.
Reasons for judgment
[emphasis added throughout]
Summary
Justice Wigney helpfully provided a summary of the judgment which is available here:
His Honour observes that reasons in criminal sentences 'are traditionally delivered orally' but that that was undesriable given the length of the reasons in this matter. Given this, and the fact that the offender was a corporation, his Honour delivered a summary of reasons orally - cautioning that the 'only authoritative statement' is contained in the full published reasons for judgement.
In respect of penalty, his Honour observed:
[8] The task for the Court is to impose a sentence that is of a severity appropriate in all the circumstances of the offence. Since the offender is a corporation, not a natural person, that sentence must comprise a fine. In NYK’s case, given the terms of the relevant legislation, the fine must not exceed $100 million. The central question, then, is what size fine, up to that maximum, is the appropriate penalty for this serious offence.
Background to the prosecution and guilty plea
[2] This is the first criminal prosecution for cartel conduct under this new regime. It arises out of a longstanding global cartel in a market of considerable importance to Australia: the market for the supply of ocean shipping services for “roll-on, roll-off” cargo, mainly cars and trucks. The particular cartel conduct the subject of the prosecution involved giving effect to the cartel arrangements in respect of shipping routes to Australia.
[3] Nippon Yusen Kabushiki Kaisha (NYK) is a large Japanese company which has for many years shipped motor vehicles to Australia from various countries where the vehicles were manufactured. A number of other large foreign corporations also supplied ocean shipping services in respect of motor vehicles on routes to Australia. Those companies ostensibly competed with each other in relation to the supply of those services. From as early as February 1997, however, NYK and a number of the other shipping companies had arrangements or understandings which had the effect of limiting or distorting that competition.
[4] NYK pleaded guilty to a single charge of giving effect to a cartel provision, contrary to s 44ZZRG(1) of the C&C Act. The indictment ... was in the following terms:
Between about 24 July 2009 and about 6 September 2012, in Japan and elsewhere, in connection with the transport of vehicles to Australia, Nippon Yusen Kabushiki Kaisha intentionally gave effect to cartel provisions in an arrangement or understanding with others in relation to the supply of ocean shipping services, knowing or believing that the arrangement or understanding contained cartel provisions contrary to s 44ZZRG(1) Competition and Consumer Act 2010 (Cth).
[5] In broad terms, there were five other parties to the cartel provisions the subject of the indictment, each of them major shipping lines that also shipped motor vehicles to Australia: ... The cartel provisions related to the fixing of freight rates, bid rigging and customer allocation in respect of shipping services supplied to ten major vehicle manufacturers: ... Six shipping routes for vehicles to Australia were covered by the cartel provisions, being routes from India, Thailand, Japan, Indonesia, North America and Europe. The cartel provisions covered the contract years 2010, 2011 and 2012.
[6] NYK’s offending conduct over the three year period covered by the charge involved the shipping of 69,348 new vehicles to Australia. While it is not possible to determine the total value of the benefits obtained that are reasonably attributable to the conduct, NYK derived revenue of AU$54.9 million and profit of AU$15.4 million from the commerce affected by the conduct. Perhaps more significantly, it is likely that the anti-competitive effect of the offending conduct resulted in higher freight rates on the subject shipping routes to Australia and that, one way or another, those higher freight rates were passed through to Australian consumers in the form of higher prices for the imported cars and trucks.
[7] On just about any view, this was an extremely serious offence against Australia’s laws prohibiting cartel conduct.
The facts
His Honour noted that the facts were not in dispute and provided a brief summary.
A corporation: NYK
His Honour noted that at the relevant time NYK was a Japanese company headquartered in Tokyo (para 34). For purposes of s 5 of the Act, it was (and is) a 'foreign corporation which carried on business in Australia'. NYK also had an Australian subsidiar (NYK (Australia) Pty Ltd) which acted as local agent and arranged ancillary services (para 39).
Competition condition
His Honour concluded that:
[41] Throughout the relevant period, NYK was or was likely to be, or but for the impugned cartel conduct which is about to be described, was or was likely to be, in competition with some or all of Mitsui, K-Line, Nissan MCC, Wallenius Wilhelmson, Hoegh and Toyofuji in relation to the supply of the Services on some or all of the routes to Australia from Japan, Thailand, India, Indonesia, North America and Europe.
The Agreements
His Honour discussed the three key agreements covering various forms of prohibited cartel conduct; price fixing, bid rigging and market sharing.
[46] From at least February 1997, NYK and a number of other shipping companies, including the Carriers, had arrived at an arrangement or reached an understanding to the effect that, as a general proposition, they would not seek to alter their existing market shares or otherwise win existing business from each other. That overarching arrangement or understanding was generally referred to as “maintaining the status quo” or giving and receiving “respect”. It may conveniently be called the “Respect Agreement”.
[47] ... There could be no doubt that the parties to the Respect Agreement, including NYK, competed with each other in respect of the supply of the Services, or at the very least would have competed with each other but for the operation of the Respect Agreement.
[48] The Respect Agreement relevantly contained three provisions: the “Freight Rate Provision”, the “Bid Rigging Provision” and the “Customer Allocation Provision”.
The Freight Rate Provision
[49] The Freight Rate Provision was to the effect that, from time to time, some or all of the Carriers would agree to do some or all of the following four things: first, share information with one another about freight rates or proposed changes to freight rates charged or proposed to be charged to customers or potential customers for the supply of Services on the routes; second, reach agreement about the freight rates, approximate rates, proposed changes or approximate changes to freight rates to be bid or otherwise communicated to customers and potential customers for the supply of Services on the routes; third, submit bids, or decline to submit bids, on the basis of the agreement reached; and fourth, enter into contracts with customers for the supply of Services on the routes reflecting the bids submitted to those customers in accordance with the agreement.
[50] ... the purpose, effect or likely effect of the Freight Rate Provision was to directly or indirectly fix, control or maintain the price for Services supplied by the parties to the Respect Agreement.
The Bid Rigging Provision
[51] The Bid Rigging Provision was to the effect that, from time to time, in the event of requests for bids being made by customers or potential customers for the supply of Services, some or all of the Carriers would do one or more of the following four things: first share information with one another about the requests for bids and freight rates or proposed changes to freight rates; second, reach agreement about how they would respond to requests for bids (which sometimes included an agreement not to bid); third, submit bids, or decline to submit bids, on the basis of the agreement reached; and fourth, enter into contracts with customers for the supply of Services on the routes reflecting the bids submitted to those customers.
[52] ...a purpose of the Bid Rigging Provision was to ensure that, in the event of a request for bids in relation to the supply of Services in respect of which two or more of the parties were or were likely to be in competition with each other, one of three things would occur: one or more of the Carriers would bid but one or more of the other Carriers would not; or two or more of the Carriers would bid but at least two of them would do so on the basis that one of those bids was more likely to be successful than the others; or two or more of the Carriers would bid, but a material component of at least one of those bids would be worked out in accordance with the Respect Agreement.
The Customer Allocation Provision
[53] The Customer Allocation Provision was to the effect that, from time to time, some or all of the Carriers would agree to allocate customers or potential customers who acquired, or were likely to acquire, Services from any or all of the Carriers on a particular route or routes. In the particular circumstances considered later, a purpose of the Customer Allocation Provision was to directly or indirectly allocate between the Carriers the customers who would acquire, or were likely to acquire, Services from those Carriers on a particular route or routes. But for this provision of the Respect Agreement, the parties would have competed for the allocation of the customers.
Giving effect to the provisions of the Respect Agreement
His Honour noted that NSK did the following things in order to give effect to the agreements:
[55] First, it made arrangements or arrived at understandings with other Carriers in relation to some or all of the following things: first, the freight rates to be bid or otherwise communicated to customers or potential customers for the supply of Services; second, the responses to requests for bids from customers or potential customers for the supply of Services; and third, the allocation of customers or potential customers who had acquired, or were likely to acquire, Services from the Carriers
[56] Second, it submitted bids, or declined to submit bids, to customers or potential customers on the basis of the arrangements made or understandings arrived at.
[57] Third, it entered into contracts with customers for the supply of Services on the Routes reflecting the bids submitted to those customers.
[58] Senior executives or senior employees of NYK engaged in discussions, either at meetings or over the telephone, with their counterparts at the other Carriers concerning the matters the subject of the Freight Rate Provision, the Bid Rigging Provision and the Customer Allocation Provision. That was a longstanding practice within NYK’s Car Carrier Group.
[59] Customer sales and contracts were the responsibility of managers in the Car Carrier Group, though some of that responsibility could also be delegated to the deputy managers. It was a common practice for employees in the Car Carrier Group to have discussions with employees of other Carriers about freight rates and responses to requests for tender.
[60] Employees in NYK’s Car Carrier Group also came to learn or understand, from their observations of the conduct of their colleagues, that communications with their counterparts at other Carriers were a common practice within the group. Some of those employees were directly instructed to have those discussions by senior management (including at times at the executive officer level) of NYK’s Car Carrier Group. Employees in NYK’s Car Carrier Group were also expected to, and routinely did, report those discussions up to senior management. Some, but not all, of the NYK employees who engaged in communications with their counterparts at other Carriers were aware that such communications breached, or were likely to breach, anti-trust laws.
[61] Where NYK did not carry a customer’s cargo on a particular route, but NYK had received a request for a bid from that customer, NYK employees would, from time to time, discuss that request with their counterparts from the other Carriers who carried the customer’s cargo on that route. Those discussions on occasion included a discussion about how NYK intended to respond. In some cases, the NYK employee would agree with their counterpart that NYK would not offer a freight rate. In other cases, at the request of NYK’s competitor, the NYK employee would reach an agreement with their counterpart about the approximate or minimum freight rate that NYK would offer, which was higher than the freight rate the other Carrier intended to offer, with the intention that NYK would not win the business.
[62] Similar discussions would often occur in circumstances where NYK did carry cargo for a particular customer on a particular route, and considered it likely that another Carrier which did not carry such cargo had also received a request for tender from the customer. In those cases, the NYK employees would endeavour to extract from their counterpart an agreement that the other Carrier would offer a rate higher than the rate that NYK intended to offer so NYK would retain or win the business.
[63] Employees in NYK’s Car Carrier Group would also sometimes have conversations with their counterparts in circumstances where NYK and other Carriers each carried a share of cargo for a particular customer on a particular route. In such a case, the freight rates or approximate freight rates that each Carrier would offer would be agreed, or it would be agreed to leave freight rates for particular routes, or for particular customers, generally unchanged, or to increase or decrease the freight rate by an amount or an approximate amount.
His Honour then discussed specific instances where NYK gave effect to the Respect Agreement (from para 64-153)
NYK's knowledge of the law
His Honour then discussed NYK's knowledge of the competition laws:
[154] In around 2009, some employees in NYK’s Car Carrier Group attended training provided by NYK’s Fair Trade Promotion Group or NYK’s Anti-Monopoly Act Task Force Team. Throughout the Relevant Period, the Fair Trade Promotion Group was responsible for monitoring NYK’s compliance with anti-trust laws, and providing training to NYK employees in respect of anti-trust laws. The training included contact details of a ‘Help Desk’ for employees in the Car Carrier Group to report issues regarding anti-trust legislation in Japan and examples of recent anti-trust findings against companies in different jurisdictions, including Japan, Europe and the United States.
[155] Some of the employees who engaged in the communications with their counterparts at other Carriers also undertook online training courses concerning anti-trust law during 2010. That training did not cause the employees to stop having discussions with their counterparts at the other Carriers about freight rates and coordinated responses to tenders. Despite the training, the employees continued to observe that such discussions were expected and remained the general practice within NYK’s Car Carrier Group.
[156] In early June 2011, Deputy Managers from NYK’s Car Carrier Group attended a meeting with the General Manager of the Fair Trade Promotion Group concerning upcoming antitrust law training to be conducted by the Fair Trade Promotion Group. Following that meeting, the General Manager of the Fair Trade Promotion Group met with the senior management of NYK’s Car Carrier Group. He told senior management that there was a possibility that employees of the Car Carrier Group were communicating with their counterparts at other Carriers in ways that could contravene Japanese anti-trust laws. He told senior management that such communications should stop.
[157] Senior management of the Car Carrier Group did not heed that advice or follow that directive. They decided that communications with NYK’s competitors should continue, but that only employees at the Manager level or above should engage in them. They also decided that the communications should not be documented in any way. They called a meeting of all Car Carrier Group staff at the Manager level and above who were involved in sales and advised them of those decisions.
[158] Not surprisingly, following this intervention by senior management, NYK employees in the Car Carrier Group continued to engage in communications with their counterparts at the other Carriers. Those communications were generally conducted orally over the telephone or in face-to-face meetings. They were rarely documented. Where the discussions were conducted by telephone, the employees generally conducted the conversations away from their desks, in hallways, lift lobbies, outside the office or in a room referred to as the “phone booth”. The phone booth was a small, glass enclosed room about the size of a phone booth. Some employees were specifically instructed to conduct such telephone calls away from their desks to minimise the risk of junior staff overhearing the conversation and reporting the conduct to the Fair Trade Promotion Group.
[159] In some instances, NYK employees did make notes of their discussions with their counterparts at other Carriers, but did so in a way that concealed or disguised the true nature of the discussions. For example, in one instance, an NYK Deputy Manager disguised his notes by including phrases such as “based on rumour” and including question marks next to notes of the competitor’s freight rates, so that it appeared that the notes were based on the employee’s own conjecture, rather than on the employee’s conversations with his counterpart.
Investigations and cooperation
His Honour noted that in September 2012 the Japanese Fair Trade Commission and US DOJ conducted dawn raids on the offices of NYK and other shipping companies. Four days later the ACCC sent a fax to NYK Australia 'referring to the media reports regarding alleged cartel arrangements between international shipping lines' (para 161) and in October 2012:
[162] ... NYK contacted the ACCC and offered to fully cooperate with any investigation the ACCC may conduct into the alleged cartel conduct. From that time, NYK has cooperated fully with the ACCC in its investigations. NYK’s cooperation included facilitating interviews with NYK executives who could not have been compelled to travel to Australia to attend interviews. ...
Penalties imposed elsewhere
His Honour discussed the penalties imposed elsewhere in respect of aspects of the conduct relating to the Respect Agreement (from para 163):
- Japan: JFTC issued administrative 'Surcharge Payment Order' of approximately AU$157 million as well as a 'cease and desist order'. The conduct involved overlapped with some of the conduct the subject of this proceeding.
- USA: After pleading guilty in December 2014 NYK paid a criminal fine of US$59.4 million. This does not appear to have involved any routes relevant to Australia. An individual was also fined US$20,000 and sentenced to 15 months imprisonment.
- South Africa: In 2015 a settlement was reached pursuant to which NYK agreed to pay a penalty of approx AU$10.2 million)
- Chile: In January 2015 the Fiscalia Nacional Economica (FNE) filed a claim; NYK was granted leniency and FNE have sought a fine of approx US$25 million against NYK (para 169)
- China: In December 2015 China's National Development and Reform Commission fined a number of shippers a total of US$65 million; however, NYK was not fined - it was the immunity applicant (para 170)
Cartel conduct - legislative scheme
His Honour then set out the legislative scheme in Australia for cartel conduct.
[175] The central provisions are in subss (1) to (4). In simple terms, a provision of a contract, agreement or understanding will be a cartel provision if it satisfies either the purpose/effect condition in subs (2), or the purpose condition in subs (3), and it also satisfies the competition condition in subs (4).
[176] Relevantly for present purposes: the purpose/effect condition will be satisfied by a provision which has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining the price for goods or services supplied by any or all of the parties to the contract, arrangement or understanding; the purpose condition will be satisfied by a provision that, in the event of a request for bids in relation to the supply of services, one or more of the parties to the contract, arrangement or understanding bid, but one or more of the other parties do not, or 2 or more parties bid, but at least 2 of them do so on the basis that one of those bids is more likely to be successful than the others; and the purpose condition also includes a provision which directly or indirectly has the purpose of allocating between any or all of the parties to the contract, arrangement or understanding the persons who are likely to acquire services from any or all of the parties. The competition condition is relevantly satisfied if at least 2 of the parties to the contract, arrangement or understanding are, or but for the contract, arrangement or understanding would be, in competition with each other in relation to the supply or likely supply of services.
[177] It is unnecessary for present purposes to delve into the complexities of s 44ZZRD(5) to (11). ... None of those provisions is directly relevant to NYK’s admitted contravention of s 44ZZRG.
His Honour then recited s 4F of the Act (references to purpose or reason)
[179] In simple terms, it is sufficient if the substantial purpose of the provision was one of the purposes listed in s 44ZZRD(2) or (3). A provision is deemed to have a particular purpose if that was its substantial purpose.
His Honour was clearly perplexed at the 'definition' of likely for purposes of cartels, and explains some of his concerns in the following paragraph:
[180] Section 44ZZRB contains some definitions of some words that are used in s 44ZZRD. A “bid”, for example, is defined as including a tender and “the taking, by a potential bidder or tenderer, of a preliminary step in a bidding or tendering process”. Curiously, the word “likely” is defined as including a “possibility that is not remote”, but only when used in relation to a supply of goods or services, an acquisition of goods or services, the production of goods or the capacity to supply goods. That definition would appear to extend the ordinary meaning of the word “likely”. That expanded definition would clearly apply to the word “likely” where it is used in some of the paragraphs of s 44ZZRD(2) and (3) in relation to the purpose/effect condition and purpose condition: for example, it would apply to the use of the word in s 44ZZRD(2)(c), which refers to “goods or services supplied, or likely to be supplied”. Issues may arise in relation to whether the definition of “likely” applies to other uses of the word in s 44ZZRD, including where it is used in the description of the competition condition in s 44ZZRD(4). The competition condition may be satisfied if 2 or more parties to the relevant contract, arrangement or understanding “are or are likely to be … in competition with each other in relation to … the supply of those goods or services”: s 44ZZRD(4)(a) and (c). On one view, at least, the use of the word “likely” in that particular phrase is not “in relation to” a supply of goods or services or any of the other elements of the definition in s 44ZZRB. Equally, however, it would be just a little bit bizarre if the word “likely” could have a different meaning in s 44ZZRD depending on the exact context in which it is used. Fortunately, it is unnecessary for present purposes to resolve any such arcane issues that may arise from the definition of “likely”.
[181] There is no dispute that the relevant provisions of the Respect Agreement satisfied the purpose/effect condition and the purpose condition. The Freight Rate Provision satisfied the purpose effect/condition, as it had the purpose, or was likely to have the effect of, fixing, controlling or maintaining the price for Services supplied by any or all of the Carriers party to the Respect Agreement. The purpose condition was satisfied by the Bid Rigging Provision and the Customer Allocation Provision. The Bid Rigging provision, amongst other things, had the purpose of directly or indirectly ensuring that in the event of a request for bids in relation to the supply of Services, one or more Carriers bid while others did not, or 2 or more of the Carriers bid, but at least 2 of them did so on the basis that one of those bids was more likely to be successful than the others. The Customer Allocation Provision had the purpose of directly or indirectly allocating between the Carriers customers who had acquired, or were likely to acquire, Services.
[182] As for the competition condition, it was not controversial, and in any event was fairly self- evident, that NYK was in competition with the other Carriers in relation to the supply of the Services, or at the very least was likely to be in competition with them, or would have been, in competition with the other Carriers in respect of the supply of the Services but for the provisions of the Respect Agreement. The roll-on, roll-off shipping services supplied by NYK were relevantly substitutable for the similar services supplied by the other Carriers. There clearly was, or at least would have been, but for the provisions of the Respect Agreement, rivalry between the Carriers in respect of the supply of the Services to the major car and truck manufacturers, particularly surrounding or in response to the manufacturers’ periodic calls for bids for the supply of Services for the routes in question.
On the appropriate level of fine
His Honour then set out the penalty provision in s 44ZZRG and continued:
[185] It was common ground that the total value of the benefits obtained by NYK reasonably attributable to the commission of the offence could not be determined. That is perhaps not surprising. The task of determining the benefits “reasonably attributable” to the commission of all but the simplest of offences against s 44ZZRG(1) would most likely be extraordinarily difficult. That is particularly because the definition of “benefit” may be wide enough to include all manner of intangible benefits, and because the relevant benefits may include benefits obtained by “one or more persons”, who may be persons other than the offender.
[186] The calculation of an offending corporation’s annual turnover for the 12 month period before the offence may also be very difficult given the complex definition of “annual turnover” in this context. Fortunately, it was an agreed fact for the purpose of this proceeding that NYK’s annual turnover, as defined, from 1 August 2008 to 31 July 2009 was approximately AUD $1 billion. Having regard to that agreed fact, the maximum fine in NYK’s case is $100 million.
His Honour then briefly discussed Part X of the Act (which 'sets up a system for regulating international line cargo shipping services' (para 187) and noted none of the conduct involved here fell within the Part X exemptions.
His Honour discussed in some detail the evidence relating to sentence, including:
Cooperation
Evidence was adduced that an officer of the ACCC stated that:
[190] ... NYK had provided “full, frank and truthful disclosure and cooperated fully and, in most instances, expeditiously, on a continuing basis throughout the ACCC’s investigation”. The officer expressed the view that the cooperation NYK provided, both in relation to its own offending and the alleged offending of others, had been “significant and valuable”.
[191] The assistance and cooperation provided by NYK included: providing the ACCC with a detailed background briefing paper together with copies of relevant documents; complying with the ACCC’s voluntary requests for information and documents; and facilitating interviews of a number of NYK executives in circumstances where they could not have been compelled to travel to Australia to be interviewed. The ACCC officer’s evidence was that NYK’s cooperation had “enabled the ACCC to obtain a range of information in relation to the conduct of NYK and other parties that may not otherwise have been discovered by the ACCC”.
There was also further evidence of 'potentially significant' cooperation that was confidential (para 194)
Early guilty plea
His Honour noted that the guilty plea was provided at an early stage after negotiations between the ACCC and the Director.
Undertaking pursuant to 16AC of the Crimes Act
NYK gave an undertaking providing for employees and executives to give evidence
Contrition and compliance
A new Chief Compliance Officer has been appointed to NYK and 'expressed contrition on behalf of NYK and stated that NYK is committed to complying fully with competition law and policy' (para 196). There was also evidence of resignations and salary reductions in relation to managers and senior officers involved in the conduct. Other compliance efforts have been put in place. These are described from para 199.
[201] There could be no doubt that since September 2012, NYK has taken a large range of measures to strengthen the culture of compliance with competition laws and prevent any recurrence of the contraventions that occurred in the Car Carrier Group in the years prior to 2012. The measures include, in very brief terms: management changes; consultation with external specialist competition law advisers; the establishment of an entirely new compliance regime called the “FTPG New Deal”; the establishment of the Compliance Executive Committee, which includes NYK’s most senior executives; a compliance pledge that all NYK employees are required to sign; a leniency policy and whistle-blower protection to encourage staff who have engaged in or witnessed violations of competition laws to report the violations to the Legal and Fair Trade Promotion Group; the conduct of formalised and systematic competition law risk assessments of each group within NYK; and global face to face competition law compliance training, which includes education of staff concerning competition laws in the jurisdictions relevant to them. NYK has also withdrawn from all conference agreements to which it has been a party.
After considering these factors his Honour considered the appropriate sentence from para 202:
[202] As a corporation convicted of a federal offence, NYK is to be sentenced in accordance with Part IB of the Crimes Act. The overarching principle is that any sentence imposed by the Court must be of a “severity appropriate in all the circumstances of the offence”: s 16A(1) of the Crimes Act.
[203] The Court must take into account the matters set out in s 16A(2) so far as they are relevant and known to the Court. The “checklist” in s 16A(2) does not exclude other relevant considerations: ... The list of matters in s 16A(2) relevantly includes: the nature and circumstances of the offence; if the offence forms part of a course of conduct, that course of conduct; the circumstances of any victim and any injury, loss or damage arising from the offence; the degree to which the offender has shown contrition for the offence; if the offender has pleaded guilty, that fact; the degree to which the offender has cooperated with law enforcement agencies in the investigation of the offence and other offences; the deterrent effect of any sentence on the offender or any other person; the need to ensure that the person is adequately punished for the offence; the character and antecedents of the offender; and the prospect of rehabilitation of the offender.
His Honour observed:
[204] The offence committed by NYK was on any view a very serious offence which requires condign punishment. A number of features of the offence and the offending conduct compel that conclusion.
They included that
- there were multiple offences over a long period of time (notwithstanding that the carge was 'rolled-up' into one offence'
- the maximum penalty was $100 million. In this respect his Honour observed:
[210] The maximum penalty for an offence against s 44ZZRG(1) is somewhat unusual. Most offence provisions specify a single maximum penalty. As has been seen, s 44ZZRG(3) provides alternative maximum penalties. ...
[211] One can readily comprehend why the legislature chose to include a maximum penalty for cartel offences which may be based on the offending corporation’s annual turnover. As discussed in detail later, specific and general deterrence must be considered to be a major consideration in determining the appropriate size of the fine to impose in relation to a cartel offence: the fine should be such as to ensure that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business. The sum required to achieve that objective will generally be larger where the offending corporation is a very large corporation, as reflected in its annual turnover. That said, in some cases a maximum penalty based on the offending corporation’s annual turnover may not provide a realistic guide to the objective seriousness of the offending conduct or criminality involved in the offence. It is, for example, possible to imagine a case where a large corporation with a very high annual turnover committed a single relatively minor offence against s 44ZZRG. ... this case is not such a case.
- nature of the cartel offence:
[215] the conduct engaged in by NYK only became liable to criminal sanction on and from 24 July 2009. That accounts for the start date of the period in the charge. Prior to that date, such conduct was only capable of attracting civil sanctions, including pecuniary penalties. The civil penalty regime continues to apply in respect of cartel conduct. The cognate civil penalty provision in relation to giving effect to a cartel provision, s 44ZZRK, is in essentially the same terms as s 44ZZRG, other than that s 44ZZRG includes relevant “fault elements” for the purposes of the Criminal Code. Curiously, the maximum pecuniary penalty payable by a corporation for contravening s 44ZZRK is effectively the same as the maximum fine payable by a corporation which has been convicted of an offence against s 44ZZRG: see s 76(1) and (1A) of the C&C Act. It would seem that the only difference is that a criminal conviction attracts opprobrium and societal condemnation in a way that the imposition of a civil penalty cannot: ...
[216] The Director submitted that cartel conduct was intrinsically serious. ...
[217] NYK submitted that caution should be applied in applying such general statements in the criminal sentencing context. It submitted that the Court is required to assess the objective seriousness of the particular offence; that there is risk of “double counting” if factors are taken into account as evidence of the intrinsic seriousness of a species of offence, and then considered again in determining the objective seriousness of the particular offence; and that the statements made in the civil penalty context may not be apposite given the different nature and objectives of criminal sentencing.
[218] It is unnecessary to resolve that rather arid debate. There is no doubt that offences against s 44ZZRG(1) may be objectively very serious. That is reflected in the maximum penalty for the offence, which is at least $10 million and may be considerably more in some cases, as it is in this case. ... ultimately it is a matter for the Court to consider the nature and objective seriousness of the particular case at hand. If careful attention is given to the particular facts and circumstances of the case, there is no risk of double counting.
[219] The Director also relied on factors that have been identified as being relevant to the imposition of civil penalties for cartel and other anti-competitive conduct. Those factors were summarised in the following terms in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited (ACCC v ANZ) [2016] FCA 1516 at [86]-[89]: [his Honour then reproduced those paragraphs]
[220] There is no reason to suppose that the factors identified in the civil penalty context would not be equally applicable in the criminal sentencing context. ... the task of appraising the nature and seriousness of particular contravening conduct in a civil penalty proceeding is relevantly the same as appraising the seriousness of an offence for the purpose of imposing a criminal sentence. There is, in any event, nothing particularly novel or unique in the factors referred to in the civil penalty cases. Indeed, most of the factors are simply matters of common-sense. Most of them are, in any event, replicated, in one way or another, in the list of relevant considerations in s 16A(2) of the Crimes Act. ... The overriding principle is that the Court should weigh all relevant circumstances.
[221] Somewhat more controversially, both the Director and NYK took the Court to pecuniary penalties that have been imposed in civil penalty cases concerning cartel or other anti- competitive conduct. Suffice it to say at this stage that the penalties imposed in the civil penalty cases, most of which were in cases that had settled on the basis of an agreed penalty and joint submissions, are of little if any assistance to the determination of the appropriate sentence in this matter.
- duration and scale of the offending conduct (observing it was of significant length and substantial scope)
- extent to which conduct was deliberate, systematic and covert
[239] Cartels, by their very nature, are likely to be deliberate and covert and are likely to require some degree of planning and deliberation. The cartel in this matter was no exception.
[240] The facts reveal that the cartel, evidenced by the conduct of NYK and some of the other carriers in giving effect to the Respect Agreement over many years, was systematic, well- orchestrated and involved a high level of planning and coordination. The central feature of the cartel was the well-developed system or practice whereby the relevant managers of the Carriers who were parties to the cartel, including the Manager and Deputy Managers in the Asia Oceania Team of the Car Carrier Group at NYK, would communicate with their counterparts in advance of and during each bidding and contract negotiation cycle. In some instances, senior management at NYK directed those discussions to occur, or were at the very least aware that they were occurring. The effect or outcomes of the discussions were also on occasion reported to senior management.
[241] ... the processes involved in giving effect to it appear to have been well-known ... and indeed appear to have been part of its corporate culture, steps were taken, including by senior management, to ensure that the collusive conduct would not be readily apparent to those who might seek to put an end to it. ...
- Seniority of employees, corporate culture and compliance programs
- The profit or benefit attributable to the conduct
[246] ... it may be inferred that NYK engaged in the conduct for the very purpose of obtaining a benefit from higher freight rates and consistent market shares in respect of the routes to Australia. That was the whole purpose of the Respect Agreement and the conduct engaged in to give effect to it. It may be inferred that NYK obtained substantial monetary benefits from the cartel conduct in the form of higher revenues and profits. If it did not, it is unlikely that it would have continued to engage in that conduct.
- Personal circumstances of any victim (observing it is not possible to 'quantify the extent of any injury loss or damage suffered by the manufacturers' (para 251), but that it was common ground that the conduct had increased freights rates (or limited any decrease that might otherwise have occurred) and that at least a proportion of that would be passed through to corporations or consumers in Australia.
- Degree of contrition (noting this was also reflected in early guilty plea)
- Plea of guilty
- Degree of cooperation
- Deterrence (noting general deterrence is a significant consideration in cartel cases):
[272] First, as has already been noted, cartel conduct is notoriously difficult to detect, investigate and prosecute. It often involves large and sophisticated corporate offenders who can deploy their considerable resources and position to minimise the risk of detection. It is generally accepted that general deterrence is a weighty consideration in sentencing for offences which are difficult to detect and investigate: ... The importance of general deterrence has also been accepted in imposing penalties for anti-competitive conduct in the civil penalty context: ...
[273] Second, cartel conduct is an essentially economic or commercial crime that generally involves the offender weighing up whether the benefit or profit from the conduct is likely to outweigh the risks of detection and penalisation. Sentences imposed for such offences should be set so that others who may engage in such a weighing exercise will come to appreciate that the risks are likely to outweigh the benefits: that the likely penalty will be such that it could not be regarded as an acceptable cost of doing business. This consideration has also been accepted in the civil penalty context: ...
[274] It is essentially common ground that specific deterrence is not a significant consideration in the particular facts and circumstances of this matter. That is because the evidence clearly shows that NYK has already taken extensive steps to not only change its corporate culture, but also establish structures, systems and processes to ensure that there is minimal risk of a similar cartel offence being committed in the future.
- Need for adequate punishment
[275] The need to impose an adequate punishment in all the circumstances is largely self-evident and requires little elaboration. One issue that requires consideration in that context, however, is the relevance or weight that is to be attached to the fact that NYK has been penalised in other jurisdictions in respect of conduct relating to or arising from the cartel the subject of this matter. NYK submitted that the penalties imposed overseas constituted a significant punishment in their own right, went some considerable way towards satisfying the requirements of deterrence in respect of the charged conduct, and were therefore a material consideration in determining an appropriate sentence. The Director submitted that the overseas penalties were only relevant in a “general way” and should not substantially reduce an otherwise appropriate sentence.
[276] The issue between the Director and NYK concerning the overseas penalties really came down to a dispute concerning the weight that should be given to the overseas penalties. It may be accepted that the fact that an offender has already been the subject of extra-curial punishment – loss or damage suffered by the offender as a result of having committed the offence, outside or in addition to the court-imposed sanction – may in some circumstances be a relevant consideration in sentencing the offender: ...
[277] The weight to be given to any extra-curial punishment depends on the particular facts and circumstances of each case. Relevant considerations include the nature and size of the administrative or other extra-curial punishment, the extent to which the penalty relates to the conduct the subject of the offence, the capacity of the offender to pay, the effect that the administrative penalty had in real terms on the offender and other questions of hardship. Each case must be considered on its own merits.
[278] It is clear that some weight must be given to the overseas penalties. They are undoubtedly very large penalties which were imposed as a result of NYK’s involvement in the global cartel pursuant to which the offending conduct the subject of the charge relates. Those penalties would undoubtedly themselves go some way towards deterring NYK from re- offending. There are, however, a number of reasons why the overseas penalties should not be given significant weight.
[279] The first and most important reason is that, with the possible exception of the “Surcharge Payment Order” imposed by the Japan Fair Trade Commission, the overseas penalties were not imposed in respect of the conduct the subject of the charge in this matter. While the agreed facts in relation to the overseas penalties are fairly sparse, it would appear, or at least can be inferred, that they were imposed in respect of NYK’s collusion or anti-competitive conduct in relation to freight rates on routes other than routes to Australia. In short, the overseas jurisdictions imposed sanctions or penalties in respect of conduct that occurred in, or in relation to, or otherwise affected, those jurisdictions.
[280] As indicated, the Japanese order is somewhat different. That is because approximately AU$20 million of the overall order related to the Oceania route, 87% of which related to the carriage of vehicles on the route from Japan to south and east Australia. It follows that there is some overlap between the conduct that led to the imposition of that part of the Japanese order, and the conduct the subject of the charge in this matter. That is a relevant consideration, because the Court should strive to avoid any element of double punishment. That said, it may be inferred that the administrative penalty imposed by the Japanese regulator was imposed having regard to Japan’s laws and public policy considerations. The Japanese regulator’s primary concerns were unlikely to relate to the impact that the conduct had on Australian related commerce or Australian consumers.
[281] The second and related reason is that the sentence imposed on NYK must be sufficient to operate as a deterrence, both specific and general, in relation to cartel conduct that relates to Australia and Australia’s laws. Large multinational corporations who engage in global cartels or other anti-competitive conduct must be sent a clear and strong message that they will be punished in Australia in respect of Australian-related conduct irrespective of what penalties may have been imposed in other jurisdictions. Whatever decisions may be made globally, Australia will not tolerate anti-competitive conduct in respect of the supply of goods and services to, or relating to, Australia or Australian consumers: ...
[282] The third reason is that, insofar as extra-curial punishment is relevant to specific deterrence, that is not a significant consideration in this matter for the reasons already given. NYK has already demonstrated that it has been deterred and has rehabilitated.
[283] The fourth and related reason is that, while the overseas penalties are very large, so too is NYK. There is no suggestion, let alone evidence, that NYK does not have the capacity to pay the fine imposed in relation to this matter in addition to the overseas administrative penalties. There is no evidence of any particular hardship arising from the overseas penalties.
- The character and antecedents of the offender
- The prospect of rehabilitation
[285] Rehabilitation is undoubtedly an important purpose of criminal sentencing. The fact that an offender has good prospects of rehabilitation, or has already demonstrated rehabilitation at the time of sentence and is unlikely to reoffend, is an important mitigating consideration.
[286] It may be accepted that NYK has rehabilitated itself, or has at the very least demonstrated excellent prospects of rehabilitation. In the five years since its offending behaviour was detected, NYK has demonstrated a change in its corporate culture of compliance, renounced its wrongdoing and established structures, systems and programs to prevent any reoffending. It has remodelled its corporate thinking and behaviour so that it may re-establish itself as a good corporate citizen ...
- Comparable cases
[284] NYK does not have a prior record of corporate criminal misconduct in Australia or elsewhere. That is no doubt an important consideration. It does not necessarily follow that NYK should be sentenced on the basis that it was of good character – that it was a good corporate citizen – at the time of the conduct the subject of the charge: ... The fact that it had been a party to the Respect Agreement since at least 1997 rather suggests otherwise. NYK had not been a good corporate citizen prior to the commission of this offence: it just had not been caught. Prior good character is also not generally given significant weight in sentencing for offences where general deterrence is a significant consideration: ...
[287] Both the Director and NYK referred in their submissions to pecuniary penalties that have been imposed in a number of “comparison” civil cartel cases. Those cases, however, provide little, if any assistance, in relation to the imposition of an adequate sentence in this matter.
[288] The consideration of sentences imposed in other comparable cases may be useful, but must be approached with some caution. Comparable cases may be useful in two ways: first, if it is possible to discern from them any unifying sentencing principles that should be applied; and second, if an analysis of the cases discloses discernible sentencing patterns or a range of sentences. However, the cases may not establish a relevant range, or the range may not necessarily be the correct range or otherwise determinative of the upper and lower limits of sentencing discretion: ... Much will depend on the number of cases referred to and whether they are truly comparable.
[289] There are a number of difficulties in placing any reliance on the penalties imposed in the civil penalty cases. First, it appears to have been accepted that the purpose of imposing a civil penalty is different to the purpose of imposing a criminal penalty. Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is said to be primarily, if not wholly, protective in promoting the public interest in compliance: ... Indeed, it has been suggested that punishment is not a purpose of imposing a civil penalty: ... Given the differences between criminal proceedings and civil penalty proceedings that were identified in Commonwealth v Director, FWBII, some caution must be exercised in applying to criminal sentencing the principles that have been developed in the civil penalty context.
[290] Second, many of the penalties that have been imposed in the civil penalty cases were agreed penalties. While those agreed penalties were approved by the Court, it may nevertheless be inferred that the penalties involved some element of compromise and may not reflect the penalty that would have been imposed by the Court had there been no agreement: see Commonwealth v Director, FWBII at [109] (per Keane J).
[291] Third, the civil cartel cases referred to by the parties are in any event not truly comparable. The facts and circumstances of each of the cases referred to by both NYK and the Director were different in important respects from this case.
[293] Fourth, and perhaps most significantly, the civil penalty cases do not disclose any discernible pattern or range of penalties that could be transposed to the criminal sentencing context. Nor is it possible to discern from them any unifying principles that should be applied in the criminal sentencing context, other than perhaps the importance of general deterrence, as discussed earlier.
Submissions on penalty
His Honour noted that as this was a criminal, not civil, case, the CDPP cannot propose an appropriate penalty; however, NYK can make submissions on an appropriate penalty range (para 294).
[294] ... The Director can and should respond to any range proposed by NYK by indicating whether in the Director’s submission it would be open to impose a sentence within that range, or whether imposing a sentence within that range might lead to appellable error: ... this was the course adopted by NYK and the Director in this matter.
[295] NYK submitted that, having regard to the maximum penalty, the purposes of sentencing, the objective features of the offence, NYK’s compelling subjective circumstances and the fines already paid by NYK, the appropriate penalty range (after the application of a discount for plea and cooperation) would be a fine in the order of $20 million to $25 million.
[296] The Director’s response was that “no submission is made that the court would fall into appellable error in relation to the range of penalty suggested by NYK …”.
Conclusions on sentence
After considering all these factors, his Honour concluded
[297] In Markarian, McHugh J said (at [66]) that the reality of the sentencing process is that the judge must weigh all the circumstances and make a judgment as to what is the appropriate sentence. ... this value judgment has frequently been described as an “instinctive synthesis of all the various aspects involved in the punitive process” ... the expression “instinctive synthesis” may need further explanation lest it be “understood to suggest an arcane process into the mysteries of which only judges can be initiated” (at [39]). It is difficult to improve on the explanation given by McHugh J in Markarian, where his Honour described it as “the method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case” (at [51]). Or, as the plurality put it in Wong (at [75]) “the sentencer is called on to reach a single sentence which … balances many different and conflicting features.”
[298] The relevant factors or features in this matter have been discussed at length throughout these reasons. Findings or observations have been made concerning the significance and weight that should be given to those factors in the particular circumstances of this case. ...
His Honour listed the factors tending to weigh in favour of more severe punishment as (at 298):
- 'the maximum penalty (fine of $100 million)'
- 'the very serious nature of the offence (involving as it did deliberate, systematic and covert conduct by relatively senior management over a lengthy period involving a large number of shipments)'
- 'the damage, or potential damage, to the integrity of Australia’s markets and economic system caused by the conduct' and
- 'the need for general deterrence, particularly in respect of offences of this kind.'
His Honour described the 'mitigating factors' as (at 298)
- 'NYK’s genuine contrition and rehabilitation, including the extensive steps taken by it to present any reoffending'
- 'NYK’s early plea of guilty'
- NYK’s significant and valuable cooperation and assistance to the ACCC and the Director in relation to the investigation of this offence and possible offences by others'
- 'NYK’s undertaking to provide assistance in relation to proceedings in the future'
- 'the extra-curial punishment, in the form of penalties imposed by courts and tribunals in other jurisdictions, already imposed on NYK in respect of conduct related to the relevant cartel' and
- 'the fact that NYK has not previously been convicted of any offence in Australia or overseas.'
His Honour then concluded:
[299] Having regard to all of the relevant features and factors, and giving them appropriate weight, the appropriate sentence in all the circumstances is a fine of $25 million. That fine incorporates a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation: meaning that but for the early plea and past and future cooperation, the fine would have been $50 million. Of that 50% discount, 10% relates to future cooperation. For the purposes of s 16AC of the Crimes Act, it is stated that the severity of the sentence imposed on NYK has been reduced because NYK has undertaken to cooperate with law enforcement agencies in proceedings relating to alleged offences committed by others and that the sentence that would have been imposed but for that reduction was $30 million.
[300] Cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment. It is inimical to and destructive of the competition that underpins Australia’s free market economy. It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly. That is so even where, as here, the decisions and conduct are engaged in overseas and as part of a global cartel. As has already been explained, but for NYK’s cooperation and willingness to facilitate the administration of justice, the penalty would have been substantially higher. That should serve as a clear and present warning to others who may have, or may be considering or planning to, engage in similar conduct.
Extraterritorial operation
As the conduct occurred outside Australia, his Honour made the following observations:
[188] ... As is readily apparent from the agreed facts, all of the offending conduct occurred outside Australia. All of the collusive arrangements and discussions, and all of the contracts that resulted from them, were engaged in overseas. It would appear that none of the NYK managers who were involved in conduct were Australian citizens or residents. Section 5 of the C&C Act provides that the provisions of, inter alia, Part IV of the C&C Act extend to, relevantly, the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business in Australia. NYK was not incorporated in Australia, however it is an agreed fact that NYK carried on business in Australia. It is on that basis that s 44ZZRG extends to NYK’s offending conduct, occurring as it did outside Australia.
Case links
Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 (Federal Court)
Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 (AustLII)
ACCC Media releases
Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 (Federal Court)
18 July 2016
The ACCC released the following press release (MR 125/16) on 18 July 2016:
Following an investigation by the Australian Competition and Consumer Commission (ACCC), Nippon Yusen Kabushiki Kaisha (NYK), a global shipping company based in Japan, has today pleaded guilty to criminal cartel conduct in the Federal Court.
"This is the first criminal charge laid against a corporation under the criminal cartel provisions of the Competition and Consumer Act," ACCC Chairman Rod Sims said.
The charge was laid by the Commonwealth Director of Public Prosecutions (CDPP) under section 44ZZRG of the Competition and Consumer Act 2010 (Cth) on 14 July 2016.
"This matter relates to alleged cartel conduct in connection with the transportation of vehicles, including cars, trucks, and buses, to Australia between July 2009 and September 2012," Mr Sims said.
NYK is one of the world’s largest shipping companies, with offices in Europe, Africa, East Asia, South Asia, China, Oceania (including Australia) and North and South America. It has over 33,000 employees and its headquarters is in Tokyo. It also operates an Australian subsidiary, NYK Line (Australia) Pty Ltd.
For corporations, the maximum fine for each criminal cartel offence will be the greater of:
- $10 million;
- three times the total benefits that have been obtained and are reasonably attributable to the commission of the offence;
- if the total value of the benefits cannot be determined,10% of the corporation’s annual turnover connected with Australia.
The ACCC’s investigation into other alleged cartel participants is continuing.
The matter is next scheduled for a directions hearing in the Federal Court on 12 September 2016.
Given this is a criminal matter currently before the Court, the ACCC will not provide any further comment at this time.
Background
The ACCC investigates cartel conduct, manages the immunity process, takes proceedings in the Federal Court in respect of civil cartel contraventions, and refers serious cartel conduct to the CDPP for consideration for prosecution. The CDPP is responsible for prosecuting criminal cartel offences, in accordance with the Prosecution Policy of the Commonwealth.
3 August 2017 (following conviction)
The ACCC released the following press release (MR 126/17) on 3 August 2017:
NYK convicted of criminal cartel conduct and fined $25 million
The Federal Court has today convicted Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) of criminal cartel conduct and ordered it to pay a fine of $25 million: the second-highest imposed in ACCC history.
Today’s judgment also marks the first successful prosecution under the criminal cartel provisions of the Competition and Consumer Act 2010 (CCA).
Following an extensive investigation by the ACCC, the Commonwealth Director of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in an arrangement or understanding with other shipping lines relating to the transportation of motor vehicles to Australia between 2009 and 2012.
The cartel operated from at least February 1997 and affected vehicles transported to Australia by NYK and other shipping lines from locations in Asia, the US and Europe on behalf of major car manufacturers including Nissan, Suzuki, Honda, Toyota and Mazda.
ACCC Chairman Rod Sims welcomed the Federal Court’s decision.
“The Australian community relies heavily on imported vehicles, so a longstanding cartel in relation to the transportation of those vehicles to Australia was of significant concern,” ACCC Chairman Rod Sims said.
“The NYK fine is also the second largest ever imposed under the Competition and Consumer Act, and incorporated a significant discount for NYK’s plea and cooperation.”
Justice Wigney stated the fine “incorporates a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation: meaning that but for the early plea and past and future cooperation, the fine would have been $50 million”.
In this case, the maximum penalty was calculated on the basis of 10 per cent of NYK’s annual turnover in connection with Australia, in the 12 months prior to the commencement of the offence. On that basis, NYK’s conduct attracted a maximum penalty of $100 million.
“The sentence imposed on NYK by the Federal Court today sends a strong warning to the industry and the business community at large. The CDPP and ACCC can and will criminally prosecute cartel conduct. It also highlights that parties who engage early and cooperate with the authorities may be shown leniency,” Mr Sims said.
Justice Wigney said in his judgment the “cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment" because "it is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly”.
Background
NYK entered a guilty plea on 18 July 2016 in the Federal Court. NYK has cooperated throughout the ACCC’s investigation.
NYK was sentenced for one “rolled-up” criminal charge of giving effect to cartel provisions. A “rolled-up” charge is one in which more than one offence forms part of the charge. Rolling-up is permissible on a plea of guilty in Commonwealth matters.
On 2 November 2016, the CDPP laid charges against another alleged participant in the cartel, Kawasaki Kisen Kaisha (K-Line), also a Japanese shipping company. The ACCC’s investigation in relation to other alleged cartel participants is continuing.
NYK is headquartered in Tokyo and has a controlling interest in a global group of companies with offices in Europe, Africa, East Asia, South Asia, China, Oceania and the North and South Americas with over 33,000 employees. It also operates an Australian subsidiary, NYK Line (Australia) Pty Ltd.
Notes to editors
The ACCC investigates cartel conduct, manages the immunity process, takes proceedings in the Federal Court in respect of civil cartel contraventions, and refers serious cartel conduct to the CDPP for consideration for prosecution. The CDPP is responsible for prosecuting criminal cartel offences, in accordance with the Prosecution.
Media and commentary (external links)
After the sentencing decision
CDPP
ACCC
ACCC, 'Criminal cartel investment pays off' (Media release, 5 August 2017)
Academic commentary
Brent Fisse, 'The First Cartel Offence Prosecution in Australia: Implications and Non-Implications' (2017) ABLR (forthcoming)Law firm commentary
Allens><Linklaters: First Successful Prosecution Under Australian Criminal Cartel Conduct Provisions (4 August 2017)
Clifford Chance: 'Legal and Practical Implications of Australia's First Criminal Cartel Case in 100 Years' (Client Briefing, August 2017)
King&Wood Mallensons: William Osborn, 'A shot across the bow for cartelists in the RORO criminal proceedings' (In Competition, 7 August 2017)
News media
James Thomson, 'ACCC secures second biggest fine ever against shipping cartel' (AFR, 3 August 2017)
Before the sentencing decision
ACCC
ACCC, 'Australia’s first criminal cartel charge laid against NYK' (Media Release, 18 July 2016)
Law firm commentary
Clayton Utz: 'Australia pursues first criminal cartel prosecution' (Clayton Utz, Knowledge, 20 July 2016)
Gilbert + Tobin: Gilbert + Tobin, 'Corporate Crime + Investigations' (eComms, July 2016); Elizabeth Avery, Chris Boyd, Gina Cass-Gottlieb, Steven Glass, Andrew Floro and Stephanie Wee, 'Japanese shipping company NYK pleads guilty to criminal cartel conduct in inaugural Australian prosecution' (Insights, 21 July 2016)
King&Wood Mallesons: Wayne Leach and Peta Stevenson, James Darch and Taylor Macdonald, 'ACCC Charting New Waters with First Criminal Cartel Prosecution' (In Competition, 22 July 2016)
News media
John Durie, 'ACCC bares teeth with criminal case against Japan's NYK' (The Australian, 16 July 2016)
John Durie, 'Under the hood of a car cartel' (The Australian, 18 July 2016)
Lilly Vitorovich (AAP), 'Shipping giant guilty on cartel charge' (Yahoo 7 News, 18 July 2016)
