The Law
Cartels
About cartels
NOTE: New cartel laws came into operation on 24 July 2009.
Australia now has a specific prohibiton of 'cartel conduct' (Division 1 of Part IV), both as a criminal offence and civilly. In addition to the specific prohibition, contracts arrangements or understandings (whether between competitors or not) which can be proven to substantially lesson competition, or be likely to do so, constitute a civil contravention of the Act pursuant to section 45. Dual listed company arrangements which substantially lessen competition are now also separately prohibited by section 49.
Exclusionary provisions (boycotts) between competitors are also prohibited per se by section 45 of the Act, and are defined in section 4D.
The ACCC has released a brief notice outlining the new cartel laws.
For a comprehensive discussion of Australia's cartel laws see: Beaton-Wells and Fisse, Australian Cartel Regulation: Law, Policy and Practice in an International Context (Cambridge University Press, 2011)
Price signallling
The Competition and Consumer Amendment Act (No 1) 2011 will come into operation on 6 June 2012. It is a complex price signalling prohibition and, at least initially, will apply only to the banking industry. The provisions will be contained in Division 1A (Anti-competitive disclosure of pricing and other information) and will not be subject to the criminal penalty regime.
Telecommunications
A separate telecommunications regime applies in relation to anti-competitive conduct in that industry.
Cartel conduct
Division 1 of Part IV of the CCA, containing provisions 44ZZRA - 44ZZRV, now contains the primary prohibition on cartel conduct (in the form of price fixing, bid rigging, market division and restricting outputs) in Australia. This Division was inserted by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 and entered into operation on 24 July 2009. It replaced the former s 45A
The criminal and civil prohibitions are the same save for an additional fault element of 'knowledge or belief' in relation to the criminal offence.
Cartel conduct is defined in s 44ZZRD as including four forms of activity: price fixing, market division, restricting outputs and bid rigging. This conduct is prohibited where made or given effect to in a 'contract, arrangement or understanding' and two or more of the parties involved are competitors (or would be but for the conduct). In relation to price fixing the provision must have the 'purpose or effect' of price fixing; in relation to the other forms of conduct the provision must have the requisite 'purpose'. Price fixing is defined in the same way in s 44ZZRD as it was in the former s 45A
Criminal penalties of up to $220,000 per offence or up to 10 years imprisonment arebe available for individuals found to have committed a cartel offence. The civil penalties for making or giving effect to a cartel provision are the same as those currently available for other contraventions of Part IV. View remedies page.
Cartels prohibited subject to a competition test
In addition to cartel conduct as defined in s 44ZZRD, section 45 of the Competition and Consumer Act (CCA) prohibits contracts, arrangements or understandings containing a provision which has the purpose, effect or likely effect of substantially lessening competition. These arrangements will genearlly be horizontal in nature, but this is not a requirement of s 45 (and as a number of anti-competitive vertical arrangements are caught by other more specific provisions in Part IV, anti-overlap provisions will give those specific provisions priority over s 45). Certain collective bargaining arrangements are permitted provided they have been notified in advance to the ACCC (see discussion under authorisation and notification below).
Dual listed company arrangements
Until recently the conduct of dual listed companies was assessed under s 45. As a result of legislation introduced in 2006 dual listed companies are now assessed under s 49 which prohibits parties making (or giving effect to) a dual listed company arrangement if a provision fo the proposed arrangement would have the purpose, effect or likely effect of substantially lessening competition.
The Competition Rule - Telecommunications
Anti-competitive conduct in the telecommunications industry is regulated by Part XIB CCA in addition to Part IV. Section 151AJ(2) provides:
‘A carrier or carriage service provider engages in anti-competitive conduct if the carrier or carriage service provider:
(a) has a substantial degree of power in a telecommunications market; and
(b) either
(i) takes advantage of that power with the effect, or likely effect, of substantially lessening competition in that or any other telecommunications market; or
(ii) takes advantage of that power, and engages in other conduct on one or more occasions, with the combined effect, or likely combined effect, of substantially lessening competition in that or any other telecommunications market'.
Pursuant to s 151AJ(3) a carrier or carriage service provider also engages in anti-competitive conduct if they engage in conduct in contravention of ss 45, 45B, 46, 47 or 48 and the conduct relates to a telecommunications market.
Section 151AK contains the 'competition rule', providing that a 'carrier or carriage service provider must not engage in anti-competitive conduct.'
This Part allows the ACCC to issue a 'competition notice' stating that a carrier or carriage service provider is engaging in anti-competitive conduct or that they have contravened the competition rule. Where a notice is given by the ACCC stating that a carrier or provider has contravened or is contravening the rule, that notice is prima facie evidence of the matters described in the notice. The ACCC may also provide exemptions from the definition of anti-competitive conduct for certain conduct.
Exceptions
There are a number of exceptions to Part IV, including the cartel provisions.
The general Part IV exceptions are contained in section 51.
In relation to Part IV Division 1 conduct (cartels) exceptions (relating to anti-overlap and joint ventures) are contained in subdivision D.
In relation to cartel and other anti-competitive conduct captured by s 45, exceptions are contained within the provision itself.
Price signallling
The Competition and Consumer Amendment Bill (No 1) 2011 has passed through both Houses of Parliament and will come into effect 6 months after receiving Royal Assent. It is a complex price signalling prohibition and, at least initially, will apply only to the banking industry.
The Law
Part IV Restrictive Trade Practices
Division 1
This sub-division includes the core definitional provision - s 44ZZRD
This sub-division includes the core criminal offence provisions (44ZZRF Making a contract etc. containing a cartel provision and 44ZZRG Giving effect to a cartel provision) and related provisions
Subdivision C - Civil penalty provisions
This sub-division contains the core criminal offence provisions (44ZZRJ Making a contract etc. containing a cartel provision and 44ZZRK Giving effect to a cartel provision ) and related provisions
Division 1A (Anti-competitive disclosure of pricing and other information) (not yet in operation)
44ZZS Definitions
44ZZT Goods and services to which this Division applies
44ZZU Provisions affecting whether a corporation has disclosed information to a person
44ZZV Meaning of private disclosure to competitors
44ZZW Corporation must not make private disclosure of pricing information etc. to competitors
44ZZX Corporation must not make disclosure of pricing information etc. for purpose of substantially lessening competition
44ZZY Exceptions that apply to sections 44ZZW and 44ZZX
44ZZZ Additional exceptions that only apply to section 44ZZW
44ZZZA Burden of proof
44ZZZB Mere receipt of information does not constitute being knowingly involved in contravention
Division 2 - Other relevant provisions
45 Contracts, arrangements or understandings that restrict dealings or affect competition
45B Covenants affecting competition
45C Covenants in relation to prices
45EA Provisions contravening section 45E not to be given effect
45EB Sections 45D to 45EA do not affect operation of other provisions of Part
49 Dual listed company arrangements that affect competition
Repealed provisions
Section 45A repealed, effective 24 July 2009.
Part XIB - The telecommunications industry: Anti-competitive conduct and record-keeping rules
[The following contains select provisions from this part; for the full part see CCA]
Division 2 - Anti-competitive conduct
151AJ Anti-competitive conduct
Cases relating to cartels
Anti-competitive agreements and price fixing
Contract, arrangement or understanding
ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973 (24 August 2011)
Price fixing - cover pricing in building tendersRe British Basic Slag Ltd’s Agreements [1963] 2 All ER 807
AgreementR v Associated Northern Collieries (1911) 14 CLR 387
Establishing collusionTPC v David Jones (Australia) Pty Ltd (1986) 13 FCR 446
Establishing collusion; price fixingTPC v Email Ltd (1980) 43 FLR 383
Establishing collusion; price fixingTPC v Nicholas Enterprises (1979) 40 FLR 83
Contract, arrangement or understandingTPC v Service Station Association Ltd (1993) 44 FCR 206
Contract, arrangement or understanding
Substantial lessening of competition
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No. 1) (1990) 27 FCR 460
Dowling v Dalgety Australia Ltd (1992) 34 FCR 109
Substantial lessening of competition; purposeAW Tyree Transformers Pty Ltd and Wilson Transformer Co Pty Ltd (1997) ATPR (Com) 50–247
Substantial lessening of competitionGallagher v Pioneer Concrete (NSW) Pty Ltd (1993) 113 ALR 159
Substantial lessening of competitionStationers Supply Pty Ltd v Victorian Authorised Newsagents Associated Ltd (1993) 44 FCR 35
Purpose of substantially lessening competition; exclusive dealing
Price Fixing
ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973 (24 August 2011)
Price fixing - cover pricing in building tendersACCC v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617
Price fixing - remediesTPC v David Jones (Australia) Pty Ltd (1986) 13 FCR 446
Establishing collusion; price fixingTPC v Email Ltd (1980) 43 FLR 383
Establishing collusion; price fixing
Articles and books relating to cartels
Australia - books
Australia
Other jurisdictions - including articles relating to criminalization of cartels generally
Yuliya Bolotova, Cartel Overcharges: An Empirical Analysis, Working Paper, September 15, 2006
Jay Pil Choi and Heiko A Gerlach, 'Global Cartels, Leniency Programs and International Antitrust Cooperation' (March 2010),
CESifo Working Paper Series No 3005 [at SSRN]
John Connor - Slideshow - 'Cartels and Antitrust Portrayed 1990-2008' (December 2008)Ari Hyytinen, Frode Steen and Otto Toivanen, 'Cartels Uncovered' (Discussion Paper, 16 March 2010)
Gregory C Shaffer and Nathaniel H Nesbitt, 'Criminalizing Cartels: A Global Trend', University of Minnesota Law School, Legal Studies Research Paper Series, Research Paper No 11-26 - published at SSRN on 20 June 2011 [http://ssrn.com/abstract=1865971]
Andreas Stephen, The UK Cartel Offence: Lame Duck or Black Mamba?, CCP Working Paper 08-19
Reports relating to cartels
Dawson Report (Chapter 10 discussing penalties for cartels)
Inquiry into the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 (Senate Report)
Guidelines
International
ICN Member State Anti-Cartel Templates
Useful links
The Cartel Project
Launched April 2009 this is the home page for an "interdisciplinary empirical research project [which] will investigate how and why
criminalisation of serious cartel conduct has become bipartisan policy in Australia."