Cartel Conduct To Be A Criminal Offence In Australia

Introduction

On 11 January 2008 the Australian Government released for public comment a draft Bill (Bill) in which it proposes to amend the Trade Practices Act 1974 (Act) by introducing two criminal offences relating to cartel conduct. One aspect of the proposed amendments includes a broadening of the extraterritorial application of the Act which will make the accessorial liability provisions applicable to conduct engaged in wholly outside Australia, but which has an effect in an Australian market.

Along with the Bill the Government released a Discussion Paper, which among other matters calls for public comment on the appropriate means of distinguishing the proposed criminal offences from civil prohibitions, and a draft Memorandum of Understanding (MOU) between the Commonwealth Director of Prosecutions and the Australian Competition and Consumer Commission which sets out their proposed respective roles in the investigation and prosecution of cartel offences.

Summary of Provisions

The Bill provides that a person (which includes a corporation and may include an individual in certain circumstances) commits an offence if the person makes, or gives effect to, a contract, arrangement or understanding which contains a cartel provision and does so with the intention of dishonestly obtaining a benefit. The civil penalty provisions mirror the criminal offence except that they do not require the establishment of dishonesty. The determination of dishonesty is a matter for the trier of fact. A prosecution of an individual must be brought before a jury. A cartel provision is a provision relating to:

price-fixing;

restricting outputs in the production and supply chain;

allocating customers suppliers or territories; or

bid-rigging

by parties that are, or would otherwise be, in competition with each other.

The amendments make it clear that they only apply to horizontal conduct by competitors in the same market.

The maximum penalty provided for a breach of a cartel offence by a corporation is the same as that provided for a breach of the civil prohibition and is the greater of:

$10,000,000;

if the court can determine the total value of the benefits obtained by one or more persons attributable to the commission off the offence, three times that total value; or, if not so determinable;

10% of the corporation's annual turnover for the 12 month period immediately prior to the month in which the offence was committed. For this purpose "annual turnover" includes...