#7182 - Cartel Conduct - Competition Law

• Cartels involve agreements between competitors – that is firms operating at the same level – to restrict competition.

44ZZRA. Simplified outline

Cartel conduct is defined to include 4 forms of conduct engaged in by competing firms:

• Horizontal price fixing.

  • In the context of cartel behaviour, price fixing refers to the fixing or controlling of prices between firms operating at the same level in a particular market (competitors).

• Output restriction.

  • This involves agreements to restrict the volume of goods produced or services offered.

• Market division.

  • This involves agreements to divide up customers or territories to limit or avoid the need to compete for custom, and have a similar effect to price fixing by removing incentives for firms to engage in price competition.

• Bid rigging.

  • This involves agreements between competitors not to compete for tenders or to ‘rig’ who will win a tender. It is a form of price fixing but is now separately defined.

Subdivision B--Offences etc

44ZZRF. Making a contract etc. containing a cartel provision

• (1): Penalty is for a corporation that makes a Contract, Arrangement or arrives at an Understanding that contains a cartel provision.

• (2): the fault element is knowledge or belief.

• (3): An offence is punishable on conviction or fine not exceeding the greater of $10 million or 3 times the total value of the benefits obtained by the person and reasonably attributable to the offence. If these total benefits cannot be calculated by the court the penalty will be 10% of the corporation’s annual turnover during the 12 month period ending at the end of the month when the corporation began committing the offence.

• (4): An offence against (1) is an indictable offence.

44ZZRG. Giving effect to a cartel provision

• (1): A corporation commits an offence if a contract, arrangement or understanding contains a cartel provision AND the corporation gives EFFECT to the cartel provision.

• (2): Fault element is knowledge or belief.

• (3): An offence is punishable on conviction or fine not exceeding the greater of $10 million or 3 times the total value of the benefits obtained by the person and reasonably attributable to the offence. If these total benefits cannot be calculated by the court the penalty will be 10% of the corporation’s annual turnover during the 12 month period ending at the end of the month when the corporation began committing the offence.

• (5): An offence against (1) is an indictable offence.

44ZZRH. Determining guilt

• (1): A corporation may be found guilty of an offence under ss 44ZZRF or 44ZZRG even if (a) each other party to the CA or U is a person who is not criminally responsible OR (b) all other parties to the CA or U have been acquitted of the offence. (Note: ‘Party’ has an extended meaning under s 44ZZRC – each body corporate related to a body corporate is taken to be a party to that Contract, Arrangement or Understanding).

• (2): A corporation CANNOT be found guilty of a ss 44ZZRF or 44ZZRG offence if all other parties to the CA or U have been acquitted of such an offence AND a finding of guilt would be inconsistent with their acquittal.

44ZZRI. Court may make related civil orders

• If a prosecution against a person for an offence against ss 44ZZRF or 44ZZRG is being or has been heard by a court the court MAY: (a) grant a s 80 injunction against the person in relation to (i) the conduct constituting the offence or (ii) other conduct of that kind or make a s 86C, 86D, 86E or 87 order in relation to the offence.

79. Offences against section 44ZZRF or 44ZZRG

• (1): a person who (aa) attempts to contravene; or (a) aids, abets, counsels or procures a person to contravene or (b) induces or attempts to induce a person (whether by threats or promises or otherwise) to contravene or (c) is in any way, directly or indirectly, knowingly concerned in, or party to the contravention by a person; or (d) conspires with others to contravene a cartel provision is taken to have contravened that provision and is punishable (e) in a case where (i) the provision is a cartel offence provision and the person is not a body corporate by a term of imprisonment not exceeding 10 years or a fine not exceeding 2000 penalty units or both.

• Therefore, the provisions refer to corporations engaging in the prohibited conduct BUT s 79 provides that persons directly or indirectly knowingly concerned in the contravention are guilty of an indictable offence.

Subdivision C--Civil penalty provisions

44ZZRJ. Making a contract etc. containing a cartel provision

• A corporation contravenes this section if (a) the corporation makes a contract or arrangement or arrives at an understanding AND (b) the CA or U contains a cartel provision. Enforcement is under Part VI.

44ZZRK. Giving effect to a cartel provision

• (1): A corporation contravenes this section if (a) a CA or U contains a cartel provision AND (b) the corporation gives EFFECT to the cartel provision.

44ZZRD. Cartel provisions

• (1): for the purposes of this Act, a provision of a CA or U is a CARTEL PROVISION IF:

  • (a): Either of the following conditions is satisfied in relation to the provision:

    • (i) the purpose/effect condition set out in (2);

    • (ii) the purpose condition set out in (3); or

  • (b) the competition condition set out in (4) is satisfied in relation to the provision.

• (2): PURPOSE/EFFECT CONDITION: satisfied if the provision has the purpose, or has or is likely to have the effect, of directly or indirectly:

  • (a) fixing, controlling or maintaining or (b) providing for the fixing, controlling or maintaining: of the price for, or a discount, allowance, rebate or credit in relation to: (c) goods or services supplied (or likely to be supplied) by any (or all) of the parties to the CA or U OR (d) goods or services acquired (or likely to be acquired) by any (or all) of the parties to the CA or U OR (e) goods or services re-supplied (or likely to be re-supplied) by persons (or classes of person) to whom those goods or services were supplied by any (or all) of the parties to the CA or U OR (f) goods or services likely to be resupplied by persons (or classes of persons) to whom those goods or services are likely to be supplied by any (or all) of the parties to the CA or U.

    • Note: this purpose/effect condition can be satisfied when a provision is considered with related provisions (see (8)). Also party has the extended meaning in s 44ZZRC (Note: ‘Party’ has an extended meaning under s 44ZZRC – each body corporate related to a body corporate is taken to be a party to that Contract, Arrangement or Understanding).

    • Subsection (5) It is IMMATERIAL whether the identities of persons can be ascertained (referred to in (2)(e) or (f) or subparagraph(3)(a)(iii), (b)(i) or (ii))

    • Subsection (6): Recommending prices: A provision of a CA or U is NOT TAKEN (a) to have the purpose mentioned in subsection (2) or to have or be likely to have the effect in subsection (2) by reason only that it recommends or provides for the recommending of a price, discount, allowance, rebate or credit.

    • (8): For the purposes of this Division, a provision of a contract, arrangement or understanding is taken to have the purpose, or to have or be likely to have the effect, mentioned in subsection(2) if the provision, when considered together with any or all of the following provisions: (a) the other provisions of the contract, arrangement or understanding; (b) the provisions of another contract, arrangement or understanding, if the parties to that other contract, arrangement or understanding consist of or include at least one of the parties to the first-mentioned contract, arrangement or understanding; has that purpose, or has or is likely to have that effect.

    • Purpose/effect of a provision: (10) For the purposes of this Division, a provision of a contract, arrangement or understanding is not to be taken not to have the purpose, or not to have or to be likely to have the effect, mentioned in subsection(2) by reason only of: (a) the form of the provision; or (b) the form of the contract, arrangement or understanding; or (c) any description given to the provision, or to the contract, arrangement or understanding, by the parties.

• (3): PURPOSE CONDITION: is satisfied if the provision has the purpose of DIRECTLY or INDIRECTLY:

  • (a) preventing, restricting or limiting: (i) the production (or likely production) of goods by any (or all) of the parties to the CA or U; or (ii) the capacity (or likely capacity) of any (or all) of the parties to the CA or U; or (iii) the supply (or likely supply) to persons (or classes or persons) by any (or all) of the parties to the CA or U; OR

  • (b) allocating between any (or all) of the parties to the CA or U (i) the persons (or classes of persons) who have acquired (or who are likely to acquire) goods or services from any (or all) of the parties to the CA or U or (ii) the persons (or classes of persons) who have supplied (or who are likely to supply) goods or services to any (or all) of the parties to the CA or U or (iii) the geographical areas in which goods or services are supplied (or likely to be supplied) by any (or all of the parties to the CA or U or (iv) the geographical areas in which goods and services are acquired (or are likely to be acquired) by any (or all) of the parties to the CA or U; OR

  • (c) ensuring that in the event of a...