Proposed criminalisation of cartel conduct

The criminal offences

The new federal Labor government has taken a first major step towards delivering on its election promise to criminalise cartel behaviour by releasing a Discussion Paper headed Criminal Penalties for Serious Cartel Conduct and an exposure draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008.

The major change contemplated in the Bill is the introduction of a new “Cartel conduct” Division into Part IV of the Trade Practices Act 1974
(Act).  The Bill proposes two criminal offences in Part IV of the Act.

First, a corporation/person will commit an offence if:  the corporation/person makes a contract or arrangement, or arrives at an understanding, with the intention of dishonestly obtaining a benefit, and the contract, arrangement or understanding contains a cartel provision.

Second, a corporation/person will commit an offence if:  a contract, arrangement or understanding contains a cartel provision; and the corporation/person gives effect to the cartel provision with the intention of dishonestly obtaining a benefit.

The criminal burden of proof (beyond reasonable doubt) for conviction applies to both of the above offences.  Under the existing civil penalty provisions the lower civil burden of proof (on the balance of probabilities) applies.  The DPP will have to prove beyond reasonable doubt that the corporation / person committed either one of the above offences.  It is important to note that if the DPP believes that it can not obtain a criminal conviction under the above provisions the ACCC can still issue proceedings for breaches of the current civil offences in Part IV of the Act.

The penalties:  A breach of either of the two criminal offences by a person may be punishable on conviction by a term of imprisonment not exceeding 5 years or a fine not exceeding $220,000.  A breach of either of the two criminal offences by a corporation may be punishable on conviction by a fine not exceeding the greater of the following: 

• $10,000,000;
• 3 times the total value of the benefit obtained from the infringing conduct;
• if the court can not determine the total value of those benefits, 10% of the corporation’s annual turnover during the 12 month period from the date the offence was committed.

The above penalties available on conviction of a corporation mirror the penalties currently applying to civil breaches of Part IV of the Act.  The penalties available on conviction of a person are new and include the possibility of a term of imprisonment.

Meaning of cartel provision:  The new definition of ‘Cartel provision’ will significantly broaden the ACCC’s powers to regulate restrictive trade practices.  Whereas the ACCC’s current mandate is limited to agreements, arrangements and understandings which fix prices, restrict dealings or substantially lessen competition, the broad “Cartel provision” definition encompasses conduct between competitors with the purpose or effect of:

• fixing, controlling or maintaining the price for, or a discount, allowance, rebate or credit in relation to goods and services;
• preventing, restricting or limiting the actual or likely production, capacity or supply of good or services;
• allocating acquirers or suppliers or the geographical areas in which goods or services are acquired or supplied; or
• engineering the outcome of a bidding process.

Meaning of dishonesty:  The Bill defines dishonesty in accordance with the existing definition of dishonesty in the Commonwealth Criminal Code Act 1995 (Criminal Code) as:

• dishonest, according to ordinary peoples’ standards; and
• known by the defendant to be dishonest according to ordinary peoples’ standards.

There has been some concern expressed by the judiciary with regard to the potential difficulty faced by jurors in comprehending the test for dishonesty¹ however this test for dishonesty is a widely established element of the Criminal Code and offences under the Corporations Act 2001.  It is unlikely that this issue will delay the passing of the Bill.

Meaning of obtaining a benefit:  The Bill defines ‘obtaining’ as including: obtaining for another person; and inducing a third person to do something that results in another person obtaining.

The Bill defines ‘benefit’ as including any advantage and is not limited to property.

Additional provisions:  In addition to the new offences, the Bill will introduce a number of supporting provisions including:

• defences for arrangements between related bodies corporate and for new joint ventures which do not substantially lessen competition;
• immunity provisions aimed at protecting whistleblowers;
• prosecution powers for the DPP for criminal offences;
• enhanced information gathering powers for the ACCC; and
• priority of payment for victims of cartel conduct over penalties.

Passing of the Bill

The provisions proposed in the draft Bill largely reflect those provisions initially proposed by the Federal Liberal government in 2005.  Further, Justices Heerey and Weinberg of the Federal Court of Australia in recent decisions² called for the introduction of criminal sanctions with regard to cartel conduct.  It would seem that the Bill has bipartisan support and one would expect that it will be passed in a similar form to the current draft in the near future.   

This article was written by Noel Batrouney, Partner, Robert Evans, Lawyer and Daniel Petrie, Lawyer.

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