Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Australian competition authority closes further on cartel behaviour and issues guidelines on new provisions

On 28 October 2009 the Australian competition authority (the ACCC)announced that it had commenced action against Thai Airways International in the Federal Court alleging that it had also engaged in price fixing overseas which affected the price for air freight into and out of Australia.

Thai Airways becomes the 11th airline against whom the ACCC has brought such actions.  As with other actions the ACCC seeks declarations, injunctive relief, pecuniary penalties and costs.

As many would be aware, the Federal Court has imposed penalties against a number of airlines who admitted to such price fixing offences.  This has included significant penalties against Qantas.  However, actions still remain unresolved against Singapore Airlines Cargo, Cathay Pacific, Emirates and Garuda by the ACCC.  Litigation by the ACCC against Singapore Airlines has already raised some interesting issues with the ACCC successfully defending its right to issue notices seeking information and documents even though the allegedly offending conduct took place overseas on the basis that had an impact on prices in the Australian market.  The actions by the ACCC are separate to class actions being brought by those who claim to have been financially disadvantaged by the alleged cartel activity by which they are seeking damages.

As many would be also aware, the actions by the ACCC take place at the same time as actions by other overseas competition authorities in relation to such alleged cartel activity.  There have been significant actions in the US and the EU including large payments to those affected.  The international actions continue to expand including a report from Japan's AU Nippon Airways that it had been informed by South Korea's Fair Trade Commission of a potential violation of competition law in its cargo operations.

In addition to the current actions by the ACCC the Australian Government has created additional offences and granted additional powers aimed at cartel behaviour.  The amendments this year to the Trade Practices Act 1974 provide additional sanctions of criminal convictions (including jail time) together with additional powers to the ACCC including search warrants and telephone interception.

The amendments to the Trade Practices Act 1974 specifically define and prohibit types of cartel conduct for which civil and criminal penalties are available.  For these purposes, a cartel provision is one that has the purpose or effect of fixing, controlling or maintaining prices and/or for the purposes of allocating customers suppliers, or territories, preventing restricting or limiting output or bid rigging, such as collusive tendering.  It is a breach of the law for competitors to make an agreement containing such a provision and there is a further breach to act in accordance with the agreement.

The ACCC has recently published a Guide entitled "Cartels – What you need to know" which serves as a useful reminder as to the types of behaviours which will offend the cartel provisions.  The Guide gives some specific examples of conduct which may and may not offend the cartel provisions together with recommending action to be taken when faced with such potentially offending conduct.  Importantly, the Guide also:

·                          gives some detail as to where action may be considered as civil or criminal;

·                          identifies the investigation powers to the ACCC;

·                          identifies where immunity may be available; and

·                          diarises exemptions (including action under cover of a Collective Bargaining Notice, action where an authorisation had been granted, joint ventures, agreements between related bodies corporate and approved Buying Groups).

What is also useful is the view of the ACCC that the 3 main messages of the legislation are:

·                          Businesses should be aware of the law and the penalties for contravening the TPA.

·                          Businesses should adopt suitable risk management and compliance strategies.

·                          Businesses should be aware of the risks of being targeted by a cartel and should be alert to possible collusion by suppliers.

It would be prudent for all businesses to appraise themselves of the new provisions prohibiting cartels and to ensure that they have appropriate compliance mechanisms in place to ensure that they do not engage in cartel conduct and are able to identify cartel conduct when it is having an adverse affect on their business.  The Guide also contains extensive comment as to what could be included in a "Compliance Program" and what resources are available to implement the Program.  The ACCC, like other agencies such as AQIS and the Australian Customs and Border Protection Service, places significant weight on the existence and observation of compliance programs and those demonstrating compliance will benefit from those efforts.

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