New legislation gets tough on cartels

03 November 2008 Topics: Compliance and corporate governance

Last week, the federal Government unveiled the Trade Practices Amendment (Cartel Conduct and other Measures) Bill 2008, and with it signalled a renewed focus on tackling cartel behaviour in corporate Australia.

What is cartel behaviour?

At its broadest point, a cartel is any arrangement between two or more businesses which has the effect of lessening competition in the marketplace. Common examples include:

  • Price fixing;
  • Market sharing;
  • Bid rigging; and
  • Controlling market output.

Cartel behaviour distorts economic markets through artificial price manipulation, choice reduction and the weakening of ordinary competitive processes.

Zero tolerance

On releasing the new Bill, the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs Chris Bowen commented:

“We have always said a jail term for cartel offences sends a clear message – price-fixing is theft from consumers and won’t be tolerated in this country.”

“Criminalising cartels, at long last, brings this country into line with the United States, Canada and the United Kingdom who have had similar sanctions in place for some time now.”

Telephone interception

By their very nature, cartels are covert operations. New telephone interception powers will seek to penetrate this veil of secrecy, making it easier for authorities to investigate and prosecute offenders who would otherwise escape prosecution.

Increased penalties

The Bill also prescribes new and additional penalties for the offence of ‘giving effect to a cartel’.

For individuals, the maximum penalty is a term of imprisonment for 10 years and/or a maximum fine of $220,000.

For corporations, the maximum penalty the greater of $10 million or three times the value of the benefit from the cartel, or where the value cannot be determined, 10 per cent of annual turnover.

Claims of innocent intent irrelevant

Significantly, authorities are not required to prove that the individual or corporation had the ‘intention of dishonestly obtaining a benefit.’ In justifying this, Chris Bowen said,

“What we didn’t want to see was the position where people … could come forward with the defence where, ‘this is always the way it has been done around here … we just thought it was a good way to do business … we weren’t meaning to rip anyone off’.”

While prosecutors still need to prove the offence beyond reasonable doubt and meet certain ‘fault’ elements which are automatically applied under the Commonwealth Criminal Code, the ability to prosecute passive cartel participants appears to have been greatly increased. The real effect, however, remains to be seen.

Compliance the best defence

With the Bill being introduced to Parliament by year end, now, more than ever, compliance provides the best defence. Ensuring all relevant people understand the requirements and limitations imposed on conduct is critical in protecting your business and its people. The cost of not acting is simply too great.

If you would like to discuss the impact of these measures on your business and how we can help you, please contact David Grace, head of Trade Practices Compliance on 07 3231 2444.

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