Revised Draft Legislation Proposes to Criminalize Cartel Conduct - International Law Office

Minister for Competition Policy and Consumer Affairs Chris Bowen recently released a revised draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 that proposes to criminalize serious cartel conduct.

The bill makes it a criminal offence knowingly to make or effect a cartel provision. A 'cartel provision' is defined as the provision of a contract, arrangement or understanding by which parties that are (or would otherwise be) in competition with each other engage in:

• price fixing;
• restricting outputs in the production and supply chain;
• allocating customers, suppliers or territories; or
• bid rigging.

A significant change to the bill is the removal of the requirement that the defendant's intention in obtaining a benefit be proved dishonest.

The bill makes the same conduct an offence in civil cases, as well as corporate situations. However, for civil offences the Australian Competition and Consumer Commission need not demonstrate knowledge or belief of the defendant's dishonesty. The standard of proof is the balance of probabilities, not the obligation to prove the offence beyond reasonable doubt.

Individuals found guilty of serious cartel conduct will face up to 10 years' imprisonment, a fine of up to A$220,000 or both. Penalties for corporations remain the same as those prescribed for civil breaches.

An exception to the cartel offences provisions concerns arrangements between related corporate bodies arranging a joint venture that does not intend to lessen or have the effect of lessening competition. This is an improvement on the initial bill, under which the joint venture defence applied only to civil cartel offences.

The publication of the revised bill follows a period of extensive public consultation. However, a surprising number of provisions from the previous bill that caused concern remain:

• There is still an overlap between the new cartel prohibitions and the existing civil prohibition (as distinct from a civil cartel contravention) against collective boycotts.
• Price fixing under the bill is exclusively a cartel offence and unlike the current legal position, there is no exemption for collective acquisitions.
• There is no carve-out for arrangements between suppliers and their customers where the two are in competition (eg, franchises that compete with company-owned stores). As a result, territorial exclusivity and price setting (other than minimum resale price maintenance) are deemed to be a cartel offence, without the benefit of the exceptions that currently operate.

An important aspect of the administration of the proposed cartel offences is the memorandum of understanding between the commission and the commonwealth director of public prosecutions, which provides that the commission will be responsible for investigating suspected breaches of criminal cartel offences while the director will be responsible for prosecutions.

The government released a draft memorandum to coincide with the publication of the previous draft of the bill. The memorandum was criticized, particularly with respect to the uncertainty of decision making and its implications for the commission's immunity policy.

The government has provided no additional guidance to coincide with the release of this bill.

For further information on this topic please contact Peter Armitage, Ayman Guirguis or Bill Reid at Blake Dawson by telephone (+1 61 2 9258 6000) or by fax (+1 61 2 9258 6999) or by email (peter.armitage@blakedawson.com or ayman.guirguis@blakedawson.com or bill.reid@blakedawson.com).