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Archive for the ‘Criminal Penalties’ Category

New Zealand: New discussion paper on criminal cartels

Posted by Julie Clarke on 2 February 2010

On 27 January the NZ Minister of Commerce, Simon Power, released a discussion document on the introduction of criminal penalties for cartels.

See also article by Caron Beaton-Wells and Brent Fisse (Uni of Melbourne Legal Studies Research Paper No 413, June 2009), ‘The Australian Criminal Cartel Regime: A Model for New Zealand’.

Submissions close on 31 March 2010.

Posted in Cartels, Competition Policy, Criminal Penalties, New Zealand, Price Fixing | Tagged: , , | Leave a Comment »

Criminal cartel laws now live in law, but not in print

Posted by Julie Clarke on 24 July 2009

Today marks the first day the long-awaited criminal cartel laws enter force in Australia.  The news laws create new civil and criminal offences for engaging in cartel conduct.  Cartel participants now risk up to 10 years jail for making or giving effect to cartel provisions, defined (in s 44ZZRD(2)!) to include price-fixing (this replaces s 45A which has been repealed), bid-rigging, restricting outputs and market division between competitors.  Despite the flaws in the drafting of the laws, it is appropriate to treat cartels as criminal and the law should be welcomed. It has been described by former ACCC Chairman as a ‘red letter day for competition law‘.

However, despite the very serious consequences now associated with the new law, Treasury has not produced a consolidated version of the Act – so nobody can clearly see how the new law operates without flicking between two different – and highly complex – documents.  This is unacceptable.  It is normal for legislative consolidations to lag behind new legislation where the amendments are trivial or incidental to amendments made to other acts.  But this is a monumental and complex change and it is not as if Treasury has been caught off guard.  The legislation passed on 16 June.  It received Royal Assent on 26 June.  Since then it has had 28 days for someone among its hundreds of staff to put together a consolidated Act prior to the criminal laws kicking in.  Nobody has bothered.  ComLaw did create a new consolidation on 1 July (AFTER the cartel act received assent) but it didn’t include the new law!

I did it in a few hours – I didn’t get much sleep on Tuesday night compiling the ‘unofficial’ consolidation, but it wasn’t a difficult task. Why?  I’m teaching the new law to my undergraduate students in a couple of weeks and wanted to see the new additions/amendments in context in order to ensure I was capturing the full raft of changes – and it was a useful exercise.  But the only consequence for me of not doing it would be to deliver a sub-standard lecture.  Although my students may consider this a particularly serious and undesirable outcome, for business and lawyers the consquences are clearly much more serious.  It is unacceptable that there is no ‘official’ means of viewing the new law, particularly given the serious – criminal – nature of the consequences for failing to adhere (for which ignorance of the law is no excuse).

This is not the only area in which Treasury has been lax in updating material for the public.  It took well over a week for the Treasury website to acknowledge Dr Craig Emerson MP as the new minister for Competition and Consumer Affairs (this change should take no more than a few minutes).  And his web site is still part of the ‘Ministers for Innovation, Industry, Science and Research’ website (Emerson is also Minister for Small Business, Independent Contractors and the Service Economy; Minister Assisting the Finance Minister on Deregulation‘) rather than Treasury Ministers portal (all the other Treasury Ministers have web sites hosted by Treasury and their quality is far superior).

At least the main page of the site now lists his various ministerial responsibilities – until recently nobody would have guessed from the web site that he had anything to do with Competition policy.  When I complained about this, Webhelp from the Department of Innovation, Industry, Science and Research, informed me (on 3 July) that the page reflecting Minister Emerson’s ministerial responsibilities had been updated ( and that the rest of the website was in the process of being updated and ‘should’ be completed shortly.  It’s not clear whether it has been ‘completed’ or whether they are still at work.  If it is ‘completed, then the reference to the Competition Ministry still remains in the shadows of a very large and overbearing ‘header’ which proclaims that this page is for Ministers of Innovation, Industry, Science and Research .  It is not terribly comforting for those hoping for a strong government focus on competition policy.

Treasury has been very keen to release reports, establish inquiries, enact complex new laws in relation to competition policy (for some of that, at least, they are to be commended) but needs to improve its act when it comes to dissemination of information about new laws and policy to the public – in particular, those subject to the new criminal laws have a right to be able to view consolidated legislation which clearly sets out their obligations.

Posted in Cartels, Criminal Penalties, Legislation, Legislation (TPA/CCA) | Leave a Comment »

Consolidated TPA

Posted by Julie Clarke on 23 July 2009

Treasury hasn’t produced one and there’s no current consolidation at ComLaw, so in light of the fact that the criminal cartel laws (and the new civil cartel laws) kick into operation tomorrow I have prepared an unofficial consolidation.  The process of reviewing the entire Act has reminded me what bad shape it is in – I thought the numbering of the new cartel provisions was bad, but I’ve been reminded that the numbering scheme is simply consistent (and in some respects simpler) than most of the rest of the Act …

Note: A current consolidation is now also available at ComLaw and AustLII

Posted in Cartels, Criminal Penalties, Legislation, Legislation (TPA/CCA) | Tagged: , , , , , | 1 Comment »

Criminal Cartel Bill receives Royal Assent

Posted by Julie Clarke on 2 July 2009

The Criminal Cartel Bill received Royal Assent on 26 June 2009 – it is now an Act (Act no 59 of 2009) and the cartel provisions will enter force after 28 days (24 July).

The ACCC has also released a Revised Immunity Policy for Cartel Conduct and associated interpretation guidelines. They will come into operation when the new cartel provisions come into force on 24 July. In addition to setting out the process for obtaining immunity for civil cartel conduct the new policy sets out the procedures for obtaining immunity in relation to criminal cartel offences, including the role of the Commonwealth Director of Public Prosecutions (CDPP) (see, in particular, Annexure B of the Prosecution Policy of the Commonwealth).

Posted in Cartels, Criminal Penalties, Guidelines, Immunity, Price Fixing | Tagged: , , , | Leave a Comment »

Criminal cartel bill passes … now awaiting assent

Posted by Julie Clarke on 17 June 2009

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 passed the Senate on 15 June 2009 with minor amendments that were confirmed by the House yesterday.  The bill is now awaiting assent and the core elements of the bill will come into operation 28 days after receiving assent.

The bill creates a new ‘cartel offence’ for which it provides criminal penalties of up to 10 years’ imprisonment and fines of up to $220,000.  A cartel offence occurs whenever a party makes or gives effect to a contract, arrangement or understanding containing a cartel provision, provided they intended to enter into that contract, arrangement or understanding and had knowledge or belief that it contained a cartel provision (the criminal ‘fault’ element).  In addition to introducing criminal penalties for cartel conduct the bill also introduces a civil prohibition, which mirrors the criminal cartel prohibition, save that it omits the criminal ‘fault’ element.  The penalty for contravening the civil prohibition is the same as the existing civil penalties.

The bill defines a cartel provision (in s 44ZZRD!) as a provision in a contract, arrangement or understanding between competitors relating to

  • Price fixing (where the provision has the purpose or effect (or likely effect) of directly or indirectly fixing, controlling or maintaining prices for goods or services supplied or acquired (or re-supplied or likely to be re-supplied)
  • Restricting outputs in the production or supply chain (where the provision has the purpose of directly or indirectly preventing, restricting or limiting production of goods, the capacity to supply services, or the supply of goods or services)
  • Allocating customers, suppliers or territories (between all or any of the parties) or
  • Bid rigging.

The existing price-fixing prohibition, contained in the more user-friendly s 45A, will be repealed.  The bill leaves in place existing exclusionary conduct provisions but does provide some anti-overlap provisions for resale price maintenance, exclusive dealing, dual listed company arrangements and mergers (these are a welcome addition to October 2008 exposure draft).

The new offence also contains a limited exception for joint ventures.  This exception has been the subject of considerable debate, centred on the fact that the exception is narrower than the current civil joint venture exception.  In particular, it is limited to contractual joint ventures (no adequate explanation has been provided for this restriction).  Amendments to the bill, passed by the House yesterday, extend the exception to joint ventures in which the parties intended to enter into a contract and ‘reasonably believed’ they had entered into a contract.  However, it does not extend the exception to arrangements or understandings and the supplementary Explanatory Memorandum, designed to explain this amendment, is unhelpful and, potentially, misleading in its explanation of the scope of this amendment.

The criminalisation of cartels is desirable.  The economic damage they cause is well documented and civil penalties, no matter the size, have failed to provide adequate deterrence.  But the consequences of criminalisation are serious and it is important to ‘get it right’.  The statement in the Senate ‘debate’ (if one can call it that) that we ‘would not want to see this legislation delayed’, despite (in Senator Cooney’s own words) its potential to generate uncertainty, the fact that the ‘legislation might be somewhat woolly’ and ‘misgivings’ about some of the provisions in the legislation, is unwise.  The legislation is long (running to 90 pages) and complex and, regardless of the desirability for criminal penalties, it would be wise to wait a bit longer and permit a full and transparent public consultation and review process before passing such far-reaching – and, in its current state, deficient – legislation.  Unfortunately the government has neglected this option.  Genuine concerns have been ignored, or dismissed, without adequate explanation.  Unfortunately the scope and complexity of the proposed new law will give rise to uncertainty for some time as the regulators, DPP and business feel their way through these new laws.

This legislation has its origins in recommendations by the Dawson Review into Competition Law which reported in 2003.  This led to the establishment of a criminal penalties working party which reported to the Government in 2004; this report was never released publicly and a recent attempt to obtain it through a FOI claim was unsuccessful.  Following this report the Howard Government announced, in February 2005, that it planned to introduce criminal penalties for serious cartel conduct as recommended by the Dawson Committee later that year.  A federal election interfered with those plans and no bill was introduced.

Following the election of the Rudd Government, an Exposure Draft Bill for implementing criminal penalties was released in early 2008 along with a Discussion Paper on Criminal Penalties for Serious Cartel Conduct.  The bill was heavily criticised, but no detailed response to the submissions on the Discussion Paper was ever released.   An amended Exposure Draft Bill was released on 17 October 2008 containing some important changes, including removal of the ‘dishonesty’ element, designed to distinguish serious from ‘non-serious’ cartel conduct, and (somewhat inexplicably) increasing the criminal penalty from 5 years imprisonment to 10 years.  A further amended version was introduced into Parliament on 3 December 2008.

The bill was sent to the Senate Economics Committee on 4 December and, in the meantime, was passed by the House on 11 February and introduced into the Senate the next Day.  The Senate Economics Committee’s report was released on 26 February and must go down as one of the worst (if not the worst) reports ever produced by that Committee – it was littered with errors and did not attempt to address issues of key concern.   The report, despite recognising certain deficiencies with the bill, recommended that it be passed in current form.  Continuing criticism over the limitations on the new joint venture exemptions (inexplicably narrower than existing exemptions form the civil prohibitions) did, however, result in a relatively minor joint venture amendment in the Senate (as noted above) and the bill, with these amendments, was passed by the Senate on 15 June.  In passing the bill the Senate engaged in no substantive debate; instead the Hansard is littered predominantly with self-congratulatory remarks over the introduction of criminal penalties. Those amendments were agreed to by the House on 16 June.  The bill now awaits Royal Assent.

Posted in Cartels, Criminal Penalties, Legislation | Tagged: , , | Leave a Comment »

Criminal cartel bill passes Senate

Posted by Julie Clarke on 16 June 2009

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 passed the Senate last night with amendments relating to the Joint Venture exemption.  For discussion of the quality of these amendments see Fisse, ‘The Contract Requirement for the Joint Venture Exceptions Under Sections 44ZZRO and 44ZZRP of the Cartel Bill’ (Draft, 6 June 2009) (PDF)

There was little debate of any substance in the Senate leading to the passage of the bill, the Senate accepting the Senate Economic Committee Report and Recommendations, without reference to the Reports many inadequacies!  View Senate Hansard (from pp 108-116)

See also press release by the new competition minister, Dr Craig Emerson (incidently, today the Treasury Ministers Portal finally added Dr Emerson to the their list of Treasury Ministers; but the web site it directs you to – Emerson’s Ministerial Home Page – still makes no mention of the fact that he is now Minister for Competition and Consumer Affairs).

UPDATE: Amendments have been agreed to by House.  Final bill as agreed to both houses can be viewed here.  I will produce a separate post regarding the final passage of the bill which now waits assent – the criminal provisions will become operative 28 days thereafter.

Posted in Cartels, Criminal Penalties, Legislation | Tagged: , , | Leave a Comment »

Competition Law Conference

Posted by Julie Clarke on 1 June 2009

The 20th Annual Competition Law Conference, organised by Chris Hodgekiss of the NSW Bar, was held in Sydney last Saturday 23 May, covering a range of current issues in competition law and policy.

The keynote speech of the Conference, ‘In Hope of Convergence – A Regional Perspective on Competition Law‘, delivered by High Court Chief Justice RS French has now been published online on the High Court’s website.  Chief Justice French paid particular attention to the new Indian competition laws, the majority of which came into operation on 20 May 2009.

Other sesssions at the Conference covered the proposed conduct of cartel litigation following the introduction of criminal penalties (including ‘the ACCC enforcement perspective on serious cartels – some key issues and practical considerations‘ by Marcus Bezzi (Executive General Manager, Enforcement & Compliance Division, ACCC) and ‘The Role of the CDPP in the Prosecution of the Proposed Cartel Offence’ Graeme Davidson (Deputy Director, CDPP). Brent Fisse (Lawyer & Senior Fellow, Melbourne Law School) followed with the paper ‘Avoidance and Denial of Liability‘, assessing potential escape routes from the new cartel laws), the complexities of representative and class action proceedings in competition law (with Dr Peter Cashman and Ben Slade) and Mergers and the availability (or otherwise) of a ‘failing firm’ defence (courtesy of Dave Poddar (Partner, Mallesons) and Tim Grimwade (ACCC))

Posted in Cartels, Conferences, Criminal Penalties, Evidentiary Issues, Guidelines, Mergers, Price Fixing | Tagged: , , , , , , | 1 Comment »

Senate to resume debate on Criminal Cartel Bill (postponed)

Posted by Julie Clarke on 13 May 2009

The Senate is due to continue second reading debate on the Criminal Cartel Bill today (of course they do seem to be running behind schedule)  – see Senate Dynamic Red for Progress.

See also Bill Home Page.

UPDATE: As predicted, the Senate adjourned before debate resumed on the cartel bill – it has been re-listed for debate today (Thursday 14 May)

ANOTHER UPDATE: Although it appeared on the Senate Order of Business until about 1.30pm, the Cartel Bill debate has now been removed from the Senate Order of Business for today.  The Senate next sits on 15 June.

Posted in Cartels, Criminal Penalties | Tagged: , | Leave a Comment »

ACCC Comments on Pratt Proceedings

Posted by Julie Clarke on 30 April 2009

While proceedings were ‘live’ the ACCC remained silent on its role in the criminal charges against Pratt which arose from their investigations into the cardboard cartel.  This was despite almost daily verbal attacks on the ACCC and, in particular, Graeme Samuel.  The ACCC has now released a press release detailing its role in the proceedings.  In particular, it states

“The ACCC has a public duty to refer all matters which may warrant criminal prosecution to the CDPP, together with relevant evidence.  The CDPP alone determines whether a prosecution will proceed. He does so pursuant to the Prosecution Policy of the Commonwealth. That policy has two pillars:

  • that there are reasonable prospects of conviction, and
  • and that the prosecution is in the public interest.

This is the process that was adopted by the ACCC in the proceedings relating to Mr Pratt.”


“The ACCC maintains that it has acted at all times in accordance with its public responsibility, and remains cognisant of the fact that both it and the CDPP must at all times have regard to the public interest in pursuing actions of this nature.”

Posted in Cartels, Criminal Penalties | Tagged: , | 1 Comment »

Senate Cartel Report Released

Posted by Julie Clarke on 26 February 2009

The Senate has just released its Report into the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008.

The Committee expressed its views on three key areas of contention (unfortunately they were addressed briefly and other issues of concern – including other aspects of the drafting of the provisions – were not addressed):

1. Distinguishing criminal from civil cartel conduct

The Committee supported the decision to omit a ‘dishonesty’ requirement from the original exposure draft bill.  They also believed that ANY attempt to legislate what constitutes a ‘criminal cartel offence’ ‘risks restricting the judgment of the regulator’ (at 4.8)  and (at 4.9) recommended against ‘an attempt to delineate between civil and criminal cartel offences’.  Case by case judgments of the ACCC are important, they continue (at 4.8), because ‘they are contextual and weigh various factors, one against others.’  Instead of legislative change the Committee favoured ‘the release of detailed guidelines by the ACCC on passing of the legislation providing a non-exhaustive list of factors so that businesses could have an understanding of the kind of behaviour that would have the potential for prosecution.’ (para 4.9)

2. Joint Venture Exemptions

This has been one of the hottest issues of contention.  The Committee was not, however, convinced by any arguments presented in relation to the exemptions: ‘Chapter 3 noted the bill’s joint venture exceptions have attracted criticism from those who claim they are too narrow, while others fear that they are too generous and potentially often sanctuary for cartelists. The committee believes that the bill strikes an appropriate balance.’ (para 4.12)

3. ACCC Powers

While acknowledging that it would be important for the ACCC to produce Guidelines to assist business in determining what conduct is likely to be pursued criminally, they did not “agree with the concerns of many witnesses that the bill would allow the ACCC to pursue innocuous (and previously legal) activities” considering that the “claim that the bill would give the ACCC too much discretion in determining the pursuit of criminal cartel cases” was “overstated”. (para 4.18)

Finally, the Committee simply recommended that the Senate pass the bill. (para 4.19)

In his ‘additional comments’, Senator Xenophon also noted that the comprehensibility of the bill could be improved by inserting  the new provisions in “a way that avoided the need to refer to complicated sub-sub-sub-sections such as ‘subsection 44ZZRF’ and so on. …’ .  He also claimed there was a ‘need for a comprehensive, independent, review of the Act … to produce a simple act which promotes fair markets that operate in the interests of the whole community.’  Unfortunately, neither the numbering system nor the complicated drafting of the provisions themselves (s 45A was nice and simple) were discussed in the majority report.

It is a pity this review was so limited.  There were only 12 submissions, no doubt in part because less then a year earlier there had been a similar call for submissions into the Exposure Draft bill (30 submissions were received) ; no report on the Government’s consideration of those submissions was ever released and no substantive explanations for legislative changes (like the removal of the dishonesty element and increased prison terms) was given (save that it brought it into line with US penalties).

There’s nothing much to excite anyone in this report and there are some frightening inaccuracies.

Errors, inconsistencies and other oddities

1. Error: Summary of Part IV: in para 1.2, designed to give ‘background’ to the discussion in the report, ‘third line forcing’ and ‘resale price maintenance’ (RPM) are listed as two of “four prohibitions on anti-competitive behaviour considered to be anti-competitive in the context of a ‘contract, arrangement or understanding’ between competitors.’  This is certainly news to me.  Both of these forms of conduct are prohibited per se in Part IV, do not require a contract, arrangement or understanding (at least not of the kind being referred to by the Committee) and are generally not (and certainly not required to be) between competitors.

2. Oddity: In para 1.2 again, the other two forms of prohibitions referred to are exclusionary provisions and price fixing (leaving aside that  price fixing is not a separately prohibited but prohibited as a form of anti-competitive agreement and is aided by a deeming provision in s 45A), exclusionary provisions (which are per se prohibited) are lumped in together with s 45(2)’s general prohibition on contracts, arrangements or understandings which substantially lessen competition.  There is a very important distinction between the two for purposes of the proposed cartel offence.

3. Error: para – 1.3 – the Committee states that authorisation can be granted for RPM, third line forcing and exclusionary conduct based on a ‘test as to whether it has substantially lessened competition in a market’.  This is simply wrong.  There is no reference to SLC in the authorisation provisions (presumably because these forms of conduct are effectively deemed to SLC) – instead a pure public benefit test applies – would the conduct result in such a benefit to the public that it should be allowed to take place?  The Committee refers to the correct provision (s 90(8)), but apparently has not bothered to read it.

3. Inconsistency: para 1.6 states ‘The twin purpose of the bill is to deter and detect criminal cartel conduct’.  Skip along a few pages and para 2.1 states taht teh ‘principal purpose of this bill is to establish a definition of and a basis for penalising criminal cartel activity.’

4. Error: para 2.18 states that the ‘”anti-overlap provisions” are excpetions to the TPA’s “per se” provisions’.  No, they are not.  An anti-overlap provision preventing RPM being caught both by s 48 (per se) and 45(2) (even if we’re kind and assume s 45A would also apply and therefore effectively capture it per se under s 45) is not an exemption to the per se prohibition (the conduct is still per se prohibited under s 48), it simply favours the specific over the general prohibition to avoid duplication of penalty for the same conduct.  This is quite a simple concept; either the Committee couldn’t grasp it or didn’t try.

5. Oddity: para 3.6 – not really an error or even an oddity, but Committtee compares US system with ‘parallel civil and criminal prohibitions’ where it is up to regulators ‘to determine which way the case will go foarward’ and how successful that has been but do not discuss at all or acknowledge the extemely different administrative structure existing there that facilitate that.

6. Oddity/insoncistency: para’s 3.9 discuss prices and seem to confuse price fixing with supply restrictions.  The complaint they refer to focusses on the prohibition in the bill on ‘preventing, restricting or limiting … the supply … of goods or services …’ – but this seems to be discussed in the context of price fixing, the Committee (at para 3.11) referring to Assoc Prof Zumbo’s proposed definition of a price fixing offence – and then quoting from him discussing conduct involving output restrictions’.  It was certianly difficult to follow …

7. Para 3.39 states ‘As the bill is currently drafted, any businesses that enter into a contract, arrangement or unerstanding that restricts supply – even if the activity is innocent and regardless of its impact on price – will be subject to the criminal cartel offences’ and (at para 3.49) ‘Ordinary commercial activities, which inadvertently restrict the supply of goods or services, may attract a criminal penalty’.  First, the first statement is inaccurate as conduct must be between businesses in competition (or likely to be so etc).  Second, it is not clear what the Committee means by ‘even if the activity is innocent’ as, although there is now no dishonesty requirement, the Committee points out in para 3.16, quoting from Scott Rogers, that it will be necessary ‘for the prosecution to prove that the corporation knew or believed that the contract contained the cartel provision’ – thus, while the conduct need not necessarily be ‘dishonest’ in that it intended to rip off consumers or others, genuinely innocent conduct should not be caught.

8. para 3.39 – While the Committee believed that ‘innocent’ and harmless conduct could be caught by the criminal provisions, they were not terribly concerned by this, expressing confidence that the ACCC would exercise appropriate judgment in determining which cases it would refer to the DPP for criminal prosecution.

The analysis that followed all of this was very limited and did not address all of the concerns the Committee itself identified earlier in its report.  It is difficult not to form the view that the Committee Review was merely ticking a box and nothing would have convinced them to alter the legislation and possibly delay its passage through Parliament.

The bill passed through the lower house on 11 February – the Senate next sits on 10 March.  View bill progress.

Posted in Cartels, Criminal Penalties, Legislation | Tagged: , , | 1 Comment »

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