Competition Law

Australian Competition Law and Policy Discussion

Posts Tagged ‘Price Fixing’

ACCC alleges price fixing by Qld construction co’s

Posted by Julie Clarke on 22 September 2009

The ACCC has commenced proceedings alleging that three Queensland construction companies engaged in price fixing when tendering for Government construction projects between 2004 and 2007.

View ACCC Press Release.

Posted in Cartels, 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The existing price-fixing prohibition, contained in the more user-friendly s 45A, will be repealed.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 »

China Defends Vitamin Price Fixing

Posted by Julie Clarke on 26 November 2008

The Wall Street Journal reports that the Chinese Ministry of Commerce has made a ‘friend-of-the-court’ filing in a case alleging price fixing by four Chinese vitamin C manufacturers.  The four companies involved are said to have captured the relevant market after eliminating rivals over a number of years through predatory pricing conduct.  It is alleged that they then agreed to control export quantities and raise prices.  China is defending the manufacturers, claiming ‘sovereign immunity’; for purposes of their motion to dismiss the Chinese manufacturers did not dispute the price-fixing allegations – they simply claimed that they were compelled to engage in that conduct by the Ministry.


On 6 November Judge Trager, in the United States District Court for the Eastern District of New York (In Re Vitamin C Antitrust Litigation 06-mdl-1738 (DGT)), rejected a claim by by the Chinese companies to dismiss the case “on the grounds that their price fixing activities were compelled by the Chinese government.” Judge Trager noted that “The Chinese government’s appearance as amicus curiae is unprecedented’.  Judge Trager held that while the Ministry’s Brief was ‘entitled to substantial deference’ it would ‘not be taken as conclusive evidence of compulsion, particularly where, as here, the plain language of the documentary evidence submitted by the plaintiffs directly contradicts the Ministry’s position.’

Judge Trager noted that ‘the issue at this stage of the case is whether there is a factual dispute as to the alleged compulsion’ and concluded that ‘the record as it stands is simply too ambiguous to foreclose further inquiry into the voluntariness of the defendants’ actions’ and, accordingly, denied the defendants’ motion to dismiss.

The outcome of this decision will have significant implications for international competition law enforcement.

See also Kate Fazzini, ‘Antitrust Suit Proceeds Against Chinese Vitamin C Makers‘, NYLJ, 13 November 2008.

Posted in Cartels, Misuse of Market Power, Price Fixing | Tagged: , , | Leave a Comment »

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