First criminal cartel fine

The Federal Court today convicted Nippon Yusen Kabushiki Kaisha (NYK) of criminal cartel conduct and ordered it to pay a fine of $25m (Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876).

This was the first successful prosecution under Australia’s criminal cartel provisions which have been in place since 2009. The fine includes a significant discount (50%) for an early guilty plea, cooperation and contrition).

Quick summary and background

In 2016, following an investigation by the ACCC, the Commonwealth Department of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in contravention of the Competition and Consumer Act 2010. NYK has been subject to several other cartel claims in other jurisdictions.

The cartel operated from at least 1997, but it was the conduct from 2009 (after the criminal cartel laws entered force in Australia) that was the subject of the CDPP’s action. The cartel related to vehicles transported to Australia by NYK and other shippers.

On 18 July 2016 NYK pleaded guilty to the charges and on 3 August 2017 was convicted and ordered to pay a fine of $25million. This represents the first criminal fine after the (relatively) new criminal laws were introduced in 2009 and second highest monetary penalty for cartel conduct in Australia (after Visy at $36m). The fine incorporated a 50% discount for cooperation and an early guilty plea.

‘Cartel conduct … warrants denunciation …’

His Honour clearly condemned cartel conduct – he concluded his reasons for judgment as follows (para 300):

Cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment. It is inimical to and destructive of the competition that underpins Australia’s free market economy. It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly. That is so even where, as here, the decisions and conduct are engaged in overseas and as part of a global cartel. As has already been explained, but for NYK’s cooperation and willingness to facilitate the administration of justice, the penalty would have been substantially higher. That should serve as a clear and present warning to others who may have, or may be considering or planning to, engage in similar conduct.

Level of fine

NYK had suggested that an appropriate fine level would be between $20 – $25 million.  Justice Wigney listed the factors tending to weigh in favour of more severe punishment as (at 298):

• ‘the maximum penalty (fine of $100 million)’
• ‘the very serious nature of the offence (involving as it did deliberate, systematic and covert conduct by relatively senior management over a lengthy period involving a large number of shipments)’
• ‘the damage, or potential damage, to the integrity of Australia’s markets and economic system caused by the conduct’ and
• ‘the need for general deterrence, particularly in respect of offences of this kind.’

His Honour described the ‘mitigating factors’ as (at 298)

• ‘NYK’s genuine contrition and rehabilitation, including the extensive steps taken by it to present any reoffending’
• ‘NYK’s early plea of guilty’
• NYK’s significant and valuable cooperation and assistance to the ACCC and the Director in relation to the investigation of this offence and possible offences by others’
• ‘NYK’s undertaking to provide assistance in relation to proceedings in the future’
• ‘the extra-curial punishment, in the form of penalties imposed by courts and tribunals in other jurisdictions, already imposed on NYK in respect of conduct related to the relevant cartel’ and
• ‘the fact that NYK has not previously been convicted of any offence in Australia or overseas.’

On comparisons with civil cases

In the course of considering an appropriate penalty his Honour dismissed references made by the CDPP and NYK to pecuniary penalties in civil cartel cases, noting they ‘provide little, if any assistance, in relation to the imposition of an adequate sentence in this matter’ (para 287)

[289] There are a number of difficulties in placing any reliance on the penalties imposed in the civil penalty cases. First, it appears to have been accepted that the purpose of imposing a civil penalty is different to the purpose of imposing a criminal penalty. Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is said to be primarily, if not wholly, protective in promoting the public interest in compliance: … Indeed, it has been suggested that punishment is not a purpose of imposing a civil penalty: … Given the differences between criminal proceedings and civil penalty proceedings that were identified in Commonwealth v Director, FWBII, some caution must be exercised in applying to criminal sentencing the principles that have been developed in the civil penalty context.

[290] Second, many of the penalties that have been imposed in the civil penalty cases were agreed penalties. …

[291] Third, the civil cartel cases referred to by the parties are in any event not truly comparable. …

[293] Fourth, and perhaps most significantly, the civil penalty cases do not disclose any discernible pattern or range of penalties that could be transposed to the criminal sentencing context. Nor is it possible to discern from them any unifying principles that should be applied in the criminal sentencing context, other than perhaps the importance of general deterrence, as discussed earlier.

More to come

Justice Wigney made a number of other interesting observations regarding the cartel laws; the blog will be updated soon – in the meantime see my case page for more details.

More information

For more information, including links to other resources, see my case page.

See also

• CDPP media release
• ACCC media release
• Judgment (or court summary of the case)
• James Thomson, ‘ACCC secures second biggest fine ever against shipping cartel’ (AFR, 3 August 2017)
• Nick Toscano, ‘Shipping giant convicted, fined $25m, for running Australian car imports cartel’ (SMH, 3 August 2017)
• Christian Edwards, ‘Japanese shipping firm fined $25m in first successful criminal cartel prosecution’ (The Australian, 3 August 2017)