Cartels | Overview
Prohibition of cartels in Australia
Cartel conduct is prohibited in a variety of ways in Australia. Most directly, it is prohibited by Part IV, Division 1 of the Competition and Consumer Act, which defines and prohibits, both civilly and criminally, cartel conduct. The definition of cartel conduct is lengthy (it runs to 36 paragraphs), but encompasses agreements between competitors to fix prices, divide markets, rig bids or restrict outputs.
Conduct falling within this definition of 'cartel conduct' is prohibited per se. Anti-competitive conduct which falls outside the definition of cartel conduct, or which benefits from an exemption from the per se prohibition, may still contravene other provisions in the Competition and Consumer Act; most notably section 45 which prohibits anti-competitive agreements.
Note: The current Harper Review Final Report has recommended significant changes designed to simplify Australia's cartel laws. View overview of recommendations and government response (PDF).
The ACCC has also developed a cartel immunity policy which is available to the first party to come forward, subject to certain criteria. In addition, parties who cooperate may benefit from the ACCC's cooperation Policy.
The relevant legislation
The core prohibition
Australia's competition laws are contained in the Competition and Consumer Act 2010 (Cth).
Division 1 of Part IV of the CCA (sections 44ZZRA - 44ZZRV) now contains the primary prohibition on cartel conduct (in the form of price fixing, bid rigging, market division and restricting outputs) in Australia. This Division was inserted by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 and entered into operation on 24 July 2009. It replaced the former s 45A which deemed certain price fixing arrangements between competitors to have the purpose, effect or likely effect of substantially lessening competition.
The criminal and civil prohibitions are the same, save for an additional fault element of 'knowledge or belief' in relation to the criminal offence.
Cartel conduct is defined in s 44ZZRD as including four forms of activity: price fixing, market division, restricting outputs and bid rigging. This conduct is prohibited where made or given effect to in a 'contract, arrangement or understanding' and two or more of the parties involved are competitors (or would be but for the conduct). In relation to price fixing the provision must have the 'purpose or effect' of price fixing; in relation to the other forms of conduct the provision must have the requisite 'purpose'. Price fixing is defined in the same way in s 44ZZRD as it was in the former s 45A.
Contract, arrangement or understanding
In ACCC v Leahy Petroleum Pty Ltd  FCA 794 the Federal Court held that in order for a 'contract, arrangement or understanding' to exist, the following elements must be present:
The final element - 'commitment' - has proven the most controversial and has, in part, led to a recommendation to extend anti-competitive conduct prohibitions (but not the direct cartel prohibitions) to 'concerted practices'.
To be caught by the definition of cartel conduct in the Act, the contract, arrangement or understanding must be between parties, two or more of whom are, or are likely to be (or would be but for the provision) in competition in relation to the supply or acquisition of the relevant goods or services (the 'competition condition') (s 44ZZRD(4))
In Norcast S.ár.L v Bradken Limited (No 2)  FCA 235 (19 March 2013) the threshold was held to be quite low, with the Court at first instance holding that 'likely to be in competition' in this context meant a 'possibility that is not remote'.
The Harper Panel has recommended that the threshold be altered so that the competition condition be satisfied only where corporations are 'in competition with each otehr or are likely to be in competition with each other, where likelihood is assessed on the balance of probabilities (that is, more likely than not)' (p 363 Final Report; emphasis added)
Exceptions and anti-overlap
There are a number of exceptions to Part IV, including the cartel provisions.
The general Part IV exceptions are contained in section 51.
In relation to Part IV Division 1 conduct (cartels) exceptions (relating to anti-overlap and joint ventures) are contained in subdivision D.
Authorisation and notification
Parties may seek authorisation (on public benefit grounds) for proposed cartel conduct. See conduct page for more detail.
Small business may also provide a collective bargaining notification to the ACCC (see conduct page for further details).
The history and future of the provision
The current cartel laws were introduced by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 and came into operation on 24 July 2009.
The reforms were initially recommend by the Dawson Committee as part of its 2002-2003 inquiry into the Competition Law provisions of the Trade Practices Act.
The current Harper Review Final Report has recommended significant changes designed to simplify Australia's cartel laws. View overview of recommendations and government response (PDF).
Penalties and remedies for contravention
Application may be made to the Federal Court for the following:
- Injunction (section 80)
- Pecuniary penalties for breach (section 76)
- Divestiture (section 81)
- Damages (by persons who suffer loss and damage as a result) (six year limitation period) (section 82)
- Disqualification from directorship (section 86E)
- Non-punitive orders (such as community service order) (section 86C)
- Other orders (Court may make 'such orders as it thinks appropriate' (section 87)
In addition, criminal penalties of up to $220,000 per offence or up to 10 years imprisonment are available for individuals found to have committed a cartel offence.
The civil penalties for making or giving effect to a cartel provision are the same as those currently available for other contraventions of Part IV. View remedies page.
Details about the key cases relating to cartels in Australia can be found on my cartel page (cases).
For a comprehensive discussion of Australia's cartel laws see: Beaton-Wells and Fisse, Australian Cartel Regulation: Law, Policy and Practice in an International Context (Cambridge University Press, 2011)
For research and commentary on cartel law in Australia see the reading room.