Cartels 2019

Last Updated July 11, 2019

Australia

Law and Practice

Authors



Herbert Smith Freehills includes eight partners and 25 lawyers in its Australia Competition team, which is part of the global HSF Competition team spanning 19 jurisdictions. It is complemented by HSF’s market-leading Australian dispute resolution practice, comprised of 41 partners and 216 lawyers. The Competition team is highly regarded for its breadth and depth of experience in complex contentious enforcement matters, including civil and criminal cartels. It is known for vigorously defending ACCC enforcement proceedings, and frequently represents leading financial, communications, energy and infrastructure firms in competition and economic regulatory investigations. HSF contentious competition law experience also extends to private follow-on actions arising from ACCC enforcement action.

The Competition and Consumer Act 2010 (Cth) (CCA) prohibits the making of a contract, arrangement or understanding that contains a cartel provision and giving effect to it. The criminal cartel prohibition is set out in sections 45AF and 45AG CCA, and the civil cartel prohibitions are set out in sections 45AJ and 45AK.

The Australian Competition and Consumer Commission (ACCC) investigates alleged cartel conduct. To obtain a civil infringement decision and a penalty or remedy, the ACCC must bring an action in the Federal Court of Australia. For criminal cartel matters, the ACCC will investigate the conduct and refer ‘serious cartel conduct’ to the Commonwealth Director of Public Prosecutions (CDPP), which will then determine whether or not to pursue a criminal prosecution. Such proceedings are commenced in the Local or Magistrates Court, before being committed to a State Supreme Court or the Federal Court of Australia (see further 3.6 Procedure for Issuing Complaints/Indictments in Criminal Cases and 3.7 Procedure for Issuing Complaints/Indictments in Civil Cases).

The ACCC is seeking to increase the number of criminal cartel prosecutions, and has recognised this as an enforcement priority, with an increasing focus on prosecuting individuals. For example, the CDPP has commenced three criminal cartel prosecutions against individuals in 2018-19, following ACCC investigations.

For corporations, the maximum pecuniary penalty per civil contravention or criminal offence is either AUD10 million, three times the benefit obtained from the conduct (if ascertainable), or 10% of the Australian annual group turnover during the 12 months prior to the infringement (if the benefit is not ascertainable). It is often difficult to ascertain the benefit obtained from the conduct that may result in the annual group turnover threshold being applied. The highest penalty imposed under the cartel prohibitions to date was AUD46 million awarded against Yazaki Corporation, a Japanese company involved in the supply of automotive parts.

For individuals involved in a cartel, the maximum civil penalty per contravention is AUD500,000 or, for criminal cartel conduct, AUD420,000 per offence or up to ten years’ imprisonment. Individuals can also be disqualified from managing a corporation.

The CCA provides a right for private parties to bring an action for damages against cartel participants, where the party has suffered loss or damage as a result of the cartel conduct. Such an action may be brought as either a standalone action or a follow-on action to enforcement proceedings. The ability to use evidence from a prior action in follow-on actions is considered in 3.11 Use of Evidence Obtained from One Proceeding in Other Proceedings.

Cartel conduct is defined in the CCA, and occurs where two actual or potential competitors make or give effect to a contract, arrangement or understanding that contains a ‘cartel provision’. Cartel conduct is prohibited outright, regardless of its effect on competition.

A cartel provision has:

  • the purpose, effect or likely effect of fixing, controlling or maintaining the price of goods or services supplied by at least one of the parties; or
  • the purpose of:
    1. preventing, restricting or limiting production, capacity or supply, or the acquisition of goods or services by at least one of the parties; or
    2. allocating customers or territories supplied by at least one of the parties; or
    3. rigging bids.

The CCA provides a defence from the civil and criminal cartel offence if the cartel provision is for the purposes of a ‘joint activity’ and is reasonably necessary for undertaking that joint activity. The joint activity must be carried on jointly by the parties or carried on through a joint venture corporate entity. The joint activity must also be for the supply or acquisition of goods or services, and not carried on for the purpose of substantially lessening competition. Parties seeking to rely on the joint activities defence bear the burden of proof in establishing the requisite elements. The defence is narrow and requires substantive rather than formulaic satisfaction, so legal advice should be sought before seeking to rely on it.

Part X of the CCA allows shipping lines to enter into agreements among themselves and, if registered with the appropriate authority, to gain an exemption from the cartel conduct prohibitions. The ACCC has advocated for the repeal of Part X.

The ACCC has six years after the contravention to commence a proceeding for civil cartel conduct to recover a pecuniary penalty. There is no limitation period for criminal cartel conduct (note that the prohibition was only introduced into the CCA in 2009, without retrospective effect).

The cartel prohibitions can extend to conduct outside Australia, and a person can be liable for cartel conduct in Australia where:

  • the company is carrying on business within Australia;
  • the person is an Australian citizen; or
  • the person is ordinarily resident in Australia.

In particular, conduct outside of Australia can be caught by the Australian cartel prohibitions where a foreign company is found to be carrying on business within Australia. The law in relation to carrying on business within Australia is not straightforward. However, it is possible that a foreign parent company will be considered to be carrying on business in Australia where the foreign parent exercises a degree of control over the subsidiary.

The cartel prohibitions were also amended in November 2017 to apply to conduct in trade or commerce within Australia or between Australia and places outside Australia. Therefore, while the conduct does not necessarily need to occur in Australia, there does need to be some form of nexus between the conduct and Australia in order for the cartel prohibitions to apply.

The principles of comity are applied to cartel enforcement through a series of agreements entered into by the Australian Government and foreign governments, or by the ACCC and foreign competition authorities. For example, the Australian Government and the Government of the United States of America have signed a treaty to avoid conflict between their respective antitrust laws and national interests, and to give due regard to each other’s sovereignty and to considerations of comity.

The ACCC also has agreements with its equivalent foreign counterparts in New Zealand, Taiwan, Canada, China, Fiji, India, Japan, the UK, the European Union, Papua New Guinea, the Philippines and the Republic of Korea. Each of these agreements has different and specific obligations, but broadly they provide for notification and consultation obligations, and the exchange of information, including the co-ordination of enforcement activities. The agreements also generally provide for the avoidance of conflict between enforcement activity and the interests of the other party. However, it is not a strict rule and the parties have discretion to continue with their proposed course of action in relation to cartel enforcement, notwithstanding the other party’s concerns or the implications for the other party’s interests.

The ACCC may become aware of a potential cartel from a wide range of sources, including its own initiative monitoring and intelligence-gathering activities, immunity applications, the media or parliamentary inquiries, complaints or other regulatory and enforcement authorities.

Once aware of a matter, the ACCC will conduct an initial assessment, having regard to the issues and the ACCC’s Compliance and Enforcement Policy. Cartel matters often proceed directly to an in-depth investigation.

An in-depth investigation is conducted in accordance with a detailed investigation plan, endorsed by senior decision-makers. The ACCC will use its range of evidence-gathering powers and tools in order to conduct an in-depth investigation – most commonly its compulsory information-gathering powers but also occasionally search warrants. In-depth investigations are typically commenced and completed within a 12-month period.

Historically, unannounced inspections by the ACCC are relatively rare in Australia.

In order to conduct an unannounced inspection, the ACCC must first make an application to the court for a search warrant, as it does not have the power to conduct unannounced inspections of its own volition. This can be contrasted to the ACCC’s broad compulsory information-gathering powers (see 2.9 Enforcement Agency's Procedure for Obtaining Evidence/Testimony).

To obtain a search warrant, the ACCC must persuade a magistrate that the requisite threshold is met. A magistrate may only issue the warrant if he or she considers that there are reasonable grounds for suspecting that there is – or may be within the next 72 hours – material evidencing an alleged cartel on the premises (which is broadly defined and includes any building or area of land). 

Once in possession of a search warrant, the ACCC will typically use the Australian Federal Police (AFP) to conduct the unannounced inspection in order to gather evidence – primarily electronic and hard-copy documents – of a suspected breach of the law.

An occupant of a premises is entitled to observe but not impede the search being conducted, and must provide the ACCC, AFP and any officer assisting with all reasonable facilities and assistance. The penalties for obstruction can include a fine or imprisonment of up to 12 months. A fine can also be imposed for providing false or misleading information or documents.

Once in possession of a search warrant, inspectors have broad powers to enter the premises, search the premises for the evidential material, seize or make copies of evidential material or use electronic equipment to access evidential material. This may include electronic material located on computers, data storage, or other electronic devices.

An occupier of a premises may withhold evidential material that is subject to legal professional privilege (see 2.12 Attorney-client Privilege). Material may also be withheld on the grounds of relevancy if it falls outside of the scope of the search warrant.

It is an offence to destroy a thing knowing that the thing is, or may be, required in evidence in a federal judicial proceeding, which would include civil or criminal cartel prosecution proceedings. The offence requires the person to engage in the conduct with the intention of preventing the thing from being used in evidence. The maximum penalty for the offence is imprisonment for five years.

An individual may be required to answer questions or produce evidential material to which the search relates. Individuals must answer questions asked of them by an ACCC inspector to the best of their knowledge and ability; it is an offence not to answer questions by an ACCC inspector.

An individual cannot refuse to respond to a question on the grounds of self-incrimination. However, incriminating evidence is inadmissible in criminal proceedings against that individual, except for offences relating to the obstruction of a search or providing false or misleading information or documents.

An occupier of a premises may request a copy of any seized material, or a receipt of items removed. Any items seized by the ACCC/AFP must be returned within 120 days, unless there is a court order extending this period, or proceedings in respect of which the thing may afford evidence are instituted, or the ACCC/AFP is otherwise authorised to retain, destroy or dispose of the item.

The ACCC may exercise its powers under the search warrant, including requiring an individual to answer questions in the absence of external or in-house counsel. The ACCC is not obliged to wait for external or in-house counsel to arrive in order to conduct the search.

There is no requirement for individuals to obtain separate legal representation, but it may be prudent to do so in circumstances where individual criminal cartel liability may arise. If an individual is examined by the ACCC, the ACCC will typically insist that the individual’s legal adviser is not the legal adviser for the company (or any other participant).

The principal initial steps to take during the initial phase of an unannounced inspection involve the following:

  • asking to see the search warrant. The ACCC must make a copy of the warrant available, although if it is a telephone warrant, there will be no evidence and the person executing the warrant will orally disclose its terms. Defence counsel should check that the details on the search warrant are accurate (such as premises specified, time period, authorisation). It is also important to confirm the alleged breaches of the CCA to which the warrant relates and the types of evidential material that are entitled to be seized;
  • accompanying ACCC officers at all times while on the premises. However, an individual shadowing the officers must be careful not to hinder, impede or obstruct the officer conducting the search;
  • obtaining a receipt for things seized and copies of documents or materials seized; and
  • making any claims of legal professional privilege or relevance, and obtaining an undertaking from officers that documents the subject of a claim will not be read pending resolution of the claims.

The ACCC has broad compulsory information-gathering powers under the CCA to obtain information, documents and evidence that relate to any matter which constitutes or may constitute a contravention of the cartel prohibition. The ACCC’s compulsory information-gathering powers are crucial to its ability to investigate and take enforcement action against suspected cartels (including covert conduct). 

The ACCC’s compulsory information-gathering powers allow it to require by notice a person to provide information in writing, produce documents or appear before the ACCC and give oral or written evidence to the ACCC (including under oath or by way of affirmation). The ACCC may use the information, documents or evidence gathered for a range of investigative purposes, including anticipated civil or criminal cartel proceedings.

The ACCC is only required to obtain internal Chair or Deputy Chair sign-off (as opposed to a court-issued warrant in the case of unannounced inspections) prior to issuing such a notice. In issuing a notice, the ACCC will take into consideration the value of the information to the ACCC’s investigation and the burden of the notice on the recipient. However, the threshold is low: the ACCC only needs to have ‘reason to believe’ that the person subject to the notice is capable of furnishing relevant information, producing relevant documents or giving relevant evidence that relates to the subject-matter of the notice. However, the ACCC does not use its compulsory information-gathering powers to conduct a ‘fishing expedition’ for information. It is difficult to challenge the ACCC on the breadth and scope of a compulsory notice, including on the basis that it imposes an undue burden on the relevant party, but it is possible to negotiate timescales for responding to compulsory notices.

In the case of oral or written evidence, the ACCC will require an individual to attend its offices to provide the evidence, typically under oath or by way of affirmation. Such a hearing will be in private and typically before an ACCC senior executive employee. While interested third parties are excluded from the examination, the examinee is permitted to have the assistance of a legal adviser. However, the ACCC may object to particular legal advisers where it perceives a potential conflict of interest or prejudice to the investigation. Following the hearing, the ACCC may direct the examinee not to disclose the contents of the examination, except to a legal adviser.

Penalties of up to two years' imprisonment or a fine may apply for refusal to comply with such a notice, or for providing false or misleading information or evidence in response to such a notice.

A person is not excused from complying with a notice on the grounds that the information, document or oral or written evidence may tend to incriminate the person or expose them to a penalty. However, to the extent that the information, documents or evidence is provided by an individual (but not a corporation), it is not admissible in evidence against the individual in any criminal proceedings, other than criminal proceedings for non-compliance with the notice. Oral evidence obtained from an officer or employee of a company is generally admissible in criminal proceedings against that company and may, in certain circumstances, be admitted into evidence generally in criminal proceedings against a third party (corporate or individual). Oral evidence is generally admissible in civil proceedings, including in proceedings involving the individual who provided the oral evidence. 

A person or corporation will be excused from disclosing information that is the subject of legal professional privilege; however, the ACCC may seek particulars of the grounds on which a claim of legal professional privilege is made.

See 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony.

The ACCC’s compulsory information-gathering powers require a person or corporate entity served with a notice to produce documents in its possession, custody or control, irrespective of whether the documents are physically located in another jurisdiction. This requirement is subject to the person or corporate entity being aware of the documents, and having conducted a reasonable search.

Attorney-client privilege, known as legal professional privilege in Australia, is governed by common-law principles where proceedings are not on foot, such as an ACCC investigation. Where proceedings have been commenced, the availability of legal professional privilege is governed by State and Federal Evidence Acts.

As noted in 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony, legal professional privilege can be asserted to withhold documents or information, or evidence in an examination, that would otherwise be compellable.

Legal professional privilege protects confidential communications between a client and their legal adviser, created for the dominant purpose of:

  • enabling the client to obtain, or the legal adviser to give, legal advice (‘advice privilege’); or
  • for use in litigation, either actual or within the reasonable contemplation of the client (‘litigation privilege’).

Legal professional privilege may also protect confidential communications between the client or their agent and a third party (such as a forensic accountant), which are for the dominant purpose of use in litigation.

Communications involving legal advisers admitted in foreign jurisdictions, as well as in-house counsel, can also be privileged, as long as they otherwise meet the relevant test. It is not uncommon for in-house lawyers to have multiple roles within an organisation, for instance, legal adviser and company secretary; privilege can only apply where the in-house lawyer is acting in their capacity as legal adviser.

Privilege may be lost through conduct that amounts to a waiver. Waivers of privilege frequently arise where the confidentiality of the communication is lost – for instance, it is disclosed to a third party on a non-confidential basis.

See 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony (in relation to privilege against self-incrimination) and 3.14 Recognition of Privileges.

The broad scope of the ACCC’s compulsory information-gathering powers and severe penalties for non-compliance mean that formal requests for information are rarely resisted by individuals or firms. Although it can be difficult to challenge the ACCC, in certain circumstances there may be scope to agree with the ACCC to narrow the request or to extend the deadline for compliance.

Information that is provided in confidence in response to a notice as part of an ACCC investigation in relation to an alleged contravention of the cartel prohibitions is deemed to be ‘protected information’ under the CCA.

The ACCC is statutorily bound not to disclose protected information, except in limited circumstances – for example, where required by law or where the ACCC is satisfied that the information will assist another agency (for example, the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority or the CDPP).

Information that relates to a breach or possible breach of the cartel prohibitions and is provided in confidence to the ACCC is ‘protected cartel information’. The protected cartel information regime supplements the general protected information regime, and is designed to promote the ACCC’s ability to obtain confidential information regarding cartel conduct from informants by giving an additional level of protection.

The protected cartel information regime limits the circumstances in which the ACCC may be required to disclose such information in court proceedings. Specifically, the ACCC is not required to disclose protected cartel information to a court or tribunal, nor to produce relevant documents, except with the leave of the court or tribunal. In deciding whether such information should be disclosed, the court or tribunal must consider, amongst other things, the fact that the information was given in confidence, the need to avoid disruption of any law enforcement and criminal investigation, discouragement in the future of any informants, and the administration of justice. In circumstances where the ACCC is not a party to the court proceedings (or will not be, if the proceedings have not yet commenced), the ACCC is not required to produce protected cartel information.

While the ACCC is not required to provide the protected cartel information in the circumstances described above, it retains the power to do so if it wishes. In exercising its discretion, the ACCC must consider the same factors that the court or tribunal must consider before granting leave to disclose.

Targets of a cartel investigation have the opportunity to make legal and factual arguments to the ACCC and/or CDPP (in the case of a potential criminal prosecution) in advance of proceedings being commenced. This will typically occur through requesting meetings and formal, without-prejudice, submissions to the ACCC and/or CDPP.

The ACCC has an immunity and co-operation policy for cartel conduct. The ACCC is responsible for granting civil immunity, while the CDPP is responsible for granting criminal immunity. In 2017/2018, the ACCC received nine applications for immunity and did not grant any conditional civil immunity, while criminal conditional immunity was granted by the CPDD in three cases (relating to immunity recommendations made by the ACCC in 2016/17). Like competition authorities in other jurisdictions, the ACCC is reliant upon immunity applications to uncover and detect cartel conduct (which is often covert).

Civil Immunity

An individual or corporation seeking immunity must first apply for a marker, which preserves their position as first in line for an application of immunity in respect of the alleged cartel. The applicant must describe the cartel conduct in adequate detail to enable the ACCC to confirm that no other marker exists for the particular cartel conduct. During this period, the individual or corporation gathers information to satisfy the ACCC’s criteria for conditional immunity.

An individual or corporation will be eligible for conditional civil immunity if it satisfies certain criteria. Importantly, the corporation must be the first person to apply for immunity in respect of the alleged cartel, must not have coerced others to participate in the alleged cartel, and must have ceased – or have indicated to the ACCC that it will cease – its involvement in the cartel. The corporation must also provide full, frank and truthful disclosure, and co-operate fully and expeditiously while making the application, and continue to do so throughout the ACCC’s investigation and any ensuing court proceedings. The ACCC must also not already be aware of the alleged cartel, having received written legal advice that it has reasonable grounds to institute proceedings in relation to the alleged cartel.

A corporation may also seek derivative immunity for its related corporate entities, directors, officers and employees. Derivative immunity operates in the same way as conditional immunity. 

To maintain conditional civil immunity, the party must continue to provide full, frank and truthful disclosure, and co-operate fully and expeditiously with the ACCC’s investigation and any ensuing court proceedings. The party must also keep its co-operation with the ACCC confidential. If an applicant does not adhere to these conditions, the ACCC may revoke conditional civil immunity (and recommend that the CDPP does the same in respect of conditional criminal immunity).

Conditional immunity will become final immunity following the resolution of proceedings against cartel members without such immunity (including any appeals).

Individuals or corporations who are not eligible for immunity (for example, because they are not the first to bring the alleged cartel to the ACCC’s attention) may still choose to co-operate with the ACCC’s investigations. Co-operation may result in leniency in terms of the level of fines ultimately imposed by the court in any proceedings.

Criminal Immunity

The ACCC may make a recommendation to the CDPP that immunity from criminal prosecution be granted. If the CDPP is satisfied that the applicant meets the ACCC’s criteria, it will first issue a letter of comfort to the applicant and later provide a written undertaking prior to the commencement of any prosecution. The CDPP’s conditions include the following:

  • that the corporation or individual provides ongoing co-operation during the investigation;
  • for an individual, that they appear as a witness for the prosecution where requested; and
  • for an individual, that they give evidence truthfully and accurately.

As with the civil immunity process, derivative immunity may be sought by a corporate for its related corporate entities, directors, officers and employees. Derivative conditional immunity operates in the same way as conditional immunity. 

The letter of comfort or undertaking may be revoked where the CDPP receives a recommendation to this effect from the ACCC, or where the CDPP believes that the applicant has provided misleading or false information, or has failed to fulfil the conditions of the letter or undertaking.

As outlined in 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony, the ACCC has broad compulsory powers to obtain information and evidence, including from employees. However, as information and answers provided by individuals in responding to the ACCC’s compulsory notices cannot be used in criminal proceedings against that individual, as a matter of practice the ACCC is less likely to issue such notices to an individual if there is a likelihood of that individual being referred to the CDPP for prosecution.

The ACCC will use its broad compulsory powers to obtain documents, information and evidence, including from the target of an ACCC investigation (see 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony). However, if the target is also the immunity applicant, in general the ACCC will not use its compulsory information-gathering powers, as the immunity applicant is required to provide full, frank and truthful disclosure as a condition of conditional immunity, and to co-operate fully and expeditiously with the ACCC’s investigation and any ensuing court proceedings (see 2.17 Leniency, Immunity and/or Amnesty Regime).

The ACCC cannot compel a person or company located outside Australia to provide documents or give evidence.

However, Australia has entered into a number of treaties and agreements with foreign countries and their respective competition enforcement authorities. Typically, these agreements provide for a mechanism whereby the ACCC can make a request to a foreign enforcement agency for materials from that jurisdiction, including requests for the foreign agency to undertake compulsory examinations of witnesses in that jurisdiction, or to require an entity to hand over documents. For example, the ACCC may make requests of US Antitrust authorities to examine witnesses compulsorily or to seize evidence. For further information, see 1.7 Principles of Comity and 3.5 Co-operation with Foreign Enforcement Agencies.

Additionally, in cases concerning serious criminal offences (such as cartel offences), the Attorney-General of Australia may make a request to a foreign authority to seize documents, conduct searches and examine witnesses under the Mutual Assistance in Criminal Matters Act 1987 (Cth).

The ACCC liaises closely with other domestic regulators and government agencies. For example, ASIC is responsible for enforcing and administering laws for many financial products and services, so the ACCC will often co-ordinate with ASIC when considering matters involving financial services.

As outlined in 2.15 Protection of Confidential/Proprietary Information, the ACCC is able to share information – including ‘protected information’ – with another agency where the ACCC is satisfied that the information will assist that other agency.

The ACCC’s International Unit is tasked with a number of matters, including fostering co-operation with international counterparts to improve outcomes in matters involving extra-territorial evidence or conduct. The ACCC regularly engages and exchanges information with international regulators. In 2017-18, the ACCC requested information from agencies in Brazil, Canada, Denmark, the European Commission, Germany, France, Ireland, Italy, Israel, Japan, New Zealand, Switzerland, Singapore, the UK and the US.

As with domestic agencies, under the CCA, the ACCC may share information with foreign government bodies if that information would enable or assist that body to perform or exercise its functions (see 1.7 Principles of Comity).

For criminal cartel matters, the ACCC will investigate the conduct and refer ‘serious cartel conduct’ to the CDPP, which will then determine, in accordance with the Prosecution Policy of the Commonwealth, whether to pursue a criminal prosecution. The CDPP considers whether the evidence is sufficient and whether it would be in the public interest to prosecute.

If the CDPP decides to prosecute, it will issue a summons or court attendance notice notifying the accused of the charge. The matter then moves into a committal phase in the Local Court or Magistrates Court. During this phase, an assessment of the evidence is undertaken by the magistrate (or certification provided in some states by the CDPP) to ascertain that there is sufficient evidence in support of the charges to warrant a trial. Depending on the jurisdiction, this may involve lengthy committal hearings at which evidence is presented before the magistrate.

Orders are also made requiring the CDPP to:

  • provide a brief of evidence, which contains all material obtained by the CDPP that forms the basis of its case or would affect the strength of its case, and copies of any other material capable of being relevant to the defendants; and
  • file a charge certificate.

If there is no guilty plea during the committal, the matter will be committed for trial to a State Supreme Court or the Federal Court of Australia (to date, matters have been committed to the Federal Court).

A number of significant pre-trial procedures apply, including:

  • the filing of an indictment, which describes the offence and the nature of the alleged offence;
  • any orders that one or more counts in an indictment be tried separately if it is satisfied that it is expedient to do so or that it is in the interests of justice;
  • pre-trial hearings and orders as are needed for the proper management of the case. This may include hearings in relation to objections on indictments, orders for pre-trial disclosure, determinations on admissibility of evidence and matters of law, and determinations by the trial judge as to whether particular witness evidence should be heard by the jury;
  • orders for disclosure of the prosecution’s case to the defendants. This might include the provision of evidence, as well as an outline of the prosecution’s case that outlines the facts, matters and circumstances on which its case is based; and
  • granting leave to the defendants to issue subpoenas requiring the production of documents by third parties.

The trial itself is conducted before a jury (typically 12 jurors), and overseen by a trial judge. The jury must return a unanimous verdict. If the verdict is guilty, then the matter proceeds to a sentencing hearing before a judge who determines the criminal sanction that should be imposed.

Civil cases are commenced in the Federal Court of Australia and heard by a judge. The process for commencing civil proceedings typically involves lodging an application along with a Statement of Claim, which must set out the particulars (material facts) necessary to enable the defendants to identify the case to be met.

Pre-hearing case management hearings typically involve orders for the following:

  • the filing of lay and expert witness evidence by the parties;
  • the exchange of submissions (which outline the respective parties’ cases);
  • the production of relevant documents by the parties (discovery) – this typically involves the production by the ACCC of information in its possession, including information obtained through any compulsory investigation powers and noting that any access information is limited by restrictions relating to privilege (see 3.14 Recognition of Privileges); and
  • the issuing of subpoenas for the production of documents by third parties.

In civil enforcement proceedings, the ACCC has generally commenced a single proceeding against the multiple parties involved. Separate trials can be ordered where the court determines that the joinder of parties may embarrass, complicate or delay the trial or hearing, or where it is otherwise inconvenient.

In criminal enforcement proceedings, the CDPP has generally initiated multiple proceedings against the different parties involved. However, where separate proceedings are initiated simultaneously against multiple parties with respect to a single cartel, it is likely that the proceedings will be managed together, at least for the purposes of the committal and pre-trial phases.

The general rule is in favour of a joint trial. However, a court can order a separate trial at any point during the proceedings. A separate trial may be ordered where the evidence admissible against one of the defendants is significantly different from the evidence admissible against another defendant, or where the prejudice flowing to a defendant by reason of the case for or against another defendant cannot be avoided by the trial judge’s directions. 

Civil proceedings may be brought by the ACCC as an enforcement action, or by a private party in standalone proceedings seeking compensatory orders. The applicant in both cases must establish each element of the cartel offence on the ‘balance of probabilities’ in order to be successful (and, where compensation is being sought, the relevant loss or damage suffered as a consequence).

In criminal cartel cases, the prosecution must prove each element of the offence ‘beyond a reasonable doubt’.

In civil enforcement proceedings, judges act as the finders of fact and come to a decision by applying those facts to the law. In criminal enforcement cases, the finders of fact are the jury. The jury are given directions as to the relevant legal matters by the trial judge, but are responsible for determining whether the offence is established based on the facts.

Parties to both criminal and civil proceedings may agree a set of facts for the purposes of the proceedings. Once agreed, no evidence is needed to prove an agreed fact, and evidence cannot be adduced by either party (without leave of the court) that contradicts or qualifies an agreed fact.

Evidence of a decision, or a finding or fact, in a prior Australian or overseas proceeding cannot be admitted as evidence of the facts alleged in issue in current proceedings.

However, a comprehensive review of Australia’s competition laws in 2015 (the Harper Review) led to the introduction of an exception to this position. The CCA permits findings or admissions of fact made in proceedings where a person is found to have committed a cartel offence (or been so involved) to be admitted as prima facie evidence of those facts in proceedings by other persons for damages or compensation orders. The amendments were intended to facilitate follow-on private actions against cartel participants by reducing the impediments to the exercise of such a right.

Documents produced in one set of proceedings but not relied upon as evidence or otherwise referred to in those proceedings generally cannot be used in any other proceedings.

The admissibility of evidence in civil and criminal cases is governed by State or Commonwealth (federal) Evidence Acts (depending on whether the matter is being heard in a State Supreme Court or the Federal Court).

Judges determine, as a question of law, whether and how evidence is admissible in a hearing or trial. Questions of admissibility of evidence may be the subject of pre-trial or hearing determinations.

One of the primary rules of evidence is the hearsay rule, which prevents evidence of a previous representation made by a person being admitted to prove the existence of a fact that it can reasonably be supposed that person intended to assert by the representation. This rule typically excludes, for example, evidence of a written note concerning the content of a conversation being used to establish what was said during that conversation.

There are a number of exceptions to the hearsay rule. For instance, documents that form part of the records belonging to or kept in the course of, or for the purposes of, a business (such as formal minutes of a meeting) are admissible under the business records exception to the hearsay rule.

Expert evidence, including economic evidence, is typically given by way of written expert reports, with the experts subject to cross-examination in the same way as lay witnesses.

The use of expert economic evidence is commonly employed by both the ACCC/CDPP and/or the parties to the proceedings. Other experts providing industry or technical expertise may also be employed.

Expert evidence provides an objective and impartial assessment of the issues that are relevant to the proceeding, drawing on the specialised knowledge of the expert on a subject, and is subject to specific guidelines. Expert evidence assists the judge on a subject with which the judge is not familiar, such as the way particular markets operate or the impact of an alleged contract, arrangement or understanding on price or supply in that market.

Expert ‘hot tubs’ may also be deployed as a case-management technique. These invite a series of exchanges between experts from opposing sides, and are used to narrow the issues in dispute, but provide the opportunity for each party to put and test expert evidence. The practice also facilitates judicial scrutiny of the expert evidence.

The following privileges may apply in civil and criminal proceedings relating to cartel conduct (and generally also in responding to the ACCC’s compulsory notices during the investigative stage):

  • legal professional privilege – this applies in the circumstances explained in 2.12 Attorney-client Privilege above;
  • without prejudice privilege – evidence of settlement negotiations can be withheld from disclosure and does not need to be adduced into evidence;
  • privilege against self-incrimination – an individual is not required to give evidence that could reasonably incriminate that individual, or open the individual to civil liability. This privilege does not apply to companies, and nor does it apply in responding to the ACCC’s compulsory notices (see 2.9 Enforcements Agency's Procedure for Obtaining Evidence/Testimony); and
  • public interest immunity (PII) – this applies to documents or information the disclosure of which would be injurious to the public interest. The court balances two competing aspects of the public interest in determining whether PII exists: First, the harm done to the public interest by the production of the documents or information, and second whether the administration of justice would be impaired if the documents were withheld. In the context of cartel proceedings, PII is often asserted by the ACCC over documents and information provided by an applicant for immunity (see 2.17 Leniency, Immunity and/or Amnesty Regime).

The ACCC will not bring a civil enforcement action at the same time as a CDPP criminal prosecution. Some matters may warrant both criminal and civil proceedings, and the ACCC and CDPP will work together to avoid the civil proceedings adversely affecting a related criminal investigation or prosecution.

Any proceedings brought by the ACCC for a pecuniary penalty order will be stayed if criminal proceedings concerning substantially the same conduct are commenced or ongoing. If the criminal proceedings result in a conviction, any ongoing civil pecuniary penalty proceedings are dismissed. If the criminal proceedings do not result in a conviction, the civil proceeding may resume. Where a pecuniary penalty has been imposed, criminal proceedings may still be commenced for substantially the same conduct.

Conduct in breach of the cartel provisions may also breach other Commonwealth and State laws and regulations within the jurisdiction of other regulators. Accordingly, enforcement proceedings concerning the same or related facts could be commenced against the same respondent by different authorities. Where there are pending criminal proceedings relating to the same subject-matter, the court may stay the civil proceedings where there is a real danger of injustice in the criminal proceedings. In determining whether to order a stay, the court may take into account factors such as the possibility of publicity arising from the civil litigation having an impact on jurors in the criminal trial, and the interference with evidence giving rise to a miscarriage of justice.

As noted in 3.8 Enforcement Against Multiple Parties, multiple proceedings concerning the same or related facts can also be launched against multiple parties involved in the contravention.

See 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards, 3.6 Procedure for Issuing Complaints/Indictments in Criminal Cases (in relation to criminal sanctions) and 3.7 Procedure for Issuing Complaints/Indictments in Civil Cases (in relation to civil sanctions).

Criminal Proceedings

In Australia, once criminal proceedings have been instituted by the CDPP, there is currently no regime available to negotiate a settlement of charges. While Australia is considering the introduction of a deferred prosecution scheme that would enable companies to settle criminal charges on certain conditions, it is not presently intended that the regime would apply to cartel conduct.

However, negotiations between the defence and the CDPP about the charges to be proceeded with can be initiated by the defence or the CDPP at any stage prior to sentencing. Such negotiations may result in the defendant pleading guilty to a lesser charge or number of charges, with the remaining charges not being proceeded with or taken into account. The CDPP’s Prosecution Policy outlines the considerations taken into account in the negotiations, which include the following:

  • the defendant’s willingness to co-operate in the investigation or prosecution of others;
  • whether the sentence likely to be imposed if the charges are varied would be appropriate for the conduct involved;
  • the desirability of prompt and certain dispatch of the case;
  • the strength of the prosecution case; and
  • the views of the ACCC (as referring agency).

The prosecution may consider agreeing to a proposal by a defendant in charge negotiations that the prosecution will not oppose a defence submission to the court at sentencing that a penalty should be within a nominated range (although following a High Court decision in 2014, the prosecution is not permitted to advance a specific sentencing result or range as appropriate in sentencing hearings).

As noted, it is the role of the court (and not the prosecutor) to determine the appropriate sentence that should be imposed. The decisions demonstrate that the extent to which a guilty plea mitigates a sentence will be informed by whether the accused pleads guilty at the first reasonable opportunity. For instance, in a recent criminal cartel sentencing decision, a company received a 40% discount for entering a plea at the earliest opportunity and for its past co-operation with the ACCC (as well as the contrition and remorse reflected by those actions).

Civil Proceedings

There is a regime for entry into enforceable undertakings with the ACCC in civil matters in order to avoid enforcement altogether, or to resolve litigation early. The content of each undertaking is the product of negotiation between the ACCC and the party involved but, typically, public acknowledgements of wrongdoing and agreements to refrain from the misconduct in future are required. The ACCC is more likely to agree to resolve a matter in this way where, among other things, the conduct is less serious and has not had a significant impact on third parties. The ACCC can otherwise settle proceedings with the defendant at any stage during proceedings until judgment is given. 

Where there is settlement of a matter that involves an acknowledgement of a breach of the cartel provisions, the parties may jointly propose a penalty, but it is ultimately for the court to determine the appropriate amount having regard to all relevant matters.

As outlined in 3.11 Use of Evidence Obtained from One Proceeding in Other Proceedings, the use of findings in one proceeding cannot generally be used to establish a case in other litigation (subject to the exception outlined above).

A finding of liability may have a number of other collateral consequences or effects. In addition to the primary sanction, on application by the CDPP or ACCC, the court may make one or more of the following orders under the CCA:

  • a community service order requiring the performance of a service for the benefit of the community;
  • a probation order requiring the person not to engage in the contravening conduct, similar conduct or related conduct during the period of the order;
  • an adverse publicity order requiring disclosure or publication of specific information;
  • one or more of a variety of orders directed to compensate person(s) who suffered loss or damage as a result of the contravening conduct; or
  • an order disqualifying a person from managing corporations for a period.

For a company, a finding of liability may also lead to the exercise of discretionary regulatory actions by other regulators, such as ASIC (including suspension or cancellation of a licence, or imposition of conditions) and APRA.

Companies may also be excluded from participating in government contracts. State and Federal Governments undertake supplier integrity due diligence in procurement tenders, which may require disclosure of matters giving rise to reputational or supplier integrity issues. A criminal conviction may be seen as giving rise to reputational or integrity issues, and may affect the prospects of securing such contracts.

For individuals, a finding of liability may lead to disqualification from managing corporations by other regulators under separate statutes, such as the Corporations Act 2001 (Cth).

It is possible that some or all of these collateral consequences may be mitigated by early pleas entered into by the company, the extent of its co-operation with the ACCC and/or CDPP, and other remedial steps taken to address identified issues.

The maximum criminal penalties for companies and individuals are prescribed in the CCA (see 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards). It is for the court to determine the appropriate sanction or penalty, taking into account relevant sentencing principles and the facts of the case. The court typically hears arguments from the prosecution concerning relevant sentencing principles and facts (although, as noted at 4.2 Procedure for Plea Bargaining or Settlement, the prosecution cannot make submissions in relation to the appropriate sentencing range), as well as from the defence, who may make submissions concerning what the defence considers to be an appropriate range for the fine or sentence. Other non-pecuniary sanctions can also be sought following a finding of liability (see 4.3 Collateral Effects of Establishing Liability/Responsibility).

The maximum civil penalties for companies and individuals are prescribed in the CCA (see 1.2 Public Enforcement Agencies and Scope of Liabilities, Penalties and Awards). Like criminal sanctions, it is for the court to determine the appropriate sanction or penalty, taking into account relevant sentencing principles and the facts of the case, and the process is similar to that which applies to criminal sentencing (see 4.4 Sanctions and Penalties Available in Civil Proceedings, above). However, the prosecution can make submissions about the appropriate sentencing range in civil penalty matters. Other non-pecuniary sanctions can also be sought following a finding of liability (see 4.3 Collateral Effects of Establishing Liability/Responsibility). 

A culture of compliance, including educational and compliance programmes and remedial steps taken in response to a matter, is a reflected factor in sentencing. However, the mere existence of a compliance programme will not carry significant weight if there is no commitment to its implementation, or where the programme is general in nature without specific training systems in place. The lack of any compliance programme will be an adverse factor for a defendant, although an undertaking to implement one has been viewed as a mitigating factor.

Under the CCA, the court may, upon the application of either the ACCC/CDPP or the person who suffered loss, grant compensatory orders requiring the cartel participant to compensate a person who suffered loss as a result of the cartel conduct. These orders include orders to vary a contract, refund money, return property or pay the amount of loss or damage. Where the defendant does not have sufficient resources to pay the pecuniary penalty or fine as well as an order for compensation, preference is given to compensation.

Civil Proceedings

Appeals from a final decision of the Federal Court in civil cartel enforcement cases may be made to the Full Court of the Federal Court (comprising a panel of three judges from the Federal Court) (Full Court).

Appeals from a final decision are as of right. However, an appeal will only be successful where it can be established that there was an error of law or an error of fact in the original decision that was significant enough for the original decision to be overturned. An error of law may arise where, for instance, the judge erred by applying an incorrect principal of law. An error of fact may arise where, for instance, the judge made a finding of fact that cannot reasonably be supported by the available evidence.

Appeals of interlocutory decisions of the Federal Court can only be brought with the leave of the court. Ordinarily, leave will only be granted if allowing the interlocutory decision to stand would cause one party substantial injustice, and there is a sufficient level of doubt concerning the decision to merit reconsideration. Generally, appeal courts are reluctant to review interlocutory decisions that concern an exercise of judicial discretion.

Criminal Proceedings

Criminal enforcement proceedings for cartel conduct can be tried in a State Supreme Court or the Federal Court. To date, all criminal enforcement proceedings have been heard in the Federal Court. Where that is the case, appeals from the Federal Court (as with civil cases) are heard by the Full Court.

Other than appeals purely concerning questions of law, appeals to the Full Court in relation to decisions about liability and sentencing require leave of the court.

The Full Court will allow an appeal against a decision with respect to convictions if:

  • the verdict of a jury was unreasonable having regard to the evidence at trial;
  • the trial judge made an error of law in reaching the decision; or
  • the decision at trial resulted in a substantial miscarriage of justice.

The Full Court will allow appeals from sentencing decisions if it is satisfied that another sentence is warranted in law.

Appeals of interlocutory decisions of the Federal Court in criminal proceedings (such as decisions to allow a jury to see contested evidence) require leave of the court. The Full Court may overturn an interlocutory decision if it is in the interests of justice.

Where a trial is heard in a State Supreme Court, any appeal would be made to either the Court of Appeal or the Criminal Court of Appeal (depending on the State) in the State in question. Generally, appeals of convictions are as of right on a point of law and can otherwise be granted with leave. Sentencing and other interlocutory decisions can typically only be appealed where leave is granted.

Final Appeal to the High Court of Australia

In both civil and criminal matters, final appeal can be sought from the High Court of Australia but only if special leave is granted. In granting special leave to appeal, the High Court must consider whether ‘there is involved a question of law that is of public importance’. The High Court will not generally grant special leave to appeal if the case involves only questions of fact.

As noted in 1.3 Private Challenges of Cartel Behaviour/Effects, the CCA provides a right for private parties to bring an action for damages against cartel participants. Such an action may be brought as either a standalone or follow-on action. The most commonly sought form of relief in these actions is for recovery of damages. Any such action must be commenced within six years after the day on which the cause of action relating to the conduct accrued.

The standard of proof is the same as for civil enforcement proceedings (see 3.9 Burden of Proof). There are provisions in the CCA enabling reliance on findings of admissions and fact in earlier proceedings, which are intended to assist with private enforcement actions of this nature (see 3.11 Use of Evidence Obtained from One Proceeding in Other Proceedings).

Private actions involving alleged cartels can be brought as representative actions (class actions). A class action can be commenced where at least seven persons have claims against the same person (or persons), the claim arises out of the same, similar or related circumstances, and the claims of all persons give rise to at least one common issue of law or fact. In Australia, the settlement or discontinuance of class actions requires the approval of the court, which determines whether a proposed settlement is fair and reasonable, having regard to the interests of the group members as a whole.

To date, six class actions relating to cartel conduct have been filed in the Federal Court. This is significantly fewer than class actions in other areas – for example, investor or shareholder claims.

The first five of these matters were settled prior to a final judgment by the court on liability, with the first being discontinued as a class action by the court. The average duration of the four cartel class actions (excluding the discontinued one) has been close to six years from commencement to resolution. The most recent class action was filed in May 2019 against a number of major investment banks, and relates to the alleged rigging of foreign exchange rates during 2008 and 2013.

If consumer associations and public interest groups have not themselves suffered damage from the conduct, they will not have standing to bring such actions (assuming that there has been no separate assignment of the right to sue by individuals to such groups). 

Australian courts have not determined authoritatively whether a respondent facing a claim for loss or damage has a defence if the applicant has passed on to customers or clients all additional costs occasioned by the implementation of an impugned cartel arrangement. It is also not clear whether indirect purchasers of goods and services have standing to sue for damages for a breach of the cartel provision. 

Answers given in response to a notice issued by the ACCC under its compulsory information-gathering powers are admissible in civil proceedings (but not criminal proceedings) for contravention of the cartel provisions, including any action for damages, but only against the party that provided the answer, or where the answer was given with authority.

In relation to ‘protected cartel information’, if the ACCC exercises its discretion to disclose a document containing protected cartel information, the document cannot be adduced in other proceedings without leave of the court (see 2.15 Protection of Confidential/Proprietary Information).

Outside class action proceedings, the private enforcement of cartel offences is rare. This may be attributable in part to the complexity of these cases, and the associated high litigation costs (including the risk of an adverse costs order where the claimant is unsuccessful).

By way of example, in Norcast S.ar.L v Bradken Ltd (No 3) [2013] FCA 283, the Federal Court ordered Bradken Ltd to pay Norcast S.ar.L USD22.4 million in damages for entry into a bid-rigging agreement with a competitor. In that case, the parties agreed to a fast-track hearing in the Federal Court. As such, the proceedings were resolved fairly expeditiously, within an approximately ten-month period (the claim was filed in May 2012, a hearing took place in November 2012 and judgment was delivered in March 2013).

Contingency fee arrangements, where lawyers calculate their fees by reference to any amount awarded in judgment, are prohibited. However, it is not uncommon for lawyers to enter into “no win, no fee” arrangements or fee uplift arrangements in the event of a successful outcome.

Costs typically follow the outcome of the proceedings, meaning that an unsuccessful party will usually be required to pay the legal costs of the successful party once assessed.

The payment of costs is taxed (or in other words, assessed) on a ‘party/party’ basis. This means that the taxing officer includes in the costs payable by the unsuccessful party those costs incurred by the successful party which appear necessary or proper for the attainment of justice or for maintaining or defending the rights of that party.

Costs will not be payable where they appear to have been incurred or increased:

  • through over-caution, negligence or mistake; or
  • by the payment of special fees to counsel or special charges or expenses to witnesses or other persons.

Other unusual expenses will also not be payable.

The court may make an award for costs to be paid other than on a party/party basis, such as an order for indemnity costs, whereby the default position is that all costs incurred will be recoverable, and costs will only by excluded if they are of an unreasonable amount or have been unreasonably incurred.

Private litigants can access the same forms of appeal as outlined for civil enforcement actions (see 4.8 Available Forms of Judicial Review or Appeal).

The ACCC annually publishes compliance and enforcement priorities. The ACCC also has a number of ‘enduring priorities’, which include compliance and enforcement actions against cartel conduct. The ACCC’s annual priorities provide a good indicator of the industry or sector focus of the ACCC. For example, in 2019 the ACCC highlighted financial services and commercial construction markets to be key sectors of interest, and has launched cartel prosecutions in both sectors.

  • ACCC immunity & co-operation policy for cartel conduct: https://www.accc.gov.au/publications/accc-immunity-cooperation-policy-for-cartel-conduct
  • ACCC immunity & co-operation policy: frequently asked questions: https://www.accc.gov.au/publications/accc-immunity-cooperation-policy-frequently-asked-questions
  • ACCC's accountability framework for investigations: https://www.accc.gov.au/publications/the-acccs-accountability-framework-for-investigations
  • ACCC guidelines – use of s 155 powers: https://www.accc.gov.au/publications/accc-guidelines-use-of-s-155-powers
  • ACCC/AER Information policy: https://www.accc.gov.au/system/files/ACCC-AER%20Information%20Policy.pdf
  • ACCC Compliance and Enforcement Priorities 2019: https://www.accc.gov.au/system/files/2019%20Enforcement-and-Compliance-Priorities.pdf
Herbert Smith Freehills

161 Castlereagh Street
Sydney NSW 2000

+61 8 9211 7777

+61 8 9211 7878

www.herbertsmithfreehills.com
Author Business Card

Law and Practice

Authors



Herbert Smith Freehills includes eight partners and 25 lawyers in its Australia Competition team, which is part of the global HSF Competition team spanning 19 jurisdictions. It is complemented by HSF’s market-leading Australian dispute resolution practice, comprised of 41 partners and 216 lawyers. The Competition team is highly regarded for its breadth and depth of experience in complex contentious enforcement matters, including civil and criminal cartels. It is known for vigorously defending ACCC enforcement proceedings, and frequently represents leading financial, communications, energy and infrastructure firms in competition and economic regulatory investigations. HSF contentious competition law experience also extends to private follow-on actions arising from ACCC enforcement action.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.