Fixing the price of cartel crimes

Last week Treasurer Peter Costello said the Government would amend the Trade Practices Act 1974 to introduce criminal penalties for serious cartel conduct as part of implementing the recommendations contained in Dawson Review of the Trade Practices Act. The Dawson Review indicated that a number of problems with the introduction of criminal penalties needed to be resolved before such penalties could be introduced. Principally, the problems identified in the Dawson Review centred on appropriately defining a criminal offence and implementing an effective leniency or immunity policy in the Australian context.

The proposed criminal cartel offence will prohibit a person from making or giving effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict output, divide markets or rig bids, where the contract, arrangement or understanding is made or given effect to with the intention of dishonestly obtaining a gain from customers who fall victim to the cartel.

Dishonesty goes to the heart of serious cartel conduct, where customers are deceived when purchasing goods or services, unaware that the price and supply of those goods and services were determined by collusion, rather than competition.

To ensure the offence targets serious cartel conduct that causes large scale or significant economic harm, and that minor breaches are dealt with through civil rather than criminal proceedings, the DPP and the ACCC will enter into a formal, publicly available Memorandum of Understanding (MOU) establishing procedures for the investigation of the cartel offence and the circumstances in which the ACCC will refer a case to the DPP for prosecution.

The MOU will also specify that in making an independent determination as to whether to prosecute a particular matter, the DPP will consider factors such as the impact of the cartel and the scale of detriment caused to consumers and the public, and previous admissions to or convictions for cartel conduct.

The ACCC will issue guidelines, prepared in consultation with the DPP, to outline the factors that will inform any decision to pursue a criminal investigation.

Appropriate protection for whistleblowers that come forward to uncover cartel conduct will be provided through a clear and certain immunity policy. Guidelines will be published setting out the conditions for immunity to be granted by the DPP, upon the advice of the ACCC. The respective roles and responsibilities of the ACCC and the DPP will also be defined in the MOU.

Let’s hope that the Government’s new cartel regime will also have legal principles such as a company is innocent before it is proved otherwise in a court of law.

As AICD CEO Ralph Evans told newspapers last week: “It needs to be very clear when, and in what circumstances, the penalties apply and what action results in liability.

“Defendants need to have the same rights as any other defendant facing a criminal allegation. For example, guilt must be proven beyond reasonable doubt."

“Legal presumptions need to apply, such as access to rights of appeal and the onus of proof resting with the accusing party.”

Most importantly, the DPP and ACCC must ensure that cases of alleged cartel behaviour are not tried in the court of public opinion before they go to a court of law.

No one wants to see a repeat of the Caltex fiasco whereby the media was tipped off about a raid on Caltex’s offices, where ACCC officers were seen carrying out boxes of documents with the visual imputation that they contained evidence only for the investigation to eventually be dropped for lack of any evidence. Further information of the Government’s proposal is at:
http://www.treasurer.gov.au/tsr/content/pressreleases/2005/004.asp