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The idea of “cartels” is not normally associated with businesses that engage in the provision of lawful goods or services, however the priorities of the Australian Competition and Consumer Commission (known as the ACCC) suggest otherwise. Since 2010, cartel behaviour has attracted criminal penalties for companies and individuals in Australia. The ACCC – Australia’s primary competition regulator – has made clear that:

Pursuing cartel conduct, which is so detrimental to the competitive process, will always be an enforcement priority for the ACCC.1

They have followed through on this threat by aggressively pursuing cartel conduct; in 2016, over 25% of all prosecutions by the ACCC in Australia related to alleged cartel conduct.2 These have attracted stiff sanctions. Most recently penalties of $15 million were imposed on Australia and New Zealand Banking Group Limited and Macquarie Bank Ltd for attempting to fix the benchmark rate of the Malaysian ringgit. Rod Sims, Chairman of the ACCC, has gone even further:

Unfortunately, I fear that only jail sentences for individuals in prominent companies will help to send the appropriate deterrence messages that cartels seriously damage competition and the economy as a whole.3

In January 2017 Sims confirmed that cartel prosecutions will remain a top priority this year.4

With cartels and price fixing high on the ACCC’s radar, it raises serious questions for businesses that are under enormous pressure to deal with rapidly changing market conditions. New and disruptive competitors, and demanding and well-informed customers are changing the landscape of the marketplace. In addition, the constant drive to increase the marginal benefit from each sale all make price collusion, arrangements not to compete, tender fixing, and other forms of cartel conduct an attractive way to keep prices high and protect market share.

In this Dispute Dialogue, Moulis partner Christopher Hewitt and senior lawyer Lisa Eldridge take a closer look at cartel conduct, the risks for your business, and how to avoid being caught in the ACCC’s net.

What is cartel conduct?

Cartel conduct is a general term that captures more than just overt price fixing and non-compete arrangements. Most businesses are aware that they are unable to call a meeting of all of their competitors, propose a floor price for common products, and agree to not compete for certain sections of the market. However, the Competition and Consumer Act 2010 (Cth) (“the Competition Act”) captures more than just obvious and over price arrangements. Under the Competition Act, cartel conduct exists where a contract, arrangement or understanding is entered into between businesses that would ordinarily be in competition that:

  • relates to price fixing;
  • prevents, restricts or limits the production or supply of goods or services;
  • results in the parties agreeing which suppliers will serve particular groups or areas; or
  • results in bid-rigging.

The contract, arrangement or understanding does not need to be formal, in writing or even necessarily overt; it may be shown through the conduct and behaviour of the businesses. It is also important to note that businesses do not have to actually follow through with it; simply making a contract, arrangement, or reaching an understanding, with its competitors is an offence under the Competition Act.

A closer look at three types of cartel conduct:

  • Price fixing occurs when competitors decide how to price their goods and services It does not need to be done in a formal way, but effectively means they are not competing against each other. Price fixing can include determining a formula for pricing or discounting their goods or services, or even agreeing on rebates, allowances or credit terms.
  • Bid-rigging There are several ways this can play out including:
    • Competitors agree who will win the bid so others deliberately bid higher;
    • Competitors agree not to bid, or withdraw a successful bid; or
    • Competitors deliberately include conditions in their bid that they know will not be accepted.
  • Bid-rotation is often used as part of bid-rigging, where competitors take turns in putting forward a successful bid. While this means everyone has an opportunity in the market, the ACCC regulates against bid-rotation for the obvious reason that it “leads to uncompetitive tender processes that can result in organisations paying higher prices or receiving lower quality goods or services”.5

Collusion is key to cartel conduct

While the definition of cartel conduct is wide, the onus is on the ACCC to prove that there has been collusion between competitors. Competitors may actually behave in a similar way due to the effects of competition. In fact, the Federal Court recently observed that “parallel conduct is not compelling evidence of collusion” but rather may simply be an effect of competitive forces operating within a market. It is the act of collusion that brings the conduct within the scope of the Competition Act.

Individuals are in the line of fire

The ACCC is willing, and some might say eager, to take action against company directors and officers personally for cartel conduct. Recently, the ACCC brought a prosecution against a number of major players in the Australian electrical cable market, including directors and managers of the relevant companies in their personal capacity.

For individuals contemplating cartel conduct, the threat is a significant deterrent. Individuals can be personally ordered to pay compensation to those affected by the cartel conduct, along with the payment of other penalties up to $500,000 for each contravention. In the most serious cases, the Commonwealth Department of Public Prosecutions can even seek imprisonment of up to ten years for those individuals engaged in overt cartel conduct. Companies can also receive fines of up to $10 million.

The ACCC’s powers extend far beyond cartel conduct

While cartels attract the most media attention, they are not the only anti-competitive behaviour that is on the ACCC’s radar. The ACCC is primarily concerned with competitors colluding and working together to substantially lessen competition or prevent, restrict or limit the supply or acquisition of goods or services to the market. Again this does not need to be a formal arrangement or even something that was implemented or complied with. If it is evident in the competitors’ conduct, arrangements or understanding it will be caught under the Competition Act.

Recently Flight Centre was successfully, and publicly, pursued by the ACCC all the way to the High Court of Australia for attempting to “induce Singapore Airlines, Malaysia Airlines and Emirates each to make a contract or arrangement, or arrive at an understanding, with Flight Centre.” It was found that this had the purpose, or would have or be likely to have the effect, of substantially lessening competition.  This case has been sent back to the Full Court of the Federal Court for determination in relation to penalty.

Abusing market power is next on the ACCC hit-list

Federal Parliament is currently considering a bill that seeks to expand the ACCC’s powers against companies that misuse their market power. The Competition Act currently covers anti-competitive behaviour where a company with substantial market power takes advantage of its market power to:

  • Damage a competitor;
  • Prevent entry of an entity into the same market; or
  • Deter or prevent an entity from engaging in competitive conduct in that market.

The misuse of market power provisions also prevent a company from supplying goods or services at less than cost price for a sustained period.

The current test requires the company to act with this purpose, whereas the proposed provisions would extend this to cover the effect or likely effect, of substantially lessening competition. Known as the “effects test,” this considers the effect of the behaviour rather than just its purpose. This is intended to overcome challenges that the ACCC has encountered in trying to show the intent of a business, so we can expect to see more prosecutions by the ACCC if this becomes law.

It is worth noting that this new provision only applies to companies that have substantial market power. But this can potentially bring even small and medium enterprises within its net, particularly if your business is on the cusp of becoming a major industry player. You can read more about this potential impact here.

How to stay out of the ACCC’s net

Businesses looking for a competitive edge may find themselves faced with an opportunity that travels the fine line between legitimate competition and collusion. While the benefits may seem attractive, you run the risk of attracting unwanted attention and publicity from the ACCC, or in a worst case scenario, ending up in jail. The ACCC has extensive powers that allow it to:

  • Compel individuals to provide documents and verbal evidence;
  • Obtain search warrants against company premises and company officers; and
  • Collect evidence using police surveillance (in certain circumstances).

The ACCC is on the hunt, so it is wise to protect yourself and your business. If you are unsure whether an opportunity may fall within cartel conduct, the best course is often to take a step back from the opportunity, and to obtain advice before the ACCC closes in on you.

Moulis Legal guides businesses across Australia and Asia in the management and resolution of cross-border and domestic commercial and property disputes in a way that is commercially focused and business-centric. We represent Australian and international organisations in various domestic and international jurisdictions on matters including contractual disputes, cross-border intellectual property disputes, real property disputes, competition law issues, and managing and responding to regulatory investigations.

For more information, please contact Christopher Hewitt on +61 7 3367 6900 ( or Lisa Eldridge on +61 2 6163 1000 (

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2017


[2]  ACCCount, A report of the Australian Competition and Consumer Commission’s activities, 2016


[4]  ACCCount, A report of the Australian Competition and Consumer Commission’s activities, 2016