Cartel Behavior of Australian Mining Joint Ventures

This article discusses the potential cartel behavior of Australian mining joint ventures, defense to cartel behavior, duties and responsibilities of the manager/operator in a resource joint venture, and fiduciary responsibilities of the manager/operator to the participants of the joint venture.

Running head: CARTEL BEHAVIOUR OF AUSTRALIAN MINING JOINT VENTURES
Cartel behaviour of Australian mining joint ventures
Name of Student
Name of University
Author Note

1
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
Table of Contents
Potential cartel behavior of ventures...............................................................................................2
Defense to cartel behavior...............................................................................................................2
Duties and responsibilities of the manager/operator in a resource joint venture.............................3
How can such duties be exploited to create a cartel behavior?.......................................................4
What fiduciary responsibilities does the manager/operator have to the participants of the joint
venture?............................................................................................................................................5
References........................................................................................................................................5

2
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
Potential cartel behavior of ventures.
A cartel is a group of businesses, operating in the same market , who instead of
competing with one another, form agreements, contracts or a mutual understanding with the
motive to fix and control prices, engage in collusive tendering or bid rigging, allocate market
shares and suppliers, and restrict output. Any business which in collusion with a competitor,
partakes in the aforementioned activities, either intentionally or unintentionally, is said to be
engaged in cartel behavior or conduct1. Joint venture is a term referring to two or more
companies pooling its resources and expertise to achieve a mutually beneficial goal. Naturally
this may require the participating companies to share details regarding some of their operational
details as well as lay down strategies, including agreements regarding of pricing, supply as well
as market strategies. Therefore, joint ventures most certainly end up flouting anti-competitive
laws by owing to its very nature2. The petroleum industry is a sector which engages in a lot of
joint ventures which may ultimately lead to some joint price fixing agreement or joint
advertisement or agreement to sell all output to a single customer. An example would be of the
joint venture of Woodside Energy, Benaris International and Origin Energy Resources which, in
2010, launched a joint marketing campaign for LPG. Consequently this implies that sale price of
LPG by all the participants was pre-determined and equal to the same advertised price3. This
technically could be classified as price fixing of cartel conduct.
1 Cartels (2018) Australian Competition and Consumer Commission
2 Competition Issues In Resources Projects: Marketing Agreements Between JV Partners - Anti-Trust/Competition Law -
Australia (2013) Mondaq.com
3 Benaris International Pty Limited, Woodside Energy Limited, Origin Energy Resources Limited Response To Submission To
The Australian Competition And Consumer Commission (2010) (Australian Competition and Consumer Committee, 2010)

3
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
Defense to cartel behavior.
Despite the criminalization of cartel behavior in Australia as per the Competition and
Consumer Act, there exists certain exemptions that are allowed for particular situations where
cartel behavior might be observed. Such exceptions could include cases where there has been
authorized sanctioning for the sake of public benefit where by it is deduced that the public
benefits might over shadow the detrimental effects and as such upon a formal appeal to the
Australian Competition and Consumer Commission (ACCC), exceptions to acts, such as, price
fixing, restriction of outputs, bid rigging and allocation of market and suppliers could be
granted4; Joint Ventures in which, if the venture deals with production or supply and has the
terms of their agreement which deals with the cartel conduct compiled in the form of a binding
contract, exemptions are allowed5; Cases relating to collective bargaining which relates to
provisions involving price fixing, allocation of suppliers and customers or restriction of output
and not under any circumstance include bid rigging; Collective acquisitions which deals with
cases relating to mainly price fixing where the parties may seek to jointly or collectively acquire
the collections from the goods or services or perhaps may be interested in joint advertisement
where by it could amount to price fixing; “Anti-overlap” provisions which are mainly technical
exemptions arising out of overlap with other provisions such as contracts that could directly or
indirectly influence competition, resale prices, and exclusive dealings, companies that may be
dual listed and acquisition; Finally, agreement between related corporates also fall under
exemption given that they do not share a competitive positioning in the market6.
4 Competition And Consumer Act 2010 (2016) Legislation.gov.au
5 Duncan, William D. Joint ventures law in Australia. Federation Press, (2012).
6 Huseyin Cosgun, Criminalising Cartels: Theory And Practice In The UK And Australia (The Interdisciplinary Centre for
Competition Law and Policy, 2013)

4
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
Duties and responsibilities of the manager/operator in a resource joint venture.
An operator or manager in the context of a joint venture is an entity which acts as an
agent of the participating organizations or companies, to undertake and oversee the management
of the joint venture. It holds the responsibility of carrying out the entire operational process of
the venture on behalf of the all parent companies. An operator could be a third party who is
assigned to the role on a contractual basis or it could be one of the partners who have the
functional expertise to carry out the project operations. Irrespectively, the manager or operator is
granted exclusive authority to conduct and manage the activities of the project either through its
own resources or by means of delegation after due approval of the parent companies. It is
obligated to relay all information and knowledge that is accumulated in due course of the
operations in order to uphold interests and rights of all members in the venture7. The operator is
in turn answerable to the management committee, set up for the sole purpose of representing the
participants. It is to be noted that the operator is expected to act in the best interests of the joint
venture and not of any individual participant or self and deliver the best service it is capable of.
Additionally, the operator is responsible for all aspects of operation including engaging with
third parties on a contractual basis, handling budgeted expenses of the project and dealing with
emergency expenses arising out of injuries that may have resulted as a consequence of the
operational process. Therefore, the operator holds the right to expend money as per requirement
for the project which fall outside the sanctioned budget. It is also responsible for the joint assets
including intellectual property of the participants for the duration of time it is engaged in the
project. Finally the agency responsible for the operations of the joint venture is expected to
7 Philippe Dume and Sergey Frank, "Managing International Joint Ventures" (2015) 26(1) London Business School Review.

5
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
transcend the cultural differences of the different parties to ensure smooth running of the
process8.
How can such duties be exploited to create a cartel behavior?
Owing to the fact that an operator may engage with third parties, such as suppliers , on a
contractual agreement under its own name and not as an agency of the participants, however
under the authorization of the Joint operations agreement for the interest of the project in its
undertaking , the parent organizations may utilize the situation as a loophole to distance itself
while engaging in collusive activities such as exchanging information, limiting outputs and
colluding with suppliers which amounts to cartel behavior9. This is made possible since, an
operator, provided that it is a contractual one, is put in charge of the property, assets as well as
functional control of the project and thus has the autonomy to interact with the local suppliers
and other third parties who may provide scope for collusion, on behalf of the parent companies
and allow them to stay under the legal radar.
What fiduciary responsibilities does the manager/operator have to the participants of the
joint venture?
Fiduciary refers to the confidentiality and loyalty that is expected out of member parties
engaged in any kind of mutual agreement10. Fiduciary duty for the most part depends on the
terms of the contract that exists between operator and the other parties involved in the venture.
However, generally an operator or any participant of a joint venture is implicitly expected to act
in the best interests of the joint venture entity, superseding any prospects of profits that they
8 Peter Killing, Strategies for Joint Venture Success (Rle International Business) (Routledge, 2014).
9 Jaakko Kooroshy, Felix Preston and Siân Bradley, Cartels And Competition In Minerals Markets: Challenges For Global
Governance (The Royal Institute of International Affairs, 2014, 2014)
10 Harner, Michelle M., and Jamie Marincic. "The Naked Fiduciary." Ariz. L. Rev. 54 (2012): 879.

6
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
alone may be solely subject to which could jeopardize the venture. An operator is expected to put
in their best efforts in running of the operations under their charge and abide by the
confidentiality of the information regarding the participants that may be shared. It is also
expected that the operator would respect the directives of any supervising authority, such as a
technical committee or the management committee and report all findings, developments and
expenses to the representatives of the participants11.
11 Duncan, William D. Joint ventures law in Australia. Federation Press, (2012).

7
CARTEL BEHAVIOR OF AUSTRALIAN MINING JOINT VENTURES
References
Benaris International Pty Limited, Woodside Energy Limited, Origin Energy Resources Limited
Response To Submission to The Australian Competition And Consumer Commission
(2010) (Australian Competition and Consumer Committee, 2010)
Cartels (2018) Australian Competition and Consumer Commission
Competition And Consumer Act 2010 (2016) Legislation.gov.au
Competition Issues in Resources Projects: Marketing Agreements between JV Partners - Anti-
Trust/Competition Law - Australia (2013) Mondaq.com
Cosgun, Huseyin, Criminalising Cartels: Theory and Practice in The UK And Australia (The
Interdisciplinary Centre for Competition Law and Policy, 2013)
Dume, Philippe and Sergey Frank, "Managing International Joint Ventures" (2015) 26(1)
London Business School Review
Duncan, William D. Joint ventures law in Australia. Federation Press, (2012).
Harner, Michelle M., and Jamie Marincic. "The Naked Fiduciary." Ariz. L. Rev. 54 (2012): 879.
Killing, Peter. Strategies for joint venture success (RLE international business). Vol. 22.
Routledge, (2012).
Kooroshy, Jaakko, Felix Preston and Siân Bradley, Cartels and Competition in Minerals
Markets: Challenges for Global Governance (The Royal Institute of International Affairs, 2014,
2014)