Cartel Conduct and Prohibited Anti-Competitive Practices: Analysis under the Competition and Consumer Act

In this document we will discuss about Cartel Conduct and Prohibited Anti-Competitive Practices and below are the summary points of this document:- Cartel conduct, including agreements between competitors to fix prices and restrict outputs, is prohibited by the Competition and Consumer Act. Anti-competitive conduct falling outside the definition of cartel conduct can still contravene other provisions of the Act, such as section 45. Cartels harm the economy by inflating prices, reducing choices, and violating fair competition principles, leading to increased consumer costs.

Has Tristan’s conduct breached any sections of the Act?
There are several ways in which cartel conduct has been prohibited in Australia. However most
directly, cartel conduct has been prohibited by Part IV, Division 1 of Competition and Consumer
Act, 2010. This legislation defines and prohibits cartel conduct, both civilly and criminally. The
definition of cartel conduct that has been provided in this legislation is very lengthy, and it runs
into 36 paragraphs however it includes the agreements that have been made between competitors
for fixing the crisis, rigging the bids, dividing markets and restricting outputs. The law provides
that the conduct falling under this definition of cartel conduct has been prohibited by the law.1
On the other hand, anti-competitive conduct falling beyond the definition of cartel conduct or the
conduct which benefits from an exemption from this per se prohibition may still result in the
contravention of other provisions present in the Competition and Consumer Act. The most
notable among these provisions is section 45 of the Act.2 This provision imposes a petition on
anticompetitive agreements and after the amendments made in November 2017, anti-competitive
concerted practices have also been prohibited.
Sometimes, agreements are made by businesses with their competitors for fixing prices, rigging
bids, share markets are restricting the outputs may be breaking the law and stealing from the
consumers and other businesses by inflating the prices and reducing the choices available and in
this way, causing harm to the economy.3
1 ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794
2 Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235

According to the Competition and Consumer Act, it is required that the businesses should
compete fairly. Most of the businesses in Australia increase their customer base and profits
honestly with the help of continuous innovation for improving their products and services, better
sales and marketing which revealed the general benefits available in case of their products and
services and by keeping the costs low so that they can offer competitive prices.4 However, the
businesses that are struggling to compete in a fair manner and maintain profits may sometimes
be tempted to secretly and deliberately join a cartel with the competitors. It can be said that a
cartel is present when the businesses have agreed to work jointly instead of competing with each
other.5 The purpose of this agreement is to increase the profits of the members of the cartel and at
the same time, maintaining an illusion of competition between the members. Cartels can be local,
national or international. The members of cartels are aware of the fact that they are doing the
wrong thing and generally they make significant efforts to prevent the discovery of the presence
of a cartel. According to certain estimates, when a cartel is operating, the prices of the
commodities that are affected by the cartel rise by at least 10%.6
In this regard, it needs to be noted that the cartels are not only prohibited by the Competition and
Consumer Act but it has also been made a criminal offense for individuals and businesses to take
part in the cartels. The cartels are illegal and immoral due to the reason that they not only
changed the consumers and other businesses, but they also illustrate the healthy growth of the
3 Albano, LA, Buccirossi, P, Spagnolo, G and Zanza, M, ‘Preventing collusion in
procurement’, Handbook of procurement, (Cambridge University Press, 2006) pp. 347–380
4 ACCC v ANZ Ltd [2013] FCA 1206
5 Harding, Christopher, ‘An emotional industry: why do cartelists do what they do and risk
going to jail?’, (Competition Law Insight, 2008) vol. 7, July 2008, pp. 9–10
6 Miller, Russell V, Miller’s annotated Trade Practices Act, 30th edition, (Thomson
Lawbook Co., 2009)

economy by increasing prices for the consumers and businesses by artificially inflating input and
capital costs through the supply chain.
In this case, Tristan, Alex and Erica were running their catering companies successfully in
Melbourne. These three catering companies were getting around 65% of catering contracts in
Melbourne. These three companies have entered into an agreement according to which they
agreed to service only to corporate clients that are located in particular to graphic areas of the
city. The arrangement had been going on fine when a new catering company drawing the
business under the name of Mobile Kitchen. In order to deal with the competition created by
Mobile Kitchen, Tristan and the two other catering companies decide to reduce their prices by
20% for at least six months so that Mobile Kitchen can be driven out of business. After six
months, Mobile Kitchen was facing financial problems and very soon, the company may end
trading. Under these circumstances, it can be said that Tristan had entered into a cartel with the
other two companies. Such conduct has been prohibited by section 45 of the Competition and
Consumer Act, 2010.
Therefore in the present case, it can be stated that the conduct of Tristan amounts to the breached
of section 45, Competition and Consumer Act, 2010.
If so, what kind of remedies and/or penalties might these breaches expose him to?
The anti-competitive practices have been prohibited by Part IV of the Competition and
Consumer Act. These practices include cartel conduct, misuse of market power, exclusionary
conduct, resale price maintenance, exclusive dealing, and anticompetitive mergers. The
maximum penalties for the breach of Part IV regarding each act or omission will be as mentioned
below. Therefore, in case of corporations, it may go up to 100.000,000 or in cases where it has

been determined by the court that reasonably attributable benefit has taken place, three times the
value of such benefit or if the value cannot be determined by the court, 10% of the annual
turnover on the company in preceding 12 months. Regarding the individuals, the penalty may go
up to $500,000. The penalty provisions that are applicable in case of the breach of section 45D of
Part IV are: $750,000 in case of corporations and in case of individuals, it is $500,000.7
The cartels have been prohibited by the Competition and Consumer Act under the civil law. At
the same time, it is also been made a criminal offense if individuals or businesses take part in
cartels. The individuals who are found guilty of being involved in cartel conduct may have to
face criminal or civil penalties. In the same way, the corporations may have to face a fine or
pecuniary penalty regarding each criminal cartel offense on civil breach of law.
It has been provided by the law that in case of the individuals who are found guilty of being
involved in cartel conduct may have to face civil or criminal penalties. These may include an
imprisonment for a term up to 10 years or a fine that may go up to $420,000 regarding each
criminal cartel offense. In case of civil contravention, the pecuniary penalty may go up to
$500,000 for each civil breach of law. It has also been provided that it will be illegal for a
company to indemnify its officers regarding in the financial penalty or legal costs.
The other forms of relief related with the cartel offense include injunctions and an order by the
court which disqualifies a person from managing corporations and also a community service
order.
In case of the corporations, the maximum fine or the pecuniary penalty regarding each criminal
cartel offense or a civil breach will be greater of $10,000,000 or three times the total value of the
7 Miller, Russell V, Miller’s annotated Australian Competition and Consumer Law, 33rd
edition, (Thomson Lawbook Co., 2011)

benefits that have been received by one or more persons and that can be reasonably attributed to
the offense or contravention in cases where the benefits cannot be determined completely, it will
be 10% off annual turnover of the company during the preceding 12 months.
The objective of the provisions related with fair competition mentioned in the Competition and
Consumer Act, 2010 is to increase the welfare of the people of Australia by promoting
competition and fair trading and providing the required protection to the consumers. The
competition provisions that have been mentioned in this legislation seeks to regulate the conduct
of the marketplace and to some extent, the structure of these markets. Among other things, these
provisions act by completely prohibiting certain conduct including cartel conduct.
Does Tristan have any options available to him to reduce his risk of prosecution?
There are certain exemptions that are applicable in case of the present cartel regime. These
exemptions include the circumstances where the Australian Competition and Consumer
Commission (ACCC) authorizes the conduct due to the reason that public benefit outweighs any
public detriment that may be the result of such conduct or where certain joint ventures have
informed why the businesses. However, it needs to be noted that these exemptions are very
specific. And as a result, before relying on them, businesses are required to seek independent
advice.
Collective bargaining: the law provides that the businesses will be excellent from cartoon
offenses and civil predictions if there is a collective-bargaining notice and the conduct is related
with price-fixing, allocating consumers, suppliers or territories; and restricting outputs. It is
worth mentioning that such exemption is not applicable in case of bid rigging.8
8 Organisation for Economic Co-operation and Development, Hard Core Cartels, Third
report on the implementation of the 1998 recommendation, (OECD Publications, 2006)

Authorization: under the circumstances where the public benefit that is going to be derived from
the conduct outweighs any public detriment. It is available to the ACCC to authorize cartel
conduct after a formal application has been made to it and the conduct is related with price-
fixing, bid rigging, and, allocating customers, territories or suppliers and restricting outputs.
Before making a decision, if authorization needs to be granted in a particular case, the ACCC is
involved in the process of public consultation. The Commission issues a draft decision and then
it considers the response made by the interested parties before it arrives at the final decision.
Generally speaking, the conduct that has already taken place cannot be authorized. Therefore it is
required that an application for organization should be made well in advance before embarking
on the conduct that may violate any provision of the CCA.
Therefore it is required that the authorization should be sought from the Commission before
embarking on the conduct that may result in the violation of any provisions to the Act. Similarly,
if a person is thinking about making an application for authorization, such person is encouraged
by the Commission to discuss this issue with the adjudication branch of the Commissions. The
details regarding the fee payable for authorization can be seen on the website of the ACCC.
However, the Commission can reduce or waive the fee at its discretion if it will result in and
unnecessary hardship for the applicant.
Joint ventures: another exception that is present to cartel offenses and several prohibitions is
present in the form of joint ventures. The parties that are going to claim the joint venture
exception are required to make sure that proportion of their agreement containing a cartel

provision is present in a contract. Similarly, the parties are also required to make sure that the
joint venture is related with joint production or supply.
The defense of joint venture to cartel provisions is complex in nature. Therefore, it is advisable
that if the parties are thinking of joint venture that may otherwise result in the reach of cartel
provisions, the parties should seek legal advice.
Therefore, in the present case, Tristan can rely on the defenses mentioned above for the purpose
of reducing the risk of prosecution that is present on account of the breach of the provisions of
Competition and Consumer Act, related with cartels. It has also been provided by section 45 AO
that the provisions of section 45AF and 45AG will not be applicable in case of a contract,
understanding or arrangement that contains a cartel provision if it can be established by the
defendant that the cartel provision is (i) for the purpose of a joint venture; and (ii) such provision
is reasonably necessary for undertaking the joint venture and if the joint venture is related with
the (i) production of goods; (ii) supply of goods or services; or (iii) acquisition of goods or
services.

Bibliography
Albano, LA, Buccirossi, P, Spagnolo, G and Zanza, M, ‘Preventing collusion in procurement’,
Handbook of procurement, (Cambridge University Press, 2006) pp. 347–380
Harding, Christopher, ‘An emotional industry: why do cartelists do what they do and risk going
to jail?’, (Competition Law Insight, 2008) vol. 7, July 2008, pp. 9–10
Miller, Russell V, Miller’s annotated Australian Competition and Consumer Law, 33rd edition,
(Thomson Lawbook Co., 2011)
Miller, Russell V, Miller’s annotated Trade Practices Act, 30th edition, (Thomson Lawbook Co.,
2009)
Organisation for Economic Co-operation and Development, Hard Core Cartels, Third report on
the implementation of the 1998 recommendation, (OECD Publications, 2006)
Case Law
ACCC v Leahy Petroleum Pty Ltd[2007] FCA 794
Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235
ACCC v ANZ Ltd[2013] FCA 1206