Chapter 3
Submissions on the bill
3.1
The committee's inquiries highlighted
three inter-related concerns with the bill. The first is that there are insufficient
criteria distinguishing between criminal cartel activity and innocent or less
anticompetitive conduct. The second and associated difficulty is that the bill's
defences are seen by some as too narrow, in particular the threat of criminal
action against legitimate joint venture activity. The third concern is the wide
discretion given to the ACCC as to whether to pursue a civil penalty, initiate
criminal proceedings or allow the behaviour to continue unchecked. Critics
argue that the bill does not provide the necessary clarity as to which actions
would attract criminal proceedings. This chapter examines each of these three
criticisms.
What is (and is not) criminal cartel activity?
3.2
The first—and most
fundamental—objection to the bill is that it does not distinguish criminal
cartel conduct from civil offences. More precisely, it does not establish the
point at which an activity goes beyond a civil cartel offence dealing with
'anti-competitive conduct' and becomes a criminal cartel offence deserving (if
found guilty) of a gaol term.
3.3
Chapter 2 noted that the bill specifies
that both civil and criminal cartel provisions relate to price fixing, sharing
or allocating a customer base, restricting supply or rigging a tender process.
This remit is consistent with the OECD's 1998 recommendation.
3.4
But these four areas of potential
cartel conduct may attract either a civil or criminal penalty, depending on the
circumstances of the case. The bill does not establish precisely what
constitutes a criminal cartel offence as opposed to a civil offence. It does state
that a criminal cartel offence must have both a 'physical' and 'fault' element,
but the physical element of a criminal cartel provision is not explained. The
prosecutor therefore has only broad guideposts as to whether to treat an
activity as a criminal, as opposed to a civil, offence. Critics argue that the
bill thereby creates uncertainty as to which matters would proceed to criminal
prosecution and which would only be dealt a civil penalty. Moreover, they cite
a risk that even ordinary commercial transactions would be captured under the
bill's criminal offences.
3.5
In its opening statement to the
committee, the ACCC foreshadowed these criticisms. The Chief Executive Officer,
Mr Brian Cassidy,
defended the approach taken in the bill:
I am aware that in the comments the
committee has received there has been some discussion of the definition of a
cartel offence...with some seeking of a more simple way of defining what a
criminal offence is and what a civil offence is. From the commission’s point of
view, we are simply not aware of a satisfactory way of doing that. Inevitably,
whether a particular conduct should be treated as criminal or civil will depend
on the particular circumstances of the conduct. If you take price fixing, for
argument’s sake, it certainly is regarded as being at the more serious end of
cartel conduct. But even there, there is some price-fixing behaviour that
should be subject to criminal proceedings. On the other hand there is other
price-fixing conduct about which, because of its circumstances, or perhaps the
lack of knowledge of those involved in what they were doing, or the minimal
effect that the conduct has, you can make a fairly compelling argument that
even though the category of conduct itself is fairly egregious in terms of
those sorts of criteria, it really does not warrant being pursued as a criminal
offence...We are not aware of a simple approach in this area of the law, as I
suspect you could say in a number of other areas of the law—a simple approach
to be able to ex ante define exactly what is criminal and what is civil.[1]
3.6
Treasury noted similarity between
the US
anti-cartel legislation and the proposed bill in that both have 'parallel civil
and criminal prohibitions in one, where it is up to the regulators to determine
which way the case will go forward'. Ms Holdaway noted that 'the US is probably the one [country] that has had the most
experience in this area and probably the greatest amount of success as well'.[2]
Two doctors in a country town...
3.7
Several submitters underscored the
lack of definition in the bill by giving examples of 'innocuous and
insignificant' commercial activity that would be considered a criminal cartel
offence.[3]
The law firm Speed and Stracey gave six examples of conduct that they argued is
commonplace but may be subject to prosecution under the bill. One of these
examples, a key point of reference at the public hearing, concerned:
Two doctors in a country town
agreeing that they will restrict the services they provide—with one to work on
Saturdays and the other on Sundays (rather than both being permanently on
call).[4]
3.8
Prima facie, the case seems a
reasonable rostering arrangement where the intent is to allow each doctor a day
off work. And yet, because its effect is to restrict supply, the arrangement
would potentially be caught by the bill's criminal provisions. As Mr Peter Speed, partner
at Speed and Stracey, noted:
...taking the doctor example, if that
matter went to the judges they would have no choice according to the law but to
determine that the individual is guilty of a cartel or a criminal cartel. They
would have some flexibility in terms of the sentencing, but the provision is
quite prescriptive and they must follow what the legislature puts down. If it
is limiting or restricting the supply of services, then you are guilty of the
offence.[5]
Prices
3.9
The doctors example raises the
question of what should be the distinguishing criteria in determining whether
an activity is a criminal cartel offence under the bill. Some witnesses argued
that evidence of criminal cartel activity should be based on the effect that
the activity in question has on price.
3.10
For example, Mr Speed argued
that:
...ultimately, there is an
indicator—and I think that is probably appropriate—of price being the matter
that is relevant. Some of these provisions could, for instance, identify that
the capacity constraint is there to influence price and the market allocation
restraint is there to influence price. So, with the examples of the doctors...if
they were colluding such that they would get Saturday off and Sunday on, such
that they could charge higher prices, then there is obviously an issue in terms
of cartel conduct. But if it is not related to price et cetera, and it is
simply to get the day off, and the prices will not change and it has no purpose
in relation to price, then it is hard to see why it is offensive or why it is
being caught by these provisions.[6]
3.11
Associate Professor Zumbo of the School of Business and
Taxation Law at the University of New South
Wales also proposed a price fixing
offence which has the purpose or effect or likely effect of 'fixing, raising,
controlling, maintaining, stabilising or influencing' price.[7]
He emphasised in his verbal evidence that identifying criminal cartel conduct must
be focused on what happens to prices as a result of the activity:
I believe strongly that the distinguishing criteria is the
concerted, organised behaviour to raise prices, because the economic literature
is quite clear that these cartels are there to raise prices.[8]
3.12
Associate Professor Zumbo told the
committee that in the case of the doctors:
They might have
discussions and say, ‘We’re going to take off Saturday and we’ll raise our
price,’ then they see that the price has gone up and they say, ‘Well, maybe we
should take Friday off, and the price will go up on a Friday.’ The problem with
that example is that at the moment the legislation captures that conduct—full
stop. They could be prosecuted as a criminal cartel...Even if the price stays the
same on a Saturday and Sunday, they could be caught because there is an output
restriction. That is my concern. I would have no problem with them simply
reducing by one day a week without price changing. If, however, the price
changed significantly and it looked like a front for trying to jack up the
price, then I would be concerned.[9]
3.13
Treasury argued that limiting the
criminal provisions to focus only on price would compromise the OECD
Recommendation which found that hard core cartels should be prohibited
outright, without the need to prove additional elements before the court (such
as price).[10]
Dishonesty
3.14
The other potential mechanism to identify
a criminal cartel offence is whether the activity was undertaken dishonestly. The
United Kingdom legislates that an individual who 'dishonestly'
agrees to cartel conduct such as price fixing, can face imprisonment for up to
five years, and/or an unlimited fine.[11]
However, the legislation has to date secured only one conviction. The widely
cited reason is the need to prove that the person/s had the intention of dishonestly
obtaining a gain from cartel activity. As Andreas Stephan from the University of East Anglia has observed:
It was thought that incorporating the
moral element of ‘dishonesty’ into the offence would harden public attitudes.
However, this has not happened in the absence of regular convictions and may be
problematic because dishonesty necessitates a contemporary moral judgement on
the part of the jury and therefore relies on attitudes being sufficiently
hardened in the first place.[12]
3.15
Under the Sherman Act, the United States
has had criminal sanctions for price-fixing since 1890. Unlike in the UK, however,
there is no 'dishonesty' test. As the Court of Appeals noted in United States v Aston (1992):
Under the
Sherman Act, price fixing is illegal per se. If you find there was a conspiracy
to fix co-payment fees, it does not matter why the fees were fixed or whether
they were too high or too low; reasonable or unreasonable; fair or unfair. It
is not a defence to price fixing that the defendants may have had good motives,
or may have thought that what they were doing was legal, or that the conspiracy
may have had some good results.[13]
3.16
A 'dishonesty' clause was included
in the January 2008 Exposure Draft Bill but was subsequently deleted. Treasury
told the committee that the feedback it has received on the dishonesty clause during
last year's consultation process:
...was that it
would greatly increase the difficulty of bringing a successful prosecution, to
the point where there was great concern that cartel conduct would not be
captured by the provisions of the bill. It would be provided for in the
legislation, but enforcement would effectively become virtually impossible.
...
In the absence of the dishonesty
element, what was inserted was that it would not be necessary for the
prosecution to prove that the corporation knew or believed that the contract
contained the cartel provision. Without specifying that, the provisions of the
Criminal Code, which applies to all Commonwealth laws, would make the necessary
element mere recklessness, which was felt to be quite low. It is not enough,
for a jail term of this magnitude, for parties to be simply reckless as to
whether or not a cartel exists. What we are looking at is deliberate knowledge
or belief on the part of the parties involved.[14]
3.17
Several submitters welcomed the
omission of a 'dishonesty clause'.[15]
The Consumer Action Law Centre argued that:
We were of the
view that the inclusion of the requirements to make out dishonesty would have
had a severe hampering effect on the effectiveness of the legislation,
particularly in view of...the high standard of proof that will still be required
to make out an offence under these provisions. We are aware that the UK is one
of the only other major jurisdictions that has a dishonesty requirement, and
that law is notable for its lack of use. We were concerned that the inclusion
of such a requirement would hamper the intent behind the legislation.[16]
3.18
Not all submitters were opposed to
a 'dishonesty' test, however. As Mr Speed told the committee:
A criminal
offence is morally reprehensible and really requires a guilty mind. Therefore,
if your purpose in doing it is simply to get the day off, and it is not
offensive...then it should not be a criminal offence. If it has an effect such
that it does substantially lessen competition, which is the typical test for when
conduct that is slightly anticompetitive is too great, then that should be the
test applied to that example.[17]
Joint venture exceptions
3.19
A second criticism of the bill relates
to the proposed joint venture exceptions. There are two opposing strands of argument.
The first is that the bill's joint venture defences are too narrow and may
result in the criminalisation of legitimate joint venture activity. As chapter
2 noted, proposed subsections 44ZZRO and 44ZZRP relate only to a 'contract',
not an 'arrangement' or 'understanding'; they also refer only to ventures which
'produce and/or supply goods and services' (see paragraph 2.16). The opposing
view is that the defences are too broad and that, particularly through joint
ventures formed through oral contracts, they risk sheltering cartelists.
Are the joint venture exceptions too narrow?
3.20
Several witnesses criticised the
bill for subjecting joint ventures operating outside of contracts and in
activities not relating to the production and/or supply of goods and services
to the civil and criminal cartel offences.
3.21
The Shopping Centre Council offered
pointed criticism of the bill for excluding joint ventures formed through 'arrangements'
or 'understandings' from the cartel defence. Mr Milton Cockburn,
Executive Director of the Centre, surmised that these exclusions were made to
ensure that joint venture structures could not be used to camouflage cartel
conduct. However:
We believe this argument carries
little weight. First, sections 44ZZRO(2) and 44ZZRP(2) provide that it is the
joint venturers who bear the onus of demonstrating that a joint venture
actually exists. Second...the courts will quickly see through artificial attempts
to use defences that are not appropriate because there is not a genuine joint
venture. Third, it is our strong view that any attempt to cloak cartel conduct
under the guise of a joint venture would be obviously transparent and would
fail.[18]
3.22
Mr Speed, who appeared both independently and before the
committee with representatives from the Shopping Centre Council, argued that
the bill should exempt joint venture activities that are conducted through a
committee, rather than a contract. He referred to a situation where:
...you have an overriding joint venture
which is contractual, you have a committee which is fully contemplated by that
joint venture, completely innocuous and typically commercial, making a decision
where it is agreeing about what the budget should be. Whether that agreement is
a contract and whether it is legally enforceable between the two
competitors—who are not in this circumstance competitors because it is their
joint shopping centre and they are only determining the rentals or setting the
budgets for rentals of particular shops within that shopping centre—when they
are doing that process—that is, doing what is called the cartel provision—it is
that process which is not contractual and it is that process which we are
concerned about.[19]
3.23
Mr Timothy Walsh, legal adviser to the Shopping Centre Council, told
the committee that the solution to this problem was very simple:
...what we are proposing is to submit a
very simple amendment to the joint venture defence which we think covers our
issue neatly and deals with the issue properly, and that is merely to insert,
in the appropriate places within the relevant joint venture defences, both for
the offence provisions and the civil liability provisions, the words
‘arrangement and understanding’. That deals with the issue.[20]
3.24
The Shopping Centre Council also argued
that legitimate joint venture activity in its sector might be unfairly captured
by the bill's narrow reference to the production and supply of goods and
services in proposed subsections (44ZZRO(1) and 44ZZRP(1)). In its submission,
it gave the example of two shopping centre owners jointly owning a centre in
one city. The two also independently own other shopping centres in the same
city such that they are in competition for the supply of retail space for
lease. The Council noted that if the reference to 'those goods or services' in
proposed section 44ZZRD(4) is interpreted in a broad sense, the owners may be
captured by the cartel provisions because they are in competition with each
other outside of their joint venture arrangements.
3.25
The Law Council of Australia also emphasised
that there are legitimate joint ventures that conduct activities other than
producing goods or supplying services as their sole or dominant function, and
that the bill is 'likely to prejudice innovation in a range of
sectors...including financial services, information technology and resource
extraction'.[21]
Mr Dave Poddar, a
partner at Malleson Stephen Jaques, told the committee that:
...the bill
talks only about joint production; it does not talk about joint acquisition. So
if you have two parties that are seeking to do a research and development joint
venture, that arguably is not captured by the current drafting. For example, in
my home state of South Australia if we had a joint venture—of which I have
given you some examples—seeking to do a water desalination plant or other type
of plant, and if you had parties who are competitors in other parts of the
world, they would also be subject to these types of laws if it were initial
development which would not involve a production jointly. With the way the
current language is drafted these things would all be subject to criminal
prosecution. We do not see any current sense in the way they are drafted.[22]
Accordingly, the Council recommended amending
subsection 44ZZRO(1)(b) to read 'for the production and/or supply or
acquisition of goods and services.[23]
3.26
The Law Council also argued that
the bill's joint venture exceptions should include 'arrangements' and
'understandings'. Professor Bob Baxt, a partner at Freehills and a member of the Council's
Trade Practices Committee, told the committee that the omission of
'understandings' and 'arrangements' in the bill's joint venture exceptions was
particularly troubling in the Australian context. He explained:
Unfortunately, we have in this
country—and it is something that we pay the price for in the way in which
litigation has to be pursued—very strong black letter law drafting. As a result...
we have to be careful in our drafting, and we have to make sure that we do not
create barriers to genuine commercial activity. To me, the way that some of
these provisions have been drafted does not achieve that.[24]
3.27
These concerns were echoed by another
member of the Law Council's Trade Practices Committee, Mr Bill Reid. He was cautious of the ACCC's assurances that joint
venture activities falling outside the bill's exceptions would only be
scrutinised if there was a deliberate attempt to manipulate the market. He told
the committee:
...the written law is the written law;
it is set out with great specificity already. If a client finds itself in a
position where, on the face of the written law, it has contravened it and
exposed itself to its executives spending many years in jail, with enormous
financial penalties as currently provided for in the provisions, that is not an
adequate way forward, in my respectful opinion, to frame the law of this
country.[25]
3.28
Ergon Energy also expressed
concern with the bill's joint venture exceptions. It noted that these
provisions might not only penalise existing joint venture activity but could
also lead to increased transactional and administrative costs for entities
which procure goods and services from various joint venture style arrangements
and strategic alliances. Ergon Energy suggests that the existing exemption for
joint ventures could be retained in section 76C with amendments to ensure it
applies to cartel provisions.[26]
3.29
Mr Brent Fisse from the Trade Practices Committee of
the Law Council of Australia has suggested the following five amendments to the
proposed bill to clarify the legitimate joint venture activity would be exempt from
the new cartel provisions.
- inserting a competition test in proposed subsection 44ZZRP based
on the current section 76C. The test would be applied to civil cases under Part
IV of the TPA where there is no trial by jury;
- to provide that a provision is "for the purposes of a joint
venture" (subsection 44ZZRO and 44ZZRP) if the "dominant
purpose" is to further a "pro-competitive activity of a joint
venture";
- extending the wording in proposed subsections 44ZZRO and 44ZZRP
to cover cartel provisions in understandings and arrangement, as well as
contracts;
- extending the wording in proposed subsections 44ZZRO and 44ZZRP
to read 'for the production, supply and/or acquisition of goods and services';
and
- inserting a competition test into subsections 44ZZRJ and 44ZZRK
parallel to that in section 76C.[27]
Treasury and the ACCC's response on the joint venture
exceptions
3.30
Treasury was asked its view of these
concerns that the bill would threaten to prosecute legitimate joint venture
activity. It noted that the exceptions proposed in the bill sought a balance
between those who believed the joint venture defences are too narrow and those
who feared they are too broad, potentially offering a haven for cartelists (see
paragraph 3.19).[28]
Moreover, Treasury emphasised that:
The joint venture exception—and, I
guess, in relation to any number of other exceptions that are in the cartels
offence or pre-existing in the TPA or criminal offences generally—are in the
nature of exceptions and people will have to make a determination as to whether
they need to get legal advice, or perhaps talk to the regulator or seek
guidance that is put out by the regulator as to whether an activity is going to
fall within the exception. It is difficult to say on particular factual cases
as to whether you will or not but the ultimate recourse people have is to get
authorisation.[29]
3.31
The ACCC noted in its submission
that the majority of cartels prosecuted by the ACCC involve arrangements or
understandings rather than legally enforceable contracts. The bill thereby
excludes from exemption those joint venture activities most likely to involve
cartel conduct.[30]
Mr Cassidy
developed this rationale at the public hearing:
From our point of view, we see the
focus on contracts as we move into a criminal regime as being desirable. The
reason for that is that we are aware, from overseas experience, that there have
been instances where cartels have been dressed up as joint ventures in an
effort to evade the law. We are particularly aware that this has happened in
the Canadian case. Their law in this area is fairly similar to ours. It seemed
to us that any genuine joint venture is likely to rest on some sort of
contractual arrangement, be it written or oral. Once you start getting into
somewhat looser things—a joint venture based on an arrangement or an
understanding—you are starting to get into territory where creative people can
use a joint venture to try and dress up and protect what is otherwise a cartel.[31]
3.32
Mr Scott Gregson, General Manager at the ACCC, sought to allay concerns
that the ACCC would be stepping in to prosecute joint ventures without regard
to the circumstances of the case in question. He referred to Speed and
Stracey's example of a joint venture between two competing coal miners
establishing management committees comprising representatives of each
competitor to agree on the operational aspects of the joint venture.[32]
In this case, he argued:
...the first thing
we would note is that joint venture arrangements, particularly those that will
set out the terms and conditions on which coal is dug out of the ground and
ultimately sold, would ordinarily be the subject of a contract that in many
cases would be in writing and, if not, certainly one that would be enforceable
being oral and, hence, why we have some comfort in the reference to contracts
delivering the protection required for joint ventures.[33]
3.33
The ACCC also responded to the Shopping
Centre Council's concern that routine non-contractual arrangements between
joint venture partners would not benefit from a joint venture exemption. Mr Cassidy told
the committee:
...without wishing
to get into a debate about shopping centres and the like, is that I wonder
about the extent to which the sort of conduct envisaged would fall under the
bill anyway. In a sense, if it were conduct being undertaken under the head
contract where the head contract was in turn subject to the joint venture
exemption, I do not think it would fall within the scope of the bill anyway.[34]
3.34 The
Shopping Centre Council in a supplementary submission suggested the following
amendment to ensure that looser arrangements that may extend from a joint
venture contract be exempted from the cartel provisions.
Sections 44ZZRF
and 44ZZRG do not apply in relation to a written contract containing a cartel
provision or in relation to an arrangement or understanding which is
contemplated by a contract and which contains a cartel provision if...[35]
3.34
However the ACCC indicated that if
an arrangement or understanding (such as an agreement of a committee) was
undertaken under the broader terms of a contract and that contract was subject
to a joint venture exception, the conduct would also attract an exception.
3.35
Treasury noted in a supplementary
response to matters raised at the hearing that:
...if a clause(s) in a contract between
(for example) shopping centre owners provides that they will decide at a later
date the rent within their shopping centre, and then later act on their
agreement to set the rent, the question that would arise is whether or not the
parties were making or giving effect to a provision contained in your
contract. If the original contract contains provisions providing for the
decision as to rent, the joint venture exception protects both the agreement
that was made, and the process of implementing that agreement (that is, giving
effect to the contract).[36]
Are the joint venture exceptions too broad?
3.36
Others argued that the bill would
enable cartels to hide behind joint venture structures. The DomGas Alliance,
for example, argued that the bill would 'significantly weaken the existing
civil penalty provisions against price fixing and will encourage
anti-competitive cartel conduct'. It expressed concern that the bill abolishes
the competition test that currently applies under section 76D and forgoes the
need for producers to seek authorisation of their price fixing arrangement by
the ACCC. It argued that the competition test for the joint venture defence
should be retained in civil penalty cases.[37]
3.37
In the course of the committee's
deliberations, Treasury was asked whether abolishing section 76D would allow
greater scope for cartels to be protected through joint venture status. It responded
that it was not possible for companies to establish a sham joint venture simply
to get out of a cartel provision. The bill's defence applies only to cartel
activity, not to the other anti-competitive provisions of the TPA. Even those
joint ventures that meet the bill's defences must still comply with other
provisions of the TPA. Those joint ventures that do not meet the bill's defences
can seek protection through the ACCC's authorisation process.[38]
The ACCC's discretion
3.38
The underlying area of concern
with the bill is the level of discretion that is conferred to the ACCC. This reflects
the lack of a distinguishing criterion in the bill as to which activities would
and would not be referred by the ACCC to the Director of Public Prosecutions as
a criminal matter.[39]
It also reflects concern that the bill's joint venture defences would shift a
heavy burden onto the ACCC to conduct an authorisation process for all joint
ventures not formed through a contract and not engaged in activities relating
to the production and supply of goods and services.
3.39
As the bill is currently drafted, any
businesses that enter into a contract, arrangement or understanding that
restricts supply—even if the activity is innocent and regardless of its impact
on price—will be subject to the criminal cartel offences. However, the ACCC claims
that it will continue to use its judgment as to whether to refer matters to the
DPP. Further, it is then up to the DPP whether it takes the matter to court. As
Mr Brian Cassidy, Chief
Executive Officer of the ACCC, told the committee:
In terms of a doctor with a rostering
arrangement—and I might say, historically, we have been very favourably
inclined to rostering arrangements particularly as far as doctors are
concerned, and we have guidelines to that effect—...even if we decided to pursue
that criminally, and I would have to say to you that I think that there is very
little prospect that we would, then quite separately the Director of Public
Prosecutions, using those criteria which are specified in the Commonwealth’s
prosecution policy, has to reach his own separate decision that there is
something there that is worth pursuing criminally.[40]
3.40
Mr Gregson added his own assurances:
...the ACCC is unlikely to be rushing
off to court either civilly or criminally without identifying exactly what the
issues are and whether indeed there is detriment there to the Australian
community. So it should not be assumed that the ACCC will simply launch into
court proceedings if there are some of those unintended consequences. I might
also emphasise what Mr Cassidy has said here, which is that in the majority of
these arrangements, and it is a little different in the joint ventures, the
goalposts are not significantly changing and, in many cases, what is prohibited
under the new provisions will be prohibited currently. So, with the queries we
have had in relation to doctors and in relation to franchising, there should
not be a mad rush to the authorisation table in that, if there are concerns,
they should be present now. The thought that, again, these would somehow be
elevated into a criminal sanction is perhaps not the case.[41]
3.41
This noted, there is concern that there
could be no guarantee for the doctors in the case mentioned above that the ACCC
would not pursue the matter criminally. As Mr Speed told the committee:
I think having faith in them [the
ACCC], or the DPP, to the extent that the laws are not sufficiently
prescriptive is an error. It is an error (a) in having faith in them and (b) in
putting laws out there that have sufficient clarity such that I know when a
doctor comes in to see me and says, ‘Can we do this or can we not?’ I can say
more than, ‘I hope you can because I hope the ACCC will go that way or I hope
the DPP will go that way.’[42]
3.42
Speed and Stracey elaborated on
these concerns in their submission:
In the future, with a change in
personnel or attitude, perhaps as a result of pressures to get "good press",
to get "good results", to generate "wins" and to cut costs,
it is inevitable that the ACCC's ability to justly and fairly make decisions—as
to what conduct is offensive, what conduct justifies a civil penalty and what
conduct deserves a criminal sanction—will be compromised. Rather than putting
the ACCC in this impossible position of being the investigator, prosecutor and
judge the Parliament should itself decide, and concisely prescribe, which
conduct, of that which technically infringes the current proposed provisions,
does not warrant prosecution, which conduct is more serious and warrants the
imposition of civil penalties and which conduct is very serious and warrants
criminal prosecution.[43]
3.43
In the absence of a defence
written into the legislation or tighter drafting of the legislation, the only
certainty the doctors could secure against prosecution is through an ACCC
authorisation. As Treasury noted:
Depending on the nature of the
agreement—the doctor is probably a good example—people can seek authorisation.
That is a separate exception under the law and that is carried over into the
cartel. So in relation to what those doctors are doing at the moment they can
continue to get certainty by continuing to do that same activity in relation to
seeking an authorisation from the ACCC.[44]
3.44
Mr Cassidy assured the committee that:
...if parties to a rostering
arrangement were feeling uneasy, our authorisation process can be quite quick,
and, once we get the application, we can decide to grant interim authorisation
which gives every protection while the authorisation process is being gone
through.[45]
Joint venture authorisations
3.45
In terms of a joint venture
defence, the ACCC emphasised that the bill provides persons with the capacity
to seek authorisation from the ACCC if they wish to engage in coordinated
activity without legally binding agreements and in circumstances not involving
joint production or supply.[46]
This drew a sharp rebuke from the Shopping Centre Council:
...that joint venturers can seek
authorisation for coordinated activity not specifically contained in a
contract, is impractical and, quite frankly, absurd. Is it seriously suggested
that every joint venture in Australia now having to lodge an authorisation to
the ACCC—and, by the way, having to lodge continuous applications for
authorisations—is a sensible and practical solution to this problem?[47]
3.46
Mr Speed also questioned the process:
It seems that we
are not asking for a provision that is particularly going to protect us or
solve the problem of a sham or ultralight joint venture. It seems strange that
we do not get the benefit of the defence upfront. Instead everybody in this
country that has a joint venture has to keep writing to the ACCC for
authorisations.[48]
3.47
Mr Dave Poddar, a partner at Mallesons, told the committee:
...the commission does a very good job
in its authorisation notification procedures, but we do not believe it is
appropriate to have a law which requires everyone to go to a regulator. It is a
retrograde step to receive a tick for this conduct. What should in fact occur
is that the conduct, if it is procompetitive, efficiency enhancing and to the
benefit of Australians, should not be subject to this legislation.[49]
ACCC guidelines
3.48
The Motor Trades Association of
Australia expressed general support for the bill, but urged the committee to
recommend that the ACCC issue guidelines on the administration of the new
provisions. It argued that these guidelines would assist all businesses to
understand how the Commission is to determine whether to pursue civil or
criminal proceedings.[50]
The other point I will make is that the
commission needs to issue the guidelines. We often find, as a trade
association, that our interpretation may not end up being the statutory or
official interpretation, so the guidelines are needed as a starting point from
which we can draw down and prepare our educative materials... We do not think
the job is finished until the commission prepares guidelines following passage
and royal assent.[51]
3.49
Mr Cassidy made the following comment indicating the ACCC do
plan on releasing guidelines:
The other thing I would say is that we
have a whole range of guidelines in the public arena and I can well envisage
that we will be putting out guidance on our approach to the criminal bill,
assuming it is passed by parliament. In doing that, we will seek to provide as
much guidance as we can.[52]
This issue is
revisited in chapter 4.
The proposed Memorandum of Understanding
3.50
The Law Council of Australia
argued in its submission that the proposed Memorandum of Understanding (MOU)
between the ACCC and the Commonwealth Director of Public Prosecutions (CDPP) is
inadequate. Specifically, it argued that the factors upon which the ACCC was to
base its decision to refer a matter to the CDPP (and by the CDPP in determining
whether to prosecute) offer insufficient guidance to the business community as
to what constitutes a cartel offence. However, in the Council's opinion, these
factors do not make clear the line between criminal and civil treatment. The
Law Council recommended that the MOU should specify that one of the factors
prompting action should be a minimum percentage of the value of affected
commerce.[53]
Summary
3.49 There is unanimity that Australia
should have criminal offences and penalties for cartel conduct. A gaol term is
an effective deterrent against business people who would otherwise deliberately
conspire to raise prices and/or restrict supply. Criminal penalties for cartel
conduct also move Australia into line with its leading trading partners in
comparable jurisdictions, which is important to deter transnational cartel
activity. Fundamentally, the argument against this bill is that it does not
address the critical issues of what constitutes a criminal cartel offence. and
some argue it will cast the net too widely. Ordinary commercial activities, which
inadvertently restrict the supply of goods or services, may attract a criminal
penalty. But the decision to refer a matter to the DPP will ultimately rest
with the ACCC, which in itself creates uncertainty.
3.51
However the counter argument, put
by Treasury and the ACCC, is of the difficulty delineating between civil and
criminal cartel conduct. A price fixing case may not be referred to the DPP
because its intent and impact may be insufficient to secure a prosecution and may
not warrant a gaol term. While it is desirable to have certainty in determining
which cases will and will not attract a criminal cartel investigation, it is
very difficult to legislate to this effect. The bill must therefore be seen as
providing the ACCC with the power to refer a matter for criminal prosecution
while retaining flexibility for it to determine each case on the specific
circumstances.
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