Chapter 4
The committee's view
4.1
This chapter presents the committee's views on the three issues
of contention discussed in Chapter 3: the lack of a definition of, and
mechanisms to distinguish, criminal cartel conduct; the scope of the bill's
joint venture exceptions; and the resulting discretion that the bill
potentially gives to the ACCC in determining which alleged cartel activities to
pursue criminally.
The threshold issue—what is criminal cartel conduct?
4.2
Chapter 3 noted the ACCC's doubt as to whether there is a
mechanism that could be established in law that would properly guide a
regulator to pursue (from the outset) either a civil or a criminal cartel
investigation. Both the ACCC and Treasury emphasised that this issue could only
be settled based on the facts of each particular case. Indeed, Treasury
emphasised the importance of giving the ACCC flexibility to investigate a
matter on civil grounds, but with the option of going down the criminal path
where appropriate.
4.3
The bill certainly provides this flexibility. The question is whether it provides too much, to
the point where the business community and the public at large could not be
sure what will—and what should—guide the ACCC in pursuing criminal cartel
investigations.
4.4
The committee recognises that some measure of clarity and
certainty is important if the proposed legislation is to be an effective
deterrent against cartel activity, without deterring ordinary day-to-day
commercial transactions. The bill's undisputed strength is in establishing
criminal offences and penalties for cartel conduct and providing the regulator
with the flexibility needed to successfully prosecute such cases. Its weakness
is this flexibility creates a level of uncertainty. Where two or more competing
businesses enter into an agreement which restricts the supply of a good or
service there is a view they are not always acting as an illegal cartel, but
nevertheless they are potentially subject to criminal sanctions. The difficulty
is that on the basis of the provisions in the bill, it is unclear where the
line is drawn between non cartel behaviour, and civil and criminal offences.
4.5
The committee considers the proposal of defining criminal conduct
on the basis of the effect that the activity has on price is too restrictive as
the only indicator of criminal conduct. The committee agrees that a more focussed
definition of the factors to be considered when prosecuting criminal cartel
conduct would clarify for the business community, the ACCC, the DPP and the
courts whether or not a criminal offence applies. However cartel conduct may
not result in an immediate increase in price. For example if two competitors
deliberately collude to fix prices below the competitive level to squeeze out
another competitor, the primary outcome may be a reduction in price.
4.6
Another difficulty with this approach is that it elevates the
importance of 'price fixing' in determining a criminal offence to the exclusion
of the three other elements in proposed subsection 44ZZRA. The ACCC told the
committee that an instance of 'price fixing' would not automatically be treated
as a criminal offence. Depending on the knowledge of the parties involved
and/or the minimal effect that the conduct might have, the ACCC may choose to
pursue a civil offence. It was not confident that legislators could construct
any basis upon which to delineate between civil and criminal offences (see
paragraph 3.5).
4.7
The committee supports the government's decision to omit a
'dishonesty' clause from the bill. A similar clause was inserted into the United
Kingdom's Enterprise Act 2002 and has since been widely blamed
for the lack of successful criminal cartel convictions. It is difficult to
persuade a jury that an action is 'morally reprehensible', as opposed to merely
'intended'. The bill's proposed requirement of knowledge or belief that a
contract contains a cartel provision is a lower threshold and one which a jury
is more likely to comprehend.
4.8
The committee is concerned that any attempt to legislate what it
is—in all cases—that constitutes a criminal cartel offence risks restricting
the judgment of the regulator. The ACCC's case-by-case judgments are important
because they are contextual and weigh various factors, one against others. It
is the ACCC's judgment that will authorise a doctors' rostering arrangement which
does not raise prices or restrictive agreements between franchisors and
franchisees.[1]
This flexibility is valued by both the government and the ACCC.
4.9
Accordingly, the committee does not support an attempt to delineate
between civil and criminal cartel offences. Instead, it proposes the release of
detailed guidelines by the ACCC on passing of the legislation providing a
non-exhaustive list of factors so that businesses could have an understanding
of the kind of behaviour that would have the potential for prosecution. These
factors should be based on those listed in the proposed MOU between the ACCC
and the DPP. Having these factors clearly listed in comprehensive guidelines
should provide some certainty.
4.10
The committee emphasises the importance of the ACCC publishing
guidelines on what is and is not acceptable activity in relation to cartels. It
agrees with the Motor Trades Association that the ACCC should publish
guidelines on how it will administer the new provisions. These guidelines
should refer to those factors listed in the proposed Memorandum of
Understanding between the ACCC and the DPP.
Recommendation 1
4.11
The committee recommends that, following the passage of this
bill, the ACCC issue guidelines on those factors that are, in all the
circumstances, most likely to lead it to refer an activity to the DPP as a
possible criminal cartel offence.
Joint venture exceptions
4.12
Chapter 3 noted the bill's joint venture exceptions have
attracted criticism from those who claim they are too narrow, while others fear
that they are too generous and potentially often sanctuary for cartelists. The
committee believes that the bill strikes an appropriate balance.
4.13
On the one hand, the bill removes the current caveat in section
76D that the joint venture activity does not have the purpose, effect or likely
effect of substantially lessening competition. On the other, it focuses the new
defence on a joint venture formed through a contract—written or verbal—and
focused on the production and supply of goods and services.
4.14
The committee acknowledges the concerns
of the Shopping Centre Council that looser arrangements extending from a
joint venture contract should be exempted from the cartel provisions. It notes,
however, that both the ACCC and Treasury have indicated that if an arrangement
or understanding is 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.
4.15
The committee believes the government is right to direct its
attention, in the context of criminal cartel activity, to joint ventures that
are formed through non‑contractual means. The Canadian experience has
been that cartel activity is more common among joint ventures that operate
through 'arrangements' or 'understandings' rather than through a contract.
4.16
The committee does acknowledge that the
bill is potentially a strong inducement for those joint ventures that are
currently operated through an arrangement or understanding to be reformed as a
contract and for new joint ventures to set up a written contract. It is expected
that the Government will assess the impact of this bill when it is in operation
to ensure that it does not unduly restrict business activities.
The ACCC's discretion
4.17
It is important that the ACCC develop and publicise its own
guidelines on the factors most likely to lead it to refer an alleged cartel
activity to the DPP for investigation. In the absence of a clear mechanism with
which to delineate civil from criminal cartel activity, these measures are key
to allaying the business community's concerns about the ACCC's broad remit
under the proposed bill.
4.18
That said, the committee does not agree with the concerns of many
witnesses that the bill would allow the ACCC to pursue innocuous (and
previously legal) activities. The claim that the bill would give the ACCC too
much discretion in determining the pursuit of criminal cartel cases is
overstated. The ACCC currently exercises discretion on a range of TPA-related
matters which require it to investigate activities and assess possible breaches
of the Act based on all the relevant circumstances. The committee sees no
reason why it could not ably do the same in relation to criminal cartel
investigations. Moreover, the ACCC is only one part in the process of a
criminal cartel prosecution. The matter is subsequently investigated by the DPP
and only then would it go before a judge and jury.
Recommendation 2
4.19
The committee recommends that the Senate pass the bill.
Senator Annette Hurley
Chair
Navigation: Previous Page | Contents | Next Page