18 June 2007
On 15 June 2007 the Australian Treasurer ordered an inquiry by the ACCC into petrol pricing in Australia in response to widespread political and public debate about recent petrol prices in Australia being too high, and offshore price reductions being too slow to flow through to consumers.
Whilst that inquiry will involve yet another general review of the oil industry in Australia, the ACCC has taken the opportunity to advise the Federal Government that it believes that Australian cartel laws under section 45 of the Trade Practices Act may need to be tightened.
This follows the ACCC’s recent loss of the Geelong Petrol cartel case, known as Leahy Petroleum. While the ACCC is still deciding whether or not to appeal that decision, Graeme Samuel has flagged to the Federal Government that "consideration may need to be given by Government to issues designed to overcome the difficulties that the ACCC faced in that case and seems likely to face in future cartel cases. In summary, these issues relate to the definition of the conduct that would amount to a cartel offence under sections 45/45A of the Act and the ACCC's ability to satisfy the necessary evidentiary burden of proof".
Mr Samuel has indicated that he would be talking further to the Treasurer about these issues once he had obtained senior counsel's advice on the ACCC's prospects of an appeal in the Geelong case.
Why did the ACCC lose the Geelong case?
According to Justice Peter Gray, the evidence led by the ACCC in the Geelong pricing case did not prove there was any commitment by the local petrol retailers to follow each other’s prices, even if there was considerable communication between them about those prices and circumstantial evidence of closely related price rises:
"an essential element of an arrangement or understanding, whether in the abstract or as pleaded, in the form of a commitment or obligation to increase prices, did not exist."
The judge concluded that the circumstantial evidence presented by the ACCC did not allow an inference to be drawn to this effect either. He concluded that the situation was, by contrast, that each party to the alleged arrangement was free to do as it wished on every occasion price information was passed to it. As he concludes, an arrangement in which each party is free to do as it wishes is a creature unknown to section 45(2) of the TPA.
Is there a reason to change the law?
Proof of an "arrangement" or understanding" by parties can be difficult and subtle. This is not a new problem for the ACCC under the Act – it needs to show some common plan or meeting of minds was formed by the alleged cartel members, which governs their pricing or behaviour.
In the Apco Service Stations last year, the ACCC similarly lost a cartel case because of evidence accepting that one party had received communications about price rises from his competitors but retained his own discretion as to whether or not to follow an increase in price- and in a number of instances, he did not follow the "cartel pricing
In Apco, the High Court refused to allow the ACCC special leave to appeal on grounds designed to extend the reach of section 45:
"The decision of the Full Court of the Federal Court turned not upon any controversial view of the relevant provisions of the Trade Practices Act but upon the Full Court's view of the facts in the light of the case as pleaded and argued by the Commission. In light of the facts as found, the case does not raise any issues of law suitable to a grant of special leave to appeal. "
The interpretation of section 45, introduced in 1977, has become reasonably settled as a result of cases over three decades. Fundamentally the courts were saying in Apco and Leahy Petroleum that a cartel requires evidence of commitments to engage in fixing, controlling or maintaining prices by competitors and the Commission simply did not present sufficient evidence in those two cases.
Nonetheless the ACCC has seized the current debate over petrol prices as a way of looking to expand the law beyond that "settled" view.
While there must be doubt as to whether a compelling case for a change to the law has been demonstrated as a result of the Leahy Petroleum and Apco Service Stations decisions, one should watch this space. Some changes to assist the ACCC to ask the court to draw inferences from lineball evidence in cartel matters may be not too far away.
