01 July 2008
Key Points:
Regulators here and abroad continue to seek out more constructive methods of detecting and prosecuting cartel participants.
As an indication for what lies ahead if Australia adopts criminal cartel laws, three UK businessman have been sentenced to up to three years imprisonment after pleading guilty to committing cartel offences under the relevant provisions of the Enterprise Act 2002.
On 11 June 2008, the former executives involved in the global marine hose cartel were sentenced to jail, marking the first criminal sanctions for competition law violations in the UK. The findings have particular significance for Australia, with the new Federal Government currently in the process of seeking to introduce formal criminal cartel legislation sometime this year.
The UK Marine Hose case
The UK Office of Fair Trading (OFT) in May 2007 announced that it was investigating a worldwide conspiracy between a number of company executives to rig bids, fix prices and allocate markets in the supply of marine hoses, which are used to transport oil between tankers and storage facilities.
This was met by the US Department of Justice (DOJ) announcing at the same time the arrest of executives from countries including the UK, France, Italy and Japan. The men were arrested in the United States following a covert recording of a cartel meeting in Houston.
Following on from the investigation, the DOJ confirmed on 12 December 2007 that three UK nationals arrested had agreed to plead guilty to participating in a conspiracy to rig bids, fix prices and allocate market shares of marine hoses sold in the US in direct violation of the Sherman Act. The three men pleaded guilty to the US charges and then, in a watershed plea agreement with the DOJ, flown back to the UK to plead guilty to the UK offences, convicted and ordered to serve the sentences handed down by the UK court.
Sentencing
In accordance with the US plea deal, if the UK courts were to sentence the men to shorter sentences in terms of the UK vis-à-vis the US, which was between 20 to 30 months each, they would have to return to the US to serve out the balance of the sentence shortfall in the US prison system. The result on 11 June 2008 was Crown Court Judge Geoffrey Rivlin handing down sentences for former Dunlop Oil and Marine executives Bryan Allison and David Brammer, along with former consulting company owner Peter Whittle, in the form of jail terms which exceeded those imposed by the DOJ. This will enable all three men to remain in the UK prisons rather than returning to the US for incarceration.
The international aspect
The Marine Hose Case demonstrates a high level of co-ordination and dialogue between competition regulators to co-operate in investigating international cartel cases. In particular, the agreement in principle between the authorities in the US and UK is a successful example of international cartel prosecutions absolving any extradition issues. The Marine Hose decision is also interesting in that it demonstrates that people found guilty of cartel offences won't always be required to serve out the sentence in the US when under investigation with the DOJ. Again, this turns on the competition regulators' level of commitment to co-operation.
Cash rewards for cartel detection
The OFT in the UK has taken the unique step in offering financial rewards for information which helps in the detection and investigation of cartels and which, in appropriate cases, leads to the fining of the companies and the criminal prosecution of the companies involved. A press release dated 29 February 2008 announced the policy under which it will pay financial incentives of up to £100,000 in return for information which helps it to identify and take action against illegal cartels. Currently, the ACCC offers no comparable financial reward for informants of cartel activity in Australia, though it does exist in some other jurisdictions (eg. The Korea Fair Trade Commission (KFTC) in South Korea).
Conclusion
The outcome in the Marine Hose Case is interesting, but is not conclusive of anything in regard to the Australian attempts to criminalise cartel activity. Some of the areas that potentially still require clarification in Australia include the distinction between civil and criminal conduct (currently, the latter is "serious cartel conduct"), resolving the use of a "dishonesty element", and dealing with immunity and liability attributions in relation to the ACCC and/or the Department of Public Prosecutions.
The Australian Commonwealth Treasury called for and received a number of submissions in relation to the draft Exposure Bill that was released in early 2008, with the Bill yet to be introduced to Parliament (we looked at the draft Bill here). It will be interesting to see whether these comments will be incorporated into an amended Bill to tabled in Parliament this year.
In the meantime, the regulators in Australia and abroad continue to seek out more constructive methods of detecting and prosecuting cartel participants. This signifies important progress as alternative deterrents must be sought to the traditional financial penalties.
