Serious cartel activity and challenges with successful prosecutions: trends in criminal cartel cases

By Michael Corrigan, Sunita Kenny and Lindsay Norton
23 Dec 2021

The ACCC has shown that it will vigorously pursue criminal cartel cases – placing a high emphasis on deterring, detecting and dismantling cartels that have the potential to harm Australian consumers. Proceedings have been brought against companies and senior managers in relation to a number of cartel arrangements in recent years, but significant challenges persist for regulators in successfully prosecuting these cases.

Since criminal liability was introduced for cartel conduct in 2009, Australia has adopted a dual-track mode of enforcement where cartel cases can be pursued on either a criminal or civil penalty basis. Here we consider the recent trends and Australian experience with criminal cartel enforcement.

Criminal vs civil cartel enforcement

While most cases continue to be pursued by the Australian Competition and Consumer Commission (ACCC) on the civil track, the ACCC will refer "serious" cases for possible criminal prosecution to the Commonwealth Director of Public Prosecutions (CDPP). ACCC Policy indicates cartel cases will be considered to be "serious" if three tests are satisfied:

  • the alleged conduct caused, or could cause "large-scale or serious" economic harm,
  • there is sufficient evidence to support the criminal standard of proof, and
  • criminal prosecution would be in the public interest.

To date, criminal cartel prosecutions have had mixed results. The CDPP faces a higher standard of proof, longer time frames and many more risks of pre-trial challenges to the manner in which the case has been assembled. Evidence obtained through the ACCC's long-standing immunity process is also likely to face many more challenges in a criminal prosecution.

Image cartel enforcements 

Since 2013 (NYK, the first criminal cartel proceeding):

  • the CDPP has initiated 8 criminal cartel prosecutions (on referral from the ACCC); and
  • the ACCC has itself initiated 18 civil cartel cases.

Of the eight criminal cartel prosecutions to date the CDPP has been successful in four cases where a guilty plea was entered. The most recent guilty pleas were submitted in the prosecution of Alkaloids Australia Pty Ltd for price fixing, bid rigging and market allocation cartel arrangements with foreign competitors.

There have been two defended cases, one resulting in an acquittal (Country Care) and one against a construction union in which the prosecution was withdrawn (CDPP v The Country Care Group Pty Ltd (No 2) [2019], in which the parties were acquitted, and CDPP v CFMEU, in which the proceedings were withdrawn).

The two remaining prosecutions remain before the courts:

  • CDPP v Citigroup Global Markets Australia Pty Ltd (No 5 – Indictment) [2021] (the Banks Cartel proceedings) is listed for trial in June 2022; since the original indictment, charges against two parties have been dropped, the remaining charges have been reduced and there are ongoing and multiple challenges to the indictments; and
  • the CDPP's proceedings against Vina Money Transfer Pty Ltd. The outcome in this case is pending: while 2 of the 5 individuals submitted guilty pleas in November 2021, the remaining 3 individuals are defending the case.

This limited experience indicates the significant challenges for criminal prosecutions for cartel conduct without a guilty plea. In defended cases, the likelihood of a successful prosecution is uncertain.

Challenges with pursuing criminal cartel cases

Justice Wigney's observations in the Bank cartel proceedings make it clear that the successful prosecution of criminal cartel proceedings is a challenging exercise. Justice Wigney described the CDPP's form of indictment in CitiGroup and Deutsche Bank (and their executives) as a "complete shemozzle", with serious defects due in part to the complexity of the cartel provisions in the Competition and Consumer Act 2010 (Cth).

In that matter, the original indictment contained 42 charges and was found to be defective. In August 2021, the CDPP submitted a new indictment with 26 charges and further particulars. However Justice Wigney considered that the case still failed to spell out or "particularise" the essential factual ingredients of the alleged offences.

In acknowledging the technical complexities of the case, Justice Wigney likened the cartel offence provisions in the Act to a "cryptic crossword", unsuited to criminal proceedings. However the combination of technical complexity and public interest considerations provided the basis for Justice Wigney to allow the CDPP a further opportunity to reformulate the charges.

This feedback/criticism indicates a closer appreciation of the challenges involved, and is likely to sharpen the approach of regulators and prosecutors in dealing with these challenges in the future.

Consequences of criminal cartel conduct

Criminal cartel charges brought by the CDPP can apply to companies and to individuals.  For individuals, the maximum criminal penalty is 10 years’ imprisonment and/or a fine of A$420,000 for each offence.  Individuals may also be subject to orders disqualifying them from managing a corporation, and community service orders.

The CCA prohibits individuals and companies from making or giving effect to a contract, arrangement or understanding with competitors that have the purpose, effect or likely effect of fixing, controlling or maintaining prices for goods or services; or have the purpose of:

  • preventing, restricting or limiting production, supply or capacity of any party;
  • allocating customers, suppliers or territories between the parties; or
  • bid-rigging (agreeing who will submit a bid in a tender, win a tender and/or at what price).

The Criminal Code Act 1995 (Cth) requires additional requirements to be met in order to prosecute a criminal cartel offence, including the need to establish certain fault elements, prove the offence beyond reasonable doubt; and, depending on the circumstances, to obtain a unanimous jury verdict.

For companies, the maximum fine for each criminal cartel offence is the greater of:

  • A$10 million;
  • three times the total benefits that are attributable to the offence; or
  • if the benefits cannot be determined, 10% of the corporate group’s annual turnover relating to the supply of goods and services in Australia in the preceding 12 months.

The ACCC has also recently issued warnings about its focus on cartel conduct in procurement by the public sector.

The current (and future) landscape for cartel enforcement in Australia

The challenges faced by regulators and prosecutors in bringing criminal cartel proceedings have been well publicised.

Key takeaways from the Australian experience to date include:

  • we can expect to see the ACCC and CDPP adapt and modify their processes as they learn from their experience in the Bank case and other cases;
  • the ACCC's fact-gathering exercises including processing of immunity claims can be expected to be more rigorous and testing for any immunity applicant;
  • the long delays in pre-trial case management, are a feature which is likely to add to the complexity of the task facing the prosecution, as witness memories may fade over the years before a case reaches a trial ( a factor reported in the abandoned construction union case);
  • similarly those delays can be punishing and create significant uncertainty, defence cost burdens and concerns for defending individuals; and
  • therefore the importance of the ACCC decision whether to refer a case for criminal or civil action will likely continue to be a critical decision point, with potentially enormous consequences for all parties involved, regardless of the kind of conduct in question.

The authors acknowledge research undertaken by Minnie Wu, Annie Achie, Alana Dunn and Karunyah Paskaran.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.