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19 Jun 2009

Are you ready for the new Cartel Act?

 

The Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 has now been passed by Federal Parliament and will introduce significant changes to trade practices law in Australia. In this Alert, we look at the things that you should do to ensure you do not break the law and are ready for the new criminal regime. This includes the ACCC's expanded investigatory powers, and immunity for cartel whistleblowers.

The Act introduces:

  • new criminal cartel offences, with 10 year jail terms, for cartel conduct such as price fixing, market sharing, and bid rigging, where the conduct is carried out with "knowledge or belief" that it involves cartel conduct, and
  • two new civil offences for making or giving effect to a contract, arrangement or understanding with a competitor which either:
  • restricts or limits a party's production or capacity to supply services, or
  • controls, governs or affects the making of competitive bids in a tender.

The new offences will come into force 28 days after the Act receives Royal Assent, which is expected within the next few days.

Are you ready?

We suggest 9 simple questions should be on your checklist:

1. Do you have a current compliance program, on which directors and senior management can safely rely?

2. Have you reviewed your trade practices compliance program (including compliance manuals, training slides and any operational procedures relating to agreements with competitors) to see if it reflects the Act?

  • The introduction of criminal offences, punishable by imprisonment, will increase the duties of directors to be vigilant about inquiries into conduct which may suggest or imply some collusion or cartel conduct is occurring with a company's competitors. An important element of this is ensuring that all employees and officers fully understand the type of conduct that will be caught by the new offences and the possible implications of a breach.

3. Is your company currently involved in, or proposing to engage in any joint ventures with firms that otherwise could be competitors?

  • The Act will narrow the joint venture defence so that it only applies to joint ventures that are (i) formalised in a contract (or at least "intended and reasonably believed to be"); and (ii) established for the supply or production of goods or services. As such, certain arrangements which were previously legal due to the operation of the joint venture defence may be prohibited under the Act.

4. Have you reviewed the company's existing distribution and sales arrangements to ensure that they do not fall foul of the new law?

5. Do any of your staff regularly participate in industry or trade associations or other associations with competitors? Do those staff understand the new law?

6. Does your company engage in competitive bidding for tenders? Are there circumstances where you may form a bidding consortium with third parties that might otherwise bid against you?

  • Under the Act: "bid rigging" and production sharing arrangements will be strictly illegal. Those involved in such arrangements may benefit from a briefing about the new rules.

7. Does your company have any tolling or other cross-supply arrangements with a competitor for the production of any goods or services? If yes, we suggest these arrangement be reviewed to ensure the company does not inadvertently breach the Act.

8. Have you considered your response strategy in the event that you become aware that your corporation may be involved in cartel conduct?

  • Company directors and employees who suspect that their company is engaged in cartel conduct will be forced to make some difficult decisions- seek immunity by reporting the cartel, cease engaging in the conduct, and modify the company's behaviour or run the risk of being criminally prosecuted. These decisions will be even more difficult where there is a mere suspicion but no proof that the company is part of a cartel. In most circumstances, there will not be much time to consider the company's options as immunity is only available to the applicant who is first in time to report the conduct and offer to co-operate with the ACCC

9. Do your staff know what to do in the event the ACCC comes knocking to investigate alleged cartel conduct?

  • The Act expands the ACCC's existing search and seizure powers to include the power to obtain telephone interception warrants and use intercepted material in relation to cartel investigations. This is in addition to the ACCC's power to conduct raids to search for and seize documents and obtain production of documents, and to examine employees on oath.
  • Do you know the ACCC has a "first in" amnesty policy for cartel confessions?

These matters are a simple checklist to identify what steps you may take to ensure that you are ready for the Act. If you would like to discuss these matters further, or how we can help you to get your business ready for the criminalisation of cartels, please do not hesitate to contact us.

Related Knowledge

Related Knowledge

  1. Price signalling

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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.