Serious Cartel Activity and the Challenges of Successful Prosecutions: Trends in Criminal Cartel Cases
The ACCC has shown that it will vigorously pursue criminal cartel cases – with a focus on deterring, detecting and dismantling cartels that can harm Australian consumers. Lawsuits have been filed against companies and senior executives in a number of cartels in recent years, but significant challenges persist for regulators to complete these cases.
Since criminal liability was introduced for cartels in 2009, Australia has adopted a two-track mode of enforcement in which cartel cases can be pursued on the basis of a criminal or civil sanction. Here we take a look at recent trends and the Australian experience in cracking down on criminal cartels.
Criminal or civil application of cartels
While most cases continue to be prosecuted by the Australian Competition and Consumer Commission (ACCC) on the civil route, the ACCC will refer “serious” cases for possible criminal prosecution to the Commonwealth Director of Public Prosecutions (PPDC). ACCC policy states that settlement cases will be considered “serious” if three tests are met:
- the alleged behavior has caused or could cause economic harm “on a large scale or serious”,
- 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 deadlines and much more risk of pre-trial challenges as to how the case was put together. Evidence obtained through the ACCC’s long-standing immunity process is also likely to face many more challenges in a criminal prosecution.
Since 2013 (NYK, the first criminal cartel proceeding):
- the CDPP initiated 8 criminal prosecutions for cartels (on referral to the ACCC); and
- ACCC itself has initiated 18 civil cartel cases.
Of the eight cartel prosecutions to date, the CDPP has been successful in four cases where a guilty plea has been entered. The most recent guilty pleas were filed in Alkaloids Australia Pty Ltd’s lawsuit for price fixing, bid rigging and market sharing arrangements with foreign competitors.
There have been two defended cases, one resulting in an acquittal (Country Care) and the other against a construction union in which the lawsuits were withdrawn (CDPP v The Country Care Group Pty Ltd (No 2) , in which the parties were acquitted, and CDPP v CFMEU, in which the proceedings were withdrawn).
The two remaining lawsuits remain before the courts:
- CDPP v Citigroup Global Markets Australia Pty Ltd (No 5 – Indictment)  (the Banks Cartel proceedings) is listed for trial in June 2022; since the initial indictment, the charges against two parties have been dropped, the remaining charges have been reduced and the indictments are the subject of multiple challenges; and
- the CDPP proceedings against Vina Money Transfer Pty Ltd. The outcome of this case is pending: while 2 of the 5 individuals pleaded guilty in November 2021, the remaining 3 individuals defend 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 in prosecuting criminal cartel cases
Judge Wigney’s observations in Bank cartel proceedings make it clear that successful prosecution of criminal cartel proceedings is a difficult exercise. Judge Wigney described CDPP’s form of indictment of CitiGroup and Deutsche Bank (and their executives) as a “complete scam”, with serious flaws due in part to the complexity of the cartel provisions in competition law and consumption of 2010 (Cth).
In that case, the original indictment contained 42 counts and was found to be flawed. In August 2021, the CDPP filed a new indictment with 26 counts and other details. However, Judge Wigney ruled that the case still had not clarified or “clarified” the essential factual elements of the alleged offenses.
Recognizing the technical complexities of the case, Justice Wigney likened the provisions of the Cartel Offenses Act to “cryptic crosswords”, unsuitable for criminal prosecution. However, the combination of technical complexity and public interest considerations allowed Judge Wigney to give the CDPP a new opportunity to reformulate the charges.
These comments / critiques indicate a better appreciation of the challenges involved and are likely to refine the approach of regulators and prosecutors to these challenges in the future.
Consequences of Conducting a Criminal Cartel
Criminal cartel charges brought by the CDPP can apply to businesses and individuals. For individuals, the maximum criminal penalty is 10 years imprisonment and / or a fine of A $ 420,000 for each offense. Individuals may also be subject to orders excluding them from running a business and community service orders.
The CCA prohibits individuals and businesses from entering into or giving effect to any contract, arrangement or arrangement with competitors which has the object, effect or probable effect of fixing, controlling or maintaining the prices of goods or services; or have for goal:
- prevent, restrict or limit the production, supply or capacity of any party;
- allocate customers, suppliers or territories between the parties; Where
- Bid-rigging (agreeing who will 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 conspiratorial criminal offense, including the need to establish certain elements of fault, to prove the offense beyond all reasonable doubt; and, depending on the circumstances, obtain a unanimous jury verdict.
For companies, the maximum fine for each criminal cartel offense is the higher of the following values:
- 10 million Australian dollars;
- three times the total benefit attributable to the offense; Where
- if the benefits cannot be determined, 10% of the annual turnover of the group of companies relating to the provision of goods and services in Australia during the preceding 12 months.
The current (and future) landscape of cartel enforcement in Australia
The difficulties faced by regulators and prosecutors in prosecuting cartels have been widely publicized.
The main takeaways from the Australian experience to date are:
- we can expect to see ACCC and CDPP adapt and modify their processes as they learn from their experiences with the Bank and other cases;
- ACCC’s fact-gathering exercises, including the processing of immunity requests, should be more rigorous and more taxing for any immunity claimant;
- long delays in dealing with cases before trial, is a feature that is likely to add to the complexity of the prosecution’s task, as witness memories can fade over the years before a case reaches a lawsuit (a reported factor in the abandoned construction union case);
- similarly, these delays can be punitive and create significant uncertainty, financial burdens of defense and concerns for the defense of individuals; and
- therefore, the importance of the ACCC’s decision to refer a case for criminal or civil action is likely to continue to be a critical decision point, with potentially enormous consequences for all parties involved, regardless of the type. conduct in question.