ACCC wins some ACCC loses some Law Reporter

Friday, 01 June 2001


    When the ACCC has persuasive evidence, companies tend to co-operate rather than fight.

    The Australian Competition and Consumer Commission has a fairly aggressive attitude towards price fixing and other per se breaches of the Trade Practices Act. But in the past month or so it has shown that it cannot win all cases – and sometimes picks the wrong cases to pursue. When it does hit the right note, however, it usually achieves positive results – in particular persuading people that breaches of the price fixing provisions of the TPA will not pay. The ACCC most recently has successfully brought price fixing and market sharing allegations against Alstom Australia Ltd with penalties totalling $7 million being imposed, while the company's managing director was fined $150,000 for his involvement. The ACCC alleged that Alstom, together with other companies, had engaged in cartel conduct within the Australian transformer industry. Alstom admitted its involvement and co-operated fully with the ACCC in pursuing its inquiries. The managing director of Alstom had apparently not met or talked with competitors. But he did admit that his senior managers had occasionally made him aware that the company was involved in such conduct.

    In cases such as this where the ACCC has fairly persuasive and conclusive evidence, it is usual for companies to co-operate with the ACCC rather than fight the case. A company will usually try to negotiate penalties and that is what happened in this case. Alstom and the ACCC agreed to approach the court together on the question of penalties. Finkelstein J in the Federal Court in assessing the penalties made reference to the importance of compliance: "When the contraventions occurred, Alstom did not have a trade practices corporate compliance program [in place] and did not provide its executives, employees and other representatives with trade practices education or training. Still, the executives engaged in the contravening conduct covertly and clandestinely, with full knowledge of its illegality." (at para 22) In referring to the level of penalties that have been imposed by the court for breaches of the TPA in the past, Finkelstein J referred to other cases and again noted: "If general deterrence is the principal object of imposing a penalty, the number of cases that still come before the court, and the seriousness of the conduct that is involved in some of them, suggests that past penalties are not achieving that object. For a penalty to have the desired effect, it must be imposed at a meaningful level. Most antitrust [that is trade practices] violations are profitable. Accordingly, the penalty must be at a level that a potential offending corporation will see as eliminating any prospect of gain." (at para 13)

    The comments made by Finkelstein J are interesting. Under Australian law it is not yet possible for representative actions to be run by the ACCC on behalf of consumers who may have suffered as a result of any price-fixing arrangement and to recover the profits gained. Individual consumers (whether they are companies or not) may seek damages for breaches of the legislation, but they must establish the relevant breach themselves in separate litigation. Co-operation in this case was important. It led to the penalties sought by the ACCC being much lower. The ACCC agreed that the company had co-operated with it in bringing the case to the court and not defending it. The maximum penalty is $10 million for each offence and $500,000 for each contravention which may be engaged in by individuals involved in corporate management or as corporate officers. It is interesting to note that the ACCC discontinued its prosecution of two high profile cases against Video Ezy for alleged breaches of the GST legislation and the banks for alleged price fixing in relation to interchange fees involving credit cards. No undertakings were provided by the banks to the ACCC in their case, so one can only assume that the ACCC did not have a strong case (and the banks will argue that the case should never have been brought). In fact, the ACCC had to seek leave from the court to discontinue the proceeding. While the Reserve Bank of Australia has designated the credit card system, thus re-introducing some form of re-regulation, that is a far cry from saying there is a breach of the law. While some undertakings were provided in the Video Ezy case, these were nominal. The result again suggests that the ACCC had a rather weak case. But these results should not lead companies into a false sense of security.

    This is particularly relevant with the Commonwealth Criminal Code to become effective at the end of this year. Breaches of trade practices law and other laws will be easier for regulators to establish, thus making it even more important than ever that corporate compliance programs are put in place. Now is the time to ensure that your company has in place an appropriate trade practices compliance program and other compliance programs to ensure it is complying with relevant Commonwealth or State legislation.


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