ACCC 2022 In Review | Cartel conduct
With multiple failed cartel conduct cases and the withdrawal of several charges in proceedings, 2021 proved to be a challenging year for the ACCC. However, despite these setbacks, the ACCC found some major success in 2022. This included success with four individuals relating to the money remittance business, Vina Money, being convicted and sentenced for criminal cartel offences – marking the first orders for the incarceration of individuals since cartel conduct was criminalised in 2009. This success with criminal proceedings continued throughout 2022, with convictions secured against Alkaloids of Australia Pty Ltd (Alkaloids) and its export manager, Mr Christopher Joyce.
We also saw a flurry of activity in the final quarter of 2022, with the ACCC bringing new civil proceedings against Ashton Raggatt McDougall Pty Ltd (ARM Architecture) and its former managing director, Anthony John Allen and Qteq Pty Ltd (Qteq) and its executive chairman, Simon Ashton. In addition, the CDPP has brought new criminal cartel proceedings brought against Bingo Industries (Bingo) and Bingo’s former managing director and CEO, Mr Daniel Tartak and related proceedings against Aussie Skips Recycling and Aussie Skips Bin Services (together Aussie Skips) and Aussie Skips’ chief executive, Ms Emmanuel Roussakis. Finally, the end of 2022 saw a key development in civil cartel proceedings, with the regulator securing a judgment in the Federal Court against BlueScope Steel Limited (Bluescope) and its former general manager of sales and marketing, Mr Jason Ellis, with the final sentencing to be concluded in early 2023.
Cartel conduct remains an enduring high priority for the ACCC
Following the ACCC’s successful criminal prosecution in the Vina Money proceeding, Ms Cass-Gottlieb noted that,
“[W]e remain focused on deterring, detecting and dismantling cartels that have the potential to harm Australian consumers and competition in the economy… [W]e will continue referring serious cases of alleged cartel conduct to the CDPP for consideration for criminal prosecution. This case also shows that the links between the ACCC and AFP are increasing our effectiveness and ability to enforce cartel provisions.”
This focus was again emphasised following the Alkaloids sentencing in late 2022, where Ms Cass-Gottlieb observed that,
“Investigating serious cartels remains an important priority for us, because of the harm such anti-competitive conduct has on consumers, other businesses, and the economy as a whole.”
Key enforcement activity
Vina Money Transfer Pty Ltd & Ors
First individuals are sentenced under the criminal cartel law
On 9 June 2022, the ACCC had a major milestone with four individuals being sentenced for criminal cartel offences for the first time since the conduct was criminalised in 2009. As outlined in our ACCC 2021 Year in Review publication, criminal charges were brought against Vina Money Transfer and five individuals for price fixing in respect of the Australian dollar and Vietnamese dong exchange rate in April 2019 following a joint investigation between the ACCC and the Australian Federal Police. The charges related to exchange rates and transaction fees that were charged when sending money from Australia to Vietnam between 2011 and 2016, with the World Bank estimating that remittances totalled about $700 million annually.
The CDPP commenced proceedings on 3 August 2021 and an indictment was filed on 27 October 2021. On 9 June 2022, the Federal Court imposed a fine on Vina Money of $1,000,000 and sentenced former company secretaries and directors of Vina Money, Van Ngoc Le and Tony Le, and former company secretary and director of Hong Vina, Khai Van Tran and former shareholder of Hong Vina, Thi Huong Nguyen, to imprisonment varying between nine and two years and six months.
Despite the prison terms, they will not serve any time in custody as they were all released on recognisance orders requiring them to maintain good behaviour. In sentencing, the charges were ‘rolled up’ into a single charge with the effect that the repeated and ongoing nature of the offending increased the element of criminality in the eyes of the Court while avoiding duplicated charges. Non-publication orders were in place until the resolution of the Court proceedings against the fifth individual against whom the charges were withdrawn in early September 2022.
The CDPP highlighted in this case that the investigation began from accidentally intercepted communication between two of the offenders in an investigation unrelated to this case. This led Justice Abraham to conclude that the operation was not conducted covertly; however, the nature of cartel conduct cases was that they are nonetheless difficult to discover and, as such, due to “the nature of cartel offences…general deterrence is of particular importance”.
Justice Abraham also dismissed the proposition advanced by the defence that the defendants were unaware of the regulatory environment in which they were operating and the criminal status of their conduct. Significantly, she concluded that,
“…regardless of whether the offenders were aware that this conduct was a criminal offence, they were aware that the conduct was disadvantageous and adverse to customers….It was said that as a small company there was no company training, guidelines or compliance manual regarding anti-competitive conduct. However, the conduct itself was deliberate. I accept that was the circumstance in which the offence was committed, but as director of the company, Ngoc Le held certain responsibilities. Ignorance of the law is no excuse.”
The ACCC media release stated that during sentencing, Justice Abraham highlighted that,
“the need to deter those who may see possible penalty as a cost of doing business” and described cartel conduct as “evil”.
Ms Cass-Gottlieb added that the ACCC would “remain focused on deterring, detecting and dismantling cartels that have the potential to harm Australian consumers and competition in the economy”.
Alkaloids of Australia Pty Ltd
Longest sentence of imprisonment for an individual under criminal cartel laws
As outlined in our ACCC 2020 Year in Review and ACCC 2021 Year in Review publications, Alkaloids and its former Export Manager Christopher Kenneth Joyce, were charged with 33 criminal cartel offences under the CCA on 1 December 2020. The allegations extended over a period of nine years, beginning on 24 July 2009, when the criminal cartel laws first came into force in Australia. The CDPP alleged that the respondents engaged with other overseas suppliers of scopolamine N-butylbromide (SNBB), an ingredient in antispasmodic medications, to fix prices and rig bids for the supply of SNBB medications to manufacturers. The offending conduct involved six major manufacturers of SNBB, which collaborated to fix the price in such a way that particular supply agreements would go to certain manufacturers. It was also heard that participants would approach Mr Joyce to enforce the arrangement on other parties who did not comply.
Following guilty pleas and admissions in late 2021, a sentencing hearing took place before Justice Abraham on 5 September 2022. Alkaloids was convicted of three charges – two of giving effect to a cartel provision and one offence of attempting to make a contract, arrangement or understanding (CAU) containing a cartel provision and was fined a total of $1,987,500.
Mr Joyce was convicted of three charges and sentenced to an aggregate of 32 months imprisonment to be served by way of intensive community correction. He was also fined $50,000 and disqualified from managing corporations until 29 November 2027. Mr Joyce admitted to seven additional offences under the Trade Practices Act 1974 (Cth) (TPA) (in respect of conduct occurring before 2010) and the CCA.
The CDPP presented a course of conduct that brought about a significant financial benefit for Alkaloids, with that financial benefit and the continued existence of sales at the fixed prices demonstrating that the cartel had continued to achieve its objective of profiting from reduced competition in the marketplace.
The importance of general deterrence as a principal concern in the sentencing process for cartel conduct cases was stressed by Justice Abraham, and she emphasised that cartel conduct,
“like other ’white collar‘ offending is difficult to detect, investigate and prosecute successfully.”
Further, when looking into the proper approach to community impact and sentencing, a broader discussion centred around the effect that cartel conduct has on the broader Australian community – with Alkaloids seeking to mitigate the effect by narrowing it to ‘Australian consumers’ of Alkaloids products. However, they were unsuccessful in this argument, and the Court considered the scope of the consumer law to apply to the Australian community generally.
Following the sentencing hearing, ACCC Commissioner Ms Liza Carver said
“The sentence imposed on Mr Joyce is the longest sentence of imprisonment imposed on an individual under the criminal cartel laws so far” and ultimately that this, “was a particularly concerning and serious case of cartel conduct by Alkaloids of Australia over a sustained period which included price fixing that had worldwide impact.”
NQ Cranes Pty Ltd
Anti-competitive ‘distributorship agreement’
As outlined in our ACCC 2021 in Review publication, on 19 October 2020, the ACCC commenced civil cartel proceedings in the Federal Court against NQ Cranes, alleging that it had entered into a signed ‘distributorship agreement’ with a competitor in 2016. The ACCC alleged that the agreement included provisions to share the market by not targeting each other’s customers within the Brisbane and Newcastle crane industry and instead focus on competing against other competitors. Following an attempt in 2021 by NQCranes Pty Ltd (NQ Cranes), to strike out paragraphs of the ACCC pleadings, the civil cartel proceedings have now resolved.
In a media release on 23 November 2022, ACCC Commissioner Liz Carver said that,
“This explicit written agreement to share the market was clearly anti-competitive and had the potential to limit the service options available to the many businesses that use overhead cranes”.
NQ Cranes admitted contravening the CCA by entering into an anti-competitive cartel agreement and, following mediation in early August 2022, agreed to pay a $1 million penalty, which was an amount equivalent to NQ Cranes’ profit for 2020. On 23 November 2022, the Court made orders declaring that NQ Cranes had contravened section 44ZZRJ of the CCA requiring NQ Cranes to pay a penalty of $1 million and to establish and maintain a competition law education, training and compliance program for three years.
First Class Slate Roofing Pty Ltd and Ors
Bid Rigging cartel results in penalties
As outlined in our ACCC 2021 Year in Review publication, on 25 October 2021, the ACCC commenced civil proceedings in the Federal Court for alleged cartel conduct against two Sydney roof tiling businesses, RAD Roofing Specialists (trading as Mr Shingles) and First Class Slate Roofing (First Class) and their sole directors, Scott Barton and Damian Hand. MLR Slate Roofing Pty Limited and its managing director Matthew Rimmer were not named parties in the proceeding, which suggests they may have cooperated with the ACCC as immunity applicants.
The Federal Court declared that Mr Shingles, First Class, and their respective sole directors had engaged in bid rigging of two slate roofing projects, one a significant and high-value project, for the educational institution Wesley College and the other a private residential project called the Bellevue Hill Project and ordered penalties totalling $420,000. Further, the Court made orders injuncting the respondents from engaging in bid rigging conduct for the supply, installation, maintenance or repair of roofing for a period of three years.
In commenting on the case, ACCC Commissioner Ms Liza Carver echoed the views of Justice Yates, noting that,
“Cartel conduct, including bid rigging as was engaged in by these firms and individuals, distorts and corrupts the competitive process and denies customers the benefits of fair competition.”
The effect of the respondents’ conduct was found to have “denied their customers the benefit of genuine competitive tender offers, including the opportunity to attempt to negotiate a lower contract price for the roofing services that were provided”. This case serves to further highlight that in civil penalty cases, deterrence remains the principal sentencing factor which can be achieved in part through the “public disclosure of the offending conduct to other participants in the respondents’ industry.” This was highlighted by the order requiring the defendants to send an “educative notice” detailing the offending and sentence to the members of the Roofing Industry Association of NSW Inc.
Guilt pleas to cartel conduct
On 16 August 2022, the CDPP commenced criminal cartel proceedings against Bingo Industries and its former managing director and CEO, Daniel Tartak. In its media release, the ACCC advised that while Mr Tartak was its Managing Director and CEO in mid-2019, Bingo agreed with its competitors Aussie Skips Bin Services and Aussie Skips Recycling to fix and increase prices for the supply of skip bins and the provision of waste processing services for building and demolition waste in Sydney.
Bingo pleaded guilty to criminal cartel offences on the day proceedings were commenced, while Mr Tartak pleaded guilty to criminal cartel offences on 20 October 2022. In a media release on 16 August 2022, upon Bingo pleading guilty, Ms Cass-Gottlieb observed,
“We are committed to detecting and investigating serious cartel allegations and taking appropriate action against those who are a party to illegal cartel behaviour, including referral of matters to the CDPP. Cartel conduct not only frequently impacts consumers but can also significantly harm competing businesses and the economy more broadly. Trying to detect cartels early and working with whistleblowers is an essential component of our work.”
Both matters have been listed for sentencing on 9 March 2023.
On 19 December 2022, further charges for criminal cartel offences were brought in the Federal Court against Aussie Skips Recycling, Aussie Skips Bin Services and their chief executive Emmanuel Roussakis for their involvement in the same cartel. These matters are listed for a case management hearing on 16 February 2023 and hearing before Justice Wigney on 9 March 2023.
Procurement processes targeted
In our ACCC 2021 in Review publication, we considered the warning to public sector agencies issued by the ACCC in November 2021, “to be alert to the potential for collusion between bidders during procurement processes, following a recent ACCC investigation where departmental processes contemplated cooperation by competing businesses on government tenders”. The ACCC’s warning came with the introduction of a new outreach program designed to educate public sector officials on the risks of cartel conduct and how it affects their duties in the context of the management of public funds – being a key risk to the joint objectives of achieving best value for money as well as quality works for public use.
Consistent with this warning, on 30 September 2022, the ACCC commenced civil proceedings in the Federal Court against Ashton Raggatt McDougall Pty Ltd (ARM) and its former managing director, Anthony John Allen, alleging they engaged in cartel conduct by attempting to rig bids for the tender for a building project at Darwin’s Charles Darwin University (CDU). ARM had succeeded in the project's first phase tender at CDU in May 2019. After the tender was issued for the second phase of the project in September 2020, the ACCC alleges that ARM sent emails to eight other architecture firms that encouraged other firms not to bid on the project as ARM needed to win it “to keep our practice alive throughout the remainder of this strange and difficult COVID-19 time”.
Several firms agreed not to bid. One of the firms who received the email confirmed that they did not intend to tender but raised concerns with Mr Allen that the communication may, on its face, constitute collusion. Further, the consultancy firm (responsible as project manager) expressed concern to Mr Allen and requested that the email be retracted. While the initial email was retracted, ARM was excluded from the tender process due to its conduct and subsequently reported for anti-competitive conduct.
Following the commencement of these proceedings, Ms Cass-Gottlieb commented,
“We are continuing to engage with public sector procurement officials at the local, state and federal levels to increase their awareness of potential anti-competitive conduct in public sector contracting, to enable early detection of this conduct”.
The matter is to be listed for hearing in relation to liability and penalty shortly. In the meantime, the parties are to file a statement of agreed facts and admissions, joint written outline of submissions and any further affidavit material by 6 February 2023.
BlueScope Steel Limited
Price-fixing and manipulation
In 2020, the ACCC issued civil cartel proceedings against BlueScope and its former General Manager, Jason Ellis. The ACCC alleged that in or around September 2013 to June 2014, BlueScope and Mr Ellis attempted to induce certain suppliers of flat steel products in Australia to fix, control and maintain the price for flat steel products. In May 2020, the ACCC amended its originating application to seek penalties against BlueScope, as well as declarations against Mr Ellis, for their alleged attempts to induce a competitor to engage in cartel conduct. The trial of the proceeding commenced on 30 August 2021 and ran for more than four weeks. The judgment was delivered on 9 December 2022.
Justice O’Bryan found that BlueScope had attempted to induce its competitors to enter into agreements or understandings that contained a cartel provision. This was done by the publishing by BlueScope of a ‘Pricing Guide’ (Guide), with competitors being encouraged to adopt the Guide under threat of BlueScope bringing an anti-dumping application against overseas importers that refused. Justice O’Bryan also found that,
“No understandings were ultimately arrived at. In some instances, the evidence suggests that BlueScope’s proposal, whatever its ultimate characterisation under the act, was rebuffed because the counterparties believed that the proposal would or might involve a contravention of the law.”
BlueScope argued that the Guide was not used as a tool to breach cartel conduct provisions and that none of its requests for parties to adopt the pricing in the Guide were accompanied by any undue pressure.
However, the Court considered that by virtue of BlueScope’s position in control of a large portion of the Australian distribution market (about 80%) the Guide was spruiked as a form of ‘benchmark’ and was a tool used for the purposes of artificially maintaining the price of flat steel products. These findings were central to the Court’s commentary that, when it considers whether there has been an attempt to breach a cartel conduct provision if a party’s conduct has merely been preparatory, that will not be sufficient to be an attempt. Instead, the party must have the requisite intent to cause a breach of the Act. The Court found that BlueScope’s conduct was not merely preparatory, and that Jason Ellis and BlueScope were engaging in attempts to contravene a cartel conduct provision with the intent of fixing or controlling the price of flat steel product distribution in Australia. A hearing on penalties and a disqualification order against Mr Ellis has been set down for 3 April 2023.
Qteq Pty Ltd
Bid-rigging for services contracts
On 8 December 2022, the ACCC initiated proceedings in the Federal Court against Qteq, a Queensland-based services company that provides, installs and services products for the oil and gas industry, and its Executive Chairman Simon Ashton. The ACCC alleges that, from around April 2017 to June 2019, Qteq made seven attempts to induce competitors competing in the provision of services to the oil and gas industry to enter into contracts, arrangements or understandings that contained one or more cartel provisions. It further alleges that Ashton attempted to induce competitors in six out of seven of the cases. In each of the cases, the ACCC alleges that the contracts, arrangements or understandings included a provision not to supply, to not compete for the supply, not supply other than “in concert” or to restrict or limit the supply. The alleged agreements are said to have allowed competing businesses to share the market and rig the bidding processes of their clients.
In its Concise Statement in respect of alleged harm, the ACCC asserted that:
Such agreements would have caused QGC, Santos and other oil and gas producers to pay higher prices, and/or to receive lower quality services, than they otherwise would have in a free and competitive marketplace. The increased costs of production would likely ultimately have been borne by end-customers, including businesses and households, who use natural gas for heating and energy purposes.
Qteq is defending the matter, which has been listed for a case management hearing before Justice Bronwich on 3 March 2023.
Delta Building Automation Pty Ltd and Timothy Davis
Alleged big ridding at National Gallery of Australia
As outlined in our ACCC 2021 Year in Review publication, on 13 May 2021, the ACCC commenced civil proceedings in the Federal Court against Delta Building Automation Pty Ltd (Delta) and its sole director, Mr Davis, for an alleged bid-rigging attempt in response to a tender issued by the National Gallery of Australia in Canberra. The alleged attempted cartel conduct occurred in late 2019 and related to the replacement and ongoing maintenance of a building management system at the National Gallery. Mr Davis and Delta have denied the claims, and the trial concluded in April last year. The parties are awaiting judgment.
Other regulatory developments
On 18 February 2022, the ACCC announced a new working group between the ACCC, US Department of Justice and Federal Bureau of Investigation, Canadian Competition Bureau, NZ Commerce Commission, and UK Competition and Markets Authority to “focus on illegal conduct, including collusion, in global supply chains, in light of the pandemic-induced disruptions that have led to much higher freight rates and more expensive goods for consumers”.
Then ACCC Chair, Mr Rod Sims said that,
“We will be sharing intelligence to identify any behaviour that restricts or distorts competition, and companies are now on notice that the ACCC and its international counterparts will be ready to act,”
Time will tell whether this new working group will lead to more cartel proceedings being issued in Australia.
If 2022 is anything to go by, we can expect 2023 to continue with a strong focus on enforcement against cartel activity. In her 2021-2022 review, Ms Cass-Gottlieb emphasised that,
“The ACCC will continue its efforts to deter, detect and dismantle cartels, and will refer serious cartel conduct to the CDPP for consideration of prosecution of those involved in the conduct.”
To this end, the ACCC has implemented several initiatives to assist with its enforcement against cartels, including an anonymous online reporting portal, a cartel screening tool for bid rigging conduct and the international working group. We believe that these initiatives will increase the identification of suitable investigation targets for both local and international cartel enforcement matters.
Despite cartel conduct being criminalised over 13 years ago, the ACCC is yet to run a successful, contested criminal cartel proceedings. Further, while sentences of imprisonment have been made in criminal cartel proceedings, we have yet to see a custodial sentence. Will 2023 bring the first of its kind? Given the intense scrutiny around the ACCC’s evidence collection processes in the failed bank cartel case, we can expect the ACCC/CDPP to be more meticulous in this process and more cautious in proceeding with contested criminal cartel proceedings, with a potential consequential delay in the issuing of proceedings as a result.
One thing we can confidently say is that a number of the current cartel matters before the Courts will be wrapped up early this year, with judgment imminent in Delta, a penalty hearing in Bluescope and a sentencing hearing in Bingo.
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