In his address to the Committee for Economic Development of Australia in March 2016, ACCC Chairman Rod Sims made it abundantly clear that cartel conduct was in the ACCC’s sights.
Ahead of our review of the ACCC’s priorities for 2017, let’s look at how 2016 shaped up on the cartels front.
The laundry detergent cartel
In late 2013, the ACCC launched proceedings against laundry detergent manufacturers Colgate-Palmolive, Unilever and Cussons alleging that in 2008 the parties colluded with Woolworths to:
- simultaneously switch supply of laundry detergents to ultra-concentrates and stop supplying standard concentrates to Woolworths;
- standardise the products offered, including package size and strength of concentrate offered; and
- sell the concentrates for the same ‘per wash’ price as standard detergents.
Ultra concentrates are cheaper to make, store and transport, which should have resulted in a lower cost per wash for the products. However, the parties agreed to not pass on savings to consumers. The arrangement included information sharing via phone calls between senior managers of Colgate and Unilever, via meetings between executives of the parties, some taking place at Woolworths’ offices in Sydney. Other meetings included site visits overseas to North America, where the transition to ultra-concentrates was further discussed and planned.
This is a substantial cartel case, involving four household name brands. So what’s the wash up?
Colgate-Palmolive: admitted to sharing sensitive market and pricing data with Unilever and was fined $18 million (plus paying $450,000 towards the ACCC’s costs) by the Federal Court. The penalty (based on 10% of Colgate’s turnover, the first time this calculation has been used) is the third largest for cartel conduct in Australian history. Paul Ansell, former Colgate sales director, admitted personal involvement and was by consent disqualified from managing corporations for seven years (plus paying $75,000 towards the ACCC’s costs).
Woolworths: fined $9 million (plus paying $250,000 towards the ACCC’s costs) for being ‘knowingly concerned’ in the arrangement made between the laundry detergent manufacturers. ACCC Chairman, Mr Rod Simms, said that this penalty in itself is “the largest the ACCC has obtained against a party that was an accessory to competition law breaches by being knowingly concerned in anti‑competitive conduct”.
Cussons: while Colgate and Woolworths admitted liability, Cussons is not going down without a fight and its case is still before the court. We’ll let you know once the case has been determined.
Unilever: successfully obtained immunity from prosecution under the ACCC’s ‘whistle-blower’ policy by dobbing-in its counterparts.
The cable cartel
Slightly less glamorous, but no less serious, the ACCC issued proceedings alleging cartel conduct alleging that, in 2003, Italian, French, and Japanese manufacturers of high voltage land cables engaged in bid-rigging and price-fixing in relation to the Snowy Hydro project. The parties had an agreement about who would submit the lowest price to the Snowy Hydro tender, which was part of a broad agreement between the parties to allocate projects amongst themselves on a global basis (demonstrating the reach of our competition laws where there is an Australian connection).
In 2013, the Federal Court fined the Japanese manufacturer $1.35 million for its role in the arrangement, restrained the company from participating in similar conduct for 3 years and ordered it pay $50,000 towards the ACCC’s costs.
In July 2016, the court found the Italian manufacturer (who was to submit the lowest big for the Snowy Hydro project) guilty of engaging in cartel conduct by entering into and giving effect to arrangements which contravened the price-fixing and exclusionary arrangement laws. While the court found that the French manufacturer was part of the cartel, the ACCC failed to prove that it was a party to the arrangement regarding the Snowy Hydro tender. Penalties in both cases are yet to be determined.
The currency trading cartel
In 2016, the ACCC successfully nabbed ANZ Banking Group Ltd and Macquarie Bank Ltd for attempted cartel behaviour in relation to the conduct of currency traders employed by both banks in attempting to influence the benchmark rate of the Malaysian ringgit. The benchmark rate for the ringgit is set by the Association of Banks in Singapore (ABS), and impacts settlements made by hedge and risk management providers in futures trading. The traders attempted to persuade other banks to make either higher or lower rate submissions to the ABS, with the aim of fixing the rate.
Both Macquarie and ANZ admitted their respective roles in the attempted cartel, and by consent were ordered to pay penalties of $6m and $9m respectively.
The shipping cartel
In the first criminal cartel prosecution in Australia under the Competition and Consumer Act 2010, the ACCC alleged that Japanese shipping giant, Nippon Yusen Kabushiki Kaisha (NYK), engaged in criminal cartel conduct regarding the transportation of vehicles to Australia between July 2009 and September 2012 and referred the matter for prosecution to the Commonwealth Director of Public Prosecutions.
In 2016, NYK plead guilty to criminal cartel conduct in the Federal Court. While penalties are yet to be determined, NYK could be facing a fine of up to $10 million, three times the profit it made from the cartel conduct or 10% of its Australian turnover.
The Australian action is but one in a series of cartel actions NYK is faced globally. In the US in 2014, the company was fined US$59.4 million for its role in price fixing, bid rigging and market sharing in relation to the international shipping of vehicles. An executive of the company was also jailed for his role in the cartel. In 2015, NYK was fined US$8.5 million after admitting to the South African Competition Commission that it colluded with competitors regarding 14 tenders for the shipping of vehicles into and out of South Africa.
The ACCC has clearly been successful in prosecuting several high-profile cases in 2016, securing penalties of over $40 million. And it’s not done yet – Chairman, Rod Simms, has disclosed that other investigations into alleged cartel behaviour are ‘advanced’ – including in relation to criminal cartel activity.