The Australian Competition and Consumer Commission (the ACCC)
has announced it will appeal the Federal Court's decision
dismissing the ACCC's proceedings against the Australian Egg
Corporation Limited (AECL), a trade association for egg producers,
and four other corporate and individual respondents.
Last month the court found that the Respondents, including the
Managing Director of AECL, a director of AECL and Twelve Oaks
Poultry and the Managing Director of Farm Pride Foods, did not
engage in cartel conduct despite admissions of one of the directors
to the allegations in an agreement with the ACCC prior to the
trial.
Background
The ACCC instituted proceedings in May 2014 alleging that the
AECL and five other corporate and individual Respondents attempted
to induce egg producers to cull hens or otherwise dispose of eggs
to reduce the number of eggs available for supply to customers and
businesses in Australia, increasing egg prices.
The ACCC alleged that the Respondents took action to address
concerns about egg oversupply by calling a meeting of AECL members,
attempting to reach an agreement to limit production or supply of
eggs, which would be unlawful under the Competition and Consumer
Act 2010 (Cth) (the Act). The ACCC's case included the
following circumstantial evidence:
- AECL member publications in which the AECL board encouraged members to reduce egg production, to avoid oversupply that would affect egg prices.
- An "Egg Oversupply Crisis Meeting" held by the AECL and attended by egg producers, where the AECL allegedly sought a coordinated approach by egg producers to reducing the supply of eggs.
- A series of AECL Board meetings, attended by the individual Respondents, in which the oversupply of eggs and its effect on prices were discussed.
The ACCC alleged that the cartel conduct attempt took place at the
"Egg Over Supply Crisis Meeting." While the court
accepted that this meeting was essentially a call to action, the
court found this alone did not determine that the Respondents had
proposed collective action with the proscribed intention.
In considering the evidence, the court found that, although the
Managing Director of AECL urged the members to make "a path
forward in a coordinated and consolidated fashion," this did
not have the requisite ill-intent required by the law. Instead, the
court found that his intentions were innocent and he was referring
to the adoption of different strategies intended only to reduce the
production of eggs.
The ACCC's case was strongest against the AECL and its managing
director; however, the Court was not satisfied they took action
with the intention of inducing members to reach an agreement
involving reciprocal obligations by competing producers. The claims
against the other Respondents were also dismissed, as the ACCC was
not able to establish particular conduct that would constitute an
attempt, except for the claim against one other individual which
will be listed for further hearing.
Implications
In its announcement, the ACCC reaffirmed its focus on cartel
enforcement and noted the risks associated with trade association
membership, as certain interactions between members and
associations may constitute attempted cartel conduct. This serves
as a strong warning to trade associations and their members. Trade
associations are recognized to provide numerous benefits to
industries, but present antitrust risk if a forum for conduct that
may be perceived as collusive.
The ACCC can pursue individuals and not just corporations under the
Australian cartel provisions. There are serious ramifications for
individuals found guilty of cartel conduct such as criminal
penalties of up to 10 years in jail and/or fines of up to $360,000,
or a civil pecuniary penalty of up to $500,000. It is also illegal
for a person to be indemnified by a corporation against legal costs
and any financial penalty under the Act.
The Australia egg litigation follows a string of recent cases in
which the ACCC has prosecuted individuals for cartel conduct. Fines
were imposed on individuals involved in corrugated fiber packaging
cartel (totaling $2 million in 2007). Federal Court penalties
levied against two key individuals ($80,000) in the construction
industry in 2011 for cover pricing (where a contractor, who wants
to bid but has no intention to win, asks another contractor to
ensure that its tender is higher, removing competition between the
two contractors). In late 2014, the ACCC also commenced action
against six company executives in the electrical cable industry for
alleged cartel and exclusionary conduct by limiting the supply of
electrical cable to contractors and restricting wholesalers from
buying cable from other suppliers.
The ACCC has again publicly identified cartel conduct as a priority
in 2016, indicating that only full compliance with the Act will be
a guarantee to staying out of the court. Corporations or
individuals concerned that their involvement in trade associations
or other meetings with competitors may involve cartel conduct
should seek legal advice. Any suspected involvement in cartel
conduct should be reported to the ACCC without delay as the party
that is the first to report the misconduct may be able to secure
immunity from actions by the authorities.
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