Representing a significant step in Australian Trade Practices law, both Houses of Federal Parliament last week passed the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth) ("Amendment Act").

The Amendment Act will come into effect 28 days after it receives Royal Assent.

In the making since the Dawson Review in 2003, the Amendment Act substantially amends Part IV of the Trade Practices Act 1974 (Cth) ("TPA") by introducing significant civil and criminal sanctions for cartel conduct.

It is anticipated that by adopting these amendments, Australia will be brought into line with good practice adopted by many other OECD countries.

What is cartel conduct?

Conduct giving rise to a cartel can take many shapes and forms.

To provide clarity in this respect, the Amendment Act pens a 'catch-all' definition which encompasses conduct giving rise to a contract, arrangement or understanding between two or more competitors that:

  • has or is likely to have the effect, of fixing prices, or
  • has the purpose of restricting outputs, allocating customers, or rigging bids.

Practically speaking, an arrangement with a competitor which involves price fixing; customer, supplier or territory allocation; bid or tending rigging; or otherwise has the effect of restricting output in the supply chain, can now potentially amount to a criminal offence.

A new era of accountability

While engaging in cartel conduct has long been outlawed under the TPA, the Amendment Act adds a new dimension of personal responsibility for directors and employees.

To establish a contravention of the criminal provisions, it must be proved beyond reasonable doubt that:

  • the relevant contract, arrangement or understanding was made, or given effect to, intentionally, and
  • the accused knew or believed that the relevant contract arrangement or understanding contained a cartel provision.

A civil cartel contravention need only be proven on the balance of probabilities.

Harsh new penalties

The Amendment Act brings into play new and additional penalties for the offence of 'giving effect to a cartel'.

For individuals, the maximum penalty is a term of imprisonment for 10 years and/or a maximum fine of $220,000.

For corporations, the maximum penalty is the greater of:

  • $10 million;
  • three times the value of the benefit from the cartel; or
  • where the value cannot be determined, 10 per cent of annual turnover.

Compliance the best defence

In this new era of accountability, now more than ever, compliance provides the best defence.

Ensuring all relevant people understand the requirements and limitations imposed on conduct is critical in protecting your business and its people.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.