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On 3 August 2017 Nippon Yusen Kabushiki Kaisha (NYK) was fined $25 million in the first ever criminal cartel prosecution commenced in Australia. Cartel conduct became criminal under Australian competition law in 2009. This is the second highest monetary penalty for cartel conduct in Australia. The decision of the Federal Court in this case outlines how the Court will determine penalties for criminal cartel conduct including discounts available for early cooperation and the little assistance offered by penalties in civil cartel cases.
Detection and prosecution of cartel conduct remains the highest priority area for the ACCC.
The ACCC has indicated that after 8 years of no criminal cartel cases, its criminal cartel team is ready and active with several briefs sent to the CDPP. Given the life changing consequences for individuals found to have engaged in criminal cartel conduct (imprisonment) and the push for significantly greater monetary fines for companies, compliance with competition laws has never before been so important.
Following an investigation by the Australian Competition and Consumer Commission (ACCC), in 2016 the Commonwealth Director of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in contravention of the criminal cartel provisions in Competition and Consumer Act 2010 (Cth). NYK has been subject to and fined in several other related cartel claims in other jurisdictions.
From at least February 1997, NYK had entered into an arrangement with other global vehicle shipping companies whereby the general effect of the arrangement was that the parties would not seek to alter their existing market shares of cargo from manufacturers or otherwise try to win existing business from each other. Three separate cartel provisions charges relating to fixing freight rates, bid rigging and customer allocation were brought against NYK and the cartel involved six different shipping routes for motor vehicles to Australia.
The conduct was uncovered in 2012 following dawn raids conducted by Japanese and US competition authorities on NYK and a number of other shipping companies.
The offending conduct as charged occurred over a three year period during which 69,348 new vehicles were imported into Australia through contracts entered into as a result of bids affected by the conduct.
The ACCC will refer serious cartel conduct for criminal prosecution by the CDPP generally where one or more of the following factors apply:
There are significant penalties for corporations and individuals who are found to have engaged in a criminal cartel offence. For corporations, the maximum fine for each criminal cartel offence will be the greater of:
Individuals found guilty of criminal cartel conduct can face penalties of up to 10 years’ imprisonment and/or fines of up to $420,000 per criminal cartel offence.
In this case, by way of agreed facts in relation to the annual turnover of NYK during the relevant period, the maximum penalty that NYK could have incurred was determined to be $100 million, being 10% of its annual turnover in connection with Australia in the 12 months prior to the commencement of the offence.
In determining the appropriate fine, the Federal Court noted that penalties imposed in ‘comparable’ civil penalty cases “are of little if any assistance to the determination of the appropriate sentence in this matter”. Whilst useful, the Court considered that the use of comparable civil penalty cases must be approached with caution noting in particular that civil penalties focus on deterrence by way of promoting public interest in compliance and not punishment whereas criminal penalties import notions of retribution and rehabilitation.
The Court also took into account a number of factors when considering the penalty to impose including the:
However, the fine of $25 million incorporated a significant discount of 50% including for:
With significant regulatory change coming into effect the spotlight is staying firmly on
culture, ethics and regulatory compliance. An organisation’s social licence to operate
remains a priority...
A short case summary on the recent Osteo Gel case.
On 26 February 2019, Rod Sims announced the ACCC’s compliance and enforcement policy for 2019. A summary of the key areas of focus are set out below.