On 20 September 2012, a US District Court Judge sentenced AU Optronics (AUO), an electronics manufacturer, to a record US$500 million criminal fine for engaging in price fixing in relation to the sale of LCD panels worldwide. Two of AUO's executives were fined US$200,000 and have each been sentenced to 3 years imprisonment for their involvement in the conduct. Seven other companies involved in the cartel pleaded guilty and have been sentenced to a total of US$890 million in criminal fines.
While the US$500 million fine equals the highest fine ever handed down in the US for an antitrust violation, it is only half of the fine actually sought by the US Department of Justice (DOJ) - namely, US$1 billion. Similarly, even though the AUO executives will spend 3 years in jail, the DOJ initially sought a jail term of 10 years.
Was the DOJ satisfied with the outcome? No - it considered that the penalties imposed were 'not enough to deter cartels like this from forming' suggesting that it would continue to seek record penalties and jail sentences for individuals.
The aggressive approach of US regulators and courts to antitrust violations is not new but it is a far cry from the Australian approach to deterrence of cartel conduct through punishment.
In Australia, the highest fine for cartel conduct was imposed in 2007 on Visy for engaging in price fixing in relation to the sale of cardboard packaging. The total of the fine was AU$36 million. In the ongoing freight cartel cases against major international airlines, nine airlines have been fined a total of AU$58 million to date (the largest fine being AU$20 million).
In the EU, the largest fine imposed by the European Commission on a single company for engaging in cartel conduct was approximately €900 million.
Given the discrepancy between the magnitude of penalties imposed in the US and EU compared with Australia, it is likely that the ACCC will sharpen its teeth and seek larger penalties to deter cartel conduct. Indeed, the ACCC has previously stated that it "will be seeking higher penalties [and] advocating for the penalty regime to be used to its maximum effect". Similarly, Australian courts may be more willing to follow their overseas counterparts in imposing considerably larger penalties than has previously been the case. Justice Finkelstein has previously recognised that "penalties in Australia are still something of a light touch."
The law is no barrier.
Under the Competition and Consumer Act 2010 (Cth) (CCA), companies that engage in cartel conduct face a maximum fine of up to the greater of AU$10 million, three times the gain from the cartel conduct or where the gain cannot be ascertained, 10% of the group's annual turnover attributable to Australia. Individuals face a maximum fine of up to AU$500,000.
While fines are more likely to be significant for multinational companies that have a considerable Australian business operation (given the 'annual group turnover' calculation), the ACCC may also seek to prosecute multiple contraventions of the CCA each of which carries the maximum fine described above. This would result in a multiplication or 'topping up' of fines.
The pursuit for jail terms will also be pursued more vigorously by the ACCC and the DPP. Under the CCA, the maximum term of imprisonment for an individual who engages in cartel conduct is 10 years. The ACCC chairman, Rod Sims stated in December 2011 that "business does need to be on notice that there are criminal sanctions attaching to cartels" and "that we are actively searching for a case".
These remarks are not without backing. As recently as 13 September 2012, Rod Sims stated that "for over a year now we have been taking a more proactive approach to cartel conduct"and "have stepped up proactive intelligence gathering and data assessment and have identified industries and sectors to monitor". That is, not only will the ACCC be seeking larger fines and longer jail terms but it is pro-actively seeking to detect the conduct that would give rise to such penalties.
Even though the sentences in the AUO case will ring in the ears of the ACCC, the DPP and Australian judges, it is important to note that US laws provide for significantly higher penalties than in Australia.
Under US legislation, companies face a maximum fine of US$100 million, or twice the 'pecuniary gain' of an anti-trust conspirator or twice the money lost by the victims of crime for a corporation, while individuals face a maximum fine of US$1 million and/or a maximum sentence of 10 years imprisonment.
In addition, the conduct in the AUO case was particularly egregious. For example:
In imposing 3 year jail sentences on the two AUO executives (rather than the 10 year terms sought by the DOJ), the Judge stated that "for a long time, the defendants thought they were doing the right thing vis-à-vis their company".
Be the first to receive the latest articles, news and publications.
The latest signpost on the long road to defamation law reform appears to point to another departure from national uniformity with the announcement that not all states are on-board for a revised set...
In its first review of a merger authorisation application since the current regime came into effect in 2017, the Australian Competition Tribunal (Tribunal) has upheld the Australian Competition and...
A recent Federal Court decision has resulted in a $1.65 million penalty being imposed on a pathology service provider for paying rents for collection sites within medical centres at significantly...