The Australian Competition and Consumer Commission (ACCC) has recently written to around 2,500 executives within the construction industry to remind them about the potential sanctions for cartel conduct. Further, on Saturday, 5 May 2012, the Chairman of the ACCC, Mr Rod Sims, announced that it "...currently ha[s] a number of important cartel investigations underway, including cartels that potentially involve criminal conduct."

These developments signal a clear need for participants in the construction industry to ensure that the following areas are well understood:

  • the laws prohibiting cartel conduct;
  • the civil and criminal penalty regimes; and
  • the mechanics of the ACCC's immunity policy for cartel conduct.

To assist you in your understanding, we provide an overview of those topics below.

If you have received such a letter from the ACCC and require assistance to better understand it, or wish to know anything more about the information contained in this update, please contact one of our team of competition experts.

The Prohibitions

The Competition and Consumer Act 2010 (Cth) (CCA) prohibits a corporation from entering into and giving effect to a contract, arrangement or understanding that:

  • contains a "cartel provision", being a provision that:
    • has the purpose or effect of fixing, controlling or maintaining prices for goods or services acquired, supplied or to be resupplied (price-fixing); or
    • the purpose of preventing, restricting or limiting output (be it by way of production, capacity or supply), market sharing or bid-rigging,
  • and where at least two or more of the parties to the arrangement are in competition with each other (Cartel Conduct); or
  • contains an "exclusionary provision", being a provision that has the purpose of preventing, restricting or limiting the supply or acquisition of goods or services to/from particular persons or classes of persons, by all or any of the parties to the contract, arrangement or understanding, where any two or more of the parties are competitive with each other (Exclusionary Conduct).

There are a number of exceptions applicable to the Cartel Conduct and Exclusionary Conduct provisions, such as the joint venture exception. In the absence of an applicable exception, a contract, arrangement or understanding that constitutes Cartel Conduct or Exclusionary Conduct is prohibited outright by the CCA, regardless of its effect on competition.

The Penalty Regime

If they are found to have contravened the Cartel Conduct or Exclusionary Conduct provisions, corporations face civil fines of up to the greater of:

  • $10,000,000;
  • if the court can determine the total value of the benefits, three times that total value; or
  • if the court cannot determine the total value of those benefits – 10 per cent of the corporation's annual turnover during the 12-month period ending at the end of the month in which the corporation committed, or began committing, the offence.

An individual who commits, or who is otherwise knowingly involved in criminal Cartel Conduct, may face imprisonment for up to 10 years, a fine of up to $220,000, or both.

The ACCC's Immunity Policy for Cartel Conduct

The ACCC has an established immunity policy for those who come forward with information about a cartel. There are a number of prerequisites to the grant of immunity, including that the applicant be the "first in".

If you or your company are concerned about whether certain conduct constitutes Cartel Conduct or Exclusionary Conduct, you should seek advice from a competition law expert immediately.

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.