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Update: Competition Penalties in Australia Set for Review: Australian Legal Update

29 March 2018
On 26 March 2018, the Organisation for Economic Co-operation and Development (OECD) reported that Australia’s anti-competitive sanctions were among the lowest in OECD member countries, prompting the Australian Competition and Consumer Commission (ACCC) to announce a potential policy change in how it polices competitiveness.

On 26 March 2018, the Organisation for Economic Co-operation and Development (OECD) reported that Australia’s anti-competitive sanctions were among the lowest in OECD member countries, prompting the Australian Competition and Consumer Commission (ACCC) to announce a potential policy change in how it polices competitiveness.

The OECD report notes that despite a legislative framework supporting higher fines, Australia’s financial sanctions for so called “antitrust” cases represent a small percentage of similar fines issued in the European Union, United States, the UK, Germany, Japan and Korea. 

The report, calculating on the basis of penalties in cartel cases up to November 2017 and comparing them with the base fine that would have been applied in comparator jurisdictions, found significant difference in the Australian environment when compared to other OECD countries. The average pecuniary penalty in Australia was $25,400,000 Australian dollars, while the average base penalty in the comparator jurisdictions would have been $320,400,000. The report calculated that the average Australian penalty would have to be increased 12.6 times to reach the level of the average penalty in the comparator jurisdictions.

The report states that this is not due to any significant distinction in the capacity to levy penalties under the legislation, but rather the Australian approach in the Federal Courts of “instinctive synthesis”. This principle, derived from the criminal cases, sees all factors relating to the case aggregated and averaged to arrive at an overall position as to the appropriate level of penalty on a global basis. This is distinct from a systemic (or “step-by-step”), approach, in which particular elements of an offence attract specific penalties, which are then subject to modification.

Section 76 of the Competition and Consumer Act 2010 sets out: 

(i) the nature and extent of the act or omission, 
(ii) any loss or damage suffered as a result of the act or omission; 
(iii) the circumstances in which the act or omission took place; and 
(iv) whether the person has previously been found by the courts to have engaged in any similar conduct in related proceedings

as factors to be taken into account by the Court in assessing penalty, but does not prescribe these as the only relevant factors. 

In Trade Practices Commission v. CSR Ltd [1990] FCA 762 and NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285, the Court established a number of additional factors which are still applied in the present context including:

  • the size of the contravening company;
  • the financial position of the contravening company;
  • the degree of power the contravening company has, as evidenced by its market share and ease of entry into the market;
  • the deliberateness of the contravention and the period over which it extended;
  • whether the contravention arose out of the conduct of senior management or at a lower level;
  • whether the company has a corporate culture conducive to compliance with the Act, as evidenced by compliance programmes and corrective measures in response to an acknowledged contravention;
  • whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention
  • the effects of the conduct on the functioning of the market and other economic effects of the conduct;
  • similar conduct in the past (which is a concept broader than the concept of reincidence); and
  • whether the conduct was systematic, deliberate or covert.

It was suggested by the OECD that whilst nothing in this list of factors or the Court’s discretion created a “hard barrier” to higher penalties, the absence of step-by-step thresholds and guidelines for calculation meant that the broad exercise of discretion fell back on the instincts of the Court and the presentation of comparable precedent cases. This, it found, suggested a situation by which earlier “low” penalties created a precedent by which similar conduct should incur a similar penalty, notwithstanding changes in public policy in relation to cartel conduct or advancements in other jurisdictions. Particularly, Australia is relatively unique in not beginning its calculations in respect of cartel conduct by direct reference to value of turnover or the overall value of commerce affected by the breach.

ACCC Chairman Rod Simms said in a statement: 

“The ACCC sees merit in considering the relevance of this baseline approach, noting that if it was applied in Australia, it would appear likely that firms with larger turnover would generally end up with much higher penalties.”

“We will reflect carefully on the report, including the OECD’s suggestion to consider developing penalty guidelines, similar to the approach taken by the other OECD jurisdictions.”

The competition space should be monitored carefully for any developments, particularly for large scale international investors interested in entering the Australian marketplace.

The full report can be read here

Further Reading

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