ACCC issues cartel warning

Australian Competition and Consumer Commission chairman Graeme Samuel has warned business the consumer watchdog will be vigilant in monitoring possible cartel activity, with proposed legislation significantly upping the penalties for companies participating in cartels.

In an exclusive briefing with WA Business News, Mr Samuel said the ACCC would maintain a strong campaign against cartels, which he called a “cancer on the economy” and “the most insidious attack on consumers”.

Mr Samuel said some consumer protection groups had accused the ACCC of taking its eye off the ball to focus on cartels, but that attacking cartels was the most primary form of consumer protection possible.

Proposed new legislation would increase penalties for companies engaging in cartels to $10 million, three times the gain received by the cartel, or 10 per cent of the turnover of a corporate group, whichever is the largest.

The proposed changes also include criminal sanctions including jail penalties of up to five years.

“With these new penalties, the cost benefit analysis of taking part in cartels will swing,” Mr Samuel said.

The immunity policy introduced in July 2003, and revised in September 2005, which grants conditional immunity from prosecution to a party which has been part of a cartel but comes forward to the ACCC, has encouraged cartel participants to offer information, according to Mr Samuel.

The high-profile cartel charges against the Visy Group and several Visy executives late last year, after Amcor came forward to the ACCC with information about the alleged cartel, demonstrate the use of the policy.

“We just don’t know how many cartels there are, but more and more are being brought to the ACCC’s attention,” Mr Samuel said.

“They are an insidious attack and fraud upon consumers – there are 10 cartel cases brought by us before the courts and another 30 investigations running, and half of those have been because of the immunity policy.”

He said that, in Western Australia, 39 respondents had so far admitted liability for cartel activity in the air-conditioning sector.

“This was going on for 10 to 15 years and effected schools, hospitals, government and private sector contracts,” Mr Samuel said.

Among other things, the ACCC has alleged that the companies entered into arrangements or understandings that involved some or all of the various parties agreeing which company among them would submit the lowest tender price for particular commercial projects let for tender.

In relation to small business, Mr Samuel said the role of the ACCC was to promote competition, not protect small business from big business.

“Some people in small business think the ACCC should protect them from big business, but it is not in the public interest to protect them from normal competition and tough bargaining,” he said.

“It is not the role of competition policy to favour one sector over another; competition policy is not about preserving competitors, it is about promoting competition.”

He said the ACCC would authorise collective negotiations for a common business pursuit, subject to certain limitations.

Provisions under the Trade Practices Act also protect small business from unconscionable conduct, something Mr Samuel said the ACCC was going to adopt a more robust attitude towards.

“Unconscionable conduct is harsh and oppressive, whereas tough bargaining is just what business is about.”