Sections 45AA to 45AU of the Competition and Consumer Act 2010 (Cth) (CCA) prohibit conduct referred to as cartel conduct. By reason of the adoption of the Competition Code by the states and territories the prohibition on cartel conduct applies to all types of businesses including companies, partnerships, unincorporated associations, government bodies, sole traders, as well as individuals.

The provisions governing cartel conduct were introduced into the CCA in 2009. The complex provisions, which replace and extend the previous prohibition on price fixing, now provide for civil penalties as well as terms of imprisonment for individuals who breach the prohibitions. At the time of writing the provisions still remain largely untested and there has been no criminal prosecution for breach of them; however the ACCC has indicated in its Compliance and Enforcement Policy published in February 2015 that cartel conduct is one of the forms of conduct that is “so detrimental to consumer welfare and the competitive process that the ACCC will always assess them as a priority”.

The primary prohibition is on the making or giving effect to a contract, arrangement or understanding that contains a cartel provision.

A cartel provision is a provision relating to:

• price-fixing;

• restricting outputs in the production and supply chain;

• allocating customers, suppliers or territories; or

• bid-rigging,

between parties who are competitive with one another. See s 45AA of the CCA for this simplified outline.

Price fixing occurs where there is:

• a contract, arrangement, or understanding (whether existing or proposed) between competitors (ie people who would otherwise compete); and

• the contract, arrangement or understanding contains a provision which has the purpose or likely effect of directly or indirectly fixing, controlling or maintaining the price of goods or services or any discount, rebate or credit in relation to goods or services:

Price fixing includes any kind of price manipulation, from an agreement on a price to be charged, to arrangements concerning discounts, allowances, rebates and credits. The prohibition against price fixing applies to any arrangement between competitors which limits the ability of competitors to set their own price.

See Price Fixing.

Output restrictions occur where there is:

• a contract, arrangement, or understanding (whether existing or proposed) between competitors (ie people who would otherwise compete); and

• the contract, arrangement or understanding contains a provision which has the purpose of preventing, restricting or limiting the production of, or the capacity to produce or the supply of goods or services by one or more of the parties.

See Output restrictions.

Market sharing occurs where there is:

• a contract, arrangement, or understanding (whether existing or proposed) between competitors (ie people who would otherwise compete); and

• the contract, arrangement or understanding has the purpose of allocating between all or any of the parties, the persons who supply or acquire, or are likely to supply or acquire, such goods or services, or the geographical areas within which such goods or services will be supplied or acquired.

See Market sharing.

Bid rigging occurs where there is:

• a contract, arrangement, or understanding (whether existing or proposed) between competitors (ie people who would otherwise compete); and

• the contract, arrangement or understanding has the purpose of ensuring that one or more of the parties does not bid, two or more do so on the basis that one is more likely to be successful, two or more parties bid, but one or more does not proceed and/or two or more parties bid but a material component of at least one bid is worked out between them.

No written agreement is necessary for a court to find that cartel conduct has taken place. Collusion on pricing, output restrictions, market sharing and/or bid rigging can occur just by signalling to a competitor. However, courts may look at circumstantial evidence such as evidence of joint action, similar behaviour and attendance at meetings to infer that a cartel conduct arrangement exists.

See Bid rigging.

Exceptions to cartel conduct are very limited and their application can be unclear, so in-house counsel should take particular care if seeking to rely on these exemptions or defences. They include:

• Joint ventures — where there is a formal joint venture agreement for the production and/or supply of goods or services and the cartel provision is for the purposes of the joint venture, the provisions will be exempt. The exemption is unlikely to cover loose joint venture arrangements.

• Joint buying groups — this exemption relates to price fixing cartel conduct only and applies only in relation to the price for goods or services to be collectively acquired or the joint advertising of the price for resupply of goods or services collectively acquired.

• Collective bargaining notifications — this defence applies only where the parties have made a collective bargaining notification to the ACCC. It is only available where the parties expect that the total value of the transactions with the target over a 12 month period will not exceed $3 million.

• Authorisation — this defence applies only where the parties have applied for and been granted prior authorisation for the conduct.

• Related bodies corporate — where the only parties to the cartel conduct are related bodies corporate within the meaning of the CCA, there will be no breach.

See Exceptions and defences to cartel conduct.

Breach of the cartel conduct prohibitions in the CCA may give rise to prosecution for civil penalties or as a criminal offence.

In order for breach of the cartel conduct prohibition to attract criminal sanctions it is necessary for the fault elements required by the Criminal Code to be established. They are that:

• the individual or corporation intended to enter into a contract, arrangement or understanding and that she/he or it knew or believed that it contained a cartel provision; or

• the individual or corporation knew or believed the contract, arrangement or understanding contained a cartel provision and that he, she or it intended to give effect to it.

The Australian Competition and Consumer Commission (ACCC) has entered into a memorandum of understanding with the Commonwealth Director of Public Prosecutions (CDPP) as to how criminal prosecutions will be handled. A copy of the memorandum of understanding and the ACCC’s guidelines as to how it handles cartel investigations can be found on the ACCC website.

See Prosecution for breach of the prohibition on cartel conduct.

The ACCC has a policy in which cartel participants can be offered immunity from civil prosecution. It is only available to the first person to “blow the whistle” and is not available where the ACCC already knows about/is investigating the conduct, nor is it available to the instigator or ringleader of the cartel.

The policy requires complete cooperation with, and disclosure to, the ACCC and requires the applicant to admit that its conduct may have breached the CCA. Derivative immunity applies to related entities and to directors, officers and employees of a company who obtain immunity. A copy of the policy and the guidelines for its implementation can be found on the ACCC website.

The CDPP also has a similar immunity policy which applies to criminal prosecutions.

See Immunity for cartel conduct.