The Proposed Australian Cartel Offence: The Problematic and Unnecessary Element of Dishonesty

Abstract

Proposals for the criminalisation of serious cartel conduct were announced by the Treasurer of Australia in a press release on 2 February 2005 (Criminalisation Proposals). The cartel offence to be introduced under those proposals will prohibit a person from making or giving effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict output, divide markets or rig bids, where the contract, arrangement or understanding is made or given effect to with the intention of dishonestly obtaining a gain, pecuniary or non-pecuniary and for the defendant or another person, from a person or class of persons likely to acquire or supply the goods or services to which the cartel relates (Cartel Offence). The Criminalisation Proposals are problematic. First, the requirement of an intention to dishonestly obtain a gain is not a touchstone of serious harm or serious culpability. The standards of ordinary people limb of the element of dishonesty is an undefined and undefinable populist notion the practical application of which will create real difficulties for judges and juries as well as for people in business and their advisers. The subjective requirement for dishonesty of knowledge that the conduct was dishonest according to the standards of ordinary people will allow large and sophisticated corporations to deny liability and quite possibly obtain an acquittal on the basis of mistake of law and self-preferring beliefs about the morality of their conduct. Secondly, the element of dishonesty is unnecessary given that there are several possible alternatives, including: (a) requiring, as a jurisdictional element of the cartel offence and as a guideline for the exercise of prosecutorial discretion, that the specific line of commerce affected by the cartel is likely to represent a minimum percentage (say 20%) or more of the value of sales by all competitors who competed in that specific line of commerce in the relevant geographic market during the period when that specific line of commerce was affected by the cartel or a specified period linked to the time of the alleged offence; and (b)(i) requiring, as the core mental element for the offence, a common intention: (a) to fix prices or restrict supply; and (b) to increase bargaining power at the expense of those with whom the cartel deals; and (ii) narrowing the definition of price fixing, restricting output, bid rigging or market sharing (eg by excluding indirect price fixing in a downstream market from the conduct prohibited by the Cartel Offence).