Cartel Offence Research Articles

The Cartel Offences: An Elemental Pathology

The statutory regime that will apply to cartel conduct in Australia from 2009 will be highly complex. Notwithstanding several revisions to the Bill during its gestation, many of the issues have not been addressed and, in general, there is considerable uncertainty as to how the new provisions will be interpreted and applied. The principal purpose of this paper is to review the requirement of a contract, arrangement or understanding, including the amendments proposed by the Australian Competition and Consumer Commission to the meaning of ‘understanding’ and the fault elements of the cartel offences. In relation to the former, the paper is highly critical of the ACCC proposals and suggests a more helpful approach is to map out the conceptual boundaries of an ‘understanding’ by comparing the approaches taken under US and EC law. In relation to the latter, the paper concludes that the main fault elements that apply - intention, knowledge and belief - raise numerous difficult issues, that the process of inference from circumstances will be problematic and that the challenges in formulating jury directions are formidable.

The Australian Criminal Cartel Regime: A Model for New Zealand?

In January 2008 the Australia government released exposure draft materials relating to the criminalisation of cartel conduct for public comment. This paper reviews the Exposure Draft Materials in relation to the definition of cartel offences and the formulation of enforcement policy, including immunity/leniency and cooperation policies; highlights preferable possible approaches and the lessons that emerge from other overseas models; and canvasses what appear to be the main possible implications for a criminal cartel regime in New Zealand if New Zealand decides to develop such a regime.

Resisting the Long Arm of Criminal Antitrust Laws: Norris v The United States

This note analyses the judgment of the House of Lords in the case Norris v USA, and argues that its ruling on whether mere price‐fixing can amount to a common law conspiracy to defraud will have a significant effect on both US and UK criminal anti‐cartel enforcement. In particular, the potential negative impact of the judgment on the future viability of the UK Cartel Offence is highlighted.

The UK Cartel Offence: Lame Duck or Black Mamba?

A criminal offence requiring Ghosh dishonesty was introduced in the UK by the Enterprise Act 2002, primarily to enhance cartel deterrence as a complement to corporate fines. Yet the first convictions resulted from a US plea bargain in 2008. This paper identifies three obstacles to enhancing deterrence through the cartel offence. First, Norris v USA and a public survey suggest relatively weak perceptions of cartels persist in the UK. It was envisaged that convictions would remedy this, but prosecutors will continue to be very selective about the cases they bring to trial if there are doubts as to whether price fixing alone is viewed as objectively dishonest. Secondly, any increase in criminal enforcement risks discouraging leniency applications to the European Commission, because corporate immunity granted on the Community level does not automatically protect employees from criminal prosecution in national courts. There is also no conclusive mechanism for direct settlement, as there is in the US. Thirdly, sizeable benefits and purportedly low detection rates mean deterrence may be weak if custodial sentences do not become the norm. Further sanctions such as Director Disqualification Orders can play an important role in ensuring cartelists do not seek immediate reemployment at a high level.

Is My Client's Conduct Dishonest or Merely Excusable Sharp Practice?

Dishonesty is fast becoming entrenched in commercial law in Australia as the defining characteristic distinguishing criminal conduct from conduct which only has civil or civil penalty consequences. Many of the serious offence provisions under the Corporations Act 2001 (Cth) require the prosecution to prove dishonesty and dishonesty has been adopted as a key element of the new cartel offence provision which is proposed for inclusion in the Trade Practices Act 1974 (Cth). Whilst deciding whether conduct is dishonest may be straightforward in most cases, situations can arise where a lawyer may be asked to advise a client as to whether a proposed course of conduct is dishonest and the answer may not be clear cut. Advising a client in such a situation may be difficult because current tests of dishonesty tend to reflect standards of ethics and morality generally accepted by the community which may not accord with the client's and/or the lawyer's personal standards. This article will examine the concept of dishonesty in the context of commercial crime, attempt to add some clarity to this particularly fluid concept and scrutinize the lawyers' role in ensuring clients' actions accord with community values.

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

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).

Business Collusion as a Criminological Phenomenon: Exploring the Global Criminalisation of Business Cartels

Over the last dozen years or so there has been a burgeoning of criminal law for purposes of dealing with business cartels in a number of jurisdictions (for instance, the new ‘cartel offence’ introduced under the Enterprise Act 2002 in the UK). The discussion here provides first of all some account of this process of criminalisation, mapping it in terms of jurisdictions and the legal character of this category of cartel offending. It then seeks to explain and account for the phenomenon and more particularly to determine the extent to which it may be seen either as an element of more forceful prosecution strategy, or alternatively as a sea-change in moral perception and evaluation. Put another way, is this a development led by legal policy, or a genuine shift in outlook, which has produced a new legal policy? It will be argued finally that, in a more pragmatic perspective, the success of the criminalisation project in any case depends on the emergence of a genuine sense of ‘hard core’ delinquency, without which effective regulation by means of criminal law is unlikely to be achieved. In this respect, a manufactured sense of moral censure, fostered by prosecutors to facilitate leniency programmes, may (outside the US) eventually prove to be a point of vulnerability in such strategies.

Forging the European Cartel Offence: The Supranational Regulation of Business Conspiracy

AbstractThe discussion in this paper examines the emergence of what may now be fairly described as the ‘European cartel offence’: that species of infringement of Article 81 of the EC Treaty, increasingly referred to as ‘hard core cartel’ activity, connoting real delinquency which justifies the imposition of severe penal sanctions. This development is significant not just as a matter of more explicit regulation within the field of competition law, but also as part of a wider context of vilification and criminalisation of certain well-established forms of cartel behaviour. As national systems (such as that in Britain) have introduced new criminal offences in relation to cartels, it is illuminating to consider and compare the evolution of the supranational ‘European cartel offence’. Having its basis in the infringement of Article 81 of the EC Treaty, the offence is necessarily one of collusion, being an agreement or concertation for anti-competitive purposes. As such, the more specific nature of the ‘offence’ has been established incrementally, very much as the product of argument presented in appeals relating to issues of evidence and penalties. It has been necessary to consider whether the offence resides in the planning or the implementation of anti-competitive activity, or both, and whether it comprises specific acts or a continuing pattern of behaviour. The mature version of the ‘offence’, worked out in the jurisprudence of the European Commission and the Community Courts, is based on the organising concept of ‘the cartel as a whole’. This process of forging a ‘European cartel offence’ provides an instructive lesson in the legal construction of criminality and the resort to a form of organisational responsibility. It also points to the emergence of a bifurcated system of both individual and corporate liability in this context.