Changes to the law make a compliance management system an imperative

In a warning delivered by the chairman of the ACCC, Graeme Samuel, at a meeting of the American Chamber of Commerce in Sydney on 9 July he indicated that serious cartel conduct will, after 24 July, be viewed by the Australian Competition and Consumer Commission as criminal and will consequently expose company executives to prison terms of up to 10 years.

He went on to add: “You do not fix prices, you do not rig bids, you do not allocate customers. This is the kind of conduct which could expose your client to gaol. The ACCC will use the full force of the law to bring you to account, either financially or through incarceration."
Under the new law, serious offenders would be jailed and, in addition, potentially face a fine and/or be banned from being a company director or company manager for life.

Furthermore, a business could be subject to fines of up to $10 million, or three times gain, or 10 per cent group turnover – whichever was the highest.

It has been my experience that breaches of the competition law can occur out of ignorance or the willingness to take risks.

Having a total sales target driven culture bereft of any warnings about the need for compliance to be maintained can send staff signals that ‘all bets are off’ as to how they achieve sales targets. Some top managers engage in ‘dog whistling’ - in that they profess support for competition law compliance but at the same time send signals that they are indifferent to how sales are maintained. A good example of this occurred in a recent cardboard box price-fixing case and is summed up neatly in the following extract:

Sacked Amcor chief Russel Jones put pressure on executives to collude with Visy, according to one executive’s record of interview with the Australian Competition and Consumer Commission.

The transcript, part of which has been obtained by The Australian Financial Review, reveals that Peter Brown, former managing director of Amcor Australia, told the ACCC in 2005 that Mr Jones had “[taken] me to task in front of the board about the low prices in corrugated boxes and how it was the most important thing to ensure the success of the business, so I felt extreme pressure to get prices up.”

Asked whether Mr Jones had said “go out and collude”, Mr Brown replied: “No, not at all, no no, and it would not have been appropriate for him to say that in those terms anyway. But I was very, very clear in my own mind what he was looking for.”

ACCC general counsel Robert Alexander asked: “When you say you are clear in your own mind what he is looking for, he was looking for increased prices, was he?”
“Yes, and the only way to get those was essentially to collude with the competitor,” Mr Brown replied.
“I think that was everyone’s view. I don’t believe anybody who was involved in the business had a view that it was possible to achieve it in any other way.”
Any firm or its executive or staff that is pondering financial gains from a cartel or price fixing arrangement should ponder the following before taking such a course.
The first is "What are your chances of being caught?" These days they can be high. For a start, the ACCC has an immunity policy whereby the first participant in a cartel/price fix in the door who reports the breach is granted immunity. An understanding can also be inferred from circumstantial evidence such as:
• parallel conduct (e.g. two competitors ceasing, at approximately the same time, to supply goods to a particular customers); and
• evidence of opportunities for an understanding to arise (such as a trade association or social meeting).
For example in the Ballarat petrol case the ACCC’s case was partially based on circumstantial evidence i.e. pattern of phone calls that correlated with price increases.

The other thing to bear in mind is that many companies are now establishing internal whistleblowing systems to allow for reporting of such conduct

If the chances of being caught are relatively high then is it worth engaging in a price fix? Think about the following consequences that can and have occurred to others:
Jail;
High fines for the firm and the participants;
Stress;
Regulators “in your face” for an extended period;
Legal costs for lawyers to represent you;
Reputation damage.

Any company that does not have an effective competition law compliance management system is putting themselves at real risk. The cost of such a system far outweighs the penalties.