During 2018 there were a number of significant developments in enforcement activity relating to corporate cartels, demonstrating an increased appetite for enforcement and a trend towards higher monetary penalties being imposed on corporations and individuals in order to deter cartel conduct. This was evident in the cases of Nippon Yusen Kabushiki Kaisha (“NYK”) and Kawasaki Kisen Kaisha (“K-Line”).
NYK is a Japanese shipping company responsible for supplying ocean shipping services to Australia. It was the first company to be criminally prosecuted in Australia since the criminalisation of cartel conduct. NYK pled ‘guilty to a single charge of giving effect to a cartel provision, contrary to s 44XXRG(1)1 of the CCA.2 Although it was not possible to determine the total value of benefits it received from its cartel conduct, the profits generated from the anti-competitive conduct were estimated at AUD$15.4 million.
In imposing the sentence, Wigney J made reference to six factors that weighed in favour of a substantial penalty being imposed:
- According to the legislation, the maximum penalty for the office is the greater of:
- AUD$10 million;
- three times the benefits attributable to the offence; or
- if benefits cannot be attributed, 10% of the corporation’s annual turnover in the 12 months preceding the offence.3
Given NYK’s benefits cannot be accurately determined, the maximum penalty they were to face was AUD$100 million (annual turnover of AUD$1 billion).
- The seriousness of the offence in the circumstances.
- The conduct was ‘covert, deliberate, systematic and involved planning and deliberation’.4
- Senior managers were involved in the conduct who knew or ought to have known that the conduct ‘breached anti-trust or competition laws’.5
- Profits were obtained from the cartel conduct.
- General deterrence for other corporations that are engaging or considering engaging in similar conduct.
Wigney J considered that the following four factors mitigated the offence and suggested a lesser penalty:
- NYK pled guilty at a very early stage. The company also provided ‘timely, full, frank and…expeditious cooperation’.6 Furthermore, NYK gave an undertaking to provide assistance in future proceedings against other members of the cartel.
- Since the offence, NYK has demonstrated excellent prospects of rehabilitation. They have established new systems and structures within the company to ensure similar conduct does not occur in the future.
- They have no ‘prior record of corporate criminal conduct’.7
- NYK has already had administrative and other penalties imposed by foreign jurisdictions in relation to the impact on those particular jurisdictions.
After considering the above factors, Wigney J came to an initial penalty of AUD$50 million. He then applied a 50% discount for the early guilty plea, past and future assistance. Of that 50% discount, 10% specifically relates to the future assistance. NYK was fined a total of AUD$25 million with the possibility of AUD$30 million if they do not comply with their undertaking.
K-Line was part of the same cartel as NYK and also pled guilty to the offence on 5 April 2018, some months after the penalty was handed down in NYK. K-Line’s cartel conduct concerns the shipping of cars, trucks and buses to Australia. K-Line is a global organisation with offices in Europe, Africa, Northeast and Southeast Asia, America, India and the Middle East and it has an Australian subsidiary with a head office in Tokyo.
K-Line’s executives have not been prosecuted, only the corporation. Australia commenced a criminal prosecution against K-Line following the Department of Justice in the US conducting an investigation which saw the corporation pleading guilty and agreeing to pay a criminal penalty of US$67.7 million.
As of the date of the writing of this article, K-Line has yet to be sentenced for the 37 contraventions of Section 44ZZRG(1) of the CCA .
Australia and New Zealand Bank, Deutsche, and Citigroup
The strong focus by the ACCC on the financial sector has seen the ANZ Bank, Deutsche Bank and Citigroup charged by the CDPP with alleged cartel conduct, relating to the CCA ‘Share Placement Cartel’. A number of CEOs and senior executives were also criminally charged.8 It is alleged that conduct involves cartel arrangements relating to trading in ANZ shares following a $2.5 billion institutional share placement in August 2015. ANZ and each of the individuals are said to be knowingly concerned in some or all of the alleged conduct.9 The case centres on ANZ’s institutional equity placement and the alleged failure to disclose that a significant portion of shares went to two of the three joint lead managers. It is said that the investigation has been conducted for over two years by the regulator. The corporations and individuals are defending the charges.
Although the above highlight the criminalisation of corporate cartels, there have also been a number of recent civil penalties imposed for similar conduct.
The ACCC alleged that Flight Centre attempted to induce three airlines to enter a contract, arrangement or understanding to fix, control or maintain prices for air travel in contravention of Section 45 and 45A of the then CCA. Flight Centre denied the claim and argued that there is no lessening of competition where the provider of air travel remains the same whether it is sold directly by the airline or by an agent for the airline. The trial Judge agreed with the ACCC and Flight Centre were ordered to pay $11 million for the contravention. Flight Centre appealed to the Full Federal Court and were successful, the Court finding that there was no separate market for distribution services to customers, and that Flight Centre did not compete in the alleged market. The ACCC were ordered to pay Flight Centre’s costs.
The ACCC was granted special leave to appeal to the High Court of Australia in 2016. The majority of the High Court (4-1) considered that there was a market in which the parties competed and as a result the agreements between Flight Centre and the airlines substantially lessened competition. In May 2017, the matter was remitted to the Full Federal Court of Australia on the issue of penalty alone and this resulted in an increased fine of AUD$12.5 million.10
The Federal Court of Australia found that Yazaki Corporation engaged, with a competitor, in collusive conduct when supplying Toyota Australia with wire harnesses. The Corporation was initially fined AUD$9.5 million. In the recent appeal, the Full Federal Court of Australia increased the penalty to AUD$45 million, which currently constitutes the highest penalty imposed under the CCA.11
This decision to more than quadruple the penalty brings Australia’s cartel penalties more in line with US and European jurisdictions.
Moving forward, it is reasonable to expect that there will be an increase in ACCC Cartel enforcement investigation and activity. The Chairman of the ACCC Rod Sims has highlighted that the regulator has a ‘substantial team of specialist criminal cartel investigators’.12
- Now s 45AG(1).
- Commonwealth Director of Public Prosecution v Nippon Yusen Kabushiki Kaisha  FCA 876 (3 August 2017), 4.
- Above n 1, s 45AG(3).
- Above n 31, 17.
- Ibid., 18.
- Ibid., 22.
- Ibid., 24.
- Australian Competition and Consumer Commission, ‘Criminal cartel charges laid against ANZ, Citigroup and Deutsche Bank’ (5 June 2018).
- Flight Centre v ACCC  FCAFC 53.
- ACCC v Yazaki Corporation  FCAFC 73.
- Global Cartel Enforcement – 2017 Full-Year Cartel Report, Allen & Overy LLP 2018.