Recent developments on liability for cartel facilitators
In this post, we examine some recent developments on liability for cartel facilitators in Europe and Australia.
The European Court of Justice has recently handed down a decision clarifying that parties can be liable for contraventions of EU cartel laws, even if they are not participants in the relevant market.
The case concerned a consultancy firm, AC-Treuhand AG, which facilitated two separate heating stabiliser supplier cartels. In 2009, the European Commission imposed fines of €348,000 on a lump sum basis (because AC-Treuhand did not have sales in the relevant market). AC-Treuhand appealed to the General Court and subsequently to the European Court of Justice. One of AC-Treuhand’s key grounds of appeal was that providing assistance to a cartel by supplying services does not fall within the scope of the prohibition in article 81 of the Treaty Establishing the European Community (now article 101 of the Treaty on the Functioning of the European Union).
The Court ultimately held that there was no requirement in the prohibition that indicates that it is only directed at parties who are active in the relevant market(s) (ie. at competitors only). Rather, the prohibition extends to parties, including consultancies, that facilitate (in a sufficiently direct manner) the cartel conduct of others. The Court’s decision was contrary to, and did not address, the opinion of the Advocate General, who considered that the relevant prohibition would not catch conduct such as the conduct alleged against AC-Treuhand.
The European Court of First Instance had previously (in 2008) confirmed AC-Treuhand’s liability for a facilitative role in a separate case involving a cartel between producers of organic peroxide.
The Australian position
Australian legislation provides for a scheme of ancillary liability that can be used by the ACCC to hold to account those who facilitate unlawful conduct. Under sections 76 and 79 of the Competition and Consumer Act 2010 (Cth) (CCA), the Court can impose pecuniary penalties (or, in the case of criminal cartel offences, criminal fines and/or imprisonment) on parties in situations including where a party has:
- aided, abetted, counselled or procured another person to contravene, or commit an offence under, most competition laws;
- induced, or attempted to induce, a person, whether by threats or otherwise, to contravene, or commit an offence under, most competition laws;
- been in any way, directly or indirectly, knowingly concerned in, or party to, a contravention of, or offence under, most competition laws.
Sections 76 and 79 empower the Court to punish parties that have not directly contravened a competition law, including parties that:
- do not directly engage in the relevant conduct; and
- do not directly participate in the market(s) affected by the relevant conduct.
In the case of cartels, in order to show a direct offence or contravention by a facilitator or consultant, the Australian Competition and Consumer Commission (ACCC) would have to show that the person was a party to the cartel contract, arrangement or understanding. Under the CCA, the relevant prohibitions relate to:
- the making of a contract, arrangement or understanding that contains a cartel provision; and
- giving effect to a cartel provision.
The definition of cartel provisions requires only that at least two parties to the relevant contract, arrangement or understanding are in competition or likely competition. This leaves open the possibility for other parties such as facilitators and consultants (that are corporations) to be directly liable. The circumstances in which such a party might make a contract, arrangement or understanding containing a cartel provision would appear to be broader than those in which an external party would give effect to a cartel provision. Individual persons acting as consultants and facilitators can only be liable in the sense of sections 76 and 79 set out above.
The European Court of Justice’s recent decision in AC-Treuhand shows that, while there is no prohibition against aiding or abetting (etc) cartel conduct in the EU, consultants and facilitators can be directly liable in some circumstances. In Australia, consultants and facilitators are more likely to be caught by the ancillary liability provisions in sections 76 and 79 of the CCA. However, consultants and facilitators that are corporations can also be directly liable if they are parties to the relevant contracts, arrangements or understandings.
Some Australian cases, which are still before the Court, include allegations that touch on this issue.
In 2014, the ACCC commenced proceedings in the Federal Court of Australia against Australian Egg Corporation Limited (AECL) and others in relation to an alleged attempt to induce egg producers to engage in cartel conduct. The ACCC did not allege that the attempt was successful. AECL is not itself an egg producer, but rather an industry body that provides marketing, research and development services using statutory levies collected from egg producers. The ACCC alleged that AECL had ‘attempted to induce’ rather than ‘attempted’ a contravention. One reason for this may be that AECL would never have been a party to the alleged cartel agreement that may have resulted had the attempt had been successful.
In 2013, the ACCC commenced proceedings against Colgate-Palmolive and others in respect of alleged cartel conduct in relation to laundry detergent. One of the respondents in that case is supermarket chain Woolworths, which the ACCC alleges ‘played a key role in organising [some of the conduct]’ and accordingly was ‘knowingly concerned’ in some of the laundry detergent suppliers’ contraventions for the purposes of section 76 of the CCA.
The ACCC has also commenced proceedings against Informed Sources (Australia) Pty Ltd and a number of petrol retailers for allegedly contravening section 45 of the CCA. Section 45 prohibits contracts, arrangements and understandings that have the purpose, effect, or likely effect of substantially lessening competition. The ACCC alleges that Informed Sources provides a service to subscribing petrol retailers that allows them to privately and, on a near real-time basis, exchange pricing information at each of their petrol stations. The ACCC alleges that this allows the retailers to monitor and respond to each other’s prices and observe and analyse the pricing behaviours and strategies of their competitors. Because the ACCC relies on Informed Sources’ agreements with the individual petrol retailers, to which Informed Sources is a party, it alleges direct contraventions by both the petrol retailers and Informed Sources.
King & Wood Mallesons acts for Informed Sources and Colgate-Palmolive in the ACCC’s respective cases against them.
In Australia, the ACCC has a recent track record of taking action against organisations that it perceives are facilitating anti-competitive conduct. Businesses, including consultants and consulting companies, should ensure that they have appropriate mechanisms in place to ensure compliance with competition legislation.
Consulting companies and industry bodies should be mindful that they may be liable in certain circumstances for anti-competitive conduct affecting a particular market, even if they do not operate in that market. Their liability might be either direct or ancillary – either way, the same maximum penalty applies.