Competing for jurisdiction on both sides of the ditch

Published On 13/09/2012 | By David Crino | Cartels, Enforcement, Litigation

In the past week, the ACCC and New Zealand Commerce Commission (NZCC) have both defeated challenges to the prosecution of cartel conduct engaged in by companies that operate on an international scale.

In Australia, the ACCC has successfully defended an appeal to the High Court by Garuda Indonesia, following a Full Federal Court decision that Garuda was not immune from the air cargo cartel prosecution by the ACCC under the Foreign States Immunity Act 1985 (Cth).  As noted in our previous alert about Garuda’s challenge, for a respondent to benefit from immunity it is necessary to show that:

  1. it was part of the foreign State, by demonstrating it is a ‘separate entity’ (being an entity that, while not a department or organ of its executive government, is nonetheless an agency or instrumentality of the State); and
  2. no relevant exception applied.

On appeal, it was accepted that Garuda was a separate entity, although it was both directly and indirectly controlled by the Republic of Indonesia.  It therefore qualified for immunity subject to an exception for proceedings that “concern a commercial transaction”.  Garuda argued that the ACCC prosecution did not fall within this exception on the basis that, while the allegations may involve evidentiary issues of the airline’s commercial dealings, there was an inherent dichotomy between private and public law, and the prosecutions were not brought to vindicate private law contractual rights.

The High Court unanimously dismissed Garuda’s argument and found that the arrangements and understandings the subject of the ACCC’s prosecution were dealings of a commercial, trading and business character, relating to commercial airline freight services to Australia, and therefore decided that the ACCC did have jurisdiction to prosecute the airline.

The ACCC has stated that it will bring separate proceedings against Garuda in the Federal Court – an unappetising prospect for even the most frequent flyer.

Meanwhile, across the Tasman, the NZCC has also had a win on the jurisdiction front in an appeal against Visy and one of its senior executives, Rod Carroll, in its corrugated fibreboard packaging (CFP) cartel prosecutions.  Each of Visy and Carroll were successfully prosecuted by the ACCC in Australia, where they admitted liability and were subject to record fines (read more here, here and here).

The NZCC commenced its own prosecutions in the New Zealand High Court on the basis that the cartel affected New Zealand markets and consumers.  Both Visy and Carroll denied the court had jurisdiction to hear the cases.  At first instance, Justice Heath decided that the Commerce Act 1986 (NZ) only covered conduct designed to substantially lessen competition in a relevant market in New Zealand, and not a ”New Zealand trans-Tasman market.”  On that basis, he determined that only those claims relating to the overarching understanding and one of eight alleged transactions could proceed.

All the parties appealed that decision.  In holding for the NZCC, the Court of Appeal found that Visy carried on business in New Zealand and that its conduct did affect a market in New Zealand.  As a result, the Court concluded that the overarching understanding and the allegations arising from all eight of the transactions could proceed against Visy.

NZCC Chair Mark Berry stated that the Court’s clarification that conduct offshore will be caught by NZ competition laws where a company is resident in or carrying on business in NZ and the conduct ’relates to’ New Zealand markets will help the Commission “take effective enforcement action against cartel conduct targeting New Zealand.

Photo credit: loco’s photos / Foter / CC BY-ND

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About The Author

is a solicitor in the competition litigation practice of King & Wood Mallesons in Sydney.

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