The ACCC has commenced proceedings against Paul and Moses Obeid, together with nine other respondents, alleging they engaged in cartel conduct in relation to a bidding process for mining exploration licences in the Bylong Valley. The ACCC is seeking pecuniary penalties and disqualification orders.
The proceedings are the latest chapter in a succession of cases and regulatory actions arising from ICAC’s Operation Jasper. The case will be of particular interest to participants in the resources sector and those interested in cartel enforcement.
A rich vein of case law
The proceedings follow an earlier case in which the Obeids unsuccessfully challenged the ACCC in Court, the Obeids’ having sought to argue that the ACCC could not issue them s 155 notices because the bidding process for the mining exploration licenses did not involve a relevant “service” under the Competition and Consumer Act 2010 (Cth) (CCA) (see our earlier posts on the first instance decision, appeal proceedings and Full Court decision).
The grant of the licences had also been the subject of an ICAC investigation, which was called into question following the High Court’s recent decision in the Cunneen case. Legislation introduced in response to the Cunneen case is the subject of a pending constitutional challenge, and laws passed to cancel the Bylong Valley licences on ICAC’s recommendation were previously challenged unsuccessfully on constitutional grounds.
The competition angle
The CCA prohibits corporations from making and giving effect to contracts, arrangements or understandings (CAUs) between competitors where a provision of the CAU has the purpose of:
- preventing, restricting or limiting the supply of services to, or acquisition of services from, particular persons or classes of persons; or
- ensuring that in the event of a request for bids in relation to the supply or acquisition of a service one or more of the parties to the CAU bids, but one or more other parties do not bid.
The Court’s decision in relation to the s 155 notice challenge confirmed that the right to participate in an application process for exploration licences, and apply for ministerial consent in relation to exploration, satisfies the definition of “services” for the purposes of these CCA prohibitions.
The ACCC opens up a new coalface
The new proceedings brought by the ACCC involve allegations that Cascade Coal and related parties entered into and gave effect to a CAU with its competitors, being persons and entities associated with the Obeids, on the basis of the following:
- the entities associated with the Obeids, including Loyal Coal, would not bid as they would withdraw an existing application for licences over coal exploration areas at Mount Penny and Glendon Brook and not pursue further mining rights in adjacent areas; and
- in return, Cascade would bid and vest its interest in an exploration licence at Mount Penny in a separate entity, grant a company associated with the Obeids a 25% interest in that entity, purchase an option over three properties located within the exploration area at four times their face value (one of which was held on trust for beneficiaries including the Obeids), and refinance or repay mortgages over those properties.
The Obeids are being sued by the ACCC as accessories on the basis that they allegedly negotiated and agreed the CAU and gave directions to others to facilitate the withdrawal of Loyal Coal’s applications, the transactions in relation to the 25% interest and the alleged property deal.
The individuals who allegedly negotiated, agreed and implemented the CAU on behalf of Cascade are also parties to the proceedings.
Though the case does not relate to procurement, it is broadly consistent with one of the ACCC’s stated enforcement priorities for 2015, which is to tackle cartel activity in the government sector and raise awareness about cartels with anti-corruption bodies. It is also a salient reminder of the reach of the cartel provisions and the need for vigilance in the context of bidding arrangements for government contracts or concessions, particularly in the resources sector.
Interestingly, the ACCC has passed up another opportunity to commence Australia’s first criminal cartel case. This is attributable, at least in part, to the fact that the alleged conduct spanned the period both before and after the commencement of the criminal cartel regime, which may have made it an unattractive vehicle for the ACCC’s inaugural criminal prosecution.