The red dust settles

Published On 05/05/2015 | By Suraj Sajnani | Cartels
ACCC to take no action in relation to Andrew Forrest call to cap iron ore production

The ACCC last week settled the dust on the PR storm that resulted from Twiggy Forrest’s public comments suggesting a cap on iron ore production.  In our earlier alert, we discussed how the Fortescue Metals Group chairman might have gotten more than he asked for when a formal ACCC investigation was triggered by comments he made at a business dinner suggesting competitors cap iron ore production to increase prices.

The ACCC investigated whether or not those comments could be seen as an attempt by Mr Forrest to induce competitors to enter into a capacity restricting cartel. In stating that the ACCC would take no further action, Chair Rod Sims stated that the Commission believed the comments were hypothetical and intended to encourage a policy debate rather than induce a cartel. Having said that, he reminded the business community that “public statements calling for competitors to agree to limit production or to raise prices may constitute a serious cartel offence”.

In its press release, the ACCC also provided insight on the application of section 51(2)(g) of the Competition and Consumer Act 2010, which provides an exemption from the operation of the cartel prohibitions for arrangements that relate exclusively to exports of goods from Australia notified to the ACCC.  As foreshadowed by King & Wood Mallesons senior competition partner Stephen Ridgeway, the ACCC did not consider the export exemption in section 51(2)(g) would have applied in the present situation. That exemption applies only to arrangements relating exclusively to the export of goods whereas a cap on iron ore production would impact both the domestic and export supply of iron ore.  While the ACCC’s conclusion does not accept Fortescue’s defence of Mr Forrest, namely that the comments made were not in breach of the law because they fell within the exemption under section 51(2)(g), it nonetheless leaves Twiggy off the hook.

Not unsurprisingly, Mr Forrest does not appear to have made a public statement about the decision.

Image credit: Flickr

About The Author

Suraj Sajnani is a trainee solicitor based in the Hong Kong office of King & Wood Mallesons and is currently located in Sydney where he works in the dispute resolution team.

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