InCompetition: criminal cartel charges in pharmaceutical industry

Bitter pill to swallow – criminal cartel charges in pharmaceutical industry

Published On 29/01/2021 | By Kritika Rampal | Cartels, Litigation

Criminal cartel charges in pharmaceutical industry: Alkaloids of Australia and its former export manager charged following ACCC investigation

In an end of year flurry, Rod Sims and the ACCC have made good on the promise to commence two new cartel cases in 2020. Less than two months after the ACCC commenced civil proceedings alleging that NQCranes had engaged in cartel conduct, in October 2020 the Commonwealth Director of Public Prosecutions commenced criminal proceedings against pharmaceutical company Alkaloids of Australia Pty Ltd and its former export manager, Christopher Kenneth Joyce, after an ACCC investigation.

According to the ACCC, Alkaloids of Australia owns plantations of duboisa in Kingaroy, Queensland. Duboisa is a native Australian plant which contains the active pharmaceutical ingredient SNBB scopolamine N-butylbromide (also known as hyoscine butylbromide) – an anti-spasmodic – used to treat motion sickness and gastrointestinal spasms. SNBB is manufactured in Australia, and then exported to manufacturers for use in anti-spasmodic medications. The medications are then imported back into Australia.

The ACCC alleges that Alkaloids of Australia and other overseas suppliers of scopolamine made and gave effect to arrangements to fix prices, restrict supply, allocate customers and/or geographical markets, and/or rig bids for the supply of SNBB to international manufacturers of generic antispasmodic medications.

Given the period over which the alleged conduct took place, Alkaloids of Australia has been charged with offences under both the Competition and Consumer Act 2010 (Cth) and its predecessor, the Trade Practices Act 1974 (Cth):

  • 16 counts of giving effect to a cartel provision. Particulars provided by the CDPP allege that Alkaloids of Australia gave effect to a cartel provision including by:
    • arriving at an agreement to sell SNBB at various minimum prices. The ACCC alleges that the conduct commenced on 24 July 2009, the date on which criminal cartel laws came into force in Australia, however as was stated in the case of the Nippon Yusen Kawasaki Kaisha (NYK) prosecution, it is possible that the conduct predated that date;
    • selling SNBB within 10% of a designated quota agreed with other parties to the contract, arrangement or understanding;
    • arranging to allocate entire supplies of duboisa plants from growers to a participant in the scheme;
    • giving effect to a contract, arrangements or understandings relating to the allocation of bid amounts to ensure that a specific bid from a pool of participants was successful (i.e. a bid rigging arrangement);
  • 16 counts of making a contract or arrangement, or arriving at an understanding containing a cartel provision, the first of which commences on or about 12 October 2009. In general, the particulars of the ‘make a contract, arrangement or understanding’ charges mirror the ‘give effect’ charges, as the particularised contract, arrangement or understanding is later implemented by the parties; and
  • one count of attempting to induce a person to contravene a cartel offence provision by attempting to supply SNBB at or around a designated amount;

Alkaloid of Australia’s former export manager, Christopher Joyce, has also been charged with offences under both the Competition and Consumer Act 2010 (Cth) and its predecessor, the Trade Practices Act 1974 (Cth). These include:

  • 32 counts of aiding, abetting, counselling or procuring the contravention of a cartel offence by Alkaloids of Australia, where the particulars of these offences mirror the particulars outlined for Alkaloids of Australia; and
  • one count of attempting to induce a person to contravene a cartel offence provision.

International coordination

While a number of international corporations are named as parties to the impugned arrangements, the ACCC has not indicated whether it intends to take any action against other named participants.

The proceedings appear to mirror dawn raids and a subsequent investigation conducted by the Swiss Competition Commission (COMCO). In a press release, COMCO indicated that it had “reasonable grounds to suspect that [unlawful price and market sharing agreements] have kept the prices of [scopolamine butylbromide] high and that [manufacturers and distributors of the ingredient] have allocated markets”.

International coordination is key to the ACCC’s continued monitoring and enforcement activities. For instance, the ACCC is a member of the International Competition Network (ICN), and participates in a number of ICN working groups, including the cartel working group. COMCO is also a member of the ICN.

Heavy penalties

The maximum corporate fine for each criminal cartel offence is the greater of:

  • $10 million;
  • three times the total benefit obtained and reasonably attributable to the commission of the offence; or
  • where the total value of the benefit cannot be determined, 10% of the corporation’s annual turnover connected with Australia.

An individual convicted of a criminal cartel offence may be sentenced to up to 10 years’ imprisonment or fined up to $420,000, or both.

The matter was mentioned in the Downing Centre Local Court on 19 January 2021 and is next listed for 30 March 2021, by which time the Prosecution is to serve the brief of evidence.

Image by jnittymaa0 / Pixabay / Licence / Filtered to B&W and resized
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About The Author

is a Solicitor in the competition litigation team in the Sydney office of King & Wood Mallesons. Kritika has a special interest in policy and regulation, and pretends to be good at playing sports on the weekend.

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