The ACCC drops anchor on RORO cartel prosecutions with $24 million fine
Wallenius convicted of cartel offence and fined $24 million
The final voyage of Australia’s international shipping cartel proceedings docked permanently on 4 February 2021 as the Federal Court of Australia imposed a $24 million fine on Wallenius Wilhelmsen Ocean AS (Wallenius). Wallenius was fined for the one, rolled up offence of intentionally giving effect to cartel provisions between 1 June 2011 and 31 July 2012. The conduct occurred in Japan and elsewhere, in connection with cargo shipped to Australia.
In August 2019, the Commonwealth Director of Public Prosecutions (CDPP) charged Wallenius with criminal cartel conduct. This was almost four years after the ACCC commenced an investigation into anti-competitive practices in the market for the supply of ocean shipping services for “roll-on, roll-off” cargo to Australia. Prior to Wallenius being charged, the investigation implicated Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen Kaisha (K-Line), both charged with substantially similar offences. After each company entered pleas of guilty, the Federal Court imposed penalties of $25 million on NYK and $34.5 million on K-Line.
The penalty against Wallenius
The penalty: initial considerations
At first glance, Wallenius’ $24 million fine appears to be lower than NYK’s penalty, and substantially smaller than K-Line’s penalty. However, the Court noted that:
- the charge period for both NYK and K-Line spanned 3 years and involved 20 or more incidents of each company giving effect to a cartel provision. In contrast, Wallenius admitted to only one offence of giving effect to a cartel provision between June 2011 and July 2012 (involving six incidents). Two other incidents from 2009 were also taken into account when determining the sentence for Wallenius (2009 marking the introduction of criminal cartel offences in Australia); and
- the objective seriousness of Wallenius’ offending was “undoubtedly less” than the objective seriousness of NYK and K-Line’s offending. Notwithstanding this, the Court found that Wallenius had committed a very serious offence in all the circumstances, given cartel conduct “should be emphatically condemned and deterred by the imposition of appropriately stern penalties.”
The ‘yardstick’: treatment of the maximum penalty
The Court determined that the starting point for determining the appropriate sentence was the maximum penalty of $48,532,493. This represented 10% of Wallenius’ annual turnover for the relevant period. The Court rejected Wallenius’ submission that this figure was not an appropriate ‘yardstick’ (Wallenius arguing it had in fact made a loss, rather than a profit, in relation to one instance of its give effect). Instead, the Court considered that, while “some degree of caution or circumspection” should generally be applied in treating the maximum penalty as a guidepost, it was nonetheless useful and reliable. In particular, the Court noted that:
- the conduct is no less serious simply because a direct financial benefit to the corporation cannot be established (with such benefits not limited to profit or other tangible financial benefits);
- the serious nature of the offence is demonstrated by a course of “deliberate, systematic and covert anti-competitive conduct,” overseen by senior management in an important market;
- potential damage to competition, and other serious economic damage, cannot be ignored; and
- the need to impose a fine to provide effective deterrence is the primary consideration.
The court determined that a penalty of $24 million was appropriate in all the circumstances. This penalty would have been $30 million but for the 20% discount applied for an early guilty plea.
Other stern warnings: the value of contrition and cooperation; and the significance of penalties paid overseas
In addition to giving insight on the value of the yardstick for any penalty, the sentencing judgment provides a reminder of the significant value placed by the Court on the contrition and cooperation offered by a party that has pleaded guilty, as well as Court’s treatment of penalties paid in overseas jurisdictions.
Plea of guilty
As noted above, a 20% discount was applied for Wallenius’ plea of guilty (largely representative of the high utilitarian value of the plea). The CDPP accepted that Wallenius pleaded guilty at the earliest possible opportunity, however the Court did not accept Wallenius’ submission that it had “foreshadowed” its guilty plea to the ACCC “well before proceedings had commenced.” Indeed, there was no evidence of that fact before the Court, agreed or otherwise.
No substantive cooperation, no additional discount
The Court rejected Wallenius’ assertion that it had provided cooperation to the ACCC, as that was not supported by the agreed facts or evidence filed by Wallenius. At  Justice Wigney stated that:
“[i]n the absence of any agreed facts or any concession by the Director, if WWO wanted to be sentenced on the basis that it had provided cooperation to the ACCC or any other investigatory body, it was incumbent on it to adduce evidence concerning that matter. It did not do so.”
This is in stark contrast to the first two shipping cartel cases, where cooperation was a significant factor in the discounts applied to NYK and K-Line’s penalties. NYK received a discount of 40% for its early guilty plea and contrition inherent in the early plea and past cooperation. It also received an additional 10% discount for future cooperation in respect of ongoing investigations and prosecutions. K-Line received a discount of 28% for its early plea of guilty, and its assistance and past cooperation.
This delivers a reminder that providing significant and meaningful cooperation can shore up a higher discount when it comes to sentencing.
The importance of in-house compliance and training
The Court determined that Wallenius had reasonable prospects of rehabilitation and low prospects of reoffending. This was based on unchallenged evidence concerning the establishment of training programs and other practices to prevent reoffending. The Court considered that this demonstrated Wallenius’ desire to change its corporate compliance structure.
Wallenius’ evidence on training and compliance systems importantly demonstrates the need for effective training and compliance controls within companies, particularly in large multi-national corporations. The Court noted that the offending conduct had taken place while regular competition law training was offered to employees. This either demonstrated that Wallenius’ training was manifestly inadequate, or that Wallenius’ corporate culture was conducive to behaviour that deliberately disregarded Australian competition laws. The Court determined that the latter was more likely and did not accept Wallenius’ assertion that the conduct was quarantined in one arm of the company. Rather, Justice Wigney stated that global culture of the company was one of “active disregard.”
The Court also noted Wallenius’ failure to demonstrate genuine contrition and remorse. Wallenius’ evidence in the proceedings did not include any express statement of contrition or remorse, and it did not take any disciplinary action in respect of staff involved in the conduct. Justice Wigney noted at :
“The absence of any apology or express statement of regret and contrition by Ms Schreuder, or any other senior officer of WWO, makes it difficult to accept that WWO is genuinely remorseful and contrite. While the implementation of compliance and training measures and the plea of guilty demonstrate that WWO knows that it has done wrong and needs to change its ways, that falls well short of the sort of genuine contrition and remorse that is deserving of any significant weight in the sentencing exercise.”
Justice Wigney’s comment that the absence of such a statement was “puzzling” serves as a reminder of the importance the Court places upon statements demonstrating genuine contrition and remorse at the highest levels.
Treatment of overseas penalties
At the sentencing hearing, Wallenius adduced detailed evidence of penalties imposed on the company across the globe concerning the conduct in question. This included penalties imposed in the United States, Europe, Japan, China, South Africa, Mexico, Brazil and South Korea.
The Court considered that some weight must be given to these penalties, all of which were civil or administrative in nature. However, the Court determined that these overseas penalties should not be given significant weight because:
- generally, they were not imposed in respect of the specific conduct of concern in the Australian proceedings, which affected routes to Australia. On that basis, any overlap was likely to be minimal, given the concerns of the overseas regulators were unlikely to relate to the impact of the conduct on Australian commerce, or Australian consumers;
- the sentence imposed must act as a sufficient deterrent against conduct that relates to Australia and Australia’s laws. Notably, the judgment warns at :
“[l]arge multinational corporations who engage in global cartels or other anti-competitive conduct must be sent a clear and strong message that they will be punished in Australia in respect of conduct which breaches Australia’s laws irrespective of what penalties may have been imposed in other jurisdictions. Whatever decisions may be made globally, Australia will not tolerate anti-competitive conduct in respect of the supply of goods and services to, or relating to, Australia or Australian consumers”
Missing the boat?
Overall, the penalty imposed on Wallenius reiterates the Court’s view that cartel conduct warrants “stern denunciation and condign punishment”. Ultimately, Wallenius’ failure to adduce evidence on its cooperation to the ACCC or another investigatory body, or make a statement of genuine contrition or remorse, meant it could not obtain any additional discount to the penalty imposed. In this sense, Wallenius missed the boat.