Caron Beaton-Wells and Julie Clarke Corporate financial penalties for cartel conduct in Australia: A critique Caron Beaton-Wells and Julie Clarke CLEN Discussion Group 28 March 2018

Context Deterrence Corporate financial sanctions Individual sanctions - criminal especially Private actions Corporate non-financial sanctions

At least in part if not substantially, 2 explains 1 Issue 1. Australian penalties are low relative to the maximum and international comparators 2. The Australian method for penalty assessment differs substantially from the international method At least in part if not substantially, 2 explains 1

Australian penalties relative to the maximum

Australian corporate penalties (1974-2017) Period Mean (AU$) Median (AU$) Highest (AU$) 1974-92 629,633 128,228 7,158,934 1993-99 1,381,391 599,915 11,140,000 2000-09 3,374,407 950,572 45,696,631 2010-17 5,731,088 3,740,271 25,000,000 * Data for first two periods derived from D Round, An Empirical Analysis of Price Fixing Penalties in Australia from 1974 to 1999: Have Australia’s Corporate Colluders been Corralled?’ (2000) 8 Competition and Consumer Law Journal 1 and for third period from Beaton-Wells and Fisse to 2009 (Beaton-Wells and Fisse, Australian Cartel Regulation, at 429). All CPI adjusted to September 2017.

Penalties per cartel, pre and post maximum change (2007-17) Air cargo Pre-2007 conduct Post-2007 conduct 2014

Penalty increase for post-2007 conduct Pre-2007 maximum: 18 cartels 79 corporate respondents Cartels post-2007 maximum: 8 cartels 16 corporate respondents

Penalties as % of maximum (2007-2017) NYK Visy * Maximum based on number of contraventions if not otherwise specified in judgment

Australian penalties relative to international comparators

Total penalties in selected jurisdictions (2016) * Fines based on Allen & Overy, Global Cartel Enforcement: 2016 (Full-Year) Cartel Report (Allen & Overy LLP, 2007) (http://www.allenovery.com/SiteCollectionDocuments/Global%20Cartel%20Enforcement%20full%20report.pdf) at 4.

EC v Australian penalties (2007-17) EU GDP > (14) AU GDP cf EU fines > (110) AU fines

Australian vs international method for penalty assessment

Key differences Economic seriousness Cooperation and leniency Maximum Inability to pay Economic seriousness Cooperation and leniency Maximum Inability to pay

Economic seriousness

At the end of the day the task is principally an evaluative exercise for the trial judge. And in any event it is only one input into a broader evaluative exercise being the setting of the pecuniary penalty itself, with any input only being weighed as part of an intuitive synthesis approach. Precision in the quantification of one of the inputs may be unrealistic given the broader nature and context of the task in setting a penalty.. ACCC v Cement Australia Pty Ltd  [2017] FCAFC 159 at [509].

International comparisons: four case studies

Yazaki * Years restricted figure based on five years (statutory limitation period) and not the 14 year cartel period. The ‘Court turnover’’ refers to the relevant turnover amount determined by the Court (significantly less than that claimed by the ACCC). This is subject to appeal (judgment reserved on 14 March 2018)

Maximum

Maximum – prescribed alternative amounts $10 million Arbitrary? Benefit maximum Unworkable? Turnover maximum Convoluted and unhelpful?

Maximum - role Legislative expression of seriousness Yardstick Not a substitute for a base penalty Yardstick Subjective and precedent setting

The ACCC contends that the conduct in question in these proceedings is the very embodiment of the “worst case” and thus the penalty in respect of aspects of the conduct giving rise to particular contraventions necessarily attracts the maximum penalty contemplated by the Parliament because this case is that very circumstance. Accordingly, the ACCC says that having regard to all of the conduct expressed in the various contraventions, a penalty of $97 million is to be imposed as the “appropriate penalty”.. On the other hand, the respondents say that .. that an appropriate penalty to be ordered against all respondents jointly and severally is $4 million in respect of all of the conduct given expression by all of the contraventions. ACCC v Cement Australia Pty Ltd [2016] FCA 453 at [578]-[579].

Recommendations

Recommendations 1. Revise method for assessing penalties (reflecting int. method) 2. Publish Guidelines 3. Encourage judicial adoption of revised method 4. Revised method to include base penalty (% sales/turnover x duration) 5. Amend CCA maximum

Benefits Facilitate increased penalties and promote deterrence Ensure penalties reflect economic seriousness of the conduct Increase transparency and consistency