Cement Australia Fined for Anti-Competitive Conduct

Tuesday 3 May 2016 @ 9.27 a.m. | Legal Research | Trade & Commerce

As reported in a recent ACCC Media Release, the Federal Court in Brisbane has ordered four cement companies to pay more than $18 million in penalties for anti-competitive conduct. The corporations include Cement Australia Pty Ltd; Cement Australia Queensland Pty Ltd; Pozzolanic Enterprises Pty Ltd; and Pozzolanic Industries Pty Ltd.

Background

These four companies were fined for numerous contraventions of s 45 of the then Trade Practices Act 1974 (now called the Competition and Consumer Act 2010 (Cth)) (the Act), which prohibits corporations from entering into, and giving effect to, contracts and arrangements that have the purpose or effect of substantially lessening competition, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).

The court found the companies prevented competition in the concrete market when they entered into contracts with power stations in south-east Queensland to acquire a product called "flyash".

Flyash is a by-product of burning black coal at power stations and can be used as a cheap substitute for cement in concrete.

The ACCC’s Response

The ACCC, which brought the proceedings against the companies in 2008, said a fine of $90 million would have been more sufficient.

ACCC Chairman Rod Sims said:

“I'm afraid for companies of this size and the nature of the behaviour and the importance of it to the companies, I'm afraid $18 million could be seen as just the cost of doing business. That's not what we want in Australia we really do need to get higher penalties to get appropriate deterrence. It is extremely important for the ACCC to take action whenever the competitive process is damaged by any behaviour that substantially lessens competition. The operation of our market economy depends upon competition to drive innovation and benefit consumers. It has been a very long road for the ACCC, and the penalty judgment is an important milestone in the proceedings.”

The proceedings relate to contracts that were entered into by Cement Australia between 2002 and 2006 with the operators of the Millmerran, Tarong, Tarong North and Swanbank power stations in south-east Queensland to acquire flyash (no allegations were made by the ACCC against the power stations).

Following a lengthy, fully contested hearing, the court found numerous contraventions of s 45 of the Act by all companies but Cement Australia Holdings Pty Ltd.

Findings of the Court

Justice Greenwood found that the conduct had the purpose and effect of preventing a competitor from entering the market by preventing them from obtaining direct access to a source of flyash in south-east Queensland.

As a result, his Honour found that the contracts had both the purpose and effect of substantially lessening competition. In reaching this conclusion, his Honour observed that Pozzolanic Enterprises Pty Ltd and Cement Australia Pty Ltd enjoyed such a substantial market share, and exercised such a substantial degree of influence upon pricing in the south-east Queensland concrete grade flyash market, that the competitive effect of new entry by a competitor would have been significant.

Claims of misuse of market power dismissed

The ACCC had also alleged that this conduct amounted to a misuse of market power but Justice Greenwood dismissed this claim, because he found that the ACCC had not established that the Cement Australia companies were taking advantage of their substantial market power.

Other proceedings brought by the ACCC

The ACCC also brought proceedings against two individuals.

The case against one individual was dismissed, but declarations made against Mr Christopher White (a manager in the Cement Australia flyash business during the relevant period) for his involvement in making the contravening contracts with the operator of the Swanbank power station in 2005.

A penalty of $20,000 was ordered against Mr White for his role in the conduct.

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Sources:

Cement companies fined $18.62m for anti-competitive conduct – abc.net.au

$18.6 million penalties ordered against Cement Australia companies for anti-competitive flyash agreements – ACCC Release MR 67/16 

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