ACCC Charges K-Line with Alleged Cartel Conduct

The Australian Competition and Consumer Commission (ACCC) has revealed in an ACCC Media Release, that criminal charges have been laid against Japanese-based company Kawasaki Kisen Kaisha (K-Line) in relation to alleged cartel conduct concerning the international shipping of cars, trucks, and buses to Australia between July 2009 and September 2012.

This is the second matter in which criminal charges have been laid against a corporation under the Criminal Cartel Provisions of the Competition and Consumer Act 2010 (Cth) (the Act).

Background to the Case

The ACCC is investigating allegations against K-Line for cartel conduct relating to shipping activities between 2009 and 2012.

Only one other cartel action has been brought by the ACCC. In early 2016, the Japanese-based global shipping company, Nippon Yusen Kabushiki Kaisha, pleaded guilty to charges under s 44ZZRG of the Act.

About K-Line

K-Line is a global organisation with offices in Europe, Africa, Northeast Asia, South East Asia, Japan, North America, Central America, South America, India, the Middle East, and Oceania (including Australia). It has over 7,000 employees and its headquarters is in Tokyo. It also has an Australian subsidiary, K-Line (Australia) Pty Ltd.

Definition of a Cartel

According to the ACCC, the Act requires businesses to compete fairly. Most Australian businesses increase their customer base and their profits honestly through:

• continual innovation to improve products or services;
• sales and marketing showing the genuine benefits of their products or services; and
• keeping costs down so they can offer competitive prices.

Businesses struggling to compete fairly and maintain profits may be tempted to deliberately and secretly set up or join a cartel with their competitors.

A cartel exists when businesses agree to act together instead of competing with each other. This agreement is designed to drive up the profits of cartel members while maintaining the illusion of competition.

There are certain forms of anti-competitive conduct that are known as cartel conduct. They include:

• price fixing - when competitors agree on a pricing structure rather than competing against each other;
• sharing markets - when competitors agree to divide a market so participants are sheltered from competition;
• rigging bids - when suppliers communicate before lodging their bids and agree among themselves who will win and at what price; and
• controlling the output or limiting the amount of goods and services available to buyers.

Why are cartels illegal?

The Act not only prohibits cartels under civil law, but makes it a criminal offence for businesses and individuals to participate in a cartel. Cartels are illegal under law because they not only cheat consumers and other businesses, they also restrict healthy economic growth.

Possible penalties for Individuals involved in a cartel

Individuals found guilty of cartel conduct could face criminal or civil penalties, including:

• up to 10 years in jail and/or fines of up to $360 000 per criminal cartel offence; and
• a pecuniary penalty of up to $500 000 per civil contravention.

It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty.

Possible penalties for Corporations involved in a cartel

For corporations, the maximum fine or pecuniary penalty for each criminal cartel offence or civil contravention (whichever applies) will be the greater of:

• $10,000,000;
• three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention; and
• where benefits cannot be fully determined, 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.

Other penalties for cartel civil contraventions or criminal offences include:

• injunctions;
• orders disqualifying a person from managing corporations; and
• community service orders.

The ACCC’s investigation into other alleged cartel participants is continuing.

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Cartels - ACCC

Second criminal cartel case; charges laid against K-Line - Australian Competition Law

Turbulent Legal Seas Ahead for the K-Line – lawpath.com.au

Criminal cartel charges laid against K-Line – ACCC Media Release MR 212/16