Australia’s first successful shipping criminal cartel prosecution

Japanese shipping company Nippon Yusen Kubushiki Karsha (“NYK”) has pleaded guilty to charges of criminal cartel conduct in the Federal Court of Australia.  The charges were brought under section 44ZZRG(1) of the Commonwealth Competition and Consumer Act 2010 (“CCA”) by the Australian Competition and Consumer Commission (“ACCC”) and the Commonwealth Director of Public Prosecutions.  The prosecution was Australia’s first ever criminal cartel prosecution based on legislation introduced in 2009.  NYK faces a fine the greater of AUD$10 million, three times the value of the benefit attributable to the Commission or the offence, or, if the attributable benefit cannot be determined, 10% of its annual turnover connected with Australia.  The case has been adjourned to 12 September for sentencing.

Section 44ZZRG of the CCA applies to cartel conduct in respect of price fixing, providing discounts, rebates or low credit for the direct or indirect purpose of preventing, limiting or restricting the production or supply of goods or services.

The prosecution arose from alleged cartel conduct in connection with the transportation of vehicles, including cars, trucks and buses to Australia between July 2009 and September 2012.  NYK was charged with the offence of intending to give effect to cartel provisions in an arrangement or understanding with others in relation to the supply of ocean shipping services, knowing or believing that the arrangement and understanding contained cartel provisions.

The Australian prosecution is the latest international enforcement action in relation to alleged conduct in the ro-ro shipping industry.  Criminal convictions, gaol terms and hundreds of millions of dollars in fines have already been levied in several jurisdictions including the USA, Japan, South Africa and China with continuing investigations in other jurisdictions.  Other international shipping lines involved in prosecutions in other jurisdictions include Wallenius Wilhelmsen Logistics AS from Norway and Compania Sudamericana de Vapores S.A. (“CSAV”) from Chile.

The ACCC has made it clear that it regards as a priority prosecuting parties involved in cartel conduct in Australia in the international transport and logistics industries.  Almost inevitably such cartel conduct involves conduct not just within Australia but internationally.  Shipping already enjoys limited exemptions from the anti-competitive provisions of the CCA in relation to outbound conference arrangements pursuant to Part 10 of the CCA.  However Part 10 was criticised by the recent Harper Review into Australian competition law and its repeal is a possibility.

Interestingly the ACCC has also been actively investigating and prosecuting cartel conduct in the international air cargo industry at the same time as similar prosecutions have taken place in other jurisdictions.  In 2010 13 airlines conceded liability for engaging in cartel conduct in the air cargo business in Australia and paid penalties to the ACCC of approximately AUD$100 million.  Two airlines, Air New Zealand and Air Garuda declined to concede liability and proceeded to trial where they were successful at first instance but failed on appeal to the Full Federal Court where by a two to one majority the court found in favour of the ACCC finding that the two airlines had engaged in anti-competitive conduct in a market in Australia even though at the time the actual conduct the subject of the prosecution took place outside Australia.  The court took the broad view that the conduct affected the market in Australia.

Post by Derek Luxford 

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