Criminal cartel conduct in Australia

Criminal cartel conduct in Australia.

What is a cartel?

A cartel is a group of businesses that secretly collude to coordinate prices, control supply or otherwise manipulate competition within a market.

Cartels have been around for many centuries. Perhaps the most well-known were the Guilds – associations of craftsmen or merchants – of the European middle ages. In the 1947 case of United States v National Lead Co., 332 U.S. 319 (1947) a cartel was described as ‘a combination of producers for the purpose of regulating production and, frequently, prices, and an association by agreement of companies or sections of companies having common interests so as to prevent extreme or unfair competition”.

Cartels typically hurt consumers in several ways, including:

• Charging higher prices through restricting supply and artificially inflating prices.
• Reducing competition by preventing new entrants coming into a market.
• Creating allocative inefficiency by producing less than the optimal output.
• Distorting the market by artificially controlling prices and output levels.
• Supressing innovation due to the lack of competitive pressure.

Are cartels illegal?

Given the harm that they cause, cartel conduct is usually illegal.

The first legislation against cartels was the Sherman Anti-Trust Act 1890, which prohibited price fixing, market sharing and other anti-competitive conduct among those engaged in commerce and industry within the US.

In Australia, cartel behaviour is prohibited by sections 45AF and 45AG of the Competition and Consumer Act 2010 (Cth), which prohibit making a contract containing a cartel provision and giving effect to a cartel provision respectively. If convicted, a corporation can face a fine of up to $50 million, and an individual a term of imprisonment not exceeding 10 years and a fine not exceeding $626,000, per criminal cartel offence. (Should those involved in cartel behaviour plead guilty early in an investigation, then those pleas will generally mitigate the sentences handed down by the courts.)

Recent examples of cartel conduct

Following an investigation by the Australian Competition and Consumer Commission (ACCC) and a referral by it to the Commonwealth Director of Public Prosecutions, the Federal Court on 23 February 2024 convicted and sentenced waste management companies Aussie Skips Bin Services and Aussie Skips Recycling (together ‘Aussie Skips’) and Bingo Industries for criminal cartel offences in relation to a price fixing arrangement for demolition waste services in Sydney.

Bingo Industries was fined $30 million. Mr Daniel Tartak, its former Managing Director and Chief Executive Officer, was sentenced for two criminal cartel offences leading to two terms of imprisonment of 18 months each, to be served as intensive correction orders over a period of two years, including 400 hours of community service. Mr Tartak was also fined $100,000 and banned from managing corporations for a period of five years.

Aussie Skips was fined $3.5 million. Mr Emmanuel Roussakis, its former Chief Executive Officer, was sentenced to 18 months for one criminal cartel offence, to be served as an intensive corrections order, including 300 hours of community service. Mr Roussakis was also fined $75,000 and banned from managing corporations for a period of five years.

According to articles in the Australian Financial Review published on 20 October 2022 and 23 February 2024, the cartel was formed over an afternoon coffee between Messrs Tartak and Roussakis on Monday 20 May 2019. The gist of the deal was that Bingo would increase prices by at least $60 a tonne and $35 per cubic metre at its facilities near Aussie Skips Strathfield facility and Aussie Skips would then increase its prices by $50 a tonne and $27.50 per cubic metre at that site.

By Sunday 1 September 2019 the parties had abandoned their deal due to instances of mutual non-compliance with the terms of the arrangement. Unfortunately, while Mr Tartak had deleted all his messages with Mr Roussakis, the Aussie Skips boss did not do the same. As Mr Roussakis’ barrister Murugan Thangaraj SC told the court at his client’s sentence hearing, “That’s why the case was able to be investigated and proven”.

Bingo Industries was acquired by Macquarie Infrastructure and Real Assets in July 2021 for $2.3 billion. Mr Chris Jeffery, Chief Executive Officer of Bingo Industries, was recently quoted as saying the group had improved its focus on governance and compliance: “We’ve got a new owner, a new board, a new chair and a new executive team. Since the matter occurred close to five years ago, we’ve significantly improved our focus on governance and compliance.

Other recent examples of cartel conduct in Australia include:

• Commonwealth Director of Public Prosecutions v Vina Money Transfer Pty Ltd & Ors [2022] FCA 665 – This case saw the first sentences against individuals for engaging in criminal cartel conduct. The sentences were reduced as a result of guilty pleas.
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• Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 – This corporate cartel conviction saw a penalty of $25 million reduced by 50% as a result of a guilty plea.

Avoiding cartel conduct

How can directors and senior managers protect themselves and their businesses from being accused of cartel activity?

• Perhaps the first and most important tool is education. The board should ensure those members of staff who are most likely to find themselves in harm’s way – including sales staff and other staff involved in the pricing of products and services – are educated about competition and consumer law.
• Secondly, remuneration arrangements for sales staff and those involved in the pricing of products and services should be structured carefully so as not to reward behaviour that might lead them to receive large bonuses from cartel behaviour such as allocating customers between competing suppliers.
• Thirdly, rotating sales staff between different geographic areas on a semi-regular basis so that they do not get too familiar with sales staff from other competitors is often helpful.
• Fourthly, board members should take the time to meet with customers to ensure that they are getting the best service that the business can provide to them.  
• Finally, board should ensure their sales staff understand their reporting obligations. If they are approached by staff from a competing business to discuss arrangements such as market sharing, bid rigging or for some means of controlling output, they must report this to senior management who should then seek legal advice about the possibility of reporting the matter to the ACCC.

If you are interested in exploring these and other related topics in more depth, Bond University offers a Master of Laws in Enterprise Governance, the first and only degree of its kind in Australia, as well as a micro credential, the Advanced Credential in Enterprise Governance. To find out more about either of these educational opportunities please click on the links.