Business and competition go hand in hand. For a business to grow, that business must compete with others in its field. However, there is a limit on what conduct is permissible in terms of remaining competitive as a business. Conduct that exceeds that limit risks characterisation as criminal anti-competition or even cartel behaviour. Such behaviour may loosely be categorised as the achievement of commercial advantage by unfair means. Questions remain, though, among the business community as to what steps may lawfully be taken to gain a competitive commercial advantage. In reality, there are numerous lawful avenues through which businesses can compete with each other. But to ascertain the boundaries of that competition, it is necessary to examine some of the laws governing commercial competition.
Criminal anti-competition and cartel offences are found in the Competition and Consumer Act
To prevent criminal anti-competition and cartel conduct in commercial settings, the law intervenes by virtue of the Competition and Consumer Act. On the matter of criminal anti-competition and cartel offences, this statute is the most relevant. It was enacted by the Commonwealth, which maintains principal jurisdiction over corporate regulation. Within the Competition and Consumer Act, Part IV stipulates the restrictive trade practices that amount to cartel conduct. As simplified in section 45AA of the Act, those practices include the ones set out under the headings below. The scope of such practices is established as any of the below nature that are brought into force by a provision of a contract, arrangement, or understanding.
In a commercial setting, prices are inherently uncertain; they respond to market stimulus on a large scale. To fix prices, then, in a commercial deal would place one or more competitors at a substantial disadvantage. For that reason, such conduct is prohibited by the Competition and Consumer Act, in sections 45AD (1) and (2). There, price fixing is defined extensively. It includes provisions of a contract, arrangement, or understanding that have any of the prescribed purposes, or effects. Notably, that means cartel provisions that are created unintentionally in a commercial setting still attract penalties. A price fixing provision, under this area of law, would be one that fixes, controls, or maintains prices, discounts, allowances, or credit, in relation to goods or services. Remember, though, that intention to achieve any of the listed outcomes is not a necessary element of this offence; cartel offences are ones of strict liability.
Restricting outputs in the production or supply chain
Like prices, production and supply respond to the principles of economics. As a result, any efforts to restrict supply or production could adversely affect competitors, and the market. Section 45AD (3)(a) of the Competition and Consumer Act therefore intervenes to prohibit any such restriction. In that section, production and supply is broken down into numerous subsets. Those subsets include production of goods, capacity to supply services, supply of goods or services, and the acquisition of goods or services. Any commercial contract, arrangement, or understanding that attempts to limit or restrict those subsets therefore amounts to criminal anti-competition. Specifically, under section 45AD (3)(a), such contracts, arrangements, or understandings, would amount to cartel offences.
Allocating customers, suppliers, or territories
By this stage, the broad purpose of the Competition and Consumer Act is relatively clear: to promote commercial freedom. Unsurprisingly, then, the Act prohibits the allocation of customers, suppliers, or territories in contracts, arrangements, and understandings. To do so, the Act relies on section 45AD (3)(b). In that section, it is unlawful to allocate the persons who have acquired or supplied goods or services. It is also unlawful, under that provision, to allocate the geographical areas in which goods or services are supplied or acquired.
Bid rigging is another activity prohibited by the Competition and Consumer Act. Bid rigging is essentially the act of ensuring, by way of provisions in a contract, arrangement, or understanding, that certain parties are more or less successful in their bids. The specific provision that proscribes that conduct is section 45AD (3)(c). That section is extensive in its description of cartel bid rigging, and it serves to ensure that bids are made freely, and without undue obligation.
Navigating the laws around criminal anti-competition and cartel conduct
As an offence of strict liability, cartel conduct is possible without intention. Cartel offences can be proven simply with reference to the effects of a provision in any contract, agreement, or understanding. That underscores the importance of sound legal advice, when entering into commercial agreements. Complying with competition laws is an important feature of business, and reliable legal advice is the most effective way of doing so.
By Finian McGrath
The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.
Liability limited by a scheme approved under professional standards legislation.