CDPP v Wallenius Wilhelmsen Ocean AS

Judgment

CDPP v Wallenius Wilhelmsen Ocean AS [2021] FCA 52 (4 Feb 2021)

Orders

1.    Wallenius Wilhelmsen Ocean AS is convicted of the offence of, between about 1 June 2011 and about 31 July 2012, in Japan and elsewhere, in connection with the transport of vehicles to Australia, intentionally giving effect to cartel provisions in an arrangement or understanding reached with others in relation to the supply of ocean shipping services, knowing or believing that the arrangement or understanding contained cartel provisions contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth).

2.    Wallenius Wilhelmsen Ocean AS is fined the sum $24 million in relation to that offence.

Judgment summary

The full judgment runs to 73 pages. Justice Wigney released a judgment summary (reproduced below).

“Reasons or remarks on sentence in criminal matters are traditionally delivered orally. Given the length of the reasons in this matter, that course is not desirable. Nor is it strictly necessary given that the offender is a corporation. In those circumstances, the appropriate course is to provide and deliver a summary of the reasons for imposing the sentence that is to be imposed on the offender today. The summary is intended to assist in understanding the reasons for imposing the sentence. It is not a complete statement of the findings and conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet at the Court’s website. This summary is also available there.

This is the culmination of the third criminal prosecution for a cartel related offence arising out of a global cartel which was on-foot for a lengthy period of time in a market which was of considerable importance to Australia: the market for the supply of ocean shipping services for “roll-on, roll-off” cargo, mainly cars and trucks.

The offender, Wallenius Wilhelmsen Ocean AS (WWO) is a large Norwegian corporation which has for many years been in the business of shipping cargo, including cars and trucks, around the world, including to Australia.  It competed, or at least purported to compete, with a number of other large multinational corporations who supplied similar shipping services.  From at least July 2009, however, WWO and a number of those other shipping corporations or carriers were parties to an arrangement or understanding which had the effect of limiting or distorting that competition.

On 18 June 2020, WWO entered a plea of guilty in this Court to a single charge of giving effect to a cartel provision, contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth).  The key particulars of that charge were that between about 1 June 2011 and 31 July 2012, in Japan and elsewhere, WWO intentionally gave effect to cartel provisions in an arrangement or understanding with others in relation to the supply of ocean shipping services.

The facts of the offence were, in broad terms, that on six specific occasions over a period of just over a year, WWO intentionally gave effect to a cartel provision in an arrangement or understanding it had reached with some of its competitors, or supposed competitors, in the market for ocean shipping services.  The arrangement or understanding between WWO and the other shipping companies involved or included what was said to be a “rule of respect” or “guiding principle” the effect of which was that the shipping companies would seek to allocate certain customers between themselves on certain international shipping routes, including routes to Australia, and would not attempt to win each other’s existing business.  The parties to the arrangement thereby sought to ensure that their existing market shares were not altered.

WWO’s conduct in giving effect to the cartel provision involved at least two other parties to the relevant arrangement or understanding: Nippon Yusen Kabushiki Kaisha (NYK) and Mitsui OSK Lines Ltd.   The shipping contracts that were impacted by, or were the subject of, the specific incidents of WWO’s cartel conduct were contracts with four major vehicle manufacturers, Renault Nissan, Fiat Chrysler, Toyota and Mitsubishi, in respect of shipping routes to Australia from the United States, Europe and Turkey.  The conduct which was covered by the offence occurred over a period of just over a year in 2011 and 2012; however, WWO also asked the Court to take into account two other incidents in which it gave effect to the cartel provision in 2009.

On just about any view, this was an extremely serious offence against Australia’s laws which prohibit cartel conduct.  The task for the Court is to impose an appropriate sentence for that serious offence. Since WWO is a corporation, that sentence must be a fine, there effectively being no alternatives.  

In considering the appropriate sentence in any criminal case, the Court is required to have regard to, and weigh in the balance, a broad range of relevant factors and considerations and then arrive at a value judgment as to the appropriate sentence.  The overarching principle is that the sentence imposed by the Court must be of a “severity appropriate in all the circumstances of the offence”.

In this matter, the factors or matters that tended to weigh in favour of the imposition of a substantial fine included the following.

First, the maximum fine that could be imposed on WWO, given the terms of the relevant legislation and the facts of the case, was $48,532,493.  The maximum penalty for an offence is generally seen as a “guidepost” or “yardstick” that bears on the ultimate discretionary determination of the sentence for the offence. That is essentially because it represents the legislature’s assessment of the seriousness of the offence.

Second, as has already been indicated, the offence committed by WWO was undoubtedly a very serious offence in all the circumstances.  Cartels are widely condemned as the most egregious forms of anti-competitive behaviour.  At its heart, a cartel is an agreement between competitors not to compete. Cartel conduct harms consumers, businesses and the economy, and is likely to increase prices, reduce choice and distort innovation processes.

The cartel conduct encompassed by WWO’s offence was no exception. It took place over a significant period of time and occurred in a market for services that were and are of considerable economic importance to Australia: the supply of ocean transport services for “roll-on, roll-off” cargo, mainly motor vehicles and trucks, on international routes, including to and from Australia.  The cartel conduct involved major global suppliers of those services.  There could be little doubt that the anti-competitive conduct the subject of the offence had the capacity to limit or distort the competitive setting of freight rates on the relevant shipping routes to Australia.  That in turn was likely to have had some impact, or at least potential impact, on the price that Australian consumers paid for imported motor vehicles.

Third, as is often the case with cartel conduct, the facts revealed that WWO’s conduct was covert, deliberate, systematic and involved planning and deliberation. It involved an anti-competitive course of conduct that spanned a period of just over one year.

Fourth, the offending conduct was engaged in by mostly senior managers and sanctioned by some senior executives at WWO. Those senior officers knew or must have known that the conduct was anti-competitive and breached antitrust or competition laws. If they did not specifically know that it breached Australia’s competition laws, they should have. In any event, they must have known that there was a real risk that it did.

Fifth, while it is not possible to determine the benefits derived by WWO, or other persons, from the offending conduct, there could be little doubt that WWO would have benefited from its conduct in giving effect to the cartel provision, both financially and in more intangible respects. That is no doubt why it engaged in the conduct for such a lengthy period of time.

Sixth, cartel conduct is notoriously difficult to detect, investigate and prosecute. It often involves large and sophisticated corporate offenders who can deploy their considerable resources and position to minimise the risk of detection. General deterrence is a weighty consideration in sentencing for offences which are difficult to detect and investigate. Cartel conduct is also an essentially economic or commercial crime that generally involves an offender weighing up whether the expected financial or other benefit from the conduct outweighs the risk of detection and the resulting imposition of a penalty.  Sentences imposed for such offences should be set so that others who may engage in such a balancing exercise will come to appreciate that the risk of having a substantial penalty imposed well outweighs the likely benefits from the anti-competitive conduct. The likely penalty must be sufficiently high that it could not be regarded to be an acceptable cost of doing business.

The factors that mitigate or otherwise tend to suggest that a lesser penalty should be imposed include the following.

First, WWO indicated that it would enter a plea of guilty to the charge at the earliest possible opportunity.  That early plea showed an acceptance of responsibility and a willingness to facilitate the course of justice.  It also saved the community the expense of what would undoubtedly have been a lengthy trial in this Court.

Second, WWO has demonstrated that it had taken steps to rehabilitate itself.  In the years since the offending behaviour was exposed, WWO has taken steps to change its corporate culture of compliance and has established systems and training programs which are designed to minimise the risk of any re-offending.

Third, WWO does not have a prior record of corporate criminal conduct in Australia.

Fourth, WWO has already been punished overseas for its participation in the cartel which gave rise to its offence in Australia.  Competition regulators, and in some instances courts and tribunals, in some foreign jurisdictions have already imposed administrative or other penalties on WWO for its anti-competitive conduct.  For the most part, however, those penalties were imposed in respect of anti-competitive conduct which impacted shipping routes and commerce involving those foreign jurisdictions, not Australia.  Foreign corporations who engage in global anti-competitive conduct in contravention of Australia’s laws should be under no illusion: they will be severely punished in Australia even if they may also have been penalised overseas in respect of other aspects of their conduct. 

In sentencing WWO, consideration also has to be given to the principle of parity. That principle requires that like offenders should be treated in a like manner, though allowance must be made for different sentences to be imposed upon like offenders to reflect different degrees of culpability and different circumstances.

As has already been adverted to, two other shipping companies who were parties to the relevant anti-competitive arrangement or understanding have already been sentenced by the Court for offences involving giving effect to cartel provisions in that arrangement.  Those two companies are NYK and Kawasaki Kisen Kaisha Ltd (K-Line).

The maximum penalty for the offences committed by both NYK and K-Line was $100 million, as compared to the maximum penalty faced by WWO.

The sentence imposed on NYK was a fine of $25 million. That fine incorporated a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation. But for the early plea and past and future assistance and cooperation, the fine would have been $50 million. Of the 50% discount, 10% related to future cooperation.

The sentence imposed on K-Line was a fine of $34.5 million. That fine incorporated a global discount of just over 28% for K-Line’s early plea of guilty and assistance and cooperation. But for the early plea and past cooperation, the fine would have been $48 million.

The objective seriousness of WWO’s offending was undoubtedly less than the objective seriousness of the offending by both NYK and K-Line.  The offending conduct of both NYK and K-Line involved 20 incidents of them giving effect to cartel provisions over a period of more than three years.  WWO’s offending, in contrast, involved six incidents of it giving effect to a cartel provision over a one year period.  

The conduct engaged in by both NYK and K-Line was also shown to have affected the competitive setting of freight rates in a number of contracts pursuant to which a very large numbers of vehicles were shipped to Australia.  Both NYK and K-Line earned significant revenue from the contracts affected by their anti-competitive conduct.  That could not be said to be the case with WWO’s offending conduct.  The facts in WWO’s case revealed that it shipped a smaller number of vehicles to Australia pursuant to contacts affected by its conduct.  That said, WWO’s conduct impacted on the competitive setting of freight rates in a number of other contracts that were awarded to other parties to the cartel.  WWO’s conduct therefore benefited, or was likely to have benefited, those other parties and in any event had a deleterious impact on competition in the market.  The seriousness of cartel conduct is not to be measured solely by reference to the revenue or profit derived from that conduct.  

It is relevant also that WWO was a smaller corporation than both NYK and K-Line and had a smaller share of the relevant market.

While WWO’s offending conduct may have been less serious than the conduct of both NYK and K-Line, both NYK and K-line had cooperated and provided assistance to the relevant investigative agency, the Australian Competition and Consumer Commission (ACCC).  NYK, in particular, provided extensive and valuable cooperation and assistance and undertook to assist in future prosecutions.  The assistance provided by K-Line was less extensive and less valuable.  The extent of the co-operation provided by NYK and K-Line was reflected in the discounts they received. 

In contrast, the agreed facts and evidence did not establish that WWO had provided any assistance to the ACCC.  WWO was accordingly not entitled to any, or any material, discount for assistance and cooperation; though, as already adverted to, it was entitled to a discount for its early plea.

Having regard to all of the relevant features and factors, and giving them appropriate weight, the Court has determined that the appropriate sentence to impose on WWO in all the circumstances is a fine of $24 million. That fine incorporates a global discount of 20% for WWO’s early plea of guilty, meaning that, but for that discount, WWO would have been fined $30 million.

It remains to reiterate and emphasise that cartel conduct of the sort engaged in by WWO warrants stern denunciation and condign punishment. It is inimical to and destructive of the competition that underpins Australia’s free market economy and is ultimately detrimental to Australian businesses and consumers. The penalty imposed on WWO is intended to and should send a powerful message to multinational corporations that conduct business in Australia: that anti-competitive conduct will not be tolerated in Australia and that they will be dealt with harshly by this Court if found to have engaged in such conduct.

JUSTICE MICHAEL WIGNEY

4 February 2021