Legislative history

Amended Competition and Consumer Amendment (Competition Policy Reform) Act 2017 (Act 114 of 2017)

2 At the end of paragraph 44ZZRD(3)(a)

Add:

(iv) the acquisition, or likely acquisition, of goods or services from persons or classes of persons by any or all of the parties to the contract, arrangement or understanding; or

3 Paragraphs 44ZZRD(4)(c) to (e)

After “services” (last occurring), insert “in trade or commerce”.

4 Paragraph 44ZZRD(4)(f)

After “goods” (last occurring), insert “in trade or commerce”.

5 Paragraphs 44ZZRD(4)(g) and (h)

After “services” (last occurring), insert “in trade or commerce”.

6 After paragraph 44ZZRD(4)(h)

Insert:

(ha) if subparagraph (3)(a)(iv) applies in relation to preventing, restricting or limiting the acquisition, or likely acquisition, of goods or services—the acquisition of those goods or services in trade or commerce; or

7 Paragraphs 44ZZRD(4)(i) and (j)

After “services” (last occurring), insert “in trade or commerce”.

8 Subsection 44ZZRD(4) (note)

Repeal the note, substitute:

Note 1: Party has an extended meaning—see section 44ZZRC.

Note 2: Trade or commerce is defined in section 4 to mean trade or commerce within Australia or between Australia and places outside Australia.

9 Subsection 44ZZRD(5)

Omit “subparagraph (3)(a)(iii),”, substitute “subparagraph (3)(a)(iii) or (iv) or”.

10 Paragraph 44ZZRD(7)(a)

Omit “subparagraph (3)(a)(iii)”, substitute “subparagraphs (3)(a)(iii) and (iv)”.

Introduced by Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009

Operative: 24 July 2009

Commentary

History

The insertion of this provision was part of the package of reforms introducing criminal penalties for cartel conduct. The reforms also created a parallel civil cartel prohibition, replacing the former s 45A which dealt directly with price-fixing.

The reforms were initially recommend by the Dawson Committee as part of its 2002-2003 inquiry into the Competition Law provisions of the Trade Practices Act.

The provision was amended as a result of the Harper Reforms on 6 November 2017. It was re-numbered and sub-section (3) (relating to output restrictions) was expanded to refer to production capacity, supply and acquisition (acquisition was not previously included). The change was designed to address any gap arising as a result of the repeal of the separate exclusionary provisions prohibition that took place as part of the reforms.

On the provision generally

On the complexity of the definition of cartel provision

In CDPP v Nippon Yusen Kabushiki Kaisha [2017] FCA 876  ➤ Justice Wigney noted

[para 174] The relative simplicity of the offence provision in s 44ZZRG(1) belies the complexity introduced by the provisions of the C&C Act that give content to the term “cartel provision”. The main provision in that regard is s 44ZZRD. It is useful to set that section out in full, if only because it makes good the proposition that the elements of the offence against s 44ZZRG(1) are very complex.

Contract, arrangement or understanding

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235  ➤ Justice Gordon usefully summarised the legal principles in relation to establishing a contract, arrangement or understanding.

[para 263]: 1. an arrangement or understanding is apt to describe something less than a binding contract or agreement:  Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at [75]; see also Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 (Privy Council) cited with approval in Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 5 ALR 465 at 469;

2. the elements of an arrangement or understanding are:

2.1 evidence of a consensus or meeting of the minds of the parties, under which one party or both of them must assume an obligation or give an assurance or undertaking that it will act in a certain way which may not be enforceable at law:  Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2008] FCA 678 at [10] and the authorities cited;

2.2 a hope or mere expectation that as a matter of fact a party will act in a certain way is not itself sufficient to establish an arrangement or understanding, even if it has been engendered by that party:  ACCC v CFMEU at [10] and the authorities cited including Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission (2005) 159 FCR 452 at [45] and Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [79];

2.3 the necessary consensus or meeting of minds need not involve, though it commonly will in fact embody, a reciprocity of obligations:  ACCC v CFMEU at [10] and the authorities cited;

2.4 in relation to whether or not mutual obligation is a necessary ingredient of an arrangement or understanding, it has been suggested that it is difficult to envisage circumstances that would be an understanding within s 45 of the TPA involving the commitment by one party without some reciprocal obligation by the other party:  Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-1 and 238.  That statement applies equally to ss 44ZZRJ and 44ZZRK of the CCA;

2.5 an arrangement may be informal as well as unenforceable with the parties free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it:  Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434 at 444;

3. whether there is a difference between an arrangement and an understanding has not been resolved:  Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 22-6 but cf Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc (2003) 199 ALR 423 at 460.  However, the concept of an understanding is broad and flexible:  cf L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 at 89 and Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2004) 141 FCR 183 at [54];

4. whether or not an arrangement or understanding has been reached will depend on the view formed of all of the circumstances.  A meeting of minds may be proved by independent facts and from inferences drawn from primary facts including, without limitation, evidence of joint action by the parties in relation to relevant matters, evidence of parallel conduct and evidence of collusion between the parties.  As Isaacs J said in R v Associated Northern Collieries (1911) 14 CLR 387 at 400:

Community of purpose may be proved by independent facts, but it need not be.  If the other defendant is shown to be committing other acts, tending to the same end, then though primarily each set of acts is attributable to the person whose acts they are, and to him alone, there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre-concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose, thus forming as well as evidencing a combination to effect the one object towards which the separate acts are found to converge. 

See also News Limited v Australian Rugby Football League Limited (1996) 64 FCR 410 at 573-4. 

[para 254] However, where proof of an arrangement or understanding rests on inferences to be drawn from primary facts, it is not sufficient for the circumstances to give rise to conflicting inferences of equal degrees of probability:  Luxton v Vines (1952) 85 CLR 352 at 359-60.

[para 265] In the present case, the evidence establishes that Castle Harlan and Bradken entered into the Bid Rigging Arrangement no later than 8 March 2011.  The Bid Rigging Arrangement was informal and unenforceable.  Either party could withdraw from it or even act inconsistently with it.  Hodges himself contemplated doing so in mid-June of 2011:  see [188] above.  But that does not detract from the finding that the Bid Rigging Arrangement:

1.         was entered into by Castle Harlan and Bradken; and
2.         was given effect to by Castle Harlan and Bradken.

[para 266] The finding that Castle Harlan and Bradken entered into the Bid Rigging Arrangement no later than 8 March 2011 is founded on direct and express communications between the parties to the arrangement, namely Castle Harlan and Bradken ...

[para 267] Even if, contrary to the view formed, those direct and express communications were insufficient to found a finding that Castle Harlan and Bradken entered into the Bid Rigging Arrangement no later than 8 March 2011, that finding is open having regard to the inferences to be drawn from the circumstances that existed:  cf News Limited v Australian Rugby Football League Limited at 573-4 citing R v Associated Northern Collieries at 400. [Her Honour then set out those circumstances in detail at para 268]

[para 269] The existence of the Bid Rigging Arrangement did not depend upon the parties having reached a concluded agreement regarding the on-sale of NWS to Bradken. ... 

On bid rigging (purpose condition)

On the meaning of a request for bids

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 Bradken alleged that there was no relevant requests for bids because it believed that it had been excluded from the sale and that there was 'no request for bids in Australia nor any request for bids in relation to the supply or acquisition of goods or services in Australia' (para 215). Bradken had submitted that to constitute a request for bids, the request it must be 'directed to the parties to the alleged contract, arrangement or understanding' (para 216) and that is those persons 'must be persons who are able to bid in response to that request' (para 218).

Justice Gordon rejected these submissions. Her Honour noted isolating words for interpretation was of limited utility as 'it is the whole phrase that is to be construed in the context of the CCA and in a manner consistent with the policy and purpose of the legislation' (para 219).

As a matter of statutory construction her Honour concluded there was:

[para 220] nothing in the language of the section that requires a request directly or individually to each of the parties to the alleged contract, arrangement or understanding.  Such a construction is not supported by the statutory language.  The section does not stipulate to whom any request need be made.  Why?  Because it refers to a singular “event of a request for bids”, not requests for bids. 

Further:

[para 221] ... that construction of the section is consistent with the purpose of the provision which is to prohibit per se bid rigging between competitors, including potential competitors.  Again, there is nothing in the language of the section (or the EM) to suggest that the bid rigging prohibition is somehow restricted to only those bidders or potential bidders who were within the scope of that process:  see EM at [1.2] and [1.39]-[1.42].  Put another way, if Bradken’s construction of the section was the preferable construction, it would frustrate the statutory purpose because the prohibition would be inapplicable to arrangements involving a person who had not been individually invited or requested to bid in circumstances where that person may nevertheless have made a bid (but for the arrangement sought to be impugned).  Such an arrangement would still be bid rigging and no less objectionable on competition grounds.

In this case there was a competitive sale process for NSW conducted by UBS and this constituted 'the event of a request for bids' within the meaning of section 44ZZRD(3)(c) of the CCA (para 223).

Her Honour further observed that, even if Bradken's construction was preferred, it would not assist because there was a 'request for bids' directed to both Bradken and Castle Harlan; this is because section 44ZZRD(3)(c) requires only a 'request for bids' and not 'an individual invitation to join in any request for bids' (para 224).

Meaning of purpose

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 Bradken submitted the purpose condition 'required that the Court must find that the operative, subjective purpose of the parties to the Bid Rigging Arrangement was to ensure that, in the event of a request for bids, one party bid but the other did not' (para 271) and that neither Bradken nor Castle Harlan had this subjective purpose. This was because Hodges and Greiner believed Bradken had been excluded from the bidding process.

Justice Gordon accepted that the purpose condition 'directs the Court to consider the subjective, operative purpose of the parties to the relevant arrangement', but also that this purpose 'may be inferred ... from the nature of the arrangement, the circumstances in which it was made and its likely effect' (para 273) and that the purpose is the 'end sought to be accomplished by the conduct' (para 275).

Here, her Honour held, the 'operative purposes to be considered were those of Hodges, Greiner, Harlan and Morgan, which could be imputed to their respective corporate principles' (para 274). Her Honour rejected the contention that 'Hodges and Greiner did not have a purpose of ensuring that Bradken would not bid, but instead Castle Harlan would bid, for NWS' (para 275), noting that the belief that Bradken had been excluded from the sale process was not inconsistent with that purpose (para 275). Her Honour noted: 'It is ... inconceivable that Castle Harlan would have agreed to enter the NWS sale process, at Bradken’s suggestion and with Bradken’s assistance, in circumstances where Bradken still reserved the right to itself bid for NWS'.

Need for reciprocity?

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 Bradken submitted that the 'requirement of "ensuring that … one or more parties to the contract, arrangement or understanding bid, but one or more other parties do not" (emphasis added) could not be satisfied unless there was a degree of reciprocity to the Bid Rigging Arrangement.' (para 271). Justice Gordon noted that it was difficult to envisage circumstances in which there would be an agreement of this nature without some reciprocal obligation (para 263) and that the relevant purpose element was satisfied here (para 278)

On territorial coverage

Requests for bids do not need to be in Australia

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 which involved claims of bid rigging, Justice Gordon rejected Bradken's claim that any relevant 'request for bids' must be 'a request for bids' in Australia (page 226). Her Honour noted that there was nothing in the language of the provision to support that contention:

[para 228] If the legislative intent had been to impose a territorial limitation in relation to the “request for bids” condition in s 44ZZRD(3)(c), then words to that effect would have been included in the provision expressly or by reference:  cf the definition of “trade or commerce” in s 4 and the definition of “market” in s 50A.

Her Honour noted that, while s 45 contains a territorial limitation (because s 45(3) defines competition for purposes of that provisions as meaning '.... competition in any market in which ...' and 'market' is defined in s 4E as 'a market in Australia'), no such territorial limitation can be found in s 44ZZRD(3)(c) and none should be implied. The result is that the territorial coverage of s 44ZZRD(3)(c) is governed by s 5 of the CCA.

On the competition condition

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 which involved claims of bid rigging, Justice Gordon observed that the 'likelihood of parties being in competition with each other is a question of fact' and that 'likely' in this context includes 'a possibility that is not remote' (para 259, referencing s 44ZZRB). Her Honour also rejected Bradken's claim that s 44ZZRD(4) required competition to be 'in respect of a market in Australia', noting that there was no such limitation in the provision and none should be implied (para 261). Her Honour noted that, had the legislature intended such a territorial limitation it would have included words to that effect, concluding, a 'territorial limitation of the kind contended for by Bradken is unnecessary and inappropriate' (para 261).

More information

See further information and resources on the cartel page.