Changes to the Commerce Act 1986 in the Commerce (Criminalisation of Cartels) Amendment Act 2019 come into force today, on 8 April 2021. While people and companies have been forbidden from working together to fix prices at a certain rate, limit the supply of a certain good they each supply or split a market between them for some time, these actions can now land you in prison. Here is what you need to know about the changes:
1. Since 2017, sections 30 – 30C of the Act have prohibited people and companies from entering into or giving effect to a cartel provision.
2. A cartel provision is defined as a contract, arrangement or understanding between people or companies who compete in the same market (e.g. mechanics or real estate agents acting in the same area) that has the purpose, effect or likely effect of:
a. Price fixing,
b. Restricting output of goods, or
c. Allocating the market between them (for example, I will sell houses on this side of the street and you sell ones across the road).
3. This definition captures contracts, arrangements and understandings that have the effect or likely effect of one of these situations. The people or companies involved didn’t have to deliberately intend to do these things and could have even done them by accident. It was the result of the contract, arrangement or understanding that mattered most.
4. Until today, people or companies that breached these provisions were liable for damages (which were calculated by the Court).
5. Now, people and companies can also be charged with criminal offences if they intentionally enter in to one of these arrangements.
6. You don’t have to know that what you’re doing is called cartel behaviour, or even that it is considered illegal. What matters is the outcome you intend to achieve and whether that outcome meets the legal definition of price fixing, restricting output or market allocating. So long as you intend to achieve that outcome, you could face criminal charges.
7. The penalty for criminal cartel behaviour is up to 7 years imprisonment and/or a fine of up to $500,000 for an individual, or, for a company, a fine up to the greater of $10 million, or a percentage of the company’s turnover or of the value of any commercial gain resulting from the cartel behaviour.
We think these new provisions are likely to make executives pay greater attention to this area of the law. The prospect of exposure to criminal charges will weigh heavily in a way quite unlike the calculation that has been possible up until now, involving a balancing act of career success, profitability and bonuses against a somewhat distant risk that the gamble could go wrong and your company get pinged.
If you want to know more about these changes and how they may affect your business, contact us.