Cartel Conduct, how it affects your business


The words ‘cartel conduct’ might elicit thoughts of the Central American drug wars and notorious cartel leaders like El Chapo. Yet, in the context of Australian Law, being found to have undertaken ‘cartel conduct’ does not need any determined effort to flout the law, El Chapo style; it can happen simply enough where, say, a group act in a concerted fashion to address, say, market dominance, which is a common enough phenomenon in the Australian supply chain.  

We at BAL say it is crucial for business management to understand what these words mean under Australian law. It is most critical for those businesses that may involve some form of co-operation between would-be competitors. And noting that “competitors” compete both for customers on their “sale side” and compete for suppliers on their “supply side”.

What is cartel conduct?

“Cartel conduct” is a type of anti-competitive behaviour prohibited under the Competition and Consumer Act 2010 (the Act). Broadly, cartel conduct involves:

  • A contract, arrangement or understanding (Note that such an agreement need not be in writing, a nod or a wink may be sufficient).
  • Between two or more competitors that relates to:
  • Price-fixing (fixes, controls or maintains prices);
  • Restricting outputs in the production and supply chain (preventing, restricting or limiting the amount of goods and services available);
  • Allocating customers, suppliers or territories (market sharing); or
  • Big-rigging.

This definition is broad and includes behaviour that you might not instinctively think would constitute cartel conduct. For instance:

  • you cannot agree with a competitor before tendering who will ‘win’ the bid and share in the profits of the bid, even if such an agreement might benefit both of you.
  • Joint bidding between competitors raises a shadow as to what might have been agreed between the competitors regarding the price to be offered, once successful.

cartel conduct is prohibited, irrespective of its effect on competition. Unlike other forms of regulated “anti-competitive conduct”  no lessening of competition needs to be proven by the ACCC. Therefore, even if your engagement in cartel conduct has no or only a negligible impact on competition, you will be operating in breach of the Act.

What are the risks of engaging in cartel conduct?

The potential civil and or criminal penalties for corporations and individuals that engage in cartel conduct are significant.

For corporations, the potential penalties will be the greater of:

  • $10 million per contravention;
  • Three times the total value of the benefits obtained from or reasonably attributable to the cartel conduct; or
  • If the value of those benefits cannot be determined, 10% of the corporation’s annual turnover.  

Individuals may also be personally liable for significant penalties, including:

  • Up to ten years jail time and/or fines up to $220,000 per criminal cartel offence
  • A pecuniary penalty of up to $500,000 per civil contravention

It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty for such breaches.

Other penalties relating to cartel conduct include injunctions, orders disqualifying a person from managing corporations and community service orders. Less tangible risks involved in cartel conduct are reputational costs to businesses and individuals from negative publicity. Governments typically steer clear of business perceived as pursuing what is fairly considered “corrupt” behaviour.

When to approach the ACCC?

Given the consequential severity of a breach, it is fortunate that the ACC affords a path to exempt persons from prosecution and in appropriate cases to allow certain “cartel conduct” to be undertaken; some cartel conduct has considerable utility.

The Australian Competition and Consumer Commission (ACCC) is proactive in investigating cartels and will refer serious cartel conduct for prosecution where possible. However, in consideration of the extreme consequences of a breach, the ACCC has included several exemptions.

Reporting and Immunity:

If you are aware of cartel conduct, you may anonymously report it to the ACCC. In addition, if you are involved in cartel conduct, you can apply for immunity from prosecution in exchange for helping the ACCC with their investigations.

Approach for Authorisation:

Where businesses are concerned that their proposed conduct could involve a breach of the Act, such as cartel conduct, they may approach the ACCC and apply for Section 88 Authorisation. If the ACCC is satisfied that the likely public benefit from the conduct outweighs the likely public detriment, it may grant authorisation. Authorisation removes the risk of legal action under the cartel provisions of the Act.

Of the Applications BAL has made in this space, we have applied on behalf of Co-operative Supermarkets Australia Limited to operate in a manner that allows it to secure volumetric discounts from suppliers to its 400 strong membership of Supermarket owners. This allows independent supermarket owners to secure arrangements that the dominant retailers in the market have access to, supporting a vital part of the Australian retail landscape.

However, for some instances, the Section 88 Authorisation process may be too long and too cumbersome a process in some cases, particularly for smaller businesses. Note that an application for authorisation must be in a form approved by the ACCC and accompanied by a lodgement fee of $7500.

Approach for Notification:

The alternative path to s.88 Authorisation for businesses seeking legal protection to engage in instances of collective bargaining allows businesses to approach the ACCC, giving notification of their proposed conduct. A collective bargaining notification will only be available where each member of a group reasonably expects that the value of the transactions under the arrangement will not exceed $3 million (or a higher amount as prescribed by regulations) over a 12-month period.

A notification will provide protection against legal action if validly lodged unless the ACCC objects. The ACCC may only object if it is not satisfied that the likely public benefit from the conduct outweighs the likely public detriment. Note that a collective bargaining notice application must be in a form approved by the ACCC and accompanied by a lodgement fee of $1000.

Here BAL assisted much loved locals and much-awarded brewers tender for the pouring rights to the local football stadium. Like the independent supermarket operators faced with “big end of town competition”, here you have small (but growing) players faced with promotional opportunities that are, if pursued separately, out of reach. Yet what could be a better promotion for the stadium, for the region and regional economy to be pouring the local product, at the local stadium, supporting the local teams.

If you suspect that your business is or may be engaged in cartel conduct or even benefit from it, please seek legal advice from the Business & Commercial team at BAL Lawyers.

Join our mailing list

Get in touch