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Competition Law News 08 Aug 2017 ACCC's first foray into uncharted waters: Australia's first criminal cartel prosecution

A global shipping company is fined A$25 million by the Federal Court of Australia, in Australia's first criminal cartel prosecution.

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What you need to know

  • This is the first prosecution under Australia's criminal cartel provisions since their introduction in 2009.
  • In a landmark decision, the global Japanese shipping company, Nippon Yusen Kabushiki Kaisha (NYK) has been fined A$25 million for its involvement in "deliberate, systematic and covert" cartel conduct involving the fixing of freight rates, bid rigging and customer allocation affecting the importation of ten major vehicle brands to Australia from India, Thailand, Japan, Indonesia, North America and Europe.
  • There were at least 20 instances of NYK's participation in cartel conduct between 24 July 2009 and 6 September 2012 (the infringement period) but they were rolled up into one single charge of giving effect to a cartel agreement and understanding after NYK agreed to enter an early guilty plea. 
  • The maximum penalty available to be imposed per charge was 10% of NYK's total annual turnover connected with Australia because the benefit it obtained from the conduct could not be accurately determined. In NYK's case, its total annual turnover was agreed to be A$1 billion, meaning the maximum penalty for the rolled up charge was A$100 million. This can be contrasted with the profit of approximately A$15 million earned by NYK on the transportation of vehicles to Australia affected by the cartel conduct because vehicle transportation was a small part of its overall business. 
  • The Court emphasised the penalty imposed would have been A$50 million but for a discount of 50% for NYK's early guilty plea and past and future assistance and cooperation with the Australian Competition and Consumer Commission (ACCC) and Commonwealth Director of Public Prosecutions (CDPP), which also demonstrated NYK's contrition and remorse.  
  • The decision highlights three key points:
    1. Large companies which engage in cartel conduct in a small part of their overall business are likely to be exposed to maximum penalties which are much more substantial than any benefit likely to be derived from the cartel conduct. This highlights the need for a culture of compliance across all of a company's activities. It will also make it difficult to predict fines.
    2. There is value in cooperation with the ACCC and CDPP in appropriate circumstances even if the firm is not first in line to cooperate or is for any other reason unable to claim full immunity from prosecution from the ACCC or CDPP under the ACCC's Immunity Policy for Cartel Conduct. Parties which engage early and cooperate with the ACCC may be shown substantial leniency. This may take the form of prosecutorial discretion concerning the number of charges ultimately laid and in the sentencing process in the quantum of the discount applied to the fine that would otherwise be imposed but for the cooperation (NYK had cooperated with the ACCC in relation to this investigation since October 2012).
    3. The processes by which pecuniary penalties are determined in the civil cartel context and fines are determined in the criminal cartel context are largely the same and are dependent on consideration of similar criteria. However, civil penalty decisions will not provide any meaningful guidance in the determination of a criminal fine because parties to civil penalty proceedings often make joint submissions as to the quantum or range of the penalty whereas this is not permitted in criminal proceedings by Barbaro v The Queen (2014) 253 CLR 58. 

What you need to do

  • Companies should ensure that their compliance programs are up-to-date, effective and cover all aspects of their business.
  • If your business suspects it has engaged cartel conduct, seek legal advice and consider approaching the ACCC for immunity under the ACCC’s Immunity Policy for Cartel Conduct.


Introduction

The ACCC became aware of, and commenced its investigation into, the alleged conduct in the third quarter of 2012. In October 2012, NYK contacted the ACCC and offered to provide full cooperation.

The ACCC referred the matter to the CDPP for criminal prosecution and charges were laid by the CDPP in July 2016. NYK entered a guilty plea to a rolled up charge of giving effect to a cartel agreement or understanding pursuant to section 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth) (CCA). 

The sentencing hearing took place on 11 April 2017. 

On 3 August 2017, Justice Wigney convicted NYK and ordered it to pay a fine of A$25 million.

What makes this case so significant?

This is Australia's first ever criminal prosecution for a cartel related offence since cartel conduct was criminalised by laws which took effect from 24 July 2009. It arises out of a longstanding global cartel in a market of considerable importance to Australia, ie the market for the supply of ocean shipping services for “roll-on, roll-off” cargo, mainly cars and trucks. 

The fine of A$25 million imposed on NYK is the second-highest penalty imposed in the history of cartel enforcement in Australia.

Whilst the principles for setting an appropriate penalty under the civil cartel regime are well known, this decision provides the first guidance as to how to set appropriate criminal fines for cartel conduct under the framework contained in section 16A of the Crimes Act  1914 (Cth) (Crimes Act). This is very important because the CCA prescribes the same maximum penalties for corporations who engage in cartel conduct under the civil and criminal regime.

The case also demonstrates how the maximum of 10% of total annual turnover in the CCA civil and criminal penalty regimes can expose corporations to maximum penalties which are substantially higher than any benefit they derived from engaging in the cartel conduct.

Background

NYK, headquartered in Tokyo, is one of the world's largest multinational shipping companies. NYK has for many years shipped motor vehicles to Australia from various countries where the vehicles were manufactured. A number of other large foreign corporations also supplied ocean shipping services in respect of motor vehicles on routes to Australia. Those companies ostensibly competed with each other in relation to the supply of those services. From as early as February 1997, however, NYK and a number of the other shipping companies had arrangements or understandings which had the effect of limiting or distorting competition between them.

The agreed or uncontested facts in this matter were that there were five other parties to the cartel provisions the subject of the charge, each of them major shipping lines that also shipped motor vehicles to Australia.

The cartel conduct related to the fixing of freight rates, bid rigging and customer allocation in respect of shipping services supplied to ten major vehicle manufacturers (including Toyota, Suzuki, Nissan, Mazda, Isuzu, Hino Motors, Fiat Chrysler, UD Trucks and Honda) that bought shipping services from NYK on six routes to Australia from Japan, India, Thailand, Indonesia, Europe and North America during the infringement period. 

Only conduct that occurred after the introduction of criminal penalties for cartel conduct in Australia on 24 July 2009 could be prosecuted. NYK’s offending conduct over the three year period covered by the charge until 6 September 2012 involved the shipping of 69,348 new vehicles to Australia. While it is not possible to determine the total value of the benefits obtained that are reasonably attributable to the conduct, NYK derived revenue of A$54.9 million and profit of A$15.4 million from the commerce affected by the conduct.

It is likely that the anti-competitive effect of the offending conduct resulted in higher freight rates on the subject shipping routes to Australia and it is possible that those higher freight rates were passed through to Australian consumers in the form of higher prices for the imported cars and trucks.

The Court's task

The task for Wigney J was to impose a sentence that was of a "severity appropriate in all the circumstances of the offence" as per s 16A(1) of the Crimes Act.

As NYK is a corporation, not a natural person, that sentence would comprise a fine. In NYK’s case, the maximum fine possible was capped at A$100 million. The central question was what fine, up to that maximum, was the appropriate penalty for this "extremely serious offence".

What did NYK do?

The agreed facts upon which NYK was to be sentenced are set out briefly below.  

The Services and the relevant market

The cartel provisions the subject of the charge concerned the provision of ocean transport services for “roll-on, roll-off” cargo, including motor vehicles, trucks, buses, commercial vehicles, agricultural equipment and construction equipment, on international routes including to and from Australia, using specialised vessels known as “Pure Car Carriers” (PCCs) and “Pure Car and Truck Carriers” (PCTCs) (the Services).

NYK was one of eight carriers who supplied the Services on routes to and from Australia. The other carriers were: Mitsui OSK Lines Ltd (MOL), Kawasaki Kisen Kaisha Ltd (K-Line), Toyofuji Shipping Co, Nissan Motor Car Carrier Co, Wallenius Wilhelmsen Logistics AS, Eukor Car Carriers Inc and Hoegh Autolines Holdings AS. Not all carriers operate on all routes.

NYK, MOL and K-Line were commonly referred to in the industry as “the Three J’s”, being the three largest Japanese carriers. Each of the Three J’s supplied the Services on various routes to Australia. 

The Three J’s accounted for approximately 85% of PCC and PCTC capacity operating direct routes from Japan to Australia, and 100% of PCC and PCTC capacity on direct routes from Thailand to Australia. 

The case was not concerned with genuine instances of cooperation between the shipping companies in relation to scheduling and operational matters in respect of the various shipping routes to Australia. The Three J’s were also parties to a “conference agreement” which was registered under Part X of the CCA which provides certain exemptions from the cartel provisions in the CCA. None of the instances of conduct that were the subject of the charge fell within the exemptions in Part X of the CCA.

NYK's operations in relation to Australia

During the infringement period, the NYK group had three distinct business divisions: global logistics, bulk shipping, and other businesses. NYK’s Car Carrier Group was part of its bulk shipping division. The Car Carrier Group was responsible for providing the Services.

Notwithstanding that NYK is a foreign corporation, it carries on business in Australia and is therefore subject to the CCA. NYK supplied Services on routes to and from Australia. It negotiated and entered into contracts in relation to those Services with the head offices of the motor vehicle manufacturers. Those negotiations invariably took place outside Australia. Pursuant to those contracts, NYK charged the manufacturers a freight rate to ship their vehicles to Australia.

The Respect Agreement

From at least February 1997, NYK and a number of other shipping companies had arrived at an arrangement or reached an understanding to the effect that they would not seek to alter their existing market shares or otherwise win existing business from each other. That overarching arrangement or understanding was generally referred to as “maintaining the status quo” or giving and receiving “respect” (the Respect Agreement).

The Respect Agreement contained three provisions: the “Freight Rate Provision”, the “Bid Rigging Provision” and the “Customer Allocation Provision”.

  • The Freight Rate Provision was to the effect that, from time to time, some or all of the carriers would agree to:
    1. share information with one another about freight rates or proposed changes to freight rates to be charged to customers or potential customers for the supply of Services on the routes;
    2. reach agreement about the freight rates to be bid or otherwise communicated to customers and potential customers for the supply of Services on the routes;
    3. submit bids, or decline to submit bids, on the basis of the agreement reached; and/or
    4. enter into contracts with customers for the supply of Services on the routes reflecting the bids submitted to those customers in accordance with the agreement.
  • The Bid Rigging Provision was to the effect that, from time to time, in the event of requests for bids being made by customers or potential customers for the supply of Services, some or all of the carriers would:
    1. share information with one another about the requests for bids and freight rates or proposed changes to freight rates;
    2. reach agreement about how they would respond to requests for bids (which sometimes included an agreement not to bid)
    3. submit bids, or decline to submit bids, on the basis of the agreement reached; and/or
    4. enter into contracts with customers for the supply of Services on the routes reflecting the bids submitted to those customers.
  • The Customer Allocation Provision was to the effect that, from time to time, some or all of the carriers would agree to allocate customers or potential customers who acquired, or were likely to acquire, Services from any or all of the carriers on a particular route or routes.

Giving effect to the provisions of the Respect Agreement

The evidence was that NYK, from time to time, gave effect to the provisions of the Respect Agreement in relation to particular customers on a number of routes as follows:

  • When a Japan-based car manufacturer initiated negotiations to renew a contract for shipments out of Japan, the incumbent carriers, including NYK, would confirm with each other the level of freight rates to be offered with a view to maintaining their respective shares of supply within that customer account, not undercut each other, and maintain or increase the freight rates to be obtained.  Furthermore, if other carriers had been invited to submit offers, the incumbent carriers would confirm with those other carriers that they do not intend to bid for the business in question or that they would be bidding a high rate.  
  • When a Japan-based car manufacturer issued a price reduction request under an existing contract for shipments out of Japan, the incumbent carriers supplying services under that contract, including NYK, would confirm with each other the general stance they would take with regard to this request, in general signaling to each other that they would not undercut and would respect each other’s share of supply. 
  • When a non-Japanese car manufacturer, or the foreign operations of a Japanese car manufacturer, issued a tender, the incumbent carriers, including NYK, would, before the deadline for bid submissions in the first and subsequent rounds, confirm with each other the level of freight rates to be offered with a view to maintaining their respective shares of supply within that customer account, not undercut each other, and maintain or increase to the desired level the freight rates to be obtained. If the tender was global, carriers would also confirm with each other which routes they wished to win orders on.

NYK's knowledge of anti-trust law

Since at least 2009 and throughout the infringement period, employees in NYK’s Car Carrier Group attended training provided by NYK’s Fair Trade Promotion Group or NYK’s Anti-Monopoly Act Task Force Team. The training included contact details of a ‘Help Desk’ for employees in the Car Carrier Group to report issues regarding anti-trust. 

Despite these internal measures, employees in the Car Carrier Group continued to engage in communications with their counterparts at the other carriers.  Senior management within the Car Carrier Group encouraged staff to use means of communication that would evade detection. For example, communications were generally conducted orally over the telephone or in face-to-face meetings and were rarely documented. Where the discussions were conducted by telephone, the employees generally conducted the conversations away from their desks, in hallways, lift lobbies, outside the office or in a room referred to as the “phone booth” to minimise the risk of other staff overhearing the conversation and reporting the conduct to NYK's Fair Trade Promotion Group.

What amounts to cartel conduct?

The offence to which NYK entered a plea of guilty is the offence of giving effect to a cartel provision contrary to s 44ZZRG(1) of the CCA, ie:

  1. A corporation commits an offence if:
    1. a contract, arrangement or understanding contains a cartel provision; and
    2. the corporation gives effect to the cartel provision.

His Honour pointed out that the relative simplicity of the offence provision in s 44ZZRG(1) belies the complexity introduced by the provisions of the CCA that give content to the term “cartel provision”, ie s44ZZRD.

To put it simply, a provision of a contract, agreement or understanding will be a cartel provision if it satisfies the purpose/effect condition for price fixing conduct, or the purpose condition for bid rigging and customer allocation conduct, and it also satisfies the competition condition.  

Relevantly:

  • the purpose/effect condition (ie price fixing) will be satisfied by a provision which has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining the price for goods or services supplied by any or all of the parties to the contract, arrangement or understanding; 
  • the purpose condition (ie bid rigging and/or customer allocation) will be satisfied by a provision that, in the event of a request for bids in relation to the supply of services, one or more of the parties to the contract, arrangement or understanding bid, but one or more of the other parties do not, or 2 or more parties bid, but at least 2 of them do so on the basis that one of those bids is more likely to be successful than the others; and the purpose condition also includes a provision which directly or indirectly has the purpose of allocating between any or all of the parties to the contract, arrangement or understanding the persons who are likely to acquire services from any or all of the parties; and 
  • the competition condition is relevantly satisfied if at least 2 of the parties to the contract, arrangement or understanding are, or but for the contract, arrangement or understanding would be, in competition with each other in relation to the supply or likely supply of services.

Wigney J noted that there was no dispute that the relevant provisions of the Respect Agreement satisfied the purpose/effect condition and the purpose condition.  The Freight Rate Provision satisfied the purpose effect/condition, as it had the purpose, or was likely to have the effect of, fixing, controlling or maintaining the price for Services supplied by any or all of the carriers party to the Respect Agreement. The Bid Rigging Provision and the Customer Allocation Provision satisfied the purpose condition as they had as their objectives the control over which carriers placed bids for the Services and the allocation between them of customers who had acquired, or were likely to acquire, Services.  

It was also self-evident that the cartel participants provided the services in competition with each other.

How was the maximum fine determined?

In Australia, the maximum fine for corporations per cartel contravention (both in criminal cartel prosecutions and civil cartel proceedings) is the greater of A$10 million, three times the total benefits that have been obtained, or, if the total value of the benefits cannot be determined, 10% of the corporation’s annual turnover connected with Australia.

Individuals found guilty of criminal cartel conduct face up to 10 years in jail and/or fines of up to A$360,000 per offence (A$420,000 for conduct engaged in after 1 July 2017).

It was common ground that the total value of the benefits obtained by NYK reasonably attributable to the commission of the offence could not be determined.

It was an agreed fact that NYK’s annual turnover, as defined, from 1 August 2008 to 31 July 2009 was approximately A$1 billion.  Having regard to that agreed fact, the maximum possible fine was A$100 million.

Evidence in relation to the sentence

In addition to the Statement of Agreed Facts, the CDPP and NYK adduced evidence directed to NYK’s cooperation with the ACCC and the CDPP and changes in NYK’s management and compliance programs and systems since the events in question.

Cooperation

In terms of NYK's cooperation:

  • The CDPP adduced affidavit evidence of an officer of the ACCC that NYK had provided “full, frank and truthful disclosure and cooperated fully and, in most instances, expeditiously, on a continuing basis throughout the ACCC’s investigation”.  This included providing the ACCC with a detailed background briefing paper together with copies of relevant documents, complying with the ACCC’s voluntary requests for information and documents, and facilitating interviews of a number of NYK executives in circumstances where they could not have been compelled to travel to Australia to be interviewed.
  • NYK agreed to plead guilty to the single “rolled-up” charge at a very early stage, after extensive negotiations between its lawyers and the ACCC and CDPP, but before a full brief of evidence had been served by the CDPP.  
  • NYK executed an undertaking pursuant to section 16AC of the Crimes Act for the provision of future assistance to the ACCC and CDPP, including providing employees and executives of NYK to give evidence, including in person, in accordance with any witness statements made by them, in any proceedings commenced by the CDPP or the ACCC.  It also provides for NYK employees to provide additional witness statements and to attend such conferences as might reasonably be requested by the ACCC or the CDPP.

Contrition

In terms of NYK's contrition, His Honour noted that NYK has taken a range of measures to strengthen the culture of compliance at NYK. This included management changes, consultation with external specialist competition law advisers and the establishment of an entirely new compliance regime which includes a leniency policy and whistle-blower protection to encourage staff who have engaged in or witnessed violations of competition laws to report the violations.

Sentencing considerations

The sentence imposed must be of a “severity appropriate in all the circumstances of the offence” and the Court must take into account the matters set out in s 16A(2) so far as they are relevant and known to the Court. Wigney J took the following matters into account:

The nature and circumstances of the offence

  • Course of conduct – a “rolled-up” offence

    NYK was charged with one offence against s 44ZZRG(1).  However, His Honour noted that the particulars and agreed facts revealed that NYK committed multiple offences (at least 20) against s 44ZZRG(1) over a lengthy period of time. Wigney J noted that the more contraventions or episodes of criminality that form part of the rolled up charge, the more objectively serious the offence is likely to be. 

  • The maximum penalty and profit attributable to the conduct

    The maximum penalty is generally considered to be a “guidepost” or “yardstick” that bears on the ultimate discretionary determination of the sentence for the offence because it represents the legislature’s assessment of the seriousness of the offence.

    The maximum penalty for the one offence committed by NYK was A$100 million for the reasons mentioned above.

    NYK submitted that the profit figure of A$15.4 million must be taken as the upper bound of the benefit derived from the conduct. His Honour said, however, that the offending conduct may also have given rise to indirect monetary benefits and also benefits of a more intangible nature and likely to derive from the increased certainty arising from stable market shares and customer allocations and the absence of any aggressive price competition. This meant that Wigney J did not regard NYK’s profit from the relevant shipments as a reason for treating the maximum penalty with circumspection. The profit was regarded as a material fact in considering the nature and seriousness of the offence.

  • Cartel offences generally

    Wigney J referred to the factors that have been identified as being relevant to the imposition of civil penalties for cartel and other anti-competitive conduct, as summarised  in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2016] FCA 1516 at [86]-[89] and said that they would be equally applicable in the criminal sentencing context. 

  • The duration and scale of the offending conduct

    The infringement period itself spanned a period of more than three years which the Court noted was highly significant. The conduct had been ongoing since 1997 and the commencement date of the infringement period was entirely artificial and simply represented the commencement of the criminalisation of cartel conduct in Australia. While NYK could not be punished for its conduct prior to 24 July 2009, and that conduct could not serve to aggravate NYK’s offence, it was nevertheless relevant to consider that the offence occurred in the context of an extremely longstanding global cartel.

  • The extent to which the conduct was deliberate, systematic and covert

    The facts revealed that the cartel, evidenced by the conduct of NYK and some of the other carriers in giving effect to the Respect Agreement over many years, was systematic, well-orchestrated and involved a high level of planning and coordination. 

  • Seniority of employees, corporate culture and compliance programs

    There was no dispute that senior managers within the Car Carrier Group at NYK were involved in the conduct the subject of the charge.

Deterrence

It is generally accepted that general deterrence is an important consideration in sentencing for offences which are difficult to detect and investigate. Wigney J noted that cartel conduct is an essentially economic or commercial crime that generally involves the offender weighing up whether the benefit or profit from the conduct is likely to outweigh the risks of detection and penalisation.  Sentences imposed for such offences should be set so that others who may engage in such a weighing exercise will come to appreciate that the risks are likely to outweigh the benefits.  That is, the likely penalty will be such that it could not be regarded as an acceptable cost of doing business.

Need for adequate punishment

Competition regulators around the world have imposed penalties, or brought court actions to impose penalties, on NYK in respect of certain aspects of its conduct related to the Respect Agreement as follows:

Country fine/penalty
Japan ¥13.1 billion (approximately A$157 million)
USA US$59.4 million (approximately A$74.5 million). Further, a senior officer of NYK’s Car Carrier Group also pleaded guilty in relation to his participation in the relevant conspiracy. He paid a fine of US$20,000 and was sentenced to 15 months imprisonment. (There is no clear indication that any of the conduct the subject of the charge in the United States involved any of the relevant routes to Australia)
 South Africa  R104 million (approximately A$10 million)
 Chile  US$25 million (approximately A$31 million)
China NYK was not fined as it was the immunity applicant

An issue for determination was the weight that should be given to the overseas penalties. In particular, the “Surcharge Payment Order” imposed in Japan included approximately A$20 million of the overall order related to the Oceania route, 87% of which related to the carriage of vehicles on the route from Japan to south and east Australia.

Wigney J noted that the overseas penalties were unlikely to have been imposed in respect of the conduct the subject of the charge in this matter. The overseas jurisdictions imposed sanctions or penalties in respect of conduct that occurred in, or in relation to, or otherwise affected, those jurisdictions.  It may also be inferred that the administrative penalty imposed by the Japanese regulator was imposed having regard to Japan’s laws and public policy considerations.  The Japanese regulator’s primary concerns were unlikely to relate to the impact that the conduct had on Australian related commerce or Australian consumers.

Further, while the overseas penalties were large, His Honour noted that, so is NYK.  There was no suggestion that NYK did not have the capacity to pay the fine imposed in relation to this matter in addition to the overseas administrative penalties.

The character and antecedents of the offender

The Court noted that NYK does not have a prior record of corporate criminal misconduct in Australia or elsewhere but that prior good character is also not generally given significant weight in sentencing for offences where general deterrence is a significant consideration.

The prospect of rehabilitation

It was accepted that NYK has rehabilitated itself or has, at the very least, demonstrated excellent prospects of rehabilitation.

Relevance of civil precedents

His Honour noted that there are a number of difficulties in placing any reliance on the penalties imposed in the civil penalty cases.  His Honour noted that it appears to have been accepted that the purpose of imposing a civil penalty is different to the purpose of imposing a criminal penalty.  Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is said to be primarily, if not wholly, protective in promoting the public interest in compliance.  Further, many of the penalties that have been imposed in the civil penalty cases were agreed penalties.  While those agreed penalties were approved by the Court, it may nevertheless be inferred that the penalties involved some element of compromise and may not reflect the penalty that would have been imposed by the Court had there been no agreement.

Submissions

In civil penalty proceedings, rather than criminal prosecution, the parties can elect to propose an agreed penalty to the Court.  In criminal prosecution, however, the CDPP cannot, but the defendant can, advance submissions concerning the appropriate penalty range.  The CDPP can then respond to any range proposed by the defendant by indicating whether the CDPP considers that imposing a sentence within that range might lead to appellable error.

NYK submitted that, having regard to the maximum penalty, the purposes of sentencing, the objective features of the offence, NYK’s compelling subjective circumstances and the fines already paid by NYK, the appropriate penalty range (after the application of a discount for plea and cooperation) would be a fine in the order of A$20 million to A$25 million.  The CDPP’s response was that imposing a sentence within that range would not lead to appellable error.

The appropriate sentence 

In summary, the Court found that the factors that tended to weigh in favour of a more severe punishment included:

  1. the maximum penalty (a fine of A$100 million); 
  2. the very serious nature of the offence (involving deliberate, systematic and covert conduct by relatively senior management over a lengthy period involving a large number of shipments);
  3. the damage, or potential damage, to the integrity of Australia’s markets and economic system caused by the conduct; and
  4. the need for general deterrence, particularly in respect of offences of this kind.

The mitigating factors included:

  1. NYK’s genuine contrition and rehabilitation, including the extensive steps taken by it to prevent any reoffending; 
  2. NYK’s early plea of guilty; 
  3. NYK’s significant and valuable cooperation and assistance to the ACCC and the CDPP in relation to the investigation of this offence and possible offences by others; 
  4.  NYK’s undertaking to provide assistance in relation to proceedings in the future; 
  5.  the extra-curial punishment, in the form of penalties imposed by courts and tribunals in other jurisdictions, already imposed on NYK in respect of conduct related to the relevant cartel; and
  6. the fact that NYK has not previously been convicted of any offence in Australia or overseas.

Wigney J found that, having regard to all of the relevant features and factors, and giving them appropriate weight, the appropriate sentence in all the circumstances was a fine of A$25 million. 

That fine incorporated a discount of 50% for NYK's early plea of guilty and past and future assistance and cooperation, together with the contrition shown through NYK's early plea and cooperation. That means that, but for NYK's early plea and past and future cooperation, the fine would have been A$50 million. Of that 50% discount, 10% relates to future cooperation.  

Takeaway message

Justice Wigney ended his judgment with the following takeaway message:

Cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment.  It is inimical to and destructive of the competition that underpins Australia’s free market economy.  It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers.  The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly. 

Next steps

The ACCC's investigation into other alleged cartel participants is ongoing. Thirty seven charges of giving effect to a cartel arrangement or understanding have been laid against K-Line, another Japanese shipping company alleged to have been involved in the conduct in Australia. K-Line has not entered a plea and is currently contesting the charges. That matter is set down for a committal hearing in October 2017.

Rod Sims, the Chairman of the ACCC, has stated that the ACCC is working on a number of "detailed investigations" of cartel conduct, and it is expected that more criminal cartel prosecutions will be commenced in Australia in the near future. Since this decision, Sims has announced that the ACCC is conducting a review of its Immunity Policy for Cartel Conduct.  The review will particularly focus on maximising the benefits and incentives for parties to provide full and continuing cooperation in ACCC investigations and enforcement cases.

The ACCC is yet to bring criminal proceedings against an individual. If that occurs and guilt is established through a guilty plea or a contested liability hearing, the penalty options available will expand beyond the traditional ambit of fines and will include, among other things, imprisonment. 

Authors: Peter Armitage, Elizabeth Sarofim and Melissa Barnwell 

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