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AUSTRALIAN Food Law Update 02 Nov 2017 ACCC fails to prove egg producers engaged in cartel conduct

ACCC v Australian Egg Corporation Limited [2017] FCAFC 152

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What you need to know

  • Industry bodies may provide information to its members, and suggest that members independently examine and consider changing their business practices without this conduct contravening CCA cartel provisions, but need to tread carefully to ensure there is no suggestion that those changes should be through collective action or pursuant to an arrangement or understanding between members.
  • The imminent introduction of a prohibition against "concerted practices" may make this area more difficult for industry bodies – see Competition Law News - Parliament passes Harper reforms to Competition Law in Australia for more information.

The Full Federal Court has dismissed an appeal brought by the ACCC in its proceeding against the Australian Egg Corporation Limited (AECL), Farm Pride Foods Ltd and Ironside Management Services Pty Ltd (trading as Twelve Oaks Poultry), and two executives.  We reported the first instance decision in our February 2016 edition of Food Law Update.

The ACCC unsuccessfully argued that each of the respondents had attempted to induce major Australian egg producers to engage in cartel conduct by entering into an arrangement or understanding to limit the supply of eggs in Australia, to correct a perceived oversupply of eggs, in contravention of section 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (CCA).

Section 44ZZRJ provides that a corporation will be found to be committing cartel conduct if:

  • the corporation makes a contract or arrangement, or arrives at an understanding; and
  • the contract, arrangement or understanding contains a cartel provision (in this case, an agreement to limit the supply of eggs).

The conduct related to a crisis summit meeting, held by AECL, to which 25 of the largest egg producers were invited and various statements made in AECL's "EggCorp EggsPress" publication in the period leading up to that summit. Presentations were given at the summit meeting about the oversupply of eggs and the resulting effect on egg pricing in Australia. Possible solutions to the oversupply were discussed, including donating excess eggs to a food bank and culling birds ahead of schedule. AECL circulated an email following the meeting summarising the outcomes restating the possible solutions.
The Full Court affirmed the primary judge's findings that:

  • while at least two of the respondents did intend for participants to reduce egg supply, there was no intention for that to occur by inducing the respondents to enter into an arrangement or understanding to take collective action; and
  • because there was no mutual obligation or reciprocal agreement formed, the conduct could not contravene section 44ZZRJ.

Notably, one of the original respondents had admitted liability before the first instance trial and was fined $120,000 for attempting to induce cartel conduct between competitors. The findings against that respondent are not affected by the subsequent findings against the ACCC.

Authors: Justin Jones, Partner; Rishada Cassim, Graduate.

 

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The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying it to specific issues or transactions.

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