Market riggers are getting off lightly in Australia with average fines of $24.5 million on anti-trust breaches that could cost them $324.4 million in the OECD, according to ACCC chairman Rod Sims.
“This disparity in pecuniary penalties is extremely concerning, as it must limit the effective deterrence of sanctions for competition law contraventions in Australia,” Mr Sims said in a speech on Monday.
His figures came from an OECD report into Australian competition law penalties, published as he spoke. It found that “both the maximum and average penalties imposed by the courts for competition law breaches are significantly lower than in the OECD jurisdictions considered, especially for large firms or for long-standing anti-competitive behaviour”.
“The OECD calculated an average Australian penalty based on a sample of cartel cases and estimated penalties would have to be increased by 12.6 times to be comparable with the level of the average penalty in these OECD countries.”
Mr Sims said that the current penalty regime in Australia was too low to be a serious deterrent for big businesses considering collusion that would damage consumers.
“We do not want the penalties for breaches of our competition laws to be seen as an acceptable cost of doing business in Australia,” he said.
“To achieve effective deterrence we need penalties that are large enough to be noticed by senior management and company boards, and also shareholders. This is certainly not the case now.”
Australian maximum competition law penalties are currently the greater of $10 million, three times the gain derived from the illegal conduct or 10 per cent of annual turnover in the 12 months preceding the year in which the breach occurred.
The largest collusion penalty in Australia, $36 million, was levied against packaging giant Visy in 2007 as a result of a cartel it ran with Amcor. Some other significant penalties have been against Colgate Palmolive ($18 million), Woolworths ($9 million), Cement Australia ($18.6 million) and Cabcharge ($15 million).
However, Australian courts have consistently dished out lower penalties than their European counterparts, according to research from Melbourne University academics Caron Beaton-Wells and Julie Clarke.
“Over the last ten years fines imposed by the European Commission (EC) for cartel conduct have averaged $A89.3 million, as compared with an average of $A3.1 million per respondent in Australia. Total fines imposed by the EC exceeded total penalties imposed by Australian courts by a factor of 110, but the number of EC decisions exceeded the number of Australian decisions by a factor of only 3.85,” the research found.
Mr Sims said that it was up to the courts, not the ACCC, to set penalties for competition breaches “although the ACCC has a role in making submissions to the court as to the appropriate penalty”. The ACCC may have not pursued tough penalties with enough vigour, he said.
“The OECD’s report indicates that we may not have given sufficient weight to this factor in our submissions on penalty to the Court, or that where we have done so, we have not persuaded the Court,” Mr Sims said.
There is also evidence that the ACCC’s practice of negotiating penalties with companies guilty of competition breaches may result in penalties that are too low.
In a cartel case that ordered $9 million in penalties against the ANZ and $6 million against Macquarie, the presiding Federal Court judge, Justice Michael Wigney, made the observation that the agreed penalties were “at the very bottom of the range of agreed penalties” and that he would have ordered a much higher penalty had there been no agreed penalty.