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Beaton-Wells, Caron --- "The ACCC Immunity Policy for Cartel Conduct: Due for Review" [2013] UMelbLRS 1

The ACCC Immunity Policy for Cartel Conduct: Due for Review

Professor Caron Beaton-Wells^*

Paper for Competition Law Conference
Sydney
4 May 2013

1. Introduction

Deterring, detecting and prosecuting cartel conduct is a high priority for enforcement authorities worldwide. Cartel conduct involves various forms of arrangement between competitors that eliminate or subvert the normal processes of competition and thereby have the effect of or potential to increase prices, reduce consumer choice and stifle innovation. Such arrangements are widely seen as the most harmful category of anti-competitive conduct. Serious or so-called ‘hard core’^[1] cartels usually involve secrecy and deception by participants with the deliberate aim of avoiding discovery. They are therefore difficult to detect and as documentary evidence is rarely available, difficult to prosecute even when detected.

Given the challenges in detecting and prosecuting cartels, the Australian Competition and Consumer Commission (ACCC) has had a form of immunity policy for cartel conduct since 2003,^[2] known since 2005 as the ACCC Immunity Policy for Cartel Conduct (AIPCC), elaborated upon in ACCC Immunity Policy Interpretation Guidelines (Interpretation Guidelines). This policy emulates the general model of such policies employed by competition authorities around the world and immunises the first party to report a cartel under certain conditions from any legal proceeding or penalty in connection with the conduct that is the subject of immunity. More than 50 jurisdictions have some form of immunity policy in support of their anti-cartel enforcement activities.^[3] Competition authorities generally regard an immunity policy (known in other parts as a leniency policy or amnesty policy)^[4] as the most important tool at their disposal for cartel detection and prosecution.^[5] They also justify an immunity policy on the grounds that it deters cartels from forming.^[6]

The ACCC has stated for some time that it has received ‘1-2 approaches per month’^[7] under the AIPCC since 2005.^[8] However, little else has been reported publicly about the operation, effectiveness and role of the policy, including any side effects (positive or negative), that it may have for enforcement and compliance generally. The AIPCC was reviewed in connection with the introduction of a dual civil/criminal regime for cartel conduct in 2009.^[9] At the same time the Commonwealth Director of Public Prosecutions (CDPP) Prosecution Policy (Prosecution Policy) was amended and Annexure B added to explain how immunity from cartel offences would be handled by the CDPP.^[10] The focus of that review was primarily on how applications for immunity from civil and criminal proceedings would be managed and the respective roles of and relationship between the ACCC and CDPP in that process. There has not been a more wide ranging examination of the AIPCC since the review undertaken of what was then known as the leniency policy in 2004, 13 years ago (the 2004 Review).^[11] The ACCC will announce at this conference that it is currently undertaking a review of the AIPCC (ACCC review).

This paper relates to a research project being conducted by the author in relation to the AIPCC (the Immunity Project). The research involves a qualitative approach to examining the operation, effectiveness and role of the AIPCC through interviews with ACCC representatives, legal practitioners, particularly those who have the most experience in advising immunity applicants and making immunity applications, and others, including to the extent possible, CDPP representatives and in-house counsel. To date interviews have been conducted with 16 interviewees and are continuing. ^[12] The Project analysis will draw also on the author’s recent research concerning the dual civil/criminal regime more generally^[13] and on her contributions to an emerging debate concerning private enforcement of competition law in Australia and its interaction with ACCC enforcement.^[14] It will also take account of policies and practices in other jurisdictions, particularly those that enforce a dual civil/criminal regime for cartel conduct and involve separate agencies in investigation and prosecution.^[15]

There is a large body of economic research of both a theoretical and empirical nature that has sought to establish the ‘optimal’ design of immunity policies and test for their ‘success’ in cartel detection, prosecution and deterrence.^[16] This research has limitations relating to data availability and methodology (for example, the need to make unrealistic assumptions for the purposes of modelling effects of immunity policies on cartel behaviour). It is also limited in the extent to which it can reveal how an immunity policy is actually perceived by immunity applicants (including potential applicants) and their advisers and implemented by enforcement agencies in practice. A qualitative approach is required for these purposes.

While qualitative approaches, involving case studies and interviews, have the potential to overcome some of the limitations of the economic research in this area, relatively little qualitative research has been undertaken. There has been no such research on this topic that is specific to the Australian context. As far as the author is aware, there have been only two case studies published about the impact of an immunity policy, both of which related to cartels investigated by European authorities.^[17] There have also only been two publicly reported attempts at eliciting information about immunity policy effectiveness through interviews with practitioners, one by Associate Professor Daniel Sokol in the United States^[18] and another by a consultancy firm commissioned by the Office of Fair Trading (the United Kingdom competition authority).^[19] The US study raised questions about the effectiveness of the US immunity policy in practice and suggested it was having hitherto unreported adverse effects, including the use of the policy strategically by businesses to damage their rivals.^[20] There have also been a number of published commentaries by practitioners and others in recent years questioning the value of immunity policies and cautioning against putting ‘all the eggs in the immunity basket’^[21] as well as drawing attention to the potentially deleterious effects of such policies on private enforcement,^[22] on criminal trials,^[23] and on engendering a culture of compliance amongst the business community.^[24]

The aims of the Immunity Project are:

1. to review and critically assess the design and operation of the AIPCC having regard to practical experience as well as key findings of the economic literature about the design of such policies;
2. to review and critically assess the effectiveness of the AIPCC, specifically the extent to which it is facilitating or capable of facilitating cartel detection, prosecution and deterrence;
3. to provider greater understanding of the interaction between the AIPCC and other aspects of or approaches to the anti-cartel enforcement (including settlement, compensation measures and compliance programs);
4. to make recommendations for any changes to the design and administration of the AIPCC seen as necessary to enhance its effectiveness and, to the extent relevant, reduce any negative effects on other aspects of or approaches to enforcement;
5. to elicit relevant insights for other jurisdictions employing an immunity policy, particularly those that have a dual civil/criminal regime.^[25]

This research is significant because it will critically evaluate the policy claimed by the ACCC to be the most potent tool in its anti-cartel enforcement armoury and enliven and inform a debate about how the policy may be improved and/or whether alternative approaches to cartel detection, prosecution and deterrence should be fostered or strengthened. The research will also have implications for other jurisdictions given the increasing adoption of and convergence in the design and administration of immunity policies worldwide.

III Aims, scope and structure of this paper

The Immunity Project is in its early stages and has not yet reached a point at which any findings have been made. The modest aims of this paper are therefore to:

• provide input to the scope and form of the ACCC review, including the range of issues that could be canvassed and questions that may be asked in connection with such issues;
• prompt consideration of and debate concerning the issues and questions raised with a view to ensuring that the ACCC review fully reflects the considered views of as many stakeholders as possible; and
• seek feedback on the issues raised in the paper by way of contribution to the research being conducted for the Immunity Project.^[26]

The paper is structured as follows:

Part IV AIPCC design and interpretation

A. Scope

B. Eligibility

C. Use of information

D. Civil and criminal immunity

Part V AIPCC effectiveness

A. Detecting cartel conduct

B. Stoping cartel conduct

C. Prosecuting cartel conduct

D. Deterring cartel conduct

Part VI The AIPCC as an element of an overall enforcement system

A. Cooperation under the ACCC Cooperation Policy for Enforcement Matters (CPEM)

B. Compensation

C. Compliance

Part VII AIPCC reporting

Part VIII Approach to the ACCC review

The paper assumes knowledge of the provisions of the AIPCC, Interpretation Guidelines and Annexure B of the CDPP Prosecution Policy and does not set these out, except to the extent required to explain the issues raised.

IV AIPCC design and interpretation

The Interpretation Guidelines and Annexure B should be amended to replace all references to the Trade Practices Act 1974 or TPA with references to the Competition and Consumer Act 2010 or CCA/CACA.

A. Scope

(i) Conduct

The statement of conduct in the AIPCC and the Interpretation Guidelines to which the AIPCC applies is limited to conduct to which the cartel prohibitions and offences in Div 1 of Part IV of the Competition and Consumer Act 2010 (CACA) may apply. It excludes reference to conduct that may be caught by the prohibitions in s 45(2) of the CACA, but not caught also by the prohibitions in Div 1. There is not a clear justification for the exclusion of conduct that may be subject to the per se prohibition on exclusionary provisions,^[27] particularly having regard to the potential overlap between the conduct subject to that prohibition and conduct subject to the prohibition on cartel provisions that involve output restriction.^[28]

Q1: Should the statement of conduct to which the AIPCC applies be amended to make it clear that the scope of the AIPCC extends to conduct that may be caught by the prohibitions in ss 45(2)(a)(i), (b)(i) of the CACA?

The statement in the Interpretation Guidelines of the conduct to which the AIPCC applies is an attempt to paraphrase the prolix and technical definition of cartel conduct under Div 1 of the CACA.^[29] Inevitably as a result the description is inaccurate in several respects. There is no reference to the important elements of liability comprised in making a contract, arrangement or understanding containing a cartel provision^[30] or giving effect to a cartel provision contained in a contract, arrangement or understanding.^[31] The competition condition is also not well captured given that that condition includes parties that are likely to be in competition with each other.^[32] The breadth of the purpose/effect and purpose conditions is also not reflected in the statement in the AIPCC. For example, the statement does not reflect the fact that the purpose/effect condition applies to provisions that have the purpose or effect, directly or indirectly, of fixing, maintaining or controlling prices, or providing therefor.^[33] In practice, this aspect of the definition extends the prohibitions well beyond what might be entailed in ‘price fixing.’^[34]

Q2: Should the statement in the Interpretation Guidelines of the conduct to which the AIPCC applies be amended to define the scope of the AIPCC by reference only to the relevant statutory provisions, similar to the approach taken in the AIPCC which states: ‘This policy applies to conduct in relation to civil contraventions of Division 1 of Part IV of the Competition and Consumer Act 2010, as amended by the Trade Practices Amendment Act (Cartel Conduct and Other Measures) Act 2009.’?^[35]

The Interpretation Guidelines are ambiguous on the question of the AIPCC’s applicability to conduct to which the cartel prohibitions and offences in the Competition Code may apply. Paragraph [13] of the Interpretation Guidelines states that ‘[w]hen the context permits, the immunity policy applies equally to the various state competition codes as it does to the TPA.’ The reason for the qualification – ‘when the context permits’ – is not clear and should be clarified.^[36]

Q3: Should the Interpretation Guidelines be amended to make it clear that the AIPCC applies to conduct to which the cartel prohibitions in the Competition Code may apply?

Unlike the Interpretation Guidelines, Annexure B does not attempt to paraphrase the conduct that would constitute a cartel offence for the purposes of ss 44ZZRF and 44ZZRG of the CACA.^[37] However, the reference in Annexure B to a ‘serious’ cartel offence in identifying the conduct to which it applies is ambiguous and potentially misleading. Any conduct that satisfies the elements of liability for the purposes of ss 44ZZRF and 44ZZRG should be regarded as serious by virtue of the fact that it is conduct to which criminal liability and sanctions of the severest kind apply. It is clear from the Memorandum of Understanding between the ACCC and CDPP (ACCC-CDPP MOU) that the ‘seriousness’ of conduct will be determined as a matter of enforcement discretion for the purposes of determining when to deal with a matter as a potential offence as distinct from a potential civil contravention.^[38] However, the uncertainty surrounding the exercise of such discretion^[39] should not be introduced into the policy which states the conduct for which immunity is available.

Q4: Should the word ‘serious’ be removed from the statement of conduct to which Annexure B applies?

Ostensibly the AIPCC is open to applications in respect of conduct that could or should more properly have been the subject of a notification or application for authorisation. This may not be a significant issue in practice but there is at least potential for applicants to use the policy to avoid the burden involved in satisfying the test for authorisation and/or the public nature of the notification and authorisation processes.^[40]

Q5: Should the AIPCC be available to corporations that can apply or could have applied for exemption by way of notification or authorisation?

Applicants do not have to admit that the conduct that is the subject of the application constitutes a contravention of or an offence under the CACA. It is sufficient to admit that the conduct may constitute a contravention or contraventions of the CACA. This highlights the fact that the AIPCC is available in respect of conduct that may not constitute a contravention. In its 2004 Review of the policy the ACCC decided that, on balance, there were sufficient reasons in favour of granting conditional immunity for conduct that does not appear to constitute a contravention. To refuse conditional immunity for such matters could disincentivise applications in respect of conduct that may not be illegal yet such applications nevertheless may reveal conduct by another party that is illegal.^[41]

Both practitioner and ACCC interviewees for the Immunity Project expressed the view that unnecessary applications (‘insurance calls’, as one interviewee referred to them) are not all that common in practice. Some practitioners observed that the onerous nature of the cooperation obligations militate against unnecessary applications, as does the need for practitioners acting for applicants to maintain credibility and goodwill in relations with the ACCC. The latter appears a particular consideration for practitioners who specialise in this field and interact regularly with the ACCC in relation to a range of different matters. Others pointed out that such applications are unavoidable given the breadth and uncertainty of the cartel prohibitions and offences and the limitations of the exceptions, particularly the joint venture exceptions (referred to further below).

According to previously unpublished figures provided to the author by the ACCC for the purposes of the Immunity Project (ACCC figures), between September 2005 and April 2013, there were 46 grants of conditional immunity from civil proceedings. However, in this period, there were only 11 cartels that were the subject of proceedings brought by the ACCC and not all of these would have been immunity-led proceedings.^[42]

This could suggest that in some proportion, possibly a considerable proportion of matters, the ACCC is being led by an immunity application to devote resources to investigations that prove unfruitful, at least in allowing for proceedings to be brought against the non-immunity parties (although they may prove fruitful in other ways). This may be the case particularly for international cartels involving conduct that would not be actionable in Australia, either because of jurisdictional issues, because of expiry of the limitations period, or because of the scope of Australian law on some elements of liability (the nature of an ‘understanding’, for example, is a narrower concept than that of a ‘concerted practice’ under European competition rules).^[43]

Practitioner interviewees gave examples of international matters in which they had been involved in which applications had been made for immunity, and conditional civil immunity granted, for conduct that would not have been or was unlikely to be the subject of proceedings in Australia for one reason or another. They explained that more often than not such applications are driven by foreign legal advisers overseeing a multijurisdictional immunity application process in which there is inadequate attention paid to or concern for the legal requirements of individual jurisdictions, notwithstanding that an unnecessary application in Australia will subject the applicant to the onerous burden of disclosure and cooperation with the ACCC, may have reputational effects and may expose it to private actions. With a degree of cynicism, one practitioner described this process involving foreign law firms and their local agents or partners as an ‘industry’.

Q6: Should the ACCC revisit the question of whether to grant conditional immunity in matters where it appears that there has not been a breach of the CACA?

A related question is the status of an immunity application in circumstances where, after a grant of conditional immunity and investigations by the ACCC, the Commission decides not to pursue the matter. The Interpretation Guidelines state that in such circumstances the ACCC will advise the immunity applicant of its decision and at that point the applicant may decide to withdraw its application or may leave it in place in which case their obligations remain in place, although they also retain their first-in status.^[44]

On the one hand it is of value to applicants in such circumstances that they retain their first-in-status given that it is possible that at some stage the ACCC may decide to re-open the investigation. On the other hand, as one practitioner observed, it is arguably unsatisfactory that final immunity is not granted at this point as it effectively leaves the applicant ‘in a limbo state’. The ACCC considered this issue in the context of the 2004 Review and decided that it should not grant final immunity in such circumstances as ‘[i]t may invite a certain amount of gaming of ACCC processes. Applicants may provide enough information to obtain conditional leniency but not enough for the ACCC to bring proceedings against the cartel participants and it may be difficult or impossible to show that the leniency applicant was not fully cooperating.’^[45]

Q7: Should the ACCC revisit the question of whether to grant final immunity to an applicant where it terminates it investigation?

(ii) Applicants

The AIPCC allows for applications by a corporation^[46] and applications by an individual independently of a corporation.^[47] There are sound policy reasons why an immunity policy should be open to individuals independently of the corporation (or non-corporate entities) by which they are employed.^[48]

A corporate applicant may apply for immunity on behalf of a corporate group and immunity will cover each member of the group where it is wholly owned by the applicant or where it is partly owned or controlled.^[49] According to the Interpretation Guidelines, ‘[f]actors including the corporate applicant’s degree of control and ownership will inform such a decision.’^[50] It is unclear whether or not in this context the ACCC applies the test that applies under s 4A of the CACA for the purpose of determining when bodies corporate are ‘related’.

Further the Interpretation Guidelines allow for the ACCC to extend derivative immunity to corporations that are partly owned or controlled by the immunity applicant’ and it ‘will have regard to the duration of the cartel and how long the related entity has been part of the applicant’s corporate group’ in deciding whether or not to extend derivative immunity for this purpose.^[51]

It is not clear from the Interpretation Guidelines when subsidiaries that are partly owned or controlled will be dealt with as part of a corporate group application and when the parent will be treated as the applicant, with the subsidiaries being dealt with by way of derivative immunity. In practice, not much may bear on the distinction. However, allowing subsidiaries to be dealt with by way of corporate group application is inconsistent on its face with the statement in the Interpretation Guidelines that an immunity application ‘may only be made by or on behalf of one party to the cartel, be they a corporation or an individual.’^[52]

It is also not clear whether the Interpretation Guidelines allow for a situation in which the applicant is a subsidiary and joint or derivative immunity is sought for a parent, although in practice interviewees indicated that the ACCC is prepared to be ‘accommodating’ in such circumstances and allow for parent corporations to be covered by a subsidiary’s application, even when it appears that the jurisdictional nexus under s 5(1)(g) of the CACA is not satisfied.^[53]

Q8: Should the Interpretation Guidelines be amended to clarify or elaborate upon:

*the circumstances in which it is appropriate to have related entities that are not wholly owned dealt with by way of a ‘corporate group’ application as opposed to dealing with them by way of derivative immunity;

*whether and in what circumstances immunity or derivative immunity may be available to a parent corporation where application is made by its subsidiary?

Aside from related bodies corporate, it is conceivable that a party or parties to a joint venture would seek to make an application for immunity.^[54] This is not an unrealistic prospect given the limitations of the joint venture exceptions.^[55] That said, authorisation is open to joint venture parties in such circumstances and arguably the AIPCC should not be available for use as a substitute for an application for authorisation (see Q5 above). Moreover, there are difficulties associated with the definition of a ‘joint venture’^[56] and there would also be a risk of engendering sham joint ventures by parties that wished to take advantage of the AIPCC as a means of avoiding liability under the cartel prohibitions.

Q9: Should the AIPCC allow for applications by joint venture parties where the parties are not related and if so, should any limits be placed on the circumstances in which such applications may be made?

The AIPCC does not appear to be available to the Crown or authorities of the Crown notwithstanding such entities are subject to the civil prohibitions (even though they may not be liable to a pecuniary penalty).^[57]

Q10: Should the AIPCC allow for applications by the Crown or an authority of the Crown?

Where a corporation receives conditional or final immunity, it will cover named current or former directors, officers or employees,^[58] although the ACCC may in some circumstances specifically exclude certain current or former directors, officers or employees from immunity.^[59] The Interpretation Guidelines state that ‘[a]ny immunity will be limited to those named persons’.^[60] One practitioner observed that the naming requirement poses practical difficulties because, on the one hand a corporation will want to protect all the individuals potentially exposed to liability and this promotes an over-inclusive approach, while on the other hand being named on the list means that the ACCC will seek to obtain information about and interview all of the named individuals and the time and expense involved in this can be considerable.

The only instance provided in the Interpretation Guidelines of when the ACCC may seek to exclude an individual from derivative immunity is where the individual has left the employment of the corporate applicant and continued to participate in the cartel while in the employment of the cartel participant. However, the interviews indicated there may be other grounds for exclusion, such as where an individual fails to fully cooperate.

The Interpretation Guidelines do not indicate how situations are dealt with where individuals are left off the list inadvertently (a not uncommon scenario particularly where individuals are no longer employed by the corporation). They also do not explain how the ACCC will resolve a situation where an individual seeks to be included on the list but this is resisted by the corporation and there may be a risk of scapegoating.^[61]

Q11: Should the Interpretation Guidelines be amended:

*to make it clear that the list may be amended to add individuals omitted inadvertently at the time of making the application (a matter apparently dealt with currently by way of discretion by the ACCC)?

*to provide greater clarification of the circumstances in which the ACCC may seek to exclude certain individuals from the list independently of the wishes of the corporation?

*to explain the approach that may be taken in dealing with situations where an individual seeks to be included in the list but this is resisted by the corporation?^[62]

The Interpretation Guidelines do not deal with the scenario in which an individual is a director of two of the corporations that are party to the cartel and one of the corporations secures immunity. In that situation the individual will have the benefit of derivative immunity in his capacity as director of the corporation that is the applicant but remains exposed to potential liability in his capacity as director of the other corporation that is not the applicant. In some situations this may be handled pursuant to the CPEM should the non-immunity applicant decide to cooperate. However, there may be situations in which the non-immunity applicant decides not cooperate. Presumably, then the individual could choose to cooperate on his own initiative under the CPEM, albeit that would place him in conflict with the non-cooperating corporation of which he is a director.

Q12: Should the Interpretation Guidelines address the situation where an individual is a director or otherwise associated with two parties to the cartel where one party is an immunity applicant? If so, should the Interpretation Guidelines indicate that the ACCC may extend full immunity to the individual under the CPEM in connection with his involvement in the cartel conduct in the capacity as director of the non-immunity applicant?

B. Eligibility

(i) Party to the cartel

Condition (a)(i) of the AIPCC requires that the corporation is or was a party to the cartel or the individual is or was a director, officer or employee of a corporation that is or was a party to the cartel. The Interpretation Guidelines do not refer to this condition and the concept of a ‘party’ to a cartel may give rise to ambiguity. In particular, there may be confusion caused by the differences in the concept of a ‘party’ for the purposes of the prohibitions and offences, on the one hand, and the concept as used in the AIPCC and Interpretation Guidelines on the other hand.

Q13: Should the Interpretation Guidelines clarify the meaning of a ‘party to the cartel’ for the purposes of condition (a)(i) (and for the purposes of other parts of the Guidelines that refer to ‘party to a cartel’ – for example [25]) and, in particular, clarify:

*that the condition does not require the corporation to have been a party in the sense of a party to the making of the contract, arrangement or understanding, given that the concept of a ‘party’ may otherwise be taken to would exclude corporations that were not party to the making of the contract, arrangement or understanding, but nevertheless gave effect to it?

*that ‘party’ in condition (a)(i) is not affected by the extended meaning of party in s 44ZZRC?^[63]

*that being a ‘party to the cartel’ for the purposes of condition (a)(i) could include being complicit in the conduct that may constitute a breach of or offence under the cartel prohibitions (on the grounds of aiding, abetting, counselling, procuring or being knowingly concerned in the principal breach / offence)?^[64]

*that being a ‘party to the cartel’ for the purposes of condition (a)(i) could relate to conduct to which inchoate forms of liability may apply (namely, attempt, attempted inducement, inducement or conspiracy)?^[65]

(ii) Admission

Condition (a)(ii) of the AIPCC requires that the applicant admit participation in conduct that may constitute a contravention of or offence under the CACA. The Interpretation Guidelines do not refer to this condition. The concept of participation could arguably benefit from some elucidation. In particular, the Interpretation Guidelines should arguably indicate that ‘participation’ not includes just conduct that could give rise to direct liability for cartel conduct but also liability for complicity and inchoate liability.

Q14: Should the Interpretation Guidelines make it clear that ‘participation’ for the purposes of condition (a)(ii) includes participation in:

*conduct that may constitute the principal breach / offence;

*conduct that may constitute complicity in the principal breach / offence;

*conduct that may give rise to inchoate liability, subject to condition (a)(iv) (coercion or clear leadership)?

(iii) First to apply

Condition (a)(iii) of the AIPCC requires that the applicant is the first person to apply for immunity in respect of the cartel under the AIPCC. The Interpretation Guidelines expressly exclude joint applications.^[66] One practical effect of this is that where two or more individuals from a company wish to apply jointly for immunity under the individual policy (as opposed to the situation where the corporation makes the application and the individuals would therefore obtain derivative immunity), it is necessary for only one to be nominated as the immunity applicant and the others are then dealt with under the CPEM. This may result in differences in the treatment of the immunity applicant and the other individuals. It is not clear, for example, whether immunity granted under the CPEM will be conditional and revocable in the same way as applies under the AIPCC. The CPEM does not make detailed provision regarding the use of information provided by the cooperating individual in the same way as the AIPCC does. Perhaps most significantly, it is not clear how the CDPP will deal with cooperating individuals as distinct from individual immunity applicants. The CDPP Prosecution Policy does not provide for full immunity for cooperating individuals in the manner available under the CPEM^[67] and several practitioner interviewees expressed concern that it was by no means clear how the CDPP would handle cooperating parties.

Q15: Should the AIPCC be available for applications by more than one individual and if so, in what circumstances?

Another practical effect of condition (a)(iii) is that it bars an application by a corporation where an individual employee of the corporation has qualified for conditional immunity, notwithstanding that the individual may have limited knowledge of and access to documents concerning the cartel. The ACCC decided in the 2004 Review that such situations should be managed by allowing for subsequent corporate applicants to be dealt with under the CPEM and this could involve a grant of full immunity.^[68] This position is reflected in the Interpretation Guidelines.^[69] However, as stated above, the protections available under the CPEM are not as extensive potentially or at least not as clear and explicit as under the AIPCC and this is particularly the case in the context of potential criminal proceedings.

Q16: Should the ACCC revisit the question of whether a corporate applicant should be eligible to apply despite an individual having qualified for conditional immunity?^[70]

(iv) Coercion or clear leadership

Condition (a)(iv) of the AIPCC requires that the applicant has not coerced others to participate in the cartel and was not the clear leader in the cartel. There are significant difficulties in defining circumstances that would constitute coercion or clear leadership. Presumably, neither would or should be satisfied by the mere fact that one of the parties has greater market power than another or other parties to the cartel. An example given in the Interpretation Guidelines suggests that the ACCC would regard a threat of commercial retaliation against a reluctant cartel entrant as coercion for the purposes of the condition.^[71] However, threats between rivals are common in the cut and thrust of business. There are also substantial constraints on the ACCC being satisfied based on ‘objective evidence’^[72] in any given case that circumstances of coercion or clear leadership exist, particularly given that at the stage of granting conditional immunity the Commission will be reliant on the applicant’s account of roles played in the cartel.

Given these difficulties, some have argued that any such exception should be removed or clearly confined^[73] and the exception has been confined to coercers in the most recent versions of the immunity policies of the New Zealand Commerce Commission, Canadian Competition Bureau and European Commission.^[74] Several interviewees cited the Visy/Amcor and airfreight cartel cases as illustrative of the difficulties with the condition, suggesting that in those cases the immunity applicant (Amcor in the former and Lufthansa in the latter) may have fit the definition of a ‘clear leader’. The ACCC interviewees indicated that there has not been a matter to date in which it has refused to grant immunity on the grounds of this condition and this is consistent with the views of practitioner interviewees that the ACCC takes a ‘very conservative’ approach to the condition (one observing that where the ACCC is part of a global process of immunity applications involving an international cartel, it ‘doesn’t even give it [referring to the condition] lipservice’, even where ‘there’s clear evidence that the immunity applicant was the leader’).

The reasons for having such a condition in the AIPCC are fairly straightforward. It may be seen as necessary to prevent the policy from being used strategically by parties that seek to instigate a cartel and then report it with the aim of harming its rivals through subjection to investigation, prosecution and penalties.^[75] The testimony of ringleaders may be regarded as likely to lack credibility, particularly before a jury.^[76] There may also be seen to be an ‘in principle’ objection to rewarding a cartel coercer or leader with immunity, leaving those more ‘innocent’ members of the cartel to bear the brunt of enforcement action. ^[77] These arguments in favour of the condition may be regarded as tenuous for at least the following reasons:

• the argument relating to strategic use of immunity policies is flawed in various respects;^[78]
• immunity beneficiaries still face the severe fall-out that private enforcement, particularly in the US, entails;
• immunity policy itself is driven by pragmatism rather than principle and the question of whether or not to include a ‘coercion or clear leadership’ condition should arguably be approached in the same way;
• in many cases a cartel leader will be the party best placed to provide the information and evidence relevant to the cartel in question and thereby facilitate the policy objectives of detection and prosecution.

Q17: Should condition (a)(iv) be removed from the AIPCC? Alternatively should condition (iv) be amended to remove reference to clear leadership so that it only excludes applicants that coerced others to participate in the cartel?

The heading to section 3.4 of the Interpretation Guidelines refers to ‘ringleaders’ as opposed to ‘clear leaders.’ The word ‘ringleader’ has pejorative overtones that are unnecessary and in any event, may not be seen to be the same in concept to a ‘clear leader’. What is more, it is not clear what is intended to be added by the adjective ‘clear’, in ‘clear leader’, beyond perhaps the requirement that the fact of leadership be readily discernible and possibly objectively determinable based on the information available to the ACCC.

Q18: If condition (a)(iv) is to be retained:

*should the references in the Interpretation Guidelines to ‘ringleaders’ be replaced with ‘Clear leaders’?

*should the adjective ‘clear’ be removed from the references to ‘clear leader’ in the AIPCC and Interpretation Guidelines?

Paragraph 84 of the Interpretation Guidelines states that ‘a corporation will not be eligible for corporate conditional immunity if it has coerced any person to participate in the cartel or is the clear leader in the cartel’ (emphasis added). This appears to be inconsistent with condition (a)(iv) in that it suggests two separate grounds for ineligibility: coercion OR clear leadership, whereas condition (iv) could be interpreted to only exclude applicants who coerced others AND were clear leaders in the cartel.

Q19: If condition (a)(iv) is to be retained, should it be amended to replace ‘and’ with ‘or’ or alternatively, should the Interpretation Guidelines be amended to replace ‘or’ with ‘and’?

Condition (a)(iv), as it relates to individual immunity applicants, requires that the individual ‘has not coerced persons in other corporations to participate in the cartel and was not the clear individual leader in the cartel.’ The same obscurities relate to coercion and leadership in this context as in the context of corporate applicants. Moreover, it is not clear why the condition should not also apply to individuals employed by or associated with a corporation who have coerced persons employed by or associated with the same corporation to participate in the cartel.

Q20: Should condition (a)(iv), as it relates to individual applicants, exclude applicants who have coerced other individuals working for the same corporation?

Paragraph [85] of the Interpretation Guidelines states that ‘[a]n individual will not be eligible for conditional individual immunity if their employer has coerced another person to participate in the cartel and they have played a role in coercing the other participants.’ This is inconsistent with the condition as it appears in the AIPCC.

Q21: Should either condition (a)(iv) as it relates to individual applicants and/or paragraph [85] of the Interpretation Guidelines be amended to make them consistent as to the circumstances in which an individual applicant will be ineligible for conditional immunity on the grounds of coercion or clear leadership?

The Interpretation Guidelines refer to circumstances which would not be sufficient to establish that a corporate applicant is ineligible under this condition. The Guidelines provide examples to illustrate when the condition would be likely or would not be likely to apply to a corporate applicant. However, condition (a)(iv) also applies to individual applicants. The Guidelines do not provide similar guidance in respect of individual applicants.

Q22: Should the Interpretation Guidelines provide guidance on the types of factors that will be relevant to ascertaining whether or not condition (iv) applies to an individual applicant and examples to illustrate its likely application?

(v) Cooperation

Condition (a)(vii) of the AIPCC requires that the applicant undertakes to provide full disclosure and cooperation to the ACCC. In addition, applicants ‘must provide ongoing full disclosure and cooperation to the ACCC for conditional immunity to remain in place and to be eligible for final immunity.’^[79] Details of the obligations entailed in ‘full disclosure and cooperation’ are provided in the Interpretation Guidelines.^[80] They are onerous obligations obligations and include obligations to collect and provide information and, in the case of individuals, make them be available for interviews and potentially court appearances, all generally at the applicant’s own expense and in accordance with the timetable set by the ACCC.

The Interpretation Guidelines do not suggest that there are any exemptions from the disclosure requirements of the cooperation condition. However, in practice, it appears that there are certain types of information or documents that the ACCC will or may not request be disclosed or produced. In particular, practitioner interviewees indicated that the ACCC does not expect or require material protected by legal professional privilege to be provided by immunity applicants. It was also pointed out that in most instances documents attracting the privilege are unlikely to constitute ‘primary evidence’ of the relevant conduct and hence are unlikely to be of interest to the ACCC in any event.

Nevertheless there is a legitimate question as to whether the Interpretation Guidelines should disclose a general position on the part of the ACCC regarding such material and, in particular, whether or not the ACCC may require legal professional privilege waivers in fulfilment of the condition of disclosure and cooperation. There are arguments for and against such a requirement. On one view, in return for the benefits of immunity, a disclosure requirement should imposed where the ACCC has reason to believe that material subject to legal professional privilege may provide valuable evidence of the cartel. An opposing view is that an immunity applicant should not have its entitlement to receive legal advice regarding the legality of its conduct prejudiced or undermined by a potential requirement to disclose. The difficulties are compounded in the context of a criminal prosecution in which the prosecutorial duty of disclosure may require waiver.^[81]

Q23: Should the Interpretation Guidelines be explicit about what, if any, categories of information or documents are not required to be disclosed or produced for the purposes of cooperation. If so, what categories of information or documents should these be?^[82] In particular, should the ACCC explain its position in relation to disclosure of documents that would be subject to legal professional privilege? If so, what should that position be?

At the time of the 2004 Review concerns were expressed by the Law Council of Australia that the policy was not sufficiently explicit about the nature and extent of the cooperation obligations, particularly having regard to the prospect of revocation should the ACCC form the view that those obligations were not being met.^[83] The ACCC also expressed concern that some applicants had been resistant to providing the level of ongoing cooperation expected by the Commission following the grant of conditional immunity.^[84] These matters were sought to be addressed by setting out in the Interpretation Guidelines details of what is required by way of ‘full, frank and truthful disclosure and cooperation’ and the list of requirements is explicitly non-exhaustive.^[85] Further there is a reminder that providing false or misleading information may not only constitute an offence but is inconsistent with the cooperation obligations under the AIPCC and it is further stated that applicants and relevant employees, directors and officers may be asked to acknowledge their understanding of this.^[86]

In practice, the concerns expressed in the 2004 Review may have diminished with the benefit of experience by both the ACCC and regular users of the policy. Practitioner interviewees spoke of the lengths to which they go to impress upon potential applicants the full nature and extent of the burden entailed in cooperation. Notably, none saw the obligations relating to disclosure and obligation as a reason in itself not to apply for immunity. However, rather as involving a process that has to be carefully managed. The ACCC interviewees indicated that there had not been an occasion on which conditional immunity had been revoked and that there had been only one occasion on which they could recall having to raise the prospect of revocation on the grounds of resistance to cooperation (an instance in which a multinational corporation was reluctant to bring employees to Australia for interviews).

Some practitioners expressed confidence in the reasonableness and pragmatism of the ACCC in negotiating compliance with cooperation obligations. Some observed that disputes could be avoided or the potential for disputes managed if the practitioner has a sufficiently good relationship with ACCC staff and is ‘trusted’ by such staff in their exercise of professional judgment. One expressed the view that the potential for disputes was minimal because there is an unwritten ‘constraint on abuse’ of the policy by the ACCC owing to the need for the Commission to retain the confidence of the business sector and its advisers in the way in which it is administered. He also identified as an important constraint the political risk that the ACCC may have its powers curtailed if it did not act in accordance with due process.

Yet others favoured the introduction of some mechanism for dispute resolution where disagreements arise between applicants and the ACCC relating to cooperation, or indeed other conditions for eligibility under the AIPCC. Given that decisions made by the ACCC pursuant to the AIPCC are unlikely to be subject to judicial review,^[87] the Law Council of Australia has proposed previously that there be an avenue by which, upon the agreement of the ACCC or CDPP, as the case may be, and the applicant, certain categories of decision in relation to immunity be reviewable by a retired judicial officer.^[88] Such a mechanism might have prevented the situation that arose in the US where a company successfully relied upon its leniency agreement with the US Department of Justice (DOJ) in having its indictment for antitrust violations dismissed, the court disagreeing with the DOJ’s assessment that the company had not complied with the conditions for leniency and hence reaching the view that leniency should not have been revoked.^[89]

In the context of criminal liability, disputes between immunity applicants and the ACCC and/or CDPP take on heightened significance given that unlike the ACCC,^[90] the CDPP is not under any self-imposed restriction with regard to the use of information provided by an immunity applicant. If the undertaking not to prosecute is revoked, the CDPP would be able to use such information in proceedings against the applicant.

Q24: Should the AIPCC provide an avenue for dispute resolution between the ACCC or the CDPP, as the case may be, and an applicant in relation to eligibility conditions and possibly other matters arising under the AIPCC and if so, in what circumstances should such an avenue be available and what form should it take?^[91]

(vi) Truly corporate act

Condition (a)(vi) of the AIPCC requires that ‘the corporation’s admissions are a truly corporate act (as opposed to isolated admissions)’. There is some explanation of this condition in the Interpretation Guidelines.^[92] However, the explanation focuses almost entirely on the question of what is expected of the corporation in terms of securing or facilitating the cooperation of directors, officers and employees. These are consistent with the expectations set out in the Interpretation Guidelines in relation to the cooperation condition. There is no explanation in the Interpretation Guidelines of what is meant by the requirement that ‘the corporation’s admissions be a truly corporate act’ (emphasis added), separate from the question of cooperation.

Further, it is evident from the interviews that this condition does not require any formal statement by the corporation’s board or CEO, either in writing or orally, to the effect that the admissions made for the purposes of the application are a ‘truly corporate act’, in the sense of being made by or on behalf of the corporation (or in some other sense). Several practitioners expressed the view that, in practical terms, the only or main way in which non-compliance with this condition was or could be assessed was through the extent of the corporation’s cooperation, or lack thereof, as the case may be. If this is so, then the condition appears to add little beyond reinforcing the extent of the cooperation condition.

One practitioner observed, however, that there may be other ways in which it would be evident that the immunity application was not a ‘truly corporate act’, pointing to examples where the corporate applicant ‘effectively denied’ its participation in or culpability in respect of the conduct, either in internal communications with its staff or in public statements. To the extent that the condition deters or prevents such denials it may add some value. However, if this is the concern that the condition is intended to address, then it may be helpful if the Interpretation Guidelines included a statement to this effect.

Another practitioner was of the view that this condition requires a commitment by the corporate applicant to ‘change the way it engages in business’; in other words, there appears to be an expectation that the corporation will commit to enhanced compliance training and education of its workforce ‘that this conduct is not acceptable’. Again, if this is what is intended by the ACCC in relation to the condition, then the Interpretation Guidelines should say so (see further re compliance as a condition of eligibility in Part VIC below).

Q25: Should condition (a)(vi) be removed or, if retained, modified to clarify what is intended by the requirement that ‘the corporation’s admissions are a truly corporate act’?

(vii) Timing of application

Condition (b) of the AIPCC requires that ‘at the time the ACCC receives the application, the ACCC has not received written legal advice that it has sufficient evidence to commence proceedings in relation to at least one contravention of the CACA arising from the conduct in respect of the cartel.’ The introduction of this condition was a significant change made following the 2004 Review. Under the 2003 policy, where the ACCC was unaware of a cartel, the applicant first to report would receive conditional immunity from proceedings (Part A immunity). However, where the ACCC was aware of the cartel but had insufficient evidence to bring proceedings, the first to report would receive immunity from pecuniary penalty (Part B immunity). This structure for eligibility was considered sub-optimal for several reasons. It was thought to be uncertain as to when the ACCC could be taken to be ‘aware’ of a cartel. The uncertainty was seen as having the potential to disincentivise a cartelist from reporting early. There was also concern at the prospect that immunity would have to be denied to an applicant notwithstanding the ACCC had only limited information regarding the cartel.^[93] There were other problems seen as associated with having two levels of immunity, including the difficulty in bringing a proceeding against a Part B applicant on the basis that there would be no penalty imposed given that penalties remain within the discretion of the court. This was seen as a particular problem should a criminal regime be introduced.^[94]

The changes which created a single level of immunity and modified the stage up to which applications would be received were seen as addressing these concerns. However, it was also acknowledged that under the new condition, the prospects of applicants continuing to report early would depend on there being a high risk of detection, severe sanctions for cartel participants and certainty in the conditions for eligibility under an application of the policy.^[95] It is difficult to assess whether applicants are reporting as early under the revised version of the policy as they did report or would have continued to report under the former version where there was a threshold of awareness. As acknowledged by the ACCC, there are various factors that influence the decision to report and its timing. Nevertheless, for the reasons set out in Part V below, there may be some doubt about the extent to which perceived detection risk and sanction severity are in fact prompting decisions to report under the AIPCC.

C. Use of information

Preserving the confidentiality of information provided by applicants in support of applications for immunity is seen by competition authorities and the practitioners who advise immunity applicants around the world as crucial to success of immunity programs.^[96] Concerns about confidentiality arise in two contexts. The first relates to exposure to follow-on private actions for damages, whether those actions are brought in Australia or overseas. The second relates to exposure to public enforcement action, but particularly prosecution, in other jurisdictions. In both contexts, the concern relates primarily to exposure in the US where treble damages are available, there is an active plaintiffs’ bar and settlement pay-outs often outstrip public fines,^[97] and where the DOJ is committed to jail sentences for cartel offenders, including if not particularly foreign executives.^[98]

(i) Disclosure to private claimants

In relation to the first context, in the 2004 Review, both the ACCC and the Law Council saw it as desirable that there be legislative protection for information provided in support of immunity applications.^[99] This was in acknowledgement of the fact that, although the ACCC may use its best endeavours as a matter of course to protect confidentiality,^[100] there may be circumstances in which it may be required by law to produce information.

Documents generated in the immunity process may be accessible under statutory or court-approved compulsory processes – for example, under subpoena, notices to produce, discovery rules, and freedom of information legislation.^[101] There is substantial uncertainty about the extent to which the ACCC may rely on various privileges (particularly public interest immunity privilege and legal professional privilege) to resist such access.^[102] The difficulty that the ACCC may face in this regard was highlighted by its failure to resist an order to produce to Cadbury for the purposes of its damages action against Amcor and Visy, proofs of evidence from employees of Amcor, the successful immunity applicant, prepared for the purposes of the ACCC’s penalty proceeding against Visy.^[103] Gordon J rejected the ACCC’s claim to public interest immunity privilege, casting significant doubt on the extent to which courts will give weight to arguments against disclosure where such arguments rest on preserving the willingness of parties to apply for immunity.^[104]

To some extent the concerns expressed by the ACCC and the Law Council at the time of the 2004 Review may have been ameliorated by the introduction of legislative protections in 2009 for what is defined as ‘protected cartel information’ (PCI).^[105] The 2009 amendments establish a statutory scheme that appears directed specifically at assuaging the concern of the ACCC and some practitioners regarding the extent to which the ACCC may be compelled to disclose confidential information in its possession as a result of the immunity process (although, the provisions are not limited to information provided by immunity applicants).^[106] The scheme identifies exhaustively the factors that must be weighed by the ACCC and, to the extent relevant, a court in determining whether access should be granted to PCI.^[107] These provisions invest substantial discretion in the ACCC with respect to providing access to information, while at the same time significantly limiting the capacity of others to obtain access through invocation of the usual legal processes.^[108]

The PCI provisions are largely untested to date. None of the interviewees could comment on how they have been applied by the ACCC in practice, although a number expressed the view that they clearly had the potential to protect from disclosure information that otherwise may have been accessible prior to 2009 amendments. There have been criticisms of the PCI provisions on the grounds that they are likely to impede the efforts of private claimants to bring proceedings for compensation.^[109] That said, several recent cases could be taken to suggest that Australian courts and tribunals may find that the reference to ‘the interests of the administration of justice’ as a factor that is mandatorily relevant to disclosure requires them to grant access to the ACCC’s file where the information on the file would become available through a subsequent discovery process, or where a party would suffer a forensic disadvantage if they could not obtain access to information on the file.^[110]

At the same time, it is important to recognise that the PCI provisions have several limitations:

• Self-evidently, the provisions can only apply where documents are generated that may be the subject of a request for disclosure. The so-called ‘paperless’ process allows immunity applicants to avoid generating documents in applying for a marker or making a proffer.
• These provisions only apply to the ACCC. They would not apply in circumstances where production is sought from an immunity applicant of all documents provided to the ACCC.
• The PCI provisions do not apply to the CDPP. Hence, once information is passed from the ACCC to the CDPP in connection with a referral in relation to immunity or a subsequent referral for prosecution,^[111] it may well be accessible subject to general law principles. The Interpretation Guidelines expressly acknowledge that the CDPP may be required to disclose information in accordance with its prosecutorial disclosure obligations.^[112] It is perhaps notable that this has not been suggested as likely to deter immunity applications and nor has it been suggested, as far as the author is aware, that the CDPP should be included in the PCI provisions.^[113]
• It is also possible that private claimants may obtain access to information provided to the ACCC by immunity applicants if and when such information is provided by the ACCC to overseas competition authorities (discussed below). However, in practice, the prospects of obtaining access in such circumstances may be slim given that the ACCC’s information sharing and cooperation agreements generally provide for the maintenance of confidentiality in any information provided in confidence, except where disclosure is required by law, and some also contain a provision requiring the parties to resist third party attempts to gain information.^[114]

(ii) Disclosure to overseas competition authorities

Section 155AAA(12) of the CACA permits the ACCC to disclose protected information, that is information given to it in confidence and relating to a matter arising under Part IV, to overseas competition authorities if the Chairman is satisfied that the information will enable or assist the overseas agency to perform or exercise its powers or functions. This is of particular practical significance in relation to international cartel matters and is consistent with the bilateral information sharing and cooperation agreements between the ACCC and several of its overseas counterparts.^[115]

Importantly, the Chairperson of the ACCC is empowered to impose written conditions to be complied with in relation to protected information that is disclosed under 155AAA(12).^[116] This power is significant because the obligations imposed by s 155AAA and the PCI regime attach to the Commission itself and do not apply to the information once it is provided to another body.
Paragraph [63] of the Interpretation Guidelines states that the ACCC will not share confidential information provided by the immunity applicant, or the identity of the immunity applicant, with overseas competition authorities without the applicant’s consent but will seek that consent as a matter of course, particularly for international matters. In practice, it is probable that the ACCC regards a waiver of confidentiality as necessary to fulfil the applicant’s cooperation obligations. The ACCC does appear to impose conditions on the use of information that it provides to foreign competition authorities pursuant to an applicant’s consent.^[117] However, the nature of those conditions is not publicly known and nor is the degree to which an applicant can negotiate such conditions with the ACCC.

It is arguable that the ACCC should not require immunity applicants to consent to the ACCC disclosing information about the immunity applicant and the application to overseas authorities in situations in which disclosure would expose the applicant and, where it is a corporate applicant, its directors, officers and employees to the risk of legal action in overseas jurisdictions, particularly where such action might include prosecution and criminal sanctions, including the prospects of jail time. The argument is perhaps even stronger in cases in which the conduct would not constitute a breach of Australian cartel law but may constitute a breach of the relevant overseas law (in the case of ‘concerted practices’, for example). Requiring such consent as a matter of course may deter immunity applications under the AIPCC. This potential effect may be ameliorated somewhat if applicants were able to negotiate with the ACCC conditions on the disclosure relating to the nature and extent of the information disclosed, the timing of disclosure and/or the use of such information by the authorities to which it is disclosed.

A counter-argument is that the AIPCC should be limited to providing applicants with protection in Australia and should not protect them from action in other jurisdictions affected by their conduct where they have failed to report to the authorities in those jurisdictions or failed to do so with sufficient speed so as to avail themselves of the relevant overseas immunity policy. The effectiveness of global cartel enforcement, it may be said, rests on cartelists being incentivised to report to authorities in every jurisdiction affected by the cartel and not being able to pick and choose those jurisdictions in which they report on the basis that they may be able to limit their exposure in other jurisdictions in which they choose not to report.

Further, from the perspective of immunity applicants, there may be benefits in a more coordinated approach to immunity processes by competition authorities in international matters. Information sharing by authorities can promote coordination in investigations and could extend, for example, to joint interviewing of witnesses which would involve cost savings for immunity applicants. On the other hand, differences in the scope of investigations and potential penalty exposures (particularly as between civil and criminal systems) between different jurisdictions may mean that the potential risks of coordination at this level outweigh any potential benefits. ICN members are currently exploring how to achieve greater cooperation and coordination in information sharing and the approach taken to confidentiality waivers, in particular.^[118]

Q26: Should the ACCC require immunity applicants to consent to the disclosure of confidential information to overseas competition authorities as a matter of course? Relatedly, should applicants be able to provide consent with conditions attached to the type or extent of information disclosed, the timing of its disclosure and/or the use of the information by the authorities to which it is disclosed?

D. Civil and criminal immunity

It was confirmed in the interviews that for conduct post-dating the introduction of the dual civil/criminal regime in 2009, applications are made for both civil and criminal immunity as a matter of course. This is not surprising given the parallel nature of the civil prohibitions and offences under Div 1 and given that they are so broad and uncertain in their scope.^[119] It would be difficult to conceive of a situation, at least in the early years of the regime, in which an applicant would be advised to seek only civil immunity on the assumption that the conduct does not fall within the terms of the offences or that, even if it did, the ACCC would be unlikely to refer for prosecution or the CDPP to prosecute. According to the ACCC figures, for conduct post-dating July 2009, there have been 21 proffers made in respect of civil and criminal immunity.

Under the dual civil/criminal regime, the ACCC receives and manage applications for both types of immunity.^[120] Such applications are made in accordance with the AIPCC and Interpretation Guidelines.^[121] The ACCC interviewees explained that there may be some engagement by the ACCC with the CDPP shortly after the proffer and, depending on the nature of the matter, there may be some discussion beforehand. The ACCC then undertakes its usual internal processes for determining whether or not to grant the application for conditional civil immunity. Once it has made this determination, it will refer the application for criminal immunity to the CDPP to enable the CDPP to decide whether or not to give an undertaking not to prosecute pursuant to s 9(6D) of the Director of Public Prosecutions Act 1983 (DPP Act).

In referring the matter to the CDPP the ACCC-CDPP MOU provides for the ACCC to make a recommendation to the CDPP as to whether an applicant should receive immunity from criminal proceedings and to apply the same principles that determine eligibility under the AIPCC and the Interpretation Guidelines when making such a recommendation as it applies in making a decision about civil immunity.^[122] It was clear from the ACCC interview that such a recommendation is made whether or not a matter is to be referred to the CDPP for prosecution. From the ACCC’s point of view at least, the immunity ‘referral’ is seen as anterior to and quite distinct from any potential subsequent prosecution referral.

However, it is not clear why a recommendation (presumably in favour of criminal immunity) is necessary in matters where the ACCC is able to reach the view early on that the matter would not fall within the criteria under the ACCC-CDPP MOU that identify conduct as suitable for prosecution as distinct from civil proceedings.^[123] For example, it may be evident from the proffer and/or the ACCC’s own independent inquiries that the matter involves conduct that falls far short of the $1 million value of affected commerce threshold and that it was of short duration and unlikely to have caused any loss or harm. One possible reason for still referring the matter to the CDPP in such circumstances is that, as an independent agency, the CDPP may reach a different view to that of the ACCC on the question whether or not a matter is suitable for prosecution.

That said, given that CDPP presumably will not (or should not) decide to prosecute without an ACCC referral,^[124] it is arguably preferable in such matters that the ACCC provide the applicant with written confirmation that it has decided not to proceed with a criminal investigation or refer a matter for prosecution.^[125] Such an approach would avoid unnecessary delay to investigations and potential settlement of civil cases. However, it would require applicants to accept a degree of risk associated with a potential prosecution by the CDPP independently of an ACCC referral and/or for practitioners to reach the view (and persuade their clients) that such a prospect is remote if not fanciful given the damage it would wreak on the relationship between the two agencies and on the effectiveness of the AIPCC.

Practitioner interviewees observed that the ACCC does not currently have a settled practice of indicating in writing that it is not proposing to treat a matter criminally. This has led to scenarios in which an immunity applicant is cooperating, in compliance with its obligations pursuant to a grant of conditional civil immunity, without any or sufficient certainty as to the CDPP’s position on the matter. One scenario described by a practitioner involved the corporate applicant bringing a foreign executive to Australia for an ACCC interview and the difficulties involved in explaining to the executive, through a translator, that there was no written assurance that he would not be arrested and prosecuted. Although the ACCC had communicated orally to the practitioner that it was not a matter they were pursuing criminally, this was seen as inadequate. Moreover, the communication had been qualified to the effect that the ACCC could not provide any assurance that the CDPP might act on its own initiative. While the ACCC is plainly unable to give any such assurance given the independence of the CDPP, an expectation that immunity applicants and their executives will cooperate in such circumstances is arguably unsatisfactory.

Q27: Where the ACCC is able to reach the view that a matter is not one that would be appropriate for a potential referral for prosecution, should it have a practice, referred to in the Interpretation Guidelines, of notifying an applicant in writing that it has decided not to proceed with a criminal investigation or refer a matter for prosecution rather than refer the application for criminal immunity to the CDPP?

According to the Interpretation Guidelines, where the ACCC is satisfied that an applicant fulfils the conditions for immunity under the AIPCC, it will recommend to the CDPP that immunity from prosecution be granted to the applicant.^[126] It is not explicit on the face of the policy documents that, if the ACCC is not so satisfied it will recommend against a grant of criminal immunity, as opposed to not making any recommendation at all. Presumably, to assist the CDPP in understanding the ACCC’s position on the matter, the former will apply.

Q28: Where the ACCC decides that an applicant does not fulfil the conditions for conditional civil immunity, should the Interpretation Guidelines clarify whether or not the ACCC then makes a recommendation to the CDPP to that effect?

According to the policy documents, ‘[w]here the Director is satisfied that the applicant meets the ACCC’s criteria for conditional immunity contained in the ACCC’s immunity policy, the Director will grant immunity.’^[127] It is further provided that the CDPP’s decision will be communicated to the applicant at the same time as the ACCC’s decision regarding conditional immunity in relation to civil proceedings.^[128] This was provided for as it was seen to be important in providing immunity applicants with maximum possible certainty and an answer in relation to both applications as timely a manner as possible.^[129]

However, in practice it is evident that in some cases this approach is causing delay in decision-making and communication of decisions to applicants or in some cases, at least, disjuncture in timing of decisions and their communication to applicants. As one practitioner observed:

‘I'm not convinced as a practitioner that it works in the way the ACCC would like people to think it works. I can't see in that [sic] processes and those policies that you quickly gain the assurance that you're actually in effect got conditional immunity and you're in the program.

...

You know now within days whether you're in the program and you know what you've got to do for a civil matter. But you don't know that at all for the criminal matter in my view.

...

I don't see - and maybe I'm misunderstanding this - I don't see that the DPP policy is about providing you with early clear written communication that you've been given immunity. I don't know. Have people got that or not? I don't know. When you have a look at the policy it doesn't even purport to say that you'll get it kind of early.’

The delay appears to be because the CDPP is taking longer to make decisions about whether or not to give an undertaking than perhaps had been anticipated. While the CDPP’s decision is said in the policy documents to be based on whether or not the applicant meets the eligibility conditions in the AIPCC, it is apparent that the CDPP also wishes to be satisfied at least that there is ‘likely to be a basis for prosecuting someone’ (ACCC interview). This in effect means that the CDPP is engaging at the immunity stage in assessing whether or not it has sufficient information to indicate that the jurisdictional nexus and elements required for criminal liability (for example, the fault elements) are present. While it does not appear that the CDPP is considering at this stage whether or not there is a reasonable prospect of securing a conviction or whether the public interest requires a prosecution (the criteria relevant to the decision to prosecute under the Prosecution Policy),^[130] the CDPP nevertheless does appear more reticent than the ACCC to give immunity in cases in which it is not clear that there would be liability for the conduct that is the subject of the application.^[131] In practice, the delay in the process is being dealt with by extending the marker, in one case cited by an interviewee, for up to a year.

On one view, this delay may not present a significant problem. While it may be uncomfortable for applicants, it is unlikely to deter applications and the obligations relating cooperation should not become live until conditional immunity and the undertaking are granted. That said, some practitioners indicated that their clients had started cooperating with the ACCC notwithstanding they were yet to receive any assurance or undertaking from the CDPP. In such situations, it appears that the ACCC continues to extend the marker while waiting for a decision by the CDPP. One described this as being in a ‘twilight zone’ and observed that it certainly ‘makes the applicant think twice about, should I cooperate...?’ He explained that while a corporation may be prepared ‘to wear the risk’ associated with cooperating, the considerations for individuals are different. On another view, where applicants resist cooperating in these situations, the delay does mean that the ACCC may be hampered in its investigations of the matter (not being in a position to seek the applicant’s disclosure and cooperation), including in matters that have little or no prospect of ever being prosecuted. This in turn means that the rate at which the ACCC can take proceedings against and potentially settle cases involving civil contraventions may be slowed.

One way of dealing with this may be for the ACCC not to refer applications for criminal immunity to the CDPP in matters that are obviously unlikely to be treated as potential cases for prosecution referral, as mentioned above. Another possible approach is for the decisions as to civil and criminal immunity to be separated, allowing for the ACCC to make the decision as to civil immunity prior to and independently of any decision that the CDPP may make as to criminal immunity. However, an applicant may be reluctant, and rightly so, to agree to the condition of full disclosure and cooperation for the purposes of civil immunity while the possibility of prosecution remains extant. Moreover, it would seem difficult for the ACCC to agree to be limited in the information that it provides to the CDPP should the CDPP decide not to grant the undertaking to an applicant to which the ACCC has granted civil immunity (this could arise, for example, where the CDPP takes a different approach to applying the ‘coercion or clear leadership condition).

Further this would raise the awkward scenario of the ACCC potentially being in a position of referring a party that has civil immunity to the CDPP for prosecution. As one practitioner pointed out, such a scenario ‘would just destroy the policy’. He expressed confidence, however, that such a scenario ‘just won’t happen’ given that the two agencies appear to have a good working relationship in this field, there appears not to be the ‘disconnect between the ACCC and the DPP [as existed] in relation to Part V prosecutions’ and agency representatives have been ‘at pains to say we’re on the same page..’

Q29: Should it be open to the ACCC to decide to grant an applicant conditional civil immunity (and communicate as much to the applicant) before the CDPP makes a decision about whether to grant an undertaking? How should the applicant’s obligations of disclosure and cooperation with the ACCC be dealt with in such a situation?

V. AIPCC effectiveness

According to the ACCC, the AIPCC provides the benefits of:

• facilitating detection of conduct that would otherwise be difficult to detect on account of being systematic, deliberate and covert;
• stopping cartel conduct and facilitating its prosecution;
• deterring the formation of cartels as potential participants will perceive a greater risk of ACCC detection and court proceedings.^[132]

The Immunity Project will explore the effectiveness of the AIPCC in achieving these objectives. However, for the purposes of this paper it is only possible to make brief and preliminary observations on this topic based on the ACCC figures.

According to the ACCC figures there have been 110 ‘approaches’ in relation to the AIPCC between September 2005 and April 2013. The ACCC defined an ‘approach’ for this purpose as ‘a contact which we receive via the immunity hotline, which we consider is relevant to the cartel provisions and which may lead to further investigation’. It has received 83 ‘first in markers’ and 5 ‘non first in markers’ over the same period. Of the 83 markers, 36 have been received since 2009. However, it is not clear how many of these 36 markers related to post-July 2009 conduct, that is, conduct to which Div 1 would potentially apply.^[133] 22 of the ‘approaches’ did not result in a marker.

Over the same period, the ACCC has received 49 proffers, of which 21 have been received ‘since 2009’. Again, it is not clear how many of these proffers relate to post-July 2009 conduct. 46 of these proffers resulted in a grant of conditional civil immunity and 2 relate to ongoing matters in which a decision as to conditional immunity has not yet been made. Of the 21 proffers made ‘since 2009’, 3 have resulted in a grant of conditional criminal immunity.

Of the 46 matters in which conditional immunity has been granted, there have been 9 in which final immunity has been granted and there are 16 matters in which investigations and/or proceedings are ongoing.

A. Detecting cartel conduct

Without knowing the full extent of cartel conduct that has affected Australian markets over the 8 year period to which the ACCC figures relate, it is impossible to know what proportion of that conduct has been the subject of an immunity application and hence to assess the extent to which the AIPCC has been effective in detecting such conduct.

Marker requests do not necessarily enable the ACCC to detect cartel conduct (particularly where they are made on a hypothetical basis),^[134] although such requests may raise suspicions or put the ACCC on a train of inquiry that may lead to detection. It may be misleading to treat proffers as detections given that the proffer will be accepted even though the ACCC has already detected the cartel provided it has not received written legal advice that it has sufficient evidence in relation to at least one contravention.^[135] In the case of international cartels in respect of which the AIPCC application follows investigations and applications made in other jurisdictions it is also difficult to attribute detection of the relevant conduct directly to the AIPCC.

It is thus problematic to draw conclusions about the effectiveness of the AIPCC as a detection tool based on the figures provided. This is not intended as a criticism of the ACCC but rather as an acknowledgement of the difficulties in assessing the success of the AIPCC in detecting cartel conduct. Notably, a number of practitioner interviewees expressed the view that the AIPCC has been effective in facilitating detection, as well as in deterring cartel conduct. Several were also of the view that its effectiveness in this regard has been boosted by the introduction of criminal sanctions. That said, the ACCC figures do not demonstrate an increase in markers or proffers since 2009. In the 4 year period between 2005 and 2009, 47 markers were received, whereas in just under 4 years since 2009, 36 have been received. 28 proffers were made between 2005 and 2009, and 21 since 2009. Thus in fact markers and proffers have been fewer in number since criminal sanctions were introduced (and, as previously mentioned, it is not clear how many post-2009 markers or proffers related to conduct potentially subject to the Div 1 prohibitions and offences). This is contrary to the prediction that was made by the ACCC that criminalisation would enhance the effectiveness of the AIPCC in detecting cartel conduct.^[136] It is also inconsistent with the DOJ’s claim that the effectiveness of an immunity policy depends to a large degree on the severity of the sanctions available for those who do not report and criminal sanctions, jail time especially, are considered the greatest inducement in this regard.^[137]

The effectiveness of an immunity policy as a detection tool is also seen as dependent on the perception by cartelists that there is a high risk of detection apart from the policy.^[138] For this reason, it is important that competition authorities employ a range of approaches and techniques directed at cartel detection. Discussion of the extent to which the ACCC is sufficiently pro-active in this regard is beyond the scope of this paper.^[139] However, recent statements by the Chairman indicate a clear appreciation of the need not to be over-reliant on immunity applications as the sole or primary source of detection.^[140]

B. Stopping cartel conduct

Given that it is a condition of eligibility for immunity that the applicant ceases participation in the cartel,^[141] it can be said that in 46 cases over 8 years the AIPCC has been responsible for stopping cartel conduct. At the very least it has stopped the conduct on the part of the applicant and it may be assumed that in a large proportion of cases the withdrawal of the applicant from the cartel has led to the other cartel parties also ceasing their involvement. If this was not simply the consequence of suspicions raised by the immunity applicant’s withdrawal from the cartel, it would almost certainly have been a consequence of the commencement of investigations by the ACCC. Again, however, it is impossible to know what proportion the 46 matters represent of all cartels affecting Australian markets over the 8 year period. It may be a significant proportion. It may be insignificant. It is also arguable that in a number of these matters involving international cartels the conduct in Australia would have stopped as a consequence of overseas investigations and grants of immunity or leniency, irrespective of whether or not there was a grant of immunity under the AIPCC.

C. Prosecuting cartel conduct

The ACCC figures are not informative on the question of the degree to which the AIPCC has been effective in facilitating proceedings being taken against cartel conduct. If anything, they suggest the AIPCC has not been all that effective in this respect. As previously mentioned, according to the ACCC figures, between September 2005 and April 2013, there were 46 grants of conditional immunity from civil proceedings. However, in this period, there were only 11 cartels that were the subject of proceedings brought by the ACCC and not all of these would have been immunity-led proceedings.^[142] Final immunity is generally available only after the resolution of any proceedings against cartel participants for conduct in relation to the cartel.^[143] Final immunity has only been granted in 9 (19.5%) of the 46 matters in which conditional immunity has been granted to date. There are said to be 16 ongoing matters. However, even if it is assumed that these matters will all result in proceedings (and that may be a generous assumption), then that means that in only just over half of the matters in which conditional immunity has been granted 25 (54.3%) have led or will lead to proceedings.

Practitioner interviewees were asked about why there have not been more cartel proceedings brought given the reported number of approaches that have been made to the ACCC under the AIPCC (the ACCC figures were not available at the time of these interviews). Several reasons were offered in response. They included:

(1) that conditional grants of immunity can be and are granted in matters that are not actionable for some reason (an issue referred to in Part IVA above);^[144]

(2) that the ACCC is slow in investigating - the reasons for this differed, however, some attributing it to a lack of forensic skills and training on the part of the ACCC staff and others to funding cuts and under-resourcing;

(3) that the ACCC, at least in the past, has been too risk averse^[145] and is reluctant to bring cases that test the boundaries of the law;^[146] and

(4) in relation to the lack of criminal cases to date, for reasons that are not clear, the ACCC is not as committed to prosecuting cartels as it may have been a few years ago when the regime was introduced.

Moreover, the ACCC figures do not say anything about the extent to which immunity applications reduced the cost and time associated with investigations and proceedings, as compared with proceedings that may have been brought in respect of the same cartel but in the absence of any immunity application. In the most well-known immunity-led proceeding relating to the Visy/Amcor cartel, the ACCC was put to the expense of amassing a significant body of evidence in preparation for trial before Visy ultimately capitulated and settled. ^[147]

Nor do the figures indicate the outcome of the proceedings or when penalties have been imposed, their quantum, in the 9 matters in which final immunity was granted (and hence, it is assumed, proceedings were brought). It is difficult to identify these matters because the ACCC generally does not report when proceedings have been brought following an immunity application and cartel judgments generally do not provide this information (see further Part VII below).

As to whether immunity applications will facilitate criminal prosecutions, the jury is still out. However, some have warned of the risks of prosecutorial reliance on an immunity applicant’s evidence, particularly in the context of a two party cartel.^[148] Such risks were borne out in the collapsed prosecution brought by the UK Office of Fair Trading against British Airways and its executives in connection with the airfreight cartel.^[149]

D. Deterring cartel conduct

Finally, the ACCC figures cannot assist in ascertaining the extent to which the AIPCC has deterred cartels from forming. In any event it is arguably meaningless to speak of the AIPCC in isolation as a mechanism or tool for deterrence. It is well-established in research relating to deterrence and compliance that decisions about whether comply with or break the law will depend on multiple factors.^[150] Critically, though, deterrence will depend on the extent to which the potential offender knows the law and the sanctions applicable to the conduct in question, the extent to which there is a perceived risk of detection of the conduct and the extent to which there is a perceived risk that, if detected, enforcement action will be taken and sanctions applied. Research led by the author (The Cartel Project) indicates that a significant proportion of the Australian business community do not know the law and the sanctions applicable to cartel conduct. Knowledge of the availability of imprisonment as a sanction is particularly low. Further, even when knowledge exists, the likelihood of detection and enforcement action is also perceived as low, albeit somewhat higher when the potential offender knows that criminal sanctions apply. Even more disconcertingly, the Project results indicate that a significant proportion of business people will still contemplate engagement in cartel conduct knowing what sanctions potentially apply.^[151]

The AIPCC clearly is relevant to perceptions of likely detection. In theory, business people contemplating engaging in cartel conduct should regard the risk of that conduct being detected, and hence the costs of such engagement, as greater in light of the AIPCC. However, the relevance of the AIPCC in this regard is premised on the potential cartelist’s awareness of the policy and his/her assessment of whether other parties to the contemplated cartel are also aware or likely to become aware thereof.

Over the last year the ACCC has engaged in a significant awareness-raising campaign, the centrepiece of which has been its film, ‘The Marker’, aimed not only at increasing awareness amongst business people of the AIPCC but more broadly at ensuring that the severity of the consequences for individuals engaging in cartel conduct are better understood.^[152] The ACCC’s campaign may well have an impact, particularly at the big end of town. The film was sent to the major media outlets (TV, internet, radio, and print). It was posted on the ACCC website and YouTube and a letter about it was sent by the ACCC Chairman to the CEOs of Australia’s top 300 companies, calling on them to take steps to ensure that their workforces understand what constitutes cartel conduct and the adverse risks and consequences associated with it. Many of the CEOs of Australia’s top companies may heed the call of ACCC Chairman to educate their workforces in this fashion.

However, it is questionable whether the campaign will penetrate the consciousness of the vast majority of Australian business people in small to medium size (SME) businesses. Even if they know about the anti-cartel laws, the Cartel Project research indicates that owners and managers in the SME sector do not tend to see these laws as relevant to their affairs.^[153] Indeed, the white-collar characters and skyscraper companies depicted in ‘The Marker’ may serve to reinforce this impression. Consistent with this assessment, many of the practitioner interviewees commented that awareness of the AIPCC was not a problem amongst large companies, particularly those with in-house legal departments. For these businesses the AIPCC is an important element of the company’s compliance program. Such programs are far less common amongst SMEs. As one practitioner commented:

‘I think at [sic] the large corporations segment, there is an awareness, because for the most part, they have compliance programs and they have whistle-blower programs. That's part of the totality of the advice we give to those clients, so there is an awareness. At the SME level, I don't necessarily think there is a significant awareness, albeit my exposure to them is somewhat limited. But I am surprised constantly by franchise organisations, that one, they don't consider themselves competitors in the first place, but secondly, that there's a level of ignorance about the breadth of the cartel provisions and the immunity policy.’

The deterrence impact of the AIPCC is also premised on the assumption that, in addition to being aware of the policy, potential cartelists will assess the incentives associated with applying for immunity as greater than the disincentives. Moreover, the potential offender would need to consider that other parties to the potential cartel would be likely to make this assessment and hence regard an immunity application by one of the cartel parties as a credible threat to the cartel.

Assessing the incentives associated with making an immunity application again requires knowledge of the applicable sanctions and the perception that they are likely to be applied. In addition to escaping sanctions, incentives would include relief from the costs, disruption and reputational damage associated with investigations and proceedings. Disincentives would include the foregone profits generated by the cartel, the burden involved in the cooperation obligations imposed by the AIPCC, exposure to follow-on private actions, and the stigma and potential commercial fall-out associated with blowing the whistle. Not only are these benefits and costs inestimable but it would seem highly unrealistic to expect a potential cartelist to engage in such a weighing exercise in connection with the decision as to whether or not to engage in cartel conduct. Rather, it is an exercise more likely to become relevant at the point of deciding whether or not to apply for immunity.

VI The AIPCC as an element of an overall enforcement and compliance system

The AIPCC does not operate in a vacuum. It is one, albeit an important, element of the ACCC’s overall approach to enforcement and compliance in respect of the cartel prohibitions and offences under the CACA and should be seen in that light. The ACCC review presents an opportunity for the ACCC and other stakeholders in this field to reflect on the AIPCC’s interaction with and impact on other aspects of the overall enforcement and compliance system.^[154] The purpose of this Part of the paper is to suggest which aspects of the overall system should be considered for this purpose.^[155] In particular, it is suggested that the AIPCC’s interaction with and impact on the following elements of the system be explored:

• the ACCC’s approach to settlement under the CPEM;
• the ACCC’s approach to compensation for parties harmed by cartel conduct;
• the ACCC’s approach to fostering a higher degree of compliance.

A. CPEM

The CPEM, which applies to any conduct that may contravene the CACA, was introduced in 2002 and has remained unchanged since then. It has not been the subject of a review (at least not a public review) since its inception. No doubt the ACCC’s practices under the CPEM have developed and been refined over the last decade and it is arguably well overdue that the CPEM be reviewed in light of that experience. At the very least it should be updated to remove references to the Trade Practices Act 1974 and to refer to the role of the CDPP in dealing with cooperation in the context of the cartel offences.^[156] It is beyond the scope of this paper and the Immunity Project to consider issues that should be incorporated in a comprehensive review.

At the time of the 2004 Review the ACCC acknowledged the importance of the interrelationship between the AIPCC and the CPEM. Unlike the AIPCC, the CPEM provides the ACCC with significant discretion and flexibility in determining the conditions on which it will deal with cooperating parties and the nature and extent of the benefits that it will offer such parties in return for cooperation. Such benefits can take the form of complete or partial immunity from action by the ACCC, negotiation of agreed facts and joint submissions to the court for a reduction in penalty based on those facts or even administrative settlement in lieu of litigation.^[157] In the majority of cartel cases to date, penalties have reflected the joint recommendation of the ACCC and the respondent formulated as part of a settlement pursuant to the CPEM. Of the 62 cases determined between 1993 and 2009, 37 (57%) were ‘settled’ by the ACCC, while the balance (25; 41%) were contested, either on penalties alone or on liability or penalties.^[158] With only a handful of exceptions,^[159] the Court endorsed the joint recommendation on penalties made by the parties.

Clearly offering parties that have not reported sufficiently early to avail themselves of the AIPCC the same outcome and certainty as is available under that policy would undermine the efficacy of the AIPCC in destabilising cartels and generating a ‘race to the confessional’. At the same time it is important to ensure that the CPEM offers sufficient certainty and incentives for cooperation (particularly, timely cooperation) by those who miss out on immunity. This is particularly so given that the AIPCC is available to the first corporation or individual to apply and that party may not necessarily be the party best placed to provide the ACCC with the information required to thoroughly investigate and ultimately prosecute the other parties to the cartel.

Furthermore, as a matter of good public policy, it is important that the ACCC’s approach to settlement under the CPEM is transparent, fair, proportionate and consistent. This is important too from the perspective of ensuring that the courts retain confidence in the ACCC’s approach to negotiating the agreed facts and penalties that it presents for judicial endorsement. Courts have shown strong support for regulatory settlements over many years, recognising the efficiencies that they offer in the administration of justice.^[160] However there are also increasing signs of judicial dissatisfaction with the level of factual information and justification provided for recommended penalties by enforcement agencies.^[161]

Without exception, the practitioner interviewees interviewed to date for the Immunity Project expressed the view that there is at least a lack of transparency if not also a degree of arbitrariness and inconsistency in the ACCC’s approach to negotiating penalty discounts under the CPEM. The discounts that have been negotiated with the airlines in relation to the airfreight cartel were commonly cited as illustrative of this. The practitioner interviewees also observed that it is possible to win significant concessions from the ACCC in relation to the scope and terms of the agreed facts, generally with a view to reducing exposure to follow on private actions, acknowledging that this means that the full extent and gravity of the cartel is not placed before the court that is subsequently asked to approve the agreed penalty.

Unlike the approach taken in some other jurisdictions, the ACCC does not offer transparent or structured guidance on the extent of leniency that will be available for second-in and subsequent cooperators. Nor does it provide guidance on how it calculates penalties for the purposes of its negotiations with parties or submissions to the court. Plainly there is value in maintaining a degree of flexibility in negotiations with parties so as to be able to tailor responses to the particular facts and circumstances of each case.^[162] However, this should not be at the expense of transparency, proportionality and consistency, all of which are important not just as a matter of good public administration but also so as to ensure that the policy is sufficiently conducive to attracting cooperation.

In light of these factors, the ACCC could consider offering greater guidance on the size of recommended penalty reductions and even possibly a graduated system of recommended penalty discounts, based on the timing of the cooperation and/or the value of the information provided, similar to the approach taken in other jurisdictions including the European Union, New Zealand and Canada.^[163] The ICN has advised that from discussions with the business community it is evident that penalty reductions allowed by a settlement system are ‘pivotal’ for companies in deciding whether to settle. Thus, ‘the more specificity that the prosecuting agency can provide as to the amount of the fine and its determination, the easier it will be for the settling party to take a decision on the settlement proposal.’^[164] Similar conclusions have been reached by the OECD.^[165]

In addition to providing greater certainty and predictability to potential cooperators (and thereby maximising the effectiveness of the CPEM)^[166], the approach of spelling out the nature of the leniency on offer under the CPEM would be valued by judges who have made it clear that the ACCC needs to explain the basis on which it has negotiated an agreed recommended penalty discount with a respondent.^[167]

If the ACCC is to consider refining its policy in this way, it may be desirable and appropriate to create a consolidated immunity and cooperation policy in relation to cartel conduct, as exists in New Zealand and Canada.^[168] In such a document it would also be helpful to explain the approach taken by the courts in assessing penalties as well as explaining the differences between this process of ‘settlement’ of civil proceedings and the process that applies when the matter becomes criminal, and thus the policy of the CDPP in relation to charge negotiation is invoked (a number of practitioner interviewees expressed uncertainty about how the CDPP would deal with ‘latecomers’). Currently, it is necessary to refer to four documents in order to understand how cooperation is dealt with under the dual civil/criminal regime.^[169] Furthermore, surprisingly, the ACCC–CDPP MOU makes no reference at all to the issue. This is not in the interests of transparency and accessibility and hinders justice. The approach taken in Canada provides an instructive contrast.^[170]

B. Compensation

In its Compliance and Enforcement Policy, the ACCC identifies one of its aims as being to ‘undo the harm caused by the contravening conduct (for example by corrective advertising or restitution for consumers and businesses adversely affected)’.^[171] However, in practice, in relation to breaches of the competition provisions of the CACA (as distinct from the consumer and fair trading provisions), and in relation to cartel conduct specifically, it is fair to say that the ACCC’s focus has been almost exclusively on deterrence.^[172] Policy questions regarding the extent to which the ACCC should focus on compensation as an objective of enforcement and how it should address tensions that arise between pursuit of such an objective and the pursuit of deterrence are large and complex ones, beyond the scope of this paper. However, in the context of the AIPCC specifically, two particular issues warrant attention:

• whether and in what circumstances documents generated in the immunity process should be made available to private claimants; and
• whether restitution should be a condition of eligibility under the AIPCC.

The question of access to information was canvassed in Part IVC above.

The 2003 version of the AIPCC made it a requirement for corporate immunity from proceedings or penalty that ‘where possible, [the corporation] will make restitution to injured parties’.^[173] That requirement was based on the US DOJ’s Corporate Leniency Policy and was said to be in ‘recognition of consumers’ expectations that the applicant not be able to obtain immunity from penalty or prosecution and keep their ill-gotten gains’.^[174] There is no public information available on whether or to what extent the restitution requirement was enforced against or fulfilled by applicants in the first 18 months of its operation (the ACCC received 10 applications during that time).^[175] However, following the 2004 Review, the restitution condition was removed from the policy.

In explaining the decision to remove the condition, the ACCC indicated that it had been included in the policy originally out of concern that leniency applicants should not be seen to escape any payment of restitution. However, the ACCC pointed out, the experience in the US and Canada has been that private law suits generally follow an application for immunity even where no public enforcement action is taken. This reasoning is not all that compelling by way of justification for removing the restitution condition in Australia. It remains the case that immunity beneficiaries escape the payment of penalties. They arguably should not also escape the payment of restitution. Penalties and restitution serve entirely different purposes. Furthermore, it seems anomalous that according to the CPEM, the ACCC takes ‘preparedness to make restitution where appropriate’^[176] into account in assessing what rewards should be available for cooperation. The contrast between this position and the position under the AIPCC appears difficult to justify. In practice, it may be the case that the ACCC does not have regard to restitution in settling cartel matters under the CPEM. If this is so, then the CPEM should be transparent to that effect.^[177]

It is true that injured parties have an entitlement to pursue for damages under ss 82 and 87 of the CACA. However, whether this is a feasible or likely pursuit in all cases, is another question altogether. The conditions in Australia are much less conducive to private actions than are those in the US and Canada, as is clear from the handful of such actions that have been brought in recent years^[178] and the challenges they have faced.^[179] In the absence of other measures to support private enforcement,^[180] it is arguable that the number of private actions is unlikely to climb significantly in the future. As a result there is arguably a stronger case for restitution as a condition of immunity in Australia than there is in other jurisdictions where the private enforcement climate is much more robust.

The removal of the restitution condition was justified further by the ACCC in the 2004 Review on the grounds that it would act as a disincentive to immunity applications.^[181] This proposition is untested in Australia (several practitioner interviewees expressed ambivalence about it) and, in any event, the retention of a restitution condition in the US policy suggests the argument may be overstated. Moreover, there have been nine years since the 2004 Review, during which time cartel offences and criminal sanctions have been introduced. The ACCC itself has acknowledged that criminal sanctions should alter significantly incentives in favour of immunity applications.^[182]

Finally, it was said in the context of the 2004 Review that victims may be too difficult to identify and loss too difficult to quantify, making a restitution condition unworkable and practically burdensome.^[183] This argument against having such a condition in the AIPCC was relied on by a number of the practitioner interviewees in speaking against the re-introduction of the restitution condition. The argument has some force. There are good reasons to consider that private plaintiffs may be in a better position to do the work of identifying victims and quantifying loss than the ACCC. However, this should not necessarily mean that the ACCC cannot and should not take steps to facilitate this process. It could consider, for example, making it a condition of eligibility for immunity that corporate applicants acknowledge the harm caused by the cartel and identify, to the extent possible, the persons or classes of persons likely to have suffered loss as a result. It could also make such a condition relevant to the benefits it is prepared to offer cooperating parties under the CPEM.^[184]

C. Compliance

It is implicit if not explicit in the ACCC Compliance and Enforcement Policy that the ACCC considers measures to foster and facilitate compliance as much of a priority as enforcement action. Compliance should be seen as relevant to the AIPCC in at least two ways.^[185]

First, it was evident from both the practitioner and ACCC interviews for the Immunity Project that not uncommonly it is the information received by business people through compliance training and programs that leads to the discovery of cartel conduct and subsequently to an approach to the ACCC that may result in a marker request if not an application for immunity. One practitioner also observed that explanations provided regarding the AIPCC in compliance programs and training assist in deterrence ‘...because it is creating in the minds of business executives that are aware of it, a greater sense of detection.’ This experience underscores the importance of the ACCC’s work in promoting the importance of compliance training and programs – particularly in the SME sector.

Secondly, there appears to be a good case for making the introduction of or revisions to a compliance program a condition of eligibility for immunity under the AIPCC.^[186] It is incongruous that the CPEM states as a relevant factor in assessing the type and degree of leniency afforded to cooperating parties whether the corporation ‘is prepared to take immediate steps to rectify the situation and ensure that it does not happen again, undertakes to do so and complies with the undertaking’^[187] – while there is no equivalent condition or other reference to compliance in the AIPCC.^[188] Practitioner interviewees observed that, as a matter of course, a corporate immunity applicant will introduce or review its compliance program as a result of its experience in discovering cartel conduct within the corporation and applying for immunity (one describing it as an ‘unwritten condition’ under the AIPCC). However, they also all agreed that as a matter of good public policy, consistency with the CPEM and ‘sending the right message’, compliance should be incorporated as a condition of eligibility under the AIPCC. None of the practitioner interviewees considered that such a condition would deter immunity applications.

VII. AIPCC reporting

As a crucial and in some respects controversial aspect of its enforcement program, it is important that the ACCC be transparent in and accountable for its use of the AIPCC. The ACCC recognised this in the 2004 Review and concluded that it would ‘include information in its annual report about the number of leniency applications during that financial year where appropriate.’^[189] It did not identify when including such statistical information in its annual reports could be seen as inappropriate. It also stated that, after consulting with the immunity applicant, it would consider whether to include information concerning an immunity applicant and application in media releases issued at the point of commencing or concluding a proceeding.^[190] It did not explain why it was considered necessary to consult with an immunity applicant about such matters if (as is assumed was intended) references in press releases would not disclose confidential information.

However, since 2004 the ACCC has done very little to enhance transparency in AIPCC reporting.^[191]

A review of its annual reports since 2005-2006 indicates that the ACCC generally does not report on the use of or outcomes under the AIPCC. General references are made to the AIPCC in the context of reporting on Key Performance Indicators.^[192] However, specific information about the numbers of approaches, markers, proffers or grants of conditional or final immunity or the number of and outcomes of immunity-led proceedings is not provided.^[193] One interviewee commented that a downside associated with such reporting is that, if the figures are low, it may suggest that the policy is not functioning as it should and that may reduce its effectiveness as a deterrent. However, he also conceded that low figures relating to the number of applications could also be interpreted as indicating that the AIPCC is acting as a deterrent and there are fewer cartels as a result.

A review of media releases regarding the commencement and conclusion of cartel proceedings since 2005 found only one media release in which the grant of immunity was referred to and this related to the Visy cartel case.^[194] In other cases it is possible that the ACCC consulted with the immunity applicant about disclosure in media releases and upon meeting resistance, decided not to disclose. It is also possible that the ACCC did not consult with the applicant but simply decided unilaterally not to make any mention of the immunity application in any media release.

It is also apparent that the ACCC does not disclose the fact of an immunity application, let alone the identity of the applicant or any other aspect of an immunity application, to the court in the context of proceedings against or submissions on penalties relating to the other cartel parties. At least, as much is suggested from the lack of references to such matters in cartel judgments. A review of these judgments since 2005 found only one in which mention was made of a grant of immunity and again, that related to the Visy cartel.^[195]

It is not suggested that the AIPCC report confidential information provided by immunity applicants. However, greater reporting in relation to the AIPCC, such as statistics relating to its use and, when proceedings are commenced or alternatively when they are concluded, the identity of immunity applicants, should be undertaken as a matter of transparent and accountable public administration. Such reporting would also arguably enhance the AIPCC’s effectiveness in detecting and deterring cartel conduct as it would provide an additional avenue for publicising the policy and its use by the business community.

VIII. Approach to the ACCC review

For the purposes of its current review, the ACCC has indicated to the author that initially it is undertaking consultations internally, with members of the office of the CDPP and with a select group of practitioners who are regular users of the policy. It has suggested that if significant issues are identified in connection with the policy in this initial phase then it will consider a broader and potentially public consultation process.

The initial phase of the process described by the ACCC should be useful in understanding the perspectives and identifying any issues associated with the operation of the AIPCC by important stakeholders. However, it is essential that the ACCC then conduct a formal public review in similar fashion to the 2004 Review, publishing a discussion paper inviting comments from any interested parties followed by a response or position paper setting out the ACCC’s views on the issues, having taken submissions into account, and its proposed changes, if any to the AIPCC and its administration. For a policy of this significance, sound public administration demands no less.

Appendix
Immunity Project Interviewees
*Interviews are continuing

1. Peter Armitage, Ashurst
2. Marcus Bezzi, Australian Competition and Consumer Commission
3. Bob Baxt AO, Herbert Smith Freehills
4. Michael Corrigan, Clayton Utz
5. Brooke Dellavedova, Maurice Blackburn
6. Rob Ghali, Australian Competition and Consumer Commission
7. Scott Gregson, Australian Competition and Consumer Commission
8. Ayman Guirguis, Corrs Chambers Westgarth
9. Lisa Huett, King & Wood Mallesons
10. Chris Jose, Herbert Smith Freehills
11. Matthew Lees, Arnold Bloch Leibler
12. Carolyn Oddie, Allens
13. Aldo Nicotra, Johnson Winter Slattery
14. Bill Reid, Ashurst
15. Stephen Ridgeway, King & Wood Mallesons
16. Luke Woodward, Gilbert + Tobin

*Melbourne Law School, University of Melbourne. The author is grateful to the interviewees identified in the Appendix to this paper for sharing their insights relevant to the matters canvassed in the paper and to the ACCC staff identified in the Appendix, in particular, for providing the figures cited in the paper as well participating in an interview (and agreeing to a further interview following this conference). Thanks also to Brent Fisse for comments on a draft of this paper and to Imme Kaschner for research assistance. The usual disclaimers apply.

¹ A descriptor originating, it seems, in OECD, Recommendation of the Council concerning Effective Action against Hard Core Cartels (C(98)35/FINAL, 14 May 1998), intended to quarantine the toughest sanctions to cartel conduct at the most serious end of the spectrum of economic harm.

^[2] ACCC, ACCC Leniency Policy for Cartel Conduct, June 2003.

^[3] See S Hammond, ‘The Evolution of Criminal Antitrust Enforcement over the Last Two Decades’, Paper at the 24^th annual National Institute on White Collar Crime conference, presented by the American Bar Association Criminal Justice Section and Center for Continuing Legal Education, February 25 2010, p. 1.

^[4] The words ‘immunity’, ‘leniency’ and ‘amnesty’ are used interchangeably in some jurisdictions while having slightly different meanings in others: see S Hammond, ‘Preface: US Department of Justice’, in K Arquit, J Buhart and O Antoine (eds), Leniency Regimes, 2^nd edn, European Lawyer, London, 2007, p. vii, p. viii.

^[5] On the adoption of immunity policies or revisions to such policies in recent years, see International Competition Network, Trends and Developments in Cartel Enforcement, Paper at the 9^th Annual ICN Conference, Istanbul, Turkey, 29 April 2010, p. 7.

^[6] G Spratling, ‘Detection and Deterrence: Rewarding Informants for Reporting Violations’ (2001) 69 George Washington Law Review 798; G Spagnolo, ‘Divide et Impera: Optimal Leniency Programmes’, CEPR Discussion Paper No 4840, Centre for Economic Policy Research, December 2004.

^[7] See the interview with Graeme Samuel in A Caldwell, ‘ACCC Calls for Harsher Penalties for Cartels’, Australian Broadcasting Corporation transcripts, 2 November 2007; G Samuel, ‘Delivering for Australian Consumers: Making a Good Act Better’, Speech delivered at the National Press Club of Australia, Canberra, 25 June 2008. In the latest public statement on the matter, the current Chairman stated that the AIPCC ‘continues to be the lead source of information for cartel investigations and proceedings’: R Sims, ‘Opening Address’ at IBA Competition Conference, 21 March 2013, Sydney.

^[8] More specific figures have been provided to the author for the purposes of this paper and are referred to below.

^[9] ACCC, ‘ACCC and CDPP Outline Arrangements for Cartel Conduct Immunity’, News Release, NR 338/08, 1 December 2008.

^[10] Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, 1992 (as amended March 2009), Annexure B.

^[11] See ACCC, Review of ACCC’s Leniency Policy for Cartel Conduct, Discussion Paper, 24 November 2004; ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005.

^[12] A list of interviewees to date is provided in the Appendix to this paper.

^[13] See ‘The Cartel Project’ at http://www.law.unimelb.edu.au/cartel.

^[14] See, eg, C Beaton-Wells and K Tomasic, 'Private Enforcement of Competition Law: Time for an Australian Debate' (2012) 35(3) UNSW Law Journal 650-684.

^[15] Canada, in particular. It has not been possible to conduct a comprehensive review of overseas policies and practices for the purposes of this paper.

^[16] See, eg, C Aubert, P Rey, W and Kovacic, ‘The impact of leniency and whistle-blowing programs on cartels (2006) 24(6) International Journal of Industrial Organization 1241; M Bigoni, S-O Fridolfsson, C Le Coq and G Spagnolo, G, ‘Fines, leniency and rewards in antitrust: An experiment’ (2012) 43(2) The RAND Journal of Economics 368; U Blum, N Steinat and M Veltins, M, ‘On the rationale of leniency programs: A game theoretical analysis’ (2008) 25(3) European Journal of Law and Economics 209; J Borrell, J L Jim´enez and C Garc´ıa, ‘Evaluating leniency programs in antitrust’ (2011) (Unpublished); S Brenner, S, ‘An empirical study of the European corporate leniency program’ (2009) 27(6) International Journal of Industrial Organization 639; A Chavda and M Jegers, ‘The effects of leniency programs and fines on cartel stability’ (2007) 58(2) Metroeconomica 231; J Chen and J Harrington, ‘The impact of the corporate leniency program on cartel formation and the cartel price path’ in Ghosal, V. and Stennek, J., editors, The Political Economy of Antitrust (2007, Oxford), p59; Y Hamaguchi, and T Kawagoe ‘An experimental study of leniency programs’, RIETIWorking paper, Research Institute of Economy, Trade and Industry (2005); J Harrington and J Chen, J, ‘Cartel pricing dynamics with cost variability and endogeneous buyer detection’ (2006) 24 International journal of industrial organization 1185; J Hinloopen, J and A Soetevent, ‘Laboratory evidence on the effectiveness of corporate leniency programs’ (2008) 39(2) RAND Journal of Economics 607; Y Lefouli and C Roux, C, ‘Leniency programs for multimarket firms: The effect of Amnesty Plus on cartel formation’ (2012) 30 International Journal of Industrial Organization, 624; D Leliefield and E Motchenkova, E, ‘To protect in order to serve, adverse effects of leniency programs in view of industry asymmetry, (2007) Technical report, TILEC working paper, series 2007–007; C Leslie, ‘Antitrust amnesty, game theory, and cartel stability’ (2006) 31 The Journal of Corporation Law 453; E Motchenkova, E, ‘Effects of leniency programs on cartel stability’, SSRN working paper 617224,Social Science Research Network; G Spagnolo, ‘Leniency and whistleblowers in antitrust’ in Buccirossi, P., editor, Handbook of Antitrust Economics, (2008 MIT Press) ch 7; J Zhou, J, ‘ Evaluating leniency with missing information on undetected cartels: Exploring time varying policy impacts on cartel duration’ (2012), SSRN working paper 1985816, Social Science Research Network.

^[17] U Blum, N Steinat, and M Veltins, ‘On the rationale of leniency programs: A game theoretical analysis’ (2008) 25(3) European Journal of Law and Economics 209; J Harrington, J, ‘Corporate leniency programs and the role of the antitrust authority in detecting collusion’ (2010) (Unpublished).

^[18] D Sokol, ‘Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement (2012) 78 Antitrust Law Journal 201.

^[19] OFT 1132, An Assessment of Discretionary Penalties Regimes, October 2009, available at http://www.oft.gov.uk/shared_oft/economic_research/oft1132.pdf.

^[20] D Sokol, ‘Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement (2012) 78 Antitrust Law Journal 201, 203.

^[21] See, eg, G Schnell and A Dumas-Emard, ‘How to catch a thief – Corporate Leniency and the Irrepressible Challenge of Cartel Detection: Finding a Better Way’ (2011) 2 CPI Antitrust Chronicle; D Sokol, ‘Detection and Compliance in Cartel Policy’ (2011) 2 CPI Antitrust Chronicle.

^[22] See eg S Lynch, 'The Case for Increased Private Enforcement of Cartel Laws in Australia' (2011) 39(6) Australian Business Law Review 385; C Cavallaro, K Stellios,'Immunity: A dilemma for both Whistleblowers and the ACCC' (2011) 19 (3) Australian Journal of Competition and Consumer Law 163; C Beaton-Wells, ‘Forks in the Road: Challenges Facing the ACCC’s Immunity Policy for Cartel Conduct: Part 1’ (2008) 16 Competition & Consumer Law Journal 71 2009; C Beaton-Wells and B Fisse, Australian Cartel Regulation: Law, Policy and Practice in an International Context (CUP, 2011) 405–19 [10.3], 517– 27 [11.5].

^[23] K Edghill, ‘Is the UK Cartel Offence Dead or is there a Problem with Immunity: The role of immunity as a prosecutorial tool in criminal cartel offences in the United Kingdom and Australia’, Paper at UNISA Competition Law Workshop, 2011.

^[24] J Murphy, Paper for OECD Roundtable, ‘Promoting Compliance with Competition Law’, DAF/COMP(2011)5, 7 Oct 2011, [26]-[37].

^[25] Insofar as relevant, these aims encompass the provisions of Annexure B of the CDPP Prosecution Policy.

^[26] Comments from conference attendees on the matters raised in the paper or other aspects of the AIPCC and its operation and effectiveness are welcomed by the author, who can be contacted for this purpose on 03 8344 1004 or c.beaton-wells@unimelb.edu.au.

^[27] See ss 45(2)(a)(i), 45(2)(b)(ii).

^[28] See s 44ZZRD(3)(a) and in particular s 44ZZRD(3)(a)(iii).

^[29] The AIPCC is stated in the Interpretation Guidelines, [10], to apply to cartel conduct which is said to comprise

‘... any of the following cartel provisions by parties that are, or would otherwise be, in competition with each other:

(a) price fixing or

(b) restricting outputs in the production and supply chain or

(c) allocating customers, suppliers or territories or

(d) bid rigging.’

^[30] See ss 44ZZRF, 44ZZRJ of the CACA.

^[31] See ss 44ZZRG, 44ZZRK of the CACA.

^[32] See s 44ZZRD(4) of the CACA. The significance of this aspect of the competition condition was highlighted recently in Norcast v Bradken [2013] FCA 235.

^[33] See s 44ZZRD(2) of the CACA.

^[34] See ACCC v CC (NSW) Pty Ltd [1999] FCA 954. Cf ACCC v The Australian Medical Association Western Australia Branch Inc [2003] FCA 686 at [195] and see the discussion in C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP) section 4.3.3; P Scott, “Unresolved Issues in Price Fixing: Market Division, The Meaning of Control and Characterisation” (2006) 12 Canterbury LR 197, 227-236.

^[35] The reference to the amending Act is unnecessary and should be removed.

^[36] The issue is of particular significance if it is possible for a State DPP to bring a prosecution for a cartel offence under the Competition Code.

^[37] Annexure B states that the policy as outlined in the Annexure applies when the CDPP is: ‘...considering an application for immunity from prosecution by a person implicated in a serious cartel offence. A serious cartel offence refers to the offences in sections 44ZZRF and 44ZZRG of the Trade Practices Act 1974 (TPA) and the corresponding offences in the State and Territory Competition Codes’ ([1.1]).

^[38] See Memorandum of Understanding between the Commonwealth Director of Public Prosecutions and the ACCC regarding Serious Cartel Conduct, July 2009, [4.2]-[4.4].

^[39] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 9.3.2.2, pp352-358.

^[40] That said, presumably the potential exposure to private actions would disincentivise use of such a tactic.

^[41] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [33]-[38].

^[42] It is difficult to know exactly how many of these proceedings followed an immunity application given that judgments do not routinely indicate when this is the case and the ACCC does not report on such matters (see further Part VII below).

^[43] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 3.4, pp47-57.

^[44] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [103].

^[45] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [41].

^[46] ACCC, ACCC immunity policy for cartel conduct, July 2009, [7].

^[47] ACCC, ACCC immunity policy for cartel conduct, July 2009, [16].

^[48] See SD Hammond, ‘Cornerstones of an Effective Leniency Program’, Paper at the Cracking Cartels Conference: International and Australian Developments – Law Enforcement Conference, Sydney, 24 November 2004, pp11-13.

^[49] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [72]

^[50] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [73].

^[51] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [74].

^[52] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [25].

^[53] That provision extends jurisdiction to extraterritorial conduct where the body corporate is ‘ incorporated or carrying on business within Australia’.

^[54] A practitioner interviewee gave an example from his experience of a joint venture party applying for and being granted immunity in respect of conduct where the ‘joint venture participants had a theoretical area of residual competitive overlap outside of the joint venture. So they weren’t able to get the joint venture exception for it.’ He described this as ‘an inept use of the policy’, expressing the view more generally that advisers will ‘creatively’ attempt to push the boundaries of the AIPCC to obtain protection for conduct for which it would not generally have thought to be intended.

^[55] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 8.3, pp267-295.

^[56] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 8.3.2.1, pp270-273.

^[57] See ss 2A, 2B and 2BA of the CACA.

^[58] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [66].

^[59] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [67].

^[60] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [71].

^[61] For example, one practitioner cited scenarios in which a corporation may choose to make an application, even where there may be uncertainty as to whether the conduct would constitute a contravention, because in respect of the individuals involved in the conduct ‘they don’t like the person or they think the person should have their wings clipped...’

^[62] Cf ACCC, ACCC immunity policy interpretation guidelines, July 2009, [98]) which indicates that the ACCC may provide full immunity under the CPEM to an individual who would be expected to qualify for derivative immunity but is omitted from the employer’s application owing to an employment-related dispute.

^[63] There has been some suggestion that s 44ZZRC may extend liability under the prohibitions and offences of Div 1 to all bodies corporate related to the corporation that is a party to the contract, arrangement or understanding (see Submission to Senate Standing Committee on Economics on the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008, Parliament of Australia, 30 January 2009, Submission No 10, pp. 5–6 (Law Council of Australia)). This is arguably incorrect. The effect of s 44ZZRC may only be that parties for the purposes of the purpose/effect and purpose conditions of a cartel provision under s 44ZZRD include related bodies corporate. Cf the experience cited by one practitioner interviewee in which the ACCC was said to have treated a parent company as a ‘party’ pursuant to s 44ZZRC despite the parent not having engaged in the conduct that was to be the subject of the immunity application.

^[64] See ss 76, 79 of the CACA.

^[65] See ss 76, 79 of the CACA.

^[66] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [25].

^[67] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 10.2.2.2, pp398-402. The approach that the CDPP will take to corporations or individuals who seek to cooperate is not dealt with the ACCC-CDPP MOU.

^[68] ACCC, ACCC Position Paper, Review of Leniency Policy for Cartel Conduct, 26 August 2005, [23]-[29].

^[69] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [97].

^[70] In practice this may not be all that material given that individual applications appear to be rare. According to the ACCC figures, only 2 ‘approaches’ have been received by individuals since September 2005. Alternatively such situations could be dealt with under a consolidated policy that deals with both immunity and leniency, as suggested in Part VIA below.

^[71] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [89], Example 2.

^[72] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [87].

^[73] See, e.g., C Leslie, ‘Antitrust Amnesty, Game Theory and Cartel Stability’ (2006) 31 Journal of Corporation Law 453.

^[74] See New Zealand Commerce Commission, Cartel Leniency Policy and Process Guidelines, March 2010, [3.14]; Canadian Competition Bureau, Bulletin-Immunity Program under the Competition Act (2010), [15]; European Commission, Commission Notice on Immunity from fines and reduction of fines in cartel cases, (2006/C 298/11).

^[75] See C Leslie, ‘Antitrust Amnesty, Game Theory and Cartel Stability’, Journal of Corporation Law, vol. 31, 2006, p. 481.

^[76] G Spagnolo, Leniency and Whistleblowers in Antitrust, Discission Paper No. 5794, August 2006, Centre for Economic Policy Research, 1, 14.

^[77] See W Wils, ‘Leniency in Antitrust Enforcement: Theory and Practice’ (2007) 30(1) World Competition 25, 51

^[78] See C Leslie, ‘Antitrust Amnesty, Game Theory and Cartel Stability’, Journal of Corporation Law, vol. 31, 2006, p. 453 at 478-479:

‘The ringleader of the cartel should, however, be eligible for leniency, because if she is not then others can trust her not to reveal the price-fixing to the government. For example, if she is not eligible for amnesty, then she can approach potential members of the cartel and offer them the opportunity to fix higher prices and tell them truthfully that she cannot betray them by going to the government in search of amnesty because she is not eligible. Her ineligibility makes her more trustworthy. The rational cartelist is much more likely to trust an individual not to confess when confession yields no significant benefit than to trust a cartel member who could escape incarceration and punitive fines by confessing... Furthermore, if the ringleader were eligible for amnesty, this would enhance deterrence because the rival firm would have to consider the possibility that its competitor is setting it up to take an antitrust fall. Antitrust enforcement benefits from the fear that a firm may form a price-fixing cartel and then expose the conspiracy to federal authorities. Fear deters cartelization. Fear of betrayal by the instigator should increase this marginal deterrence. Additionally, the confession of the ringleader might be the most useful for prosecuting other members of the cartel.’

Cf the economic research suggesting that strategic use of immunity policies cannot be discounted : see eg, Miller, N. H, ‘Strategic leniency and cartel enforcement’ (2009) 99(3) American Economic Review 750; U Blum, U, N Steinat, N and M Veltins, ‘On the rationale of leniency programs: A game theoretical analysis’ (2008) 25(3) European Journal of Law and Economics 209; C Ellis, and W Wilson, ‘What doesn’t kill us makes us stronger: An analysis of corporate leniency policy’ (2001) (Unpublished). Cf. also the findings reported in relation to strategic use of the policy in the US in D Sokol, ‘Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement (2012) 78 Antitrust Law Journal 201, 203. Only one of the interviewees for the Immunity Project professed knowledge of an instance in which the AIPCC appeared to have been used strategically by a cartel party. However, the ACCC interviewees did observe that immunity applicants were sometimes eager to see that their co-conspirators felt the full brunt of proceedings and penalties and an account given by one practitioner was consistent with this, expressing frustration when the ACCC did not bring proceedings against the other cartel parties given that the corporate applicant had been keen to ‘raise their rivals’ costs’.

^[79] ACCC, ACCC immunity policy for cartel conduct, July 2009, [10], [19].

^[80] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [77]-[80].

^[81] The UK Office of Fair Trading is currently consulting on this issue: see OFT, ‘Applications for leniency and no-action in cartel cases, OFT's detailed guidance on the principles and process, A Supplementary Consultation on OFT guidance’, October 2012, OFT803suppcon.

^[82] It has been argued, for example, that an immunity applicant should not have to disclose information that would prejudice its rights to immunity in other jurisdictions and thus potentially expose it to criminal prosecutions in those jurisdictions. See K Edghill, ‘Is the UK Cartel Offence Dead or is there a Problem with Immunity: The role of immunity as a prosecutorial tool in criminal cartel offences in the United Kingdom and Australia’, Paper delivered at UNISA Competition Law Workshop, 2011.

^[83] Law Council of Australia, Submission to the ACCC: Review of the ACCC’s Leniency Policy for Cartel Conduct, February 2005, p11, p13.

^[84] ACCC, Review of ACCC’s Leniency Policy for Cartel Conduct, Discussion Paper, 24 November 2004, [3.11].

^[85] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [80].

^[86] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [79].

^[87] Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Penalties, Report 95, [23.2]–[23.36].

^[88] Submission to Treasury, Criminal Penalties for Serious Cartel Conduct – Draft Legislation, 5 March 2008, Submission No 17, [221]–[239] (Law Council of Australia).

^[89] Stolt-Nielsen SA v United States, 442 F.3d (3^rd Cir, 2006), cert denied, 127 S Ct 494 (2006). For discussion of the case and its implications for the DOJ’s leniency policy see E Magarian Jr, M Lindsay and J Nichols, ‘To Cooperate or Not: The Corporate Leniency Program after Stolt-Nielsen’, Antitrust Source, February 2008, p. 1.

^[90] Under the 2009 version of the AIPCC it does not appear that the ACCC seeks to retain the ability to use information provided in support of an application for immunity against the applicant in civil proceedings for breach of the CACA in the event that immunity is revoked. This is a significant change from the 2005 version of the policy under which, if a grant of final or conditional immunity was revoked because the applicant failed to satisfy the requirements for immunity, the ACCC was free to use any information obtained from the applicant against the applicant (and employees of the applicant) ‘in any action for breaches of the Act and obstruction proceedings’ ([43], [50]). Under the current policy, the ACCC will receive information in support of an application on the basis that the ACCC will not use it as evidence in proceedings against the applicant in respect of the relevant conduct ([61]) but it is a condition of so accepting the information that, if immunity is revoked, the information may be used in obstruction proceedings (with no reference to its use for any other purpose) ([62]). As a matter of principle, it is not clear why the ACCC should not be able to use immunity information against an applicant in the event of revocation. The prospect of that information being used serves as a valuable incentive to applicants to be truthful and comprehensive in making their applications and to fulfil their ongoing obligations of disclosure and cooperation.

^[91] A broader but related question is whether the policy should be legislated. That question is beyond the scope of this paper.

^[92] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [81]-[83].

^[93] ACCC, Review of ACCC’s Leniency Policy for Cartel Conduct, Discussion Paper, 24 November 2004, p7.

^[94] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005 [60].

^[95] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [48].

^[96] ICN, ‘Anti-Cartel Enforcement Manual, Ch 2: Drafting and implementing an effective leniency policy’, Subgroup 2: Enforcement techniques, May 2009, pp9-10.

^[97] See J Connor, ‘Private Recoveries in International Cartel Cases Worldwide: What do the Data Show?’, AAI Working Paper No. 12-03, 15 October 2012.

^[98] See, eg, S Hammond, ‘The Evolution of Criminal Antitrust Enforcement Over the Last Two Decades’, Paper at 24^th Annual Conference of the National Institute on White Collar Crime, 25 February 2010.

^[99] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [144]; Law Council of Australia, Submission to the ACCC: Review of the ACCC’s Leniency Policy for Cartel Conduct, February 2005, p10.

^[100] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [144].

^[101] There may be significant obstacles to relying on the Freedom of Information Act 1982 to obtain access to the ACCC’s file when the file concerns an application of immunity because most of the information, documents and evidence held on the file would come within one or more of the exemptions in the FOI Act.

^[102] See the discussion of these developments in R Baxt, ‘Cracking Cartels: International and Australian Developments: International Cooperation’, Paper presented at the Cracking Cartels Conference: International and Australian Developments – Law Enforcement Conference, Sydney, 24 November 2004; R McInnes and M Wilding, ‘Bring it On! New Challenges and Opportunities in the Pursuit of Cartels in Australia’ (2009) 17 Trade Practices Law Journal 167, 178–82, and the cases referred to therein.

^[103] Cadbury Schweppes Pty Ltd v Amcor Ltd [2008] FCA 88; (2008) 246 ALR 137. See further the related decision in Cadbury Schweppes Pty Ltd v Amcor Ltd [2008] FCA 398; [2008] ATPR 42-224. Cf. Korean Airlines Co Ltd v ACCC [2008] FCA 265; [2008] ATPR 42-232 in which Jacobson J upheld the ACCC’s claim to public interest immunity privilege in response to a notice to produce internal documents relevant to its decision-making with respect to a settlement with KAL over allegations of price fixing of air cargo freight charges. The judge accepted the ACCC’s evidence that disclosure entailed a ‘serious risk of adversely affecting the Commission’s ongoing investigation into conduct suspected to have been carried out by the applicant and other carriers, and thereby impeding the Commission’s fulfilment of its statutory functions in the public interest’: at 49,172 [66]–[69]. The Cadbury and Korean Airlines cases should not necessarily be seen as inconsistent as they were decided in different contexts. The latter concerned a public interest immunity claim in the context of an ongoing investigation, whereas in Cadbury the documents that were sought were witness proofs prepared in the course of an investigation that had been completed.

^[104] For discussion of the decision and its broader significance in the context of a debate about private enforcement, see C Beaton-Wells and K Tomasic, 'Private Enforcement of Competition Law: Time for an Australian Debate' (2012) 35(3) UNSW Law Journal 650, 672-3.

^[105] See ss 157B(7), 157C(7) of the CACA. Such concerns are also likely to have been addressed to some extent to the introduction of a ‘paperless’ process for the purposes of proffers following the 2004 Review.

^[106] The introduction of the PCI scheme may be seen also as an attempt to circumvent the uncertainty inherent in the application of the general law in this area (See, e.g., Australian Law Reform Commission, Privilege in Perspective: Client Legal Privilege in Federal Investigations, Report 107, 2007, p. 26). However, the rationale for the PCI scheme can only be speculated upon given that the scheme was not foreshadowed in the Dawson Committee’s report (see Trade Practices Committee of Review, Review of the Competition Provisions of the Trade Practices Act, January 2003, p. 165) or the press release of the former Treasurer of 2 February 2005 (Treasurer, ‘Criminal Penalties for Serious Cartel Behaviour’, Press Release, 2 February 2005).

^[107] See ss 157(1B), 157B(5), 157C(5) of the CACA.

^[108] For a summary of the effect of the scheme, see C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 10.3.2, pp410-415.

^[109] See, eg, Submission to Treasury, Criminal Penalties for Serious Cartel Conduct – Draft Legislation, 4 March 2008, Submission No 13 (Maurice Blackburn Pty Ltd); Submission to Treasury, Criminal Penalties for Serious Cartel Conduct – Draft Legislation, 12 March 2008, Submission No 25 (Maurice Blackburn Pty Ltd). There were criticisms by others, however. See Submission to Treasury, Criminal Penalties for Serious Cartel Conduct – Draft Legislation, 7 March 2008, Submission No 23, p. 29 (Blake Dawson); Submission to Treasury, Criminal Penalties for Serious Cartel Conduct – Draft Legislation, 7 March 2008, Submission No 21, pp. 16–17 (Business Council of Australia); B Slade and R Ryan, ‘Representative Proceedings in Competition Law’, Paper presented at the Competition Law Conference, Sydney, June 2009.

^[110] See Allphones Retail Pty Ltd v ACCC [2009] FCA 980; (2009) 259 ALR 354; ACCC v Prysmian [2011] FCA 938; (2011) 283 ALR 137; ACCC v Prysmian (No 2) (2012) 287 ALR 762. However, these cases were not dealt with under the PCI scheme. For a general discussion see S Henrick and M Sherman, ‘Cartels: access to the ACCC’s files’, Paper at Law Council of Australia Competition and Consumer Law Workshop, August 2012.

^[111] The ACCC is authorised to provide ‘protected information’ to the CDPP in accordance with s 155AAA(12).

^[112] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [65]. See the obligations under ss 23CD, CE of the Federal Court of Australia Act 1976.

^[113] These provisions were not consulted on and nor were they foreshadowed in the Dawson Committee’s report (see Trade Practices Committee of Review, Review of the Competition Provisions of the Trade Practices Act, January 2003, p. 165) or the press release of the former Treasurer of 2 February 2005 (Treasurer, ‘Criminal Penalties for Serious Cartel Behaviour’, Press Release, 2 February 2005).

^[114] See eg Agreement between Australia and the United States of America on Mutual Antitrust Enforcement Assistance (signed on 27 April 1999) Article VI(A); Cooperation Arrangement between the ACCC, The Commerce Commission in New Zealand and Her Majesty’s Secretary of State for Trade and Industry and the Office of Fair Trading in the United Kingdom Regarding the Application of their Competition and Consumer Laws (signed on 16 October 2003), Article VII(4). It is also common for the agreements to establish specific obligations in relation to the handling of confidential information and the use of documents. For example, the US Agreement provides that evidence may only be used or disclosed for the purpose of administering or enforcing anti-trust laws and the parties are required to inform the other party if a request for information or its contents cannot be kept confidential. All information communicated pursuant to the UK and New Zealand Agreement is deemed to be confidential unless otherwise arranged. The Agreement contemplates that the exchange of information may be contingent upon acceptable assurances regarding confidentiality and use.

^[115] See, eg, Agreement between Australia and the United States of America on Mutual Antitrust Enforcement Assistance (signed on 27 April 1999); Cooperation Arrangement between the ACCC, The Commerce Commission in New Zealand and Her Majesty’s Secretary of State for Trade and Industry and the Office of Fair Trading in the United Kingdom Regarding the Application of their Competition and Consumer Laws (signed on 16 October 2003); Cooperation Arrangement between the ACCC and the Korean Fair Trade Commission Regarding the Application of their Competition and Consumer Protection Laws (signed 29 September 2002).

^[116] See s 155AAA(13).

^[117] See ICN, Cartels Working Group, Sub-Group 2 Enforcement Techniques, Charts Summarising Information Sharing Mechanisms: Australia, July 2012, at http://www.internationalcompetitionnetwork.org/uploads/cartel%20wg/is/australia.pdf.

^[118] See ICN Cartel Working Group 2012 – 2013 Work Plan, p2, http://www.internationalcompetitionnetwork.org/uploads/library/doc802.pdf.

^[119] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), sections 2.4.3.1, 2.4.3.2, pp25-27.

^[120] Memorandum of Understanding between the Commonwealth Director of Public Prosecutions and the ACCC regarding Serious Cartel Conduct, July 2009, [7.2] (1^st bullet point), ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [25].

^[121] ACCC, ACCC Immunity Policy for Cartel Conduct, July 2009, [5].

^[122] Memorandum of Understanding between the Commonwealth Director of Public Prosecutions and the ACCC regarding Serious Cartel Conduct, July 2009, [7.2] (4^th bullet point); ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [11].

^[123] Memorandum of Understanding between the Commonwealth Director of Public Prosecutions and the ACCC regarding Serious Cartel Conduct, July 2009, [4.4].

^[124] Cf. the view that ‘criminal charges can only be ruled out by the DPP’: A Fels, ‘The Criminalisation of Serious Cartel Conduct: Issues and Questions for Discussion’, Paper at the 7^th Annual University of South Australia Trade Practices Workshop, October 2009, p8.

^[125] Similar to the proposed practice of providing ‘comfort’ letters to individuals seeking leniency in the UK: Office of Fair Trading, Leniency and No-Action: OFT’s Guidance Note on the Handling of Applications, OFT803, December 2008, [7.4].

^[126] ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [33]. Cf. Annexure B which states that a recommendation ‘may’ be made in such circumstances: at [3.3]. It is unclear whether or not this is a deliberate discrepancy. Presumably it is inadvertent given that, if there was any uncertainty as to whether or not the ACCC would make a recommendation in favour of criminal immunity when satisfied that the applicant had fulfilled the conditions of the Immunity Policy, it would spell the demise of the policy’s effectiveness.

^[127] Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, 1992 (as amended March 2009), Annexure B [3.4]; ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [34]. Cf. ACCC, ACCC Approach to Cartel Investigations, July 2009, [30], which states that the CDPP may give an undertaking if the CDPP ‘considers it appropriate to do so’.

^[128] Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, 1992 (as amended March 2009), Annexure B [3.4]; ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [35].

^[129] ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [31].

^[130] Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, 1992 (as amended March 2009), [2.5], [2.8].

^[131] The reticence may be cultural but it may also be referable to the fact that there is a statutory basis for the indemnity given under the DPP Act.

^[132] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [1]-[7]. The ultimate objective of detecting, stopping, prosecuting and deterring cartel conduct is identified by the ACCC as protection of the competitive process which delivers lower prices, greater choice and better service and thereby enhances the welfare of Australians, consistent with the objective in s 2 of the CACA. The Immunity Project is not setting out to test the effectiveness of the AIPCC in delivering these broader benefits, at least not directly.

^[133] Clarification from the ACCC will be sought about this and a range of other aspects of the ACCC figures.

^[134] A person seeking a marker need only provide the ACCC with sufficient information to allow the ACCC to determine whether or not any other person has obtained a marker or applied for immunity in respect of the cartel and the ACCC has not received legal advice that it has sufficient evidence to commence proceedings in respect of the cartel: ACCC, ACCC immunity policy interpretation guidelines, July 2009, [41]. Generally speaking marker requests involve identifying the general nature of the conduct involved (eg price fixing, bid rigging) and the industry affected.

^[135] ACCC, ACCC immunity policy interpretation guidelines, July 2009, [53].

^[136] See, eg, G Samuel, ‘The Relationship between Private and Public Enforcement in Deterring Cartels’, Paper at International Class Action Conference (25 October 2007) 8. The simple logic offered is that, by adding clout to the ‘stick’, the ‘carrot’ of immunity from prosecution will be more irresistible. The decision as to whether or not to apply for immunity will no longer be a business decision (weighing the avoidance of pecuniary penalties against exposure to civil damages). It will be a decision about whether or not to risk imprisonment — a decision to which it is much more difficult to attach a ‘price tag’.

^[137] S Hammond, ‘Cornerstones of an effective leniency program’, Paper at ICN Workshop on Leniency Programs, 22-23 November 2004, Sydney, 6-9.

^[138] See SD Hammond, ‘Cornerstones of an Effective Leniency Program’, Paper at the Cracking Cartels Conference: International and Australian Developments – Law Enforcement Conference, Sydney, 24 November 2004, pp9-10.

^[139] Cf the discussion in C Beaton-Wells, ‘Forks in the Road: Challenges Facing the ACCC’s Immunity Policy for Cartel Conduct: Part 2' (2008) 16(2) Competition and Consumer Law Journal 246, 265-268.

^[140] R Sims, ‘Looking back, looking forward – the ACCC’s approach to making markets work for Australian consumers’ Paper at Law Council of Australia Competition and Consumer Law Workshop, 25 August 2012, Canberra, p4.

^[141] ACCC, ACCC immunity policy for cartel conduct, July 2009, [8](a)(v), [17](a)(v).

^[142] It is difficult to know exactly how many of these proceedings followed an immunity application given that judgments do not routinely indicate when this is the case and the ACCC does not report on such matters (see further Part VII below).

^[143] ACCC, ACCC immunity policy for cartel conduct, July 2009, [11].

^[144] See Part IVA(i).

^[145] Cf statements by the ACCC Chairman indicating a change in this approach: R Sims, ‘ACCC – Future Directions’ (Speech delivered at the Law Council of Australia Competition and Consumer Workshop, Gold Coast, 27 August 2011) 4–5; R Sims, ‘Some Compliance and Enforcement Issues’ (Speech delivered at the Law Institute of Victoria Breakfast, Melbourne, 25 October 2011) 2–3; R Sims, ‘Some Perspectives on Competition and Regulation’ (Speech delivered at the Melbourne Press Club, 10 October 2011) 3–4.

^[146] One practitioner attributed this to past high profile losses in cartel cases: ‘I definitely think they’ve been spooked by those petrol cases..’.

^[147] For background on the case, see C Beaton-Wells, 'The Billionaire, Prime Minister and Chairman: ACCC v Visy Ltd' in B Rodger (ed), Landmark Cases in Competition Law, Kluwer International (Law), 2012, ch 1, pp27-45.

^[148] K Edghill, ‘Is the UK Cartel Offence Dead or is there a Problem with Immunity: The role of immunity as a prosecutorial tool in criminal cartel offences in the United Kingdom and Australia’, Paper at UNISA Competition Law Workshop, 2011.

^[149] See the discussion in A Stephan, ‘‘How Dishonesty Killed the Cartel Offence’ [2011] Crim LR 446.

^[150] See generally Parker, C. and Nielsen, V. (eds), 2011, Explaining Compliance: Business Responses to Regulation, Edward Elgar, Cheltenham UK.

^[151] For further information about the research methodology and results, see the reports generated by the Cartel Project available at http://www.law.unimelb.edu.au/cartel/project-news/project-outputs. For a summary see C Beaton-Wells and C Parker, ‘Justifying criminal sanctions for cartel conduct: a hard case’ (2012) Journal of Antitrust Enforcement 1.

^[152] See at http://transition.accc.gov.au/content/index.phtml/itemId/1076067. The ACCC has also taken actions in specific industries to raise awareness of the AIPCC. For example, in 2012 it wrote to 2,500 executives in the heavy construction and construction supply industries - providing a reminder about the potential sanctions for cartel conduct, and providing the name of someone they can contact if they want to report their involvement in a cartel and apply for immunity. See R Sims, ‘ACCC Priorities in Enforcing Competition Law’, Paper at Competition Law Conference, 5 May 2012, Sydney.

^[153] See C Parker and C Platania-Phung, The Deterrent Impact of Cartel Criminalisation: Supplementary Report on a Survey of Australian Public Opinion Regarding Business People's Views on Anti-Cartel Laws and Enforcement, (12 January 2012) and the discussion and analysis in C Parker, ‘The war on cartels and the social meaning of deterrence’ (2012) Regulation and Governance, in press (advance access version published online 16 October 2012, DOI: 10.1111/j.1748-5991.2012.01165.x); C Parker, ‘Economic rationalities of governance and ambiguity in the criminalization of cartels’ (2012) 52(5) British Journal of Criminology 574.

^[154] Note the author’s call for a similar opportunity to be taken advantage of at the time that the dual civil/criminal regime was under consideration: see C Beaton-Wells, ‘Forks in the Road: Challenges Facing the ACCC’s Immunity Policy for Cartel Conduct: Part 1’ (2008) 16 Competition & Consumer Law Journal 71.

^[155] The Immunity Project will explore such matters in greater detail.

^[156] In addition there should arguably be alignment between the condition in the CPEM relating to coercion or clear leadership and the equivalent condition in the AIPCC (see the discussion in Part IVB(iv) above). The CPEM refers to ‘has not compelled or induced any other corporation to take part in the anticompetitive agreement and was not a ringleader or originator of the activity’.

^[157] ACCC, Cooperation Policy for Enforcement Matters 2002, 1.

^[158] See C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), p433.

^[159] See, e.g., Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 329, 336 [39]; Australian Competition and Consumer Commission v Australian Abalone Pty Ltd [2007] FCA 1834; [2007] ATPR 42-199, 48 322 [150]; Australian Competition and Consumer Commission v Safeway Stores Pty Ltd [No. 4] [2006] FCA 21; [2006] ATPR 42-101, 44 836 [91].

^[160] See NW Frozen Food v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285; Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; [2004] ATPR 41-993.

^[161] See most recently the criticism of ASIC in ASIC v Ingleby [2013] VSCA 49. For criticism of ACCC settlement practices, see Australian Competition and Consumer Commission v FFE Building Services [2003] FCA 1542; [2004] Aust Contract R 90-179, 92 530 [36]; Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] FCA 383; [2001] ATPR 41-815, 42 936 [5]; Australian Competition and Consumer Commission v FFE Building Services [2003] FCA 1542; [2004] Aust Contract R 90-179.

^[162] ACCC, ACCC Immunity Policy Interpretation Guidelines, July 2009, [95].

^[163] In New Zealand, for example, in an attempt to make the rewards available for cooperation more explicit, the Commerce Commission’s 2010 leniency policy and process guidelines state that the Commission will consider recommending reductions in penalty in the range of 25–40% and potentially up to 50%, depending on the value of the information provided. See Commerce Commission, Cartel Leniency Policy and Process Guidelines, March 2010, [4.08]. Note that the Commission also indicates that ‘[i]n exceptional circumstances’ it may consider taking no enforcement action against ‘an individual whose assistance is considered critical to the successful outcome of an investigation’: at [4.09]. In Canada, the Competition Bureau has published a leniency policy under which the first leniency applicant is eligible for a recommended reduction of up to 50% of the fine that would have otherwise been recommended and for subsequent leniency applicants, reductions of up to 30% are available. See Competition Bureau, Bulletin Leniency Program, 29 September 2010, [12]-[15]. In the EU, specific percentage reductions in fines are identified in the EC’s Leniency Notice as available to applicants under the Notice. After the first applicant (which, subject to satisfaction of the relevant conditions, obtains 100% immunity, see [8]-[13]), subsequent applicants that produce significant value-added evidence to the EC may receive discounts which decrease with each new application: the first (subsequent) undertaking qualifies for a discount between 30–50%, the second for a discount between 20–30% and subsequent undertakings for discounts up to 20%. European Commission, Commission Notice on Immunity from Fines and Reduction of Fines in Cartel Cases [2006] OJ C 298/17, 8 December 2006, [26]. In addition, under its 2008 settlement procedure, the EC may reward an undertaking for cooperation under the procedure with a 10% reduction to its fine (additional to any leniency discount) and it is further provided that any deterrence multiplier is not to exceed two. See European Commission, Commission Notice on the conduct of settlement procedures in view of the adoption of Decisions pursuant to Article 7 and Article 23 of Council Regulation (EC) No 1/2003 in cartel cases [2008] OJ C 167, 2 July 2008, [32]-[33].

^[164] International Competition Network, Cartels Working Group, Subgroup 1 – general framework, Setting of Fines for Cartels in ICN Jurisdictions, Report to the 7^th Annual Conference, Kyoto, April 2008, p. 39.

^[165] Directorate for Financial and Enterprise Affairs Competition Committee, Organisation for Economic Cooperation and Development, Policy Roundtables, Experience with Direct Settlements in Cartel Cases, DAF/COMP(2008)32, October 2009, pp. 7–8.

^[166] Cf. the argument against predictability in relation to fining policy in W Wils, ‘Optimal Antitrust Fines: Theory and Practice’, World Competition: Law and Economics Review, vol. 29, 2006, p. 183. See also the conclusion in London Economics, An Assessment of Discretionary Penalties Regimes, Final Report, OFT1132, A Report Prepared for the Office of Fair Trading, October 2009, [3.27], that ‘[o]n balance, predictability may be an advantage if fine levels are on average very high, but a disadvantage otherwise.’

^[167] Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; [2004] ATPR 41-993, 48627–8 [57].

^[168] See Commerce Commission, Cartel Leniency Policy and Process Guidelines, March 2010, [3.14]; Competition Bureau, Revised Draft Information Bulletin on Sentencing and Leniency in Cartel Cases, 25 March 2009.

^[169] The ACCC Cooperation Policy; ACCC Investigation Guidelines; CDPP Prosecution Policy; ACCC Immunity Policy and Interpretation Guidelines.

^[170] See the discussion in C Beaton-Wells and B Fisse, Australian Cartel Regulation (2011, CUP), section 10.2.2.3, pp403-404.

^[171] ACCC, Compliance and Enforcement Policy (February 2013) 2.

^[172] In addition to stopping the conduct in question, encouraging the use of compliance systems, and punishing wrongdoers, all of which are also identified as aims in the ACCC’s Compliance and Enforcement Policy 2013.

^[173] ACCC, Leniency Policy for Cartel Conduct (June 2003) Pt A, [2(e)]; Pt B, [2(e)].

^[174] ACCC, Review of ACCC’s Leniency Policy for Cartel Conduct, Discussion Paper (24 November 2004) 4, 13.

^[175] ACCC, Review of ACCC’s Leniency Policy for Cartel Conduct, Discussion Paper, 24 November 2004, 5.

^[176] ACCC, Cooperation Policy for Enforcement Matters 2002, 2.

^[177] It would be easier to deal with such matters in a consolidated immunity and leniency policy for cartel conduct given that the CPEM applies to enforcement for any breach of the CACA.

^[178] See, eg, actions relating to the Visy/Amcor cardboard packaging cartel (see Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (Federal Court of Australia Proceeding No VID1650/2005)) and Cadbury Schweppes Pty Ltd v Amcor Ltd [2008] FCA 88; (2008) 246 ALR 137; the air cargo surcharge cartel (De Brett Seafood Pty Ltd v Qantas Airways Ltd (formerly Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd) (Federal Court of Australia Proceeding No VID12/2007)); and a rubber cartel (Wright Rubber Products Pty Ltd v Bayer AG (Federal Court of Australia Proceeding No VID882/2007)).

^[179] See, eg, P Cashman and R Abbs, ‘Problems and Prospects for Victims of Cartels: The Strengths and Limitations of Representative and Class Action Proceedings’ (Paper presented at the Competition Law Conference, Sydney, 23 May 2009); B Slade and R Ryan, ‘Representative Proceedings in Competition Law’ (Paper presented at the Competition Law Conference, Sydney, 23 May 2009); B Dellavedova and R Gilsenan, ‘Challenges in Cartel Class Actions’ [2009] UNSWLawJl 52; (2009) 32 University of New South Wales Law Journal 1001; Hank Spier, ‘A “Mature” Trade Practices Act Needs Some Fine Tuning in Some Core Areas’ (2009) 17 Trade Practices Law Journal 287; C Beaton-Wells and B Fisse, Australian Cartel Regulation: Law, Policy and Practice in an International Context (CUP, 2011) 405–19 [10.3], 517– 27 [11.5]; Ian Wylie, ‘Cartel Compensation – A Consumer Perspective’ (2011) 39 Australian Business Law Review 177.

^[180] For example, removal of the requirement for ministerial consent under s 5 of the CACA in international cartel cases and an amendment to s 83 to clarify that agreed facts constitute at least prima facie evidence of such facts for the purposes of follow on actions. Cf the uncertainty expressed about the applicability of s 83 in such circumstances in See Australian Competition and Consumer Commission v Monza Imports Pty Ltd [2001] FCA 1455; (2001) ATPR 41-843, 43 440 (Carr J); Australian Competition and Consumer Commission v Apollo Optical (Aust) Pty Ltd [2001] FCA 1456 (17 October 2011) [22]–[26] (Carr J); Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169, 183–4 [51] (Finkelstein J); Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [No 3] [2005] FCA 265; (2005) 215 ALR 301, 323 [116]–[118] (Goldberg J); Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2006) 236 ALR 665, 691–2 [106]–[107] (Kiefel J).

^[181] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [88].

^[182] G Samuel, ‘Current Issues on the ACCC’s Radar’, Paper at Competition Law Conference, Sydney, 29 May 2010) 6. Cf. the ACCC figures cited above which suggests there have not been an increase in immunity applications since the introduction of criminal sanctions.

^[183] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [87], [97].

^[184] A more onerous version of this proposal would involve: (a) including an estimate of the damage cause by the agreed conduct and requiring that the settling respondent put aside that amount for compensation to private claimants, with a distribution model to be developed and implement by claimants’ representatives subject to court approval; (b) requiring that the settling respondents provide information to claimants’ representatives to enable them to calculate the damage caused, and as per above require that amount to be set aside and distributed. See Maurice Blackburn, Position Paper for Melbourne Law School Roundtable on Private Enforcement of Competition Law, 12 November 2010, [5.9].

^[185] Consider also the broader considerations as to whether the AIPCC may undermine so-called ‘normative compliance’: C Beaton-Wells, ‘Normative Compliance – The End Game’, CPI Antitrust Chronicle, February 2012(1).

^[186] Seethe discussion in D Sokol, ‘Policing the Firm’, Legal Studies Research Paper Series, Research Paper No. 13-13, 7 March 2013, pp31-35.

^[187] ACCC, Cooperation Policy for Enforcement Matters 2002, 3.

^[188] A similar discrepancy applies in the US between the treatment of antitrust violations and other corporate crimes. In that jurisdiction there is no reward for an antitrust violator on account of having a compliance program. Yet outside of the antitrust area, a compliance program may be (at least in part) a basis for a decision not to charge under the operative DOJ charging discretion memos. See US Department of Justice and US Securities and Exchange Commission, FCPA: A Resource Guide to the US Foreign Corrupt Practices Act (Nov. 14, 2012), http://www.sec.gov/spotlight/fcpa/fcpa-resource-guide.pdf.

^[189] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [160].

^[190] ACCC, ACCC Position Paper, Review of ACCC’s Leniency Policy for Cartel Conduct, 26 August 2005, [161].

^[191] Cf the transparent practices of the European Commission. Its Notice on Immunity from Fines and Reduction of Fines in Cartel Cases [2006] OJ C 298/17, 8 December 2006, [39] sets out that:

[i]n line with the Commission's practice, the fact that an undertaking cooperated with the Commission during its administrative procedure will be indicated in any decision, so as to explain the reason for the immunity or reduction of the fine.

Press releases by the Directorate General after the conclusion of proceedings contain details about both the fine that would have been imposed on immunity applicants but for the immunity, as well as any leniency, or 'procedural discounts' that were actually applied. See eg European Commission Directorate General Competition Press Release, Antitrust-Commission fines producers of TV and computer monitor tubes € 1.47 billion for two decade-long cartels, IP/12/1317 (05 December 2012) <http://europa.eu/rapid/press-release_IP-12-1317_en.htm> (attached as PDF-EUPressReleaseCathodeRayCartelFines); European Commission Directorate General Competition Press Release, Antitrust-Commission fines producers of water management products € 13 million in 6th cartel settlement, IP/12/704 (27 June 2012) <http://europa.eu/rapid/press-release_IP-12-704_en.htm> (attached as PDF- EUPressReleaseWaterProductCartelFines). Notably the press releases also include a statement alerting persons affected by the behaviour that is the subject of the release to their rights to seek damages and confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal. ACCC press releases make no reference to private rights and compare also the more uncertain position under s 83 of the CACA regarding the evidentiary status of findings of fact made in Commission proceedings, particularly where the proceedings are settled.

^[192] See, eg, ACCC, Annual Report 2010-2011, p29; ACCC Annual Report 20009-2010, p39; ACCC Annual Report 2008-2009, p27; ACCC Annual Report 2006-2007, p48; ACCC Annual Report 2005-2006, p43.

^[193] The one exception to this is in the ACCC’s Annual Report 2007-2008 where it is stated that the Commission had ‘concluded four cases that had been instituted following the granting of immunity’ (p45).

^[194] ACCC, ‘Proceedings instituted against Visy group, senior executives for alleged cartel in the corrugated fibreboard container market’, MR 327/05, 21 December 2005.

^[195] See ACCC v Visy Industries Holdings Pty Ltd [2007] FCA 1617, [8]-[12], [38].