By Elizabeth Avery, Chris Boyd, Gina Cass-Gottlieb, Steven Glass, Andrew Floro and Stephanie Wee
On 18 July 2016, Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) entered a plea of guilty to charges of criminal cartel conduct in the Federal Court of Australia – a significant milestone for the Australian Competition and Consumer Commission (ACCC) and the Commonwealth Director of Public Prosecutions (CDPP) in Australia’s first ever criminal cartel prosecution based on laws introduced in 2009.
Criminal charges were brought by the CDPP against NYK under section 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth) (CCA) last Thursday (14 July 2016). Appearing before Justice Wigney at a court directions hearing on Monday, NYK entered a plea of guilty and proceedings were adjourned to a further directions hearing on 12 September 2016.
NYK now faces a fine the greater of $10 million, three times the value of the benefit attributable to the commission of the offence or, if the attributable benefit cannot be determined, 10% of its annual turnover connected with Australia.
Collusion in the global automobile transportation industry
In its press release, ACCC Chairman Rod Sims said, “[t]his matter relates to alleged cartel conduct in connection with the transportation of vehicles, including cars, trucks, and buses, to Australia between July 2009 and September 2012."1
According to documents lodged with the Federal Court, NYK is charged with a single offence of intentionally giving effect to cartel provisions in an arrangement or understanding with others in relation to the supply of ocean shipping services, knowing or believing that the arrangement or understanding contained cartel provisions – in breach of section 44ZZRG(1) of the CCA.
The Australian prosecution is the latest enforcement action in relation to alleged conduct in the “roll-on, roll-off cargo” industry (or Ro-Ro). Criminal convictions, jail terms and hundreds of millions of dollars in fines have been apportioned in several jurisdictions, including the United States, Japan, South Africa and China – with investigations ongoing in other countries.
In January 2015, NYK admitted to customer allocation, bid-rigging and price fixing in the United States, agreeing to pay fines of USD 59.4 million. In July 2016, the total fines issued for contraventions in the United States topped USD 234 million as Wallenius Wilhelmsen Logistics AS (WWL), a Norweigan firm, became the fourth shipping company to be charged by the Department of Justice (DOJ) and agreed to pay a fine of USD 98.9 million.
In March 2015, a NYK employee, Susumu Tanaka, was sentenced to 15 months imprisonment for his involvement in the cartel and became the third individual to plead guilty to antitrust charges related to the global shipping cartel in the United States.2 In June 2016 a fourth individual, an executive from Chilean shipping company Compañia Sudamericana de Vapores S.A. (CSAV), was also indicted for price fixing and bid-rigging.3
A total of seven executives, including two from NYK, have been sentenced to prison in Japan. NYK was also fined JPY 13 billion (around USD 59 million) by the Japan Fair Trade Commission (JFTC) in March 2014. In South Africa, NYK has been fined ZAR 104 million (around USD 8.5 million).
In China, NYK received first-in immunity from the National Development and Reform Commission (NDRC) and has avoided paying a fine.
Global cartels. A local enforcement priority.
International cartel investigations in Australia
The criminal cartel charges laid by the CDPP against NYK follows an investigation by the ACCC into “roll-on, roll-off” shipping routes to Australia.
The ACCC is armed with sweeping powers to investigate potential contraventions of both the civil and criminal cartel prohibitions, including:
- search and seizure powers (dawn raids, including with the assistance of the Australian Federal Police (AFP) in criminal investigations);4 and
- broad powers to compel production of information or documents, or compel person(s) to give evidence under oath or by way of affirmation (by way of section 155 Notice).5
The ACCC also has cooperative arrangements with competition regulators in other jurisdictions.
The threshold for the ACCC to issue a section 155 notice is low – merely requiring that the ACCC have a “reason to believe” that the person to whom the notice is issued is capable of furnishing the information or documents, or providing evidence about a matter which may constitute a breach of the CCA. Failure to comply, or deliberating providing false or misleading information in response to a section 155 notice may lead to an ACCC referral to the CDPP for criminal prosecution and attract a penalty of 12 months imprisonment.
Obtaining immunity from criminal prosecution or ACCC-initiated civil proceedings
The ACCC’s investigatory capability is further strengthened by its Immunity and Cooperation Policy6 (Immunity Policy). The policy grants full immunity from any civil enforcement action brought by the ACCC to the first individual or corporation to satisfy the criteria prescribed by the Immunity Policy, which includes ongoing cooperation and full disclosure of information relating to the alleged cartel.
As the agency with responsibility for investigating and referring cases involving serious cartel conduct to the CDPP for prosecution, the ACCC also accepts applications for criminal immunity and makes recommendations to the CDPP that an applicant be granted immunity pursuant to the Prosecution Policy of the Commonwealth.7 Such a recommendation will only be made where the individual or corporation first satisfies the criteria for a conditional immunity application under the ACCC’s own civil Immunity Policy.
Gilbert + Tobin’s Corporate Crime + Investigations team
Gilbert + Tobin’s Corporate Crime + Investigations team has experience managing complex cartel investigations across diverse industries. Our lawyers and partners are highly respected by the ACCC and have served as trusted advisors to both companies and individuals on high-profile cases.
We provide strategic thinking and clear advice for our clients. Whether preparing an application for immunity, engaging with the ACCC on the investigation process or negotiating settlement, our team draws on its deep understanding of competition law to deliver the best possible outcome.
Background to criminal cartels in Australia
Australia has had in place a criminal cartel regime since July 2009 when, under the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009, a new Division 1 of Part IV was introduced to the CCA, including two specific criminal cartel offences.8 By supplementing Australia’s existing civil cartel regime with criminal prohibitions, Australia adopted OECD recommendations calling for tougher sanctions against serious cartel conduct.
From that time it has been an offence in Australia to intentionally make or give effect to a contract, arrangement or understanding, where the individual or corporation has the knowledge or belief that the contract, arrangement or understanding contains a cartel provision (for example, a price fixing or customer allocation provision).
1See, ACCC Press Release, 18 July 2016.
2 See, United States Department of Justice, ‘Third Ocean Shipping Executive Pleads Guilty to Price Fixing on Ocean Shipping Services for Cars and Trucks’, 10 March 2015.
3 See, United States Department of Justice, ‘Fourth Ocean Shipping Executive Indicted for Price Fixing and Bid Rigging’, 7 June 2016.
4 CCA, section 154X.
5 CCA, section 155.
6 Australian Competition and Consumer Commission, ACCC Immunity and Cooperation Policy, September 2014.
7 Commonwealth Director of Public Prosecutions, Prosecution Policy of the Commonwealth, Annexure B: Immunity from Prosecution in Serious Cartel Offences, September 2014.
8 CCA, sections 44ZZRF and 44ZZRG.