Economic Analysis of Cartels and Their Impact on an Oligopoly Market Structure

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“To catch a cartel”

Author: Elisabeth Sexton.
Date: 21 March 2008
Source: The Sydney Morning Herald

The competition watchdog's tactic of offering corporate whistleblowers legal immunity to expose cartels is under threat as the government moves to make price-fixing a criminal offence. Elisabeth Sexton reports. Graeme Samuel has a clear recollection of the events of November 22, 2004. In the morning, the chairman of the Australian Competition and Consumer Commission received the phone call every regulator longs for. On the other end of the line was a partner of law firm Allens Arthur Robinson, Patrick Ryan. He was acting for packaging giant Amcor and wanted a meeting that day. "It was fairly dramatic," Samuel says, recalling the sight of three Allens partners accompanying Amcor's chairman, Chris Roberts, and then managing director, Russell Jones, into one of the ACCC's conference room in the afternoon. "None of us had any idea at the time what it was about." Amcor wanted to strike a deal: immunity from prosecution in return for full and frank disclosure about a price-fixing cartel in the cardboard-box market. "It suddenly hit us," Samuel says. "It was obviously a very serious matter, in terms of both the size of the alleged cartel and the people involved." The drama ended in the Federal Court in November last year when Amcor's co-conspirator, Visy Industries, admitted its participation. Justice Peter Heerey fined Visy $36 million for 37 contraventions of the Trade Practices Act. The high profile of Visy's owner, the billionaire Richard Pratt, ensured intense media interest in what the judge called "by far the most serious cartel case to come before the court in the 30-plus years in which price fixing has been prohibited by statute". True to the deal Samuel struck soon after the meeting with Roberts and Jones, the ACCC did not prosecute Amcor. It was a triumph, and a highly publicised one, for the whistleblower immunity policy adopted by the ACCC in 2003 and strengthened in 2005. Justice Heerey said the successful outcome in the Visy case might not have occurred without it. A few short months later, that policy is under threat. The ACCC is not the only one pursuing price-fixers, bid-riggers and other species of cartel participants. The Commonwealth Director of Public Prosecutions is about to become involved, courtesy of an election pledge by the Rudd Government to introduce criminal penalties for serious cartels. The reaction from the legal community to draft proposals for the new system released by the minister for competition policy, Chris Bowen, is that the DPP's approach to granting immunity in criminal cases could work directly against the type of deal Samuel struck with Amcor. Also joining the chase are customers nursing losses from price-fixing conduct. Cadbury Schweppes is suing Amcor in the Federal Court in Melbourne to recoup the amount it says it was overcharged for packaging while the cartel was operating. Amcor has filed a cross-claim against Visy, saying it should share any damages awarded. Class-action firm Maurice Blackburn has launched a similar case in Sydney, led by a Queensland banana-packing company, Jarra Creek Central Packing Shed Pty Ltd, and involving potentially thousands of other customers of Amcor and Visy. The suits have the ACCC worried. It sent barristers to the Cadbury case in December and to the Maurice Blackburn case in February to oppose documents provided by Amcor as part of the deal struck in November 2004 being used in the new cases. They argued that whistleblowers would not come forward in future if confidentiality could not be assured. Samuel says the immunity policy is "absolutely vital" to the ACCC's ability to bust illegal collusive conduct. "Without it our investigations into cartels would be reduced to a dribble," he says. "Probably three-quarters if not more of our current serious investigations are as a result of our immunity policy." The justification...
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