BACKGROUND
1. What is the relevant legislation containing the leniency policy and what is the enforcing body?
The Trade Practices Act 1974 (Cth) (TPA) contains Australia’s competition laws but leniency policy in Australia is not a creature of legislation. Rather, the Australian Competition and Consumer Commission (ACCC), as the independent government statutory body responsible for administering the TPA, has two policies in place which deal with the favourable treatment of parties who assist with its investigations.
The ACCC Immunity Policy for Cartel Conduct (Immunity Policy) came into force on 5 September 2005. It replaces the Leniency Policy and deals only with cartel conduct. The ACCC Cooperation Policy for Enforcement Matters (Cooperation Policy) came into effect in July 2002 and applies to any potential contravention of the TPA. Both of these policies are available on the ACCC website at www.accc.gov.au.
2. What are the basic tenets of a leniency/immunity programme?
The Immunity Policy provides the first successful corporate or individual applicant with immunity from ACCC initiated court proceedings in relation to cartel conduct. Although the term ‘cartel’ is not defined in the TPA, it covers agreements between competitors in relation to price fixing, market sharing, production or sales quotas and agreements to restrict competition. The Immunity Policy provides for a number of steps in the process of applying for immunity:
The Cooperation Policy provides that where parties assist the ACCC in its investigation of anti-competitive conduct, they will receive more lenient treatment than if they do not cooperate. This policy sets out a series of general principles only, which are applied on a case-by-case basis.
3. How many cartels have been unveiled and punished since the adoption of the leniency policy?
As at March 2005, when the former Leniency Policy applied, the ACCC had identified approximately 40 suspected cartels, with 25 of these under ‘serious investigation’ (Graeme Samuel (Chairman of the ACCC), appearing before the Senate Economics Legislation Committee, Senate Standings Committee Budget Estimates, 17 February 2005 from Research Brief No 16 2004–05).
On 22 December 2005 Graeme Samuel stated on the ‘7.30 Report’, a current affairs programme, that the ACCC was having success in detecting cartels through the use of the Immunity Policy.
There is no publicly available data regarding the number of applications made for leniency under the new Immunity Policy or regarding the number of cartels under investigation due to the policy. With respect to the former Leniency Policy, the ACCC stated in April 2005 that it had received 14 applications for leniency since the introduction of the policy in July 2003 (Graeme Samuel, International Bar Association, International Competition Enforcement Conference; Tokyo, 21 April 2005).
4. What is needed to be a successful leniency applicant? Is documentary evidence required or is testimonial evidence sufficient?
In applying for immunity, an applicant may request a ‘paperless’ application process, rather than applying in writing. This allows the applicant to make an application without generating new documents which may include admissions or provide a ‘road map’ to third parties.
To succeed in obtaining conditional immunity, the applicant must:
Further, at the time the ACCC receives the application, the ACCC must not have received written legal advice that it has sufficient evidence to commence proceedings in relation to at least one contravention of the TPA arising from the cartel conduct.
Corporations are subject to an additional condition. The admissions and cooperation given must be a ‘truly corporate act’. The application cannot be based on a limited number of individuals providing confessions.
To receive favourable treatment under the Cooperation Policy, the party must meaningfully assist and cooperate with the ACCC in its investigation by, for example, providing pivotal information, immediately ceasing conduct upon realisation of a breach or being prepared to provide restitution. Under the Cooperation Policy, the ACCC may, in its discretion, offer leniency to a corporation even if the corporation has already unsuccessfully sought immunity under the Immunity Policy.
TIMING
5. What are the benefits of being ‘first-in’ to cooperate?
An applicant may only be granted conditional immunity, and ultimately final immunity, if it is the first to approach the ACCC requesting immunity. Second or subsequent applicants may only be granted conditional immunity if an earlier applicant has withdrawn its application, is ineligible for conditional immunity or has had conditional immunity revoked by the ACCC.
The ‘marker system’ effectively allows for the formation of an ‘immunity queue’. The first to apply for a marker has a limited period of time to gather the necessary information to show it satisfies the requirements for conditional immunity. If a marker expires and a second corporation or individual has already requested a marker, it will be given the opportunity to demonstrate it satisfies the requirements for conditional immunity.
Under the Cooperation Policy, being the ‘first-in’ to cooperate renders it more likely that favourable treatment will be given.
6. What are the consequences of being ‘second’? Is there an ‘immunity plus’ or ‘amnesty plus’ option?
Under the Immunity Policy there can be only one successful applicant for immunity. Immunity does not apply to the ‘second’ applicant. A fundamental requirement for eligibility under this Policy is that there has been no successful prior applicant.
However, the Guidelines to the Immunity Policy provide for an ‘amnesty plus’ option. If a corporation or individual cooperates with the ACCC investigation into a cartel despite not being the first applicant for immunity, the ACCC may recommend a reduced penalty with respect to that person’s involvement in the cartel. If, in addition to cooperating with investigations into the first cartel, the person reports a second cartel, and is granted conditional immunity in relation to the second cartel, the ACCC will recommend the person’s penalty be further reduced in relation to the first cartel.
Under the Cooperation Policy, if an applicant is not the first to give information but nevertheless helps the ACCC, they may still receive lenient treatment. There is no provision for ‘amnesty plus’ in the Cooperation Policy.
7. Are subsequent firms given any beneficial treatment if they make a useful contribution? How are ‘useful contributions’ defined?
Any subsequent firm which makes a useful contribution to the ACCC’s investigation has recourse only to the ‘amnesty plus’ option discussed in question 6 or to the Cooperation Policy. Under the Cooperation Policy the ACCC assesses applications on a case-by-case basis. However, the Cooperation Policy provides that lenient treatment is more likely where the applicant:
SCOPE/FULL LENIENCY
8. Is it possible to achieve full leniency? And, if so, what are the conditions required to receive full leniency?
Under the Immunity Policy it is possible to receive full immunity from ACCC-initiated court proceedings in relation to cartel conduct. To receive full immunity, the requirements to qualify for conditional immunity, as detailed in question 4, must be met. Full and final immunity from any penalties imposed by a court will be granted by the ACCC after the resolution of ACCC court proceedings against cartel participants. This requires the applicant to whom conditional immunity has been granted to continue to provide full, frank, expeditious and continuous cooperation and disclosure to the ACCC up until final immunity is granted.
Although the Immunity Policy provides full leniency, the applicant remains vulnerable to actions initiated by third parties in relation to the cartel conduct.
9. How many companies have received full immunity from fines to date?
The Immunity Policy was recently introduced. There is no data indicating how many companies have received immunity from fines to date. However, there are a number of publicly known examples of companies that have been granted immunity. For example, in 2003 Amcor was granted immunity from suit under the former Leniency Policy in relation to ACCC proceedings against its competitor, Visy.
PROCEDURE/CONFIDENTIALITY
10. What are the practical steps required to apply for leniency?
As soon as a decision has been made to request immunity, an applicant generally takes the following steps:
If an applicant is seeking lenient treatment under the Cooperation Policy, generally the applicant approaches an ACCC Contact Officer and makes mention of the policy. Legal representatives may also approach the ACCC on behalf of a client to ascertain the likelihood of lenient treatment being afforded to them, although the ACCC is not able to give a guarantee as to its future course of action. The ACCC will determine each application on a case-by-case basis.
11. Is there an optimal time to approach the regulatory authority?
The Guidelines to the Immunity Policy state that ‘the ACCC encourages parties to come forward as soon as they are aware that they are implicated in a cartel’. Given that immunity is granted only to the first successful applicant and only where the ACCC has not already received written legal advice that it has sufficient evidence to commence proceedings, there are significant incentives to apply for a marker or for conditional immunity quickly. Of course, the corporation needs to weigh the risks associated with applying for immunity; even if successful in gaining immunity from the ACCC, the applicant risks the information provided to the ACCC being used against it in third party actions.
Although the Cooperation Policy does not give any guidance regarding the optimal time to approach the ACCC, the degree of leniency under the Cooperation Policy is affected by the level of new information an applicant can furnish. Therefore, it would be prudent to approach the ACCC as soon as possible.
12. What guarantees of leniency exist if a party cooperates?
Neither the Immunity Policy nor the Cooperation Policy has legislative force. The guarantee of immunity is therefore notional only but the ACCC would rarely dishonour either policy and retract an offer of leniency. To do so would fundamentally undermine the operation of both policies.
13. Is confidentiality afforded to the leniency applicant and other cooperating parties? If so, to what extent?
With respect to the Immunity Policy, the Guidelines state that the ACCC will use its best endeavours to protect any confidential information provided by applicants for immunity. Further, except as required by law, the ACCC will not share confidential information provided by the immunity applicant, or the identity of the applicant, with regulators in other jurisdictions without the consent of the applicant, but will seek consent as a matter of course, particularly in international matters.
Further, the ACCC may advise a person who has requested a marker or applied for immunity that another person has sought a marker or applied for immunity, but will not disclose the identity of the other person.
However, the identity of the applicant and details of the conduct are likely to become public if proceedings in relation to the cartel are commenced.
With respect to the Cooperation Policy, there are no guarantees of confidentiality for applicants.
CONSEQUENCES
14. What effects does leniency granted to a corporate defendant have on the defendant’s employees?
Under the Immunity Policy, if a corporation qualifies for conditional immunity, all current and former directors, officers and employees of the corporation who admit involvement in the cartel conduct and provide full disclosure and cooperation to the ACCC, will be eligible for conditional immunity in the same form as the corporation. Subject to continuing to provide full disclosure and cooperation to the ACCC, the ACCC will grant the directors, officers and employees final immunity when it grants this to the corporation.
In some circumstances, the ACCC may specifically exclude certain current or former directors, officers and employees from immunity. In doing so, the ACCC may have regard to the wishes of the corporation and individuals concerned. For example, the ACCC would be unlikely to grant immunity to an executive who has left the applicant corporation’s employment and has continued to participate in the cartel in the employment of another participant.
Under the Immunity Policy, current and former directors, officers and employees may also apply for immunity individually.
In the event that some of the corporation’s directors, officers or employees do not wish to cooperate, the ACCC will ascertain whether the application is a ‘truly corporate act’ before deciding whether to grant immunity to the corporation. In doing this, the ACCC will consider whether the corporation has taken all reasonable and legal steps to secure the cooperation of all directors, officers and employees. They will also look at the number and importance of the individuals who choose not to cooperate and the explanation for non-cooperation.
The Cooperation Policy does not address the effects that leniency granted to a corporate applicant has on the applicant’s employees. However, the approach taken is likely to be similar to that taken under the Immunity Policy.
15. Does leniency bar further criminal or private enforcement?
The Immunity and Cooperation Policies deal only with actions taken by the ACCC. They do not preclude private enforcement against the applicant for the same conduct. Recently there have been a number of cases where ACCC-initiated proceedings against cartel members were followed by proceedings initiated by third parties for damages.1 The corporate parties to the ACCC v Roche Vitamins Australia Pty Ltd & Ors price-fixing and bid-rigging cartel recently paid $30.5 million to settle a class action brought by purchasers following successful prosecution by the ACCC.
Follow-on litigation has become an increasingly important factor for those weighing up the pros and cons of seeking immunity, particularly in the light of emerging jurisprudence which suggests that cartel members could be barred from invoking the limitations defence in instances of concealed fraud or unconscientious assertion of a legal right.2
Currently, the cartel enforcement regime in Australia is a civil one. However, in February 2005 the government indicated that it intends to legislate to introduce criminal penalties for hardcore cartel conduct (see www.treasurer.gov.au/tsr/content/pressreleases/2005/004.asp). These proposed amendments respond to the Dawson Review of the Competition Provisions of the Trade Practices Act recognising the international experience that criminal sanctions are effective in deterring cartel behaviour, and recommending that such conduct be criminalised in Australia: www.tpareview.treasury.gov.au/content/report.asp.
REFORM/LATEST DEVELOPMENTS
16. Is there a reform underway to revisit the leniency policy? What are the latest developments?
The introduction of the Immunity Policy in September 2005, to replace the Leniency Policy, was a major reform. The key changes included the introduction of a marker system, the possibility of applying for immunity in a paperless process and the extension of immunity to former directors, officers or employees of a corporation.
In an independent review of the TPA released in 2003, the Dawson Review Committee recommended the introduction of criminal penalties, including prison terms of up to five years, for serious cartel behaviour3. These reforms are likely to be implemented in the next round of amendments to the TPA.
No changes to the Cooperation Policy are expected in the near future.
FOOTNOTES
1 Both the ACCC v ABB Transmission and Distribution Ltd & Ors and the ACCC v Roche Vitamins Australia Pty Ltd & Ors [2001] FCA 150 cases have been followed by third party actions for damages.
2 See generally, Roche, D., Cartels and time limits under the Trade Practices Act 1974 - has time run out on the limitation defence?, (2002) 18(2) TPLB 23 and Mayne Nickless v Multigroup Distribution Services P/L [2001] FCA 1620 (19 November 2001).
3 Sir Daryl Dawson, Jillian Segal and Curt Rendall Review of the Competition Provisions of the Trade Practices Act, Commonwealth of Australia, January 2003, p 164.
