Competition Cartels, Collusion & the Code By Andrew C Wood Hon MRCSA (Life) Barrister August 2011

War stories… FTC v Doctor Conspiracies OFT v Recruitment Firms Plastics v Cosmetics AMA v WA Hospital AMA v GSWAHS ACCC v Concrete Carters ACCC v Rockie O&Gs Bris GPs v The Syndicates SEQ Private Hospitals v Health Funds RCSA v Darwin

How it started… The Old Code ▫Transition ▫6 months no poaching ▫Effective referral S.87B undertaking New Code Authorisation #1 Compliance Program

Code… Members must comply with all legal, statutory and government requirements.

Code… Members will not engage in any form of collusive practices.

Code… Principle 7 – Professional Knowledge ▫Members will work diligently to develop and maintain a satisfactory and up to date level of relevant professional knowledge. ▫Members will ensure that their staff are adequately trained and skilled to undertake their responsibilities.

Anti competitive agreements Do not make or give effect to… …Contract arrangement or understanding… …that substantially lessens competition… …or contains an exclusionary provision.

Cartels price fixing ▫competitors make an agreement that has the purpose or effect of fixing, controlling or maintaining the price of goods or services market sharing ▫competitors divide up the market so that the participants are sheltered from competition bid rigging ▫competitors agree they will not compete genuinely with each other for particular tenders, allowing one of the participants in the agreement to win the tender output controls ▫competitors agree to limit the volume of particular goods or services available on the market; they have the effect of inflating prices in the market.

Penalties… Individuals ▫imprisonment of up to 10 years ▫fines of up to $ per contravention. ▫Under the civil prohibition, individuals may be liable to a pecuniary penalty of up to $ per contravention. Corporations ▫fine or pecuniary penalty for each contravention not to exceed the greater of:  $  3 x total value of the benefits obtained  10% of the corporate group’s annual turnover in a 12-month period when the offence/contravention occurred. injunctions, orders disqualifying a person from managing corporations and community service orders.

Code outcomes & sanctions 80% - 90% problem solved Expulsion Suspension Do or refrain from doing something Self disclosure Remedial undertaking

Misuse of market power Don’t use substantial market power to: ▫ eliminate or substantially damage a competitor ▫prevent entry of a person into a market ▫deter or prevent a person from engaging in competitive conduct

Exclusive dealing Don’t tie up your suppliers or clients in a way that substantially lessens competition Especially don’t force someone else’s services on your suppliers or clients (third line forcing)

Resale price maintenance… Don’t do it!

Mergers… Don’t do them if they will substantially lessen competition!

Protections Authorisations Informal review (mergers) Notifications  Exclusive dealing (after 14 days for 3 rd line forcing) Exclusive dealing  Collective bargaining negotiations (after 14 days) Collective bargaining negotiations  each member of the collective bargaining group must reasonably expect that: ▫the value of the transactions it will conduct with the target under the collective bargaining arrangement in any 12- month period will not exceed $3 million.

Certification issues Barriers to entry Exclusionary provision Sensitive information exchange Third line forcing Misleading & deceptive conduct False representations about services Unconscionable conduct Administration Protection

Do take prompt remedial action if you get into strife The basics… Do ensure Chair and meeting reps comply Do object immediately when competitors discuss price Do exercise independent commercial judgments Do take care if exchanging info with competitors Do seek external legal advice promptly if issues arise Do ensure that staff are trained in competition laws Do review internal documents to ensure compliance

What lessons do you take away? Questions & Discussion