News & Insights

The Australian Competition and Consumer Commission (ACCC) recently lost its first “hub and spoke” cartel case against PZ Cussons Australia. The ACCC has since appealed the Federal Court’s dismissal of the ACCC’s allegations of cartel conduct. Though the ACCC were unsuccessful in trial, ACCC v Colgate-Palmolive Pty Ltd (No 4) 2018 ATPR (Case) serves as an important reminder for businesses attending industry association meetings, or receiving market intelligence about the plans of competitors from customers or suppliers, to act with great caution so as to avoid the appearance of cartel conduct.

What is cartel conduct?

A cartel exists when businesses appear to the market to be in competition with one another but in reality have agreed to act together in a bid to drive up profits. Cartel conduct can involve direct communications between competitors, or indirect communications through an intermediary. “Hub and spoke” cartel conduct (as argued in the Case) is an arrangement whereby an intermediary is relied on by competitors as a central “hub” through which to coordinate and implement collusive activity.

The Case

The ACCC initially launched civil proceedings against Colgate-Palmolive Pty Ltd, former Colgate executive Mr Ansell, Unilever Australia Limited, PZ Cussons Australia (collectively, Suppliers) and Woolworths. The ACCC alleged, amongst other things, that the Suppliers engaged in cartel conduct by collectively agreeing to cease supply of standard concentrate laundry detergent in favour of its new ultra-concentrate detergent.

These agreements, the ACCC alleged, took place through both direct negotiations between the Suppliers and through “intermediaries” (initially the national industry association, then Woolworths) through various industry meetings, email exchanges and discussions. All parties (aside from Unilever Australia Limited, who was granted immunity) admitted to cartel conduct prior to the hearing, except for PZ Cussons Australia (Cussons).

The Federal Court found the evidence did not support any finding that Cussons engaged in cartel conduct. This finding rested heavily on expert evidence, tendered by Cussons, that the transition to ultra-concentrate laundry detergent by the Suppliers would most likely have happened irrespective of any collusion between Suppliers, and could be explained without reference to cartel conduct.

The appeal would allow the Full Federal Court to consider whether the allegations of Cussons’ cartel conduct should have been dismissed based on the uncontested evidence of the case.

Prohibitions against concerted practices

Last October, amendments were made to the Competition and Consumer Act 2010 (Act) to give effect to the introduction of a concerted practices prohibition. Therefore, though the ACCC was unsuccessful in its initial action against Cussons, we can expect to see an increase in these types of actions being brought by the ACCC.

Unlike the cartel provisions under the Act, under the new sections the ACCC need not prove that parties to the agreement were even competitors. Further, as the new provisions of the Act prohibit engaging in concerted practices that have the purpose, effect or likely effect of substantially lessening competition, the ACCC need not even prove competition was compromised. Instead, they can simply show an agreement between parties, who need not even be competitors, is likely to lessen competition.

Macpherson Kelley can advise on cartel conduct, how to avoid Cussons-type actions being brought against your business, and how to ensure compliance with the new concerted practices provisions. Contact us for more information.

This article was written by Jason Han,  Lawyer – Litigation and Dispute Resolution. 

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.