Yazaki cartel penalties of $46 million highest ever

On 16 May 2018, Yazaki Corporation (Yazaki), a Japanese company, was ordered by the Full Federal Court of Australia to pay penalties totalling $46 million for cartel conduct. The penalties are almost a 5-fold increase from the original $9.5 million imposed by the trial judge on 9 May 2017, which signals the trend for higher penalties for breaches of competition law.

This follows a recent OECD report which estimated that the average pecuniary penalty in Australia for breaches of competition law was $25.4 million. It was reported that this figure would need to be increased by 12.6 times to be comparable with the average penalty of comparable OECD jurisdictions.

Background

On 13 December 2012, the ACCC commenced proceedings against Yazaki and its Australian subsidiary, Australian Arrow Pty Ltd (Australian Arrow), for cartel conduct.

The ACCC alleged that between 2003 and 2009, Yazaki and Australian Arrow made and gave effect to cartel agreements with its competitors, Sumimoto Electric Industries Ltd (SEI) and its Australian subsidiary, SEWS Australia Pty Ltd (SEWS-A), in relation to Requests for Quotations (RFQ) issued by Toyota Motor Corporation Pty Ltd (Toyota) for the supply of wire harnesses. Wire harnesses are electrical systems which facilitate the distribution of power and the sending of electrical signals between the components of a motor vehicle.

Specifically, there were four relevant agreements:

1. 2002 Toyota Camry Minor RFQ Agreement: Australian Arrow made an arrangement with SEWS-A in relation to a RFQ issued by Toyota to SEWS-A concerning a minor model change to the 2002 Toyota Camry, for the purpose of restricting the supply of engine room main wire harness for the 2002 Toyota Camry to Toyota, and the purpose of fixing the prices of such wire harnesses.
2. 2003 Agreement: Yazaki made an arrangement with SEI in relation to a RFQ issued by Toyota for the supply of wire harnesses for the 2006 Toyota Camry, for the purpose of restricting the supply of selected wire harnesses for the 2006 Toyota Camry to Toyota.
3. 2008 Agreement: Yazaki made an arrangement with SEI in relation to a RFQ issued by Toyota concerning the supply of wire harnesses for the 2011 Toyota Camry, for the purpose of restricting the supply of wire harnesses for the 2011 Toyota Camry.
4. Overarching Cartel Agreement: by making the 2003 and the 2003 Agreement, Yazaki gave effect to the Overarching Cartel Agreement, which had the purpose of restricting the supply of wire harnesses to Toyota by Yazaki and SEI (or by either of them).

The ACCC sought pecuniary penalties against Yazaki in relation to the 2008 Agreement and the Overarching Cartel Agreement. However, penalties could not be sought in relation to the 2002 Toyota Camry Minor RFQ Agreement or the 2003 Agreement because the statute of limitation period had expired.

The Federal Court initially ordered Yazaki to pay penalties totalling $9.5 million and 85% of the ACCC’s costs of the proceedings. Upon the ACCC’s appeal in relation to the penalties imposed, the Full Federal Court increased the penalties to $46 million.

Implications

The penalty of $46 million is the highest ever pecuniary penalty ordered under the Competition and Consumer Act 2010 (Act). The previously held record was ordered against Visy for cartel conduct in 2007, which amounted to a total of $36 million. This sends a strong signal that the ACCC will continue to strive for higher penalties to better reflect the seriousness of the conduct and the size of the infringing organisation.

For companies, the maximum pecuniary penalty for each cartel conduct is currently the greater of:

1. $10 million;
2. If the Court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission – 3 times the value of that benefit;
3. If the Court cannot determine the value of that benefit – 10% of the annual turnover of the body corporate during in the 12 months ending on the month in which the act or omission occurred.

Yazaki’s fine also serves as a timely reminder that the Treasury Laws Amendment (2018 Measures No. 3) Bill 2018 was introduced on 15 February 2018 to align the maximum penalties under the Australian Consumer Law (ACL) with the maximum penalties under the competition provisions of the Act. The maximum penalty for breaches of the ACL currently sits at $1.1 million for companies and $220,000 for individuals.

Macpherson Kelly frequently advises on various competition and consumer related matters. If you have any questions, or wish to seek legal advice, please contact us.

This article was written by Jason Kaye, Lawyer – Commercial.