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...assumptions this analysis. First, criminalisation makes the morality of serious cartel activity a relevant consideration in the design and application of the new law Secondly, recognition of the moral dimension will enhance the prospects of the criminal regime securing the support necessary for its effective enforcement It should also boost the regime's deterrence value by facilitating internalisation of relevant moral norms in the business community. The article concludes that there is still much work to be done in refining and even rethinking aspects of the new offence to ensure that it properly reflects the criminal nature of hard core cartels.]
CONTENTS I Introduction II Background III Culpability IV Harmfulness V Wrongfulness VI Conclusion A Culpability B Harmfulness C Wrongfulness
I INTRODUCTION
It is proposed in Australia to criminalise serious forms of business cartel activity, namely price-fixing, market-sharing, output restriction, and bid-rigging. (1) This proposal was announced by the former Treasurer in 2005 (2) and was supported by the then opposition Labor party, (3) recently elected to government. Shortly after the election, Labor officials indicated that criminalising legislation would be introduced within 12 months. (4) In so legislating, Australia will join a worldwide movement towards tougher regulation of cartels and, in particular, the imposition of criminal sanctions. (5) Collusive practices have been regulated by competition law in many countries for some time. Outside of North America, this regulation has largely been of an administrative and civil character. (6) In the last decade though, there has been a global burgeoning of the use of criminal law in dealing with business cartels. (7) The US has led the criminalisation movement where, since the late 1990s. competition authorities have made it their top priority to prosecute and imprison participants in international cartels affecting the US economy. (8) The movement has also had the support of international organisations, such as the Organisation for Economic Co-Operation and Development ('OECD') which has taken a strong anti-cartel stance, exhorting members to ensure that their competition laws effectively deter so-called 'hard core' cartel activity. (9)
An important aspect of the debate surrounding cartel criminalisation concerns the justification of criminal penalties on moral grounds. More specifically, there is the question as to how, at the level of legislative prescription, the offence of cartel conduct may be designed so as to capture explicitly or implicitly the moral reprehensibility generally associated with criminal behaviour. As has been observed in relation to the European experience, the real challenge for jurisdictions new to cartel criminalisation is to establish a concept of 'antitrust delinquency', similar to that which exists in the US. (10) Recognising this challenge, it has been noted in the Australian context by the Trade Practices Act Review Committee ('Dawson Committee') that there is substantial difficulty in 'defining the requisite degree of criminality to justify the imposition of criminal sanctions'. (11)
This difficulty is aggravated by the potential for resistance in Australian competition law circles to the idea that morality may become a relevant consideration in an area of regulation dominated by law and economics. (12) Such resistance has been displayed even in the US, where cartels have attracted criminal sanctions for over a century. (13) Generally speaking, in the US, antitrust enforcers, policy-makers and scholars have circumvented the morality of antitrust crimes. (14) This reflects the influence of the Chicago School of economic thought, according to which antitrust analysis is concerned primarily with economic efficiency, and normative concepts such as morality are thereby excluded. (15)
The introduction of morality as a relevant dimension in competition regulation is complicated further by longstanding concerns held by some criminal law theorists over the attachment of criminal consequences to white-collar or regulatory offences. (16) Their concerns stem from the argument that the offending conduct in such contexts is in effect morally neutral or at least, morally ambiguous. (17) A range of factors is seen as responsible for this perception. (18) In the case of economic activity, however, the moral conundrum has been attributed fundamentally to the conflict between criminalisation and 'the national ethos', an ethos that produces 'the values that the man of business himself holds, as well as the attitude of the public toward him and his activities.' (19) Characterising criminalisation of such conduct as 'both unjust and counterproductive', these critics argue that 'it unfairly brands defendants as criminals, weakens the moral authority of the sanction, and ultimately renders the penalty ineffective.' (20)
However, the charge of regulatory over-criminalisation has not gone unanswered. Two major counter-arguments have emerged. The first is that the over-criminalisation critique fails to recognise or give sufficient weight to the interactive and reciprocal nature of the relationship between the criminal law and public morality. Thus, the criminal law is said to play an important educative and socialising role, informing and shaping society's perceptions of moral standards--'the public learns what is blameworthy in large part from what is punished.' (21) Secondly, a significant challenge has been mounted to the notion that white-collar or regulatory offences are morally neutral. In particular, the influential work of legal and moral philosopher Stuart Green provides a tripartite framework for identifying and mapping the moral content of such activity. (22) Under this framework, criminality has three distinct, albeit interrelated, elements: culpability, harmfulness and moral wrongfulness. Green does not assert that any or all of these elements are either sufficient or necessary conditions for criminalisation. However, he does suggest that the absence of any of the three at least might cast doubt on the criminal status of the conduct in question and, in particular, he argues that it is not a proper use of the criminal law to sanction harms that are not also wrongful. (23)
The most elusive and, perhaps for that reason, most contested of these elements--moral wrongfulness--is best understood, Green argues, in terms of everyday moral norms, such as cheating, deception or stealing. (24) His central thesis is that, rather than considering wrongfulness in terms of a violation of another person's rights (the traditional approach), (25) it should be considered in terms of 'a collection of everyday, but nevertheless powerful moral norms.' (26) It is the very everydayness of such norms that, according to Green, helps explain the difficulties encountered in distinguishing between white-collar crime and lawful, even if aggressive, kinds of behaviour. (27) Green draws on these norms as a means of exploring the immorality of conduct that critics of regulatory criminalisation traditionally have regarded as devoid of moral content. His framework is thus of substantial assistance in tackling the moral debate surrounding the criminalisation of cartels and, in particular, in identifying the source(s) of moral wrongfulness in such activity.
This article reviews the Australian proposal for a criminal cartel offence and analyses the extent to which it captures the criminality, as defined by Green's framework, of the conduct to which it will apply. The analysis is timely given the recent high profile action of the Australian Competition and Consumer Commission ('ACCC') against the Visy group of companies and their owner, Richard Pratt, for price-fixing in the corrugated fibreboard packaging industry, resulting in record-level penalties and renewing the push for criminal sanctions for this type of conduct. (28) The relevance of the analysis is based on two significant assumptions. First, it is assumed that criminalisation makes the morality of serious cartel activity a relevant consideration in the design and application of the new law. (29) This follows from the relationship between moral standards in society and criminal law; as Professor John Collins Coffee Jr has observed, there is a 'close linkage between the criminal law and behaviour deemed morally culpable by the general community.' (30) A criminal conviction 'carries with it an ineradicable connotation of moral condemnation'; indeed, it is the 'judgement of community condemnation' that is the defining attribute of the criminal law. (31) Secondly, it is assumed that recognising the moral dimension of the new cartel law will have significant practical effects. In particular, it will shore up public, political and institutional support for the regime, each of which will be necessary for its effective enforcement. (32) It should also boost the deterrence value of the criminal regime by facilitating the internalisation of relevant moral norms in members of the business community, (33) and thereby securing long-term compliance with the law. (34)
Proceeding on the basis of these assumptions and using Green's framework, the article assesses whether the Australian proposal for cartel criminalisation is likely to catch only that conduct which is sufficiently culpable, harmful and wrongful to warrant criminal sanction. In particular, the article examines the way in which the proposed offence, in terms of both its design and the policy for its enforcement, differs in each of these elements from the civil prohibitions that currently (and will continue to) apply to cartel activity in Australia. The approaches taken to such matters in the US and the UK are drawn upon to assist in the analysis. By way of background, however, it is necessary first to set out the terms of the Australian proposal and some explanation of the process and the players involved in its formulation.
II BACKGROUND
A historical perspective is necessary to appreciate the dramatic change that criminalisation represents for cartel regulation in Australia. Before 1965, restrictive trade practices were rife in this country; indeed, they were widely regarded as 'normal business behaviour.' (35) Under the Restrictive Trade Practices Act 1965 (Cth), collusive arrangements were prohibited, but only if they had not been registered on an official register of restrictive agreements between competitors. When passed, the current Trade Practices Act 1974 (Cth) ('TPA') took a different approach. It contains a prohibition on contracts, arrangements or understandings between competitors that have the purpose or effect, or likely effect, of substantially lessening competition. (36) Certain types of arrangement are banned outright, without testing for such purpose or effect, on the grounds that they are seen as particularly or most predictably anti-competitive in character. These arrangements, characterised by price-fixing or exclusionary/boycott provisions, are said to be prohibited per se. (37)
At the same time, the TPA recognises exemptions and defences for some arrangements, as in the case of joint buying and marketing groups (which are exempted from per se illegality) (38) and joint ventures (which may form the basis for a defence to the per se prohibitions). (39) Further, it provides a system by which firms may have their arrangements authorised (and thereby immunised from ACCC proceedings for breach of the substantive prohibition) on the grounds of public benefit. (40) Recent legislation has made this process even easier for small firms wanting to bargain collectively with larger buyers or suppliers--a classic cartel arrangement, but recognised as having sufficient economic, social, and arguably political merit to warrant special treatment. (41) The TPA also introduced a penalty regime, albeit one that is explicitly civil in character, (42) allowing the imposition of pecuniary penalties set, since 1993, at maximum levels of $10 million for corporations and $500 000 for individuals for each contravention. (43) As a result of recent amendments, these levels have been increased for corporations to the higher of $10 million or three times the benefit derived from the contravention or, if the benefit is unascertainable, 10 per cent of the annual turnover of the corporation. (44)
In 2001, the then Chairman of the ACCC, Allan Fels, publicly called for the first time for the introduction of criminal sanctions for hard core collusive activity in Australia. (45) The primary rationale offered for criminalisation was the need for greater deterrence. In particular, it was argued that in the current era of globalised and deregulated trade, the Australian economy is especially vulnerable to the operation of international cartels. Australia, it was said, lags behind its major trading partners in taking tough action against practices that inflict significant harm on competition and consumer welfare. Notably, in addition to justification on the grounds of harmfulness and the need for enhanced deterrence, Fels asserted that hard core collusion ought to be seen as 'morally reprehensible', as tantamount to theft or fraud and as little different in this regard from other white-collar crimes. (46) Viewed in this light, there was a case for at least considering punishment as another legitimate object in penalising colluders (bearing in mind the judicial emphasis to date on deterrence as the primary, if not sole, object of penalisation). (47) These were not, Fels argued, 'victimless crimes', but rather should be seen as 'harmful and malevolent acts' committed by 'serious offenders prepared to inflict massive damage on consumers and markets for their own gain.' (48)
The ACCC's call for criminalisation was formalised in its submission to the Dawson Committee, a committee charged with the task of reviewing the provisions of the TPA in 2002. (49) In its January 2003 report, the Committee agreed that the current civil penalty regime was an insufficient deterrent to the business community. It recommended that criminal sanctions be introduced, subject to the resolution of definitional, procedural and leniency-related issues. (50) The Committee made no comment on the question of how cartel activity might be viewed from a moral standpoint, despite acknowledging the difficulties in discriminating, in terms of offence design, between conduct that is suitable for a civil regime of regulation and that which ought to be singled out for criminal penalisation. (51)
A government working party on penalties for cartel behaviour was convened in October 2003 for the purposes of resolving these and other issues. The report of that working party has not been released and a request for access to it under the Freedom of Information Act 1982 (Cth) has been refused. (52) However, on 2 February 2005, the then Treasurer, Peter Costello, announced in a press release that criminal sanctions for 'serious cartel behaviour' would be introduced. (53) The 'cartel offence' proposed by the Treasurer
will prohibit a person from making or giving effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict output, divide markets or rig bids, where the contract, arrangement or understanding is made or given effect to with the intention of dishonestly obtaining a gain from the customers who fall victim to the cartel. (54)
The proposal indicated that the maximum penalties for individuals for a cartel offence will be a term of five years' imprisonment and a fine of $220 000. For corporations, reflecting the new civil provisions, the fine will be the greater of $10 million or three times the value of the benefit from the cartel or where that value cannot be ascertained, 10 per cent of annual group turnover. The Treasury papers for the 2006 Commonwealth Budget indicated that the legislation would be introduced to Parliament in the winter sittings of that year. (55) However, the Bill was not introduced. In August 2007, the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2007 (Cth) and Federal Court Amendment (Criminal Jurisdiction) Bill 2007 (Cth) were listed on the government's website as legislation proposed to be introduced in the spring sittings of Parliament. However, subsequently the calling of the federal election intervened. As indicated earlier, despite the change in government, it is fairly clear that a Bill criminalising serious cartel conduct will still be introduced and the only questions that remain are when this will happen and what form the Bill ultimately will take. An exposure draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 (Cth), together with a discussion paper and draft memorandum of understanding ('MOU') between the ACCC and Director of Public Prosecutions ('DPP') was released on 11 January 2008, calling for submissions by 29 February 2008. (56) These documents reflect largely the proposals set out in the Treasurer's 2005 press release. (57)
III CULPABILITY
'Culpability' is the term used by Green to...
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