Cartel crackdown: Koyo fined $2M for anti-competitive conduct

Competition Law eBulletin - 25 October 2013

Summary

Koyo Australia Pty Ltd , a wholly-owned subsidiary of Japanese company JTEKT Corporation, has been fined $2 million for engaging in cartel conduct, in a case brought by Australia's competition watchdog, the Australian Competition and Consumer Commission (ACCC). 

The successful action puts local and foreign-operated businesses on notice that participation in anti-competitive behaviour in the Australian market will attract heavy civil penalties, as well as the possibility of criminal sanctions. 

In this eBulletin we discuss the ACCC's case against Koyo Australia. We also look at the role of the ACCC, and what the outcome of this case will mean for foreign operators in Australia.


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The Koyo Case

The Federal Court found that in 2008 and 2009 Koyo conspired with two of its competitors – fellow Japanese engineering groups NSK Australia and Nachi Australia – to increase the price of ball and roller bearings in the Australian market.

From 2001, senior executives from the ball bearings suppliers met between three and four times a year at restaurants in Sydney and Melbourne to socialise and swap industry intelligence. The Court found that at a February 2008 dinner, the companies exchanged confidential information, and it was agreed to "implement an increase in the sales price for bearing products to [after-market] customers in Australia". 1

At a similar meeting in May 2008, Koyo made an arrangement to increase its prices by three percent. Further price rises were agreed at another dinner in 2009.

Contraventions and penalty

he Court ruled that Koyo, by colluding with its competitors to fix prices and giving effect to these arrangements, contravened the general prohibition on anti-competitive arrangements in the Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth) (Act). In giving effect to the cartel arrangement, Koyo also breached the cartel conduct provisions of the Act.

The Act requires businesses to compete fairly, and prohibits price fixing and other forms of cartel conduct such as market sharing and bid rigging.

The Court accepted that Koyo's contraventions of the Act were serious, and in imposing the $2 million fine discussed the need to impose a penalty that was sufficiently high to deter repetition of the breaches by Koyo, as well as others who might be inclined to contravene the Act.

In determining the penalty, the Court took into consideration that Koyo admitted to the conduct and cooperated fully with the ACCC’s investigation into the cartel.

The Court made a number of other orders including requiring Koyo to implement a competition law compliance program.

This is not the first time a member of the JTEKT group has come under the scrutiny of competition regulators; the company has been the subject of legal proceedings for anti-competitive activity in other jurisdictions. In early October 2013, the company pleaded guilty to participating in an international price fixing conspiracy following a United States Department of Justice investigation and agreed to pay a criminal fine in excess of (US)$103 million. In July 2013, it was fined (CAD)$5 million for its involvement in an international bid-rigging cartel in a prosecution brought by the Canadian Competition Bureau.

The role of ACCC

The ACCC is responsible for investigating anti-competitive behaviour, and has recently focused on detecting, stopping and deterring cartel activity. In addition to the Koyo prosecution, the ACCC has commenced proceedings against Australian Arrow Pty Ltd, a subsidiary of the Yazaki group, for price-fixing.

The ACCC alleges that Yazaki and Australian Arrow engaged in cartel conduct, market sharing and price fixing, in relation to the supply of wire harnesses to Toyota Motor Corporation and its related entities in Australia.

ACCC Commissioner Sarah Court commented in July, “The ACCC’s focus on cartel conduct sends a strong message. It is crucial for the proper functioning of business in Australia that the ACCC continues to tackle cartel conduct with the full force of the law.”

The ACCC maintains the position that serious cartel conduct should be prosecuted criminally whenever possible. Serious cartel arrangements involve conduct of the type that usually causes, or has the potential to cause, large scale or serious economic harm.

Warning for foreign operators

The Koyo judgment and the ongoing proceedings against Australian Arrow puts the business community on notice that arrangements with competitors to fix prices, rig bids, share markets or restrict output are unlawful cartels and will be actively sought out and prosecuted by the ACCC.

The ACCC advises businesses that if they are invited to join an arrangement that seems like a cartel, they should seek independent legal advice and notify the ACCC. 
 

Author
Timothy Griffiths, Senior Associate

Further information


1. Australian Competition and Consumer Commission v Koyo Australia Pty Ltd [2013] FCA 1051 (18 October 2013),at [26].

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