Be aware! Cartel conduct and your business

  • All businesses need to have an understanding of the cartel conduct provisions in the Competition and Consumer Act. 
  • The risk of a breach of these provisions is particularly relevant for organisations that are comprised of potential competitors, such as franchise networks, industry associations and co-operatives. 
  • The ACCC does proactively take action against companies that they consider are involved in cartel conduct.

Row of porcelain pigs with one covered by a transparent glass

The words ‘cartel conduct’ often bring to mind thoughts of Central America and drug wars. However, for those in business it is important to have an understanding of what these words mean in the context of Australian law. While important for all businesses, understanding Australia’s cartel conduct laws is especially important for businesses that may, in some way, involve some sort of co-operation between parties who may be competitors.

For instance, franchise networks and co-operatives, both of which may be comprised of a group of competitors, need to be particularly cognisant of these laws and ensure that adequate steps are taken to minimise potential breaches.

Cartel conduct: What is it?

Cartel conduct is a category of anti-competitive behaviour that is prohibited under the Competition and Consumer Act 2010 (the Act). Broadly speaking, cartel conduct:

  • involves a contract, arrangement or understanding. (Note that the arrangement does not have to be written. In fact, it often will not be — it could be as simple as a nod or a nudge) 
  • between two or more competitors which: 
    • fixes, controls or maintains prices (price fixing)
    • limits who you or your competitor deals with, or the areas or terms of dealing (market sharing) or
    • prevents or restricts or limits output or rigs bids (market sharing).

The definition of cartel conduct is broad and captures a range of behaviours that you might not automatically think constitute cartel conduct — for instance, you cannot agree with a competitor to split up a marketing territory or customers, even if such an agreement might result in efficiencies (and therefore benefits) for both of you.

It is also important to note that cartel conduct is prohibited, regardless of the effect that it has on competition. Therefore if you engage in cartel conduct, even if there is no, or only a minimal, effect on competition, you will be acting in breach of the Act.

This article is exclusive to Governance Institute members and subscribers.

To read the full article…

or Become a member