In September 2014, the Australian Competition & Consumer Commission (ACCC) took steps to simplify its immunity policy for applicants notifying of cartel conduct. The immunity policy acts as a whistleblower incentive for companies and individuals that have been involved in cartel conduct. The purpose of the immunity process is to ensure that there is appropriate encouragement (and a logical business reason) for businesses and individuals to disclose cartel conduct; this has been shown worldwide to increase the chances of competition regulators uncovering and prosecuting cartel conduct. The ACCC reports that since it introduced the immunity policy to entice businesses to come forward with information it has received over 150 approaches. Why seek immunity? Without immunity the penalties for cartel conduct can be very significant and for each cartel offence can be:
- for companies: penalties of (whichever is greater) up to $10 million, three times the total value of the benefits obtained, or 10% of the total annual turnover of the corporate group in Australia in the preceding 12 months; and
- for individuals: up to 10 years imprisonment and fines of up to $340,000 for criminal offences, and pecuniary penalties of up to $500,000 for civil breaches, along with various court orders for the costs relating to ACCC investigations and prosecutions. Along with these public penalties, the impact on a business’s reputation and trading name act as a further penalty, and information gathered by the ACCC can lead to further private claims.
Investigations and prosecutions generally operate as a partnership between the regulators, with the ACCC investigating and prosecuting civil charges and the Commonwealth Director of Public Prosecutions (CDPP) investigating and prosecuting criminal charges. Change 1: interaction with the CDPP Most importantly, the ACCC’s amendments streamline the interaction between the ACCC and the CDPP in dealing with the investigation and prosecution of cartel conduct, and specifically in the granting of immunity to immunity applicants. One of the major changes is that applicants may now seek both civil immunity and criminal immunity. Under the old policy, the CDPP would only issue formal undertakings and therefore the process could be delayed as the CDPP required a significant amount of information in respect of the conduct before it would issue a formal undertaking not to prosecute on criminal matters. Under the new policy, the CDPP will grant immunity from criminal prosecution in a two-step process:
- by issuing a letter of comfort which provides “first-in-status” for the applicant, and confirming that at the relevant time the CDPP will provide an immunity undertaking; and
- before commencing proceedings against other cartel participants, the CDPP will grant a binding immunity undertaking under the DPP Act. This process is likely to decrease the amount of time before an immunity applicant receives a response to the application as the CDPP is likely to require less information before it will issue a letter of comfort (although the applicant will still deal with the ACCC for the civil immunity process). This amendment reduces the uncertainty involved in the process as an applicant can expect to receive criminal immunity at the same time as civil immunity, likely resulting in a more favourable environment for immunity applicants.
The new ACCC policy also reflects the 2014 chapter of the International Competition Network’s anti-cartel enforcement manual on “Drafting and implementing an effective leniency policy” which emphasises that “[i]n a parallel system, it is important that the application of the leniency policy to civil and criminal cartel conduct is clearly articulated to provide maximum certainty to potential leniency applicants.” Change 2: removing the ringleader exception Another very significant change delivered by the ACCC’s new policy is the removal of the “clear leader” provisions. This change has broadened the application of the policy, which might have the effect of increasing the number of companies and individuals that might be incentivised to report cartel conduct. Under the previous cartel immunity policy, it was a requirement for the granting of immunity that the applicant had “not coerced others to participate in the cartel and was not the clear leader in the cartel”. Although it was very rare to come across a case of coercion, it was not always clear whether there was a clear leader. The risk was that if the client applied for immunity they had to provide a significant amount of information about the conduct to obtain immunity but that this might increase the risk if they applied but were refused because they had undertaken enough actions to become the clear leader. In practice, applications were rarely, if at all, turned down because the client was a clear leader but the risk remained and had to be taken into account by boards in determining whether to apply for immunity. With the recent amendments, the policy now “applies to corporations and individuals who have engaged in cartel conduct, whether as a primary contravener or in an ancillary capacity”. This change means that from today forward any party involved in a cartel may apply for immunity, regardless of their involvement in the cartel and regardless of the timeframe for the conduct. This is a major amendment to the scope of the immunity policy and will provide significant comfort to entities applying for immunity. Treatment of applicants that had a central role in establishing or organising cartels differs markedly worldwide. In many jurisdictions (such as the European Union and the United States), it is still not possible for a “coercer” to be granted immunity from fines (whereas the opposite is true in Brazil, after 2011 reforms). Overall, the change signals the ACCC’s desire to increase the pool of potential immunity applicants. Change 3: full, frank and truthful disclosure While applicants were always required to provide the ACCC with full disclosure throughout the immunity application and subsequent cartel investigation process, this requirement has been amended to require applicants to provide full, frank and truthful disclosure. Further, applicants are now also required to co-operate fully and expeditiously while making the application and supporting the ongoing proceedings in order to receive continuing conditional, and subsequent final approval. In practice, this will not make a significant difference as most immunity applicants had considered that full disclosure meant full, frank and truthful disclose. However, it does clarify the obligations upon the immunity applicant. Change 4: recording of oral proffers A major change in the immunity policy is that the policy expressly states the ACCC may record oral “proffers”. In practice, the ACCC has recently often insisted on this but not in all cases. Traditionally, oral proffers were a way for the immunity applicant to admit its conduct to the ACCC, including details relating to the commission of cartel conduct, as part of a paperless process. The purpose of a paperless process is generally to reduce the evidence (specifically, clear evidence of an admission of the conduct) that could subsequently be obtained by third party plaintiff lawyers for bringing civil suits against the immunity applicant after the prosecution of the broader cartel. While the majority of amendments to the ACCC’s immunity policy act to increase the incentives for applicants to come forward with evidence of cartel conduct, this amendment may increase the chances of subsequent civil prosecution. There is no guidance on whether stricter conditions will apply to confidentiality surrounding the transcript of the recording. A similar process has been applied in the European Union for a number of years; there the recording of the oral proffer is transferred into a written transcript, which the immunity applicant is obliged to check and sign to confirm that it is a true and accurate record of the oral statement. The transcript itself is a file that is not shared widely, and has increased security and confidentiality. It appears that further clarification will be required on the ACCC recording process. Change 5: simplification On the whole, the amendments to the immunity policy have simplified and streamlined the entire immunity application process. The new policy is shorter and less detailed than the previous iteration, something that may add comfort to applicants who can now see a clearer and more certain process when applying for immunity from cartel prosecution and continuing to cooperate with the ACCC’s investigations. The immunity policy is also now accompanied by a detailed set of frequently asked questions that set out the major concerns that most applicants will face, and what the applicant should do in the face of those concerns. Conclusions It appears that the most recent amendments to the cartel immunity policy will serve to strengthen the protections afforded by the policy, at the same time giving the ACCC more power to ensure ongoing full, frank and truthful cooperation in investigations. By broadening the scope of potential applicants that could be covered by the policy, the ACCC has also expanded the pool of cartel participants that are likely to seek immunity. By Jo Daniels, Georgina Foster, Rowan McMonnies and Rowan Kendall* *Jo Daniels is a partner, Rowan Kendall is an associate in Baker & McKenzie’s Brisbane office, Georgina Foster and Rowan McMonnies are both partners in Baker & McKenzie’s Sydney office.