Cartel Conduct or Joint Venture?

When considering dealings involving actual or potential competitors, Australian competition law has long struggled drawing a bright line between:

  • permissible pro-competitive joint venture activity; and
  • illegal anti-competitive cartel conduct.

The ACCC has prosecuted some apparent joint venture activity (for example (ACCC v PKR Corp Pty Ltd [2009] FCA 715), and businesses have not uncommonly seen a need to incur the significant expense and delay associated with obtaining specific authorisation to avoid risk for apparently pro-competitive cooperative conduct (for example ACCC Authorisations AA1000396-1&2 2 March 2018).

There was, until November 2017, a limited defence for some provisions for the purposes of a joint venture that did not have a substantial purpose or likely effect of substantially lessening competition. Limited additional “joint venture” defences were introduced with the criminalisation of cartel conduct in July 2009, but they were criticised as unduly narrow and arguably broadened somewhat for conduct from 6 November 2017 in sections 45AO and 45AP of the Competition and Consumer Act 2010 (CCA). It has remained difficult for business to determine and practitioners to advise when joint ventures and related competitor collaboration are legal in the absence of decided cases.

Against that background, some guidance has arrived from what, at first blush, might appear an unexpected quarter. A betting person might not gamble that a proposed joint venture with Eddie Obeid entities would be viewed favourably in the face of ACCC claims that the arrangement involved cartel conduct, but the Federal Court of Australia has found otherwise in a judgment released publically on 22 August 2018 over Obeid objections.

In Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 3) [2018] FCA 1019, Foster J considered ACCC claims that dealings resulting in Cascade Coal being awarded a coal licence involved cartel conduct because Obeid-controlled entities agreed to withdraw an expression of interest and not compete with Cascade.  The entities and facts involved were complex, and the Court rejected the ACCC’s claims primarily on the basis that those entities were not, in the particular circumstances, in actual or likely competition with Cascade in relation to the potential coal licence.

However, the Court also upheld Cascade’s joint venture defences in a judgment significant for applying the defences more broadly than the ACCC accepts generally or argued in the case. The following findings are informative:

  • The joint venture defences provided for in the CCA applied, although the joint venture had not actually been established at the time of the challenged agreement (see [550]).
  • The parties’ own subjective views regarding the proposed association as a “joint venture” were relevant, although not determinative (see [553]).
  • The definition of joint venture in the CCA and general law do not require the joint activity to be undertaken to be carried on by the parties together for the defence to apply (see [558]).
  • The challenged promise not to compete in relation to the potential coal licence was “for the purposes of the joint venture”, as if the Obeid entity wanted to be involved in the joint venture it needed to promise not to compete with the activities of the joint venture (see [562]).
  • The challenged provision did not have the purpose, effect or likely effect of substantially lessening competition, as its purpose was to contribute to the establishment and success of the joint venture (see [564]-[565]).

The case was decided under the law applying to conduct prior to 6 November 2017, but remains informative as to the courts’ likely approach to the defences available from that time. That is because the new defences apply the same definition of “joint venture” and requirement of “for the purposes of the joint venture”, and require the same absence of “the purpose of substantially lessening competition”.

The ACCC lodged an appeal on 3 August 2018 which will likely be determined in the next 12 months, and may provide further more definitive guidance on these issues.

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