The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 02/02/2005

Press Conference
Treasury Place, Melbourne

Wednesday, 2 February 2005
11.00 am

SUBJECTS: Cartels; Xstrata; Abortion

TREASURER:

Today I announce that the Australian Government proposes to amend the law to make it a criminal offence for companies to engage in hard core cartel behaviour.

A cartel arises when companies agree between themselves to rig prices so as to rob people of money when they buy goods or services. I will go back over that again. A cartel arises when companies agree between themselves to rob people by overcharging them for goods or services. Not only is it robbing people but it is harmful for the economy, because the fixing or the rigging of those prices feeds its way into the cost structure, damages other companies, damages competition and damages the overall level of growth in an economy.

Up until now cartel conduct has been a civil breach of the law, but the Government is proposing to make it a criminal offence. It will be a criminal offence which will lead to a maximum term of imprisonment of five years and a fine for corporations, whichever is the greater of $10 million, or three times the value of the benefit that the cartel got from the illegal arrangement.

The purpose of these changes is to send an absolutely clear signal that this behaviour will not be tolerated. And if any executive would be tempted by the economic gain from entering into a cartel, they should know that they run the risk of imprisonment. We want to send an unmistakably clear signal to executives who might be tempted or to companies who might be tempted, that this kind of behaviour will not be tolerated.

In addition to that, we will continue, which has already been recently introduced in relation to civil conduct, what is called the ‘leniency policy’. The leniency policy will be that the first mover who comes forward with information will get leniency. Because in a cartel you nearly always have two or more people, and it is nearly always secret, so it is hard to prove. But the leniency policy says that if one of those parties comes forward and makes a disclosure, then they will get leniency provided they give evidence in relation to the cartel and those that have wanted to keep their conduct secret.

The leniency policy will encourage, I hope, anybody who is involved in a cartel to make a full disclosure and enable the prosecution of the remaining parties.

This sends an unmistakable, clear sign that we want to ensure that consumers are protected, the economy is productive, anti-competitive conduct is unacceptable and ripping people off by rigging markets in secret cartels will not be tolerated in Australia.

JOURNALIST:

How widespread a problem do you fear cartel behaviour is in the corporate sector?

TREASURER:

Very hard to know whether there are cartels and how widespread because they are by nature secret. These are secret agreements which never see the light of day and part of the essence of it is to keep it secret. I would hope that we don’t have any cartels. The object of amending the law is to put a very strong deterrent in there against anyone who would be tempted. But if there are such cartels operating at the moment in Australia, I would say to the people that are in them, be very careful, this will become criminal activity and the best port of call would be to go and make a full disclosure and to get the advantage of the leniency policy.

JOURNALIST:

Were you shocked, for instance, by the allegation surrounding AMCOR and the corrugated box industry?

TREASURER:

Well there is an investigation going on in relation to one case at the moment. I don’t want to pre-judge that case, but the reason that case came to light was the introduction of the leniency policy. Somebody decided that it was in their best interests to go and talk to the regulators and they will get the best deal as a consequence of that. And I would say to anybody else that has been tempted into this kind of conduct – you had better be the first person to make disclosure because the second person is not going to get the same deal.

JOURNALIST:

Will the new policy apply to any outcome of the investigation into AMCOR or is that…?

TREASURER:

This is going to be a criminal offence and it will be prospective. That is, it will apply to behaviour that is continued or entered into after the law is amended. But you see if a cartel has already been entered into and they continue it, it is the continuing to give effect to the cartel which will be caught by these amendments.

JOURNALIST:

Are some sectors more prone to price fixing than others?

TREASURER:

I suspect that cartel behaviour is more effective in areas where there are fewer competitors.

JOURNALIST:

Are some sectors more prone to price fixing than others?

TREASURER:

I suspect that cartel behaviour is more effective in areas where there are fewer competitors. Where there are fewer competitors you don’t have to get as many people to join. A cartel can’t work if there is somebody that is not in it and is prepared to break it. So, those sectors of the economy which have few competitors are not so prone to external competition from international competitors would be where you would see the activity the most.

JOURNALIST:

So the Government will be examining certain sectors of the economy then?

TREASURER:

The Australian Competition and Consumer Commission has agreed to examine all areas but…

JOURNALIST:

(inaudible) fuel, aviation, all the like.

TREASURER:

…what we are targeting here is we are actually targeting people who may have engaged in it because we want the first mover to come forward and to get the advantages of leniency. My advice is, if you have been in one of these or if you are in one of these, be the first person to disclose it because the second person is going to get a much tougher run.

JOURNALIST:

Who would these laws apply to, would it be the CEO’s or even up to the Board level?

TREASURER:

Anybody who enters into the Cartel. Sometimes the cartel can be entered into below CEO level. It can be entered into perhaps even by the marketers or the sellers but it is the people who enter into it or the people who give effect to it and of course the corporations themselves.

JOURNALIST:

How do you define ‘hard-core’ cartel action?

TREASURER:

Hard-core cartel is cartel activity which involves larger sums of money. We want to ensure that the prosecutors go after the big cartels which effect more people for larger sums of money and that is where the focus is going to be.

JOURNALIST:

What sort of sum? Can you give us a ball park figure?

TREASURER:

Well there will be an agreement which will be entered into between the Australian Competition and Consumer Commission and the Director of Public Prosecutions which will indicate the parameters of that and the larger sums that will be required to become the focus of enforcement activity.

JOURNALIST:

And where will this put Australia in terms of the rest of the world?

TREASURER:

The United States already had provisions which can make cartel activity a criminal offence. The United Kingdom already has provisions which can make cartel activity a criminal offence, Canada has the same, so we will be moving more in line with other western English speaking countries. And of course needless to say if there is an international cartel that is picked up trying to fix prices in the United States and effect has been given to that in Australia, then you will be able to be prosecuted in Australia as well for international cartel activity.

JOURNALIST:

Are you expecting the regulators to make any announcements soon on its prosecution?

TREASURER:

Well I have got to enact the law first so that will take some time with consultation that will have to be engaged in, the law will have to be enacted through the two houses of Parliament so that will take some time.

JOURNALIST:

When will those parameters between the ACCC and the DPP be set?

TREASURER:

Well they will be, I am issuing today an information paper which will talk about that and they will be set by agreements on page 6 of the information paper.

JOURNALIST:

And in relation to leniency provisions, will that be written into the legislation?

TREASURER:

That will be a practice which has already been introduced, this is a recommendation that was made out of the Dawson Inquiry to have a leniency policy. It has been adopted by the ACCC and I think in recent events it has proved its usefulness, I put it that way.

JOURNALIST:

How do you think this will be received by business, big business?

TREASURER:

Well I want to send an unmistakable message to business that cartel activity is unacceptable and I would say to those businesses, they can also be the victim of cartel activity as much as the perpetuator. If the cartel operates it can also be used to force up prices on other businesses. So I think genuine businesses that want to be competitive will actually appreciate the fact that this activity is getting stamped out.

JOURNALIST:

When would you expect legislation to go to Parliament?

TREASURER:

Well I hope that we can get onto it in this session.

JOURNALIST:

Treasurer, just on another issue, this morning Xstrata increased its bid for WMC by $1 billion. Does this change the Government’s opinion and its thinking towards the national interest issue?

TREASURER:

The Government doesn’t look at price, price is a matter for shareholders, the Government looks at the national interest. If a bid is against the national interest, then whatever the price, it wouldn’t be allowed. If a bid is consistent with the national interest and it is allowed, then it is up to the shareholders to make their decision.

JOURNALIST:

And is a decision on this matter likely to be soon, in the next few weeks?

TREASURER:

Yes.

JOURNALIST:

In the next few weeks?

TREASURER:

Possibly.

JOURNALIST:

End of the month?

TREASURER:

I am not going to put time limits on myself but it will be done within the statutory requirements.

JOURNALIST:

And Treasurer just on cartels, what will be done to protect small business (inaudible) or will small business be included?

TREASURER:

Well let me say, I think small business has a lot of gain by the busting up of cartels. Small business can be the victim of cartel activity. If their suppliers get together and rig prices against small business, small business can be the victims as much as anybody else and I would actually say this will be of enormous benefit to small business. Small businesses very rarely, (inaudible), let me re-phrase that, small businesses would actually find it hard to engage in cartel activity because there are so many of them. As I said earlier, cartel activity generally operates in those areas of the economy where there are fewer (inaudible).

JOURNALIST:

Mr Costello on another subject, do you think the abortion debate has damaged your Party?

TREASURER:

No I don’t think it has damaged our Party. The abortion debate is a debate where people have very strong views on either side and they should be free to express them as long as they do so in an understanding way which is respectful to differences. And I would say that the issue should be discussed calmly with respect for people on both sides of the debate and MPs will have the opportunity to contribute in accordance with their consciences and the only thing I say is that it be done with respect for all parties. These are very difficult issues for all people involved and I think all people involved deserve some respect when they are expressing their views.

JOURNALIST:

Do you support calls to limit access to abortion? We had an Anglican Bishop this morning making those sort of calls, is that something you would endorse?

TREASURER:

Well look, my view on abortion is that it shouldn’t be a method of contraception, that it is an extreme and harrowing experience which should only be available in extreme circumstances not as a first port of call for contraception. But it does have to be available in some very difficult situations and I don’t think anybody would or should go into that experience lightly because it is such a difficult decision.

JOURNALIST:

Treasurer just on interest rates, this morning the decision by the Reserve Bank, you weren’t surprised by that outcome to put rates on hold?

TREASURER:

Whether I am surprised or not I am not going to give a running commentary on my emotional reactions to announcements.

JOURNALIST:

What does it suggest to you as Treasurer?

TREASURER:

Lots of things. Any other questions? OK, thanks very much.