Thursday, August 3, 2017

Misery Continues for RoRo Cartel Participants as Another Multi-Million Dollar Fine Levied

Federal Court Imposes Second Biggest Antitrust Penalty in History
Shipping News Feature
AUSTRALIA – JAPAN – The Federal Court of Australia has convicted Japanese shipping line Nippon Yusen Kabushiki Kaisha (NYK) of criminal cartel conduct and ordered it to pay a fine of A$25 million, the second-highest imposed in Australian Competition and Consumer Commission (ACCC) history. The cartel involved collusion in fixing the freight rates and market shares for the RoRo shipments of motor vehicles to Australia.

Following an extensive investigation by the ACCC, the Commonwealth Director of Public Prosecutions (CDPP) charged NYK with giving effect to cartel provisions in an arrangement or understanding with other shipping lines relating to the transportation of motor vehicles to Australia between 2009 and 2012. The judgment also marks the first successful prosecution under the criminal cartel provisions of the Competition and Consumer Act 2010 (CCA).

From at least February 1997, NYK had an arrangement with other global vehicle shipping companies, to the effect that they would not seek to alter their existing market shares of cargo from manufacturers including Nissan, Suzuki, Honda, Toyota and Mazda, or otherwise try to win existing business from each other.

Between 24 July 2009, when legislation criminalising cartel conduct commenced in Australia, and 6 September 2012, when Japanese and United States authorities raided the offices of NYK and a number of other shipping companies, NYK worked within a cartel with other global shipping companies and their subsidiaries. Three separate cartel provisions relating to fixing freight rates, bid rigging and customer allocation were undertaken. It involved six different shipping routes for vehicles to Australia, from India; Thailand; Japan; Indonesia; North America, and Europe; and shipping services supplied to ten vehicle manufacturers.

The criminal activity occurred over a three year period during which 69,348 new vehicles were imported into Australia through contracts entered into as a result of bids affected by the conspirators.

NYK entered a guilty plea on July 18, 2016 in the Federal Court. The shipper was sentenced for one ‘rolled-up’ criminal charge of giving effect to cartel provisions. A ‘rolled-up’ charge is one in which more than one offence forms part of the charge. Rolling-up is permissible on a plea of guilty in Commonwealth matters.

In November last year, the CDPP laid charges against another alleged participant in the cartel, Kawasaki Kisen Kaisha (K Line), also a Japanese shipping company, and the ACCC’s investigation in relation to other alleged cartel participants is continuing. ACCC Chairman Rod Sims welcomed the Federal Court’s decision, saying:

“The Australian community relies heavily on imported vehicles, so a longstanding cartel in relation to the transportation of those vehicles to Australia was of significant concern. The NYK fine is also the second largest ever imposed under the Competition and Consumer Act, and incorporated a significant discount for NYK’s plea and cooperation.”

In this case, the maximum penalty was calculated on the basis of 10% of NYK’s annual turnover in connection with Australia, in the 12 months prior to the commencement of the offence. On that basis, NYK’s conduct attracted a maximum penalty of A$100 million. In handing down sentence, his Honour Justice Wigney said:

”The fine incorporates a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation: meaning that but for the early plea and past and future cooperation, the fine would have been $50 million.

“The cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment, because it is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly.”