Allen & Overy’s Global Cartel Enforcement Report 2019 has highlighted “a sharp rise in cartel enforcement fine levels” to US$45.6 million ($65 million), an increase of more than US$15 million ($21.4 million) on the previous year’s fines.
The report flagged a number of “key” trends in cartel enforcement for Australia to explain such a dramatic increase in prosecution activity: the Australian Competition and Consumer Commission’s (ACCC) increasing of lobbying efforts for higher penalties to be given by the courts, as well as focusing on ensuring the size of penalties given to companies matched company size; the December 2018 government announcement of an increase in the budget supporting global cartel enforcement, and this funding leading to the appointment of six new cartels unit investigators to assist with future criminal cartel prosecution.
Allen & Overy partner Peter McDonald commented on the above trends as signaling “increased enforcement efforts by the ACCC”.
Flagging “several notable events in cartel enforcement”, Mr McDonald highlighted that “three criminal cartel cases were initiated involving senior managers, with the explicit threat of jail time”.
According to the lawyer, “perhaps the most significant case involves alleged arrangements relating to ANZ shares and several senior bankers”.
On 1 June 2018, it was revealed that the Commonwealth Director of Public Prosecutions (CDPP) was preparing to prosecute ANZ for being knowingly concerned in alleged cartel conduct relating to an arrangement or understanding allegedly made between the joint lead managers in relation to the supply of 80.8 million shares in August 2015.
The Australian Securities and Investments Commission also began investigating whether ANZ’s announcement on 7 August 2015 should have stated that the joint lead managers took up approximately 25.5 million shares of the placement.
This represented approximately 0.91 per cent of total shares on issue at that time and was jointly underwritten by Citigroup Global Markets Australia, Deutsche Bank AG and JPMorgan.
The CDPP, following a referral by the ACCC, also began bringing legal proceedings against Citigroup and Deutsche Bank; however, JPMorgan has been reportedly granted immunity from the proceedings as a result of whistleblowing on the matter. The three banks had all denied the allegations.
“This looks to be a tough case for the ACCC, and convictions are far from certain,” Mr McDonald said but noted that “after many years of talk, ACCC chairman [Rod] Sims has backed up his rhetoric of bringing several criminal cases before the courts each year”.
Elaborating on the ACCC’s standing, Mr McDonald said: “We have seen increased funding and the recruitment of more specialist cartel investigators, the agency working more closely with top global cartel experts like the US FBI, and a willingness to seek and obtain record-high penalties following reports that Australia was lagging against comparable OECD economies”.
On a more global scale, Mr McDonald did flag “a general downturn in the number of leniency applications” as posing a challenge for enforcers.
“We will see how this plays out over the coming years, but it is likely attributable to the spread of aggressive private damages claims,” he explained.
“Cartelists are increasingly aware that creating a leniency paper trail can come with big compensation costs across multiple countries, including Australia.”