General information, not legal adviceThe ACCC says it can’t provide legal advice, and neither can this page. Its cartels page is the official place to check.
Two boards that meet, and are never glued
A butt joint is two pieces brought edge to edge. With competitors, that is the right picture: the boards can touch, but the law forbids the glue. The ACCC describes a cartel as businesses agreeing to act together instead of competing, while keeping up “the illusion of competition”, and says a cartel can involve businesses of any size and can be local, national or international.
The law is in the Competition and Consumer Act 2010, which the ACCC says applies to all corporations in Australia and to individuals involved in the conduct.
The four cuts the ACCC names
- Fixing prices
- Competitors agree on pricing instead of competing. The ACCC says the agreement can be about selling or buying prices, minimum prices, a formula for pricing or discounting, or rebates, allowances or credit terms, and that it may be formal or informal: written, verbal, or “just a signal, like a ‘wink and a nod’”.
- Sharing markets
- Competitors divide a market so they don’t have to compete: not producing each other’s goods or services, serving different areas, dividing contracts by value, or assigning customers with an understanding not to win each other’s.
- Rigging bids
- Suppliers agree among themselves who should win a tender, and at what price. The ACCC says they may take turns winning, or reward the losers with a guaranteed subcontract or a payment, and that the others may not bid, bid high, add terms the client won’t accept, or withdraw a winning bid.
- Controlling output
- Competitors agree to restrict how much is supplied, or which goods and services are offered, so that prices rise or don’t fall.
Short of a cartel: concerted practices
The law reaches further than the four cuts. The ACCC says the ban covers contracts, arrangements, understandings and concerted practices whose purpose, effect or likely effect is a substantial lessening of competition in a market, even where the conduct falls short of the stricter cartel definition.
A concerted practice, in the ACCC’s description, is communication or cooperation between businesses that is not quite a contract, arrangement or understanding, but goes beyond each responding to the market on its own. It involves sharing strategic commercial information. The risk to competition grows when competitors swap commercially sensitive information and then act on it, or plan to. It needn’t be competitors alone: the ACCC says these arrangements can involve suppliers, distributors, consultants and trade or professional associations.
Which side of the line
| Situation | What the ACCC says |
|---|---|
| You match a rival’s lower price after seeing it | Unlikely to be illegal where each business decides its own prices independently. It calls this parallel behaviour. |
| You cut back production because demand fell | Businesses can reduce output on their own in response to demand; agreeing with competitors to restrict output is illegal. |
| Two businesses owned by the same company coordinate | Not a cartel. |
| Rivals talk about their customers, prices or bids | It tells businesses to avoid speaking to competitors about customers and pricing, including bids for projects. |
| Small businesses negotiate with a big supplier as a group | This risks breaking competition law unless an exemption covers it. Most small business collective bargaining is covered by a class exemption; see bargaining as a group. |
What’s at stake
The ACCC says cartel activity is a civil breach and also a criminal offence, for individuals and for businesses. Individuals can face jail for up to 10 years, fines, civil penalties, injunctions, orders barring them from managing corporations, and community service orders. It is also illegal for a corporation to protect its officers against loss, or to pay their legal costs or penalties. The current penalty amounts are on the ACCC’s fines and penalties page.
If a competitor suggests something
The ACCC’s guidance is direct. If a rival raises pricing, customers or bidding with you, its advice is to stay out of it and report the approach to the ACCC. If you are invited into an arrangement that seems like a cartel, it says to seek independent legal advice and report any suspicious activity. Anyone can report possible cartel activity, and the ACCC offers a way to report anonymously. A business already involved that is the first to report and cooperates may be eligible for immunity.
The lawful way to cooperate
Some cooperation that would otherwise risk breaking competition law can be protected in advance. The ACCC says a business planning such conduct can seek an exemption, which protects it from legal action over the conduct, and that it grants one only where the conduct won’t substantially lessen competition, or where it has a net public benefit. The routes are authorisation, notification and class exemptions. For small businesses, the class exemption for collective bargaining is the one most likely to matter, and it has its own guide.