Australia’s leniency system – taking the guessing out of confessing

Once upon a time, an advanced degree in astronomy and access to an observatory was required before one could navigate Australia’s leniency system. Over recent years, we’ve stripped back a little of the complexity – now a decent compass and some orienteering experience should get you there. But before starting the journey, let’s study the map a little.

A brief outline

In practice, Australia’s leniency system operates in a similar manner to major jurisdictions overseas, with a few local quirks. As usual, it’s all about cartels – technically, other anticompetitive conduct (and even consumer protection breaches) can be the subject of co-operative arrangements with the ACCC, but the framework is built around cartels.

First stop: immunity

The key document is the ACCC Immunity and Cooperation Policy for Cartel Conduct (2014), which sets out how the ACCC deals with applications for immunity against civil proceedings. The ACCC can’t grant immunity against criminal proceedings as that is a decision for a different agency (the Commonwealth Director of Public Prosecutions or the CDPP). But an application to the ACCC is automatically considered as an application for both civil and criminal immunity and, in practice, the two agencies work closely together – it’s very unlikely that you’ll get flowers from one and a smack from the other.

Immunity is available only for the first eligible party to disclose the cartel conduct. 

Eligibility criteria

A corporation or individual is eligible for immunity where it (or s/he):

• was party to a cartel
• admits its conduct may contravene the Competition and Consumer Act
• is the first applicant for immunity in respect of the relevant cartel
• has not coerced others to participate in the cartel (i.e. is not a “ring-leader”)
• has ceased (or will cease) involvement with the cartel
• in the case of a corporation, makes admissions as a “truly corporate act”, and
• provides “full, frank and truthful disclosure and cooperate[s] fully and expeditiously”

Finally, at the time of receiving the application, the ACCC must not have received written legal advice that it has reasonable grounds to institute proceedings in relation to the cartel. 

Next stop: leniency falling short of immunity

Where immunity is not on the table – for example, the applicant is a ring-leader or is not first in time – co-operation may still result in leniency. This can range from effective immunity (where the ACCC elects not to prosecute) to an agreement to go easy on the applicant in court (although any penalties are ultimately at the discretion of the court).

How to apply

As with overseas jurisdictions, the application process tends to be “paperless”. Parties generally obtain “conditional immunity” (or leniency), with no final decision until any resulting legal proceedings are resolved. So it often happens that conditional immunity is never finalised. 

The basic steps for seeking immunity or leniency are:

• placing a marker – this preserves, for a short time, the marker recipient’s spot in the queue (obviously the applicant is hoping to be first).  The applicant then has 28 days (or thereabouts) gather the necessary information to demonstrate that it satisfies the requirements for conditional immunity. Markers can be sought on a “hypothetical, anonymous basis”
• proffering information – a marker recipient then provides to the ACCC – almost always orally – a detailed description of the cartel conduct (a “proffer”), including specific information regarding the type of evidence that it can provide
• grant of conditional immunity – where the ACCC is satisfied that the eligibility criteria are met, it will grant conditional immunity. Often there might be several iterations before a decision is made as the ACCC frequently seeks further information
• recommendation to CDPP – where conditional immunity is granted, the ACCC will (where appropriate) make a recommendation to the CDPP regarding criminal immunity

What leniency does not protect against

As noted above, the CDPP and not the ACCC decides whether to grant immunity or leniency for criminal prosecutions. This issue, however, generally sorts itself. More importantly, a successful applicant is not protected against third-party civil claims (for example, from grumpy customers). 

Hmmm… should you place a marker or not?

First, you need to understand whether in fact there has been a contravention of the Competition and Consumer Act. Remember, if you pursue a marker, it’s on the basis of an admission – it doesn't work well to “confess” to the ACCC whilst also protesting your innocence. 

Once you understand your legal position, there are some further factors to think about:

• do any overseas competition authorities know about the conduct (or similar conduct)?
• could another party involved in the conduct tell the ACCC? What happens if there’s a change in management at one or more of the other parties?
• do you have any disgruntled employees who might “dob” you in? Could other parties involved in the conduct have disgruntled employees?
• is it possible that a customer knows about the conduct or could guess that something’s up? This can occur, for example, when an employee of a cartel member goes to work for a customer.

Essentially, you’re trying to make an educated guess about the likelihood of the ACCC finding out by some means other than you. If you guess wrong, the consequences can be pretty dire, so confessing just might be the way to go. 

Note: this piece has largely been written from the perspective of a corporate entity. Down the track, I’ll address the issue from an individual’s viewpoint.

If you have any questions about leniency or any other Australian competition issue, please contact me at [email protected]