House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, the Hon Chris Bowen Mp

Chapter 6 - Remedies

Outline of chapter

6.1 This chapter outlines amendments to the remedies and enforcement provisions under the Trade Practices Act 1974 ('the TP Act').

Context of amendments

6.2 As Part IV does not currently contain criminal offences, many of the remedial provisions in Part VI of the TP Act require amendments so that they will apply effectively to the cartel regime.

6.3 The Commonwealth Director of Public Prosecutions ('the CDPP') (with responsibility for prosecuting Commonwealth criminal offences) is not able to seek the orders that the Australian Competition and Consumer Commission ('the ACCC') (with responsibility for prosecuting civil prohibitions) may currently seek, such as non-punitive, disqualification and adverse publicity orders.

6.4 If the CDPP were not given the same powers as the ACCC in relation to remedies and enforcement, its role in the prosecution of cartel offences would be limited. To address this, the Bill amends the TP Act to put the CDPP in the same position as the ACCC in relation to orders it is able to seek from a court in criminal cartel proceedings.

Summary of new law

6.5 The Bill amends the enforcement and remedies provisions of Part VI of the TP Act to place the CDPP in the same position as the ACCC in relation to the orders it may seek from a court in criminal cartel proceedings, such as disqualification orders, non-punitive orders and other orders. The Bill also places the CDPP in the same position as the ACCC in relation to applications for injunctions and undertakings as to damages. In addition, the Bill enables the CDPP to take representative actions on behalf of those who have suffered loss as a result of a breach of the proposed criminal offence provisions.

6.6 The Bill also extends the enforcement and remedy provisions in Part VI to apply to the prohibitions on serious cartel conduct, including:

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the statutory bars (under section 76B) to apply to Part IV of the TP Act, including the cartel offences;

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the compensation for victims provisions (under section 79B) so that if a defendant has insufficient financial resources to pay both a pecuniary penalty and compensation to a victim, the Court may give preference to the latter;

•

the enforcement and recovery of fines provisions (under section 79A) so that the methods for enforcing and recovering fines under the TP Act also apply to the cartel offences; and

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the evidence provisions (under section 83) so that findings of fact made against a respondent in earlier proceedings will be prima facie evidence of those facts in later proceedings by any affected person for damages or compensation orders.

Comparison of key features of new law and current law

Detailed explanation of new law

Statutory bars

6.7 Current subsection 76B(2) prevents a pecuniary penalty from being imposed against a person for a contravention if the person has been convicted of an offence for substantially the same conduct. Under subsection 76B(3), pecuniary penalty proceedings are stayed if criminal proceedings are started in relation to substantially the same conduct. Pecuniary penalty proceedings may only be resumed if the criminal proceedings do not result in a conviction. At present, subsections 76B(2) and (3) only apply to a contravention of sections 75AYA (misrepresenting the effect of the new tax system changes) and 95AZN (providing false and misleading information in relation to merger clearances and authorisations).

6.8 Consistent with recommendations 11.2 of the Australian Law Reform Commission's report, Principled Regulation : Federal Civil and Administrative Penalties in Australia and sections 1317M and 1317N of the Corporations Act 2001 , the Bill extends the statutory bars in section 76B to apply to Part IV of the TP Act, including the criminal cartel offences. [Schedule 1, item 27, subsections 76B(2) to (4)]

6.9 Cartels often operate across national borders, although the introduction of cartel criminal offences in Australia will assist to deter such conduct. As defence counsel could seek to rely on a prosecution for an offence in another jurisdiction to engage the application of the statutory bars, the Bill defines an offence to refer to an offence against a law of the Commonwealth, a State or a Territory. This reflects analogous provisions in the Corporations Act 2001 . [Schedule 1, item 28, subsection 76B(6)]

6.10 Current subsection 76B(5) also stipulates that evidence or information given by an individual for the purposes of civil proceedings against that person for a pecuniary penalty will be inadmissible in criminal proceedings against that individual (under sections 75AYA and 95AZN) if the criminal offence is based on substantially the same conduct as the claimed civil contravention. The only exception to this is in relation to falsity of evidence. Amendments applying subsection 76B(5) to Part IV, including the criminal cartel proceedings, are necessary to ensure that fairness is maintained. [Schedule 1, item 27, subsection 76B(5)]

Compensation for victims

6.11 Current section 79B enables the Court to give preference to compensation for victims of cartel conduct where the defendant has insufficient financial resources to pay both a pecuniary penalty (under section 76 for cartel conduct) or a fine (under the consumer protection offences in Part VC) as well as compensation. This provision is amended to extend the principle to the cartel criminal offences. [Schedule 1, item 38, subparagraph 79B(a)(ii)]

Orders which can be sought by the CDPP

6.12 Various existing powers are amended to enable the CDPP to seek similar orders to those able to be sought by the ACCC.

Undertakings

6.13 An injunction under section 80 may be sought for a contravention of the cartel offences or civil prohibitions by virtue of subparagraph 80(1)(a)(i). The CDPP will be able to seek an injunction under subsection 80(1) because an application may be made by any person. However, if the CDPP were to seek an interim injunction pursuant to this section, the CDPP (unlike the ACCC) would currently be required to make an undertaking as to damages. This would create a significant financial disincentive for the CDPP to seek an interim injunction that is in the public interest. Consequently, an amendment is made so that the CDPP is not required to make an undertaking as to damages. [Schedule 1, item 39, subsection 80(9)]

Non-punitive orders

6.14 The ACCC may currently apply for non-punitive orders under section 86C of the TP Act. The purpose of section 86C is to enable the Court to make orders to redress, or prevent the repeat of, a contravention of certain provisions of the TP Act by making: a community service order; a probation order; an order directing a person to establish a compliance program; a training program; or an order to publish information or an advertisement.

6.15 As the cartel offences and civil prohibitions are inserted in Part IV, section 86C will apply by virtue of the definition of 'contravening conduct' in subsection 86C(4). However, as currently drafted, the CDPP would not be able to seek an order under section 86C in proceedings against a person for contravention of the cartel offences. Consequently, amendments give the CDPP this ability. [Schedule 1, item 52, subsection 86C(1A)]

Adverse publicity orders

6.16 Current section 86D enables the Court, on the application of the ACCC, to order that a person who has contravened the specific provisions of the TP Act to publicise that fact, either generally, or to specific persons. Section 86D will apply to the cartel civil prohibitions by virtue of paragraph 86D(1)(a).

6.17 However, as currently drafted, the CDPP would not be able to seek an order under section 86D in proceedings against a person for contravention of the cartel offences. Consequently, amendments give the CDPP this ability. [Schedule 1, items 53 and 54, paragraph 86D(1)(b) and subsection 86D(1A)]

Disqualification orders

6.18 Current section 86E enables the Court to disqualify individuals from managing a corporation where they are involved in a contravention of Part IV of the TP Act. As the cartel offences and civil prohibitions will be inserted in Part IV, section 86E will apply by virtue of the wording of paragraph 86E(1)(a).

6.19 However, as currently drafted, the CDPP would not be able to seek an order under section 86E in proceedings against a person for contravention of the cartel offences. To address this, amendments give the CDPP this ability. [Schedule 1, item 53, subsection 86E(1A)]

6.20 In addition, current subsection 86E(3) provides that the ACCC must notify ASIC if the Court makes a disqualification order on application of the ACCC. This is to ensure that ASIC is aware of any disqualification orders made against a person so that it is able to update its register of disqualified persons (as required under section 1274AA of the Corporations Act 2001 ). Accordingly, amendments are made so that if the Court makes a disqualification on the application of the CDPP, the CDPP is required to notify ASIC of this fact. [Schedule 1, item 58, subsection 86E(3A)]

Other orders

6.21 Current subsection 87(1) enables the Court to make orders it thinks appropriate against a person who has engaged in a contravention of a provision of Part IV or an offence against Part VC. As currently worded, subsection 87(1) would not apply in relation to a cartel offence proceeding. This is because such a proceeding would not be a proceeding under Part VI of the TP Act. Consequently, amendments specifically refer to the cartel offences in the same way as the subsection refers to offences against Part VC. [Schedule 1, item 59, subsection 87(1)]

Representative actions

6.22 Current subsection 87(1B) enables the ACCC to take representative actions in relation to Parts IV (other than section 45D or 45E), IVA, IVB, V or VC. However, as currently drafted, the CDPP is not able to take representative actions in relation to cartel offences. The amendments give the CDPP the ability to take actions on behalf of persons who have suffered loss. [Schedule 1, items 61 and 62, paragraph 87(1A)(ba) and subsection 87(1BA)]

Findings in proceedings to be evidence

6.23 Current section 83 provides that findings of fact made against a respondent in earlier proceedings will be prima facie evidence of those facts in later proceedings by any affected person for damages or compensation orders. Section 83 is designed to make it easier for individual applicants to prove their case against a respondent to which whom the ACCC or some other party has successfully brought proceedings. Section 83 is amended to specifically refer to the cartel offences and civil prohibitions. [Schedule 1, item 40, section 83]

Reference to cartel offences to exempt cartel offences from section 78

6.24 Current section 78 provides that criminal proceedings are not to be brought for contraventions of Part IV or V. Amendments exempt the cartel criminal offences from section 78. [Schedule 1, item 30, subparagraphs 78(a)(i) and (ia)]

Consequential amendments

Statutory bars

6.25 Consequential amendments reflect the proposed application of the statutory bars to Part IV of the TP Act. [Schedule 1, item 26, subsection 76B(1)]

References to new disqualification order provisions

6.26 Consequential amendments provide specific reference to the proposed provisions regarding disqualification orders. [Schedule 1, items 56 and 57, subsections 86E(2) and (3)]

Representative actions

6.27 Consequential amendments in relation to the representative action amendments insert the word 'or'. [Schedule 1, item 60, paragraph 87(1A)(b)]

6.28 To reflect the proposed ability for the CDPP to take representative actions, the Bill makes consequential amendments to expand the definition of a plaintiff to include the CDPP. [Schedule 1, item 63, paragraph 87D(aa)]