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Howard & Costello ignored 15 warnings from ACCC on jail terms for cartels.



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Chris Bowen MP Shadow Assistant Treasurer Shadow Minister for Revenue & Competition Policy Federal Member for Prospect

13 November 2007

HOWARD & COSTELLO IGNORED 15 WARNINGS FROM ACCC ON JAIL TERMS FOR CARTELS

Federal Labor has called on the Prime Minister explain why he has ignored 15 separate warnings from the Australian Competition and Consumer Commission (ACCC) on the need for reforms that would see jail terms for company executives involved with serious cartel behaviour.

This follows the revelation that the government has ignored at least 15 separate warnings from the ACCC chair Graeme Samuel on the urgency and need for the Federal Government to criminalise serious cartel behaviour.

In contrast, a Rudd Labor government has pledged to introduce laws to criminalise serious cartel behaviour within the first 12 months if elected to office.

In the same way that the Coalition refuses to heed the warnings of the Reserve Bank of Australia on the capacity constraints that drive inflationary pressures, the Prime Minister has ignored the many warnings from the consumer watchdog on cartel conduct.

The Prime Minister recently made it clear that he would not continue with the reforms that were first outlined by the Treasurer in February 2005.

"We would continue to examine the strength of the trade practices law and if further changes were needed we would implement them but I'm not making any commitment beyond that.” (AAP, ‘No plans to make price fixing criminal: Howard’, 9/11/07)

The most recent reminder from the ACCC Chair Mr Graeme Samuel came on November 4th when he said:

“Thus the reason why we have advocated... indeed, since 2004 when this cartel was first discovered, was first brought to light, we have advocated over and over again that we need criminal penalties, that is jail sentences for cartel offenders and I think the jury's not out on that.” (Interview, Inside Business, 4/11/2007)

“The Prime Minister has turned his back on the reforms to cartel conduct proposed by the Treasurer in February 2005,” Labor's Shadow Assistant Treasurer, Chris Bowen said.

“The Prime Minister and Treasurer are at odds over whether to proceed with these important reforms.

“Mr Samuel has made it clear on many occasions that financial penalties simply aren’t enough to prevent collusion and cartel conduct.

“It is clear that the Prime Minister isn’t taking the threat and potential damage caused by big cartels seriously.

“This is an issue that the Prime Minister must address immediately, especially given that the Treasurer’s view on jail terms for cartel conduct is at odds with his own view.

Media Contact - James Cullen 0409 719 879

THE ACCC’s 15 WARNINGS SINCE THE DAWSON COMMITTEE REPORTED IN APRIL 2003

15. 26TH August 2003, the Sydney Morning Herald reported Mr Graeme Samuel’s comments to the Melbourne Media Cup the day before that:

“The view of the commission is that jail is a far more effective deterrent for the wrongdoer. I happen to think that criminal penalties are a very important part of the armoury of ensuring proper, fait; vigorous, lawful competition is adhered to by businesses in Australia.” (‘He may be new watchdog but it’s the same old bite’)

14. 13th November 2003, the Sydney Morning Herald reported Mr Samuel’s speech to the National Press Club where he said:

“It seems somewhat incongruous that we can put people in jail for evading the taxation laws, we can put pensioners in jail for defrauding the social welfare system, but we can’t put business executives in jail for extorting the community through hardcore cartel activity.” (‘Jail cartel executives, says ACCC’, 13/11/2003)

13. 3rd February 2004, the Age reported comments made by Mr Samuel at a CEDA lunch in Melbourne where he said:

“It is silent extortion.”

“It is for this reason I am still strongly publicly promoting the concept of criminal sanctions to be imposed under the Trade Practices Act.” (‘ACCC has online fraudsters and cartels in its sights’)

12. 16th March 2004, the Age reported comments made by Mr Samuel at a luncheon held the day before in Melbourne by the Institute of Chartered Accountants in Australia:

The report said in part:

‘Mr Samuel also repeated his view that jail terms for cartel operators would provide a much greater deterrent than fines. The Federal Government is considering whether to introduce jail terms for hard-core cartel operators.’ (‘Corporate watchdog to cure economy of cartel cancer’)

11. 28th May 2004, Mr Samuel made a speech entitled ‘Australian Competition Policy And World’s Best Practice’ to the Australian Institute of Company Directors, he said in part:

“We are not alone in this thinking, and the Dawson Committee recommended the introduction of criminal sanctions for serious, or hard-core, cartel behaviour, after looking at the overseas experience.

“Tax cheats are imprisoned, sometimes even pensioners who defraud social security are sent to jail.

“Why should executives who deliberately enter secretive cartel arrangements to defraud their customers or taxpayers be treated differently?”

10. 2nd October 2004, the Australian Financial Review reported Mr Samuel’s comments:

“The financial penalties are too low at the moment. The Dawson committee has recognised that.”

“However, whatever the financial penalties, they will not be sufficient. You have to be able to put executives in jail.” (‘ACCC investigates 41 cartels’)

9. 11th December 2004, the Age reported Mr Samuel’s comments:

“The combination of that (leniency) policy and the prospect of jail sentences will operate more effectively than almost anything else that’s been done of recent times in this area to suddenly break open these secretive processes.” (‘Tip-off for the ACCC’)

8. 17th May 2005, the Courier Mail reported Mr Samuel’s comments:

“I’m seriously looking forward to the day when I go to the Director of Public Prosecution and say prosecute these people . . . to try to put them in jail for this cartel.” (‘Corporate watchdog sets sights on cartels’)

7. 4th July 2005, the ACCC Chair issued a media release entitled ‘Information package raises awareness of cartel conduct’, it said in part:

"The package is part of the ACCC's focus on cracking cartel behaviour and is preparatory to changes to the Trade Practices Act which will lead to higher civil penalties and criminal sanctions, including the possibility of jail terms for company executives".

6. 16th September 2005, Mr Samuel made a speech entitled ‘Trade Practices Act update’ to the Country Chief Financial Officers Forum, it said in part:

“The legislation is not yet tabled for the offence, but the point is that executives will be facing a possible term in jail.”

5. 23rd December 2005, The Australian reported Mr Samuel’s comments:

“Cartel behaviour is, in reality a form of theft and little different from classes of corporate crime that already attract criminal sentences.” (‘Apathy rules out chance of prison’)

4. 4th August 2006, the SMH reported Mr Samuel’s evidence to a Senate inquiry into petrol prices:

‘For three years the Government has been sitting on a report which recommends criminal sanctions, including five years' jail for individuals.’ …

"We can't haul people before the courts for profiteering or price gouging.” (‘Watchdog urges tougher laws on petrol price fixing’)

3. 25th June 2007, the SMH reported Mr Samuel’s comments from an interview with the Herald:

‘The head of the competition watchdog and his predecessor have joined forces to demand jail terms to cure the "cancer on the Australian economy" inflicted by illegal price fixing - four years after the Federal Government promised jail terms if companies colluded to rip off consumers.

‘In an interview with the Herald, the chairman of the Australian Competition and Consumer Commission, Graeme Samuel, said: "It is ... a criminal action to secretly get together with your competitors to collude with absolute intent to rip off and steal from consumers to satisfy your own greed and your own profit."’ (‘Jail price fixers, watchdog demands’)

2. 2nd November 2007, Mr Samuel was reported in AAP:

"Australia must fall in line with other jurisdictions by imposing criminal sanctions that include jail terms for executives who engage in cartel activities.

"Nothing concentrates the mind of an executive contemplating creating or participating in a cartel more than the prospect of a criminal conviction and a stretch in jail." (‘ACCC calls for jail terms for cartel executives’)

Federal Court judge Justice Peter Heerey also stated:

"The government hasn't yet got around to introducing criminalisation.” (‘Judge slams Pratt over worst ever cartel’, AAP)

1. 4th November 2007, Mr Samuel told Alan Kohler on Inside Business:

“Thus the reason why we have advocated since 2004 when this cartel was first discovered, was first brought to light, we have advocated over and over again, that we need criminal penalties, that is jail sentences for cartel offenders.

“I think the jury is not out on that, the jury has come back in and the jury has made it very clear, based on our own analysis, based on the analysis conducted by the OECD, based on the experience of regulators in the United States, the United Kingdom, and many other nations in the world, that the only way you will breakdown cartels, the only way you will stop their insidious attack on consumers - ripping-off, theft.

“The only way you will stop it is to say to executives, if you are engaged in cartels you face the prospect of going to jail for five years.”