In Touch: Alkaloids and former export manager sentenced for criminal cartel conduct; and other developments

The latest in competition and consumer law 8 min read

A bitter pill to swallow: Alkaloids and former export manager sentenced for criminal cartel conduct

On 29 November 2022, Alkaloids of Australia Pty Ltd (Alkaloids) and its former export manager were sentenced in the Federal Court of Australia after pleading guilty to criminal cartel conduct.

Alkaloids was convicted and penalised $1,987,500. The company's former export manager, Christopher Joyce, was sentenced to 32 months imprisonment to be served as an intensive corrections order, including 400 hours of community service. Mr Joyce was also disqualified from managing corporations for five years and fined $50,000.

Alkaloids is a pharmaceutical ingredient company which produces and supplies an active pharmaceutical ingredient called scopolamine N-butylbromide (SNBB) for use in antispasmodic medications.

Alkaloids and Mr Joyce admitted to giving effect to agreements to fix prices, restrict supply, allocate customers and/or geographical markets and/or rig bids for the supply of SNBB to international manufacturers of generic antispasmodic medications.

Mr Joyce represented the company at industry conventions and would contact competing manufacturers of SNBB around the world to enter into these cartel arrangements. Mr Joyce was found to be active in policing and monitoring manufacturers' compliance with the cartel.

The sentence imposed on Mr Joyce is the longest sentence of imprisonment imposed on an individual under the Australian criminal cartel laws to date. Mr Joyce was also the first individual to plead guilty to a criminal cartel offence under the Australian criminal cartel laws.

The Federal Court took into account numerous factors during sentencing including that the offending conduct occurred over a significant period of time, was 'deliberate systematic, coordinated and covert'. The cartels were also found to have global impact, raising the price of SNBB which potentially affected SNBB customers around the world. Alkaloids' and Mr Joyce's sentences were discounted by 25% to account for their early guilty pleas.

$1 million penalty hangs over NQCranes for cartel agreement with competitor

On 23 November 2022 the Federal Court ordered NQCranes, an overhead crane company based in Queensland, to pay a $1 million penalty for entering into an agreement with a competitor, MHE-Demag Australia Pty Ltd.

The competitors had agreed in a 'distributorship agreement' to cooperate in the market for servicing overhead cranes by not targeting each other’s current customers in parts of Queensland and New South Wales. The competitors instead agreed to focus on competing against other companies in the industry instead of each other with regard to the acquisition of future customers.

The Federal Court took into account several mitigating factors including that the contravening conduct was not deliberate in the sense that the senior managers did not know the agreement was capable of contravening the cartel provisions, the conduct was isolated being a single contravention that occurred over a limited time, the cartel provision was not actually put into effect, NQCranes had no prior contraventions and it had cooperated with the ACCC including during settlement discussions at court-ordered mediation which removed the need for a contested hearing.

The judge determined that the penalty was appropriate to the financial position and family-run nature of the business while also reflecting the seriousness of the contravention and the need for deterrence.

ACCC springs to action against turf breeder for concerted practices 

On 18 November 2022, turf breeder Lawn Solutions Australia Group Pty Ltd (LSA) provided a court-enforceable undertaking to the ACCC to address concerns that its information sharing with turf growers and resellers about turf prices may have amounted to a concerted practice.

LSA develops, licenses and markets a substantial portion of instant turf grass products in Australia. It sells its turf products to customers via a large network of growers and resellers, which technically compete with each other in the retail supply of turf in geographic markets in Australia.

The ACCC had concerns about how LSA communicated turf prices to growers and resellers, including by circulating price surveys and communicating expectations that growers and resellers should set their prices as recommended by LSA and/or to stop discounting LSA turf products.

LSA also identified growers and resellers who were not complying with these requests and pressured them to change their pricing practices.

The ACCC was also concerned that LSA had contacted a rival turf breeder about their prices on numerous occasions, either directly or through an intermediary, to discourage them from setting lower prices for competing turf products.

Without making a formal admission that it contravened the Competition and Consumer Act in the undertaking, LSA:

• acknowledged its conduct had the capacity to cause suppliers of LSA turf to cease discounting, and to suppress or hinder price competition in the supply of turf in the greater Sydney region of New South Wales;
• agreed to cease communicating certain retail pricing information or discounting requests to LSA growers and resellers, and rival turf breeders; and
• committed to establish and implement a compliance training program.

SmileDirectClub takes $3.5m penalty on the chin; admits misleading conduct

On 11 November 2022, in proceedings brought by the ACCC, the Federal Court ordered SmileDirectClub to pay $3.5m in penalties for misleading customers about health insurance reimbursement for teeth aligners. The parties had put forward an agreed position to the court, making joint submissions in respect of penalties and other orders. SmileDirectClub also commenced reimbursing some consumers prior to the court making orders.

SmileDirectClub admitted that it had:

• represented to consumers they may be eligible for a reimbursement for SmileDirectClub aligners and associated treatment from their health fund;
• told consumers they should check to see if the aligner treatment was covered by their health fund using item numbers 825 and 811. Consumers who did check using these items may have been advised that their health insurance covered them for the aligner treatment; and
• sent emails to consumers who submitted an insurance inquiry form which represented that SmileDirectClub had contacted their health insurer and there was 'good news' that they were entitled to reimbursement for the aligner treatment which could be claimed after they had paid SmileDirectClub in full.

SmileDirectClub made these representations in emails and text messages to consumers and on printed cards made available in store. SmileDirectClub, jointly with the ACCC, submitted that the absence of compliance programs or internal structures to ensure compliance with the ACL, and the failure to make adequate inquiries to confirm that the representations were true or had a reasonable basis, were key factors in determining the penalty.

At least 26,300 consumers had signed up at a cost of $2,499 and $3,155 for SmileDirectClub’s aligner treatment.

The ACCC indicated that 98.5% of Australian private health insurance companies did not provide coverage for the costs of SmileDirectClub’s aligner treatment.

Telstra, Optus and TPG to pay $33.5m penalty for misleading NBN maximum speeds

In proceedings brought by the ACCC, Australia's telco providers have been ordered by the Federal Court to pay penalties totalling $33.5 million. for making false or misleading representations in relation to promoting certain NBN plans. Telstra will pay $15 million, Optus $13.5 million and TPG $5 million. The telcos have agreed to compensate customers.

Each telco admitted to making statements on their websites, in emails to consumers or in telesales which promised to tell consumers within a reasonable timeframe if the speeds they were paying for could not be reached on their NBN connections.

They each also said they would offer these consumers options, including moving to a cheaper plan with a refund, if they could not achieve the maximum speed on their plans.

ACCC publishes its fifth Digital Platform Services Inquiry interim report

On 11 November 2022, the ACCC published its fifth Digital Platform Services Inquiry interim report. It recommended significant legislative reforms targeting potential anticompetitive conduct and consumer law contraventions by digital platforms.

Proposed reforms could have significant implications economy-wide and include:

• mandatory sector-specific codes for 'designated' digital platforms with targeted obligations;
• an economy-wide unfair practice prohibition;
• mandatory processes for scams, harmful apps and fake news; and
• mandatory internal dispute resolution processes and an external ombudsman scheme.

For more on this, see our Insight: ACCC recommends significant reforms targeting digital platforms.

Dell Australia taken to task by the ACCC for misleading price promotions

The ACCC has instituted Federal Court proceedings against Dell Australia over allegedly misleading discounting claims for add-on monitors.

The ACCC claims that Dell's use of 'strikethrough' pricing which purported to represent available discounts on the price for monitors when offered as an add-on purchase, was misleading as the strikethrough prices did not correspond to the prices at which the relevant monitors were previously or usually sold.

This had the effect of overstating the supposed discount offered to the consumer.

The ACCC also claims that the price of the monitor being offered as a discounted add-on was more expensive than if the consumer just purchased it on a standalone basis.

A number of other statements about the price of the add-on monitor were also displayed to the consumer, including 'total savings', 'includes x% off', 'discounted price' and 'get the best price for popular accessories when purchased with this product'.

The ACCC argues that Dell’s conduct likely induced consumers to purchase monitors they would not have purchased or caused consumers to pay a higher price than they otherwise could have on the Dell website.

The ACCC is seeking penalties, declarations, consumer redress, costs and other orders.

New UCT laws unleashed

On 9 November 2022, proposed legislation to strengthen the unfair contract terms (UCT) regime in the Australian Consumer Law was given Royal Assent and passed into law.

The new legislation expands the scope of existing UCT laws, introduces and increases financial penalties for breaches, and arms courts with new powers in terms of remedies.

Businesses have a 12-month grace period to amend their contracts in line with the new UCT regime and will be required to comply with the amended provisions from 10 November 2023.

For more on this, see our Insight: Significant changes to unfair contract terms laws and higher penalties for competition and consumer law breaches.