Amid the furious public debate over misuse of market power and the conduct of big businesses in some sectors of the economy, last week’s report by Professor Ian Harper’s Competition Policy Review is a missed opportunity to tackle a thorny issue that can affect any business in any industry, and one that can land businesspeople in jail: the ACCC’s immunity policy for cartel conduct.
The immunity policy is the main cartel detection tool for the ACCC.
While we have seen no prosecutions under the criminal cartel laws introduced in 2009 along with maximum jail terms of 10 years, the ACCC has recently claimed to have about a dozen in-depth cartel investigations under way.
The policy offers immunity from criminal and civil prosecution for the first cartel member who approaches the ACCC and agrees to co-operate in the prosecution of the other cartel members.
The lure of automatic immunity is unique to cartels, despite the importance of detecting and prosecuting many other types of serious crimes. The policy does not offer protection from civil claims or class actions, but the thinking is that executives will approve their companies making compensation payments, so long as the executives themselves can avoid doing time.
However, as previously reported in The Australian, we argued in our submissions to the review that the policy fails to deliver the single most important feature of any effective immunity regime: certainty for applicants.
A business that learns it is involved in cartel conduct must have complete confidence that, if it applies for immunity, immunity will be granted. Without such certainty, the business faces the risk that, by applying for immunity, all it will do is expose itself to prosecution. That risk strongly deters any application for immunity and undermines the entire immunity regime.
The Harper Review Panel has concluded that the current immunity regime provides an “adequate level” of certainty. We strongly disagree. It is our experience, from advising many clients over the years that the policy has been in operation, that potential immunity applicants are naturally very concerned about the risk of their immunity application being rejected. We have also had significant disagreement with the ACCC regarding the application of the criteria for immunity in the ACCC’s policy and its own guidelines.
The immunity regime is subject to dual administration by both the ACCC and the Commonwealth Director of Public Prosecutions. As a result, an immunity application is only successful if it is accepted by both these government bodies, with each applying its own judgment on its policy document. This is unwieldy, creates administrative duplication and delays, and invites disagreement between the two bodies, while jeopardising the effectiveness and certainty of the entire regime — to say nothing of the nervous wait endured by applicants.
Prospective immunity applicants are also concerned by the lack of natural justice in the application process. Although criminal punishment is at stake, the immunity application process is not administered by an impartial arbiter, but by the ACCC and DPP.
These are enforcement and prosecution agencies, who also write and can rewrite the rules about who is entitled to immunity.
This situation raises concerns, not only about a conflict of interest, but about the required separation of legislative, executive and judicial power under the Australian Constitution.
To add to these concerns, an applicant has no right to a hearing and there is no established process for reviewing or appealing a decision to grant, refuse or revoke immunity. Rather, the immunity regime operates in secret with confidential communications between the applicant and the relevant government agencies, away from the gaze of public scrutiny.
This is not a recipe for good governance and effective public administration.
Although it has not gone far enough, the ACCC has recently made some tentative steps towards reducing the uncertainty of its immunity policy. Previously, immunity was not available to a party that was the “ringleader” of the cartel. However, disqualification based on that vague and highly-contested criterion was scrapped in September last year, when the ACCC reissued its cartel immunity policy. This policy could, and should, be made more certain by abolishing other uncertain criteria, such as the disqualification for cartel parties who have “coerced” another.
Such issues are better taken into account in sentencing or, conceivably, as a defence of duress. As it stands, immunity applicants are discouraged from coming forward in the first place, because of the fear that any immunity granted may be revoked down the track, just because another cartel member starts pointing the finger at them.
More fundamental changes are required to address the lack of impartiality and procedural safeguards in the immunity application process. Despite its importance, the dark secret of the immunity regime is that it has no proper legal basis.
Even though decisions under the immunity policy have a significant impact on parties’ rights and liberty, the regime itself rests on nothing more than public policy statements by the ACCC and the DPP and the breadth of their prosecutorial discretion.
The current regime urgently requires legislative backing, with decisions to grant, refuse or revoke immunity made subject to proper judicial oversight and appropriate procedural safeguards.
Zaven Mardirossian and Matthew Lees are competition partners at Arnold Bloch Leibler.
Extracted in full from the Australian