Dishonesty requirement in anti-cartel laws won’t work

A group representing small businesses is calling on the Federal Government to remove the dishonesty requirement from the proposed laws aiming to send cartel-runners to jail.

The Rudd Government has released for public comment an exposure draft of legislation criminalising anti-competitive practice.

The Fair Trading Coalition, which represents about 30 groups including the Australian Hotels Association and the Council of Small Business Organisations of Australia, has argued in its submission to Treasury on the proposed amendments that the dishonesty requirement should be removed because it would be too difficult for prosecutors to prove that an individual actually knew that its company was acting dishonestly.

“The dishonesty test seems too onerous on the ACCC. The proposed test will make successful prosecutions harder to prove,’ said Fair Trading Coalition convener Michael Delaney.

Treasury is currently reviewing submissions received on draft legislation. In line with its election commitments, the Government intends to introduce legislation criminalising cartel behaviour into Parliament later this year.

Under the proposed amendments, it will be unlawful to make or give effect to a provision of a contract, arrangement or understanding if it contains a “cartel provision”. For criminal offences, in addition to containing a “cartel provision”, the corporation must have entered into the arrangement “with the intention of dishonestly obtaining a benefit”.

“The introduction of a standard of dishonesty marks a move away from the largely economic framework, in which laws affecting competition are currently measured, to a more explicit framework invoking ideas such as cheating, fraud and theft,” says Andrew Bell, competition law specialist at Deacons Lawyers.

Prosecutors will have to prove that “the individual had actual knowledge of each element of the relevant cartel offence”.

“For criminal cartel offences, this means that the prosecutors must not only prove that the individual had knowledge of all of the essential features of the underlying cartel agreement itself, but also that the individual actually knew that the company was acting dishonestly and with the intention of obtaining a benefit,” Bell says.