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Case study presentation - Ballarat petrol cartel

Case study presentation - Ballarat petrol cartel. Brenton Philp Australian Competition and Consumer Commission. Please ask questions at any time…. Details of the Case. Long standing price-fixing arrangement Providing for controlling of price increases

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Case study presentation - Ballarat petrol cartel

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  1. Case study presentation -Ballarat petrol cartel Brenton Philp Australian Competition and Consumer Commission

  2. Please ask questions at any time…

  3. Details of the Case • Long standing price-fixing arrangement • Providing for controlling of price increases • Telephone calls advising of impending price increases or complaining when prices did not rise • 8 wholesalers and/or retailers • Mobil, BP, Shell, Caltex/Ampol, Swift + Apco brands • Particularised 22 June 1999 – 8 December 2000 • Trial – AUD 23.3m fines • Appeal – Apco succeeded • Further appeal being sought by ACCC Brenton Philp

  4. Brenton Philp

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  7. Building the Case “Find out who’s who and who does what” • Interview retailers • 4 distributors • 3 types of supply arrangements • Prices effectively set by distributors Brenton Philp

  8. Building the Case “Find out who the distributors are talking to” • Call charge records • Distributors telephoning each other before price rises Brenton Philp

  9. Building the Case “Find an insider” • Interview ex-employees • Approach from ex-tanker driver Brenton Philp

  10. Distributor A Distributor C Distributor B Brenton Philp

  11. Distributor A Distributor C Distributor B Calls to A’s sites + A’s sites increase prices Brenton Philp

  12. Distributor A Distributor C Distributor B Calls to C’s sites + C’s sites increase price Calls to A’s sites + A’s sites increase prices Calls to B’s sites + B’s sites increase prices Brenton Philp

  13. Distributor A Distributor C Distributor B Calls to C’s sites Sometimes, one of C’s sites fails to increase prices Calls to A’s sites + A’s sites increase prices Calls to B’s sites + B’s sites increase prices Brenton Philp

  14. Distributor A Distributor C Distributor B Calls to C’s sites, but one of C’s sites fails to increase prices on time Calls to A’s sites + A’s sites increase prices Calls to B’s sites + B’s sites increase prices Brenton Philp

  15. Building the Case “Find an insider” • More approaches to ex-employees • Receptionist + others • Sales Clerks Brenton Philp

  16. Building the Case “Find an insider” • Use of immunity policy • Former 2nd-in-charge • Heavily involved Brenton Philp

  17. Building the Case “Find out whose price went up when + by how much” • Use of statutory powers • Documents • Particulars of price increases, phone bills + commercial dealings • Information • Admissions or other explanations Brenton Philp

  18. Building the Case “Find out who was speaking to whom when prices went up” • Use of Call Charge Records (CCR) Brenton Philp

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  24. Building the Case “Find out what the distributors have to say for themselves” • Use of statutory powers requiring individuals to give sworn/affirmed evidence • Junior staff 1st • Sales Reps • Leniency Applicant Brenton Philp

  25. Building the Case “Find out who else is involved” • Repeated investigative process • More reliance on high-level information from immunity witnesses Brenton Philp

  26. Building the Case • Interviewing retailers • Finding witnesses • Former and current employees evidence • Use of immunity + leniency policies • Finding particulars • CCR and price records • Use of statutory powers Leniency applicants Immunity applicants Price Records CCRs Former Employees 2-I-C Former Employees Clerk Accountant Clerk Former Employees Receptionist Drivers “Whistle blower” Retailers Brenton Philp

  27. Any questions???????

  28. “The fuel industry and business in Ballarat was, to an extent, a closed business. The distributors blurred the lines between work and social relationships because we were all in the same business and while we were competitors, we were not fiercely competitive. We considered each other as colleagues. In relation to competitors, there was definitely a general practice that each would notify the others of price moves or intended price moves in Ballarat (“price move calls”) and I participated in many price move calls…. Sometimes after price move calls, particular sites in the Ballarat area did not move their prices as expected. When this happened, I participated in more phone calls with our competitors about trying to get the sites to lift their prices (“reminder calls”)…. The price move and reminder calls worked not by each competitor ringing all the others but by passing messages through the contact for a particular competitor. We relied upon other people in the loop to pass the message through to certain competitors. We didn’t discuss these roles or say ‘you have to be the contact for such-and-such’ – they just fell into place because of the social or business relationships that the different competitors had with one another.” Brenton Philp

  29. Triton Swift Chisholm Balgee Brenton Philp

  30. Brumar Triton Triton Swift Swift Chisholm Chisholm Balgee Balgee Leahy Brenton Philp

  31. Brumar Brumar Triton Triton Triton United Swift Swift Swift Chisholm Chisholm Chisholm Ampol + Alien Balgee Balgee Balgee CORE 2nd LEVEL Leahy Leahy 3rd LEVEL Apco Brenton Philp

  32. Litigating the case – Determining the respondents • Inner Core • Made + received many many calls • Definite commitment to action: “Alright, we’ll play ball” • Acted as the Contact for other levels • 2nd Level • Made + received lesser number of calls • More ambiguous commitment to action: “We’ll have a go” • 3rd Level • Mainly received calls • Lesser commitment to action: “I’ll look into it” Brenton Philp

  33. Long standing arrangement About 10 years CCR + price records Specifics for 16 occasions over 3 months Litigating the case - Particularising the conduct Brenton Philp

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  36. Litigating the case – Issues arising • Evidence • Witness statements + Oral testimony • Issues of form • Delay by time of giving evidence • Some statements withdrawn because of admitting respondents • Defensive strategies • Corroboration • Thorough statement-taking process Brenton Philp

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  40. Litigating the case – Issues arising • Avoiding distractions • Unnecessary expert evidence • Claims of impecuniosity • General and specific deterrence • Recovery of Penalties Brenton Philp

  41. “The circumstances of the present case suggest that the substantially increased monetary penalties provided for by the legislature in respect of conduct contravening Pt IV of the Act, and the numerous occasions on which the Court has imposed substantial penalties on arrangements and understandings proscribed by Pt IV of the Act, have had little, if any, affect on the parties to the price-fixing understanding.” (Merkel J) “The penalty imposed must be substantial enough that the party realises the seriousness of its conduct and is not inclined to repeat such conduct. Obviously the sum required to achieve this object will be larger where the Court is setting a penalty for a company with vast resources. However, as specific deterrence is only one element and general deterrence must also be achieved, consideration of the party’s capacity to pay must be weighed against the need to impose a sum which members of the public will recognise as significant and proportionate to the seriousness of the contravention.” (Goldberg J) “It should not be thought that because a middle or lower management level employee is proceeded against for being involved in a contravention of a Pt IV provision, that the penalty will bear a relativity to the employee’s financial resources and that a penalty appropriate having regard to the seriousness of the contravention and the need for a general deterrence component to be included will not be imposed. If the end result is that such an employee may be compelled to seek the protection of the bankruptcy laws, that may only reflect the seriousness of the contravention and the need for a general deterrence component, rather than the conclusion that the penalty was inappropriate having regard to the financial resources of the employee.” (Goldberg J) Brenton Philp

  42. Analysis & Techniques in Cartel Investigations & Litigation • Working from base-up • ex-employees, insiders, immunity + leniency • Using statutory investigative powers • Secure evidence + exclude defences • Relying on witnesses’ evidence • Supplemented by corroboration • Framing the case to reflect conduct • Taking some managed risks • Undertaking thorough statement taking process • Adapting approach to meeting attacks on evidence Brenton Philp

  43. Any questions???????

  44. Post script: • APCO appeal • Geelong Petrol decision Brenton Philp

  45. Brenton Philp +61 2 6243 1220 Brenton.Philp@accc.gov.au Brenton Philp

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