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Japanese company guilty of cartel conduct

Japan based shipping company, Nippon Yusen Kabushiki Kaisha Ltd (NYK), was convicted and fined $25 million today in the Federal Court of Australia. It was the first modern criminal prosecution of cartel conduct in Australia.  The cartel involved collusion in fixing the freight rates and market shares for the international shipping of motor vehicles to Australia.

NYK is the parent company of a global logistics and bulk shipping group based in Japan with over 33,000 employees.  The Car Carrier Group within NYK’s bulk shipping division  provides ocean transport services to supply new passenger cars, trucks, buses and commercial vehicles from overseas manufacturers to Australia.

From at least February 1997, NYK had an arrangement with other global vehicle shipping companies, to the effect that they would not seek to alter their existing market shares of cargo from manufacturers or otherwise try to win existing business from each other (a cartel referred to as the Respect Agreement).   Between 24 July 2009, when legislation criminalising cartel conduct commenced in Australia, and 6 September 2012, when Japanese and United States authorities raided the offices of NYK and a number of other shipping companies, NYK gave effect to the cartel with  other global shipping companies and their subsidiaries.

Three separate cartel provisions relating to fixing freight rates, bid rigging and customer allocation were undertaken. It involved six different shipping routes for vehicles to Australia, from India; Thailand; Japan; Indonesia; North America, and Europe; and shipping services supplied to 10 vehicle manufacturers.

The offending occurred over a three year period during which 69,348 new vehicles were imported into Australia through contracts entered into as a result of bids affected by the conduct.

NYK co-operated with Australian authorities and pleaded guilty to one rolled-up count of giving effect to cartel provisions, contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth). The maximum penalty was $100 million.

In handing down sentence, his Honour Justice Wigney stated:

‘Cartel conduct of the sort engaged in by NYK warrants denunciation and condign punishment. It is inimical to and destructive of the competition that underpins Australia’s free market economy. It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers. The penalty imposed on NYK should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly.’

His Honour stated that but for NYK’s early guilty plea and co-operation, the fine would have been $50 million.

Shane Kirne, Deputy Director, CDPP, described the case as a milestone in the prosecution of cartels in Australia:

‘This was the first prosecution of a cartel since legislation criminalising such conduct commenced in 2009. The case demonstrates that no company, big or small, is above the law. The conviction and penalty imposed on NYK will act as a significant deterrent for others contemplating illegal conduct’, Mr Kirne said.

The Australian Competition and Consumer Commission referred the matter to the CDPP and played an active role in support of the proceedings.

The investigation and prosecution of other alleged cartel participants is continuing.

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