The Guardian 24 October, 2007
The Visy-Amcor cartel:
Meagre punishment, crocodile tears
Peter Mac
The Federal court case against packaging giant Visy has revealed massive corporate greed, hypocrisy and cynicism. The Australian Consumer and Competition Commission (ACCC) took Visy to Federal Court for 193 breaches of the Trade Practices Act, involving its establishment of a cartel with its rival Amcor, resulting in significant price rises for its customers, and hence for Australian families. Amcor has been granted immunity from prosecution because it blew the whistle on the arrangement.
The two companies control about 90 percent of Australia’s $1.9 billion cardboard box industry, and also produce bottles and cans. Early in 2000, after a price war, both firms agreed that they would not poach each other’s customers, and would set mutual price rises. According to court testimony, Amcor did not thereafter compete with Visy to supply Cadbury Schweppes with bottles, and when Coca-Cola Amatil sold its PET bottle plant to Visy, Amcor didn’t even bid.
During the court hearing, the ACCC recommended that $38 million should be paid in fines. Visy’s owner, Richard Pratt, agreed that he and the firm would pay $36 million, and Visy CEO Harry Debney agreed to pay $1.5 million, if Federal Court Judge Peter Heerey imposed these penalties.
Pratt claimed he had a "poor appreciation of the complexities" of the Trade Practices Act. He stated plaintively "I know a lot more now than I knew then. I sincerely regret what’s happened and I accept ultimate responsibility."
Visy’s lawyers stated sorrowfully that their clients "have been contrite in accepting that they have contravened the TP Act, but also in accepting the seriousness of their contraventions. They have apologised for their conduct. They regret the circumstances in which they occurred and they repent".
Nevertheless, they immediately claimed that: "These increases would have taken place in any event, and if that’s right we can’t accept there was any loss incurred because of the collusion".
Real penalties?
Companies which were forced to pay extra costs because of the Visy/Amcor cartel include agricultural firms which are wrestling with the effects of the drought, and which could crash because of extra packaging costs. They include the tiny cooperative, the Jarrah Creek Central Packaging Shed, which is leading a separate class action suit against the two companies.
The Visy prosecution was the first major successful case for several years, and twenty other cartel cases are now being investigated. Under the immunity policy, introduced in 2005, whistleblowers are granted immunity if they reveal all to the ACCC, provided they are not the ringleader.
According to Graeme Samuels, ACCC Chairman, cartels are "a form of theft". Commentator Malcolm Maiden has stated that "Cartels are a cancer in the capitalist system, which stands or falls on the concept of fair competition".
However, the capitalist system is particularly ineffectual in stamping out cartels. As Maiden has noted, the imposition of financial [penalties] alone are "little more than an additional cost of doing business": $38 million might seem a lot, but according to lawyers involved in the Visy/Amcor class action, both companies enjoyed an extra profit of some $700 million from the cartel!
Moreover, granting immunity is a questionable practice. For example, even though Amcor claim they did not suggest forming a cartel with Visy, they nevertheless went along with it enthusiastically. Moreover, the practice is open to dispute. Visy is now stating that it was Amcor, who were being outperformed by Visy, which instigated the cartel.
Other sanctions are feasible. Under legislation passed last February the ACCC can now forbid directors of companies involved in collusion from becoming directors of other companies. However, the ACCC cannot bar Richard Pratt (now a director of 119 companies) or Harry Debney (now the director of the Packaging Council of Australia) from directorships, because the Visy case precedes the passing of that legislation, which cannot be used retrospectively.
ASIC has the legal power to take action, but insists that the Visy/Amcor case must be handled by ACCC. It seems that neither organisation will take action against the directors in the case.
Three years ago the Howard Government stated that it would make collusion a criminal act, under which offenders would face jail sentences. However, it has not introduced the legislation.
Kevin Rudd has promised to make collusion a criminal act if he becomes Prime Minister. But don’t hold your breath. After all, both Visy and Amcor made big donations to the major political parties. (Pratt himself gave $400,000 to the Liberals, $100,000 to federal ALP and $20,000 to Nationals). Australia’s political history is littered with examples of honourable policies compromised by financial obligations, and the criminalisation of cartel collusion will probably provide another.