Article acc revised cartel immunity policy

Considering the ACCC’s revised cartel immunity policy

04 November 2019

The ACCC has released a revised Immunity and Cooperation Policy for Cartel Conduct (Immunity Policy) – the first significant update of the policy since 2014. The revised Immunity Policy applies to all immunity applications made from 1 October 2019.

In parallel, the Commonwealth Director of Public Prosecutions (CDPP) released a revision of its prosecution policy which works together with the ACCC Immunity Policy. The ACCC also released revised Frequently Asked Questions (FAQs) which provide more practical guidance.

The revised Immunity Policy[1] narrows the circumstances in which immunity is available, and is intended to provide greater clarity as to what is expected of an immunity applicant and how the ACCC will treat information provided to it during the ‘proffer’ and cooperation stages of an immunity application.

The ACCC has also set up a whistleblower portal, which will allow whistleblowers to report information anonymously but without seeking immunity.

A tighter timeframe to seek immunity

If the ACCC is satisfied that it is not already in possession of information that is likely to establish at least one cartel contravention (whether civil or criminal), civil immunity will be granted on a conditional basis.

The prior edition of the Immunity Policy identified this window of opportunity as closing once the ACCC has received ‘written legal advice that it has reasonable grounds to institute proceedings for cartel conduct’, which could take some time. The revised Immunity Policy narrows this window of opportunity significantly, particularly where the ACCC may receive materials from international regulators, as opposed to through its own investigations. This emphasises the importance of testing on a hypothetical anonymous basis whether a ‘marker’ (discussed below) is available as soon as possible.

This differs from the UK OFT’s leniency guidelines which allow the possibility that leniency but not immunity may be granted to a qualifying immunity applicant.[2] In the United States, Type A leniency is available if the Department of Justice has not yet received information about the activity from another source, and Type B immunity is available if the Department of Justice has not yet received evidence against the company that is likely to result in a sustainable conviction.[3]

A narrower scope of conduct can be immunised

Following the introduction of a prohibition on anticompetitive ‘concerted practices’ in 2017, the ACCC expanded the application of the Immunity Policy to cover concerted practices, as well as cartel conduct. The revised Immunity Policy winds back that expansion, and from 1 October 2019, immunity will no longer be available for concerted practices which are not cartel conduct.

The ACCC recognises the potential for some conduct to constitute both cartel conduct and a concerted practice.[4] However, this change in policy is unsympathetic to the issue. It is also at odds with other jurisdictions, such as the UK and EU, where immunity can be available for concerted practices.[5]

This puts corporations evaluating conduct at the margins of cartel conduct and a concerted practice in a very difficult position. If a corporation makes an immunity application, but the ACCC concludes the conduct only constitutes a concerted practice, it will have disclosed information about unlawful conduct to the ACCC and conditional immunity will not be granted. In these cases, the Immunity Policy makes clear[6] that the ACCC can use that information indirectly[7] in an investigation as to whether the concerted practices prohibition (or any other prohibition) has been contravened. Such an applicant can have recourse to the ACCC’s Cooperation Policy for Enforcement Matters, under which the ACCC may decide not to prosecute certain conduct or to provide partial immunity.

An additional narrowing of the scope of the Immunity Policy is that it will not apply to corporations or individuals who have unilaterally attempted (without success) to get others to engage in cartel conduct. However, a current or former individual employee, officer or director of a corporation that attempted to cause others to engage in cartel conduct can be eligible for immunity if they meet all of the immunity conditions and can provide material assistance in proceedings against another party. The FAQs indicate that this may cover circumstances where an individual is able to provide information about their current or former employer attempting to induce a competitor to form a cartel.

New requirements to obtain immunity

The majority of conditions to be satisfied for immunity to be granted have not changed.

In summary, the process starts by approaching the ACCC (which can be done on an anonymous or hypothetical basis), describing the nature of the conduct in sufficient detail to allow the ACCC to confirm if any other person has applied for immunity or sought a marker for the same conduct.

If the applicant is first in, they will be granted a ‘marker’, preserving their position for a limited period of time, to allow them to demonstrate an entitlement to conditional immunity. The process then moves to the ‘proffer’ stage, in which the holder of the marker must demonstrate that they meet the requirements for condition immunity, being that:

cartel conduct has been disclosed and the corporation admits it engaged in that conduct as a principal or ancillary capacity;
the applicant is ‘first in’ to apply for immunity;
the corporation has ceased or will cease its conduct;
the corporation’s admissions are a ‘truly corporate’ act as opposed to individual admissions;
the corporation has provided full frank and truthful disclosure and has cooperated fully and expeditiously, and will proactively do this on a continuing basis (the Immunity Policy has elaborated this obligation to make clear that the corporation must take all reasonable steps to procure the assistance and cooperation of witnesses and to provide sufficient evidence to substantiate its submissions);
the corporation has not coerced others to participate in the cartel;
the corporation has entered into a cooperation agreement (while this previously occurred, the formalisation as a condition for conditional immunity is a new requirement); and
the corporation will maintain confidentiality about its status as an immunity application, the ACCC’s investigation and any ensuing proceedings. This requirement is expressly stated in the revised Immunity Policy – in the prior version it was not expressly identified, but was mentioned as an aspect necessary for final civil and criminal immunity.

Applicants for ‘derivative immunity’ (i.e. identified officers and staff of a corporate immunity applicant) are also required to enter cooperation agreements if they seek immunity.

At the same time, the CDPP will receive a recommendation from the ACCC as to whether immunity from criminal prosecution should be granted. The CDPP will exercise its own independent discretion in assessing the immunity application. If the ACCC ultimately does not grant immunity, or if the marker lapses or is withdrawn, the information provided in the proffer will not be used by the ACCC or CDPP directly as evidence against the immunity applicant, but may use that information indirectly.[8]

Generally, an immunity applicant will be informed whether it has received conditional criminal immunity (by the CDPP issuing a ‘letter of comfort’[9]) at the same time it is informed if the ACCC has granted conditional civil immunity. The letter of comfort states that the CDPP undertakes that the corporation (or individual) will not be prosecuted for the cartel conduct so long as they maintain eligibility criteria for conditional immunity and comply with their cooperation agreement.

The conditional immunity will not become finalised until all stages of the co-operation process have concluded, which may extend to giving evidence in proceedings against other cartel participants either in a civil or criminal prosecution.

Key differences under the revised policy

The key differences or clarifications under the revised Immunity Policy are as follows.

Cooperation Agreements. As part of the immunity application process, an applicant will now be required to enter a pro forma Cooperation Agreement with the ACCC. The Cooperation Agreement will specify the actions expected of the applicant and the date by which each action is to be completed. For corporate applicants, it will extend to seeking to make relevant staff available for witness interviews, providing statements and cooperating fully.
Unhelpful staff. The revised Immunity Policy makes clear that, if a corporation seeks immunity but a staff member is unwilling to provide the necessary assistance, it will not be fatal to the corporate immunity applicant’s application. However, the ACCC will expect the corporation to have taken all legal steps available to it (including dismissal of employees who refuse to co-operate) to seek to procure the staff member’s cooperation. The FAQs make clear that, in these cases, it will be necessary to provide an explanation for the witness’s non-cooperation.
What does the proffer require? During the ‘proffer’ process, the applicant has to provide the ACCC with a detailed description of the cartel conduct, and may be required to provide supporting documents and witnesses. The proffer will need to disclose sufficient information to allow the ACCC to be satisfied that the conditions for conditional immunity are satisfied. The Immunity Policy now expressly states that the ACCC may not regard the proffer stage as completed until after it has taken signed statements from relevant witnesses.

The FAQs provide guidance as to the kind of information that should be disclosed in a proffer – which can be made in writing or orally. If made orally, it will likely be recorded by the ACCC for the purpose of allowing it to seek legal advice from its own advisers as to whether the information discloses that cartel conduct has occurred.

While each case is different, the proffer (over time) would generally be expected to include:
- a description of the parties involved, and corporate structures;
- a list of all derivative immunity applicants (including related corporate entities and individuals) that each satisfy the criteria for conditional immunity;
- information about the relevant product or service, end users and the industry;
- details of the conduct, including time period, geographic scope, how agreements were made, evidenced and put into effect, how the conduct was concealed and whether it is ongoing;
- a description of the impact of the conduct (e.g. volume of commerce affected or relative price increase) and any data supporting that assessment; and
- details of the steps taken by the applicant to investigate the conduct (including how the conduct was discovered, identification of potential witnesses, a description of records available to the applicant including key words used in searches and the locations searched (both physical and electronic), and an explanation concerning any witnesses and records that are known to exist but are not available at that point in time).

Waivers to share information. The revised Immunity Policy provides clearer guidance as to when an immunity applicant will be expected to provide a ‘waiver’ permitting the ACCC to disclose information provided by the applicant to foreign competition regulators. As a matter of course, the ACCC will usually request waivers when international conduct is involved. The FAQs make clear that, while a grant of conditional immunity may not be dependent on an applicant granting a waiver, its unwillingness to grant the waiver may call their cooperation into question in the absence of a convincing justification. The ACCC recognises that a valid reason to not provide a waiver would be:
- to prevent the sharing of information with a jurisdiction where the immunity applicant may not be eligible for immunity – and where the sharing of that information could expose them to criminal prosecution;
- because the immunity applicant may be compelled by a law enforcement agency or a court of law to maintain confidentiality.
Use of information provided to ACCC and confidentiality. The immunity guidelines provide greater clarity as to how the ACCC will use information provided in support of any immunity application. This is of particular importance in assisting applicants to make a decision to seek immunity where there is the prospect that conditional immunity may not be granted or may be revoked. In short:

Status	Information Use
Conditional immunity granted	ACCC will not use information provided by the applicant directly as evidence in, or indirectly in respect of, civil proceedings against the applicant under any other provision of the Competition and Consumer Act 2010 in respect of the cartel conduct for which immunity was granted
Conditional immunity not granted (including lapse of marker or withdrawal)	ACCC/CDPP will not use information provided by the immunity applicant directly, however the ACCC may use such information indirectly to further its investigation, including gathering evidence that could be used against the applicant or applicants for derivative immunity
Conditional immunity revoked	ACCC/CDPP may use any information provided by immunity applicants against them or any derivative immunity applicant in any civil or criminal proceedings

The ACCC also makes clear in the FAQs that, while it will use its best endeavours to protect any confidential information provided by an immunity applicant (including their identity) from being disclosed to third parties (that is, parties who are not participants in the cartel), there is no certainty that this will occur. The ACCC and the CDPP are subject to obligations to make information available to a defendant in any criminal proceedings as a matter of fairness owed to a defendant in those circumstances.

Certification of satisfaction of obligations. The ACCC will require an immunity applicant (and each derivative immunity applicant) to certify in writing (in a form acceptable to the ACCC) at the end of the evidence-gathering phase of the ACCC’s investigation that it has fully complied with its obligations under the Immunity Policy. That certification will be required to confirm that the applicant has conducted all reasonable searches and provided all relevant witnesses, information and documents to the ACCC. The Immunity Policy emphasises that it is an offence to knowingly provide information to the ACCC or the CDPP which is false or misleading.

This is an approach that is in line with the recent ‘Use of Section 155 Powers’ guidance published by the ACCC concerning its powers under section 155 of the Competition and Consumer Act 2010 – that the ACCC ‘prefers’ the recipient of a 155 notice to certify that they have undertaken a careful and thorough search for all responsive documents. This also aligns with the Corporate Cooperation Guidance published in August 2019 by the UK Serious Fraud Office, which requires an organisation to have an independent lawyer certify that any privilege claims made by that organisation are supportable.

The ACCC’s pro forma Cooperation Agreement allows for specific aspects of the cooperation required by the ACCC to be amended on a case-by-case basis. Some foreign regulators have taken the view that proper cooperation in some regulatory investigations requires the applicant for leniency or immunity to go above and beyond what the law requires – which in some cases has seen regulators require that corporations will voluntarily waive claims to legal professional privilege.

Key takeaways

Given the use the ACCC can make of information it receives if the conduct is not accepted as cartel conduct, the changes in the revised Immunity Policy will require a much closer consideration of circumstances that may fall to be analysed as either a concerted practice or a cartel.
Given the narrower window in which immunity may be available, organisations will have to react quickly to enquire if a marker is available, and initiate internal investigations as soon as they become aware of potential cartel conduct to maximise the chance of making a successful immunity application.
The ACCC expectations about the cooperation required from immunity applications are becoming ever more extensive, prescriptive and burdensome.

^[1]^{The ACCC administers a policy intended to detect cartel conduct that provides complete immunity from prosecution to the first eligible cartel participant to cooperate fully with the ACCC.}

^{[2] UK OFT Applications for leniency and no-action in cartel cases, paras 2.42- 2.43: “In exercising its discretion in relation to the grant of immunity or leniency in cases where it has a pre-existing investigation into cartel activity, the OFT may in some cases conclude that it will no longer accept any further leniency applications.
2.43 This may be because the OFT considers that it already has sufficient information to establish the infringement or offence in relation to all relevant parties, or that any additional information is unlikely to add significant added value such as to justify the resources necessary to handle the application…”}

^{[3] Type A leniency provides greater certainty of derivative immunity for employees than Type B leniency; see Q 22 in DoJ FAQs: https://www.justice.gov/atr/frequently-asked-questions-regarding-antitrust-divisions-leniency-program.}

^{[4] ACCC Guidelines on Concerted Practices, paras 8.4- 8.5.}

^{[5] See the UK OFT Applications for leniency and no-action in cartel cases and EU Notice on Immunity from fines and reduction of fines in cartel cases}

^{[6] Paras [8] and [83] and FAQs Q 59}

^{[7] Evidence is used directly where the actual item of evidence would be presented in a court proceeding – e.g. an admission made, or a document provided in the cooperation process. Evidence is used “indirectly” where the ACCC or CDPP uses information derived from that direct evidence to further its investigation or in court proceedings– by reason of using information disclosed in the evidence to locate other items of evidence that can be used to build a case. For example – an oral admission may merely refer to an email, but not provide it. The email, obtained by other means could be deployed.

[8] Policy [83] and 60

[9] Issued under Section 6D of the}^{Director of Public Prosecutions Act 1983 (Cth)}

Authors