Close scrutiny and tough sanctioning of cartel conduct (involving price-fixing, market sharing, output reduction, or bid-rigging by competing businesses) have been a focus of competition law and enforcement across the globe for the last decade and a half. A growing number of countries have criminalized or are contemplating criminalization of this type of conduct. Criminal treatment is based on the view that cartels represent a widespread and potent threat to competition and hence to domestic and global economic welfare. The economic rationale for a penal approach has been accompanied by strong moral rhetoric by enforcement officials, tarnishing cartelists as cheats and thieves.
Australia's introduction of cartel offenses and criminal sanctions in 2009 is consistent with this international trend. At the same time it represents a significant shift in the approach taken to regulating cartel conduct in this country. The shift is from a fairly benign regime involving civil penalties imposed at relatively low levels, to a heavy-handed one threatening the stigma of conviction and a jail sentence of up to ten years.
Consistent with the position taken by criminalization advocates world-wide, the Australian reform was justified on the grounds that having a criminal regime is the most effective way to deter cartel conduct (through the fear of criminal sanctions-principally jail) and induce compliance (through the stigmatizing effect of the criminal process). These were the arguments made by the Australian Competition and Consumer Commission ("ACCC"), the initiator and leading proponent of the reform, and the Australian government.
However, research carried out in the course of the University of Melbourne's Cartel Project exposed weaknesses in the key justifications given for cartel criminalization. It revealed problems with the assumptions that are made about the likely effects of criminalization on business behavior both as a deterrence mechanism and as a moral inducement.
A year after criminal sanctions took effect in Australia, the researchers conducted a large scale survey of the Australian public, including a representative sample of 567 business people who were likely in their work life to be involved in activity to which the anticartel laws apply (for example, in setting prices or production levels or tendering for contracts).
Interviews were also done with 25 business people who have been subject previously to civil enforcement proceedings by the ACCC, as well as with a range of other stakeholders from the legal profession, the judiciary, consumer movement, academia, and the media, as well as from the ACCC itself.