Advertisement

Steel giant fined $57.5m over bid to fix pricing

Australian’s biggest steel manufacturer has been fined $57.5 million and its former sales chief, $575,000, for breaching cartel provisions.

BlueScope Steel Limited and its former general manager sales and marketing Jason Ellis were handed the penalties today by Justice O’Bryan in the Federal Court in Melbourne, as a result of proceedings brought by the Australian Competition and Consumer Commission (ACCC).

In December last year, the Court found that between September 2013 and June 2014, the steel maker and Mr Ellis attempted to induce eight steel distributors in Australia, and overseas manufacturer Yieh Phui, to enter agreements to maintain or raise the price of flat steel products supplied in Australia.

ACCC Commissioner Liza Carver said at the time the decision was an important one that could strengthen the ACCC’s position in future cases of cartel conduct.

“If successful, these attempts would have resulted in agreements between competitors which reduced price competition in the Australian flat steel market and increased prices for flat steel products which are widely used in Australia,” Ms Carver said.

“Cartels not only disadvantage other businesses which are competing lawfully, but can also lead to consumers paying higher prices.”

Advertisement

In his decision today, Justice O’Bryan said most of the competitors targeted in the inducements held a significant national market share or a significant share in at least one state or territory market.

He said it was not possible to conclude that BlueScope ultimately made any financial gain but “there can be no doubt that BlueScope’s conduct was motivated by the potential for financial gain, and the Court ought to have regard to the overall value of the trade and commerce that could potentially have been affected by the offending conduct if it were successful”.

He made similar remarks about the potential for loss and damage had the attempts to induce cartel conduct succeeded.

“In Yazaki Corporation, the Full Court observed that an appropriate penalty for cartel conduct needs to reflect that such conduct is ‘generally regarded as the most pernicious of all breaches of competition law’, is ‘often attended by secrecy’ and is ‘notoriously difficult to identify’, and may only be detected a long time after it manifests,” he said.

“Each of those descriptions is applicable to the attempts to induce cartel conduct the subject of this proceeding.

“The benchmarking strategy and the overseas mill strategy were deliberate and systematic strategies, the aim of which was to bring about an increase in prices for the supply of flat steel products, both at the manufacture/import level of the market and at the distribution level of the market.

Advertisement

“Ultimately, none of the attempts to induce cartel conduct were successful. In some instances, the attempts were rebuffed because the counterparties believed that BlueScope’s proposal would or might involve a contravention of the law; in other instances, the attempts were ignored because the competitive pressure from imported steel made BlueScope’s proposal commercially unviable.

“It is significant that the offending conduct did not cease because BlueScope management realised that the goal being pursued was prohibited by the Act.”

The ACCC instituted civil cartel proceedings against the company and Mr Ellis in August 2019.

Mr Ellis was convicted and sentenced to eight months’ imprisonment in December 2020 for inciting the obstruction of an ACCC investigation, after he encouraged two other BlueScope employees to give false information and evidence to the ACCC.

For BlueScope, the ACCC had sought a fine of $83 million (if the maximum penalty for each attempt is $10 million) or $120 million (if the maximum penalty for six of the attempts is 10 per cent of turnover).

For Mr Ellis, the ACCC had sought a fine of between $600,000 and $800,000; a seven-year disqualification from managing corporations; and a non-indemnification order covering any applicable insurance policy in regards to the fine.

Advertisement

Justice O’Bryan declined to make the disqualification order but made the indemnification order.

He also ordered BlueScope and Mr Ellis pay the ACCC’s court costs.

Share this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Search by keyword