ACCC Investigates Claims of Aboriginal and Mining “Cartels”

Mining companies and Aboriginal groups allegedly engaged in "cartel conduct", including price fixing for work involving ancient indigenous heritage sites, according to claims investigated by the Australian Competition and Consumer Commission (ACCC).

The ACCC will not act on the claims but will monitor the situation, and asked the groups involved to review their business practices.

What is a Cartel?

As stated by the ACCC, the Competition and Consumer Act 2010 (Cth) (the Act) requires businesses to compete fairly. Most Australian businesses increase their customer base and their profits honestly through:

• continual innovation to improve products or services;
• sales and marketing showing the genuine benefits of their products or services; and
• keeping costs down so they can offer competitive prices.

Businesses struggling to compete fairly and maintain profits may be tempted to deliberately and secretly set up or join a cartel with their competitors. Under the Act, ss 44ZZRA, 44ZZRF, 44ZZRG, 44ZZRJ and 44ZZRK, a cartel exists when businesses agree to act together instead of competing with each other. This agreement is designed to drive up the profits of cartel members while maintaining the illusion of competition.

There are certain forms of anti-competitive conduct that are known as cartel conduct. They can include:

• price fixing, when competitors agree on a pricing structure rather than competing against each other;
• sharing markets, when competitors agree to divide a market so participants are sheltered from competition;
• rigging bids, when suppliers communicate before lodging their bids and agree among themselves who will win and at what price; and
• controlling the output or limiting the amount of goods and services available to buyers.

Cartels can be local, national or international. 

Why are Cartels Illegal?

The Act not only prohibits cartels under civil law, but makes it a criminal offence for businesses and individuals to participate in a cartel. They are immoral and illegal because they not only cheat consumers and other businesses, they also restrict healthy economic growth by, for example:

• increasing prices for consumers and businesses through artificially inflating input and capital costs across the supply chain, including the cost of buildings and equipment rent, interest and decreased opportunities over the life of an asset;
• reducing innovation and choices by protecting their own inefficient members who no longer have to compete so don’t bother to invest in research and development; and
• reducing investment by blocking new industry entrants that might invest in opportunities, economic growth and jobs.

Previous ACCC Cartel Conduct Investigations

The ACCC has successfully investigated and prosecuted instances of Cartel Conduct. Some have included:

• Bid rigging - This case involved price fixing, bid rigging and market sharing by four foreign companies that supplied rubber hosing to transfer oil and gas from production and storage facilities to offshore tankers including Dunlop Oil & Marine, Bridgestone Corp., Trelleborg Industrie SAS and Parker ITR;
• Attempted Collusive Quotation – In a remote region of SA, a truck and tractor mechanic quoted on the repair to a front end loader. The customer stated that they would seek a competitive quote. As there was only one other operator in the region, the mechanic wrote a note on the quote inviting the other mechanic to "cover" him on this job (quote higher) and that he would return the favour in the future. He asked his secretary to fax the quote to his competitor. The secretary made an error and faxed the note to the customer, who promptly informed the ACCC. The matter was settled by the mechanic giving court enforceable undertakings not to repeat the conduct, among other things; and
• Queensland pre-mixed concrete cartel - The Pioneer, Boral and CSR cartel involved bid rigging, price fixing and market sharing in the pre-mixed concrete market in south-east Queensland from 1989 until 1994. The participants had more than 50 regular meetings and phone conversations. In addition to fixing prices, they agreed on market shares and not to compete on specified major projects.

The Current Investigation

Critics say Aboriginal cultural knowledge has been "commodified" and important artefacts and sites are being destroyed to make way for mining developments. However, mining companies insist they have acted properly.

Mining companies can pay groups known as "registered Aboriginal parties" to conduct field surveys and manage or salvage artefacts affected by mining development.

The ACCC investigated claims involving Rio Tinto Coal, Ashton Coal and NuCoal Resources, whereby all registered Aboriginal parties were allegedly paid the same pre-agreed fixed rate for their services. It also investigated claims that only groups listed on a roster held by the mining companies were given work.

It said such conduct, if it occurred, would constitute price fixing and market sharing, and would be anti-competitive. The ACCC expressed "concerns in this matter" but said "it will not take any further action … at this stage".

It asked involved parties to "review business practices to comply with the requirements of the [law]" and may consider action "should further allegations be brought to its attention".

Responses to the Allegations

A Rio Tinto Coal Australia spokesman said the company ran a "culturally and commercially appropriate procurement process", involving more than 40 Aboriginal parties in cultural heritage assessment.

An Ashton Coal spokesman said it thoroughly reviewed the way it acquires cultural heritage field services and "we have acted appropriately on all occasions".

A NuCoal spokesman said the company denied any wrongdoing but "fully co-operated" with the ACCC investigation, which "concluded that no action was warranted".

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ACCC investigates claims of Aboriginal and mining 'cartels' - Article from smh.com.au

Cartels case studies & legal cases - Information from accc.gov.au