ACCC Acts On Alleged Cartel Conduct From Electrical Cable Suppliers

Friday 5 December 2014 @ 8.53 a.m. | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) has issued proceedings in the Federal Court against five companies, six individuals and an industry association for alleged cartel and exclusionary conduct in the supply and acquisition of electrical cable throughout Australia.

The conduct primarily involves low voltage electrical cables used within residential and commercial buildings.

Background

After a detailed evaluation of the circumstances and evidence, and consultation with the Commonwealth Director of Public Prosecutions, the ACCC determined that civil rather than criminal action was appropriate in this case. The ACCC had regard to a number of factors in reaching this view, including that the alleged conduct was not clandestine.

In 2009 the ACCC commenced proceedings in the Federal Court in Adelaide against Olex and Prysmian’s foreign parent companies for alleged bid rigging and price fixing relating to the supply of high-voltage or extra high-voltage land or submarine cable, including supply to Australia. Those proceedings are continuing.

This matter is unrelated to the recent recall by 18 retailers and wholesalers of Infinity electrical cable due to safety concerns.

The Current Proceedings

Proceedings have been filed against:

  • Australia’s two largest manufacturers of electrical cable, Olex Australia Pty Ltd (Olex) and Prysmian Power Cables & Systems Australia Pty Ltd (Prysmian);
  • the electrical wholesaling businesses L&H (which is operated by Lawrence & Hanson Group Pty Ltd) and Rexel (which is operated by Rexel Electrical Supplies Pty Ltd and Australian Regional Wholesalers Pty Ltd);
  • six senior executives from these manufacturing and wholesaling companies; and
  • an industry association, Electrical Wholesalers Association of Australia Limited (EWAA).

Olex and Prysmian supply electrical cable and other services throughout Australia from manufacturing facilities largely based in Victoria (Olex) and NSW (Prysmian).

The ACCC Allegations

The ACCC alleges that during 2011, Olex, Prysmian, Rexel and L&H entered into and gave effect to an arrangement that included provisions which had the purpose of:

  • preventing, restricting, or limiting the supply of electrical cable by Olex and Prysmian directly to contractors and other customers;
  • allocating electrical contractors and other customers to the wholesalers;
  • preventing, restricting, or limiting the acquisition of electrical cable by certain wholesalers from suppliers other than Olex and Prysmian; and
  • fixing, controlling, or maintaining the price of cutting services provided by Olex and Prysmian.

The alleged conduct mainly occurred at industry association meetings. The ACCC is alleging that the EWAA aided, abetted, and/or was knowingly concerned in the contraventions of the manufacturers and wholesalers.

The ACCC also alleges that Rexel and Prysmian engaged in bid rigging by making and giving effect to a contract, arrangement, or understanding that Prysmian would submit a higher bid to Caltex than the price it submitted to Rexel for the supply of electrical cable for an upgrade of the Kurnell Refinery in Botany Bay, NSW.

The ACCC Chairman Rod Sims commented:

“Identifying and prosecuting cartel conduct is a key priority for the ACCC because of the significant damage that cartels can cause to competitors and consumers by driving up prices.

This alleged cartel spanned most of the major players in the supply chain for electrical cable, so the potential for harm to customers such as electricians and commercial contractors, and therefore ultimately businesses and households, was considerable.

Indeed, the investigation of this matter was triggered by user complaints.

At the time the arrangement was entered into, manufacturers were supplying not only to wholesalers but also directly to contractors and end-users (such as industrial companies like BHP and Rio-Tinto), and wholesalers were increasing the amount of electrical cable they imported. We allege that the alleged conduct was entered into to address these issues.

This case also serves as a warning that the ACCC will act if it suspects an industry association or any other forum is being used as an apparatus for collusion.”

It is also alleged by the ACCC that a senior executive from each of Olex, Prysmian, Rexel, and L&H aided, abetted, counselled, procured, induced, and/or was knowingly concerned in the alleged conduct of their company.

In addition, the ACCC alleges that two senior executives from wholesaler CNW Pty Ltd attended EWAA meetings on behalf of the wholesaler buying group Gemcell, and were involved in the contraventions by the manufacturers and wholesalers.

Penalties Sought by the ACCC

The ACCC is seeking pecuniary penalties, declarations, and costs against the companies and individuals, as well as orders for compliance programs against the companies.

The matter has been filed in the Federal Court in Melbourne and is listed for a directions hearing on 6 February 2015.

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Sources:

ACCC takes action against electrical cable suppliers for alleged cartel – ACCC Release MR 294/14

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