ACCC v Australian Egg Corporation Limited [2016] FCA 447: AECL Found Guilty of Cartel Conduct
Friday 6 May 2016 @ 9.44 a.m. | Legal Research | Trade & Commerce
The Federal Court has ordered Zelko Lendich, who is a former director of the Australian Egg Corporation Limited (AECL) and the former managing director of Farm Pride Foods Ltd (Farm Pride), to pay a pecuniary penalty of $120,000 for an attempt to induce a cartel arrangement between competing egg producers, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).
The Court declared that between 19 January and 8 February 2012, Mr Lendich attempted to encourage certain egg producers in Australia to enter into an arrangement or arrive at an understanding that would limit the production and supply of eggs in Australia.
Background
The orders were made on the basis of an admission by Mr Lendich that he attempted to induce the egg producers to make a cartel arrangement in contravention of ss 44ZZRD, 44ZZRJ, 155 of the Competition and Consumer Act 2010 (Cth) (the Act).
The ACCC instituted proceedings in May 2014 alleging that AECL and the five other corporate and individual respondents attempted to induce egg producers who were members of AECL to engage in cartel conduct.
The proceedings concerned allegations by the ACCC that AECL, Farm Pride, and Twelve Oaks Poultry, together with Mr Kellaway, Mr Lendich and Mr Ironside had attempted to induce egg producers who were members of AECL to cull hens or otherwise dispose of eggs, for the purpose of reducing the amount of eggs available for supply to consumers and businesses in Australia.
On 10 February 2016, the Court found that while the ACCC had established that the respondents intended that egg producers should take action to address and correct an oversupply of eggs, it did not establish that this action was intended to be pursuant to an agreement or understanding involving reciprocal obligations by competing producers.
What function does the AECL perform?
The AECL is an industry corporation that collects levies for promotional activities and research and development activities from member egg producers. At the relevant time, AECL had between 100 and 150 egg producer members.
Response from the ACCC
Commenting on the judgment in a recent ACCC Media Release, the ACCC Chairman Rod Sims said:
“The ACCC brought this proceeding against the AECL and competing egg producers because it was concerned that the actions of the respondents, including Mr Lendich, if successful, could have reduced the production and supply of eggs and ultimately increased the price for consumers and other businesses. We consider that this penalty sends a strong deterrence message to directors of industry and business associations, and business managers generally, and underscores the significant legal risks that may arise from bringing competing firms together without appropriate safeguards being in place.”
Admission of Cartel Conduct and penalties imposed
In subsequently dealing with the ACCC’s case against Mr Lendich, Justice White found [at para 2] Mr Lendich’s admission included an admission of an intention to induce a cartel arrangement or understanding between competing egg producers, and accordingly the Court was prepared to find that Mr Lendich had contravened the Act.
In addition to imposing a penalty, His Honour also made orders that Mr Lendich attend and undertake a compliance program, and pay an agreed amount towards the ACCC’s costs of the proceedings [see para 42].
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Sources:
ACCC v Australian Egg Corporation Limited [2016] FCA 447 (29 April 2016)
Federal Court orders Zelko Lendich to pay $120,000 penalty for attempt to induce cartel arrangement between egg producers – ACCC Release MR 68/16
