Gas companies fined $8.3 million as cartel conduct blows up

Gas companies fined $8.3 million as cartel conduct blows up

Two gas companies and several senior executives have been hit with fines totalling more than $8.3 million for engaging in cartel conduct.

It’s the second round of litigation against cartel conduct this year, with the Australian Competition and Consumer Commission taking action against the bearing industry in May over several Japanese executives who had conspired to fix prices in Australia.

The Federal Court found Renegade Gas, which trades as Supagas NSW, and Speed-E-Gas, a subsidiary of Origin Energy, formed a “no-poaching” understanding from 2006 until 2011.

The companies each agreed to not supply liquid petroleum gas cylinders for forklifts (forklift gas) to each other’s customers.

It was found their behaviour included not approaching certain customers of the other, not offering to supply forklift gas to certain customers of the other, or offering to supply gas only at prices that they knew were unlikely to induce the customer to change suppliers; and communicating with each other for the purposes of implementing the understanding.

Justice Gordon ordered Renegade Gas to pay a penalty of $4.8 million, and Speed-E-Gas a penalty of $3.1 million, with the ACCC attributing Speed-E-Gas’s lower penalty to its cooperation at the early stages of its investigation.

The former managing director of Renegade Gas, Paul Berman, was also fined a pecuniary penalty of $250,000 and disqualified for three years from managing corporations, while a senior officer of Renegade Gas was ordered to pay a penalty of $100,000 and a former senior officer of Speed-E-Gas to pay a penalty of $50,000.

SmartCompany understands the sums were the result of an agreed settlement.

Justice Gordon found the conduct contravened the law “through a deliberate, largely covert, long standing understanding which had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney and which likely had an adverse effect on those businesses that were denied the opportunity of receiving a price competitive offer from either Renegade or Speed-E-Gas during the Relevant Period”.

Dr Julie Clarke, Associate Professor at Deakin University’s School of Law, previously told SmartCompany the result over cartel conduct is generally over-priced goods, meaning the consumer pays more.

Clarke said cases in Europe often saw guilty companies forking out billions in penalties and believed there was a feeling that if higher penalties weren’t brought in to Australia, there may not be a strong enough deterrent for business.

“Cartel conduct happens covertly, it’s very difficult to detect, if the fines are too low people just think they can factor it into risk assessment of doing business, so it needs to be much higher to provide a deterrent,” said Clarke.

She said Australian studies have estimated only 10% of cartel conduct in Australia is detected.

An Origin spokesperson told SmartCompany the ACCC found Origin did not participate in the cartel conduct and acknowledged the company’s cooperation.

“The case related to anti-competitive behaviour that commenced prior to Origin’s acquisition of Speed-E Gas in 2006,” said the spokesperson.

“Origin was not aware of the unlawful behaviour — it was not disclosed during the purchase process and was then concealed from Origin after the acquisition. The behaviour is completely unacceptable to Origin. As soon as we became aware of the allegations, Origin conducted a thorough investigation, co-operated fully with the ACCC and appointed new management to operate the business.

The spokesperson also said Origin has not found evidence that Speed-E-Gas profited from the behaviour.

Renegade Gas released the following statement:

“Renegade Gas acknowledges the Federal Court’s decision that the company engaged in anti-competitive conduct with regard to the supply of LPG cylinders for forklifts in Sydney during the period 2006-2011. Renegade Gas also acknowledges the Court’s decision about two of its executives in relation to this matter. We sincerely regret that this conduct occurred and note that no such conduct occurred in any other market in which Renegade operates.

“Since becoming aware of the issue in 2011, Renegade Gas has taken proactive steps to ensure the highest levels of compliance and integrity. The company undertook its own investigation into practices at the company. Following this investigation, Renegade Gas voluntarily implemented a competition and consumer law compliance program to ensure its future conduct would be in line with the Competition and Consumer Act. This program has been running for three years and is voluntarily reviewed by external consultants on an annual basis at Renegade Gas’s expense.

“Utilising these proactive and corrective measures, Renegade Gas is ensuring ongoing compliance with competition and consumer law at every level within the company in every market in which it operates.”

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