The verdict on Richard Pratt and Visy
Friday, November 2, 2007/
Packaging giant Visy has been ordered to pay the largest fine in Australian corporate history after the board was found guilty of engaging in a price-fixing and cartel scheme with rival Amcor.
The Federal Court today told the Visy board to cough up $36 million, more than twice the past largest fine, for the breach of law, which is understood to have increased Visy’s market share from 47% to 55% over several years and hurt 90% of SMEs in the $1.8 billion cardboard box market.
The price fixing is estimated to have cost customers, many of them small businesses, $300-$700 million.
Justice Peter Heerey ordered former executives Harry Debney and Rod Carroll to pay fines of $1.5 million and $500,000 respectively.
Chairman Richard Pratt has escaped personal penalty but Justice Heerey found that Pratt knew exactly what was happening and the culture of Visy had enormous moral blind spots.
He said Visy’s corporate culture in relation to its obligations under the Trade Practices Act was “non-existent” and that its Trade Practices compliance manual “might have been written in Sanskrit for all the notice anyone took of it”.
Small and medium businesses harmed by the packaging behemoth are expected to seek compensation.
Justice Heerey said Visy’s actions were “calculated and premeditated” and the case was the “worst cartel to come before the court in the 30-plus years since cartel behaviour has been illegal” in Australia.
Associate professor Frank Zumbo from the University of NSW says there is no doubt that other cartels are operating, given the very large sums of money that can be made for this kind of illegal conduct.
“Australia needs jail terms against those involved in cartels (that is, price fixing or market sharing arrangements) that rip off consumers.”