The Federal Government plans to introduce criminal penalties for serious cartel conduct.

It will amend the Trade Practices Act following the Dawson Review of the legislation.

The proposed criminal cartel offence will prohibit giving effect to a contract, arrangement or understanding between competitors that contains a provision to fix prices, restrict output, divide markets or rig bids.

To ensure minor breaches are dealt with in civil proceedings, the Department of Public Prosecutions and the Australian Competition and Consumer Commission (ACCC) will establish procedures for investigating offences.

Maximum penalties for the criminal offence will be five years’ prison and a fine of $220,000 for individuals and a fine for corporations of $10 million or three times the value of the benefit from the cartel, whichever is greater. Where the value cannot be determined, the penalty will be 10% of annual turnover.

Freehills competition partner Bob Baxt – a former chairman of the Trade Practices Commission, predecessor of the ACCC – says the insurance industry will have to be very careful. Although there’s no suggestion insurers in Australia have been acting unethically, caution is warranted for all sectors.

“Any decision on product pricing, rationalisation or market sharing needs to be carefully appraised,” he said.

“In very concentrated markets – and insurance has the top five players with around 80% of the market – there’s a tendency to rationalise. Basically a culture of compliance should be introduced.”