Member Article

The establishment and operation of many Cooperative Research Centres (CRCs) involves cooperation amongst industry participants, including those who may be competitors in other aspects of their businesses.  It is very important that participants in CRCs remember that the prohibitions against anti-competitive conduct in the Trade Practices Act 1974 (Cth) (TPA) will apply to the CRC collaboration.  With the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 (Cartel Bill) likely to be passed soon, it is a timely reminder for those involved in, or in the process of establishing, a CRC to make sure they are vigilant about the application of the TPA to their operations.

Who is, or will be, involved in your CRC?

Innovation within an industry is often propelled through a collaboration between business and researchers, including in the form of CRCs.  CRCs can comprise industry associations, universities, government research agencies and small and large enterprises, and often will involve more than one participant engaged in the industry that is the focus of the CRC's research.  The participants may also include multiple organisations who compete to supply research and other services.  Therefore, some of the parties who participate in the CRC are likely to be competitors for the purposes of the TPA.

CRCs regularly require contributors to discuss, determine and consider a vast array of industry issues in order to direct and carry out the CRC's research.  It is very important that participants in CRCs, particularly those who are competitors, are aware of the TPA and the conduct it prohibits, and proactively ensure compliance with their obligations.

What type of TPA issues may arise?

CRCs may act as a forum for competitors to interact as well as, in some instances, involve supply or acquisition decisions by competitors who are participants in the CRC.  This means that TPA issues can potentially impact a CRC in several ways.

Industry associations in which competitors interact have long been recognised as potentially high risk for TPA non-compliance.  Forums for competitors to meet require caution as discussions can stray from legitimate industry issues into forbidden territory such as customers, prices or suppliers.  Where a CRC contemplates competitors being involved, it is important to remember the TPA prohibitions on arrangements between competitors, including price fixing and market sharing, and to ensure that the collaboration for the purposes of the CRC does not enter into those forbidden areas.

Another TPA risk can arise by virtue of the operation of the CRC itself.  CRCs may require participants to make certain decisions for the purposes of the CRC.  A steering group, board or other unit that makes such decisions may include representatives of some or all participants.  These decisions may relate to people who may be involved in an aspect of the CRC's research, or who may supply certain goods or services to the CRC.  Such decisions could be subject to the TPA if competitors are involved in making them, even if they are made in the context of the CRC. 

Why should you care about the Cartel Bill?

The Cartel Bill creates a criminal offence (which requires a 'fault' element) and a parallel civil prohibition (which does not require a fault element) in respect of the making, or giving effect to, a contract, arrangement or understanding that contains a 'cartel provision'.  Broadly, a 'cartel provision' is a provision which (directly or indirectly) has:

• the purpose or effect of fixing, controlling or maintaining prices or
  
  
• the purpose of:
  
  
  • preventing, restricting or limiting production, capacity or supply
    
    
  • allocating customers, suppliers or geographical areas or
    
    
  • rigging bids, by parties that are, or would otherwise be, in competition with each other.
    

Individuals found guilty under the new criminal cartel offence will be subject to jail terms of up to 10 years and fines of up to $220,000.  A corporation will be liable for up to the greater of $10 million or three times the value of the benefit attributable to the cartel as a whole (if that value cannot be determined, 10% of the corporation's annual turnover).

What measures should you take?

With the upcoming legislative changes, the Government's focus on TPA issues generally, and the vigilance of the TPA regulator (the Australian Competition & Consumer Commission), it is important that CRCs, and the entities which are involved in them, understand the TPA.  Undertaking TPA compliance training is an important step toward complying with the law.  In instances where there are competitors involved in a CRC, competition law protocols to govern interactions with competitors through the CRC should also be documented and implemented, which may involve drafting constituent documents accordingly. 

Overall, CRCs must endeavour to create a culture of compliance – a positive and pro-active attitude towards compliance with the TPA for all participants, ideally at the inception of the CRC.

 

Link to article