19 April 2021
On 4 February 2021, Justice Wigney of the Federal Court of Australia handed down judgment in Commonwealth Director of Public Prosecutions v Wallenius Wilhelmsen Ocean AS  FCA 52, imposing a penalty of AU$24 million on the defendant, Wallenius Wilhelmsen, for intentionally giving effect to cartel provisions in an arrangement with its competitors in the ocean shipping services business.
It is the third conviction of major shipping companies, in addition to Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha (2017) 254 FCR 235 and Commonwealth Director of Public Prosecutions v Kawasaki Kisen Kaisha Ltd  FCA 1170; 137 ACSR 575, in relation to cartel provision offences under the Competition and Consumer Act 2010 (Cth) from which around AU$83.5 million in penalties have been handed out by the Court so far.
Wallenius Wilhelmsen (WWO) was held to be a party to what was termed by the Court to be the “Respect Arrangement” in which it, along with at least three other major shipping companies, Nippon Yusen Kabushiki Kaisha (NYK), Kawasaki Kisen Kaisha (K-Line) and Mitsui OSK Lines Ltd (MOL), would seek to allocate certain customers between themselves on certain international shipping routes and would not attempt to take business from each other.
WWO is a large Norwegian shipping company based in Lysaker, Norway, with 9,400 employees stationed in 29 countries worldwide. It has a global presence with offices and agents in Europe, Africa, North East Asia, South East Asia, Japan, North America, Central and South America, India, the Middle East and Australia. In Australia, it operates out of each major port including Brisbane, Sydney, Melbourne, Newcastle, Port Kembla and Fremantle.
As part of its operations, WWO conducts, and is one of the market leaders of, “roll-on, roll-off” or RoRo shipping. For those unfamiliar with the term, RoRo shipping is the carriage and consignment of wheeled vehicles.
WWO ships motor vehicles, trucks, buses and commercial vehicles including agricultural, mining and construction equipment. It supplies these shipping services, in competition with other similar providers, to a variety of customers, including manufacturers, along a number of shipping routes.
However, from around July 2009, WWO, NYK, K-Line and MOL entered into the Respect Arrangement and did not compete for business from certain customers or attempt to win contracts of tender once they were due for renewal. In doing so, they ensured that their existing shares of the RoRo shipping market were undisturbed.
Terms of the Respect Arrangement
WWO and the other companies that were part of the arrangement, including NYK, K-Line and MOL, would engage in three general types of conduct to ensure the efficacy of the Respect Arrangement:
Plea of guilty
WWO was charged with, and pleaded guilty to, six offences, and further admitted to two additional offences concerning conduct from 2009 to 2012. The offending conduct involved:
The offences to which WWO admitted guilt were, however, not the only offences that were committed by the company over the near three-year period during which the Respect Arrangement was in force. WWO has been ordered to pay over US$300 million in penalties in foreign jurisdictions in relation to cartel provisions offences which includes the United States, Europe, Japan, China, South Africa, Mexico, Brazil and South Korea.
Submissions as to penalty
Although WWO pleaded guilty and accepted wrongdoing, it did make submissions to the Court as to what should constitute the Court’s appropriate sentence. WWO made submissions that:
His Honour Justice Wigney did not accept the majority of WWO’s submissions. He found that:
However, the Court did find that WWO’s conduct was less serious than that of K-Line and NYK. His Honour said:
“ The objective seriousness of WWO’s offending was undoubtedly less than the objective seriousness of offending by NYK and K-Line…
 The offending conduct of both NYK and K-Line involved 20 incidents of them giving effect to cartel provisions in the Respect Arrangement over a period of more than three years. In NYK’s case, the cartel provisions included not only the market allocation provision, but also provisions involving price fixing and bid rigging. In K-Line’s case, the cartel provision involved price fixing. WWO’s offending, in contrast, involved six incidents of it giving effect to one cartel provision, the market allocation provision, over a one year period…”
Final sentence and key takeaways
In this case, the maximum penalty that could have been imposed by the Court was, based on WWO’s relevant annual turnover in the 12 months preceding the offence, a fine of AU$48,532,493.
Despite the seriousness of the offences, his Honour took into account the following several mitigating factors which reduced its penalty to AU$24 million:
While the fine imposed on WWO was lower than the fines imposed on both NYK and K-Line, at AU$24 million, it was nevertheless significant. In handing down such a substantial punishment, the Court has maintained its tough stance on anti-competitive conduct from multinational corporations which is destructive to the competition that underpins Australia’s free market economy.
It did not matter that WWO did not extensively profit from its participation in the Respect Arrangement. The Court held that WWO clearly benefited from the arrangement, otherwise it would not have participated in it over three years.
With this decision, the Court and Justice Wigney made it “clear to multinational corporations that they will be dealt with harshly if they give effect to cartel arrangements in a way which transgresses Australia’s competition laws”.
Authors: Nathan Cecil & Charlie Coleman
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