Yazaki Gets Record $46M Cartel Fine in Australian Court

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By Eleanor Tyler

Yazaki Corp. must pay A$46 million ($34.5 million), Australia’s highest ever cartel fine, on charges that it rigged the Australian automotive wire harness market with its competitor, Sumitomo Electric Industries Ltd.

The Australian Full Federal Court, in an appellate opinion issued May 16, increased the size of potential fines cartel violators could pay in future Australian enforcement cases. The court said for the first time that under Australia’s 2010 Competition and Consumer Act, cartel members in Australia can be fined 10 percent of their overall revenue in the country, even if the cartel affected only one market of many in which the company participates.

That legal decision and Yazaki’s fine, roughly half of the A$87 million ($66.3 million) the court found was the statutory maximum applicable to Yazaki’s conduct, brings Australian cartel penalties more in line with those in other jurisdictions, according to a statement by Australia’s antitrust enforcer, the Australian Competition and Consumer Commission.

It’s five times the A$9.5 million ($7.1 million) imposed by a trial court, which the ACCC appealed because it considered the fine too low.

“Cartel conduct is illegal because it not only cheats consumers and other businesses, it also restricts healthy economic growth. For this reason, it is of considerable importance that penalties imposed by the courts are large enough to act as a sufficient deterrent to prevent companies and their employees contravening Australia’s competition laws,” said ACCC Chairman Rod Sims in response to the judgment.

“The ACCC is continuing to seek penalties which are high enough to deter anticompetitive conduct, particularly by large national and multinational corporations,” he said.

Long Fight

The record fine is the culmination of efforts by the ACCC to hold Yazaki liable for the cartel, which set prices on wire harness bids to Toyota’s Australian operations in 2003 and 2008. There were 15 wire harnesses in a 2011 Toyota Camry made in Australia, so the cartel likely drove up prices, the regulator said.

The ACCC opened an investigation into potential cartel activity in wire harnesses in 2012 following enforcement efforts around the globe against a worldwide auto parts cartel. In June of that year, a Yazaki executive pleaded guilty in the U.S. to fixing prices on wire harnesses sold to Honda Motor Co. in the U.S. and agreed to serve a 14-month term in prison.

In 2015, the federal trial court in Australia held that Yazaki violated the country’s antitrust laws by rigging bids to Toyota in Australia, even if most of the planning, agreeing, and rigging happened in Japan.

The appeals court agreed with the ACCC that the original penalty was too low and should reflect five independent violations rather than the two “courses of conduct” the trial court considered.

More in Line

The appeals court decision could set up a more predictable methodology for determining cartel fines in Australia and bring its maximum cartel fine more into line with what other countries impose. In March, the ACCC announced that it would “rethink” its approach to penalties for cartel violations in light of an OECD report finding that Australia’s cartel penalties were “significantly lower” than those in “comparable jurisdictions.”

The OECD determined that both the maximum and average penalties imposed by Australian courts for competition law breaches were much lower than in other countries, especially for large firms or for longstanding anticompetitive behavior like that alleged in the Yazaki case. The OECD estimated that Australian cartel penalties would have to increase by 12.6 times to be comparable with the level of the average penalty elsewhere.

“Clearer guidance on the size of penalties could be useful in Australia to ensure penalties deter and that companies are aware of the likely size of fines,” OECD Economist Sean Ennis said when the report issued in March.

The case is Australian Competition and Consumer Commission v. Yazaki Corp. , Fed. Ct. Austl., FCAFC 73, 5/16/18 .

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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