Oh What a Feeling! Yazaki!

The Full Federal Court¹ has imposed a record breaking penalty of $46 million, the highest penalty ever imposed under the Competition and Consumer Act 2010 against Yazaki Corporation for cartel operations relating to equipment used in the manufacturing of Toyota Camry’s in Australia.

The original penalty of $9.5 million was significant but the final determination by the Full Court was significantly higher at $46 million when the decision was appealed.

The case involved price fixing and market sharing amounting to cartel operations in the supply of wire harnesses that are used to manufacture motor vehicles. The cartel operations existed between two Japanese companies, Yazaki and SEI, which are global manufacturers of the wire harnesses but those companies have wholly owned Australian subsidiaries. Yazaki and SEI entered into a worldwide overarching cartel arrangement that effectively agreed on and fixed prices to preserve their own monopoly over discrete geographic markets for tenders for wire harnesses for manufacturing vehicles.

The Australian subsidiary companies effected the cartel operations in Australia by agreeing between themselves to set prices for requests for quotations in 2003 and 2008 for wire harnesses to manufacture the 2006 Toyota Camry and the 2011 Toyota Camry respectively.

In the primary decision, the judge penalised Yazaki $7 million and $2.5 million for two courses of conduct based on a maximum penalty of $10 million each. The first course of conduct was the making of the agreements and the activity between Yazaki and SEI and the second course of conduct was the submission of prices in response to the request for quotations.

These penalties related only to the 2008 conduct because of statutory limitation periods.

The Australian Competition and Consumer Commission (ACCC) appealed the decision.

The Full Court partly allowed the appeal and determined that the maximum penalty for each contravention was over $18 million not $10 million because s76(5) of the Act provides for penalty based on annual turnover and the sum of the values of all the supplies of not just Yazaki, but any company related to the company and it is inappropriate to limit the maximum penalty to the value of the benefit.

The Full Court also said five penalties should be imposed on five contraventions. The penalties should not be limited to two courses of conduct. Three acts were separate and discrete acts while the fourth and fifth acts involved overlap so they broadly involved the same course of conduct even though they involved different acts.

It was interesting to note that the Full Court also commented that there was no need to be a relevant market in Australia and it was sufficient that the entities involved were in competition with each other even if they did not compete in a market in Australia even though there was a market in Australia for wire harnesses for Toyota Camry vehicles.

It was also interesting to note the Federal Court did not consider knowledge of the cartel agreements on the part of the entity carrying out the conduct was an essential element of “giving effect to” a cartel operation. This was relevant because the court found that Yazaki’s Australian subsidiary gave effect to the cartel operations despite not knowing of the cartel its parent company was involved in.

Ultimately the Full Court considered it was appropriate to impose the following penalties:

• $14 million for the cartel arrangement in 2008 for the 2011 Toyota Camry’s
• $12 million for giving effect to the cartel by agreeing prices with SEI
• $12 million for giving effect to the cartel by submitting agreed prices to Toyota in Japan
• $8 million for giving effect to the cartel by directing and causing the Australian subsidiary to submit the agreed prices to Toyota’s subsidiaries in Australia

Yazaki and the Australian subsidiary were also ordered to pay 85% of the ACCC’s costs.

As competition increases, industries are looking for ways to maximise potential opportunities for keeping and growing their market share. Joint venture arrangements are not uncommon and are not unlawful, when done correctly. The consumer law has, however, evolved to ensure there is greater protection than ever for consumers and if you are considering commercial opportunities, it is good governance to obtain advice on the opportunity and ensure its compliance with consumer law provisions that might be relevant.

Contact our commercial solutions team for more information.

1. The citation for this case is ACCC v Yazaki Corporation (2018) ATPR ¶42-594; [2018] FCAFC 73