Bearing distributor slapped with $3 million fine for price fixing

Bearing distributor NSK Australia was yesterday slapped with a $3 million penalty, after the Federal Court found Japanese executives had conspired to fix prices in Australia.

The court found several senior NSK executives living in Australia and those of two other bearings companies, Nachi Australia and Koyo Australia, had met over dinner as a group they called the ‘Southern Cross Association’ to share pricing plans.

This is not the first time a Japanese-based company has been fined for participating in “cartel conduct” in Australia, last April cable supplier Viscas was hit with a $1.3 million fine after it was found guilty of bid rigging and price fixing by the Federal Court in Adelaide.

The court found at two separate ‘Southern Cross Association’ meetings, which had taken place at Japanese restaurants in Sydney and Melbourne, an arrangement had been made between NSK, Nachi and Koyo to control the price of bearings to their aftermarket customers.  

NSK Australia then proceeded to implement increases to their customers as discussed at these meetings.

Dr Julie Clarke, Associate Professor at Deakin University’s School of Law, said these sorts of ‘cartel’ judgements tended to be based on agreed facts and admission of liability, meaning the court actually heard little detail about whether a contravention had indeed taken place and what it was.

“They’ve gotten together, they’ve talked about prices and exchanged price lists, and they have admitted it was an arrangement to fix control on prices,” said Clarke.

“The result is over-priced goods so that the consumer is paying more.

“The theory behind cartel conduct is that competitive market prices are more likely to be fixed at an optimal competitive level, but if people are getting together to agree on prices, they are almost certainly going to agree on what will be a higher price for consumers.

“The consumer is going to lose what would have been the difference between the price in a competitive market and what the parties agreed on.

Clarke said because the meetings took place before 2009, when new cartel laws were introduced to Australia, the judgement appeared to have been based on those older laws, and potentially meant NSK was not open to criminal charges or higher fines brought in by the new laws.

The court made orders restraining NSK from engaging in similar cartel conduct for a period of three years, requiring it to implement a competition and consumer law compliance training program.

They received a significant discount in penalty for co-operating with the ACCC during the investigation, which Clarke said was typical in these cases.

She said $3 million was a comparatively modest fine compared to other cases of cartel conduct, especially cases in Europe which saw guilty companies forking out billions in penalties.

Clarke said there was a feeling that if higher penalties weren’t brought in to Australia, there may not be a strong enough deterrent for business.

“Cartel conduct happens covertly, it’s very difficult to detect, if the fines are too low people just think they can factor it into risk assessment of doing business, so it needs to be much higher to provide a deterrent.”

She said Australian studies have estimated only 10% of cartel conduct in Australia is detected.

SmartCompany has contacted NSK Australia for comment but none had been received at the time of publication.