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Case study - Japanese shipping company convicted and fined $34.5 million for cartel conduct

On 2 August 2019, Japanese shipping company Kawasaki Kisen Kaisha Ltd (K‑Line) was convicted of criminal cartel conduct and fined $34.5 million: the largest ever criminal fine imposed under the Competition and Consumer Act 2010 (Cth).

K‑Line pleaded guilty to engaging in a cartel with other shipping companies in order to fix prices on the transportation of cars, trucks, and buses to Australia between 2009 and 2012.

From at least February 1997, K‑Line was part of an arrangement with other global vehicle shipping companies, which saw them agree that they would not seek to alter their existing market shares of cargo from manufacturers or otherwise try to win existing business from each other.

This collusion impacted the transportation prices of cars, trucks and buses to Australia from the US, Asia and various European countries. K‑Line, and other shipping lines transported these vehicles on behalf of major car manufacturers such as Nissan, Suzuki, Honda, Toyota, Isuzu and others.

Nippon Yusen Kabushiki Kaisha (NYK), another participant in the cartel, was convicted in August 2017. NYK was convicted of criminal cartel conduct and ordered to pay a fine of $25 million. The investigation and prosecution of other alleged cartel participants is continuing.

This matter has been investigated and prosecuted in a number of other jurisdictions, including the United States, where key K‑Line executives have been imprisoned or indicted.

K‑Line pleaded guilty to 20 instances in which the company gave effect to cartel provisions between 24 July 2009 and 6 September 2012. The instances were rolled‑up into a single charge of giving effect to those provisions, contrary to s44ZZRG(1) of the Competition and Consumer Act 2010 (Cth).

K‑Line’s conduct was punishable by a maximum penalty of $100 million. The court allowed a discount of 28 per cent for K‑Line’s early guilty plea, contrition, assistance and cooperation. But for K‑Line’s early guilty plea and cooperation, the fine would have been $48 million.

In handing down the sentence, Justice Wigney of the Federal Court of Australia said that the “penalty imposed on K‑Line should send a powerful message” and that “anti‑competitive conduct will not be tolerated and will be dealt with harshly when it comes before this Court.

On just about any view, this was an extremely serious offence against Australia’s laws prohibiting cartel conduct. It is likely that the anti‑competitive effect of the offending conduct would ultimately have had some impact on Australian consumers of imported vehicles.”

Deputy Director of the Commercial, Financial and Corruption practice group, Berdj Tchakerian, said the case reflects the complexity of this type of prosecution.

“The prosecution of criminal cartel cases present a particular challenge to the CDPP as they are complex and difficult to prosecute, often involving conduct committed in a number of different jurisdictions, both domestic and foreign.

Courts sentencing corporations that have engaged in cartel conduct have
emphasised the need for denunciation and condign punishment, given such conduct is inimical to and destructive of the competition that underpins Australia’s free market economy.

The sentence imposed sends a powerful message to multinational corporations that such conduct will not be tolerated and will be dealt with harshly.”

Mr Tchakerian said this case was another example of the close working relationship between the CDPP and Australian Competition and Consumer Commission, which referred the matter to the CDPP.