The Federal Court has fined BlueScope Steel $57 million for cartel conduct under the Competition and Consumer Act 2010 (Cth) (CCA), after attempting to collude with other companies to adjust the price of steel products in Australia. BlueScope’s former general manager Jason Ellis was also personally fined $575,000 for his role in the scheme.
The size of the penalty against Bluescope is to be seen in the context that it is “a very large, profitable and well-resourced company” – in FY22, “its revenues were $19 billion and its net profit was $2.8 billion”. The penalty imposed on Ellis was 1% of the penalties imposed on BlueScope.
The Court had earlier determined liability in Australian Competition and Consumer Commission v BlueScope Steel Limited (No 5) [2022] FCA 1475, finding that each of BlueScope Steel and Ellis had attempted to induce nine competing suppliers of flat steel products in Australia to contravene s 44ZZRJ of the CCA by arriving at an understanding that contained a cartel provision.
The fine of $57 million
As to the fine of $57 million, the Court said that only a substantial penalty for each of the attempts to induce cartel conduct would serve the objectives of specific and general deterrence.
“That is due to the facts that: the conduct is of a serious kind (an attempt to induce cartel conduct); it was carried out at a senior level of the company; it had the potential to occasion significant loss and damage to acquirers of flat steel products and associated economic harm to Australia; it had the potential to deliver substantial financial gain to BlueScope; and BlueScope is a very large and profitable company”.
Nevertheless, the Court also took into account that BlueScope had made substantial efforts to strengthen its compliance processes; and that it had not previously been found to have contravened the cartel conduct prohibitions or any other competition provision of the CCA.
Ellis’ $575,000
Ellis was closely involved in the cartel conduct. At one meeting, at an airport, Ellis had informed one attendee that the meeting was not to be put into their calendars, and not to be discussed with anyone else at BlueScope, and emails were to be deleted. He was later convicted of trying to have witnesses give false or misleading information to the ACCC when it was investigating the matter.
As to penalty,
“on the matters of cooperation and contrition, there is nothing that can be said in Mr Ellis’s favour and no discount to penalty should be given”.
Ellis “owns virtually no assets “
As to his financial means, the Court said that the evidence was not clear. He “owns virtually no assets and has no financial resources in his own name” which the Court inferred was because of “his own financial planning choices”, and that such wealth that he has gained over the years is held by other members of his family.
Hence, the Court placed limited weight on the fact that Mr Ellis owned no assets in the assessment of penalty and said it could be accepted that any penalty imposed may not be paid. Or, any penalty would only be paid “if others, no doubt at Mr Ellis’s request, choose to make funds available for that purpose”.
Also, Ellis earned approximately $600,000 in the year that he commenced at Bluescope, also being the period of the offending conduct.
No insurance cover
The Court held that Ellis could not claim his fine from his insurance company.
“If Mr Ellis were to claim and obtain indemnity for the pecuniary penalty under the D&O Policy, the pecuniary penalty would be entirely devoid of sting or burden” and “it may not have much, if any, specific or general deterrent effect …… It is important that the deterrent effect of the penalty being imposed is not undermined by the ability of company directors and officers to insure against the financial cost of the penalty”.
BlueScope and Mr Ellis were ordered to pay the ACCC’s legal costs.
