Competition Alert – February 2019
The Australian Competition and Consumer Commission (ACCC) has succeeded in its first gun jumping prosecution. Yesterday, the Australian Federal Court fined Cryosite Limited (Cryosite) AU$1.05 million (approximately NZ$1.1 million) for engaging in cartel conduct with Cell Care Australia Pty Ltd (Cell Care).
Cryosite had agreed to sell its cord blood and tissue banking business assets to Cell Care, the only other private cord blood and tissue banking company in Australia. As part of the agreement, Cryosite agreed that until the deal completed it would refer all new customer enquiries to Cell Care (the Cryosite Restraint). In other words, the parties would stop competing pending completion. The agreement was signed on 23 June 2017, following which Cryosite did, in fact, stop supplying new customers, and established a process under which its staff would refer such customers to Cell Care.
The conduct only stopped when the ACCC raised concerns in August 2017. In response to the ACCC's concerns, the parties agreed to:
- Delete the Cryosite Restraint; and
- Make completion of the proposed sale conditional on receiving confirmation from the ACCC that it would not oppose the deal.
These concessions were not enough to discourage the ACCC from taking its first ever gun jumping prosecution. This case serves as a timely reminder to businesses that competition regulators take all forms of cartel conduct extremely seriously. It is irrelevant that the conduct only lasted a few months and was carried out in the context of M&A activity that may ultimately not have raised any competition concerns.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.
See our July 2018 Competition Alert for further background to the case, the New Zealand Commerce Commission's position on gun jumping, and some key takeaways for businesses contemplating M&A activity with a competitor.
If you want to know more about how to mitigate competition law risks when contemplating M&A activity with a competitor, please contact Troy Pilkington.