FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2016] FCA 1516

SUMMARY

In accordance with the practice of the Federal Court in cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment which will be available on the internet at the Court’s website. This summary is also available there.

On a number of occasions during 2011, Australia and New Zealand Banking Group Limited and Macquarie Bank Limited, through the actions of traders employed by them in their Singapore offices, attempted to contravene s 44ZZRJ of the Competition and Consumer Act 2010 (Cth). A corporation contravenes that section if it makes a contract or arrangement, or arrives at an understanding and the contract, arrangement or understanding contains a cartel provision. In simple terms relevant to this matter, a cartel provision includes a provision which has the purpose or effect of fixing, controlling or maintaining the price of goods or services supplied by parties to the contract in competition with each other.

The services in question in these proceedings were foreign exchange forward contracts denominated in the currency of Malaysia, the ringgit. In simple terms, a foreign exchange forward contract is an agreement between two parties to exchange currencies – in this case the Malaysian ringgit and the United States dollar – at a future date at a forward rate agreed in advance. On the appointed future date, the forward contract can be settled by calculating the difference between the agreed forward rate and the settlement rate. In the case of the Malaysian ringgit, which is not freely traded outside Malaysia, the settlement rate is arrived at by reference to a benchmark or fixing rate that is determined by a process involving a panel of banks making submissions about the rate to an independent third party. Those submissions are supposed to reflect the exchange rates that the submitting banks believed in good faith they were able to transact on the day in question. Unfortunately, because the submissions involve an element of subjectivity, the submission process was susceptible to collusion and abuse by the submitting banks. That is what occurred in this matter.

On ten occasions during 2011, traders employed by ANZ, which was a member of the relevant panel of submitting banks, engaged in discussions with traders employed by other banks, including other submitting banks, about the submissions that would be made concerning the Malaysian ringgit benchmark rate. On eight occasions during 2011, a trader employed by Macquarie engaged in the same sorts of discussions, though Macquarie was not itself a submitting bank. The traders employed by ANZ and Macquarie attempted to get the traders employed by the other banks to make either high submissions, or low submissions, as the case may be, and thereby manipulate the setting of the Malaysian ringgit benchmark rate. In so doing, they attempted to make arrangements which indirectly provided for the fixing of the price for Malaysian ringgit forward contracts. That is because the prices of those contracts were essentially determined by reference to the benchmark rates. ANZ, Macquarie and the banks whose traders participated in those discussions were in competition with each other in the market for Malaysian ringgit forward contracts. The arrangements that the ANZ and Macquarie traders attempted to make with the traders from the other banks therefore contained cartel provisions.

The Australian Competition and Consumer Commission commenced proceedings against ANZ and Macquarie in respect of their attempted contraventions of s 44ZZRJ. The Commission sought orders requiring ANZ and Macquarie to pay pecuniary penalties. Because ANZ and Macquarie did not obtain any benefits from their attempted contraventions, the maximum penalty in respect of each attempted contravention was $10 million. The total maximum penalty for ANZ in respect of its attempted contraventions was accordingly $100 million. The total maximum penalty for Macquarie in respect of its attempted contraventions was $80 million.

The Commission, Macquarie and ANZ effectively settled the proceedings. They did so on the basis that ANZ and Macquarie would admit the contraventions and the matter would proceed on the basis of agreed facts. The parties also agreed on the amount of the pecuniary penalties that they would jointly propose to the Court. The agreed penalty in relation to each of ANZ’s attempted contraventions was $900,000, resulting in a total agreed penalty of $9 million. The agreed penalty in relation to each of Macquarie’s attempted contraventions was $750,000, resulting in an agreed total penalty of $6 million.

The Court was not bound to impose the penalties agreed between the parties. The Court’s statutory task was to order ANZ and Macquarie to pay such pecuniary penalties in respect of each of the attempted contravention as it determined to be appropriate having regard to all relevant matters.

High Court authority suggests, however, that where a regulator and a contravening corporation agree to settle a civil penalty proceeding and propose an agreed penalty, the question for the Court essentially becomes whether the Court is satisfied that the submitted agreed penalty is an appropriate penalty. And an appropriate penalty may be one that falls within a “permissible range” in which courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.

The willingness of the Commission to accept a particular sum by way of civil penalty to discharge its claim can be expected by the Court to reflect a considered, but also pragmatic, estimation or assessment that, given the hazards and expense of contested litigation, acceptance of the agreed penalty is apt to advance the public interest in the enforcement of the regulatory regime more effectively and efficiently that the continued prosecution of the claim. The question in such circumstances is essentially whether the Commission has been too pragmatic in compromising the claim and has agreed to a penalty that is not appropriate and not in accordance with principle.

If the Court is persuaded that the agreed penalty is an appropriate penalty, it is consistent with principle, and highly desirable in practice, for the court to accept the parties’ proposal and impose the agreed penalty. That is because acceptance of an appropriate agreed penalty promotes the predictability of outcome for regulators and wrongdoers, which encourages wrongdoers to acknowledge contraventions and, in turn, assists in avoiding lengthy and complex litigation.

The question for the Court in this proceeding, therefore, was essentially whether the penalties agreed as between the Commission, ANZ and Macquarie were appropriate penalties having regard to all relevant matters. While the Court was not bound to accept the agreed penalties, if satisfied that the penalties were within the permissible range of appropriate penalties in the circumstances, in practice the public policy and other considerations just referred to effectively compelled the Court to accept and impose the agreed penalties.

Having entertained the submissions of the parties and given the matter earnest consideration, I reached the conclusion that the agreed penalties of $900,000, in respect of each of ANZ’s contraventions, and $750,000 in respect of each of Macquarie’s contraventions, were within the permissible range of appropriate penalties and should be accepted and imposed by the Court. That conclusion was arrived at with some hesitation and not without some solicitude.

The attempted contraventions of s 44ZZRJ by ANZ and Macquarie were very serious. The conduct that gave rise to the attempted contraventions had the capacity to significantly undermine the integrity and efficacy of the market in Malaysian ringgit forward contracts. If the attempted arrangements had successfully manipulated the relevant benchmark rates, they would most likely have had an adverse impact on companies that had, for entirely genuine business purposes, entered into Malaysian ringgit forward contracts that settled on the days in question. The conduct of the traders employed by ANZ and Macquarie was deliberate, systematic and covert. ANZ and Macquarie bore corporate responsibility for the conduct of their traders because they failed to establish satisfactory training, compliance and surveillance systems in their Singapore offices. They failed to foster environments conducive to compliance with the Competition and Consumer Act. Those corporate failings were significant and serious.

The penalties for the attempted contraventions were required to be fixed with a view to ensuring that they would not be regarded by ANZ, Macquarie and other financial institutions in positions similar to them as the acceptable cost of doing business. They were required to be sufficiently large to deter ANZ, Macquarie, and other large financial institutions like them, who might be tempted to engage in similar conduct in the future.

On the other hand, both ANZ and Macquarie cooperated with the Commission’s investigations. They did not contest the proceedings and agreed to facts that were sufficient to establish the attempted contraventions. They have demonstrated contrition and a willingness to facilitate the course of justice. Both ANZ and Macquarie have not previously been found to have contravened the Competition and Consumer Act and can, in general terms, be considered to be good corporate citizens. Since the attempted contraventions, both ANZ and Macquarie have improved their compliance and surveillance systems.

Reasonable minds might well differ in relation to evaluative judgments such as the fixing of appropriate penalties in respect of serious attempted contraventions of the Competition and Consumer Act. That is why there is said to be a “permissible range” of appropriate penalties. My own evaluation of the relevant facts and circumstances concerning the attempted contraventions and the particular circumstances of ANZ and Macquarie suggested that the penalties agreed between the Commission, ANZ and Macquarie were towards the very bottom of the permissible range of appropriate penalties. All other things being equal, I would have imposed higher penalties, possibly significantly higher penalties, in respect of each of the attempted contraventions, were it not for the fact that the parties had agreed on the penalties. Once it was accepted, however, that the agreed penalties were within the permissible range, albeit towards the bottom of that range, it was consistent with both established and authoritative principle and practice to accept and impose the agreed penalties.

Accordingly:

ANZ is ordered to pay a pecuniary penalty of $900,000 in respect of its attempted contraventions of s 44ZZRJ of the Competition and Consumer Act on 5 May 2011, 7 June 2011, 24 June 2011, 13 July 2011, 21 July 2011, 27 July 2011, 28 July 2011, 2 August 2011, 7 September 2011 and 9 September 2011. The total of the pecuniary penalties payable by ANZ is $9 million.

ANZ is ordered to pay a lump sum contribution of $200,000 in respect of the Commission’s costs.

Macquarie is ordered to pay a pecuniary penalty of $750,000 in respect of its attempted contraventions of s 44ZZRJ of the Competition and Consumer Act on 18 February 2011, 4 April 2011, 14 July 2011, 19 July 2011, 27 July 2011, 28 July 2011, 23 September 2011 and 17 October 2011. The total of the pecuniary penalties payable by Macquarie is $6 million.

The Macquarie is ordered to pay a lump sum contribution of $200,000 in respect of the Commission’s costs.

JUSTICE MICHAEL WIGNEY

14 December 2016