Australians love their eggs, which is why recent allegations from the Australian Competition and Consumer Commission (ACCC) against several major egg producers have attracted plenty of attention.
The ACCC has alleged some of Australia's largest egg suppliers worked together on decisions that should normally be made independently by competing businesses. The claims are yet to be tested in court, but they have raised questions about what a cartel is and why competition laws matter.
To help explain what the allegations mean, You and the Law spoke with Queensland Law Society Competition and Consumer Law Committee Chair Kathryn Finlayson.
What is a cartel?
According to Kathryn, a cartel occurs when businesses that should be competing against one another agree not to.
"Normally, each business makes its own decisions about how much of a product to produce, what price to charge and who to sell to," she said.
"When competitors start making those decisions together, consumers lose the benefits of competition."
Competition between businesses is designed to encourage lower prices, greater choice and innovation. When that competitive pressure is removed, consumers can be disadvantaged.
The classic signs of cartel conduct
Cartel conduct can take a number of forms.
"The classic cartel behaviours involve fixing prices, limiting how much of a product is produced, dividing up customers or territories, or rigging bids," Kathryn said.
"All of those behaviours replace competition with coordination."
Importantly, cartel arrangements are not always formal or documented.
"People often think there must be a signed contract, but that's not necessarily the case. Cartels can involve informal agreements, a conversation, a phone call or an understanding between competitors not to compete."
Why are cartel cases difficult to prove?
If agreements are often informal, proving they exist can be a significant challenge for regulators.
Kathryn said the ACCC must establish several key elements before a court can find cartel conduct has occurred.
"First, there has to be an agreement. That means a genuine meeting of the minds where the parties commit to a particular course of action," she said.
"Second, the parties must be competitors, or potential competitors."
"And third, there must be a cartel provision within that agreement, such as an arrangement to fix prices, restrict output or allocate customers."
Because these agreements are frequently unwritten, regulators often rely on a combination of documents, business records, communications and evidence of how businesses acted in practice.
What is the ACCC alleging?
The ACCC alleges the businesses coordinated decisions about egg production, supply and expansion plans. It also alleges some producers worked together to manage oversupply in the market, reducing the competitive pressure that would normally exist between rival businesses.
Kathryn said allegations of this kind go to the heart of competition law.
"The purpose of competition law is to ensure businesses make decisions independently of one another," she said.
"When competitors stop acting independently and start coordinating their conduct, consumers can miss out on the benefits of competition, including lower prices and greater choice."
One of the ACCC's allegations relates to the purchase of a property at Pittsworth in Queensland. The regulator alleges the acquisition was coordinated to prevent a rival egg supplier from acquiring the site and expanding its operations.
Why is this case significant?
Kathryn said the current proceedings are unusual because the alleged conduct centres on a shared business arrangement.
"This case is a little different from some of the cartel matters we've seen before," she said.
"The ACCC's allegations focus on coordination occurring through a shared business structure, so the court will likely be looking closely at documents that were prepared by the businesses and the actions taken under those arrangements."
That means the case may involve more documentary evidence than is often available in traditional cartel investigations.
Why does this matter to consumers?
Eggs are a staple item for many Australian households, making competition in the industry particularly important. The ACCC alleges the conduct substantially reduced competition over a number of years, claims that will now be tested before the Federal Court.
Kathryn said competition laws exist to protect consumers and ensure businesses compete fairly.
"When businesses compete independently, consumers benefit from greater choice and competitive prices," she said.
"Competition law is designed to protect that process."
What happens next?
The ACCC's allegations remain before the courts, and the egg producers involved will have the opportunity to respond to the claims.
As the proceedings continue, the case will provide an important test of Australia's competition laws and the rules designed to ensure businesses compete fairly.
For consumers, the case is also a reminder of why competition matters.
"When businesses compete independently, consumers benefit from greater choice and competitive prices. Competition law is designed to protect that process."
This article is general information only and does not constitute legal advice. Court proceedings are ongoing and the allegations have not been determined by the court.
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