BlueScope execs toured world trying to form carrot-stick cartel: ACCC claims

Senior BlueScope executives, including former general manager sales Jason Ellis, allegedly flew around the world meeting with the steel giant's competitors and distributors in an attempt to set up a cartel that would rig the prices of steel and create a massive windfall for the ASX-listed company.

Court documents released to The Sydney Morning Herald and The Age on Wednesday, following a successful legal challenge, show the competition watchdog also claims Mr Ellis, the son of former BHP chairman Jerry Ellis, allegedly devised a 'carrot and stick strategy' in dealing with competitors to induce cartel conduct.

Former BlueScope executive Jason Ellis at Port Kembla steel plants in 2014.

This strategy, the regulator alleges in its Concise Statement filed in connection to civil penalty proceedings launched against BlueScope and Mr Ellis, included threatening to lodge an anti-dumping complaint against the mills if they did not raise prices, inviting overseas mills to raise their prices as their product was much cheaper and informing overseas competitors of their own pricing changes.

The meetings listed in the court documents record BlueScope executives sitting down with competitors in Taiwan, India and Victoria to discuss the alleged plan.

Neither BlueScope nor Mr Ellis has filed a defence in response to the Concise Statement.

The Age and The Herald can also reveal the Commonwealth Director of Public Prosecutions is considering the brief of evidence in order to decide whether to prosecute. Lawyers for the Australian Competition and Consumer Commission (ACCC) told the court a decision on whether to proceed was anticipated by the end of October.

The fresh details of the major cartel investigation emerged after the Federal Court refused a request by the ACCC to have its claim against BlueScope and Mr Ellis suppressed arguing media coverage could impact any future criminal trial involving Mr Ellis or the company. Lawyers for BlueScope and Mr Ellis supported the ACCC's push.

However, on Wednesday, Justice Michael O'Bryan found the documents ought to be released.

The documents detail the ACCC's allegations that Mr Ellis and other senior BlueScope representatives made various attempts to induce competitors into price fixing agreements.

"Following his appointment as general manager, [Mr] Ellis devised and, with the assistance of a number of senior BlueScope representatives, implemented a strategy to increase the price of flat steel supplied by BlueScope, as well as that supplied by its competitors, in order to alleviate the consequences of the intense competition arising from the market downturn," the ACCC claim documents say.

The ACCC alleges Mr Ellis and other BlueScope representatives made several attempts to fix steel prices with eleven other steel market participants during a series of separate meetings in 2013 and 2014 in Victoria, Taiwan and India. The ACCC has made no allegation of wrongdoing against any of the companies named in the documents.

A spokesman for one of the steel mill operators listed in the court documents as having been the subject of attempts by BlueScope representatives to induce a price fixing deal, Taiwan's Shang Chen Steel Co Ltd, said the two companies had met but could not recall exactly when. "But we are sure that we never had a discussion about price fixing," he said.

A spokeman for another company listed in the court documents as being approached by BlueScope representatives over price fixing, Selection Steel, said: "Bluescope never broached the topic of market pricing with us.

Other companies named as being approached by BlueScope did not respond to inquiries including Apex Steel, Southern Steel Group, China Steel Corporation and India's JSW Steel, while Vulcan Steel, Celhurst (trading as Selwood Steel Trading), and listed Taiwanese group Yieh Phui Enterprise, also allegedly approached, declined to comment.

The alleged meetings took place between September 2013 and March 2014 - a time when the global steel industry was wrestling with a worldwide over-supply of steel and lower demand for the product following the global financial crisis.

Steel prices in Australia were low and BlueScope and other Australian steel distributors were under financial pressure, the ACCC notes in its claim.

"By at least February 2014, [Mr] Ellis had devised and introduced a strategy known as the 'Carrot and Stick Strategy' in relation to BlueScope's interactions with overseas steel mills in order to protect and improve BlueScope's position in the Australian steel market," the documents say.

The ACCC alleges BlueScope did this by "restricting the volume of steel being imported into Australia from those mills" and by "increasing the price of flat steel products being exported by those mills into Australia".

The ACCC is seeking fines and declarations.

Mr Ellis' lawyers declined to comment. BlueScope is defending the court action. It has already conducted an internal investigation into the allegations, chairman John Bevan has said. 

Chairman John Bevan has said in August: "While we have not seen all of the evidence that has been relied on by the ACCC, based on what we know today, we do not believe that BlueScope, or any current or former employees, have engaged in cartel conduct".

Claim details revealed

The ACCC claims that BlueScope representatives used various techniques to induce its competitors to form a cartel including "speaking to aligned distributors to find out what BlueScope should do for them"., in order for them to buy more steel from BlueScope" and limiting the amount of tactical pricing or discounting offered to distributors to meet the prices of their competitors.

The ACCC also alleges BlueScope through Mr Ellis and other representatives sought to increase the amount of steel BlueScope sold to distributors, such as Vulcan Steel and Selection Steel Trading.

The strategy also allegedly involved creating a two-tier pricing structure to aid potential cartel members lift prices and informed its competitors in advance of its pricing figures or plans to increase prices. 

The ACCC alleges the conduct of BlueScope through Mr Ellis and other BlueScope representatives involved attempts to induce "various steel companies at all functional levels of the Australian steel market" to try and raise the price of flat steel.

"The attempts had the potential to, and were intended to, raise prices and restrain or remove effective competitive price competition and thereby cause large scale, serious and ongoing economic harm in the Australian steel industry to a range of Australian steel users."

Annual sales for flat steel at the time of the alleged cartel conduct were about 2 million tonnes valued at between $2.5 billion and $2.8 billion. BlueScope's share of the market was $2 billion.

The case continues.