BlueScope Steel weighing appeal after $57.5m find for cartel conduct

The Federal Court has again criticised BlueScope’s leadership for not doing enough to prevent a senior manager trying to fix steel prices.

BlueScope Steel is considering its options over an appeal after being handed a record $57.5m fine by the Federal Court over trying to fix steel prices in a civil case brought by the competition watchdog.

Justice Michael O’Bryan handed down his initial decision on the cartel case in December 2022, finding that BlueScope tried to induce eight other Australian steel distributors, as well as Taiwanese manufacturer Yieh Phui, to lift the price of flat steel products over a 10-month period between September 2013 and June 2014.

At the time, steel prices were tumbling and BlueScope’s Australian business was under considerable pressure.

Hearings over penalties were held earlier this year, and Justice O’Bryan handed down his decision on that matter on Tuesday, finding BlueScope’s conduct “warrants a significant penalty”.

Under the way the law is applied in this case, however, BlueScope’s right to appeal the initial decision was only triggered when Justice O’Bryan handed down his decision on penalties on Tuesday, not by the original findings in December.

The maximum penalty available to the court, according to Australian Competition & Consumer Commission submissions, was $400m for six of the nine attempts made by BlueScope and former sales and marketing manager Jason Ellis, where BlueScope had obtained some potential benefit from the attempt, and $10m for the remainder.

Justice O’Bryan said on Tuesday he did not accept the ACCC’s argument BlueScope had obtained a tangible benefit from its conduct.

“Overall, there is no evidence to support a finding that any change to the pricing behaviour of distributors enabled BlueScope to increase its prices at the manufacture/import level of the market and thereby increase its profits,” he said.

Without evidence of a benefit, Justice O’Byran said the maximum penalty was $90m for all of BlueScope’s attempts.

Justice O’Bryan also imposed a $575,000 penalty on Mr Ellis, and issues orders saying the penalty cannot be recovered from an insurance company.

“The conduct in the present case warrants a significant penalty to deter repetition by Mr Ellis and by others who may otherwise calculate that the rewards from such conduct outweigh the risks of detection,” he said in the decision.

ACCC commissioner Liza Carver said the judgement should serve as a strong warning to corporate Australia that an attempt to fix prices “will have very serious consequences”.

“We welcome this substantial penalty against BlueScope. It is important that penalties are sufficiently large to deter even large companies and their employees from breaching Australia’s competition laws,” she said.

“Cartel conduct is illegal because it cheats Australians by increasing the prices consumers and business customers have to pay, and by restricting healthy economic growth.”

Mr Ellis was also charged with two counts of inciting the obstruction of a Commonwealth official over the ACCC’s investigation, for encouraging two other BlueScope employees to give false information and evidence to the ACCC – to which he pleaded guilty in September 2020.

While Mr Ellis was the only BlueScope employee directly penalised in the case, Justice O’Bryan also took aim at BlueScope’s leadership, saying managing director Mark Vassella – the chief executive of Australia and New Zealand at the time of the cartel behaviour – had been given enough information by Mr Ellis about his sales strategy that he should have been alert to the risk the company could fall afoul of Australia’s competition laws.

“There was no evidence that Mr Vassella took any steps to confirm or verify that the commercial strategies being implemented by Mr Ellis were compliant with the act. This indicates that, at the relevant time, senior managers of BlueScope were not sufficiently attentive to the requirements of the act,” Justice O’Bryan said.

BlueScope said on Tuesday it has 28 days to decide whether to file an appeal.

Its shares closed 0.7 per cent higher at $20.88 in a higher market on Tuesday.