Paul McIntyre: Amcor probe ripples spread

There you go. Australian businessmen have been behaving badly.

A woman or two might well be embroiled in the price-fixing scandal which broke this week over Amcor's cartel behaviour in the A$2 billion ($2.13 billion) cardboard box industry but at this stage it's all about blokes. And some very wealthy blokes at that.

Amcor's wealthy Australasian boss Russell Jones was dumped on Monday night, and BMWs have been speedily entering and exiting his Tuscan-style mansion in the inner Melbourne suburb of Canterbury ever since.

But an intriguing aside will be the knock-on effect for Australia's third richest man, the A$4.2 billion packaging king Richard Pratt, and his cash cow Visy Industries.

Visy controls 39.2 per cent of the Australian cardboard box industry, behind Amcor's 41.4 per cent.

Carter Holt Harvey has 3 to 4 per cent of the market and it too has been sucked into investigations over its use of a consultancy set up by former Amcor executives, called Australasian Manufacturing Consulting Group.

Their homes and offices were raided by Amcor lawyers last month under special provisions allowing them to obtain evidence to prove Amcor's allegation that they had nicked details of more than 8000 customers - and Amcor's pricing structures - before they left the company.

It was these raids that accidentally blew the lid on Amcor's dodgy behaviour, resulting in its chairman, Chris Roberts, sacking his chief executive this week.

It's stating the obvious here, but for cartel behaviour to occur you need two players, if not more, and the most obvious place to look is at Pratt's privately held empire, which operates globally with 8000 employees.

The philanthropic and environmentally minded Pratt was in Canberra this week working on a water conversation project with the Federal Government but hardly a word was uttered over the emerging scandal. "I'm here to talk about water," he said.

Visy and CHH have denied any knowledge of cartel behaviour, although Visy has confirmed it has launched its own internal investigation.

And so too has competition chief Graeme Samuel, who only a few weeks ago indicated that the Australian Competition and Consumer Commission was on a new cartel-busting crusade.

Samuel has got an early scalp in Russell Jones, although just what case the ACCC can mount and win in the courts is still foggy. But Samuel said more cartel prosecutions were to come.

"I can confidently say that in the very near future there will be some more news of prosecutions to be launched by the ACCC," he said.

"Cartels will be pursued relentlessly by the ACCC, prosecuted with vigour and substantial penalties sought against offenders through the courts."

Sensational stuff, although the ACCC has also come under fire after Queensland fruit growers said they had lodged claims of cartel behaviour in the packaging sector nearly two years ago. Horticulture industry group Growcom said on Wednesday that the ACCC was told of near-identical price rises by Visy and Amcor within a month of each other for cardboard packing boxes.

The ACCC would not confirm whether it had investigated the matter, but it has triggered debate about whether consolidation in Australian industry has gone too far.

Some argue it is far easier to prevent collusion by denying companies the temptation via unchecked market consolidation than to prove a case after the event.

Samuel says price fixing is theft and costs the community billions - the implications are that the current packaging case is costing an additional A$220 million a year, based on European studies which show cartel behaviour adds an average 10 per cent to prices.

According to Credit Suisse Boston, wholesale prices in Australia for corrugated cardboard boxes have risen about 15 per cent in the past three years. In the case of the Queensland fruit growers, packaging represents a significant proportion of their production costs, but they are stuck in the middle of two consolidated sectors.

On one hand they have no power to drive packaging prices down because the market is essentially controlled by two groups, and on the other they have no power to pass on price rises because Australia's food sector is run by two giant retailers - Coles and Woolworths.

How the Amcor scenario will play out is still uncertain but this week's revelations came at the same time as one of the stiffest jail terms for white-collar crime in the past 20 years was handed down on Thursday by the NSW District Court.

Robert Walker, a former executive director of the "millionaires factory", was sentenced to seven years in jail for making misleading statements about investment returns.

Walker's company, Financial Options Group Inc (aptly abbreviated to FOGI), pledged returns of 20 per cent a year to prospects but of the A$11 million it raise from investors, just A$1.6 million was used for the purposes the company marketed.

The rest was diverted into the personal trading accounts of directors.

Walker may well be joined in jail by a small army from other law-breaking suits.

* Paul McIntyre is a Sydney journalist.