Antitrust Alert:  Australian Court Construes Collaborative Bidding in M&A Sale Process to Constitute Cartel Conduct & Misleading and Deceptive Conduct

Antitrust Alert: Australian Court Construes Collaborative Bidding in M&A Sale Process to Constitute Cartel Conduct & Misleading and Deceptive Conduct

Surprising litigation in the Australian Federal Court highlights the potential risks for parties engaging in back to back transactions and consortium, intermediary or other collaborative bidding, including in relation to transactions outside Australia. Two multinational suppliers of mining consumables, Norcast S.ár.L and Bradken Limited, recently settled litigation in which Norcast alleged that Bradken had engaged in bid rigging in a tender process for the purchase of Norcast's subsidiary, Norcast Wear Solutions, Inc. (NWS). This followed a decision against Bradken at trial. The settlement also resolved allegations that Bradken engaged in misleading and deceptive conduct in the tender process. The settlement means that the Full Federal Court of Australia will not hear an appeal on a number of M&A and competition law issues important for companies doing business in Australia. 

Although an unusual context, this is the first private litigation to apply the antitrust "cartel" prohibitions that Australia introduced in 2009, which provide for substantial criminal penalties in addition to the pre-existing civil penalties. Given the trial court decision in Bradken, would-be participants in an M&A sale process must be alert to potential breaches of Australian competition law and should ensure that any collaboration arrangement and the conduct of their tender is carefully thought out and managed. 


In early 2011, Norcast (owned by Pala Investments, a Swiss private equity firm) decided to sell its wholly owned subsidiary NWS (a Canadian company). UBS conducted the sale process and invited bids from a number of potential buyers. Bradken was not specifically invited to bid (and during the litigation submitted that it had been excluded from the process). Bradken therefore approached the New York based private equity firm, Castle Harlan, and encouraged it to bid for NWS, in the hope that Bradken might thereafter subsequently acquire NWS from Castle Harlan.

Castle Harlan ultimately was selected as the successful bidder and acquired NWS through its subsidiary BC for US$190 million. Earlier that same day, Bradken had entered into an agreement with BC giving Bradken the right to acquire BC. Within hours of the sale of NWS to BC, Bradken exercised the right and acquired BC and hence also acquired NWS. The total amount paid to Castle Harlan entities by Bradken was approximately US$212 million. Given the strategic advantages for Bradken in acquiring NWS (including synergies), Norcast alleged that Bradken would have paid a higher price to Norcast than Norcast ultimately accepted from Castle Harlan. 

Norcast brought a lawsuit under the Australian Competition and Consumer Act (Act), claiming that Bradken's arrangement with Castle Harlan constituted "bid rigging" in contravention of the Act's "cartel" prohibitions and claiming that the conduct of Castle Harlan and Bradken during the sales process constituted breaches of the Act's prohibition of misleading or deceptive conduct.

In March last year, the trial court upheld Norcast's claims, ordering Bradken to pay damages of US$22.4 million to Norcast (the difference between what Bradken ultimately paid to Castle Harlan and what Castle Harlan had paid to Norcast). Bradken appealed this decision to the Full Federal Court and the ACCC was granted leave to intervene. The litigants then reached an accommodation with each other and sought appeal orders by consent. However, the Court decided that it would not determine an appeal on that basis and finally the parties settled the case for an undisclosed amount.

The bid rigging claim

Determining that the cartel provisions had been breached, the trial judge rejected Bradken's submission that, to give rise to a breach of the Act, a request for bids must be a request directed to the parties to the alleged bid rigging agreement. The judge decided that there was no barrier to a successful bid rigging claim merely by the fact that Bradken had not been invited to participate in the tender process.

Further, the court found that there is no requirement that the request for bids need be in Australia nor that the parties must be in competition with respect to a market in Australia; that is, there is no territorial limitation on such claims. As a result of this, parties who carry on any kind of business in Australia may be subject to Australian competition actions, even relating to tenders unrelated to Australia or arrangements with other potential bidders who do not compete with that party in Australia.

Notwithstanding Bradken's arguments that it had been excluded from and never intended to participate in the NWS tender process, the Court found that Castle Harlan and Bradken were competitors for this tender. Castle Harlan wanted to acquire NWS for resale at a profit, while and Bradken, the logical purchaser, also wished to acquire NWS; hence, absent the arrangement between them, it was possible that the two would have competed with each other in bidding for NWS.

The misleading or deceptive claim

The court found that both Bradken and Castle Harlan had engaged in misleading or deceptive conduct, simply as a result of their failure to disclose their arrangement to Norcast. Under Australian law, silence can constitute misleading and deceptive conduct in breach of the Act, although this is difficult to establish where there is no duty to disclose in the circumstances no reasonable expectation that a fact would be disclosed. Full disclosure in commercial negotiations is not required, but that this does not give commercial negotiators "licence to deceive."  In this case, the court determined that the parties had by their silence acted to "deceive" Norcast and hence were in breach of the Act. Importantly, the Court found that Bradken and Castle Harlan had taken deliberate steps to conceal their arrangement from Norcast and that Castle Harlan had also made express representations to Norcast that were misleading and deceptive.

The judgement emphasizes that participants in an M&A sales process or negotiation need to be alert both to what is said and what is omitted, to ensure a balance is maintained between the party's own interests and its compliance with obligations under Australian competition and consumer law.


The Bradken judgement means that future parties responding to M&A tenders will need to pay much greater attention to the structure of any collaborative bidding arrangement. The Bradken case will be relevant to intermediary or nominee arrangements, consortium bids, and partial or complete flow-on transactions. Participants in such arrangements will need to consider whether they could be considered competitors for the target in their own right. The restrictions on each member of a consortium will also need to be carefully thought through, as potentially giving rise to a bid rigging arrangement or other cartel conduct.

Participants in commercial negotiations will also need to bear in mind the broad application of the misleading and deceptive conduct prohibitions under the Act and consider carefully what is said and not said in light of the particular circumstances of each transaction. Sellers may wish to include express obligations of disclosure in pre-transaction agreements and both buyer and seller should also consider the role of clauses excluding or indemnifying a party against post-completion statutory claims.

Court decision

The trial judge's decision stands on a number of important points. In particular, the judgement: 

  1. confirms that Australian courts are willing to take a broad view of when parties are in competition, or likely to be in competition, with each other to acquire a target.
  2. acts as a timely reminder that Australian courts will actively enforce misleading or deceptive conduct claims in the context of M&A transactions (this has particular relevance to bidders who wish to conceal their identity for any part of the tender process); and
  3. indicates that international firms conducting business in Australia and engaging in off-shore M&A with little to no Australian connection may still be subject to potential claims under Australian law. 

The Bradken judgement can be found here.   

Lawyer Contacts 

For more information, please contact your principal Jones Day representative or either of the lawyers listed below. 

Nicolas J. (Nick) Taylor

Jason Beer
+61 2 8272 0578

Chris Ahern

David Sim

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