Ex-Farm Pride boss to pay $120,000 penalty for egg cartel involvement

The Federal Court has ordered Mr Zelko Lendich, who is a former director of the Australian Egg Corporation Limited (AECL) and the former managing director of Farm Pride Foods, to pay a pecuniary penalty of $120,000 for an attempt to induce a cartel arrangement between competing egg producers, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).

The court declared that between January 19, 2012 and February 8 2012, Mr Lendich attempted to encourage certain egg producers in Australia to enter into an arrangement or arrive at an understanding that would limit the production and supply of eggs in Australia.

The orders were made on the basis of an admission by Mr Lendich that he attempted to induce the egg producers to make a cartel arrangement in contravention of the Competition and Consumer Act 2010 (CCA).

ACCC chairman Rod Sims said the watchdog launched legal proceeding against the AECL and competing egg producers because it was concerned the actions of the respondents, including Mr Lendich, if successful, could have reduced the production and supply of eggs and ultimately increased the price for consumers and other businesses.

“We consider that this penalty sends a strong deterrence message to directors of industry and business associations, and business managers generally, and underscores the significant legal risks that may arise from bringing competing firms together without appropriate safeguards being in place,” Mr Sims said.

The court’s consideration of Mr Lendich’s admission followed its decision on February, 10 2016 dismissing the ACCC’s allegations of an attempt to induce a cartel arrangement involving AECL; Farm Pride; Ironside Management Services, trading as Twelve Oaks Poultry; Mr James Kellaway, managing director of AECL; and Mr Jeffrey Ironside, a director of AECL and Twelve Oaks Poultry; because the ACCC had not established that these respondents intended egg producers to enter into an arrangement or understanding involving reciprocal obligations by competing producers.

The ACCC has lodged an appeal from that decision. A hearing date is yet to be scheduled.

In subsequently dealing with the ACCC’s case against Mr Lendich, the court found Mr Lendich’s admission included an admission of an intention to induce a cartel arrangement or understanding between competing egg producers, and accordingly the court was prepared to find that Mr Lendich had contravened the CCA.

In addition to imposing a penalty, the court also made orders that Mr Lendich attend and undertake a compliance program, and pay an agreed amount towards the ACCC’s costs of the proceedings.

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