Can companies face criminal charges? Yes they can!

Can companies face criminal charges? It is a complicated question, but not one that can be answered with a flat out ‘no’. Woolworths (ASX:WOW) New Zealand was criminally charged by the New Zealand Commerce Commission earlier this week along with 2 individual Pak’nSave outlets. We thought this was the perfect chance to explore this question. But first, let’s look at that individual case.

Can companies face criminal charges? Woolworths NZ suggests companies can be

The NZCC did not point to specific breaches, but alleged inaccurate pricing and misleading specials.

“Shoppers should have confidence that the price they see will be the price they pay, and specials really are special,” Commerce Commission Deputy Chair Anne Callinan declared.

“Supermarkets have long been on notice about the importance of accurate and clear pricing and specials, and we’re not satisfied with the continuing issues we’re seeing across the industry.

“Pricing accuracy is a consumer right and an expectation of a competitive market. The major supermarkets are large, well-resourced businesses that should invest the time and effort to get pricing and promotions right.

“The charges we are filing against major supermarket brands are to remind all supermarket operators that we expect them to fix ongoing pricing accuracy issues and implement better processes to prevent issues like these in the future’.

No soul to be damned…

It is important to note we are talking about the charging of companies as legal entities. Of course directors can be charged or sued for misconduct while at the company such as misleading the market, fleecing money from it or insider trading. But charging the company with a crime? It’s complicated.

The former Lord High Chancellor of Great Britain Edward Thurlow put it so well,’ Did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?’ The second half of that statement has how many have described the dilemma. In that sense, a company cannot be ‘imprisoned’.

Yes companies can be charged

Nonetheless, Australia’s legal framework does allow for companies as legal entities to be criminally liable in some circumstances, particularly where the corporation has expressly, tacitly or impliedly authorised or permitted the offence.

In the aftermath of the Financial Services Royal Commission, parliament amended laws to significant increase penalties for criminal offences. For crimes under corporations and consumer credit legislation, companies can be fined up to A$9.99m, three times the value of the benefit obtained or up to 10% of annual turnover during the 12 months preceding the offence. There are other sanctions for other offences.

One of the most high profile cases were Aussie Skips and Bingo Bins which were charged with criminal cartel offences in late 2022. This followed an investigation that found a 3 month cartel where the companies agreed to fix their prices for waste collection and processing services in Sydney.

In February 2024, both companies were convicted and sentenced – Bingo copped a $30m fine and Aussie Skips got a $3.5m fine. The former CEOs of these companies – Daniel Tartak and Emmanuel Rossakis – were fined too and received intensive corrections orders along with bans from managing corporations for five years. Bingo’s $30m fine was the second largest fine imposed for criminal cartel offences under the Competition and Consumer Act.

Bingo had been ASX-listed at the time of these offences but delisted in 2021 after it was bought by Macquarie for $2.3bn.

Conclusion

This may seem like an obscure topic because it is unlikely you’ll be invested in a company that engages in misconduct. Even then, it is far more common to see the company sued civilly, and any criminal sanctions to fall on management. Nonetheless, we thought this was something worth addressing.

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