FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73

ORDERS

THE COURT ORDERS THAT:

1.    Time be extended to the first respondent for the filing and serving of the notice of contention up to and including 13 March 2018 and leave be granted to rely upon said notice of contention in the appeal.

2.    The appeal against the orders of the Court made on 9 May 2017 be allowed in part.

3.    Order 9 of the orders made by the Court on 9 May 2017 be set aside and in lieu thereof it be ordered that under s 76(1) of the Competition and Consumer Act 2010 (Cth) (the Act) and the Competition Code as applied as a law of Victoria by s 5 of the Competition Policy Reform (Victoria) Act 1995 (Vic), Yazaki Corporation pay to the Commonwealth of Australia penalties totalling $46 million in respect of contravention of ss 45(2)(a)(i) and 45(2)(b)(i) of the Act and the Competition Code identified as follows:

(1)    Declarations 5 and 7 (as to the 2008 Agreement): $14 million;

(2)    Declaration 6.1: $12 million;

(3)    Declaration 6.2: $12 million;

(4)    Declaration 6.3: $4 million; and

(5)    Declaration 6.4: $4 million.

4.    In addition to the declarations made by the Court on 9 May 2017, it be declared after declaration 6:

6A    By submitting to TMCA the 2006 Toyota Camry agreed prices for the 2006 Toyota Camry wire harnesses in respect of which the first respondent Yazaki had been awarded supply by TMC, AAPL gave effect to the 2003 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.

6B    By submitting to TMCA the 2011 Toyota Camry agreed prices for the 2008 Toyota Camry wire harnesses, AAPL gave effect to the 2008 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.

5.    The notice of contention be dismissed.

6.    The cross-appeal be dismissed.

7.    The respondents pay the appellant’s costs of and incidental to the appeal, cross-appeal and notice of contention.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction and background facts

1    This is an appeal and cross-appeal (also involving an application by the respondents to file, serve and rely upon a notice of contention) against declarations and orders, including civil penalties totalling $9.5 million, made by a judge of the Court in relation to a cartel concerning the supply of wire harnesses for motor vehicles between two Japanese corporations: Yazaki Corporation (Yazaki) and Sumitomo Electric Industries Ltd (SEI) and their wholly owned Australian subsidiaries, Australian Arrow Pty Ltd (AAPL) and SEWS Australia Pty Ltd (SEWS-A), respectively. The primary judge delivered two judgments: Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304; 332 ALR 396 (liability judgment) and Australian Competition and Consumer Commission v Yazaki Corporation (No 3) [2017] FCA 465 (relief judgment). For the reasons that follow we would allow the appeal, dismiss the cross-appeal and re-fix the penalties to be imposed on Yazaki in a total amount of $46 million. Our disagreements with the primary judge are focused upon matters of statutory construction, the evaluation and identification of a market with the advantage of recent High Court authority, and the legal characterisation of the conduct of Yazaki and SEI. The task on appeal was made significantly easier than it otherwise might have been by the clear, precise and comprehensive reasons of the primary judge after a factually complex and hard-fought trial. Also, the Court is grateful to counsel on the appeal for the quality of their assistance in argument.

2    Yazaki and AAPL were the respondents to the proceeding brought by the Australian Competition and Consumer Commission (ACCC). SEI and SEWS-A co-operated with the ACCC in its investigation, and most of the evidence of the contravening conduct came from officers or employees of SEI and SEWS-A.

3    Wire harnesses are electrical systems that distribute power and electrical signals to other components in a motor vehicle. Different types of wire harnesses control different functions and parts of the vehicle. For instance, an engine wire harness is mounted on top of the engine and controls the engine; the engine room main wire harness is placed around the engine cavity and controls headlights, hazard lights and indicators; floor wire harnesses control the seats; and door wire harnesses control functions on the doors. For this proceeding the most important wire harness was the engine room main wire harness.

4    Globally, the main manufacturers of wire harnesses were three Japanese corporations: Yazaki, SEI and Furukawa Co Ltd; and two United States’ corporations: Lear Corporation and Delphi.

The commencement of the cartel – the Overarching Cartel Agreement

5    The relevant conduct between Yazaki and SEI began by at least the mid-1990s when they entered into an arrangement or understanding referred to in the liability judgment as the Overarching Cartel Agreement, which dealt with their agreed mutual response to any request for quotation (or RFQ) from motor vehicle manufacturers for wire harnesses. The evidence was confined to conduct in relation to requests for quotations issued from time to time by Toyota Motor Corporation (TMC) or its related companies. The evidence also concerned TMC or a related company seeking proposals from suppliers outside requests for quotations for price revisions, which were described as price down requests.

6    The Overarching Cartel Agreement contained provisions that when an RFQ was issued to them, Yazaki and SEI would meet and discuss the request; that they would seek to agree upon the intended allocation of wire harnesses to be supplied by them and their subsidiaries to the manufacturers in the various countries in which the model was manufactured; that after agreeing on the allocation of wire harnesses to the various markets, they would agree upon the prices that they or their subsidiaries would submit to the manufacturer in the relevant country; and that the prices would be such as to ensure, as far as was possible, that the manufacturer would award supply contracts for wire harnesses in accordance with the agreed allocation between Yazaki and SEI. It was alleged by the ACCC that there were two further provisions of the Overarching Cartel Agreement: that once the contract was awarded to one, the other would not compete in relation to supply; and that each would keep the arrangement secret. The primary judge concluded that the evidence did not support findings in that regard, though he said that such could in a sense be readily implied. There can be no doubt, however, that the arrangement was surreptitious and kept hidden from TMC, and indeed from Yazaki’s subsidiary AAPL. Such “competition” as occurred was contrived by reference to prices they agreed in order to encourage TMC to choose the agreed incumbent.

7    No relief was sought by the ACCC in relation to the making of the Overarching Cartel Agreement; rather it was sought in relation to the giving effect to it.

8    In addition to the Overarching Cartel Agreement, the ACCC alleged and the primary judge found three other contravening agreements, arrangements or understandings: the 2002 Toyota Camry Minor RFQ Agreement, made by the Australian subsidiaries of Yazaki and SEI, and the 2003 Agreement and the 2008 Agreement, made by Yazaki and SEI. The making of or arriving at the 2003 Agreement and the 2008 Agreement were also the giving effect to the Overarching Cartel Agreement. Further, various conduct by Yazaki in 2003 and 2011 which we describe below was found to be giving effect to the 2003 Agreement and the 2008 Agreement, respectively.

The arrangement or understanding between the subsidiaries: the AAPL and SEWS-A 2002 Toyota Camry Minor RFQ Agreement

9    In April 2003, AAPL and SEWS-A made an arrangement or arrived at an understanding about a request for quotation that was issued by TMC’s Australian subsidiary, Toyota Motor Corporation Limited (TMCA) to SEWS-A in connection with a minor model change to the 2002 Toyota Camry. This arrangement or understanding between the two subsidiaries, referred to as the 2002 Toyota Camry Minor RFQ Agreement, concerned the supply of the engine room main wire harness. The provisions of this agreement were that as AAPL was the incumbent supplier to TMCA of the engine room main wire harness for the 2002 Camry, SEWS-A would not, in its response to the RFQ, attempt to win supply of the wire business; that AAPL would provide SEWS-A with the price at which AAPL then supplied the engine room main wire harness to TMCA; and that then SEWS-A would determine itself or in conjunction with AAPL a price to be submitted by SEWS-A to TMCA, sufficiently higher than AAPL’s price to ensure, as far as was possible, that TMCA did not award supply under the RFQ to SEWS-A.

10    In May 2003, AAPL gave effect to the 2002 Toyota Camry Minor RFQ Agreement by providing SEWS-A with its prevailing prices at which it supplied engine room main wire harnesses to TMCA; and by discussing with SEWS-A the extent to which SEWS-A’s prices should exceed AAPL’s.

The 2003 Agreement between Yazaki and SEI

11    Meanwhile, in May 2003, in Japan, the 2003 Agreement was made between Yazaki and SEI. TMC sought bids for the supply of wire harnesses to TMC for a new model of the Toyota Camry to be introduced in 2006. The bids were to be from five locations: Japan, the United States of America, Australia, Thailand and Taiwan. SEI became aware that TMC were dissatisfied with Yazaki because of some quality problems. SEI had another competitive edge in that it had been selected by TMC to provide certain parts for two other models, which parts were related to the engine room main wire harness. Yazaki and SEI representatives met in June. They discussed formally the “dominant principle” of their existing overall cartel arrangement that each should maintain its respective market shares and prevent price erosion, but in relation to this RFQ they recognised TMC’s expectations of SEI, and Yazaki’s quality issues. The discussions dealt with the allocation of regions by price variations. At [159] of the liability judgment, the agreement was described as follows:

(1)    with respect to supply in Australia, SEI was to “win” by around 1% including customs duty;

(2)    with respect to supply in North America, Yazaki was to “win” by 2-3% approximately;

(3)    with respect to supply in Japan, Yazaki was to “win” by 1-2% approximately; and

(4)    with respect to supply in Thailand, Yazaki was to “win” by 2-3%.

12    The 2003 Agreement contained provisions that Yazaki and SEI would discuss and attempt to agree, in respect of each 2006 Toyota Camry manufacturing location, the prices for the 2006 Toyota Camry wire harnesses to be submitted in response to TMC’s RFQ of May 2003; that these prices would be agreed with a view to ensuring, as far as possible, that TMC awarded supply of wire harnesses for the 2006 Toyota Camry in each manufacturing location to the incumbent supplier of equivalent wire harnesses for the 2002 Toyota Camry (in Australia, Yazaki); that they would submit the agreed prices to TMC in Japan, and that for each manufacturer’s location other than Japan, Yazaki and SEI would submit or have their subsidiaries submit to the relevant TMC subsidiary in that location the agreed prices.

13    During June and July 2003, those responsible at SEI and Yazaki met and discussed prices to implement the agreement. This involved exchanging information about component pricing and agreeing prices that would look logical to TMC. This collusion was surreptitious. Yazaki and SEI were deciding on the fine detail necessary to mislead deliberately TMC about the genuineness of both their responses.

14    Despite the arrangement, TMC awarded the supply of engine room main wire harnesses to SEI in all countries, with other supply of wire harnesses being awarded in accordance with the cartel arrangements. There were accusations by Yazaki of “double crossing” by SEI, and protestations of “innocence” by SEI.

15    The primary judge found that Yazaki gave effect to the 2003 Agreement by discussing and agreeing prices with SEI in June and July 2003 that they would submit in response to the RFQ for the 2006 Camry; by submitting the agreed prices in July to TMC; by directing AAPL to submit the agreed prices to TMCA in September and October 2003; and by causing AAPL to submit the agreed prices to TMCA in October 2003.

16    In making the arrangement or arriving at the understanding constituting the 2003 Agreement Yazaki gave effect to the Overarching Cartel Agreement.

17    It will be necessary to refer in more detail to the events in Australia in 2003 in relation to the 2003 Agreement and the issuing of an RFQ by TMCA to the local subsidiaries of Yazaki and SEI in Australia, given that the decision for supply in Australia was made in Japan by TMC. It suffices to say at this point that the ACCC alleged that AAPL (not just Yazaki) gave effect to the 2003 Agreement by submitting the agreed prices to TMCA in October 2003. AAPL was not a party to the 2003 Agreement. The case of the ACCC was that AAPL did have knowledge of the cartel. The primary judge found, however, that it did not have any knowledge of the 2003 Agreement or of the Overarching Cartel Agreement. The ACCC also submitted that even without that knowledge AAPL gave effect to the 2003 Agreement. The primary judge also rejected that contention by the ACCC. That latter rejection was challenged on appeal by the ACCC.

The 2008 Agreement between Yazaki and SEI

18    The case against Yazaki and the findings in relation to the 2008 Agreement followed a similar pattern to the 2003 Agreement. In March 2008, TMC issued an RFQ for the global supply of wire harnesses for use in the manufacture of the 2011 Toyota Camry in nine locations, including Australia, and for 15 wire harness parts. At the time of the RFQ four of the 15 wire harness parts (including the engine room main wire harness) were supplied by SEI, and six by Yazaki.

19    Representatives of Yazaki and SEI met to discuss and agree upon the allocation between them and their respective subsidiaries of the supply of wire harnesses for the 2011 Toyota Camry to TMC and its subsidiaries. In May 2008, Yazaki and SEI submitted prices that they had agreed between them to TMC.

20    The primary judge found that the 2008 Agreement was made out and contained the same provisions, mutatis mutandis, as the 2003 Agreement (as set out at [12] above). Further, Yazaki gave effect to the 2008 Agreement by meeting with SEI and discussing and agreeing prices for wire harnesses in the 2011 Toyota Camry; by submitting those prices to TMC; and by directing AAPL to submit the prices to TMCA in Australia.

21    In making the arrangement or arriving at the understanding constituting the 2008 Agreement Yazaki gave effect to the Overarching Cartel Agreement.

22    The ACCC alleged that AAPL (not just Yazaki) gave effect to the 2008 Agreement. The primary judge rejected this contention, as he had done in relation to the 2003 Agreement.

The relevant statutory provisions, the conclusions of the primary judge and the issues on the appeal, cross-appeal and notice of contention

Statutory provisions on liability

23    Sections 45(2) and 45(3) of the Competition and Consumer Act 2010 (Cth) (the Act), previously known as the Trade Practices Act 1974 (Cth), and of the Competition Code of Victoria (the Competition Code) were in the following terms:

45    Contracts, arrangements or understandings that restrict dealings or affect competition

(2)    A corporation shall not:

(a)    make a contract or arrangement, or arrive at an understanding, if:

(i)    the proposed contract, arrangement or understanding contains an exclusionary provision; or

(ii)    a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b)    give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

(i)    is an exclusionary provision; or

(ii)    has the purpose, or has or is likely to have the effect, of substantially lessening competition.

(3)    For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.

24    The phrase “exclusionary provision” referred to in ss 45(2)(a)(i) and 45(2)(b)(i) was the subject of s 4D as follows:

4D    Exclusionary provisions

(1)    A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:

(a)    the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and

(b)    the provision has the purpose of preventing, restricting or limiting:

(i)    the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

(ii)    the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;

by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.

(2)    A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first‑mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.

25    Before its repeal in 2010, s 45A provided in sub-section (1) a deeming provision in relation to conduct taken to have the purpose or to have or be likely to have the effect, of substantially lessening competition:

(1)    Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.

26    The phrase “give effect to” was defined in s 4 as follows:

... in relation to a provision of a contract, arrangement or understanding, includes do an act or thing in pursuance of or in accordance with or enforce or purport to enforce.

27    The word “market” used in s 45(3) was defined in s 4E as follows:

4E     Market

For the purposes of this Act, unless the contrary intention appears, market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first mentioned goods or services.

28    Yazaki’s conduct occurred substantially in Japan. Thus, the extraterritoriality provisions of the Act and the Competition Policy Reform (Victoria) Act 1995 (Vic) (the CPRA) that made the Competition Code the law of Victoria became important. Section 5 of the Act was as follows:

5    Extended application of Parts IV, IVA, V, VB and VC

(1)    Part IV, Part IVA, Part V (other than Division 1AA), Part VB and Part VC extend to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia or by Australian citizens or persons ordinarily resident within Australia.

29    Sections 8(1) and 8(2) of the CPRA was as follows:

8    Application of Competition Code

(1)    The Competition Code of this jurisdiction applies to and in relation to –

(a)    persons carrying on business within this jurisdiction; or

(b)    bodies corporate incorporated or registered under the law of this jurisdiction; or

(c)    persons ordinarily resident in this jurisdiction; or

(d)    persons otherwise connected with this jurisdiction.

(2)    Subject to subsection (1), the Competition Code of this jurisdiction extends to conduct, and other acts, matters and things, occurring or existing outside or partly outside this jurisdiction (whether within or outside Australia).

30    As to ss 5 and 8(1), the ACCC’s case was that Yazaki carried on business in Australia; ACCC’s case was also (from s 8(1)) that Yazaki was a body corporate otherwise connected with Victoria.

31    Section 84(2) of the Act, as to conduct by agents, was as follows:

84    Conduct by directors, servants or agents

...

(2)    Any conduct engaged in on behalf of a body corporate:

(a)    by a director, servant or agent of the body corporate within the scope of the person’s actual or apparent authority; or

(b)    by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent;

shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.

32    The cartel provisions of the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth) were also relied upon. They fell to be analysed by reference to s 45(2). Debate on appeal was focussed on s 45.

The conclusions of the primary judge on liability

The satisfaction of ss 45(2)(a)(i) and (ii) and (b)(i) and (ii) by AAPL

33    The conduct of AAPL in 2003 in making the 2002 Toyota Camry Minor RFQ Agreement contravened both ss 45(2)(a)(i) and 45(2)(a)(ii) and its conduct in giving effect to the arrangement or understanding contravened both ss 45(2)(b)(i) and 45(2)(b)(ii). There was no appeal from these findings.

The satisfaction of ss 45(2)(a)(i) and (ii) and (b)(i) and (ii) by Yazaki

34    Whilst no relief was sought in relation to the making of the Overarching Cartel Agreement, relief was claimed in relation to giving effect to it by making the 2003 Agreement and the 2008 Agreement. The primary judge considered, however, (at [81] of the liability judgment) that the Overarching Cartel Agreement was within the terms of ss 45(2)(a)(i) and 45(2)(a)(ii) and s 44ZZRD of the Act and the Competition Code. There was no appeal from that conclusion.

35    As to the 2003 Agreement, the primary judge found that its provisions had the purpose of restricting or limiting supply of wire harnesses to TMC or its subsidiaries to the incumbent supplier and so were exclusionary provisions for s 4D and so fell within s 45(2)(a)(i) and the definition of cartel provision in s 44ZZRD of the Act and Competition Code: [168] of the liability judgment; and that the provisions had the purpose or had or were likely to have the effect of controlling or maintaining or providing for the controlling or maintaining of prices for wire harnesses supplied by Yazaki and SEI and their subsidiaries to TMC and its subsidiaries for s 45A(1) and so fell within s 45(2)(a)(ii) and within s 44ZZRD in the Act and Competition Code: [179] of the liability judgment. There was no appeal from these findings.

36    The primary judge found (at [227] of the liability judgment) that the giving effect to the Overarching Cartel Agreement by making the 2003 Agreement satisfied ss 45(2)(b)(i) and 45(2)(b)(ii) of the Act and Competition Code.

37    We have already referred to the acts that comprised Yazaki giving effect to the 2003 Agreement, at [13]-[15] above, within the meaning of s 45(2)(b) of the Act. There was no appeal from this finding, though the ACCC does appeal from the conclusion by the primary judge (at [228]-[240] of the liability judgment) that AAPL did not give effect to the 2003 Agreement. The appeal is one limited to the question of construction as to whether knowledge of the prohibited arrangement or understanding is an essential element of the meaning of the phrase “give effect to”. No appeal was taken against the finding that AAPL did not have, as a matter of fact, the relevant knowledge.

38    The primary judge made substantially the same findings as to the contravention of s 45(2) of the Act and the Competition Code by the making of and giving effect to the 2008 Agreement.

39    The findings as to the satisfaction of both ss 45(2)(a)(i) and (ii) and (b)(i) and (ii) must be read subject to the primary judge’s conclusions on the necessity for it to be shown that there was a relevant market in Australia for contravention of ss 45(2)(a)(ii) and 45(2)(b)(ii), but not ss 45(2)(a)(i) and 45(2)(b)(i), as to which, see below.

Extraterritoriality

40    The primary judge rejected the submission of the ACCC that Yazaki was carrying on the whole of the business of AAPL in Australia. His Honour did, however, find that because of its involvement in the supply of wire harnesses to TMCA (in effect through its close direction in giving effect to the cartel behaviour) Yazaki was, with AAPL, carrying on business in Australia in the supply of wire harnesses to TMCA, and was for those reasons connected with the jurisdiction of Victoria. There was no appeal from these findings.

The meaning of “exclusionary provision” and the relevance of the existence of a market in Australia

41    It was common ground that an element of contravention of ss 45(2)(a)(ii) and 45(2)(b)(ii) was that the provision of the arrangement or understanding had the purpose, or would have or be likely to have the effect, of substantially lessening competition, meaning by ss 45(3) and 4E, competition in a market in Australia.

42    The relevant market in Australia was asserted by the ACCC to be the supply of wire harnesses for Toyota Camry models. The primary judge found that there was no such market in Australia, on the basis that no competitive activity took place in Australia in relation to that supply, rather all rivalrous behaviour was found to have taken place in Japan.

43    The consequence of this finding was that though the other elements of ss 45(2)(a)(ii) and 45(2)(b)(ii) were satisfied, there was no contravention without a finding of a relevant market.

44    The primary judge concluded that ss 45(2)(a)(i) and 45(2)(b)(i) were nevertheless contravened, because he concluded, contrary to the submission of Yazaki, that such contravention did not require a market in Australia.

45    Yazaki in its cross-appeal contends that the primary judge was wrong to conclude that contravention of ss 45(2)(a)(i) and 45(2)(b)(i) does not require proof of a market within Australia.

46    Upon the filing of the cross-appeal in this regard, the ACCC challenged in an amended notice of appeal, the primary judge’s conclusion as to there being no relevant market in Australia. The ground of appeal (ground 3A) commences, “Insofar as the issue arises by reason of the Respondents’ cross-appeal …”. No attempt was made in the amended notice of appeal to seek declarations as to contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii). The ground was defensive in nature in order to maintain the findings of contravention of ss 45(2)(a)(i) and 45(2)(b)(i).

The issues on the appeal and cross-appeal on liability

47    Thus, the liability issues arising and the later structure of these reasons are as follows:

(a)    Appeal grounds 1-3: Notwithstanding the (unchallenged) finding that AAPL had no knowledge of any of the relevant cartel conduct by Yazaki, did it nevertheless in the circumstances give effect to the 2003 Agreement and 2008 Agreement? This raises principally a question of statutory construction as to the phrase “give effect to” and its definition in s 4.

(b)    Cross-Appeal: Whether for there to be an exclusionary provision and contravention of ss 45(2)(a)(i) and 45(2)(b)(i) there must be found to be a relevant market in Australia. This raises a question of statutory construction, in particular whether s 45(3) and its reference to “competition” is to govern and contribute to the meaning of the conception of an exclusionary provision in s 4D through its use of the word “competitive”.

(c)    Appeal ground 3A: If the cross-appeal succeeds and a relevant market in Australia is necessary for contravention of ss 45(2)(a)(i) and 45(2)(b)(i), whether there was at the relevant time a market in Australia for the supply of wire harnesses for Toyota Camry vehicles. This is substantially a question of fact and legal characterisation of facts not otherwise in dispute.

Statutory provisions on penalty

48    The Court made declarations as to the conduct by AAPL contravening ss 45(2)(a)(i) and (ii) and (b)(i) and (ii) (as to the 2002 Toyota Camry Minor RFQ Agreement) and by Yazaki contravening ss 45(2)(a)(i) and 45(2)(b)(i), by making the arrangements, or arriving at the understandings, with SEI constituting the 2003 Agreement and the 2008 Agreement, by giving effect to them, and by giving effect to the Overarching Cartel Agreement by making or arriving at the 2003 Agreement and 2008 Agreement. Further, injunctive relief was also made against Yazaki. Apart from the primary judge’s refusal to make a declaration that AAPL also gave effect to the 2003 Agreement and 2008 Agreement, there was no issue on the appeal about declaratory or injunctive relief. Thus, the only relevant provision for this Court to consider on relief is s 76 concerning penalties, which was, relevantly, in the following form:

(1)    If the Court is satisfied that a person:

(a)    has contravened any of the following provisions:

(i)    a provision of Part IV;

…

the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.

(1A)    The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:

…

(b)    for each act or omission to which this section applies that relates to any other provision of Part IV—the greatest of the following:

(i)    $10,000,000;

(ii)    if the Court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission—3 times the value of that benefit;

(iii)    if the Court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and

…

Note: For annual turnover, see subsection (5).

…

(3)    If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

(4)    The single pecuniary penalty that may be imposed in accordance with subsection (3) in respect of conduct that contravenes provisions to which the 2 limits in paragraphs (1A)(a) and (b) apply is an amount up to the higher of those limits.

Annual turnover

(5)    For the purposes of this section, the annual turnover of a body corporate, during the turnover period, is the sum of the values of all the supplies that the body corporate, and any body corporate related to the body corporate, have made, or are likely to make, during that period, other than:

(a)    supplies made from any of those bodies corporate to any other of those bodies corporate; or

(b)    supplies that are input taxed; or

(c)    supplies that are not for consideration (and are not taxable supplies under section 72-5 of the A New Tax System (Goods and Services Tax) Act 1999); or

(d)    supplies that are not made in connection with an enterprise that the body corporate carries on; or

(e)    supplies that are not connected with Australia.

(6)    Expressions used in subsection (5) that are also used in the A New Tax System (Goods and Services Tax) Act 1999 have the same meaning as in that Act.

The conclusions of the primary judge on relief and penalty

49    There was no debate between the parties on relief with the exception of the questions whether there should be injunctive relief against AAPL and as to the appropriate penalty. The primary judge did not grant injunctive relief against AAPL. There was no appeal by the ACCC in that regard.

50    It was not open to seek penalties for the 2002 Toyota Camry Minor RFQ Agreement or the 2003 Agreement because of the six year limitation period. Penalties were sought only in relation to the conduct concerning the 2008 Agreement and the giving effect to the Overarching Cartel Agreement by the making of the 2008 Agreement.

51    After considering s 76(5), the primary judge concluded that the maximum penalty for each act or omission that amounted to a contravention was $10 million. This conclusion followed his Honour’s rejection of the construction of the annual turnover provision (s 76(5)), and in particular s 76(5)(d)) for which the ACCC had contended.

52    The ACCC had argued that there were five contraventions that were each subject to the maximum penalty which were set out in tabular form in [31] of the relief judgment, as follows:

53    The primary judge rejected Yazaki’s submissions that there was one “act” being one course of conduct for the purposes of s 76(1A)(b), and that all the contraventions were part of the same conduct within s 76(3).

54    After considering the cases dealing with so-called course of conduct, the primary judge, concluded that Yazaki’s conduct could be divided into two “broad categories”: the making of the agreements and the activity between the contraveners, on the one hand, and the submission of the prices to the purchaser, on the other. Treating these as two courses of conduct he imposed two penalties, one for each course of conduct, of $7 million and $2.5 million.

The issues on the appeal and the notice of contention on penalty

55    The penalty issues arising are as follows:

(a)    Appeal grounds 4-6: Whether the primary judge misconstrued s 76(5) in concluding that the relevant maximum penalty was $10 million instead of a sum over $17 million for each contravention based on turnover.

(b)    Appeal grounds 7 and 8: Whether the primary judge erred in his application of the so-called course of conduct principle by applying a maximum penalty to each course of conduct, as opposed to each contravention; and accordingly whether the aggregate maximum should have been $50 million if calculated pursuant to s 76(1A)(b)(i) or over $87 million if calculated pursuant to s 76(1A)(b)(iii), rather than $20 million.

(c)    Appeal ground 9: Whether the penalties were manifestly inadequate.

(d)    Notice of contention (if leave be granted to extend time to rely upon it): Whether the conduct of Yazaki in making and giving effect to the 2008 Agreement should be regarded as two “acts” for the purpose of s 76(1) and s 76(1A), or, alternatively, should be regarded as two courses of the “same conduct” for the purpose of s 76(3).

(e)    If we consider there to be a material error of principle by the primary judge, what are the appropriate penalties on a reimposition of penalty by this Court?

The relevant principles of statutory construction

56    The general principles of statutory construction were not the subject of specific debate. Much emphasis, however, was placed by Yazaki, in support of its cross-appeal, on what was said to be the proper approach to the treatment of definition sections in Acts, and in particular on one aspect of the judgment of McHugh J in Kelly v The Queen [2004] HCA 12; 218 CLR 216 at [103]. We deal with that argument below. It is nevertheless appropriate to say something of legal context and so-called plain meaning. In the enquiry as to ascription of meaning, it is both permissible and necessary to examine context at the same time as considering the text of a statute. Understanding the text in its statutory, historical or legal context may suggest a meaning that a mere textual analysis does not. A summary of the proper approach (from decisions of the High Court) was conveniently stated in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159 at [377]-[378] as follows:

377    We have reached this conclusion through an orthodox application of the principles of statutory construction. These principles of statutory construction require a consideration of the statutory text, context and purpose: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[71]; Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39]; Thiess v Collector of Customs (2014) 250 CLR 664 at [22]-[23]; Military Rehabilitation and Compensation Commission v May (2016) 257 CLR 468 at [10]; North Australian Aboriginal Justice Agency Ltd v Northern Territory (2015) 256 CLR 569 at [11]. Statutory construction must begin and end with the statutory text: Thiess at [22] (quoting Consolidated Media Holdings at [39]). But as Gageler J observed in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34 (SZTAL) at [37]:

But the statutory text from beginning to end is construed in context, and an understanding of context has utility “if, and in so far as, it assists in fixing the meaning of the statutory text”.

(Footnote omitted.)

378    Similarly, Kiefel CJ and Nettle and Gordon JJ observed in SZTAL at [14]:

The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.

(Citations omitted.)

57    The relevance of the reports of law reform commissions and cognate inquiries in the examination of legal context can be seen in many cases, examples of which are CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384; Newcastle City Council v GIO General Ltd [1997] HCA 53; 191 CLR 85; Laemthong International Lines Co Ltd v BPS Shipping Ltd [1997] HCA 55; 190 CLR 181.

Did AAPL give effect to the 2003 and 2008 Agreements – the meaning of “give effect to”?

58    The primary judge held, at [229] and [231] of the liability judgment, that knowledge of the cartel arrangement comprises an essential element of the legal standard for “giving effect to” under s 45(2)(b) of the Act:

    229    … The respondents do not dispute that a third party can give effect to a prohibited arrangement or understanding, but they submit that knowledge of the arrangement or understanding is an essential element of a third party's liability. They point to the following matters. First, the ACCC has assumed the obligation of proving knowledge by pleading it in its Amended Statement of Claim. I do not accept this proposition. If knowledge is not necessary as a matter of law, I do not think a party is required to prove it simply because it has pleaded it. Secondly, the respondents referred to the analogous contravention of aiding and abetting where proof of knowledge would be necessary (s 75B of the Act; Yorke and Another v Lucas (1985) 158 CLR 661 at 667). There is force in the submission. Thirdly, the respondents submit that it could not have been the intention of Parliament to make liable the courier driver or typist who unwittingly does an act which gives effect to a prohibited arrangement or understanding. There is force in this submission.

…

    231    … The two considerations identified by the respondents, the vagueness of a test involving a connection, and the fact that pecuniary penalties attend a contravention of s 45(2), lead me to conclude that knowledge of the prohibited arrangement or understanding is an essential element.

59    The primary judge on this basis concluded that knowledge of a given arrangement is a pre-requisite, as a matter of law, to an entity being capable of “giving effect to” such an arrangement for the purposes of s 45(2)(b) of the Act. The ACCC appeals this finding. The relevant grounds of appeal in the ACCC's Further Amended Notice of Appeal were as follows:

A.    Liability – section 45(2)(b) – knowledge

1.    His Honour erred in concluding that, for the purposes of s 45(2) of the Competition and Consumer Act 2010 (Cth) (the Act), it was necessary for the Second Respondent to have had knowledge of the 2003 Agreement and the 2008 Agreement to be held liable for giving effect to those agreements.

2.    His Honour erred in failing to find that the Second Respondent contravened s 45(2)(b)(i) of the Act and the Competition Code as applied as a law of Victoria by s 5 of the Competition Policy Reform (Victoria) Act 1995 (Code), by giving effect to the 2003 Agreement by submitting to Toyota Motor Corporation Australia (TMCA) the 2006 Toyota Camry agreed prices for the 2006 Toyota Camry wire harnesses in respect of which the First Respondent had been awarded supply by Toyota Motor Corporation (TMC).

3.    His Honour erred in failing to find that the Second Respondent contravened s 45(2)(b)(i) of the Act and the Code, by giving effect to the 2008 Agreement by submitting to TMCA the 2011 Toyota Camry agreed prices for the 2008 Toyota Camry wire harnesses.

60    Based on these grounds of appeal, the question before us is whether knowledge comprises an essential element, as a matter of law, in the interpretation of “give effect to” for the purposes of s 45(2)(b) of the Act.

61    If the ACCC prevails on that point, a further question for the Court's consideration is whether the conduct of Yazaki's subsidiary AAPL in submitting agreed wire harness prices to TMCA at the direction of Yazaki suffices for the purposes of “giving effect to” the 2003 and 2008 Agreements under s 45(2)(b).

62    In paragraph 12 of the ACCC's Further Notice of Appeal, the ACCC sought declarations to the effect that:

(1)    AAPL gave effect to the 2003 Agreement, and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code, by submitting to TMCA the 2006 Toyota Camry agreed prices for the 2006 Toyota Camry wire harnesses in respect of which Yazaki had been awarded supply by TMC.

(2)    AAPL gave effect to the 2008 Agreement, and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code, by submitting to TMCA the 2011 Toyota Camry agreed prices for the 2008 Toyota Camry wire harnesses.

63    The ACCC submitted that the term “give effect to” in s 45(2)(b) should be given its ordinary meaning, which in turn does not require knowledge as an essential component. Rather, referring to dictionary definitions, the ACCC submitted that the term “give effect to” connotes carrying out some plan, and is broad enough to cover circumstances where a person carries out another's plan at that other person's direction without knowledge of the underlying details. In terms of the context of “give effect to” in s 45(2)(b), the ACCC submitted that no element of context served to limit its ordinary meaning by way of a knowledge requirement. More specifically, the ACCC submitted that the context afforded by the more explicit knowledge requirement in s 75B in respect of aiding and abetting sheds no light on the meaning of “give effect to”. In terms of the object and purpose of s 45(2)(b), the ACCC submitted that its function could be subverted if a subsidiary were able to avoid liability by reason of a lack of knowledge such as in the circumstances of the present case. In particular, there would be potential for foreign corporations to arrange their affairs so as to avoid liability for their conduct and the conduct of their subsidiaries by ensuring the subsidiary lacked the requisite knowledge. Conversely, the ACCC rejected the primary judge's concern that the absence of a knowledge requirement would result in liability for a courier driver or typist who unwittingly does an act that gives effect to a prohibited arrangement. Rather, cases should be determined on their facts on a case-by-case basis, and in respect of the present case, the factual position of a subsidiary is distinct from that of an unwitting third party.

64    For its part, AAPL submitted that the ordinary meaning of “give effect to” – as reflected in the dictionary definitions referred to by the ACCC as well as the definition set out in s 4 of the Act – demonstrates that it connotes at least some level of awareness of the plan being followed or carried out or enforced. This is because in order to act “in accordance with” an arrangement, or to do something “in pursuance of” it or “enforce” it, a party must have at least some level of knowledge of the arrangement. In terms of the context of the term, AAPL submitted that, to the extent there is any ambiguity in the ordinary meaning of the term, the Court should opt for a restrictive interpretation in AAPL's favour due to the pecuniary penalties attaching to s 45(2)(b). In respect of the object and purpose of s 45(2)(b), AAPL submitted that there was unlikely to be a legislative intent to expose a party acting unwittingly to a civil penalty, whereas the ACCC's construction would have the effect of exposing the unwitting delivery driver or even the victim of cartel conduct to a civil penalty. For AAPL, there was no principled way of distinguishing the coincidental or fortuitous conduct of a stranger from that of a subsidiary directed to participate by its parent, and no support in the language of s 45(2)(b) for doing so.

65    Turning to our consideration of the issue, the core principles of statutory interpretation have been set out above. Essentially we construe the term “give effect to” based on the ordinary and grammatical sense of that term, interpreted having regard to its context and the legislative purpose.

66    We say at the outset that the appropriate approach to the interpretation of penal provisions is the same task as that of construing other legislative provisions, applying established principles of statutory construction.

67    If there is a true ambiguity, the Court may resolve that ambiguity in favour of a respondent. In relation to criminal offences, Gibbs J (as he then was) in Beckwith v The Queen [1976] HCA 55; 135 CLR 569 at 576 stated:

The rule formerly accepted, that statutes creating offences are to be strictly construed, has lost much of its importance in modern times. In determining the meaning of a penal statute the ordinary rules of construction must be applied, but if the language of the statute remains ambiguous or doubtful the ambiguity or doubt may be resolved in favour of the subject by refusing to extend the category of criminal offences … The rule is perhaps one of last resort. …

68    This statement has been endorsed by the High Court in Deming No 456 Pty Ltd v Brisbane Unit Development Corporation Pty Ltd [1983] HCA 44; 155 CLR 129 at 145; and Waugh v Kippen [1986] HCA 12; 160 CLR 156 at 164. These principles equally apply to civil penalty provisions: see Trade Practices Commission v TNT Management Pty Ltd [1985] ATPR 40-512; 6 FCR 1 at 47-8 and Rich v Australian Securities and Investments Commission [2004] HCA 42; 220 CLR 129.

69    It is to be recalled, however, that cartel provisions are to be interpreted in a way that makes their enforcement effective. Arguments based on anomaly should not be accepted if to do so would defeat the true operation of a statutory provision so intended by the Parliament.

70    Beginning with the text of the term at issue, we rely on the interpretation of “give effect to” set out in s 4 of the Act, which provides the non-exhaustive definition that “give effect to”, in relation to a provision of a contract, arrangement or understanding, includes do an act or thing in pursuance of or in accordance with or enforce or purport to enforce. It is apparent from s 4 that “give effect to” focuses on the implementation of the contract, arrangement or understanding at issue. There is no explicit knowledge requirement in the text of s 4. Indeed, we note that neither party submitted that the ordinary meaning of “give effect to” necessarily compels a knowledge requirement. In particular, AAPL accepted that it is possible to at least construe the words “in accordance with” so as to capture actions in accordance with another’s unknown plan. Nonetheless, AAPL’s primary contention was that such an interpretation should be rejected in the present case in view of the potential implications of omitting a knowledge requirement, which could not conceivably reflect the legislative intent of the provision.

71    We agree that the ordinary meaning of “give effect to” – at least taken in isolation – does not necessarily compel a knowledge requirement. In our view, its ordinary meaning is not ambiguous in that regard. Conceptually, it is a term whose principal concern is the existence of certain conduct and whether such conduct implements, enacts, or otherwise administers an agreement. As a concept, its ordinary meaning does not immediately or necessarily evoke the subjective intentions that may underlie such conduct. Of course, in order for conduct to be said to “give effect to” an agreement, it must be demonstrated sufficiently to have been actually undertaken pursuant to, in accordance with, or otherwise enacting, implementing or administering that agreement. However, that is a question of fact rather than a matter of legal interpretation. The fact that the actor undertaking the impugned conduct had knowledge, in a subjective sense, of the scheme in question would likely be probative evidence towards satisfying the legal standard of “give effect to”. However, adducing such evidence is not necessarily the only means of satisfying the legal standard of “give effect to”, at least based on its ordinary meaning.

72    Turning then to the context of “give effect to” in s 45(2)(b) of the Act, we see nothing in the relevant contextual elements to restrict its ordinary meaning in the way contended for by AAPL.

73    Reliance by AAPL on the context in which s 75B is found and the more explicit knowledge requirement found therein does not assist in the interpretation of the term “give effect to” in the cartel provisions. The knowledge requirement was imported into the statutory accessorial liability provisions in s 75B because those provisions made use of existing criminal law concepts, and it was properly assumed that s 75B was to be interpreted consistently with the settled meaning of those concepts: see Yorke v Lucas [1985] HCA 65; 158 CLR 661, at 668 per Mason ACJ, Wilson, Deane and Dawson JJ, at 673 per Brennan J. A similar approach is not apposite in the context of s 45(2)(b).

74    Further, there is no obvious reason arising from the subject matter of the provision in which this term subsists as to why subjective knowledge would be required as a matter of law. There is nothing inherently incongruent or anomalous with the proposition that an entity could play a role in giving effect to a cartel arrangement – for instance, at the direction of its controlling parent – without necessarily possessing subjective knowledge of that arrangement. Indeed, the very nature of cartel arrangements suggests that they will be surreptitious, and their principal architects may be reluctant to disclose their existence and nature to the extent such disclosure to other parties (including related parties) can be avoided.

75    We address now the legislative object and purpose of the provision, and whether it would be subverted by the respective legal interpretations advocated by the parties. A narrow interpretation would enable foreign parent companies to avoid penalties, even in the case where a subsidiary it controlled was directed to act by its foreign parent, although the subsidiary had no knowledge of the purpose of the direction. On the other hand, a broad interpretation would not necessarily capture the conduct of unwitting third parties playing an unknowing role in the implementation of a cartel agreement, such as typists and couriers.

76    As we have indicated, whether a person or entity was “giving effect to” the cartel agreement in question must be resolved on a case-by-case basis on the evidence before the Court. The circumstance of a controlling company directing or instructing its subsidiary to play a role in giving effect to a cartel agreement is as a matter of fact different in character from the incidental and fortuitous acts of a courier or typist involved only by carrying out their roles. In this proceeding, AAPL submitted to TMCA the relevant agreed prices for the Toyota Camry wire harnesses after being specifically directed to do so by Yazaki. This was sufficiently related to and connected with the cartel agreements, and was a direction given referable to the operation of those cartel agreements.

77    Having taken into account the text and context of the term “give effect to” in s 45(2)(b), as well as the object and purpose of the provision in which it subsists, we conclude that the primary judge erred in finding that for there to be a contravention, knowledge of the cartel agreements at issue on the part of the entity carrying out the impugned conduct was required to be demonstrated. This is not to suggest that such knowledge will not be relevant to the inquiry – on the contrary, we envisage such knowledge would be probative evidence in a consideration of whether the impugned conduct gave effect to any cartel agreement at issue. However, we conclude that such knowledge is not an essential element of the legal standard of “give effect to” for the purposes of s 45(2)(b).

78    Having reached this conclusion, the question remains (as raised in the Further Amended Notice of Appeal) whether AAPL in fact gave effect to the 2003 and 2008 Agreements on the basis knowledge was not an essential element of the contravention. It is apparent from the primary judge's reasons in the liability judgment that the absence of knowledge was the determinative factor in finding that AAPL did not give effect to the arrangements in question.

79    As we have said, in determining whether a person has given effect to a prohibited agreement, each case needs to be considered having regard to its own particular facts. Here, Yazaki entered into unlawful cartel agreements that necessarily would involve the conduct or participation of its Australian subsidiary AAPL for implementation: the agreements themselves related to the supply of components by its Australian subsidiary in Australia to TMCA. Further, Yazaki directed its Australian subsidiary AAPL to submit prices in accordance with the unlawful agreements and AAPL followed that direction. In these circumstances, AAPL's conduct of implementation can be characterised as being at the very least “in accordance with” the unlawful agreements entered into by Yazaki.

80    On this basis, it is appropriate to make the declarations sought by the ACCC as sought in paragraph 12 of the Further Amended Notice of Appeal in relation to the conduct of AAPL.

Is a market in Australia required for there to be an exclusionary provision?

81    By its notice of cross-appeal dated 19 June 2017, Yazaki, the first respondent, cross-appealed in relation to declarations 3, 4, 5, 6 and 7 and orders 8, 9 and 10 and to the part of the reasons on liability in the judgment given on 24 November 2015, in which the primary judge concluded that a market in Australia was not a necessary element of a contravention of s 45(2)(a)(i) or s 45(2)(b)(i) of the Act or of the Competition Code applied as a law of Victoria by s 5 of the CPRA and accordingly found contraventions by Yazaki of those provisions.

82    The grounds of cross-appeal focused in particular on [383], [394] and [397]-[398] of the liability judgment.

83    In those paragraphs, the primary judge said, first, there was no need for the ACCC to establish a market in Australia in relation to the alleged contraventions of ss 45(2)(a)(i) and 45(2)(b)(i). The fact that in the general section of its Amended Statement of Claim the ACCC had pleaded a market in Australia did not preclude it from establishing contraventions of s 45(2)(a)(i) and s 45(2)(b)(i) without proving a market in Australia. Next, the primary judge concluded that there was no market in Australia for the supply of Toyota wire harnesses. The key consideration was whether all or some of the competitive activity in relation to the supply of Toyota wire harnesses in Australia took place in Australia. The primary judge did not think that it did. He said that such competitive activity as there was in relation to the supply of Toyota wire harnesses in Australia took place in Japan.

84    The primary judge then concluded:

    397    The ACCC has established that Yazaki contravened s 45(2)(a)(i) by making an arrangement or arriving at an understanding described in these reasons as the 2003 Agreement and that Yazaki contravened s 45(2)(b)(i) by giving effect to the agreement in the manner described in these reasons. Furthermore, in making the arrangement or arriving at the understanding Yazaki contravened s 45(2)(b)(i) by giving effect to the Overarching Cartel Agreement.

    398    The ACCC has established that Yazaki contravened s 45(2)(a)(i) by making an arrangement or arriving at an understanding described in these reasons as the 2008 Agreement and that Yazaki contravened s 45(2)(b)(i) by giving effect to the agreement in the manner described in these reasons. Furthermore, in making the arrangement or arriving at the understanding Yazaki contravened s 45(2)(b)(i) by giving effect to the Overarching Cartel Agreement.

85    The grounds of the cross-appeal were, first, that the primary judge erred in concluding that a market in Australia was not a necessary element of a contravention of s 45(2)(a)(i) or s 45(2)(b)(i) of the Act or the Competition Code. As a consequence, the primary judge erred in concluding that Yazaki contravened ss 45(2)(a)(i) and 45(2)(b)(i) of the Act and the Competition Code by making and giving effect to the 2003 Agreement and the 2008 Agreement; and contravened s 45(2)(b)(i) of the Act and the Competition Code by giving effect to the Overarching Cartel Agreement by making the 2003 Agreement and the 2008 Agreement. The primary judge therefore erred in ordering Yazaki to pay a pecuniary penalty under s 76(1) of the Act and the Competition Code.

86    The circumstances were that Yazaki (or a related body corporate) and SEI (or a related body corporate) were not in competition in a market in Australia for the supply of Toyota wire harnesses. This finding is the subject of ground 3A of the ACCC’s appeal in which the ACCC contends that the primary judge erred in that finding. For present purposes we proceed on the basis that the primary judge was correct in making that finding.

87    The relevant statutory provisions were ss 45(2), 45(3), 4D and 4E that are set out above at [23], [24] and [27].

88    Yazaki submitted that the single issue on its cross-appeal was whether a contravention of ss 45(2)(a)(i) and 45(2)(b)(i) required the agreement containing the exclusionary provision to be between competitors who were in competition in a market in Australia. Yazaki submitted that, properly construed, the answer to this question was yes. This construction was said to be supported by: (a) reading the words of the defined terms in ss 4D and 4E into s 45(2) before attempting to construe ss 45(2)(a)(i) and 45(2)(b)(i). In this respect Yazaki emphasised Kelly 218 CLR 216 at [103] per McHugh J. Although McHugh J was in dissent in Kelly, it was submitted that his statement of principle has been widely endorsed, including by this Court (see e.g. Australian Securities and Investments Commission v Administrative Appeals Tribunal [2011] FCAFC 114; 195 FCR 485 at [124]-[125] and Shahid v Australasian College of Dermatologists [2008] FCAFC 72; 168 FCR 46 at [175]: “When the issue before a court is the proper construction of a statutory definition, or of a word or phrase within such a definition, the exercise necessarily involves a consideration of the definition, word or phrase as it appears when read into the substantive provisions in which it is used”; and see also Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 at [42(11)]).

89    On the issue of construction, Yazaki relied also on: (b) consistency between the two limbs of s 45(2); (c) the common law presumption regarding the interpretation of penal legislation; (d) s 21 of the Acts Interpretation Act 1901 (Cth), and the common law presumptions regarding extraterritorial operation of legislation; and (e) the decisions in SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (No 2) [2012] FCA 1116; 298 ALR 69 and Wright Rubber Products Pty Ltd v Bayer AG [2010] FCAFC 85. Yazaki submitted that to the extent there was contrary authority (ASX Operations Pty Ltd v Pont Data Australia Pty Limited (No 2) [1991] FCAFC 179; 27 FCR 492, News Ltd v Australian Rugby Football League Ltd [1996] FCAFC 870; 64 FCR 410 and Norcast SarL v Bradken Ltd (No 2) [2013] FCA 235; 219 FCR 14), it was not binding on this Court, and should not be followed.

90    Yazaki submitted that all of the contravening conduct, with the exception of the submission of prices to TMCA, which was a “formality only”, took place in Japan. The agreements containing exclusionary provisions were made or arrived at in Japan between Japanese companies. Those exclusionary provisions were given effect in Japan, by the agreement and submission of prices by Japanese companies, to a Japanese company, in Japan. The anti-competitive conduct related to competitive activity in Japan.

91    Yazaki submitted it was an ordinary canon of statutory construction, given force by s 18A of the Acts Interpretation Act, that “where a word or phrase is given a particular meaning, other parts of speech and grammatical forms of that word or phrase have corresponding meanings.” The definition of “competition” in s 45(3), therefore, necessarily informed the meaning of the words “competitive with each other” in s 4D(1), once those words had been read into ss 45(2)(a)(i) and 45(2)(b)(i), as they must be by reason of the inclusion of the defined term “exclusionary provision”. Also, s 4D(2) deemed a person to be competitive with another person for the purposes of s 4D(1) if that person was “in competition” with the other person, indicating a legislative intent consistent with that mandated by s 18A of the Acts Interpretation Act.

92    By s 45(3) of the Act, “competition” meant “competition in any market”. By s 4E, a “market” meant a “market in Australia.” It followed it was submitted by Yazaki that making and giving effect to a contract or arrangement containing an exclusionary provision was only proscribed if it was between persons any two or more of whom were in competition with each other in a market in Australia.

93    It was submitted by Yazaki that there was no indication in the text that the two limbs of s 45 ought to operate with differing territorial scope. Section 45 was entitled “Contracts, arrangements or understanding that restrict dealings or affect competition”, and the fact that both price-fixing and restrictive dealings were dealt with in the one section demonstrated a legislative intent that the territorial scope of the two prohibitions be the same. Further, the definition of competition in s 45(3) was expressed to be “in relation to a provision of a contract, arrangement or understanding”. Each limb of s 45(2) dealt with such a provision.

94    The ACCC submitted the short point of statutory construction was whether s 45(3) applied to ss 45(2)(a)(i) and 45(2)(b)(i) such that those sections were only contravened if two or more of the parties to the agreement containing the exclusionary provision (or their respective related bodies corporate) were in competition with each other in a “market in Australia”. It was uncontroversial that s 45(3) defined the meaning of “competition” for certain purposes, and that definition referred to competition in any market in which a party to a relevant agreement, or any related body corporate, supplied or acquired goods or services. It was also uncontroversial that the word “market” was defined in s 4E for the purposes of the Act to mean a market in Australia. The controversy was whether s 45(3) was applicable to ss 45(2)(a)(i) and 45(2)(b)(i).

95    The ACCC submitted that the conclusion of the primary judge that s 45(3) was not applicable to ss 45(2)(a)(i) and 45(2)(b)(i) was in accordance with the plain meaning of the statutory text. Sections 45(2)(a)(i) and 45(2)(b)(i) respectively provided that a corporation shall not make a contract or arrangement, or arrive at an understanding, containing an “exclusionary provision”, and shall not give effect to such a provision. The sections did not refer to the word “market”.

96    The term “exclusionary provision” was defined in s 4D, also without reference to the word “market”. A provision of an agreement was an exclusionary provision if two conditions were satisfied (stated with simplifying abbreviations): first, the agreement containing the relevant provision must be “between persons any two or more of whom are competitive with each other” (s 4D(1)(a)). Secondly, the provision must have the purpose of preventing, restricting or limiting the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons by all or any of the parties to the agreement or a related body corporate (s 4D(1)(b)).

97    The phrase “competitive with” in s 4D(1)(a) was, the submission continued, exhaustively defined by s 4D(2), which provided (again stated with simplifying abbreviations): that a person will be deemed to be competitive with another person for the purposes of s 4D(1) if, and only if, the first mentioned person (or a related body corporate) was likely to be in competition with the other person (or a related body corporate) in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision related.

98    The ACCC submitted that the result was that, when s 4D was read together with ss 45(2)(a)(i) and 45(2)(b)(i) in accordance with the approach to statutory interpretation described by McHugh J in Kelly, the provisions made no reference to the concept of a “market”.

99    The ACCC submitted that Yazaki’s submission involved two errors. First, the definition of “competition” in s 45(3) was expressly “[f]or the purposes of this section and section 45A”. Section 45(3) was not intended to operate as a general definition of “competition” for the purposes of the Act. That was to be contrasted with s 4(1), which contained a definition of “competition” that applied more generally “[i]n this Act, unless the contrary intention appears”. A related difficulty with Yazaki’s construction was that it would result in the term “exclusionary provision” having different meanings in different sections of the Act. Section 4D purported to define the term “exclusionary provision” “for the purposes of this Act”. That language suggested that the definition was intended to operate throughout the Act. On Yazaki’s construction, however, s 45(3) would operate to confine the meaning of “exclusionary provision” in the context of s 45(2), but the same confined meaning would not apply where the term is used outside s 45 (e.g., s 88). Such a reading would conflict with the words of general application which appeared at the beginning of the definition in s 4D.

100    Secondly, the definition of “competition” in s 45(3) was confined to the use of that word “in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding” (emphasis added by the ACCC). The effect of those words was to confine the definition in s 45(3) to the prohibitions in ss 45(2)(a)(ii) and 45(2)(b)(ii) which concerned agreements containing provisions that have the purpose or likely effect of substantially lessening competition. In contrast, exclusionary provisions, as defined in s 4D, were not provisions that depended upon an effect on competition. Exclusionary provisions were defined as provisions that prevent, restrict or limit the supply or acquisition of goods or services (s 4D(1)(b)). While the definition required the parties to the relevant agreement to be competitive with each other (s 4D(1)(a)), s 45(3) was not stated to apply “in relation to the parties to a contract, arrangement or understanding”.

101    The ACCC submitted that if there was any ambiguity in the language of s 45(3), the construction accepted by the trial judge was supported by the legislative history. The original Trade Practices Act enacted in 1974 contained a definition of the word “market” in s 4(1): ‘“market’ means a market in Australia”. The Explanatory Memorandum accompanying the Trade Practices Bill 1974 (Cth) stated that: “The extent to which the legislation will operate extra-territorially is indicated in clause 5. The definition of market in clause 4 is also relevant in this regard.” At that time, the prohibition in s 45 against agreements in restraint of trade made reference to the effect on competition of the restraint (ss 45(3) and 45(4)), but did not refer to competition in a “market”. Various prohibitions in the original Pt IV of the Act referred to competition or competitive effects in a “market” (such as ss 46, 47 and 50) while others did not (ss 45, 48 and 49). Thus, the word “market” was not the primary extraterritorial limitation within the original Act; that work was performed by s 5.

102    Sections 4D and 4E were introduced, and s 45 was amended, by the Trade Practices Amendment Act 1977 (Cth), which followed upon the presentation in August 1976 of the report of the Trade Practices Review Committee (the Swanson Committee). As to the definition of the word “market”, the Swanson Committee recommended that the definition should include reference to substitutable products. That recommendation was effected by the deletion of the definition in s 4(1) and the insertion of s 4E in its current form.

103    As to s 45, the Swanson Committee considered the then differences between s 45 (prohibiting agreements in restraint of trade that had a significant effect on competition between the parties: s 45(4)) and s 47 (prohibiting various forms of exclusive dealing that were likely to have the effect of substantially lessening competition in a market for goods or services: s 47(5)). The Committee stated at [4.14]:

In our view, the competitive effects of most agreements and practices should be tested by reference to a market for goods or services (the present test of sub-section 47(5)). However, we do not consider that adopting a single definition of area, for all purposes, would be an improvement to the Act. We consider that there are certain agreements in respect of which competitive effects will basically be felt between parties to the agreement, or particular competitors thereof (e.g. collective boycotts, which often affect small business). These latter-mentioned competitive effects should, in our view, be tested according to effect on competition between the parties and other persons (the present test of sub-section 45(4)). We consider that unless the Trade Practices Act recognises these distinctions it will be ineffectual and discredited in many circumstances in which it should have force.

104    The reference to “collective boycotts” was to conduct of a kind that was ultimately prohibited by ss 45(2)(a)(i) and 45(2)(b)(i). With respect to such contraventions, the Swanson Committee expressly rejected the inclusion of a market element at [4.116] and [4.117]:

We consider that a collective boycott, i.e. an agreement that has the purpose of or the effect of or is likely to have the effect of restricting the persons or classes of persons who may be dealt with, or the circumstances in which, or the conditions subject to which, persons or classes of persons may be dealt with by parties to the agreement, or any of them, or by persons under their control, should be prohibited if it has a substantial adverse effect on competition between the parties to the agreement or any of them or competition between those parties or any of them and other persons.

In our view such matters are appropriate to be tested by reference to their competitive effect between parties and other persons, and not by reference to a market.

(Emphasis added by the ACCC.)

105    Thus, the ACCC submitted, the Swanson Committee recommended that conduct of the kind ultimately prohibited by ss 45(2)(a)(i) and 45(2)(b)(i) ought not be defined by reference to the competitive effect in a market. That recommendation was accepted by Parliament and reflected in the language of s 45 as enacted by the Trade Practices Amendment Act 1977 (Cth). The relevant Explanatory Memorandum stated:

The new section 45 prohibits contracts, arrangements or understandings which have the purpose or effect of substantially lessening competition in a market, or of effecting a collective boycott … For the purposes of the new section, effects on competition are tested by reference to a market for goods or services, in contrast with the present section which tests such effects solely by reference to the parties. There is no competition test for collective boycotts.

106    The ACCC submitted that s 45 as enacted drew a distinction between agreements that contained exclusionary provisions and agreements that contained provisions that had the purpose or likely effect of substantially lessening competition (which included price fixing agreements under the now repealed s 45A that were deemed to have that effect). In respect of the latter types of agreements, s 45(3) defined competition as competition in any market in which a party to the agreement (or a related body corporate) supplied goods or services. In respect of the former types of agreements, the relevant competition was defined as competition between two or more parties to the agreement.

107    The legislative history, it was submitted by the ACCC, reinforced the conclusion arrived at from the language used, that s 45(3) was not intended to apply to ss 45(2)(a)(i) and 45(2)(b)(i).

108    In reply, Yazaki submitted that in construing s 45(2), the first step was to read in any definitions. That exercise required the definition of “exclusionary provision” in s 4D to be read in to ss 45(2)(a)(i) and 45(2)(b)(i), for the purposes of s 45, and to read the definition of “market” in s 4E in to the definition of “competition” in s 45(3). Its construction did not lead to an inconsistent use of the term “exclusionary provision” in the Act, because the only other applications of the phrase related back to s 45(2).

109    It was further submitted by Yazaki in reply that there was no textual support for the ACCC’s submission that the effect of the words “in relation to a provision of a contract, arrangement or understanding” (emphasis added by Yazaki) in s 45(3) was to confine the definition of ‘competition” in s 45(3) to ss 45(2)(a)(ii) and 45(2)(b)(ii) because those provisions concerned agreements containing provisions that have the purpose, effect or likely effect of substantially lessening competition, whereas exclusionary provisions did not depend upon an effect on competition. Section 45(3) said nothing about the effect on competition. It provided a definition of “competition” for the purpose of s 45 in relation to a provision of an agreement. Each limb of s 45(2) was addressed to a type of provision in an agreement.

110    Yazaki submitted that s 45(3) described the markets that were relevant to a consideration of the competitive purpose, effect or likely effect of a provision of an agreement for the purposes of ss 45(2)(a)(ii) and 45(2)(b)(ii) and it had corresponding work to do in relation to ss 45(2)(a)(i) and 45(2)(b)(i). For the purposes of those provisions, s 45(3) described the markets that were relevant to a consideration of whether parties to an agreement containing an exclusionary provision were relevantly competitive with each other. Contrary to the ACCC’s submissions, there was nothing incoherent, superfluous or contradictory in such an application of s 45(3).

111    Yazaki submitted that there was no relevant ambiguity in the text of s 45(2), as the ACCC appeared to accept, and therefore no warrant for recourse to extrinsic materials. In any event, however, the Swanson Report must be approached with caution. As the High Court observed in Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53 at [77], the Swanson Report was “extremely brief and vague about what it called “collective boycotts” ... [and]... Parliament departed from [it] to a radical extent.” The Swanson Report, the submission continued, called for collective boycotts to be prohibited where they had a substantial adverse effect on competition between parties and other persons, with the adverse competitive effect to be tested by reference to the effect on competition between parties and other persons and not by reference to a market. Contrary to the ACCC’s submission, that recommendation was not accepted by Parliament, indeed, it is one of the respects in which the High Court had found the legislature departed from the Swanson Report.

112    We reject the construction contended for by Yazaki. In our opinion, the submissions on behalf of Yazaki involve an artificial reading of the statutory provisions, a reading which is overly literal, and the submissions do not pay sufficient regard to the text, context or purpose of those provisions.

113    First, in our opinion, s 4D bears little similarity to the definition under consideration in Kelly. That case involved a simple definition. The issue in Kelly was the meaning of the phrase “in the course of official questioning” within the definitions of “confession or admission” and “official questioning” in s 8(1) of the Criminal Law (Detention and Interrogation) Act 1995 (Tas). What McHugh J said in Kelly 218 CLR 216 at [103], was as follows:

As I earlier pointed out, the function of a definition is not to enact substantive law. It is to provide aid in construing the statute. Nothing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment. There is, of course, always a question whether the definition is expressly or impliedly excluded. But once it is clear that the definition applies, the better — I think the only proper — course is to read the words of the definition into the substantive enactment and then construe the substantive enactment — in its extended or confined sense — in its context and bearing in mind its purpose and the mischief that it was designed to overcome. To construe the definition before its text has been inserted into the fabric of the substantive enactment invites error as to the meaning of the substantive enactment. In so far as the judgment of Megarry J in No 20 Cannon St Ltd v Singer & Friedlander Ltd suggests his Lordship thought that an interpretation or definition clause should be construed independently of the substantive enactment, I think his Lordship erred. The long title to the first Interpretation Act 1850 (UK) (13 & 14 Vict c 21) was ‘‘An Act for shortening the Language used in Acts of Parliament’’. The long title to the Acts Interpretation Act 1931 (Tas), is “An Act to provide certain rules for the interpretation of Acts of Parliament; to define certain terms commonly used therein; and to facilitate the shortening of their phraseology”. These titles convey the true purpose of an interpretation or definition clause. It shortens, but is part of, the text of the substantive enactment to which it applies.

(Citations omitted.)

114    In contrast, s 4D states substantive law and as such does not fit within the tenor of what was said by McHugh J. Thus, in our view, it is doubtful whether s 4D is a definition, or at least a definition of that character: its main purpose is not to “shorten language” but to enact substantive law.

115    Next, we do not read s 4D so as to give it a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of the substantive enactment, assuming, contrary to our preferred view, that s 45 and not s 4D is the only substantive enactment. Instead, our approach is first to read s 4D, including the deeming provision in s 4D(2).

116    So read, the present question is sufficiently identified by asking whether there are persons any two or more of whom are competitive with each other and whether the contract or arrangement was made or the understanding was arrived at between persons any two or more of whom are competitive with each other.

117    Section 4D(2) then deems a person to be competitive with another person for the purposes of s 4D(1) if, and only if, the first‑mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.

118    Section 4D in its terms does not refer to “market” but only to competition. It does not say that the persons must compete in the same market or in the market to which the arrangement applies. Thus the narrower concept of “market”, suggesting the area of close competition, does not apply in terms. Section 4D reflects in tolerably clear language a focus on “competitive effects between parties” referred to in the Report of the Swanson Committee. The Report by the Swanson Committee was clear in its statement that this was not by reference to a market.

119    Turning next to s 45, the two provisions which use the term “exclusionary provisions” are s 45(2)(a)(i) and s 45(2)(b)(i). Those provisions do not use the term “competition”. In contrast, s 45(2)(a)(ii) and s 45(2)(b)(ii) do refer to “competition” in the expression “substantially lessening competition”. It is in that context that s 45(3) defines the word “competition” for the purposes, relevantly, of s 45. It is that definition which defines “competition” in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, to mean competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.

120    In our opinion, the text, context and structure of the provisions gives a clear meaning and it is not necessary or appropriate to apply literally the dicta of McHugh J in Kelly.

121    The clear meaning is that when the word “competition” appears in s 45 as written then it means competition in a market as defined. In our opinion, it does not mean that the word “competitive” in s 4D means competitive in a market as defined in s 45(3) for the purposes of s 45.

122    This is not to read s 4D independently of the substantive enactment but it is to read it first, according to its terms and in its legal context which includes the Swanson Committee Report.

123    In terms of s 18A of the Acts Interpretation Act, providing that in any Act where a word or phrase is given a particular meaning, other parts of speech and grammatical forms of that word or phrase have corresponding meanings, there is a contrary intention in terms of s 2(2) of that Act, so that the operation of s 18A is displaced.

124    We would also observe that s 4D is the more specific provision and we do not consider it to be displaced by the more general terms of s 45, in circumstances where s 45(3) does not purport to define the term “exclusionary provisions”.

125    We would reach the same conclusion even without the extrinsic materials referred to at [102]-[105] above, that is, the recommendation of the Swanson Committee and the terms of the Explanatory Memorandum. Those materials are, however, part of the legal context and, in our view, make the point pellucid.

126    Turning to authority, in Australian Securities and Investments Commission v Administrative Appeals Tribunal we prefer the emphasis which the Full Court gave as follows at [128], having pointed out that McHugh J’s approach to construction in Kelly was referred to with approval in Hastings Co-operative Ltd v Port Macquarie Hastings Council [2009] NSWCA 400; 171 LGERA 152 at [16]:

As Basten JA (with whom Allsop P and Handley AJA relevantly agreed) said in Hastings at [35], generally speaking, the purpose of an instrument will be promoted by giving effect to the definitions of defined terms. His Honour also warned against abstruse and complex arguments of construction which tend to depart from the purpose and ease of application of a statutory instrument.

127    We have given effect to the definition of “exclusionary provisions” and eschewed what we regard as the abstruse and complex arguments of construction on behalf of the first respondent.

128    We do not disagree with what was said in Shahid 168 FCR 46 at [175] with reference to Kelly, that the exercise necessarily involves a consideration of the definition, word or phrase as it appears when read into the substantive provisions in which it is used, but we do not consider that Kelly is authority for changing the meaning of the definition of “exclusionary provisions” once it is so read into s 45.

129    We find support for our conclusion in earlier Full Court dicta.

130    In Pont Data Australia 27 FCR 492 at 495 [9]-[10], Lockhart, Gummow and von Doussa JJ said:

In Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 74, Franki J pointed out that in s 4D no mention is made of “market”. Whilst “competition” as it appears in s 45 (and s 45A) is defined in sub-s 45(3) by reference to competition in a “market”, the term “competition” does not appear in those limbs of s 45 which proscribe exclusionary provisions. In dealing with exclusionary provisions, sub-s 4D(1) itself requires that the parties in question be “competitive” with each other, and sub-s 4D(2) deems persons to be competitive only if the criteria it specifies are met. But those criteria are not framed in terms of competition in a “market”.

These provisions were introduced by the Trade Practices Amendment Act 1977 (Cth), which followed upon the presentation in August 1976 of the Report of the Trade Practices Review Committee (“the Swanson Committee”). In its report (paras 4.116-4.117) the Swanson Committee had recommended the prohibition of what are now styled exclusionary provisions and had said that in its view “such matters are appropriate to be listed by reference to their competitive effect between the parties and other persons, and not by reference to market”.

131    In News Ltd 64 FCR 410 at 558, Lockhart, von Doussa and Sackville JJ said:

The prohibition imposed by s 45 of the TP Act applies irrespective of the extent to which putative exclusionary provisions affect competition in a market. It is plain that the Parliament regarded horizontal arrangements of an exclusionary character as having a necessary tendency to inhibit competition and that this was regarded as sufficient to proscribe the making of such arrangements.

Section 4D(2) of the TP Act is important. The subsection deems persons to be competitive with each other if they satisfy the specified tests. The Act prohibits the making or giving effect to exclusionary provisions whether they do or do not have the purpose or the effect of substantially lessening competition. This is plain from the terms of s 45(1) and (2). The prohibition against making or giving effect to a provision of a contract that has the purpose, or would have or be likely to have the effect of substantially lessening competition is imposed by s 45(l)(b), (2)(a)(ii) and (2)(b)(ii). The definition of “competition” for the purposes of those provisions appears in s 45(3), in terms which require competition in a market. This contrasts with the prohibition against the making of or giving effect to exclusionary provisions. Hence it is not necessary to consider questions of market definition for s 4D purposes.

132    In our opinion, the primary judge did not err in his construction of s 4D when read with s 45, and it is sufficient that the entities referred to in s 4D were in competition with each other, without the added requirement that they compete in a market in Australia. We would dismiss the cross-appeal.

133    In the cases relied upon by Yazaki to the contrary, SPAR Licensing and Wright Rubber Products, the point was not argued. The pleadings and submissions in SPAR assumed the position contended for by Yazaki. The matter was likewise assumed and the point not argued in Wright Rubber Products. These decisions, to the extent that they may be seen to support the proposition that it is necessary to plead and prove a market in Australia for the purposes of ss 45(2)(a)(i) and 45(2)(b)(i), should not be followed.

Was there a market in Australia for the supply of wire harnesses for Toyota Camry vehicles?

134    The question is whether Yazaki or AAPL and SEI or SEWS-A competed in a market in Australia. The market alleged was the market for the supply of Toyota Camry wire harnesses in Australia.

135    The primary judge commenced his discussion of the question with a reference to the classic statement of the Trade Practices Tribunal (Woodward J, Mr J A F Shipton and Professor Maureen Brunt) in the Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190; 8 ALR 481 at 517:

… We take the concept of a market to be basically a very simple idea. A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them. ... Within the bounds of a market there is substitution — substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive. Let us suppose that the price of one supplier goes up. Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.

It is the possibilities of such substitution which set the limits upon a firm’s ability to “give less and charge more”. Accordingly, in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were to “give less and charge more” would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, i.e. a relatively high cross-elasticity of demand or cross-elasticity of supply?

136    That passage was approved by the High Court in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; 215 CLR 374 at [133] by Gleeson CJ and Callinan J and in this respect approved by Gaudron, Gummow and Hayne JJ. As Kiefel CJ, Bell J and Keane J said in Air New Zealand Ltd v Australian Competition and Consumer Commission [2017] HCA 21; 344 ALR 377 at 380 [12]:

The authorities confirm that a market, within the meaning of [the Act], is a notional facility which accommodates rivalrous behaviour involving sellers and buyers. …

137    The authorities to which their Honours referred were Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd [1989] HCA 6; 167 CLR 177 at 188, 195 and 199; Boral 215 CLR 374 at [247]-[248] and [252]-[253]; and Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49; 339 ALR 342 at [66], [69] and [126].

138    Their Honours set out three passages from Queensland Wire and Boral at 344 ALR 377 at 380-381 [12]-[13]. The first passage was from Deane J in Queensland Wire at 195:

The Act does not otherwise seek to define what is meant by the word ‘market’. That is not surprising since the word is not susceptible of precise comprehensive definition when used as an abstract noun in an economic context. The most that can be said is that ‘market’ should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes.

139    The second passage was some additional comments of Dawson J in Queensland Wire at 199:

A market is an area in which the exchange of goods or services between buyer and seller is negotiated. It is sometimes referred to as the sphere within which price is determined and that serves to focus attention upon the way in which the market facilitates exchange by employing price as the mechanism to reconcile competing demands for resources.

140    The third passage was from the judgment of McHugh J in Boral at [252]:

[T]he market is the area of actual and potential, and not purely theoretical, interaction between producers and consumers where given the right incentive … substitution will occur. That is to say, either producers will produce another similar product or consumers will purchase an alternative but similar product.

141    The references that the plurality made in Air New Zealand to Flight Centre (339 ALR 342 at [66], [69] and [126]) importantly referred to the metaphorical and analytical nature of the market. In Flight Centre at [69], Kiefel CJ and Gageler J, drawing on the seminal work of Professor Brunt (“Market Definition: Issues in Australia and New Zealand Trade Practices Litigation” (1990) 18 Australian Business Law Review 86) and the influential judgment of French J for the Full Court in Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 808; 33 FCR 158, said:

… Identifying a market and defining its dimensions is “a focusing process”, requiring selection of “what emerges as the clearest picture of the relevant competitive process in the light of commercial reality and the purposes of the law”. The process is “to be undertaken with a view to assessing whether the substantive criteria for the particular contravention in issue are satisfied, in the commercial context the subject of analysis”. “The elaborateness of the exercise should be tailored to the conduct at issue and the statutory terms governing breach”. Market definition is in that sense purposive or instrumental or functional.

(Citations omitted.)

142    Their Honours were dealing with the limits of the functional approach, in particular that it needed to reflect practical commercial reality. They were not denying its necessarily instrumental character as discussed by Professor Brunt.

143    In Air New Zealand, Gordon J also discussed the process of market definition. In an extended discussion of the approach to market identification (344 ALR 377 at [57]-[66]) Gordon J referred to the importance of the particular provision under consideration to the conception of the market – that is, the importance of the context or question at hand. Citing Professor Brunt, Gordon J referred to the fact that market identification was a tool of analysis of the competitive process: 344 ALR 377 at 392 [63]-[66]. As an economic tool, it is part of a social science. The purpose for which one is asking the question about the existence of a market, may affect the evaluation and identification of the answer. We do not take anything said by Gordon J in Air New Zealand at [57]-[66] to be contrary to the approach of the plurality in Air New Zealand or with anything said in Flight Centre. Her Honour was elaborating upon what can be called the “functional” or “purposive” or “instrumental” approach to which the plurality had referred. It is important to recognise that the process of market identification is not done in a vacuum, nor is it an enquiry about a stable unitary extant thing; rather it is a process to answer a question whether a particular contravention has occurred. The first step is to identify “precisely what it is that is said to have been done in contravention of the section”: Queensland Wire 167 CLR 177 at 195 (Deane J). One must then ask “what market identification best assists the assessment of the conduct and its asserted anti-competitive attributes”: Gordon J in Air New Zealand 344 ALR 377 at 390 [58], citing Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2006] FCA 826 at [437].

144    The fact that the market is an abstraction does not mean that it is not to be geographically located or that it is not to have a relationship with commercial reality. That the market is a tool of analysis does not remove it from commercial and business reality. A practical business approach is required: see generally Air New Zealand 344 ALR 377 at 381 [14]; Flight Centre 339 ALR 342 at [70]; and Australian Competition and Consumer Commission v ANZ Banking Group Limited [2015] FCAFC 103; 236 FCR 78 at 106-108 [133]-[138].

145    The essence of the case of Yazaki was clearly summarised by the primary judge at [386] of the liability judgment:

The respondents submit that there was no market in Australia because the relevant ‘consumer choices’ or demand side substitution decisions were made in Japan by TMC, not by TMCA in Australia, and the relevant competition between the sellers accordingly was (or would have been but for the anti-competitive conduct) in Japan between Yazaki and SEI, not in Australia between AAPL and SEWS-A. That is to say, despite the fact that the goods were supplied in Australia by companies with substantial operations in this country to a company which also had a substantial operation here, there is no market in Australia because the competition between potential suppliers and the purchaser’s decision as to which entity was to supply occurred in Japan and not in Australia.

146    At [388]-[389] of the liability judgment, the primary judge summarised relevant evidence as follows:

In relation to the supply of Toyota Camry WHs in Australia, the bid or tender for supply and the allocation of supply occurred in Japan. Prices were resubmitted in Australia, but that was a matter of formality only. The prices submitted in Japan were a starting price in terms of the prices at which the WHs will be supplied in Australia in the manner I have described earlier in these reasons. There is then a period in the order of three years where there are fairly intense communications and discussions between the supplier in Australia (i.e., AAPL and SEWS-A) and TMCA where consideration is given to design changes, other variations and VE proposals and revised prices are submitted. Where AAPL was involved, Yazaki kept a close watch over these events, but at the same time, AAPL exercised some autonomy and discretion. Once supply commenced, it took place in Australia between two companies in Australia and the purchase price was paid in Australia. The contract for the supply of any particular WH or batch of WHs was made between the two companies in Australia with the purchaser (i.e., TMCA) advising the supplier from time to time of the quantity of WHs it required. The Australian purchaser was regularly, both before and after supply commenced, seeking price reductions from the Australian supplier. The Australian purchaser placed significant pressure on the Australian supplier in terms of the prices at which WHs were supplied and it no doubt had high quality control standards which were to be met.

It might be said in a very broad sense that the presence of SEWS-A in Australia brought competitive pressure to bear on AAPL and its relationship with TMCA in relation to the supply of WHs in Australia. However, the real place of competitive activity in terms of the supply of WHs to TMCA in Australia was in Japan and it involved Yazaki, SEI and TMC.

147    After referring to Emirates v Australian Competition and Consumer Commission [2009] FCA 312; 255 ALR 35 at [66] as to the relevance, but not determinant effect, of the place of contracting, and also of marketing and negotiating, on the locality of the relevant market; to Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited (No 5) [2009] FCA 1464 at [40] as to the relevance of the place of negotiation and the need for competitive activity in the locality of the relevant market; and to Perram J at first instance in Australian Competition and Consumer Commission v Air New Zealand [2014] FCA 1157; 319 ALR 388, the primary judge in this matter concluded at [394] of the liability judgment, as follows:

Not without some hesitation, I have concluded that there was no market in Australia for the supply of Toyota WHs. In my opinion, the key consideration is whether all or some of the competitive activity in relation to the supply of Toyota WHs in Australia took place in Australia. I do not think that it did. Such competitive activity as there was in relation to the supply of Toyota WHs in Australia took place in Japan.

148    It is, of course, now necessary to refer to the approach of the High Court in Air New Zealand. It is essential, however, not (as some of the submissions of the parties tended to do) to elevate factual evaluation and characterisation in Air New Zealand to rules of law.

149    The plurality in Air New Zealand were of the view that Perram J had given too much weight to the place of substitution or switching – that being outside Australia. Substitutability was seen as important but not determinative (344 ALR 377 at 383 [26]). Much depends on the economic context. The act of substitution is the conclusion or end point of rivalry (344 ALR 377 at 383 [27]). But the place where the substitution occurs does not necessarily locate the geographical area of rivalry. In Air New Zealand, the High Court looked at a number of features which showed that the market for international inbound air freight services was in Australia: shippers in Australia were a source of demand (344 ALR 377 at 384-385 [31]); and airlines engaged in rivalrous conduct to win them over. The interplay of the powers of supply and demand encompassed Australia. The airlines had marketing strategies and pursued sales in Australia. The evidence established that Australia was not just “the end of the line”, but a vital source of demand from customers located in Australia: see generally 344 ALR 377 at 383-385 [27]-[34]. Justice Gordon explained (344 ALR 377 at 391 [60]), citing the Full Court in Australian Competition and Consumer Commission v ANZ 236 FCR 78 at [138], that the market must realistically describe and reflect interaction between, and perceptions and actions of, the relevant actors or participants.

150    It is also well to recall, especially in the context of evaluating a cartel of the kind Yazaki and SEI undertook, that the market includes the area of potential close rivalry: Deane J in Queensland Wire at 195 ([138] above).

151    The primary judge clearly placed great weight on the place where the demand side decisions were made – Japan. We respectfully disagree with the emphasis given to that factor.

152    One starts with the real world reality that the firms in question, Yazaki and SEI, took the trouble to form a world-wide cartel to protect their respective businesses in discrete geographic markets by agreeing upon and fixing prices in tenders to share out each of those markets by reference to incumbency. This was done notwithstanding a process set up by TMC (indeed designedly to defeat the process), that was supposed to be open and competitive for the purchasing of goods in a world-wide tender, divided up by specific country locations. In blunt terms, TMC was seeking honest competitive tenders for geographic locations all around the world (including Australia). In response, Yazaki and SEI surreptitiously rigged the bids for that tender in relation to each geographic location (including Australia).

153    The other real world reality was that each member of the cartel had a wholly owned subsidiary in Australia that, in Australia, did the precise bidding of its parent in Japan. One can conclude that (albeit unbeknownst to it) the directions AAPL received from Yazaki contained no element of rivalry from Yazaki; rather they were the means to give effect to the cartel. If, however, there had been no cartel Yazaki and SEI would, as rivals, have competed whenever and wherever they could (including Australia) for business from manufacturers such as TMC. Their compliant local subsidiaries in each location would, no doubt, have been required to take such steps as necessary to advance the commercial interests of Yazaki and SEI and their respective groups. That hypothesis, based on honest commercial conduct, frames the plain potential for rivalry in Australia. It is also reflected in the evidence discussed below. From the evidence, the reality of this rivalry, clouded as it necessarily was by the operation of the cartel, was evident.

154    The ACCC relied on the High Court in Air New Zealand and upon six specific features of the facts in support of a general proposition that sought foundation in the commercial reality of the potential rivalry in Australia between Yazaki and AAPL, on the one hand, and SEI and SEWS-A, on the other.

155    The six factual features were as follows. First, there was demand in Australia from TMCA for the supply of wire harnesses in Australia. Secondly, TMCA’s demand was to be met by suppliers, including AAPL and SEWS-A. Thirdly, Mr Ward, AAPL’s manager of sales between 2008 and 2011, who had previously worked for TMCA and Mitsubishi between 2003 and 2008, regarded SEWS-A as AAPL’s biggest competitor in relation to the supply of wire harnesses. Fourthly, SEI and SEWS-A engaged in marketing activity in Australia that included presentations to TMCA about supply or possible supply of wire harnesses. Fifthly, the relevant supply contracts were made in Australia and the price paid in Australia. Sixthly, the prices in Australia that were ultimately paid were the subject of a period of “fairly intense communications” between AAPL and TMCA, and SEWS-A and TMCA.

156    The ACCC’s general proposition was that these factors, coloured as they were in fact by the secret collusion of the two parents, reveal the real framework of rivalry that would have occurred in Australia had the cartel not existed, and that as a matter of commercial and economic reality the market at issue was in Australia or included Australia.

157    Yazaki likewise sought to rely upon the High Court decision in Air New Zealand. It focused on the rivalrous conduct in Japan in accordance with the primary judge’s findings as follows: the request for quotation being made by TMC in Japan; the (collusive) responses in Japan by the parents, in Yazaki’s case without input from AAPL; the supply of wire harnesses being awarded by TMC globally in Japan; the re-submission of prices in Australia being a formality; TMCA not issuing requests for quotation in Australia for Australian supply of wire harnesses; TMC directing TMCA to purchase wire harnesses from particular suppliers.

158    The submissions of the ACCC should be accepted. It can be readily accepted from the findings of the primary judge that in fact much of the decision-making occurred in Japan. There was a global tender process, but it was also divided into geographical locations. The purchaser (TMC) wished to keep that central decisional control over its subsidiaries. It does not follow from such circumstances, however, that rivalrous conduct in geographical locations to win business in that location would not follow as natural commercial behaviour. For instance, Yazaki relies on the fact that it bid without input from AAPL. Such lack of input was hardly surprising when Yazaki’s decision-making was based on the performance of the cartel with SEI. If, however, one posits an honest commercial response from Yazaki, the reality would be that there would have been input from AAPL in relation to prices and strategies to win the local business, as is reflected in the evidence.

159    It does not matter that the market may be seen to extend to Japan. The common sense reality is that Australia was a location of at least potential rivalrous conduct. As the High Court in Air New Zealand made clear, one should not give too much weight to the place of decisions of substitution. Substitution is one aspect, but not necessarily the defining feature of the market: Air New Zealand 344 ALR 377 at [24]-[26].

160    There can be accepted to be a wide area of global rivalry, but also a narrower area of rivalry in a local geographical location: cf Boral 215 CLR 374 at 422-423 [133] (Gleeson CJ and Callinan J).

161    The reality is that there were some local dynamics of rivalry even if they were influenced by decisions made at the global level. For instance, Australia-specific quality problems led to competitive tension between AAPL and SEWS-A in Australia: liability judgment at [101].

162    The 2003 global request for quotation issued by TMC sought bids for wire harnesses in five manufacturing locations: Japan, the United States of America, Australia, Thailand, and Taiwan. The tender then treated Australia as a distinct demand centre. The colluders then decided to treat Australia as a distinct geographic area of their collusion. Yazaki submitted Australia specific information. Assuming true rivalry existed, that no doubt would have been influenced by what rivalry as to price AAPL could bring to bear.

163    There was rivalry in Australia, as found by the primary judge: see liability judgment at [137]. The reality of rivalry can be seen in [96] of the liability judgment:

Mr Nagasawa's understanding shortly after he joined SEWS-A was that the company had an understanding with AAPL that the companies would respect each other’s territory in terms of the supply of WHs to TMCA during the production cycle of a particular model of vehicle. That meant that neither company would attempt to win the business of the other during the production cycle of a particular model, including any minor model changes. Mr Nagasawa said that the same understanding did not necessarily apply when the companies were invited to provide prices for a new model.

(Emphasis added.)

164    In relation to the 2008 Agreement, the price agreed to in Japan preceded further negotiations between AAPL and TMCA. These included negotiations about (using abbreviations from the liability judgment) SE level prices, pre-CV level prices, submission of CV-level prices, submission of 1A level prices, submission of 2A level prices, and submission of final start of production prices: [300] of the liability judgment, see also [170] and [174]. The pricing in Australia was adapted for local factors, such as variations in exchange rates, input prices, and local design. AAPL would also submit suggestions to TMCA in respect of ways to reduce price through elements of the production process like design adjustments: [171], [182], [204] and [332] of the liability judgment.

165    Some of the best evidence of the field of actual and potential transactions comes from people who engage in them: Rural Press 216 CLR 53 at [45]; Boral 215 CLR 374 at [247]; Air New Zealand 244 ALR 377 at [40]. See also Seven Network Ltd v News Ltd [2007] FCA 1062 at [1795]-[1797] per Sackville J and Seven Network Ltd v News Ltd [2009] FCAFC 166; 182 FCR 160 at [61] per Mansfield J and [365]-[371] per Dowsett and Lander JJ. This must especially be so when there is a parent-led cartel hidden from the subsidiary, and the officers of the subsidiary view another company in Australia as its competitor (even though the other company is a subsidiary of the cartel participant and knows of the general existence of the cartel.

166    The evidence of Mr Nagasawa (Senior Manager at SEWS-A), Mr O’Donoghue (holding various senior management roles from 2002 to 2013 at AAPL) and Mr Ward (Department Manager (Sales) at AAPL) supports the view that a market for the supply of wire harnesses continued to exist in Australia, even in the middle of a production cycle. While Mr Nagasawa described it as “highly unlikely” for TMCA to switch suppliers mid-production cycle, he did accept that it was possible if “something exceptional occurred”. This evidence was accepted by the primary judge, who also noted that Mr O’Donoghue and Mr Ward gave evidence “to similar effect”: [100] of the liability judgment. Further, after considering the evidence by Mr Sakamoto (Purchasing Department at TMCA) as to why TMCA offered a new tender to SEWS-A, the primary judge concluded that “there was some chance that SEWS-A could win the right to supply the engine room main wire harnesses to TMCA for the 2002 Toyota Camry”: [106] and [134] of the liability judgment.

167    These possibilities highlight the existence of potential transactions and actual close competition mid-production cycle in Australia. Indeed, the primary judge found that this “chance” led to the agreement between Yazaki and SEI that SEWS-A would quote a price 2-3% higher than AAPL for the 2002 bid. This was so that AAPL would keep the supply, but SEWS-A would not be viewed as uncompetitive. This shows that competitiveness, or at least the perception of it by customer companies like TMCA, was important to Yazaki and SEI and so potentially important to AAPL and SEWS-A. This reinforces the view that the potential for competition between AAPL and SEWS-A existed during the production cycle; and that had the cartel not influenced conduct there would have been even more rivalrous behaviour in Australia.

168    In our view, for the purposes of examining behaviour of the kind prohibited by s 45(2), the evidence established a market in Australia for wire harnesses for Toyota Camry vehicles.

What is the relevant maximum for each act or omission that is a contravention? – The proper construction of s 76(5) and in particular s 76(5)(d)

169    The primary judge held, at [31] of the relief judgment, that the maximum penalty was $10 million. His Honour accepted Yazaki’s submission that the amount calculated in accordance with s 76(1A)(b)(iii) was approximately $6.5 million and, neither party having sought to prove the amount of actual benefit attributable to Yazaki’s contravention, the maximum penalty was therefore $10 million pursuant to s 76(1A)(b)(i). The ACCC’s case was that the amount calculated in accordance with s 76(1A)(b)(iii) was approximately $17.5 million and was the maximum penalty.

170    The reasoning of the primary judge was as follows.

171    Considering s 76(5), the primary judge said that it involved a consideration of the value of all supplies made by Yazaki and AAPL. Supplies made by Yazaki were not connected with Australia and were excluded, and that left for consideration supplies made by AAPL. There was no challenge to that conclusion.

172    Before coming to s 76(5)(d), the primary judge considered, at [22] of the relief judgment, the submission by the ACCC that the annual turnover as defined of AAPL included all of its turnover and not only that turnover which related to AAPL’s supplies to TMCA. The primary judge said the difficulty with that submission was that it did not take account of the fact that s 76(5)(d) referred to “the body corporate” and did not include a reference to “any body corporate related to the body corporate”. The reasoning of the primary judge was:

That is significant having regard to other features of s 76(5). There is express reference to the body corporate and any body corporate related to the body corporate in the first part of s 76(5) of the Act and s 76(5)(a) of the Act distinguishes between “any of those bodies corporate” and “any other of those bodies corporate”.

(Emphasis in original.)

173    The primary judge concluded, at [22] of the relief judgment, that body corporate was restricted to Yazaki.

174    The relevant grounds in the ACCC’s Further Amended Notice of Appeal were as follows:

4.    His Honour erred in concluding that the maximum pecuniary penalty for each act of the First Respondent’s contravening conduct should be determined by operation of s 76(1A)(b)(i) of the Act.

5.    In making the error at paragraph 4 herein, his Honour misconstrued the operation of s 76(5) of the Act by:

5.1.    interpreting the word ‘enterprise’ as being limited to an area of business activity carried on by the First Respondent; and

5.2.    failing to find that all of the Second Respondent’s business activities (other than supplies in respect of s 76(5)(a) of the Act) were supplies for the purpose of calculating the First Respondent’s annual turnover in accordance with s 76(5) of the Act.

6.    His Honour erred in failing to find that the maximum pecuniary penalty for each act of the First Respondent’s contravening conduct should be determined by operation of s 76(1A)(b)(iii) of the Act.

175    The ACCC’s primary submission was that the words “the body corporate” in s 76(5)(d) referred to each of the bodies corporate referred to in the chapeau to s 76(5). If that construction was incorrect, and the words “the body corporate” should be construed as a reference to the contravening body corporate, the ACCC’s secondary submission was that the meaning of the composite phrase “supplies …made in connection with an enterprise that the body corporate carries on” was broader than supplies made pursuant to a business carried on by the contravening body corporate. The submission was that the phrase included supplies that may properly be characterised as part of the business or trading enterprise of the contravening body corporate, including supplies made by subsidiaries where part of the business or trading enterprise of the contravening body corporate was carried on by subsidiaries.

176    The ACCC submitted that an examination of the text, context and purpose of s 76(5)(d) supported its construction. Section 76(5) defined the annual turnover of the contravening body corporate for the purposes of s 76(1A). The annual turnover was defined as the sum of the values of all the supplies that the contravening body corporate and any related body corporate had made or were likely to make during the defined period. Thus, the section was concerned with the value of supplies made by the contravening body corporate and each of its related bodies corporate. Each of the related bodies corporate was the subject of the section.

177    Paragraphs (a) to (e) of the section excluded certain types of supplies from the calculation, the submission continued. It was apparent textually and contextually that the subject of each of those paragraphs was the supplies that were referred to in the chapeau, being the supplies of the contravening body corporate and each related body corporate. Paragraphs (b), (c) and (e) did not expressly refer to any body corporate, but it was plain from the context that the paragraphs were intended to refer to all supplies that were referred to in the chapeau. Paragraph (a) referred to “supplies made from any of those bodies corporate to any other of those bodies corporate”, expressly referring to each body corporate in the chapeau and excluding supplies between them. Paragraph (d) referred to supplies that were not made in connection with an enterprise that the body corporate carried on. The words “the body corporate” should be read as referring to each of the bodies corporate that were the subject of s 76(5). In paragraph (d), it was grammatically necessary to include the words “the body corporate” in order to express the exclusion of supplies that were not made in connection with an enterprise carried on. In paragraphs (b), (c) and (e), it was not necessary to include the words “the body corporate” for the words to be clear.

178    The ACCC submitted that the phraseology used in paragraph (a) provided no support for the construction adopted by the primary judge. Paragraph (a) was concerned with supplies made between any of the bodies corporate referred to in the chapeau. The use of the phrase “any of those bodies corporate” was necessary to address the subject matter of the exclusion.

179    The ACCC submitted that its construction promoted the purpose of paragraph (d), which was to exclude from the calculation of “annual turnover” supplies that were not business or trading in nature. The term “enterprise” was to be given the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). The term “enterprise” was defined in s 9-20(1) of the GST Act to include “an activity, or series of activities” done “in the form of a business” or “in the form of an adventure or concern in the nature of trade”, but to exclude such things as private hobbies and recreational pursuits and activities undertaken without a reasonable expectation of profit or gain. There was a correspondence between the exclusions in paragraphs (a) to (e) of s 76(5) and the exclusions within the definition of “taxable supply” in the GST Act.

180    If paragraph (d) was construed as referring only to the contravening body corporate, and if the paragraph as a whole was construed as referring only to supplies made as part of the business of the contravening body corporate, in most cases the paragraph would exclude supplies made by related bodies corporate (in apparent conflict with the chapeau). The supplies of a related body corporate would only be aggregated in the calculation of annual turnover if circumstances existed such that the contravening body corporate could be regarded as carrying on the business of the related body corporate. No textual, contextual or purposive considerations supported that result.

181    The ACCC submitted in the alternative that the words “supplies…made in connection with an enterprise that the body corporate carries on” had a meaning that was broader than supplies made pursuant to a business carried on by the contravening body corporate. The phrase included supplies that may properly be characterised as part of the business or trading enterprise of the contravening body corporate, which would include supplies made by a subsidiary of the contravening body corporate where part of the business or trading enterprise of the contravening body corporate was carried on by the subsidiary. Applying the definition from the GST Act, the word “enterprise” meant activities in the form of a business or a concern in the nature of trade, as distinct from activities in the nature of paid employment, recreational pursuits or not for profit pursuits. Thus, the word “enterprise” primarily directed attention to the character of the activities to be included in the calculation of turnover, not the entity or business structure through which the activities were undertaken. The composite phrase “supplies…made in connection with an enterprise that the body corporate carries on” was sufficiently broad to encompass the whole of the commercial undertaking of the relevant body corporate, whether carried on directly by the body corporate or carried on indirectly by its subsidiaries.

182    The respondents submitted there was no warrant for reading in additional words to s 76(5)(d). Section 76(5) distinguished between supplies by a contravening body corporate, and supplies made by bodies related to the contravening body corporate, in both the chapeau and s 76(5)(a). If the legislature had intended s 76(5)(d) to have the meaning contended for by the ACCC, it would have followed that pattern and expressly incorporated the additional words contended for by the ACCC. The fact that it did not do so was fatal to the ACCC’s contention.

183    The respondents submitted that the words “the body corporate”, where they appeared in paragraph (d), were a repetition of the words “the body corporate” where they appeared in the chapeau. If it had been intended that one was to deduct supplies that were not made in connection with an enterprise that related bodies corporate carry on, one would expect to see that in paragraph (d) in order to be consistent with the way in which the legislature had framed the provision, both in the chapeau and in paragraph (a). There was no warrant for reading in additional words of the kind for which the ACCC contended.

184    The respondents submitted there was no textual or extrinsic support for the ACCC’s asserted purpose of the provision being to exclude supplies that were not of a business or trading nature (or any ambiguity warranting recourse to extrinsic materials) and, in any event, the words sought to be read in by the ACCC were unnecessary in order to achieve it. The use of the term “enterprise” would exclude activities that did not have a business or trading character.

185    The respondents submitted that the purpose of determining annual turnover was to arrive at a proxy for the value of the benefit attributable to a contravening act, in circumstances where that benefit could not otherwise be calculated. Having regard to that purpose, it was not surprising that the legislature had excluded from the calculation of annual turnover supplies made by a related body corporate that had no connection with any contravening act of the contravening body corporate.

186    In cases such as the present, where the contravening body corporate only came within the purview of the Act by virtue of the extended operation in s 5, s 76(5)(d), along with s 76(5)(e) (which excluded supplies that were not connected with Australia), had the effect of ensuring that any penalty imposed was referable to the impact of contravening conduct on Australian consumers, an outcome that was consistent with the object of the Act stated in s 2.

187    The ACCC did not challenge the findings that Yazaki carried on business in Australia only in relation to the supply of Toyota Camry wire harnesses to TMCA. The primary judge also held in another finding that was unchallenged by the ACCC that “it cannot be said that AAPL was acting as Yazaki’s agent or that both Yazaki and AAPL were conducting the whole of the business apparently conducted by AAPL.” Further, the primary judge held that, even if “enterprise” meant “commercial activity”, Yazaki was not carrying on AAPL’s commercial activity of making supplies to Holden and Mitsubishi.

188    The use of the phrase “in connection with” should not be interpreted so as to sweep away principles of separate legal personality, the respondents submitted. Although the phrase had a wide meaning, it was a relational one, whose breadth depended upon the context in which it appeared, including the object or purpose of the provision in question. Here, the context was the relationship between supplies and the enterprise carried on by a contravening body corporate. In that context, the phrase “in connection with” should be given a meaning similar to “in furtherance of” or “in the course of”. This would not capture supplies made by a related body corporate that were not in the course or furtherance of any business carried on by the contravening body corporate.

189    The respondents also referred to a disconformity or potential disconformity between the penalty and any blameworthiness on the part of a body corporate related to the contravening corporation.

190    In reply, the ACCC submitted its construction of s 76(5)(d) did not require additional words to be read into the section. The question of construction was simply the meaning of the words “the body corporate”. It submitted s 76(1A)(b)(iii) specified an alternative maximum, calculated by reference to turnover, in circumstances where subparagraph (ii) could not be determined. Subparagraph (iii) was not a proxy for (ii); it was a substitute if the value of the benefit could not be determined. Further, subparagraph (ii) was not directed to the value of the benefit; it was three times that value. The turnover figure in subparagraph (iii) was therefore a substitute for 3 times the value of the benefit. The chosen substitute was 10% of turnover, which had no necessary correlation with three times the value of the benefit. Thus, subparagraph (iii) was simply an alternative figure which the legislature regarded as an appropriate maximum penalty.

191    In our opinion, it must be borne in mind that the purpose of the provision is to fix a maximum pecuniary penalty payable by the contravening corporation. It is not a related body corporate which is liable to the penalty and the provision does not deal with the penalty itself but with the maximum penalty.

192    Next, in our opinion the words “the body corporate, and any body corporate related to the body corporate”, which appear in s 76 (1A)(b)(ii) are not incorporated in the language of subparagraph (iii) because of the quantity of language. It is left to s 76(5) to specify that which is the annual turnover of “the body corporate” which is the contravening corporation. The maximum pecuniary penalty is 10% of that annual turnover during the turnover period.

193    We reject the respondents’ submission that s 76(1A)(b)(iii) should be construed by reference to a concept of proxy for s 76(1A)(b)(ii). Each of the two provisions is fixing a maximum pecuniary penalty payable by the contravening body corporate. Where the Court can determine the value of the benefit that the contravening body corporate and any body corporate related to the contravening body corporate have obtained directly or indirectly and that is reasonably attributable to the contravening act or omission, then the maximum pecuniary penalty is three times the value of that benefit. It cannot be said that 10% of the annual turnover of the contravening body corporate during the turnover period is to be considered a proxy. Rather, it is an alternative basis of calculation. This conclusion is strengthened by the consideration that the concept of proxy does not assist in the task of statutory construction. That task is in effect a constructional choice between 10% of the annual turnover of the contravening body corporate during the turnover period and 10% of the annual turnover being the sum of the values of all the supplies that the body corporate and its related bodies corporate have made or are likely to make during that period, subject to the specified exceptions. The former is no more or no less a proxy than the latter.

194    We reject the respondents’ conceptually related submission that the purpose of the pecuniary penalty provision is to punish a contravening corporation for conduct sufficiently related to the contravening conduct. In our opinion, that is to treat s 76(1A)(b)(iii) as limited by the nature of s 76(1A)(b)(ii) when the true position is that s 76(1A)(b)(iii) applies when the Court cannot determine, and therefore cannot use, the value of the benefit in s 76(1A)(b)(ii). It is therefore not appropriate to construe s 76(1A)(b)(iii) as limiting the maximum penalty of the contravening corporation to the value of the benefit.

195    There can be no doubt that “a body corporate” in s 76(5) is “the body corporate” referred to in s 76(1A)(b)(iii). It is that annual turnover which, for the purposes of s 76 “is the sum of the values of all the supplies that the body corporate and any body corporate related to the body corporate, have made, or are likely to make, during that period…” Paragraph (d) is an exception and applies to each of the bodies corporate referred to in the chapeau. It would be grammatically inapt to use the indefinite article in paragraph (d). The better construction is that “an enterprise that the body corporate carries on” applies distributively to each of the bodies corporate with which the subsection is concerned.

196    It was necessary in s 76(5)(a) expressly to set out, by way of exception, “supplies made from any of those bodies corporate to any other of those bodies corporate” because that is a straightforward, if not necessary, way of excluding supplies made within the group of corporations, that is, the contravening corporation and any body corporate related to that body corporate.

197    We do not accept the respondents’ submission founded on the literal repetition of the words “the body corporate” in paragraph (d) of the words “the body corporate” where they appeared in the chapeau. This is to rely on literalism at the expense of meaning. It follows that we also do not accept the respondents’ submission that had it been intended that one was to deduct supplies that were not made in connection with an enterprise that related bodies corporate carried on, one would expect to see that in paragraph (d) in order to be consistent with the way in which the legislature had framed the provision, both in the chapeau and in paragraph (a). As we have said, the alleged consistency operates only at the level of literalism.

198    We also do not accept the respondents’ submission that the construction for which they contend is to be preferred by considering the position of a tiny subsidiary of a major Australian corporation, carrying on some very incidental and discrete part of the corporate group’s business, and engaging in cartel conduct, in circumstances where no other company in the corporate group had any knowledge of what was going on. If the consequence is that all of the values of the supplies made by every company in the corporate group were brought in, irrespective of their connection with the conduct of the contravening subsidiary corporation, we would not regard that as an absurd consequence, that is, a consequence obviously unintended by the Parliament. We repeat our earlier observation that the purpose of the provision is to identify the maximum penalty for the contravening corporation: it is not to fix the penalty itself. And, again, the submission depends to some extent on the proposition, which we have rejected, that s 76(1A)(b)(iii) is a proxy for s 76(1A)(b)(ii). In our opinion, if a rational connection needs to be seen between the purpose of the provision and the better construction of that provision, that connection exists: compare the decision of the Full Court in One.Tel Ltd v Australian Communications Authority [2001] FCA 54; 110 FCR 125.

199    In our view, the primary judge erred in construing s 76(5)(d) as limited to Yazaki.

200    The maximum penalty is $87,411,359.30: see [52] above.

201    The extrinsic material supports our preferred construction.

202    The provision was introduced by item 7 of Sch 9 to the Trade Practices Legislation Amendment Act (No. 1) 2006 (Cth). The Minister in his second reading speech made in the House of Representatives on 17 February 2005 said:

The government has adopted recommendations made by the Dawson review which provide that the maximum pecuniary penalty for corporations be raised to be the greater of $10 million or three times the gain from the contravention or, where gain cannot be readily ascertained, 10 per cent of the turnover of the body corporate and all of its interconnected bodies corporate, if any.

203    The Dawson Report in 2003 recommended, with reference to s 80 of the Commerce Act 1986 (New Zealand):

It is generally accepted that an effective sanction for cartel activity should take into account the expected gains from the cartel. In a recent study in Norway it was remarked that:

‘The most important principle for levying fines is the expected loss for violating the law should exceed the gain.’

A similar study in New Zealand drew the same conclusion. Accordingly, the New Zealand Act now provides for an increased pecuniary penalty for breaches of the equivalent of Part IV of our Act. It is, in the case of a corporation, the greater of – (I) NZ$10 million; or (II) either – (A) if it can be readily ascertained and if the Court is satisfied that the contravention occurred in the course of producing a commercial gain, three times the gain resulting from the contravention; or (B) if the commercial gain cannot be readily ascertained, 10 per cent of the turnover of the body corporate and all of its interconnected bodies corporate (if any). The Committee considers this to be a desirable provision and for that reason, and because it is in the interests of closer economic relations between the two countries, is of the view that the Australian Act should be amended along the same lines.

(Citations omitted.)

204    The New Zealand Commerce Act contains the following provision in s 80:

(2B)    The amount of any pecuniary penalty must not, in respect of each act or omission, exceed,—

(a)    in the case of an individual, $500,000; or

(b)    in any other case, the greater of the following:

(i)    $10 million:

(ii)    either,—

(A)    if it can be readily ascertained and if the court is satisfied that the contravention occurred in the course of producing a commercial gain, 3 times the value of any commercial gain resulting from the contravention; or

(B)    if the commercial gain cannot readily be ascertained, 10% of the turnover of the person and all its interconnected bodies corporate (if any) in each accounting period in which the contravention occurred.

205    It also contains a definition of “interconnected” and “interconnected bodies corporate” in s 2 as follows:

(7)    For the purposes of this Act, any 2 bodies corporate are to be treated as interconnected if—

(a)    one of them is a body corporate of which the other is a subsidiary (within the meaning of section 5 of the Companies Act 1993); or

(b)    both of them are subsidiaries (within the meaning of that section) of the same body corporate; or

(ba)    both of them are entities referred to by any of the paragraphs (other than paragraph (e)) of the definition of transferor in section 2(1) of the Health Sector (Transfers) Act 1993; or

(c)    both of them are interconnected with bodies corporate that, in accordance with paragraph (a) or paragraph (b), are interconnected,—

and interconnected bodies corporate has a corresponding meaning.

206    We should also express our views on whether, as held by the primary judge at [29] of the relief judgment, the word “enterprise” means business rather than, as submitted by the ACCC, doing no more than drawing a broad distinction between commercial activities on the one hand and private activities on the other. It was because the primary judge considered the most natural meaning of the word “enterprise” was business that he concluded that Yazaki was not carrying on AAPL’s business of making supplies to Holden and Mitsubishi. The primary judge said that even if “enterprise” meant commercial activity, he did not consider the Yazaki was carrying on AAPL’s commercial activity of making supplies to Holden and Mitsubishi.

207    In our opinion, consistently with our conclusion that s 76(5)(d) applies distributively to each of the bodies corporate, that is the contravening body corporate and any body corporate related to the contravening body corporate, what is excluded is supplies that are not made in connection with an enterprise carried on by any of those bodies corporate. It then follows that the concept of an enterprise in s 9-20 of the GST Act would be applied to see first whether the activity, or series of activities, was done in the form of a business or in the form of an adventure or concern in the nature of trade and then to exclude, for example, an activity or series of activities done as a private recreational pursuit or hobby. We do not accept the submission that, if paragraph (d) is limited to the contravening corporation, all supplies made by a related body corporate are made in connection with the enterprise carried on by the contravening corporation.

Other asserted errors in fixing penalty and the refixing of penalty by this Court

208    In relation to other asserted errors in fixing penalty, the ACCC in its Further Amended Notice of Appeal relied upon the following grounds:

C.    Penalty – course of conduct principle – maximum penalty

7.    His Honour erred in the application of the ‘course of conduct’ principle of sentencing by determining the pecuniary penalty that he ordered the First Respondent to pay on the basis that the maximum penalty (which he appeared to hold to be $10 million) applied to each course of conduct as opposed to each contravention.

D.    Penalty – overall errors

8.    In applying the ‘course of conduct’ principle to determine the pecuniary penalty, his Honour erred in failing to find that the aggregate maximum pecuniary penalty for the five contraventions engaged in by the First Respondent after 13 December 2006 was:

8.1. $50,000,000, if calculated pursuant to s 76(1A)(b)(i) of the Act; or

8.2. $87,411,359.30, if calculated pursuant to s 76(1A)(b)(iii) of the Act.

…

9.    Further, or in the alternative to paragraphs 4 to 8A above, his Honour erred by imposing a pecuniary penalty on the First Respondent that was manifestly inadequate in that it did not adequately achieve the objective of specific and general deterrence.

209    Grounds 7 and 8 primarily concern the application of the course of conduct principle and the determination of the aggregate maximum penalty. The ACCC originally included an additional ground 8A in its Further Amended Notice of Appeal that the primary judge “erred in failing to impose a separate pecuniary penalty for each for the five contraventions engaged in by the First Respondent after 13 December 2006.” The ACCC indicated prior to the hearing that it would no longer press that ground of appeal.

210    Yazaki attached to its written submissions dated 13 February 2018 a proposed Notice of Contention covering similar or related grounds to those relied upon in grounds 7 and 8 of the ACCC's Further Amended Notice of Appeal as follows:

The primary judge’s imposition of a penalty totalling $9.5 million, if not upheld on the grounds relied upon by the primary judge, and if not set aside as a result of the First Respondent’s Cross-Appeal, should be upheld on one of the following grounds:

1.    The conduct of the First Respondent in making and giving effect to the 2008 Agreement should be regarded as two “acts” for the purpose of sections 76(1) and 76(1A) of the Act.

2.    Alternatively, the conduct of the First Respondent in making and giving effect to the 2008 Agreement should be regarded as two courses of the “same conduct” for the purpose of section 76(3) of the Act.

211    Yazaki necessarily sought an extension of time to file the proposed Notice of Contention.

212    At the hearing of the appeal the extension of time was not seriously opposed by the ACCC. No prejudice was pointed to by the ACCC in the Court proceeding to consider the grounds raised in the proposed Notice of Contention, which in any event raised similar or related issues to those in the ACCC's appeal. In these circumstances, the Court will grant the required extension of time for Yazaki to file its proposed Notice of Contention.

213    We recall our earlier finding that the primary judge erred in identifying the aggregate maximum penalty, which we concluded was $87,411,359.30. We are now called upon to address whether the following aspects of the primary judge’s relief judgment reveal an erroneous application of the course of conduct and totality principles:

32    Yazaki submits that the power to impose a pecuniary penalty should be exercised on the basis that there was one act or the same conduct or a single course of conduct with the result that sentencing should be approached as if there was one maximum penalty of $10 million. It put its submission in various ways.

33    First, Yazaki submitted that the reference in s 76(1A)(b) of the Act to “each act or omission” should be read broadly and it referred to the decision of Goldberg J in ACCC v Dermalogica and, in particular, the following observations made by his Honour (at [55]):

By s 76(1A), the pecuniary penalty payable under s 76(1) by a body corporate for offences including offences against s 48 is not to exceed $10,000,000 for each act or omission. The phrase in s 76(1) (and in subs (1A)) ‘each act or omission’ should not be taken as requiring a separate pecuniary penalty to be awarded, for example, for each conversation, each letter and each offending phrase in the website information. The relevant 'act' is engaging in the course of conduct that constitutes the practice of resale price maintenance.

34    I do not think the five contraventions are one act in this sense. Whilst the approach identified by Goldberg J means that in the present case not every conversation about, for example, the allocation of supply and the fixing of prices would be treated as a separate act (see liability reasons at [257]-[258] and [263]), I do not think that the principle extends any further than this.

35    Secondly, Yazaki submitted that the five “contraventions” were all part of the same conduct within s 76(3) of the Act. It sought to rely on the following observations made by Gordon J as a member of this Court in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [127]:

In considering the maximum penalties, Coles is not liable for more than one pecuniary penalty in respect of the same conduct: s 224(4)(b) of the ACL. In determining what constitutes the same conduct, regard may be had to the “one transaction” or “one course of conduct” principle as explained by the majority of the Full Court in Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461 39 at [39] and [41]:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factual specific inquiry.

…

In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise.

(Citations and emphasis omitted.)

36    Whatever the position may be under s 224(4)(b) of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act), I do not think the conduct in this case can be, or should be, characterised as the same conduct for the purposes of s 76(3) of the Act. Each act was carried out at a different time and at least some of the acts had a different quality from the others. The approach which is relevant in this case is that which applies in the case of a course of conduct. The approach is closely related to the totality principle.

…

43    I think Yazaki’s conduct can be divided into two broad categories. Those categories are the making of the agreement and activities between the contraveners on the one hand, and the submission of the prices to the proposed purchaser on the other. The quality of those two acts is different. Referring to the table put forward by the ACCC (at [31]), I characterise acts 1, 2 and 4 as one course of conduct, and acts 3 and 5 as a separate course of conduct. I propose to impose a pecuniary penalty for the first course of conduct and a second pecuniary penalty for the second course of conduct. However, the pecuniary penalty for the second course of conduct will be considerably lower than the pecuniary penalty for the first course of conduct to reflect the fact that to an extent, but not entirely, there is a connection between all of the conduct.

44    For the reasons set out below, I think that the appropriate pecuniary penalty in relation to the first course of conduct is $7 million, and the appropriate pecuniary penalty in relation to the second course of conduct is $2.5 million.

…

88    The conduct in this case involved contraventions of a key provision in Part IV of the Act and Competition Code. The conduct was deliberate, sophisticated and devious. It included the manipulation of the prices and the components of the prices so as to avoid arousing suspicion. The conduct gave effect to a longstanding and broader anti-competitive agreement. The conduct was more serious than “mid-range” as Yazaki suggested. I think a pecuniary penalty of $7 million is appropriate for the first course of conduct. As I have said, because of the connection between the contravening acts, a lower penalty is appropriate for the second course of conduct. I impose a penalty of $2.5 million.

214    We begin by a consideration of the application of s 76(1A) and s 76(3) of the Act, as specifically raised in the Notice of Contention and encompassed in grounds 7 and 8 of the Further Amended Notice of Appeal.

215    It is convenient to set out here the relevant declarations made by the primary judge at [8] of the relief judgment:

2008 Agreement

5.    In or about late April 2008, Yazaki made an arrangement or arrived at an understanding with SEI in response to a Request For Quotation issued by TMC for the supply of wire harnesses for the 2011 Toyota Camry (2008 Agreement), the provisions of which:

5.1.    had the purpose of preventing, restricting or limiting the supply of the selected wire harnesses for the 2011 Toyota Camry to TMC or its related bodies corporate, including TMCA, by Yazaki and SEI, or by either of them, or by any bodies corporate related to either of them, in competition with each other;

5.2.    constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Act and the Competition Code,

and thereby contravened section 45(2)(a)(i) of the Act and the Competition Code.

6.    By:

6.1.    discussing and agreeing with SEI between 9 and 28 May 2008 prices for wire harnesses for the 2011 Toyota Camry that they would submit in response to the Request For Quotation issued by TMC (2011 Toyota Camry agreed prices);

6.2.    submitting the 2011 Toyota Camry agreed prices to TMC in Japan on 29 May 2008;

6.3.    directing AAPL to submit the 2011 Toyota Camry agreed prices to TMCA in Australia between late May 2008 and mid-2008; and

6.4.    causing AAPL, as an agent of Yazaki within section 84(2) of the Act, to submit the 2011 Toyota Camry agreed prices to TMCA on 25 June 2008,

Yazaki gave effect to the 2008 Agreement and thereby contravened section 45(2)(b)(i) of the Act and the Competition Code.

Overarching Cartel Agreement

7.    By making or arriving at the 2003 and the 2008 Agreement, Yazaki gave effect to the Overarching Cartel Agreement, the provisions of which:

7.1.    had the purpose of preventing, restricting or limiting the supply of wire harnesses to TMC or its related bodies corporate, including TMCA, by Yazaki and SEI, or by either of them, or by any bodies corporate related to either of them, in competition with each other;

7.2.    constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Act and the Competition Code;

and thereby contravened section 45(2)(b)(i) of the Act and the Competition Code.

216    Yazaki contended that the contraventions referred to in the declarations 5 and 7, 6.1, 6.2, 6.3 and 6.4 corresponding respectively to acts 1 to 5 summarised in the table in [31] of the relief judgment, should be regarded as two acts within the meaning of s 76(1A). The first act was the conduct between the contraveners in making the 2008 Agreement and the agreeing of the wire harness prices for the 2011 Toyota Camry, and the second act encompassed the other conduct of implementation.

217    Section 76(1) in providing for the payment of the penalty, and s 76(1A) in providing for the amount of the penalty, refer to “each act or omission by the person to which this section applies”. As Goldberg J said in Australian Competition and Consumer Commission v Dermalogica Pty Ltd [2005 FCA 152; 215 ALR 482 the relevant acts and omissions are of the acts and omissions of engaging in the course of conduct that constitutes the relevant contravention to which s 76 applies. The different acts identified by the primary judge in the table in [31] of the relief judgment can each be seen as constituting relevant contraventions. A relevant act constitutes the act or omission to which s 76 applies by reason of it being found that the person by reason of such conduct contravened the relevant provision of Pt IV of the Act. The conclusion as to what is the act or omission for s 76 involves an assessment and characterisation of conduct, events and circumstances. The making or reaching of a prohibited agreement, arrangement or understanding would ordinarily be one “act” which would constitute a contravention (even though there may be various individual acts or conduct, events and circumstances to be assessed and characterised). Conduct that gives effect to a prohibited agreement may involve many acts. In our view, the primary judge correctly applied s 76(1A) of the Act in the assessment and characterisation of the conduct, events and circumstances set out at [31] of the relief judgment.

218    We then turn to s 76(3). Section 76(3) specifically deals with the situation of a contravention of two or more provisions of Pt IV but where the conduct in respect of the contravention is the same. The breaches of ss 45(2)(a)(i) and 42(2)(b)(i) (being act 1 and referred to in declaration 5 and declaration 7) relate to the making and arriving at the 2008 Agreement and the giving effect to the Overarching Cartel Agreement, which involved the same conduct. The ACCC accepted that only one pecuniary penalty was payable in respect of those two contraventions – combined as act 1 in the table in [31] of the relief judgment.

219    Yazaki then contended that other acts in the table in [31] of the relief judgment involve a contravention of two provisions. Even if this was so, the conduct that relevantly constituted each contravention was not the same, which is clearly set out in the declarations themselves. For the purposes of the application of s 76(3) the actual conduct that constitutes a contravention of one provision must be the “same conduct” that constitutes the contravention of the other provision.

220    Yazaki referred to two authorities relevant to the interpretation of and application of s 76(3). The first was Australian Competition and Consumer Commission v Midland Brick [2004] FCA 693; 207 ALR 329. At [27] the Court stated:

Pursuant to s 76(3) of the Act a person is not liable to pay more than one pecuniary penalty in respect of the same conduct. The two contraventions of s 45(2)(a)(ii) of the Act committed by Bristile arose out of a single course of conduct and the restriction imposed by s 76(3) should be taken to apply to that conduct. (See: McPhee at [180]-[183]).

221    However, as s 76(3) makes clear, it is only where the same conduct constitutes a contravention of two or more provisions of the relevant Act that s 76(3) applies. Without further elaboration of the Court in Midland Brick in its reasoning, where there were contraventions of only one provision, it is difficult to see how s 76(3) could have been applicable in its terms.

222    The second authority relied upon by Yazaki was the decision of Toohey J in Trade Practices Commission v Tubemakers of Australia Ltd [No 2] [1983] ATPR 40-390. His Honour stated at page 2:

There are two obstacles in the way of applying s 76(3) in the present case. The first is that the conduct of Tubemakers and Steel Supplies was held to be an attempt to contravene a provision of Part IV and an attempt to induce another to contravene such a provision. Section 76(1) distinguishes a contravention from an attempt and from an inducement. Secondly, the conduct of Tubemakers and Steel Supplies was not held to involve a contravention of two or more provisions of Part IV; only one provision was involved.

It does not follow that I should not apply the philosophy of subs (3) if the matters found against Tubemakers and Steel Supplies were aspects of the same conduct or even of conduct that was very similar. If in truth there was, in the case of each company, a single infringement of s 45, a single penalty is appropriate. See Trade Practices Commission v Simpson Pope Ltd (1980) 30 ALR 544 per Franki J at p 556.

223    His Honour appreciated he could not apply s 76(3) on its terms, but effectively applied the “course of conduct” principle to which we will return.

224    Therefore, it is apparent that s 76(3) is directed to preventing multiple penalties being imposed on one contravener for the same conduct that constitutes a contravention of two or more provisions of the Act. As such, the section has no application to the position of Yazaki, other than in respect of act 1 involving the same conduct (as described in declarations 5 and 7) and the breach of two provisions (namely ss 45(2)(a)(i) and 45(2)(b)(i)).

225    Putting aside the application of ss 76(1A) and 76(3), Yazaki submitted that the primary judge correctly observed that there was a connection in this case between all of the acts which comprised the contravening conduct. Yazaki submitted that it would be punished multiple times for what was, in substance, the same or at least two types of underlying wrongdoing if the ACCC’s approach of treating each of the five acts as separate contraventions attracting substantial and individual penalties was adopted by the Court. In essence, Yazaki contended that certain of the individual acts comprising the contraventions are inextricably linked in the factual matrix of the present case to be treated as effectively the same conduct or same course of conduct.

226    Before analysing the contravening conduct and its interrelationship, we turn to the legal principles applicable to our analysis. In determining the appropriate penalty for a multiplicity of civil penalty contraventions, courts have had regard to two related principles that originate in the criminal law: the “course of conduct” or “one transaction” principle and the “totality” principle. They are not rules, but principles or tools to assist the Court in arriving at an appropriate penalty.

227    We make this preliminary observation. It is not appropriate or permissible to treat multiple contraventions as just one contravention for the purposes of determining the maximum limit dictated by the relevant legislation. We do not understand the contrary to be decided by the Full Court in CFMEU v Williams [2009] FCAFC 171; 262 ALR 417 (Moore, Middleton and Gordon JJ). In support of the contrary position, Yazaki relied upon the statement of the Full Court in Williams at [31] as follows:

In the present case, it is appropriate to take the single course of conduct into account by imposing separate fines for the two offences which when aggregated would represent a single penalty appropriate to punish the single course of conduct concerned. Fixing an amount of fines that when taken together represent a single penalty appropriate to punish the one course of continuing conduct begins from the premise that the maximum penalty for all of the contravening conduct that comprises a single transaction, but constitutes two separate offences, is to be treated, in effect, as $110,000 for the Union and $22,000 for Mr Mates: cf Mornington at [18] (per Gyles J) and at [47]-[49] (per Stone and Buchanan JJ).

228    This statement was made in the context of the Full Court re-exercising the sentencing discretion and based upon the acceptance (on the facts before the Full Court) that there was effectively one activity or one offence (see [15] and [25]), adopting the approach taken in Mornington Inn Pty Ltd v Jordon [2008] FCAFC 70; 168 FCR 383.

229    The Full Court was not saying that as a matter of law or principle, in applying the course of conduct tool of analysis, it was appropriate or permissible to treat multiple contraventions as just one contravention for the purposes of determining the maximum limit to consider as a yardstick in reaching the appropriate penalty.

230    At [37] of the relief judgment the primary judge recorded by reference to [31] of Williams that the application of the course of conduct “tool of analysis” did “not mean that a number of contraventions become one contravention, but rather, where it is appropriate to apply the approach, a number of contraventions may be treated as if they attract one penalty. But, with respect, to treat a number of contraventions as subject to one maximum penalty (as we think his Honour did here) is to treat them, impermissibly, as one contravention.

231    As observed recently by Beach J in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [24]-[25]:

… the “course of conduct” principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The “course of conduct” principle cannot unduly fetter the proper application of s 224.

232    This statement was approved by the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [141] per Jagot, Yates and Bromwich JJ and in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159 at [425] and [426] per Middleton, Beach and Moshinsky JJ.

233    Further, in applying the course of conduct principle the statutory context in which the contraventions occurred must be considered. For instance, the Act contains no equivalent of s 557 of the Fair Work Act 2009 (Cth). In Cement, the Full Court made the following observations:

431    We consider that the course of conduct principle must be informed by the particular legislative provisions relevant to these proceedings. In particular, we consider that weight must be given to the fact that the legislature has deliberately and explicitly created separate contraventions for each of the making of, and giving effect to, a contract, arrangement or understanding that restricts dealings or affects competition: ss 45(2)(a) and 45(2)(b).

432    This statutory structure is relevant because it will often be the case that the making of, and giving effect to, a contract, arrangement or understanding will involve overlapping or homogenous conduct. The Court should be wary that it does not undermine this explicit distinction by applying the course of conduct principle too liberally in such circumstances.

234    The “course of conduct” or “one transaction” principle means that consideration should be given to whether the contraventions arise out of the same course of conduct or the one transaction, to determine whether it is appropriate that a “concurrent” or single penalty should be imposed for the contraventions. The principle was explained by Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 194 IR 461 at [39]:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry.

(Emphasis omitted.)

235    As Middleton and Gordon JJ further explained in Cahill, even if the contraventions are properly characterised as arising from a single course of conduct, a judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions.

236    The course of conduct principle has some overlap with the totality principle, at least to the extent that the aim is to avoid a penalty being imposed which is not proportionate with the offending conduct: see Mill v The Queen [1988] HCA 70; 166 CLR 59 at 63.

237    We do not need to discuss further the totality principle, or other principles to be applied in the process of imposing a civil penalty under s 76, other than to observe that proper weight must be given to the statutory maximum (it being referrable to the most serious kind of contravention), and that there is little utility in reference to other cases decided at a different time, in different circumstances and with different facts. In this latter connection, Yazaki referred to a number of cases said to give some guidance as to the appropriate penalty to impose: see Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia SRL (No 5) [2013] FCA 294; Australian Competition and Consumer Commission v April International Marketing Services (No 8) [2011] FCA 153; Australian Competition and Consumer Commission v Bridgestone Corporation [2010] FCA 584; 186 FCR 214; Australian Competition and Consumer Commission v Prysmian Cavil E Sistem S.R.L (No 13) [2017] FCA 851; and Australian Competition and Consumer Commission v ANZ Banking Group Limited [2016] FCA 1516. These cases all involved an “agreed penalty” submitted by the parties, and involved different circumstances and facts. It is not necessary to give any particular attention to any of the cases referred to by Yazaki for the purposes of this appeal.

238    We now consider the contravening conduct in light of the above principles.

239    The primary judge at [43] of the relief judgment characterised acts 1, 2 and 4 as one course of conduct and acts 3 and 5 as a separate course of conduct. The ACCC accepted that acts 4 and 5 (as referred to in declarations 6.3 and 6.4 respectively) overlap to a degree and that the similarity between that conduct might lead to a lower penalty. However, in relation to the other acts, the ACCC contended that they were discrete in time and nature for the purposes of determining penalty. On the other hand, Yazaki submitted in relation to the course of conduct principle that there was a connection between all of the acts which comprised the contravening conduct.

240    In addition to the submission of Yazaki in supporting the approach of the primary judge and in relation to re-sentencing by the Court, Yazaki made the following written submissions dated 21 March 2018 directed to the course of conduct principles:

1.2    The relevant contravening conduct in this case was the making of, and giving effect to, the 2008 Agreement, being an agreement between Yazaki and SEI to allocate between them the supply of WHs for the 2011 Toyota Camry. The agreement was made during a phone call between Mr Nagano (SEI) and Mr Kawai (Yazaki) in late April or early May 2008. The phone call was preceded by an approach by Mr Nagano (during which Mr Kawai was non-committal), and a meeting between Mr Nagano and Messrs Sudo and Kawai in early April 2008.

1.3    To give effect to the agreement, it was necessary to coordinate the details of prices to be submitted to TMC. A number of meetings and phone calls between SEI and Yazaki representatives took place in May 2008 for this purpose. Yazaki submitted the prices so coordinated to TMC on 29 May 2008. Some time before mid-June 2008, Yazaki directed AAPL to submit the same prices to TMCA, which AAPL did on 25 June 2008. The submission of prices to TMCA was a “formality only”.

1.4    The trial judge correctly observed that there was a connection in this case between all of the acts which comprised the contravening conduct. All of the conduct took place during a period of about two months (late April to 25 June 2008). It was all directed, in substance, toward the purpose of a single underlying wrong – the rigging of TMC’s supplier selection process for the 2011 Toyota Camry. It involved a single competitor (SEI), a single customer (TMC), a single product (the 2011 Toyota Camry) and a single contract (the contract for the supply of WHs for the 2011 Toyota Camry).

…

1.6    The trial judge was correct to reject the ACCC’s contention. It does not pay proper regard to the circumstances of the contraventions and would have the effect of punishing Yazaki multiple times for what is, in substance, the same underlying wrongdoing:

(a)    Acts 1 and 2 were inextricably linked. The agreement to allocate supply for the 2011 Toyota Camry necessarily entailed the coordination of prices. The process of coordinating prices commenced more or less immediately after the agreement was reached: it was essentially a continuation of the same conduct. The approach advocated by the ACCC would result in Yazaki being penalised for having agreed to allocate supply, and then penalised again for not abandoning that agreement immediately after it was made.

(b)    In respect of acts 3, 4 and 5, the ACCC seeks a penalty for Yazaki submitting prices to TMC; then directing its agent AAPL to submit the same prices to TMCA; and yet a further penalty for Yazaki upon AAPL following that direction.

241    By reference to the declarations made by the primary judge and the evidence before the primary judge (especially at [253] to [305] of the liability judgment) we do not accept the characterisation made by Yazaki as to the course of conduct and interrelationship between the contraventions. Similarly, we respectfully consider that the primary judge fell into error in characterising acts 1, 2 and 4 as one course of conduct, by reference to which his Honour fixed one penalty based on one maximum penalty, and acts 3 and 5 as a separate course of conduct, by reference to which his Honour fixed a second penalty also based on one maximum penalty. This approach saw the conduct as subject to two maximum penalties, effectively a characterisation of it as two contraventions. In essence the contraventions involved discrete steps – the making of the cartel arrangement, and the giving effect to that cartel arrangement. These steps then involved separate acts: discussions in Japan between the competitors about the agreed prices that were going to be submitted, the submission of prices in Japan and then the submission of prices in Australia.

242    We take the view that acts 1, 2 and 3 are separate and discrete acts, whilst acts 4 and 5 involve a considerable degree of overlap so as to be properly treated as broadly involving the same course of conduct, even though they involve different acts.

243    Contrary to the submissions of Yazaki, it is not appropriate to treat all the acts as being directed toward the purpose of a single underlying wrong, namely the market-rigging of the TMC’s supplier selection process for the 2011 Toyota Camry. This generalises the contraventions improperly, and fails to put each act constituting the contravening conduct in the context of the legislative prohibitions. As mentioned in Cement, overlapping and homogenous conduct will often occur in contraventions involving the making of, and giving effect to, an unlawful arrangement. The statutory provisions make an explicit distinction at least between these two courses of conduct.

244    Then for Yazaki to focus on the limited circumstances in which the conduct occurred, submitted as involving a single competitor, customer, product and contract, is to ignore the broader context in which the unlawful behaviour of Yazaki occurred.

245    By reference to the declarations made by the primary judge and the evidence, act 1 (declaration 5) included the making in about late April 2008 of the 2008 Agreement, a discrete and separate act constituting a contravention of s 45(2)(a)(i). Act 2 (declaration 6.1) related to discussions and further agreement in Japan, which continued for many weeks in May 2008, and led to agreement on the prices for the wire harnesses. Act 3 (declaration 6.2) involved the giving effect to the 2008 Agreement on 29 May 2008 (following on from the earlier discussions in Japan), by submitting the agreed prices to TMC. Then acts 4 and 5 involved the directing of AAPL to submit prices and AAPL’s submissions of agreed prices to TMCA, which (though in one sense, separate acts) can be seen broadly as one course of conduct, although not the same conduct.

246    Whilst recognising that the exercise of a sentencing discretion on appeal should be based upon undisturbed factual findings of the primary judge, the Court must come to its own view of the appropriate penalty. This necessarily involves in this appeal a characterisation of each act and application of the course of conduct and totality principles.

247    Having found error in the approach of the primary judge in determining the aggregate maximum penalty and in the characterising of the acts as constituting two courses of conduct to fix two penalties by reference to two maximum penalties, it falls upon this Court to re-fix the penalties. On this basis, we do not need to consider whether the penalty imposed by the primary judge was manifestly inadequate, as this Court now undertakes the task of imposing the appropriate penalty.

248    It is then necessary to consider the appropriate penalty in the context of the proper characterisation of the relevant contraventions and course of conduct and the aggregate maximum penalty being $87,411,359.30.

249    Yazaki, in addition to referring to the notional aggregate maximum penalty of $20 million, referred to a number of factors in favour of maintaining the penalty imposed by the primary judge. These factors included the limited connection to Australia of the conduct, there being no evidence of loss and damage being suffered, and the disproportionate range of penalties now contemplated compared to other penalties imposed in Australia in recent years for other international cartel conduct.

250    Yazaki supported the approach of the primary judge, and did not criticise the various factors he took into account in determining the appropriate penalty. In re-sentencing, we take into account each of the factors relied upon by the primary judge and his findings of fact, but with two important changed circumstances. First, the aggregate maximum penalty is not that which was determined by the primary judge and secondly, the primary judge’s characterisation of two courses of conduct has been displaced by acts 1, 2 and 3 being treated as separate contraventions and acts 4 and 5 being treated as one course of conduct.

251    In re-fixing the penalties, the following matters are to be recalled.

252    Yazaki is a large multinational supplier of automotive parts with considerable market share globally, in Japan and Australia. It is one of the main suppliers of wire harnesses globally. It has a large total turnover in the billions of Australian dollars. In addition, at the time of the conduct, the Yazaki Group engaged approximately 200,000 people and by June 2015 this number grew to 279,800 globally.

253    According to the primary judge, Yazaki’s conduct was “deliberate, sophisticated and devious”: see [49] and [88] of the relief judgment. It included the manipulation of the prices and the components of the prices so as to avoid arousing suspicion: see [88] of the relief judgment. The trial judge described Yazaki’s conduct as “serious”, or “hard-core” cartel conduct, undertaken in the context of a longstanding overarching cartel agreement: see [52] of the relief judgment. The conduct gave effect to a longstanding and broader anti-competitive agreement since at least the mid-1990s: see [51] and [88] of the relief judgment.

254    In addition to the matters referred to above the trial judge made the following findings which we have relied upon:

(1)    Yazaki's conduct “bore upon substantial financial transactions between substantial corporations in Australia, one of which provided goods to members of the Australian public”: see [54] of the relief judgment.

(2)    Given the longstanding nature of the prohibited arrangement and the size of the transactions, Yazaki’s contravening conduct “caused loss and damage and enabled Yazaki or AAPL to secure a not insignificant profit or avoid a not insignificant loss”: see [54] and [59] of the relief judgment.

(3)    There was no evidence of cooperation by Yazaki before the proceeding was commenced: [76] of the relief judgment.

(4)    There was no evidence of contrition on the part of Yazaki for its contravening conduct (except for an expression of regret to stakeholders in a report published in 2011): see [77] of the relief judgment.

(5)    The longstanding contravening conduct was engaged in by senior management of Yazaki: see [71]-[72] of the relief judgment.

(6)    Yazaki did not have a competition or antitrust compliance program or any training in place at the time of the conduct: [73] of the relief judgment.

255    The primary judge himself concluded that the conduct was more serious than “mid-range” (see [88] of the relief judgment), and the overall penalty should reflect this assessment of the conduct. We agree with these comments of the primary judge. The comments were manifest in his Honour’s imposition of penalties totalling $9.5 million assuming (incorrectly in our view) a total maximum of $20 million for the two penalties.

256    We have also kept in mind in our consideration of the appropriate penalty the narrow market in Australia in which the conduct occurred. If there was not such a limited connection with the Australian market the penalty may well have needed to be higher.

257    In our view, only a very sizeable penalty in this case is likely to act as specific deterrent against future contraventions by Yazaki, and as a general deterrent for similarly-sized global companies contemplating similar conduct. Cartel conduct is generally regarded as the most pernicious of all breaches of competition law. It is often attended by secrecy and is notoriously difficult to identify, and its detection may only occur a long time after it manifests. Those matters need to be reflected in an appropriate penalty.

258    ACCC contended before the trial judge, and maintains on appeal, a total penalty in the range of $42 to $55 million is appropriate. This comprises a penalty in the range of $12 to $15 million for each of acts 1, 2 and 3 and $4 to $6 million for each of acts 4 and 5.

259    It can be observed that on the basis of the maximum penalty being $87,411,359.30, the aggregate penalty of $9.5 million imposed by the primary judge was only 10.9% of the proper aggregate maximum penalty. Further, the penalty of $9.5 million represented a very small proportion of Yazaki’s total turnover of all operations. Such a penalty fails to make clear that the “cost of courting a risk of contravention of the [Act] cannot be regarded as an acceptable cost of doing business”: see Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [68] (Keane CJ, Finn and Gilmour JJ).

260    In view of these considerations, by reference to the acts described in the table in [31] of the relief judgment, we consider that penalties should be imposed as follows:

261    In considering each penalty and the overall penalty we have considered the totality principle, keeping in mind the statutory maximum penalty, the significance of each contravention, the connection between all of the conduct and the factors that led the primary judge to impose a substantial penalty although by reference to the wrong statutory maximum and inappropriate characterisation of the course of conduct. The separate imposition of penalties for acts 4 and 5 does not deny that there was broadly one course of conduct, but reflects our view that $8 million is the appropriate penalty for the acts, being broadly one course of conduct.

262    We have not dealt separately with the argument of the ACCC that the penalties were manifestly inadequate. It follows from our reasons that the penalties that we would impose are significantly higher than those imposed by the primary judge. That significant difference follows, however, from our different view as to the maximum penalty for each contravention and our different approach to course of conduct.

Costs

263    In its Amended Notice of Appeal, the ACCC sought to set aside the costs order made by the primary judge that Yazaki and AAPL pay only 85% of the ACCC’s costs of the proceeding. In lieu thereof, the ACCC sought an order that Yazaki and AAPL pay all of the ACCC’s costs of the proceeding.

264    The primary judge dealt with the issue of costs at [89], [90] and [93] of the relief judgment as follows:

89    The ACCC succeeded on the issues identified in the declarations set out above.

90    The ACCC failed on the following issues:

(1)    As far as Yazaki is concerned, the ACCC failed to establish that it contravened s 45(2)(a)(ii) and (b)(ii) of the Act and Competition Code because I found that there was not a market in Australia for the supply of Toyota WHs (liability reasons at [394] [395]).

(2)    As far as Yazaki is concerned, the ACCC failed to establish the fifth alleged provision of the 2003 Agreement against Yazaki (liability reasons at [164]-[166]) and the fifth alleged act of giving effect to the 2003 Agreement (liability reasons at [218]-[226]). Leaving aside the fact that there would have been additional contraventions by Yazaki, the significance of this is that had I found otherwise, some of the conduct would have fallen within the six year period for the imposition of a pecuniary penalty. The same conclusions apply with respect to the 2008 Agreement (liability reasons at [264]) with the qualification that there was no allegation in the case of that Agreement of a contravention by continuing to supply (liability reasons at [306]).

(3)    As far as AAPL is concerned, the ACCC failed to establish that it gave effect to the 2003 Agreement (liability reasons at [228]-[240]) and the 2008 Agreement (liability reasons at [307]-[308]). Leaving aside the fact that there would have been additional contraventions by AAPL, the significance of this is that had I found otherwise, some of the conduct would have fallen within the six year period for the imposition of a pecuniary penalty.

…

93    My assessment is that the ACCC was substantially successful and is entitled to an order for costs. The question is whether the ACCC’s failure on some issues should lead to a reduction in the ACCC’s costs. Of the three matters identified above (at [90]), I would not reduce the ACCC’s costs because of paragraph (1). I think paragraph (2) is borderline, but I do think that paragraph (3) involved matters which were sufficiently important and separate that the ACCC’s failure with respect to them should be reflected in the order for costs in the ACCC’s favour. The determination of the extent of the reduction is not an exact science, but I think a reduction of 15% is a fair reflection of the circumstances.

265    There has been no suggestion by any party that the primary judge’s approach as to costs was in error. The ACCC’s submission on appeal is that on the basis the Court finds the primary judge made errors as identified in the Further Amended Notice of Appeal, the ACCC should be awarded all its costs of the proceeding (as well as of the appeal).

266    The relevant issue on appeal relating to the reduction in the costs awarded to the ACCC is whether AAPL gave effect to the 2003 Agreement and the 2008 Agreement (as identified in paragraph (3) of [90] of the relief judgment extracted above at [264]). We have found in favour of the ACCC on this issue, although the appeal on this aspect was one limited to a point of statutory construction. No appeal was taken against the factual finding that AAPL did not have knowledge of the prohibited arrangement or understanding. The factual question of knowledge was put in issue by the ACCC, in addition to the legal argument that knowledge was not required to be proved in order to establish a contravention.

267    As the primary judge observed at [93] of the relief judgment, as a reason for reducing the costs awarded to the ACCC, the failure to establish whether AAPL gave effect to the Agreements was sufficiently important and separate to be relevant to the question of the reduction in costs. However, it was the factual enquiry which occupied the time and expense in the proceeding that was the true basis of the primary judge giving the ACCC a reduction of 15% on its award of costs.

268    Whilst the ACCC has been successful on its legal argument, it nevertheless put in issue the factual enquiry as to the knowledge of AAPL, in which the ACCC was unsuccessful. On this basis, we see no reason to disturb the approach of the primary judge as to the incidence of costs in the proceeding. It remains a fair and appropriate distribution of the burden of costs below, notwithstanding the success of the ACCC on the question of construction.

Orders

269    For the above reasons, we would make the following orders:

1.    Time be extended to the first respondent for the filing and serving of the notice of contention up to and including 13 March 2018 and leave be granted to rely upon said notice of contention in the appeal.

2.    The appeal against the orders of the Court made on 9 May 2017 be allowed in part.

3.    Order 9 of the orders made by the Court on 9 May 2017 be set aside and in lieu thereof it be ordered that under s 76(1) of the Competition and Consumer Act 2010 (Cth) and the Competition Code as applied as a law of Victoria by s 5 of the Competition Policy Reform (Victoria) Act 1995 (Vic), Yazaki Corporation pay to the Commonwealth of Australia penalties totalling $46 million in respect of contravention of ss 45(2)(a)(i) and 45(2)(b)(i) of the Act and the Competition Code identified as follows:

(1)    Declarations 5 and 7 (as to the 2008 Agreement): $14 million;

(2)    Declaration 6.1: $12 million;

(3)    Declaration 6.2: $12 million;

(4)    Declaration 6.3: $4 million; and

(5)    Declaration 6.4: $4 million.

4.    In addition to the declarations made by the Court on 9 May 2017, it be declared after declaration 6:

6A    By submitting to TMCA the 2006 Toyota Camry agreed prices for the 2006 Toyota Camry wire harnesses in respect of which the first respondent Yazaki had been awarded supply by TMC, AAPL gave effect to the 2003 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.

6B    By submitting to TMCA the 2011 Toyota Camry agreed prices for the 2008 Toyota Camry wire harnesses, AAPL gave effect to the 2008 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.

5.    The notice of contention be dismissed.

6.    The cross-appeal be dismissed.

7.    The respondents pay the appellant’s costs of and incidental to the appeal, cross-appeal and notice of contention.

Associate:

Dated:    16 May 2018