FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - resale price maintenance - standard of proof - meaning of “induce” in Section 96(3)(b) of Act - whether communications with an intermediary within Section 96(3)(b) of the Act.

EVIDENCE - admissions made with authority - whether representation by employee as to policies of employer within scope of authority.

Trade Practices Act 1974 (Cth) Pt IV, ss 48, 96(1)(2), (3)(a), (b), (c), (d), (f);  97, 98

Evidence Act 1995 (Cth) s 87(1)(b)

Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100 Appl

The Heating Centre Pty Ltd v Trade Practices Commission  (1986) 9 FCR 153 Appl

Briginshaw v Briginshaw (1938) 60 CLR 336 Appl

Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) ATPR 41-019 Appl

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors (1992) 110 ALR 449 Appl

Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168 Refd

Australian Competition and Consumer Commission v Mayo International Pty Ltd, Alan Jon Le Court, Brian McIntosh Thom and Alexandra Margaret Shaw

QG 179 of 1995

 

 

Kiefel J

Brisbane

10 July 1998

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 179 of 1995

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	MAYO INTERNATIONAL PTY LTD First Respondent   ALAN JON LE COURT Second Respondent   BRIAN McINTOSH THOM Third Respondent   ALEXANDRA MARGARET SHAW Fourth Respondent

 

JUDGE:	KIEFEL J
DATE:	10 July 1998
PLACE:	BRISBANE

REASONS FOR JUDGMENT

 

The applicant Commission alleges that Mayo International Pty Ltd by its directors and sales representatives, has engaged in conduct in order to maintain the retail price at which its products could be sold to that specified by it, in contravention of Part IV Trade Practices Act 1974 (Cth).  It is alleged that the conduct in question first occurred in 1992 when a director of Mayo International, Mr Le Court, sought to have a franchising company, Price Attack Franchising Pty Ltd (“Price Attack”) direct or persuade its franchisees not to sell Mayo International’s products at a price discounted from its recommended retail price and that this was combined with a threat to maintain a withdrawal of fifteen per cent discount on the wholesale price, which Mayo International had formerly granted Price Attack franchisees.  A further contravention is alleged to have taken place in July 1995, when Mayo International did withdraw that discount, ostensibly because some franchisees had persistently breached terms as to payment.  The Commission however alleges that the action taken was in truth connected with some franchisees having recently offered Mayo International’s products for sale at less than the price it specified and that the communication by Mayo International to Price Attack advising of the withdrawal of the discount makes this plain.  This, it alleges, was consistent with the attitude of those controlling Mayo International, that discounting from its price was both unnecessary and undesirable, given the quality of its products.  It is also contended that it is to be seen as consistent with the arrangement reached with Price Attack in 1992 on that subject.

Further individual contraventions are alleged.  They concern, in the main, communications with Price Attack franchisees about selling at less than the current specified retail price.

Background

Mayo International is a manufacturer and supplier of hair care products in Australia.  Mr Jon Le Court is the managing director of both Mayo International and Jon Le Court Pty Ltd.  The lastmentioned company owns a chain of hairdressing salons throughout Queensland and New South Wales.  Mrs Le Court, who was not named as a party to these proceedings, is a director of Mayo International and of Jon Le Court Pty Ltd.  The third respondent, Mr Brian Thom, is a director and national sales manager of Mayo International.

Price Attack operates a franchise system through agreements with its franchisees in Queensland and other states.  Mr Gary Jackson is the managing director of Price Attack and Mr Christopher Coffey the sales and marketing director.  Mr Terence McCloud was a founding director of Price Attack.  He sold his interest in it, and resigned as a director, in 1990 and was then employed by Mayo International in 1991 as a sales representative, but some months later returned to Price Attack as an area supervisor.  In early 1990 there were approximately eleven Price Attack outlets and they numbered about eighty four by May 1996.

Mayo International initially manufactured and marketed hair styling products in a range called “Vivant” which included a product called “Revitafoam”.  In 1990 it extended its range to include the “Genetix” range.  It commenced its supply of products to Price Attack outlets in late 1988.  At this point it would appear that the franchisees were supplied on the same terms and conditions as Mayo International’s other customers, which included a requirement of payment within thirty days from invoice.

In late 1990 discussions were held between Mayo International and Price Attack as to the grant of a discount, on the wholesale purchase price, to Price Attack’s franchisees.  It would appear that Mr McCloud had suggested the discount as an alternative to the practice, which Mayo International employed, of providing “bonus stock” to be used in hairdressing salons. Mayo International, for the most part, sold its products to hairdressing salons.  The provision of free extra stock was for use by the hairdressers “at the basin” with customers, as a method of promoting the products.  Whilst Price Attack outlets did have a small salon attached to their retail store, the salons did not generate the larger part of their income.  Their real focus was on retail sales, often at discounted prices. Fifteen per cent of the purchase price was estimated as the amount of discount which would equal the free stock offered to other customers of Mayo International. 

Each of the persons associated with Mayo International said that the fifteen per cent discount then granted was conditional upon payment being made by Price Attack franchisees within thirty days, that is to say that they kept to the trade terms earlier agreed.  Mr Coffey and Mr McCloud said that no conditions were attached to the grant of the discount.

By letter dated 24 April 1992 Mr Le Court, for Mayo International, wrote to Mr Jackson of Price Attack in these terms:

“At our initial negotiation in regards trading terms between Price Attack stores and ourselves, we offered Price Attack a 15% discount on purchases under certain conditions. 

One of those conditions was the receipt of all payments due within the agreed thirty (30) days. 

As this has not been adhered to and is currently not adhered to, I have no alternative than to advise that we are unable to offer Price Attack stores the 15% discount and that all goods purchased as from May 1st, 1992, will be invoiced to you as per our normal price list.”

It appears that Mayo International had indeed been in contact with franchisees who were in default in payment.  About one month before a letter had been sent to Findham Pty Ltd, one of the Price Attack franchisees, a company controlled by the witness Mr de Candia.  It was in these terms:

“At a recent meeting of the Directors of Mayo International it was decided to write to all our V.I.P. customers to advise them of the following:

The agreed terms of trading are payment for goods received within thirty (30) days after invoice.

The discount offered to you is only available if payment is received within these terms.

Should payment be received after thirty (30) days from invoice, the discount will be subsequently disallowed and will be added to the amount owing. 

It is not our intention to offend our customers, it is our intention to produce innovative quality products and offer excellent service. 

I hope we continue to have a mutually beneficial business relationship.”

I take it that letters, in the same terms, were sent to other defaulting franchisees.

The First and Second Alleged Contraventions

It is convenient, in the first place, to summarise the communications in 1992 between Mayo International and Price Attack.  The letter of 24 April 1992 to Mr Jackson gave rise to a meeting between Mr Jackson and Mr and Mrs Le Court on 26 May 1992.  It is alleged that Mr Le Court then advised Mr Jackson that Price Attack had to sell Mayo International products at the retail price it had specified and that Mayo International would stop discounting its line of products to franchisees and would disrupt or cease supply of stock if Price Attack did not stop selling Mayo International products at below the suggested retail price.  It is also alleged that Mr Le Court said that this was required to be followed “in order for Price Attack to stay viable”.  These statements are denied by Mr Le Court. 

I should add here that Mayo periodically issued, and reissued, recommended retail prices for its products and distributed these lists to its customers.  In these reasons the reference to “recommended retail price” is a reference to Mayo International’s advices provided by this means.  It is not suggested that the terms of any such list contravened s 48 Trade Practices Act. 

During the hearing it was contended by Mayo International that Price Attack controlled not only the products which its franchises could sell, but also their prices.  I do not however consider that question to be relevant to these proceedings, save where the control exercised related to Mayo International’s products and might be considered to have a connexion with some arrangement having been entered into with it.

On the following day, 27 May 1992, Mr Le Court wrote to Mr Jackson.  He referred to the lunch meeting, and went on:

“As we discussed, we feel that you could easily realise the Recommended Retail Prices and so enjoy a greater profit on Mayo products.

I was also grateful for your suggestion that should any of your stores fall behind in payment, to let you personally know so that you could take action. 

I have instructed Irene our office manager in Melbourne to contact you should this be necessary.  I have also instructed her to reinstate the 15% discount and back date it, as if it was never stopped.

…”

The next alleged contravention was said to arise from a facsimile transaction on 24 November 1992 from Mayo International to Price Attack in relation to discounting undertaken by Price Attack franchisees.  Some other correspondence had however occurred in the interim. 

By a letter dated 5 June 1992 from Mr Jackson to Mr Le Court, Mr Jackson advised that it was not possible for Price Attack to monitor the payment of accounts by all of its outlets and Mayo International ought itself to ensure that its trading terms were complied with.  This communication was obviously responsive to the letter of 27 May 1992.  Mr Jackson referred to Mayo International’s ability to stop supply to franchisees, or to supply only on a cash-on-delivery basis if credit terms were breached.  He asked that Mayo International closely monitor all accounts with franchisees, but offered assistance in obtaining payment if there was a problem.

In relation to outstanding accounts, a memorandum sent by Mayo International to its sales staff in August 1992 carried the reminder that payment must be made by customers more promptly and that problems would be experienced by the company if debtors remained at the same level.  To that end a new regime was proposed, in lieu of that which permitted payment within thirty days after invoice, and which required payment for the preceding order at the time the next was placed.  This does not however appear to have been implemented.

On 24 November 1992 the facsimile message, earlier referred to, was sent to Mr Jackson from Mr Le Court.  It is necessary to set it out:

“Gary, just been advised that you are discounting Super Mousse from the recommended retail price of $11.50 to $8.95 in your new Price Attack Salon, Pacific Fair. 

You did assure me that you would never discount Mayo products. 

Of course we are delighted that Price Attack stocks and sells Mayo products but our future does depend on it not being discounted. 

Our trading terms are based on that agreement. 

I am sure you understand the situation.”

This letter is of some importance in these proceedings.  It is relied upon by the Commission to confirm what it alleges was discussed in the meeting in May 1992 and to establish new threats.

This communication was the subject of some evidence as to its interpretation.  In that connexion, and in connexion with other aspects of the evidence, the attitude of Mayo International, but in particular Mr and Mrs Le Court, with respect to discounting the price of Mayo International products or offering them as “special deals” was brought into focus.

It is clear that at least one reason for the removal of the discount in April 1992 was that given, namely the non-compliance of franchisees like Findham Pty Ltd, with trade terms.  I do not however think it likely that the terms of the payment were expressed to be directly linked to the grant of the fifteen per cent discount when the latter agreement was negotiated between Mayo International and Price Attack, although the parties would have understood that the terms which had earlier been agreed, requiring payment by franchisees within thirty days of invoice, were to continue.  There is nothing to suggest, at the time the negotiations for the discount were entered into with Mr Coffey, that it was considered necessary to condition the discount.  The terms of the letters written in March and April 1992 by Mr Le Court no doubt reflected his belief that the franchisees could not have the benefit of the discount without complying with their obligations to pay within time.  Whilst that view, and the irritation felt at some persistent overdue accounts, might explain the letter of 24 April 1992, it does not entirely explain all that followed in the communications with Mr Jackson. 

The allegations made by Mr Jackson, as to what was said at the lunch meeting on 26 May 1992, require there to have been some discussion as to the prices at which Mayo International goods were sold.  I am satisfied that that must have been so, at least in discussions as between Mr Le Court and Mr Jackson.  In the first place it was necessary to any discussion by Mr Jackson as to the importance, from the point of view of both Price Attack and its franchisees, that the fifteen per cent discount on the purchases from Mayo International be retained.  Mr Le Court’s own evidence bears this out to some extent.  He said that Mr Jackson explained to him that the margin of profit made by franchisees on Mayo International products was not high and it was therefore important that they retain the fifteen per cent discount.  There is nothing in the evidence which suggested that sales of Mayo International products in Price Attack outlets was high or that they accounted for a significant part of their income.  The purpose of having products from the Mayo International range available for sale appears to have been to provide a product of quality.  The Mayo International products, according to some witnesses, were not able to be substituted with other available products.

Other evidence given by Mr Le Court also hints at the topic of price having been discussed.  Mr Le Court said that Mr Jackson suggested that if Mayo International’s sales representatives observed its products being displayed as “leading bargains” or at prices out of line with other Price Attack stores, Mayo International should advise him.  The reference to “leading bargains” may be taken to include a reference to practices such as the use of “dump bins”, which involves the placement of products, alone or with other products, in cardboard or other containers at a prominent point in the store, in such a way as to convey to customers that the product is being sold cheaply, or at a reduced price.  There may well have been a discussion about this practice, and other aspects of marketing, for these were areas of concern to Mr and Mrs Le Court.  I do not accept that Mr Jackson was likely to have offered to do something about franchisees whose prices were “out of line”.  The reference is oblique.  I take it is intended, at the least, to refer to prices which were very different, but that raises the question from what?  It could refer to other franchisees, but Mayo International would not have an interest only in that.  The context in which Mr Le Court’s other evidence would place it is marketing, but that does not really make sense.  What the reference does serve to confirm is that price was discussed.  To that may be added that if, as is implied, it was also to do with effects of prices upon the perception of quality, the recommended retail price is most likely to have been included in such a discussion.

There was considerable evidence, and examination, about the attitudes of Mr and Mrs Le Court to discounting.  Its relevance is however limited.  It cannot, by itself, prove the conduct in question.  It is sufficient presently to observe that the evidence of both Mr and Mrs Le Court and Mr Thom was that they viewed the Mayo International products as of very high quality and that they considered it unnecessary, and to an extent counter-productive, to market the products by offering them at any price less than that they recommended.  That does not however amount to relevant offending conduct.  It is indicative of their preference, albeit a strongly held one.  The question which arises is whether they took any steps to achieve that preferred position. 

That price was discussed, and that that discussion included a reference to Price Attack franchisees not needing to sell Mayo International products below the retail price it recommended, is in any event borne out by the letter sent by Mr Le Court the following day.  That letter also confirms, as do letters sent in the months following, that action on outstanding accounts was also considered to be of importance to Mr Le Court.  Lastly, the letter advised that the fifteen per cent discount to franchisees was to be reintroduced.  The critical question at this point, it seems to me, is what it was that produced that result. 

Mr Jackson’s allegations, reiterated in the statement of claim, centre upon the threats, outlined above, being made by Mr Le Court in the context of some attempt to have Mr Jackson agree to influence or direct franchisees not to sell below the recommended retail price.  Mr Jackson denied, at a number of points in his evidence, that he had actually agreed to such a course of action.  The reasons for that may be obvious.  The Commission however submitted that it was possible for the Court to find that such an accommodation was actually reached between Mr Jackson and Mr Le Court, although Mr Jackson’s evidence did not go that far.  To an extent, of course, this impugns Mr Jackson as a witness.  There are, in any event, other aspects of his evidence which I consider to be unsatisfactory.  Were there no evidence other than that of Mr Jackson as to what was said at that meeting, I would not be prepared to find that some form of understanding or agreement was reached to maintain the price recommended by Mayo International.  Given the state of Mr Jackson’s evidence it would involve some conjecture.  There is, however, evidence of later statements, including statements by Mr Le Court, which confirm that this must have been the case.

Given the terms of the letter written by Mr Le Court on 27 May 1992, it is not difficult to conclude that something had been said about the recommended retail price.  It is quite possible that it did involve some offer on the part of Mr Jackson.  The letter also shows that the offer of assistance by Mr Jackson with respect to outstanding accounts was of importance to Mr Le Court and that either or both of those factors lay behind the reintroduction of the discount.  The letter of 24 November 1992 however in my view can only be read as referring to some arrangement having been made with Mr Jackson, not only as to debtors, but also as to maintenance of price.  The critical reference in the facsimile message of 24 November 1992 was the assurance, which Mr Le Court records Mr Jackson as having given, “that you would never discount Mayo International products”, which continues with the later reference to “our future does depend on it not being discounted”.

In evidence Mr Le Court sought to explain that the reference to discounting in that message was intended by him to refer to the fact that the price at which the outlet in question was selling was substantially below the recommended retail price and, in effect, at cost price, such that it amounted to poor marketing.  It was not a reference to it simply being below recommended retail price.  Examination however showed that the cost price to that franchisee would have been $6.50 and not the $8.95 referred to in the letter.  In any event the terms of the letter are in my view clear and the rather unsatisfactory explanation proffered must be rejected.  It is clear that the discount referred to in relation to the Pacific Fair outlet was “from the recommended retail price”.  The reference to Mr Jackson’s assurance “that you would never discount Mayo International products” can only sensibly refer to a benchmark established by the only price recommended, that by Mayo International. The other explanation advanced by Mr Le Court, that the assurance by Mr Jackson was as to the “manner of discounting” must also be rejected on the same basis.  There is not a hint of any aspect of marketing in the letter.  It refers only to a discount in price.  It is however possible to accept his explanation that the reference to Mayo International’s “future” was a reference to the maintenance of the quality and standing of the product.  It is at least as capable of bearing this meaning as it is the threat of non-supply, the interpretation for which the Commission contended.  This is consistent with a desire that Mayo International products would not be discounted, and with an arrangement having been put in place to secure that end.

Reference to the facts surrounding the individual contraventions shows that Mr Jackson (and Mr Coffey) on a number of occasions advised franchisees to discontinue discounting and maintain the retail price recommended by Mayo International, when complaints were made by Mr Le Court.  This tends to confirm the existence of some such arrangement between Mr Jackson and Mr Le Court. Further confirmation is to be found in the later letter of July 1995 and the reference in it to a “gentleman’s agreement”.

In my view therefore the making of an arrangement whereby Mr Jackson would take steps to ensure the recommended retail price was maintained is established.  Given the state of Mr Jackson’s evidence it is not however possible to conclude exactly what was said about what he would do.  It seems to me unlikely however that Mr Le Court threatened to disrupt or cease supply of stock unless the practice of discounting ceased, as the Commission alleged.  There does not seem to me to be any cogent reason for him to have done so.  He had already taken the step of removing the discount and Mr Jackson’s efforts were then put towards obtaining its return.  Whilst one may accept that his promise to take steps to maintain the price would have worked as an inducement to Mr Le Court, there does not seem to me to have been any point in the discussion related where a threat was called for.

The Individual Contraventions

The contraventions alleged to have occurred by reason of statements made to particular retailers, most of whom were Price Attack franchisees, took place between 1993 and July 1995 when the fifteen per cent discount was again withdrawn and when Price Attack made its complaint to the Commission.  Some further conduct is said to have occurred in the months following that. 

The allegations brought are the result of investigations undertaken initially by Price Attack itself, which were then continued by the Commission.  The statements, which appear to have formed the basis for affidavits used in the proceedings, were first taken by Price Attack’s employed solicitor.  A difficulty with them, and which affects proof of the contraventions in question, is that the representations said to have been made by Mayo, its officers and representatives, tend to be expressed in the same terms.  This applies particularly to the common allegation of a statement by sales representatives that the retailer was “not allowed” to sell at a lower price than the current recommended retail price.  On at least one occasion the process undertaken by Price Attack’s staff was to suggest these words to the witness. The other difficulty with the evidence of the Commission’s witnesses, was that it often comprised mere assertion, absent any context in which to assess the critical statements.

Some of the contraventions in question relate to statements said to have been made by Mr Le Court and those may perhaps be viewed in light of what had earlier occurred.  The greater number of the balance are attributed to the fourth respondent, Ms Shaw, a sales representative of Mayo International in Queensland.  Overall the Commission alleged that the numerous statements made by Mayo International’s employees merely reflect the policy decision made by its management.

I shall refer to the occasions in question by reference to the name of the witness, the procedure adopted during the course of the proceedings.  I shall deal, in the first place with conduct which involved the then Queensland sales manager of Mayo International, Mr Blencowe.  His evidence in relation to directions given to sales staff is of some importance in these proceedings.

Mr Cameron

During 1993 the company controlled by Mr Cameron, Ferngloss Pty Ltd, traded as Price Attack Sunshine Plaza and Price Attack Maroochydore.  He had discussions with Mr Blencowe in the Maroochydore store at some time in this period during which Mr Blencowe is alleged to have said that “as the ‘Genetix’ product had increased in price, Mr Cameron was no longer allowed to sell the product at the old price and thereupon removed the display ticket showing the old price off the shelf”.  It is also alleged that on a further, subsequent, occasion in 1993 a discussion took place between them during which Mr Cameron was again told by Mr Blencowe that there had been a price increase, and that he was “no longer allowed” to sell Mayo International goods at the old price but was to sell at the new recommended retail price.  Mr Cameron said in cross-examination that Mr Blencowe had said similar things about prices at other times but he recalled these two occasions because there had been a price increase at the time.

Mr Blencowe was called by the Commission.  He had left Mayo International in about March 1995.  He said, however, that any acrimony which had existed at that time had passed and it was not suggested that Mr Blencowe’s evidence was tainted by any feelings of ill-will.  As I have said, his evidence is of some importance in these proceedings for the reason that it was evidence as to what was conveyed to Mayo International’s staff, which might explain their actions, and it was evidence given by a person who had nothing to lose or gain by the proceedings.  I do not put the management of Price Attack in that same category.

The other aspect of Mr Blencowe’s evidence which is relevant to the circumstances prevailing at July 1995, is his confirmation that difficulties were encountered with payment by franchisees, and that some were required to pay cash-on-delivery.

Mr Blencowe’s evidence was that discounting of prices by Price Attack was discussed at sales meetings at Mayo International.  These took place on a weekly basis.  He believed that Price Attack franchisees would sell at the retail price provided by Mayo International, and this belief was engendered by conversations he had with Mr Le Court.  He reported to Mr Le Court and Mr Thom when he saw discounting taking place.  The only other evidence on this topic was given by Ms Shaw, or at least was an available inference from what she said.  Ms Shaw said that Mr Le Court told representatives at sales meetings to encourage customers to enjoy “the full margin” of profit by selling at the recommended retail price.  Mr Fonti, to an extent, confirmed this as a topic often discussed. 

Mr Blencowe then said that he would suggest, or recommend, to customers that they sold at the prices Mayo International listed.  On one occasion he says he may have asked whether they “minded” putting up the prices to that recommended, in the context of a recent price rise. Mr Blencowe denied that he was directed by either Mr Le Court or Mr Thom to demand that people put their prices up and he denied that he ever spoke to customers such as Mr Cameron in a forceful manner or suggested that they were obliged to maintain their prices.  Mr Cameron did not in fact do so for some time.

In view of Mr Blencowe’s evidence it is not difficult to accept that discussions with franchisees relating to price occurred when there had been a price increase, and that this may well have involved an encouragement to use the new price.  The question which arises however is the exact terms that are likely to be used, one which may have some importance in considering whether the conduct amounts to an inducement, or an attempt to induce within s 96(3)(b) Trade Practices Act. 

Mr Cameron’s evidence, like so many other witnesses, is replete with the words “not allowed” or “no longer allowed”.  The extent to which the words appear in the evidence combined with the evidence of Mr McCahon, as to the process undertaken in taking his statement, are sufficient indicators that little reliance can be placed upon them as conveying the words actually used on any occasion, although it may well be that the witnesses now consider that that was what was being conveyed. Given the real possibility however of this suggestion having been made to witnesses, even that must be discounted.  The most that one could conclude with any confidence is that, on each occasion, Mr Cameron’s attention was drawn to the new price and he was requested to put the price up to that level, or that course was recommended to him.  Absent any statement of demand, I am not able to accept that Mr Blencowe also proceeded to remove price tickets.  It would seem to me an unusual action on the part of a sales representative, unless there has been some prior understanding between the franchisee and representatives, which led the latter to believe this conduct was acceptable, but Mr Cameron does not appear to have been subject to demands or persuasion in relation to discounting of price.

The next conduct in connexion with Mr Cameron is alleged to have taken place in 1995.  It is alleged that in about January 1995 Mr Thom advised him that he should not be discounting Mayo International products below the recommended retail price and that discounting its goods in that way was going to affect Mayo International’s trading terms in dealings with Mr Cameron.  Mr Thom does not recall Mr Cameron, admits that he may have had some conversation with him in his capacity as sales manager, but denies a conversation in those terms.  Subsequent to that discussion Mr Cameron says that he was approached by the representative Ms Shaw, who asked if he had been discounting over the Christmas period and he said he had.  Ms Shaw then advised him that because he had been discounting the Genetix product, he would no longer be able to take advantage of special deals, such as some free products.  He said that since that time he has been refused special deals and that when he asked Ms Shaw about that, a few months later she simply laughed.

Ms Shaw denies the conversation.  The context in which a discussion about discounting occurred, according to Ms Shaw, was when Mr Cameron expressed anger over Mr Le Court’s salon in the same centre being able to discount Mayo International products.  On this occasion that competitor was offering Redken products at a price which he could not match.  Mr Cameron admitted in evidence that conversations touching on these topics occurred.  He was at that time having difficulty in meeting the competition and thought the other salon’s prices were unrealistic.  As a result, he says he advised Ms Shaw that he would have to reduce the prices on the Genetix range.  Mr Cameron does not however agree that Ms Shaw advised him to approach Redken to see if he could obtain a better deal, instead of cutting the price on Mayo International products.  Mr Cameron says, in effect, that this would have been futile as he would have been receiving the same deal from Redken as other salons.

In the absence of any evidence as to what may have led to the discussion with Mr Thom in the terms suggested I am not able to conclude that it occurred.  It seems to me that some discussion, about whether to discount Mayo International products, took place with Ms Shaw although it is more likely that it occurred in the context she spoke of.  The Commission does not suggest a contravention is made out by what she recounts.  It seems to me unlikely that a “special” deal was refused because a Mayo International product had been discounted.  The evidence generally was that special deals, which involved free product, were not made available on a regular basis to Price Attack franchisees, for the reasons earlier outlined and which led to the grant of a fifteen per cent discount.  Once again, it is not difficult to accept that some discussion occurred and that it may well have amounted to encouragement to maintain Mayo International’s recommended price.  The Commission does not however seek findings in accordance with Ms Shaw’s evidence.  There must have been more extensive conversation  with Mr Cameron than his statement discloses and for that reason alone I am disinclined to accept, as accurate, his statement as to the words actually used.  It also appears, although it was not disclosed by him, that around this time Mayo International had removed his fifteen per cent discount on account of non-payment and it is quite possible that the removal of any special deals also followed that notification.

Mr McCloud

As earlier mentioned, Mr McCloud was well known to Mr Le Court.  Mr McCloud controlled the Price Attack franchisee Sailnote Pty Ltd, which, in March 1994, conducted an outlet at Miranda Fair in New South Wales.  It is alleged that he had a conversation with Mr Le Court who was then visiting the store.  Upon greeting him Mr Le Court is alleged to have said words to the effect “I am just coming up to keep you bastards honest and to make sure you are not discounting”.  Mr McCloud described the statement as “tongue in cheek”.  Mr Le Court denies using those words.  I am persuaded that Mr McCloud gave a correct account, in part because of Mr Le Court’s expressed concerns about discounting are confirmed by later conduct, to which I shall now turn.

It is also alleged that, in about May 1995, the Sailnote store was advertising the product Revitafoam at $9.95, the same price advertised by another retailer in the same shopping centre, and was below the recommended retail price of $11.95.  In a telephone conversation at this time with Mr Jackson, Mr Le Court complained, in referring to Mr McCloud, that “that little bastard used to work for me and now he is discounting my products”.  Mr Jackson then informed Mr McCloud of the conversation and he, in turn, telephoned Mr Le Court and recounted what he had been told.  He explained to Mr Le Court that he was discounting to meet competition.  Mr Le Court is said to have replied that if Mr McCloud had any problems with his competition he should call Mr Le Court directly about it and that he would do everything he could to ensure that all non-salon retailers did not get his product.  The implication was that the retailer in question was not directly supplied by Mayo International.

Mr Le Court agreed that he had a telephone call from Mr McCloud on an occasion when he was upset about something he believed Mr Le Court had said.  He also said that there was a discussion about how a group called Priceline had come to be supplied with Mayo International products, as that was a matter of concern to those associated with Price Attack.  He denied any discussion of the price at which Priceline were selling, although he later conceded having some such discussion with Mr Jackson.

Mr Le Court’s evidence at least confirms the general subject-matter of the discussion, but stops short of any discussion, with Mr Jackson or Mr McCloud, about price.  But it was the Priceline stores’ actions which led Mr McCloud to discount.  Given Mr Le Court’s views about the matter, it is not difficult then to accept that the conversations took place in the terms alleged.  Thereafter, I accept, Mr McCloud increased the price of Revitafoam to the suggested retail price.  He said that he did so at the behest of Mr Jackson who wished to keep the peace and because Mr McCloud did not then want his actions to affect the other stores.

 

Mr Kotis

It is accepted by the Commission that the allegation, in the statement of claim, that Mr Le Court threatened not to supply Mayo International products was not made out. 

Mr Kotis conducted a hairdressing salon at the Carindale shopping centre in Brisbane.  His principal competitor was a Jon Le Court salon.  In response to that salon’s offer of Delva haircare products at low prices, Mr Kotis reduced the price of Mayo International’s Revitafoam product.  Mr Le Court contacted him and said that he did not appreciate Mr Kotis’ actions, which cheapened the Mayo International products, and that he would appreciate it “very much” if Mr Kotis would sell at the recommended retail price.  When the Delva promotion by Jon Le Court salon ceased shortly thereafter, Mr Kotis put the price of Revitafoam back to the recommended retail price.  This evidence was not challenged.

Mr de Candia

Mr de Candia is the controlling force behind Findham Pty Ltd, a franchisee of Price Attack.  Mr de Candia alleged that in the first dealing he had with Ms Shaw, in about August 1993, he was directed by her to sell Mayo International products at a particular price.  He said that he was contacted by Ms Shaw on his mobile telephone and she asked him if he would put up the price of the Revitafoam product to the recommended retail price. He says he declined to do so as he had just purchased a large amount of stock and wished to sell it quickly.  He alleges that Ms Shaw then threatened to take his stock of Mayo International products out of Findham’s Chermside store.  He says that he pointed out to her that her actions were, in his view, contrary to the Trade Practices Act and an attempt to set prices.  Nevertheless, he alleges Ms Shaw then said that “we will make sure that your stock does not arrive and will hold up orders so you won’t get any stock”.  Mr de Candia said that he spoke to Mr Thom following the discussion and he advised that he also believed that Mayo International could insist on its products not being discounted below the recommended retail price, because its products were superior.

Mr de Candia was, according to Ms Shaw, a person who took offence at being “chased” about outstanding payment.  His company was habitually late in payment and he admitted this in his evidence.  It appears to form part of his business practice.  Ms Shaw recounted a conversation with Mr de Candia relating to stock, but which occurred at some point in the middle of 1994.  Ms Shaw had taken an order from an employee at one of Findham’s three stores on the basis of thirty six items of product as bonus stock.  She explained that this “deal” was not usually offered to Price Attack stores because they were receiving a cash discount and that they would have to take the bonus units in lieu of the cash discount.  Mr de Candia however also deducted the fifteen per cent discount when making payment.  She spoke to him about this.  His response was that she should be giving him some additional stock and implied that sales representatives did so, illicitly, from time to time.  More importantly, for present purposes, she advised Mr de Candia that his options were to return the stock or to pay the full amount.  He said that he had already sold the stock and she then advised that, in that event, he would have to pay the full amount.

A conversation in these terms seems the more credible.  A sales representative may be expected to claim the return of stock in the context of non-payment or a dispute about price.  That the “special deal” did not attract the fifteen per cent discount is consistent with the other evidence.  Nothing however suggests that a threat would be made to remove stock because discounting from the recommended retail price was being engaged in.  Whilst, as I have accepted, there was a concern and strongly held views about the practice, a reaction such as that Mr de Candia recounts seems exaggerated.

To these observations it may be added that Mr de Candia’s first statement taken contained no reference to this threat.  This was not satisfactorily explained.  The impression gleaned of Mr de Candia was of a person who bore some ill-will towards those involved with Mayo.  It is quite possible that this arose out of the dealings he had with them and in particular their regular demand for payment of monies, which appears to have annoyed him considerably.  It is however unnecessary to determine whether that is so.  The doubt created about his motives is sufficient in my view to render his evidence unreliable in important respects.  This also affects the further evidence given by him.

Mr de Candia also said that in about November 1993 he was visiting the store at Chermside when he met Ms Shaw.  She asked him to follow her around to a coffee shop for a meeting with Mr Thom.  At that meeting Mr Thom is alleged to have said that, in view of the fact that Findham had three franchises, it could sell more Mayo International products.  Mr de Candia was not interested he said, because Mayo International did not want its prices discounted below the recommended retail price, and Mayo International products were too expensive.   This incident is not relied upon as a contravention.  The evidence with respect to it however has further relevance to Mr de Candia’s credit.

Ms Shaw says that she does recall making an arrangement with Mr Thom to see Mr de Candia but this would have occurred in mid to late 1994.  This accords with a period when, according to Mr de Candia’s statement, Findham had been placed on trading terms with Mayo International such that it was unable to obtain supplies of stock until its cheques in payment had been received and cleared. Ms Shaw explained that at this time, as appears to be the case, Mayo International was having difficulty obtaining payment from Findham and she arranged a meeting so that Mr Thom could speak to him about the matter.  She denies that it was accidental and maintained that it had been arranged in advance.  This seems more likely, given that the meeting was to be with the national sales manager.  She further explained that Mr de Candia was rarely at the Chermside store.  During the meeting Mr Thom, according to Ms Shaw, asked Mr de Candia to ensure that payments were made on time, to which he responded that a thirty day trading term was too onerous and that Mayo International did not offer a high enough discount.  Mr de Candia is alleged to have said “If you give me more discount I will push your product” to which Mr Thom said that “all he wished was for payments to be made on time” and the meeting finished in a stalemate.  Again this seems to me to be likely.  The picture of Mr de Candia’s business practices, confirmed to an extent by his oral evidence, was of an aggressive approach based on high turnover, extended profit margins and late payment.  I consider it quite unlikely that, as his version of events suggests, he was prepared to go along with some requirement on the part of Mayo International not to discount.  It seems to me that if Mr de Candia wished to discount, he would simply do so. 

Another contravention is alleged to have occurred in connexion with Mr de Candia.  Mr de Candia alleges that, in the last week of June 1995, he had a telephone conversation with Ms Shaw at which time she said that Mayo International was going to put up its price on the whole range and that Price Attack was “not allowed” to sell at the old recommended retail price.  This is at a time shortly prior to the withdrawal of the discount in July 1995.  Ms Shaw agrees that she telephoned Mr de Candia to advise that prices were going up because of an increase in sales tax.  She says she advised him that she could offer a special forty per cent discount on a minimum order of 24 units of the product Aerolac;  that she pointed out what the recommended retail price was but that he could discount them (from $10.95 to $8.95) and make a one hundred per cent mark-up.  He replied that he wouldn’t want that stock.  She further says that shortly prior to Christmas 1995 she had a discussion with him about the fact that he was unable to obtain supply because of his credit history.  He responded at that point by saying that he cared nothing for Mayo International products.  For reasons earlier stated, I do not accept Mr de Candia’s evidence where it is not supported by other evidence.  Ms Shaw’s evidence concerning the Aerolac, also gains support from other evidence that Mayo International did permit that product  to be discounted.

Mrs Nicholson

Mrs Nicholson is a director of the company Merryworth Pty Ltd, which trades as a  Price Attack franchise in Caboolture, Queensland.  It is alleged that in about March 1994 Ms Shaw offered Mrs Nicholson a special deal, whereby if she purchased 144 products she received a number of units free of charge.  Mrs Nicholson is then said to have told Ms Shaw that she would, consequent upon purchase, “dump them” which was intended to refer to them being offered at a lower price.  Ms Shaw is said to have agreed that Mrs Nicholson could “dump them” or “dump bin them” but that she was “not allowed” to lower the price.  Ms Shaw’s evidence was that she suggested that the product in question, Revitafoam, was a leading product and did not need to be sold in this way, but that if Mrs Nicholson intended to do so that she should follow the example of another store and “dump bin” them, but not lower the price. Mrs Nicholson then agreed, under examination, that Ms Shaw had said:

“You can dump them, but you do not drop the price.  When they are dumped then everybody thinks they are on special anyway”.

In these circumstances, it seems to me, caution must be exercised in relation to Mrs Nicholson’s earlier statement that she was “not allowed”, in addition to the problems I have earlier referred to.  Ms Shaw can only be taken as having said that there was no need to reduce the price

The second incident concerning Mrs Nicholson is said to have taken place in June 1995.  She says she had a further discussion with Ms Shaw, who told her that certain of Mayo International’s goods in her store were incorrectly priced and that she would have to change them.  In the statement of claim it is alleged that Ms Shaw specified the correct price of those goods, which was higher than the price marked and that at the conclusion of that discussion Mrs Nicholson changed the prices as requested.  This was not however dealt with in Mrs Nicholson’s affidavit.  As is the case with the other franchisees called as witnesses Mrs Nicholson’s account in her affidavit was very short and largely absent context.  The evidence at hearing disclosed that a discussion took place about a new price list.  Ms Shaw conceded that she may have mentioned to Mrs Nicholson that some of her products were being sold at the previous recommended price.  Once again the difference in the versions centres upon whether Ms Shaw demanded that Mrs Nicholson change them, or “fix” the prices, or whether, as she implies, she merely brought the new prices to Mrs Nicholson’s attention.  A wholesale price increase had in fact really taken place.

There does not seem to me to be a compelling reason why a sales representative would make such a demand.  Whilst Mayo International did not in any view wish its products discounted, it was not established that it viewed a short-term reference to the former retail price as falling in the same category.

Ms de Vries

Ms de Vries is a director of Muscatstone Pty Ltd, which carries on business as a Price Attack store at Toombul Shoppingtown, Brisbane.

An employee of Muscatstone had a telephone enquiry from Ms Shaw, in the latter part of 1994, as to whether discounts were being offered on Mayo International products, and Ms Shaw is alleged to have said that she had had complaints from other customers about that taking place.  That some such discussion occurred seems likely.  Ms Shaw said that she was, in that call, making enquiries on behalf of another customer.  Realistically the enquiry could only have concerned price.  There was also general agreement that Ms de Vries later telephoned Ms Shaw, and that she was then rather angry about examinations being conducted of her staff.  Ms de Vries then alleges Ms Shaw said that discounting was illegal, or if it was not (as Ms de Vries asserted) it was at least unethical.  Ms Shaw denies this aspect of the conversation.  Its terms are certainly odd.  The fact that some such conversation occurred does not, logically support a conclusion that these assertions were made.  I am conscious of the fact that Ms Shaw was put into a defensive position, but this does not provide great assistance and suggests only the possibility of overstatement.  Whilst I remain rather puzzled that a sales representative would use such extravagant language, there seems nothing to detract generally from the clear impression gained by Ms de Vries about what was being communicated.  The very strangeness of the terms perhaps makes them memorable.

Mr McCahon

Third Gralloch Pty Ltd, a company controlled by Mr McCahon, conducts the Price Attack (Kippa-Ring) store in Queensland.  It is alleged that in about July 1994 he had a conversation with Ms Shaw at that store when she advised him that he was “not allowed” to sell below the specified recommended retail price and asked him to take down price tags which displayed a discounted price for the Aerolac hairspray product ($8.95 instead of $10.95).  Mr McCahon complied with that request, and has not discounted the product since that time.

Ms Shaw says that the conversation concerned merchandising and marketing and that she asked whether there was any point in offering $1.00 off the Genetix shampoos and conditioners where the two were purchased together.  She advised him that he would be better off “price pointing” products that needed some help.  It was in this background that he sought an  opinion in relation to another matter.  He advised Ms Shaw that he had been instructed by “head office” (Price Attack Franchising) to sell all hairsprays at a price cheaper than the Price Attack’s own brand.  She thought this was somewhat unusual because it was not consistent with what she had observed in other Price Attack stores.  One of the brands of hairspray which had been reduced in price by him was Mayo International’s Aerolac.  Ms Shaw says, as does Mr Le Court, that Aerolac was the Mayo International product which was most commonly sold below the recommended retail price and the Jon Le Court salons regularly discounted it. Accordingly she says she did not comment upon it specifically but simply said to Mr McCahon that she thought the idea of having a hairspray “push” was a little silly and out of line with what other Price Attack stores were doing. 

The affidavit of Mr McCahon adds little more to the circumstances of this discussion.  The words “not allowed” are again employed in the context of a discussion about price.  Whilst it is possible, in light of the attitude of the management of Mayo International to discounting, that some such conversation occurred it is not possible to conclude that that was likely or that it was in the terms alleged.  There are no other indicia which assist. 

There is agreement by Ms Shaw that some discussion occurred in July 1995 with Mr McCahon about products.  Mr McCahon however alleges that at that time he was again told that he was “not allowed” to discount Mayo International products below the recommended retail price.  The discussion recounted by him appears to have occurred in two parts:  the first was connected with some enquiry on his part, the terms of which are not clear, about sales of Mayo International products at Redcliffe.  This led to what seems to have been a general discussion about advertising on his part and to his statement that he needed to discount, to which she is said to have replied that Price Attack franchisees were “not allowed” to discount Mayo International’s products below the recommended retail price and that advertising was on the basis of reputation and quality of the product.  The second part of the conversation is in connexion with Mayo International products he had advertised and Ms Shaw’s advice to him that there had been a new price increase and that he was again “not allowed” to sell below this price.  He increased the price. 

There are some difficulties in an acceptance of Mr McCahon’s evidence.  It was not cohesive and appeared to combine two separate discussions.  It not only appeared to be drawn to the formula employed in other statements, but his evidence was that the words “not allowed” were suggested to him by Price Attack’s employed solicitor who took the statement.  Then, in cross examination it appeared, at one point, that Mr McCahon agreed that Ms Shaw could have said it was not necessary to discount the product, but he later contended that she said both that and that he was “not allowed”.  The first mentioned statement nowhere appears in his earlier affidavit.  Again, given Mayo International’s views of discounting and the agreement in existence there may have been some reference to franchisees maintaining the retail price.  It is however not possible to conclude that a conversation in the terms alleged occurred, and the Commission did not seek to pursue some other statement arising from the evidence.  Ms Shaw’s evidence puts the conversation in a completely different context.  Mr McCahon remained adamant that the conversation about hairspray occurred the year before.  There is nothing which would permit me to resolve these different versions of conversations and to enable findings to be made as to the alleged contraventions.

Mr Cicchini

Mr Cicchini conducts a salon at the Logan Hyderdome in Queensland.  He is not a Price Attack franchisee.  His salon is in direct competition with a Jon Le Court salon and was opened in about August 1994.  By way of an opening special his salon sold the Revitafoam product at $10.95.  He alleges that Mr Blencowe visited his salon and said that Mayo International would like the price on it increased to the recommended retail price;  that Jon Le Court’s salon was selling the product at that price;  and that Mr Cicchini should also.  Mr Cicchini did so eventually, after some three or four weeks.  His evidence discloses however that he was not easily influenced and probably did so only when he came to list the new prices.

Mr Cicchini’s affidavit has Mr Blencowe speaking in imperative terms.  I have referred at other points in these reasons to a concern that the words appearing in the affidavits, consistent with demands or threats, are to be viewed with some suspicion.  Mr Cicchini, a straight-forward witness it seemed to me, explained in cross examination that what Mr Blencowe used to say was “This is the recommended price;  that’s what Jon Le Court are selling it at; why don’t you sell it at that price”.  Mr Blencowe admitted a discussion about price, but gave as its justification the prospect that Mr Cicchini could make more profit.  His denial was addressed to the allegation that he demanded that Mr Cicchini do anything and this appears to be borne out.  His evidence does not however detract from that of Mr Cicchini, that he suggested Mr Cicchini sell at the higher price.  The Commission, on this occasion, submitted that that ought be accepted and that it nevertheless amounts to conduct contravening the Act.

Ms Criss

Ms Criss was a director of the companies Millicroft Pty Ltd and Noosa River Heights Pty Ltd, which conducted Price Attack franchise stores in Brisbane at Indooroopilly Shoppingtown, Edward Street in the city and, from 1995, at Sunnybank.

Ms Criss was in the habit of discounting all products, including Mayo International products.  She said that on two occasions prior to mid-1994 she had conversations with Mr Blencowe who said that Mayo International did not want her to sell their products at below the recommended retail price and that on one of those occasions complained “what are you doing to me?” and proceeded to take the prices off the shelves displaying Mayo International goods.  On the other of those two occasions he is alleged to have pleaded with her and explained that he would get into trouble if she continued to discount. 

In addition to this it is alleged that after mid-1994 the “special deal”, whereby Millicroft would receive a number of additional units free of charge was withdrawn, and that on two occasions during the twelve months to September 1995 Ms Criss had conversations with the sales representative Ms Wayland during which she said that there were no special deals available and she was not permitted to discount. 

The connexion between the withdrawal of the “special deal” is not clear from Ms Criss’ own evidence.  Further, Ms Wayland explained that Ms Criss had been informed that the “special deal” was for salon proprietors, who did not receive the fifteen per cent discount.  The same topic had arisen between other representatives and Price Attack customers.  Ms Wayland denies saying that Ms Criss was “not permitted” to discount.  Ms Criss’ reference to it suffers from being bound up in the conversation relating to the “special deal” and I am unable therefore to glean anything from the context. 

The statements attributed to Mr Blencowe are in a different category. I set  the other conduct alleged to one side for the reasons I have earlier mentioned.  Mr Blencowe who was called by the Commission did not deny them, and it was not put to him that they were inaccurate.  He said only that discussions he would have had about price would have arisen because of recent price increases.

Ms Hopp

Ms Merrigan (then Ms Hopp) was employed in the Price Attack Toowong store in about April 1995.  She was asked by Ms Wayland, it is alleged, to remove the prices at which the Genetix product was marked for sale.  At that time the product was marked on “special” at a price less than the recommended retail price.  Ms Merrigan says she did so. 

In evidence Ms Merrigan said that she had sold Revitafoam at a discount from about July 1994 until March 1995.  She said that whilst Ms Wayland was at the store she spoke to Mr Coffey by telephone and conveyed to him Ms Wayland’s request.  She was told to comply.  She also added in evidence that Ms Wayland explained her request by saying that Price Attack stores were not able to reduce the prices of Mayo International products.  In my view this additional item of evidence should be viewed with caution, since the statements taken by the Commission are set out in detail in the statement of claim and it is difficult to accept that it would have been overlooked.  Ms Wayland said that it is possible that she might have mentioned to Ms Merrigan, at some time after a price increase, that Ms Merrigan still had the old prices on display.

There was also further evidence from Ms Wayland of a conversation had with Ms Merrigan at a later time, and during the currency of these proceedings, in which Ms Merrigan is alleged to have said that she knew that Ms Wayland had not said any of the things contained in her statement but that she had been pushed into signing by her employer.  Ms Merrigan’s evidence as to this was not at all clear, but I was left with the impression that some conversation about these proceedings did take place.  It is difficult to conclude whether Ms Merrigan was not being forthright in not giving an account of what occurred, or whether this was attributable to confusion in the questioning.  The circumstances however lend sufficient support to Ms Wayland’s account, which itself seems unlikely to be the subject of invention, such that Ms Merrigan’s other evidence ought not, in my view, to be accepted.

Ms M Jackson

Ms Jackson was the manager of the Price Attack store conducted by Havencool Pty Ltd, of which company Mr Coffey is a director, at Pacific Fair, Queensland.  It is alleged that between October 1994 and April 1995 she had a conversation with the representative Mr Weedon when she was told that she couldn’t have the Revitafoam product on sale at the price marked and that it must be returned to its recommended retail price of $11.50, the price at which Jon Le Court stores sold it.  She did so.  She also said that she spoke to Mr Coffey about the matter who said that she should put the price back up and that he would take the matter further.

Mr Weedon was not called as a witness by either party.  He was interviewed by the Commission, but no signed statement or affidavit was obtained.  No point was sought to be made, by either party, of his not being called.  That does not however conclude the matter, so far as concerns the effect of no answer being provided to allegations concerning him.  The respondents point to the event, as narrated, as being unlikely, since Ms Jackson frequently discounted and this was apparently the only occasion on which Mr Weedon thought it necessary to say anything.  The representative who replaced him in mid-1995 did not even apparently raise the topic.  I refer to this topic generally later in these reasons.  I do not however consider that it answers the specific allegations here made.

Ms Stanojevic

Ms Stanojevic managed the Price Attack Parramatta store which was owned by Price Attack Franchising.  It is alleged that on about 7 September 1995 she had a discussion with the Mayo International representative Mr Fonti, who enquired whether she was aware that she was not supposed to sell the Revitafoam product for $9.95.  Mr Fonti is alleged to have said to her that it was in the contract between Price Attack and Mayo International that all products must retail at the usual recommended retail price.  Ms Stanojevic expressed some surprise at that and said that she thought she could retail her products at whatever price she liked and that she would check with someone at head office about it.  Mr Fonti is alleged to have said that Revitafoam was such a “great” product that it did not need to be discounted.  Ms Stanojevic said that that evening she checked with Mr Coffey who told her to make a note of what had been said. 

Mr Fonti admits that a conversation took place concerning Mayo International products and prices but that it was in the context of him giving her a “quick run down” on products, as the Parramatta store had only opened at the end of July.  This fact is correct.  It opened on 27 July 1995.  He said that he noticed some 80-100 cans of Revitafoam in a dump basket at the back of the store but does not recall at what price they were being sold.  This confirms that some form of discounting was being undertaken when he was then present.  He says that he asked her why she would “prostitute” the best product on the market and put it in a dump basket but said that he did not make any mention of the price at which it was sold.  Ms Stanojevic recalled, when asked, the reference to that term relating to the product but was adamant that she had been told that she was not to sell below the recommended retail price.  It seems credible to me that the act of “dump binning” would produce a response from a Mayo International representative and that it is likely that price was mentioned in that context. 

The respondents referred also to the time at which this is alleged to have occurred, some time after Mayo International had been approached by the Commission and to the fact Ms Stanojevic knew that Price Attack was in the process of making a complaint to the Commission about it.  This does not seem to me however to weigh against her evidence. What seems more strange to me is that a representative of Mayo International would make such a comment at this time.  All the indications, however, are that he did so.

Ms Purcell

Purcell Holdings Pty Ltd traded as a Price Attack outlet at Southport.  It is alleged that in about November 1994 Ms McKenna (then Ms Purcell) had a discussion with Mayo International’s representative Mr Weedon when she expressed a desire to purchase a large volume of the Revitafoam product for the purpose of selling it quickly, by offering it at a discount.  Mr Weedon advised her that she could not do so and was “not allowed” to discount Mayo International products below the recommended retail price.  He said that if she did so and he “caught her” he would remove the Mayo International products from the shelves.  Ms McKenna said that in her view that was unfair and asked why other Price Attack stores were discounting, to which Mr Weedon is alleged to have replied that she should advise him which stores were discounting and he would ensure it ceased.  She added, under examination, that she continued to discount but put the sign away when Mr Weedon attended at the store.  She made no complaint to the management of Price Attack, but said that she mentioned it to a Price Attack representative who advised her she was able to discount. 

I have the same concern about accepting that the words “not allowed” were used, although it may be that words to similar effect were employed on occasions. Again, I have some difficulty in understanding, and therefore accepting why a sales representative would speak in such an aggressive manner.  On the other hand there is no evidence to weigh against Ms McKenna’s account.  The matter is resolved, in my view, by accepting the general tenor of her evidence, that a complaint was made by Mr Weedon and that some pressure was applied to achieve a listing at Mayo International’s price, but to regard the balance as somewhat exaggerated.

Ms Bretherton

Marlestone Park Pty Ltd conducts a Price Attack franchise store at Coffs Harbour, New South Wales.  Ms Bretherton of that company said that a sales representative from Mayo International, who was never identified although presumably was known to Mayo International, called to the store and whilst there removed the price tags from the Genetix and Revitafoam products and explained, upon her enquiry, that there had been a recent price increase and these were wrong, since they were the old prices.  It is of course possible that the sales representative was simply assisting Ms Bretherton. She explained she would have changed the prices in any event, but had not had the time.  This may have been appreciated by the sales representative.   No one however asserted that that was the case and Ms Bretherton, whose evidence I accept, said that she specifically recalled ringing Price Attack after the visit and complained about his actions.

Ms Moses

Colora Pty Ltd conducted the Price Attack franchise store at Cairns in April 1994.  Ms Mawson, then Ms Moses, said she had a conversation with a Mayo International representative whom she could only describe as “Robyn” at which time she was told she was “not allowed” to discount the Revitafoam product.  Ms Mawson said that she discussed this with the franchise owner and they decided to continue selling the product at the discounted price but to change the price back to the recommended retail price when the representative was next expected.  The conversation is alleged to have started with the sales representative inquiring why she was discounting Revitafoam to which she responded she thought it was a good way of selling the stock more quickly.

Whilst the words “not allowed” may not have been used, I accept that some discussion about Mayo International’s desire that she did not do so likely occurred.

Ms Eastley

Ms Porter, then Ms Eastley, was the Manager of the Price Attack store located at The Pines Shopping Centre, Currumbin, Queensland, owned by Mr Maloney.  She said that a Mayo International representative called “Robert”, and whom the parties accepted in submissions to be Mr Weedon, visited the store in November 1993 and said he was concerned that the Mayo International products were marked at the old price and that the price of Revitafoam should be $10.50, not $9.95 as displayed.  She advised him she had not had time to change the prices marked.

As is the case with many of these conversations recalled some years after they were made, there will be understandable controversy about the actual words used.  In cross examination Ms Porter frankly conceded that the words used may have been in the nature of an observation that she had not yet marked the new prices.  Ms Porter also accepted that he said that if she was going to continue to charge the recommended prices, they had changed.  The account set out in her affidavit does not appear to be entirely consistent with such a conversation.  She said that he said she was “not allowed” to sell Mayo International below the suggested retail price and that he made a point of waiting while she changed the prices.  I am not sure what to make of this later action, which might objectively mean nothing and, as I have said, I am not prepared to accept that the words “not allowed” were used by each of the representatives.  In some cases I have been able to conclude that that was the impression created by whatever words were used, but in this case such a statement seems strange and out of context. 

Mr Balmer

Mr Balmer is a director of Balmer enterprises Pty Ltd, which is a Price Attack franchise trading at Kawana Waters.  In evidence at the hearing Mr Balmer said that the representative Ms Shaw had said, on an occasion in January 1995, that she hoped he would not discount, or that she would prefer he didn’t.  This was a departure from his affidavit in which the clear suggestion was that she had made a “special deal” conditional upon that.

This change to his account of events would also seem to me to render unlikely the conversation alleged to have taken place the next day, when Ms Shaw is alleged to have complained that the special deal was conditional in that way, but in any event he gave a somewhat different account of that conversation as well.  How this important change to his recollection came about was not satisfactorily explained.  The Commission nevertheless pressed the allegation that the statements by Ms Shaw as he now recounted them were attempts to induce him to maintain the price.  I am not however prepared to accept Mr Balmer’s evidence as reliable.

Other Observations as to Individual Contraventions

The respondents submitted that, with respect to may instances of conduct alleged, but also in relation to apparent concerns about discounting generally, there was not a consistent practice on the part of representatives, which one might expect if there had been some company policy on the matter.  This would therefore affect both the likelihood that there was any such policy and the likelihood that statements and other conduct attributed to them occurred.  In addition to what might be gleaned from the evidence of witnesses called by the Commission there was some other evidence which might indicate that such practices were not engaged in.

I have however concluded, largely on the basis of Mr Le Court’s own written communications, that there was an arrangement with Mr Jackson about discounting the retail price and that this reflected a real concern on the part of those controlling Mayo International.  It is true that they must also have appreciated that Price Attack was, essentially, a group which attempted to sell at lower prices.  It seems to me however that Mr Le Court believed that this was to be controlled in the case of Mayo International, and that some exception was to be created for it. 

It is also possible that discounting was practised by Price Attack franchisees on a more regular basis but without exciting the interest of the management of Mayo International or the representatives.  The reason why comments would be made on some, but not all, occasions where Mayo International products were offered at reduced prices was not apparent from the evidence.  Whilst I have taken it into account in considering the likelihood, as to whether any statements such as those alleged were made on the occasions in question, I do not consider that any inconsistency in approach permits me to draw the inference that no such conduct occurred.

I have also been conscious of the number of instances where representatives are said to have threatened to take stock off shelves or remove price tags.  It has not been shown that the taking of this evidence was similar to that employed in connexion with the prohibitory statement that resellers were “not allowed …”.  As I have earlier observed, the conduct seems strange, at least in the absence of evidence which might explain it as not unusual, on the part of the representatives in question or that Mayo International representatives were encouraged to act in such a way.  Whilst I can accept that Mayo International may have advised its representatives to be alert and discourage discounting from its recommended price, the level of concern which can be discerned, combined with marketing and sales techniques discussed, does not suggest resort to these tactics was likely.

Included amongst the history of occasions of alleged contravening conduct were a few events recounted by Mr Coffey, where Mr Le Court was said variously to have complained of instances of discounting by particular franchises;  asserted there was an agreement to the contrary between their two companies;  threatened that Price Attack’s “trading terms” would be affected and that it would lose its discount. 

I have referred above to my concerns generally about the reliability of the evidence of Price Attack management.  They have a real interest in the outcome of these proceedings.  At the very least their standing and that of the franchisor company with franchisees may be affected by its outcome.  It is also, I consider, inherently unlikely that a conversation in these terms alleged occurred.  To that may be added the observation that, at the one point where Mr Coffey’s evidence, as outlined in the statement of claim, could have been confirmed in critical respects by the witness Ms Jackson, it was not.  For these reasons I have not accepted his evidence as reliable.

Trade Terms and Outstanding Accounts and the June and July 1995 Communications

In the period from 1993 through to July 1995 there was further correspondence between Mayo International and Price Attack Franchising concerning the terms of credit upon which Price Attack franchisees were to be supplied with Mayo International products. 

It seems that in early 1993 Mayo International had resolved to change its trading terms and by August 1993 it had come to the attention of Mr Jackson that Price Attack franchisees were being placed on an “order to order” basis for payment, which I take to refer to payment being made for the previous order at the time the next was placed.  The changeover appears, however, to have been abandoned by Mayo International.  By December of the following year Mr Le Court was writing confirming the arrangement that had previously been in place:

“Our trading terms necessitate payment within thirty (30) days of invoice.  If this is achieved, we are happy to offer Price Attack Stores the agreed 15% discount.  However if payment is not received within the agreed thirty (30) days of invoice, we will not be able to offer the 15% discount or the thirty (30) days payment from invoice.  We simply would request that goods be paid for by C.O.D. at our list price.

We believe it to be good business sense to enforce our trading terms.  We are doing this generally with all our customers.”

That letter was written in response to, and in respect of a request by Price Attack for a further discount of three per cent for early payment.

Mr Le Court then wrote on 12 December 1994.  The terms of that letter were then communicated by Mr Jackson to managers of the Price Attack outlets:

“Their (Mayo International) trading terms with us are strictly 30 days from invoice with a 15% discount. 

Any Price Attack stores who go outside the trading terms (ie are over 30 days in arrears) will be put on a COD basis without discounts.  Once the account has been paid, stores will once again be put on the agreed terms.”

The evidence shows that in August 1994 Mayo International had sought the assistance of Mr Jackson in pursuing payments from three Price Attack outlets:  Sunnybank, Cannon Hill and Edward Street.  Most of the total sum involved, about $3,500.00, had been overdue for 90 days.  Price Attack Franchising wrote to those franchisees.  In December 1994 Mayo International wrote again to Price Attack Franchising, listing some twelve stores which had not kept to their trading terms and which were, they advised, to be denied the fifteen per cent discount in the future.  Price Attack Franchising again wrote to its franchisees.

Nevertheless, the Commission submits, matters had improved by July 1995, such that Mayo International’s explanation, that the withdrawal of the fifteen per cent discount in July 1995 was attributable to breach of trading terms, should not be regarded as credible. 

Mr Thom said in evidence that in the first part of 1995 a number of Price Attack stores continued to fail to make payments within the time agreed and that he discussed this on a regular basis with Mr Le Court.  He said that a decision was ultimately made, towards the end of June 1995, to advise Mr Jackson that unless the position changed dramatically the fifteen per cent discount would have to be withdrawn.  It was not and was then “formally withdrawn”.  Mr Le Court said that this took place shortly prior to 23 June 1995 and that this constituted the “agreement” referred to in later correspondence to which I shall shortly refer.  The agreement was to the effect that Mr Jackson would take steps to have all franchisees bring any arrears up to date.  Mr Jackson denies this conversation.

Mr Le Court wrote a letter on 23 June 1995, which referred to a recent telephone conversation with Mr Jackson and contained these two paragraphs:

“If you are able to keep your part of our agreement I am confident Mayo International can continue to offer our existing trade terms. 

I would ask you to look at your store in Kawana who currently are selling Revitafoam at 2 for $20.00.”

Mr Jackson said that he had a telephone conversation with Mr Le Court on about 8 July 1995 when Mr Le Court said he was unsure whether Mayo International would be prepared to continue to supply Price Attack franchisees because some stores had been discounting its products and made specific reference to the store at Kawana Waters.  He alleges that Mr Le Court advised that if discounting continued he would stop the fifteen per cent discount and that would not make it viable for Price Attack to sell the products.  There is some support from individual franchisees that this would in fact be the case, but this does not of course prove Mr Le Court’s state of mind or that he made the statement.  Mr Jackson said he responded in words to the effect that he would not set prices of products in the Mayo International range, even though withdrawal of the discount was threatened.  He says he felt able to say so because he considered the business relationship with Mayo International to be coming to an end.  The letter of 23 June 1995 received by Mr Jackson has his handwritten note on it “informed Jon that we could and would not set prices of Mayo International range even though he threatened to stop our discount”.  Mr Jackson said he made that note shortly after the conversation.  I am not prepared to place any reliance upon it as confirming the contents of the conversation.  Shortly afterwards it appears that Mr Jackson and his in-house lawyers set about obtaining statements from franchisees.

Mr Le Court then wrote, in a letter dated 11 July 1995:

“We had a gentlemans agreement regarding your selling of Mayo International products, but it now seems obvious to me that Price Attack are not able to keep their part of that agreement.

The current trading terms - ie 15% discount off list price were based on this agreement and I therefore must advise that Mayo International can no longer offer this to Price Attack stores.

I have instructed our Sales Team and Accounting Department that in future, all goods sold to Price Attack will be invoiced at the list price of our current price list and that credit for thirty (30) days from invoice be applicable only to those stores who comply with our trading terms.  Should accounts not be paid as per our written agreement on our Application for Account form, then that particular store will only be supplied thereafter on a payment before delivery basis.

Gary, I am sorry to have taken this action.”

Once again its terms were the subject of evidence as to their meaning.  Mr Le Court contended that the “gentleman’s agreement” was a reference to that reached prior to 23 June 1995, where Mr Jackson would ensure that his franchisees would meet their thirty day trading terms.

On 13 July 1995 Price Attack circulated a memorandum to its franchisees advising that from 11 July 1995 the fifteen per cent discount from Mayo International would no longer be available.  It went on to emphasise:

“It is imperative that all Price Attack outlets stay within the trading terms that Mayo have in place with Price Attack and all lines that are in our Stock Control be fully stocked within all Price Attack outlets.

As further negotiations are taking place between Mayo and Price Attack to rectify this situation, it is extremely important that all Price Attack outlets stay within the above guidelines …”

 

On 27 July 1995 Price Attack wrote to the Trade Practices Commission advising, amongst other things, that Mayo International had taken away the fifteen per cent from Price Attack franchisees “and has changed its trading terms in respect of payment”.  In it Mr Jackson asked:

“Could you please peruse the statements from Price Attack’s franchisees enclosed and advise us whether each are able to re-establish the favourable trading terms which Price Attack franchisees have enjoyed until recently, namely, the 15% discount which are similar to or the same as the terms enjoyed by our competitors with Mayo International Pty Ltd”.

In a subsequent telephone discussion with Mr Cream of the Commission, Mr Jackson alleged that “over the years” Mayo had threatened to stop supply or stop providing discounts because franchisees frequently discounted the products.  The Commission then wrote to Mayo International on 2 August 1995 outlining the general allegations by Price Attack and making reference to one specific instance.  The Assistant Director, Queensland, expressed concern that Mayo International was at risk of contravening the resale price maintenance provisions of the Trade Practices Act and asked for “comments” together with answers to a number of questions as to the company’s practices with respect to pricing.

In answer to the Commission’s letter, Mr Le Court wrote on 21 August 1995 denying that Mayo International had set the price at which Mayo International’s goods must be sold with any customers.  In the case of Price Attack, he advised that it was correct to say that Mayo International had recently informed the franchisees that it was unable to favour them further with a discount agreed to some time ago, but this decision was based upon the fact that various Price Attack stores would not comply with the stipulated trading terms of payment to be received by Mayo International within thirty days of invoice.  He said that the initial agreement had been based upon the buying power of the number of stores and the receipt of payment within required terms, that Mayo International had been extremely patient, but that many Price Attack stores had not met the terms for many months to date.

Explaining that there had been an attempt on his part to resolve this problem, he said he had previously telephoned Mr Jackson and made a “gentleman’s agreement” that, should one of the Price Attack stores not meet the agreed time for payment, Mr Jackson would be advised and he would take action on Mayo International’s behalf.  This agreement, he said, had not resolved the situation, resulting in a resolution to withdraw the discount and to extend the thirty day trading terms only to those stores which had met trading terms.  He enclosed a list of Price Attack stores who had contravened the trading terms in the past twelve months.  The list attached in fact showed those stores who had breached agreement in the past four months.  They numbered some thirty stores most of whom had been in default at least twice.  From September 1995 there followed a period where Mayo International sought to make the discount available to individual franchisees, who had been diligent in keeping to trading terms, but this met with an angry response from Price Attack who did not wish some franchisees to be discriminated against.  Eventually the fifteen per cent discount was offered again.

It may be observed at this point that, despite the Commission’s submission that Mayo International could not have viewed the defaults in payment by franchisees as serious, it in fact did so.  In my view the approach taken by it was consistently one of a determination not to allow them to continue.  That is not however an end to the matter.  At most it might explain, in part, the decision to take action and withdraw the fifteen per cent discount on the wholesale price.  The terms of the letter however suggest that whilst compliance with its terms of trading was a matter of concern to Mayo International, it was not the main reason for removal of the discount.  Despite Mr Le Court’s claims that the letter said nothing about discounting, it seems to me tolerably clear that the only “gentleman’s agreement” between Mr Le Court and Mr Jackson was as to maintenance of Mayo International’s listed retail price.  Any agreement as to terms of payment could not fall into this category, as it was obviously intended to be binding on the franchisees and its terms were disclosed.  Further, I do not accept that it was an intended reference to some further, recent, arrangement whereby Mr Jackson was to resolve outstanding accounts.  The first paragraph of the 11 July letter does not even hint at some such discussion.  The agreement there referred to clearly concerned “selling”.  The following paragraph simply confirms the nexus between the grant of the discount in 1992 and maintenance of price.  In summary, it seems to me that both factors - recent examples of selling below recommended retail price and the failure of some franchisees to pay in the time agreed - combined to produce the letter of 11 July.  I shall discuss this matter further when considering the letter as amounting to relevant conduct.

The Admissions

Ms Treloar was the secretary of a company called Sutone Pty Ltd, a Price Attack franchisee which has traded as Price Attack Myer Centre Adelaide since 1993.  It was also a purchaser of Mayo International products.  Ms Treloar dealt with a Mayo International sales representative called Mr Speight, who had worked with Ms Treloar sometime in the past.  There is nothing to suggest that Mr Speight had any authority other than that usual to a sales representative. 

Ms Treloar heard of the withdrawal of the discount by Mayo International by a facsimile message received on about 13 July 1995.  She says that later in July, Mr Speight visited her store and she asked him what had been the reason for the removal of the discount and that he then advised her that it was because Price Attack stores in Queensland had been discounting, and that some Price Attack stores had failed to settle their monthly accounts on time.  She asked why the discount could not be continued on a thirty day settlement basis and he offered to take the matter up with his superiors. 

It appears that neither Ms Treloar nor any other of Mr Speight’s customers in South Australia discounted Mayo International products.  Similarly, none of them had been in the habit of late payment. 

Mr Speight says that he had a conversation with Ms Treloar but that it was limited to an enquiry by her as to the reason why franchisees, such as her, were now threatened with supplies of Mayo International products being stopped if payment was not made within thirty days.  He denies that any discussion about discounting occurred.  He says that he advised her to take it up with Price Attack Franchising. 

The likelihood, it seems to me, is that the discussion Ms Treloar recounted occurred.  Price Attack franchisees were advised of the stoppage of discount and this is the matter which would have been of importance to her.  The consequences of late payment would not have troubled her, as they did not apply to her.  Her recollection of the dual reasoning behind the withdrawal of discount accords with the advices that Mr Jackson of Price Attack had received on 11 July 1995.  There is nothing to suggest that Ms Treloar obtained that more detailed information from a source other than the sales representative Mr Speight. 

The Commission sought to have the evidence tendered under s 87(1)(b) Evidence Act 1995 (Cth) and I deferred my ruling on it.  Section 87 appears in Part 3.4 “Admissions” and is entitled “Admissions made with authority”.  Sub-section (1)(b) provides:

“For the purpose of determining whether a previous representation made by a person is also to be taken to be an admission by a party, the court is to admit the representation if it is reasonably open to find that:

…

(b)          When the representation was made, the person was an employee of the party, or had authority otherwise to act for the party, and the representation related to a matter within the scope of the person’s employment or authority; 

…”

There is no doubt about the employment of Mr Speight and that he had some authority to act for Mayo International.  The question is whether the representation as to the reasoning or policy lying behind the withdrawal of the discount lay within the scope of his employment or authority.  

The respondents’ central argument against admissibility of these statements as an admission is that, whilst Mr Speight had the authority to make sales and to advise customers about products, pricing and marketing, he could not be assumed to be privy to any of the policy decisions of the Mayo International head office such that he could be expected to communicate them in a conversation with his customers.  The Commission submitted that the sales representatives were the contact point between Mayo International and customers and answered their queries about account payments and trading terms.  It is of some particular importance that a memorandum exhibited to Mr Le Court’s own affidavit, and dated 25 September 1995, addressed to “sales executives” of Mayo International and concerning the “Price Attack Group” offered an explanation to the sales executives as to the previous decision to withdraw the discount, advised of the basis of the decision, and referred to how Price Attack franchisees were to be treated in the future.  The reason given was the late payment of accounts by franchisees but this is not, in my view, to be taken as an accurate representation coming, as it does, after contact by the Commission.  What the memorandum does however show is that sales representatives were kept informed as to the rationale behind changes of trading terms with customers, since they would have to deal with them and answer the queries.  It was not suggested that this was a new procedure and I would not expect it to have been.

Cross on Evidence (5th ed) at par 33-540 suggests that the way to view the matter is to determine whether the admission must have been made by the agent as part of a conversation or other communication which the agent was authorised to have with a third party.  Fraser Henleins Pty Ltd v Cody (1945) 70 CLR 100 provides some examples where authority to make admissions on behalf of a principal might be inferred from the nature and extent of an employee’s duties (133, 134).  Williams J (134) there explained that, even with respect to past transactions, there are some agents who derive an implied authority from their employment of a sufficiently wide nature to make admissions against the principal, provided that they were then still in the employment of their principal, because their employment was such that they must be presumed to have authority to give the information in question.

In these circumstances, it seems to me, the admission is to be taken as an admission by Mayo International as to the reasons for the withdrawal of the discount.  The reasons for a change in the terms of trading is just what Mayo International representatives would discuss with their customers and in my view formed as much a part of this function as updating on prices and products with its practices such as discounting and advertising.  Some evidence of Mayo International’s dealings with its staff provides support for the view.  Such an admission does not however seem to me necessary to enable a conclusion to be reached about the letter of 11 July 1995. It would however follow from the terms of that admission that there were two factors which played a part in Mayo International’s decision to withdraw the discount not only franchisees selling below the recommended retail price also non-payment of stock within the time agreed.

Further admissions are relied upon by the Commission as binding Mayo International.  It is alleged that in about July 1995 Ms K Nicholson, the daughter of Mrs P Nicholson earlier referred to and who also worked in the Caboolture Store, mentioned to Ms Shaw that she had observed another Price Attack store selling the Genetix product at a discount and she was advised that “they had got into trouble about it”.  Ms Nicholson confirms the terms of that conversation and that Ms Shaw also said “that won’t happen again”.  It is also alleged that on or about 25 July 1995 Ms Shaw asked Ms Nicholson whether she knew what was taking place between Mayo International and Price Attack and went on to say that the discount had been lost to franchisees because persons “up the coast” had been discounting the Genetix product.  She said it had caused a real problem with Mayo International and that Price Attack might lose Mayo International products.

Ms Shaw’s denial of the conversation was combined with an explanation that she was unlikely to have discussed such matters with an 18 year old, although at least on the first occasion Mrs Nicholson was present in any event.  The reference to discounting “up the coast” could well refer to the outlet at Kawana Waters.  Mrs Nicholson gave what is a detailed account, and one which clearly included information not known to her.  She did so within six weeks of the statements being made to her.  There seems to me no basis for doubting them.  The reason given by the sales representative for the discounting, on this occasion, would seem to me to fall into the same category as that I have already dealt with and is able to be taken as evidence of an admission by Mayo International to that effect.

Findings - Contraventions

The standard of proof applicable to proceedings brought for contravention of Part IV Trade Practices Act is the civil standard, but the seriousness of the allegations and their consequences are to be taken into account: The Heating Centre Pty Ltd v Trade Practices Commission  (1986) 9 FCR 153, 159-60 (applying Briginshaw v Briginshaw (1938) 60 CLR 336 and followed in Commodore Business Machines Pty Ltd v Trade Practices Commission (1990) ATPR 41-019, 51,345).  This may affect the strength of the evidence required in a particular case:  Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors (1992) 110 ALR 449, 450.

Section 48 provides that a corporation or other person shall not engage in the practice of resale price maintenance.  Section 96(1) provides that acts referred to in subsection (3) constitute engaging in resale price maintenance.  Of principal relevance in these proceedings are pars (a), (b) and (f) of subsection (3), which provide as follows:

“96(3)The acts referred to in sub-sections (1) and (2) are following:

(a)       the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier;

(b)       the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier;

…

(f)        the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold.”

Of relevance also are the provisions of s 97 which, in general terms, exempts statements of price which are accompanied by the words “recommended price” or where it is clear that the price recommended as appropriate for those goods is not obligatory.

[1]        Conduct of the kind referred to in each of pars (a),(b) and (f) is alleged to have been engaged in by reason of what was said at the May 1992 meeting, which stood as confirmed by other evidence.  The allegation that the statements in question were also directed specifically to two companies, with which Mr Jackson and Mr Coffey were associated, is not now pressed. 

It is not likely that the arrangement reached, and the discussion which took place in connexion with it, at the May 1992 meeting was connected with or contained any threat in relation to the supply of Mayo International products. Paragraph (a) is not made out.  And, whilst the price which Mayo International provided as its “recommended retail price” was then understood by Mr Jackson to be that which was to be maintained, this was because of the agreement reached between him and Mr Le Court and not because of the way in which the price was itself stated in the lists which were published from time to time, which seems to me to be the concern of par (f).  The first alleged contravention then falls to be considered either as an inducement or an attempt to induce sales at not less than the specified prices within the meaning of par (b).

The respondents pointed to the apparent requirement of par (b) that the inducement, or attempt to induce, be directed to a reseller.  As a simple matter of construction that appears to be correct.  The “second person” there referred to is a reseller.  What the submissions however further imply is that conduct will not fall within (b) when it comprises discussions with an intermediary.

It is correct to observe that the discussion which took place and the arrangement reached with Mr Jackson, whilst providing the source for and explanation of later conduct said to contravene the Part, brings provisions such as s 45 TPA to mind, rather than those provisions under consideration.  Such an issue does not however arise in these proceedings.  In any event what that approach overlooks is the effect, or intended effect of what was undertaken and that these are the matters dealt with in par (b). 

In my view the communications in question are not required to be had with the reseller, so long as that person is in fact induced by the relevant conduct, or it can be shown that the supplier, in any event, attempted to bring that result about.  Many means may be employed in such a process.  The use of an intermediary is perhaps a more obvious one particularly where the resellers are part of a group such as franchisees.  In the case of an inducement, the statutory provision will be satisfied where the necessary causal connexion is shown between the supplier’s words or actions and the maintenance of price.  When an attempt is in issue, the essential question will be whether the supplier can be shown, by the conduct in question, to have intended the reseller to act in that way.

“Inducing” to my mind conveys both the means employed and the result.  It refers to actions which are effective, although they may not have comprised actual coercion or pressure, or the offer of an advantage (see The Heating Centre case, 164, Pincus J).  In the present case it has not been shown that the franchisees were in fact induced by what was arranged.  It has not been shown that Mr Jackson ever made plain what their supposed obligations were and the evidence relating to the individual contraventions suggests that he did not. 

It is, however, clear that Mr Le Court intended that all those in the Price Attack group, whom he supposed to be subject to the influence, if not the direction, of the franchisor company and Mr Jackson, should sell at Mayo International’s price if the fifteen per cent discount were reinstated.  Indeed it would appear that he believed that the advantageous offer would be effective to bring this about.  The necessary intention to bring about the result with identified resellers is then made out (and see Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168, 183).  In these circumstances it is not necessary to consider the position of Price Attack itself as a reseller, through its own corporate stores.

[2]        The facsimile message of 24 November 1992 is also relied upon as conduct within each of pars (a), (b) and (f).  It refers to discounting undertaken by one franchisee at Pacific Fair, the company Havencool Pty Ltd in which Mr Coffey had an interest.  The terms of the letter are clearly a reminder to Mr Jackson of the arrangement that had been made, that no discounting on retail price would occur, and contains a veiled threat that the continuance of the fifteen per cent discount (“our trading terms”) depends upon that.  The communication was directed, once again, to Mr Jackson as the head of the Price Attack group, which comprised both the franchisor company and all franchisees.  It stands as both a reminder and an attempt to have the Pacific Fair salon brought to heel by Mr Jackson and therefore an attempt to induce it to maintain Mayo International’s prices.

Neither par (a) nor (f) seem to me relevant, for much the same reasons earlier referred to.  In the reasons which follow I have taken a similar approach and concluded that they do not have application, but I have not on each occasion so stated.

[3]        Only one occasion of conduct affecting Mr Cameron and the company Ferngloss Pty Ltd, has been made out.  On that occasion Mr Blencowe, on behalf of Mayo International, encouraged Mr Cameron to use the new recommended retail price by the use of either a request (as to whether he “minded” doing so) or a suggestion or recommendation.  This conduct, whilst arguably amounting to an attempt to induce, is not that alleged nor that relied upon in submissions. 

[4]        Allegations of conduct directed to Mr McCloud, and the franchisee Sailnote Pty Ltd, were established on the evidence.  In the first instance the statement by Mr Le Court, that he was visiting to ensure there was no discounting, is alleged to amount to conduct within s 96(3)(a),(b) and (f).  The same allegation is made with respect to the second occasion of conduct.  It seems to me that both fall to be considered only as inducements or attempts to induce resale price maintenance. 

The comment as to the purpose of Mr Le Court’s visit is absent any threat or inducement.  It takes the form of a negative encouragement, absent reference to any consequences which might follow.  It is then in the category of a type of mild persuasion.  Such persuasion, in my view, will suffice to qualify conduct as an attempt to induce the maintenance of price (see Assoc Professor Clarke, “Vertical Price Fixing in Australia” The Federation Press 1991 p 68 and following).  Indeed persuasion of some kind will, at the least, be employed where it is intended to bring about that result.  Here one may infer that intention from the words used, even if they were not expressed in strong terms.  In each case much may depend upon what is known about the recipient and how that person will view what is said.

The second occasion involved Mr Le Court complaining about Mr McCloud’s practice of discounting to Mr Jackson.  The terms of the complaint were then put to Mr Le Court by him in the following telephone conversation and were not denied by him.  Mr Le Court then suggested other means which might address Mr McCloud’s need to discount.  It had the result that he desisted.  This conduct, taken as a whole, amounted to an inducement.

[5]        Having regard to the evidence concerning conversations between Mr Kotis and Mr Le Court, the Commission now submits only that conduct under par (b) is made out.  The statement made was in the nature of a request.  This conduct could not in my view be taken as effective as an inducement.  Mr Kotis raised his prices later and only when Mr Le Court’s salon changed its prices. 

I acknowledge there may be difficulties in concluding that a “mere request” to maintain prices could  amount to an attempt to induce (as Assoc Prof Clarke suggests, 70).  A request however may be framed in such a way as to be persuasive and to be taken to have been so intended. 

There is no doubt an assumption that in commerce “mere requests” will ordinarily be of no avail.  Mr Kotis’ evidence is then somewhat unusual, for he imported some emotion into his account of the conversation with Mr Le Court.  His evidence was that Mr Le Court appealed to Mr Kotis, as a person known to him over a long period rather than as a competitor, and about his (Mayo International’s) product, which he said he thought was being damaged by Mr Kotis’ action.  It is of course possible that Mr Kotis deduced some kind of offer by Mr Le Court, in the way the matter was discussed, but this was not explored. Accepting the conversation occurred as Mr Kotis recounts, in my view it took the form of persuasion which involved the necessary intentional element.  An attempt is therefore established.  I should add that the Commission, in submissions, properly drew to my attention the prospect that I may not be satisfied that Mr Le Court spoke on behalf of Mayo International, and that he did so as a salon proprietor.  I am however satisfied that he spoke as a person having an interest in the image and standing of Mayo International’s products.  It would have been otherwise if he had simply offered to change the prices on the Delva products in the salon.

[6]        The alleged conduct in connexion with Mr de Candia and Findham Pty Ltd has not been established.

[7]        I have accepted that Ms Shaw did say to Mrs Nicholson (Merryworth Pty Ltd) in about March 1994, that there was no need to change the prices of a Mayo International product.  As such it may be seen as either advice, or an attempt to persuade Mrs Nicholson not to reduce the price below Mayo International’s listed price.  Whilst the evidence did not establish the allegations made, submissions addressed the evidence of Mrs Nicholson in the terms I have found.  I therefore accept that conduct within par 96(3)(b) is established.  The second occasion of conduct, in June 1995, was not made out.

[8]        The assertions made by the sales representative to Ms de Vries (Muscatstone Pty Ltd) were not as subtle and bordered on intimidatory.  Whilst not having the desired effect, they amount to an attempt to induce price maintenance.

[9]        The conduct alleged in connexion with Mr McCahon (Third Gralloch Pty Ltd) was not made out.

[10]      Mr Blencowe suggested to Mr Cicchini that he sell at the recommended retail price, as the Jon Le Court salons were doing.  He did not however do so for some time.  Whilst it may not appear likely to be particularly persuasive it was, I consider, intended to have that effect and ought to be taken as an attempt to have the recommended retail price maintained.

[11]      Mr Blencowe did attempt to persuade Ms Criss (Millicroft Pty Ltd and Noosa River Heights Pty Ltd) to maintain Mayo International’s price by a combination of references to its wishes and appeals to her, on the basis that Mayo International would take some action against him.  Other conduct, which I take to be that amounting to a threat to withhold supply, as referred to in par (d) of s 96(3), was not made out.

[12]      Statements alleged to have been directed to Ms Hopp were not established.

[13]      The statement made by Mr Weedon to Ms Jackson, that she could not list products at other than the recommended retail price, was not amongst the allegations contained in the statement of claim.  They depended largely upon Mr Coffey’s evidence, which I have rejected.  Whilst the statement of claim should have been amended, her statement of the incident in question was provided to the respondents and the proceedings were conducted on that basis.  On this occasion the assertion made was effective, because of the possible implication it conveyed in relation to other franchisees.  An inducement to maintain price has been established.

[14]      The statements made to Ms Stanojevic about the existence of an agreement between Mayo International and Price Attack, which obliged her and the corporate Price Attack store she managed to sell at Mayo International’s listed price, amounted to an attempt to induce her to do so. (Ms Stanojevic ignored them).  The additional comment that it was not necessary to do so, because of the quality of the product, did not detract from this.  If that had been all that was said it would have been arguable that it was a mere expression of opinion, although, again elements of persuasion can be seen in it.

[15]      I have accepted that Ms Purcell (Purcell Holdings Pty Ltd) was at least the subject of some pressure to sell only at Mayo International’s price.  She was however disabused of the notion of any obligation by Price Attack’s own staff.  An attempt to induce retail price maintenance is nevertheless made out.

[16]      Even if one accepts that the sales representative who spoke to Ms Bretherton  (Marlestone Park Pty Limited) was attempting to be helpful rather than dictatorial, the assertion that prices were “wrong” and “that there was therefore a need to change them” constitutes an attempt to maintain the price.

[17]      I have accepted that some discussion by the sales representative, conveying the wishes of Mayo International that discounting not be pursued, was made to Ms Moses.  Whilst seemingly innocuous it is to be borne in mind that they are made by a representative of a supplier to a reseller who is not likely to be aware of what arrangements have been made between the supplier and the franchisor and who lacks any real power.  In this background such statements are capable of conveying the prospect of an unknown, but undesirable, outcome.  Whilst this may not be sufficient to convert it to the type of threats referred to in other parts of subsection 96(3), one is able to discern that the representatives would know that it would have impact and might, therefore, be effective to bring about the desired change.  An attempt to induce the maintenance of the listed price is established. 

[18]      The allegations in connexion with Ms Eastley were not made out.

[19]      The conduct in connexion with Mr Balmer was not established.

[20]      There remains, for consideration, the central allegations concerning the letters of June and July 1995.  It is alleged that this course of conduct comes with not only s 96(3)(a),(b) and (f) but also par (d) which provides that the following are also acts with the meaning of s 96(1):

“(d)     the supplier withholding the supply of goods to a second person for the reason that the second person -

(i)        has not agreed as mentioned in paragraph (a); or

(ii)       has sold, or is likely to sell, goods supplied to him by the supplier, or goods supplied to him by a third person who, directly or indirectly, has obtained the goods from the supplier, at a price less than a price specified by the supplier as the price below which the goods are not to be sold;”

The Commission then also refers to s 98 (“Withholding the supply of goods”) and to that part which provides:

“(1)     For the purposes of paragraphs 96(3)(d) or (e), the supplier shall be deemed to withhold the supply of goods to another person if -

…

(b)       the supplier refuses to supply those goods except on terms that are disadvantageous to the other person;

…”

In summary, and as relevant here, these provisions appear to provide that actions will amount to contravening conduct, where they comprise supply on terms disadvantageous to the reseller (the withholding of supply) for the reason that the reseller would not agree to maintain the supplier’s specified price or has sold at prices less than it specified.  “Disadvantageous” in this context would seem to me to comprehend supply on terms which would put the reseller at a disadvantage with other resellers in the marketplace.

The letter of 23 June 1995 contained a veiled threat that the fifteen per cent discount might not continue if Mr Jackson did not abide by the agreement to ensure franchisees did not discount on resale.  To take the reference to “trade terms” as referable only to that discount, and not to terms as to payment is, I consider, consistent with its use in other communications.  That the letter and the threat were motivated by a franchisee’s actions in discounting from Mayo International’s prices is clear by the following, brief, reference to the Price Attack store at Kawana, on the north coast.  That situation was not rectified.  The later letter of 11 July accepts that Price Attack is unable to ensure that such practices will not continue.   In the way in which it is expressed it is conceivable that that was the only reason for the withdrawal of the fifteen per cent discount on the wholesale price.  The letter went on, however, to alter terms as to payment.  The previous terms providing credit were not entirely withdrawn.  They remained in place for those franchisees who complied with them.  A separate category was created for those who did not.  This approach was consistent with what had been threatened for some time and was not, I consider, motivated by the practices of franchisees concerning pricing.  On the other hand, consistent with the admissions sought to be used against Mayo International, it would seem that franchisees’ habits both as to pricing and non-payment combined to cause the decision to deny them the fifteen per cent discount in the future.

The terms of the two letters in question fall outside the scope of pars (a), (b) and (f).  Matters had gone beyond any attempt to secure maintenance of Mayo International’s price.  What was first threatened, and then put in place, was a change in the terms of supply to Price Attack franchisees because Mr Jackson and Price Attack were taken no longer to agree that retail sales would not take place at less than Mayo International’s listed prices.  This conclusion had been drawn because Price Attack franchisees were doing so and had in the past done so without any obvious intervention from Price Attack. 

Paragraph (d) is concerned with the supply to resellers and the reason for its being withheld or provided on disadvantageous terms.  It does not however require that that reason be made known to the reseller, although in many cases that will be obvious.  In my view the conduct in question falls within that provision.  The wholesale price to Price Attack franchisees, without the fifteen per cent discount, would not permit them to compete by offering lower prices.  Mr Le Court understood this.  Mr Le Court’s own evidence as to the discussions in May 1992 go some way towards confirming what I consider to be fairly obvious.  Mayo International, by this means, was going to secure the maintenance of its listed prices.  It was motivated to do so principally because some franchisees had not sold at the recommended retail price and because it apprehended that such practices would continue.  Whilst problems with payments of accounts played some part in the decisions contained in the July letter, the substantial reason in question was that just mentioned (see s 4F(1)).

The Second, Third and Fourth Respondents

I have not had the benefit of submissions as to these respondents’ complicity in the conduct I have found to contravene s 48.  I shall allow a short period for written submissions as to these matters prior to hearing argument as to penalty.

Orders

In addition to directions as to the time for the filing of these submissions, the issues of penalties and costs shall be adjourned for further hearing on a date to be fixed.  I

will also make directions as to the filing of proposed orders by the Commission and as to outlines of argument.

I certify that this and the preceding fifty (50) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel

Associate:

Dated:              10 July 1998

Counsel for the Applicant:	Mr P O’Shea
Solicitor for the Applicant:	Corrs Chambers Westgarth
Counsel for the Respondents:	Mr R Hanson QC with him Mr L Bowden
Solicitor for the Respondents:	Bowdens Lawyers
Date of Hearing:	10, 11, 12, 13, 16, 17, 18, 20, 23, 24 February 1998
Date of Judgment:	10 July 1998