FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2016] FCA 1516

File number(s):

NSD 2035 of 2016

NSD 2036 of 2016

Judge(s):

WIGNEY J

Date of judgment:

14 December 2016

Catchwords:

COMPETITION contracts, arrangements or understandings containing cartel provisions – where two major Australian banks attempted to make arrangements involving the manipulation of a financial benchmark and thereby the fixing of the price of foreign exchange forward contracts – where the banks admitted that they attempted to contravene s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) – pecuniary penalties under s 76 of the Competition and Consumer Act 2010 (Cth) – relevant principles – where the Australian Competition and Consumer Commission and the banks proposed agreed pecuniary penalties – relevant principles in determining whether agreed penalties should be accepted – Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 applied

Legislation:

Competition and Consumer Act 2010 (Cth), ss 44ZZRD(1), 44ZZRD(2)(a)-(b), 44ZZRD(4)(a), 44ZZRD(4)(c), 44ZZRJ, 76(1)(a)-(b), 76(1A)(aa)

Cases cited:

Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559

Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238

Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2016] FCA 453

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330

Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2001] FCA 1716

Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (No 5) [1998] FCA 310

Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640

Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483

Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701

Australian Securities and Investments Commission v Southcorp Ltd (2003) 130 FCR 406

Australian Securities and Investments Commission, in the matter of Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 936

Barbaro v The Queen (2014) 253 CLR 58

Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161

Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46

Markarian v The Queen (2005) 228 CLR 357

Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285

Rich v Australian Securities and Investments Commission (2004) 220 CLR 129

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20

TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277

Trade Practices Commission v CSR Ltd [1990] FCA 521

Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-09

Date of hearing:

6 December 2016

Date of last submissions:

9 December 2016

Registry:

New South Wales

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

Economic Regulator, Competition and Access

Category:

Catchwords

Number of paragraphs:

167

Counsel for the Applicant in NSD2035/2016 and NSD2036/2016:

Mr J K Kirk SC with Mr J A Arnott

Solicitor for the Applicant in NSD2035/2016 and NSD2036/2016:

Australian Government Solicitor

Counsel for the Respondent in NSD2035/2016:

Mr A Archibald QC with Ms K Madgwick

Solicitor for the Respondent in NSD2035/2016:

Clayton Utz

Counsel for the Respondent in NSD2036/2016:

Mr N O’Bryan SC

Solicitor for the Respondent in NSD2036/2016:

Norton Rose Fulbright

Table of Corrections

9 January 2017

Paragraph [38], first sentence – replace “Deutsche Bank” with “DBS Bank”

9 January 2017

Paragraph [42], first sentence – replace “Deutsche Bank” with “DBS Bank”

ORDERS

NSD 2035 of 2016

BETWEEN:

AUSTRALIAN COMPEITION AND CONSUMER COMMISSION

Applicant

AND:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)

Respondent

JUDGE:

WIGNEY J

DATE OF ORDER:

14 DECEMBER 2016

THE COURT ORDERS THAT:

1.    In these orders, the following definitions apply:

1.1    ABS means The Association of Banks in Singapore;

1.2    ABS MYR Fixing Rate means the benchmark fixing rates published by Thomson Reuters on behalf of the ABS in respect of the MYR;

1.3    ANZ means Australia and New Zealand Banking Group Limited;

1.4    BNP means BNP Paribas;

1.5    CA-CIB means Credit Agricole CIB;

1.6    CCA means the Competition and Consumer Act 2010;

1.7    CS means Credit Suisse;

1.8    DBS means DBS Bank;

1.9    ING means ING Bank;

1.10    Macquarie means Macquarie Bank Limited;

1.11    MYR means Malaysian ringgit;

1.12    NDF means non-deliverable forward contract;

1.13    RBS means Royal Bank of Scotland;

1.14    SCB means Standard Chartered Bank;

1.15    Submission means a submission of a buy and sell (bid/offer) rate for USD against the MYR by a submitting bank to Thomson Reuters prior to 11:15am Singapore time for the purposes of the calculation of the ABS MYR Fixing Rate;

1.16    UBS means UBS AG;

1.17    USD means United States dollars.

2.    ANZ pay to the Commonwealth of Australia, within 30 days of this order, a pecuniary penalty in the amount of $900,000 for each attempt to contravene s 44ZZRJ of the CCA in the manner and on the 10 days set out below, with penalties in the total sum of $9,000,000 being payable:

2.1    On 5 May 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with Macquarie, SCB, Nomura, ING and CA-CIB containing a provision that ANZ, SCB, ING and CA-CIB would make high Submissions to the ABS in respect of the MYR on 5 May 2011, which provision:

2.1.1    had, as a substantial purpose:

2.1.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 5 May 2011;

2.1.1.2    thereby fixing, controlling or maintaining, the price of NDFs supplied by ANZ, Macquarie, SCB, Nomura, ING and CA-CIB that referenced the ABS MYR Fixing Rate on 5 May 2011; and

2.1.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.2    On 7 June 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with BNP, CS and Macquarie, containing a provision that, on 7 June 2011, each of ANZ, BNP and CS would make Submissions at an agreed level in the interests of some or all of the parties to the arrangement, which provision:

2.2.1    had, as a substantial purpose:

2.2.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 7 June 2011;

2.2.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, BNP, CS and Macquarie that referenced the ABS MYR Fixing Rate on 7 June 2011; and

2.2.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.3    On 24 June 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with DBS and SCB containing a provision that ANZ and SCB would make high Submissions to the ABS in respect of the MYR, which provision:

2.3.1    had, as a substantial purpose:

2.3.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 24 June 2011;

2.3.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, DBS and SCB that referenced the ABS MYR Fixing Rate on 24 June 2011; and

2.3.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.4    On 13 July 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with CS containing a provision that ANZ and CS would make high Submissions on 13 July 2011, which provision:

2.4.1    had, as a substantial purpose:

2.4.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 13 July 2011;

2.4.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ and CS that referenced the ABS MYR Fixing Rate on 13 July 2011; and

2.4.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.5    On 21 July 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with BNP, CS and Macquarie containing a provision that ANZ, BNP and CS would make Submissions at an agreed level in the interests of some or all of the parties to the arrangement, which provision:

2.5.1    had, as a substantial purpose:

2.5.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 21 July 2011;

2.5.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, BNP, CS and Macquarie that referenced the ABS MYR Fixing Rate on 21 July 2011; and

2.5.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.6    On 27 July 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with Macquarie, RBS and SCB containing a provision that ANZ, RBS and SCB would each make high Submissions on 27 July 2011, which provision:

2.6.1    had, as a substantial purpose:

2.6.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 27 July 2011;

2.6.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, Macquarie, RBS and SCB that referenced the ABS MYR Fixing Rate on 27 July 2011; and

2.6.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.7    On 28 July 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with Citibank, DBS, Macquarie and SCB containing a provision that ANZ and SCB would make high Submissions on 28 July 2011, which provision:

2.7.1    had, as a substantial purpose:

2.7.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 28 July 2011;

2.7.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, Citibank, DBS, Macquarie and SCB that referenced the ABS MYR Fixing Rate on 28 July 2011; and

2.7.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.8    On 2 August 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with SCB containing a provision that each of ANZ and SCB would make high Submissions on 2 August 2011, which provision:

2.8.1    had, as a substantial purpose:

2.8.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 2 August 2011;

2.8.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ and SCB that referenced the ABS MYR Fixing Rate on 2 August 2011; and

2.8.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.9    On 7 September 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with CS, Macquarie and UBS containing a provision that ANZ, CS and UBS would make high Submissions to the ABS at an agreed level on 7 September 2011, which provision:

2.9.1    had, as a substantial purpose:

2.9.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 7 September 2011;

2.9.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ, CS, Macquarie and UBS, that referenced the ABS MYR Fixing Rate on 7 September 2011; and

2.9.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.10    On 9 September 2011, ANZ attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement with CS containing a provision that each of ANZ and CS would make low Submissions at an agreed bid/ask spread on 9 September 2011, which provision:

2.10.1    had, as a substantial purpose:

2.10.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 9 September 2011;

2.10.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by ANZ and CS that referenced the ABS MYR Fixing Rate on 9 September 2011; and

2.10.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

3.    ANZ pay to the Applicant, within 30 days of this order, a contribution towards its costs in the sum of $200,000.

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

ORDERS

NSD 2036 of 2016

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND:

MACQUARIE BANK LTD ACN 008 583 542

Respondent

JUDGE:

WIGNEY J

DATE OF ORDER:

14 December 2016

THE COURT ORDERS THAT:

1.    In these orders, the following definitions apply:

1.1    ABS means Association of Banks in Singapore;

1.2    ABS MYR Fixing Rate means the benchmark fixing rates published by Thomson Reuters on behalf of the ABS in respect of the MYR;

1.3    ANZ means Australia and New Zealand Banking Group Limited;

1.4    BNP means BNP Paribas;

1.5    BOT means Bank of Tokyo-Mitsubishi UFJ;

1.6    CA-CIB means Credit Agricole;

1.7    CCA means the Competition and Consumer Act 2010;

1.8    CS means Credit Suisse;

1.9    ING means ING Bank;

1.10    Macquarie means Macquarie Bank Limited;

1.11    MYR means Malaysian ringgit;

1.12    MYR Submission means a submission of a buy and sell (bid/offer) rate for USD against the MYR by a submitting bank to Thomson Reuters prior to 11:15am Singapore time for the purposes of the calculation of the ABS MYR Fixing Rate;

1.13    NDF means non-deliverable forward contract;

1.14    RBS means Royal Bank of Scotland;

1.15    SCB means Standard Chartered Bank; and

1.16    USD means United States dollars.

2.    Macquarie pay to the Commonwealth of Australia, within 30 days of this order, a pecuniary penalty in the amount of $750,000 for each attempt to contravene s 44ZZRJ of the CCA in the manner and on the days set out below, with penalties in the total sum of $6,000,000 being payable:

2.1    On 18 February 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with SCB containing a provision that SCB would make a low MYR Submission on 18 February 2011, which provision:

2.1.1    had, as a substantial purpose:

2.1.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 18 February 2011;

2.1.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie and SCB that referenced the ABS MYR Fixing Rate on 18 February 2011; and

2.1.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.2    On 4 April 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with ING and CA-CIB containing a provision that the MYR Submissions made by each of ING and CA-CIB that day would be high, which provision:

2.2.1    had, as a substantial purpose:

2.2.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 4 April 2011;

2.2.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie, ING and CA-CIB that referenced the ABS MYR Fixing Rate on 4 April 2011; and

2.2.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.3    On 14 July 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with SCB containing a provision that SCB would make a high MYR Submission on 14 July 2011 and Macquarie would seek to arrange for CS, ANZ, BNP, BOT and ING to also make high MYR Submissions that day, which provision:

2.3.1    had, as a substantial purpose:

2.3.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 14 July 2011;

2.3.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie and SCB that referenced the ABS MYR Fixing Rate on 14 July 2011; and

2.3.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.4    On 19 July 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with SCB containing a provision that SCB would make a low MYR Submission on 19 July 2011 and Macquarie would seek to arrange for CS, BNP and BOT to also make low MYR Submissions that day, which provision:

2.4.1    had, as a substantial purpose:

2.4.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 19 July 2011;

2.4.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie and SCB that referenced the ABS MYR Fixing Rate on 19 July 2011; and

2.4.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.5    On 27 July 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with CS and RBS containing a provision that the MYR Submissions made by each of CS and RBS that day would be high, which provision:

2.5.1    had, as a substantial purpose:

2.5.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 27 July 2011;

2.5.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie, CS and RBS that referenced the ABS MYR Fixing Rate on 27 July 2011; and

2.5.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.6    On 28 July 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with SCB and RBS containing a provision that SCB and RBS would each make high MYR Submissions on 28 July 2011 and Macquarie would seek to arrange for BNP, CS, ING and BOT to also make high MYR Submissions that day , which provision:

2.6.1    had, as a substantial purpose:

2.6.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 28 July 2011;

2.6.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie, SCB and RBS that referenced the ABS MYR Fixing Rate on 28 July 2011; and

2.6.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.7    On 23 September 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with RBS containing a provision that the MYR Submission made by RBS that day would be low, which provision:

2.7.1    had, as a substantial purpose:

2.7.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 23 September 2011;

2.7.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie and RBS that referenced the ABS MYR Fixing Rate on 23 September 2011; and

2.7.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

2.8    On 17 October 2011, Macquarie attempted to contravene s 44ZZRJ of the CCA by attempting to make an arrangement or arrive at an understanding with CS containing a provision that the MYR Submission made by CS that day would be high, which provision:

2.8.1    had, as a substantial purpose:

2.8.1.1    directly or indirectly providing for the fixing, controlling or maintaining of the ABS MYR Fixing Rate on 17 October 2011;

2.8.1.2    thereby fixing, controlling or maintaining the price of NDFs supplied by Macquarie and CS that referenced the ABS MYR Fixing Rate on 17 October 2011; and

2.8.2    constituted a cartel provision within the meaning of s 44ZZRD of the CCA.

3.    Macquarie pay to the Applicant, within 30 days of this order, a contribution towards its costs in the sum of $200,000.

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

REASONS FOR JUDGMENT

WIGNEY J:

1    This proceeding is concerned with the determination of appropriate pecuniary penalties in relation to admitted attempts by two major Australian banks to collude with certain other banks in Singapore to manipulate a benchmark rate for a foreign currency and thereby fix, control or maintain the price of foreign exchange forward contracts calculated by reference to that benchmark rate. The Australian Competition and Consumer Commission commenced proceedings against the banks. Those proceedings were settled. As part of that settlement, the Commission and the banks proposed agreed penalties for the attempted contraventions. The question is: are the proposed agreed pecuniary penalties appropriate having regard to all relevant matters? Should the Court accept and impose the agreed penalties as part of the settlement of the proceedings?

2    Australia and New Zealand Banking Group Limited and Macquarie Bank Ltd are both large and well-known Australian financial institutions. In addition to traditional banking activities, they both operated substantial global foreign exchange businesses. Their foreign exchange businesses included negotiating, supplying and trading in foreign exchange forward contracts. In simple terms, a foreign exchange forward contract, or “currency forward”, is an agreement between two counterparties to exchange currencies at a future date at a forward rate agreed in advance. It is essentially a bet on what the exchange rate of the currency will be in the future. At maturity, the currency forward can be settled by calculating the difference between the agreed forward rate and a settlement rate which, in the case of freely traded currencies, is usually determined by reference to a benchmark published exchange rate.

3    Both ANZ and Macquarie had offices in Singapore. At their Singapore offices, both ANZ and Macquarie supplied and traded in currency forwards denominated in the Malaysian ringgit. Because the Malaysian ringgit was not freely traded outside Malaysia, the settlement rate could not be calculated using a benchmark determined on the basis of objective market data. Rather, it was calculated by a process which involved a panel of banks submitting the buy and sell rates that they believed reflected market rates in that currency to an independent third party, Thomson Reuters. The panel of submitting banks, which included ANZ, were required to make those submissions independently, however because the submissions involved an element of subjectivity, the process was susceptible to collusion. That susceptibility was exploited by some of the submitting banks.

4    On multiple occasions during 2011, traders employed by ANZ and Macquarie attempted to make arrangements with traders employed by a number of other major international banks who, like ANZ, were submitting banks in relation to the setting of the benchmark or fixing rate for the Malaysian ringgit. In simple terms, the ANZ and Macquarie traders attempted to get the other traders to submit high or low buy and sell rates for the ringgit, as the case may be, which did not reflect a bona fide view of trading. The purpose of those arrangements was to manipulate the benchmark rates and thereby indirectly fix, control or maintain the price of Malaysian ringgit currency forwards which were determined by reference to those rates. Such arrangements, if entered into, would have contained “cartel provisions” as defined in s 44ZZRD of the Competition and Consumer Act 2010 (Cth). The conduct of the traders in attempting to enter into arrangements containing cartel provisions was deemed to be the conduct of ANZ and Macquarie because it was engaged in on their behalf and was within the scope of the traders’ actual or apparent authority. As a result, both ANZ and Macquarie attempted to contravene s 44ZZRJ of the Competition and Consumer Act.

5    The Commission commenced proceedings and sought orders that ANZ and Macquarie Bank pay pecuniary penalties in respect of each of the attempted contraventions. Those proceedings were settled on the basis that ANZ and Macquarie admitted that, through the actions of their traders, they attempted to make arrangements containing cartel provisions and therefore attempted to contravene s 44ZZRJ of the Competition and Consumer Act. ANZ and Macquarie consented to orders requiring them to pay pecuniary penalties in respect of each of the attempted contraventions. As part of the settlement, the parties reached agreement in relation to the facts that were to be put before the Court and agreed on the amount of the penalties that they would jointly propose to the Court in respect of each attempted contravention.

6    There were ten separate attempted contraventions by ANZ, and eight separate attempted contraventions by Macquarie. The maximum penalty payable in respect of each contravention was $10 million. The Commission and ANZ agreed and jointly submitted that the appropriate pecuniary penalty for each of ANZ’s attempted contraventions was $900,000, resulting in pecuniary penalties totalling $9 million. The Commission and Macquarie agreed and jointly submitted that the appropriate penalty for each of Macquarie’s attempted contraventions was $750,000, resulting in pecuniary penalties totalling $6 million.

7    The Court’s statutory task is to order ANZ and Macquarie to pay such pecuniary penalties in respect of each attempted contravention as it determines to be appropriate having regard to all relevant matters. Where, however, a regulator such as the Commission and a person who has contravened a civil penalty provision of an Act, such as the Competition and Consumer Act, agree to settle a civil penalty proceeding and propose an agreed penalty, the question for the Court essentially becomes whether the Court is satisfied that the submitted agreed penalty is an appropriate penalty. If it is, public policy and other considerations generally dictate that the agreed penalty should be imposed.

8    Were the penalties agreed as between the Commission, ANZ and Macquarie appropriate penalties having regard to all relevant matters? Despite first impressions, and initial misgivings concerning the size of the agreed penalties, I am persuaded that the proposed agreed penalties are appropriate and should be imposed. The following reasons explain why.

THE facts IN MORE DETAIL

9    The facts relating to the contravention were not in dispute. They were set out in statements of agreed facts. In certain respects the agreed statements of facts were somewhat spare and frugal in terms of detail. The likelihood is that they were the product of negotiation and compromise and were parsed over by a phalanx of lawyers eager to render them effectively lifeless and devoid of any excessive light or colour. Following the hearing, as a result of exchanges that occurred during the hearing, supplementary statements of facts, which elaborated on some aspects of the facts, were furnished by the parties. The Court accepts as accurate, and has had regard to, all of the facts set out in the statements of agreed facts, including the supplementary statements of agreed facts. Following is a brief summary.

Currency forward contracts in the Malaysian ringgit

10    A foreign exchange forward contract is an agreement between two counterparties to exchange currencies at a future date at a rate agreed in advance. If no regulatory restrictions apply to the trade in those currencies, a foreign exchange forward contract can be settled by exchange or delivery of those currencies on the settlement date. Alternatively, they can be cash settled. Where a foreign exchange forward contract is cash settled, the parties settle the contract on the basis of the difference between the prevailing market price and the forward rate in the contract.

11    Participants in foreign exchange markets may use forward contracts for a number of reasons. They may, for example, want to hedge an underlying exposure in one currency against the other. They may also want to gain exposure to or speculate on movements in the relative value of the currencies.

12    Some currencies are not freely traded on foreign exchange markets. Those currencies are commonly referred to as “non-deliverable” currencies. The Malaysian ringgit is a non-deliverable currency. Forward contracts involving non-deliverable currencies are often referred to as NDFs. NDFs are over-the-counter products. They are negotiated between the counterparties rather than being traded on a central exchange.

13    The International Swaps and Derivatives Association published standard terms that could be used to document NDF transactions. It was standard practice within the banking and financial services industry for NDFs denominated in the ringgit to be in accordance with the ISD Association’s standard terms.

14    It is unnecessary to provide a detailed description of the operation of NDFs involving the ringgit or the standard terms that applied to them. The important point is that the economic outcome of an NDF involving the ringgit depended on the difference between the forward rate (the rate agreed in the NDF) and the settlement rate at the maturity (or settlement date) of the NDF. In the case of the ringgit, the Association’s standard terms calculated the settlement rate by reference to the benchmark fixing rate published by Thomson Reuters on behalf of the Association of Banks in Singapore two business days before the settlement date.

15    Thomson Reuters calculated the benchmark fixing rate in relation to the ringgit in accordance with rules determined by the Association of Banks in Singapore. The rules included that the Association nominated a panel of fifteen banks that were required to contribute submissions to Thomson Reuters. The panel of banks comprised a number of major international banks, and included ANZ, Barclays Bank, Bank of America, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, ING Bank, The Hong Kong and Shanghai Banking Corporation Limited, Overseas Chinese Banking Corporation Limited, Royal Bank of Scotland, Standard Chartered Bank, UBS AG and United Overseas Bank. Macquarie Bank was not a submitting bank.

16    On each trading day, each of the submitting banks was required to submit to Thomson Reuters prior to 11:15am Singapore time a buy and sell rate for the United States dollar against the Malaysian ringgit. In practice, Thomson Reuters permitted submitting banks to amend or modify their submissions until approximately 11:30 a.m. Not surprisingly, the rules provided that the submission of each submitting bank was to be made without reference to the submissions of other submitting banks. There was, in short, to be no collusion between the submitting banks as to what would be in their respective submissions. The submissions were required to reflect the rates which the submitting banks believed in good faith they were able to transaction between 10.55 am and 11.05 am Singapore time.

17    At 11.15 am Singapore time, Thomson Reuters would calculate the benchmark fixing rate for the ringgit by the following process: the midpoint between the buy and sell rates in each submission would be determined and ranked from highest to lowest; the number of submissions that fell within the top or bottom quartile would be determined; the midpoints that fell within the top or bottom quartiles would be excluded; and the arithmetic mean of the remaining midpoints would be calculated and determined as the benchmark fixing rate. Thomson Reuters would publish that rate at around 11.30 am each day.

The market in Malaysian ringgit NDFs

18    Banks and non-bank financial institutions acquired or entered NDFs denominated in the Malaysian ringgit to gain exposure to that currency either for speculative purposes, to hopefully profit from its appreciation or depreciation over time, or to hedge or manage risks associated with the currency. Bank customers acquired and entered into Malaysian ringgit NDFs to manage currency risks arising from contracts or other business they conducted with Malaysia and which therefore involved the ringgit. To give a simple example, an Australian company might enter into contracts with a Malaysian company concerning the export of goods to Malaysia where the price was specified in ringgit. The company might wish to acquire or enter into an NDF involving the ringgit to protect itself against the weakening of the ringgit against the dollar.

19    Trading in NDFs obviously gave rise to certain risks arising from movements in the relevant non-deliverable currency. It was common for banks, including ANZ and Macquarie, to hedge against those risks by entering into countervailing or offsetting NDFs for a proportion of their trading book. Where a bank hedged some or all of its trading book in that way, the book was only exposed to adverse currency movements for the unhedged portion. The unhedged portion was referred to as the “net open position”.

20    NDFs denominated in the Malaysian ringgit were supplied in various trading centres, including in Australia. Singapore was a major trading centre for NDFs denominated in the ringgit. A large number of banks and non-bank financial institutions were active in the supply of NDFs denominated in the Malaysian ringgit. ANZ and Macquarie competed with those banks and non-bank financial institutions in relation to the supply of such NDFs. The other banks included the submitting banks referred to earlier, as well as other major Australian banks like the Commonwealth Bank of Australia, the National Australia Bank and Westpac Banking Corporation.

21    There are no detailed statistics available in relation to the use of NDFs by Australian entities. Based on publicly available data in relation to the global foreign exchange industry, however, it was estimated that during 2011, the daily turnover in Australia of Malaysian ringgit NDFs had a face value equating to approximately A$35 to A$40 million. The annual turnover in Australia had a face value equating to approximately A$9 to A$10 billion.

ANZ and its NDF business

22    ANZ is the third largest listed company in Australia and is one of Australia’s four major banks. As at October 2016, it had a market capitalisation of approximately A$80 billion. In the financial year ending 30 September 2016, its total assets exceeded A$900 billion (total liabilities approximately A$856 billion), its operating income exceeded A$20 billion and its profit before income tax exceeded A$8 billion. The comparable figures for the financial year ending 30 September 2012 were: total assets exceeding A$640 billion (total liabilities approximately A$600 billion); operating income exceeding A$17 billion; and profit before income tax of almost A$8 billion.

23    At all times relevant to this matter, ANZ had a Singaporean banking licence issued by the Monetary Authority of Singapore. The Monetary Authority of Singapore acts as the central bank of Singapore and, amongst other things, conducts integrated supervision of financial services in Singapore. ANZ operated a global foreign exchange business through various branch offices, including a branch office in Singapore. That business included marketing, supplying, acquiring and trading NDFs, including NDFs denominated in the Malaysian ringgit. As has already been noted, ANZ was a nominated submitting bank for the Malaysian ringgit benchmark fixing rate.

24    During 2011, ANZ had an estimated daily trade volume in Malaysian ringgit NDFs equating to A$177 million. Its customers in that regard included other banks, non-bank financial institutions, hedge funds, leveraged funds, asset managers and corporations. ANZ’s largest Australian counterparties for Malaysian ringgit NDFs at the time were other major Australian banks, including the Commonwealth Bank, Westpac, National Australia Bank and Macquarie.

25    ANZ employed traders in its Singapore branch whose responsibilities included trading in NDFs. At various times during 2011, the traders who were employed as traders on the “NDF desk” were Mr Wei Ewen Chew, Ms Wai Theng (Jasmine) Hooi and Mr Joo Heng Tan. Mr Chew worked on the NDF desk from January 2010 to October 2011; Ms Hooi worked on the NDF desk in the period April 2011 to March 2012; and Mr Tan worked on the NDF desk from July 2011 to September 2012. Each of the traders reported to the Head of NDF, who in turn reported to the Head of Local Markets and the Head of Currency Trading Asia, who in turn reported to the CEO and the Head of Markets, Singapore. As well as trading in NDFs, each of the traders was also responsible for, and were authorised to make, submissions to Thomson Reuters for the purposes of the calculation of the ringgit benchmark fixing rate.

Macquarie and its NDF business

26    Macquarie is part of a global investment banking and financial services group. As at 31 March 2016, its total assets exceeded A$180 billion (total liabilities of almost A$170 billion), its net operating income exceeded A$5 billion and its profit exceeded A$1 billion. The comparable figures as at 31 March 2012 were: total assets exceeding A$136 billion (total liabilities A$126 billion); net operating income exceeding A$4 billion; and profit exceeding A$600 million.

27    At all relevant times, Macquarie operated a global foreign exchange business. Its foreign exchange trading services business for Asia was headquartered in Singapore. That business included marketing, supplying, acquiring and trading NDFs, including NDFs denominated in the Malaysian ringgit. Macquarie commenced trading in NDFs in late 2010 and the Monetary Authority of Singapore issued a Singaporean banking licence to Macquarie on 1 February 2011. Macquarie was not a submitting bank in respect of the calculation of the Malaysian ringgit benchmark fixing rate.

28    Macquarie transacted both as notional buyer and notional seller of Malaysian ringgit. The most common notional values were US$5 million or US$10 million, although smaller and larger transactions also occurred. Macquarie’s customer base for Malaysian ringgit NDFs included banks, non-bank financial institutions, hedge funds, leveraged funds, asset managers, corporations and funds. Its largest Australian counterparties for Malaysian ringgit NDFs at the time were major Australian banks, including ANZ, the Commonwealth Bank, Westpac and the National Australia Bank. Macquarie did not supply NDFs to Australian retail customers.

29    Macquarie estimated that in the period between 1 April 2011 and 31 March 2012, it entered into (on average) approximately 40 to 50 Malaysian ringgit NDFs with external counterparties globally on each trading day. That figure represented Macquarie's worldwide trade and was not limited to Australian counterparties. Macquarie’s net open position at the end of each trading day during that period was approximately US$2 million. The gross profit Macquarie derived from trading in ringgit NDFs during that period was about US$1.3 million.

30    During 2011, Macquarie’s Asian markets division included approximately 18 staff. A number of those staff were traders, though during 2011 only one trader was responsible for trading Macquarie’s Malaysian ringgit “book”. His name was Mr Istvan Wye Lung Loh. As the employee responsible for trading Macquarie’s ringgit NDF book, Mr Loh was authorised by Macquarie to trade with other banks and communicate with them for the purpose of doing so. Mr Loh reported to the Head of Foreign Exchange Trading (Singapore), who in turn reported to the Head of Asian Markets (Singapore). Mr Loh worked for Macquarie in Singapore from 1 September 2010 to 1 April 2012, when his employment was terminated for reasons not related to events the subject of this proceeding.

The attempts to make arrangements containing the cartel provisions

31    During 2011, it was common practice for traders at banks who competed in relation to Malaysian ringgit NDFs to communicate by way of electronic communications platforms offered by Reuters or Bloomberg. Those platforms, called “virtual chatrooms” by their no doubt predominantly “Gen Y” users, operated in a similar fashion to instant messenger services and allowed traders to communicate in real time about trades and other matters. The communications engaged in using the chatrooms were accessible only to the parties to those communications. Records of the discussions” in the chatrooms were retained by Bloomberg and Reuters.

32    There were a variety of legitimate reasons for traders to communicate by means of the Reuters and Bloomberg chatrooms. It was not uncommon for traders to be in regular contact with traders at other banks throughout the course of the trading day. Regrettably, however, the chatrooms also provided the opportunity for the relevant traders at ANZ and Macquarie to attempt to make arrangements which contained cartel provisions proscribed by the Competition and Consumer Act.

33    During 2011, traders at a number of the banks who traded in Malaysian ringgit NDFs, including the relevant traders employed by ANZ and Macquarie, developed a practice whereby at times they would communicate about the submissions that were to be made by the submitting banks to Thomson Reuters in relation to the Malaysian ringgit. Those communications tended to occur during the trading period leading up to the submission deadline of 11:15am Singapore time. The communications between traders took place privately in the Reuters and Bloomberg chatrooms. During the course of those communications traders at times discussed the position or interest their bank had in relation to the Malaysian ringgit benchmark rate that day, including if they wanted submissions to be high or low.

The ANZ attempted arrangements

34    On ten occasions during 2011, one or more of Mr Chew, Ms Hooi or Mr Chan, on behalf of ANZ, engaged in communications on the Reuters or Bloomberg communications platforms during which they attempted to make arrangements with traders employed by other banks that were involved in trading in Malaysian ringgit NDFs. The arrangements that they attempted to make included provisions which were cartel provisions as defined in s 44ZZRD of the Competition and Consumer Act. That is because: first, they had, as a substantial purpose, the manipulation of the Malaysian ringgit fixing benchmark rate, and therefore, indirectly, the fixing, controlling or maintaining of the price of Malaysian ringgit NDFs calculated by reference to the benchmark rate; and second, ANZ was in competition with the banks that employed the traders with whom the arrangements were sought to be made. In engaging in that conduct, Mr Chew, Ms Hooi and Mr Chan were acting within their apparent authority as traders employed by ANZ.

35    Following are the basic details of each of the attempted arrangements derived from the agreed statement of facts. The parties did not tender the records of the chatroom discussions.

5 May 2011 – Ms Hooi and Mr Chew

36    On 5 May 2011, Ms Hooi and Mr Chew engaged in a chatroom discussion with Mr Gary Tan of ING Bank, Mr Loh of Macquarie, Ronald Cheung of Nomura, Ron Ren Goh of Standard Chartered and Yee Tern Yeo of Credit Agricole. During the course of that discussion, the parties discussed their respective banks' position in relation to the ringgit fixing rate. Mr Chew indicated that ANZ would like a high fixing rate and offered to make an arrangement with the other participants that the submitting banks represented by those participants (ANZ, ING, Standard Chartered and Credit Agricole) would make high submissions that day.

7 June 2011 – Ms Hooi

37    Between about 10:24 am and 10:41 am on 7 June 2011, Ms Hooi engaged in chatroom discussions with Slew Ming Chin of Credit Suisse, Mr Loh of Macquarie and Hudson Wong of BNP Paribas. During the course of that discussion, Ms Hooi indicated that ANZ was neutral in relation to the Malaysian ringgit fixing rate and offered to make an arrangement with the other participants in the discussions that ANZ, Credit Suisse and BNP Paribas would make submissions at an agreed level.

24 June 2011 – Ms Hooi

38    Between about 10:57 am and 10:59 am on 24 June 2011, Ms Hooi, participated in a chatroom discussion with Eugene Wong and Kok Jin Koh of Standard Chartered, Chee Tiong Yeo of DBS Bank and Ewe Sean Teoh of Citibank. During the course of that discussion, Ms Hooi offered to make an arrangement with the other participants to make high submissions.

July 2011 – Ms Hooi

39    Between about 10:38 am and 10:39 am on 13 July 2011, Ms Hooi participated in a chatroom discussion with Siew Ming Chin of Credit Suisse.    During that discussion, Ms Hooi offered to make an arrangement with Credit Suisse to the effect that ANZ and Credit Suisse would make high submissions.

21 July 2011 – Ms Hooi

40    At around 10:51 am on 21 July 2011, Ms Hooi participated in a chatroom discussion with Siew Ming Chin of Credit Suisse, Hudson Wong of BNP Paribas and Mr Loh of Macquarie. During that discussion, Ms Hooi indicated that ANZ was neutral that day. She nevertheless offered to make an arrangement with the other participants pursuant to which ANZ, Credit Suisse and BNP Paribas would make submissions at a level to be agreed.

July 2011 – Mr Tan

41    From 10:30 am on 27 July 2011, Mr Tan participated in a chatroom discussion with Mr Loh of Macquarie. During the course of that discussion Mr Loh said that he had no interest in that day's Malaysian ringgit fixing rate. Mr Loh referred to previous discussions with Royal Bank of Scotland and Standard Chartered in which those banks had indicated that they wanted high submissions. Mr Loh said that he could ask the Royal Bank of Scotland and Standard Chartered traders to make submissions at a particular level on ANZ's behalf. Mr Tan agreed and asked Mr Loh to request Royal Bank of Scotland and Standard Chartered to make high submissions. Mr Tan also offered to make a high submission on ANZ's behalf.

28 July 2011 – Mr Tan

42    Between about 10:44 am and 11:00 am on 28 July 2011, Mr Tan participated in a chatroom discussion with Mr Loh of Macquarie, Eugene Wong and Kok Jin Koh of Standard Chartered, Chee Tiong Yeo of DBS Bank and Ewe Sean Teoh of Citibank. During that discussion, Mr Tan offered to make an arrangement with the other participants to the effect that ANZ and Standard Chartered would make high submissions.

2 August 2011 – Mr Tan

43    At around 10:49 am on 2 August 2011, Mr Tan participated in chatroom discussion with Mr Loh of Macquarie, Eugene Wong of Standard Chartered and Ewe Sean Teoh of Citibank. During the course of that discussion, Mr Tan offered to make an arrangement with Standard Chartered to the effect that both ANZ and Standard Chartered would make high submissions.

7 September 2011 – Ms Hooi

44    Between about 10:53 am and 11:02 am on 7 September 2011, Ms Hooi participated in a chatroom discussion with Siew Ming Chin of Credit Suisse, Brian Lock of UBS and Mr Loh of Macquarie. During that discussion, Ms Hooi offered to make an arrangement with the other participants to the effect that ANZ, Credit Suisse and UBS would make high submissions at an agreed level.

9 September 2011 – Ms Hooi

45    Between about 10:28 am and 10:59 am on 9 September 2011, Ms Hooi participated in a chatroom discussion with Mr Loh of Macquarie, Siew Ming Chin of Credit Suisse, Ronald Cheong of Nomura and Brian Lock of UBS. During the course of that discussion, Ms Hooi offered to make an arrangement with Credit Suisse to the effect that Credit Suisse and ANZ would make low submissions at an agreed bid and ask spread.

Investigations by the Monetary Authority of Singapore

46    In 2012 and 2013, the Monetary Authority of Singapore investigated various Singapore benchmark submissions. That investigation included, but was by no means limited to, a review of submissions concerning the Malaysian ringgit fixing benchmark during 2011. It was not conclusively found that there had been any impact on the benchmark as a result of any of any of the conduct the subject of the investigation.

47    The Authority did, however, require certain banks to set aside additional statutory reserves at zero interest for specified periods. ANZ was required to set aside SGD300 million. Macquarie was required to set aside between SGD100,000,000 and SGD300,000,000 in additional statutory reserves. Those reserves have since been returned.

Other relevant facts concerning ANZ

48    At the time of the relevant communications, Mr Chew, Ms Hooi and Mr Tan were required to follow relevant ANZ policies and procedures. Those policies and procedures included ANZ's Code of Conduct and Ethics and the Global Markets Business Instruction Manual. The Code set out some broad principles and values that ANZ employees were required to follow. They included that ANZ employees would act in ANZ's best interests and value ANZ's reputation; act fairly and honestly; identify and manage conflicts of interest responsibly; respect and maintain privacy and confidentiality; comply with the Code of Conduct and Ethics, the law and ANZ policies and procedures; and immediately report any breaches of the Code, the law or ANZ policies and procedures.

49    The Global Markets Business Instruction Manual was introduced in October 2010 and was continually updated. It contained over 30 sections and summarised the key principles, rules, policies and procedural requirements that employees in ANZ’s global markets business were required to comply with. All ANZ employees were required to comply with all policies, processes and specific requirements in the country relevant to their activities. In Singapore, that included the rules published by the Association of Banks in Singapore.

50    ANZ did not have a competition law compliance program in place in Singapore during 2011.

51    Following the investigation by the Monetary Authority of Singapore, ANZ made significant improvements to its compliance systems. Those improvements included, relevantly: enhancing and implementing internal policies and procedures with respect to benchmark submissions; conducting training of all trading staff; implementing surveillance of all communications to identify irregularities; and procuring the external audit of the adequacy of ANZ’s control environment in respect of trading activities.

52    ANZ has not previously been found by the Court to have contravened the Competition and Consumer Act.

53    ANZ at all times cooperated with the Commission and, where possible, assisted the Commission’s investigations in relation to this matter. The Commission first contacted ANZ in relation to the investigation in April 2014. ANZ voluntarily provided a range of additional information and assistance in addition to information that was supplied under compulsion pursuant to notices issued under s 155 of the Competition and Consumer Act. ANZ undertook a voluntary exercise to try to identify, from its trading systems, how many NDF transactions were undertaken by ANZ in the relevant period with non-bank Australian counterparties. In mid-2015, ANZ voluntarily provided the Commission with a arrange of information about its business and operations in South East Asia and the NDF market, including summaries of relevant NDF trading data. ANZ also arranged conferences with the Commission in August 2015 and early to mid-2016 to provide assistance, expertise and explanations in relation to some of the relevant financial information and the operation of ANZ’s NDF business.

54    ANZ indicated at an early stage of the investigation that it was prepared to work with the Commission to resolve its investigation. ANZ ultimately agreed to make admissions and did not contest the making of pecuniary penalty orders.

The Macquarie attempted arrangements

55    On eight occasions during 2011, Mr Loh, on behalf of Macquarie, engaged in communications on the Reuters or Bloomberg communications platforms during which he attempted to make arrangements with traders employed by other banks involved in trading in Malaysian ringgit NDFs. The arrangements that he attempted to make included provisions which were cartel provisions as defined in s 44ZZRD of the Competition and Consumer Act. That is because: first, they had, as a substantial purpose, the manipulation of the Malaysian ringgit fixing benchmark rate, and therefore, indirectly, the fixing, controlling or maintaining of the price of Malaysian ringgit NDFs calculated by reference to that benchmark rate; and second, Macquarie was in competition with the banks that employed the traders with whom the arrangements were sought to be made. In engaging in that conduct, Mr Loh acted within his apparent authority as a trader employed by Macquarie.

56    Following are the basic details of each of the attempted arrangements derived from the agreed statement of facts. The parties did not tender the records of the chatroom discussions.

18 February 2011

57    At around 11.09 am on 18 February 2011, Mr Loh communicated with a trader employed by Standard Chartered. The communication occurred on either the Reuters or Bloomberg communications platform. During the course of that communication, Mr Loh asked the Standard Chartered trader to make a low submission to Thomson Reuters in relation to the ringgit fixing benchmark rate. Mr Loh referred to discussions that he had engaged in with traders from the Bank of Tokyo and ING Bank and stated that each of those banks would be making low submissions.

4 April 2011

58    Between about 10:19 am and 10:33 am on 4 April 2011, Mr Loh participated in a chatroom discussion with traders at ING Bank, Credit Agricole and Nomura. During those discussions: Mr Loh requested ING Bank and Credit Agricole to make high submissions; the ING Bank trader responded by stating that he could "do high today so far"; the trader at Credit Agricole stated he had no interest in the outcome of the fixing; and Mr Loh requested the traders at ING Bank and Credit Agricole to submit high if they could.

14 July 2011

59    Between about 9.50 am and 10.25 am on 14 July 2011, Mr Loh participated in a chatroom discussion with a trader at Standard Chartered. During the course of that discussion: the Standard Chartered trader requested Mr Loh's assistance in requesting other banks to make high submissions; Mr Loh offered to speak with other banks to seek their agreement to make high submissions; the Standard Chartered trader asked Mr Loh to ask Bank of Tokyo and ANZ to make high submissions; Mr Loh reported that he was asking ANZ to make a high submission and that, while a BNP trader had told him that BNP would be making a high submission, he did not know whether that was true; and Mr Loh said that each of Credit Suisse, ANZ, BNP Paribas, Bank of Tokyo and ING Bank would be making high submissions.

19 July 2011

60    Between about 10.40 am and 11.05 am on 19 July 2011, Mr Loh participated in a chatroom discussion with a trader at Standard Chartered. During the course of that discussion: the Standard Chartered trader said he needed a high fixing; Mr Loh said he would ask other banks to make high submissions; the Standard Chartered trader said he now needed a low fixing, but that he could go neutral; Mr Loh responded that it would be easier to “go low”; the Standard Chartered trader asked Mr Loh whether he wanted to "go low for the fix; Mr Loh replied that he had no interest but could help the Standard Chartered trader to go low and would ask Credit Suisse, BNP Paribas and Bank and Bank of Tokyo to make low submissions; Mr Loh asked the SCB trader to "tell ALL" to make low, to which the Standard Chartered trader responded that he had already done so; and Mr Loh said that ANZ’s submission that day would be low

27 July 2011

61    Between about 10.30 am and 10.59 am on 27 July 2011, Mr Loh engaged in chatroom discussions with traders at Credit Suisse and Royal Bank of Scotland during which he: requested Credit Suisse to make a high submission; asked whether the Royal Bank of Scotland trader wanted the ringgit fixing rate that day to be high; said that Royal Bank of Scotland and Macquarie needed all the help they could get with the fixing rate that day; said that the submissions made by each of ANZ, Bank of Tokyo and Credit Suisse that day would be high; and requested Royal Bank of Scotland to make a submission that was high.

28 July 2011

62    Shortly after 9.00 am on 28 July 2011, Mr Loh participated in a chatroom discussion with a trader at Standard Chartered. During the course of that discussion: the Standard Chartered trader stated that he needed a high fixing; Mr Loh stated that he was the same way; the Standard Chartered trader stated that he would need to "call for help early"; and Mr Loh agreed and informed the Standard Chartered trader that he was getting help from other banks in relation to the fixing.

63    Between about 10.25 am and 11.00 am on the same day, Mr Loh participated in a chatroom discussion with a trader from Royal Bank of Scotland. During that discussion: Mr Loh stated that he thought people would "go hi [high] tod [today]"; the Royal Bank of Scotland trader said that he would also go high; Mr Loh said that BNP Paribas, Credit Suisse and Standard Chartered would all be making high submissions; Mr Loh said that he would ask ING Bank and Bank of Tokyo to make high submissions and asked the Royal Bank of Scotland trader to contact Credit Agricole; the Royal Bank of Scotland trader asked what rate he should put as his submission for the fixing; and Mr Loh asked the Royal Bank of Scotland trader to make a high submission.

23 September 2011

64    Between about 10.23 am and 11.00 am on 23 September 2011, Mr Loh initiated a chatroom discussion with a trader at Royal Bank of Scotland. During the course of that discussion: Mr Loh asked the Royal Bank of Scotland trader how he was planning to submit that day; the Royal Bank of Scotland trader said he would submit low; Mr Loh said that he wanted a low submission as well; and Mr Loh asked the Royal Bank of Scotland trader to make a low submission.

17 October 2011

65    Between about 10:33 am to 11:07 am on 17 October 2011, Mr Loh participated in a chatroom discussion with a trader at Credit Suisse. During the course of that discussion: Mr Loh said he wanted the ringgit fixing rate to be high; the Credit Suisse trader said he also wanted the fixing rate to be high; and Mr Loh asked the Credit Suisse trader to make a high submission.

Other relevant facts concerning Macquarie

66    At the time Mr Loh engaged in the relevant communications, Macquarie had in place a market risk compliance framework comprising policy documents, online compliance training modules and ad-hoc monitoring covering various products, including NDFs. The compliance documentation included: a Market Risk Limits Policy; a Risk Management Group Trading Book Policy Statement; a Macquarie Bank Limited Singapore Compliance Manual; an Employee Guide; and a Compliance Declaration. The online compliance training and modules included: annual compliance refresher training; anti-bribery and corruption training, jurisdictional training concerning Singapore; information risk awareness training; compliance industry training, and anti-fraud training.

67    Macquarie did not, however, have a competition law compliance program in place during 2011.

68    At some stage subsequent to 2011, Macquarie put in place new processes and procedures which were intended to establish and maintain an effective control environment to ensure proper standards of market conduct in trading activities were maintained. Macquarie conducted regular training for relevant front office staff and new joiners on appropriate conduct, competition law and market practices.

69    Macquarie at all times cooperated with the Commission and, where possible, assisted the Commission’s investigations in relation to this matter. Macquarie’s first “engagement” with the Commission in relation to the Commission’s investigation occurred in around mid-2014. It voluntarily produced information requested by the Commission, including information to assist the Commission to understand the industry and complex financial instruments. It also requested the Commission to issue a notice under s 155 of the Competition and Consumer Act so that Macquarie could produce further information, which it considered might assist the Commission, but which was outside the scope of an earlier s 155 notice. Macquarie also arranged meetings with a senior and experienced trader to explain various matters relating to Macquarie’s NDF business and assisted in the preparation of summaries of trading data information requests. Macquarie’s cooperation extended to very senior levels within Macquarie.

70    Macquarie indicated at an early stage of the investigation that it was prepared to work with the Commission to resolve its investigation. Macquarie ultimately agreed to make admissions, assisted in the drafting of the agreed statement of facts, and did not contest the making of pecuniary penalty orders.

Relevant provisions of the Competition and Consumer Act

71    Section 44ZZRJ of the Competition and Consumer Act provides as follows:

44ZZRJ  Making a contract etc. containing a cartel provision

A corporation contravenes this section if:

(a)    the corporation makes a contract or arrangement, or arrives at an understanding; and

(b)    the contract, arrangement or understanding contains a cartel provision.

72    Section 44ZZRD contains a detailed definition of a cartel provision. Relevant, for the purposes of this matter, are ss 44ZZRD(1), (2)(a) and (b) and (4)(a) and (c) which provide as follows:

44ZZRD  Cartel provisions

(1)    For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if:

(a)    either of the following conditions is satisfied in relation to the provision:

(i)    the purpose/effect condition set out in subsection (2);

(ii)    the purpose condition set out in subsection (3); and

(b)    the competition condition set out in subsection (4) is satisfied in relation to the provision.

(2)    The purpose/effect condition is satisfied if the provision has the purpose, or has or is likely to have the effect, of directly or indirectly:

(a)    fixing, controlling or maintaining; or

(b)    providing for the fixing, controlling or maintaining of;

the price for, or a discount, allowance, rebate or credit in relation to:

(c)    goods or services supplied, or likely to be supplied, by any or all of the parties to the contract, arrangement or understanding; or …

(4)    The competition condition is satisfied if at least 2 of the parties to the contract, arrangement or understanding:

(a)    are or are likely to be; or

in competition with each other in relation to:

(c)    if paragraph (2)(c) or (3)(b) applies in relation to a supply, or likely supply, of goods or servicesthe supply of those goods or services; or

73    Section 76 of the Competition and Consumer Act provides for the imposition of pecuniary penalties for, amongst other things, contraventions and attempted contraventions of certain provisions of the Act. Relevantly, ss 76(1)(a) and (b) and 76(1A)(aa) provide as follows:

76  Pecuniary penalties

If the Court is satisfied that a person:

(a)    has contravened any of the following provisions:

(i)    a provision of Part IV (other than section 44ZZRF or 44ZZRG);

(ia)    section 55B;

(ii)    section 60C;

(iia)    section 60K;

(iii)    section 95AZN;

(iv)    a civil penalty provision of an industry code; or

(b)    has attempted to contravene such a provision; or

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

(aa)    for each act or omission to which this section applies that relates to section 44ZZRJ or 44ZZRK—the greatest of the following:

(i)     $10,000,000;

(ii)    if the court can determine the total value of the benefits that have been obtained (within the meaning of Division 1 of Part IV) by one or more persons and that are reasonably attributable to the act or omission—3 times that total value;

(iii)    if the Court cannot determine the total value of those benefits—10% of the annual turnover (within the meaning of Division 1 of Part IV) of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and

74    It is common ground that s 76(1A)(aa)(ii) and (iii) do not apply to the attempted contraventions of s 44ZZRJ by ANZ and Macquarie because no benefits were obtained from the acts that constituted the attempted contraventions.

75    Section 5(1)(a) and (g) of the Competition and Consumer Act operate to extend Part IV of the Act (which includes s 44ZZRJ) to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia. Accordingly, in this matter, s 44ZZRJ applies to the conduct of ANZ and Macquarie (through their traders) that occurred in Singapore.

Determining the appropriate pecuniary penalty – relevant principles

76    The Competition and Consumer Act provides limited express guidance in relation to determination of an appropriate pecuniary penalty in respect of contraventions, or attempted contraventions, of provisions such as s 44ZZRJ. Section 76 says only that the pecuniary penalty that the Court should order the contravener to pay is the amount which the Court determines to be “appropriate” having regard to all relevant matters. Four particular considerations are then listed. These four considerations may be taken to be mandatory considerations. They are: first, the nature and extent of the act or omission which constitutes the relevant contravention; second, any loss or damage suffered as a result of the act or omission; third, the circumstances in which the act or omission took place; and fourth, whether the person has previously been found by the Court in proceedings under Parts VI and XIB to have engaged in similar conduct. That list is obviously not exhaustive.

77    There are, however, a number of general principles that are applicable to the determination of appropriate pecuniary penalties under the Competition and Consumer Act.

78    Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 at 490 [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene: both specific and general deterrence are important: Australian Securities and Investments Commission, in the matter of Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 936; (2006) 234 ALR 511 at 532 [90].

79    A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]. In relation to general deterrence, it is important to send a message into the marketplace that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (2003) 130 FCR 406 at 418 [32].

80    The question whether a pecuniary penalty involves an element of punishment appears to have excited some controversy. The authorities do not speak with one voice. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285, Burchett and Keifel JJ said (at 296-7) that the purpose of penalties under s 76 of the Competition and Consumer Act is not “punishment”. Carr J, on the other hand, did not “rule out” or exclude punishment as one of the purposes of a penalty under s 76. In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238, Goldberg J (at 241) expressed difficulty with the proposition that the fixing of a penalty under s 76 should not be regarded as punishment. His Honour referred to an observation made by Smithers J in Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896 that a penalty under s 76 should “constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act”. In Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2001] FCA 1716; (2002) ATPR 41-851 at 44,543 [50], the Full Court appeared to have no difficulty accepting that a penalty under s 76 “should act as a punishment of the offender”.

81    It is difficult to understand why that issue is controversial. It may be because judges have been at pains to distinguish pecuniary penalty proceedings from criminal proceedings, or civil penalties from criminal sanctions. In Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2016] FCA 453; (2016) 336 ALR 1 at 25 [76], for example, Greenwood J, in fixing penalties under s 76, placed no emphasis on the notion of punishment “as that term is regarded in the context of a criminal prosecution (emphasis in original). Yet the mere fact that the imposition of a pecuniary penalty may involve punishment does not mean that the civil penalty proceeding is, or should for all purposes be likened to, a criminal proceeding.

82    Section 76 is concerned with imposing a “pecuniary penalty”. The ordinary meaning of “penalty” is “a punishment imposed for contravention of law”: see ACCC v Safeway at 44. The ordinary meaning of “punish”, according to the Macquarie Dictionary, is to subject to, or inflict a penalty; and punishment simply means that which is inflicted as a penalty in punishing. There could be little doubt that, in imposing a pecuniary penalty pursuant to s 76 of the Competition and Consumer Act for a contravention of a relevant provision of that Act, the Court is imposing punishment, even if the primary object of imposing that punishment is to protect and deter. That appeared to be accepted by the Full Court in Singtel Optus, where it was said (at 265 [62]), in respect of fixing a penalty under s 76, that “the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by the offender or others as the acceptable cost of doing business” (emphasis added).

83    In short, the primary purpose of imposing a pecuniary penalty is to protect and deter by punishment. Lest this be thought to be somehow inconsistent with what was said by French J in TPC v CSR (at 52-152), in a passage that was referred to with apparent approval by the plurality in Commonwealth v Director, FWBII (at 490 [55]), it should be noted that punishment imposed primarily, if not solely, for the purpose of deterrence does not amount to retribution “within the sense of the Old and New Testament moralities that imbue much of our criminal law”; it is not vengeance or the infliction of pain or suffering purely in requital for a wrong. It is the imposition of a penalty for a statutory wrong for protective purposes. It has a primarily economic content, rather than a moral content.

84    The fixing of a pecuniary penalty pursuant to s 76 of the Competition and Consumer Act involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the contravenor, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf. Commonwealth v Director, FWBII at 491 [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the “instinctive synthesis” involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294. Instinctive synthesis is the “method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case”: Markarian v The Queen (2005) 228 CLR 357 at 378 [51] (per McHugh J). Or, as the plurality put it in Markarian (at 374 [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) “the sentencer is called on to reach a single sentence which … balances many different and conflicting features”.

85    In fixing the amount of a civil penalty, reference is frequently made to the lists of factors or considerations identified by Santow J in Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80 at 114-115 [126] and French J in Chemeq at 534 [99]. Those lists of relevant considerations, which have been approved and elaborated on by many subsequent decisions of this Court, were not, and plainly were not intended to be, exhaustive. Nor was it suggested that each of the factors referred to in the respective lists was necessarily relevant or important in every case. These lists of factors (and similar lists given in other cases) should not be treated as a rigid catalogue or checklist of matters to be applied in each case: the overriding principle is that the Court should weigh all relevant circumstances: Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [72].

86    In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and serious of the offending conduct, or concern the particular circumstances of the contravenor in question (what sentencing judges commonly refer to as the offender’s “subjectives” or the “subjective circumstances”).

87    The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the contravenor is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.

88    The factors that concern the particular circumstances of the contravenor (where the contravenor is a corporation) generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.

89    The size of the contravening corporation does not of itself justify a higher penalty than might otherwise be imposed: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at 559-561 [89]-[92]. The size of the corporation may, however, be particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent. The sum required to achieve that object will generally be larger where the company has vast resources: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 at 309 [39]; Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646 at [38].

90    Careful attention must also be given to the maximum penalty for the contravention. That is so for at least three reasons: first, because the legislature has legislated for the maximum penalty and it is therefore an expression of the legislature’s policy concerning the seriousness of the prescribed conduct; second, because it permits comparison between the worst possible case and the case that the Court is being asked to address; and third, because the maximum penalty provides a “yardstick” which should be taken and balanced with all the other relevant factors: Markarian at 372 [31] (per Gleeson CJ, Gummow, Hayne and Callinan JJ).

91    Even where the maximum penalty for the contravention is high, and the amount necessary to provide effective deterrence is large, the amount of the penalty should be proportionate to the contravention and should not be so high as to be oppressive: TPC v Stihl Chainsaws at 17,896; NW Frozen Foods at 293.

Agreed penalties – Commonwealth v Director, FWBII

92    In Commonwealth v Director, FWBII, despite previous indications that the distinction between criminal and civil proceedings was, at best, unstable or involved an imprecise dichotomy (cf. Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 at 173-173 [29]-[30], 180-181 [62]-[63]; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at 141 [22], 145 [32]), the High Court pointed out a number of important differences between criminal proceedings and civil proceedings. Those differences were such that, whatever may be the position in criminal proceedings (cf. Barbaro v The Queen (2014) 253 CLR 58), in civil penalty proceedings the Court can and should receive submissions by the parties in relation to the appropriate pecuniary penalty. That includes the scenario where a regulator and a contravenor have settled the proceeding and, in pursuance of that settlement, have jointly proposed an agreed penalty or penalties. In so deciding, the Court espoused a number of important principles concerning the approach that the Court should take to proposed agreed penalties.

93    First, the High Court confirmed, as had previously been authoritatively determined, that the Court is not bound by the figure suggested by the parties.

94    Second, the plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) likened the Court’s task, when faced with agreed penalty submissions, to approving a compromise in civil proceedings like an infant’s compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement (at 491 [58]). Their Honours said (at 491 [57]) that it is “entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate” and (at 491 [58]) that there is “no reason in principle or practice why civil penalty proceedings should be treated as an exception” to that general rule.

95    Third, and largely following from the second point, when the parties jointly propose an agreed penalty, the Court’s task, in the view of the plurality, is essentially to consider whether the settlement, including the proposed agreed penalty, is appropriate. And, it would seem, if the Court is satisfied that the agreed penalty is appropriate, the Court should ordinarily accept that penalty, or at least it would be highly desirable for it to do so. In the words of the plurality, if the Court is persuaded of “the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed” (emphasis in original) it would be “highly desirable in practice for the Court to accept the parties’ proposal and therefore impose the proposed penalty (at 491 [58]).

96    The emphasis on “an” in that passage appears to be important. It suggests, consistently with what was said by the Full Court of this Court in NW Frozen Foods at 290-291 and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 at 48-626 [51] (see also 48-625 [47]), that there is no single appropriate penalty: rather, there is a range within which no particular figure can be said to be more appropriate than another. An agreed penalty may be “an” appropriate penalty if it falls within that range.

97    Fourth, the desirability of the Court accepting a proposed agreed penalty which it is persuaded is an appropriate penalty appears to derive primarily from a public policy consideration. That public policy consideration is the promotion of predictability of outcome in civil penalty proceedings. According to the plurality in Commonwealth v Director, FWBII (at 489 [46]), “the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers” and “such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention”. In short, since it is desirable to encourage the settlement of complex pecuniary penalty proceedings, it is desirable to accept and make agreed penalty orders, so long as the agreed amount is considered to be an appropriate penalty.

98    Fifth, Keane J explicitly recognised that the willingness of a regulator to accept an agreed penalty is likely to be the product of a compromise which reflects “a considered estimation that, given the hazards and expense of litigation, satisfaction of the [regulator’s] claim against the defendant on such terms is apt to advance the public interest in the enforcement of the regulatory regime more effectively and efficiently than the continued prosecution of the claim” (at 503 [109]). In agreeing to the proposed penalty, it might be expected that the regulator had weighed up, amongst other things, the likely cost of the proceeding and the risk of failure if a compromise was not reached and the matter proceeded to hearing. The regulator’s “stance can be expected to reflect a pragmatic assessment by the authority charged by the legislature with the effective enforcement of the regulatory regime that the public interest is best served by bringing the proceeding to a conclusion on agreed terms as to penalty (at 503-504 [109]). In that sense at least, the regulator is not bound to be dispassionate and may advocate for any litigious outcome which it considers to be in the public interest: see also Gageler J at 496 [78]; Keane J at 502 [105].

99    The explicit recognition that an agreed penalty is likely to reflect compromise and pragmatism is important. It appears to implicitly recognise that the agreed penalty may well be less than the penalty that the regulator might otherwise have sought or advocated. In short, the regulator might well have been prepared to accept a penalty which has been discounted to reflect the risk and cost of the proceeding if not compromised: much like a plaintiff settling a civil damages claim might apply a discount to the damages sought to reflect the compromise and the avoidance of cost and risk.

100    Each of the parties in these proceedings accepted that the agreed penalties were the product of compromises and the assessment of risks and costs. It was expressly put that the Commission had started “high” and ANZ had started “low” and that the parties had met somewhere in between. It was expressly and candidly acknowledged by the Commission that it would have preferred a higher penalty.

101    The fact that the agreed penalty is likely to be the produce of compromise and pragmatism also informs the Court’s role when faced with a proposed agreed penalty. According to Keane J, it is because a regulator may, on occasion, be “too pragmatic in taking such a stance that the court must exercise its function to ensure that the penalty imposed is just, bearing in mind competing considerations of principle, including that of equality before the law and the need to maintain an effective deterrence to other potential contravenors” (Commonwealth v Director, FWBII at 504 [110]). In other words, compromise and pragmatism are to be expected, but if the regulator goes too far, the penalty may cease to be an appropriate penalty because it would cease to achieve the objective of deterrence.

102    Sixth, Keane J noted another feature of civil proceedings which suggested perhaps another reason why the Court would perhaps be slow not to accept an agreed civil penalty That reason is that an agreed penalty is not merely the opinion of the parties concerning what penalty would be just. Rather, it goes more fundamentally to the basis up which the controversy between them may be quelled. His Honour said (at 502 [103]):

In proceedings under s 49 of the BCII Act, as indeed in any civil proceedings, it is the right and duty of the plaintiff to mark out the extent of its claim against the defendant. The plaintiff’s claim establishes the scope of the controversy to be resolved by the judgment of the court. When a plaintiff asserts a claim to the grant of a particular remedy, it is not proffering an opinion on a matter of fact or law; it is stating the basis on which a controversy between it and the defendant may be quelled by the exercise of judicial power. When a defendant agrees to a civil penalty in a particular amount, it is assenting to the grant of relief to that extent. And an agreement of the parties as to the basis on which they seek to resolve the controversy between them is not merely an opinion proffered by either or both of them as to how the proceedings should justly be resolved: it is a resolution of the controversy between them insofar as the quelling of that controversy is in their power.

103    Overall, the decision in Commonwealth v Director, FWBII suggests that the Court’s primary task, when faced with civil penalty proceedings that have settled on the basis of agreed facts and joint submissions advocating an agreed penalty, is to consider whether the agreed penalty is an appropriate penalty having regard to all relevant matters. The relevant matters include, where the contravention is a contravention of the Competition and Consumer Act and the penalty is to be imposed under s 76 of that Act, the matters expressly referred to in that section. They also include the factors and principles discussed earlier, including the factors that bear on the nature and seriousness of the contravention, the factors that relate to the particular circumstances of the contravenor, and the overall objective of deterrence. If, upon consideration of those factors and principles, the Court is persuaded that the penalty is an appropriate penalty, it should ordinarily be accepted and imposed, mainly for public policy reasons relating to the promotion of predictability of outcome and the encouragement of settlements.

104    In considering whether the proposed agreed penalty is an appropriate penalty, the Court should also generally recognise that there is no single appropriate penalty and that an agreed penalty may be an appropriate penalty if it falls within a range within which any of the figures could be considered to be appropriate having regard to all relevant circumstances. The Court should also recognise that the agreed penalty is most likely the result of compromise and pragmatism on the part of the Commission, and to reflect, amongst other things, the Commission’s considered estimation of the risks and expense of the litigation had it not been settled. While the High Court did not say so in terms, it seems to be implicit in what was said (at least by Keane J), that because the agreed penalty might be the result of compromise, pragmatism and an assessment of risk and expense, it might also reasonably be expected that the agreed penalty is likely to be lower than what the Commission might otherwise have contended was an appropriate penalty. That, in any event, would appear to be a practical and realistic assessment of the likely outcome of a compromise involving an agreed penalty. The question is whether the Commission had been “too pragmatic”.

ANZ attempted contraventions - appropriate penalties

105    Are the proposed agreed penalties of $900,000 for each attempted contravention by ANZ, resulting in a total penalty of $9 million, appropriate penalties having regard to all relevant matters?

106    To answer that question, it is necessary apply the general principles concerning the imposition of pecuniary penalties, discussed at length earlier, to the particular facts and circumstances revealed in the agreed statement of facts concerning ANZ and its attempted contraventions. The relevant facts to consider and balance in the scales include; the nature and extent of ANZ’s actions (through its employed traders) that resulted in the attempted contraventions; any loss or damage suffered as a result of those actions; the circumstances in which the actions took place; any previous contraventions by ANZ; assistance and cooperation provided by ANZ to the Commission in respect of the investigation and the conduct of these proceedings; and, more generally, the level of the penalties necessary to achieve specific and general deterrence in all the circumstances. Are the penalties sufficient to deter repetition by ANZ and contraventions by others who might be tempted to contravene? Do the penalties send a message into the marketplace that the contraventions are serious and not acceptable?

The nature, extent and circumstances of the attempted contraventions

107    There could be little doubt that the attempted contraventions of s 44ZZRJ by ANZ were very serious. ANZ did not submit otherwise.

108    In admittedly simple terms, ANZ’s conduct involved a series of attempts to manipulate the Malaysian ringgit benchmark or fixing rate and thereby indirectly fix (or control or maintain) the price of Malaysian ringgit NDFs. Attempted price fixing is almost invariably considered to be seriously unlawful conduct. In Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (No 5) [1998] FCA 310, Heerey J said:

Deterrence is especially significant in relation to price-fixing. This form of contravention commonly occurs in secret and between parties who seek a mutual benefit. The risk of detection is often low and the potential gain to the contravenors, and damage to the community, large. Therefore the penalty needs to be correspondingly high. Moreover, where the contravention takes the form of an attempt at the making of a price-fixing arrangement, it needs to be remembered that most price-fixing must start with some form of contact, however discreet, with a competitor. Those minded to engage in price-fixing might be tempted to think that if an informal and subtle approach is made, the worst that can happen is a rebuff. A penalty should reflect the fact that an attempt at price-fixing is seriously unlawful conduct in itself.

109    While made in a different factual context, and in respect of earlier provisions of the Competition and Consumer Act, the observations of Heerey J remain pertinent and apposite to the circumstances of this matter. Similar observations concerning the seriousness of conduct involving price fixing have been made by numerous judges over the years: see for example ACCC v Leahy Petroleum (No 3) at 313 [57] (Goldberg J); Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; (2002) ALR 169 at 173 [13] (Finkelstein J).

110    Attempts by banks and other market participants to fix prices or financial benchmarks in the financial system should be regarded as particularly serious contravening conduct. It is essential that market participants and the public generally have confidence in the integrity and efficacy of the financial system. That, in turn, depends on faith and the belief that free market forces are allowed to operate and are not distorted by anti-competitive or collusive behaviour. Attempted price fixing by banks and other market participants has the capacity to seriously undermine these very underpinnings of the financial system. That is particularly the case where, as here, the integrity of the benchmarks relies on the integrity and propriety of certain market participants.

111    The conduct in question here involved collusion for the purpose of influencing a financial benchmark that lay at the heart of a not insignificant market: the market for Malaysian ringgit NDFs. As the agreed facts reveal, the best estimate of the daily turnover in Malaysian ringgit NDFs is between A$35 to A$40 million. The yearly turnover is estimated to be approximately A$9 to A$10 billion. ANZ’s estimated trade volume in Malaysian ringgit NDFs during the period that the contraventions occurred was A$177 million. Those figures represent the face value of the NDFs, not the margins or settlement amounts. It may readily be accepted that while these amounts appear at first blush to be large, in the context of the broader financial system, there are many far more substantial and important financial markets. By way of contrast, the estimated daily turnover in outright forward contracts is approximately $9 to $10 billion.

112    Nevertheless, the Malaysian ringgit NDF market cannot be dismissed as insubstantial or unimportant. Corporations in Australia and elsewhere who enter into Malaysian ringgit NDFs do so to manage currency risks and for other genuine commercial purposes. They enter into such arrangements in good faith, no doubt believing that the benchmark fixing rate used to determine the settlement rate is calculated in accordance with the relevant rules and in the absence of collusion between the submitting banks. The integrity and efficacy of the market in Malaysian ringgit NDFs relies on the confidence of market participants that the benchmark is not rigged by the major banks that are entrusted with the responsibility of making submissions to Thomson Reuters. The conduct in question in this matter had the capacity to significantly undermine that confidence and the integrity and efficacy of the market for Malaysian ringgit NDFs.

113    ANZ had been specifically entrusted with the role of submitting bank by the Association of Banks in Singapore. ANZ’s conduct, through its traders, effectively amounted to an abuse of the trust that had been placed in it by the Association.

114    If the arrangements that the ANZ traders attempted to make had in fact been made, there was at the very least a serious or real risk that some of the parties to Malaysian ringgit NDFs that were settled on the days that collusion occurred would have been adversely affected. That is because there was at least a serious prospect that the collusion would have resulted in a distorted Malaysian ringgit fixing benchmark rate, which in turn would have affected the settlement currency amount. Adversely affected customers in that scenario would have included not just ANZ’s customers, but any customer who settled Malaysian ringgit NDFs on the days that the benchmark was affected by the collusive behaviour. While it is not possible to calculate, or even estimate, the loss that might have been suffered by market participants had the attempts in question succeeded in influencing the benchmark, that does not detract from the seriousness of the attempted contraventions.

115    There could be little doubt that conduct involving collusion and the “rigging” of financial benchmarks, including the Malaysian ringgit fixing benchmark rate, would in most cases be very difficult for regulators to detect. Such conduct is almost invariably, almost by definition, engaged in covertly and intended to be kept secret. The effect of the collusion is also generally not obvious. The conduct in question here is a case in point. Traders engaged in discussions using communications platforms that were only available to the parties to the communications. Records of the discussions were apparently retained by Bloomberg and Reuters, however plainly the traders involved in the impugned discussions proceeded safe in the knowledge that their communications were unlikely to ever be scrutinised. To that extent, the conduct of the traders was covert and involved a degree of secrecy. Given the way in which the relevant benchmark was calculated, it was highly unlikely that distortions resulting from any collusive behaviour would be noticed or noticeable by Thomson Reuters, the Association of Banks in Singapore, the Monetary Authority of Singapore or any other relevant regulator. No evidence or agreed fact was put before the Court to explain how and in what circumstances the Commission became aware of ANZ’s conduct. General deterrence is a particularly important consideration when imposing a penalty for a contravention which is difficult to detect.

116    The conduct of the traders in question was deliberate and systematic. It is difficult to see how the traders could not have appreciated that that their conduct was improper and, at the very least, in breach of the relevant Association rules. If they did not, plainly they should have. At the very least they acted recklessly. The conduct was not engaged in on the spur of the moment and was not isolated. It occurred over a number of months. As adverted to earlier, it was also covert, secretive and was obviously not disclosed to the Association of Banks in Singapore, Thomson Reuters or indeed any of ANZ’s customers or clients.

117    ANZ sought to characterise the relevant traders as “low level” employees. Beyond a very basic organisational chart, however, there was no evidence (or agreed facts), concerning the terms and conditions of their employment, including their salary and whether they were paid any performance related bonuses. The precise extent and scope of their authority was also relatively unclear from the material placed before the Court. One thing, however, was clear: the traders were given the authority to make submissions on behalf of ANZ to Thomson Reuters for the purposes of the calculation of the Malaysian ringgit fixing rate without any apparent need to clear the submissions with, or report the submissions to, anyone more senior in the hierarchy. That is not indicative of a low level employee. That said, it is fair to say that the conduct did not involve any senior management at ANZ. That is an important consideration.

118    Equally, it is fair to say that the traders responsible for the attempts did not work at ANZ for long. Ms Hooi, who was responsible for seven out of the ten attempts (six of them alone), commenced work at ANZ in April 2011 and appeared to have engaged in the impugned conduct within weeks of the commencement of her employment. By March 2012 she had left the employ of ANZ. Similarly, Mr Tan commenced employment at ANZ in July 2011 and engaged in the impugned conduct within a very short space of time. He left ANZ’s employment in September 2012. Mr Chew commenced work in January 2010. He engaged in only one of the attempts. By October 2010 he no longer worked at ANZ.

119    While the conduct of the ANZ traders was deemed to be the conduct of ANZ for the purposes of the attempted contraventions, from a purely corporate perspective, and from the perspective of deterrence, the gravamen of ANZ’s corporate failing and responsibility in relation to the actions of its traders lies in the fact that it did not establish or ensure that there were appropriate or satisfactory training, compliance and surveillance systems and procedures in its Singapore office during 2011. ANZ had a Code of Conduct and Ethics which appeared to contain some broad principles that all ANZ employees were required to follow. It also had a Global Markets Business Information Manual, which contained some more specific principles, rules, policies and procedural requirements for staff in ANZ’s Global Markets division. The exact content of those principles, rules, policies and procedural requirements was, at least as far as the Court is concerned, unknown. Neither the Code nor the Manual were in evidence. All that can be said is that they were plainly insufficient to prevent the attempted contraventions by the traders. There was also no evidence (or agreed fact) to the effect that ANZ conducted any detailed and ongoing training of its Singapore employees in relation to the contents of the Code or the Manual.

120    Nor was there any evidence that ANZ conducted any appropriate checks or surveillance to detect conduct of the type in question here. The available inference is that it did not, at least in Singapore. It plainly did not conduct audits or checks of the communications that its traders engaged in using the Reuters and Bloomberg chatrooms.

121    The other thing that is clear on the facts is that ANZ had no competition law compliance program in place in Singapore at the time of the attempted contraventions. That was, on just about any view, a serious failing in all the circumstances.

122    Overall, the agreed facts concerning ANZ’s compliance systems indicates that, at the time of the attempted contraventions, ANZ did not have a corporate culture in its Singapore office which was conducive to compliance, including compliance with the Competition and Consumer Act.

123    As was acknowledged in the joint submissions, the public is entitled to expect that corporations of ANZ's size and reputation will have adequate training, compliance and surveillance systems in place so as to ensure, where possible, that attempted contraventions of the kind admitted in this proceeding do not occur. There is a legitimate community expectation that Australian financial institutions will develop and maintain a good corporate culture which ensures that their staff do not engage in illegal, unethical and unprofessional conduct and do not act in disregard of the interests of their customers. The Australian public is entitled to expect that Australia’s major corporations act as exemplary corporate citizens wherever in the world they may operate.

Considerations relevant to ANZ’s particular circumstances

124    There is no doubt that ANZ is a very large corporation with enormous resources. That said, as noted earlier, size alone does not justify a larger penalty. The size of a contravening corporation is mainly relevant to ascertaining the level of penalty necessary to achieve specific and general deterrence in all the circumstances. In general terms, modest penalties are unlikely to deter very large corporations from engaging in contravening conduct from which they may derive significant benefits.

125    The joint submissions note that ANZ did not have a substantial degree of market power in the market for the supply of Malaysian ringgit NDFs. That may be so. By the same token, that consideration is deserving of little weight in considering an appropriate penalty for the attempted contraventions. A corporation’s market power is generally only likely to be a significant consideration in relation to market power based contraventions of the Competition and Consumer Act.

126    Of far more importance is the fact that ANZ has never before been found to have contravened the Competition and Consumer Act. ANZ is entitled to the full benefit of its good record as a corporate citizen.

127    Equally important is the agreed fact that ANZ has at all times cooperated with the Commission in relation to the investigation, as well as the fact that ANZ ultimately made admissions in relation to the attempted contraventions and did not contest the making of pecuniary penalty orders.

128    Two issues should be noted in relation to the weight to be given to ANZ’s cooperation and the fact that it ultimately made admissions and did not contest the proceedings.

129    First, the agreed facts insofar as they related to cooperation were initially expressed in very sparse and general terms. Subsequent to the hearing, as a result of exchanges that occurred during the hearing and with the leave of the Court, the Commission and ANZ furnished a supplementary statement of agreed facts that contained some additional detail concerning ANZ’s cooperation. A supplementary statement of agreed facts was also furnished in relation to cooperation by Macquarie.

130    Second, both the Commission and ANZ advanced submissions concerning the complexity of the factual and legal issues, the parties’ respective assessment of the litigation risks and the length of the hearing that would have ensued if the proceeding had not been compromised. Those submissions were no doubt directed to the public policy considerations referred to in Commonwealth v Director, FWBII.

131    The difficulty, however, is that the Court is in no real position to form a view concerning the parties’ respective risks or the length of the hearing that would have ensued had the matter not been compromised. It was submitted, for example, that factual complexity arose because it was difficult to decipher the relevant Bloomberg or Reuters records of the chatroom communications. The parties, however, chose not to tender those records and were ultimately able to agree on what is accepted to be an accurate summary of the relevant communications. It is in those circumstances difficult to assess the degree of complexity arising from the nature of the so-called “chats” or how long it would have taken to resolve the issue concerning the meaning of them if the matter went to trial.

132    ANZ also referred to the difficulty or complexity of the question whether manipulation of the Malaysian ringgit benchmark indirectly fixed the price of Malaysian ringgit NDFs. The implicit suggestion appeared to be that the Commission faced significant hurdles in its case against ANZ and that ANZ should therefore be given significant “credit” for not contesting the case. It is, however, difficult to assess the risk that the Commission’s case might have failed on this or any other ground, particularly in the absence of any detailed argument and in circumstances where, ultimately, the indirect purpose or effect element relating to price was agreed or conceded.

133    Ultimately, it is unnecessary to make any factual findings concerning the precise degree of cooperation, or the length and complexity of the trial that was avoided, or the strength or otherwise of the Commission’s case had the matter been contested. As for cooperation, weight must be given to the fact that ANZ “at all times” cooperated with the Commission, though more weight may have been given to that consideration if further details of the cooperation had been provided. It must also be accepted that the compromise of the proceeding avoided a potentially long, complex and costly contested hearing, though it is neither possible nor necessary to put a figure to the saving, let alone quantify any “discount” that should be given for fact that ANZ did not contest the proceeding. ANZ’s cooperation and approach to these proceedings may also be taken to be an indication of ANZ’s contrition, acceptance of responsibility and willingness to facilitate the course of justice: NW Frozen Foods at 293-294. Each of those matters is also relevant to a consideration of the level of the penalty that is necessary to secure specific deterrence.

Deterrence

134    As discussed in detail earlier, the primary object of a pecuniary penalty is deterrence, both specific and general. As explained earlier, putting aside the individual actions of the traders, ANZ’s corporate failing and responsibility in relation to the attempted contraventions was its failure to establish appropriate training, compliance and surveillance systems and procedures. In that context, the penalties must be sufficient to deter ANZ and other companies in their position from repeating such failings. Put in more positive terms, the penalties should provide a sufficient incentive going forward to ensure that ANZ, and like corporations, develop and maintain adequate training, compliance and surveillance systems wherever conduct of the sort that gave rise to the attempted contraventions may occur. The penalties must be such that they will not be simply viewed as an acceptable cost of doing business.

Other matters

135    The parties submitted that some weight should be given to the fact that in 2012 and 2013, the Monetary Authority of Singapore conducted some sort of investigation into benchmarks and took some action against ANZ and various other banks. The difficulty is that the facts relating to the investigation were far from pellucid. The agreed facts were that the Monetary Authority of Singapore investigated “Singapore benchmark submissions”, that the Authority’s “review covered the occasions in this proceeding” and included the Malaysian ringgit fixing rate, that the Authority “made no conclusive finding that the relevant benchmark rates were successfully impacted”, but that the Authority required certain banks to set aside additional statutory reserves at zero interest for specified periods.

136    At the hearing, the parties were put on notice that the brevity, generality and, in some respects, the ambiguity of the agreed facts concerning the Monetary Authority of Singapore’s “review” made it difficult for the Court to assess and give any weight to those facts. The precise nature and scope of the Authority’s review was unclear. It was, for example, unclear to what extent the review focused on the Malaysian ringgit fixing rate, whether it specifically considered or made findings concerning the communications between the relevant traders that formed the basis of ANZ’s attempted contraventions, and whether the fact that the Authority made no conclusive finding arose from the nature and scope of the inquiry, or from an absence of evidence, or for some other reason. It was unclear whether the Authority made any findings whatsoever in relation to the Malaysian ringgit fixing rate. Equally, it was unclear whether the Authority’s requirement that the ANZ set aside additional reserves had anything to do with any findings it might have made in relation to the Malaysian ringgit fixing rate.

137    The parties were invited to supply further agreed facts or evidence in relation to the Monetary Authority of Singapore’s review and anything that flowed from it. The Commission and Macquarie provided a supplementary agreed statement of facts which dealt in part with that matter. The supplementary statement attached a statement issued by the Authority on 14 June 2013. The statement referred to the Authority’s “year-long review of the processes relating to banks’ benchmark submissions” which “covered the Singapore dollar interest rate benchmarks – the Singapore Interbank Offered Rates (SIBOR) and Swap Offered Rates (SOR) – and the Foreign Exchange spot benchmarks (FX Benchmarks) that are commonly used to settle Non-Deliverable Forward FX contracts over the period from 2007 to 2011”. It can be inferred from this that the review covered the Malaysian ringgit benchmark rate.

138    The statement records the following findings in relation to the activities of banks and traders:

Banks

Twenty banks were found to have deficiencies in the governance, risk management, internal controls, and surveillance systems for their involvement in benchmark submissions. MAS has censured these banks and directed them to adopt measures to address the deficiencies. The banks are required to report their progress to MAS on a quarterly basis, and conduct independent reviews to ensure the robustness of their remedial measures.

The banks are required to set aside additional statutory reserves with MAS at zero interest for a period of one year…

…..

Traders

A total of 133 traders were found to have engaged in several attempts to inappropriately influence the benchmarks. While there is no conclusive finding that SIBOR, SOR and FX Benchmarks were successfully manipulated, the traders’ conduct reflected a lack of professional ethics. Although the number of traders involved represents a small proportion of the trading community in Singapore, MAS takes a serious view of the need to uphold high standards of integrity in the industry and expects banks to foster a culture of ethical conduct among all their employees.

The respective banks have taken disciplinary actions against the traders involved….

139    It is open to infer from this statement that the actions of some or all of the traders who worked on the respective banks’ NDF desks may have been covered by the review. What remains unclear, however, is the extent to which any findings concerning the activities of those traders played a part in the Authority’s decision to require the banks to set aside additional reserves. It is also unclear from the agreed facts whether either ANZ or Macquarie took disciplinary action against the relevant traders as a result of any findings made by the Authority. All of the relevant traders had left their employ with either ANZ or Macquarie by the time the Authority issued this statement.

140    The Authority’s review is of some relevance. It is not, however, a particularly weighty factor in considering whether the agreed penalties are appropriate. It does reveal that the Monetary Authority of Singapore had identified serious issues in the process relating to benchmark submissions by banks as long ago as 2012 or 2013. If the actions of the traders in question in these proceedings were investigated and exposed by the Monetary Authority of Singapore review, it is unclear why it has taken until late 2016 for these proceedings to be resolved.

141    The Commission provided the Court with details of penalties imposed in a number of other cases concerning cartel related contraventions. Ultimately, however, the parties essentially agreed that the facts and circumstances of those cases were not comparable to this matter and that little was to be gained from comparing those penalties with the proposed agreed penalties in this matter.

Are the proposed agreed penalties appropriate?

142    The proposed agreed penalties of $900,000 in respect of each of the ten ANZ attempted contraventions should be accepted. Each of them is, in the sense discussed earlier, an appropriate penalty for the attempted contravention of s 44ZZRJ by ANZ. They are within the range of appropriate penalties that might be arrived at by the proper application of the relevant principles to the agreed facts. In those circumstances, and having regard to the principles discussed in Commonwealth v Director, FWBII, it is “highly desirable” that the agreed penalties be accepted and imposed.

143    That conclusion has been reached with some hesitation, and not without some solicitude.

144    The determination of an appropriate pecuniary penalty is a quintessentially evaluative exercise. The Court is required to consider and weigh in the balance a number of relevant facts, circumstances and considerations. The metaphoric scales, however, do not produce one correct answer. Minds may well differ about the weight and significance to be given to some of the facts and circumstances. Equally, minds may well differ as to the size of the penalty required to achieve the object of specific and general deterrence in all the circumstances. These are not matters of science, mathematics or pure logic. As was pointed out earlier, it is well accepted that the evaluative process involved in determining an appropriate penalty may produce a range of possible penalties, none of which could definitively be said to be more appropriate than any other within that range. Any penalty within that range could be accepted to be an appropriate penalty, even though it may not be able to be said to be the only appropriate penalty.

145    When all of the relevant facts, circumstances and considerations in relation to ANZ and its attempted contraventions are weighed in the balance, it cannot be concluded that the proposed agreed penalties are outside the range of possible appropriate penalties. In that sense, it may be accepted that they are appropriate penalties. Two important points should, however, be made clear in relation to that conclusion.

146    First, in my view, the agreed penalties are at the very bottom of the range of appropriate penalties. Or, perhaps more precisely, my evaluation of the relevant facts, circumstances and other considerations would be that the agreed penalties are at the very bottom of the range of available appropriate penalties. That is primarily because of the seriousness of the contravening conduct, the serious consequences of the attempted contraventions in terms of the integrity of the market for Malaysian ringgit NDFs and financial markets generally, and ANZ’s size and status as a major Australian financial institution. It is unnecessary to repeat what was said earlier about those considerations. A very sizeable penalty is plainly required to deter a financial institution of the size of ANZ from engaging in such conduct again. Equally, a very sizeable penalty is required to deter other large financial institutions in positions similar to ANZ who might be tempted to engage in similar contravening conduct.

147    It is, of course, accepted that the agreements were not ultimately made (or, perhaps more accurately, the Commission does not allege or contend that they were), that the benchmark therefore was not in fact influenced, that the conduct was engaged in by traders who did not work for at ANZ for long, and that the gravamen of ANZ’s corporate fault lay in its failure to establish appropriate compliance and surveillance systems and procedures. Those factors reduce the level of seriousness of the attempted contraventions. They remain, however, very serious attempted contraventions. Equally, it is accepted that ANZ should be given credit for its hitherto good corporate record and the fact that it cooperated with the Commission and did not contest the proceedings. Those are matters that are deserving of weight, though, as has been explained, the facts concerning cooperation were fairly sparse and general. Cooperation and compromise are to be encouraged and operate to mitigate or moderate the penalty that would otherwise be appropriate. But even having regard to those matters, a very sizeable penalty was and is required.

148    It appears to be tolerably clear that the reason that the agreed penalties are, in my judgment, toward the bottom of the range of appropriate penalties is that they were very much the product of negotiation and compromise. The Commission and ANZ reached agreement in relation to the penalties that would be proposed to the Court after negotiation and having regard to their respective analyses of the risks (including perhaps reputational risk) and costs if the matter proceeded to a contested hearing. The agreed penalties are most likely less than the penalties that the Commission would have sought, all other things being equal, if the proceedings had not settled. So much so was effectively conceded by the Commission in its oral submissions. Nevertheless, as has already been said, the penalties are within the range and are therefore appropriate in the relevant sense. This is not a case where the Commission has been “too pragmatic” (to use the words of Keane J in Commonwealth v Director, FWBII at [110]) in compromising and accepting the agreed penalty.

149    Second, and following on from the first point, I do not suggest for a moment that, all other things being equal, I would have imposed penalties of $900,000 for each of the contraventions were it not for the fact that the parties had agreed and proposed penalties of that amount. It follows from what has already been said that I almost certainly would have imposed higher penalties, being penalties towards the higher end of the range. Nevertheless, having accepted that the agreed penalties are, as explained, within the range, albeit towards the very bottom of the range, and having regard to the principles that appear to emerge from Commonwealth v Director, FWBII, I accept that that the penalties are appropriate and that it is highly desirable that they be accepted and imposed.

150    In saying this, I am not suggesting that I regard myself as in any way bound to impose the agreed penalties. I am simply saying that, applying the principles that I am bound to apply, I accept that the penalties are within the range of appropriate penalties, are therefore appropriate penalties for the purposes of s 76, and should be made for the important public policy reasons explained in Commonwealth v Director, FWBII.

Macquarie attempted contraventions appropriate penaltIES

151    The question whether the proposed agreed penalties in respect of Macquarie’s attempted contraventions are appropriate, in the sense that has been explained, involves almost identical considerations to those that have just been addressed in the context of ANZ’s attempted contraventions. The factors and considerations relevant to the determination of appropriate penalties in relation to the attempted contraventions by Macquarie are not dissimilar to those just addressed in relation to ANZ. There are, however, some differences in both the nature, extent and circumstances of Macquarie’s conduct and in relation to the considerations relevant to Macquarie’s particular circumstances.

The nature, extent and circumstances of the attempted contraventions

152    It is unnecessary to repeat what has already been said in the context of considering the nature, extent and circumstances of the attempted contraventions by ANZ. The nature, extent and circumstances of the attempted contraventions by Macquarie are virtually the same. It is sufficient to simply identify the differences between ANZ’s conduct and Macquarie’s conduct. All things considered, however, those differences are not particularly significant.

153    First, Macquarie’s attempted contraventions were the result of the conduct of only one trader, not three.

154    The fact that Mr Loh was the only Macquarie trader who worked on the Macquarie Malaysian ringgit NDF “desk” was probably simply a reflection of the fact that Macquarie’s foray into the business of trading in those NDFs was newer and smaller than ANZ’s business in that area. It does not, however, detract in any material way from the seriousness of the conduct of the trader, or from the seriousness of Macquarie’s corporate failings and responsibility for that conduct.

155    Second, unlike ANZ, Macquarie was not a submitting bank. Unlike the ANZ traders, the relevant Macquarie trader did not, and could not, make submissions to Thomson Reuters and thereby influence the calculation of the benchmark. That is a relevant consideration. Unlike the case with ANZ, it could not be said that the Macquarie trader, and hence Macquarie itself, breached the trust that the Association of Banks in Singapore placed on the submitting banks. That said, the actions of the Macquarie trader amounted to an attempt to get other traders, who were employed by submitting banks, to breach the trust of the Association and manipulate the benchmark rate. That was still very serious contravening conduct.

156    Third, Macquarie’s Malaysian ringgit NDF business was relatively new at the time of the attempted contraventions and was not as large as ANZ’s business. It was, nevertheless, a significant business. Macquarie’s profit of US$1.3 million from its business in Malaysian ringgit NDFs between April 2011 and March 2012 may not have been large by Macquarie’s standards, but it was still a sizeable profit.

157    While those three differences are of some relevance and should be given some weight, they do not alter the fact that the attempted contraventions by Macquarie were, like ANZ’s attempted contraventions, very serious. All of the observations made earlier in the context of ANZ’s attempted contraventions apply equally to Macquarie’s attempted contraventions. In short, it was conduct that had the capacity to undermine the foundations and integrity of the market in Malaysian ringgit NDFs and the capacity to undermine the integrity of financial markets generally. If the attempts had been successful, they may have had an adverse impact on businesses who settled Malaysian ringgit NDFs on the days in question. While the potential adverse effect of the attempted contraventions cannot be quantified or even estimated, it cannot be simply dismissed as minor or trivial. The conduct of the trader was deliberate, systematic and covert. Macquarie’s corporate failing and responsibility in relation to the establishment of satisfactory compliance and surveillance systems and an environment conducive to compliance with the Competition and Consumer Act was significant and serious.

Considerations relevant to Macquarie’s particular circumstances

158    Macquarie’s particular circumstances are not dissimilar to ANZ’s circumstances in any material respect. Macquarie was not, and is not, as large a corporation as ANZ. It is, however, a very large and significant Australian corporation.

159    Like ANZ, Macquarie cooperated with the Commission’s investigations, and ultimately did not contest the proceedings or the making of pecuniary penalties in respect of its attempted contraventions. The findings and observations made in relation to ANZ’s cooperation apply equally to Macquarie. Like ANZ, Macquarie has no prior record of contravening the Competition and Consumer Act and is otherwise a good corporate citizen. Like ANZ, Macquarie improved its compliance systems and training after the attempted contraventions, though again the detail of the improved systems in the agreed facts was somewhat lacking.

Are the agreed penalties appropriate?

160    Like the ANZ penalties, the proposed agreed penalties of $750,000 in respect of each of the eight Macquarie attempted contraventions should be accepted. Each of them is, in the sense discussed earlier, an appropriate penalty for the attempted contravention of s 44ZZRJ by Macquarie. They are within the range of appropriate penalties that might be arrived at by the proper application of the relevant principles to the agreed facts. In those circumstances, and having regard to the principles discussed in Commonwealth v Director, FWBII, it is “highly desirable” that the agreed penalties be accepted and imposed.

161    All of the observations made in the context of the ANZ penalties apply equally to the Macquarie agreed penalties. My evaluation of the facts, circumstances and other considerations is that the agreed Macquarie penalties are, like the ANZ agreed penalties, toward the very bottom of the range of appropriate penalties. They are, nonetheless, within the range.

162    All other things being equal, I would not have imposed penalties of only $750,000 in respect of Macquarie’s attempted contraventions. I almost certainly would have imposed higher penalties having regard to the seriousness of the attempted contraventions, Macquarie’s position, status and size as a large Australian financial institution and the need for specific and general deterrence. I would have put a higher price on Macquarie’s attempted contraventions to deter Macquarie and other like institutions that might be tempted to engage in similar conduct in the future. At the end of the day, however, because the agreed penalties are within the range and therefore appropriate in the relevant sense, they should be accepted for the public policy and other reasons explained in Commonwealth v Director, FWBII.

Disposition

163    ANZ should be ordered to pay a pecuniary penalty of $900,000 in respect of its attempted contraventions of s 44ZZRJ of the Competition and Consumer Act on 5 May 2011, 7 June 2011, 24 June 2011, 13 July 2011, 21 July 2011, 27 July 2011, 28 July 2011, 2 August 2011, 7 September 2011 and 9 September 2011. The total of the pecuniary penalties payable by ANZ is $9 million.

164    The Commission and ANZ agreed that ANZ should be ordered to pay a lump sum contribution of $200,000 in respect of the Commission’s costs. That is an appropriate order to make in the circumstances.

165    Macquarie should be ordered to pay a pecuniary penalty of $750,000 in respect of its attempted contraventions of s 44ZZRJ of the Competition and Consumer Act on 18 February 2011, 4 April 2011, 14 July 2011, 19 July 2011, 27 July 2011, 28 July 2011, 23 September 2011 and 17 October 2011. The total of the pecuniary penalties payable by Macquarie is $6 million.

166    The Commission and Macquarie agreed that Macquarie should be ordered to pay a lump sum contribution of $200,000 in respect of the Commission’s costs. As was the case with the Commission’s costs in respect of ANZ, that is an appropriate order to make in the circumstances.

167    The parties prepared draft short minutes of orders in anticipation of this judgment. The orders as drafted by the parties are appropriate. Accordingly, orders will be made in the terms set out in the short minutes.

I certify that the preceding one hundred and sixty-seven (167) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

Associate:

Dated:    14 December 2016