FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73
SUMMARY
In accordance with the practice of the Court in cases that are of interest to the public, the Court has prepared a summary of the judgment. However, the only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment. This summary has no legal status as part of, or in explanation of, the reasons for judgment themselves.
This case was an appeal and cross-appeal (also involving an application by the respondents to rely upon a notice of contention) against declarations and orders, including civil penalties totalling $9.5 million, made by a judge of the Court in relation to a cartel concerning the supply of wire harnesses for motor vehicles between two Japanese corporations (Yazaki Corporation and Sumitomo Electric Industries Ltd) and their wholly owned Australian subsidiaries.
The Full Court of the Federal Court of Australia has allowed the appeal in part, dismissed the cross-appeal and notice of contention, and re-fixed the penalties imposed on Yazaki to a total of $46 million.
This case was first brought in 2012 by the ACCC against Yazaki Corporation. Sumitomo Electric Industries Ltd had cooperated with the ACCC and much of the evidence was provided by Sumitomo employees or officers.
Wire harnesses are electrical systems that distribute power and electrical signals to components in motor vehicles. Yazaki and Sumitomo are two of the five main manufacturers of wire harnesses globally.
From the mid-1990s, Yazaki and Sumitomo entered an overarching cartel agreement which involved an agreed mutual response to requests for quotation from vehicle manufacturers around the world for wire harnesses. The agreed response was to respect each other’s incumbency in the market and agree on prices that would, as far as possible, see the incumbent retain their particular geographic markets around the world.
Yazaki and Sumitomo and their subsidiaries put this overarching cartel agreement into effect in Australia by agreeing prices in response to requests for tender from Toyota for the manufacture of Toyota Camry vehicles in Australia. In 2003, the two companies engaged in this conduct in respect of the tender for the 2006 Toyota Camry. In 2008, they made a similar arrangement in respect of the tender for the 2011 Toyota Camry.
In 2003, the two Australian subsidiaries of Yazaki and Sumitomo engaged in their own cartel conduct, agreeing and submitting prices to Toyota’s Australian subsidiary in respect of a minor model change to the 2002 Toyota Camry.
The primary judge found that each of the above agreements, arrangements or understandings had occurred, and made declarations accordingly. These declarations were not the subject of appeal.
The primary judge fixed penalties of $7 million and $2.5 million for what he concluded were two courses of conduct in 2008, in light of what he found to be a maximum penalty of $10 million for each course of conduct. These penalties were only imposed on Yazaki in respect of the 2008 conduct by Yazaki and Sumitomo as the relevant statute of limitations precluded the imposition of penalties by reason of any of the earlier conduct.
The Full Court has allowed the appeal by the ACCC in part, finding: that the maximum penalty for each contravention was over $18 million, not $10 million, because of the proper construction of s 76(5) of the Competition and Consumer Act 2010 (Cth) (the Act); that the penalties should not be limited to two courses of conduct, but should be imposed on five contraventions (including some broadly overlapping conduct); that there does not need to be a relevant market in Australia for there to be an exclusionary provision and contravention of ss 45(2)(a)(i) and (b)(i) of the Act, and in any case, by finding that at the relevant time there was a market in Australia for the supply of wire harnesses for Toyota Camry vehicles; and that Yazaki’s subsidiary gave effect to the contravening conduct notwithstanding the finding that it lacked knowledge of the cartel in which its parent was involved.
The Full Court has imposed five penalties:
(1) for the making of the cartel in April 2008 in response to the Toyota request for tender concerning the supply of wire harnesses for the 2011 Toyota Camry, $14 million;
(2) for the giving effect to this cartel by discussing and agreeing with Sumitomo in May 2008 the prices that they would submit to Toyota for the request for tender, $12 million;
(3) for the giving effect to this cartel by submitting these agreed prices to Toyota in Japan in May 2008, $12 million; and
(4) and (5) for the giving effect to this cartel by both directing and causing its subsidiary to submit the agreed prices to Toyota’s Australian subsidiary in May to June 2008, $8 million, represented by two penalties of $4 million each.
A full copy of the orders of the Court as originally made and amended by the Full Court is attached to this summary. Orders 1 to 6, 7, 8 and 10 were those originally made and orders 6A, 6B and 9 are those made by the Full Court.
The published reasons for judgment and this summary will be available on Federal Court website at www.fedcourt.gov.au.
Allsop CJ, Middleton and Robertson JJ
16 MAY 2018
SYDNEY
ORDERS
Besanko J (9 May 2017)
Amended by the Full Court (16 May 2018)
THE COURT DECLARES THAT:
1. On 28 April 2003, Australian Arrow Pty Limited (AAPL) made an arrangement or arrived at an understanding with SEWS Australia Pty Limited (SEWS-A) in respect of a Request for Quotation (RFQ) issued by Toyota Motor Corporation Australia Limited (TMCA) to SEWS-A in connection with a minor model change to the 2002 Toyota Camry (2002 Toyota Camry Minor RFQ Agreement), the provisions of which
1.1 had the purpose of preventing, restricting or limiting the supply of the engine room main wire harness for the 2002 Toyota Camry to TMCA, by AAPL and SEWS-A, or by either of them, which were in competition with each other;
1.2 constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Competition and Consumer Act 2010 (Act) and the Competition Code as applied as a law of Victoria by section 5 of the Competition Policy Reform (Victoria) Act 1995 (Competition Code);
1.3 had the purpose, effect or likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, prices for the engine room main wire harness for the 2002 Toyota Camry supplied or to be supplied by AAPL or SEWS-A, or by either of them, in competition with each other; and
1.4 by operation of section 45A of the Act and the Competition Code (as in force at that time), had the purpose, effect or likely effect of substantially lessening competition in the Australian Toyota Camry wire harness market,
and thereby:
1.5 contravened section 45(2)(a)(i) of the Act and the Competition Code; and
1.6 contravened section 45(2)(a)(ii) of the Act and the Competition Code.
2. On 1 May 2003, by:
2.1 providing SEWS-A with the price at which AAPL then supplied the engine room main wire harness to TMCA (AAPL’s engine room main wire harness price);
2.2 discussing with SEWS-A the extent to which the price for the engine room main wire harness that SEWS-A would submit to TMCA in response to the Request for Quotation would exceed AAPL’s engine room main wire harness price;
AAPL gave effect to the 2002 Toyota Camry Minor RFQ Agreement, and thereby:
2.3 contravened section 45(2)(b)(i) of the Act and the Competition Code; and
2.4 contravened section 45(2)(b)(ii) of the Act and the Competition Code.
3. On 30 June 2003, Yazaki Corporation (Yazaki) made an arrangement or arrived at an understanding with Sumitomo Electric Industries Ltd (SEI) in response to a Request For Quotation issued by Toyota Motor Corporation (TMC) for the supply of wire harnesses for the 2006 Toyota Camry (2003 Agreement), the provisions of which:
3.1 had the purpose of preventing, restricting or limiting the supply of the selected wire harnesses for the 2006 Toyota Camry to TMC or its related bodies corporate, including TMCA, by Yazaki and SEI, or by either of them, or by any bodies corporate related to either of them, in competition with each other;
3.2 constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Act and the Competition Code,
and thereby contravened section 45(2)(a)(i) of the Act and the Competition Code.
4. By:
4.1 discussing and agreeing with SEI between 30 June 2003 and 7 July 2003 prices for wire harnesses for the 2006 Toyota Camry that they would submit in response to the Request For Quotation issued by TMC (2006 Toyota Camry agreed prices);
4.2 submitting the 2006 Toyota Camry agreed prices to TMC in Japan on 7 July 2003;
4.3. directing AAPL to submit the 2006 Toyota Camry agreed prices to TMCA in Australia between 17 September 2003 and 28 October 2003; and
4.4 causing AAPL, as an agent of Yazaki within section 84(2) of the Act, to submit the 2006 Toyota Camry agreed prices to TMCA on 28 October 2003;
Yazaki gave effect to the 2003 Agreement and thereby contravened section 45(2)(b)(i) of the Act and the Competition Code.
5. In or about late April 2008, Yazaki made an arrangement or arrived at an understanding with SEI in response to a Request For Quotation issued by TMC for the supply of wire harnesses for the 2011 Toyota Camry (2008 Agreement), the provisions of which:
5.1 had the purpose of preventing, restricting or limiting the supply of the selected wire harnesses for the 2011 Toyota Camry to TMC or its related bodies corporate, including TMCA, by Yazaki and SEI, or by either of them, or by any bodies corporate related to either of them, in competition with each other;
5.2 constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Act and the Competition Code,
and thereby contravened section 45(2)(a)(i) of the Act and the Competition Code.
6. By:
6.1. discussing and agreeing with SEI between 9 and 28 May 2008 prices for wire harnesses for the 2011 Toyota Camry that they would submit in response to the Request For Quotation issued by TMC (2011 Toyota Camry agreed prices);
6.2. submitting the 2011 Toyota Camry agreed prices to TMC in Japan on 29 May 2008;
6.3. directing AAPL to submit the 2011 Toyota Camry agreed prices to TMCA in Australia between late May 2008 and mid-2008; and
6.4. causing AAPL, as an agent of Yazaki within section 84(2) of the Act, to submit the 2011 Toyota Camry agreed prices to TMCA on 25 June 2008,
Yazaki gave effect to the 2008 Agreement and thereby contravened section 45(2)(b)(i) of the Act and the Competition Code.
6A. By submitting to TMCA the 2006 Toyota Camry agreed prices for the 2006 Toyota Camry wire harnesses in respect of which the first respondent Yazaki had been awarded supply by TMC, AAPL gave effect to the 2003 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.
6B. By submitting to TMCA the 2011 Toyota Camry agreed prices for the 2008 Toyota Camry wire harnesses, AAPL gave effect to the 2008 Agreement and thereby contravened s 45(2)(b)(i) of the Act and the Competition Code.
7. By making or arriving at the 2003 and the 2008 Agreement, Yazaki gave effect to the Overarching Cartel Agreement, the provisions of which:
7.1. had the purpose of preventing, restricting or limiting the supply of wire harnesses to TMC or its related bodies corporate, including TMCA, by Yazaki and SEI, or by either of them, or by any bodies corporate related to either of them, in competition with each other;
7.2. constituted exclusionary provisions, within the meaning of sections 4D and 45(2) of the Act and the Competition Code;
and thereby contravened section 45(2)(b)(i) of the Act and the Competition Code.
THE COURT ORDERS THAT:
8. Yazaki be restrained for a period of three years from the date of this order from making, arriving at, or giving effect to, any contract, arrangement or understanding with SEI for the supply of wire harnesses, containing provisions which have the purpose of preventing, restricting or limiting the supply of wire harnesses by it, or its related bodies corporate or agents, to any customer in Australia, unless such conduct is authorised under section 88 of the Act or any other Australian statute in accordance with section 51 of the Act.
9. Under section 76(1) of the Act and the Competition Code as applied as a law of Victoria by section 5 of the Competition Policy Reform (Victoria) Act 1995 (Vic), Yazaki Corporation pay to the Commonwealth of Australia penalties totalling $46 million in respect of contravention of sections 45(2)(a)(i) and 45(2)(b)(i) of the Act and the Competition Code identified as follows:
(1) Declarations 5 and 7 (as to the 2008 Agreement): $14 million;
(2) Declaration 6.1: $12 million;
(3) Declaration 6.2: $12 million;
(4) Declaration 6.3: $4 million; and
(5) Declaration 6.4: $4 million.
10. The respondents pay 85% of the applicant’s costs of the proceeding as agreed or taxed.
