CATCHWORDS
TRADE PRACTICES ACT - penalties under s.76 for contraventions of Part IV - price fixing - effect of agreement between A.C.C.C. and corporation on joint submissions proposing particular orders - desirability of settlement of such cases - penalty cases not criminal prosecutions - matters relevant to penalty - object of ensuring compliance with the Act by deterrence - effect of undertaking by corporation of a compliance programme agreed with the Commission - difficulties in comparing penalties in other cases with that proposed for the instant case - importance of the particular market - significance of identity of corporation to be penalised where it was a member of a group - significance of whether a corporation has previously contravened - inappropriateness of diminishing the credit to be given a corporation for co-operation and admission of liability by reference to any costs saving it may achieve thereby - reference to U.S. law conceding the U.S. Federal Trade Commission "a special competence in formulating remedies" - discussion of the question for the Court where penalty is the subject of an agreed joint submission.
Trade Practices Act 1974, ss.76, 78, 79
Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256
Commerce Commission v New Zealand Milk Corporation Ltd (1994) 2 NZLR 730
Trade Practices Commission v TNT Australia Pty Ltd (1995) 17 ATPR 40,161
Trade Practices Commission v CC (New South Wales) Pty Limited (No 2) and (No 6) (1995) 17 ATPR 40,495
Trade Practices Commission v Hymix Industries Pty Limited (1995) 17 ATPR 40,101
Trade Practices Commission v Simsmetal Limited (1996) ATPR 41,510
Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Limited (1996) ATPR 41,579
Trade Practices Commission v CSR Limited (1991) 13 ATPR 52,135
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) 2 ATPR 17,882
Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296
Trade Practices Commission v Prestige Motors Pty Ltd (1994) 16 ATPR 42,693
Pye Industries Sales Pty Ltd v Trade Practices Commission (1979) 2 ATPR 18,311
Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532
Trade Practices Commission v Axive Pty Ltd (1994) 16 ATPR 42,782
Australian Competition and Consumer Commission v Hugo Boss Australia Pty Ltd (unreported, Lockhart J, 25 July 1996)
Trade Practices Commission v Annand and Thompson Pty Ltd (1987) 9 ATPR 48,390
Commodore Business Machines Pty Limited v Trade Practices Commission (1990) 12 ATPR 51,341
Trade Practices Commission v Malleys Ltd (1979) 2 ATPR 18,290
Lowe v The Queen (1984) 154 CLR 606
Australian Competition and Consumer Commission v Ampol Petroleum (Victoria) Pty Ltd (1996) ATPR 41,754
Federal Trade Commission v Ruberoid Co. (1952) 343 US 470
Federal Trade Commission v Motion Picture Advertising Service Co., Inc. (1953) 344 US 392
N.W. FROZEN FOODS PROPRIETARY LIMITED -V- AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
TG 24 of 1996
Burchett, Carr and Kiefel JJ.
Sydney (Heard in Hobart)
20 December 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
TASMANIA DISTRICT REGISTRY ) TG 24 of 1996
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: N.W. FROZEN FOODS PROPRIETARY LIMITED
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Respondent
CORAM: Burchett, Carr and Kiefel JJ.
PLACE OF HEARING: Hobart
DATE: 20 December 1996
MINUTE OF ORDERS OF THE COURT
THE COURT ORDERS THAT:
(1) The appeal be allowed;
(2) The order appealed against be set aside, and in lieu thereof it be ordered that the appellant pay a pecuniary penalty of $900,000 in respect of its contraventions of the Trade Practices Act 1974 as alleged in the amended Statement of Claim, payment of that sum to be deferred for 12 months from 7 August 1996;
(3) There be no order as to the costs of the appeal.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
TASMANIA DISTRICT REGISTRY ) TG 24 of 1996
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: N.W. FROZEN FOODS PROPRIETARY LIMITED
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Respondent
CORAM: Burchett, Carr and Kiefel JJ.
PLACE OF HEARING: Hobart
DATE: 20 December 1996
REASONS FOR JUDGMENT
BURCHETT AND KIEFEL JJ:
This appeal arises out of a very unusual circumstance. The appellant, one of a number of corporations and individuals against which the Australian Competition and Consumer Commission had brought proceedings for the imposition of civil penalties for contraventions of section 45 of the Trade Practices Act 1974, as expanded by s.45A, admitted the contraventions and reached agreement with the Commission upon the facts to be put before the Court and the amount of penalties to be proposed jointly to the Court. That is a course which has been followed in numerous cases since the decision of Sheppard J. in Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256. But in
this instance, for the first time, the Court has rejected a penalty jointly put forward by a corporation, which is the appellant, and the Commission (in the sum of $900,000-00), substituting a significantly severer penalty, ($1,200,000-00). The appellant appeals, not challenging the power of the learned trial judge, but claiming that the decision involved a number of errors of law and was not justified on the evidence. At the hearing of the appeal, counsel for the respondent Commission lent broad support to the case advanced by the appellant, and the appellant adopted the arguments of the Commission.
It is necessary to outline briefly the agreed facts. The corporations against which the proceedings were principally brought (the corporations) supplied frozen food service lines (such as chip potatoes, poultry, desserts, seafood etc), chilled foods (such as dairy products and chilled meats) and "dry" foods (such as tinned goods, sauces, oils, flours etc) to restaurants, hotels and take-away outlets in Tasmania. The appellant carried on business selling these lines in each of the three geographic markets into which the state has been divided for the purposes of this case. None of the other corporations that were respondents below operated in all of these three markets. Between October 1991 and March 1995, on a number of occasions, representatives of the corporations discussed the prices of various lines carried by them, reaching arrangements and understandings which were usually, although not always, then implemented. Other discussions took place in attempts to secure compliance. Over the period, the appellant made arrangements with its competitors in relation to price on some thirty-three occasions, gave effect to such arrangements on thirty-two occasions and attempted to make or induce arrangements on a further eight occasions. By comparison, the corresponding figures for the next most frequent contravener among the corporations, Northern Food Service Pty Ltd, were thirteen, eleven and nil.
The most important line sold by the corporations was chip potatoes, an item which, the parties agreed, was "more likely to be discounted" in the absence of a price fixing agreement. The arrangements in respect of chip potatoes involved all the corporations and "were maintained longer and more consistently than any other product agreement". Chicken prices fluctuated throughout the year and price-fixing agreements "came and went on an ad hoc basis", chickens being prone to discounting. Attempts to arrange Christmas prices for whole turkeys failed, but processed turkey products were the subject of "more successful" arrangements. Seafoods, being imported frozen flake and frozen scallops, were subject to seasonal variations in availability and buying prices, with the result that price-fixing arrangements "tended to break down easily" and they "tended to be made on an ad hoc basis". Agreements were reached covering the mark-up or actual price of Sara Lee cakes, ice-creams, croissants and the like. Take-away lines, the Commission acknowledged, "were not an important component of the price-fixing".
It was accepted that the appellant "adhered to the agreements to a greater extent than the other [corporations], who would often cheat on the agreements by, for example, providing free stock or off-invoice rebates." Many of the attempts which were made to organize the agreements better, and to extend them, originated with the appellant. The admitted facts included the statement that the "price-fixing was principally concerned with chips, though during the period other price-fixing arrangements occurred between [the appellant] and various other[s] [of the corporations] with the addition of a number of other common lines". The arrangements covered the whole of Tasmania, and the corporations between them represented "the overwhelming majority of market share". This would have left their customers little option, except that there was a great deal of "cheating on the agreements". Because of the considerable cost of doing so, the Commission and the parties made no estimate of the quantum of the loss or damage sustained by the arrangements, which appear to have originated in a price war that led to the collapse of a company trading in one of the markets.
The appellant was a dominant trader in each of the three markets, and the only one to participate in each. It had approximately five times the turnover of the next largest of the corporations, with annual sales averaging $36.5 million during 1991-1995. It is a wholly owned subsidiary of a substantial publicly listed company, Clements Marshall Consolidated Limited, to the latest annual operating profit of which, after tax, of $1.544 million, it contributed $1.016 million. Its dominance is indicated by a market share exceeding fifty per cent in each of the markets.
The appellant took the lead in the making and policing of the arrangements, and its general manager and branch managers were involved. The general manager admitted that at the time he knew price-fixing was illegal. It was accepted that "there was no corporate compliance culture" in any of the corporations, and "no evidence that prior to the investigation Trade Practices Act training was conducted by any [of them]". But it was also accepted that subsequently there had been compliance training, and the corporations had agreed "to consent to an order requiring a formal compliance program to be instituted". No Trade Practices Act proceedings had previously been brought against any of the parties.
The agreed facts contain a statement about deterrence, which included the following:
"The resultant publicity surrounding the conduct and the significant penalty package can be expected to significantly heighten awareness of the requirements of the Act throughout the entire business sector in Tasmania.
The parties submit that the respondents have obtained significant concessions because of their cooperation with the investigation. Similarly, the Commission believes that an agreed settlement will encourage businesses involved in anti-competitive conduct to come forward to the Commission."
It was accepted by the Commission that the expense of a protracted investigation was saved by the co-operation of the corporations, including the appellant, which had been given "once the [Commission's] investigation was under way and the s.155 [of the Trade Practices Act] powers had been invoked". Examinations under section 155 became unnecessary, comprehensive admissions being made prior to the institution of the proceedings. It may fairly be commented that such complete co-operation at an early stage compares favourably with the circumstances of many of the reported cases, and provides good reason to expect compliance with the requirements of the Act for the future. The appellant's acceptance of the setting in place of compliance programmes gives important further assurance.
In summary, the agreed facts put before the Court stated clearly the seriousness of deliberate contraventions of important provisions of the Act, involving the senior management of each participant in the markets, extending over a period of approximately three and a half years. Any existing arrangements ended when the Commission commenced its preliminary investigation in March 1995. The arrangements had been designed to insulate the market unlawfully from competitive pressures and artificially to maintain price levels. A significant proportion of the contraventions took place after increased penalties became law. But against that, it was accepted that "the respondents have assisted the Commission in its investigations and the corporate respondents have agreed to establish trade practices compliance programs", which, the trial judge found, had "been agreed with the Commission and [would] include training programs, the distribution of compliance manuals and regular audits of procedures, all at the expense of the [corporations]."
Section 76 of the Trade Practices Act relevantly provides:
"(1) If the Court is satisfied that a person:
(a) has contravened a provision of Part IV;
(b) has attempted to contravene such a provision;
...
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part to have engaged in any similar conduct.
(1A)The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed $10,000,000 for each act or omission to which this section applies.
(1B)The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies."
The maximum penalty for a corporation, and that for an individual, applies in each case to acts or omissions occurring after 21 January 1993. Previously, a maximum penalty of $250,000 was provided for a corporation, and $50,000 for an individual. Each of the corporations involved in the present matter admitted contraventions attracting both the higher and the lower maximum penalty. The appellant's contraventions were divided approximately evenly between the period from October 1991 to 21 January 1993 and from 21 January 1993 to March 1995.
The contrast between sections 78 and 79 of the Act makes it quite clear that a penalty imposed under section 76 is a civil penalty, and that a contravention falling within the section is not to be regarded as a criminal offence. At the same time, the seriousness with which the law views the contraventions in question in this case is underlined by the very large sums which the Court is authorized to levy against a contravener. A consequence of the civil nature of a penalty under s.76 is that the onus of proof of the contravention is the civil onus - in contradistinction to the onus of proof beyond reasonable doubt generally borne by the prosecution in a proceeding brought to punish crime.
The Act places on the shoulders of the Court the responsibility to determine the "appropriate" penalty in each particular case, having regard to "all relevant matters" including the matters specified in the section. But effects upon the functioning of markets, and other economic effects, will generally be among the most significant matters to be considered as relevant, so that the Court is likely to be assisted greatly by views put forward by the Australian Competition and Consumer Commission, or by economists called on behalf of the parties. Since the decision in Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (supra), it has been accepted that both the facts, and also views about their effect, may be presented to the Court in agreed statements, together with joint submissions by both the Commission and a respondent as to the appropriate level of penalty. Because the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount.
There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardized if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.
It appears to us that the authorities in both Australia and New Zealand have provided unanimous support for the approach we have outlined: Trade Practices Commission v Allied Mills Industries Pty Ltd (supra, at 259); Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730 at 733-734; Trade Practices Commission v TNT Australia Pty Ltd (1995) 17 ATPR 40,161 at 40,165-40,166; Trade Practices Commission v CC (New South Wales) Pty Limited (No 2) and (No 6) (1995) 17 ATPR 40,495 at 40,498 and 40,843 at 40,851; Trade Practices Commission v Hymix Industries Pty Limited (1995) 17 ATPR 40,101 at 40,102 - 40,103; Trade Practices Commission v Simsmetal Limited (1996) ATPR 41,510 at 41,512; Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Limited (1996) ATPR 41,579 at 41,582. In New Zealand Milk at the pages cited Eichelbaum CJ and Greig J said that "in cases such as this it is strongly in the public interest that litigation should be brought to a conclusion, and if possible at an early date". They approved the general acceptance of a "negotiated settlement", reserving for further consideration only the case where a compromise was based, not on considerations bearing on the quantum of the penalty, but on doubts or difficulties attending the proof of the contravention. In Simsmetal, Lee J, in approving agreed penalties, said (at the page cited) that "the approach adopted by the parties in fixing (the figures put to the Court) is not dissimilar to the approach that would have been adopted by the Court had it been necessary for the Court to undertake the penalty fixing exercise itself", and that he agreed with the approach of Lockhart J in another case of refraining from "stating whether the penalties to which the parties have agreed are the size of [those] which the Court itself would have imposed". In Pioneer Concrete (at the page cited), Lockhart J said:
"I am of the view that the agreement that has been reached, subject to the Court's concurrence, is broadly in accord with what the Court would have done itself based upon the facts as I have read them from the affidavits, and I think the result is a sensible one. I propose to endorse it."
In TNT at 40,165 Burchett J said:
"[I]t cannot be denied that the fixing of the quantum of a penalty is not an exact science. It is not done by the application of a formula, and, within a certain range, courts have always recognized that one precise figure cannot be incontestably said to be preferable to another."
When the Court approaches the task of assessing a penalty under section 76, or of determining whether an agreed penalty is appropriate, there are certain principles which must be kept steadily in mind. The section itself lays down that the penalty is to be "appropriate having regard to all relevant matters", and then indicates certain matters which the legislature regarded as relevant, being:
– "the nature and extent of the act or omission"
– "the nature and extent ... of any loss or damage suffered as a result of the act or omission"
– "the circumstances in which the act or omission took place"
– "whether the person [contravening] has previously been found by the Court in proceedings under [Part VI of the Act] to have engaged in any similar conduct."
The specified considerations do not necessarily exhaust 'all relevant matters', but they do indicate considerations to which the Parliament turned its attention. In Trade Practices Commission v CSR Limited (1991) 13 ATPR 52,135 at 52,152-52,153, French J set out a checklist of matters to which judges have since frequently made reference. He added to those expressly mentioned in section 76 the following further points, which may be regarded as elaborations of the statutory requirement to consider "the circumstances in which the act or omission took place":
– "The size of the contravening company"
– "The degree of power it has, as evidenced by its market share and ease of entry into the market"
– "The deliberateness of the contravention and the period over which it extended"
– "Whether the contravention arose out of the conduct of senior management or at a lower level"
– "Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention"
– "Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention".
In CSR Ltd, French J said (at 52,152):
"The principal, and I think probably the only, object of the penalties imposed by s.76 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 the Act."
Earlier, Smithers J in Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) 2 ATPR 17,882 at 17,896 treated "deterrent quality" as a measure of the penalty to be imposed, on the basis that the penalty "should reflect the will of Parliament that the commercial standards laid down in the Act must be observed", an approach also adopted by Toohey J in Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 297-298. Toohey J there said:
"The penalty should be such as to deter not only the particular offender but others who may be disposed to engage in prohibited conduct of a similar kind."
He referred to the deliberateness and extent of the conduct, and to any damage it had caused, but commented:
"There is the wider public interest in ensuring that the provisions of the Act are observed."
In Trade Practices Commission v Prestige Motors Pty Ltd (1994) 16 ATPR 42,693 at 42,699, Lee J referred to "the object to be served by s.76, namely, to promote competitive conduct in trade or commerce by use of penalties sufficient to deter acts that would tend to be destructive of such competition", and said:
"The principal purpose of s.76 is to underline the seriousness of Parliament's intention that corporations engaged in trade or commerce adhere to the standards set out in the Act and to secure that adherence by providing for the exaction of penalties sufficient to deter a trader from contravening the Act and from taking the risk of being ordered to pay such a penalty."
The statement by Smithers J in Stihl Chain Saws, making deterrence a measure of the appropriate penalty, was cited with approval by a Full Court in Pye Industries Sales Pty Ltd v Trade Practices Commission (1979) 2 ATPR 18,311 at 18,326. It is also consistent with the approach of Eichelbaum CJ and Greig J in New Zealand Milk (at 737), where they referred to "the need for the imposition of deterrent penalties" as a factor "of particular significance". It has recently been again followed by Lee J in Simsmetal (at 41,512), who said:
"The main tenet of the Act is the promotion of competition between parties engaging in trade or commerce. The primary purpose and regulatory effect of pecuniary penalties is to deter parties in the market from engaging in conduct which would be antithetical to the promotion of competition."
In TNT (at 40,168), it was pointed out that some other factors which have been regarded as important actually flow from what French J called in CSR Limited (at 52,152) "[t]he primacy of the deterrent purpose in the imposition of penalty". One of those factors is the size of the corporation involved, since "[w]hat would deter a small company might have little effect on a very large one". That size was a factor was noted in CSR Limited at 52,154 and in Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532 at 542. Attention was also drawn in TNT (ubi supra) to the significance of another matter which follows from the primacy of deterrence:
"It is a most important factor in mitigation of the amount of a penalty that, in a particular case, there may be acceptable evidence of a corporate culture of compliance, and of concern to ensure that the contravention which has occurred will not be repeated."
A further point may be made in such a case, and also generally. As Smithers J emphasized in Stihl Chain Saws at 17,896, insistence upon the deterrent quality of a penalty should be balanced by insistence that it "not be so high as to be oppressive". Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression.
It is well settled that, in the assessment of a penalty, a respondent withdrawing defences and acknowledging liability is entitled to special consideration of reduction of the amount that would otherwise be assessed. Where, in addition, acceptable evidence is adduced, or the Commission agrees, that a programme has been instituted the purpose of which is to ensure an understanding by executives of the requirements of the Act and of their obligations under it, and where a corporation has committed itself to future expenditure upon such a programme, there is the more reason to reduce the penalty. Some contraventions disclosed in the cases have been blatant, and knowledge of them must have been widespread in the large companies involved. Perhaps the situation in those cases arose out of the long years during which there was no effective enforcement of competition in the Australian marketplace. Given the function of penalties to secure compliance with the Act, and that they are not criminal sanctions, if the threat of their imposition can be translated, in the case of a particular corporation, into a firm programme aimed at eradicating ignorance and disregard of the national competition laws, and at instituting an open system in which the reach and purposes of the law are expounded and its observance inculcated, very much will have been achieved. This is, indeed, the advance Parliament sought to make by the legislation. Where the Commission established to administer the Act is satisfied that an appropriate programme has been undertaken, or the undertaking of it is proved to the Court, this is a most important matter to take into account on penalty.
The significance of evidence pointing to compliance for the future has been reflected in many statements in the authorities. In Trade Practices Commission v Prestige Motors Pty Ltd (supra, at 42,701), Lee J said:
"[S]ubsequent to the commencement of this litigation the corporate respondents have arranged for seminars and courses to be conducted to instruct executives of the corporations in the operation of the Act. Those actions justify some confidence that similar conduct will not be repeated by the respondents."
In Trade Practices Commission v Axive Pty Ltd (1994) 16 ATPR 42,782 at 42,795, Sheppard J drew attention to the place of deterrence in the amendments made to the Act in 1992 increasing the maximum amount at which a penalty could be fixed in certain cases, and pointed out that in other cases there was no increase specifically because compliance was able to be achieved "efficiently and effectively by other means". The combination of a reduced penalty with steps to secure compliance would, quite frequently, be in keeping with this approach. See too the comment by R. Baxt, the former chairman of the Trade Practices Commission, in 69 ALJ 243 at 244. The Court also took account of steps to ensure compliance with the law in future in Simsmetal (supra, at 41,512); New Zealand Milk (supra, at 736); TNT (supra, at 40,168, 40,170); and Australian Competition and Consumer Commission v Hugo Boss Australia Pty Ltd (unreported, Lockhart J, 25 July 1996, at 5-6). In Trade Practices Commission v Annand and Thompson Pty Ltd (1987) 9 ATPR 48,390 at 48,394, Spender J distilled from the decided cases a number of relevant factors to be taken into account in assessing a penalty, among which were the steps taken to educate employees prior to the contravention, the existence or otherwise of a policy by the corporation against breaches of the provisions of the Act, and "whether, since the occurrence, controls over employees, particularly sales personnel [a breach of section 48 was involved], have been increased or improved to prevent a repetition of the conduct". In Commodore Business Machines Pty Limited v Trade Practices Commission (1990) 12 ATPR 51,341 (a decision of a Full Court), at 51,349; CSR Limited (supra), at 52,155; and Trade Practices Commission v Malleys Ltd (1979) 2 ATPR 18,290 at 18,293, the failure of a corporation to take corrective steps to avoid future contraventions was treated as a relevant matter.
There are, of course, limits to the approach accepted in these cases. The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay, and detection lead merely to a compliance programme for the future.
A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions should incur similar penalties: Trade Practices Commission v Axive Pty Ltd (supra, at 42,795). There should not be such an inequality as would suggest that the treatment meted out has not been even-handed: cf. the criminal law case Lowe v The Queen (1984) 154 CLR 606. However, other things are rarely equal where contraventions of the Trade Practices Act are concerned. In the present case, differing circumstances, size, market power and responsibility for the contraventions, as well as other factors, complicate any attempt to compare the penalties imposed on the appellant with those imposed on the other corporations.
Another form of comparison is not appropriate. The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case. The point was well made by Spender J in Trade Practices Commission v Annand and Thompson Pty Ltd (supra, at 48,394) when he said:
"Each case must, of course, be viewed on its own facts and facts may be infinite in their variety."
It follows, as his Honour also said, that "[t]he quantum of penalties imposed in other cases can seldom be of very much direct assistance".
In the present appeal, senior counsel for the appellant relied on the treatment by the learned trial Judge of one particular authority as demonstrating error. After detailing at some length the agreed facts of the case, his Honour referred, as giving "guidance to the appropriate level of penalties for Part IV contraventions like those in the present case", to the decision of Jenkinson J in Australian Competition and Consumer Commission v Ampol Petroleum (Victoria) Pty Ltd (1996) ATPR 41,754. His Honour summarized the contraventions there involved, in respect of which two separate proceedings had been brought, that had come to be decided ultimately pursuant to the one set of reasons for judgment. The first proceeding was brought in 1993 and the second on 14 November 1995. Naturally, the earlier proceeding related to contraventions occurring before its institution, the last of which appears to have taken place in June 1993. Ten of those contraventions did not occur, or were not shown to have occurred, after 21 January 1993 (after which it will be recalled higher penalties came into force), while nine contraventions did occur after that date. The second proceeding related to a contravention in December 1994, that is, at least a year after the institution of the previous proceeding, and a further contravention in February 1995. In respect of the earlier proceeding, Jenkinson J accepted as appropriate to be imposed upon the corporate respondent penalties of $100,000 for the contraventions prior to 21 January 1993 and $900,000 for the subsequent contraventions. In respect of the second proceeding, he accepted as appropriate to be imposed on the same respondent penalties in the sum of $2,500,000.
The learned trial judge who heard the present matter pointed out that, in Ampol Petroleum, the "total penalties imposed in both cases was ... $3.5 million." He remarked that the officer of the corporation responsible was "at most at middle management level", being the manager of a price support system in the area in which particular suburbs of Melbourne lay. His Honour then said:
"I accept of course that each case turns on its own facts, but at least broad consistency is essential if the penalty regime of Part IV is to be seen as operating rationally and fairly. Although the Clements Marshall group is much smaller than Ampol, in all other relevant respects the contraventions in the present case seem markedly more serious than those in the Ampol case. They extended over three and a half years and affected markets throughout the whole of a State. Had they not been discovered by chance, the price fixing arrangements would still be operating. Most significantly, the instigator and driving force was the senior executive officer of Allfood Distribution [the trading name of the appellant], which in turn was the largest subsidiary of a long-established public listed company. It is a depressing thought that the introduction of the vastly increased (and widely publicised) penalties in January 1993 had no effect whatsoever on Mr Dally and Allfood Distribution. It was business as usual.
I cannot accept that in culpability terms these contraventions fall within the lowest decile of the range of appropriate penalties. Had this matter to be considered after a full investigation and contested litigation, I think an appropriate penalty would be $1.5 million. Were Clements Marshall a larger group, the penalty would be greater, perhaps a lot greater. An appropriate discount to allow for the saving as a result of the co-operation that has taken place is $300,000. The Clements Marshall Group has also saved its own costs of protracted litigation which would be at least that amount, and possibly two to three times more. Accordingly the penalty will be $1.2 million."
A number of difficulties attend this reasoning. In the first place, as we have said, a single authority cannot govern the amount at which a penalty should be fixed in the different circumstances of another case. His Honour acknowledged this at the beginning of the passage we have quoted, but, with respect, the acknowledgment was not reflected in the argument then set out. In the second place, the markets involved in the two cases are entirely different. The level of penalty required to deter anti-competitive conduct in each of the three Tasmanian markets with which this appeal is concerned may bear little relation to the level of penalty required to deter similar conduct in the market in which motor fuel was sold by the Ampol company in metropolitan Melbourne. Nor is it possible to glean from the brief reasons given by Jenkinson J, who had no need to expound the matter at length because he accepted the agreed penalties put before him as appropriate, what all the factors were which might have determined conduct in the market with which he was concerned.
The statement "[a]lthough the Clements Marshall group is much smaller than Ampol, in all other relevant respects the contraventions in the present case seem markedly more serious than those in the Ampol case" requires separate consideration. When this statement is examined in the context of the later reference to "culpability terms" ranked in deciles, it appears to reflect a view that the exercise in which the Court was engaged was one of punishment. To punishment for flagrant breaches, the differences between the markets might indeed not have been "relevant". But the penalties imposed by section 76 are, as we have said, not criminal sanctions, and their purpose, established now by a long line of cases, is not punishment.
A further
difficulty resides in the repeated references to the Clements Marshall
Group. Clements Marshall Consolidated
Limited was not a party to the proceeding, and it would have been a denial of
natural justice to treat the proceeding as one against that company. Because the appellant was a wholly owned
subsidiary, and the most significant contributor to the Group's earnings, it
may have been all too easy to overlook the identity of the corporation against
which the Commission had proceeded.
Perhaps this explains the level of penalty. As counsel for the appellant pointed out, the
penalty is approximately equal to an entire year's earnings of the appellant;
and it equates fairly exactly with the appellant's entire net worth as shown in
the audited consolidated accounts.
Viewed as a proportion both of earnings and of net worth, whether
considered alone or by comparison with the penalties imposed on the other
corporations, the penalty imposed on the appellant seems very harsh.
Next, the appellant says that, quite apart from the differences between the markets involved in the Ampol case and in the present case, the statement that "in all other relevant respects [than size] the contraventions in the present case seem markedly more serious than those in the Ampol case" is simply not correct. The statement follows a reference to the "total penalties" in the Ampol case as being $3.5 million. It is plain that his Honour was making a comparison between that total figure and the $900,000 upon which the appellant and the Commission had agreed as being appropriate for the present case. But a most relevant matter in the Ampol case was the fact that further serious contraventions had occurred long after the institution of proceedings for prior contraventions. As a result, when Jenkinson J came to impose a penalty in the second proceeding before him, he had just found Ampol to have engaged in similar conduct to that for which he was now imposing a penalty, and Jenkinson J was perfectly conscious of this aspect of the matter. For when he was dealing with the first proceeding, he specifically stated (at 41,757):
"Neither Ampol nor [the individual respondent] has previously been found by the court in proceedings under Part VI of the Act to have engaged in [any] similar conduct."
Plainly enough, the fact that this could not be said
(and was not said by him), when he came to deal with the second
proceeding, justified the imposition, for a smaller number of contraventions,
of a penalty fixed at more than two and a half times the amount fixed in the
earlier proceeding for the nine contraventions occurring after 21 January
1993. There had been a demonstration of
the need to deter. As we have noted, the
question whether a person has previously been found by the Court in proceedings
under Part VI to have engaged in any similar conduct is a matter expressly
specified in section 76 as required to be taken into account when a penalty is
assessed. The appellant in the present
case had never been found to have engaged in any similar conduct. His Honour's overlooking of this significant
difference between the Ampol case and the present, in the context of treating
the Ampol case as virtually determinative of the level of penalty for the
present, was an error which requires us to consider for ourselves what penalty
should be imposed on the appellant.
Before we turn to the question of the proper level of penalty in this case, a further argument raised by the appellant should be mentioned. At the conclusion of the passage we have cited from his Honour's judgment, reference is made, as a factor apparently diminishing the credit to which the appellant's co-operation entitled it, of the fact that its co-operation had also saved it a very significant amount of legal costs. We do not think it is appropriate to whittle away in this fashion the benefit which has been promised, to a defendant who co-operates, by a long line of authorities, both in the criminal law and in the law relating to civil penalties. The thief who confesses doubtless eases his conscience, and may perhaps even hope for spiritual as well as temporal benefits; at the same time, if he is paying for his own legal representation, he reduces his financial burden. It is not generally thought that these matters go to diminish the allowance that ought to be made for a plea of guilty or acknowledgment of liability, especially when combined with genuine remorse (in the case of a crime), or the setting in place of an appropriate programme to secure compliance with the Act (in the case of a proceeding under section 76). Particularly in the case of a proceeding under section 76, where the object is to secure compliance with the Act by deterring contravention, a corporation which gives a court reason to believe that this object has been achieved, so far as it is concerned, by its co-operation with the Commission and its entry into a compliance programme the form of which has been agreed with the Commission, should be entitled to full credit, whether or not it receives incidental advantages from the amendment of its conduct.
We have found that the fixing of the penalty in the present case was vitiated by error, and that it is necessary for us to give consideration to the appropriate penalty. As we have already made clear, there is no doubt that, when the Court considers this question, the view of the specialist Commission is a relevant matter. The appellant's submission appeared to go further, suggesting that the Commission would have knowledge about the particular case and the markets involved not available to the Court, which should make the Court reluctant to interfere with its conclusions. Courts have learned to be suspicious of claims of secret knowledge; and justice should be done in the light, with the relevant facts exposed to view. It is the Court which bears the responsibility. (Cf. the position in the United States, where under the Clayton Act the Federal Trade Commission has "a special competence in formulating remedies to deal with problems in the general sphere of competitive practices": Federal Trade Commission v Ruberoid Co. (1952) 343 US 470 at 473, but even so, as Frankfurter J. pointed out in his dissenting judgment in Federal Trade Commission v Motion Picture Advertising Service Co., Inc. (1953) 344 US 392 at 406: "[H]e is no friend of administrative law who thinks that the Commission should be left at large.") However, in discharging its responsibility, the Court gratefully accepts all proper help, and the views of the specialist body set up to protect the public interest in the maintenance of economically healthy competition are plainly relevant, for example, to the question whether a proposed penalty will be sufficient to deter anti-competitive behaviour in a particular market. On that issue, those views are likely to be persuasive; while "subjective" matters, calling perhaps for a degree of mercy, may fall less within the specialist sphere, and more within those broad concepts of justice to which the Court must always have regard.
The cases we have discussed earlier in these reasons unite in affirming the public interest in the promotion of settlements, especially in this area where litigation is likely to be very lengthy. We agree with the statement made in several of the cases cited that it is not actually useful to investigate whether, unaided by the agreement of the parties, we would have arrived at the very figure they propose. The question is not that; it is simply whether, in the performance of the Court's duty under section 76, this particular penalty, proposed with the consent of the corporation involved and of the Commission, is one that the Court should determine to be appropriate. In our opinion, it is appropriate.
Accordingly, the appeal should be allowed; the order appealed against should be set aside; and in lieu of the order appealed against, it should be ordered that a penalty be imposed in the sum of $900,000. In all the circumstances, there should be no order as to the costs of the appeal.
I certify that this and the preceding twenty-seven (27) pages are a true copy of the Reasons for Judgment herein of their Honours Justice Burchett and Justice Kiefel.
Associate:
Date: 20 December 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
TASMANIA DISTRICT REGISTRY ) TG 24 of 1996
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: N.W. FROZEN FOODS PROPRIETARY LIMITED
Appellant
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Respondent
REASONS FOR JUDGMENT
CARR J:
I have had the very considerable advantage of reading, in draft form, the reasons for judgment delivered by Burchett and Kiefel JJ. I agree that this appeal should be allowed for the reasons given. I have one slight reservation. That relates to the sentence, in the joint judgment, which reads:
"But the penalties imposed by section 76 are, as we have said, not criminal sanctions, and their purpose, established now by a long line of cases is not punishment."
It is quite clear that the penalties imposed by s.76 are not criminal sanctions. However, in my view the cases decided to date on the question of the assessment of pecuniary penalties have not ruled out or excluded punishment as one of the purposes of s.76 of the Trade Practices Act 1974 (Cth).
I do not think that it is necessary to decide that issue for the purposes of disposing of this case. For that reason, I would prefer to have left the point open.
I agree with the orders proposed in the joint judgment.
I certify that this and the preceding page
are a true copy of the Reasons for Judgment
of Justice Carr.
A/g Associate:
Date: 18 December 1996
Counsel for the Appellant: R.A. Finkelstein QC
with N.J. O'Bryan
Solicitors for the Appellant: Dobson Mitchell & Allport
Counsel for the Respondent: C.A. Sweeney QC with D. Wilson
Solicitors for the Respondent: Australian Government Solicitor
Date of hearing: 20 November 1996
