Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd & Ors [1997] FCA 450

Catchwords CATCHWORDS

TRADE PRACTICES - penalties - appropriate penalty - various contraventions of Trade Practices Act 1974 including resale price maintenance - factors relevant to quantum - number and extent of contraventions - previous contraventions - decentralised management structure leading to contravention - extent of compliance program - size of company - co-operation with Australia Competition and Consumer Commission - relevance of claim that respondent was co‑erced by trading partner to commit the contraventions - effect on consumers.

TRADE PRACTICES - penalties - purpose of imposition of penalty - deterrence - whether one of the purposes of Trade Practices Act 1974 penalty is punishment.

Trade Practices Act 1974: Pt IV

s 2, s 45(2)(a)(ii), s 45(2)(b)(ii), s 45A, s 46, s 48,

s 76, s 76(3), s 78, s 84(2), s 96,

Trade Practices Commission v Allied Mills Industries Pty Ltd

(No 4) (1981) 37 ALR 256

Australian Competition and Consumer Commission v NW Frozen

Foods Pty Ltd (1996) ATPR ¶41‑515

NW Frozen Foods Pty Ltd v Australian Competition and Consumer

Commission (1996) 141 ALR 640

Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076

Trade Practices Commission v TNT Australia Pty Limited

(1995) ATPR ¶41-375

Trade Practices Commission v CC (New South Wales) Pty Ltd

(No 2) (1995) ATPR ¶41-406

Trade Practices Commission v Axive Pty Ltd (1994) ATPR ¶41-368

Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd

(1978) ATPR ¶40‑091

Trade Practices Commission v Mobil Oil Australia Ltd

(1984) 4 FCR 296

Trade Practices Commission v Prestige Motors Pty Ltd

(1994) ATPR ¶41‑359

Trade Practices Commission v Simsmetal Ltd (1996) ATPR ¶41‑449

Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd

(1989) 167 CLR 177

Trade Practices Commission v ICI Australia Operations Pty Ltd

(1991) 105 ALR 115

Trade Practices Commission v Carlton United Breweries Ltd

(1990) 24 FCR 532

McDonald v The Queen (1994) 48 FCR 555

Mill v The Queen (1988) 166 CLR 59

Trade Practices Commission v ICI Australia Operations Pty Ltd

(1991) ATPR ¶41‑153

AUSTRALIA COMPETITION AND CONSUMER COMMISSION v AUSTRALIAN SAFEWAY STORES PTY LIMITED & ORS

No VG 762 of 1996

GOLDBERG J

MELBOURNE

30 MAY 1997

Orders

FEDERAL COURT OF AUSTRALIA )

VICTORIA DISTRICT REGISTRY )

GENERAL DIVISION ) No VG 762 of 1996

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

and

AUSTRALIAN SAFEWAY STORES PTY LIMITED

(ACN 004 319 939) First Respondent

and

GEORGE WESTON FOODS LIMITED

(ACN 008 429 632) Second Respondent

and

MARK JONES

Third Respondent

and

BERNIE BROOKES

Fourth Respondent

CORAM: GOLDBERG J

PLACE: MELBOURNE

DATE: 30 MAY 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The second respondent pay a pecuniary penalty of:

(a) $300,000.00 in respect of its contravention of s 45(2)(a)(ii) of the Trade Practices Act 1974 ("the Act") in or about April 1995;

(b) $450,000.00 in respect of its contravention of s 45(2)(b)(ii) of the Act in or about May 1995;

(d) $200,000.00 in respect of its contravention of s 48 of the Act at Albury in or about November 1995;

(e) $200,000.00 in respect of its contravention of s 48 of the Act at Ferntree Gully in or about November 1995.

2. The second respondent pay to the applicant its costs of the proceeding to the extent that, and insofar as, such proceeding has been brought and continued against the second respondent.

3. The parties have liberty to apply in respect of the question of costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court rules

ReasonsFEDERAL COURT OF AUSTRALIA )

VICTORIA DISTRICT REGISTRY )

GENERAL DIVISION ) No 762 of 1996

B E T W E E N:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

and

AUSTRALIAN SAFEWAY STORES PTY LIMITED

(ACN 004 319 939) First Respondent

and

GEORGE WESTON FOODS LIMITED

(ACN 008 429 632) Second Respondent

and

MARK JONES

Third Respondent

and

BERNIE BROOKES

Fourth Respondent

CORAM: GOLDBERG J

PLACE: MELBOURNE

DATE: 30 MAY 1997

REASONS FOR JUDGMENT

Introduction and background

The applicant ("the Commission") has filed an application seeking pecuniary penalties, declarations and injunctive relief against Australian Safeway Stores Pty Limited and two of its employees (the first, third and fourth respondents) and against George Weston Foods Limited (the second respondent) in relation to various contraventions of Pt IV of the Trade Practices Act 1974 ("the Act"). In its statement of claim the Commission sets out allegations in relation to five sets of
circumstances and the consequential contraventions of the Act upon which it relies. The first, third and fourth respondents have denied the allegations of contraventions of the Act and the proceeding against them must proceed to trial in the ordinary course. However, the second respondent ("GWF") has made certain admissions in its defence which result in GWF admitting that it has contravened the Act in five respects. On 21 February 1997 I ordered that the issues in the proceeding against GWF be heard separately from the issues in the proceeding against the other respondents and the purpose of the present proceeding is to fix, and order the payment of, pecuniary penalties by GWF. The Commission does not persist with its application for declaratory or injunctive orders against GWF.

The Commission and GWF have filed an agreed statement of facts which sets out the circumstances and conduct giving rise to the Commission's application. Affidavits have also been filed on behalf of GWF in relation to the assessment of the penalties. It is important to note that the statement of facts is agreed only as between the Commission and GWF and that the first, third and fourth respondents are not a party to the agreed statement and therefore are not to be taken as accepting the agreed facts.

GWF, a listed public company, is a flour miller and manufacturer of bread, biscuits, cakes and smallgoods. It also manufactures a range of products for the food industry, stockfeed for the rural industry and a range of cleaning products. According to its 1996 annual report it had an annual turnover of $1.28bn and employs almost 7000 people. It operates in more than 60 locations in Australia and New Zealand through a number of divisions and business units one of which is "Tip Top", a manufacturer and wholesaler of bread which has a division which operates in Victoria as a separate profit centre. Tip Top produces branded, plain wrap and generic products. The first respondent ("Safeway") operates a chain of supermarkets in Victoria and purchases approximately 19.2% of Tip Top's Victorian output and is Tip Top's largest customer in Victoria. Tip Top's sales are approximately 23% of plant bread sales in Victoria and approximately 11.5% of total bread sales in Victoria. Safeway's parent company, Woolworths Ltd, is a significant customer of Tip Top bread throughout Australia.

GWF has four directors on its board, one of whom is resident in the United Kingdom and two of whom are executive directors. One of the executive directors, Mr John Pascoe, is chief executive officer. The other executive director, Mr Robert Kelly, who is a lawyer, has the principal responsibility for GWF's program for compliance with the Act. GWF has a national corporate office and a decentralised management structure. Each division has a divisional chief executive who reports directly to the chief executive officer of GWF. Within each division there are State operations which operate as separate profit centres and are managed by a State manager. The Tip Top Victoria State manager reports to the national operations manager of the bread division based in Sydney who reports to the chief executive officer. The relevant contraventions were committed by employees within the Tip Top Victoria division which is part of the bread division.

The Contraventions

Preston - Fixing prices and restricting sale of bread

During 1995 GWF conducted a stall at the Preston market at which it retailed bread products and Safeway sold bread at its supermarket in Murray Road, Preston. On 24 March 1995 the Safeway store at Preston refused to accept a delivery of Tip Top bread because "you are selling bread across at the market cheaper than we are". This matter came to the attention of Tip Top's bakery sales manager Mr Lovett, its general manager of Victorian Operations Mr Guthridge and its State sales manager Mr Gunton. Mr Gunton was told by the third respondent Mr Jones, a category manager at Safeway, that all Tip Top products had been delisted from Safeway at Preston (that is Safeway Preston had ceased purchasing or stocking Tip Top products) because Tip Top's price at the Preston market stall was lower than the price for Safeway's "red spot" or "house brand" bread. Mr Gunton was told that Tip Top would not be permitted to recommence supply at Safeway Preston until Tip Top increased the supply of its bread and stopped selling branded bread from the Preston market stall. Mr Gunton and Mr Jones had subsequent conversations on the matter in which Mr Jones said that Safeway Preston did not want Tip Top to sell branded bread at its Preston market stall. During April 1995 Mr Guthridge told the fourth respondent Mr Brookes, Safeway's Victorian merchandising manager, that branded bread was not being sold at the Preston market stall and gave him a list of the bread sold at the Preston market stall and the retail prices to be charged. During the same period Mr Guthridge told Mr Gunton and Mr Lovett that no proprietary bread was to be sold at the Preston market stall. On 24 or 26 April 1995 either Mr Gunton or Mr Guthridge told Mr Lovett that Safeway Preston would only permit Tip Top to recommence the supply of bread products on condition that Tip Top only sell plain wrap bread at its Preston market stall at prices at least 2 cents or 3 cents higher than the price of Safeway house brand bread.

On 27 April 1995, on Mr Gunton's instructions, Mr Lovett met with Mr Felgie, the Safeway Preston store manager, at the Preston market stall where they examined the products being sold. Mr Felgie asked why there was branded bread in stock, he was told it was a mistake and he instructed Mr Lovett to remove the branded bread from the stall and to remove a price list on which it was stated that Tip Top branded bread was being sold. Mr Felgie told Mr Lovett that he wanted to see the price at which plain wrap bread was being sold on the price board and Mr Lovett told him that the Preston market stall was selling plain labelled Code C bread for $1.50 (before the issue arose Tip Top had been selling this bread for $1.20 to $1.30 per loaf) and Code D bread for $1.80 (before the issue arose Tip Top had been selling this bread for $1.40 per loaf). Mr Felgie told Mr Lovett the price for Code D bread should be increased and agreed to the price of $1.90 per loaf proposed by Mr Lovett. On the same day Mr Lovett instructed a Tip Top area representative to change the price list at the Preston market stall and to make sure that branded bread was not sent to the Preston market stall in the future. The retail price for Tip Top plain label bread sold at the Preston market stall was increased to $1.50 for Code C bread and $1.90 for Code D bread and all stock other than plain labelled bread was removed from the stall. On the same day Mr Felgie told Mr Lovett that Tip Top could recommence delivery of Tip Top bread to Safeway Preston on 1 May 1995.

Following the commencement of the sale of only plain label bread at the Preston market stall, sales at the Preston market stall fell by approximately 50% from an average of 5858 loaves per week in March 1995 to an average of 2604 in July 1995. According to the agreed statement of facts, "at most" the agreement was implemented for four months but there is no evidence as to when, or under what circumstances, the implementation of the agreement ceased or was abandoned.

Albury - May 1995 attempted resale price maintenance

In or about May 1995 Mr Hollan Morrell, the proprietor of Bob's IGA, a retail outlet in Albury, discussed with a Tip Top representative Mr Graham Taylor a proposal for the supply of Tip Top Mighty White bread for a two day promotion. Mr Taylor told Mr Morrell that he had to sell the bread at $1.39 or Tip Top would get into trouble with Safeway. Bob's IGA store is located across the street from the Safeway supermarket in Albury and is about three kilometres from the Safeway supermarket in Lavington. On or about 9 May 1995 Mr Taylor telephoned Mr Morrell and asked him at what price the bread was to be sold during the two day promotion, he was told $1.29 and he said that that would put Tip Top in "foul" with Safeway. He asked Mr Morrell if he could withdraw the advertisement and Mr Morrell said that he would try to do so. According to the agreed statement of facts Mr Taylor intended Mr Morrell to understand that he did not want him to sell the bread under $1.39 per loaf. On the next day, 10 May 1995, Mr Morrell advertised the Mighty White loaf at $1.29 in the Border Mail newspaper and Mr Taylor told him that he should not have advertised the bread for $1.29 as Safeway might delist Tip Top bread products as a result.

Subsequently, Mr Jones from Safeway told Mr Gunton that Tip Top had been deleted from Safeway stores in the Albury area and he asked why Tip Top was selling two types of bread at $1.29 at Bob's IGA. Mr Gunton told him that the advertisement was wrong and that the store was only selling Mighty White. The advertisement incorrectly depicted two branded loaves. On 10 May 1995 Tip Top bread products were not displayed at Safeway's Albury or Lavington stores but were displayed at the Wodonga store. Mr Toohey, Tip Top's northern Victoria district manager was told by Safeway Albury's store manager that instructions to remove the Tip Top bread products from display came from Safeway head office because of the Mighty White special advertised by Bob's IGA. Subsequently Mr Taylor telephoned Mr Morrell and told him that Tip Top had been kicked out of Safeway and that if he could ever convince Tip Top's management to give Mr Morrell another special deal he must sell it at a good, not a cheap, price. Mr Morrell's two day promotion ended on 11 May 1995, the Safeway stores in Albury and Lavington refused to accept Tip Top bread products on 11, 12, 13 and 14 May and the Wodonga Safeway store refused to accept Tip Top bread products on 13 and 14 May.

Albury - November 1995 resale price maintenance

In early November 1995 Tip Top commenced supplying Bob's IGA store with a plain wrap bread known as "Eureka". Mr Morrell assured Mr Taylor that he would not sell the bread below $1.39 per loaf. As was the usual practice for bread supplied on a no‑return basis Mr Morrell told his staff to reduce the price towards the end of the day. On 14 November 1995 Mr Taylor visited Bob's IGA shop, saw the price of the Eureka bread as $1.29 per loaf and told Mr Morrell that he should start at $1.39 per loaf and go to mark downs later in the day. Mr Morrell said he would not do so that day but would fix the matter the following day. Mr Taylor told Mr Toohey that Mr Morrell was going to put the price back up to $1.39. On 15 November 1995 Mr Jones from Safeway telephoned Mr Maine, then the Victorian State sales manager of Tip Top, told him that they had cheap bread in Albury and Ferntree Gully, told him to get the bread out of those places and told him that Tip Top had already been deleted in two stores in Albury and would be deleted in Ferntree Gully. Mr Maine in the presence of Mr David Kadir, Tip Top's national marketing director, telephoned Mr Toohey and during the conversation it was decided that Mr Toohey should advise Mr Morrell that Tip Top was withdrawing supplies of the Eureka bread from Bob's IGA and that a different bread would be offered instead at a discounted price every second week until the end of the year and that Bob's IGA was to resell the bread at $1.39 per loaf. On the same day Mr Toohey told Mr Morrell he would no longer be receiving Eureka plain wrap bread because of threats from Safeway to withdraw Tip Top bread from its stores in the Albury/Wodonga area if Tip Top continued to supply Mr Morrell. Mr Toohey offered Mr Morrell a supply of Sunblest Code C bread every second week until the end of the year to be sold at $1.39 per loaf.

On 15 November 1995 Safeway Albury removed Tip Top bread products from display but on 16 November 1995 Safeway accepted Tip Top bread at its Albury and Lavington stores. From 16 ‑ 28 November 1995 Tip Top withdrew the sale of Eureka plain wrap bread from Bob's IGA.

Ferntree Gully - November 1995 resale price maintenance

In November 1995 the Cool Store in Ferntree Gully advertised "Eureka" plain wrap bread Code C at $1.15 per loaf. On 16 November 1995 Mr Maine told Mr Gladstone, the Tip Top area representative that Safeway was threatening to delete Tip Top from its Ferntree Gully store because of the price at which the Cool Store was selling Tip Top bread and he instructed Mr Gladstone to visit the Cool Store in Ferntree Gully and ask its proprietor Mr Dobson to increase the price of Tip Top bread to $1.39 per loaf. Mr Gladstone also had a conversation with Mr Kadir who advised him to ask Mr Dobson to increase the price to $1.39. Mr Gladstone told Mr Dobson that if he did not put his price up Safeway was threatening to take Tip Top bread products out of its stores. Mr Dobson said he was prepared to put the price up to $1.29 per loaf from 20 November 1995 which he did.

On 20 November 1995 Mr Jones from Safeway telephoned Mr Maine and complained about the cheap bread at Ferntree Gully. Mr Maine then telephoned Mr Gladstone and told him that Tip Top bread products were going to be deleted from Safeway if they did not fix the problem with the Cool Store and he told Mr Gladstone to withdraw supplies of Eureka bread from the Cool Store the following day. Mr Gladstone told Mr Dobson that it was no longer acceptable to sell Eureka bread at $1.29 per loaf and that Tip Top would no longer supply Eureka plain wrap bread but only branded bread products. Mr Gladstone told Safeway Ferntree Gully that Tip Top was pulling the Eureka bread out of the Cool Store from the following day and Mr Maine passed this on to Mr Jones from Safeway. From
21 to 27 November 1995 Tip Top withdrew the supply of Eureka plain wrap from the Cool Store.

According to the agreed statement of facts when the incidents at Ferntree Gully and Albury occurred and were publicised, GWF voluntarily contacted the Commission to advise it that it was investigating the allegations internally and would discuss the incidents with the Commission shortly. The incidents had not been reported to GWF's corporate office before the publicity occurred. When representatives of GWF met with the Chairman of the Commission in December 1995 they were informed that a complaint had been received of an incident involving price fixing at the Preston market. Throughout the Commission's investigation of all matters GWF has provided a high level of co-operation.

It is also said as part of the agreed statement of facts that each of the contraventions in relation to the Preston market arose from the conduct of Safeway and that each of the contraventions in relation to Albury and Ferntree Gully was a result of conduct or a perceived threat of conduct by Safeway. I return to these matters later.

The provisions of the Act contravened

The matters in relation to the Preston incident result in a contravention of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Act because of the deeming provisions of s 45A of the Act, there being a proscribed agreement, arrangement or understanding made between GWF and Safeway which was also implemented. The May incident at Albury results in a contravention of s 48 and s 96(3)(b) and (f) of the Act, there being an attempt at resale price maintenance by GWF which was not carried into effect. The November incidents at Albury and Ferntree Gully result in contraventions of s 48 and s 96(3)(a), (b), (d) and (f) of the Act as the practice of resale price maintenance was carried into effect.

The hearing involved a contest as to the relevant matters for the Court to take into account in fixing the penalties and the appropriate penalties to fix. The Commission submitted that a total penalty of $2,000,000.00 was appropriate. Its components were $400,000.00 for making the price fixing agreement at Preston, $600,000.00 for giving effect to it, $200,000.00 for the attempted resale price maintenance in May 1995 and $400,000.00 for each of the two episodes of resale price maintenance in November 1995. By contrast GWF submitted that the appropriate penalty should not be more than a total of $225,000.00 made up of $25,000.00 for the attempted resale price maintenance and $50,000.00 for each of the other four contraventions. I will return to a consideration of these amounts.

Evidence in mitigation of penalty

Mr Kelly described in considerable detail the action taken by GWF's corporate office once it became aware of the contraventions, the communications and co‑operation with the Commission and its own investigations. He also described what he called GWF's "strong culture of compliance" with the Act and the steps taken to revise the compliance program after the contraventions became known to the corporate office.

Wendy Peter, a solicitor who has advised GWF on trade practices for some time described GWF's "strong culture of compliance" in relation to the Act. She referred to GWF's company-wide education program and produced various documents relating to the compliance program. The most recent compliance guide prior to the occurrence of the contraventions was published in 1993. As at November 1995 Ms Peter had been instructed by GWF to update and improve the guide, a task which she was undertaking. The most recent edition of the compliance guide was adopted by the board of GWF in July 1996 and was distributed to all relevant employees. GWF in conjunction with its solicitors had also conducted seminars relating to compliance with the Act. Since December 1995 these seminars have continued and have been attended by over 800 employees.

It is relevant to note that the compliance guide which was current at the time of the contraventions (revised August 1993) made it quite clear that the contraventions which occurred were "strictly prohibited". Further, the guide contained a section entitled "Some tips for day-to-day business conduct" which included advice as to what should not be discussed with competitors.

Tip Top Victoria is operated as a separate profit centre within GWF's bread division and confidential evidence was given as to its profit and loss figures for the 1994/95 and 1995/96 years. Included within the confidential exhibit was a balance sheet for Tip Top Victoria which showed substantial assets.

Although it was submitted that I should look at the Victorian Tip Top operation as being in effect a separate business entity and assess and determine the relevant penalties having regard to the size and profitability of the Tip Top Victoria division I am not satisfied that that is the correct approach where a large public listed corporation carries on business through divisions rather than through separate operating companies. It is very important in this area that responsibility be assumed and discharged by the board of directors and senior executives and management for compliance by the corporation with its obligations under the Act. It is the board of directors which supervises and ultimately controls the executive and operational aspects of a corporation's commercial activities and it would tend to minimise the significance and extent of the degree of vigilance and supervision required by the board and its senior executives to look at any contraventions of the Act, for which the board and the senior executives are ultimately responsible, by reference to divisions or units of the corporation's operations which make up only one aspect or
component part of its commercial activities and profitability.

In any event I note that Tip Top Victoria's turnover and assets run into many millions of dollars. In the overall context of GWF's financial position I do not regard it as material for the determination of the penalties in the instant case that I should have regard to the profitability of the Tip Top Victoria bread division in isolation from GWF's overall financial position. It was submitted by GWF that at the time of the contraventions the Tip Top bread division in Victoria was operating at a loss but I do not consider this as relevant to penalty in isolation from the rest of GWF's financial position. It cannot reasonably be argued, in the context of a corporation which has sales of $1.28bn and a profit before income tax of $81,746,000.00, that a relevant penalty should be reduced because a particular division or section made only a small operating profit or suffered an operating loss.

Although there is no evidence, nor is it indeed suggested, that any of the directors or officers in the national bread or corporate offices (other than Mr Kadir the national marketing director of Tip Top) were involved in the contraventions, senior persons participating in the management and supervision of the Tip Top Victoria division were involved in the contraventions. The knowledge of the contraventions possessed by the board and the chief executive officers was obtained through publication of a newspaper article which reported a
question asked in the Victorian Parliament about the withdrawal of the supply of bread by Tip Top from the Cool Store in Ferntree Gully. Thereafter there was co‑operation with the Commission and it was only during that period of co‑operation that GWF's corporate and national officers became aware of the contravention which had occurred at Preston.

As I have pointed out, a number of senior people in the management and supervision of the Tip Top Victoria division were involved in the contraventions notwithstanding the fact that they had been involved in GWF's compliance program. Mr Guthridge, Tip Top's general manager of Victorian operations, and Mr Gunton the State sales manager, had both received a personal tutorial in trade practices compliance from GWF's solicitors in February 1995 and Mr Maine, who became the Victorian State sales manager in September 1995, had received a copy of the revised August 1993 Compliance Guide on 18 October 1995.

Relevant principles

Prior to 21 January 1993 s 76 of the Act prescribed a maximum penalty of $250,000.00 for a corporation and $50,000.00 for an individual. By Act No 222 of 1992 the maximum penalty for a corporation for the contraventions under consideration was increased to $10,000,000.00 and, for an individual, to $500,000.00.

The Commission submits that after taking into account the co‑operation that GWF has given to the Commission, and its admission of the contraventions shortly after the proceeding was filed, the appropriate penalties are:

(a) $400,000.00 for making the price fixing and supply restriction agreement at Preston;

(b) $600,000.00 for giving effect to the price fixing and supply restriction agreement;

(d) $400,000.00 for the actual resale price maintenance at Albury in November 1995;

(e) $400,000.00 in respect of the actual resale price maintenance at Ferntree Gully in November 1995.

By contrast, GWF submits that the appropriate penalties are:

(a) $25,000.00 for the attempted resale price maintenance;

(b) $50,000.00 in respect of each of the other four contraventions.

Both parties referred to a number of cases in which relevant principles in relation to the fixing of penalties under s 76 were set out, penalties were fixed by the Court and where penalties were agreed by the parties and the Court did not dissent from that agreement. Although one can gain assistance and guidance from the principles referred to in the authorities, it is trite to say that each contravention must be assessed on its own by reference to the relevant facts constituting the contravention. Guidance as to the fixing of penalties is provided by s 76 which provides that the penalty is to be "appropriate having regard to all relevant matters" and the section then sets out certain matters which the legislature regarded as relevant, namely:

(a) the nature and extent of the act or omission;

(b) the nature and extent of any loss or damage suffered as a result of the act or omission;

(d) whether the contravener has been previously been found by the court in proceedings under the Act to have engaged in any similar conduct.

These considerations are not the only matters to which the Court must direct its attention. A useful guide as to the range of relevant matters to which reference should be made was set out by French J in Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 at 52,152-3. French J in addition to the matters set out in s 76 referred to:

(a) the size of the contravening company;

(b) the degree of power it has, as evidenced by its market share and ease of entry into the market;

(d) whether the contravention arose out of the conduct of senior management or at a lower level;

(e) 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;

(f) whether the company has shown a disposition to co‑operate with the authorities responsible for the enforcement of the Act in relation to the contraventions.

This checklist has been approved and adopted in a number of other cases: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640; Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR ¶41‑375; Trade Practices Commission v CC (New South Wales) Pty Ltd (No 2) (1995) ATPR ¶41‑406; 41,431; Trade Practices Commission v Axive Pty Ltd (1994) ATPR ¶41-368.

It has been emphasised in a number of cases that the object of the penalties imposed by s 76 is to deter repetition of the contraventions of the Act: Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR ¶40‑091 at 17,896; Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296, 297‑8; Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR ¶41‑359 at 42,699; Trade Practices Commission v Simsmetal Ltd (1996) ATPR ¶41‑449 at 41,512; Trade Practices Commission v CSR Ltd (supra); NW Frozen Foods Pty Ltd v Australia Competition and Consumer Commission (supra). The deterrent aspect of a penalty is both specific and general. It is calculated to deter repetition by the party penalised and to serve as a warning to the community at large: Trade Practices Commission v Mobil Oil Australia Ltd (supra, 298). As the Full Court of the Federal Court said in NW Frozen Foods
Pty Ltd v Australia Competition and Consumer Commission (supra, 648):

"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 program for the future".

However, the issue arises whether a Court, in assessing an appropriate penalty for contravention of the Act, should consider not only the issue of deterrence but also the issue of punishment for the contravention. The Act makes it clear that contravention of Part IV of the Act does not constitute a criminal offence: s 78. However, that does not mean that the imposition of a civil penalty should not be regarded as punishment for the contravention. The Oxford English Dictionary defines "penalty" as "A punishment imposed for contravention of law, rule or contract".

In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra, 650) the majority of the Full Court of the Federal Court said that the purpose of penalties imposed by s 76 "established now by a long line of cases is not punishment". Carr J agreed with the majority in their conclusion that the appeal should be allowed and the pecuniary penalty fixed by the trial judge reduced. However, Carr J expressed "one slight reservation" in relation to the observation of the majority that the purpose of the penalties imposed by s 76 "established now by a long line of cases is not punishment". Carr J expressed the view that the cases decided on the assessment of pecuniary penalties "have not ruled out or excluded punishment as one of the purposes of" s 76 of the Act. Accordingly, he would have preferred to have left that point open.

I am, of course, bound by the authority of the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) but apart from Trade Practices Commission v CSR Ltd (supra), to which I shall refer I have been unable to find any positive statement in any of the cases that the purpose of the imposition of penalties by s 76 "is not punishment". This is a significant matter because, in my view, a court in an appropriate case where there has been a flagrant and wilful contravention might take the view that a severe penalty was warranted having regard to the deliberateness and wilfulness of the contravention. As Burchett J said in Trade Practices Commission v TNT Australia Pty Limited (supra, 40,167):

"Penalties are not designed to express outrage; but they certainly should not be in an amount suggesting a weak tolerance of defiance of the law".

None of the cases which have emphasised the deterrent nature of penalties makes deterrence an exclusive consideration and excludes punishment as a relevant consideration save for Trade Practices Commission v CSR Ltd (supra).

In Trade Practices Commission v CSR Ltd (supra) French J said that the provisions of Pt IV of the Act were regulatory rather than of a penal character and that as proceedings for the recovery of pecuniary penalties were not classed as criminal prosecutions:

"... it is not necessary to measure the contravening conduct against some general communal morality in which the law is embedded. Aspects of some commercial behaviour, such as ruthlessness and expansionary ambition, are not elements of the classes of conduct prohibited by Pt IV nor even aggravating factors. For those same attributes may be found in vigorous and lawful competition."

His Honour said that specifically in relation to s 46 it was not necessary to show that a contravener took advantage of its market power in a way that was "reprehensible, predatory or unfair or regarded in commerce as deserving of criticism" and he referred to Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177 at 191, 194, 202, 213. His Honour then relied on these passages in support of his proposition that any moral or amoral components of a contravener's behaviour have no part to play in fixing penalty. His Honour then said (52,152):

"Punishment for breaches of the criminal law traditionally involve three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution or rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV. Nor, if it be necessary to say so, is there any compensatory element in the penalty fixing process".

It may well be that the conduct proscribed by Pt IV of the Act does not reflect or record a moral content in any biblical or philosophical sense. Nevertheless I have difficulty with the proposition that the fixing of a penalty for a contravention of a statutory provision such as is found in Pt IV should not be regarded as a punishment. In my view, Smithers J so regarded the fixing of a penalty for a contravention of Pt IV in Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (supra) where he said at 17,896:

"The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality, and it should be kept in mind that the Act operates in the commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive".

(This passage was extracted by French J in Trade Practices Commission v CSR Ltd (supra, 52,153).

If it be the will of Parliament that commercial standards laid down in the Act must be observed and if it be the will of Parliament that a civil penalty is to be imposed if those commercial standards are not observed it follows, in my opinion, that the imposition of a penalty might be said to have a punishment content as well as a specific and general deterrent content. In the light of NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) this aspect of the fixing of penalties under s 76 of the Act may need further consideration.

It is apparent from the amendment to s 76 in 1992 that Parliament took the view that the penalties fixed for contraventions of the Act were inadequate and needed to be
increased. The Second Reading Speech in relation to the Trade Practices Legislation Amendment Bill 1992 which included the amendment to s 76 made it clear that the view was taken that the penalties were inadequate and that they had not had an adequate deterrent value. However, it is not necessary to have resort to the Second Reading Speech in order to recognise that Parliament has taken the view that the previous penalties were inadequate. The increase in the maximum penalties in 1992 speaks for itself.

The Commission submitted that in assessing the appropriate penalties the Court should take into account the changes that had occurred in trade practices and competition law and policy over the last five years. There is no doubt that the Court should take into account the forty‑fold increase in the maximum penalty that can be imposed under Pt IV of the Act in relation to corporations as the Court should take into account changes in legislation. However, changes in government policy are more problematic as considerations which may influence the level of penalties fixed. There is a clear distinction to be drawn between legislative policy and government policy. Micro‑economic reforms introduced by various governments are very important in understanding and explaining market structure and market influences. However, it is a contravention of the law which gives rise to the imposition of a penalty, not a contravention of government policy except insofar as it may be reflected in, or may result in, a contravention of the law. If government policy is reflected in legislative policy which can be discerned upon the proper construction of relevant legislation it will be given effect. Absent any relevance to, or embodiment in, legislation, government policy is of no relevance in determining the appropriate level of penalty to impose. Mr Fajgenbaum QC, who appeared with Mr Beach for the Commission, said that the Commission was saying no more than that the Hilmer reforms had been implemented by legislation and that it was this legislative action rather than government policy to which the Court should have regard. However, in my view a consideration of any such legislative action does not alter, exacerbate or minimise the nature of the contraventions of Pt IV of the Act. Those contraventions must be considered in the light of the statutory provisions in Pt IV rather than by reference to other legislation.

The Commission submitted that in many respects GWF was in an analogous position to the ICI Company in Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 which involved four separate contraventions of the resale price maintenance provisions of the Act. The Commission sought to draw an analogy between the size of ICI, the period during which the acts of resale price maintenance occurred, the demand for the relevant product and the fact of a previous imposition of a penalty. Mr Nettle QC, who appeared with Mr Scerri for GWF, submitted that the analogy was misconceived but in my view drawing analogies in this area is fraught with difficulty. The myriad of distinctions which will arise when comparing the actions of a company in one field of economic activity with the activities of a differently structured company in another field of economic activity are such as to render the drawing of an analogy virtually useless. However, this is not to say that similar contraventions should not be visited with similar penalties. As the Full Court of the Federal Court said in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra, 648):

"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 R (1984) 154 CLR 606; 54 ALR 193. 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 therefore 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."

What penalties should be imposed?

In my view significant penalties are called for in relation to the contraventions before the Court. They were brought about by the actions of senior people in the Victorian Tip Top division of GWF. It is true that there was not an involvement by the directors or the top management of GWF but the officers involved were occupying senior and responsible positions and were effectively the top management for the Tip Top bread business in Victoria. They included the general manager of Victorian operations, Mr Guthridge, the State sales manager Mr Gunton, the later State sales manager, Mr Maine and Tip Top's national marketing director, Mr Kadir. None of these officers operated as a check or control on the others involved and they all participated in the contraventions without any consideration of the fact that they were causing GWF to contravention the Act. The contraventions did not occur as a result of one GWF officer acting on a frolic of his own, but rather as a result of the actions of a number of participants.

It is somewhat surprising, having regard to GWF's compliance program, that no participant raised the issue of contravention of the Act. As I noted earlier, the relevant compliance guide made it clear that the contraventions which occurred were strictly prohibited and could be the subject of severe penalties. Price fixing and resale price maintenance were specifically adverted to in the compliance guide. In such circumstances I must assume that the failure of the officers to raise the issue of contravention of the Act occurred either as a result of ignorance or disregard of the issue. It was put by GWF that there had been a high turnover of management over the preceding five years but I do not regard that as a mitigating factor. Section 84(2) of the Act attributes the conduct of a company's directors and officers to the company and a high turnover of management only requires the board and top management to ensure, and be more vigilant, that a compliance program is actively implemented and carried into effect.

GWF is entitled to have consideration and weight given to the fact that as soon as the contraventions came to the attention of its board of directors and senior national management, full co‑operation was given to the Commission and to the fact that once the proceedings were issued a defence was filed in which contraventions were admitted and a lengthy and expensive trial avoided. GWF is entitled to say that in these circumstances it ought to receive a reduction in the amount of the penalties which would otherwise be imposed if the contraventions were determined after a lengthy contested trial: Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532, 542; Trade Practices Commission v TNT Australia Ltd (supra, 40,169); NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra, 647).

The Commission, in support of its submission that a penalty of $2,000,000.00 is warranted, relies upon a previous contravention for price fixing for which a subsidiary of GWF was ordered to pay a penalty of $50,000.00 representing 20% of the then maximum penalty: Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256. Although that contravention and penalty is relevant and is to be taken into account (s 76 of the Act), I am of the opinion that it is of marginal significance or impact in relation to the contraventions presently before the Court. That contravention occurred almost 20 years before the present contraventions and under quite different circumstances. It is not suggested that there has been a continuity of conduct and there has also been a substantial compliance program implemented during the intervening period.

It must not be forgotten that an express object of the Act is "to enhance the welfare of Australians through the promotion of competition ..." (s 2). The effect of the contraventions was to eliminate competition so far as Safeway and GWF were concerned at GWF's stall in the Preston market for a period of at least four months. The incidents of resale price maintenance also had the effect of inducing and preventing two small retailers from offering consumers a competitive price for the relevant products. Although the effect of the contraventions may have been localised that does not diminish their significance as deliberate contraventions.

The Commission submitted that as the parties had not put before the Court an agreed position as to the appropriate penalty to be imposed, the circumstances facing the Court were to be distinguished from the numerous cases dealing with negotiated or agreed penalties. However, there is a logical inconsistency in this proposition because it seems to contain within it the suggestion that if the parties agree upon an appropriate penalty then that agreed penalty, if accepted by the Court, will in some way be different from the penalty which the Court might reach independently of any submitted agreement by the parties. It is trite to say that s 76 of the Act puts the responsibility on the Court, not on the parties, to determine the appropriate penalty to be imposed. As the Full Court pointed out in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra, 644):

"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".

I therefore do not exclude from my consideration the issues raised and principles discussed in the various cases which considered the imposition of penalties in the context of a negotiated or agreed position being placed before the Court.

The Commission and GWF submit that a number of factors warrant the imposition of their respective penalties which total $2,000,000.00 and $225,000.00. The Commission says that GWF was engaged in five separate contraventions over a substantial period of time. GWF submits that there were in reality only three offences namely, the price fixing in relation to the Preston shop, the resale price maintenance at Albury in November 1995 and the resale price maintenance at Ferntree Gully in November 1995. However, although the attempt at resale price maintenance in Albury did not succeed, a relevant contravention of the Act occurred. So far as the price fixing in relation to the Preston shop is concerned, s 45 of the Act recognises two separate contraventions where an agreement is made and where it is carried into effect. I therefore proceed on the basis that there are five separate contraventions in respect of each of which a substantive penalty is to be imposed.

The Commission says that GWF by its relevant officers engaged in the infringing conduct knowingly and deliberately. GWF says that it did not instigate or lead any of the contraventions, that the conduct was not deliberate or systematic but rather was reactive behaviour initiated by Safeway's conduct. I cannot accept the proposition that the conduct was not deliberate and systematic. It may have been reactive behaviour but it was also quite deliberate and engaged in for commercial considerations. Further the resale price maintenance episodes involved GWF anticipating Safeway's reaction. There was no suggestion that the relevant officers tried to avoid participating in the conduct; rather they willingly embraced it. In my opinion they consciously and deliberately contravened the Act albeit under commercial pressure. They may not have done so systematically in the sense that it occurred on a regular recurring basis but it was the same circumstance underlying each contravention - we must go along with Safeway. As I have pointed out earlier there is no suggestion that the conduct was engaged in with the acquiescence of the board of directors or its top management, but it was nonetheless engaged in by those senior officers
responsible for the management of the Tip Top business in Victoria.

The Commission relies on the fact that the contravening conduct was engaged in with the knowledge and acquiescence of senior management. This is correct so far as the top Victorian management is concerned. In addition, Mr Kadir, the national sales director of Tip Top, was involved in the two resale price maintenance incidents in November 1995. True it is that top management was not involved but where a company puts in place a decentralised management structure it inevitably takes a risk that contraventions might occur in circumstances where, had there been more direct control from top management, the contraventions may not have occurred. I do not accept that it is a fair description of the participants to say that they were Tip Top's Victorian middle management as GWF contended. Rather the participants included Tip Top's Victorian senior management.

It is submitted by the Commission that the period of the price fixing arrangement was substantial. It is not clear from the evidence how long the price fixing arrangement was in place, but on the most charitable view it continued for at least four months. It is not clear as to how or why it faded away but what is clear is that GWF took no active steps to change the position. GWF says that the conduct extended for very short, isolated periods of time and that the agreement on price "lapsed almost immediately". I cannot accept that submission. According to the agreed statement of facts "at most the agreement was given effect to for four months" and "it is arguable that the arrangement had lapsed earlier than this" because there were no further discussions about pricing at the Preston stall. If the agreement was given effect to for four months, I cannot accept that it lapsed almost immediately. The fact that there were no further discussions about price does not mean that the original agreement or arrangement was not being carried into effect. The drop in turnover suggests that it was being carried into effect at least through July 1995 and there is no evidence before the Court as to when, if at all, GWF reduced its prices at Preston and recommenced to offer branded bread for sale. Nor is there any evidence that GWF confronted Safeway and told it that GWF would no longer participate in the agreement or arrangement.

The Commission says that the comparative strengths of the parties involved in the resale price maintenance are of significance as both retailers in Albury and Ferntree Gully were small family businesses. GWF points out that the resale price maintenance only applied in respect of one brand of Tip Top bread leaving Tip Top and other company brands untouched by any constraint but that does not diminish the nature and significance of the contraventions. It is also important to remember that GWF was participating in conduct that according to the agreed statement of facts was intended to ensure that the discounting of bread by retailers other than large grocery chains was discouraged or prevented. In other words, GWF was aware that its conduct was specifically directed towards small businesses.

The Commission places significance on the fact that had the resale price maintenance conduct not been given publicity and had the Commission not announced that it was investigating the matter, the conduct was likely to have continued unabated. One can only speculate about this aspect but there is a relevant connecting factor between all the contraventions which was the desire of GWF to keep Safeway "on side". It is not unreasonable to assume that that desire would have continued to be implemented if it had not been uncovered. However I recognise that once the circumstances become known to GWF's top management GWF co‑operated fully with the Commission.

The relevance of GWF's compliance program was in issue between the parties. The Commission submits that it is not a substantial mitigating circumstance as it had no effect on the behaviour of GWF's management. GWF places great weight upon the compliance program. One needs to look at the compliance program in two respects. Firstly one must ask whether there was a substantial compliance program in place which was actively implemented by GWF; the answer is in the affirmative which is a mitigating factor as is GWF's revision of the program: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra, 647). The compliance guide made it quite clear that the Act could not be ignored and that "severe pecuniary penalties" were involved if the Act was contravened. Seminars were also conducted. Secondly, one must ask whether the implementation of the compliance program was successful and in the circumstances of this case the answer must be in the negative. It appears that all GWF's officers who participated in the contraventions were well aware, or ought to have been well aware from the documentation that they had received and seminars some had attended, that what they were doing was a clear contravention of the Act which "may involve severe pecuniary penalties". To this extent the compliance program failed and has been the subject of revision since the contraventions became known. Such failure was not an isolated failure; it occurred on different occasions and with different officers. In my view the level of penalties should take this failure into account.

The Commission submits that the size of GWF justifies a more substantial penalty than for a smaller company. The size of GWF is a relevant consideration to take into account in determining the extent to which the Court demonstrates by the penalties that these contraventions will not be condoned when committed by the commercial community. I accept that the penalties must be proportionate to the contraventions but in my view corporations of the size of GWF have a responsibility to the public at large to ensure that its commercial activities do not contravene Pt IV of the Act. When a corporation's commercial activities substantially permeate the commercial and consumer life of the public it is appropriate in my view, to take that fact into account in determining an appropriate level of penalty for contravention. It is not a matter of penalising a wealthy offender more than a less wealthy offender; rather it is a matter of recognising the position GWF has in the commercial community. I adopt as relevant and applicable to GWF the following observation of Olney J in Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) ATPR ¶41‑153 at 53,178 where he was setting out matters relevant to the assessment of penalties:

"First, ICI is a large corporation with extensive interests and resources. It has a high profile in the community and is of such standing that it ought to be a leading exponent of ethical and lawful business practices".

The Commission says that it is no excuse that GWF was coerced to engage in the relevant conduct by Safeway. GWF does not submit that it was the subject of economic coercion to the extent that it had no alternative but to obey the dictates of Safeway. Rather it says it was subject to extreme commercial pressure from a major customer to which its relevant officers succumbed and this pressure explains the result of human frailty in acting contrary to corporate direction. GWF submits that the commercial pressure exerted, although not an excuse, is relevant to penalty and that but for the pressure the contraventions would not have occurred. I am prepared to accept that it was a concern about Safeway reprisals that motivated the GWF officers to commit the contraventions but it does not appear that they took any steps to challenge Safeway on the issue or seek to have the matter dealt with or resolved at a higher national or corporate level. They were passive in relation to Safeway and it needs to be brought home to GWF's officers and the commercial community that if approached or pressured to commit a contravention of the Act they should not be willing or unwilling participants but rather should bring the matter to the attention of their board or senior management.

Mr Nettle submits that from a relative point of view the contraventions had a minimal effect on consumers, retailers and the relevant market. I do not regard it as correct to say that the contraventions had a "minimal" effect. Perhaps it may be correct to say that they had a limited geographic and temporal effect but nevertheless consumers who purchased bread at the relevant outlets at the time of the contraventions (apart from the attempted resale price maintenance in May) paid more for the bread the subject of the contraventions and were denied the benefit of competition in relation to branded bread. The nature and significance of the contraventions is not to be trivialised or minimised by the fact that that the product involved was a relatively cheap product and the distortion of its price was only to be measured in cents in respect of a small number of consumers.

Mr Nettle submits that the level of penalties propounded by the Commission is excessive and that I should use NW Frozen Foods v Australian Competition and Consumer Commission (supra) as a touchstone for the determination of the level of penalty having regard to the fact that in that case a total penalty of $1,200,000.00 was regarded as excessive in respect of 33 contraventions. However as I have already pointed out it is unwise, and indeed inappropriate, to use the circumstances of one case for the purpose of identifying a touchstone for the fixing of penalty in another case. It was because the learned primary judge in Australian Competition and Consumer Commission v NW Frozen Foods (supra) had used a single decision substantially to determine the amount of the penalty that the Full Court concluded that he had fallen into error.

I have taken into account in particular the corporate level at which the contraventions occurred, GWF's corporate structure, the compliance program adopted and implemented by GWF, the failure of that program in the circumstances to which I have referred, the nature and circumstances of the contraventions and their effect, the relative size and position of GWF in the commercial and corporate community, the co-operation of GWF and its admission of the contraventions at a very early stage of the proceeding. I have also taken into account the principles and matters to which I have referred in these Reasons as well as the submissions by the Commission and GWF.

I have reached the conclusion that the appropriate penalties to fix are in excess of those propounded by GWF but less than those propounded by the Commission. In particular, I do not start off with any view that the total of the penalties for all the contraventions should be at a particular level. There are five contraventions, each a separate contravention and each of them brought about by separate conduct rendering s 76(3) of the Act inapplicable. I accept that there is a totality principle (explained below) but here the circumstances underpinning the making and implementation of the price fixing agreement and the various resale price maintenance circumstances, both attempted and implemented, are quite separate. Although the general motivating factor behind them was to keep Safeway "on side" they were not otherwise connected.

In Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (supra) Sheppard J had regard to the proper total penalty and did not impose substantial penalties for a number of contraventions. However in that case the contraventions arose out of the one transaction, an arrangement or understanding.

The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved: McDonald v The Queen (1994) 48 FCR 555. But that does not mean that a Court should commence by determining an overall penalty and then dividing it amongst the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined. In Mill v The Queen (1988) 166 CLR 59 the High Court accepted the following statement as correctly describing the totality principle:

"The effect of the totality principle is to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate is 'just and appropriate'. The principle has been stated many times in various forms: 'when a number of offences are being dealt with and specific punishments in respect of them are being totted up to make a total, it is always necessary for the court to take a last look at the total just to see whether it looks wrong[']; 'when ... cases of multiplicity of offences come before the court, the court must not content itself by doing the arithmetic and passing the sentence which the arithmetic produces. It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences'."

As Spender J pointed out in McDonald v The Queen (supra, 556):

"Implicit in that statement is that the sentence for each offence should be 'properly calculated in relation to the offence for which it is imposed'".

It is explicit in this statement that a sentencer or penalty fixer must, as an initial step, impose a penalty appropriate for each contravention and then as a check, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct involved: McDonald v The Queen (supra, 563) per Burchett and Higgins JJ.

The contraventions were blatant, implicating the top Victorian management of the Tip Top bread division of GWF. True it is that a compliance program was in place but the program in the circumstances of the contraventions under consideration was not effective. It was disregarded or ignored by the top Victorian management of the Tip Top division. If it is not effective with management at the level involved in these contraventions it must be brought home to GWF and its officers at every level that they must obey the law. In my opinion a significant deterrent element is required in relation to these contraventions.

I consider the appropriate penalties are:

(a) $300,000.00 for making the price fixing and restriction on sale agreement;

(b) $450,000.00 for giving effect to the price fixing and restriction on sale agreement;

(d) $200,000.00 for the resale price maintenance at Albury in November 1995;

(e) $200,000.00 for the resale price maintenance at Ferntree Gully in November 1995.

The order of the Court will be that:

1. The second respondent pay a pecuniary penalty of:

(a) $300,000.00 in respect of its contravention of s 45(2)(a)(ii) of the Act in or about April 1995;

(b) $450,000.00 in respect of its contravention of s 45(2)(b)(ii) of the Act in or about May 1995;

(d) $200,000.00 in respect of its contravention of s 48 of the Act at Albury in or about November 1995;

(e) $200,000.00 in respect of its contravention of s 48 of the Act at Ferntree Gully in or about November 1995.

2. The respondent pay to the applicant its costs of the proceedings to the extent that, and insofar as, such proceedings have been brought and continued against the second respondent.

Counsel for the applicant: Mr J I Fajgenbaum QC &

Mr J B R Beach

Solicitors for the applicant: Australian Government

Solicitor

Counsel for the second respondent: Mr G A A Nettle QC &

Mr C M Scerri

Solicitors for the second respondent:Arthur Robinson &

Hedderwicks

Date of Hearing: 8 May 1997

Date of Judgment: 30 May 1997

I certify that this and the preceding forty-one (41) pages are a true copy of the Reasons for Judgment of the Honourable Justice Goldberg

Associate:

Date: 30 May 1997

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