FEDERAL COURT OF AUSTRALIA

ACCC v SIP Australia Pty Ltd [1999] FCA 858

TRADE PRACTICES – contravention of Part IV Trade Practices Act 1974 (Cth) – application for final orders by consent - injunctions and pecuniary penalties – power of Court to make orders – factors to be considered.

Trade Practices Act 1974 (Cth):  Pt IV

Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41‑375

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

Australian Competition and Consumer Commission v Real Estate Institute of Western Australia (1999) 161 ALR 79

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

AUSTRALIAN COMPETITION & CONSUMER COMMISSION v SIP AUSTRALIA PTY LIMITED & ORS

V 189 of 1999

GOLDBERG J

25 JUNE 1999

MELBOURNE

THE COURT ORDERS THAT:

1.         The fourth respondent (“Baker Bros”), whether by itself, its servants or agents, is restrained for a period of three years from:

(a)        making or arriving at;

(b)        giving effect to; or

(c)        attempting to make, arrive at or give effect to:

any contract, arrangement or understanding with any competitor of Baker Bros in the supply of compressors, including ABAC compressors, anywhere in Australia, which contract, arrangement or understanding contains a provision that:

(i)                  has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of, or a discount in relation to, compressors supplied or to be supplied anywhere in Australia;

(ii)                has the purpose of preventing, restricting or limiting the supply of compressors to particular persons or classes of persons anywhere in Australia; or

(iii)       has the purpose of preventing, restricting or limiting the supply or distribution of compressors, in particular circumstances or on particular conditions, anywhere in Australia.

2.         The fifth respondent (“Andrew Baker”) whether by himself, his servants or agents, is restrained for a period of three years from:

(a)        making or arriving at, or being knowingly concerned in, or party to, the making or arriving at of;

(b)        giving effect to, or being knowingly concerned in, or party to, the giving effect to of; or

(c)        attempting to make, arrive at or give effect to, or being knowingly concerned in, or party to, the attempting to make, arrive at or give effect to of:

any contract, arrangement or understanding with any competitor of Baker Bros, or any entity with which Andrew Baker is associated, in the supply of compressors, including ABAC compressors, anywhere in Australia, which contract, arrangement or understanding contains a provision that:

(i)         has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of, or a discount in relation to, compressors supplied or to be supplied anywhere in Australia;

(ii)        has the purpose of preventing, restricting or limiting the supply of compressors to particular persons or classes of persons anywhere in Australia; or

(iii)       has the purpose of preventing, restricting or limiting the supply or distribution of compressors, in particular circumstances or on particular conditions, anywhere in Australia.

3.         The sixth respondent (“Guy Baker”) by himself, his servants or agents, is restrained for a period of three years from:

(a)        making or arriving at, or being knowingly concerned in, or party to, the making or arriving at of;

(b)        giving effect to, or being knowingly concerned in, or party to, the giving effect to of; or

(c)        attempting to make, arrive at or give effect to, or being knowingly concerned in, or party to, the attempting to make, arrive at or give effect to of:

any contract, arrangement or understanding with any competitor of Baker Bros, or any entity with which Guy Baker is associated, in the supply of compressors, including ABAC compressors, anywhere in Australia, which contract, arrangement or understanding contains a provision that:

(i)         has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of, or a discount in relation to, compressors supplied or to be supplied anywhere in Australia;

(ii)        has the purpose of preventing, restricting or limiting the supply of compressors to particular persons or classes of persons anywhere in Australia; or

(iii)       has the purpose of preventing, restricting or limiting the supply or distribution of compressors, in particular circumstances or on particular conditions, anywhere in Australia.

4.         Baker Bros pay a pecuniary penalty pursuant to s 76(1) of the Act in the amount of $50,000.

5.         Andrew Baker pay a pecuniary penalty pursuant to s 76(1) of the Act in the amount of $5,000.

6.         Guy Baker pay a pecuniary penalty pursuant to s 76(1) of the Act in the amount of $5,000.

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

REASONS FOR JUDGMENT

Introduction

1                     The applicant (“the Commission”) has filed an application against two corporations and their directors alleging contraventions of pars 45(2)(a)(i) and (ii) and pars 45(2)(b)(i) and (ii) of the Trade Practices Act 1974 (Cth) (“the Act”) arising out of what are claimed to be price fixing and customer sharing activities which occurred principally in Victoria and New South Wales between January 1994 and June 1998 in relation to the supply of compressors and compressor parts.  The Commission seeks declaratory and injunctive relief and the payment of pecuniary penalties in respect of these activities.  It has filed a statement of claim and the fourth respondent Baker Bros (Aust) Pty Ltd and its two directors, the fifth and sixth respondents have filed a defence admitting all the allegations against them.  The Commission and the fourth, fifth and sixth respondents have joined in an application to the Court to make consent orders restraining the fourth, fifth and sixth respondents for a period of three years from engaging in the activities which they admit contravened the Act.  The Commission also seeks the imposition of pecuniary penalties.  The Commission and the fourth, fifth and sixth respondents have filed joint submissions to the Court which set out facts agreed between the parties, consent orders as to the form of injunctive relief and joint submissions as to the appropriate penalties to be paid by the fourth, fifth and sixth respondents.

2                     The procedure of the Commission and respondents making a joint submission as a result of a negotiated settlement in cases involving contraventions of Part IV of the Act as to the appropriate penalties to be imposed by the Court has been accepted by the Court.  However it is not a matter of the Court accepting an amount proffered jointly by the parties.  Rather it has been accepted that the determination of the amount of any penalty to be imposed in respect of a contravention of Pt IV of the Act is a matter for the Court which is not bound by any agreement or proposal reached between the parties.  There have been a number of decisions of the Federal Court which have accepted the procedure taken in this case and adopted penalties agreed between the Commission and respondents:  see for example Trade Practices Commission v Allied Mills (No 5) (1981) 60 FLR 38, 41‑42; Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41‑375; Trade Practices Commission v CC (NSW) Pty Limited (1994) ATPR 41‑363, (1995) ATPR 41‑406 and 41‑415; Trade Practices Commission v Hymix Industries (1995) ATPR 41‑369; Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Ltd (1996) ATPR 41‑457; Australian Competition and Consumer Commission v Foamlite (Australia) Pty Ltd (1998) ATPR 41‑615; and Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79.

3                     In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285, Burchett and Kiefel JJ made the following observations in relation to negotiated settlements of proceedings brought by the Commission under Part IV of the Act (291):

“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 jeopardised 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.”

4                     In Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (supra) French J considered the role of the Court where agreement has been reached between the parties in relation to the orders to be made in cases involving contraventions of statutes such as the Act in the following terms (80):

“Courts are frequently asked to play their part by accepting formal undertakings or making orders by consent which prohibit parties from certain conduct or require them to do certain things.  Sometimes they are asked to impose agreed pecuniary penalties.  In carrying out these functions, courts are conscious of the public interest in the settlement of cases.  They must also be conscious, however, that the laws they apply are public laws.  It is in the public interest that, in considering agreement between parties requiring orders of a court, the court does not act as a mere rubber stamp.  What is proposed must always be scrutinised to determine whether undertakings or consent orders are within power and are appropriate.”

Later his Honour said (86):

“The question whether an undertaking is to be accepted or a consent order made is not concluded by a finding that it is within the power of the court to do so.  The power of the court to make the orders sought is ‘defined and conferred by public law not by private agreement’:  Fiss, ‘Against Settlement’ (1984) 93 Yale Law Journal 1073.  In the exercise of that power the court is not merely giving effect to the wishes of the parties, it is exercising a public function and must have regard to the public interest in doing so.  This principle applies to the resolution of private litigation by consent orders or undertakings.  A fortiori it applies to proceedings brought by the Crown or public or statutory authorities to enforce the law in the public interest.  The court has a responsibility to be satisfied that what is proposed is not contrary to the public interest and is at least consistent with it.  So in OD Transport Pty Ltd v WA Railways Commission (1987) 13 FCR 500; 71 ALR 356, a private action brought under Part IV of the Act, the proposed settlement involved cross undertakings which were themselves reflective of an anti‑competitive purpose ‘foreign to the general scope and purpose of the Act’: at FCR 505.  Consideration of the public interest, however, must also weigh the desirability of non-litigious resolution of enforcement proceedings.”

I adopt, with respect, his Honour’s observations and I approach the matter before me in accordance with these observations.

The nature of the proceedings

5                     It is important to note that the matter presently before me is only a partial resolution of the proceeding.  The joint submissions have been made by the Commission and the fourth, fifth and sixth respondents.  The first, second and third respondents are not a party to the submissions and therefore are not to be taken as accepting the agreed facts.  The proceeding against them must proceed to trial in the ordinary course.  Therefore, where in these reasons I refer to submissions of “the parties” I am referring to the Commission and the fourth, fifth and sixth respondents.

6                     The allegations made against the fourth respondent (“Baker Bros”) is that as a result of two agreements involving price fixing and customer sharing activities in relation to the supply of compressors and compressor parts during the period from January 1994 to June 1998, Baker Bros breached pars 45(2)(a)(i), 45(2)(b)(i), 45(2)(a)(ii) and 45(2)(b)(ii) of the Act by making and giving effect to those agreements.  As against the fifth respondent (“Mr Andrew Baker”) and the sixth respondent (“Mr Guy Baker”) it is alleged that they have been directly or indirectly, knowingly concerned in, or a party to, Baker Bros’ contravening conduct within par 76(1)(e) of the Act.  These allegations are admitted by Baker Bros and its two directors, Mr Andrew Baker and Mr Guy Baker.

Background

7                     The facts to which I refer are taken from the statement of claim (the allegations in which are admitted by the parties) and the parties’ joint submissions.

8                     The first respondent (“SIP”) was established in Australia in 1988 and is a supplier or distributor in Australia of compressors and compressor parts.  In these reasons I refer to compressors and compressor parts collectively as “compressors”.  In particular SIP supplies compressors manufactured in Turin, Italy by ABAC Aria Compressa S.p.A (“ABAC”).  The second respondent (“Mr Ippaso”) was the managing director of SIP between January 1994 and June 1998 and the third respondent (“Mr Gates”) was a director of SIP from 2 November 1996 to June 1998.

9                     Baker Bros is a family company originally incorporated on 19 May 1988.  Like SIP, Baker Bros carries on the business of supplying and distributing compressors in Australia, including ABAC compressors.  Mr Andrew Baker is the managing director, and Mr Guy Baker a director, of Baker Bros.  In addition to its two directors, Baker Bros employs four employees and over the last four years has had an average annual turnover of $3.4 million.  It operates predominantly in the Australian compressor wholesale market but also sells articles such as bench grinders, spray equipment and other tools.  As at 30 June 1998 its assets totalled $1,750,000.

10                  It is estimated that between 50,000 and 60,000 compressors are sold in Australia each year at the wholesale level.  Baker Bros sales of compressors comprise approximately 5% of this market.  Australian assemblers who have purchased ABAC compressor pumps from Baker Bros make sales which comprise less than 15% of the market.  It is estimated that SIP sales in Australia account for 2% of the market.

SIP and Baker Bros dealings with ABAC

11                  During 1988 Baker Bros negotiated a distribution agreement with ABAC to import and sell ABAC products.  At that time Baker Bros was the principal Australian importer of ABAC products.

12                  Baker Bros believes that in the early 1990s SIP was importing small volumes of ABAC products and was not considered by Baker Bros to be a significant competitive threat.  In 1993 Mr Ippaso arrived in Australia from Italy and SIP began importing ABAC products into Australia on a much larger scale.  SIP became, and remains, one of ABAC’s principal distributors, importing large quantities of ABAC products into Australia badged under SIP’s name.  It was not until this increase in imports by SIP that Baker Bros considered SIP to be a major competitive threat to its business.  Baker Bros became very concerned about its reliance on ABAC’s products for its sales and felt threatened by the emergence of SIP which it considered had a much stronger financial and business relationship with ABAC. 

The 1994 Agreement

13                  In about July 1993 Mr Guy Baker and Mr Andrew Baker met for the first time with Mr Ippaso with a view to considering commercial matters that had arisen as a result of them both being importers of ABAC products.  Issues which were discussed included the sharing of shipping containers for transporting ABAC pumps to Australia and the joint importation of particular products so that bigger quantities could be imported from ABAC.

In or about February 1994 a meeting was held at ABAC’s offices in Turin, between Mr Guy Baker and Mr Paolo Arrigoni (“Mr Arrigoni”) and other representatives of ABAC at which the first prospective agreement between SIP and Baker Bros was discussed.  There were further conversations between Mr Guy Baker and Mr Arrigoni, in one of which Mr Guy Baker voiced his concerns that given Mr Ippaso’s aggressive attitude to the Australian market, his success in the English market and the fact that he was a major customer of ABAC, SIP could secure better prices from ABAC and convince ABAC to cease supplying Baker Bros altogether.  In reply to these concerns Mr Arrigoni replied:

“There should be room for both you and Mr Ippaso.  You are mainly selling to different types of customers and you will be selling different products.  We should be able to work things out co-operatively for everyone’s benefit.”

14                  On 3 March 1994 a meeting was held at SIP’s offices with Mr Andrew Baker and Mr Guy Baker.  Baker Bros asserts that the parties effectively agreed to pool their resources in order to market most effectively ABAC products in Australasia.  The agreement was that SIP was to contribute the expertise it had gained in other markets and Baker Bros would contribute its Australian expertise.  On 18 March 1994, Mr Andrew Baker wrote to Mr Ippaso about the proposed arrangement and sought to simplify it so that the customers were divided, an agreed pricing structure would be set and a marketing policy would be organised.

15                  On 24 March 1994 an agreement was signed by ABAC, SIP and Baker Bros which provided for a categorisation of customers between SIP and Baker Bros and agreement on pricing levels.  The agreement was on ABAC letterhead and included the following clause under the heading ‘Strategy and Objectives’:

“In a nutshell, the main objective is to proceed speedily and aggressively in a smooth distribution of direct drive compressors manufactured by ABAC, in the Australian market.  This can be obtained by maximising our common efforts, allocating certain marketing functions to the different firms focussing the channels and customers to attack and sell to.”

The agreement included terms as to the customers to be supplied by Baker Bros and SIP and as to the prices to be charged to customers.

16                  Baker Bros said in substance that it entered into the agreement to maintain a positive commercial relationship with ABAC and because it was concerned about the effect which SIP would have on its business if it did not enter into the agreement.

17                  The agreement as to market sharing and price fixing was carried into effect.  For example between March 1994 and December 1997 Baker Bros did not sell ABAC compressors to any customer allocated to SIP under the agreement.  However Baker Bros contends that it was under pressure from SIP to give effect to the agreement.

18                  For example, on 3 November 1995 SIP wrote to Baker Bros saying:

“It’s your prerogative to act as you are but do not complain if we take steps to safeguard our business in different directions.  You know that we have the financial, production and organisation resources to sustain, maintain and increase our market share in Australia.  I think it is worthwhile for you to come with quick answers!”

The 1997 agreement

19                  Prior to 1997 SIP was the only company in Australia importing entire 50 litre compressor packages from ABAC.  In early 1997 Baker Bros discussed with ABAC the possibility of importing, in addition to pumps, entire belt driven compressor packages on 50 litre tanks.  ABAC postponed further discussions with Baker Bros about the supply of 50 litre compressor packages until another meeting which was held at ABAC’s offices in Italy in November 1997 at which Mr Andrew Baker met with Mr Ippaso and ABAC representatives.  The three parties reached agreement at this meeting on another arrangement whereby each party would respect certain of each other’s key existing customers.  It was agreed that minimum prices were to be discussed further and agreed upon at a later date.  The agreement, again set out on ABAC letterhead, dealt with individual customers on a named basis.  SIP and Baker Bros subsequently agreed that it would not be practical to establish any minimum pricing for ABAC products:

“In relation to establishing a minimum selling price (as indicated in letter of intent dated 6 November 1997) it is agreed that in view of the fluid price situation created in Australia by a massive attack of some manufacturers it is not advisable to formulate any price agreement.”

This second arrangement was put into effect in December 1997 when SIP and Baker Bros exchanged customer lists.  The lists were the subject of further correspondence between the parties and were eventually finalised at a meeting at SIP’s offices on 17 February 1998. 

20                  Once this agreement was put into place, it was not significantly adhered to by Baker Bros and the agreement does not appear to have had any major impact on the market.  The customers on SIP’s list included a number of customers that Baker Bros was not in any event supplying for a number of different reasons.  Of those customers on SIP’s list which were also customers of Baker Bros, Baker Bros continued to supply compressors to those customers after November 1997 and made no apparent effort to stop marketing to those customers.  As for the customers on Baker Bros’ list, the agreement had little impact on Baker Bros’ sales to those businesses which indicates that if SIP was previously supplying these customers, it made no moves to stop doing so after November 1997.

21                  The Commission and Baker Bros and its directors have summarised the two agreements in the following terms:

“(a)     In or about January 1994, Baker Bros and SIP and ABAC entered into an agreement pursuant to which it was agreed that each of Baker Bros and SIP would not seek to do business in ABAC compressors with the other’s customers.  Moreover, an agreed pricing structure was put into place.

 (b)      In or about December 1997, a second agreement was entered into by SIP, Baker Bros and ABAC that provided that each of Baker Bros and SIP would supply to the other a list of its customers that the other would not sell ABAC compressors to.  In or about December 1997 broad agreement was reached as to the firms to which SIP and Baker Bros would sell ABAC compressors.  Over the following months the lists of agreed customers was finalised.”

These agreements resulted in contraventions of pars 45(2)(a)(i) and (ii) and pars 45(2)(b)(i) and (ii) of the Act.

Relevant principles

22                  Guidance as to the fixing of penalties is provided by s 76 of the Act 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;

(c)                the circumstances in which the act or omission took place;

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

23                  These considerations are not the only matters to which the Court should 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 where at 52,152‑3 his Honour said:

“The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases.  These include the following:

1.         The nature and extent of the contravening conduct.

2.         The amount of loss or damage caused.

3.         The circumstances in which the conduct took place.

4.         The size of the contravening company.

5.         The degree of power it has, as evidenced by its market share and ease of entry into the market.

6.         The deliberateness of the contravention and the period over which it extended.

7.         Whether the contravention arose out of the conduct of senior management or at a lower level.

8.         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.

9.         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.”

24                  A number of decisions have approved and adopted these principles: see NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra); Trade Practices Commission v TNT Australia Pty Limited (supra); 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.

25                  It should be remembered that the object of s 76 is to deter repetition of the contraventions of the Act - Trade Practices Commission v Stihl Chainsaws (Aust) Pty Limited (1978) ATPR 40‑091 at 17,896, Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 41‑449 at 41,512, Trade Practices Commission v CSR Ltd  (1991) ATPR 41‑076.  The deterrence is both specific, in that it is calculated to deter repetition by the party penalised, as well as general in that it is to serve as a warning to the community at large:  Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 298.

What penalties should be imposed?

26                  I now turn to the facts in the light of these principles.  The Commission has accepted Baker Bros’ explanation that it believed it would be forced out of business if it did not enter into the agreements.  That is no justification for the conduct entered into but it is a matter to be taken into account when determining the appropriate penalties to impose.  Between 50,000 and 60,000 compressors are sold in Australia each year at a wholesale level.  Of this market, Baker Bros’ share is about 5% while SIP’s share is about 20%.  The balance of the market is shared by numerous competitors and competitive products.  The parties submitted that as a result it is difficult to define the extent of the contravening conduct and quantify any loss or damage suffered.  I also take into account the fact that Baker Bros did not always adhere to the agreements and ultimately there was a breakdown of the arrangement.  Given Baker Bros 5% market share it is clear that it never possessed market power nor did it deter or prevent other competitors from entering the market. 

27                  In determining the penalty to impose on Baker Bros it is appropriate for the Court to give weight to the fact that it is relatively small company and that the penalty proposed by the parties, albeit at the lower range of penalties available under the Act, will have a substantial effect on the company and its directors.  What will serve as a deterrent to a small company may not have the same impact upon a large company (Trade Practices Commission v TNT Australia Pty Ltd (supra) at 40,169).  As at 30 June 1998 Baker Bros had assets of $1,750,000.  The family of each of the two directors have net assets in the vicinity of $200,000 (excluding superannuation and their interests in the company) principally in their family home.  Mr Andrew Baker has two school age children and Mr Greg Baker has three school age children.

28                  It was submitted that in determining the pecuniary penalty to be imposed on Baker Bros I should give weight to the fact that Baker Bros is a small family run company and therefore cannot be put on the same footing as a highly organised large corporation with legal officers with training programs.

29                  The contravening conduct took place over four and a half years and was considered by the Commission to be “a serious example of a documented and well-organised market sharing and price fixing arrangement between Australian parties and an international supplier”.  Messrs Baker have said that they were not aware of the provisions of the Act before the Commission intervened in this matter.  The Commission has accepted that although the conduct of Baker Bros and Messrs Baker was deliberate in the sense that it was entered into as a result of conscious decisions, they were not aware that their conduct constituted breaches of the provisions of the Act.  It is trite to say that ignorance of the law is no excuse and although this was quite rightly conceded by Baker Bros and its directors I find it disconcerting that 20 to 25 years after the Act was passed there are still people involved in trade who do not know that market sharing and price fixing is illegal.

30                  Mr Stern, who appeared for Baker Bros and its directors, said that once the Commission raised the matter with his clients they immediately contacted solicitors and advised that they would co-operate with the Commission.  Upon becoming aware of the seriousness of its conduct Baker Bros immediately instructed its solicitors to undertake a complete review of its conduct in order to provide the Commission with all the relevant facts to assist its investigation.  The co‑operation given to the Commission was not delayed, full and frank admissions were made, assistance was given and the Commission was not required to undertake a lengthy investigation.  I also give weight to the fact that when they were served with s 155 notices Baker Bros and its directors implemented their own compliance program without it being suggested or requested by the Commission.  Although the s 155 notices only related to the 1997 contraventions Baker Bros and its directors gave the Commission information about the 1994 contraventions of which the Commission was previously unaware.  These admissions saved both the Commission’s and the Court’s resources.

31                  Initially the parties sought an order that Baker Bros implement a trade practices corporate compliance program in the form contained in the application filed with the court.  However this was not pursued and I have been informed, and I note, that Baker Bros has agreed to enter into an undertaking pursuant to s 87B of the Act to implement a compliance program.

32                  Mr Peters, who appeared for the Commission, said that the Commission had a received a very full and high level of co‑operation from Baker Bros and its directors and that the case was one that warranted the application of the Commission’s leniency policy.  In October 1998 the Commission published its leniency policy in relation to co‑operation in enforcement matters.  The Commission presented the policy as one which is “flexible and intended only as an indication of the factors the Commission will consider relevant when considering leniency.”  The Court, of course, is not bound by the policy nor is it required to take it into account in any given case.  Nevertheless the matters which the policy takes into consideration are matters relevant to a determination of the appropriate penalties to impose for contraventions of Pt IV of the Act.

33                  In relation to corporations, the policy states that leniency is most likely to be considered for a corporation which:

·               comes forward with valuable and important evidence of a contravention of which the Commission is otherwise unaware or has insufficient evidence to initiate proceedings;

·               upon its discovery of the breach, takes prompt and effective action to terminate its part in the activity

·               provides the Commission with full and frank disclosure of the activity and all relevant documentary and other evidence available to it, and co-operates fully with the Commission’s investigation and any ensuing prosecution;

·               has not compelled or induced any other corporation to take part in the anti-competitive agreement and was not a ringleader or originator of the activity;

·               is prepared to make restitution where appropriate;

·               is prepared to take immediate steps to rectify the situation and ensure that it does not happen again, undertakes to do so and complies with the undertaking; and

·               does not have a prior record of Act, or related, offences.

I regard these matters as relevant to be taken into account in the Court’s consideration of the appropriate penalties to impose in respect of the contraventions of the Act.

34                  The parties submitted that Baker Bros has substantially satisfied these requirements and that accordingly the penalties recommended by the parties to the Court are at a relatively low level.

35                  Mr Stern submitted that in addition to the factors set out by French J I should also take into account four other matters that he said have been referred to in United States Sentencing Guidelines - the nature of the subject goods and their importance to the community, whether the respondents improperly obtained a financial advantage, the self‑reporting of offences or contraventions and whether the respondents have offered ongoing assistance to the Commission in their continuing investigation and prosecution of the first, second and third respondents.  Mr Stern submitted that compressors are not a staple product or essential commodity and that this is relevant in considering the seriousness of the contraventions.  He submitted that Baker Bros had a small share of the relevant market and that there was a large number of competitors and competing products in the market.  On the issue of self‑reporting he said that Baker Bros had provided evidence in relation to the 1994 contraventions without that subject having been raised by the Commission and he said that his clients have agreed to assist the Commission in its prosecution of the proceeding against the first, second and third respondents.  I have taken these matters into account as well as considering the matters referred to in s 76 of the Act and the matters referred to by French J.

36                  Having regard to all these matters I am satisfied that the penalties proposed by the parties fall within the range of penalties which are appropriate for the relevant contraventions of the Act.  Although the proposed penalties fall at the lower end of the range I am satisfied that it is appropriate that those penalties be imposed having particular regard to the absence of any market power held by Baker Bros, the assets of the company and its directors and the immediate and full assistance and co‑operation offered to the Commission.  I bear in mind the observations of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd (supra), to which I have already referred, that:

“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.”

A similar observation was recently made in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (supra) where French J after referring to this passage in NW Frozen Foods Pty Ltd (supra) said (87):

“Similarly, in relation to proposed consent orders and undertakings the court will not simply substitute its own view of the orders or undertakings which it would have made if those proffered fall within the range of an appropriate disposition of the case.”

I should also bear in mind the observation of Burchett J in Trade Practices Commission v TNT Australia Pty Limited (supra at 40,165):

“However, it 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 recognised that one precise figure cannot be incontestably said to be preferable to another.”

37                  Although I have been referred to a number of cases where similar levels of penalties have been fixed, I must concentrate on the particular facts and circumstances before me.  I adopt, with respect, the observations of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd (supra at 295) that:

“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.”

Conclusion

38                  I consider the appropriate pecuniary penalties to be imposed are $50,000 in respect of Baker Bros and $5,000 in respect of each of its two directors and I make such orders.  The parties have submitted forms of injunctions to be ordered against Baker Bros and its directors restraining them in substance for three years from engaging market sharing in relation to the supply of compressors.  It is appropriate that such injunctions be granted and I so order.

39                  The only matter remaining is the issue of costs.  It has been agreed between the parties that the Baker Bros respondents pay the Commission’s costs in the sum of $7,500 within 90 days of these orders.  I was informed by Mr Peters that the Commission did not seek a formal order as to costs.

Associate:

Dated:              25 June 1999