FEDERAL COURT OF AUSTRALIA

ACCC v George Weston Foods Ltd [2000] FCA 690

TRADE PRACTICES – attempt to contravene Trade Practices Act 1974 (Cth) – attempt to induce price fixing – attempt not successful – number of attempts – intention of contraveners.

TRADE PRACTICES – penalty – purpose of penalty – attempt to induce contravention – attempt admitted – factors to consider in imposing penalty – prior contravention – effect on penalty of mitigating circumstances – contravener co‑operated with Australian Competition and Consumer Commission – existence of compliance regime – compliance regime failed.

Trade Practices Act 1974 (Cth):  s 45(2), s 76

Trade Practices Commission v Parkfield Operations Pty Ltd [1985] ATPR 41‑639 cited

Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455 cited

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238; 145 ALR 36 cited

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

Trade Practices Commission v ICI Operations Pty Ltd [1991] ATPR 41-153 cited.

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v GEORGE WESTON FOODS LIMITED & ORS

No VG 583 of 1998

GOLDBERG J

MELBOURNE

25 MAY 2000

REASONS FOR JUDGMENT

Introduction

1                     The applicant, Australian Competition and Consumer Commission (“the Commission”), seeks declaratory and injunctive relief and an order that the first respondent, George Weston Foods Limited (“George Weston”), pay a pecuniary penalty in respect of an attempt by George Weston and two of its employees to induce two retailers to contravene s 45(2) of the Trade Practices Act 1974 (Cth) (“the Act”).  The attempt to induce the contravention is admitted and the parties have filed a statement of agreed facts.  There has not been a joint submission as to any particular penalty or range of penalties which should be imposed and each party has made submissions relating to the matters by reference to which the Court should determine the appropriate pecuniary penalty.

2                     The contravening conduct is that George Weston by its employees, the second respondent, Peter Gilbert and the third respondent, Phillip McLennan, attempted to induce two competing retailers, Chickenfeed Bargain Stores (“Chickenfeed”) and Purity Supermarkets (“Purity”), who carry on business in southern Tasmania, to contravene s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Act by making and giving effect to a price fixing arrangement in respect of the retail sale of packaged biscuits sold under the brand name “Lots O’ Cookies” in southern Tasmania.

3                     It should be noted that although the attempt was to induce a contravention of s 45(2) of the Act, George Weston did not contravene the Act.  The responsibility of George Weston for its conduct arises pursuant to s 76 of the Act and it is that conduct which attracts a penalty.  Section 76(1)(d) provides that where a person attempts to induce another person to contravene the Act that person is liable to a penalty.  The person does not commit a contravention of the Act itself but rather is exposed to liability for being involved in an attempt to bring about a contravention.

The parties

4                     George Weston is a listed public company carrying on business as a flour miller and manufacturer of bread, cakes, biscuits, dairy products and a range of other products for the food industry as well as stockfeed for the rural industry and a range of cleaning products.  It has a division, Western Baked Foods (now called George Weston Foods Limited Biscuit and Cake Division), which supplies packaged biscuits and cakes to retailers in Tasmania and elsewhere.  At the date of the relevant conduct it held approximately 14% of the Tasmanian market for biscuits.

5                     Chickenfeed, a business carried on by Radiata Investments Pty Ltd and Rye Holdings Pty Ltd, is a retailer of a wide variety of products including grocery and variety lines and operates mainly as a clearance or liquidator outlet.  It endeavours, wherever possible, to sell products at a $2 price point and at the date of the contravention operated approximately eleven outlets in southern Tasmania. 

6                     Purity Supermarkets at the date of the contravention carried on business as a division of Woolworths (Victoria) Pty Limited (“Woolworths”) and held approximately 57% of the retail grocery market in southern Tasmania.  Roelf Vos Supermarkets, at the date of the contravention, was a grocery retailing business carried on by Woolworths at approximately fifteen outlets in northern Tasmania.  Not long after the date of the contravention Woolworths amalgamated the management of Purity and Roelf Vos Supermarkets.

7                     On the day of the conduct, 3 June 1997, Mr McLennan was the Tasmanian State Operations Manager for Weston Baked Foods, a position he had held since 3 March 1997.  His duties included marketing biscuits to retailers.  Mr McLennan had four full‑time Territory managers and one casual merchandiser who reported to him. Mr McLennan reported to Mr Gilbert, who was Sales Operation Manager, southern region, for Weston Baked Foods which comprised Victoria, South Australia, Western Australia and Tasmania.  Mr Gilbert reported to the Victorian General Manager of Weston Baked Foods who reported to the Divisional Chief Executive who reported to the Group General Manager‑Commercial who reported to the Chief Executive Officer of George Weston.

History of the attempt

8                     In 1997 Lots O’ Cookies had been deleted from George Weston’s regular range of biscuit lines and was no longer to be manufactured.  In order to use left over packaging material the biscuits were being offered on a one‑off basis to retailers at a discount with no marketing support.  Once the surplus packaging was exhausted the product would not be available; this occurred by 7 August 1997.  When sold as a regular line, Lots O’ Cookies retailed between $3.00 and $4.00 per packet but as a clearance line the promotion price suggested by George Weston was around $1.99 per packet.

9                     On 26 March 1997 Jason Moore (Mr McLennan’s predecessor) and Mr McLennan offered to supply Lots O’ Cookies to Gary Sutherland (a Purity Category Manager) and Ricky Sheehan (Purity’s Promotions Manager) as a clearance line or “job lot” of approximately 2000 cartons.  They also offered Lots O’ Cookies on the same day to Mr Wilson, a Merchandise Manager of Chickenfeed.  They suggested to both organisations a retail price of $1.99 per packet.  At that time Chickenfeed ordered 500 cartons (9000 packets) to be delivered by 8 May 1997.  In early May 1997, Purity ordered 1285 cartons (23,130 packets).  Chickenfeed’s order had a retail value (at $2.00 per packet) of $18,000 and Purity’s order had a retail value (at $1.99 per packet) of $46,029.

10                  Mr McLennan understood that Chickenfeed’s 26 March 1997 order, required by 8 May 1997, was intended for promotion not long after delivery.  He understood that Purity’s promotion for Lots O’ Cookies was scheduled for the week of 26 May 1997.  In fact Chickenfeed did not commence its promotion until the week beginning 26 May 1997.  Chickenfeed promoted the biscuits at $2 per packet; Purity’s promotional price was $1.99 per packet.

11                  Towards the end of the week commencing 26 May 1997 Mr Wilson complained to Mr McLennan over the telephone about the clash of promotions for Lots O’ Cookies between Chickenfeed and Purity.  On the same day Mr Sheehan from Purity also complained over the telephone to Mr McLennan about the clash of promotions.  On both occasions Mr McLennan blamed Jason Moore and apologised.

12                  In the week beginning 2 June 1997 Mr McLennan became aware of a price war between Purity and Chickenfeed over the price of Lots O’ Cookies.  On or about 2 June 1997 Mr Sheehan telephoned Mr McLennan, complained that Chickenfeed had dropped its price to $1.75 and said that Purity had been forced to drop its price to match Chickenfeed.  Mr Sheehan said that in line with company policy Purity intended to claim from George Weston the difference of 24¢ per packet between the price of $1.99 at which Purity had initially offered Lots O’ Cookies and the price of $1.75 at which Purity was selling the biscuits.  He said Purity wanted to sell the biscuits at the price they had advertised, namely $1.99.

13                  Mr McLennan understood that both companies were complaining about the promotional clash and the price war.  He was new in the position, felt his commercial credibility was on the line and so he telephoned Mr Gilbert, his immediate superior.  He told him what had happened, that Purity was not happy with the price and the margin it was making for the biscuits because of Chickenfeed’s pricing and that Purity was going to claim from George Weston the difference between its intended price and its reduced price.  Mr McLennan asked Mr Gilbert whether Purity could claim the price reduction from George Weston and whether there was anything they could do about it.  Mr Gilbert said that there was not and he expressed his displeasure at the price for which Purity had bought the biscuits from George Weston, observing that George Weston had already lost on the deal and could not afford to lose any more money. 

14                  According to the statement of agreed facts Mr McLennan and Mr Gilbert have “slightly different recollections” as to what was said next.  It is desirable to set out the respective recollections as narrated in the statement of agreed facts:

“Phillip McLennan recalls that he then had an idea that if one of Chickenfeed or Purity went back up with its price, the other might also go back up.  Phillip McLennan recalls that he sought Peter Gilbert’s advice as to whether he could ask one of the retailers whether, if the other retailer went up, it would also go up, and then, if that retailer agreed, he could go to the other with a similar proposition.

On the other hand, Peter Gilbert recollects that Phillip McLennan asked him what he could do in respect of Purity’s threats.  Peter Gilbert suggested to Phillip McLennan he could speak to Chickenfeed to determine whether Phillip McLennan could do anything about it, including improving Chickenfeed’s margin or increasing Chickenfeed’s price on the Lots O’ Cookies product.  Peter Gilbert also recalls that Phillip McLennan asked if he was allowed to do that.  Peter Gilbert replied that you can only ask.”

What is not in issue is that Mr Gilbert indicated that Mr McLennan “could try it but that he should be very careful as to what he said and how he tried to do it”.  Mr Gilbert also said that he “knew nothing about it”.  I take this to be a reference to the fact that he did not wish to be told or to know about the actions Mr McLennan was taking.

15                  Mr McLennan was concerned by Mr Gilbert’s warning to “be very careful” and his request not to be told about the actions Mr McLennan was to take.  He was ignorant of the provisions of the Act and thought the conduct might in some way have been unethical rather than illegal.  Mr Gilbert’s intentions were to avoid receiving, or to minimise the amount of, competition markdown claims from Purity in respect of the sale of the biscuits.  Mr Gilbert did not stop Mr McLennan from pursuing the proposed solution to his problem and did not seek advice himself from George Weston’s head office as to the appropriate conduct.

16                  Mr McLennan then telephoned Mr Wilson on 3 June 1997.  The conversation was tape recorded and is set out in the statement of agreed facts.  It is not necessary to set it out in full.  In substance, Mr McLennan asked Mr Wilson whether it would be beneficial for him to sell the biscuits at $1.99.  Mr Wilson said that he wanted the price to be $2.00 but because of Purity they had to go to $1.75.  Mr McLennan asked whether if Purity went back to $1.99 Chickenfeed would go back to $1.99 to which Mr Wilson answered – yes.  In fact Mr Wilson had no intention of increasing the price at which Chickenfeed was selling the biscuits.  In the course of the conversation Mr McLennan said:

“now all I’m trying to do is trying to fix the situation, in that, … because at the end of the day nobody is winning at a dollar seventy‑five are they?”

(One wonders what view Mr McLennan had about the benefits which consumers were deriving from the competition which had been generated).  Mr McLennan said to Mr Wilson after further discussion that he would get back to him, hopefully within about half an hour and said that he would see:

“if we can get it back to, to a realistic, so you’re both making money at the end of the day”.

Immediately after the telephone conversation ended Mr Wilson spoke to the Commission about the matter.

17                  Mr McLennan then telephoned Mr Sheehan and asked him whether Purity would go up to $1.99 because Chickenfeed would, or would probably, go up as well.  Mr Sheehan said that it would not be worth it because Purity did not have much stock left and the claim would not be very much anyway.  Mr Sheehan raised with Mr McLennan whether the proposed conduct would amount to price fixing and Mr McLennan, after pausing, responded that it was the last thing he was trying to do – he was not trying to fix the price.

18                  Mr McLennan called Mr Gilbert and told him of Mr Sheehan’s rejection of the proposed arrangement.  In the course of that conversation Mr Gilbert asked “whether the police had not come and taken him away”.  Mr Gilbert maintained that this was a misguided attempt at humour.  The next day Mr McLennan telephoned Mr Wilson and suggested to him that without doing anything “contradictory to Trade Practices” he should keep the prices where they were.  Mr Wilson wanted to know what Purity’s position was on the proposed arrangement and Mr McLennan said that Purity did not have much stock left.  Mr Wilson sought confirmation that Purity was not going to move its price and Mr McLennan answered that Purity was not, as it was not worth it and there was not much stock left.  Mr McLennan also said that Purity had said that if the market showed they were going up to “that price” (presumably $1.99) Purity would follow but Purity did not have a lot of stock left.  Thereafter Chickenfeed and Purity continued to sell the biscuits at $1.75 but, in some cases, Purity sold them for a higher price.  Some of the Purity stores claimed from George Weston 24¢ per packet being the difference between the price at which Purity had initially offered the biscuits for sale and the price at which it subsequently sold them.

George Weston’s response to the attempt

19                  George Weston first became aware of the breach in late July 1997 when its Chief Executive Officer was contacted by the Chairman of the Commission.  George Weston said that it would co‑operate fully with the Commission in relation to the matter, which it has done.  George Weston has not denied that it had, through the actions of Mr McLennan, attempted to induce a price fixing arrangement or understanding between Chickenfeed and Purity and it has not denied the involvement of Mr Gilbert in the conduct.  The Commission issued notices pursuant to s 155 of the Act which were complied with and George Weston made relevant personnel available for interview by the Commission.

George Weston’s Trade Practices Act compliance policy

20                  At the time of the attempt George Weston had Trade Practices Act compliance procedures in place but those procedures, according to the statement of agreed facts, broke down because Mr Gilbert did not stop Mr McLennan from pursuing the proposed solution to his problem nor did Mr Gilbert seek advice himself as to the appropriate conduct.  The conduct of Mr McLennan and Mr Gilbert was clearly contrary to George Weston’s trade practices training and policy.  In its Trade Practices Compliance Guide current at the time of the contravention (issued in July 1996) George Weston stressed that staff must seek legal advice where there was any doubt concerning a possible application of the Act.  Mr Gilbert had been issued in late 1993 with a copy of George Weston’s then current Compliance Guide and on 23 September 1996 he had been provided with the July 1996 Trade Practices Compliance Guide.  Although the Guide did not specifically refer to inducing or assisting customers to reach a price fixing arrangement or understanding, it clearly warned of the illegality of such arrangements between competitors and Mr Gilbert was aware of this at the time of the contravention.  On 21 January 1997 he had sent a written warning to sales staff that they were not to be involved in negotiating a retailer’s price point on behalf of another retailer.  Mr Gilbert had attended trade practices seminars prior to June 1997 and had previously sought advice within George Weston on the trade practices implications of commercial issues.

21                  A copy of George Weston’s Trade Practices Compliance Guide had been provided to Mr McLennan on 30 September 1996 but he had received no trade practices training by the date of the attempt.  Mr McLennan said that he did not read the Guide before attending training and the first trade practices seminar he attended was on 17 June 1997, after the attempt.  This had been organised prior to the attempt.  When he attended the seminar on 17 June 1997 he did not report what had occurred to senior management although he did tell his predecessor Jason Moore after the seminar that he thought he had done something wrong.  He did not consider that he needed to take the matter any further as he had already reported his conduct to Mr Gilbert.

22                  In addition to the statement of agreed facts, George Weston relied upon the affidavit of Mr Robert Williams who was appointed as the Compliance and Regulatory Affairs Manager of George Weston in August 1998.  Mr Williams said that his position and appointment were part of George Weston’s response to:

“the shortcomings of [George Weston’s] then existing trade practices compliance programme which were exposed by this case and the Victorian bread matter.”

Mr Williams explained how he reviewed George Weston’s existing compliance program, the changes he proposed and the changes he had made.  In short, he has strengthened the compliance program and made it more rigorous and effective.  In particular he has sought to raise awareness and consciousness of trade practices issues in George Weston employees.  The program is extremely comprehensive and is designed to cover staff throughout Australia.  It is not necessary to set out Mr Williams’ views and proposals in any detail.  Relevantly for present purposes he has taken into account that “the compliance message must be communicated from the earliest time that an employee joins the company”.  This did not occur with Mr McLennan.

Matters in issue

23                  Although the Commission and George Weston have submitted a statement of agreed facts, there are some issues which are controversial and not covered by the statement which bear upon the issue of the amount of the penalty.  I refer in particular to the intentions of the participants and whether the attempt which occurred is to be regarded as constituting one attempt or two attempts for the purpose of assessing the appropriate penalty.  There is also the issue as to how I should view the ineffectiveness of the compliance procedures at the time of the attempt. 

The intentions of the participants

24                  The issue in relation to the intentions of the participants arises because, although it is accepted by George Weston that the conduct was intentionally carried out, the Commission contends that the conduct was a deliberate and blatant breach of the Act involving a senior employee, Mr Gilbert.  George Weston admitted that the agreed facts constituted an attempt to contravene the Act but submitted that they do not support the conclusion that Messrs McLennan and Gilbert knowingly or deliberately breached the Act.  That may be so in relation to Mr McLennan but it is more problematic in relation to Mr Gilbert.

25                  According to the statement of agreed facts, at the time of the contravention Mr McLennan was ignorant of the provisions of the Act.  It is said that Mr McLennan thought his conduct may in some way have been unethical rather than illegal.  The statement of agreed facts proceeds on the basis that in making the telephone calls to Mr Wilson and Mr Sheehan it was not Mr McLennan’s intention to force the retailers to increase their price or to threaten them so as to make them increase their prices.  He had two customers who were annoyed about the clash of promotions and he was trying to regain customer goodwill and restore his own credibility by assisting them to make the margin that each of them had intended to make prior to the clash of promotions.  At the same time he was trying to ensure that George Weston should not lose any money as a result of a claim from Purity.  What is significant about these matters is that such customer goodwill was sought at the expense of maintaining competition in the retail market.

26                  I am satisfied that Mr McLennan did not knowingly or deliberately attempt to bring about a contravention of the Act.  I am unable to reach that conclusion in relation to Mr Gilbert.  According to the statement of agreed facts Mr Gilbert’s intentions were:

“to avoid receiving, or to minimise the amount of, competition markdown claims from Purity in respect of the sale of Lots O’ Cookies.”

However, this does not mean that he did not knowingly or deliberately engage in an attempt to contravene the Act.  Indeed other facts and circumstances point to the conclusion that Mr Gilbert knowingly and deliberately engaged in an attempt to bring about a contravention of the Act. 

27                  There is a difference between the recollections of Mr McLennan and Mr Gilbert as to the content of their first conversation but that difference does not work to Mr Gilbert’s advantage.  Mr McLennan said that he raised the issue of Chickenfeed or Purity increasing their price.  Mr Gilbert said that Mr McLennan asked him what he could do about Purity’s threat and it was he (Mr Gilbert) who raised the issue about Mr McLennan speaking to Chickenfeed about Chickenfeed raising the price.  According to Mr Gilbert’s version of his telephone conversation with Mr McLennan on 3 June 1997, he suggested to Mr McLennan that Mr McLennan could speak to Chickenfeed:

“to determine whether Phillip McLennan could do anything about [Purity’s threat], including improving Chickenfeed’s margin or increasing Chickenfeed’s price on the Lots O’ Cookies product.”

Mr McLennan could improve Chickenfeed’s margin by giving it a discount or rebate.  There is no suggestion that either of those matters was raised.  But how could Mr McLennan increase Chickenfeed’s price?  It was for Chickenfeed to determine its retail price.  The only way Mr McLennan could increase Chickenfeed’s price was by creating a situation where Chickenfeed was prepared to increase its price in circumstances where it would still be able to sell the biscuits and be competitive.  It is difficult to see what Mr Gilbert could have had in mind when suggesting to Mr McLennan he could speak to Chickenfeed about increasing its price other than getting Chickenfeed to increase its price in circumstances where Purity would also be increasing their price.  In the circumstances which existed it was apparent that there was no point in Chickenfeed increasing its price unless Purity also increased its price as otherwise Chickenfeed would be uncompetitive and would not achieve sales.  According to the statement of agreed facts, by this time Mr Gilbert was aware of the illegality of price fixing arrangements or understandings between competitors.  In these circumstances I consider that it is open to me to infer that Mr Gilbert knowingly and deliberately engaged in conduct which was an attempt to bring about a contravention of the Act.

28                  However, one should be careful about taking aspects of evidence or parts of conversations in isolation from their context and without reference to other relevant circumstances which occurred.  In the same conversation Mr Gilbert told Mr McLennan he should be very careful as to what he said and as to how he tried to do it and he also said that he, Mr Gilbert, “knew nothing about it”.  This statement may not go as far as establishing that Mr Gilbert was seeking to act covertly or to cover up what was happening (as the Commission submitted), but in my view, it supports the finding that Mr Gilbert knowingly and deliberately engaged in conduct which was an attempt to bring about a contravention of the Act.

29                  On the same day, 3 June 1997, after speaking to Mr Wilson and Mr Sheehan, Mr McLennan telephoned Mr Gilbert who, according to the statement of agreed facts, asked “whether the police had not come and taken him away”.  Mr Gilbert says that this was a misguided attempt at humour.  That may well be, and black humour as it was, but it also demonstrates a consciousness and knowledge that the conduct which had been engaged in bore upon a contravention of the Act.

30                  The matters to which I have referred in pars 27 to 29 satisfy me that Mr Gilbert knowingly and deliberately engaged in conduct which was an attempt to bring about a contravention of the Act.

31                  The Commission submitted that the conduct engaged in was covert in the sense that it was not in the marketplace.  George Weston challenged the Commission’s characterisation of the contravention as being covert and sought to distinguish the circumstances in Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (1998) ATPR 41‑628 in which Heerey J found that senior management in Victoria was involved in what he said was a carefully planned, covert and sophisticated attempt to bring about a price fixing arrangement.  There is little value in contrasting and comparing circumstances in different cases so as to establish some form of relativity between the gravity of the offences.  Each particular case must be considered by reference to its own circumstances.

32                  In the circumstances which occurred I do not consider that characterising the conduct as covert adds significantly to the gravity of the conduct.  It was not suggested that there was a cover‑up of the conduct or an attempt to suppress its existence.  Price fixing conduct of its very nature is unlikely to be patent, open or in the marketplace but in this case it was not undertaken in circumstances which I consider it appropriate to characterise as covert or clandestine.

One or two contraventions

33                  The Commission submitted that the relevant conduct involved two separate and distinct attempts to induce a contravention of the Act.  First, an attempt to induce Chickenfeed to make an arrangement or arrive at an understanding with Purity and to give effect to that arrangement or understanding.  Secondly, an attempt to induce Purity to make an arrangement and arrive at an understanding with Chickenfeed and to give effect to that arrangement or understanding.  Although an attempt may be constituted by conduct in relation to one of the parties without any conduct in relation to the other party yet having occurred, it was submitted that the matter should be treated in the circumstances as one contravention only.  George Weston submitted that it is artificial to say that in the circumstances of this case there were two attempts as the attempt to induce two parties to enter into a price fixing arrangement by bringing about a meeting of their minds was one attempt albeit undertaken by two telephone calls. 

34                  I am satisfied that in the circumstances of this case it is appropriate to treat the circumstances which occurred as a single attempt to induce the making of a single price fixing agreement or arrangement, albeit through two telephone calls.  The third telephone call on the following day was not an element of any attempt as it was simply Mr McLennan reporting back to Mr Wilson that Purity would not move its price.  If Mr McLennan had only made the telephone call to Mr Wilson on 3 June 1997 and had not telephoned Mr Sheehan an attempt, for the purposes of s 76(1)(d) of the Act, would have been made.  In order for an attempt to be established the relevant conduct must go beyond mere preparation.  I adopt the observations of the Full Court of the Federal Court in Trade Practices Commission v Parkfield Operations Pty Ltd [1985] ATPR 40‑639 at 47,189:

“We agree that an attempt must involve the taking of a step towards the commission of the illegal act and that it is not sufficient that it be merely remotely connected or preparatory to the commission of it.”

The first conversation between Mr McLennan and Mr Gilbert on 3 June 1997 may have been only preparatory but the first conversation Mr McLennan had with Mr Wilson was certainly an implementation of the attempt and substantially more than preparation.  It put in place what was in effect the first leg of a two leg proposal.  In that sense the Commission is correct that there were two distinct attempts by reference to each conversation with Mr Wilson and Mr Sheehan.  Nevertheless, because the attempt which was made was an attempt to achieve a meeting of the minds of Chickenfeed and Purity I consider it appropriate to regard the attempt by George Weston as an attempt to induce the commission of one contravention of the Act, albeit by the two parties to that contravention.  Although an attempt to induce may have been consummated by the first telephone call it was the same attempt which flowed over into the second telephone call.  What occurred was essentially the one piece of conduct, spread over two phone calls, so that one penalty is appropriate having regard to the contravention which was sought to be consummated.

35                  In Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455 Toohey J said at 472:

“I have no difficulty with the proposition that a statement relied upon to found an allegation of attempt must carry within its terms the potential for an arrangement or understanding.  A statement made quite unilaterally of intention to do something or to refrain from doing something, with no suggestion express or implied that others might act in the same way, is hard to visualise as an attempt to make an arrangement or arrive at an understanding for the control of discounts on the sale of steel products.”

The potential for inducing an arrangement or understanding existed because Mr McLennan had, in effect, put to Mr Wilson if he could get Purity to increase its price to $1.99, would Chickenfeed increase its price to $1.99 and Mr Wilson had agreed.  Nevertheless after Mr McLennan spoke to Mr Wilson he telephoned Mr Sheehan and asked him whether Purity would go up to $1.99.  There was, in effect, a continuity in the conduct engaged in, all the elements of which were proximate to each other.  I consider it artificial to conclude that the sequence of conduct engaged in by Mr McLennan, in conjunction with Mr Gilbert, constituted two attempts for the purposes of fixing a penalty pursuant to s 76(1)(d) of the Act.

Matters to be taken into account in determining penalty

36                  The determination of the appropriate penalty to impose for the attempt depends upon a consideration of a number of matters to which varying degrees of weight must be given in the overall context.  Section 76(1) of the Act requires the Court to have regard to all relevant matters including:

·                    the nature and extent of the conduct;

·                    any loss or damage suffered as a result of the conduct;

·                    the circumstances in which the conduct took place;

·                    whether the respondent has previously been found by the Court in proceedings under Pt VI or Pt XIB of the Act to have engaged in any similar conduct.

In Trade Practices Commission v CSR Limited [1991] ATPR 41‑076 French J, at 52,152‑52,153, included in addition to the matters specified in s 76(1) the following matters as relevant to take into account in determining a penalty of appropriate deterrent value:

·                    the size of the contravening company;

·                    the degree of power the company has, as evidenced by its market share and ease of entry into the market;

·                    the deliberateness of the contravention and the period over which it extended;

·                    whether the contravention arose out of conduct of senior management or at a lower level;

·                    whether the company has a corporate culture conducive to compliance with the Act;

·                    whether the company has shown a disposition to co‑operate with the Commission in relation to the contravention.

The relative significance of each of these matters will vary from case to case but these matters, taken in conjunction with the matters referred to in s 76, provide an appropriate road map for the Court to follow in determining the level of penalty to be fixed under s 76.  French J’s list of matters to be taken into account has been approved and adopted in a number of other cases:  see, for example, NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 292; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 240; 145 ALR 36 at 44.

37                  A common thread running through cases dealing with the imposition of a penalty under s 76 of the Act is that the penalty must have a deterrent quality:  Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40‑091 at 17,896; Trade Practices Commission v Mobil Oil Australia Limited (1984) 4 FCR 296 at 298; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 293.  Two further observations should be made in relation to the deterrent quality of a penalty.  First, the penalty should not be so great as to be oppressive:  Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (supra) at 17,896; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 293.  Secondly, there are two aspects to the deterrent quality of a penalty, namely a specific aspect and a general aspect.  A penalty should be calculated to deter not only repetition by the contravening party but also to serve as a signal or warning to the general community: Trade Practices Commission v Mobil Oil Australia Limited (supra) at 298; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 294‑295.

38                  In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) the majority of the Full Court of the Federal Court said that the purpose of penalties imposed by s 76 was not punishment.  In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) at 241 I considered that:

“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.”

However, as I observed in that decision I am bound by the authority of the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) not to take into account punishment in determining the appropriate level of penalty to impose.

39                  The cases also make it clear that there are a number of factors that should be taken into account in mitigation of penalty.  I refer in particular to a contravener acknowledging liability, co‑operating with the Commission at an early stage and establishing and implementing an appropriate compliance regime.  As the majority of the Full Court observed in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 293‑294:

“It is well settled that, in the assessment of a penalty, a respondent withdrawing defences and acknowledging liability is entitled to special consideration of reduction of the amount that would otherwise be assessed.  Where, in addition, acceptable evidence is adduced, or the Commission agrees, that a program has been instituted the purpose of which is to ensure an understanding by executives of the requirements of the Act and of their obligations under it, and where a corporation has committed itself to future expenditure upon such a program, there is the more reason to reduce the penalty.”

40                  It is a significant matter to be taken into account in this case that George Weston had incurred a penalty under the Act a short time earlier in somewhat similar circumstances.  By similar circumstances I refer to the issues of price fixing and resale price maintenance which were considered in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra).  This matter makes relevant the observations of Olney J in Trade Practices Commission v ICI Operations Pty Ltd [1991] ATPR 41‑153 where his Honour said at 53,179:

“The facts show that a penalty of modest proportions was imposed in 1983 and despite the best endeavours of the corporate group in the meantime, in the early part of 1987 senior and responsible employees again engaged in similar conduct.  Two alternative inferences are open.  Either the amount of the penalty previously imposed was not regarded as being so significant as to justify any real change in company policy or the attempt to educate staff as to the requirements of the Trade Practices Act were singularly unsuccessful.  Whatever may be the case, it is difficult to conceive that a company of the standing of ICI could not have imposed its corporate will upon its employees if it had seriously set about that task.”

41                  I am satisfied that the conduct in this case was intended at a significant managerial level to be a deliberate and considered attempt to induce a contravention of the Act.  Although Mr McLennan may not have been aware that what he was proposing was an attempt to induce a contravention of the Act, I am satisfied that Mr Gilbert was so aware for the reasons to which I have referred earlier.  Mr Gilbert held a significant executive or managerial position within George Weston.  He was Sales Operation Manager, Southern Region for Weston Baked Foods which comprised Victoria, South Australia, Western Australia and Tasmania.  I have not been told how many employees reported to Mr Gilbert or were under his general supervision but because he was responsible for sales operations in four States I infer that there was a significant number of employees.  I have been provided with confidential details of his salary at the time of the contravention and this level satisfies me that it is appropriate to say that management at a significant level participated in the conduct.

42                  For a person at Mr Gilbert’s level to say, when confronted by an enquiry from a subordinate whether he could ask the retailers to put up their prices (Mr McLennan’s version), that the subordinate should be very careful as to what he said and as to how he tried to do it and that he (Mr Gilbert) did not want to be told about what was done is, in effect, to act in conscious and deliberate disregard of the Act.  It is not unreasonable to expect a person in Mr Gilbert’s position, when faced with such an enquiry from Mr McLennan, to say something along the lines – wait a minute, there is something in the Trade Practices Act about this; we should think carefully about it and seek advice.  It is more damning on Mr Gilbert’s version that he raised the issue of Mr McLennan asking Chickenfeed whether he could do anything about Purity’s threats including increasing Chickenfeed’s price.

43                  At the least, Mr Gilbert, with his experience and knowledge in exercising proper managerial responsibility, should have raised the potential for contravention of the Act with his subordinate.  At the most, he should have told him that he should not be talking to Purity or Chickenfeed in any manner about their retail prices.  Mr Gilbert’s disregard of the relevance of the Act was exacerbated by Mr Gilbert’s later comment to Mr McLennan regarding whether the police had come and taken him away.  It may have been a misguided attempt at humour, but as I have observed earlier it demonstrates an awareness that what Mr McLennan had done, to the knowledge of Mr Gilbert, was to engage in conduct which Mr Gilbert knew bore upon a contravention of the Act.  Not only did Mr Gilbert not do anything to restrain Mr McLennan’s conduct, he approved of it and acquiesced in it.  Mr Gilbert gave no explanation for his conduct other than to say (as the statement of agreed facts asserts) that his intention was to avoid receiving markdown claims from Purity.  It is not unreasonable to infer that his attitude was:  it is worth a punt to try and get the two retailers to increase their prices.  He must have believed that trying to prevent the payment of the markdown claims outweighed the risk which flowed from the attempt to induce the contravention of the Act.

Compliance regime

44                  It is relevant to take into account in determining the appropriate level of penalty whether George Weston had an appropriate compliance regime in place.  George Weston had a compliance regime which had been in place for a number of years.  It had been revised in the light of the conduct which formed the subject of consideration in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) because of its failure to have the desired effect.  The conduct under consideration in this case occurred three days after the decision imposing penalties was handed down in that case.  As a result of the conduct which had occurred in that case George Weston was well aware of the failure of its compliance regime well prior to June 1997 and had taken steps to revise and upgrade its compliance regime.  The fact that George Weston had a substantial compliance program in place which it actively implemented is clearly a mitigating factor to be taken into account: in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 647.  However the compliance regime and procedures failed not only in relation to an employee at Mr McLennan’s level but, more importantly, in relation to an executive at Mr Gilbert’s level.  The compliance regime failed in a number of respects.  It failed because Mr McLennan did not know that what he was proposing was an attempt to induce a contravention of the Act.  He had no personal or seminar training in the Act at the relevant time.  It failed because Mr Gilbert not only made a decision to disregard the Act but he did not, at the least, caution a subordinate about his proposed conduct or, at the most, direct him not to undertake it.

45                  Although George Weston is to be commended for having a comprehensive compliance regime in place it must be recognised that that compliance regime has failed.  However that failure is not a factor in aggravation of penalty as the Commission submitted; rather it is a factor which to an extent neutralises the weight to be given to the compliance regime.  The compliance regime did not provide for Mr McLennan to have the appropriate training and for him to be made aware of relevant provisions of the Act before he commenced his marketing activities.  He was Tasmania’s State Operations Manager for Western Baked Foods supervising four full‑time Territory managers and one casual merchandiser who reported to him.  He was permitted to undertake his marketing activities and to be responsible for the conduct of these other employees for at least three months uninformed as to George Weston’s compliance requirements and programs.  The failure of the compliance regime in relation to Mr Gilbert is more stark.  There is an explanation in relation to Mr McLennan but there is no explanation in relation to Mr Gilbert. 

46                  George Weston says that it has learned two lessons in relation to its compliance program.  First, all newly appointed or newly promoted employees must obtain appropriate trade practices training before they commence their duties.  Secondly, compliance training must reach, in an effective way, every aspect of George Weston’s organisation.  One would have thought that such propositions would be part of a compliance regime right from the start.

47                  Whatever may have been the shortcomings of the compliance policy and regime in the past, George Weston has now taken significant steps to review, revise and upgrade its trade practices compliance program.  Mr Robert Williams, a very experienced trade practices practitioner, was employed in August 1998 to supervise, review and revise George Weston’s trade practices compliance program.  His appointment was a significant step forward for George Weston, not only because of his experience but also because of the senior position which was established for him.  Mr Williams reviewed George Weston’s existing compliance program and has implemented a number of changes in relation to matters such as training of staff, communication of the manner in which trade practices issues might arise and how they should be resolved and the availability of expert advice for employees with potential trade practices issues.  It is apparent from Mr Williams’ evidence that George Weston is taking a most serious approach to its trade practices compliance program and I am satisfied that there is an appropriate culture of compliance in George Weston.

48                  Nevertheless the program was either inadequate or it was ignored.  In my view it was inadequate so far as Mr McLennan was concerned as there was apparently no procedure in place for him to receive training or for it to be confirmed that he had read and understood the Compliance Guide before he commenced to have contact with customers and become responsible for the employees who reported to him.  It also did not have a sufficient or adequate effect on Mr Gilbert and was certainly not sufficient to deter him from the conduct in which he was involved.  What is all the more surprising about the compliance program is that it was revised as a result of senior management in George Weston becoming aware of the contraventions which were the subject of Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra).  Those revisions were ineffective to prevent the conduct of Mr McLennan and Mr Gilbert. 

49                  Although I take into account the existence of the compliance regime as it existed on 3 June 1997 and George Weston’s professed commitment to trade practices compliance, I regard it as a matter of significance that the contravening conduct occurred a relatively short time after the revision of the compliance program was implemented.  This is the second time within the space of three years George Weston has come to the Court and said – our compliance program failed.  This diminishes the significance of the compliance program as a mitigating factor.  Although I take it into account it as a mitigating factor I am influenced by the fact that the revision of it was not adequate to deter the present conduct.

50                  The difficulty which arises as a result of the reliance of George Weston upon its compliance program is that it is relying on a program which, notwithstanding relatively recent revision in the light of significant contraventions, has still failed.  The existence of a compliance program is a matter which a Court should take into account in mitigation of penalty, bit its significance is diminished where it has failed even though there is an undertaking and commitment to revise and upgrade it thereafter.  It is important that persons subject to trade practices compliance should not think that a failure of a compliance program for a second time and a commitment to review and strengthen it will result in the mitigation of a penalty as if the compliance program had failed for the first time.  As the majority of the Full Court said in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) at 294‑295:

“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.”

51                  The Commission submitted that the facts and circumstances demonstrated that although it may have had a compliance program in place, George Weston did not have a culture of compliance in its organisation.  It was said that it was one thing to have a program which imparted information about compliance to employees; but it was another thing to ensure that there was a genuine attitude in the organisation that contraventions of the Act were unacceptable.  I am not prepared to find that there was no culture of compliance in George Weston.  There was certainly a culture of compliance at senior levels.  Rather, the circumstances suggest that there was, in certain respects, less than rigorous attention to detail in the implementation of the compliance regime.  For example, the circumstances might have been different if Mr McLennan’s attention had been drawn more directly and closely to compliance issues before he assumed his new position in Tasmania and if he had attended trade practices training immediately upon his appointment to that position and before he went on the road.  In those circumstances he would have been more alive to the relevant issues than he was on 3 June 1997.  I am not sure what more could have been done in relation to Mr Gilbert.  What is clear is that he was not sufficiently imbued with a culture of compliance.

52                  The contravention which occurred was an attempt to induce two persons to contravene the Act.  No contravention by those persons occurred because Purity would not go along with the proposal.  The fact that the proposed contravention by Purity and Chickenfeed did not occur and was not consummated does not mean that the conduct of George Weston should be viewed less seriously than if the contravention had occurred as a result of George Weston’s conduct.  George Weston’s intention through Messrs McLennan and Gilbert was an intention to engage in conduct which, of itself, was conduct rendering George Weston liable to a penalty under the Act.  In terms of responsibility, it is as serious for George Weston to attempt to induce Purity and Chickenfeed to contravene the Act as it was for Purity and Chickenfeed to contravene the Act themselves.  Although, as George Weston submitted, courts have imposed heavier penalties for contraventions than those imposed for attempts, the nature and circumstances surrounding the attempt will affect the size of the penalty.  In the circumstances of this case the conduct constituting the attempt warrants the imposition of a significant penalty. 

53                  George Weston submitted that the contraventions which it had admitted in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) involved different circumstances and were more serious than the conduct in the present case.  Certainly the contraventions arose in different circumstances but I do not consider that it is appropriate to say that they were more serious than the conduct alleged in this case.  Although there were a number of discrete contraventions involved in the Safeway case and although retail price maintenance was sought to be imposed by measures taken against retailers, there was not a situation, as in the present case, where a subordinate sought advice from a senior manager and not only did not get appropriate guidance but rather received complicit conduct.  Mr McLennan’s conduct occurred because he was ignorant of the law, he was not properly trained and he relied upon his supervisor.  George Weston acknowledges that Mr Gilbert’s failure was more fundamental and more serious because, as counsel for George Weston put it, “Gilbert was a manager who had training and should have applied it and didn’t, for whatever reason”.  George Weston said that Mr Gilbert failed to give any appropriate guidance to his subordinate.  That acknowledgment only tells half of the story.  Not only did Mr Gilbert fail to give any appropriate guidance; he was aware of the danger involved in what Mr McLennan was proposing and he turned a blind eye to it.  So much is to be inferred from the statements in the statement of agreed facts that Mr Gilbert said that Mr McLennan:

“could try it but that he should be very careful as to what he said and how he tried to do it”,

and the statement that Mr Gilbert “knew nothing about it”.  In short, Mr Gilbert at the least acquiesced in, and at the most encouraged, what he knew was an attempt to induce a contravention of the Act.  What Mr McLennan did may not have been covert but I reject George Weston’s submission that it was not planned.  It was planned by Mr McLennan and Mr Gilbert in consultation.

Other factors to be taken into account

54                  I do not accept that I should regard the conduct as less serious than any of the aspects of the conduct the subject of consideration in the Safeway case.  The circumstances were, in my view, at least as serious as those in the Safeway case, if not more so.  There was a deliberate and conscious attempt to eliminate competition in the relevant market, to disadvantage consumers and to induce two retailers to commit a per se contravention of the Act.  What made the conduct, on one view, more serious than the Safeway contraventions was the involvement of the sales operation manager of one of George Weston’s divisions who had responsibility for four States, Victoria, South Australia, Western Australia and Tasmania whose level of salary recognised his level of executive responsibility.

55                  I accept that the conduct was limited in respect of the employees of George Weston who participated in it but that is only one factor to be taken into account.  The fact that the conduct occurred in relation to a one‑off clearance line which was going to be sold within a relatively short period of time is not to the point other than to consider in the context of the nature and extent of the conduct.

56                  As I have noted earlier George Weston’s size is a factor to be taken into account in determining the appropriate level of penalty.  It is a listed public company.  During the financial year ended 31 July 1997 the sales revenue of George Weston and its controlled entities was $1.3 billion and the sales revenue of George Weston was $1.1 billion.  For the same financial year George Weston and its controlled entities had an operating profit after income tax of $64.6 million and George Weston had an operating profit after tax of $62.5 million.  The profit of its biscuit and cake division for that financial year (disclosed in a confidential exhibit) was far more modest but for the reasons which I set out in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) at 42, I do not consider it a correct approach to consider only the size and profitability of a business division of a large public listed corporation when considering the matters relevant to the imposition of a penalty under the Act.  It is the public company, of which the division forms part, which should be under scrutiny as it is that entity which ultimately bears responsibility for how its business divisions carry on their commercial activities. 

57                  The significance of the size of George Weston is as relevant in this case as it was in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) where I made the following observation at (ALR) 51:

“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) 105 ALR 115 at 118; 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’”.

58                  I do not take into account, as the Commission submitted I should, the fact that no disciplinary action has been taken by George Weston against Mr McLennan or Mr Gilbert.  The Commission submitted that this fact demonstrated that George Weston did not have a culture of compliance with the Act.  I do not consider that I should draw this inference from what happened after the conduct became known to senior management.  Mr Gilbert was assigned to positions where he did not deal directly with retail chains and had no supervisory role and both he and Mr McLennan were given detailed trade practices training.  Mr McLennan did approach his immediate supervisor Mr Gilbert to seek advice.  He received the wrong advice and was unaware of the trade practices implication in what was proposed.  For that he should not have been disciplined; rather he should have been educated and trained as he was.

59                  The attempt to induce Chickenfeed and Purity to enter into a price fixing arrangement was unsuccessful.  Accordingly no loss or damage was caused to any party and, in particular, any consumer of the biscuits.  There is therefore no amount of loss or damage to take into account as is required by s 76(1) of the Act.  That will always be the situation where the relevant basis for imposing a penalty under s 76 is an attempt to contravene the Act or an attempt to induce another to contravene the Act.  I therefore place no weight in favour of George Weston on the fact that no loss or damage was caused.  What is, perhaps, more relevant in the context of an attempt is to consider what might have been the result if the attempt had been successful.  In my view, such a consideration is relevant to determining the gravity or seriousness of the attempt.  What would have occurred if the attempt had been successful was that some southern Tasmanian consumers would have paid of the order of 24¢ more for a packet of the biscuits than otherwise would have been the case.  Having regard to the number of cartons which were sold the loss and damage would have been under $5,000, as Mr Sheehan said on 3 June 1997 that Purity did not have much stock left.

Relevance of other cases

60                  Although it is desirable in fixing penalties for contraventions of the Act to try and achieve a measure of consistency and proportionality in relation to other cases, one must be astute to recognise that comparisons are useful not to identify similarity of facts but rather for the purpose of identifying relevant general principles.  These matters were considered by the majority of the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (supra) where their Honours said at 295:

“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 [[1994] ATPR 42,782] (at 42,795).  There should not be such an inequality as would suggest that the treatment meted out has not been even‑handed:  cf the criminal law case Lowe v The Queen (1984) 154 CLR 606.  However, other things are rarely equal where contraventions of the Trade Practices Act are concerned.  In the present case, differing circumstances, size, market power and responsibility for the contraventions, as well as other factors, complicate any attempt to compare the penalties imposed on the appellant with those imposed on the other corporations.

Another form of comparison is not appropriate.  The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed.  Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.  The point was well made by Spender J in Trade Practices Commission v Annand and Thompson Pty Ltd [[1987] ATPR 48,390] (at 48,394) when he said:

‘Each case must, of course, be viewed on its own facts and facts may be infinite in their variety.’

It follows, as his Honour also said, that ‘[t]he quantum of penalties imposed in other cases can seldom be of very much direct assistance’”.

61                  An important matter to take into account is prior contraventions.  There are two cases involving contraventions committed by George Weston.  In Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256 a subsidiary of George Weston was ordered to pay a penalty of $50,000 for price fixing.  That contravention occurred twenty years ago and under different circumstances.  Although s 76 of the Act requires me to take it into account I consider that it is of marginal significance for present purposes.  The contravention under consideration is not said to have been part of a pattern of conduct since that contravention. 

62                  Of more immediate significance are the contraventions in respect of which I fixed penalties in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) on 30 May 1997.  As I noted earlier, the present contravention occurred some four days after the penalties were fixed in that case.  However, the events which led to those penalties had occurred earlier and were well known to George Weston during 1996.  As I have observed earlier, the revision of the compliance program after those contraventions came to the attention of George Weston’s Board and senior management were ineffective so far as the present conduct is concerned.

Deterrence

63                  One of the primary objects for the imposition of penalties under s 76 of the Act is to deter the contravener and others in the community from further contraventions of the Act.  As I have mentioned earlier there is an aspect of specific deterrence and also an aspect of general deterrence.  The level of penalty which is required to ensure that deterrence occurs must take into account the fact that previous penalties have not had an adequate effect.  George Weston may have learned its lesson from the conduct under consideration and may have substantially revised and updated its compliance program.  But it did so after the previous contraventions came to light and before the present conduct occurred on 3 June 1997.

64                  Although I have taken into account the compliance program which is now in place I consider that a substantial penalty is warranted, in particular by reason of the more recent contraventions and the failure of the compliance program, which was upgraded after those contraventions came to light, to capture and contain the proposed conduct by Mr McLennan before he could start to implement it by the telephone calls which he made.  Deterrence is a more important consideration where there are relatively recent contraventions and where an upgraded compliance program failed to prevent the later conduct.  It is important that persons and corporations whose commercial activities are subject to the provisions of the Trade Practices Act realise that the Court views with great seriousness deliberate disregard of the Act.  The level of penalty should recognise that where a contravention has occurred recently and an upgraded compliance program has failed to prevent a further contravention or conduct liable to a penalty, a significant penalty is called for which needs to be sufficient to be a real and positive deterrent to future contraventions.  Although knowledge of the penalties imposed in respect of the previous contraventions on 30 May 1997 may not have permeated through to sales staff by 3 June 1997, knowledge of the contraventions and that penalties were to be imposed would have done so or, if they had not, information as to those contraventions and the fact that penalties would be imposed should have been passed on by George Weston to all its employees as part of its compliance program well before 3 June 1997.

Conclusions

65                  I have proceeded on the basis of a single attempt.  If I had formed the view that there were two attempts as submitted by the Commission, I would have reached the same conclusion as to the overall total penalty to be imposed having regard to the totality principle:  Mill v R (1988) 166 CLR 59; McDonald v R (1994) 48 FCR 555.  In my view characterising the conduct as two attempts rather than one should not lead to two penalties greater than the penalty which ought to be imposed for a single attempt having regard to the sequential nature of the contravening conduct. 

66                  I have reached the conclusion that there should be a significant deterrent component in the assessment of the penalty from both a George Weston and public point of view.  At the same time I take into account and make allowance for the existence of George Weston’s compliance program, albeit diminished in the respects to which I have referred.  The compliance program was not effective at the level at which Mr Gilbert operated.  It must be brought home to George Weston and its management at every level where they have employees reporting to them that they must obey the law.

67                  I have taken into account the level in George Weston at which the conduct occurred, the limited number of persons involved in it, the potential impact which the proposed contravention had in the market place and the substantial commitment which George Weston has made to the implementation of a compliance program and its review of its program under Mr Williams.  It is also a mitigating factor that the moment the matter came to the attention of senior management there was an acknowledgment of the attempt to induce a contravention and full co‑operation by George Weston with the Commission.  These issues must be taken into account in determining the appropriate level of penalty as corporations are to be encouraged to acknowledge these matters and co‑operate with the Commission when they come to the knowledge of persons in the companies other than those involved in the contraventions.  Nevertheless I consider that a significant penalty is warranted having regard to the nature of the conduct, the failure of Mr Gilbert to arrest and contain it and his willingness to turn a blind eye to what Mr McLennan was proposing. 

68                  I consider the appropriate penalty, in all of the circumstances to which I have referred, to be $900,000.

Associate:

Dated:              25 May 2000