FEDERAL COURT OF AUSTRALIA

ACCC v Rural Press Ltd  [2001] FCA 1065

TRADE PRACTICES - application for injunction under s 80 of the Trade Practices Act 1974 (Cth) - whether Court should make an order that the two corporate respondents undertake a Trade Practices Corporate Compliance Program based on Australian Standard AS 3806-1998 for five years - neither corporate respondent agreed to the imposition of such an order - consideration of the position of each corporate respondent and whether they are likely to repeat the contravening conduct - one corporate respondent engaged independent solicitors to design and implement a compliance program following the contravention.

TRADE PRACTICES - imposition of pecuniary penalty under s 76 of the Trade Practices Act 1974 (Cth) against corporate respondents - considerations relevant to the imposition of penalty - consideration of the respective roles of the corporate respondents in the conduct, their position in the relevant market and features unique to each respondent.

TRADE PRACTICES - imposition of pecuniary penalty under s 76 of the Trade Practices Act 1974 (Cth) against “personal” respondents - consideration of their involvement in the contraventions - involvement at level of senior management.

Trade Practices Act 1974 (Cth)

Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (2001) ATPR 41-815 referred to

Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 41-359 applied

Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 9) (2000) ATPR 41-756 applied

Trade Practices Commission v CSR Limited (1991) ATPR 41-076 applied

Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 applied

J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 applied

Australian Competition and Consumer Commission v Safeway Stores Pty Ltd (1997) ATPR 41-562 referred to

ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 referred to

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640 referred to

Trade Practices Commission v Milreis Pty Ltd (No 2) (1978) 32 FLR 234 referred to

Australian Competition and Consumer Commission v Z-Tek Computers Pty Ltd (1997) 148 ALR 339 applied

Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) ATPR 41-673 applied

Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) ATPR 41-719 applied

Australian Competition and Consumer Commission v Telstra Corporation Ltd  (1997) ATPR 41-540 referred to

Trade Practices Commission v Mobil Oil Australia Ltd (1985) 4 FCR 296 referred to

Trade Practices Commission v Allied Mills Pty Ltd (1981) ATPR 40-241 applied

Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 referred to

Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618 referred to

Australian Competition and Consumer Commission v Mayo (1998) ATPR 41-655 applied

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v RURAL PRESS LIMITED, BRIDGE PRINTING OFFICE PTY LIMITED, IAN LAW, TREVOR McAULIFFE, WAIKERIE PRINTING HOUSE PTY LIMITED, PAUL TAYLOR, DARNLEY TAYLOR

S 56 OF 1999

MANSFIELD J

ADELAIDE

7 AUGUST 2001

THE COURT ORDERS THAT:

1.         Rural Press Limited do pay to the Commonwealth a pecuniary penalty in the sum of $400,000.

2.         Bridge Printing Office Pty Ltd do pay to the Commonwealth a pecuniary penalty in the sum of $200,000.

3.         Ian Law do pay to the Commonwealth a pecuniary penalty in the sum of $40,000.

4.         Trevor McAuliffe do pay to the Commonwealth a pecuniary penalty in the sum of $30,000.

5.         Paul Taylor do pay to the Commonwealth a pecuniary penalty in the sum of $15,000.00

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

REASONS FOR JUDGMENT

introduction

1                     On 1 March 2001, I published reasons for judgment in this matter [2001] FCA 116.

2                     I found that Rural Press Limited (“Rural Press”) and Bridge Printing Office Pty Limited (“Bridge”) had each contravened s 46(1)(a) and s 46(1)(c) of the Trade Practices Act 1974 (Cth) (“the Act”) by taking advantage of a substantial degree of power which each enjoyed in the market for the supply of regional newspapers in the Murray Bridge area for the purpose of eliminating Waikerie Printing House Pty Limited (“Waikerie Printing”) as a competitor in that market and for the purpose of deterring or preventing Waikerie Printing from engaging in competitive conduct in that market.  I further found that Ian Law (“Mr Law”) and Trevor McAuliffe (“Mr McAuliffe”) were each knowingly concerned in those contraventions within the meaning of s 75B of the Act.

3                     In relation to that aspect of the case concerning s 45 of the Act, I found that Rural Press and Bridge of the one part, and Waikerie Printing of the other, entered into and gave effect to an arrangement containing an exclusionary provision contrary to s 45(2)(a)(i) and s 45(2)(b)(i) of the Act.  The arrangement contained an exclusionary provision because it restricted the supply of the River News newspaper by Waikerie Printing to a prime circulation area ending about forty kilometres north of Mannum.  In my judgment, that arrangement and the giving effect to that arrangement, also contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Act as it had the purpose, and it had the effect, of substantially lessening competition in the market for the supply of regional newspapers in the Murray Bridge area.  I found also that Mr Law, Mr McAuliffe and Paul Taylor (“Mr Taylor”) were each persons involved in those contraventions of s 45 within the meaning of s 75B of the Act.

4                     On 4 April 2001 I made declarations to give effect to those findings and I granted injunctions restraining each of those entities and persons from engaging in conduct of that kind for a period of three years.  I will not set out in these reasons the terms of those declarations and orders.

5                     The Australian Competition and Consumer Commission (“the ACCC”) now seeks orders imposing penalties upon Rural Press, Bridge, Waikerie Printing, Mr Law, Mr McAuliffe and Mr Taylor under s 76 of the Act.  It also seeks injunctions under s 80 of the Act requiring each of Rural Press, Bridge and Waikerie Printing to implement a trade practices compliance program, the terms of which are set out in minutes of orders provided, and which include an obligation to report to the ACCC annually of the steps taken to comply with that program.

6                     I will not repeat the background to the issues in these proceedings, nor the detailed findings.  That is set out in my reasons for judgment given on 1 March 2001.  It will be necessary to refer to certain of those matters in these reasons.

general considerations

7                     The parties in their closing submissions accepted that the principal purpose for the imposition of penalties under s 76 of the Act is deterrence.  It is not necessary to address therefore whether retribution or punishment is also a relevant consideration:  see for example the recent comments of Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (2001) ATPR 41-815 at 42,936.

8                     Relevantly s 76 provides that, if a Court is satisfied that a person has contravened a provision of Pt IV of the Act :

“the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.”

9                     The matters relevant to the assessment of a pecuniary penalty will depend on the particular circumstances before the Court.  In Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 41-359 (“Prestige Motors”), Lee J said at 42,699 :

“Some of the additional matters that may be relevant to the assessment of             the appropriate penalty under s 76 have been referred to in cases such as TPC v Annand and Thompson Pty Limited and TPC v CSR Limited [full citations omitted] but in the end the particular facts of each case must determine the appropriate penalty having regard to the object to be served by s 76, namely, to promote competitive conduct in trade and commerce by use of penalties sufficient to deter acts that would tend to be destructive of such competition.”

10                 Thus, in Prestige Motors, Lee J took account of the respondent’s position of influence and leadership in the retail motor vehicle trade in assessing penalty.  See also Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 9) (2000) ATPR 41-756 (“The CC (No 9) Case”).

11                  A list of factors likely to be relevant generally (including those referred to in s 76) is particularised by French J in Trade Practices Commission v CSR Limited (1991) ATPR 41-076 (“CSR”).  There are numerous authorities which have taken account of the factors articulated by French J.  I have given consideration to each of them, to the extent that I consider that they touch upon the appropriate pecuniary penalties in this application.

12                  I am also mindful in assessing the level of pecuniary penalty, that it is directed to deterrence of acts that would tend to be destructive of competition.  That deterrence has two facets.  They are the deterrence of the individual contravener from engaging in conduct in contravention of the Act in the future, and the deterrence of other traders from engaging in conduct in contravention of the Act.

13                  The ACCC submits that general deterrence is of special significance in this matter.  Its written submission includes the following :

“ … this case will be the first time in ten years that the court has had to consider the imposition of penalties for contraventions of section 46 of the Act.  Further it is the first occasion that the court has had to consider penalties in respect of contraventions of section 46 of the Act under the increased penalty maxima introduced in 1993.  In the Commission’s submissions, it is particularly important, after a gap of many years during which maximum corporate penalties for such contraventions increased forty fold, that penalties of appropriate severity be imposed so that a clear message goes out to those ‘who might be tempted to think that contravention would pay’”.

14                  The maximum penalty now provided by s 76 for a contravention of s 45 or s 46 of the Act by a corporation is $10,000,000:  s 76(1A)(b), and in the case of an individual is $500,000:  s 76(1B).  Those penalties were significantly increased from 4 January 1993 by the Trade Practices Legislation Amendment Act 1992 (Cth) from the levels prescribed prior to that time.  The increase in the maximum penalty signals that the Court should impose penalties in respect of contraventions since 1993, including the current contraventions, having regard to the maxima prescribed.  To the extent to which it is useful to fix the pecuniary penalties by reference to those imposed in other cases, those cases involving penalties fixed for contraventions prior to that time will be of little or no assistance in that respect.  However each case must be looked at in its own particular circumstances.  I have not really gained much assistance in determining the appropriate pecuniary penalties in this matter by reference to those imposed in other cases.  The circumstances do not lend themselves to any such ready comparison. 

15                  I do not understand the ACCC to submit that the penalties imposed should be harsh or substantial simply because an action of this kind has not come before the Court in the last ten years.  If that were its submission, I would reject it.  Indeed, it might be said that the fact that this is the first time that the Court has had to consider penalties for contravention of s 46 since 1993 indicates that there is no great need for the penalties in this matter to add to the community’s attitude to compliance with s 46.  That prescribed level for penalties for contraventions of provisions of Part IV of the Act may be producing its own salutary effect.  The penalties imposed by the Court should not dilute any such perception.  However, I do not take that step.  In my view, it is necessary to fix the level of the pecuniary penalties having regard to the maxima prescribed in s 76 and to all the circumstances relevant to the nature and circumstances of the contraventions and of each of the respondent’s individual circumstances.  In doing so, the Court must bear in mind the two deterrent objectives, namely deterrence of the respondents and deterrence of others in the community from failure to comply with ss 45 and 46 of the Act, which the pecuniary penalties are directed to securing.  In relation to the respondents, even though it may be unlikely that a respondent will contravene a provision of Part IV of the Act in the proximate future, it is desirable to impose a penalty to ensure that the respondent, as well as the public generally, is reminded of the consequences of contravention:  The CC (No 9) Case.

16                  The ACCC submits that one penalty should be imposed upon Rural Press for each of its contraventions of ss 45 and 46 of the Act, and a separate penalty against Bridge for each of its contraventions.  Similarly, it proposes that the Court should impose one penalty only upon each of Waikerie Printing, and Mr Law, Mr McAuliffe and Mr Taylor.  Its submission reads :

“11.     The Commission submits that, consistently with section 76(3) of the Act, it is possible for the Court to impose separate penalties against each of the corporate respondents for two or, in the case of Rural Press and Bridge Printing, three distinct contraventions of the Act.  However, the various forms of contravening conduct, although distinct from each other, were closely interconnected and all aimed at having a particular anti-competitive effect in the Murray Bridge district.  Accordingly, the Commission seeks one penalty in relation to each of Rural Press, Bridge Printing and Waikerie Printing, embracing all of the possible contraventions in which they been [sic] found to have engaged.”

17                  The respondents accept that the Court should so proceed, although there is some disagreement between the respondents and the ACCC (in its submissions in reply) about the basis upon which that should be done.  In my view, s 76 empowers the Court to adopt that course of action, and in view of the common submission I intend to proceed in that way.

18                  Section 76(3) of the Act provides :

“If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.”

19                  The point of difference emerges because the respondents contend that the “totality principle”, namely that the total penalty the total penalty for related offences ought not to exceed that which is proper for the entire contravening conduct involved (see eg per Burchett J in Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169 (“TNT”)) does not involve simply aggregating each penalty to be imposed for each contravention to reach the appropriate pecuniary penalty.  I think that the proposition is unexceptionable.  The ACCC is correct in stressing that, as I have found, the conduct of the respondents involved two contraventions of s 45 of the Act, namely the making of an arrangement and separately carrying it into effect.  In a practical sense, I consider that the conduct that constituted the first of those contraventions was “part and parcel” of the conduct that constituted the second of those contraventions:  see for example J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 (“McPhee”), per Black CJ, Lee and Goldberg JJ at 583 [182].  However, although the conduct constituting the contraventions of s 46 was also closely allied to that conduct, in my view the contraventions of s 46 are separate and could be dealt with separately.  For the reasons proposed by the ACCC, and accepted by the respondents, I will however impose one penalty upon each respondent for the contraventions of the Act by that particular respondent, or in which that particular respondent was involved.  In this matter, the level of pecuniary penalty which I impose would not alter whether the s 45 and s 46 contraventions had to be treated as part and parcel of the one set of conduct by reason of s 76(3) or were capable of being treated as separate contraventions.

20                  In assessing penalties I have also had regard to the desirability of ensuring consistency.  However, there are certain features of this case to which I refer when addressing the individual circumstances of the contraventions and of the respondents which in my view make it difficult to extract any relevant “tariff”, even as a starting point, in fixing pecuniary penalties, other than to note the maxima fixed by s 76.  As the assessment of a penalty draws largely on the unique circumstances of a particular case it is not surprising that many other courts have found it difficult, if not impossible, to draw analogies in fixing penalties with other cases.

compliance programs

21                  The ACCC seeks against each of Rural Press, Bridge and Waikerie Printing an order under s 80 of the Act that each undertake for a period of five years a “Trade Practices Corporate Compliance Program” in terms indicated in the annexures to its proposed minutes of orders.  That compliance program in each instance is based largely upon Australian Standard AS3806-1998 published by the Standards Association of Australia Ltd (“SAA”), although it has been tailored slightly to reflect the position of each corporate respondent.

22                  The fact that a contravener of a provision of Pt IV of the Act has in place a trade practices compliance program which is carefully designed and properly implemented is a factor relevant to the assessment of a pecuniary penalty under s 76, even if in the particular instance it proved to be ineffective to prevent the contravention: Australian Competition and Consumer Commission v Safeway Stores Pty Ltd (1997) ATPR 41-562 (“Safeway”).  The significance of such a compliance program will depend upon its thoroughness and the extent of the commitment to its implementation: CSR.  Sometimes the fact of the contravention will demonstrate that the compliance program is not effective, and in such cases there will be little reason to give much credit to the contravening entity in fixing a pecuniary penalty: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (“ICI”);  McPhee.  The fact that, following a contravention, a contravening entity has implemented at its own expense a trade practices compliance program to ensure its compliance and that of its employees and agents with the Act, will also be a consideration which will mitigate the level of a pecuniary penalty: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 141 ALR 640 (“NW Frozen Foods”);  Prestige Motors.  Such conduct gives some confidence that the particular contravener will not engage in similar conduct in the future, and it may also be assumed would come to the knowledge of the community through the reasons given when fixing penalty, so as also to serve the purpose of community deterrence.

23                  It is a different question whether the Court, in its discretion, should make an order under s 80 imposing a trade practices compliance program upon a contravener when such an order is resisted by that contravener, or (as is the case in respect of Rural Press and Bridge) whether the Court should impose a trade practices compliance program different from that which the particular contravener has adopted.  So far as I can determine, no such orders have been made to date in those circumstances.

24                  It is now common for the ACCC and a contravener to present to the Court the consent of the contravener to undertake a trade practices compliance program as part of the orders sought to be made by consent.  The Court has generally, in those circumstances, made the orders sought including the imposition of the agreed trade practices compliance program:  see Trade Practices Commission v Milreis Pty Ltd (No 2) (1978) 32 FLR 234 at 243 per Franki J, and Merkel J’s review of the principles applicable under s 80 and the cases where a compliance program has been ordered in Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 148 ALR 339 (“ACCC v Z-Tek”) at 341 - 345.  It has not always done so, at least in the terms agreed.  In Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) ATPR 41-673 (“ACCC v REIWA”), French J said at 42,606 :

“There was within the ACCC submission in this case a thread of reasoning that seemed to suggest broad compliance programs could be ordered because of their general beneficial effects.  It may be accepted without reservation that corporate eduction in trade practices through wide ranging compliance programs and the fostering of a culture of compliance is good.  That does not mean it is appropriate for the Court bounteously to impose the full measure of that good upon a contravener”

25                  Subsequently, in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) ATPR 41-719, French J made orders in terms consented to by the parties, including a trade practices compliance program, but limited the obligation to undertake it to a period of six years.  French J, (at 43,352), considered it appropriate to give effect to that part of the consent orders because the respondent had an :

“... entrenched culture of non-compliance, no doubt based upon misunderstanding of the application of Part IV, [so that] there is a need for the development in REIWA of an institutional sensitivity to and understanding of the principal provisions of Part IV.  Such institutional sensitivity and understanding of the law is indispensable to the culture of compliance which will minimise the risk of further contraventions of the Act in this area.  The development of that culture is not going to happen overnight.  There will plainly be a need to build up appropriate infrastructure, supporting internal practices and procedures, which over a period of time will bring about the necessary changes.  The Compliance Program is appropriately designed to that end.  In so far as it is required to comply with the relevant Australian Standard for Compliance Programs, there is a best endeavours requirement which overcomes the concern I expressed in relation to the compliance program proposed in orders sought against the third and fourth respondents.  The Program is comprehensive and thorough going, but so too were the contraventions.  The Program is not disproportionate to the contraventions which have been admitted ...”

26                  In ACCC v Z-Tek, Merkel J made an order that the contravener implement a trade practices compliance program in a more limited form than that proposed by the parties.  In his concluding remarks, Merkel J said at 347 :

“My decision relates to what is ‘appropriate’ for a court to order under s 80 as part of an agreed settlement of a proceeding in the court.  It is not intended that the decision govern, influence or limit a trade practices compliance program which might be the subject of agreement between the ACCC and a party to a proceeding rather than the subject of a court order under s 80(1) or s 80(1AA).  I would add that the issue of whether a trade practices compliance program should be made under s 80(1), when the making of the order is opposed, is a matter for another day.”

27                  I do not find it necessary to determine that issue which Merkel J left unresolved.  That is because, assuming that it may be “appropriate” to order the implementation of a trade practices compliance program over the opposition of a contravener in certain circumstances, I do not consider it appropriate to impose upon Waikerie Printing the trade practices compliance program imposed by the ACCC.  I also do not consider it appropriate in this instance, to impose upon Rural Press and Bridge the trade practices compliance program proposed by the ACCC rather than that which Rural Press and Bridge are presently implementing.

28                  Subsections 80(4) and (5) empower the Court to grant injunctive relief notwithstanding that a contravener does not intend to engage in the contravening conduct again, or that there is no imminent danger of substantial damage to any person by the contravener engaging in the conduct of the type which constituted the contravention, or that there is no imminent risk the contravener will refuse or fail to do that which it ought to do.  The traditional requirements for the grant of equitable injunctive relief are clearly not necessary when the Court considers the exercise of its discretion under s 80(1):  see ICI.  In that case, Lockhart J remarked at 256 :

“In my opinion subss (4) and (5) are designed to ensure that once the condition precedent to the exercise of injunctive relief has been satisfied (ie contraventions or proposed contraventions of Pt IV or V of the Act), the court should be given the widest possible injunctive powers, devoid of traditional constraints, though the power must be exercised judicially and sensibly.”

29                  The Court has already exercised its discretionary power by making injunctive orders on 4 April 2001 restraining Rural Press, Bridge and Waikerie Printing for a period of three years from engaging in the sort of conduct which gave rise to the contraventions.  The Court may, in deciding whether to make the further orders sought, ask the purpose for which the proposed order is sought:  see eg per Jenkinson J in Australian Competition and Consumer Commission v Telstra Corporation Ltd  (1997) ATPR 41-540 at 43-505;  Toohey J in Trade Practices Commission v Mobil Oil Australia Ltd (1985) 4 FCR 296 at 300. 

30                  In my view, the conduct engaged in by the respondents is unlikely to be repeated.  They are now each the subject of general injunctive orders in respect of that conduct.  The proposed trade practices compliance programs will not, except in a theoretical sense, benefit any members of the public.  There is no ongoing detriment suffered by the public by reason of the contravening conduct which the proposed trade practices compliance program will alleviate.  The pecuniary penalties will emphasise the Court’s disapproval of the conduct of the several respondents.  It was at the senior executive or directorial (in the case of Waikerie Printing) level at which the contraventions occurred within the respective organisations, so there is no reason to think that the proposed program would present a relevant additional sanction if it were directed generally within the organisations.  Indeed, within Bridge Ms Beryl Price was anxious at all times to respond to the competition posed to the Murray Valley Standard from the River News in a competitive way, and within Waikerie Printing Mr John Pick also was anxious simply to pursue his goal of expanding the prime circulation area of the River News for the reasons he explained, and which I accepted.  There is not shown to be any underlying cultural attitude on the part of the respondent corporations, except that demonstrated by the conduct of Mr Law, Mr McAuliffe and Mr Taylor and his brother, which indicates ignorance or disregard for the provisions of the Act.  I do not accept the ACCC contention that, by reason of the involvement of the Managing Director of Rural Press, Mr McCarthy, as shown in his settling of the draft (and unsent) letter dated 7 March 1998, he was himself in some way complicit in the contraventions by Rural Press, or that his involvement indicates on the part of Rural Press management above the level of Mr Law, a cavalier attitude towards compliance with the Act.  In my view, that is simply too long a bow to draw on the evidence.  Finally, the pecuniary penalties to be imposed upon each of the respondents, including the individual respondents, will signify in no uncertain terms the consequences of a failure to comply with the provisions of the Act.

31                  There are also features of the terms of the proposed trade practices compliance programs which, in my view, weigh in the scales against making the orders sought in the face of opposition.  The compliance programs proposed by the ACCC are based upon AS3806-1998.  As noted earlier, it does not have statutory recognition.  It makes clear that it is a guide only, so that individual corporations should use the system best suited to their operations:  cl 1.1. 

32                  I am also in this matter mindful of the fact that the Court has received only limited evidence as to the quality of the trade practices compliance program being implemented by Rural Press and Bridge, compared to that contained within AS3806-1998.   The Court, in the face of opposition to implementing AS3806-1998, should not assume that it is necessarily superior to that proposed by another independent expert formulator or provider of such programs in achieving an effective compliance program for a particular entity.  In this matter. Rural Press has retained independent solicitors to advise it about what steps it should take to procure and implement a trade practices “training tool” to develop a trade practice compliance culture within that group and to prevent conduct which might contravene the Act.  It received that advice, and has commenced to implement it.  It has requested its adviser to integrate the proposed action so as to ensure compliance with AS3806-1998.  It will incur considerable expense in implementing that program.  The ACCC has pointed to features of AS3806-1998 which do not appear to be the subject of specific preventative or instructive action within the Rural Press group if it fully implements that which it has been advised to undertake.  However, the capacity to point to particular features of AS3806-1998 which do not find expression in the trade practices compliance program to be undertaken by Rural Press does not mean that its program is not a sound or sensible one.  As I have noted, it has been adopted upon the basis of independent expert advice.  I accept that it is a program genuinely directed to ensuring a culture of compliance with the Act within its organisation.  There is no reason to think that the quality of the advice given is other than professional and competent, or that the program is not comprehensive in relation to the structure and needs of Rural Press.  I am not, in those circumstances, disposed to direct Rural Press and Bridge to undertake a trade practices compliance program different from that which it proposes to undertake.

33                  I also have reservations about ordering, as an element of a trade practices compliance program, that the person or entity the subject of the order notify the ACCC of steps taken to comply with that program, where such a requirement is opposed.  The need for such a direction highlights that the Court is being asked to make an order which requires ongoing or regular supervision to ensure it is being complied with, as there will be (absent any further contravention) no external indication of its compliance.  Implementation of a trade practices compliance program does not require the injuncted party to do, or to refrain from doing, something in relation to a third person.  The reporting process which the ACCC suggests is clearly aimed at providing a mechanism by which an external third party may measure the performance of the primary obligations proposed.  Presumably, then, if it were not satisfied that the trade practices compliance program was being properly implemented, the ACCC would then move the Court for an order that the non-complying party would be dealt with for contempt of Court.  It should not be a means of empowering the ACCC to negotiate privately about the proper means of implementing the order of the Court.  I am not confident that it is appropriate for the Court, which has directed a party to undertake certain conduct such as a trade practices compliance program over a number of years, which conduct may be in part exhortatory and in part of only generally described, to impose the ACCC in effect as a supervisor of compliance with that order.  However, as I have determined not to accede to the ACCC’s submission to make orders under s 80 imposing trade practices compliance programs on Rural Press, Bridge and Waikerie Printing in this matter, I do not need to resolve whether I would have included the suggested reporting term in any such order.

rural press and bridge

34                  The ACCC seeks the imposition of a penalty in the sum of $6,500,000 against Rural Press and in the sum of $1,500,000 against Bridge Printing.  The discrepancy between the two suggested penalties no doubt reflects the size of those entities.  Rural Press is clearly a very large corporate entity.  It publishes 30 agricultural magazines and 147 regional newspapers throughout Australia and has interests in New Zealand and the United States of America.  Through its subsidiaries, it publishes roughly half the regional newspapers in South Australia.  At the end of the 1999/2000 financial year its group had total sales revenue of some $438 million, and its operating profit before tax was some $99 million.  It has made similar levels of profit in previous years.  Its net assets at 30 June 2000 were valued at $410 million.

35                  Bridge Printing in the 1999/2000 financial year earned revenue of $8,611,357 with an operating profit before tax of $3,010,802.  It also made similar profits in the previous few years.  As at 30 June 2000 Bridge Printing held net assets of $2,261,319.

36                  Clearly, having regard to the size of those entities, it is necessary to impose significant financial penalties to deter those entities, and the community generally, from engaging in conduct such as that which I have found them to have undertaken in contravention of the Act.

37                  The deliberate nature of the contraventions by Rural Press and Bridge are also factors which weigh in favour of significant financial penalties.  In the case of their contraventions of s 46 of the Act, I have found that in the period from the latter part of 1997 to April 1998, they exercised their power in the market for the supply of regional newspapers in the Murray Bridge area for proscribed purposes.  In the case of their contraventions of s 45 of the Act they, through Mr Law and Mr McAuliffe, were in my view the drivers of those contraventions.  It was at the senior management levels represented by Mr Law and Mr McAuliffe that the strategy was adopted of endeavouring to secure the agreement of Waikerie Printing to withdraw active circulation of the River News from the Mannum area, and then pursued over a period of some months by the communications to which I have referred in the reasons for decision given on 1 March 2001.  They pursued that strategy in the face of an apparent lack of response by Waikerie Printing in the early months of 1998 despite those communications.

38                  Some account should be taken of the role that Bridge played as principal actor.  The conduct arose out of a dispute between two competitors, Bridge and Waikerie Printing.  Mr McAuliffe and Mr Law were acting in the immediate interests of Bridge, and only indirectly in the broader interests of Rural Press.  The responsibility of Rural Press lies largely with its role as the holding company and its ability to guide and control the actions of Bridge.  In my view Bridge’s conduct can be seen as that which contributed directly to the anti-competitive conduct.  As its parent company, Rural Press is implicated in its conduct.  Both Mr McAuliffe and Mr Law were employed by Rural Press.  Mr McAuliffe was its regional manager for South Australia, and from January 1998 Mr Law was its general manager for regional publishing.

39                  On the other hand, the contraventions themselves are not at the serious end of the spectrum of contraventions of s 45 and s 46 of the Act.  They occurred following upon Waikerie Printing extending the prime circulation area of the River News into part only of the prime circulation area of the Murray Valley Standard, namely the Mannum area.  The section of the Murray Bridge regional newspaper market in issue was small both in terms of geography and population.  The Murray Bridge area has a population of 16,562 of which 3,207 people live in Mannum.  The circulation of The River News in the Mannum area resulted only in about 100 - 180 additional copies being sold per week in that area.  The River News was only a threat to the Murray Valley Standard to a relatively small degree.  The response of Ms Price, in particular, as the manager of Bridge was to combat that competition and to compete with the River News in its own prime circulation area.  Whilst there may have been, on the part of Rural Press, a desire to be seen not to tolerate passively any competition in the markets of any of its regional newspapers, at least from the point of view of Bridge I think its response was restricted to protecting its own market.

40                  The ACCC correctly submits that :

“Prior to July 1997 Bridge Printing, by virtue of the Standard, held 100% market share in the newspaper market in Murray Bridge.  For a period of ten months some of that market share was lost to Waikerie Printing.  After the contravening conduct Bridge resumed its 100% market share.  The Standard is now the only regional newspaper circulated throughout the Murray Bridge district.”

41                  The extension of the River News into the Mannum area for the period July 1997 to May 1998 resulted in greater coverage of Mannum news in that area, and over a little time the opportunity for Mannum advertisers to advertise in the River News.  Bridge responded in a competitive way by increasing its coverage of Mannum news in the Murray Valley Standard.  The evidence indicates that, notwithstanding the retreat of the River News from the Mannum area from May 1998 (so that its coverage of Mannum news was effectively reduced to the levels prior to July 1997), the Murray Valley Standard has continued the level of increased Mannum news.  The competitive advertising opportunities available by the expansion of the River News into the Mannum area, in a practical sense, has restricted the advertisers and potential advertisers from the Mannum area.  Advertisers in Murray Bridge itself were unlikely to be particularly interested in advertising in the River News, which principally was directed to another market and related only to the Mannum area within the Murray Bridge market.

42                  The evidence shows that the River News is still available for sale at the Mannum Newsagency, but it is not actively promoted and it does not make the feature of carrying Mannum news nor does it seek advertising from the Mannum area.  Nevertheless, it still sells a significant number of copies in that area each week.

43                  In my view, it is appropriate to have regard to the size of the relevant market, the extent of the planned and actual participation in the market by Waikerie Printing which, by the contravening conduct, ceased to be carried on, and the nature and extent of the detriment to the public by reason of the contraventions.

44                  On those scores, the particular contraventions must be at the lower end of the scale.  The competitive battle, from which Waikerie Printing retired as a result of the contravening conduct, was over the promotion and sale of a few hundred copies of a weekly newspaper into a small section of the market for the Murray Valley Standard by the expansion of the River News into that area.  I accept that, for the foreseeable future from July 1997, Waikerie Printing had no intention of further expanding the prime circulations area of the River News beyond that area.  The particular comparison was a consequence of the changed local government administrative areas, as explained in my earlier reasons for judgment.  Nevertheless, as the ACCC says, the retirement of the River News from that battleground left the Murray Valley Standard as exclusively occupying that market.  To a degree, as I also found in my earlier reasons for judgment, there was competition to service the readership and advertising section of that market from local radio, regional television, and Statewide newspaper and television services provided in other markets.

45                  In Trade Practices Commission v Allied Mills Pty Ltd (1981) ATPR 40-241 Sheppard J, in explaining why he thought that that case did not involve the most serious contravention of s 45 said at 43,181 - 43,182 :

“In particular, there is no evidence to suggest that the public was affected very much, if at all by what was done, and the evidence tends to establish that the arrangement or understanding had a comparatively short life, certainly no longer than three months and probably less.”

46                  Even in cases where the contravening conduct was not carried through to its conclusion and therefore no loss resulted, courts have taken into account the potential harm in determining the seriousness of the offence (see Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 (“Weston Foods”) and Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618).  In this instance the potential harm to the community by the contravening conduct was always going to be small, even if the appropriate focus is only upon the Mannum community.

47                  This is the first contravention of the Act by Rural Press or by Bridge.  That is a factor to be taken into account in determining penalty, expressly identified in s 76(1) of the Act.  I give Rural Press and Bridge credit on that account.  The ACCC contends that neither of those entities has a corporate culture of compliance with the Act.  The attitude of a contravener to compliance with the Act is a relevant factor in determining penalty.  The absence of an appropriate compliance culture may warrant a higher penalty:  see TNT at 40,168 - 40,169.  In CSR, French J noted as relevant to penalty (at 52,155) :

“There was little convincing evidence of a corporate culture, seriously committed to the need of complying with the requirements of the Act.”

48                  It is the case that neither Rural Press nor Bridge presented any evidence of any process of instilling into the organisation a culture of compliance with the Act.  The conduct of Mr Law and of Mr McAuliffe in relation to these contraventions suggests that there was no such culture.  Accordingly, whilst I give credit for the fact that neither Rural Press nor Bridge has previously contravened the Act, that credit is diluted somewhat by my acceptance of ACCC’s submission that those entities, prior to the contraventions, had no positive culture of compliance with the Act and had taken no steps to instil one. 

49                  It also goes to their credit in determining the level of pecuniary penalties that they are now in the process of implementing a trade practices compliance program.  As I noted earlier, that program has been proposed by independent experts.  I accept that, even having regard to the relatively late stage at which that program was implemented, it is a genuine effort by Rural Press and Bridge to develop a culture of compliance with the Act and to prevent further contraventions of the Act.

50                  Evidence of co-operation with the ACCC and candidness on the part of the respondents in confronting allegations of contraventions and in the course of investigations has been regarded as significant in a number of cases.  The respondents in this matter did not acknowledge their contraventions before the judgment.  I agree, however, that they should not be penalised for not admitting liability.  They were entitled to test the evidence, and their contentions fairly indicated that there were legal issues of some complexity to address.

51                  In my view, in this matter, both Rural Press and Bridge should be given credit for their meaningful co-operation in the investigation of the ACCC and in the conduct of the hearing.  They co-operated in the investigation through the production of documents and by making their employees available for interviews without compulsion and in other ways.  They provided through their solicitors a detailed exposition of the communications, and their explanation for them.  Their focus in the course of the hearing was directed to the initial issues, as they saw them, and sensible acquiesced in the tender of much of the evidence and tested witnesses only where that was directly relevant to their case.  The majority of cases have dealt with co-operation on behalf of the respondents by way of acknowledgment of liability which has effectively dispensed with litigation (see for example Weston Foods at 40,986;  NW Frozen Foods;  The CC (No 9) Case, and TNT).  In my view the factors which I have mentioned should also be taken into account in favour of Rural Press and Bridge in fixing pecuniary penalties.  Their conduct has facilitated the investigation and enabled the trial to be conducted efficiently.

52                  Fixing the appropriate level of pecuniary penalties is not an exact science.  It results from a careful consideration of the relevant considerations in all the circumstances.  I have endeavoured to address those circumstances above.  Despite the matters which go to the credit of Rural Press and Bridge, and notwithstanding the nature and size of the relevant market and the effect upon competition which the contraventions procured, in my judgment substantial pecuniary penalties are called for.  The contraventions were procured by persons at a senior management level, and the conduct was calculated and persistent.  The contraventions of s 45 were procured by Rural Press and Bridge, rather than by Waikerie Printing.  The contraventions were directed to restoring a previously existing non-competitive situation within the market for the supply of regional newspapers in the Murray Bridge area, and were successful.

53                  Having regard to the matters to which I have referred, in my judgment Rural Press should be ordered to pay to the Commonwealth a pecuniary penalty of $400,000 and Bridge should be ordered to pay to the Commonwealth a pecuniary penalty of $200,000.

waikerie printing

54                  The ACCC contends that Waikerie Printing should be ordered to pay a pecuniary penalty in the amount of $1,000,000.

55                  In the financial year ending 30 June 2000 Waikerie Printing House received total revenue of $728,236 and reported net trading profit of $121,325.  It held net assets of $683,089.  In the financial year ending 30 June 1999, it received total revenue of $642,706 and had a net trading profit of $50,943.  It is clearly a substantial and profitable business, although it cannot be compared to Rural Press or to Bridge.  I accept that the River News was one of the smaller regional newspaper publications, and was not a dominant trader or in any position to exercise “influence or leadership in that segment of trade” of regional newspapers in South Australia.  Nevertheless it is a substantial and profitable enterprise.

56                  The size of a contravener is clearly significant in the assessment of penalty, the imposition of a higher penalty will ordinarily apply where a large corporation is involved, to achieve a deterrent effect on that specific individual (see for example Weston Foods;  The CC (No 9) Case at 40,827;  Safeway Stores at 43,816;  ICI at 118;  and CSR at 52,155).  Conversely, the deterrent effect will be achieved in relation to a smaller corporation by a smaller penalty, and it is proper to ensure that the penalty is not oppressive.

57                  In Australian Competition and Consumer Commission v Mayo (1998) ATPR 41-655 at 41,284, Kiefel J found that a relevant consideration in assessing penalty was that:

“… the general picture of Mayo was that it did not appear to have the capacity to absorb a very substantial penalty without endangering Mayo itself.  A penalty should be no greater than was necessary to achieve the object of adherence to the standards set by the legislation.  What would serve as a deterrent to a small company might not have the same impact upon a large one. [references omitted]”

58                  In my view, the size of Waikerie Printing warrants a penalty significantly smaller than that imposed upon Rural Press and Bridge.

59                  A Court may also have regard to difference between the roles played between the different contraveners of the Act.  Here, Waikerie Printing’s contraventions are confined to s 45 of the Act.  In my view, it is also fair to characterise Waikerie Printing’s conduct as reactive to pressure applied by Rural Press and Bridge.  It was the conduct of Rural Press and Bridge which pressured Waikerie Printing into retracting the circulation of the River News in the Mannum area.  In TNT, Burchett J said at 40,166. that :

“The individual respondents, of course, were implicated in the contraventions in varying degrees, and the penalties imposed upon them reflected that fact.  Although all three companies were principals, again there is some room to differentiate between them.”

Similarly in Prestige Motors at 42,703, Lee J took into account that :

“... Mr Crawford and Mr Zito had a major role in constructing the trading arrangement and recommending it to the Toyota dealers and in causing the Toyota dealers to give effect to it.  The extent and form of the involvement of Mr Crawford and Mr Zito in the contravening conduct of their respective corporations may be distinguished from the involvement admitted by the remaining corporate officers. “

60                  In this matter, I consider that the entry into the arrangement by Waikerie Printing, and its giving effect to that arrangement, was in response to what it regarded as a potential and serious economic adverse consequence that Rural Press or Bridge would launch a newspaper in the Riverland area in competition with the River News or with other papers published by companies under the control of Mr Taylor and his brother.  In one sense, the arrangement was to preserve a monopoly market or markets which the River News and their other newspapers enjoyed.  They should get like credit for that.  In another sense, the arrangement was to preserve the economic wellbeing of Waikerie Printing and the other Taylor companies as they feared the consequences of non-agreement could be competition from a much larger and well resourced entity, perhaps even by the provision of a free newspaper in their markets, and competition which might threaten their entire wellbeing.  In addition to the factors concerning the nature and size of the market which was, by the arrangement, deprived of competition to which I have referred above, I also take into account in fixing the appropriate pecuniary penalty that Waikerie Printing was acting re-actively in making and giving effect to the arrangement in circumstances where it feared for its economic well-being. 

61                  I have also had regard to the fact that this is the first occasion that Waikerie Printing has contravened the Act, although again the credit to be given for that factor must be reduced because Waikerie Printing is not shown to have any culture of compliance with the Act nor to have made any attempts to promote such a culture before the contraventions.  Nor, in its case, does it get any credit for implementing any trade practices compliance program after the contraventions, nor for co-operating with the ACCC in its investigation.  Its officers provided information only by the ACCC exercising its statutory power under s 155 of the Act.  I give it credit for its sensible and focussed conduct of the hearing itself.

62                  I will not repeat the matters which otherwise I have referred to when considering the appropriate pecuniary penalties for Rural Press and Bridge, and which apply to Waikerie Printing.  In its case, however, the fact that the contraventions occurred through the conduct of its director is a matter which weighs against too much leniency.

63                  In the light of all the considerations I consider it appropriate to order Waikerie Printing to pay to the Commonwealth a pecuniary penalty of $60,000.

MR LAW, MR McAULIFFE AND MR TAYLOR

64                  The ACCC seeks penalties against the “personal” respondents in the amounts of $300,000 against Mr Law, $200,000 against Mr McAuliffe and $150,000 against Mr Taylor.

65                  As noted earlier, Mr Law from January 1998 was the General Manager of the Regional Publishing Division of Rural Press.  He reported directly to the Managing Director of Rural Press.  Mr McAuliffe at relevant times was the South Australian Regional Manager of Rural Press.  He was responsible for various subsidiary companies of Rural Press including Bridge.  He reported to Mr Law.

66                  I have already found that Mr Law and Mr McAuliffe were each knowingly concerned in the contraventions of ss 45 and 46 of the Act by Rural Press and Bridge.  I found :

“They were each clearly aware of the general financial strength of Rural Press and of its relationship with Bridge.  They were each aware of the general market in which the Standard competed, effectively until July 1997 without competition.  They were each aware of the physical resources available to Rural Press and to Bridge if it were desired to embark upon publishing a regional newspaper in the Riverland area in competition with the newspapers published by the Taylors.  I am satisfied that they were each also aware that the communications with the Taylors, in one instance through Robinson, would have been perceived by the Taylors as the threat of a response by publishing a regional newspaper in the Riverland area which would potentially much reduce the profitability of the Taylor’s businesses.” [138].

67                  In each of their cases, a severe penalty is called for.  Mr Law and Mr McAuliffe were each in very senior positions.  They were both involved directly in the conduct which amounted to the contraventions.  They were in a position to control or prevent the contraventions.  Rather than discourage the contraventions, they gave their informal approval to the conduct.  As Mr Law was in a more senior position than Mr McAuliffe, I consider that a greater penalty should be imposed upon him.  Each displayed scant regard for compliance with the Act, and Mr Law in fact persevered with his conduct after his managing director on about 7 April 1998 had drawn to his attention the possible implications of the Act.  On the credit side, both disclosed documents in their personal files to the ACCC and co-operated with the ACCC in its investigations.  They also share the credit for the focussed conduct of the trial.  Neither benefited personally from the contraventions.  Neither has previously contravened the Act.  I have been told nothing about their personal resources.  I accept the submission that both Mr Law and Mr McAuliffe are remorseful for their role in the contraventions, and that each is unlikely to be involved in any contravention of the Act in the future.  In the case of Mr Law, he instigated a trade practices awareness training program for the managers under his supervision in April 1999, promptly after the ACCC identified concerns to Rural Press about the events concerning Waikerie Printing to April or May 1998.

68                  Mr Taylor at all relevant times was a director of Waikerie Printing and of Loxton News Pty Ltd and Murray Pioneer Pty Ltd.  I found that both he and his brother Darnley Taylor, now deceased, were involved in the contraventions of the Act by Waikerie Printing.  I found :

“I think it is clear that, in the face of the threat from Rural Press and Bridge which they perceived, they each participated in the communications referred to and in the decision by Waikerie Printing to enter into the arrangement with Rural Press and Bridge in March or April 1998 to withdraw the River News from active promotion and circulation in the Mannum area.  They understood that the River News and the Standard were competitors in that part of the Murray Bridge area around Mannum, and that the purpose of the arrangement was that that competition should come to an end and that Rural Press and Bridge would not then enter the Riverland area with any regional newspaper.  They also understood that the members of the community in and around Mannum, and its local businesses, would no longer then be able to get access to the information and news in the River News or to its advertising as had been the case between July 1997 and April 1998.”

69                  Mr Taylor and his brother effectively controlled Waikerie Printing and the two other newspaper companies mentioned.  I have already found that Waikerie Printing played a less serious part in the contraventions of s 45, and that its participation was mainly a reaction to the circumstances drawn to its attention by Rural Press and Bridge.  Those factors also weigh towards a lesser penalty in relation to Mr Taylor.  However, as he was an active participant in the contravening conduct, and was a director of Waikerie Printing, the penalty must be significant.

70                  Mr Taylor has not previously contravened the Act.  However his conduct shows little regard for its terms, and in his case there is no proffering of any education problem about compliance with the Act either through Waikerie Printing or directly.  As with Waikerie Printing, I do not find reason to give him credit for his pre-trial dealings with the ACCC, but he must share in the credit given for the focussed conduct of the trial.  Unlike Mr Law and Mr McAuliffe, he did stand to gain indirectly or derivatively from the benefits which Waikerie Printing secured by entering into and giving effect to the arrangement.  I accept, as contended on his behalf, that he now regrets his role in the contraventions and that he is unlikely to contravene the Act again.  I do not think that the level of his assets is such as to impede the Court from imposing the level of pecuniary penalty which would otherwise be imposed.

71                  Having regard to the submissions, and the matters discussed above, I order that Mr Law should pay a pecuniary penalty to the Commonwealth in respect of his role in the contravention of the Act by Rural Press and Bridge of $40,000 and that Mr McAuliffe should pay a pecuniary penalty to the Commonwealth in respect of his role in those contraventions of $30,000.  In the case of Mr Taylor, I have reached the view that he should be ordered to pay a monetary penalty of $15,000 to the Commonwealth.

Associate:

Dated:              7 August 2001