FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Woolworths

(South Australia) Pty Ltd (ACN 007 873 118) (Trading as Mac’s Liquor)

[2003] FCA 530

TRADE PRACTICES – proposed consent orders to be entered against some respondents only – alleged price fixing agreements against several respondents – whether orders should be made before proceedings against other respondents are determined – whether court should ‘note’ undertakings given by consenting respondents to ACCC which include terms which are not clearly within the power of ACCC to accept – function of court when asked to ‘note’ undertakings given to ACCC under s 87B Trade Practices Act 1974.

PRACTICE AND PROCEDURE – court asked to note undertakings given to ACCC – whether court has any function to consider whether the undertakings are within power of ACCC to accept – nature of court’s function having regard to s 87B Trade Practices Act 1974.

Federal Court of Australia Act 1976 (Cth)

Trade Practices Act 1974 (Cth) s 45 and 87B

Trade Practices Amendment Act (No.1) 2001 (Cth)

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

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

Thompson Australia Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 followed

Australian Competition and Consumer Commission v Office Link (Aust.) Pty Ltd (1997) ATPR 41-598 considered

Australian Competition and Consumer Commission v Alice Car & Truck Rentals Pty Ltd (1997) ATPR 41-582 noted

Australian Competition & Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41-702 noted

Australian Competition and Consumer Commission v ABB Transmission & Distribution (2001) 190 ALR 169 noted

Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No.2) (2002) ATPR 41-871 and 41-872 noted

Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc. (2001) 114 FCR 91 considered

Australian Competition & Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41-702 noted

Beach Petroleum ML v Johnson (1995) 57 FCR 119 noted

Higgins v Nicol (1972) 21 FLR 34 considered

Australian Competition and Consumer Commission v Signature Security Group Pty Ltd [2003] FCA 3 noted

Trade Practices Commission v Cue Design Pty Ltd (1969) ATPR 41-475 noted

ACCC v Apollo Optical (Aust.) Pty Ltd [2001] FCA 1456 noted

Trade Practices Commission v Olympic Productions and Publications Pty Ltd (1985) 8 FCR 467 considered

Knowles v Fuller (1947) SR(NSW) 243 noted

St John Shipping Corporation v Joseph Rank Ltd [1957] 1QB 2367 noted

Anderson Ltd v Daniel [1924] 1 KB 138 noted

Australian Petroleum Pty Ltd v Australian Competition and Consumer Commission (1997) 73 FCR 75 considered

Virgin Blue Airlines Pty Ltd v Australian Competition and Consumer Commission [2001] FCA 1271 considered

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

Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 noted

Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 noted

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v WOOLWORTHS (SOUTH AUSTRALIA) PTY LIMITED (ACN 007 873 118) (TRADING AS MAC’S LIQUOR), THE ARNHEM CLUB INCORPORATED (RIN 00217C), RHONWOOD PTY LIMITED (ACN 010 832 309) (TRADING AS WALKABOUT TAVERN), DONALD ALEXANDER MILLER, PAUL SAMUEL MILLER AND MICHELLE LOUISE MILLER

D 18 of 2002

MANSFIELD J

30 MAY 2003

ADELAIDE (HEARD IN DARWIN)

THE COURT NOTES THAT:

1.                  In order to resolve the issues between the Applicant and the First Respondent without lengthy and expensive litigation, the First Respondent:

(a)                admits the allegations made against it in the Statement of Claim including the contraventions set out in paragraphs 48 and 49 thereof; and

(b)               has provided an undertaking to the Applicant pursuant to section 87B of the Trade Practices Act 1974 (‘the Act’) in the terms of the Annexure to these orders.

THE COURT ORDERS BY CONSENT THAT:

2.                  The First Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from:

(a)                making or arriving at;

(b)               giving effect to;

(c)                inducing, or attempting to induce, any person to make or arrive at, or give effect to;

(d)               aiding, abetting, counselling or procuring any person to make or arrive at, or give effect to; or

(e)                being in any way knowingly concerned in, or party to, the making or arriving at, or giving effect to:

any contract, arrangement or understanding which contains a provision that:

(f)                has the purpose, or has or is likely to have the effect, of fixing controlling or maintaining, or provides for the fixing, controlling or maintaining of, the prices for or the discounts in relation to take-away alcoholic beverages in Nhulunbuy; or

(g)               has the purpose, or has or is likely to have the effect, of substantially preventing, hindering or lessening competition in the sale of take-away alcoholic beverages in Nhulunbuy.

3.                  The First Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from organising, attending or otherwise participating in, any meetings of representatives of the vendors of take-away alcoholic beverages in the Nhulunbuy area, being a meeting held for the purpose of, or for purposes which include the purpose of, fixing, controlling or maintaining the prices for or the discounts in relation to take-away alcoholic beverages in Nhulunbuy.

4.                  The First Respondent pay the costs of the Applicant in the agreed sum of $60,000.

ANNEXURE

TRADE PRACTICES ACT 1974 – SECTION 87B

UNDERTAKING

Person giving Undertaking:

This undertaking is given to the Australian Competition and Consumer Commission (‘the ACCC’) by Woolworths (South Australia) Pty Limited ACN 007 873 118 (trading as Mac’s Liquor) (‘Woolworths’) under section 87B of the Trade Practices Act 1974 (‘the Act’).

Background:

The ACCC proposes to institute proceedings in the Federal Court of Australia against Woolworths, The Arnhem Club Incorporated RIN 00217C (‘The Arnhem Club’), Rhonwood Pty Limited ACN 010 832 309 (‘Rhonwood’) and certain persons acting on behalf of Rhonwood (‘the proceedings’). The proceedings will involve allegations of price-fixing conduct in the Nhulunbuy take-away alcohol market and/or the Nhulunbuy alcohol market in the Northern Territory, in breach of sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act.

The allegations and Woolworth’s participation in the alleged contraventions of the Act are set out in the Statement of Claim to be filed in the proceedings. Woolworths has admitted the allegations made against it in the Statement of Claim, including the contraventions set out in paragraphs 46 and 47, and has agreed with the ACCC on the terms of consent orders to be sought from the Court to resolve the proceedings in respect of Woolworths.

Undertakings:

As part of the resolution of the proceedings, Woolworths has agreed to provide to the ACCC the undertakings contained herein that:

(1)               It will make a donation in the sum of $150,000 to the Nambara School Council (Yirrkala CEC) on the Gove Peninsula for the purpose of an alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities.

(2)               It will upgrade and maintain its trade practices compliance program in accordance with the Australian Standard AS 3806 to ensure, so far as reasonably possible, the company and its relevant employees are not involved in further contraventions of the Act.

(3)               It will, if requested by the ACCC, provide the assistance and cooperation referred to in clauses 5 and 6 of this undertaking.

The ACCC has agreed to accept the undertaking from Woolworths under section 87B of the Act.

Commencement of Undertakings:

1.                  This undertaking comes into effect on the later of when:

(a)                the undertaking is executed by Woolworths;

(b)               the undertaking so executed is accepted by the ACCC; and

(c)                the Court makes consent orders in respect of Woolworths.

Obligations under the Undertakings:

Donation

2. Woolworths will make a donation in the sum of $150,000 to the Nambara School Council (Yirrkala CEC) on the Gove Peninsula for the purpose of an alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities.

Trade Practices Compliance Program

3. Woolworths has in place a Trade Practices Compliance Program (‘the Program’) in respect of the Act, the object of which is to ensure compliance with the Act by Woolworths and relevant officers, employees and agents. The Program includes the following features:

(a)                            Woolworths has appointed Mr Gerard Rohl, of Woolworths Legal Department as the Compliance Officer with overall responsibility for Trade Practices Compliance under Mr Rohan Jeffs, General Manager Corporate Services.

(b)                            The Program requires training of management involved in Woolworths Retail Operations and Buying and Marketing functions, including stores managers, liquor managers and their respective deputies, in a manner appropriate to ensure that all such management are conversant with the provisions of the Act to a level where:-

                                                                                                   i.      they can avoid obvious contraventions and can identify more complex potential trade practices problems for referral to the appropriate person in the Woolworths compliance infrastructure;

                                                                                                  ii.      persons with responsibilities within the Woolworths compliance infrastructure can effectively carry out those responsibilities.

(c)                            The Woolworths Compliance Officer, Mr Rohl, can address more complex trade practices issues and identify issues which require referral to its external solicitors.

(d)                            The Program includes procedures for monitoring the implementation of the educational and training requirements of the Program including the recording of training given to management including the names of those involved, the dates upon which training was given and by whom and the nature of the training.

(e)                            The Program includes a procedure for monitoring compliance with the Act including the recording of any consistent questions or major issues raised by management or third parties, the response given to those questions, any complaints made, and the response given to any complaints.

4. Woolworths undertakes that:

(a)                Within 60 days of these undertakings Woolworths will forward to the ACCC for comment a complete copy of Woolworths’ current Program with a view to the ACCC identifying any improvements or suggestions which it considers would assist Woolworths in avoiding the type of contraventions which occurred in this matter.

(b)               Woolworths will incorporate into the Program and implement as part of the Program any reasonable changes to the Program that are so recommended by the ACCC and endorsed by Woolworths’ external solicitors in writing.

(c)                Woolworths will commence the implementation of the Program within 90 days of the ACCC agreement to the changes to the existing Program as referred to above.

(d)               The Program will remain in force for a minimum period of 5 years from the date of its implementation and during that time will be varied by addition or omission to accord with any relevant changes to the Act.

(e)                At the end of the 24 month and 48 month periods following the execution of this undertaking, Woolworths will cause an independent auditor who will be an independent solicitor or compliance professional as notified by the ACCC to review and report to the ACCC on:

(i) the implementation of the Program and achievement of its objectives over the preceding reporting period; and

(ii)                any recommended changes to the Program that may be necessary to ensure achievement of the objectives set out in this undertaking.

(f) Woolworths will cause the independent auditor to complete the review and provide a copy of his or her report to Woolworths and the ACCC within 60 days at the end of each reporting

period.

(g) Woolworths will incorporate into the Program and implement as part of the Program all reasonable changes to it that are recommended by the independent auditor’s report and are also:

(i)                     approved by the ACCC in writing, if such approval is advised to Woolworths within 60 days of the ACCC receiving the report of the independent auditor; and

(ii)                   endorsed by Woolworths’ external solicitors in writing.

Assistance:

5. Woolworths will, if requested by the ACCC:

(a)                 assist and facilitate (but not require or compel) its current employees; and

(b)                request (but not require or compel) former employees;

to cooperate with the ACCC:

(c)                 in the preparation of affidavits or statements on matters which are the subject of the proceedings; and

(d)                in giving evidence in Court consistent with any such affidavits or statements and in making themselves reasonably available to the ACCC or its legal representatives to discuss such evidence.

6. Woolworths will, if requested by the ACCC, continue to provide documents and information in the possession of Woolworths in respect of matters the subject of the proceedings.

Acknowledgments:

7. Woolworths acknowledges and accepts that:

(a) the ACCC may make this undertaking available for public inspection including by placing it on a register, publishing it and allowing third parties to publish it, and that the ACCC may from time to time publicly refer to this undertaking, including by way of media release;

(b)               this undertaking in no way derogates from the rights and remedies which may be available to any other person arising from the alleged conduct.

THE COURT NOTES THAT:

1. In order to resolve the issues between the Applicant and the Second Respondent without lengthy and expensive litigation, the Second Respondent:

(a) admits the allegations made against it in the Statement of Claim including the contraventions set out in paragraphs 48 and 49 thereof; and

(b) has provided an undertaking to the Applicant pursuant to section 87B of the Trade Practices Act 1974 in the terms of the Annexure to these orders.

THE COURT ORDERS BY CONSENT THAT:

1.                  The Second Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from:

(a)               making or arriving at;

(b)               giving effect to;

(c)               inducing, or attempting to induce, any person to make or arrive at, or give effect to;

(d)               aiding, abetting, counselling or procuring any person to make or arrive at, or give effect to; or

(e)               being in any way knowingly concerned in, or party to, the making or arriving at, or giving effect to:

any contract, arrangement or understanding which contains a provision that:

(f)                 has the purpose, or has or is likely to have the effect, of fixing controlling or maintaining, or provides for the fixing, controlling or maintaining of, the prices for or the discounts in relation to take away alcoholic beverages in Nhulunbuy; or

(g)               has the purpose, or has or is likely to have the effect, of substantially preventing, hindering or lessening competition in the sale of takeaway alcoholic beverages in Nhulunbuy.

3.                       The Second Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from organising, attending or otherwise participating in, any meetings of representatives of the vendors of take-away alcoholic beverages in the Nhulunbuy area, being a meeting held for the purpose of, or for purposes which include the purpose of, fixing, controlling or maintaining the prices for or the discounts in relation to take away alcoholic beverages in Nhulunbuy.

4.                       The Second Respondent pay the costs of the Applicant in the agreed sum of $30,000.

ANNEXURE

TRADE PRACTICES ACT 1974 – SECTION 87B

UNDERTAKING

Person giving Undertaking:

This undertaking is given to the Australian Competition and Consumer Commission (‘the ACCC’) by The Arnhem Club Incorporated (RIN 00217C) (‘The Arnhem Club’) under section 87B of the Trade Practices Act 1974 (‘the Act’).

Background:

The ACCC proposes to institute proceedings in the Federal Court of Australia against Woolworths (South Australia) Pty Limited ACN 007 873 118 (‘Woolworths’), The Arnhem Club, Rhonwood Pty Limited ACN 010 832 309 (‘Rhonwood’) and certain persons acting on behalf of Rhonwood (‘the proceedings’). The proceedings will involve allegations of price-fixing conduct in the Nhulunbuy take-away alcohol market and/or the Nhulunbuy alcohol market in the Northern Territory, in contravention of sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act.

The allegations and The Arnhem Club’s participation in the alleged contraventions of the Act are set out in the Statement of Claim to be filed in the proceedings. The Arnhem Club has admitted the allegations made against it in the Statement of Claim and has agreed with the ACCC on the terms of consent orders to be sought from the Court to resolve the proceedings in respect of The Arnhem Club.

Undertakings:

As part of the resolution of the proceedings, The Arnhem Club has agreed to provide to the ACCC the following undertakings:

(1) It will make a donation in the sum of $150,000 to an alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities, being a program identified as suitable by the applicant on advice from the Commonwealth Department of Health and Aged Care.

(2) It will establish a trade practices compliance program in accordance with the Australian Standard AS 3806 to ensure, so far as reasonably possible, the Club and its employees are not involved in further contraventions of the Act.

(3) It will continue to assist the ACCC in respect of this matter, including the ACCC’s preparation for and conduct of the proceedings.

The ACCC has agreed to accept the undertakings from The Arnhem Club under section 87B of the Act.

Commencement of Undertakings:

1. This undertaking comes into effect when

(a)               the undertaking is executed by The Arnhem Club;

(b)              the undertaking so executed is accepted by the ACCC; and

(c)               the Court makes consent orders in respect of The Arnhem Club.

Obligations under the Undertakings:

Donation

2. (a) The Arnhem Club will make a donation in the sum of $150,000 to a suitable alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities (‘the Program’).

(b)               The donation will be paid in quarterly instalments of $37,500 each, the first of which will be due within 30 days of The Arnhem Club receiving notice of the identity of the program pursuant to paragraph 2(c) below. Subsequent instalments of $37,500 will be paid at three monthly intervals, to be completed no later than 12 months after the date at which the first instalment was made.

(c) The program will be one identified to The Arnhem Club as suitable by the ACCC on advice from the Commonwealth Department of Health and Aged Care.

Trade Practices Compliance Program

3. The Arnhem Club undertakes that:

(a)                    The Arnhem Club will implement a trade practices compliance program (‘the Program’) in respect of Part IV of the Act.

(b)                   The Program will be described in writing.

(c)                    The Arnhem Club will use its best endeavours to ensure that the Program complies with the following requirements:

(i) The Program will comply with the Australian Standard for Compliance Programs AS 3806-1998.

(ii) The object of the Program will be to ensure compliance with the Act by The Arnhem Club, its officers, employees and agents.

b.      The Arnhem Club will appoint an appropriately qualified senior officer as the compliance officer with overall responsibility for trade practices compliance.

c.       The Program will require the training of all staff of The Arnhem Club who may be involved in conduct which may breach Part IV of the Act, in a manner appropriate to ensure that staff are conversant with the provisions of the Act to a level where:

. general staff can avoid obvious contraventions and can identify more complex potential trade practices problems for referral to the appropriate person in The Arnhem Club compliance infrastructure.

. persons with responsibilities within The Arnhem Club compliance infrastructure can effectively carry out those responsibilities; and

. The Arnhem Club compliance officer can address more complex trade practices issues and (if that person is not legally qualified and able to give the relevant advice) identify issues which require referral to its solicitors;

d.      The Program will contain a timetable for its implementation.

e.       The Program will provide for the production and distribution to each staff member of a compliance manual.

f.        The Program will specify a procedure for monitoring the implementation of the educational and training requirements of the Program, including the recording of training given to staff including the names of staff involved, the dates upon which training was given and by whom, and the nature of the training.

g.       The Program will specify a procedure for monitoring compliance with the Act, including the recording of any questions or issues raised by staff or third parties, the response given to those questions, any complaints made, and the response given to any complaints.

(d)               The Arnhem Club will submit a draft of the Program to the ACCC within 45 days of the date of this undertaking.

(e)               The Arnhem Club will incorporate into the Program, and implement as part of the Program, any reasonable changes to the draft program that are recommended by the ACCC in writing.

(f)                 The Arnhem Club will implement the Program within 30 days of the ACCC advising whether any changes are required to the draft program, as referred to in subparagraph (e) above.

(g)               The Program will remain in force for a minimum period of five years from the date of its implementation.

(h)               At the end of each 12 month period following the acceptance of this undertaking by the ACCC, until the fifth anniversary of that acceptance, The Arnhem Club will cause an independent auditor (who shall be an independent accountant or solicitor approved by the ACCC) to review and report on:

. the implementation of the Program and the achievement of its objectives over the preceding 12 months; and

. any recommended changes to the Program that may be necessary to ensure achievement of the requirements set out in this undertaking.

(i)                 The Arnhem Club will cause the independent auditor to complete the review and provide a copy of his or her report to The Arnhem Club and to the ACCC within 14 days of the end of each 12 month period.

(j)                 The Arnhem Club will incorporate into the Program, and implement as part of the Program, all reasonable changes to it that are recommended by the independent auditor’s report and are also approved by the ACCC in writing.

Assistance

4.                 The Arnhem Club will:

(a)                 Provide active assistance to the ACCC with preparation of statements and/or affidavits of current and former employees and/or officers of The Arnhem Club on matters which are the subject of these proceedings.

(b)                Assist and facilitate current and former employees and/or officers of The Arnhem Club to give evidence in Court in response to such requests consistent with any affidavit or statement prepared in relation to this matter and make themselves reasonably available to the ACCC or its legal representatives to discuss such evidence.

(c)                 Continue to provide to the ACCC documents and information in the possession of The Arnhem Club in respect of this matter until the ACCC’s investigation and proceedings arising from the investigation have been finalised.

Acknowledgments:

5.                 The Arnhem Club acknowledges and accepts that:

(a)                the ACCC may make this undertaking available for public inspection including by placing it on a register, publishing it and allowing third parties to publish it, and that the ACCC may from time to time publicly refer to this undertaking, including by way of media release;

(b)               this undertaking in no way derogates from the rights and remedies which may be available to any other person arising from the alleged conduct.

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

REASONS FOR JUDGMENT

1                     The Australian Competition and Consumer Commission (the ACCC) commenced proceedings on 11 December 2002 against the respondents. It alleges that Woolworths (South Australia) Pty Limited (Woolworths (SA)), The Arnhem Club Incorporated (The Arnhem Club) and Rhonwood Pty Limited (Rhonwood) each contravened ss 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) (the TP Act) by making an arrangement which had the purpose, or which had or was likely to have the effect, of substantially lessening competition in what is called the Nhulunbuy take-away alcohol market in January or February 1997. It further alleges that each of those respondents also contravened s 45(2)(b)(ii) of the TP Act by giving effect to the arrangement from about March 1997 to August 1999. The personal respondents are variously alleged to be managers or directors of Rhonwood. I shall call those respondents together ‘the personal respondents’. Each of the personal respondents is alleged to have aided and abetted or to have been knowingly concerned in the contraventions by Rhonwood, although in somewhat different degrees or ways. It is not necessary to further address their alleged roles at present.

2                     In its application, the ACCC seeks declarations of contraventions of the TP Act as alleged against each of the respondents, injunctions against each of them, pecuniary penalties but only against Rhonwood and the personal respondents, and an order that Rhonwood implement a trade practices compliance program. It also seeks orders for costs.

3                     The application first came on for directions on 13 February 2003.

4                     At that time the ACCC and Woolworths (SA), and the ACCC and The Arnhem Club, through counsel, indicated that they had reached agreement as to the final disposition of the application as regards those respondents. They requested the Court to make by consent agreed orders. Rhonwood and the personal respondents appeared together by counsel. I was informed that Rhonwood and the personal respondents were unaware of the arrangements entered into between the ACCC and Woolworths (SA), and between the ACCC and The Arnhem Club. I accordingly gave Rhonwood and the personal respondents the opportunity to make such submissions as they may be advised by 24 February 2002 as to whether the Court, if it was otherwise satisfied that it was appropriate to do so, should make the final orders agreed between the ACCC and Woolworths (SA), and between the ACCC and The Arnhem Club, at this point of the proceedings, or should defer doing so until final resolution of the application against Rhonwood and the personal respondents. I also gave directions concerning pleadings and other interlocutory issues as between the ACCC and Rhonwood and the personal respondents.

5                     Rhonwood and the personal respondents made only a brief submission opposing the Court making the final orders proposed between the ACCC and Woolworths (SA), or between the ACCC and The Arnhem Club, at this point in the proceedings.

6                     Although it appears that the arrangement between the ACCC and Woolworths (SA), and the arrangement between the ACCC and The Arnhem Club, were each separately arrived at, the effect of what each of those respondents has accepted and agreed to is in much the same terms. One difference is as to the amount of costs agreed to be paid by each.

THE ADMITTED FACTS

7                     Each of Woolworths (SA) and The Arnhem Club admit the allegations in the statement of claim. In substance, they are that at material times each of Woolworths (SA), The Arnhem Club and Rhonwood, under the business name ‘Walkabout Tavern’, carried on business in Nhulunbuy, inter alia, as vendors of take-away alcoholic beverages. Woolworths (SA) operated under the business name ‘Mac’s Liquor’. The three entities sold most of the alcoholic beverages sold to the public in Nhulunbuy, including take-away alcoholic beverages. From time to time up to January 1997, the three entities separately advertised and sold take-away alcoholic beverages at discounted prices.

8                     On 22 January 1997, representatives of Woolworths (SA), The Arnhem Club and Rhonwood attended a meeting. The other persons present were the Town Administrator of the Nhulunbuy Corporation Limited and Chairman of the Nhulunbuy Town Board Incorporated (the administrator), a representative of the Gove Country Club Incorporated (the golf club), a representative of the Gove Yacht Club Incorporated (the yacht club), a representative of the Gove Peninsula Surf Life Saving Club (the surf club), and a member of the police force. Each of the yacht club, the surf club and the golf club also were smaller suppliers of alcoholic beverages at Nhulunbuy. It was then agreed that, subject to the consent of senior management of Woolworths (SA) and the committee of The Arnhem Club, there would be no advertising or selling of certain take-away alcoholic beverages at a discounted price in Nhulunbuy commencing two weeks after the date of that meeting until further notice. The alcoholic beverages in question were: Berri Estates Riesling wine casks; Jim Beam bourbon whisky; and cartons of Victoria Bitter beer (the beverages).

9                     On 27 February 1997, representatives of Woolworths (SA), The Arnhem Club and Rhonwood attended a further meeting. There were also present representatives of the three smaller licensees, and the administrator. At that meeting it was agreed that there would be no advertising or selling of the beverages at a discounted price in Nhulunbuy from 14 March 1997.

10                  In fact, from March 1997 until August 1999 Woolworths (SA), The Arnhem Club and Rhonwood did not advertise the beverages for sale in newspapers circulating in Nhulunbuy either at a discounted price or at all, and they did not sell the beverages at a discounted price in Nhulunbuy. The arrangement came to an end following a further meeting on 26 August 1999 of representatives of Woolworths (SA), The Arnhem Club and Rhonwood, representatives of the golf club and of the yacht club, a representative of the police force, representatives of the Northern Territory Liquor Commission, a representative of Living With Alcohol and the administrator. It was then agreed that the existing arrangement not to discount the beverages in Nhulunbuy should come to an end. The meeting of 26 August 1999 followed inquiries by the ACCC into the existence of the earlier arrangement.

11                  Woolworths (SA) and The Arnhem Club further acknowledge that the arrangement referred to amounted to a contract arrangement or understanding of the kind referred to in ss 45A and 45 of the TP Act. They acknowledge that they made and gave effect to such an arrangement, thereby contravening ss 45(2)(a)(ii) and 45(2)(b)(ii) of the TP Act by engaging in conduct of the kind referred to in ss 76(1)(a) and 80(1)(a) of the TP Act.

12                  There is also agreement as to the circumstances in which the admitted contraventions came to occur.

13                  It is acknowledged that Woolworths (SA), The Arnhem Club and Rhonwood are the major take-away liquor outlets in Nhulunbuy, located on the Gove Peninsula in north-eastern Arnhem Land in the Northern Territory. Aboriginal people in Nhulunbuy have a history of opposition to the local Aboriginal people having ready access to alcohol, and they opposed the granting of liquor licenses to Rhonwood and to Woolworths (SA). They have over time sought a reduction in access to alcohol in Nhulunbuy to address their concerns about excessive alcohol consumption.

14                  Prior to February 1997, Rhonwood advocated that Woolworths (SA), The Arnhem Club and Rhonwood cease discounting of alcohol products. Consequently, at least on the facts acknowledged as between the ACCC and Woolworths (SA) and The Arnhem Club, the arrangement was entered into at the instigation of Rhonwood. (Of course, as with all the acknowledged facts, they are acknowledged only on the part of Woolworths (SA) and The Arnhem Club. Rhonwood and the personal respondents are entitled to dispute those facts and to assert and to establish different factual circumstances.)

15                  The ACCC, Woolworths (SA) and The Arnhem Club acknowledge that there is no evidence to indicate that the arrangement to stop discounting the price of the beverages led to a reduction in alcohol consumption in Nhulunbuy. The arrangement was not reviewed or evaluated, and was only terminated when the three corporate respondents were advised of the ACCC investigation of the matter.

16                  Each of Woolworths (SA) and The Arnhem Club acknowledge that they ought to have known that their conduct was in contravention of the TP Act. They accept that, if there had been any likelihood of a public benefit arising from the arrangement, the proper course of action would have been to apply to the ACCC for authorisation of the proposed arrangement in accordance with Part VII of the TP Act.

THE PROPOSED ORDERS

17                  In the light of those acknowledgments, Woolworths (SA) and The Arnhem Club request the Court to note the undertakings given by each of them to the ACCC and to make the orders set out below. The proposed orders and the proposed undertaking in the case of The Arnhem Club are in the following terms:

‘THE COURT NOTES THAT:

1.             In order to resolve the issues between the Applicant and the Second Respondent without lengthy and expensive litigation, the Second Respondent:

(a)              admits the allegations made against it in the Statement of Claim including the contraventions set out in paragraphs 48 and 49; and

(b)              has provided an undertaking to the Applicant pursuant to section 87B of the Trade Practices Act 1974 (‘the Act’) in the terms of the Annexure to these orders.

THE COURT DECLARES BY CONSENT THAT:

2.                  The Second Respondent by entering into a contract, arrangement or understanding, at meetings on 22 January 1997 and 27 February 1997 at Nhulunbuy in the Northern Territory of Australia, that the First, Second and Third Respondents would not advertise or sell at a discounted price at their respective Nhulunbuy retail stores from 14 March 1997:

(a)               Berri Estate 5 litre Riesling wine casks;

(b)               Jim Beam bourbon whisky 700 ml bottles; and

(c)               Cartons of Victoria Bitter beer,

(‘the Beverages’)

engaged in conduct in contravention of s.45(2)(a)(ii) of the Act.

3.             The Second Respondent in giving effect to the contract arrangement or understanding referred to in the previous paragraph by:

(a)               not advertising the Beverages at a discounted price in newspapers circulating in Nhulunbuy; and

(b)               not selling the Beverages at a discounted price in Nhulunbuy,

from March 1997 until a meeting on 26 August 1999 at Nhulunbuy, engaged in conduct in contravention of s 45(2)(b)(ii) of the Act.

THE COURT ORDERS BY CONSENT THAT:

4.                  The Second Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from:

(a)               making or arriving at;

(b)               giving effect to;

(c)               inducing, or attempting to induce, any person to make or arrive at, or give effect to;

(d)               aiding, abetting, counselling or procuring any person to make or arrive at, or give effect to; or

(e)               being in any way knowingly concerned in, or party to, the making or arriving at, or giving effect to:

any contract, arrangement or understanding which contains a provision that:

                                                                           i.      has the purpose, or has or is likely to have the effect, of fixing controlling or maintaining, or provides for the fixing, controlling or maintaining of, the prices for or the discounts in relation to take-away alcoholic beverages in Nhulunbuy; or

                                                                         ii.      has the purpose, or has or is likely to have the effect, of substantially preventing, hindering or lessening competition in the sale of take-away alcoholic beverages in Nhulunbuy.

5.                  The Second Respondent, whether by its directors, servants, agents, or otherwise howsoever, be restrained for a period of five years from organising, attending or otherwise participating in, any meetings of representatives of the vendors of take-away alcoholic beverages in the Nhulunbuy area, being a meeting held for the purpose of, or for purposes which include the purpose of, fixing, controlling or maintaining the prices for or the discounts in relation to take away alcoholic beverages in Nhulunbuy.

6.                  The Second Respondent pay the costs of the Applicant in the agreed sum of $30,000.’

The undertaking is proffered to the ACCC. It is as follows:

TRADE PRACTICES ACT 1974 – SECTION 87B

UNDERTAKING

Person giving Undertaking:

This undertaking is given to the Australian Competition and Consumer Commission (the ACCC) by The Arnhem Club Incorporated (RIN 00217C) (The Arnhem Club) under section 87B of the Trade Practices Act 1974 (the Act).

Background:

The ACCC proposes to institute proceedings in the Federal Court of Australia against Woolworths (South Australia) Pty Limited ACN 007 873 118 (‘Woolworths’), the Arnhem Club, Rhonwood Pty Limited ACN 010 832 309 (‘Rhonwood’) and certain persons acting on behalf of Rhonwood (‘the proceedings’). The proceedings will involve allegations of price-fixing conduct in the Nhulunbuy take-away alcohol market and/or the Nhulunbuy alcohol market in the Northern Territory, in contravention of sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act.

The allegations and the Arnhem Club’s participation in the alleged contraventions of the Act are set out in the Statement of Claim to be filed in the proceedings. The Arnhem Club has admitted the allegations made against it in the Statement of Claim and has agreed with the ACCC on the terms of consent orders to be sought from the Court to resolve the proceedings in respect of the Arnhem Club.

Undertakings:

As part of the resolution of the proceedings, the Arnhem Club has agreed to provide to the ACCC the following undertakings:

1.                  It will make a donation in the sum of $150,000 to an alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities, being a program identified as suitable by the applicant on advice from the Commonwealth Department of Health and Aged Care.

2.                  It will establish a trade practices compliance program in accordance with the Australian Standard AS 3806 to ensure, so far as reasonably possible, the Club and its employees are not involved in further contraventions of the Act.

3.                  It will continue to assist the ACCC in respect of this matter, including the ACCC’s preparation for and conduct of the proceedings.

The ACCC has agreed to accept the undertakings from the Arnhem Club under section 87B of the Act.

Commencement of Undertakings:

1. This undertaking comes into effect when:

(a)              the undertaking is executed by the Arnhem Club;

(b)              the undertaking so executed is accepted by the ACCC; and

(c)              the Court makes consent orders in respect of the Arnhem Club.

Obligations under the Undertakings:

Donation

2. (a) The Arnhem Club will make a donation in the sum of $150,000 to a suitable alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities.

(b) The donation will be paid in quarterly instalments of $37,500 each, the first of which will be due within 30 days of the Arnhem Club receiving notice of the identity of the program pursuant to paragraph 2(c) below. Subsequent instalments of $37,500 will be paid at three monthly intervals, to be completed no later than 12 months after the date at which the first instalment was made.

(c)               The program will be one identified to the Arnhem Club as suitable by the ACCC on advice from the Commonwealth Department of Health and Aged Care.

Trade Practices Compliance Program

3. The Arnhem Club undertakes that:

(a)                  The Arnhem Club will implement a trade practices compliance program (‘the Program’) in respect of Part IV of the Act.

(b)                  The Program will be described in writing.

(c)                   The Arnhem Club will use its best endeavours to ensure that the Program complies with the following requirements:

                                                                                 i.          The Program will comply with the Australian Standard for Compliance Programs AS 3806-1998.

                                                                               ii.          The object of the Program will be to ensure compliance with the Act by the Arnhem Club, its officers, employees and agents.

                                                                             iii.          The Arnhem Club will appoint an appropriately qualified senior officer as the compliance officer with overall responsibility for trade practices compliance.

                                                                             iv.          The Program will require the training of all staff of the Arnhem Club who may be involved in conduct which may breach Part IV of the Act, in a manner appropriate to ensure that staff are conversant with the provisions of the Act to a level where:

. general staff can avoid obvious contraventions and can identify more complex potential trade practices problems for referral to the appropriate person in the Arnhem Club compliance infrastructure.

. persons with responsibilities within the Arnhem Club compliance infrastructure can effectively carry out those responsibilities; and

. The Arnhem Club compliance officer can address more complex trade practices issues and (if that person is not legally qualified and able to give the relevant advice) identify issues which require referral to its solicitors;

                                                                           v.              The Program will contain a timetable for its implementation.

                                                                         vi.              The Program will provide for the production and distribution to each staff member of a compliance manual.

                                                                       vii.              The Program will specify a procedure for monitoring the implementation of the educational and training requirements of the Program, including the recording of training given to staff including the names of staff involved, the dates upon which training was given and by whom, and the nature of the training.

                                                                     viii.              The Program will specify a procedure for monitoring compliance with the Act, including the recording of any questions or issues raised by staff or third parties, the response given to those questions, any complaints made, and the response given to any complaints.

(d)               The Arnhem Club will submit a draft of the Program to the ACCC within 45 days of the date of this undertaking.

(e)              The Arnhem Club will incorporate into the Program, and implement as part of the Program, any reasonable changes to the draft program that are recommended by the ACCC in writing.

(f)               The Arnhem Club will implement the Program within 30 days of the ACCC advising whether any changes are required to the draft program, as referred to in subparagraph (e) above.

(g)              The Program will remain in force for a minimum period of five years from the date of its implementation.

(h)              At the end of each 12 month period following the acceptance of this undertaking by the ACCC, until the fifth anniversary of that acceptance, the Arnhem Club will cause an independent auditor (who shall be an independent accountant or solicitor approved by the ACCC) to review and report on:

. the implementation of the Program and the achievement of its objectives over the preceding 12 months; and

. any recommended changes to the Program that may be necessary to ensure achievement of the requirements set out in this undertaking.

(i)                The Arnhem Club will cause the independent auditor to complete the review and provide a copy of his or her report to the Arnhem Club and to the ACCC within 14 days of the end of each 12 month period.

(j)               The Arnhem Club will incorporate into the Program, and implement as part of the Program, all reasonable changes to it that are recommended by the independent auditor’s report and are also approved by the ACCC in writing.

Assistance:

4.                  The Arnhem Club will:

(a)              Provide active assistance to the ACCC with preparation of statements and/or affidavits of current and former employees and/or officers of the Arnhem Club on matters which are the subject of these proceedings.

(b)              Assist and facilitate current and former employees and/or officers of the Arnhem Club to give evidence in Court in response to such requests consistent with any affidavit or statement prepared in relation to this matter and make themselves reasonably available to the ACCC or its legal representatives to discuss such evidence; and

(c)               Continue to provide to the ACCC documents and information in the possession of the Arnhem Club in respect of this matter until the ACCC’s investigation and proceedings arising from the investigation have been finalised.

Acknowledgments:

5.                  The Arnhem Club acknowledges and accepts that:

(a)              the ACCC may make this undertaking available for public inspection including by placing it on a register, publishing it and allowing third parties to publish it, and that the ACCC may from time to time publicly refer to this undertaking, including by way of media release;

(b)              this undertaking in no way derogates from the rights and remedies which may be available to any other person arising from the alleged conduct.’

18                  There are no pecuniary penalties proposed.

19                  Similar orders are proposed against Woolworths (SA), except it has agreed to pay costs of $60,000. The undertaking given by Woolworths (SA) to the ACCC is also in similar terms. It has undertaken to pay $150,000 to the Nambara School Council (Yirrkala CEC) on the Gove Peninsula, also for the purpose of an alcohol harm reduction, prevention, education or rehabilitation program in Nhulunbuy and the surrounding communities. It has an existing trade practices compliance program which it will upgrade and maintain, and procedures are specified for its upgrading under the approval of the ACCC.

consideration

20                  In considering whether the Court should make the proposed consent orders, with certain reservations, I think the principles are clear.

21                  There is an important public policy in the Court encouraging fair and appropriate settlement of litigation. See e.g. per French J in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at 80; [1999] FCA 18 at [1] (REIWA); NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291 per Burchett and Keifel JJ, Carr J concurring (NW Frozen Foods). It is a general principle of judicial restraint in the scrutiny of proposed settlements, particularly in the case of settlements between parties legally represented and able to understand and evaluate the desirability of agreeing to a settlement, that the Court will not refuse to give effect to terms of settlement which may be made within the Court’s jurisdiction and are otherwise unobjectionable: see REIWA at 87, [20] and cases cited therein.

22                  On the other hand, the Court must be satisfied that, by making the orders which it is being asked to make, it is not exceeding its jurisdiction and that the orders are appropriate: Thompson Australia Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 (Thompson); REIWA, where French J said at 80, [1]:

‘[The Courts] must also be conscious, however, that the laws they apply are public laws. It is in the public interest that, in considering agreements between parties requiring orders of the Court, the Court does not act as a mere rubber stamp. What is proposed must always be scrutinised to determine whether undertakings or consent orders are within power and are appropriate. There is sometimes a tension between these components of the public interest …’.

It was pointed out in Thompson that the parties cannot by consent confer power upon the Court to make orders which the Court otherwise lacks power to make.

23                  In this instance, putting aside the timing of the orders which are sought to be made, and the fact that the orders by consent are sought to be made only against some of the parties to the alleged arrangement, I think the public policy considerations in the finality of litigation and in the avoidance of litigation where parties acknowledge contraventions, and the beneficial consequences of a negotiated resolution being jeopardised if parties conclude that proper settlements are clouded by unpredictable risks, weigh in favour of making the proposed orders. The proposed orders declare in appropriate and limited terms the contraventions which are now admitted by the respondent Woolworths (SA) and The Arnhem Club. The declarations relate to the beverages, that is to the particular liquor the subject of the agreement and to the particular periods of time concerned. The proposed injunctions, albeit for a little longer period than is sometimes seen, are also specific to the sale of takeaway alcoholic beverages in Nhulunbuy, and to conduct which might involve the risk of a further meeting and agreement in contravention of the TP Act in relation to the sale of take-away alcoholic beverages in the Nhulunbuy area only. They are appropriately geographically confined.

24                  Given the admissions made by Woolworths (SA) and by The Arnhem Club, I am satisfied that the proposed settlement is consistent with the public interest. It is not necessary for me to form a view precisely as to whether I would have made declarations and injunctions in the terms which have been agreed. See NW Frozen Foods at 644.

25                  There are three matters which, I think, require more detailed consideration:

(1)               whether the proposed consent orders should be made at this stage of the proceedings;

(2)               whether the agreed amounts for costs, totalling $90,000, should be ordered as they might appear excessively high having regard to the stage of the proceedings; and

(3)               whether the Court should ‘note’ the proposed undertakings, in particular the terms whereby Woolworths (SA) is to pay $150,000 to the Nambara School Council for the identified purpose, and by The Arnhem Club to pay $150,000 for a like purpose to an entity yet to be identified.

26                  The Court has, in other cases, been asked to make orders or to accept undertakings proffered by consent directing an entity which has contravened a provision of the TP Act to institute and maintain a trade practices compliance program, and generally does so. The trade practices compliance program must bear a proper relationship to the contravention: Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 148 ALR 339 (Z-Tek Computer); Australian Competition and Consumer Commission v Office Link (Aust) Pty Ltd (1997) ATPR 41-598. In this instance, as I consider the Court would have power to accept directly the undertakings concerning the proposed trade practices compliance program (in the case of The Arnhem Club) and the proposed upgrading of its trade practices compliance program (in the case of Woolworths (SA)) as appropriate having regard to the admitted contraventions, I do not need to consider whether the fact that undertakings in that regard are being given to the ACCC under s 87B is of significance.

the timing of the proposed orders

27                  There have been cases where the Court has made declaratory or injunctive final relief by consent in the disposition of proceedings as against some only of the parties to the alleged arrangement: see Australian Competition and Consumer Commission v Alice Car & Truck Rentals Pty Ltd (1997) ATPR 41-582; Australian Competition & Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41-702; [1999] FCA 858; Australian Competition and Consumer Commission v ABB Transmission & Distribution (2001) ATPR 41-839; and Australian Competition & Consumer Commission v ABB Transmission & Distribution Ltd (2002) 190 ALR 169. There were however concerns expressed by Carr J in Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc (2001) 114 FCR 91 (AMA,WA) and by French J in REIWA as to whether it is appropriate in some circumstances to make declarations and final injunctions before the proceedings have been finalised in respect of all parties to the alleged arrangement or understanding, either by consent or by the findings of the Court.

28                  In AMA,WA the Court was asked to make orders by consent against one of two parties to an alleged price fixing agreement, and its officers, on the basis of admitted facts. The other party to the alleged price fixing agreement strongly disputed it. The contesting party opposed the making of the proposed consent orders against the submitting party until the hearing and determination of the allegations against the contesting party. Carr J at [47] was concerned that, if the contesting party was successful in its defence, there would be a finding of no relevant price fixing agreement, but there would nevertheless be on the record declarations by the Court which might be inconsistent with such a finding. His Honour, in the light of that consideration, and in the light of certain observations of French J in REIWA at 91, [38] declined at that stage of the proceedings either to make declaratory orders or to grant final injunctions against the submitting party, although he was prepared to make the proposed injunctive orders pending the hearing and determination of the proceedings against the contesting party and its officers.

29                  In REIWA, French J declined to make declaratory orders proposed by consent as between the ACCC and some only of parties to an alleged price fixing agreement until the completion of the proceedings. His Honour said at 91, [38]:

‘While the declarations which are sought against the colleges appear to be both within power and appropriate, they are declarations of apparently general proceedings between the ACCC and REIWA and Mr Griffith have not yet been concluded. I do not think it appropriate at this time to make the declarations in these general terms unless and until there is either a consent by REIWA and Mr Griffith or until there are findings after trial to support the declarations. This should not in any way affect the efficacy of the relief agreed between the ACCC and the other parties.’

The proposed declarations related to a certain clause of two licence of copyright agreements which the licensees accepted, but which the licensor disputed, contravened s 45(2)(a)(ii) of the TP Act.

30                  On the other hand, in Australian Competition & Consumer Commission v SIP Australia Pty Ltd (1999), ATPR 41-702 (1999) FCA 858, Finkelstein J made final injunctive orders by consent against some only of the respondents, and fixed the penalty payable by them for admitted contraventions of the TP Act, even though other respondents continued to dispute that there had been any contravention of the TP Act. It does not appear that the disputing respondents opposed that course of action. His Honour was not asked to make any declaratory orders.

31                  In my view, it is not appropriate in the present case to make the declarations sought by consent by the ACCC and Woolworths (SA) and The Arnhem Club at this point in the proceedings. I respectfully share the views of Carr J and French J as to why that is the case. The proposed consent declarations are general in their terms. They concern an alleged arrangement in contravention of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act to which Rhonwood is alleged to be a party. Consequently, if Rhonwood successfully defends the allegations against it, there will nevertheless have been declarations by the Court that Woolworths (SA) and The Arnhem Club had entered into, and given effect to, a price fixing arrangement with Rhonwood in contravention of the TP Act, even though Rhonwood would not have been found to have been a party to, or to have given effect to such an argument. Depending upon the outcome of the proceedings against Rhonwood, I would be prepared to make the agreed declarations at that later time.

32                  I do not have the same difficulty in respect of the proposed consent injunctions. They are specific to each of Woolworths (SA) and to The Arnhem Club. They are based upon the admitted conduct. If made, and if Rhonwood successfully defends the proceedings, they will not involve any potential inconsistency in orders of the Court. If Rhonwood successfully defends the proceedings, of course no injunction would be directed against it. But the admitted conduct of Woolworths (SA) and of The Arnhem Club would nevertheless warrant injunctive relief against them, even if it were found that Rhonwood was not a party to the alleged arrangement.

33                  Consequently, I propose to make the final injunctive orders against Woolworths (SA) and against The Arnhem Club proposed by consent at this point of the proceedings.

costs

34                  Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a discretion to award costs in a proceeding such as the present. Where the costs are agreed, and in the light of the admissions, the Court clearly has power to order Woolworths (SA) and The Arnhem Club to pay the costs of the ACCC. The practice of agreeing an amount for costs of the proceedings is an appropriate course, and one to be encouraged.

35                  I was initially concerned about the amount of the costs. The proceedings were commenced on 11 December 2002 by application supported by a statement of claim. By the first directions hearing Woolworths (SA) and The Arnhem Club had come to acknowledge the alleged contraventions, and had agreed to submit to the orders which were sought. Indeed, the terms of the undertakings which the Court is asked to note suggest clearly that their agreements were reached before the proceedings were instituted: each undertaking is dated 16 December 2002, and the ‘background’ section of the undertaking refers to the intention of the ACCC to institute proceedings alleging the contraventions. Consequently, I was concerned, by reference to the amount of the agreed costs, that they may relate in part to the costs of the investigation by the ACCC into a suspected contravention of the TP Act.

36                  Generally speaking, the recoverable costs of an applicant will be in relation to seeking advice concerning the proceedings, and instituting and prosecuting them. The costs of investigation of a body such as the ACCC are not clearly costs which the Court may order. Order 62 r 40 requires a bill of costs lodged for taxation to specify the work done by the solicitor for the taxing party or the agents or servants of the solicitor, and to specify the proper disbursements incurred in the conduct of the proceeding. I note the discussion of the Australian Law Reform Commission in its Discussion Paper 65: Civil and Administrative Penalties (2002) at pars 13.32-13.41 dealing with the recovery of the costs of investigations under the TP Act. The fact that O 62 r 4(2) provides for the fixing of a gross or lump sum for costs does not extend the nature of the work or the disbursements in respect of which costs may be ordered: see Beach Petroleum NL v Johnson (1995) 57 FCR 119. If the costs agreed to be paid had extended beyond the proper costs of the proceedings, such as the investigation costs of the ACCC, I would have required further submissions to be made to be satisfied the Court had the power to make such an order.

37                  The ACCC has, through its counsel, assured the Court that the agreed costs are costs of the proceedings. They are not part of its costs incurred in its investigation of the claimed (and, by Woolworths (SA) and The Arnhem Club, admitted) contraventions of the TP Act. I accept that assurance. It is not one with which Woolworths (SA) joins issue. The Arnhem Club accepts the assurance, and for its part considers the costs it has agreed to pay to the ACCC to be proper and reasonable. Recoverable costs may include costs of work done prior to the institution of proceedings, provided the work was necessary or proper for the fair conduct of the proceedings: see e.g. Higgins v Nicol 1972 21 FLR 34. As I am satisfied that the agreed costs do not extend beyond those which are properly costs of the proceedings, it is appropriate now to make the costs orders sought.

THE UNDERTAKINGS

38                  The only terms of the undertakings which are of concern, in the light of my consideration of the principles, are those by which Woolworths (SA) and The Arnhem Club have each agreed to make a payment of $150,000 to an entity to promote an alcohol harm reduction, prevention, education or rehabilitation program in the Nhulunbuy or surrounding communities. I shall call them hereafter ‘the payment undertakings’.

39                  The undertakings are not proffered to the Court. They are each an undertaking given to the ACCC pursuant to s 87B of the TP Act. Section 87B provides:

‘(1) The Commission may accept a written undertaking given by a person for the purposes of this section in connection with a matter in relation to which the Commission has a power or function under this Act (other than Part X).

(2) The person may withdraw or vary the undertaking at any time, but only with the consent of the Commission.

(3) If the Commission considers that the person who gave the undertaking has breached any of its terms, the Commission may apply to the Court for an order under subsection (4).

(4) If the Court is satisfied that the person has breached the term of the undertaking, the Court may make all or any of the following orders:

(a) an order directing the person to comply with that term of the undertaking;

(b)               an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;

(c)                an order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

(d) any other order that the Court considers appropriate.’

40                  It has been submitted that the Court on this application should not be concerned with these terms of the undertakings, as each undertaking is to the ACCC and not to the Court. Were the undertaking to the Court, there would be a serious question as to whether the Court was empowered under the Act to make orders in terms of the payment undertakings, and so whether it could accept the payment undertakings in those terms: Thompson.

41                  I do not accept that the Court should ‘note’ undertakings proffered to the ACCC under s 87B(1) without regard to their content. There are three reasons for that view.

42                  The first is that the Court is empowered under s 87B(4) to make orders to enforce compliance with such an undertaking, or to remedy the consequences of a failure to comply with such an undertaking. If the undertaking were one which was beyond the power of the ACCC to have accepted, the Court would not make any order under s 87B(4) in respect of its breach. If the Court is not previously aware of the undertaking, any issue as to the power of the ACCC to have accepted it will be resolved on any application for orders under s 87B(4). However, if (as here) the Court is made aware of the terms of the undertaking because it is asked to ‘note’ it, it would seem inappropriate that the Court should do so even where it may be clear that the ACCC has no power to accept the undertaking. There might otherwise arise circumstances where the Court has noted what an entity has undertaken to the ACCC to do, without demur, but at a later point in time has found the ACCC did not have power to accept the undertaking.

43                  In Australian Competition and Consumer Commission v Signature Security Group Pty Ltd [2003] FCA 3 Stone J was asked to make orders under s 87B(4) for failure to comply with undertakings accepted by the ACCC. One step in her Honour’s reasons at [38] was to be satisfied that the undertakings were ‘properly given by the respondent and properly accepted by the ACCC’. In an extreme and very unlikely case, the proffered undertaking might involve some illegal conduct on the part of the profferor which the ACCC and the profferor may have overlooked. In my view, it would be undesirable that such circumstances might arise.

44                  That is not to say that the Court should positively find the proffered undertaking is one within the power of the ACCC to accept. To do so would also expose the risk of inconsistent findings upon the question, if later an application for orders under s 87B(4) was made. Moreover, at the present stage of the proceedings, where the Court is simply asked to note the undertaking, there is no issue raised as to the entitlement of the ACCC to accept it and there is no contradictor. I think the proper balance is for the Court to consider the terms of the undertaking to be satisfied that prima facie it is one which the ACCC is empowered to accept.

45                  Counsel drew to my attention the observations of O’Loughlin J in Trade Practices Commission v Cue Design Pty Ltd (1996) ATPR 41-475 at 41,834 where his Honour said:

‘In my opinion, it is not for the court to express a view that the Commission should have or should not have proceeded under s 87B; the section clearly states that it is the Commission who “may accept a written undertaking” (s 87B(1)). The court has no involvement until (if at all) it is satisfied, on application made by the Commission, that a person has breached an undertaking (s 87B(4)).’

That case concerned breaches of s 79(1) of the TP Act by reason of contraventions of s 53 by the use of dual-priced swing tags. The context of his Honour’s remarks was a submission by the respondent that it had not been necessary for the proceedings to have been instituted, as it had acknowledged and corrected the contravening conduct when it learnt of it and had proffered appropriate undertakings to the Trade Practices Commission under s 87B of the TP Act. The Trade Practices Commission was not prepared to accept the undertakings proffered as it did not regard them as satisfactory. When seen in their context, I do not consider the remarks of O’Loughlin J are inconsistent with the view I have expressed about the Court’s role in the present circumstances. I observe also that Carr J in Australian Competition and Consumer Commission v Apollo Optical (Aust) Pty Ltd [2001] FCA 1456 agreed with the observations of O’Loughlin J in the same context – that is, whether the Court in determining what orders it might make upon an admitted contravention of the TP Act should consider whether the ACCC might have accepted an undertaking under s 87B rather than have brought the proceedings. Carr J did not regard the refusal of the ACCC to accept a statutory undertaking as never being relevant to the Court’s preparedness to make orders for contravention of the Act: see at [14].

46                  The second reason is that the Court, when ‘noting’ conduct which a party or parties propose to engage in, or to refrain from engaging in, in implementation of a settlement should not generally take an entirely passive attitude. Where undertakings are proffered to the Court, it may accept them in lieu of granting injunctions only provided it has the power to do so: Thomson at 163.

47                  In Trade Practices Commission v Olympic Productions and Publications Pty Ltd (1985) 8 FCR 467, Spender J was prepared to accept the agreed undertakings instead of making injunctive orders without it being shown by evidence to the Court’s satisfaction that the respondents had engaged in, or proposed to engage in, conduct that would fall within s 80 of the TP Act. In that case, the undertakings were offered without any admissions by the respondents. His Honour was satisfied that it was nevertheless appropriate to accept the undertakings proffered by the respondents. It is important to note the bases upon which his Honour so proceeded. In the first place, it was clear that if the facts alleged were made out, the Court would have jurisdiction to grant injunctions in terms identified in the proposed undertakings, and that conduct in breach of any such injunctions would be punishable by contempt proceedings (at 469). As was explained in Thomson at 164-165, the proposed undertakings if given to the Court would be treated as the equivalent of injunctive orders in the same terms for the purposes of enforcement. Secondly, his Honour relied upon a passage in the majority judgment in Thomson at 164 where Gibbs CJ, Stephen, Mason and Wilson JJ said:

‘In deciding whether consent orders sought are in conformity with legal principle the Court is entitled to treat the defendants’ consent as involving an admission of all facts necessary or appropriate to the granting of the relief sought.’

Hence, the necessary factual basis for the exercise of the Court’s jurisdiction was found by Spender J to exist in the particular circumstances.

48                  Judicial notice is taken of any illegality apparent in proceedings on the part of any party, by reason of which the Court considers its assistance should be refused to that party, even though the illegality is not pleaded and is not relied upon by the other party: Halsbury’s Laws of England, 4th edn Vol 17(1) par 567 and the cases cited in fn 9; Chitty on Contracts, Sweet & Maxwell, 28th edn(1999), Vol 1 par 17-196; Knowles v Fuller (1947) SR(NSW) 243 at 245. The Court will not lend its aid to parties whose purpose is to carry into effect an illegal agreement. The reason underlying that position is generally said to be public policy, although as discussed in Chitty at pars 17-003 to 17-012 the demands of public policy are not necessarily clear and consistent. The same general principles apply in respect of the making or the performance of contracts rendered illegal; and so unenforceable by statute: Contract Law in Australia, Carter & Harland, Butterworths 4^ed (2002), [1601] at 555; St John Shipping Corporation v Joseph Rank Ltd [1957] 1QB 2367; Anderson Ltd v Daniel [1924] 1 KB 138. Of course, the proffering and acceptance of undertakings under s 87B of the TP Act may not properly be described as a contractual arrangement. In Australian Petroleum Pty Ltd v ACCC (1997) 73 FCR 75 Lockhart J explained how an undertaking accepted under s 87B derives its force from the section itself and is an ‘instrument’ under the TP Act. And it may additionally be expected that the circumstances where the terms of an undertaking are ex facie beyond the power of the ACCC to have accepted will be very rare. Nevertheless, the point to be made is that the Court should not sit idly by when it is apparent that an undertaking to engage in a proposed course of conduct, or an undertaking to refrain from a proposed course of conduct, does involve a commitment to the ACCC beyond that which its powers permit it to have accepted. The noting by the Court of undertakings given to the ACCC should not, in my view, be done entirely passively so as to lead to the Court noting undertakings which may clearly involve the ACCC having exceeded its powers. I note in passing the discussion of the extent of the power of the ACCC to accept undertakings discussed in Section 87B Undertakings: ‘There’s No Accounting for Such Conduct!’, Zumbo, (1997) 5 TPLJ 121; ‘Overstated Undertakings: Recent Developments for Compliance Programs’, Voon, (1998) 6 TPCJ 196.

49                  In Virgin Blue Airlines Pty Ltd v Australian Competition and Consumer Commission [2001] FCA 1271, Gyles J was confronted with a third party seeking to challenge the validity of certain undertakings accepted by the ACCC from Qantas Airways Ltd (Qantas) in relation to certain commercial merger arrangements between Qantas, Impulse Airlines Pty Ltd and others. The challenge to the standing of the applicant included consideration of whether the decision of the ACCC to accept an undertaking under s 87B of the TP Act was immune from judicial review. Gyles J declined to resolve that particular issue in advance of the hearing. His Honour said at [33]:

‘There is certainly a respectable argument that the TP Act contemplates that the interests of commercial competitors of parties involved in transactions alleged to breach Part IV of the TP Act will be vindicated by substantive action by the competitor in relation to which it has standing, rather than by judicial review of decisions of the ACCC such as that involved in this case. However, in order to properly consider that issue, it is necessary to form a view as to the scope and purpose of s 87B when considered in the light of the TP Act as a whole. This seems to me to be inextricably bound up with the substance of the application for review. The issues of natural justice and the ascertainment of relevant and irrelevant considerations which form the grounds for the substantive claims for relief in this proceeding if not interdependent with, are closely related to, the assessment of the place of a competitor in the market in relation to a decision pursuant to s 87B which is relevant to a decision as to the standing of a competitor for the purposes of judicial review. For this reason, it is not appropriate to resolve the separate questions in advance of the hearing, at least without another suitable separate question (or questions) also being isolated.’

50                  The third reason is that the role of the Court in noting an undertaking accepted by the ACCC in circumstances such as the present involves it recording matters which are part of the final resolution of issues between the ACCC and Woolworths (SA), and between the ACCC and The Arnhem Club. Where the ACCC in the performance of its functions under the TP Act brings proceedings in the Court, it does so as the public entity largely charged with the responsibility of administering and enforcing the TP Act. It is established under the TP Act as the independent statutory authority responsible for administering the TP Act. It has a wide range of functions and powers granted under a range of provisions in the TP Act. Its functions include the dissemination of information, law reform and research: s 28. It reports annually on its activities.

51                  It is important therefore that resolution of proceedings, where the resolution is to result in orders of the Court, should be properly recorded. Where such resolution includes the ACCC accepting undertakings under s 87B, the undertakings should be disclosed. To do so ensures that the public is accurately informed about the outcome of the proceedings. Failure to do so may be contrary to public policy, as the ACCC rightly contended, as the public might otherwise falsely perceive the outcome of the proceedings to have been different. And there would be a risk that the ACCC by the settlement, or the Court by making the consent orders, might be seen as not independently and conscientiously performing their respective functions. For example, the application shows that the ACCC does not seek Woolworths (SA) and The Arnhem Club, pay any pecuniary penalties whilst it continues to seek pecuniary penalties against Rhonwood and the personal respondents; but for disclosure of the payment undertakings, the ACCC might have been seen to have lacked evenhandedness in its claims against the respondents.

52                  The fact that the full terms of the settlement between the ACCC and Woolworths SA and between the ACCC and The Arnhem Club should be laid open as part of the Court’s orders indicates, in my view, that the Court should not be entirely remote from consideration of the terms of the undertakings which it is asked to note.

53                  It remains to consider whether the payment undertakings proposed to be accepted by the ACCC are so clearly beyond the power of the ACCC that, despite the preparedness of Woolworths (SA) and The Arnhem Club respectively to offer them and of the ACCC to accept them, the Court should refuse to note that they are proffered and accepted.

54                  The power of the ACCC to accept undertakings is different from that of the Court. The contravening conduct was committed before the introduction of s 86C of the Act (see Sch 1 item 25 of the Trade Practices Amendment Act (No 1) 2001 (Cth)), but in any event the terms of the payment undertakings would not fall within the Court’s powers under s 86C. In particular, they would probably not amount to a ‘community service order’ as defined in s 86C(4) because they would probably not require the performance of a service that ‘relates to the conduct’ contravening the Act for the benefit of the community, although the required relationship of the conduct to the community service order has yet to be fully explored.

55                  The ACCC’s power under s 87B is to accept an undertaking ‘in connection with’ a matter in relation to which it has a power or function. It is arguably a more extensive power. The scope of the power is to be determined as a matter of statutory construction. The expression ‘in connection with’ was given a wide scope of operation by Kitto J in Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 at 658-659, as requiring ‘a substantial relation, in a practical business sense’. The test does not necessarily require an immediate causal relationship: per Wilcox J in Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 479-480.

56                  Clearly the two undertakings are proffered as part of the resolution of proceedings which involve allegations of making a price fixing agreement, and giving effect to it, by each of Woolworths (SA) and The Arnhem Club contrary to s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TP Act. The nature and terms of undertakings which may be accepted by the ACCC under s 87B is different from, and more extensive than, the Court’s power to grant injunctions (and to accept undertakings) under s 80. The nature and extent of the Court’s power under s 80, and the limitations upon the extent of that power, were addressed in Thomson and by Merkel J in Z-Tek Computer. On the other hand, the ACCC could not in my judgment accept an undertaking which did not have a proper connection with the alleged contravening conduct.

57                  The payment undertakings are, in some sense, connected to the contravening conduct. It is the occasion for the proffering of the payment undertakings. The payments will provide benefits to some of those in the community, and in a more general sense to the community, affected by the contravening conduct. The purpose of the proposed payments is broadly tied to the sale of alcohol in the community. But the payments and their purpose are not directly tied to the contravening conduct. It led to the community losing the benefit of price competition in respect of the beverages. There is nothing to indicate that the amount of the payments is somehow reflective of the lost benefit to the community by the contravening conduct. There is not sufficient information to determine that the amount of the payments is somehow reflective of the amount or range of any penalty that the Court might otherwise impose under s 76 of the TPA. The parties have not suggested that the qualification of the payments was reached on that basis. The basis of the qualification of the payments the subject of the payment undertakings is not disclosed. The detriment to the community was suffered by those who otherwise would have benefited from price competition in the sale of the beverages. Those persons are clearly not those who will benefit directly from the intended use of the proposed payments.

58                  In this matter, there is no legislative indication that the powers of the ACCC under s 87B should be limited to powers akin to those of the Court. Indeed, it may be the choice of the words ‘in connection with’ in s 87B, compared for example to the words ‘relates to’ in s 86C(4), are intended to indicate the powers of the ACCC should be widely interpreted. The words ‘in connection with’ are capable of bearing a wide meaning. Although they may require more than that, the contravening conduct provides the occasion for the acceptance of the particular terms of the undertaking. Having regard to what I have perceived as the role of the Court at this point, I do not think the Court should decline to note the payment undertakings as part of the overall settlement of the matter. I do not regard the payment undertakings as clearly not falling within the ACCC’s powers to accept them, that is as clearly not coming within the envelope of matters which are ‘in connection with’ the ACCC’s performance of its powers and functions arising from the admitted contravening conduct.

conclusion

59                  For the reasons given, I propose to note the undertakings proffered to and accepted by the ACCC by Woolworths (SA) and by The Arnhem Club, and to make the injunctive and costs orders sought by the ACCC and acquiesced in by Woolworths (SA) and The Arnhem Club against them. I will not make the declarations proposed by consent at this point in the proceedings, but will deal with that aspect when the issues between the ACCC and Rhonwood and the personal respondents are resolved. I will stand over the proceedings against Woolworths (SA) and The Arnhem Club for that purpose to a date to be fixed, with liberty to apply on reasonable notice.

Associate:

Dated: 29 May 2003