FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710

TRADE PRACTICES – misleading and deceptive conduct – penalty – where first respondent admitted engaging in misleading or deceptive conduct or conduct likely to mislead or deceive – where parties submitted draft consent orders and statement of agreed facts

Held: declarations made, undertakings given by first and second respondents accepted and orders for corrective advertising made.

TRADE PRACTICES – resale price maintenance – penalty – where first respondent admitted engaging in resale price maintenance – where third respondent admitted being directly or indirectly knowing concerned in or party to first respondent’s resale price maintenance – factors to be considered by Court in determining appropriate pecuniary penalties – where parties submitted draft consent orders, joint submissions and statement of agreed facts – whether figures for pecuniary penalties proposed by parties appropriate

Held: declarations made, undertaking given by first respondent accepted and orders for pecuniary penalties of $120,000 for first respondent and $14,000 for third respondent made.

Corporations Act 2001 (Cth)

Evidence Act 1995 (Cth) s 191

Federal Court of Australia Act 1976 (Cth) s 21, s 50

Trade Practices Act 1974 (Cth) ss 4, 48, 52, 76, 80, 84, 86C, 87B, 96

Australian Competition and Consumer Commission v Auspine Ltd (2006) 235 ALR 95 cited

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 cited

Australian Competition and Consumer Commission v Hobie Cat Australasia Pty Ltd [2008] ATPR 42-225 cited

Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] ATPR 42-031 cited

Australian Competition & Consumer Commission v NW Frozen Foods [1996] ATPR 41-515 referred to

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

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) 71 FCR 285 discussed

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 referred to

Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 discussed     

AUSTRALIAN COMPETITION & CONSUMER COMMISSION v SKINS COMPRESSION GARMENTS PTY LTD (ACN 110 666 923), JAIMIE ROYSTON FULLER and CHRISTOPHER THOMAS WARHURST

SAD 136 of 2007

BESANKO J

2 JULY 2009

ADELAIDE

THE COURT DECLARES BY CONSENT THAT:

1.         The First Respondent (“Skins”) engaged in the practice of resale price maintenance in contravention of section 48 of the Trade Practices Act 1974 (the Act) in its dealings with The Sports Locker Pty Ltd (“Sports Locker”) in that Skins, by reason of the operation of section 84(2)(a) of the Act:

1.1       induced Sports Locker not to advertise Skins products at prices less than prices specified by Skins, by reason of, in about July 2005, Christopher Thomas Warhurst (“Warhurst”) of Artipena Springs Pty Limited trading as Warhurst Agencies, being the South Australian agent of Skins requesting that Sports Locker remove an advertising board which advertised Skins products at 20% off (“the Skins advertising board”) on display outside the premises of Sports Locker, in response to which request Sports Locker removed the Skins advertising board for a period of approximately 4 weeks;

1.2       attempted to induce Sports Locker not to advertise Skins products at prices less than prices specified by Skins, by reason of, in about September 2005, Warhurst requesting that Sports Locker remove the Skins advertising board on display outside the premises of Sports Locker; and

1.3       attempted to induce Sports Locker not to advertise Skins products at prices less than prices specified by Skins, by reason of, in about May 2006, Warhurst requesting that Sports Locker remove the Skins advertising board on display outside the premises of Sports Locker.

2.         On each occasion that Skins engaged in conduct that contravened section 48 of the Act, Warhurst was directly or indirectly knowingly concerned in, or party to, the contravention in that:

2.1       he engaged in the conduct referred to in paragraph 1; and

2.2       he was aware of all the facts and circumstances by reason of which the conduct was resale price maintenance.

UNDERTAKING TO THE COURT:

3.         The Court accepts the following undertaking from Skins:

3.1       Skins undertakes to the Court that Skins shall not, by itself, its servants, agents or otherwise howsoever, for a period of 3 years from the date of this undertaking, induce or attempt to induce, any person or corporation not to sell or advertise Skins products supplied to it by Skins for sale at a price less than a price specified by Skins.

THE COURT ORDERS BY CONSENT THAT:

4.         Pursuant to section 76(1) of the Act that Skins pay to the Commonwealth of Australia a pecuniary penalty of $120,000 in respect of the conduct set out at paragraph 1.

5.         Pursuant to section 76(1) of the Act that Warhurst pay to the Commonwealth of Australia a pecuniary penalty of $14,000 payable by 12 monthly instalments of $1,166.67 each commencing on 5 December 2008 and on or before the 5^th day of each month thereafter.

6.         In the event of default by Warhurst in the making of a periodical payment so ordered in order 5 hereof, which default has continued for 14 days, then the whole of the outstanding pecuniary penalty payable by Warhurst shall thereupon become due and payable.

7.         Skins provide a letter in the terms and size of Annexure A to this Order, which letter shall be on Skins letterhead, within 7 days of the making of this Order, to each of Skins’ current retailers, agents and/or distributors.

THE COURT DECLARES BY CONSENT THAT:

1.       By making representations:

1.1       during July 2006, in television advertisements broadcast during coverage of the Tour de France on the SBS national television network; and

1.2       from at least 26 September 2005 to 28 August 2007, on its website www.skins.com.au/ns (“the first website”) through the display of print advertisements, radio advertisements, a television advertisement and statements,

that:

1.3       Skins does not pay money to sports stars, or their representatives, clubs, teams or governing bodies for sports stars to wear Skins products (this representation is referred to below as the “no payment to wear” representation);

1.4       Skins does not provide Skins products to sports stars, or their representatives, clubs, teams or governing bodies unless the Skins products are paid for with money (this representation is referred to below as the “always paid for” representation);

1.5       Skins does not pay money to sports stars, or their representatives, clubs, teams or governing bodies for sports stars to endorse Skins products (this representation is referred to below as the “no payment to endorse” representation);

in circumstances where, pursuant to agreements with sports stars, or their representatives, clubs, teams or governing bodies (“the Skins agreements”):

1.6       during the period from 26 September 2005 to 28 August 2007 Skins paid money to:

1.6.1    each of Brett Lee, Michael Milton and Jono Brauer, or their representatives, for each of Brett Lee, Michael Milton and Jono Brauer respectively to wear and endorse Skins products; and

1.6.2    each of the Western Bulldogs, St Kilda and Melbourne Football Clubs, the Wests Tigers rugby league team and NSW Rugby Union for players from respectively the Western Bulldogs, St Kilda and Melbourne football teams, the Wests Tigers rugby league team and the Waratahs rugby union team to wear and endorse Skins products;

1.7       during the period from 1 July 2005 to 28 August 2007 Skins provided Skins products to:

1.7.1     players associated with Cricket Australia;

1.7.2     Michael Milton;

1.7.3     Jono Brauer;

1.7.4    players from the Western Bulldogs, St Kilda and Melbourne Football Clubs;

1.7.5    players from the Sydney Roosters, North Queensland Cowboys and Wests Tigers rugby league teams;

1.7.6    players from the Sydney Kings basketball team and the Opals and Boomers national Australian basketball teams;

1.7.7     players from the Newcastle Jets soccer team;

1.7.8     players from the Waratahs rugby union team;

1.7.9    players from the Kookaburras national Australian hockey team; and

1.7.10   athletes representing Rowing Australia,

or their representatives, clubs, teams or governing bodies without the Skins products being paid for with money;

Skins engaged in conduct, in trade or commerce, that was misleading or deceptive, or was likely to mislead or deceive, in contravention of section 52 of the Act.

2.         By making:

2.1       between July 2005 and October 2005, the “always paid for” representation in print advertisements;

2.2       during July 2005, the “always paid for” representation in radio advertisements;

2.3       during July 2005, the “always paid for” representation in television advertisements; and

2.4       during October 2005, the “no payment to wear” representation in print advertisements,

in the circumstances set out at paragraphs 1.6 and 1.7, Skins engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Act.

3.         By making from at least 5 April 2006 to 28 August 2007, the “always paid for” representation and the “no payment to wear” representation on its website www.skins.com.au, which changed to www.skins.net (“the second website”) through the display of a statement and a television advertisement, and in the circumstances set out at paragraphs 1.6  and 1.7, Skins engaged in conduct, in trade or commerce, that was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Act.

4.         From at least 1 June 2006 to 28 August 2007, by making representations in respect of the following sports stars depicted in photographs on the first website:

4.1       cricketer Brett Lee;

4.2       athlete Michael Milton;

4.3       skier Jono Brauer;

4.4       Australian Football League players from the Western Bulldogs, St Kilda and Melbourne Football Clubs;

4.5       rugby league players from the Sydney Roosters, North Queensland Cowboys and Wests Tigers rugby league teams;

4.6       basketball players from the Sydney Kings basketball team and the Opals and Boomers national Australian basketball teams;

4.7       soccer players from the Newcastle Jets soccer team;

4.8       rugby union players from the Waratahs rugby union team;

4.9       hockey players from the Kookaburras national Australian hockey team; and

4.10     athletes representing Rowing Australia

(for the remainder of paragraph 4, the persons referred to in paragraphs 4.1 to 4.10 are referred to as “the sports stars”),

that:

4.11     Skins does not pay money to the sports stars, or their representatives, clubs, teams or governing bodies for the sports stars to wear or endorse Skins products;

4.12     Skins does not provide Skins products to the sports stars, or their representatives, clubs, teams or governing bodies unless the Skins products are paid for with money;

in circumstances where, pursuant to the Skins agreements:

4.13     during the period from 26 September 2005 to 28 August 2007 Skins paid money to:

4.13.1  each of Brett Lee, Michael Milton and Jono Brauer, or their representatives, for each of Brett Lee, Michael Milton and Jono Brauer respectively to wear and endorse Skins products; and

4.13.2  each of the Western Bulldogs, St Kilda and Melbourne Football Clubs, the Wests Tigers rugby league team and NSW Rugby Union for players from respectively the Western Bulldogs, St Kilda and Melbourne Football Clubs, the Wests Tigers rugby league team and the Waratahs rugby union team to wear and endorse Skins products;

4.14     during the period from 1 July 2005 to 28 August 2007 Skins provided Skins products to:

4.14.1   Michael Milton;

4.14.2   Jono Brauer;

4.14.3  players from the Western Bulldogs, St Kilda and Melbourne Football Clubs;

4.14.4  players from the Sydney Roosters, North Queensland Cowboys and Wests Tigers rugby league teams;

4.14.5  players from the Sydney Kings basketball team and the Opals and Boomers national Australian basketball teams;

4.14.6   players from the Newcastle Jets soccer team;

4.14.7   players from the Waratahs rugby union team;

4.14.8  players from the Kookaburras national Australian hockey team; and

4.14.9   athletes representing Rowing Australia,

or their representatives, clubs, teams or governing bodies, without the Skins products being paid for with money,

Skins engaged in conduct in trade or commerce that was misleading or deceptive, or was likely to mislead or deceive, in contravention of section 52 of the Act.

5.         From at least 5 April 2006 to 28 August 2007, by making representations in respect of the following sports stars depicted in photographs on the second website:

5.1       skier Jono Brauer;

5.2       touring car driver Garth Tander;

5.3       Australian Football League players from the St Kilda and Melbourne Football Clubs;

5.4       rugby league players from the Sydney Roosters and Wests Tigers rugby league teams;

5.5       basketball players from the Sydney Kings basketball team and the Opals national Australian basketball team;

5.6       soccer players from the Newcastle Jets soccer team;

5.7       rugby union players from the Waratahs rugby union team; and

5.8       hockey players from the Kookaburras national Australian hockey team,

(for the remainder of paragraph 5, the persons referred to in paragraphs 5.1 to 5.8 are referred to as “the sports stars”)

that

5.9       Skins does not pay money to the sports stars, or their representatives, clubs, teams or governing bodies for the sports stars to wear Skins products;

5.10     Skins does not provide Skins products to the sports stars, or their representatives, clubs, teams or governing bodies unless the Skins products are paid for with money;

in circumstances where, pursuant to the Skins agreements:

5.11     during the period from 26 September 2005 to 28 August 2007 Skins paid money to:

5.11.1  Jono Brauer, or his representative, for Jono Brauer to wear Skins products; and

5.11.2  each of the St Kilda and Melbourne Football Clubs, the Wests Tigers rugby league team and NSW Rugby Union, for players from, respectively the St Kilda and Melbourne football teams, the Wests Tigers rugby league team and the Waratahs rugby union team to wear Skins products;

5.12     during the period from 1 July 2005 to 28 August 2007 Skins provided Skins products to:

5.12.1   Jono Brauer;

5.12.2   Garth Tander;

5.12.3   players from the St Kilda and Melbourne Football Clubs;

5.12.4  players from the Sydney Roosters and Wests Tigers rugby league teams;

5.12.5   players from the Sydney Kings basketball team;

5.12.6   players from the Newcastle Jets soccer team; and

5.12.7   players from the Waratahs rugby union team,

or their representatives, clubs, teams or governing bodies, without the Skins products being paid for with money,

Skins engaged in conduct in trade or commerce that was misleading or deceptive, or was likely to mislead or deceive, in contravention of section 52 of the Act.

THE COURT ORDERS BY CONSENT THAT:

6.         Skins within 30 days of the making of this Order, at its own expense, cause to be published on the Internet at the home page of all websites which are owned, operated or maintained by or on behalf of Skins, including the following website accessible via uniform resource locator address (“URL”) www.skins.net (or if any such URL is replaced or changed, the Internet home page of the corresponding website) for a period of 4 months, a notice in terms of Annexure A to this Order and use its best endeavours to ensure that:

6.1       such notice shall be viewable by clicking a “click-through” icon located on the homepage of the website www.skins.net;

6.2       the 'click-through' icon referred to in the previous sub-paragraph is located on the left hand side of the homepage directly below the “click-through” icon labelled “contact” and is the same size as the “click-through” icon in relation to the NSW Swifts which was included at that location on the homepage on 6 August 2008;

6.3       the “click-through” icon shall contain the words “Misleading Advertising by Skins – Corrective Notice Ordered by Federal Court of Australia” prominently in yellow and the words “click here”; and

6.4       the notice accessed via the above mentioned 'click-through' icon shall:

6.4.1    have a bold type heading in at least 16 point type and the body of the notice shall be in a type not less than 11 point, Times New Roman font and right and left justified;

6.4.2    include the business logo of Skins at the top as appearing on Skins letterhead; and

6.4.3    occupy the entire webpage which is accessed via the “click-through” icon referred to above.

7.         Skins within 90 days of the making of this Order, at its own expense cause to be broadcast a corrective advertisement, in the form of and containing the content set out in Annexure B to this Order, with such corrective advertisement to be broadcast:

7.1       on the SBS national television network;

7.2       with a frequency of twice per day for seven consecutive days;

7.3       once between 6.00 pm and 6.30 pm and once between 6.30 pm and 9.00 pm; and

7.4       for a duration of at least 30 seconds;

8.         Skins, within 1 month of the conclusion of the broadcasting of the corrective advertisement and not later than 6 months from the date of this Order, provide a written report to the Applicant detailing the dates upon and times at which the corrective advertisement was broadcast.

9.         Skins within 3 months of the making of this Order, at its own expense, cause to be published in B & T Weekly, a notice in terms of Annexure C to this Order, with such notice to:

9.1       be within the first 10 pages;

9.2       be of a size that is not less than half a page;

9.3       be in Times New Roman font, with a bold type heading in at least 18 point type and the body of the notice in at least 11 point type, and right and left justified; and

9.4       include the business logo of Skins at the top as appearing on Skins letterhead.

The First Respondent to pay the Applicant’s party/party costs fixed at $80,000.00

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

[This Annexure is referred to in order 7 of the orders relating to s 48 of the Trade Practices Act 1974 Cth)]

ANNEXURE A

BY ORDER OF THE FEDERAL COURT OF AUSTRALIA

Dear retailer / agent / distributor

As a result of action taken by the Australian Competition and Consumer Commission against us, the Federal Court of Australia has found that Skins, by reason of conduct by our agent, engaged in resale price maintenance in breach of the Trade Practices Act 1974 (“the Act”) in supplying Skins brand sports compression garments (“Skins products”) to a retailer in South Australia.

Pursuant to the Act the conduct of our agent is deemed to be conduct engaged in by Skins.

The Court’s findings included that we acted unlawfully by reason of our agent:

·     on one occasion inducing the retailer to cease advertising a discount off Skins products for a period; and

·     on two occasions attempting to induce the retailer to cease advertising a discount off Skins products.

The above conduct is known as resale price maintenance and it is illegal.  Suppliers may not specify to retailers a minimum price below which goods or services are not to be resold or advertised for sale.

Skins may only recommend a retail price. A retailer can advertise and offer Skins products for sale below Skins’ recommended retail prices.

Skins accepts that the conduct was unlawful and that we are responsible for the conduct of our agent.

Skins has undertaken that we will improve the quality and integrity of our business systems, by implementing a corporate compliance program, to bring them in line with the Trade Practices Act.

The Court has ordered us to pay a penalty of $[insert amount] and Mr Christopher Warhurst of our South Australian agent, Warhurst Agencies, to pay a penalty of $[insert amount] for his involvement in the conduct.

Regards,

Jaimie Fuller

Managing Director

Skins Compression Garments Pty Ltd

[This Annexure is referred to in order 6 of the orders relating to s 52 of the Trade Practices Act 1974 (Cth)]

ANNEXURE A

BY ORDER OF THE FEDERAL COURT OF AUSTRALIA

Following legal action by the Australian Competition and Consumer Commission (the “ACCC”), the Federal Court has declared that Skins engaged in conduct that was misleading or deceptive or likely to mislead or deceive in advertising and promoting Skins brand sports compression garments (“Skins products”), in breach of section 52 of the Trade Practices Act 1974 (the “Act”).

The Court declared that Skins had represented that:

·     it does not pay money for sports stars to wear Skins products;

·     it does not pay money for sports stars to endorse Skins products;

·     it does not provide Skins products for sports stars to wear unless the Skins products are paid for with money,

when under agreements with sports stars, or their representatives, clubs, teams or governing bodies, Skins paid for sports stars to wear and endorse Skins products, and Skins products have been provided for sports stars to wear without the products being paid for with money.

Skins has given undertakings not to make similar representations unless they are true and to implement a trade practices compliance program.  Jaimie Royston Fuller, the sole director of Skins at the relevant time, has also given an undertaking to attend trade practices compliance training on his obligations in relation to section 52 of the Act.

[This Annexure is referred to in order 7 of the orders relating to s 52 of the Trade Practices Act 1974 (Cth)]

ANNEXURE B

The television advertisement shall consist of the following:

(a)        white screen back drop;

(b)        the Skins business logo as appearing on Skins letterhead displayed prominently at the top of the screen throughout the advertisement;

(c)        for the first 5 seconds of the advertisement, the words “Notice by Federal Court order” displayed prominently in the centre of the screen, and thereafter throughout the duration of the advertisement, the image of the Skins sport long sleeve top with glowing border as displayed on the home page of the website www.skins.com.au as at the date of this Application, is to be displayed prominently in the centre of the screen;

(d)        a voice over stating:

‘In 2006 we at Skins advertised our sports compression products in television advertisements which represented that Skins does not pay sports stars to wear or endorse our products, and that Skins does not provide products for sports stars to wear unless they are paid for with money. Our advertisements were misleading contrary to the Trade Practices Act because Skins has paid sports stars to wear and endorse our products, and Skins has provided our products free of charge for sports stars to wear. Skins accepts that making the representations was unlawful.’

(e)        the text of the voice over is to appear at the bottom of the screen so as to be legible by persons viewing the advertisement.

[This Annexure is referred to in order 9 of the orders relating to s 52 of the Trade Practices Act 1974 (Cth)]

ANNEXURE C

BY ORDER OF THE FEDERAL COURT OF AUSTRALIA

[insert logo]

Following legal action by the Australian Competition and Consumer Commission, the Federal Court has declared that Skins engaged in conduct that was misleading or deceptive or likely to mislead or deceive in advertising and promoting Skins brand sports compression garments (“Skins products”), in breach of section 52 of the Trade Practices Act 1974.

The Court declared that Skins had represented in print, radio and television advertising and on its websites that:

·     it does not pay money for sports stars to wear Skins products;

·     it does not pay money for sports stars to endorse Skins products;

·     it does not provide Skins products for sports stars to wear unless the Skins products are paid for with money.

when under agreements with sports stars, or their representatives, clubs, teams or governing bodies, Skins paid sports stars to wear and endorse Skins products, and Skins products have been provided for  sports stars without the products being paid for with money.

Skins now accepts that we engaged in conduct that was unlawful.

Skins acknowledges that we have a responsibility not to mislead consumers by the way in which we advertise and promote our products.

Skins has given undertakings not to make similar representations unless they are true and to implement a trade practices compliance program. Jaimie Royston Fuller, the sole director of Skins at the relevant time, has also given an undertaking to attend trade practices compliance training on his obligations in relation to section 52 of the Act.

REASONS FOR JUDGMENT

1                          On 2 December 2008, I made a number of orders in a proceeding brought by the Australian Competition and Consumer Commission (“the Commission”) against Skins Compression Garments Pty Ltd (“Skins”), Mr Jaimie Royston Fuller and Mr Christopher Thomas Warhurst. The proceeding consists of two parts. In the first part of the proceeding, the Commission alleged that Skins, by making various representations, engaged in conduct, in trade or commerce, that was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the Trade Practices Act 1974 (Cth). In the second part of the proceeding, the Commission alleged that Skins engaged in the practice of resale price maintenance in contravention of s 48 of the Act, and that Mr Warhurst was, directly or indirectly, knowingly concerned in, or party to, the contraventions by Skins.

2                          There were detailed discussions between the parties and, as a result of those discussions, they were able to agree a number of matters.

3                          In relation to the misleading or deceptive conduct allegations, I was given draft  consent orders and I admitted in evidence a statement of agreed facts.

4                          In relation to the resale price maintenance allegations, I was given draft consent orders and I admitted in evidence joint submissions of the applicant and respondents and a statement of agreed facts.

5                          The statements of agreed facts were in the form required by s 191 of the Evidence Act 1995 (Cth) and they were admitted in evidence pursuant to that section.

6                          These are my reasons for the orders I made on 2 December 2008.

The respondents

7                          It is convenient to begin with a brief description of the respondents and the businesses they were engaged in at the relevant times.

8                          Skins is a body incorporated pursuant to the provisions of the Corporations Act 2001 (Cth), is liable to sue and be sued in its corporate name and is a trading corporation within the definition of that term in s 4 of the Trade Practices Act 1974 (Cth) (“the Act”). At all material times, Mr Royston was the sole director of Skins. The company carried on a business, in trade or commerce, as the supplier of compression sports performance garments (“Skins products”) to a distributor and retailers across Australia, and as a retailer of Skins products to the general public in Australia via telephone and internet sales.

9                          Mr Warhurst was the sole director and shareholder of Artipena Springs Pty Ltd, which was incorporated in or about September 2002. Mr Warhurst was an employee, servant or agent of the company. The company traded as Warhurst Agencies, and I will refer to it in that way. At all material times, Mr Warhurst acted within the scope of his actual or apparent authority as an employee or agent of Warhurst Agencies. Warhurst Agencies carried on a business whereby it acted as agent for suppliers of sports goods including sports clothing, footwear and equipment. In that role, Warhurst Agencies was involved in the promotion of the products of the suppliers to sports retail stores in South Australia and the obtaining of orders for the suppliers’ products. In performing those tasks, employees and representatives of Warhurst Agencies, including Mr Warhurst, regularly visited retailers or potential retailers of products supplied by suppliers for whom Warhurst Agencies acted as agent.

10                        In October 2004, Warhurst Agencies acted as agent for various suppliers of sports goods. On 30 October 2004, Skins and Warhurst Agencies entered into an agreement whereby the latter agreed to act as Skins’ agent in respect of the sale of Skins products in consideration whereof Skins agreed to pay a commission on all payments received on orders placed by Warhurst Agencies.

Misleading or deceptive conduct

11                        A summary of the relief I granted in relation to the misleading or deceptive conduct allegations by the applicant is as follows:

1.         I made five declarations of conduct by the first respondent, in trade or commerce, which was misleading or deceptive, or was likely to mislead or deceive, in contravention of s 52 of the Act; and

2.         I made orders for corrective advertising by Skins via the home pages of websites on the Internet, the SBS national television network, and a publication called the B & T Weekly.

12                        In addition, the first and second respondents each gave an undertaking to the Court. Those undertakings are in the following terms:

“Skins Compression Garments Pty Ltd (ACN 110 666 923) (‘Skins’) the First Respondent in these proceedings gives the following undertakings to the Court.

1.         Skins undertakes to the Court that Skins shall not, by itself, its servants, agents or otherwise howsoever, for a period of 3 years from the date of these undertakings, market, promote or sell its products by making representations that:

1.1        it does not pay money for sports stars to wear Skins products;

1.2        it does not pay money for sports stars to endorse Skins products; and/or

1.3        it does not provide Skins products for sports stars to wear unless the Skins products are paid for with money;

or representations to similar effect, unless the representations are true.

2.         Skins undertakes to the Court that Skins shall not, by itself, its servants, agents or otherwise howsoever, for a period of 3 years from the date of these Orders, induce or attempt to induce, any person or corporation not to sell or advertise Skins products supplied to it by Skins for sale at a price less than a price specified by Skins.”

“Jaimie Royston Fuller, the Second Respondent in these proceedings gives the following undertaking to the Court.

1.         I undertake to the Court that I will not, for a period of 3 years from the date of this undertaking, be in any way directly or indirectly knowingly concerned in, or party to, Skins Compression Garments Pty Ltd (ACN 110 666 923), or any other corporation whether by itself, its servants, agents or otherwise howsoever, marketing, promoting or selling Skins products by making representations that:

1.1        Skins does not pay money for sports stars to wear Skins products;

1.2        Skins does not pay money for sports stars to endorse Skins products;

1.3       Skins does not provide Skins products for sports stars to wear unless the Skins products are paid for with money,

or representations to a similar effect, unless the representations are true.”

13                        As far as the five declarations are concerned, the Court’s power to make binding declarations of right is contained in s 21 of the Federal Court of Australia Act 1976 (Cth). In the ordinary case, a Court will not make a declaration by consent unless it is satisfied by evidence that it should do so. In this case, I have the statement of agreed facts under s 191 of the Evidence Act 1995 (Cth) and, by reason of that section, evidence is not required to prove the existence of the agreed facts.

14                        In addition to being satisfied by evidence that it is appropriate to make the declarations sought, I must be satisfied that I have the power to make the declarations and that they are appropriate: Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 (“Real Estate Institute”).

15                        The power to make orders for corrective advertising is contained in s 86C of the Act and the power to accept undertakings of the nature proffered is part of the power to grant injunctions in s 80 of the Act. Again, as with the declarations, the Court must be satisfied that it has the power to accept the undertakings and that they are appropriate, although the Court will not substitute its own view for that of the parties if the undertakings fall within an appropriate disposition of the case: Real Estate Institute at 87, 89 [21], [26] per French J.

16                        Skins admits that, on a number of occasions, it engaged in conduct, in trade and commerce, that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Act.

17                        At the heart of the contravening conduct were three representations. The first representation was that Skins did not pay money to sports stars, or their representatives, clubs, teams or governing bodies, for the sports stars to wear Skins products. The parties referred to this as the “no payment to wear” representation, and it is convenient to adopt that shorthand way of referring to the representation. The second representation was that Skins did not provide Skins products to sports stars, or their representatives, clubs, teams or governing bodies, unless the Skins products were paid for with money. The parties referred to this representation as the “always paid for” representation and again it is convenient for me to do likewise. The third representation was that Skins did not pay money to sports stars, or their representatives, clubs, teams or governing bodies, for sports stars to endorse Skins products. The parties referred to this representation as the “no payment to endorse” representation, and again it is convenient for me to do likewise.

18                        From about June 2005, Skins undertook a significant and award-winning advertising campaign in relation to Skins products. The campaign consisted of print advertising, radio advertising, television advertising and the marketing of Skins products on its website. I will deal with each form of advertising in turn.

Print advertising

19                        The print advertising took place between June and October 2005 and involved Skins causing advertisements for Skins products to be published in the print media in various parts of Australia. It is not necessary for me to outline the names of the print media in which the advertisements appeared or when that happened.

20                        Three versions of the print advertisements were published. Each version of the print advertisements:

(1)        contained the statement “[w]e don’t pay sports stars to wear our products. They pay us”;

(2)        superimposed the statement over a full-page photograph of a person wearing sports apparel; and

(3)        included the Skins logo, the words “Skins Bioacceleration Technology Skins™” and the text “skins.com.au”.

21                        By making the statement referred to in paragraph (1) in the print advertisements in the context described in paragraphs (2) and (3) above, Skins made the “no payment to wear” representation and the “always paid for” representation.

Radio advertising

22                        The radio advertising occurred between June and July 2005 and involved Skins causing radio advertisements for Skins products to be broadcast on radio in the Sydney metropolitan area on radio stations Nova 969 and 2GB. Four versions of the radio advertisements were broadcast, and each version contained the following statement:

“We don’t pay sports stars to endorse our product, they pay us to wear it. Skins Bioacceleration Technology Sportswear. Find out more at skins.com.au.”

23                        By making this statement, Skins made the “no payment to endorse” representation and the “always paid for” representation.

Television advertising

24                        The television advertising occurred between May and July 2005, and again in July 2006, and involved Skins causing television advertisements for Skins products to be broadcast on national television in various parts of Australia. There were three versions of the television advertisements which were broadcast. The versions differed in duration and content.

25                        The first version was 15 seconds in duration and contained a visual image of a man dressed in Skins products kicking a soccer ball and the statement:

“Skins, we improve sports performance, not sports stars’ bank accounts. Skins Bioacceleration Technology.”

26                        The second version was 30 seconds in duration and contained various visual images concluding with a visual image of a man dressed in Skins products kicking a soccer ball and the statement:

“To all those baby-faced multi-millionaire sports stars who get paid too much, live in huge houses, have ridiculous hair cuts, have never tipped, get paid to advertise anything and will never enter a supermarket again, let alone know the price of milk, just because they kick a ball … we’ve got news for you! We ain’t going to pay you a cent to wear our product, you can carry on paying us. Skins Bioacceleration Technology.”

27                        The third version was 45 seconds in duration and contained various visual images, concluding with a visual image of a man dressed in Skins products kicking a soccer ball and the statement:

“To all those baby-faced multi-millionaire sports stars who get paid too much, hang out with the beautiful, live in huge houses, have ridiculous hair cuts, have never tipped, get paid to advertise anything, frequent massage parlours and will never enter a supermarket again, let alone know the price of milk, just because they kick a ball … we’ve got news for you! We ain’t going to pay you a cent to wear our product, you can carry on paying us. Skins Bioacceleration Technology.”

28                        It is not necessary for me to set out the details of the times when these television advertisements were broadcast.

29                        By making the statement in the first version of the television advertisement, in the context described, Skins made the “no payment to wear” representation and the “no payment to endorse” representation. By making the statements in the second and third versions of the television advertisements in the context described in each case, Skins made the “no payment to wear” representation and the “always paid for” representation.

The first website

30                        Skins also advertised on its website, www.skins.com.au/ns. I will refer to this as the first website. The advertising occurred from at least 26 September 2005 to 28 August 2007. The advertising included the following:

(1)        The print advertisements with the content set out in [20] above.

(2)        The radio advertisements with the content set out in [22] above.

(3)        The third version of the television advertisement with the content set out in [27] above.

(4)        The following statements:

 (a)       “How many pairs do the guys on TV get for free?

None. Skins™ are NOT provided to top sports stars in the hope that wearing the brand will aid advertising. This is another thing that makes Skins™ completely different to other sporting brands around the world. All Skins™ are sold even to international athletes. In the development stages some athletes helped by wearing Skins™ to give feedback, but now all are sold.

Sports stars pay the company to wear Skins™ and this is because of the performance and recovery benefits they get from wearing them. Check out the website for some testimonials about why sports stars wear Skins™. www.Skins.com.au; and”

(b)        “Unlike our competitive set, we don’t pay sports stars to wear our products. The products have become a vital part of training, playing and recovery for elite athletes, and although many are paid to wear products from the large global apparel companies, these same elite teams and individuals still purchase Skins.”

31                        From at least 1 June 2006 to 28 August 2007, Skins caused to be displayed on the first website photographs depicting the following sports stars: cricketer, Brett Lee; athlete, Michael Milton; skier, Jono Brauer; Australian Football League players from the Western Bulldogs, St Kilda and Melbourne Football Clubs; rugby league players from the Sydney Roosters, North Queensland Cowboys and Wests Tigers Rugby League Clubs; basketball players from the Sydney Kings Basketball Team and the Opals and Boomers national Australian basketball teams; soccer players from the Newcastle Jets Soccer Club; rugby union players from the Waratahs Rugby Union Team; hockey players from the Kookaburras national Australian hockey team; and athletes representing Rowing Australia.

32                        By displaying the print advertisements on the first website with the content set out in [20] above, Skins made the “no payment to wear” representation and the “always paid for” representation. By displaying the radio advertisements on the website with the content set out in [22] above, Skins made the “no payment to endorse” representation and the “always paid for” representation. By displaying the third version of the television advertisement on the first website with the content set out in [27] above, Skins made the “no payment to wear” representation and the “always paid for” representation. By making the statement in paragraph (4)(a) of [30] above, Skins made the “no payment to wear” representation and the “always paid for” representation. By making the statement in paragraph (4)(b) of [30] above, Skins made the “no payment to wear” representation and the “always paid for” representation.

33                        By displaying the photographs referred to in [31] above in the context of the display on the first website of the printed advertisements, the radio advertisements, the third television advertisement and the statements set out in paragraph (4)(a) and (b) of [30] above, Skins made representations that it does not pay money to the sports stars, or their representatives, clubs, teams, or governing bodies, for the sports stars to wear or endorse Skins products and it does not provide Skins products to the sports stars or their representatives, clubs, teams or governing bodies, unless the Skins products are paid for with money.

The second website

34                        Skins advertised on a second website from at least 5 April 2006 to 28 August 2007 (www.skins.com.au, and from 12 October 2006 www.skins.net). The advertising involved the following:

(1)        The statement referred to in paragraph (4)(b) of [30] above;

(2)        Photographs depicting the following sports stars: skier, Jono Brauer; touring car driver, Garth Tander; Australian Football League players from the St Kilda and Melbourne Football Clubs; rugby league players from the Sydney Roosters and Wests Tigers Rugby League Clubs; basketball players from the Sydney Kings Basketball Team and the Opals national Australian basketball team; soccer players from the Newcastle Jets Soccer Club; rugby union players from the Waratahs Rugby Union Team; and hockey players from the Kookaburras national Australian hockey team.

(3)        The third television advertisement with the content set out in [27] above.

35                        By making the statement referred to in paragraph (4)(b) of [30] above, Skins made the “no payment to wear” representation and the “always paid for” representation. By displaying the photographs referred to in paragraph (2) of [34] above in the context of the display on the second website of the statement set out in paragraph (4)(b) of [30] above and the third television advertisement, Skins made representations that it does not pay money to the sports stars, or their representatives, clubs, teams or governing bodies, for the sports stars, to wear or endorse Skins products, and it does not provide Skins products to the sports stars, or their representatives, clubs, teams or governing bodies, unless the Skins products are paid for with money. By displaying the third television advertisement on the second website with the content set out in [27] above, Skins made the “no payment to wear” representation and the “always paid for” representation.

Relevant agreements

36                        Between June 2005 and October 2006, Skins entered into 29 agreements with sports stars, or their representatives, clubs, teams or governing bodies. The other parties to the agreements were as follows:

·    Cricket Australia;

·    Australian Basketball Federation Inc (“Basketball Australia”);

·    Sydney Kings Syndicate Pty Ltd (“Sydney Kings Basketball Team”);

·    Australian Rugby League (“ARL Kangaroos”);

·    Eastern Suburbs District Rugby League Football Club Ltd (“Sydney Roosters Rugby League Club”);

·    Insite Organisation Pty Ltd as agent for Brett Lee;

·    St Kilda Saints Limited (“St Kilda Football Club”);

·    Western Australia Rugby Union (Inc) (“Western Force Rugby Union Club”);

·    Cowboys Rugby League Football Limited (“North Queensland Cowboys Rugby League Club”);

·    Richmond Football Club Ltd (“Richmond Football Club”);

·    Team O’Grady, in respect of its senior and junior cycling teams;

·    Footscray Football Club (“Western Bulldogs Football Club”);

·    Insite Organisation Pty Ltd as agent for Jason Gillespie;

·    Newcastle United Jets (“Newcastle Jets Soccer Club”);

·    Wests Tigers Rugby League Football Club Pty Ltd (“Wests Tigers Rugby League Club”);

·    Netball Australia;

·    Perth Glory (“Perth Glory Soccer Club”);

·    One More Mountain Pty Ltd as agent for Michael Milton;

·    Jono Brauer, Australian skier;

·    Garth Tander, Australian touring car driver;

·    New South Wales Rugby Union Ltd (“Waratahs Rugby Union Team”);

·    Melbourne Football Club Ltd (“Melbourne Football Club”);

·    Wollongong IMB Hawks (“Wollongong Hawks Basketball Team”);

·    Rowing Australia;

·    Dandenong Basketball Association Inc (“Dandenong Rangers Women’s Basketball Team”);

·    Queensland Roar (“Queensland Roar Soccer Club”);

·    Hockey Australia Inc (“Hockey Australia”);

·    Andrew Bogut, Australian basketballer; and

·    Perth Wildcats (“Perth Wildcats Basketball Team”).

37                        The agreements were variously titled “Official Supplier Agreement”, “Sponsorship Agreement”, “Marketing and Promotion Agreement”, “Partnership Agreement” or “Strategic Partner Agreement”.

38                        The agreements were tendered in evidence, as was a summary in the case of each agreement setting out the type of agreement, its date, its duration and the non-cash benefits included in the agreement.

39                        Skins agreed to make cash payments under the agreements to the following:

·    Insite Organisation Pty Ltd as agent for Brett Lee;

·    Insite Organisation Pty Ltd as agent for Jason Gillespie;

·    One More Mountain Pty Ltd as agent for Michael Milton;

·    Jono Brauer;

·    Melbourne Football Club

·    St Kilda Football Club

·    Western Bulldogs Football Club

·    Wests Tigers Rugby League Club

·    Waratahs Rugby Union Team.

40                        In addition, Skins agreed to supply, without cash payment, either an agreed number of Skins products or Skins products to an agreed value or Skins products for training and competition purposes, pursuant to each of the Skins agreements, except for the agreements with Insite Organisation Pty Ltd, as agent for Brett Lee and Jason Gillespie respectively. I will not set out the details of the numbers of Skins products that Skins agreed to provide pursuant to the Skins agreements.

41                        In return for these payments and giving of benefits, Skins agreed to receive certain non-cash benefits, pursuant to the Skins agreements. These benefits may be summarised as follows:

(1)        Advertorials which included an endorsement of Skins products

The agreement with Basketball Australia provided that Skins would receive advertorials and online promotions on the benefits of wearing Skins products. The agreement with North Queensland Cowboys Rugby League Club provided for an advertorial in the club’s newsletter, including an endorsement of Skins products by the strength and conditioning coach.

(2)        The use of athletes or players for Skins’ print advertising campaign

Numerous of the Skins agreements provided for the use of athletes or players for Skins’ advertising campaign. For example, the agreement with Cricket Australia provided for the use of photographs of players associated with Cricket Australia in promotion and advertising activities. The other Skins agreements which provided for such use of athletes or players were the agreements of Basketball Australia, Hockey Australia, Rowing Australia, Sydney Roosters and Wests Tigers Rugby League Clubs, Western Force Rugby Union Club and Waratahs Rugby Union Team, Richmond and Western Bulldogs Football Clubs, Newcastle Jets, Perth Glory and Queensland Roar Soccer Clubs, Melbourne Football Club, Wollongong Hawks and Perth Wildcats Basketball Teams and Dandenong Rangers Women’s Basketball Team.

(3)        Editorial coverage on the benefits of wearing Skins products

Each of the agreements with Sydney Kings, Wollongong Hawks and Perth Wildcats Basketball Teams, Dandenong Rangers Women’s Basketball Team, St Kilda and Western Bulldogs Football Clubs, Newcastle Jets, Perth Glory and Queensland Roar Soccer Clubs, Wests Tigers Rugby League Club, Netball Australia and Rowing Australia provided for editorial coverage on the benefits of wearing Skins products.

(4)        Written testimonials

Skins agreed to receive a written testimonial from Stuart O’Grady of Team O’Grady, Garth Tander and Andrew Bogut. Skins also agreed to receive, pursuant to the Skins agreements, written testimonials from members of the coaching staff of Cricket Australia, Rowing Australia, Hockey Australia, Sydney Kings, Wollongong Hawks and Perth Wildcats Basketball Teams, Dandenong Rangers Women’s Basketball team, ARL Kangaroos, St Kilda, Richmond and Western Bulldogs Football Clubs, Western Force Rugby Union Club, Waratahs Rugby Union Team, Wests Tigers Rugby League Club, and Newcastle Jets, Perth Glory and Queensland Roar Soccer Clubs.

(5)        Website endorsements

Each of the Skins agreements with North Queensland Cowboys Rugby League Club, Western Bulldogs Football Club, Newcastle Jets, Perth Glory and Queensland Roar Soccer Clubs, Netball Australia, Rowing Australia, Garth Tander and Perth Wildcats Basketball Team provided for an endorsement of Skins products on that party’s website.

(6)        Photographic shoots of individuals, athletes or the team wearing Skins products for use in advertorials and Skins promotional materials

Photographic shoots were provided in the agreements with Cricket Australia, Hockey Australia, Basketball Australia, Rowing Australia, Sydney Roosters and Wests Tigers Rugby League Clubs, Insite Organisation Pty Ltd as agent for Brett Lee and Jason Gillespie, St Kilda, Western Bulldogs and Richmond Football Clubs, Western Force Rugby Union Club, Waratahs Rugby Union Team, Team O’Grady, Newcastle Jets, Perth Glory and Queensland Roar Soccer Clubs, One More Mountain Pty Ltd as agent for Michael Milton, Jono Brauer, Garth Tander, Wollongong Hawks and Perth Wildcats Basketball Teams, Dandenong Rangers Women’s Basketball Team and Andrew Bogut.

42                        The total amount of cash payments Skins agreed to make pursuant to the Skins agreements is at least $751,250 plus GST over the years 2005 to 2010, and the total value of Skins products that Skins agreed to supply pursuant to the Skins agreements is at least $835,210 plus GST over the years 2005 to 2010.

43                        Between 26 September 2005 and 28 August 2007, Skins had an obligation under the Skins agreements to make the cash payments referred to in the Skins agreements and it fulfilled those obligations. In return, it received the non-cash benefits identified in [41] above. From 1 July 2005 to 28 August 2007, Skins had an obligation to supply Skins products as set out in [40] above. Skins fulfilled that obligation and received the non-cash benefits set out in [41] above.

44                        Skins admits that:

·    in the circumstances, it engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Act in the print advertisements in making the “no payment to wear” representation during October 2005 and in making the “always paid for” representation between July and October 2005 in the radio advertisements during July 2005 in making the “always paid for” representation, and in television advertisements in making the “always paid for” representation during July 2005 and July 2006, the “no payment to wear” representation in July 2006 and the “no payment to endorse” representation during July 2006;

·    from at least 26 September 2005 to 28 August 2007, by making the “no payment to wear”, “always paid for” and “no payment to endorse” representations through the display of the print advertisements, the radio advertisements, the third television advertisement and the statements set out in paragraph 4 in [30] on the first website, and, from at least 1 June 2006 to 28 August 2007, the “no payment to wear” representation and the “always paid for” representation through the display of photographs of sports stars on the first website, in the circumstances, it engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Act; and

·    by making, from at least 5 April 2006 to 28 August 2007 on the second website, the “always paid for” representation and the “no payment to wear” representation through the display of the statements set out in paragraph 4 in [30] above and the third television advertisement, and the “no payment to wear” representation and the “always paid for” representation through the display of photographs of sports stars on the second website, in the circumstances, it engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 52 of the Act.

45                        In light of these facts, I was satisfied that each of the proposed declarations and the undertakings given to the Court by the first and second respondents respectively were within power and appropriate.

Resale price maintenance

46                        Section 48 of the Act prohibits a corporation or other person from engaging in resale price maintenance. Section 96 defines the acts which constitute resale price maintenance. They include a supplier inducing, or attempting to induce, a second person not to advertise, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier (s 96(3)(b) and (7)(a)). Under the Act, a supplier may act through an agent (s 84(2)(a)). Under the Act, engaging in resale price maintenance may attract a pecuniary penalty, not only for the contravener, but also for any person who has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person (s 76(1)(a) and (e)).

47                        The agreed facts and the joint submissions proceeded on the basis that there was no reason to distinguish between Warhurst Agencies and Mr Warhurst.

48                        Between July 2005 and May 2006, The Sports Locker Pty Ltd (“Sports Locker”) carried on business as a retailer of sporting goods, including sports clothing and accessories and sports equipment. It specialised in selling high performance products. Mr Donald Shipway and Mrs Kaylene Shipway were the directors and shareholders of the company. Sports Locker conducted its business from a store located at 270 Main North Road, Prospect, South Australia, which was on a very busy main road. Prior to October 2004, Sports Locker had a business relationship with Warhurst Agencies, and Mr Shipway and Mr Warhurst had a business relationship going back many years.

49                        Sports Locker had a business practice, which was known to Mr Warhurst, of advertising and selling its products at 20 per cent off the recommended retail price of sports clothing and 25 per cent off the recommended retail price of sports footwear. The company regularly advertised sports goods for sale by way of A-frame signs placed on the footpath immediately outside its store, and some of the signs advertised sporting goods for sale at a discount of 20 per cent or 25 per cent. Since about 2003, Mr Warhurst was aware that Sports Locker advertised in this way.

50                        In May 2005, Warhurst Agencies provided a Skins brochure to Mr Shipway and the brochure contained recommended retail prices for various Skins products. I will refer to these prices as “the specified prices”. On 10 May 2005, Sports Locker placed its first order for Skins products with Warhurst Agencies.

51                        At various times between May 2005 and May 2006, Sports Locker advertised Skins products for sale on an A-frame sign (“the sign”) outside its store. The sign read “Skins Bioacceleration 20% off”, and customers who purchased Skins products from Sports Locker received a 20 per cent discount off the recommended retail prices of Skins products. Mr Warhurst came to know of the sign in about May 2005.

52                        The sign was outside the store in July 2005. At this time, Mr Warhurst arranged to meet Mr Shipway at the store and the following discussion took place:

“Warhurst:        I’m asking you as a personal favour to take the Skins sign in. We have got a TV promotion going to launch the brand. We’ve been getting complaints. Can you bring the sign in for four weeks? It’s been causing us problems.

Shipway:           I understand. I’ll bring it in for four weeks. But this is a personal favour. I’m only doing one of them. I’ll be putting it back out afterwards.”

53                        Sports Locker took the sign in and did not display it for a period of approximately four weeks. Mr Warhurst became aware that the sign had been taken in.

54                        Skins admits that, by reason of s 84(2)(a) of the Act, the conduct of Mr Warhurst is deemed to be conduct engaged in by Skins and it admits that, by the aforesaid conduct, it induced Sports Locker not to advertise Skins products supplied to it by Skins for sale at prices less than prices specified by Skins, namely, the specified prices, and that it thereby engaged in the practice of resale price maintenance in contravention of s 48 of the Act. Mr Warhurst admits that he was, directly or indirectly, knowingly concerned in, or party to, the contravention of s 48 by Skins.

55                        The sign was outside the store in September 2005. Mr Shipway and Mr Warhurst had another discussion at the store in early to mid-September 2005:

“Warhurst:        I have to ask you to take the sign in. It’s costing us money. I have to ask you to take it in.

Shipway:           No. I’m not taking it in. I can’t even believe you are concerned about it.”

Sports Locker continued to display the sign outside its store after this conversation.

56                        Skins admits that, by this conduct, it attempted to induce Sports Locker not to advertise Skins products supplied to it by Skins for sale at prices less than prices specified by Skins, namely, the specified prices, and that it thereby engaged in the practice of resale price maintenance in contravention of s 48 of the Act. Mr Warhurst admits he was, directly or indirectly, knowingly concerned in, or party to, the contravention of s 48 by Skins.

57                        The sign was outside the store in May 2006. Mr Shipway and Mr Warhurst had another discussion at the store on 10 May 2006:

“Warhurst:        It is about the sign. I’ve got to ask you to take it in. Other retailers are complaining and it’s costing us money.

Shipway:           Well, I’m not taking the sign in. That’s it.”

Sports Locker continued to display the sign outside the store after this conversation.

58                        Skins admits that, by this conduct, it attempted to induce Sports Locker not to advertise Skins products supplied to it by Skins for sale at prices less than prices specified by Skins, namely, the specified prices, and that it thereby engaged in the practice of resale price maintenance in contravention of s 48 of the Act. Mr Warhurst admits he was, directly or indirectly, knowingly concerned in, or party to, the contravention of s 48 by Skins.

Relevant principles

59                        The Court was asked to make declarations that Skins contravened s 48 of the Act by an act of inducement in July 2005, an act of attempting to induce in September 2005 and a second act of attempting to induce in May 2006. The Court was also asked to make a declaration that on each occasion Mr Warhurst was, directly or indirectly, knowingly concerned in, or party to, the contravention. Clearly there was power to make the declarations and, having regard to the agreed facts and submissions, I considered that it was appropriate to make the declarations. The declarations I made sufficiently described the conduct which contravened s 48 (cf Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at 91 [89]-[90] per Gummow, Hayne and Heydon JJ).

60                        The Court was also asked to accept an undertaking by Skins in the following terms:

“Skins undertakes to the Court that Skins shall not, by itself, its servants, agents or otherwise howsoever, for a period of 3 years from the date of this undertaking, induce or attempt to induce, any person or corporation not to sell or advertise Skins products supplied to it by Skins for sale at a price less than a price specified by Skins.”

61                        I discussed the limitations on the Court’s power to accept an undertaking in Australian Competition and Consumer Commission v Auspine Ltd (2006) 235 ALR 95 at 104-109 [24]-[35]. Although the undertaking is expressed in somewhat general terms, I considered that I had both the power to accept it and that it was appropriate for me to do so. In reaching that conclusion, I had regard to the decisions of the Full Court of this Court in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 and Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513 (“Dataline”).

62                        The Commission sought an order that Skins provide a letter on its letterhead to each of its current retailers, agents and/or distributors. The terms and size of the letter were to be in accordance with a document annexed to the draft consent orders. The letter advises the addressee of the results of this proceeding, including the pecuniary penalties imposed, and of the fact that Skins may only recommend a retail price, and is not allowed to specify to retailers a minimum price below which goods or services are not to be resold or advertised for sale. Skins consented to such an order. I considered that it was appropriate to make such an order (see s 86C(2); Australian Competition and Consumer Commission v Hobie Cat Australasia Pty Ltd [2008] ATPR 42-225).

63                        The Commission proposed that Skins pay to the Commonwealth of Australia a pecuniary penalty of $120,000 and that Mr Warhurst pay to the Commonwealth of Australia a pecuniary penalty of $14,000.

64                        Under s 76 of the Act, it is for the Court to determine the appropriate pecuniary penalty. At the same time, the Court can place weight on the pecuniary penalties proposed by the parties. The relevant principle and the reason for it were stated by the Full Court of this Court in the following passage in the reasons for judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (“NW Frozen Foods”) at 290-291:

“The Act places on the shoulders of the Court the responsibility to determine the ‘appropriate’ penalty in each particular case, having regard to ‘all relevant matters’ including the matters specified in the section. But effects upon the functioning of markets, and other economic effects, will generally be among the most significant matters to be considered as relevant, so that the Court is likely to be assisted greatly by views put forward by the Australian Competition and Consumer Commission, or by economists called on behalf of the parties. Since the decision in Trade Practices Commission v Allied Mills Industries Pty Ltd [(1981) 60 FLR 38; 37 ALR 256], it has been accepted that both the facts, and also views about their effect, may be presented to the Court in agreed statements, together with joint submissions by both the Commission and a respondent as to the appropriate level of penalty. Because the fixing of the quantum of a penalty cannot be an exact science, the Court, in such a case, does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount.

There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention.  At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.”

65                        Section 76(1) of the Act requires the Court to consider all relevant matters in determining the appropriate pecuniary penalty, including the nature and extent of the contravening conduct, the amount of loss and damage caused by the contravening conduct, the circumstances in which the contravening conduct took place and whether the contravener had previously been found by the Court to have engaged in similar conduct.

66                        In Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 (“Trade Practices Commission v CSR”) at 52,152-52,153, French J identified relevant factors additional to those in the section and they are the following:

(1)        the size of the contravening company;

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

(3)        the deliberateness of the contravention and the period over which it extended;

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

(5)        whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

(6)        whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention.

67                        In NW Frozen Foods, Burchett and Kiefel JJ referred (at 292) to these matters as “elaborations of the statutory requirement to consider ‘the circumstances in which the act or omission took place’”.

68                        In addition to the above matters, the trial judge (Heerey J; see Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd [1996] ATPR 41-515) considered (at 42,444-42,445) the financial position of the respondents and the deterrent effect of the proposed penalty.

69                        It will be seen that, in the passage quoted from NW Frozen Foods and set out in [64] above, Burchett and Kiefel JJ emphasised the importance of the effects of the conduct on the functioning of the market, and other economic effects.

70                        The principal object of the penalties imposed by s 76 of the Act is deterrence, and, in particular, general deterrence: Trade Practices Commission v CSR at 52,152 per French J; NW Frozen Foods at 292 per Burchett and Kiefel JJ; Dataline at 527-528 [60], [62]; Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] ATPR 42-031 per Selway J.

Application of principles

71                        I turn now to apply these principles to the facts of this case.

72                        The nature and extent of the contravening conduct is three separate contraventions during the period from July 2005 to May 2006. One act was successful in inducing Sports Locker not to advertise Skins products for sale at prices less than the prices specified by Skins and there were two acts, each constituting an attempt to induce Sports Locker to act in that way.

73                        There is no evidence of the precise loss and damage caused by the conduct of Skins and Mr Warhurst. Sports Locker removed the sign advertising Skins products at a discount for approximately four weeks. It is an agreed fact that Sports Locker purchased Skins products to a wholesale value of approximately $8,000 between May and October 2005 and that it stopped purchasing Skins products in October 2005 because it did not want to purchase Skins products if it was going to be subject to the type of conduct which constituted the contraventions.

74                        The contravening conduct was as follows. It was conduct by Mr Warhurst, who was the agent of Skins in South Australia. Skins products were, and remain, premium-priced sports compression garments with recommended retail prices of $109.99 for Sports Skins Long Sleeve Tops and $139.99 for Sports Skins Long Tights. Prior to October 2004, Skins products had been sold primarily on the internet and by telephone. Skins appointed various agents to obtain orders from retailers and in May 2005 approximately 100 retailers across Australia were selling Skins products. By May 2006, the number of retailers selling Skins products had increased to approximately 400 and the number continued to increase thereafter. Shortly prior to July 2005, Skins, in order to increase awareness and sales of its brand, commenced a significant nationwide advertising campaign for Skins products, including television advertising, radio advertising, print advertising and the promotion of Skins products on the internet.

75                        Neither Skins nor Mr Warhurst have been found by a Court to have engaged in similar conduct in the past.

76                        Evidence of the sizes of the businesses of Skins and of Warhurst Agencies respectively was put before the Court by way of the tender of Skins’ financial statements and taxation returns for the financial years ended 30 June 2006 and 30 June 2007 respectively, and the financial statements and taxation returns of Artipena Springs Pty Ltd and Mr Warhurst for the financial years ended 30 June 2006 and 30 June 2007. For the reasons I gave at the hearing, I made an order pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth) forbidding publication of these documents and the figures as to the financial performance of those entities set out in paragraphs 55, 56 and 58 of the joint submissions of the applicant and respondents. It is sufficient for me to say that in the 2005/2006 financial year Skins was a small to medium size company which was thereafter to grow rapidly. Warhurst Agencies is a small business.

77                        Submissions were made as to the degree of power Skins has, as evidenced by its market share, and ease of entry into the market. No submissions were made as to these matters as far as Warhurst Agencies is concerned. At the relevant times, Skins specialised in the manufacture and supply of compression sports performance garments under the Skins brand, whereas its competitors, including such well-known brands as Nike, Adidas, Reebok and Canterbury, sold a range of other products as well as compression sports performance garments.

78                        Skins has grown rapidly. It was incorporated in mid-2004 and it acquired the business and assets of a company that had manufactured and sold compression sports performance garments primarily to professional athletes. There were only relatively few sales by that company to retail outlets. Skins began supplying to a large number of retail outlets and over time it began supplying its products to purchasers in a number of overseas countries. An indicator of the company’s growth over this time is that in mid-2005 it had six full-time employees and one casual employee. In May 2008, Skins had approximately 25 full-time employees, one part-time employee and six casual employees. Skins is now a leading Australian apparel manufacturer and distributor and is the dominant manufacturer and supplier of compression sports performance garments in Australia. The Skins brand is extremely well known. In May 2008, Skins supplied its products to over 820 retailers in Australia. Of course, I must remember that the relevant time for the purpose of the present proceeding is between July 2005 and May 2006.

79                        The three contraventions by Skins and Mr Warhurst were deliberate and they were committed over the period from July 2005 to May 2006. Of the three contraventions, one was successful and two were not.

80                        The contravening conduct was carried out by a Skins agent and not a Skins employee, and Skins and the Commission submitted that this was a mitigating factor. The contraventions arose out of conduct by Mr Warhurst and at the time he was the sole director and shareholder of Warhurst Agencies.

81                        At the time of the contravening conduct, neither Skins nor Warhurst Agencies had in place a trade practices training or compliance program for its agents or employees. Since the contraventions, Skins has done the following:

(1)        it has conducted annual trade practices compliance seminars for its agents and employees and it is compulsory for its agents to attend;

(2)        it has appointed a new chairman, who has extensive international corporate experience;

(3)        it has appointed a trade practices compliance officer and implemented a trade practices compliance manual; and

(4)        it has offered, and the Commission has accepted, an undertaking pursuant to s 87B of the Act to implement a trade practices compliance program with particular regard to Part IV of the Act.

82                        Mr Warhurst has offered, and the Commission has accepted, an undertaking pursuant to s 87B of the Act not to engage in similar conduct, and to participate in trade practices compliance training with regard to Part IV of the Act.

83                        The Commission commenced its investigations into the alleged contraventions in 2006 and it commenced this proceeding on 28 August 2007. Skins and Mr Warhurst provided documents and information voluntarily during the course of the investigation. Skins and Mr Warhurst did not make admissions prior to the institution of the proceeding. A mediation was held on 5 August 2008 upon the application of Skins and Mr Fuller, and supported by Mr Warhurst. Shortly after the mediation, the contraventions were agreed. Skins and Mr Warhurst thereafter cooperated with the Commission in seeking resolution of the proceeding on a joint basis.

84                        The pecuniary penalties proposed by the parties are said to involve a 20 per cent discount for the cooperation afforded by Skins and Mr Warhurst.

85                        It is an agreed fact that Skins and Mr Warhurst are able to pay the pecuniary penalties proposed by the parties.

86                        The joint submission of the Commission and Skins is that the contravening conduct was limited to a specific agent in relation to one retailer and that there is little risk of Skins knowingly contravening s 48 of the Act in the future. It is submitted that specific deterrence is not an “aggravating” factor. However, general deterrence remains relevant.

87                        The joint submission of the Commission and Mr Warhurst is that the latter’s conduct was deliberate, and specific deterrence as well as general deterrence is relevant.

88                        It was not necessary for me to determine whether, unaided by the agreement of the parties, I would have arrived at the very figures the parties proposed. It was sufficient for me to conclude that, having regard to the matters I have identified, the proposed pecuniary penalties of $120,000 in the case of Skins and $14,000 in the case of Mr Warhurst were appropriate.

Conclusion

89                        For the foregoing reasons, I made orders on 2 December 2008 in the terms that appear preceding these reasons.

Associate:

Dated:         2 July 2009