FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135
| IN THE FEDERAL COURT OF AUSTRALIA | |
| DATE OF ORDER: | |
| WHERE MADE: |
DEFINITIONS
In these Orders:
(a) Act means the Competition and Consumer Act 2010 (Cth);
(b) Berman means the Third Respondent;
(c) Exceptions means particular non exhaustive circumstances in which customers might be recruited by either Renegade or Speed-E-Gas on a basis other than price, being:
(i) where a customer cited poor service as the reason in deciding to change suppliers;
(ii) where a customer initiated contact with Renegade or Speed-E-Gas and was generally seeking quotes from the market in an effort to change supplier;
(iii) where a customer was part of, or joined, a buying group;
(iv) where a customer’s business was acquired on the basis of an agreement to supply that was made in another State or anywhere outside of Sydney; or
(v) where a customer sought to consolidate their gas supply requirements and have all their gas products, including Forklift Gas, supplied by one supplier.
(d) Forklift Gas means delivered liquid petroleum gas in cylinders for use in forklifts;
(e) Relevant Period means the period between 24 August 2006 and June 2011;
(f) Renegade means the First Respondent, which trades as “Supagas NSW”;
(g) Replacement Provision means a provision of the Understanding that, if contrary to the Stay Away Provision, one party supplied Forklift Gas to a customer(s) of the other party in Sydney, it would not be a breach of the Stay Away Provision for the second mentioned party to supply Forklift Gas limited to approximately the amount required to replace the volume or value lost to the first mentioned party;
(h) Smith means the Fourth Respondent;
(i) Speed-E-Gas means the Second Respondent;
(j) Stay Away Provision means a provision of the Understanding that, subject to the Exceptions, each party would not supply or seek to supply Forklift Gas to customers of the other in Sydney;
(k) Understanding means the understanding in place between Renegade and Speed-E-Gas containing the Stay Away Provision and the Replacement Provision relating to the supply in Sydney of Forklift Gas;
(l) Wilson means the Sixth Respondent.
THE COURT ORDERS THAT:
FIRST RESPONDENT – RENEGADE
Declarations
1. The Court declares that, during the Relevant Period, Renegade by:
1.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Renegade knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Speed-E-Gas; and
1.2 managing its response to breaches by Speed-E-Gas of the Stay Away Provision so that Renegade sought only to replace approximately the volume or value of Forklift Gas lost to Speed-E-Gas; and
1.3 communicating with Speed-E-Gas to the effect:
(a) that Speed-E-Gas should stay away from Renegade customers in Sydney;
(b) of inquiring as to why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of determining whether Speed-E-Gas’ supply or attempt to supply was consistent with the Understanding;
(c) of informing Speed-E-Gas why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of persuading Speed-E-Gas that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of restricting or limiting the supply of Forklift Gas to customers in Sydney, in contravention of s 45(2)(b)(i) of the Act.
2 The Court declares that, from 24 July 2009 to June 2011, Renegade by:
2.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Renegade knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Speed-E-Gas; and
2.2 managing its response to breaches by Speed-E-Gas of the Stay Away Provision so that Renegade sought only to replace approximately the volume or value of Forklift Gas lost to Speed-E-Gas; and
2.3 communicating with Speed-E-Gas to the effect:
(a) that Speed-E-Gas should stay away from Renegade customers in Sydney;
(b) of inquiring as to why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of determining whether Speed-E-Gas’ supply or attempt to supply was consistent with the Understanding;
(c) of informing Speed-E-Gas why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of persuading Speed-E-Gas that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of:
2.4 directly or indirectly preventing, restricting or limiting the supply or likely supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney, within the meaning of s 44ZZRD(3)(a)(iii) of the Act; and
2.5 allocating between Speed-E-Gas and Renegade, customers in Sydney who had acquired or were likely to acquire Forklift Gas from Speed-E-Gas or Renegade, within the meaning of s 44ZZRD(3)(b)(i) of the Act,
in contravention of s 44ZZRK of the Act.
Pecuniary Penalty Order
3 The Court orders that Renegade pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraphs 1 and 2 in the total amount of $4,800,000.
Injunction
4 The Court orders that Renegade be restrained, for a period of 5 years from the date of these Orders, from:
4.1 making any contract or arrangement or arriving at an understanding with one or more of its competitors for the supply of Forklift Gas to customers in Sydney containing a provision which:
(a) has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding, to customers in Sydney; or
(b) has the purpose of allocating between the parties to the contract, arrangement or understanding customers who had acquired or were likely to acquire Forklift Gas in Sydney; or
4.2 giving effect to such a provision,
unless:
4.3 the conduct referred to in 4.1 and 4.2 is authorised under s 88 of the Act or any other Australian statute in accordance with or not a contravention by reason of s 51 of the Act;
4.4 the contract, arrangement or understanding referred to in 4.1 is for the purpose of a joint venture which joint venture is carried on jointly by all parties in the contract, arrangement or understanding, within the meaning of s 44ZZRP of the Act; or
4.5 that contract, arrangement or understanding is only between Renegade and a related body corporate.
Other Orders
5 The Court orders that Renegade:
5.1 implement an updated compliance and education / training program to accord with the Compliance and Education / Training Program set out in Appendix A to these Orders:
(a) for the employees or other persons involved in its business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of Part IV of the Act or any similar or related conduct; and
(b) revising the internal operations of its business which led to it engaging in the conduct declared by the Court in this proceeding to be in contravention of Part IV of the Act or any similar or related conduct;
5.2 maintain and administer, at its own expense, the Compliance and Education / Training Program set out in Appendix A for a period of three years;
5.3 provide, at its own expense, a copy of any documents to be provided to the Applicant pursuant to Appendix A.
6 The Court orders that Renegade pay a contribution to the Applicant’s costs of and incidental to these proceedings, in the agreed amount of $400,000.
7 The Court orders that the pecuniary penalty in paragraph 3 and the costs contribution in paragraph 6 are to be paid to the Commonwealth of Australia as follows:
7.1 $1.5 million within 60 days of the date of these Orders;
7.2 $925,000 within 13 months of the date for payment set out in paragraph 7.1;
7.3 $925,000 within 26 months of the date for payment set out in paragraph 7.1;
7.4 $925,000 within 39 months of the date for payment set out in paragraph 7.1; and
7.5 $925,000 within 52 months of the date for payment set out in paragraph 7.1.
SECOND RESPONDENT – SPEED-E-GAS
Declarations
8 The Court declares that, during the Relevant Period, Speed-E-Gas by:
8.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Speed-E-Gas knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Renegade; and
8.2 managing its response to breaches by Renegade of the Stay Away Provision so that Speed-E-Gas sought only to replace approximately the volume or value of Forklift Gas lost to Renegade; and
8.3 communicating with Renegade to the effect:
(a) that Renegade should stay away from Speed-E-Gas customers in Sydney;
(b) of inquiring as to why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of determining whether Renegade’s supply or attempt to supply was consistent with the Understanding;
(c) of informing Renegade why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of persuading Renegade that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of restricting or limiting the supply of Forklift Gas to customers in Sydney, in contravention of s 45(2)(b)(i) of the Act.
9 The Court declares that, from 24 July 2009 to June 2011, Speed-E-Gas by:
9.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Speed-E-Gas knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of Renegade; and
9.2 managing its response to breaches by Renegade of the Stay Away Provision so that Speed-E-Gas sought only to replace approximately the volume or value of Forklift Gas lost to Renegade; and
9.3 communicating with Renegade between 24 July 2009 and June 2011 to the effect:
(a) that Renegade should stay away from Speed-E-Gas customers in Sydney;
(b) of inquiring as to why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of determining whether Renegade’s supply or attempt to supply was consistent with the Understanding;
(c) of informing Renegade why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of persuading Renegade that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of:
9.4 directly or indirectly preventing, restricting or limiting the supply or likely supply of Forklift Gas to certain customers of Renegade in Sydney, within the meaning of s 44ZZRD(3)(a)(iii) of the Act; and
9.5 allocating between Speed-E-Gas and Renegade, customers who had acquired or were likely to acquire Forklift Gas from Speed-E-Gas or Renegade, within the meaning of s 44ZZRD(3)(b)(i) of the Act,
in contravention of s 44ZZRK of the Act.
Pecuniary Penalty Order
10 The Court orders that Speed-E-Gas pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraphs 8 and 9 in the total amount of $3,100,000 within 30 days of the date of these Orders.
Injunction
11 The Court orders that Speed-E-Gas be restrained, for a period of 5 years from the date of these Orders, from:
11.1 making any contract or arrangement or arriving at an understanding with one or more of its competitors for the supply of Forklift Gas to customers in Sydney containing a provision which:
(a) has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding, to customers in Sydney; or
(b) has the purpose of allocating between the parties to the contract, arrangement or understanding customers who had acquired or were likely to acquire Forklift Gas in Sydney; or
11.2 giving effect to such a provision;
unless:
11.3 the conduct referred to in 11.1 and 11.2 is authorised under s 88 of the Act or any other Australian statute in accordance with or not a contravention by reason of s 51 of the Act;
11.4 the contract, arrangement or understanding referred to in 11.1 is for the purpose of a joint venture which joint venture is carried on jointly by all parties in the contract, arrangement or understanding, within the meaning of s 44ZZRP of the Act; or
11.5 that contract, arrangement or understanding is only between Speed-E-Gas and a related body corporate.
Other Order
12 The Court orders that Speed-E-Gas pay to the Commonwealth of Australia a contribution to the Applicant's costs of and incidental to these proceedings, in the agreed amount of $75,000, within 30 days of the date of these Orders.
THIRD RESPONDENT – BERMAN
Declaration
13 The Court declares that Berman, having determined that, subject to the Exceptions, Renegade would adopt the business practice of implementing the Stay Away Provision, by:
13.1 not changing that business practice when he had the authority to do so; and by
13.2 instructing Smith and other staff of Renegade to implement or adopt that business practice; and by
13.3 authorising and instructing Smith to instruct other staff of Renegade to manage Renegade’s response to breaches by Speed-E-Gas of the Stay Away Provision by implementing the Replacement Provision; and by
13.4 communicating from time to time with Mr Geoffrey Hobby who was the manager of Speed-E-Gas and Wilson to the effect that Speed-E-Gas should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied to certain customers,
was directly or indirectly knowingly concerned in, or a party to, conduct by which Renegade gave effect to the Stay Away Provision and the Replacement Provision, both of which were provisions of the Understanding, in contravention of:
13.5 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
13.6 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
14 The Court orders that Berman pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 13 above in the total amount of $250,000, to be paid within 30 days of the date of these Orders.
Injunction
15 The Court orders that Berman be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
15.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
15.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
15.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
15.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
15.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
15.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
15.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Orders
16 The Court orders, pursuant to s 86E(1) of the Act, that Berman be disqualified from managing corporations for a period of three years from the date of these Orders.
17 The Court orders that within six months of these Orders being made and again at least once per year for the following five years, Berman will procure and attend practical trade practices training administered by a qualified compliance professional or legal practitioner with expertise in competition law, which training is to focus, in particular on the responsibilities and obligations imposed by and the consequences of contravening, Divisions 1 and 2 of Part IV of the Act and be tailored to the types of trade practices issues that may arise in the market for the supply of LPG gas in Sydney.
18 The Court orders that Berman take all reasonable steps to ensure that the qualified compliance professional or legal practitioner referred to in paragraph 17 above provides confirmation in writing to the Applicant of Berman’s participation in this training within one month of the conclusion of the training each year.
19 The Court orders that Berman pay to the Commonwealth of Australia a contribution to the Applicant’s costs of and incidental to the proceedings, in the agreed amount of $100,000, within 30 days of the date of these Orders.
FOURTH RESPONDENT – SMITH
Declaration
20 The Court declares that Smith by:
20.1 implementing and enforcing the business practice, subject to the Exceptions, of Renegade implementing the Stay Away Provision and by instructing other Renegade staff to adopt that business practice; and by
20.2 managing Renegade’s response to breaches by Speed-E-Gas of the Stay Away Provision by implementing the Replacement Provision,
was directly or indirectly knowingly concerned in or a party to conduct by which Renegade gave effect to the Stay Away Provision and Replacement Provision, both of which were provisions of the Understanding, in contravention of:
20.3 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
20.4 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
21 The Court orders that Smith pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 20 above in the total amount of $100,000, to be paid within 30 days of the date of these Orders.
Injunction
22 The Court orders that Smith be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
22.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
22.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
22.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
22.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
22.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
22.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
22.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Order
23 The Court orders that Smith pay to the Commonwealth of Australia a contribution to the Applicant’s costs of and incidental to the proceedings, in the agreed amount of $25,000, within 30 days of the date of these Orders.
SIXTH RESPONDENT – WILSON
Declaration
24 The Court declares that Wilson, having determined with Mr Geoffrey Hobby who was the manager of Speed-E-Gas, that subject to the Exceptions, Speed-E-Gas would adopt the business practice of implementing the Stay Away Provision, by:
24.1 not changing that business practice when he had the capacity to do so; and by
24.2 instructing other staff of Speed-E-Gas to implement that business practice; and by
24.3 instructing other staff of Speed-E-Gas to implement a practice of dealing with prospective customers who were Renegade customers in Sydney by:
(a) not approaching the customer; or
(b) not offering to supply or declining to supply Forklift Gas to the customer; or
(c) restricting any offer to supply Forklift Gas to the customer to a price that Speed-E-Gas knew was not likely to induce the customer to change suppliers; and by
24.4 managing Speed-E-Gas’ response to breaches by Renegade of the Stay Away Provision by implementing the Replacement Provision; and by
24.5 communicating from time to time with Berman and Smith to the effect that Renegade should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied to certain customers,
was directly or indirectly knowingly concerned in or a party to conduct by which Speed-E-Gas gave effect to the Stay Away Provision and Replacement Provision, both of which were provisions of the Understanding, in contravention of:
24.6 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
24.7 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
25 The Court orders that Wilson pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 24 above in the total amount of $50,000, to be paid as follows:
25.1 $25,000 within 30 days of these Orders;
25.2 Three further payments of $8,333.33. The first payment is to be paid within one year from the date of these Orders, the second payment is to be paid within two years from the date of these Orders and the third payment is to be paid within three years from the date of these Orders; and
25.3 If any amount is not paid by its due date, all amounts outstanding are to be paid within six months of that failure to pay.
Injunction
26 The Court orders that Wilson be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
26.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
26.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
26.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
26.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
26.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
26.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
26.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Order
27 The Court orders that Wilson and the Applicant bear their own costs of the proceedings insofar as they relate to Wilson.
GENERAL
28 The proceedings against the Respondents otherwise be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).
APPENDIX A
COMPLIANCE AND EDUCATION / TRAINING PROGRAM
Interpretation
1. In this Appendix:
1.1. Act means the Competition and Consumer Act 2010 (Cth);
1.2. Commission means the Australian Competition and Consumer Commission;
1.3. Compliance Advisor means the person defined in paragraph 6 below;
1.4. Compliance Officer means the person appointed under paragraphs 2 or 3 below;
1.5. Compliance Policy means the report defined in paragraph 8 below;
1.6. Compliance Program means the Trade Practices Compliance and Education / Training Program in this Appendix;
1.7. Compliance Program Review Report is the report defined in paragraph 19 below;
1.8. Compliance Trainer is defined in paragraph 14 below;
1.9. Contravening Conduct means the conduct declared by the Federal Court of Australia in proceeding NSD 1239 of 2012 to be in contravention of Part IV of the Act or any similar or related conduct;
1.10. External Reviews means the reviews required by paragraph 18 below;
1.11. Order of the Court is the order of the Federal Court of Australia made in proceeding NSD 1239 of 2012 to which this Appendix A is attached;
1.12. Relevant Provisions means ss 44ZZRK and 45 of the Act, which were contravened by the Contravening Conduct and Part IV of the Act which deals with similar or related conduct;
1.13. Renegade means the First Respondent in proceeding NSD 1239 of 2012;
1.14. Respondent’s Program means the steps taken by Renegade to comply with the Orders of the Court;
1.15. Reviewer is defined in paragraph 18.2 below;
1.16. Risk Assessment means the assessment required by paragraph 6 below;
1.17. Risk Assessment Report means the report required by paragraph 7 below; and
1.18. Training means the training required by paragraph 13 below.
Compliance Officer
2. Renegade must, within one month of the Order of the Court, appoint a Director or a Senior Manager with suitable qualifications or experience in corporate compliance as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
3. After the appointment of the Compliance Officer in accordance with paragraph 2, Renegade must take all reasonable steps to ensure that, for the duration of the Order of the Court, there is a Director or a Senior Manager with suitable qualifications or experience in corporate compliance appointed as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
4. Renegade must take all reasonable steps to ensure that for the duration of the Order of the Court the Compliance Officer discharges his or her responsibility of ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
5. Renegade must take all reasonable steps to ensure that the Compliance Officer reports in writing to Renegade’s board of directors every six months with respect to the on-going maintenance and administration of the Compliance Program including, in particular, whether the Respondent’s Program is effectively:
2.1. ensuring an awareness by the employees and other persons involved in the respondent’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
2.2. revising the internal operations of Renegade’s business which led to the respondent engaging in the Contravening Conduct.
Risk Assessment
6. Renegade must, within one month of the Order of the Court, appoint a qualified, internal or external, compliance professional with expertise in trade practices issues (Compliance Advisor) to conduct a risk assessment to:
6.1. identify the areas of Renegade’s business where it is at risk of contravening the Relevant Provisions;
6.2. assess the likelihood of any such contravention occurring;
6.3. identify where there are deficiencies in Renegade’s procedures for managing any such risk;
6.4. make findings concerning sub-paragraphs 6.1 to 6.3 above; and
6.5. make recommendations for action having regard to sub-paragraphs 6.1 to 6.4 above (Risk Assessment).
7. Renegade must instruct the Compliance Advisor to set out, and must take all reasonable steps to ensure that the Compliance Advisor sets out, the findings and recommendations of the Risk Assessment in a written report (Risk Assessment Report), to be provided to Renegade’s board of directors within two months of his or her appointment.
Compliance Policy
8. Renegade must, within 30 days of the Order of the Court, establish a policy (Compliance Policy) which is communicated in writing to all employees or other persons involved in Renegade’s business regarding trade practices compliance, which must include:
8.1. a statement of commitment by Renegade to comply with the Relevant Provisions;
8.2. a direction to all employees or other persons involved in Renegade’s business to report any compliance related issues and trade practices compliance concerns to the Compliance Officer;
8.3. a statement guaranteeing that employees or other persons involved in Renegade’s business making a complaint or report in relation to Renegade’s compliance with the Relevant Provisions will not be prosecuted or disadvantaged in any way by reason of their complaint or report and that their complaint or report will be kept confidential and secure; and
8.4. a statement that Renegade will take disciplinary action against any persons who are knowingly or recklessly concerned in a contravention of the Relevant Provisions and will not indemnify them.
9. Renegade must take all reasonable steps to ensure that the Compliance Program is maintained and administered in a manner that is consistent with the Compliance Policy for the duration of the Order of the Court.
10. Renegade will provide a copy of the Compliance Policy to all new staff at the commencement of their employment with Renegade.
Complaints Handling
11. Renegade must establish, maintain and administer a trade practices complaints handling system.
12. Renegade must take all steps that are necessary to ensure that the trade practices complaints handling system is in accordance with AS/ISO 10002:2006 Customer satisfaction - Guidelines for complaints handling in organizations, though tailored to its own circumstances.
Training
13. Renegade must take all reasonable steps to ensure that all directors, officers, employees, representatives and agents of Renegade, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions, receive practical trade practices training (Training) no less than once during each 12 month period over which the Compliance Program is in operation.
14. The Training must be conducted by either a suitably qualified compliance professional or legal practitioner with expertise in trade practices law (Compliance Trainer).
15. Renegade must instruct the Compliance Trainer to design the Training, and must take all reasonable steps to ensure that the Training is designed, to ensure that the persons at the Training are made aware of:
15.1. the responsibilities and obligations in relation to the Relevant Provisions;
15.2. the potential consequences of contravening the Relevant Provisions;
15.3. the areas of Renegade’s business where it is at risk of contravening the Relevant Provisions, as identified in the Risk Assessment Report;
15.4. the content of the Compliance Policy; and
15.5. the content of the Compliance Program.
16. Renegade, for the purposes of conducting the Training, must provide the Compliance Trainer with a copy of:
16.1. the Order of the Court;
16.2. the Compliance Policy; and
16.3. the Risk Assessment Report.
17. Renegade must take all reasonable steps to ensure that an awareness of the Compliance Program, the Compliance Policy and the complaints handling system forms part of the induction of all new directors, officers, employees, representatives and agents, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions.
External Review
18. Renegade must take all reasonable steps to ensure that annual reviews of Renegade’s compliance with the Order of the Court are carried out in accordance with sub-paragraphs 18.1 to 18.4 below (External Reviews):
18.1. Scope of the External Reviews – The External Reviews are to ascertain whether the Respondent’s Program:
18.1.1. has made the employees or other persons involved in Renegade’s business aware of their responsibilities and obligations in relation to the Relevant Provisions;
18.1.2. has revised the internal operations of Renegade’s business in relation to the Relevant Provisions and the circumstances that led to the Contravening Conduct;
18.1.3. effectively maintains and administers the Compliance Program.
18.2. Independence of Reviewer – Renegade must take all reasonable steps to ensure that all External Reviews are carried out by a suitably qualified, independent compliance professional with expertise in competition law (Reviewer). The Reviewer will qualify as independent on the basis that he or she:
18.2.1. is not a present or past director, employee or officer of Renegade;
18.2.2. has no significant shareholding or other interests in Renegade;
18.2.3. has not acted for or consulted to, and does not act for or consult to, Renegade in any matters involving alleged contraventions of Australian competition or consumer protection legislation;
18.2.4. has not acted for or consulted, and does not act for or consult to, Renegade or provide other services in relation to this Compliance Program, other than as the Reviewer in a previous year; and
18.2.5. has no conflict of interest in carrying out the Reviews.
18.3. Evidence – Renegade must take all reasonable steps to ensure that in the conduct of the External Reviews the Reviewer has access to all relevant sources of information in Renegade’s possession or control, including access to:
18.3.1. any officers, employees, representatives or agents of Renegade;
18.3.2. any relevant records of Renegade, including its complaints register/reports and any documents relevant to its training or induction program; and
18.3.3. any documents created by Renegade’s consultants or legal advisers for use in relation to the Respondent’s Program.
18.4. Timing – Renegade must take all reasonable steps to ensure that the first External Review is completed within one year of the Order of the Court and that each subsequent External Review is completed within one year thereafter, save that all steps to be taken by Renegade in relation to the final External Review are to be completed one month prior to the expiration of the Order of the Court.
19. Renegade must instruct the Reviewer to set out, and must take all reasonable steps to ensure that the Reviewer sets out, the findings of each of the External Reviews in a written report (Compliance Program Review Report) which addresses each of the following:
19.1. details of the evidence gathered and examined during the External Review;
19.2. the name and relevant experience of the person appointed as the Compliance Officer;
19.3. if, and to what extent, the Respondent’s Program includes all the elements and requirements of the Compliance Program;
19.4. if, and to what extent, the Respondent’s Program adequately covers the areas identified in the initial Risk Assessment; and
19.5. recommendations that the Reviewer considers are reasonably necessary to ensure that the Respondent’s Program effectively maintains and administers the Compliance Program.
20. Renegade must instruct the Reviewer to complete and provide the Compliance Program Review Report to it, and must take all reasonable steps to ensure that the Compliance Program Review Report is completed and provided to it, within one month of each Review.
21. Renegade must retain each Compliance Program Review Report.
22. Within 30 days of the receipt of each Compliance Program Review Report, Renegade’s board of directors must hold a meeting to consider:
22.1. the Compliance Program Review Report;
22.2. whether to make any changes to the Respondent’s Program to more effectively implement the Compliance Program for the purposes of:
22.2.1. ensuring an awareness for the employees or other persons involved in Renegade’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
22.2.2. revising the internal operations of Renegade’s business in relation to the circumstances that led to the Contravening Conduct;
22.3. any recommendation of the Commission for the purposes of sub-paragraph 22.2 above.
23. At the meeting referred to in paragraph 22 above held by Renegade, Renegade’s board of directors must consider:
23.1. the Compliance Program Review Report;
23.2. whether to make any changes to the Respondent’s Program to more effectively implement the Compliance Program for the purposes of:
23.2.1. ensuring an awareness for the employees or other persons involved in Renegade’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
23.2.2. revising the internal operations of Renegade’s business in relation to the circumstances that led to the Contravening Conduct;
23.3. any recommendation of the Commission for the purposes of sub-paragraph 23.2 above.
24. Within 14 days of holding the meeting referred to in paragraph 23 above, Renegade must advise the Commission in writing of:
24.1. details of when the meeting was held and who was present;
24.2. the outcome of the meeting, including:
24.2.1. what, if any, changes Renegade decided to make to the Respondent’s Program to more effectively implement the Compliance Program and details of the proposed implementation of any changes; and
24.2.2. the decisions made by Renegade about each of the recommendations that had been made by the Commission (if any).
25. Within 14 days of holding a meeting referred to in paragraph 23 above at which Renegade decides to make changes to the Respondent’s Program it must take all reasonable steps to communicate those changes to all employees or other persons involved in Renegade’s business.
Supply of Documents to the Commission
26. Renegade must within 14 months of the Order of the Court, cause to be produced and provided to the Commission copies of each of the following documents:
26.1. documents evidencing the appointment of the Compliance Officer and Compliance Adviser;
26.2. the Risk Assessment Report;
26.3. the Compliance Policy and the documents evidencing its implementation; and
26.4. documents evidencing the provision of Training, including all materials used in the Training.
27. Renegade must provide a copy of each Compliance Program Review Report to the Commission within 14 days of its receipt from the Reviewer.
28. If requested in writing by the Commission, Renegade must, at its own expense, provide copies of documents and information constituting or evidencing compliance or non-compliance with the Orders of the Court.
| NEW SOUTH WALES DISTRICT REGISTRY | |
| GENERAL DIVISION | NSD 1239 of 2012 |
| BETWEEN: | AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant |
| AND: | RENEGADE GAS PTY LTD (TRADING AS SUPAGAS NSW) (ACN 074 008 496) First Respondent SPEED-E-GAS (NSW) PTY LTD (ACN 064 624 915) Second Respondent PAUL BERMAN Third Respondent COREY JOHN SMITH Fourth Respondent JAY RUSSELL WILSON Sixth Respondent |
| JUDGE: | GORDON J |
| DATE: | 24 OCTOBER 2014 |
| PLACE: | SYDNEY |
REASONS FOR JUDGMENT
A. INTRODUCTION
1 These proceedings relate to the supply of delivered liquid petroleum gas (LPG) cylinders for use in forklifts (Forklift Gas) in Sydney between 24 August 2006 and June 2011 (the Relevant Period). From the early 2000’s to June 2011, the First Respondent (Renegade) and the Second Respondent (Speed-E-Gas) competed to supply Forklift Gas in Sydney. During the Relevant Period, an understanding between Renegade and Speed-E-Gas existed in respect of the supply of Forklift Gas in Sydney that neither would try to secure the other business’ Forklift Gas customers in Sydney and, if one did, the other business would retaliate for the customers it lost. During the Relevant Period, Speed-E-Gas and Renegade gave effect to that understanding. That understanding was in contravention of the Competition and Consumer Act 2010 (Cth) (the Act). The Respondents’ conduct contravened the Act through a deliberate, largely covert, long standing understanding which had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney and which likely had an adverse effect on those businesses that were denied the opportunity of receiving a price competitive offer from either Renegade or Speed-E-Gas during the Relevant Period.
2 The Applicant (ACCC) seeks declarations, injunctions, pecuniary penalties and other relief against Renegade, Speed-E-Gas, the Third Respondent (Mr Berman), the Fourth Respondent (Mr Smith) and the Sixth Respondent (Mr Wilson) for contraventions of the Act. Mr Berman is a shareholder of Renegade and, until recently, was its managing director. Mr Smith was, and remains, employed by Renegade as its Sydney Branch Manager. Mr Smith reported to Mr Berman. Mr Wilson was Speed-E-Gas’ Sales Manager. He is no longer employed by Speed-E-Gas. Each respondent has made certain admissions. It will be necessary to consider those admissions later in these reasons for judgment.
3 These reasons for judgment will consider the factual background, the applicable principles and then turn to consider the individual circumstances (including the relief sought) against each respondent.
B. FACTS
4 For the purposes of this proceeding only, various statements of agreed facts between the ACCC and the respondents were filed within the meaning of s 191 of the Evidence Act 1995 (Cth). There was an overarching statement of agreed facts between the ACCC, Renegade, Mr Berman, Mr Smith and Mr Wilson. There was a separate statement of agreed facts between the ACCC and Speed-E-Gas. There was also a supplementary statement of agreed facts between the ACCC and each of Renegade, Mr Berman, Mr Smith and Mr Wilson. Mr Berman also tendered an extract dated 29 September 2014 from the Australian Securities and Investments Commission database for Renegade. Finally, Mr Smith filed an affidavit and tendered four character references. Mr Smith was not cross-examined. A joint submission was filed by the ACCC, Renegade, Mr Berman, Mr Smith and Mr Wilson. A separate joint submission was filed by the ACCC and Speed-E-Gas. The facts recorded in these documents were the entirety of the facts considered by the Court.
5 The following factual summary has been extracted from those documents. Unless otherwise specified, the facts are admissions against each respondent.
1. Forklift Gas
6 LPG is a fuel used to operate forklifts. Forklifts powered by LPG, unlike other forklifts, can be operated in both indoor warehouse environments and outdoor environments. LPG for forklifts is supplied in gas cylinders which have a liquid withdrawal mechanism. The most common system for supply of LPG for forklifts is cylinder exchange, whereby the LPG supplier periodically attends the customer’s premises and exchanges full LPG cylinders for empty cylinders. The empty cylinders are then refilled and redistributed. This supply of LPG for forklifts by cylinder exchange is what has been defined earlier as Forklift Gas. Renegade sells Forklift Gas in 15kg cylinders, and Speed-E-Gas sells Forklift Gas in both 15kg and 18kg cylinders. Renegade and Speed-E-Gas also sell LPG for domestic use (primarily for heating and cooking) in 9kg and 45kg cylinders.
7 Suppliers of Forklift Gas in Sydney have always had the practice of retaining ownership of the cylinders in which they supply LPG, collecting empty LPG cylinders when delivering full cylinders of LPG and only refilling cylinders owned by it. That has meant there has been an industry-wide practice of marking of cylinders. Renegade marked cylinders it owned with red colouring on the top or bottom of the cylinders, while Speed-E-Gas marked its cylinders with green colouring on the top or bottom of the cylinders. Other suppliers of Forklift Gas each used their own unique cylinder markings. Generally customers who had obtained Forklift Gas from a particular supplier would continue to obtain Forklift Gas from that supplier unless and until the customer decided to change to another supplier.
8 It is common for customers of Forklift Gas to store the cylinders in an outside area on their premises. Full cylinders of LPG are often stored outdoors at various warehouses, factories and workshops with each supplier’s cylinders bearing unique colouring. That meant that the identity of the customer’s supplier of Forklift Gas was usually apparent to sales representatives of competitors of that supplier who were able to observe the cylinders stored at the customer’s premises, or in use on a forklift.
9 Further, when a customer changed supplier of Forklift Gas, the identity of the outgoing supplier was apparent to the incoming supplier from the marking of the empty cylinders which were present at the customer’s premises at the time of change of supplier. Speed-E-Gas commenced supplying LPG in Sydney in about 1993 or 1994. Renegade commenced doing so in about 1999. A core part of each of their businesses was the supply of Forklift Gas. They were not the only suppliers of Forklift Gas. Other substantial suppliers were BOC, Elgas and Kleenheat. BOC, Elgas and Kleenheat were active in selling in Sydney during the Relevant Period. During this period, both of Renegade and Speed-E-Gas won customers from, and lost customers to, each of BOC, Elgas and Kleenheat.
2. Managers of Renegade and Speed-E-Gas
Renegade
10 Mr Berman has been employed by Renegade since September 2000 and has been a director of Renegade since July 2001. He held the title of Managing Director from January 2004. Mr Berman resigned as a director on 23 September 2014. Mr Smith has also been employed by Renegade since 2000. Mr Smith had supervisory responsibility for the sales functions in Sydney at all times. Mr Smith reported directly to Mr Berman throughout the Relevant Period.
Speed-E-Gas
11 Mr Geoffrey Hobby (Mr Hobby) was employed by Speed-E-Gas or an associated company from 1992 until December 2011. In 2006, Speed-E-Gas was purchased by Origin Energy LPG Limited, a subsidiary of the publicly listed Origin Energy Limited (Origin). From that time, Mr Hobby was responsible for the management of Speed-E-Gas’ business until he was stood down from his duties in July 2011. In December 2011, Mr Hobby ceased to be employed by Origin. Mr Hobby recently died.
12 Mr Wilson was employed by Speed-E-Gas as a Sales Manager from the mid-1990s until February 2012. Mr Wilson managed the sales function of Speed-E-Gas until he was stood down from the position on 15 July 2011, as a result of the ACCC’s investigations. His employment was terminated on 24 February 2012. From the time Mr Wilson commenced employment with Speed-E-Gas until he was stood down, he reported to and was subject to the direction of Mr Hobby.
3. Renegade and Speed-E-Gas operations
13 Renegade and Speed-E-Gas were close competitors in the supply of Forklift Gas in Sydney. Each promised customers “next day delivery”. Each operated from a single refilling depot in Sydney’s western suburbs: Renegade from Wetherill Park and Speed-E-Gas from Minto. Each used “cold calling” as a primary means for marketing of their Forklift Gas. Sales representatives engaged in cold calling would visit business premises where it would ordinarily be apparent that LPG was being used to fuel forklifts – because the forklifts were visible or the LPG cylinders were visible.
14 Each generally offered discounted prices in order to win the business of potential Forklift Gas customers. Where discounted pricing was offered, both Renegade and Speed-E-Gas were usually prepared to offer prices of about $21 per cylinder to win a customer. Where Speed-E-Gas sales representatives sought to offer pricing below that, sales representatives were required to speak to Mr Wilson. Occasionally during price wars, Speed-E-Gas would quote as low as $18 per cylinder to win or retain an account. It was rare for Speed-E-Gas to quote such low prices outside of price war periods because this pricing was unsustainable.
15 Renegade’s position was that on those occasions when Renegade or Speed-E-Gas offered discounted prices to win the business of a customer of the other, the customer typically obtained a price reduction of between $1 and $18 per cylinder or between 2% and 50%, relative to the price being paid before the discount offer was made. The reduced price was, in such cases, given either by the incoming supplier (if it won the business) or by the original supplier (reducing its price to retain the business). When a discounted price was offered by Renegade or Speed-E-Gas to a customer of the other, the customer who was the subject of such competition typically obtained a discount in the order of $7 or 20% (the average effect of competition relative to original price).
16 This paragraph and the following paragraph are only relevant to one of the corporate respondents. The system of increasing prices adopted by Renegade and Speed-E-Gas was different. Renegade regularly increased its prices for all, or almost all, of its LPG customers in line with increases in a commonly accepted index of LPG prices known as the Saudi Gate Price. Those increases occurred as frequently as monthly when the Saudi Gate Price was rising, but only on one occasion when the Saudi Gate Price was not rising. The Saudi Gate Price fluctuated both up and down from time to time. Except for high volume customers, Renegade did not generally reduce its prices when the Saudi Gate Price reduced. As a result, over time the margin earned by Renegade from each customer would usually increase.
17 Speed-E-Gas increased its list prices from time to time, usually in response to increases in the Saudi Gate Price. Increases in list prices were calculated so that increases in the cost of LPG and Speed-E-Gas’ own operating costs were accommodated, so that even with negotiated discounts to customers, it was intended that Speed-E-Gas would be able to earn a profit on sales.
18 During the Relevant Period, Speed-E-Gas’ position was that Renegade and Speed-E-Gas had the two largest volumes of sales of Forklift Gas in Sydney. Renegade’s position was that between them they supplied between 50% to 70% of Forklift Gas in Sydney and that Renegade supplied 20% to 30% of that market. These positions are not inconsistent.
19 Renegade and Speed-E-Gas were able to achieve commercial synergies by selling Forklift Gas and 45kg cylinders together, as follows:
1. The LPG is the same in each cylinder type and is sourced from the same location;
2. Greater volumes of LPG purchased lead to cheaper prices per tonne;
3. As the infrastructure required to fill cylinders is the same regardless of cylinder size, as more cylinders are filled and sold (regardless of size), the use of the infrastructure becomes more cost effective; and
4. With a larger potential customer base, there is greater potential to make additional sales, resulting in delivery synergies as the distribution method for each size of cylinder is the same. With more customers, there are better opportunities to organise distribution runs so as to minimise delivery costs.
4. Formation of the Understanding
20 Shortly after Renegade started operating in Sydney, Mr Wilson initiated contact with Mr Berman. From that time Mr Wilson, acting subject to Mr Hobby’s authority and direction, communicated with Mr Berman and Mr Smith. Discussions between them developed over time until they were in regular communications, including in person, by telephone, text message and occasionally email. Those communications were usually about individual customers and directed to dissuading the other party from making or continuing with a competitive approach to a customer, or, seeking to explain why a customer had been “poached” to dissuading the competitor from seeking to poach a further customer to replace the lost business. Those communications developed into an understanding between Mr Wilson and Mr Berman that Renegade and Speed-E-Gas would avoid approaching each other’s customers.
21 An example occurred in May 2003 when Mr Wilson sent an email to Mr Berman in which he referred to a customer which Speed-E-Gas had recently lost to Renegade. Mr Wilson said:
... I visited our client seeking an explanation for their decision to change suppliers and their response was as I had expected that [Renegade] had pursued them relentlessly for the past few weeks masquerading behind [Mr Smith’s] initial phone call.
Throughout our association I have adhered to our mutual agreement with very few exceptions the same however can not be said for your company. As you would expect retaliatory action is imminent given the circumstances behind this incident and furthermore please don’t fall under the misapprehension that one here and there wont (sic) matter, it will. Like you, we too miss out on business opportunities because of active competition between [Renegade] and Speed-E-Gas. You too have customers paying reasonable prices and your decision to poach Speed-E-Gas will affect this greatly.
22 As noted above, the conduct in issue in the proceedings is limited to conduct during the Relevant Period. The end of the Relevant Period is when the ACCC executed search warrants at Renegade’s and Speed-E-Gas’ premises. It was admitted on the pleadings, and was an agreed fact, that by 23 August 2006 there was an understanding (Understanding) in place between Renegade and Speed-E-Gas containing the Stay Away Provision and the Replacement Provision relating to the supply of Forklift Gas in Sydney as described below.
23 The Stay Away Provision was a provision that, subject to Exceptions (described in [25] below), each party would not supply or seek to supply Forklift Gas to customers of the other in Sydney. The Replacement Provision was a provision that, if contrary to the Stay Away Provision, one party supplied Forklift Gas to a customer(s) of the other party in Sydney, it would not be a breach of the Stay Away Provision for the second mentioned party to supply Forklift Gas limited to approximately the amount required to replace the volume or value lost to the first mentioned party.
24 The Understanding was formed before the Relevant Period. The subject matter of these proceedings is the conduct of each of the respondents in giving effect to that Understanding during the Relevant Period.
25 The Exceptions to the Understanding are also admitted on the pleadings and are the subject of agreed facts. They were, in essence, those circumstances in which customers might be recruited by either Renegade or Speed-E-Gas on a basis other than price, being:
1. Where a customer cited poor service as the reason in deciding to change suppliers;
2. Where a customer initiated contact with Renegade or Speed-E-Gas, and was generally seeking quotes from the market in an effort to change supplier;
3. Where a customer was part of, or joined, a buying group;
4. Where a customer’s business was acquired on the basis of an agreement to supply that was made in another State or anywhere outside of Sydney; or
5. Where a customer sought to consolidate their gas supply requirements and have all their gas products, including Forklift Gas, supplied by one supplier.
5. Communicating to implement the Understanding
26 Throughout the Relevant Period, Mr Berman had principal responsibility for giving effect to the Understanding on behalf of Renegade by taking responsibility for the majority of communications with Speed-E-Gas.
27 From 2006 to late 2007, Mr Wilson was the person directly responsible for implementation of the Understanding at Speed-E-Gas, though at all times he had the full authority of Mr Hobby who was kept informed by Mr Wilson of the Understanding and its day to day implementation. In late 2007, Mr Hobby assumed direct responsibility for communications with Mr Berman for the purpose of implementing the Understanding.
28 Implementation of the Understanding was managed through communication between the competitors about individual customers. Those communications between Mr Berman and Mr Wilson, the majority of which concerned the Understanding, took place by telephone, voicemails and text messages:
1. From August 2006 to December 2006, nine communications were exchanged, with five in December;
2. In 2007, 45 communications were exchanged, with nine in April, seven in February and five in September;
3. In 2008, 15 communications were exchanged, with five in September and four in March. Mr Berman and Mr Wilson agreed that of those calls, 10 were calls originated by Mr Berman which resulted in voicemail messages left for Mr Wilson; and
4. In 2009, one communication was exchanged on 20 May 2009. Mr Berman and Mr Wilson agreed that the call was originated by Mr Berman and resulted in a voicemail message left for Mr Wilson.
29 Many of the communications between Mr Berman and Mr Wilson from August 2006 until the end of 2007 concerned retaliations for approaching each other’s customers in which words to the following effect were exchanged:
“Why have you taken [name of customer A] from us?”
“We took them because you took [name of customer B] from us”
“That customer used to be ours and you took it from us. They are fair game.”
“You guys have been in and taken ... [a Renegade customer]. Why?”
“You should speak with your guys. That customer actually came to us due to a service issue with you guys. We did not poach that one.”
“Stop trying to undermine me with Geoff [Hobby]. I have told him the facts on the customers you have taken from us.”
30 There was one occasion in around September 2008 when Mr Wilson received a missed call from Mr Berman on his mobile phone. Mr Berman left a message asking who Matthew Jackson was. Mr Wilson returned the call and had a conversation to the following effect:
Mr Wilson said: “Mathew Jackson is an account manager at Speed-E-Gas. Why what’s the problem?”
Mr Berman replied: “Oh he’s been in to a customer of ours offering $24”
31 The majority of calls in 2008 and the call in 2009 were initiated by Mr Berman and resulted in voicemail messages left for Mr Wilson. Mr Wilson did not respond to the majority of those calls, as a result of a decision he had made not to communicate with Mr Berman in relation to the Understanding. Mr Wilson also had some telephone conversations with Mr Smith. There were no telephone conversations, voicemails or text messages between Mr Berman and Mr Wilson in 2010 or 2011.
32 From about late 2007 until June 2011, Mr Berman and Mr Hobby also had regular and numerous telephone communications, which included text messages, concerning the Understanding. At some time in late 2007, Mr Hobby said to Mr Berman words to the effect:
Jay [Wilson] doesn’t want to talk to you now. If you want to talk about a customer you need to speak to me from now on.
33 The telephone communications between Mr Berman and Mr Hobby were irregular in terms of their frequency, sometimes occurring monthly and sometimes there were no communications for extended periods of time:
1. In 2007, 22 communications were exchanged, with nine in April;
2. In 2009, 31 communications were exchanged, with 26 in September;
3. In 2010, 25 communications were exchanged, with 15 in December; and
4. In 2011, 7 communications were exchanged, with three in June.
34 Telephone communications in late 2007 to June 2011 occurred frequently between Mr Berman and Mr Hobby and largely concerned staying away from each other’s customers. Mr Berman and Mr Hobby both said to each other words to the following effect:
“Leave our customers alone.”
“Stay out of our customers.”
“Your blokes have been in to see [customer name]. They’re offering a ridiculous price.”
“I’ll look into it.”
“You guys have been into [customer name]. We're just going to replace the volume.”
“I’ll look into it.”
35 From about late 2007 to June 2011, Mr Berman and Mr Hobby also communicated with each other at face to face meetings that occurred on at least three occasions at various locations.
36 There was no legitimate business reason for Renegade and Speed-E-Gas to engage in this significant number of communications.
6. Renegade’s internal implementation of the Understanding
37 This section is not relevant to Speed-E-Gas. It is relevant to all other respondents. Mr Berman managed the internal implementation of the Understanding within Renegade. At some time before August 2006, Mr Berman instructed Mr Smith about the existence and terms of the Understanding and instructed him to implement them. He had also instructed Mr Smith that he should not mention the existence of the Understanding to other staff of Renegade. Mr Berman instructed Mr Smith and other sales staff in words to the effect of:
“I’ve had a conversation with [Mr Wilson]. [Renegade] have an understanding with [M Wilson] not to approach Speed-E-Gas customers and vice versa”
“We don’t approach [Speed-E-Gas], I don’t want you to touch them”
“Stay away from them, I don’t want you to start a war with [Speed-E-Gas]”
38 Mr Berman instructed Mr Smith to implement the Understanding on behalf of Renegade by adopting strategies which included the following:
1. Instructing Renegade sales representatives not to approach Speed-E-Gas Forklift Gas customers; or
2. Instructing Renegade sales representatives if they did approach Speed-E-Gas Forklift Gas customers they were:
(a) not to offer a price for the supply of Forklift Gas to that customer; or
(b) to offer prices for the supply of Forklift Gas to that customer that were higher than they were currently paying to Speed-E-Gas in an effort not to win the business; or
(c) to quote list price for the supply of Forklift Gas which both Mr Berman and Mr Smith knew was likely to be higher than the price the customer was currently paying to Speed-E-Gas; or
(d) not to follow up the customer.
39 The ACCC, Renegade and Mr Berman, but not Mr Smith, submitted that pursuant to those instructions from Mr Berman, Mr Smith gave detailed and repeated instructions to Renegade sales staff to act in accordance with those instructions. The following facts are not in dispute. Consistent with Mr Berman’s instructions, throughout the Relevant Period, Mr Smith gave instructions to Renegade staff. The statements of agreed facts between the ACCC, Renegade, Mr Berman, Mr Smith and Mr Wilson records that 17 instructions were given by Mr Smith, as listed at [44] below. Counsel for Mr Smith submitted that 13 of these were instructions not to approach Speed-E-Gas customers, two were instructions about what to do when a staff member came across a Speed-E-Gas customer and two were instructions that there was the Understanding and that the direction came from Mr Berman. In addition, the ACCC and Mr Smith have separately agreed that Smith did not formally brief sales representatives or Renegade’s sales coordinator about the Exceptions. Rather, Mr Smith instructed Renegade’s sales representatives and the sales coordinator about the Exceptions and how they applied to their sales activities as and when the need arose. In light of the agreed facts, the finding that Mr Smith gave detailed and repeated instructions to Renegade sales staff to act in accordance with those instructions is not only open but the only conclusion to be drawn. Instructions were given over a period of approximately five years, on 17 separate occasions and were delivered “as and when the need arose”. In other words, instructions were delivered repeatedly by Mr Smith with the content varying depending on the needs of the particular circumstances.
40 In 2008, as part of a reorganisation at Renegade, Mr Dominic Grayson was appointed to have direct responsibility for sales in Sydney. The ACCC, Renegade and Mr Berman, but not Mr Smith, submitted that Mr Smith instructed Mr Grayson to ensure that sales staff took the steps necessary to implement the Understanding. There is no dispute that when Mr Grayson was a sales representative in Sydney, Mr Smith instructed him “Do not go after Speed-E-Gas customers. Focus on the other competitors because they are slower to react”. There is also no dispute that Mr Smith instructed Mr Grayson to provide that instruction to sales representatives and that Mr Smith understood that he did so. I reject Mr Smith’s submission that these instructions should not be characterised as Mr Smith instructing Mr Grayson to ensure that sales staff took the steps necessary to implement the Understanding. The instructions were specific and direct – to implement the Understanding. The fact that the instructions did not refer to the existence of the Understanding or, it would seem, all aspects of it, do not detract from that characterisation. The matter may be tested this way – why else give the instruction?
41 Next, the ACCC and Mr Berman, but not Renegade and Mr Smith, submitted that Renegade’s sales staff were trained in the processes and strategies to be adopted in order for Renegade to avoid making competitive offers to Speed-E-Gas customers and that those instructions were regularly communicated at formal sales staff meetings, which were minuted. I reject the submissions of Renegade and Mr Smith. The following facts that were agreed to by the ACCC, Renegade, Mr Berman and Mr Smith support those findings.
42 Throughout the Relevant Period, Mr Berman gave Mr Smith and other sales staff general instructions regarding the approach to be taken with customers who were being supplied by Speed-E-Gas. Throughout the Relevant Period, Mr Berman’s instruction to Mr Smith and other sales staff about staying away from Speed-E-Gas customers remained unchanged and consistent with the Understanding.
43 Mr Berman said words to the following effect:
(a) To Smith: “I’ve had a conversation with Jay. We [Renegade] have an understanding with Jay not to approach Speed-E-Gas customers and vice versa.”
(b) To sales representatives: “We are not allowed to touch Speed-e-gas customers.”
(c) To sales representative … : “This [the attacks on Speed-e] stops now. I want you to tell the reps to stop attacking Speed-e-gas.”
(d) To sales representative: “We just don’t touch each other’s customers because Speed-E-Gas and [Renegade] have an arrangement not to touch each other’s customers.”
(e) To sales representative: “It’s not on to take Speed-E-Gas customers because together we don’t touch each other’s customers, that’s how it is.”
(f) To sales representative: “We have an arrangement, you are not allowed to touch them [Speed-E-Gas].”
(g) To sales representative: “Jay Wilson and I have an agreement not to undercut each other on price.”
(h) To sales representative: “We don’t approach them [Speed-E-Gas], I don’t want you to touch them.”
(i) To sales representatives: “Just remember guys, don't approach Speed-E-Gas customers”.
(j) To a sales representative: “Stay away from them, I don’t want you to start a war with Speed-E”.
(k) To a sales representative: “Don’t attack Speed-E”.
44 The strategies that Mr Berman instructed Mr Smith to adopt throughout the Relevant Period are set out in paragraph [38] above. What then did Mr Smith do? On Mr Berman’s instructions, Mr Smith provided oral instructions about the Understanding in sales and other meetings and in conversations (in person and by telephone) using words to the following effect:
(a) “Leave Speed-e alone.”
(b) “We are not allowed to touch Speed-e-Gas customers.”
(c) “We are not allowed to get Speed-e-Gas customers based on price. All Speed-E-Gas issues, especially price, need to go through me.”
(d) “We don’t go and attack Speed-e customers.”
(e) “Don’t approach any Speed-e-Gas customers.”
(f) “Don’t approach or sign up any Speed-e-Gas customer.”
(g) “You can’t go after any of Speed-e-Gas’ customers.”
(h) “Do not go after Speed-E-Gas customers. Focus on other competitors because they are slower to react.”
(i) “Don’t go after Speed-E-Gas’s forklift customers.”
(j) “If you come across a Speed-E-Gas customer, pass their details onto me, or if I’m not around, pass it onto Paul. We’ll look after them.”
(k) “The deal is that we do not touch Speed-E-Gas customers, that’s what Paul wants, that’s what we do.”
(l) “We are not allowed to go to their customers and they aren’t allowed to come to ours.”
(m) “When you come across a Speed-E customer find out what they are paying and speak to ... me about what to do next.”
(n) “Stay away from Speed-E customers or we won't be paying the commissions.”
(o) “We've got a verbal agreement with Speed-E [to stay away from each other’s customers]”.
(p) “The directive not to take Speed-E Gas customers comes from Paul”.
(q) “Go and approach any customers you want, except Speed-E-Gas customers.”
45 Two further specific agreed facts are relevant in this context. Both involve Mr Smith and Mr Grayson. The first is the instruction Mr Smith gave to Mr Grayson when he was a sales representative in Sydney: see [40] above. It is not clear whether this is a separate instruction to that listed at [44(h)] above. The second took place in September and October 2008. In September 2008, Ivan Silvera (a Renegade sales representative) signed up several large Speed-E-Gas customers in Liverpool in breach of the Stay Away Provision of the Understanding. On about 3 October 2008, Mr Grayson met Mr Silvera and said to him words to the effect that:
“Corey [Smith] and I were very pleased to see the turnaround in you and based on your numbers it appeared that you would get the award for sales rep of the month.
I was so disappointed to find out that you had quoted and supplied Speed-E customers in Liverpool to get these numbers. Your numbers are only a facade.
Why the hell did you go and get Speed-E customers? Corey [Smith], Paul [Berman] and myself have directly instructed you in the past not to price and take Speed-E customers.
Your behaviour in not following our instruction in relation to Speed-E customers is not acceptable or professional.
You know that your commission will now not be paid for those Speed-E customers you signed up and that this meeting acts as a second warning for you.”
46 On 13 October 2008, Mr Grayson sent a written warning to Mr Silvera in the following terms:
Further to the meetings that took place on the 3/10/08 between you and me, please read below for a summary of our discussions.
We meet (sic) to discuss why you had disregarded direct instruction that had been given by me as well as [Mr] Smith and [Mr] Berman on prior occasions. These instructions related to specific customers you had been advised to not provide pricing to.
However, I started the meeting off by informing you how pleased [Mr Smith] and I were to have seen the turn around from you since our last meeting the month earlier and how it appeared based on the numbers on the sales board you would receive the award for rep of the month. I stated it had appeared you had performed the way you said you would in the email you sent previously.
My behaviour will be focussed on achieving our KPI’s and putting 100 units into the marketplace. I will remain professional at all times and portray a positive frame of mind.
I then stated how disappointed I was to find that you had quoted and supplied these customers and how the numbers on the board were only a faÇade and how this behaviour was not acceptable or professional.
I gave you the opportunity to offer an explanation as to why you disregarded my direct instructions and you acknowledged that you did the wrong thing but explained that you didn’t really have an explanation.
I advised you that the consequences of you (sic) actions would result in commission not being paid for these customers and that this meeting also acted as a second warning.
We then spoke about your future efforts and how we could ensure that things improved from now on. Again you assured me things would improve and that you would achieve the required result moving forward.
…
47 Mr Berman and Mr Smith were both consulted before Mr Grayson decided not to pay commissions to Mr Silvera and to issue the written warning to him. The use of possible warnings and deductions to commissions of sales representatives for contacting a Speed-E-Gas customer without first speaking to Mr Grayson reflected Mr Smith’s concerns of how serious it was to Renegade (1) to adhere to the Understanding at this time and (2) to address Mr Silvera’s conduct in approaching Speed-E-Gas customers in breach of Mr Grayson’s directions. At a meeting of Renegade sales representatives at about this time, Mr Grayson said words to the effect that:
[Mr Silvera] was going into customers he was not supposed to. This is very disappointing. [Mr Silvera] told me in a meeting that he will change his behaviour. [Mr Silvera] will now not be paid his commissions for the customers he was not supposed to take. [Mr Silvera] will now rank last this month. Speed-E is aware that we have taken their customers and will attack us. Beware of this.
48 It is also important to record that these strategies were not implemented in respect of any customers of any other competitor.
49 Throughout the Relevant Period, when Mr Berman became aware that Speed-E-Gas had breached the Understanding by supplying Forklift Gas to customers in Sydney who, prior to that supply, were Renegade customers, Mr Berman responded. His response was to instruct Mr Smith and sales representatives to target customers of Speed-E-Gas with price competitive offers to supply Forklift Gas and to manage the retaliation so that any Speed-E-Gas customers acquired by Renegade were approximately equivalent by volume or value to the customers that had been acquired by Speed-E-Gas. Mr Berman instructed Mr Smith to implement that practice in words to the following effect:
“… On Toll, have you spoken to Jay at Speed-E? You must get as many Speed-E customers to make up Toll’s loss …”
“Have you spoken to Jay? Have we attacked Speed-E? You must get 1 big customer or 5-6 smaller ones.”
50 Mr Berman and Mr Smith understood that Speed-E-Gas took the same approach towards cheating and retaliation because they observed that Speed-E-Gas’ conduct in respect of customers that were secured contrary to the general approach of staying away was consistent with Renegade’s own conduct in the market.
7. Speed-E-Gas’ internal implementation of the Understanding
51 When Mr Wilson and Mr Berman implemented the Understanding, Mr Hobby was aware from the outset of Mr Wilson’s dealings with Mr Berman and fully authorised those dealings. Further, Mr Hobby ensured the Understanding was implemented within Speed-E-Gas by instructing Mr Wilson and other sales staff in terms including:
“Tell the boys to stay out of [Renegade] because it’s going to cause trouble.”
“What are you guys doing [going into a Renegade customer], you idiots? You’re only going to start a price war.”
“Don’t touch [Renegade] customers.”
52 Throughout the Relevant Period, Mr Hobby fully authorised Mr Wilson to implement the Understanding on behalf of Speed-E-Gas by adopting strategies which included:
1. Instructing Speed-E-Gas sales representatives not to approach Renegade Forklift Gas customers; or
2. Instructing Speed-E-Gas sales representatives that if they did approach Renegade Forklift Gas customers they were:
(a) not to offer a price for the supply of Forklift Gas to that customer; or
(b) to offer prices for the supply of Forklift Gas to that customer that were higher than they were currently paying to Renegade in an effort not to win the business; or
(c) to quote list price for the supply of Forklift Gas which Speed-E-Gas knew was likely to be higher than the price they were currently paying to Renegade; or
(d) not to follow up Renegade Forklift Gas customers in an effort to win their business, following any initial cold call.
53 From August 2006 to late 2007, Mr Wilson orally instructed other sales staff of Speed-E-Gas to implement the Understanding in training and induction sessions, sales meetings and in conversations with sales representatives in person and by telephone, whilst not disclosing to them the existence of the Understanding. From late 2007 to June 2011, Mr Wilson orally instructed other sales staff of Speed-E-Gas in terms which were consistent with the continued implementation of the Understanding, although he was no longer communicating with Renegade about the Understanding and had told Mr Hobby that he would no longer do so.
54 These strategies were not implemented in respect of any customers of any other competitor.
8. Implementation of the Understanding by sales representatives
55 The sales representatives of both Renegade and Speed-E-Gas adopted similar approaches to the implementation of the Understanding.
56 Usually when the sales representatives could identify without approaching the customer that the customer’s current supplier was the other party to the Understanding, sales representatives would neither approach the customer nor record details.
57 If contact was made with the customer, the sales representative would either not provide a price or, if pressed, would provide a price which they knew was unlikely to be attractive to the customer. In the case of Renegade, sales staff made records known as Daily Sales Reports in which they would either leave the “price quoted” section blank or record an offer at the list price which, over the Relevant Period, was always higher than $26.50 per cylinder. In the case of Speed-E-Gas, its sales representatives made records known as New Business Information Sheets in which they would either leave the “price quoted” section blank or record an offer at a price which was uncompetitive.
58 In circumstances where either party to the Understanding acquired a customer in breach of the Understanding, both parties accepted that the other should retaliate by acquiring a customer or customers sufficient to replace the volume of sales lost. That process was actively managed by Mr Berman and Mr Hobby and was implemented by instructions ordinarily given by Mr Smith, Mr Grayson and Mr Wilson to sales representatives. By 2009 both Renegade and Speed-E-Gas had developed lists of customers of the other which were available to be used in circumstances where lost volume was to be replaced.
59 On a number of occasions where the poaching of customers led to retaliations which were not immediately controlled, price wars developed, being situations where both Speed-E-Gas and Renegade openly competed with one another by targeting and poaching as many customers as possible from the other business. Price wars were sometimes brought to an end by communications between Mr Berman and Mr Wilson or Mr Hobby.
9. Conduct would have continued
60 In June 2011, the ACCC executed search warrants at Renegade’s and Speed-E-Gas’ premises. The conduct in giving effect to the Understanding that is the subject of these proceedings is likely to have continued beyond the Relevant Period had the ACCC not taken that action. It is unnecessary to determine for how long that conduct would have continued or what might have brought that conduct to an end. The fact is that it ceased because of the actions of the ACCC and, but for that action, would likely have continued for some time.
C. RELIEF SOUGHT AND APPLICABLE PRINCIPLES
61 The parties propose that the Court make various orders by way of:
1. Declarations pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (the FCA);
2. Pecuniary penalties pursuant to s 76 of the Act;
3. Injunctions pursuant to s 80 of the Act;
4. Disqualification orders pursuant to s 86E of the Act; and
5. Compliance program and training orders pursuant to s 86C of the Act.
62 The parties propose that declarations and pecuniary penalties be imposed upon each of Renegade, Speed-E-Gas, Mr Berman, Mr Smith and Mr Wilson:
1. Upon Renegade for its contravention of ss 44ZZRK and 45 of the Act;
2. Upon Speed-E-Gas for its contravention of ss 44ZZRK and 45 of the Act;
3. Upon Mr Berman and Mr Smith for being accessories to Renegade’s contraventions; and
4. Upon Mr Wilson for being an accessory to Speed-E-Gas’ contraventions.
63 The conduct in respect of which declarations and penalties are sought was proscribed by s 45 of the Act throughout the Relevant Period. The additional proscription of cartel conduct, contained in Div 1 of Pt IV of the Act, and in particular in s 44ZZRK read with s 44ZZRD, was inserted by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth) which was assented to on 26 June 2009 and relevantly commenced on 24 July 2009. The parties submitted that while those amendments underlined the seriousness attached by the Parliament to market distorting conduct of the kind admitted in this proceeding, s 76 of the Act was not relevantly amended other than to exclude from the scope of the section contraventions of ss 44ZZRF and 44ZZRG of the Act.
1. Declarations
64 The Court has a wide discretionary power, pursuant to s 21 of the FCA, to grant declarations that particular persons have engaged in conduct that contravenes the Act: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 97-98. The Court does not lack jurisdiction or power to grant declaratory relief merely because the relief is sought with the consent of the parties: IMF (Australia) Ltd v Sons of Gwalia Ltd (admin apptd) (2004) 211 ALR 231 at [47] and Australian Competition & Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 at [30].
65 Considerations relevant to the exercise of the discretion to make declarations in the present case include whether the declaration will have any utility, whether the proceeding involves a matter of public interest and whether the circumstances call for the marking of the Court’s disapproval of the contravening conduct: Tobacco Institute at 99-100; Australian Competition & Consumer Commission v Powerballwin.com.au Pty Ltd [2010] FCA 378 at [41] and Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8.
66 Declarations are not made as a matter of course. Where it is appropriate for a declaration to be made, attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred. The declarations should contain appropriate and adequate particulars of how and why the impugned conduct is a contravention of the Act: Rural Press Ltd v Australian Competition & Consumer Commission (2003) 216 CLR 53 at [90]; Australian Competition & Consumer Commission v Francis (2004) 142 FCR 1 at [113] and BMW Australia Ltd v Australian Competition & Consumer Commission (2004) 207 ALR 452 at [35].
67 There can be no doubt that the declarations sought here will have utility. In the absence of them, the contravening conduct would not otherwise be clearly identified. There is also public interest to be served in making the declarations. They will serve as a warning to others who may contemplate making or giving effect to contracts, arrangements or understandings between competitors which allocate customers between them. They may also inform affected businesses that the conduct occurred and was unlawful. Given the seriousness of the conduct and the period over which it occurred, this is a case where the circumstances call for the marking of the Court’s disapproval of the contravening conduct. The Respondents’ conduct contravened the Act through a deliberate, largely covert, long standing cartel arrangement which had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney and which likely had an adverse effect on those businesses that were denied the opportunity of receiving a price competitive offer from either Renegade or Speed-E-Gas during the Relevant Period.
68 Renegade did not accept that the contravening conduct had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney. I reject that contention. It did: see [18] above.
2. Pecuniary penalties
(a) Legislation and proposal
69 Section 76(1)(a)(i) of the Act provides that if the Court is satisfied that a person has contravened a provision of Pt IV of the Act (save for ss 44ZZRF or 44ZZRG), the Court may order that person to pay such pecuniary penalty as the Court determines appropriate, in respect of each relevant act or omission.
70 Section 76(1)(e) of the Act provides that, if the Court is satisfied that a person has been knowingly concerned in, or party to such a contravention, the Court may order that person to pay such pecuniary penalty as the Court determines appropriate, in respect of each relevant act or omission.
71 As noted above, the parties propose that a pecuniary penalty be imposed pursuant to s 76 of the Act upon each of Renegade, Speed-E-Gas, Mr Berman, Mr Smith and Mr Wilson:
1. Upon Renegade for its contravention of ss 44ZZRK and 45 of the Act;
2. Upon Speed-E-Gas for its contravention of ss 44ZZRK and 45 of the Act;
3. Upon Mr Berman and Mr Smith for being accessories to Renegade’s contraventions; and
4. Upon Mr Wilson for being an accessory to Speed-E-Gas’ contraventions.
(b) Contravening conduct - one course of conduct
72 There was no distinction between the conduct of Renegade or Speed-E-Gas which contravened s 44ZZRK of the Act and that which contravened s 45 of the Act. In each case, the conduct was giving effect to the Understanding. Nor was there any distinction between the conduct which resulted in Mr Berman, Mr Smith and Mr Wilson being accessories to those contraventions. In each case, the conduct was them causing the relevant corporation to give effect to the Understanding.
73 Moreover, in each case the conduct should be regarded as a single course of conduct and therefore a single penalty only may be imposed: s 76(3) of the Act and Australian Competition & Consumer Commission v IPM Operation & Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11 (dealing with contraventions of s 45E); Australian Competition and Consumer Commission v ABB Transmission and Distribution (No 2) (2002) 190 ALR 169 at [38]; Australian Competition & Consumer Commission v Rural Press Ltd [2001] FCA 1065 at [19] and Australian Competition & Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238 at [221]-[227].
(c) Other considerations
74 The non-exhaustive mandatory considerations that the Court must have regard to in s 76(1) of the Act in determining the appropriate level of pecuniary penalty are as follows:
1. The nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;
2. The circumstances in which the act or omission took place; and
3. Whether the person has previously been found by the Court in proceedings under [Pt VI] or Pt XIB of the Act to have engaged in any similar conduct.
75 In Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152-3, French J identified the following additional considerations that may be relevant to the assessment of a pecuniary penalty under s 76 of the Act:
1. The size of the contravening company;
2. The degree of power the contravening company 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 Trade Practices Act 1974 (Cth) (TP 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 TP Act in relation to the contravention.
Of course, in the case of natural persons, these considerations may not be relevant or may require modification.
76 Those considerations were approved and expanded upon by the Full Court of the Federal Court in NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 and J McPhee & Son (Australia) Pty Ltd v Australian Competition & Consumer Commission (2000) 172 ALR 532 as follows:
1. The respondent’s financial position: NW Frozen Foods at 297A-B; and
2. Whether the conduct was systematic, deliberate or covert.
A careful reader will notice that is overlap between the various matters identified by the Act and the authorities as relevant to the imposition of a pecuniary penalty.
77 NW Frozen Foods also emphasised (at 298) that cooperation should be given full credit, “particularly in the case of a proceeding under s 76, where the object is to secure compliance with the Act by deterring contravention, a corporation which gives a court reason to believe that this object has been achieved, so far as it is concerned, by its co-operation with the Commission…”.
78 Next, the object of s 76 of the Act. A principal object of a penalty under s 76 is deterrence, both general and specific. The penalty for contravention of the Act:
must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business ... [T]hose engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention.
Singtel Optus Pty Ltd v Australian Competition & Consumer Commission [2012] FCAFC 20 at [62]-[63]. See also Australian Competition & Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54 at [65]-[66]; Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] ATPR 40-091 at 17,896 and CSR Ltd at 52,153.
79 However, a penalty must not be so high as to be oppressive: Stihl Chain Saws at 17,896; NW Frozen Foods at 293; Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9].
80 The process to be applied in arriving at a particular penalty under s 76 of the Act may be summarised as follows:
1. The Court’s assessment of the appropriate penalty is a discretionary judgment based on all relevant factors;
2. Careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the Court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick;
3. It will rarely be appropriate for a Court to start with the maximum penalty and proceed by making a proportional deduction from that maximum;
4. The Court should not adopt a mathematical approach of increments or decrements from a pre-determined range, or assign specific numerical or proportionate value to the various relevant factors;
5. It is not appropriate to determine an “objective” sentence and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities;
6. The Court may not add and subtract item by item from some apparently subliminally derived figure to determine the penalty to be imposed; and
7. Since the law strongly favours transparency, accessible reasoning is necessary in the interests of all, and, while there may be occasions where some indulgence in an arithmetical process will better serve the end, it does not apply where there are numerous and complex considerations that must be weighed.
See TPG Internet v Australian Competition & Consumer Commission (2012) 210 FCR 277 at [146].
81 As noted earlier, the parties have filed statements of agreed facts, joint submissions and have agreed penalties. An approach to penalties sought by agreement of the parties was described by the Full Court in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [53] as follows (and see further [53]-[60]):
(i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.
(ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.
(iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.
(iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more “subjective” matters.
(v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.
(vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.
Those principles were described as emerging from the reasoning in NW Frozen Foods. The views in Mobil Oil and NW Frozen Foods have been adopted in later decisions including Fair Work Ombudsman v A Dalley Holdings Pty Ltd [2013] FCA 509; Tax Practitioners Board v Shanahan [2013] FCA 764; Australian Competition & Consumer Commission v AGL Sales Pty Ltd [2013] FCA 1030; Australian Competition & Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 and Australian Competition & Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336. (Cf Australian Securities & Investments Commission v Ingleby (2013) 93 ACSR 274 where the Court of Appeal of the Supreme Court of Victoria recently criticised as incorrect the approach applied by the Full Federal Court in Mobil Oil and NW Frozen Foods in considering whether to make orders for pecuniary penalties sought by agreement of the parties).
82 The issue of the principles that might be applied in the imposition of penalties when they have been agreed between a regulator and respondent were also addressed in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 1014 at [8]-[9] and [32]-[33] where I stated:
[8] It is not unusual in modern litigation for proceedings commenced by a regulator against a defendant to be resolved and for the parties to jointly approach the Court with an agreed statement of facts. The beneficial consequences of such a resolution are well known: see, by way of example, NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285, 290-291. It has been suggested that cases which involve serious contraventions of the law cannot be “settled” by agreed facts that do not present a fair and accurate picture of the relevant offending to the Court: cf Australian Securities and Investments Commission v Ingleby [2013] VSCA 49 at [31]. So much may be accepted. When this proceeding was settled, the only documents filed with the Court were the originating application and a statement of claim. As a result, in assessing whether the agreed facts and admissions present a fair and accurate picture of the offending conduct, the Court, in the exercise of its judicial power, must satisfy itself that it has sufficient facts and matters to enable it to assess and impose an appropriate penalty: cf Ingleby at [33] citing with approval Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [79]. If the Court forms the view that it does not have sufficient facts and matters, it can and should request the parties to provide additional evidence or information: Mobil Oil at [79].
[9] Consistent with the exercise of judicial power, the first question to be asked is whether the Court does have sufficient facts and matters to enable it to assess and impose a penalty in the proper exercise of that judicial power? ….
...
[32] The parties have agreed the penalties. The Court’s approach to agreed penalties has been the subject of considerable judicial ink: see, by way of example, Mobil Oil at [47]-[60]; Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [45]; and Ingleby.
[33] In the end, the principles to be applied may be simply stated. First, the question of an appropriate penalty for a proven contempt or an established breach of a statutory prohibition is a matter for, and function of, the Courts in the exercise of judicial power. Secondly, contrary to statements in some cases, the role of the Court in addressing an agreed penalty is not to exercise an “appellate” role: Ingleby at [29] and [99]. The role of the trial judge is to give such weight to an agreed penalty as is appropriate and to treat the joint submission as it is – a joint submission – to be considered as a factor, an important factor, in the exercise of judicial power of fixing the appropriate penalty in the circumstances of the particular case. These principles are consistent with the observations of Lockhart J in Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Ltd (1996) ATPR 41-457 at 41,581-41,582. The role of the Court is to assess what it would do itself based on the facts. Whether the Court assesses for itself what is the appropriate penalty and then tests that against the agreed penalty, or the Court asks itself whether the agreed penalty is broadly in accord with what the Court would have done acknowledging that the fixing of quantum – the task is not an exact science. The role of the Court is the same – to impose a penalty that is proportionate to the gravity of the contravening conduct. Much of the current debate about the appropriate approach has descended into a debate about which goes first – the Court assessing the penalty having regard to the agreed penalty or assessing whether the agreed penalty is within the appropriate range. For my part, that debate is distracting. It is distracting because it ignores the important role of the fundamental principles of sentencing that must be considered by a trial judge.
83 I remain of the view there expressed – that the role of the Court is to assess what it would do itself based on the facts. What penalty would the Court impose that is proportionate to the gravity of the contravening conduct? There is no prescribed method. The method will inevitably vary depending on the facts. It is against that background that the question of the imposition of a penalty on each respondent will be addressed in Sections D-I below.
3. Injunctions
84 The parties have agreed upon injunctions under s 80 of the Act. The power of the Court to grant an injunction under s 80 of the Act is broad. It is subject to three limitations:
1. The power is confined by reference to the scope and purpose of the Act. The relief should be designed to prevent a repetition of the conduct for which the relief is sought;
2. As the jurisdiction to grant an injunction is enlivened by an alleged or actual contravention of Pt IV of the Act, there must be a sufficient nexus or relationship between the contravention and the injunction; and
3. The Federal Court exercises judicial power under Ch III of the Constitution in respect of “matters” and therefore the injunction must relate to the case or controversy the subject of the proceeding: Australian Competition & Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 at 202-4.
85 As will become apparent, the terms of the injunctions (as identified in Sections D-H below) are limited by reference to the conduct in contravention of the Act in which the particular respondent has engaged, have a demonstrable nexus to that contravention, and are designed to prevent a repetition of that conduct by that respondent. The injunctions agreed upon are within power and are appropriate to deter a repetition of the contraventions (by attaching the sanctions available for contempt of Court to any repetition of the contraventions): ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 268 (see also at 256).
86 Finally, it is important to note that each injunction excludes, from its scope, conduct which is authorised by the ACCC or is otherwise lawful because of the various exception and exemption provisions of the Act.
4. Disqualification orders
87 An order for disqualification from managing corporations has been agreed between Mr Berman and the ACCC. This section is relevant to Mr Berman only.
88 Provision for the making of such an order is in s 86E of the Act. That section was inserted by the Trade Practices Legislation Amendment Act (No 1) 2006 (Cth) which was assented to on 6 November 2006 and commenced on 1 January 2007 in relation to contraventions of s 86E occurring after that time. As will become apparent, a significant proportion of Mr Berman’s conduct that was the subject of these proceedings, including implementation of the Understanding, occurred after 1 January 2007.
89 Section 86E was considered on an application for orders by consent in Australian Competition & Consumer Commission v Halkalia Pty Ltd (No 2) [2012] FCA 535 at [110]-[112] where Tracey J said:
[110] The ACCC advised the Court that, so far as it is aware, the Court has not previously been asked to make an order of this kind under s 86E. It helpfully drew attention to the principles which had been developed in relation to the banning of officers under ss 206C and 206E of the [Corporations Act 2001 (Cth)]. Section 86E has been modelled on s 206C. They are in identical terms.
[111] The principles which have been developed under the Corporations Act were distilled by Santow J in ASIC v Adler (2002) 42 ACSR 80. One of those principles, namely that banning orders were purely protective in nature and not punitive, was later rejected by the High Court in Rich v ASIC (2004) 220 CLR 129. Otherwise, there is no reason to doubt that these principles will provide useful assistance when the Court is considering opposed applications under s 86E of the Act.
[112] The ACCC’s present application for an order under s 86E is, as has been noted, not opposed by Mr Hann. It is, therefore, sufficient that I record that, having regard to the principles which Santow J identified in Adler, I am satisfied that a 15 year banning order is warranted in the circumstances of the present case. Such an order will be made.
See also Director of Consumer Affairs Victoria v Dimmeys Stores Pty Ltd [2013] FCA 1371.
90 Disqualification orders may be imposed by way of deterrence (both personal and general): Australian Securities & Investments Commission v Vizard (2005) 145 FCR 57 at [35] and Gillfillan v Australian Securities & Investment Commission [2012] NSWCA 370 at [182]-[183].
91 Disqualification orders may also be imposed by way of punishment: Vizard at [35] and Gillfillan at [182]. Longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty: Australian Securities Commission v Donovan (1998) 28 ACSR 583 at 605-6 citing Re Civica Investments Ltd [1983] BCLC 456. In assessing an appropriate length of prohibition, the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public may be relevant considerations: Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561 at 580-2; Australian Securities & Investments Commission v Parkes (2001) 38 ACSR 355 at 385-6; Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd (1999) 30 ACSR 339 at 349-350; Australian Securities Commission v Roussi (1999) 32 ACSR 568. A mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming: Forem-Freeway Enterprises at 351.
92 Disqualification orders are also designed to protect the public from the harmful use of a corporate structure or from use that is contrary to proper commercial standards: see Australian Securities & Investments Commission v Hutchings (2001) 38 ACSR 387 at 395; Pegasus Leveraged Options Group at 581; Donovan at 602 and Re Tasmanian Spastics Association; Australian Securities Commission v Nandan (1997) 23 ACSR 743 at 751.
93 The banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office: Roussi at 570 citing Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 at 525 and Re Gold Coast Holdings Pty Ltd (in liq); Australian Securities & Investments Commission v Papotto (2000) 35 ACSR 107 at 112.
94 Protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors: Roussi at 570; Re Gold Coast Holdings Pty Ltd at 112; Re Tasmanian Spastics Association at 751.
95 It is therefore necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct: Donovan at 607; Parkes at 386.
96 In Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 at 525 the Court stated that the following matters have relevance (although it is not an exhaustive list):
1. The character of the defendant;
2. The nature of the breach(es);
3. The structure of the companies and the nature of their business;
4. The interests of shareholders, creditors and employees;
5. The risk to others from the defendant continuing as a company director;
6. The honesty and competence of the defendant;
7. Hardship to the defendant and their personal and family business interests; and
8. The defendant’s appreciation that future breaches could result in fresh proceedings.
See also Roussi at 570-1; Re Gold Coast Holdings Pty Ltd at 111.
97 Where it is proposed that both a pecuniary penalty and a disqualification period be imposed upon an individual the Court is required to consider both the pecuniary penalty and the disqualification order as part of the proposed penalty as a whole in deciding whether each order is appropriate: Kerkhoffs v Registrar of Aboriginal and Torres Strait Islander Corporations [2014] FCAFC 66 at [17]-[21]. That is the position here in relation to Mr Berman.
5. Training program
98 The ACCC and Renegade have agreed that orders should be made requiring Renegade to update and maintain its compliance and education / training program. In addition, the ACCC and Mr Berman have agreed that orders should be made requiring Mr Berman to procure and attend practical trade practices training.
99 Section 86C of the Act permits the Court to make non-punitive orders, which include “probation orders”. An order to establish a compliance program and / or an education or training programme is a “probation order”. Such programmes are designed to ensure employees’ awareness of their responsibilities in relation to the contravening conduct or similar or related conduct.
100 In exercising the Court’s discretion whether to make such a probation order, relevant factors may include:
1. Whether it is necessary in light of the particular circumstances of the contravention, other relief proposed to be granted, and in particular in light of any existing compliance program and steps taken since the contravention occurred: Australian Competition & Consumer Commission v Wizard Mortgage Corp Ltd [2002] FCA 1317 and Australian Competition & Consumer Commission v Harbin Pty Ltd [2008] FCA 1792;
2. Whether a clear benefit will be delivered, in relation to the respondent’s future conduct: Australian Competition & Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 at [214]. Where there is evidence of a compliance program or training in place, in the face of prolonged and deliberate violation of trade practices laws, such an order may be entirely appropriate to safeguard against future violations: Australian Competition & Consumer Commission v Pepe’s Ducks Ltd [2013] FCA 570 at [53]-[55];
3. Whether the scope of the proposed order is focussed on the particular contravening conduct: Z-Tek Computer Pty Ltd at 205;
4. That the scope of the order be adequately defined to enable it to be easily ascertained whether the order has not been complied with: Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [24];
5. That the scope of the order be within the Court’s powers: BMW Australia Ltd.
101 Courts are reluctant to order individuals to implement a compliance program: see Francis. Instead, it is appropriate to make orders requiring individuals to attend training programmes: see for example Australian Competition & Consumer Commission v Seal-A-Fridge Pty Ltd [2010] FCA 525 at [186].
D. DECLARATIONS AND ORDERS AGAINST RENEGADE
102 The draft orders proposed by the ACCC and Renegade contained declarations, the imposition of a pecuniary penalty, an injunction, a training order and an order relating to costs. The declarations and orders, amended by the Court, are set out in paragraphs 1-7 of Annexure A. Each will be addressed in turn.
1. Declarations
103 Renegade admitted that the Understanding existed throughout the Relevant Period: see Section B(4) above. Renegade admitted that it implemented the Understanding throughout the Relevant Period: see Section B(5), B(6) and B(8) above. By the conduct at Sections B(5), B(6) and B(8) above, Renegade gave effect to the Stay Away Provision of the Understanding and the Replacement Provision of the Understanding. The conduct of Mr Berman and Mr Smith caused Renegade to give effect to both the Stay Away Provision of the Understanding and the Replacement Provision of the Understanding.
(a) Declaration 1
104 The declaration at paragraph 1 of Annexure A is that, by the conduct specified, Renegade contravened s 45(2)(b)(i) of the Act.
105 Section 45(2)(b)(i) of the Act provides that a corporation shall not give effect to a provision of a contract, arrangement or understanding if that provision is an exclusory provision.
106 An “exclusionary provision” is defined in s 4D of the Act as follows:
(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:
(a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and
(b) the provision has the purpose of preventing, restricting or limiting:
(i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or
(ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;
by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.
(2) A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.
107 Each of the Stay Away Provision and the Replacement Provision was an exclusionary provision within the meaning of s 4D of the Act. Each of the Stay Away Provision and the Replacement Provision had the purpose of preventing, restricting or limiting the supply of Forklift Gas to those persons or class of persons which were Speed-E-Gas customers in Sydney. Renegade admitted in its defence that each of the Stay Away Provision and the Replacement Provision was such a provision. Next, by giving effect to each of those provisions (see Sections B(5), (6) and (8) above), Renegade contravened s 45(2)(b)(i) of the Act. Renegade admitted in its defence that it had contravened s 45(2)(b)(i) of the Act. The proposed declaration in paragraph 1 is both appropriate and necessary.
(b) Declaration 2
108 The declaration at paragraph 2 of Annexure A is that, by the conduct specified, Renegade contravened s 44ZZRK of the Act.
109 Section 44ZZRK of the Act provides:
(1) A corporation contravenes this section if:
(a) a contract, arrangement or understanding contains a cartel provision; and
(b) the corporation gives effect to the cartel provision.
(2) Paragraph (1)(a) applies to contracts or arrangements made, or understandings arrived at, before, at or after the commencement of this section.
110 A cartel provision is defined in s 44ZZRD:
(1) For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if:
(a) either of the following conditions is satisfied in relation to the provision:
(i) the purpose / effect condition set out in subsection (2);
(ii) the purpose condition set out in subsection (3); and
(b) the competition condition set out in subsection (4) is satisfied in relation to the provision.
…
Purpose condition
(3) The purpose condition is satisfied if the provision has the purpose of directly or indirectly:
(a) preventing, restricting or limiting:
(i) … ; or
(ii) … ; or
(iii) the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the parties to the contract, arrangement or understanding; or
(b) allocating between any or all of the parties to the contract, arrangement or understanding:
(i) the persons or classes of persons who have acquired, or who are likely to acquire, goods or services from any or all of the parties to the contract, arrangement or understanding; or
…
Competition condition
(4) The competition condition is satisfied if at least 2 of the parties to the contract, arrangement or understanding:
(a) are or are likely to be; or
(b) …;
in competition with each other in relation to:
(c) if paragraph … (3)(b) applies in relation to a supply, or likely supply, of goods or services – the supply of those goods or services; or
…
(h) if subparagraph (3)(a)(iii) applies in relation to preventing, restricting or limiting the supply, or likely supply, of goods or services – the supply of those goods or services; or
…
111 Two conditions in s 44ZZRD must be satisfied in the present case for the Stay Away Provision and the Replacement Provision to be a cartel provision – the purpose condition in subs (3) and the competition condition in subs (4).
112 The competition condition in s 44ZZRD(4) is satisfied. The Understanding is concerned with the supply of Forklift Gas by Renegade and Speed-E-Gas. During the Relevant Period, Renegade and Speed-E-Gas were competitors in the supply of Forklift Gas in Sydney: see Section B(3) above.
113 Next, the purpose condition in s 44ZZRD(3)(a)(iii) of the Act. Both the Stay Away Provision and the Replacement Provision meet this condition because each prevents, restricts or limits the supply or likely supply of Forklift Gas to Speed-E-Gas customers by Renegade which is a party to the Understanding. Renegade admitted that each of the Stay Away Provision and the Replacement Provision satisfied the purpose condition in s 44ZZRD(3)(a)(iii) of the Act.
114 Further, both the Stay Away Provision and the Replacement Provision additionally meet the purpose condition in s 44ZZRD(3)(b)(i) because each has the purpose of allocating between Renegade and Speed-E-Gas the persons or classes of persons who were likely to acquire goods or services (Forklift Gas) from each of them. Renegade admitted that each of the Stay Away Provision and the Replacement Provision satisfied the purpose condition in s 44ZZRD(3)(b)(i) of the Act.
115 Accordingly, each of the Stay Away Provision and the Replacement Provision is a cartel provision within the meaning of s 44ZZRD of the Act.
116 The Understanding was an understanding (see Australian Competition & Consumer Commission v TF Woollam & Son Pty Ltd (2011) 196 FCR 212) which contained two cartel provisions – the Stay Away Provision and the Replacement Provision – for the purposes of s 44ZZRK (see [109] above). By giving effect to the Understanding and each of those provisions, Renegade contravened s 44ZZRK of the Act. Renegade admitted those contraventions. The proposed declaration in paragraph 2 is both appropriate and necessary.
(c) Conclusion
117 The declarations at paragraphs 1 and 2 of Annexure A have utility. In the absence of them, the contravening conduct would not otherwise be clearly identified. There is also public interest to be served in making the declarations. They will serve as a warning to others who may contemplate making or giving effect to contracts, arrangements or understandings between competitors by which they allocate customers between them. Given the seriousness of the conduct and the period over which it occurred, this is a case where the circumstances call for the marking of the Court's disapproval of the contravening conduct. Renegade’s conduct contravened the Act through a deliberate, largely covert, long standing cartel arrangement, which had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney and which likely had an adverse effect on those businesses that were denied the opportunity of receiving a price competitive offer from Renegade during the Relevant Period and from 24 July 2009 to July 2011.
2. Pecuniary penalty
118 The ACCC seeks the imposition of a pecuniary penalty. Renegade and the ACCC propose that Renegade be ordered to pay a pecuniary penalty of $4.8 million in respect of the contraventions referred to in Section D(1) above.
(a) Principles and maximum penalty
119 It is against the background of the principles summarised at [62] to [63] and Section C(2) above, that the question of the imposition of a pecuniary penalty against Renegade is assessed. It was agreed by the ACCC and Renegade that the maximum penalty payable for a single course of conduct for a corporation in the circumstances of the present case is $10 million: s 76(1A)(aa)(i) of the Act.
(b) Nature and extent of contravening conduct
120 Although the conduct constituted a single course of conduct (Section C(2)(b) above and s 76(3) of the Act), that single course of conduct affected or potentially affected a very large number of Forklift Gas customers in Sydney during the Relevant Period. Indeed, the conduct was central to the organisation of Renegade’s Sydney Forklift Gas sales functions: see Section B(2) above (Managers of Renegade and Speed-E-Gas), Section B(3) above (Renegade and Speed-E-Gas Operations), Section B(4) above (Formation of the Understanding), Section B(5) above (Communicating to implement the Understanding), Section B(6) above (Renegade’s internal implementation of the Understanding) and Section B(8) above (Implementation of the Understanding by Sales Representatives). Moreover, the conduct would have continued: see Section B(9) above.
121 Implementation of the Understanding was a key aspect in how Renegade sales representatives approached customers. That implementation was actively managed by Mr Berman, Mr Smith and Mr Grayson.
122 Renegade implemented the Understanding through conduct which affected Renegade’s sales activities in Sydney with respect to all customers known by it or its sales staff to be Speed-E-Gas customers including:
1. Customers which sales representatives did not approach and about whom no records were made, because they had green coloured cylinders in their yard or were otherwise known to be Speed-E-Gas customers;
2. Customers that were approached but about whom records were not created because they were to be left alone.
(c) Amount of loss or damage caused
123 It is not possible to quantify the number of customers denied the opportunity of a price reduction for Forklift Gas in Sydney due to the existence and implementation of the Understanding, or the period of time for which those customers were denied that opportunity.
124 However, having regard to the facts and matters set out at Section B(1) above (Forklift Gas), [13]-[16] and [18] above and that the number of potential customers that could be affected grew over the Relevant Period, the inference to be drawn is that the existence and implementation of the Understanding resulted in a very large number of customers being denied a competitive offer that otherwise would have been made. The extent of the loss or damage is able to be assessed to a limited extent by the fact that, as Renegade described the position, when a discounted price was offered by one of the two companies to a customer of the other, the customer who was the subject of such competition typically obtained a discount in the order of $7 or 20% (the average effect of such instances of competition - again, relative to original price): see [15] above.
125 Further, it is important to note that, as described at [16] above, Renegade regularly increased its prices for all, or almost all of its LPG customers in line with increases in an index known as the Saudi Gate Price. Those increases occurred as frequently as monthly when the Saudi Gate Price was rising, but only on one occasion when the Saudi Gate Price was not rising. The Saudi Gate Price fluctuated both up and down from time to time. Except for high volume customers, Renegade did not generally reduce its prices when the Saudi Gate Price reduced. As a result, over time the margin earned by Renegade from each customer would usually increase.
(d) Size of Renegade and its financial position
126 Renegade is a private company. The equity is tightly held. Mr Mark Michalowsky holds 90% and Mr Berman holds 10%. Renegade is substantial and profitable. Renegade’s total turnover for the 5 year period from 2006/2007 to 2010/2011 was substantial. Over the same period, Renegade derived a substantial estimated gross profit.
127 During the Relevant Period, Renegade had the following number of full time equivalent employees:
| Year | Total (including Sydney) | Sydney (including Corporate) |
| 2011 | 132 | 77 |
| 2010 | 113 | 66 |
| 2009 | 96 | 65 |
| 2008 | 76 | 57 |
| 2007 | 64 | 55 |
| 2006 | 60 | 47 |
128 Renegade and the ACCC propose that a pecuniary penalty of $4.8 million be paid over 52 months. That issue is addressed at [154] below.
(e) Degree of power of Renegade – market share and ease of entry into market
129 The ACCC submitted, and I accept, that Renegade had market power in the Forklift Gas market in Sydney. Renegade’s position was that between the two, they supplied between 50% and 70% of the Forklift Gas market in Sydney: see [18] above. Renegade’s position was that it supplied between 20% and 30% of the Forklift Gas market in Sydney.
130 There is little direct evidence of barriers to entry in the Forklift Gas market in Sydney. However, the following facts and matters are relevant:
1. The most common system for supply of LPG for forklifts is cylinder exchange: see [6] above;
2. Renegade (and Speed-E-Gas and other suppliers of Forklift Gas in Sydney) retain ownership of the cylinders in which the LPG is supplied as Forklift Gas, collect empty LPG cylinders when delivering full cylinders of LPG and only refill the LPG cylinders they own (see [7] above);
3. Renegade and Speed-E-Gas require only one filling station to service Sydney (see [13] above).
The ACCC submits, and I find, that the operation of a Forklift Gas supply business involves substantial capital investment in cylinders and a gas filling depot. A Forklift Gas supply business also involves substantial capital investment in delivery vehicles.
131 Next, there are commercial (delivery) synergies in selling Forklift Gas and 45kg cylinders used for domestic gas supply together because the distribution method for each size of cylinder is the same. The more customers the better opportunity there is to organise distribution runs and thereby minimise delivery costs. Therefore, the absence of an established customer base itself constitutes a barrier to entry to the Forklift Gas market in Sydney because it impedes a more efficient organisation of distribution runs: see [19] above.
132 Finally, in this context it is necessary to record that the Understanding operated for a number of years and, absent Renegade and Speed-E-Gas having a power in that market, the Understanding would not have operated or, at the very least, would have been less successful.
(f) Circumstances in which conduct took place
133 The circumstances in which the conduct took place include:
1. Generally customers who had obtained Forklift Gas from a particular supplier would continue to obtain Forklift Gas from that supplier unless and until the customer decided to change to another single supplier (see [7] above);
2. The identity of a customer’s supplier of Forklift Gas was usually apparent to sales representatives of competitors of that supplier who observed the colouring of any LPG cylinders stored at the customer's premises or in use on a forklift (see [8] above);
3. When a customer changed suppliers of Forklift Gas, the identity of the outgoing supplier was apparent to the incoming supplier from the marking of the empty cylinders which were present at the customer’s premises at the time of change of supplier (see [9] above).
4. Renegade’s position was that, during the Relevant Period, it supplied between 20% and 30% of the Forklift Gas supplied in Sydney and Speed-E-Gas between 30% and 40%; with the balance of the Forklift Gas Market supplied by a number of other suppliers. The other main competitors in the supply of Forklift Gas were BOC, Elgas and Kleenheat (see [9] and [18] above).
5. During the Relevant Period, Kleenheat, Elgas and BOC were active in selling Forklift Gas in Sydney and Renegade and Speed-E-Gas won customers from, and lost customers to, each of Kleenheat, Elgas and BOC (see [9] above). The central commercial benefits to Renegade of giving effect to the Understanding during the Relevant Period were:
5.1 to reduce the frequency of price competitive offers being made by Speed-E-Gas sales representatives cold calling Renegade’s customers;
5.2 to maintain its pricing practices (see [16] above) which usually resulted in an improvement of its margins earned over time. Renegade succeeded in increasing the price of Forklift Gas over time.
(g) Deliberateness of contravention, period over which it extended, seniority of staff involved and whether conduct systematic or covert
134 Renegade’s conduct was largely covert, considered, systematic and deliberate, and it extended over a substantial period of time. Renegade implemented and gave effect to the Understanding as a direct result of the conduct of Mr Berman, Renegade’s most senior official (and part-owner) and Mr Smith: see Section B(4) (Formation of the Understanding), Section B(5) (Communicating to implement the Understanding) and Section B(6) (Renegade’s internal implementation of the Understanding) above.
135 The conduct would have continued: see Section B(9) above. The conduct also must be considered in the context of Renegade’s corporate culture which fostered this conduct. That issue is addressed next.
(h) Renegade’s corporate culture
136 Renegade’s corporate culture was not conducive to compliance with the Act. Indeed, Renegade’s corporate culture was influenced by Mr Berman and Mr Smith’s systematic non-compliance. During the Relevant Period, there were no relevant educational programs, systems or processes directed at ensuring or encouraging compliance with competition or consumer laws.
137 In August 2008, Mr Berman presented a business plan to Renegade’s board. The Business Plan stated:
LPG (specifically forklift gas) is still [Renegade’s] core business and the most effort will be spent increasing our market share. While expansion in Sydney remains competitive especially with not aggressively attacking Speed-e, there should be no reasons restricting Queensland’s growth …
One operator that affects growth in New South Wales in forklift gas is Speed-e. As an independent they were as aggressive as we were and we’ve made a commercial decision not to target their customers, as we would face retaliation. Since they have been bought by Origin we have maintained that approach as previous influential employees still remain. The effect on our growth is that they probably control about 50% of the forklift gas market. As we probably control 30% that leaves only 20% available for growth.
(Emphasis added.)
Renegade led no other evidence of what transpired at the board meeting or the board’s reaction to the business plan.
138 Finally, it must be recalled that in September and October 2008, Renegade underlined to sales representatives that they were required to implement the Understanding and that if they did not do so they would be denied sales commissions and at risk of employment sanctions: see [45]-[47] above.
139 The ACCC submitted, and I find, that the corporate governance of Renegade was deficient. There was nothing to suggest that any aspect of Renegade’s corporate culture would militate against the culture of non-compliance. Indeed, the only inference open is that Renegade’s corporate culture fostered a culture of non-compliance.
(i) Cooperation with the ACCC by Renegade
140 The ACCC executed a search warrant at Renegade’s premises in June 2011 and, from that time, Renegade was on notice that the ACCC was investigating the existence and implementation of the Understanding.
141 What was Renegade’s response? Renegade did not indicate any intention to assist the ACCC under the ACCC Cooperation Policy for Enforcement Matters, it did not provide any documents or information to the ACCC voluntarily and did not assist the ACCC in its investigation in any other way voluntarily.
142 From June 2011 to June 2012, Renegade provided the ACCC with extensive documentation and information in response to compulsory notices issued by the ACCC and related correspondence. When it was compelled to answer questions in writing pursuant to ss 155(1)(a) and (b) of the Act, Renegade stated:
During the period 1 November 1998 to 17 June 2011 there have not been any communications between Renegade and Speed-E-Gas relating to the following issues:
(a) preventing, restricting or limiting the supply, or likely supply of LPG;
(b) allocating between either or both Renegade ... and Speed-E-Gas, LPG customers who were acquired, or were likely to acquire LPG; or
(c) any Arrangement between Renegade … and Speed-E-Gas other than in respect of those issues identified in paragraphs 1 to 5 above.
(Original emphasis.)
That answer was reviewed and approved by Mr Berman before it was provided to the ACCC and it was false. It must be recalled that Mr Berman had engaged in extensive communications with Mr Hobby and Mr Wilson relating to the Understanding and its implementation with respect to individual customers: see Section B(5) (Communicating to implement the Understanding) above.
143 Six of Renegade’s then officers and directors were examined by the ACCC pursuant to s 155(1)(c) of the Act. All were represented by lawyers who did not represent Renegade. There is no evidence that Renegade did anything to facilitate their attendance or examination.
144 These proceedings were commenced on 23 August 2012 without prior notice to Renegade. The ACCC submitted that the events that transpired over the 23 months following the commencement of the proceedings demonstrated that prior notice could not have resulted in resolution of the proceedings. I agree.
145 Renegade did not bring any interlocutory application except to seek mediation and, at each directions hearing, Renegade consented to the directions sought by the ACCC. The ACCC submits, and I agree, that there is no evidence that Renegade could have taken any different course consistently with s 37M of the FCA.
146 On 23 May 2013, after Renegade had received all of the ACCC’s affidavit evidence in relation to the conduct alleged to have been engaged in by Renegade (but before Speed-E-Gas had reached agreement with the ACCC and consequently filed its amended defence on 19 September 2013), Renegade made an offer to settle the proceedings on terms including payment of a pecuniary penalty of $2 million and declarations, injunctions and other relief in terms similar to the relief now the subject of the proposed orders. The ACCC submitted that Renegade contended that a penalty at that level was appropriate on the basis, amongst other things, that (1) no loss or damage, or other adverse economic effects, resulted from Renegade’s conduct, (2) Renegade’s conduct related only to a small geographic area, (3) Renegade did not deliberately intend to contravene and (4) Renegade’s conduct was not systemic and covert. Renegade proposed that if the ACCC was not to accept the offer, the proceedings be mediated and foreshadowed to the ACCC that Renegade would be filing only limited evidence on market and contextual matters.
147 The ACCC did not accept the offer. Contentions (1), (3) and (4) were not accurate: see Section D(2)(b), Section D(2)(c) and Section D(2)(g) above. Loss or damage necessarily resulted from Renegade’s conduct and, although Renegade’s conduct was limited to Sydney, that market was not small. Renegade’s conduct also was intentional, systemic and covert.
148 On 2 July 2013, the Court ordered mediation on the application of Renegade. Renegade filed a lay witness statement on 9 August 2013. The mediation in August 2013 was unsuccessful. On 19 September 2013, the substantive proceedings were set down for trial on 8 September 2014, on an estimate of five weeks.
149 The ACCC and Renegade settled the proceedings on 25 July 2014. The ACCC and Renegade submitted, and I accept, that Renegade is entitled to a modest discount for settling the proceedings six weeks prior to trial thereby saving the costs of the Court and the further costs of the ACCC in trial preparation and conduct of the trial. The ACCC further submitted, and I accept, that there should be no further discount for any other aspect of Renegade’s conduct in the investigation or these proceedings.
(j) Engaged in similar conduct in the past?
150 Renegade has not previously been found to have contravened the Act. However, it must be recalled that the Understanding was formed prior to the Relevant Period.
(k) Other considerations
151 The ACCC submitted that the conduct of Renegade and Speed-E-Gas was such that the penalty, without discount, should be set at $5 million, the mid-point of the statutory range. The conduct was serious and protracted but it did not affect the whole market, and the affected market was constrained by narrow product dimension (Forklift Gas). I agree.
152 The ACCC also submitted that a discount of only 4% (off the headline penalty of $5 million) was appropriate because (1) all respondents other than Renegade had settled with the ACCC by September 2013 and (2) although Renegade made an offer to settle in May 2013 (which was rejected), there was nothing that had occurred between May 2013 and July 2014 that could explain why the “plea” communicated in July 2014 was not made in May 2013. July 2014 was when Renegade ultimately settled with the ACCC on the terms set out in paragraphs 1-7 of the draft orders.
(l) Conclusion
153 In all the circumstances, it is appropriate that Renegade be ordered to pay to the Commonwealth a pecuniary penalty of $4.8 million.
154 Paragraph 7 of the draft orders provides that Renegade will pay the pecuniary penalty and the costs by instalments over 52 months. That is a long time. The joint submission filed by the ACCC and Renegade (and the Individuals) records that “the fact that Renegade consents to those orders indicates that its owners and senior management have determined that it has the financial capacity to comply with the order provided that the payment terms proposed … are approved”. No evidence was adduced in relation to that contention. It is unable to be tested. That is unfortunate. Each instalment (payable each 13 months) equates to a significant proportion of the yearly net profit of Renegade over the last five years. On balance, I am persuaded that the order for payment by instalments is appropriate.
3. Injunction
155 The injunction sought by agreement is in paragraph 4 of the draft orders. Consistent with the principles set out in Section C(3) above, it is appropriate to be made. The injunction is within power. The terms of the injunction are designed to prevent a repetition of the conduct for which relief was sought, there is a direct nexus between the contravention and the injunction, the terms of the injunction are limited by reference to the contravention of the Act in which Renegade has engaged and it is designed to act as a deterrent. Finally, the terms of the injunction exclude conduct authorised by the ACCC or conduct which is otherwise lawful. The injunction will be granted in the terms set out in paragraph 4.
4. Compliance program
156 Renegade has implemented a competition and consumer law compliance and training program under the guidance of its solicitors. That program continues to operate. Paragraph 5 of the Orders requires Renegade to update its compliance and education / training program. Consistent with the earlier principles (see Section C(4) above), that order is appropriate.
5. Costs
157 Paragraph 6 of the draft orders records an agreement between the ACCC and Renegade in relation to costs. That order will be made.
E. DECLARATIONS AND ORDERS AGAINST SPEED-E-GAS
158 The draft orders proposed by the ACCC and Speed-E-Gas contained declarations, the imposition of a pecuniary penalty, an injunction and an order relating to costs. The orders, amended by the Court, are set out in paragraphs 8-12 of Annexure A. Each will be addressed in turn.
1. Declarations
(a) Declaration 1
159 The declaration at paragraph 8 of Annexure A concerns Speed-E-Gas’ conduct in dealing with potential customers and in communicating with Renegade for the purposes of implementation of the Understanding.
160 Speed-E-Gas admitted that throughout the Relevant Period, in its dealings concerning prospective customers who were Renegade customers in Sydney, Speed-E-Gas, for the reason they were Renegade customers:
1. Did not approach the customer;
2. Did not offer to supply or declined to supply Forklift Gas to the customer; or
3. Made offers to supply Forklift Gas to the customers only at prices that Speed-E-Gas knew were not likely to induce the customers to change suppliers.
161 Speed-E-Gas also admitted that throughout the Relevant Period, Speed-E-Gas implemented the Understanding by adopting a practice whereby its sales representatives, for the reason that the customers were Renegade customers:
1. Stayed away; or
2. Did not offer to supply or declined to supply Forklift Gas; or
3. Made offers to supply Forklift Gas at prices that Speed-E-Gas knew were not likely to induce the customers to change suppliers.
162 Although Mr Hobby and Mr Wilson could have changed that practice or, in the case of Mr Wilson, could have attempted to change that practice by recommending such a change to Mr Hobby or refusing to implement the practice, they did not do so at any time before June 2011, when the ACCC conducted a raid of the Speed-E-Gas premises as part of its investigation into the Understanding.
163 Instead, throughout the Relevant Period, Speed-E-Gas consistently implemented the Understanding by providing instruction to Speed-E-Gas sales representatives on the sales approach to be adopted in dealing with customers which was consistent with the practice of staying away or not offering to supply each other’s Forklift Gas customers.
164 The scope of the communications between Mr Berman and Mr Smith on behalf of Renegade and Mr Hobby or Mr Wilson on behalf of Speed-E-Gas were admitted by Speed-E-Gas and are summarised at Section B(5) (Communicating to implement the Understanding) above.
165 By engaging in the conduct with customers the subject of the declaration at paragraph 8, Speed-E-Gas gave effect to the Stay Away Provision of the Understanding.
166 As we have seen, s 45(2)(b)(i) provides that a corporation shall not give effect to a provision of a contract, arrangement or understanding if that provision is an exclusionary provision. “Exclusionary provision” is defined in s 4D of the Act: see [106] above.
167 Each of the Stay Away Provision and the Replacement Provision had the purpose of preventing, restricting or limiting the supply of Forklift Gas to those persons or that class of persons which were Renegade customers in Sydney. It follows that each of the Stay Away Provision and the Replacement Provision was an exclusionary provision within the meaning of s 4D of the Act. This was admitted by Speed-E-Gas in its defence. By giving effect to those provisions (see Sections B(5), B(7) and B(8) above) Speed-E-Gas contravened s 45(2)(b)(i) of the Act. Speed-E-Gas admitted in its defence that it had contravened s 45(2)(b)(i) of the Act. The proposed declaration in paragraph 8 is both appropriate and necessary
(b) Declaration 2
168 The declaration at paragraph 9 of Annexure A concerns Speed-E-Gas’ contraventions of s 44ZZRK.
169 Speed-E-Gas admitted in its defence that each of the Stay Away Provision and the Replacement Provision was a purpose condition within the meaning of both ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i). As explained in Section D(1)(b) above, each of the Stay Provision and the Replacement Provision was a cartel provision within the meaning of s 44ZZRD. Further, as explained in that section, the Understanding was an understanding (see TF Woollam & Son) which contained two cartel provisions – the Stay Away Provision and the Replacement Provision for the purposes of s 44ZZRK. By giving effect to the Understanding and each of those provisions, Speed-E-Gas contravened s 44ZZRK of the Act. Speed-E-Gas admitted those contraventions. The proposed declaration in paragraph 9 is both appropriate and necessary.
(c) Conclusion
170 The declarations at paragraphs 8 and 9 of Annexure A have utility. In the absence of them, the contravening conduct would not otherwise be clearly identified. There is also public interest to be served in making the declarations. They will serve as a warning to others who may contemplate making or giving effect to contracts, arrangements or understandings between competitors by which they allocate customers between them. Given the seriousness of the conduct and the period over which it occurred, this is a case where the circumstances call for the marking of the Court’s disapproval of the contravening conduct. Speed-E-Gas’ conduct contravened the Act through a deliberate, largely covert, long standing cartel arrangement, which had the potential to adversely affect a high proportion of manufacturing and distribution businesses across Sydney and which likely had an adverse effect on those businesses that were denied the opportunity of receiving a price competitive offer from Speed-E-Gas during the Relevant Period and from 24 July 2009 to July 2011.
2. Pecuniary penalty
171 The ACCC seeks the imposition of a pecuniary penalty. Speed-E-Gas and the ACCC propose that Speed-E-Gas pay a pecuniary penalty of $3.1 million.
(a) Principles and maximum penalty
172 It is against the background of the principles summarised at [62] to [63] and Section C(2)above, that the question of the imposition of a pecuniary penalty against Speed-E-Gas is assessed. It was agreed by the ACCC and Speed-E-Gas that the maximum penalty payable for a single course of conduct for a corporation in the circumstances of the present case is $10 million: s 76(1A)(aa)(i) of the Act because none of the circumstances in ss (ii) or (iii) are satisfied.
(b) Nature and extent of contravening conduct
173 Although the conduct constituted a single course of conduct (Section C(2)(b) above and s 76(3) of the Act), that single course of conduct affected or potentially affected a very large number of Forklift Gas customers in Sydney during the Relevant Period.
174 Implementation of the Understanding was a key aspect of how Speed-E-Gas’ sales representatives approached customers: see Section B(7) above. As we have seen, that implementation was actively managed by Mr Hobby and by Mr Wilson.
175 Mr Hobby and Mr Wilson sought to keep secret and covert from all other employees of Speed-E-Gas and Origin the existence of the Understanding as distinct from their requirement that sales staff comply with Mr Wilson’s instructions.
176 The ACCC executed search warrants in June 2011 at Speed-E-Gas’ premises. The conduct continued for a long time and is likely to have continued while the relevant people remained in the Speed-E-Gas business.
177 Renegade and Speed-E-Gas maintained the Understanding throughout the Relevant Period for the purposes of allocating Forklift Gas customers between themselves and restricting or limiting the supply of Forklift Gas to a party’s customers by the other party. Speed-E-Gas’ general approach of staying away from Renegade customers and Renegade’s approach of staying away from Speed-E-Gas’ customers were the principal components of the Understanding and occurred on a large number of occasions.
(c) Amount of loss or damage caused
178 As noted earlier, it is not possible to quantify the number of customers denied the opportunity of a price reduction for Forklift Gas in Sydney due to the existence and implementation of the Understanding, or the period of time for which those customers were denied that opportunity..
179 However, having regard to the facts and matters set out at Section B(1) above (Forklift Gas), [13]-[14] and [17]-[18] above (except where it is noted that Renegade advanced a particular position) and that the number of potential customers that could be affected grew over the Relevant Period, the inference to be drawn is that the existence and implementation of the Understanding resulted in a large number of customers being denied a competitive offer that otherwise would have been made. Speed-E-Gas would usually offer prices of about $21 per cylinder to win the business of potential Forklift Gas customers: see [14] above. The average prices offered by Speed-E-Gas over the relevant period were consistently higher than this.
180 Speed-E-Gas accepted that an effect of the conduct in issue was to reduce and / or delay the occasions upon which Renegade might compete with Speed-E-Gas to supply Forklift Gas to customers of Speed-E-Gas.
181 Further, it is important to note that, as described at [17] above, Speed-E-Gas increased its list prices from time to time, usually in response to increases in the Saudi Gate Price. Increases in list prices were calculated so that increases in the cost of LPG and Speed-E-Gas’ own operating costs were accommodated, so that even with negotiated discounts to customers, it was intended that Speed-E-Gas would be able to earn a profit on sales.
(d) Size of Speed-E-Gas and its financial position
182 Speed-E-Gas has carried on a forklift cylinder exchange business in Sydney since the early 1990’s, and still does. It has two offices, one based in Minto, Sydney and the other in Newcastle. At all relevant times, less than 50 people have worked for the Speed-E-Gas business.
183 On 1 March 2006, Origin acquired the Speed-E-Gas business by the purchase of all issued shares in Speed-E-Gas. Integration of some aspects of the Speed-E-Gas business within Origin has occurred over time, however, the Speed-E-Gas forklift business, and sales to commercial and domestic customers of Speed-E-Gas, were not integrated within Origin.
184 If a contravenor is part of a large corporate group, the size of its parent company may be a relevant factor in the exercise of the Court’s discretion only where there is evidence that the parent company had some responsibility for the conduct of the respondent, or where the contravenor puts in issue its ability to meet a penalty: Schneider Electric (Aust.) Pty Ltd v Australian Competition & Consumer Commission (2003) 127 FCR 170; Australian Competition & Consumer Commission v Fila Sport Oceania Pty Ltd (admin appt’d) [2004] FCA 376; Global One Mobile Entertainment Pty Ltd v Australian Competition & Consumer Commission [2012] FCAFC 134.
185 Speed-E-Gas does not contend that it cannot pay the proposed penalty. Further, in this case, there is no evidence that Origin had any responsibility for the conduct of Speed-E-Gas: the ACCC and Speed-E-Gas agree that the impugned conduct commenced prior to Origin’s acquisition of Speed-E-Gas, the conduct the subject of the proceedings was not known about by any of the Origin appointed directors of Speed-E-Gas during the period of pleaded conduct, and no executives of Origin other than Mr Wilson and Mr Hobby were involved in the conduct. In this case, the size of Origin is not relevant to the penalty to be imposed on Speed-E-Gas.
186 The evidence of Speed-E-Gas’ net profit after tax arising from the Speed-E-Gas business attributable to the sale of Forklift Gas in Sydney for the Relevant Period was less than satisfactory. The evidence rose no higher than the net profit after tax was “somewhere between an aggregate loss of $[X] and an aggregate profit of $[Y]”. Those figures were prepared using assumptions about cost allocation to determine the profitability for that part of the Speed-E-Gas business relevant to the Understanding. The evidence explains that a high and low range were provided because the “assumptions influence the level of profitability”. Those figures were less than informative.
(e) Degree of power of Speed-E-Gas – market share and ease of entry into market
187 This consideration has been addressed in Section D(2)(e) above. Except where it is stated that a position was relevant to Renegade, that section is also relevant to Speed-E-Gas. In addition, it is appropriate to record that Speed-E-Gas accepted that during the Relevant Period, Renegade and Speed-E-Gas had the two largest volumes of sales of Forklift Gas in Sydney: see [18] above. It had market power in the Forklift Gas market in Sydney.
(f) Circumstances in which conduct took place
188 This consideration has been addressed in Section D(2)(f) above. Except where it is stated that a position is relevant to Renegade, that section is also relevant to Speed-E-Gas. In addition, it is appropriate to record that Speed-E-Gas accepted that Renegade and Speed-E-Gas had the two largest volumes of sales of Forklift Gas in Sydney: see [18] above. Further, Speed-E-Gas accepted that an effect of the conduct in issue was to reduce and / or delay the occasions on which Renegade might compete with Speed-E-Gas to supply Forklift Gas to customers of Speed-E-Gas.
(g) Deliberateness of contravention, period over which it extended, seniority of staff involved and whether conduct systematic or covert
189 During the Relevant Period, Speed-E-Gas’ conduct was deliberate, systematic, covert and extended over a substantial period of time. It was implemented by Mr Hobby and Mr Wilson for Speed-E-Gas, both of whom had senior roles within Speed-E-Gas: see Section B(2). During the Relevant Period, none of the Origin appointed directors of Speed-E-Gas knew of the contravening conduct. The conduct would have continued: see Section B(9) above. The conduct also must be considered in the context of Speed-E-Gas’ corporate culture. That issue is addressed next.
(h) Speed-E-Gas’ corporate culture
190 Prior to the acquisition of Speed-E-Gas by Origin, Speed-E-Gas did not have a policy, program or training in place to address compliance with competition or consumer law. Origin had trade practices compliance programs and policies in place at all relevant times.
191 Since Origin acquired Speed-E-Gas, it has provided employees with trade practices training initially through one on one corporate induction sessions and, then from early to mid-2007, also through an on-line resource called SALT, which had been developed by a law firm and regularly updated. The training provides detailed instruction on matters covered by the Act including all types of restrictive trade practices and cartel conduct. The training is undertaken by a series of modules which describe the relevant concepts, and provide case studies to demonstrate how the concepts can arise in a business context. Each employee completes an online test at the end of each module. At least 80% of the questions must be answered correctly to complete the training session.
192 Mr Hobby, Mr Wilson and other Speed-E-Gas sale representatives completed the training for the first time in late June 2007. The training had an effect on Mr Wilson. It persuaded him to no longer communicate with Mr Berman at Renegade in relation to the Understanding. However, it did not dissuade him from continuing to cause Speed-E-Gas to engage in the contravening conduct.
193 The training had no effect on Mr Hobby. Mr Hobby took over direct communications with Renegade for the purpose of giving effect to the Understanding. Mr Wilson continued to manage the sales team in such a manner that the Understanding continued to be implemented by Speed-E-Gas.
(i) Cooperation with the ACCC by Speed-E-Gas
194 Speed-E-Gas and Origin cooperated with the ACCC’s investigation from the initial stages. On 20 July 2011, within one month of the execution of the search warrant, Speed-E-Gas and Origin confirmed they would cooperate with the ACCC and have done so. The cooperation has been significant. The ACCC and Speed-E-Gas submitted, and I accept, that this cooperation attracts a substantial discount. The quantum of that discount is addressed below.
(j) Engaged in similar conduct in the past?
195 Speed-E-Gas has not previously been found to have contravened the Act. However, it must be recalled that the Understanding was formed prior to the Relevant Period.
(k) Other considerations
196 The ACCC submitted, and Speed-E-Gas accepts, that Renegade and Speed-E-Gas are broadly equally culpable and responsible. The ACCC submitted that the conduct of Renegade and Speed-E-Gas was such that the penalty, without discount, should be set at $5 million, the mid-point of the statutory range. The conduct was serious and protracted but it did not affect the whole market (that is, all participants), and the affected market was constrained by narrow product dimension (Forklift Gas). I agree.
197 The ACCC submitted (and I accept) that in relation to Speed-E-Gas a substantial discount off the headline penalty of $5 million was appropriate because of the timing, nature and extent of Speed-E-Gas’ cooperation with its investigation. That discount would generate a final penalty of $3.1 million.
(l) Conclusion
198 In all the circumstances, it is appropriate that Speed-E-Gas be ordered to pay to the Commonwealth a pecuniary penalty of $3.1 million.
3. Injunction
199 The injunction sought by agreement is in paragraph 11 of the draft orders. Consistent with the principles set out in Section C(3) above, it is appropriate to be made. The injunction is within power. The terms of the injunction are designed to prevent a repetition of the conduct for which relief was sought, there is a direct nexus between the contravention and the injunction, the terms of the injunction are limited by reference to the contravention of the Act in which Speed-E-Gas has engaged and it is designed to act as a deterrent. Finally, the terms of the injunction exclude conduct authorised by the ACCC or conduct which is otherwise lawful. The injunction will be granted in the terms set out in paragraph 11.
4. Costs
200 Paragraph 12 of the draft orders records an agreement between the ACCC and Speed-E-Gas in relation to costs. That order will be made.
F. DECLARATION AND ORDERS AGAINST MR BERMAN
201 The draft orders proposed by the ACCC and Mr Berman contained a declaration, the imposition of a pecuniary penalty, an injunction, a disqualification order, a training order and an order relating to costs. The orders, amended by the Court, are set out in paragraphs 13-19 of Annexure A.
1. Declaration
202 The declaration at paragraph 13 of Annexure A concerns five aspects of Mr Berman’s conduct. It reflects, and is consistent with, the declarations made in respect of Renegade’s conduct in Section D(1) above.
203 The five aspects of Mr Berman’s conduct are that:
1. He determined that, subject to the Exceptions, Renegade would adopt the business practice of implementing the Stay Away Provision;
2. He did not change that business practice when he had the authority to do so;
3. He instructed Mr Smith and other staff of Renegade to implement or adopt that business practice;
4. He authorised and instructed Mr Smith to instruct other staff of Renegade to manage Renegade’s response to breaches by Speed-E-Gas of the Stay-Away Provision by implementing the Replacement Provision; and
5. He communicated from time to time with Mr Hobby and Mr Wilson to the effect that Speed-E-Gas should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied.
204 In relation to the first aspect, Mr Berman admitted that Renegade stayed away from Speed-E-Gas customers for the reason that they were Speed-E-Gas customers by not approaching the customers or making offers to supply Forklift Gas to the customers only at prices that Renegade knew were not likely to induce the customers to change suppliers. Mr Berman also admitted that Renegade implemented the Understanding by adopting a practice in relation to Speed-E-Gas customers whereby its sales representatives stayed away, did not offer to supply or declined to supply Forklift Gas or made offers to supply Forklift Gas at prices that Renegade knew were not likely to induce those customers to change suppliers. The first aspect of the conduct the subject of the declaration is established.
205 In relation to the second aspect of the conduct, the ACCC and Mr Berman agreed that although at all relevant times Mr Berman had the authority to decide to change that practice, Mr Berman did not change that practice at any time before June 2011 when the ACCC conducted a raid of the Renegade premises as part of its investigation into the Understanding. The second aspect of the conduct the subject of the declaration is established.
206 In relation to the third and fourth aspects of the conduct, Mr Berman admitted that he caused Renegade to engage in the conduct by:
1. Not changing the business practice of Renegade staying away from Speed-E-Gas customers;
2. Permitting Mr Smith to implement that business practice;
3. Instructing Mr Smith or the sales manager and / or other staff of Renegade to implement that practice; and
4. Instructing Mr Smith to instruct the sales manager and sales representatives to implement that practice.
The nature and extent of instructions given by Mr Berman to implement the Understanding are set out above, see [10], [37]-[48] and [58]-[59]. The third and fourth aspects of the conduct the subject of the declaration are established.
207 In relation to the fifth aspect of the conduct, Mr Berman admitted that from time to time during the Relevant Period he or Mr Smith, on behalf of Renegade, communicated with Mr Hobby or Mr Wilson, on behalf of Speed-E-Gas, about the implementation of the Understanding. The scope and nature of those communications are considered at Section B(5) above. The fifth aspect of the conduct the subject of the declaration is established.
208 By that conduct, Mr Berman caused Renegade to give effect to the Stay Away Provision and the Replacement Provision. Renegade contravened ss 45(2)(b)(i) and 44ZZRK of the Act: see Section D(1) above. Mr Berman was knowingly concerned in or a party to that conduct by Renegade. The proposed declaration is both appropriate and necessary.
2. Pecuniary penalty
209 The ACCC seeks the imposition of a pecuniary penalty. Mr Berman and the ACCC propose that Mr Berman be ordered to pay a pecuniary penalty of $250,000.
(a) Principles and maximum penalty
210 The principles are summarised in Section C(2) above. The maximum penalty payable for a single course of conduct for a natural person is $500,000: s 76(1B)(b) of the Act.
(b) Mr Berman’s personal and financial circumstances
211 Mr Berman is 55 years old. He migrated from South Africa to Australia in January 2000. He had attended university and obtained a degree in South Africa. Shortly after he arrived in Australia, Mr Berman was invited to join Renegade and has worked for the company since that time.
212 Mr Berman is a shareholder in Renegade. Since July 2001, he has held 10% of the issued shares in Renegade. Although the total shareholders’ equity in Renegade is significant, the shares are not readily tradeable and confer no practical control. For those reasons, it is accepted that this illiquidity may impact on the value of the shares held by Mr Berman. In addition, Mr Berman has an outstanding loan of $300,000 used to fund the purchase of those shares as well as a liability for uncalled capital of $300,000. In relation to dividends earned from those shares, he received one dividend payment of $30,000 on 5 October 2010. Mr Berman has not received any other dividends from those shares.
213 He has limited personal assets. His wife is the registered proprietor of the family home in which he resides.
214 During the Relevant Period, Mr Berman was also the Managing Director of Renegade reporting to a Board of Directors composed of himself as an Executive Director and a number of Non-Executive Directors. His remuneration was not insignificant. Prior to the hearing, he had resigned as Managing Director of Renegade.
(c) Nature and extent of contravening conduct
215 The Understanding was formed by Mr Berman and Mr Wilson: see Section B(4) above. Throughout the Relevant Period, Mr Berman:
1. Together with Mr Smith (and from 2008, the Sales Manager Mr Grayson), instructed Renegade sales staff to stay away or not offer to supply Forklift Gas customers of Speed-E-Gas: see [206] above;
2. Remained Renegade’s principal point of contact with Speed-E-Gas for administration of the Understanding: see [26] above;
3. Actively managed Renegade’s replacement of volume when Speed-E-Gas breached the Stay Away Provision by poaching Renegade’s customers: see [49]-[50] above.
216 The facts and matters in Section D(2)(b) (Nature and extent of contravening conduct), D(2)(c) (Amount of loss or damage caused), D(2)(f) (Circumstances in which conduct took place), and D(2)(h) (Renegade’s corporate culture) that were identified in relation to Renegade are also relevant to Mr Berman’s conduct.
(d) Deliberateness of the conduct, period over which it extended, seniority and whether conduct systematic or covert.
217 Throughout the Relevant Period, Mr Berman’s conduct was deliberate and systematic. This conduct extended over a substantial period of time.
218 As part of the ACCC’s investigation, Mr Berman was examined pursuant to s 155(1)(c) of the Act over three days commencing on 7 May 2012. Mr Berman’s initial response to the ACCC’s enquiries, including during the examination, was to deny the existence of any contract, arrangement or understanding. Mr Berman acknowledged Renegade’s practice of avoiding making offers to Speed-E-Gas’ customers because they were Speed-E-Gas’ customers but attributed that conduct to a unilateral commercial decision made by him to avoid competition with Speed-E-Gas and thereby avoid retaliation. It was only after he was confronted with some of the records of the volume of communications between him and Mr Wilson, and him and Mr Hobby, that he came to acknowledge that that conduct had occurred, that an arrangement existed and that its purpose and effect was to limit or reduce competition.
219 The facts and matters in Section D(2)(g) (Deliberateness of contravention, period over which it extended, seniority of staff involved and whether conduct systematic or covert) addressed in relation to Renegade are also relevant to Mr Berman’s conduct.
(e) Cooperation with the ACCC
220 Mr Berman did not cooperate with the ACCC’s investigation. The ACCC invited Mr Berman to attend a voluntary interview on 3 February 2012 and he declined to do so.
221 These proceedings were commenced on 23 August 2012. Between October 2012 and June 2013, Mr Berman sought to resolve the proceedings and made a number of offers to the ACCC. By April 2013, the ACCC had served all of its affidavit evidence on the conduct alleged to have been engaged in by Renegade, Mr Berman and Mr Smith.
222 On 27 June 2013, Mr Berman offered to settle the proceedings on terms which were accepted by the ACCC. On 5 August 2013, Mr Berman filed an Amended Defence in which he substantially admitted the allegations made against him. By his offer of 27 June 2013 and the filing of his Amended Defence on 5 August 2013, Mr Berman avoided putting the ACCC to the costs of discovery, preparation and service of an expert report, preparation for trial and conduct of a trial.
(f) Contrition and corrective measures
223 By the conduct set out in Section F(2)(d) above, Mr Berman demonstrated, at least initially, a lack of contrition or acceptance of responsibility. Mr Berman has taken no step to inform any customer of Renegade’s conduct or to make reparation for any loss caused to any such customer.
224 Prior to the hearing, Mr Berman had not expressed contrition or remorse for his conduct in relation to the Understanding, other than in without prejudice communications with the ACCC. At the hearing, Counsel for Mr Berman stated that Mr Berman wanted to convey to the Court, and to the community, his unreserved apology for his contravention of the law, that he appreciates that his conduct was wrong, he accepts unreservedly that his knowledge of competition law was seriously deficient and that he should have known that his conduct involved a contravention of the Act.
225 Since the investigation has commenced, Mr Berman has sought to improve his understanding through self-directed learning, discussions with his own solicitors, by attending compliance training with Renegade’s solicitors and training conducted by the compliance officer of Renegade. In addition, the proposed orders provide for an ongoing program of training for five years. This will be discussed further below.
226 Mr Berman resigned as the Managing Director of Renegade on 23 September 2014, approximately one week prior to the hearing. In addition, the proposed orders provide for an order disqualifying Mr Berman from managing corporations for three years. This will be discussed further below
(g) Engaged in similar conduct in the past?
227 Mr Berman has not previously been found to have contravened the Act or to have been involved in a contravention of the Act.
(h) Conclusion
228 The ACCC submitted, and I accept, that features of Mr Berman’s conduct place it towards the top end of a natural person’s culpability for a cartel contravention. That conduct included:
1. He was the Managing Director;
2. He was one of the two instigators;
3. Generally he conducted himself covertly, including in his dealings with the non-executive directors to whom he reported;
4. The conduct was deliberate and systematic involving instructions and training of a large number of staff over a protracted period; and
5. He had an equity stake in the corporation.
Mr Berman believed that his conduct assisted in maintaining the profitability of Renegade. The ACCC submitted, and I accept, that Mr Berman must therefore have believed his conduct caused some customers of Renegade to pay higher prices.
229 Notwithstanding those significant facts and matters, the ACCC submitted that a penalty in the mid-point of the range was appropriate because the ACCC has also sought, and Mr Berman has consented to, a disqualification order for a period of 3 years in circumstances where that order might have a pecuniary impact on Mr Berman. In addition, although Mr Berman did not cooperate with the ACCC’s investigation, he reached agreement with the ACCC and substantially admitted his contraventions more than a year before the trial was to commence and was therefore entitled to a discount which was more than modest but less than substantial. Finally, while Mr Berman is well off by community standards a penalty of $250,000 will have a significant impact, and together with the disqualification order, is sufficient for specific deterrence. I accept those submissions.
230 In all the circumstances, a pecuniary penalty of $250,000 is an appropriate penalty to be imposed on Mr Berman.
3. Injunction
231 The injunction sought against Mr Berman is in paragraph 15 of Annexure A. Consistent with the principles in Section C(3) above, the injunction is appropriate.
4. Disqualification order
232 The ACCC sought an order (paragraph 16 of Annexure A) that Mr Berman be disqualified from managing corporations for a period of three years pursuant to s 86E(1) of the Act. The relevant principles are in Section C(4) above. The only conduct of Mr Berman which is taken into account is that occurring on and from 1 January 2007.
233 The ACCC and Mr Berman are agreed that a period of disqualification of three years is the appropriate period in all the circumstances (and when considered with the balance of the orders, including the pecuniary penalty). There are two questions – should Mr Berman be disqualified and, if so, for how long?
234 Should Mr Berman be disqualified?
235 Mr Berman allowed himself to manage what became a substantial Australian company while he was completely deficient in his understanding of Australian competition law. In that regard, he had a gravely inadequate understanding of the proper role of a Managing Director and the duty he owed to Renegade.
236 By his conduct in giving effect to the Understanding, Mr Berman demonstrated serious incompetence and irresponsibility through his failure to have regard to the requirements of competition law and demonstrated the danger that he poses to customers and the lawful functioning of markets while he continues managing a corporation: see Section F(2)(c) and Section F(2)(d) above. It is not possible for the Court to determine the level of loss incurred by customers. However, losses are likely to have been incurred by a very large number of customers: see Section D(2)(c) above in relation to Renegade, which is also relevant to Mr Berman. There is no question that Mr Berman’s conduct was deliberate: see Section F(2)(d) and Section F(2)(e) above. Mr Berman’s contrition and the appropriate corrective measures have been addressed in Section F(2)(f) above. His personal circumstances are addressed in Section F(2)(b) above. Mr Berman should be disqualified. An order banning him from future management of Renegade will protect customers and have a specific and general deterrent effect. Next, for how long should he be disqualified?
237 In the absence of a substantial pecuniary penalty, the ACCC submitted it would have sought a significantly longer period of disqualification for Mr Berman. It is appropriate for the Court to consider the pecuniary penalty and disqualification orders proposed against Mr Berman together as both have a deterrent objective: see [97] above.
238 In all the circumstances, a period of disqualification of three years is appropriate, having regard to the very serious nature of the conduct, balanced with a prospect of rehabilitation. Given Mr Berman’s age, a longer period of disqualification would hamper any meaningful prospect of rehabilitation in Mr Berman’s case. In addition, it must be recalled that the injunction and the training requirements (both critical components of the relief sought) will continue once the period of disqualification has come to an end. Mr Berman will be subject to those components for a further two years. For those reasons, disqualification from managing corporations for three years is an appropriate period of disqualification to be imposed on Mr Berman.
5. Compliance training
239 Paragraphs 17 and 18 of the draft orders in Annexure A provide for a tailored program of practical trade practices training to be undertaken annually by Mr Berman for the next five years.
240 Those orders are appropriate in light of Renegade’s corporate culture (see Section D(2)(h) above) and the principles in Section C(5) above.
241 As earlier explained, Mr Berman has taken steps to seek to improve his knowledge and understanding of competition and consumer law and has indicated his intention to continue to do so. Mr Berman has stated that he recognises the need for him to continue to do so in the future and the need for him to remain abreast of the content and effect of trade practices law and any changes that occur in the future. Further, Mr Berman has stated that he recognises that his commitment to this training is essential if he is to be employed in a management role in the future.
6. Costs
242 Paragraph 19 of the draft orders records an agreement between the ACCC and Mr Berman in relation to costs. That order will be made.
G. DECLARATION AND ORDERS AGAINST MR SMITH
243 The draft orders proposed by the ACCC and Mr Smith contained a declaration, the imposition of a pecuniary penalty, an injunction and an order relating to costs. The orders, amended by the Court, are set out in paragraphs 20-23 of Annexure A.
1. Declaration
244 The declaration at paragraph 20 of Annexure A concerns two aspects of Mr Smith’s conduct. It reflects, and is consistent with, the declarations made in respect of Renegade’s conduct in Section D(1) above.
245 The two aspects of Mr Smith’s conduct are (1) implementing and enforcing the business practice, subject to the Exceptions, of Renegade implementing the Stay Away Provision and instructing other Renegade staff to adopt that business practice and (2) managing Renegade’s response to breaches by Speed-E-Gas of the Stay Away provision by implementing the Replacement Provision.
246 Mr Smith admitted that in relation to Speed-E-Gas customers in Sydney, Renegade did not approach those customers or made offers to supply Forklift Gas to those customers only at prices that Renegade knew were not likely to induce the customers to change suppliers (the Stay Away Provision). Mr Smith admitted that he caused Renegade to engage in that conduct. The facts establish that Mr Smith gave extensive and persistent instructions to Renegade staff to stay away from Speed-E-Gas customers: see Section B(6) above.
247 Smith also admitted that he caused Renegade to manage its response to poaching by Speed-E-Gas so that Renegade only sought to replace approximately the volume or value of Forklift Gas sales acquired by Speed-E-Gas (the Replacement Provision): see [49]-[50] and [58]-[59] above.
248 The ACCC submitted that Mr Smith could have stopped the implementation of the Understanding by refusing to give instructions and by recommending to Mr Berman that the practices cease and he did not do so. It is clear that Mr Smith acted on instructions from Mr Berman and, unfortunately, did not know or appreciate that the Understanding was in contravention of the Act, so there was no basis on which he would have known to stop the conduct or make that recommendation.
249 However, by that conduct, Mr Smith caused Renegade to give effect to the Stay Away Provision and the Replacement Provision. Renegade contravened ss 45(2)(b)(i) and 44ZZRK of the Act: see Section D(1) above. Mr Smith was knowingly concerned in or a party to that conduct by Renegade. The proposed declaration is both appropriate and necessary.
2. Pecuniary penalty
250 The ACCC seeks the imposition of a pecuniary penalty. Mr Smith and the ACCC propose that Mr Smith be ordered to pay a pecuniary penalty of $100,000.
(a) Principles and maximum penalty
251 The principles are summarised in Section C(2) above. The maximum penalty payable for a single course of conduct for a natural person is $500,000: s 76(1B)(b) of the Act.
(b) Mr Smith’s personal and financial circumstances
252 Mr Smith is 41 years old. He completed his Higher School Certificate in 1990. He undertook no tertiary studies. He completed an apprenticeship as a plumber but did not qualify as a licensed plumber. Prior to commencing employment with Renegade in 2000, he worked as an apprentice plumber, driver and doorman. Mr Smith remains employed by Renegade as the Branch Manager of the Sydney branch. In his roles at Renegade, he was required to report to Mr Berman.
253 Mr Smith is paid an annual salary plus commission. The commission is calculated monthly on three criteria – (a) the number of new products (including cylinders) Mr Smith personally puts into the market, (b) the total number of cylinders the sales representatives for whom Smith was responsible put into the market and (c) the number of agreements Mr Smith personally had signed by customers. The commission payable on (a) and (b) was on a sliding scale. The more units, the higher the commission. The commission was payable on all gas cylinders, not just LPG. The rate payable varied. The commission payable on (c) was for every agreement he secured and, in respect of Forklift Gas, he would also receive the first month’s rent as commission. During the Relevant Period, Mr Smith’s remuneration was not insignificant.
254 Mr Smith’s wife also works at Renegade. Mr Smith personally, and jointly with his wife, holds a number of assets. The available equity in those assets is limited.
255 Mr Smith and his wife have two small children. As a result of the ACCC’s investigation and these proceedings, Mr Smith has experienced stress and anxiety requiring ongoing medical treatment. Mr Smith submitted that the proceedings have also had an impact on his family.
(c) Nature and extent of contravening conduct
256 Mr Smith knew of the existence of the Understanding and implemented it throughout the Relevant Period: see Section B(6) above. He had some conversations with Mr Wilson. During the Relevant Period, Mr Smith was employed by Renegade and subject to the direction of Mr Berman. However, as Section B(6) above demonstrates, his instructions to staff were specific and direct – to implement the Understanding: see, for example, [40]ff above. It is also important to recall that Mr Smith was consulted on the disciplining of Mr Silvera for Mr Silvera’s making competitive price offers to Speed-E-Gas. Mr Smith agreed that the use of possible warnings and deductions to commissions of sales representatives for contacting a Speed-E-Gas customer without first speaking to Mr Grayson reflected his concerns of how serious it was to adhere to the Understanding: [47] above.
257 The facts and matters in Section D(2)(b) (Nature and extent of contravening conduct), D(2)(f) (Circumstances in which conduct took place), and D(2)(h) (Renegade’s corporate culture) that were identified in relation to Renegade are also relevant to Mr Smith’s conduct.
(d) Deliberateness of the conduct, period over which it extended and whether conduct systematic or covert
258 Throughout the Relevant Period, Mr Smith followed the instructions he received from Mr Berman about the Understanding. His conduct was deliberate and coordinated, systematic and generally covert: see Section B(6) above. Mr Smith’s conduct extended over a substantial period of time.
(e) Cooperation with the ACCC
259 The ACCC asked Mr Smith to cooperate with its investigation on 20 January 2012. Mr Smith declined.
260 Mr Smith attended the ACCC’s offices on 8 May 2012 to be examined pursuant to s 155(1)(c) of the Act. Smith indicated that he did not recall the existence of the Understanding. He also stated that he did not recall being told about conversations between representatives of Speed-E-Gas and Renegade concerning the Understanding.
261 The next day, 9 May 2012, shortly after the examination recommenced, Mr Smith’s counsel (Mr Carr) indicated that, after reflection overnight, Mr Smith wished to correct the record in respect of answers he had given on day one which were inaccurate or incorrect. The transcript read as follows:
MR CARR: Do you wish to correct the record in respect of those responses?
MR SMITH: Yes.
MR CARR: Do you recall a series of questions early in the examination posed by Mr Nell in respect of the arrangement, if I can describe it that way, that [Renegade] would not approach Speed-E-Gas customers and then try to entice them away?
MR SMITH: Yes.
MR CARR: There were a number of questions presented to you in respect of that discrete topic. Do you recall the question, “Are you aware that there was an understanding between Renegade and Speed-E-Gas?”
MR SMITH: Yes.
MR CARR: Do you recall your response to that question was, “Not to my recollection.”
MR SMITH: Yes.
MR CARR: Do you wish to withdraw that answer?
MR SMITH: Yes.
MR CARR: What is your answer to that question now?
MR SMITH: Yes.
MR CARR: Another question that was posed by Mr Nell was that the Renegade approach adopted, was that pursuant to discussions between the two companies, to your knowledge. Your response was, “Not that I recall.”
MR SMITH: Yes.
MR CARR: Do you wish to withdraw that response?
MR SMITH: Yes.
MR CARR: What is your response to that question?
MR SMITH: Yes.
MR CARR: Another question presented to you was whether you were aware that the Speed-E-Gas approach was pursuant to any discussions between a representative of Speed-E-Gas and a representative of [Renegade]. Your response to that question was, “I have no recollection of being informed of that.” Do you wish to withdraw that answer and substitute it with another answer?
MR SMITH: Yes.
MR CARR: What is that answer?
MR SMITH: Yes.
MR CARR: Another question posed to you was whether you were aware of a representative of your company, that is, Renegade, having discussions with a representative of Speed-E-Gas as a consequence of which the approach not to approach [Renegade (sic)] customers was adopted. Your response was, “I do not recall being told we can’t attack Speed-E because of an agreement.”
MR SMITH: Yes.
MR CARR: Would you like to withdraw that answer?
MR SMITH: Yes.
MR CARR: What is your answer to that question?
MR SMITH: Yes.
MR CARR: You were also asked a question as to a recollection as to why the decision not to approach [Renegade] clients by Speed-E-Gas was taken. You gave an answer, “Yes.” You were also then called upon to give a reason for that decision being made, and you provided the answer, “It was a commercial decision.” Would you like to add to that answer?
MR SMITH: Yes.
MR CARR: What is the additional comment you wish to make?
MR SMITH: Prior to August 2008 Paul Berman informed me he had come to an agreement with Jay Wilson and Speed-E not to approach each other’s customers.
MR CARR: Did he use the word “agreement” or some other word? Did he say “agreement” or “an understanding”?
MR SMITH: He said “understanding”.
262 During May 2012, Mr Smith assisted the ACCC under the ACCC Cooperation Policy for Enforcement Matters. Mr Smith provided a statutory declaration to the ACCC. Completion of that statutory declaration required Mr Smith to meet with the ACCC for seven days over a 14 day period for between 6.5 and 12 hours a day. At the time, Mr Smith was working for Renegade with Mr Berman. Unsurprisingly, Mr Smith found this to be both challenging and an ordeal.
263 Mr Smith had no further contact with the ACCC until these proceedings were filed and served on him on 23 August 2012. Mr Smith filed his defence on 16 November 2012, in which he made significant admissions. On 29 January 2013, in light of the admissions he had made, Mr Smith sought to be excused from further participation in these proceedings until further order. That order was made. On 11 March 2013, Mr Smith swore an affidavit in these proceedings. That affidavit had been sought by the ACCC. On 18 March 2013, Mr Smith and the ACCC agreed terms of settlement. By that agreement, Mr Smith avoided putting the ACCC to the cost of preparation for, and conduct of, a trial against Mr Smith. On 9 April 2013, Mr Smith filed an Amended Defence which made minor amendments. None of his earlier admissions were withdrawn.
264 However, the context in which Mr Smith cooperated had wider implications. Mr Smith’s cooperation was provided at a time when he remained employed by Renegade, working with Mr Berman and where each of Renegade and Mr Berman were disputing the allegations against them. Those facts are significant.
(f) Contrition and corrective measures
265 As mentioned above, Mr Smith filed four character references in this proceeding and an affidavit. The character references attested to his otherwise good character. The affidavit included the following statements under the heading “My Contrition”:
At no time prior to the execution of the search warrant by the ACCC in June 2011 was I aware that the conduct, admitted by me in my defence, was unlawful and in breach of competition law.
I utterly and without reservation apologise to the Court for my acknowledged contraventions. I can assure the Court that I have learnt valuable lessons from these proceedings and will not in the future engage in conduct in breach of competition laws.
I believe my reputation has suffered as a result of the general publicity relating to these proceedings and it has caused distress to me, my wife and my family.
266 Counsel further submitted that Mr Smith’s contrition is real, and this was additionally identified by his early admission, his cooperation with the ACCC and the material contained in the character references.
267 Prior to the search warrant being issued, there was no in-house training program at Renegade about the Act: see Section D(2)(h) above. Since the commencement of the ACCC investigation, Mr Smith has sought to improve his understanding of competition laws through self-directed learning, compliance training conducted by Renegade’s solicitors and training conducted by Renegade’s compliance officer. Mr Smith provided further details of the self-directed learning in his affidavit, and stated that he is now acutely aware and mindful of competition law.
(g) Engaged in similar conduct in the past?
268 Mr Smith has not previously been found to have contravened the Act or to have been involved in a contravention of the Act.
(h) Conclusion
269 The ACCC submitted, and I accept, that Mr Smith is entitled to more than a modest discount for his cooperation with the investigation since May 2012 (qualified by the circumstances described in Section G(2)(e) above).
270 The ACCC submitted that a pecuniary penalty of $100,000 takes into account:
1. Mr Smith’s early admission of the contravention;
2. Mr Smith’s contrition;
3. That Mr Smith’s conduct was serious but not at the top of the range;
4. That Mr Berman, not Mr Smith, was the person principally responsible for Renegade’s contraventions and Mr Smith was subject to Mr Berman’s direction;
5. That Mr Smith cooperated with the ACCC’s investigation and was of some assistance in that investigation;
6. Mr Smith’s financial position; and
7. That Mr Smith’s cooperation with the ACCC has caused him stress and anxiety requiring ongoing medical treatment, given his continuing employment with Renegade and Mr Berman.
271 In all the circumstances, a pecuniary penalty of $100,000 is an appropriate penalty to be imposed on Mr Smith.
3. Injunction
272 The injunction sought against Mr Smith is in paragraph 22 of Annexure A. Consistent with the principles in Section C(3) above, the injunction is appropriate.
4. Costs
273 Paragraph 23 of the draft orders records an agreement between the ACCC and Mr Smith in relation to costs. That order will be made.
H. DECLARATION AND ORDERS AGAINST MR WILSON
274 The draft orders proposed by the ACCC and Mr Wilson contained declarations, the imposition of a pecuniary penalty, an injunction and an order relating to costs. The orders, amended by the Court, are set out in paragraphs 24-27 of Annexure A.
1. Declaration
275 The declaration at paragraph 24 of Annexure A concerns six aspects of Mr Wilson’s conduct. It reflects, and is consistent with, the declarations made in respect of Speed-E-Gas’ conduct in Section E(1) above.
276 The six aspects of Mr Wilson’s conduct are that:
1. He determined with Mr Hobby that, subject to the Exceptions, Speed-E-Gas would adopt the business practice of not supplying or seeking to supply Forklift Gas to Renegade customers in Sydney;
2. He did not change that business practice when he had the capacity to do so;
3. He instructed other staff of Speed-E-Gas to implement that business practice;
4. He instructed other staff of Speed-E-Gas to implement a practice of dealing with prospective customers who were Renegade customers in Sydney by:
4.1 not approaching the customer; or
4.2 not offering to supply or declining to supply Forklift Gas to the customer; or
4.3 restricting any offer to supply Forklift Gas to the customer to a price that Speed-E-Gas knew was not likely to induce the customer to change suppliers;
5. He managed Speed-E-Gas’ response to breaches by Renegade of the Stay Away Provision by implementing the Replacement Provision and by instructing other Speed-E-Gas staff to manage Speed-E-Gas’ response to that effect;
6. He communicated from time to time with Mr Berman and Mr Smith to the effect that Renegade should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied to certain customers.
277 Mr Wilson admitted the first five aspects of that conduct in his defence, see also: Sections B(4), B(5), B(7) and B(8) above In relation to the sixth aspect, he admitted that sixth aspect from at least 24 August 2006 to in or about the end of 2007.
278 By that conduct, Mr Wilson caused Speed-E-Gas to give effect to the Stay Away Provision and the Replacement Provision. Speed-E-Gas contravened ss 45(2)(b)(i) and 44ZZRK of the Act: see Section E(1) above. Mr Wilson was knowingly concerned in or a party to that conduct by Speed-E-Gas. The proposed declaration is both appropriate and necessary.
2. Pecuniary penalty
279 The ACCC seeks the imposition of a pecuniary penalty. Mr Wilson and the ACCC propose that Mr Wilson be ordered to pay a pecuniary penalty of $50,000.
(a) Principles and maximum penalty
280 The principles are summarised in Section C(2) above. The maximum penalty payable for a single course of conduct for a natural person is $500,000: s 76(1B)(b) of the Act.
(b) Mr Wilson’s personal and financial circumstances
281 Mr Wilson is 49 years old. He is married with two teenage children.
282 Mr Wilson left school in 1978, aged 13. He was in year 9. He immediately commenced work as a delivery driver for his father. He remained there until 1994 when he commenced work as delivery driver for Minto Sand and Soil, now known as Speed-E-Gas.
283 In 1996, Mr Wilson was offered and accepted a position as Speed-E-Gas’ first full time sales representative. He continued to do some deliveries until 2005. In about 2005, another sales representative was employed by Speed-E-Gas and Mr Wilson was appointed Sales Manager. By 2011, Mr Wilson managed three sales representatives and one administrative staff member.
284 In June 2011, Mr Wilson was stood down from his employment with Speed-E-Gas because of the ACCC’s investigations. Between August and October 2011, Mr Wilson met extensively with the ACCC and provided an extensive statement. The first statement was provided to the ACCC on 11 or 12 October 2011. Mr Wilson then met with Speed-E-Gas’ solicitors. He signed a statement on 19 January 2012. Mr Wilson’s employment was terminated by Origin on 1 February 2012. This aspect of his conduct is addressed in greater detail in section H(2)(e) below.
285 Mr Wilson was unemployed until 14 May 2012 when he commenced employment as an Industries Development Manager with an operator of correctional facilities. His gross annual income is modest. He is fearful of losing his current job and, given his age and education, he may have difficulty in finding alternative employment.
286 Mr Wilson has very limited assets. He sold his family home in August 2013 in anticipation of being ordered to pay a pecuniary penalty in these proceedings. His share of the proceeds, approximately $80,000 after discharge of a mortgage, is retained by him in a bank account. He has no other financial resources available to him. He has been unable to afford legal representation. He has been assisted from time to time on a pro bono basis by lawyers.
(c) Nature and extent of contravening conduct
287 The nature and extent of Mr Wilson’s conduct is to be assessed over two periods, the first ending in late 2007 and the second ending when the ACCC executed its search warrants in June 2011. Throughout the Relevant Period, Mr Wilson was subject to the direction of Mr Hobby.
288 Until at least late 2007, Mr Wilson was Speed-E-Gas’ point of contact for the administration of the Understanding with Mr Berman. Mr Wilson had implemented that Understanding with Mr Berman.
289 From late 2006, circumstances changed. Mr Wilson knew that the new owners of Speed-E-Gas, Origin, required him to not communicate with Mr Berman. Mr Wilson had a conversation with Mr Rob Winten, an executive of Origin, to the following effect::
Mr Wilson: “What’s the TPA?”
Mr Winten: “It’s the Trade Practices Act. You shouldn’t talk to your competitors or Origin will hang you out to dry …”
Mr Wilson: “We’ve had this thing with [Renegade]…” [cut off by Mr Winten]
Mr Winten: “I don’t want to know about any of that. Whatever you do just don’t talk to your competitors or Origin will hang you out to dry.”
290 Despite that instruction, Mr Wilson continued to communicate with Mr Berman about the Understanding through 2007 at least until he had completed trade practices compliance training. Shortly after that, he indicated to Mr Hobby that he was no longer willing to communicate with Mr Berman and Mr Smith.
291 Through to the end of 2007, Mr Wilson ensured that Speed-E-Gas implemented the Understanding by instructions to sales staff: see Sections B(7) and (8) above.
292 From late 2007, Mr Wilson knew that Origin disapproved of any arrangement such as the Understanding and knew that that arrangement was illegal. As the facts demonstrate, while Mr Wilson indicated he no longer wished to communicate with Mr Berman, and he ceased those communications largely from about late 2007 or 2008, he nevertheless knew that the Understanding remained in force and he gave effect to it: see Sections B(7) and (8) above.
293 That is not all. Throughout both periods, Mr Wilson closely monitored the operation of the Understanding through what were described as “the Account Loss / Margin Loss” and “New Business Spreadsheets”. He also developed a comprehensive target list, including a listing of all existing Renegade customers known to Speed-E-Gas used to assist sales representatives to approach Renegade customers but only on occasions which were consistent with the Understanding.
(d) Deliberateness of the conduct, period over which it extended, seniority and whether conduct systematic or covert
294 Throughout the Relevant Period, Mr Wilson’s conduct was systematic, deliberate and generally covert: see, for example, Section B(5), Section B(7), section B(8).
295 The following four paragraphs were agreed between the ACCC and Mr Wilson, but not by Speed-E-Gas. Why that was so was never explained. The conduct directly involves both Speed-E-Gas and Origin. First, in late 2006, Mr Wilson had the conversation with Mr Rob Winten, an executive of Origin, set out at [290] above.
296 Second, in about 2010 Mr Wilson used the phrase “Tiger in the cage” as a metaphor for his approach of generally avoiding Renegade customers. He said to Mr Hobby words to the effect: “You don’t put your hand in the cage with a tiger, because it’ll get bitten off. [If] they stick theirs in ours we’ll bite theirs off too”.
297 Then, in late 2010, Mr Wilson learnt that Mr Hobby’s immediate manager within Origin, Mr Tim Elliott, was to visit Speed-E-Gas. Mr Hobby and Mr Wilson had a conversation to the following effect:
Mr Hobby: “Tim’s coming in.”
Mr Wilson: “I want to talk to him about the Tiger in the cage scenario. I want to ask Tim if this is alright.”
Mr Hobby: “OK”
298 Finally, when Mr Elliott attended at Speed-E-Gas’ premises, Mr Hobby, Mr Wilson and he had a meeting in which words were exchanged to the following effect:
Mr Wilson: “We’ve got this thing where we don’t stick our hand in a cage with a tiger called [Renegade] because we’ll get it bitten off. We don’t touch them and they don’t touch us. Is what we’re doing alright?”
Mr Elliott: “I’ll find out and come back to you.”
There was no evidence of what Mr Elliott of Origin did, if anything, in response.
299 Neither during that conversation, nor at any other time, did Mr Wilson tell Mr Elliott, or any other executive of Origin senior to Mr Hobby, of his or Mr Hobby’s communications with Mr Berman concerning individual customers, of any communication concerning individual customers between Speed-E-Gas and Renegade, or of the specific details of the Understanding with Renegade.
(e) Cooperation with the ACCC
300 In August 2011, Mr Wilson approached the ACCC and cooperated by being extensively interviewed for the purpose of providing the ACCC with a statement. Had he not come forward then, the ACCC’s investigation would have been more prolonged. A detailed statement was provided by Mr Wilson on 11 or 12 October 2011 which included the following paragraph:
From around mid to late 2007 onwards Speed-E’s policy to avoid poaching [Renegade’s] customers remained unchanged in line with the [Understanding]. During this period, I told Mr Hobby that I wanted nothing to do with [Renegade] or the [Understanding]. The [Understanding] was still being complied with by both Speed-E-Gas and [Renegade] up until 21 June 2011 when the ACCC executed a search warrant at Speed-E’s premises.
301 Next, Mr Wilson was interviewed by Speed-E-Gas’ solicitors and he signed a statement on 19 January 2012.
302 On 6 February 2012, another law firm wrote to the ACCC enclosing a statement by Mr Wilson signed and dated 1 February 2012 in which he stated that “whilst I accept that it is possible that the [Understanding] continued until 21 June 2011, without my knowledge, I do not believe that it did”. On 2 April 2013, Mr Wilson provided an affidavit in these proceedings in which he retracted that statement. The effect of April 2013 affidavit was that, from late 2007, Mr Wilson was aware that the Understanding had not stopped completely. On 15 April 2013, Mr Wilson filed an amended defence substantially admitting the allegations against him. On 5 September 2013, Mr Wilson and the ACCC agreed on the relief to be sought against him. By the amended defence filed on 15 April 2013 and the agreement reached on 5 September 2013, Mr Wilson avoided putting the ACCC to the costs of discovery, preparation and service of an expert report, preparation for trial and conduct of trial.
(f) Contrition and corrective measures
303 Mr Wilson came forward at the earliest opportunity and cooperated with the ACCC’s investigation. The issues raised in this proceeding have taken a toll on Mr Wilson’s life, both mentally and physically, and on his family life. Mr Wilson, through his counsel, informed the court that he is truly remorseful for his actions and deeply regrets his involvement in the Understanding.
(g) Engaged in similar conduct in the past?
304 Mr Wilson has not previously been found to have contravened the Act or to have been involved in a contravention of the Act.
(h) Conclusion
305 The ACCC submitted, and I accept, that a penalty of $50,000 for Mr Wilson adequately takes into account that:
1. Mr Wilson’s conduct was serious but not at the top end of the range;
2. Mr Hobby, and not Mr Wilson, was the person in control of Speed-E-Gas’ conduct, and at all times Mr Wilson was subject to the direction of Mr Hobby;
3. Mr Wilson gave early and substantial cooperation to the ACCC’s investigation;
4. Given his level of assets and income a penalty of $50,000 is sufficient to achieve the objective of specific deterrence; and
5. The timing and scope of his cooperation was to be given significant weight in assessing the general deterrent effect of the order.
306 In all the circumstances, a pecuniary penalty of $50,000 is an appropriate penalty to be imposed on Mr Wilson.
307 The ACCC and Mr Wilson have agreed that this penalty will be paid by instalments. That is appropriate given Mr Wilson’s financial circumstances.
3. Injunction
308 The injunction sought against Mr Wilson is in paragraph 26 of Annexure A. Consistent with the principles in Section C(3) above, the injunction is appropriate.
4. Costs
309 Paragraph 27 of the draft orders records an agreement between the ACCC and Mr Wilson in relation to costs. That order will be made.
I. PARITY AND TOTALITY OF PENALTIES
310 The parity of penalties to be imposed upon the respondents must be considered.
1. Corporations
311 The penalties to be imposed on Renegade ($4.8 million over 52 months) and Speed-E-Gas ($3.1 million payable within 30 days) are appropriate. They are equally culpable and responsible.
312 The difference between the two penalties reflects, among other things, a difference in the discount for Renegade’s belated “plea” before trial and for Speed-E-Gas’ early and substantial cooperation with the ACCC investigation and early “plea”.
2. Natural persons
313 As noted above, in assessing parity for the natural person respondents it is appropriate to consider both disqualification orders and pecuniary penalties: Kerkhoffs at [17]-[21].
314 Mr Berman is to pay a pecuniary penalty of $250,000 and be disqualified for 3 years. Mr Smith is to pay a pecuniary penalty of $100,000. Mr Wilson is to pay a pecuniary penalty of $50,000. There is parity in the orders proposed against Mr Berman and the pecuniary penalties proposed to be imposed on Mr Smith and Mr Wilson having regard to Mr Berman’s greater culpability and, on the other side, Mr Smith’s and Mr Wilson’s cooperation with the ACCC.
315 The ACCC submitted (and I accept) that the culpability of both Mr Wilson and Mr Smith is significantly less than that of Mr Berman. Each was subject to the direction of his manager, and for the majority of the Relevant Period, the active collusion underpinning of the Understanding occurred directly between Mr Berman and Mr Hobby with Mr Smith and Mr Wilson responsible for implementing their instructions consequent upon that collusion. In relation to Mr Smith and Mr Wilson, during the Relevant Period, each was broadly equally culpable and responsible for the contravening conduct.
316 Mr Smith is to pay a pecuniary penalty of $100,000 while Mr Wilson is to pay $50,000. Mr Wilson is entitled to a substantial discount because of his cooperation with the ACCC. Mr Smith is entitled to a lesser discount because his cooperation came later. Further, Mr Smith enjoys a much higher income than Mr Wilson and otherwise has a significantly greater capacity to pay. While a penalty of more than $50,000 imposed upon Mr Wilson would be likely to exceed any amount required for specific deterrence, a penalty of that amount imposed upon Mr Smith would be inadequate for that purpose.
317 For those reasons, I accept that there is appropriate parity between the penalties proposed to be imposed upon each of the respondents.
3. Totality
318 Mr Berman will pay a pecuniary penalty and be subject to a disqualification order.
319 As a final check, the Court is required to apply the totality principle – to consider whether those penalties, considered as a whole, are just and appropriate: Kerkhoffs and Australian Competition & Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998 at [49]. In my view, the pecuniary penalty of $250,000 together with disqualification for three years is within the appropriate range, particularly in light of the objective of specific and general deterrence.
J. CONCLUSION
320 For those reasons, the declarations and orders set out in Annexure A will be made.
| I certify that the preceding three hundred and twenty (320) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. |
Associate:
ANNEXURE A
DEFINITIONS
In these Orders:
(a) Act means the Competition and Consumer Act 2010 (Cth);
(b) Berman means the Third Respondent;
(c) Exceptions means particular non exhaustive circumstances in which customers might be recruited by either Renegade or Speed-E-Gas on a basis other than price, being:
(i) where a customer cited poor service as the reason in deciding to change suppliers;
(ii) where a customer initiated contact with Renegade or Speed-E-Gas and was generally seeking quotes from the market in an effort to change supplier;
(iii) where a customer was part of, or joined, a buying group;
(iv) where a customer’s business was acquired on the basis of an agreement to supply that was made in another State or anywhere outside of Sydney; or
(v) where a customer sought to consolidate their gas supply requirements and have all their gas products, including Forklift Gas, supplied by one supplier.
(d) Forklift Gas means delivered liquid petroleum gas in cylinders for use in forklifts;
(e) Relevant Period means the period between 24 August 2006 and June 2011;
(f) Renegade means the First Respondent, which trades as “Supagas NSW”;
(g) Replacement Provision means a provision of the Understanding that, if contrary to the Stay Away Provision, one party supplied Forklift Gas to a customer(s) of the other party in Sydney, it would not be a breach of the Stay Away Provision for the second mentioned party to supply Forklift Gas limited to approximately the amount required to replace the volume or value lost to the first mentioned party;
(h) Smith means the Fourth Respondent;
(i) Speed-E-Gas means the Second Respondent;
(j) Stay Away Provision means a provision of the Understanding that, subject to the Exceptions, each party would not supply or seek to supply Forklift Gas to customers of the other in Sydney;
(k) Understanding means the understanding in place between Renegade and Speed-E-Gas containing the Stay Away Provision and the Replacement Provision relating to the supply in Sydney of Forklift Gas;
(l) Wilson means the Sixth Respondent.
THE COURT ORDERS THAT:
FIRST RESPONDENT – RENEGADE
Declarations
1. The Court declares that, during the Relevant Period, Renegade by:
1.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Renegade knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Speed-E-Gas; and
1.2 managing its response to breaches by Speed-E-Gas of the Stay Away Provision so that Renegade sought only to replace approximately the volume or value of Forklift Gas lost to Speed-E-Gas; and
1.3 communicating with Speed-E-Gas to the effect:
(a) that Speed-E-Gas should stay away from Renegade customers in Sydney;
(b) of inquiring as to why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of determining whether Speed-E-Gas’ supply or attempt to supply was consistent with the Understanding;
(c) of informing Speed-E-Gas why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of persuading Speed-E-Gas that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of restricting or limiting the supply of Forklift Gas to customers in Sydney, in contravention of s 45(2)(b)(i) of the Act.
2 The Court declares that, from 24 July 2009 to June 2011, Renegade by:
2.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Renegade knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Speed-E-Gas; and
2.2 managing its response to breaches by Speed-E-Gas of the Stay Away Provision so that Renegade sought only to replace approximately the volume or value of Forklift Gas lost to Speed-E-Gas; and
2.3 communicating with Speed-E-Gas to the effect:
(a) that Speed-E-Gas should stay away from Renegade customers in Sydney;
(b) of inquiring as to why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of determining whether Speed-E-Gas’ supply or attempt to supply was consistent with the Understanding;
(c) of informing Speed-E-Gas why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of persuading Speed-E-Gas that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of:
2.4 directly or indirectly preventing, restricting or limiting the supply or likely supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney, within the meaning of s 44ZZRD(3)(a)(iii) of the Act; and
2.5 allocating between Speed-E-Gas and Renegade, customers in Sydney who had acquired or were likely to acquire Forklift Gas from Speed-E-Gas or Renegade, within the meaning of s 44ZZRD(3)(b)(i) of the Act,
in contravention of s 44ZZRK of the Act.
Pecuniary Penalty Order
3 The Court orders that Renegade pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraphs 1 and 2 in the total amount of $4,800,000.
Injunction
4 The Court orders that Renegade be restrained, for a period of 5 years from the date of these Orders, from:
4.1 making any contract or arrangement or arriving at an understanding with one or more of its competitors for the supply of Forklift Gas to customers in Sydney containing a provision which:
(a) has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding, to customers in Sydney; or
(b) has the purpose of allocating between the parties to the contract, arrangement or understanding customers who had acquired or were likely to acquire Forklift Gas in Sydney; or
4.2 giving effect to such a provision,
unless:
4.3 the conduct referred to in 4.1 and 4.2 is authorised under s 88 of the Act or any other Australian statute in accordance with or not a contravention by reason of s 51 of the Act;
4.4 the contract, arrangement or understanding referred to in 4.1 is for the purpose of a joint venture which joint venture is carried on jointly by all parties in the contract, arrangement or understanding, within the meaning of s 44ZZRP of the Act; or
4.5 that contract, arrangement or understanding is only between Renegade and a related body corporate.
Other Orders
5 The Court orders that Renegade:
5.1 implement an updated compliance and education / training program to accord with the Compliance and Education / Training Program set out in Appendix A to these Orders:
(a) for the employees or other persons involved in its business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of Part IV of the Act or any similar or related conduct; and
(b) revising the internal operations of its business which led to it engaging in the conduct declared by the Court in this proceeding to be in contravention of Part IV of the Act or any similar or related conduct;
5.2 maintain and administer, at its own expense, the Compliance and Education / Training Program set out in Appendix A for a period of three years;
5.3 provide, at its own expense, a copy of any documents to be provided to the Applicant pursuant to Appendix A.
6 The Court orders that Renegade pay a contribution to the Applicant’s costs of and incidental to these proceedings, in the agreed amount of $400,000.
7 The Court orders that the pecuniary penalty in paragraph 3 and the costs contribution in paragraph 6 are to be paid to the Commonwealth of Australia as follows:
7.1 $1.5 million within 60 days of the date of these Orders;
7.2 $925,000 within 13 months of the date for payment set out in paragraph 7.1;
7.3 $925,000 within 26 months of the date for payment set out in paragraph 7.1;
7.4 $925,000 within 39 months of the date for payment set out in paragraph 7.1; and
7.5 $925,000 within 52 months of the date for payment set out in paragraph 7.1.
SECOND RESPONDENT – SPEED-E-GAS
Declarations
8 The Court declares that, during the Relevant Period, Speed-E-Gas by:
8.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Speed-E-Gas knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of its competitor, Renegade; and
8.2 managing its response to breaches by Renegade of the Stay Away Provision so that Speed-E-Gas sought only to replace approximately the volume or value of Forklift Gas lost to Renegade; and
8.3 communicating with Renegade to the effect:
(a) that Renegade should stay away from Speed-E-Gas customers in Sydney;
(b) of inquiring as to why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of determining whether Renegade’s supply or attempt to supply was consistent with the Understanding;
(c) of informing Renegade why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of persuading Renegade that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of restricting or limiting the supply of Forklift Gas to customers in Sydney, in contravention of s 45(2)(b)(i) of the Act.
9 The Court declares that, from 24 July 2009 to June 2011, Speed-E-Gas by:
9.1 its conduct of:
(a) not approaching certain Forklift Gas customers in Sydney;
(b) not offering to supply or declining to supply Forklift Gas to certain customers in Sydney;
(c) making offers to supply Forklift Gas to certain customers in Sydney only at prices that Speed-E-Gas knew were not likely to induce customers to change suppliers,
for the reason that those customers were customers of Renegade; and
9.2 managing its response to breaches by Renegade of the Stay Away Provision so that Speed-E-Gas sought only to replace approximately the volume or value of Forklift Gas lost to Renegade; and
9.3 communicating with Renegade between 24 July 2009 and June 2011 to the effect:
(a) that Renegade should stay away from Speed-E-Gas customers in Sydney;
(b) of inquiring as to why Renegade had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Speed-E-Gas in Sydney for the purpose of determining whether Renegade’s supply or attempt to supply was consistent with the Understanding;
(c) of informing Renegade why Speed-E-Gas had quoted, attempted to supply or commenced the supply of Forklift Gas to certain customers of Renegade in Sydney for the purpose of persuading Renegade that the supply or attempt to supply was consistent with the Understanding,
gave effect to the Stay Away Provision and Replacement Provision both of which were provisions of the Understanding which had the purpose of:
9.4 directly or indirectly preventing, restricting or limiting the supply or likely supply of Forklift Gas to certain customers of Renegade in Sydney, within the meaning of s 44ZZRD(3)(a)(iii) of the Act; and
9.5 allocating between Speed-E-Gas and Renegade, customers who had acquired or were likely to acquire Forklift Gas from Speed-E-Gas or Renegade, within the meaning of s 44ZZRD(3)(b)(i) of the Act,
in contravention of s 44ZZRK of the Act.
Pecuniary Penalty Order
10 The Court orders that Speed-E-Gas pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraphs 8 and 9 in the total amount of $3,100,000 within 30 days of the date of these Orders.
Injunction
11 The Court orders that Speed-E-Gas be restrained, for a period of 5 years from the date of these Orders, from:
11.1 making any contract or arrangement or arriving at an understanding with one or more of its competitors for the supply of Forklift Gas to customers in Sydney containing a provision which:
(a) has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding, to customers in Sydney; or
(b) has the purpose of allocating between the parties to the contract, arrangement or understanding customers who had acquired or were likely to acquire Forklift Gas in Sydney; or
11.2 giving effect to such a provision;
unless:
11.3 the conduct referred to in 11.1 and 11.2 is authorised under s 88 of the Act or any other Australian statute in accordance with or not a contravention by reason of s 51 of the Act;
11.4 the contract, arrangement or understanding referred to in 11.1 is for the purpose of a joint venture which joint venture is carried on jointly by all parties in the contract, arrangement or understanding, within the meaning of s 44ZZRP of the Act; or
11.5 that contract, arrangement or understanding is only between Speed-E-Gas and a related body corporate.
Other Order
12 The Court orders that Speed-E-Gas pay to the Commonwealth of Australia a contribution to the Applicant's costs of and incidental to these proceedings, in the agreed amount of $75,000, within 30 days of the date of these Orders.
THIRD RESPONDENT – BERMAN
Declaration
13 The Court declares that Berman, having determined that, subject to the Exceptions, Renegade would adopt the business practice of implementing the Stay Away Provision, by:
13.1 not changing that business practice when he had the authority to do so; and by
13.2 instructing Smith and other staff of Renegade to implement or adopt that business practice; and by
13.3 authorising and instructing Smith to instruct other staff of Renegade to manage Renegade’s response to breaches by Speed-E-Gas of the Stay Away Provision by implementing the Replacement Provision; and by
13.4 communicating from time to time with Mr Geoffrey Hobby who was the manager of Speed-E-Gas and Wilson to the effect that Speed-E-Gas should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied to certain customers,
was directly or indirectly knowingly concerned in, or a party to, conduct by which Renegade gave effect to the Stay Away Provision and the Replacement Provision, both of which were provisions of the Understanding, in contravention of:
13.5 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
13.6 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
14 The Court orders that Berman pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 13 above in the total amount of $250,000, to be paid within 30 days of the date of these Orders.
Injunction
15 The Court orders that Berman be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
15.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
15.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
15.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
15.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
15.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
15.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
15.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Orders
16 The Court orders, pursuant to s 86E(1) of the Act, that Berman be disqualified from managing corporations for a period of three years from the date of these Orders.
17 The Court orders that within six months of these Orders being made and again at least once per year for the following five years, Berman will procure and attend practical trade practices training administered by a qualified compliance professional or legal practitioner with expertise in competition law, which training is to focus, in particular on the responsibilities and obligations imposed by and the consequences of contravening, Divisions 1 and 2 of Part IV of the Act and be tailored to the types of trade practices issues that may arise in the market for the supply of LPG gas in Sydney.
18 The Court orders that Berman take all reasonable steps to ensure that the qualified compliance professional or legal practitioner referred to in paragraph 17 above provides confirmation in writing to the Applicant of Berman’s participation in this training within one month of the conclusion of the training each year.
19 The Court orders that Berman pay to the Commonwealth of Australia a contribution to the Applicant’s costs of and incidental to the proceedings, in the agreed amount of $100,000, within 30 days of the date of these Orders.
FOURTH RESPONDENT – SMITH
Declaration
20 The Court declares that Smith by:
20.1 implementing and enforcing the business practice, subject to the Exceptions, of Renegade implementing the Stay Away Provision and by instructing other Renegade staff to adopt that business practice; and by
20.2 managing Renegade’s response to breaches by Speed-E-Gas of the Stay Away Provision by implementing the Replacement Provision,
was directly or indirectly knowingly concerned in or a party to conduct by which Renegade gave effect to the Stay Away Provision and Replacement Provision, both of which were provisions of the Understanding, in contravention of:
20.3 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
20.4 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
21 The Court orders that Smith pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 20 above in the total amount of $100,000, to be paid within 30 days of the date of these Orders.
Injunction
22 The Court orders that Smith be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
22.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
22.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
22.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
22.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
22.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
22.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
22.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Order
23 The Court orders that Smith pay to the Commonwealth of Australia a contribution to the Applicant’s costs of and incidental to the proceedings, in the agreed amount of $25,000, within 30 days of the date of these Orders.
SIXTH RESPONDENT – WILSON
Declaration
24 The Court declares that Wilson, having determined with Mr Geoffrey Hobby who was the manager of Speed-E-Gas, that subject to the Exceptions, Speed-E-Gas would adopt the business practice of implementing the Stay Away Provision, by:
24.1 not changing that business practice when he had the capacity to do so; and by
24.2 instructing other staff of Speed-E-Gas to implement that business practice; and by
24.3 instructing other staff of Speed-E-Gas to implement a practice of dealing with prospective customers who were Renegade customers in Sydney by:
(a) not approaching the customer; or
(b) not offering to supply or declining to supply Forklift Gas to the customer; or
(c) restricting any offer to supply Forklift Gas to the customer to a price that Speed-E-Gas knew was not likely to induce the customer to change suppliers; and by
24.4 managing Speed-E-Gas’ response to breaches by Renegade of the Stay Away Provision by implementing the Replacement Provision; and by
24.5 communicating from time to time with Berman and Smith to the effect that Renegade should comply with the Stay Away Provision or concerning whether the Stay Away Provision applied to certain customers,
was directly or indirectly knowingly concerned in or a party to conduct by which Speed-E-Gas gave effect to the Stay Away Provision and Replacement Provision, both of which were provisions of the Understanding, in contravention of:
24.6 section 45(2)(b)(i) of the Act throughout the Relevant Period; and
24.7 section 44ZZRK of the Act throughout the period from 24 July 2009 to June 2011 (because the Stay Away Provision and Replacement Provision was each a cartel provision within the meaning of ss 44ZZRD(3)(a)(iii) and 44ZZRD(3)(b)(i) of the Act).
Pecuniary Penalty Order
25 The Court orders that Wilson pay to the Commonwealth of Australia a pecuniary penalty in respect of the contraventions referred to in paragraph 24 above in the total amount of $50,000, to be paid as follows:
25.1 $25,000 within 30 days of these Orders;
25.2 Three further payments of $8,333.33. The first payment is to be paid within one year from the date of these Orders, the second payment is to be paid within two years from the date of these Orders and the third payment is to be paid within three years from the date of these Orders; and
25.3 If any amount is not paid by its due date, all amounts outstanding are to be paid within six months of that failure to pay.
Injunction
26 The Court orders that Wilson be restrained for a period of five years, by himself, his servants or agents or otherwise howsoever, from being in any way, directly or indirectly, knowingly concerned in, or party to, any conduct of a corporation which supplies Forklift Gas in making, or giving effect to, any contract, arrangement or understanding with any other supplier of Forklift Gas containing a provision which:
26.1 has the purpose of preventing, restricting or limiting the supply of Forklift Gas (or of preventing, restricting or limiting the supply of Forklift Gas in particular circumstances or under particular conditions) by all or any of the parties to that contract, arrangement or understanding to customers in Sydney; or
26.2 has the purpose of allocating between any of those parties customers who had acquired or were likely to acquire Forklift Gas in Sydney,
unless:
26.3 when the said contract, arrangement or understanding was made it stipulated that the provision would not come into force unless the Applicant granted an authorisation to give effect to the provision; or
26.4 the provision was permitted because of the operation of an authorisation, notification or collective bargaining notice under any of ss 88, 93 or 93AD of the Act; or
26.5 each of the corporations which was a party to that contract, arrangement or understanding was a related body corporate of the other corporation or corporations which were also such a party; or
26.6 the provision was for the purpose of a joint venture for the production and / or supply of goods or services; or
26.7 the provision was for the joint advertising of the price for the resupply of goods or services collectively acquired by the parties to that contract, arrangement or understanding.
Other Order
27 The Court orders that Wilson and the Applicant bear their own costs of the proceedings insofar as they relate to Wilson.
GENERAL
28 The proceedings against the Respondents otherwise be dismissed.
APPENDIX A
COMPLIANCE AND EDUCATION / TRAINING PROGRAM
Interpretation
6. In this Appendix:
6.1. Act means the Competition and Consumer Act 2010 (Cth);
6.2. Commission means the Australian Competition and Consumer Commission;
6.3. Compliance Advisor means the person defined in paragraph 6 below;
6.4. Compliance Officer means the person appointed under paragraphs 2 or 3 below;
6.5. Compliance Policy means the report defined in paragraph 8 below;
6.6. Compliance Program means the Trade Practices Compliance and Education / Training Program in this Appendix;
6.7. Compliance Program Review Report is the report defined in paragraph 19 below;
6.8. Compliance Trainer is defined in paragraph 14 below;
6.9. Contravening Conduct means the conduct declared by the Federal Court of Australia in proceeding NSD 1239 of 2012 to be in contravention of Part IV of the Act or any similar or related conduct;
6.10. External Reviews means the reviews required by paragraph 18 below;
6.11. Order of the Court is the order of the Federal Court of Australia made in proceeding NSD 1239 of 2012 to which this Appendix A is attached;
6.12. Relevant Provisions means ss 44ZZRK and 45 of the Act, which were contravened by the Contravening Conduct and Part IV of the Act which deals with similar or related conduct;
6.13. Renegade means the First Respondent in proceeding NSD 1239 of 2012;
6.14. Respondent’s Program means the steps taken by Renegade to comply with the Orders of the Court;
6.15. Reviewer is defined in paragraph 18.2 below;
6.16. Risk Assessment means the assessment required by paragraph 6 below;
6.17. Risk Assessment Report means the report required by paragraph 7 below; and
6.18. Training means the training required by paragraph 13 below.
Compliance Officer
7. Renegade must, within one month of the Order of the Court, appoint a Director or a Senior Manager with suitable qualifications or experience in corporate compliance as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
8. After the appointment of the Compliance Officer in accordance with paragraph 2, Renegade must take all reasonable steps to ensure that, for the duration of the Order of the Court, there is a Director or a Senior Manager with suitable qualifications or experience in corporate compliance appointed as Compliance Officer with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
9. Renegade must take all reasonable steps to ensure that for the duration of the Order of the Court the Compliance Officer discharges his or her responsibility of ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Order of the Court.
10. Renegade must take all reasonable steps to ensure that the Compliance Officer reports in writing to Renegade’s board of directors every six months with respect to the on-going maintenance and administration of the Compliance Program including, in particular, whether the Respondent’s Program is effectively:
2.3. ensuring an awareness by the employees and other persons involved in the respondent’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
2.4. revising the internal operations of Renegade’s business which led to the respondent engaging in the Contravening Conduct.
Risk Assessment
29. Renegade must, within one month of the Order of the Court, appoint a qualified, internal or external, compliance professional with expertise in trade practices issues (Compliance Advisor) to conduct a risk assessment to:
29.1. identify the areas of Renegade’s business where it is at risk of contravening the Relevant Provisions;
29.2. assess the likelihood of any such contravention occurring;
29.3. identify where there are deficiencies in Renegade’s procedures for managing any such risk;
29.4. make findings concerning sub-paragraphs 6.1 to 6.3 above; and
29.5. make recommendations for action having regard to sub-paragraphs 6.1 to 6.4 above (Risk Assessment).
30. Renegade must instruct the Compliance Advisor to set out, and must take all reasonable steps to ensure that the Compliance Advisor sets out, the findings and recommendations of the Risk Assessment in a written report (Risk Assessment Report), to be provided to Renegade’s board of directors within two months of his or her appointment.
Compliance Policy
31. Renegade must, within 30 days of the Order of the Court, establish a policy (Compliance Policy) which is communicated in writing to all employees or other persons involved in Renegade’s business regarding trade practices compliance, which must include:
31.1. a statement of commitment by Renegade to comply with the Relevant Provisions;
31.2. a direction to all employees or other persons involved in Renegade’s business to report any compliance related issues and trade practices compliance concerns to the Compliance Officer;
31.3. a statement guaranteeing that employees or other persons involved in Renegade’s business making a complaint or report in relation to Renegade’s compliance with the Relevant Provisions will not be prosecuted or disadvantaged in any way by reason of their complaint or report and that their complaint or report will be kept confidential and secure; and
31.4. a statement that Renegade will take disciplinary action against any persons who are knowingly or recklessly concerned in a contravention of the Relevant Provisions and will not indemnify them.
32. Renegade must take all reasonable steps to ensure that the Compliance Program is maintained and administered in a manner that is consistent with the Compliance Policy for the duration of the Order of the Court.
33. Renegade will provide a copy of the Compliance Policy to all new staff at the commencement of their employment with Renegade.
Complaints Handling
34. Renegade must establish, maintain and administer a trade practices complaints handling system.
35. Renegade must take all steps that are necessary to ensure that the trade practices complaints handling system is in accordance with AS/ISO 10002:2006 Customer satisfaction - Guidelines for complaints handling in organizations, though tailored to its own circumstances.
Training
36. Renegade must take all reasonable steps to ensure that all directors, officers, employees, representatives and agents of Renegade, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions, receive practical trade practices training (Training) no less than once during each 12 month period over which the Compliance Program is in operation.
37. The Training must be conducted by either a suitably qualified compliance professional or legal practitioner with expertise in trade practices law (Compliance Trainer).
38. Renegade must instruct the Compliance Trainer to design the Training, and must take all reasonable steps to ensure that the Training is designed, to ensure that the persons at the Training are made aware of:
38.1. the responsibilities and obligations in relation to the Relevant Provisions;
38.2. the potential consequences of contravening the Relevant Provisions;
38.3. the areas of Renegade’s business where it is at risk of contravening the Relevant Provisions, as identified in the Risk Assessment Report;
38.4. the content of the Compliance Policy; and
38.5. the content of the Compliance Program.
39. Renegade, for the purposes of conducting the Training, must provide the Compliance Trainer with a copy of:
39.1. the Order of the Court;
39.2. the Compliance Policy; and
39.3. the Risk Assessment Report.
40. Renegade must take all reasonable steps to ensure that an awareness of the Compliance Program, the Compliance Policy and the complaints handling system forms part of the induction of all new directors, officers, employees, representatives and agents, whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions.
External Review
41. Renegade must take all reasonable steps to ensure that annual reviews of Renegade’s compliance with the Order of the Court are carried out in accordance with sub-paragraphs 18.1 to 18.4 below (External Reviews):
41.1. Scope of the External Reviews – The External Reviews are to ascertain whether the Respondent’s Program:
41.1.1. has made the employees or other persons involved in Renegade’s business aware of their responsibilities and obligations in relation to the Relevant Provisions;
41.1.2. has revised the internal operations of Renegade’s business in relation to the Relevant Provisions and the circumstances that led to the Contravening Conduct;
41.1.3. effectively maintains and administers the Compliance Program.
41.2. Independence of Reviewer – Renegade must take all reasonable steps to ensure that all External Reviews are carried out by a suitably qualified, independent compliance professional with expertise in competition law (Reviewer). The Reviewer will qualify as independent on the basis that he or she:
41.2.1. is not a present or past director, employee or officer of Renegade;
41.2.2. has no significant shareholding or other interests in Renegade;
41.2.3. has not acted for or consulted to, and does not act for or consult to, Renegade in any matters involving alleged contraventions of Australian competition or consumer protection legislation;
41.2.4. has not acted for or consulted, and does not act for or consult to, Renegade or provide other services in relation to this Compliance Program, other than as the Reviewer in a previous year; and
41.2.5. has no conflict of interest in carrying out the Reviews.
41.3. Evidence – Renegade must take all reasonable steps to ensure that in the conduct of the External Reviews the Reviewer has access to all relevant sources of information in Renegade’s possession or control, including access to:
41.3.1. any officers, employees, representatives or agents of Renegade;
41.3.2. any relevant records of Renegade, including its complaints register/reports and any documents relevant to its training or induction program; and
41.3.3. any documents created by Renegade’s consultants or legal advisers for use in relation to the Respondent’s Program.
41.4. Timing – Renegade must take all reasonable steps to ensure that the first External Review is completed within one year of the Order of the Court and that each subsequent External Review is completed within one year thereafter, save that all steps to be taken by Renegade in relation to the final External Review are to be completed one month prior to the expiration of the Order of the Court.
42. Renegade must instruct the Reviewer to set out, and must take all reasonable steps to ensure that the Reviewer sets out, the findings of each of the External Reviews in a written report (Compliance Program Review Report) which addresses each of the following:
42.1. details of the evidence gathered and examined during the External Review;
42.2. the name and relevant experience of the person appointed as the Compliance Officer;
42.3. if, and to what extent, the Respondent’s Program includes all the elements and requirements of the Compliance Program;
42.4. if, and to what extent, the Respondent’s Program adequately covers the areas identified in the initial Risk Assessment; and
42.5. recommendations that the Reviewer considers are reasonably necessary to ensure that the Respondent’s Program effectively maintains and administers the Compliance Program.
43. Renegade must instruct the Reviewer to complete and provide the Compliance Program Review Report to it, and must take all reasonable steps to ensure that the Compliance Program Review Report is completed and provided to it, within one month of each Review.
44. Renegade must retain each Compliance Program Review Report.
45. Within 30 days of the receipt of each Compliance Program Review Report, Renegade’s board of directors must hold a meeting to consider:
45.1. the Compliance Program Review Report;
45.2. whether to make any changes to the Respondent’s Program to more effectively implement the Compliance Program for the purposes of:
45.2.1. ensuring an awareness for the employees or other persons involved in Renegade’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
45.2.2. revising the internal operations of Renegade’s business in relation to the circumstances that led to the Contravening Conduct;
45.3. any recommendation of the Commission for the purposes of sub-paragraph 22.2 above.
46. At the meeting referred to in paragraph 22 above held by Renegade, Renegade’s board of directors must consider:
46.1. the Compliance Program Review Report;
46.2. whether to make any changes to the Respondent’s Program to more effectively implement the Compliance Program for the purposes of:
46.2.1. ensuring an awareness for the employees or other persons involved in Renegade’s business of their responsibilities and obligations in relation to the Relevant Provisions; and
46.2.2. revising the internal operations of Renegade’s business in relation to the circumstances that led to the Contravening Conduct;
46.3. any recommendation of the Commission for the purposes of sub-paragraph 23.2 above.
47. Within 14 days of holding the meeting referred to in paragraph 23 above, Renegade must advise the Commission in writing of:
47.1. details of when the meeting was held and who was present;
47.2. the outcome of the meeting, including:
47.2.1. what, if any, changes Renegade decided to make to the Respondent’s Program to more effectively implement the Compliance Program and details of the proposed implementation of any changes; and
47.2.2. the decisions made by Renegade about each of the recommendations that had been made by the Commission (if any).
48. Within 14 days of holding a meeting referred to in paragraph 23 above at which Renegade decides to make changes to the Respondent’s Program it must take all reasonable steps to communicate those changes to all employees or other persons involved in Renegade’s business.
Supply of Documents to the Commission
49. Renegade must within 14 months of the Order of the Court, cause to be produced and provided to the Commission copies of each of the following documents:
49.1. documents evidencing the appointment of the Compliance Officer and Compliance Adviser;
49.2. the Risk Assessment Report;
49.3. the Compliance Policy and the documents evidencing its implementation; and
49.4. documents evidencing the provision of Training, including all materials used in the Training.
50. Renegade must provide a copy of each Compliance Program Review Report to the Commission within 14 days of its receipt from the Reviewer.
If requested in writing by the Commission, Renegade must, at its own expense, provide copies of documents and information constituting or evidencing compliance or non-compliance with the Orders of the Court.
