FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v OmniBlend Australia Pty Ltd [2015] FCA 871

UPON THE RESPONDENTS GIVING THE FOLLOWING UNDERTAKINGS TO THE COURT

(a)    The first respondent undertakes that from the date this undertaking is given to the Court for a period of five years, it will not, whether by itself, its agents, servants or howsoever otherwise, in trade or commerce, aid, abet, counsel or procure Taiwan Star Industrial Inc (TSI) or any other corporation to:

(i)    induce, or attempt to induce, any person not to sell kitchen appliances for commercial or domestic use at a price less than a price specified by TSI or the other corporation;

(ii)    withhold supply of kitchen appliances for commercial or domestic use to a person for the reason that:

(A)    the person had not agreed not to sell the appliances at a price less than the price specified by TSI or the other corporation; or

(B)    the person had sold, or was likely to sell, the appliances at a price less than the price specified by TSI or the other corporation.

(b)    The second respondent undertakes that from the date this undertaking is given to the Court for a period of five years, he will not aid, abet, counsel or procure TSI or any other corporation to:

(i)    induce, or attempt to induce, any person not to sell appliances for commercial or domestic use at a price less than a price specified by TSI or the other corporation;

(ii)    withhold supply of appliances for commercial or domestic use to a person for the reason that:

(A)    the person had not agreed not to sell the appliances at a price less than the price specified by TSI or the other corporation; or

(B)    the person had sold, or was likely to sell, the appliances at a price less than the price specified by TSI or the other corporation.

THE COURT DECLARES BY CONSENT THAT:

1.    The first respondent, OmniBlend Australia Pty Ltd (OmniBlend Australia), by statements made in emails sent by the second respondent, Neal Bowhay (Mr Bowhay), to representatives of TSI during the period 16 January 2013 to April 2013, aided, abetted, counselled or procured TSI to engage in the practice of resale price maintenance in contravention of s 48 of the Competition and Consumer Act 2010 (Cth) (the Act) by:

(a)    TSI inducing and attempting to induce Athena Solutions Pty Ltd (Athena) not to sell OmniBlend V blenders TM-800, TM-800A and TM-900A (OmniBlend Blenders) at prices less than the prices specified by TSI; and

(b)    TSI withholding supply of OmniBlend Blenders to Athena for the reason that:

(i)    Athena had not agreed not to sell OmniBlend Blenders at prices less than the prices specified by TSI; and, or alternatively,

(ii)    Athena had sold, or was likely to sell, OmniBlend Blenders at prices less than the prices specified by TSI.

2.    Mr Bowhay, by sending the emails referred to in paragraph 1, aided, abetted, counselled or procured TSI to engage in the practice of resale price maintenance in contravention of s 48 of the Act by:

(a)    TSI inducing and attempting to induce Athena not to sell OmniBlend Blenders at prices less than the prices specified by TSI; and

(b)    TSI withholding supply of OmniBlend Blenders to Athena for the reason that:

(i)    Athena had not agreed not to sell OmniBlend Blenders at prices less than the prices specified by TSI; and, or alternatively,

(ii)    Athena had sold, or was likely to sell, OmniBlend Blenders at prices less than the prices specified by TSI.

AND THE COURT ORDERS BY CONSENT THAT:

3.    OmniBlend Australia take all reasonable steps to ensure that all officers, employees, representatives and agents of OmniBlend Australia, whose duties could result in them being concerned with conduct that may contravene Part IV of the Act, receive practical training regarding Part IV of the Act at least once in the period of 12 months from the date of this order, by either a suitably qualified compliance professional or legal practitioner with expertise in Part IV of the Act.

4.    Mr Bowhay receive practical training regarding Part IV of the Act at least once in the period of 12 months from the date of this order, by either a suitably qualified compliance professional or legal practitioner with expertise in Part IV of the Act.

5.    OmniBlend Australia serve on the ACCC within 30 days of the date on which it complies with paragraph 3 of this order an affidavit of its proper officer verifying that it has carried out its obligations under paragraph 3 of this order.

6.    Mr Bowhay serve on the ACCC within 30 days of the date on which he complies with paragraph 4 of this order an affidavit verifying that he has carried out his obligations under paragraph 4 of this order.

7.    OmniBlend Australia pay $10,000 towards the ACCC’s costs of and incidental to the proceeding.

AND THE COURT ORDERS THAT:

8.    OmniBlend Australia pay a pecuniary penalty to the Commonwealth of Australia fixed in the amount of $17,500 to be paid by two equal instalments, the first instalment to be paid within six months of the date of this order and the second instalment to be paid within 12 months of the date of this order.

9.    The proceeding be otherwise dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The applicant (ACCC) and the respondents, OmniBlend Australia Pty Ltd (OmniBlend Australia) and Neal Bowhay (Mr Bowhay), have agreed to resolve the respondents’ liability as accessories concerning their involvement in contraventions of s 48 of the Competition and Consumer Act 2010 (Cth) (the Act).

2    The respondents have admitted that they aided, abetted, counselled and procured Taiwan Star Industrial Inc (TSI) to contravene s 48 of the Act within the meaning of ss 76(1)(c) and 80(1)(c) of the Act.

3    Separately, the ACCC has also advanced a case that the respondents had contravened s 44ZZRJ of the Act. But that case is no longer pressed.

4    The parties have reached agreement on the appropriate form of orders in relation to declarations, a compliance program, undertakings and costs. But no agreement has been reached on the question of pecuniary penalty.

5    In terms of the relief that has been agreed:

    declarations in an agreed form have been proposed as against both respondents;

    undertakings in an agreed form are to be given by both respondents that analogous infringing conduct will not be engaged in in the future;

    orders are to be made against both respondents in respect of the implementation of a compliance training program;

    OmniBlend Australia is to make a modest contribution of $10,000 towards the ACCC’s costs of this proceeding.

6    The ACCC has also sought a pecuniary penalty against OmniBlend Australia only. Consistently with the authority of Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) 320 ALR 631 (DFWBII), the parties have not put to me an agreed figure or range for the quantum of penalty. Further, they have not put to me any individual position on that question.

7    Consistently with that position they have submitted that:

(a)    First, I am not free to construe Barbaro v The Queen (2014) 253 CLR 58 for myself but must apply DFWBII’s interpretation of what the High Court said in Barbaro; accordingly, it is said that I should put aside my own observations in Australian Energy Regulator v Snowy Hydro Ltd (No 2) [2015] FCA 58 at [136];

(b)    Second, I should prefer a decision of this Court in its original jurisdiction (DFWBII) over a considered decision of this Court in its appellate jurisdiction (NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285);

(c)    Third, I should apply single judge decisions of this Court following DFWBII which instruct me to accept propositions (a) and (b), unless I consider them to be plainly wrong.

8    I will apply DFWBII. It is not necessary to identify which if any of propositions 7(a) to (c) I have accepted. And in applying DFWBII, I will treat any discretionary power that I have to fix a pecuniary penalty as being at large, subject only to being in conformity with s 76 of the Act.

9    But even applying DFWBII, I am free to receive from the parties information concerning:

(a)    what quantum of penalty OmniBlend Australia has the financial capacity to pay;

(b)    the quantum of penalties imposed in other comparable cases;

(c)    relatedly, what quantum of penalty, which if imposed, would infringe any parity principle;

(d)    what circumstances would justify no penalty, what circumstances would justify the maximum penalty and where on the spectrum between such end points of circumstances, the circumstances of the present case lie;

(e)    what quantum of penalty which, if I imposed it, would be manifestly inadequate on the one hand, or manifestly excessive on the other hand; not to receive such information would be conducive to seducing me into error.

10    In all the circumstances, and for the reasons later discussed, I would fix the pecuniary penalty against OmniBlend Australia in the amount of $17,500; the theoretical maximum is, of course, $10 million for each contravention.

11    The parties have put before me a statement of agreed facts (s 191 of the Evidence Act 1995 (Cth)) which also has attached to it various relevant emails, the content and exchange of which constituted the relevant accessorial infringing conduct.

12    The respondents have also filed an affidavit of Mr Bowhay sworn 29 June 2015 with attachments; Mr Bowhay was not cross-examined. Counsel for the respondents sought to use that material in an endeavour to put a favourable spin on the respondents’ conduct. He even went so far as to suggest that somehow the respondents had been provoked into the relevant conduct and somehow had acted in “self defence” in the protection of their commercial interests. Making the usual allowance for the rhetorical flourishes of counsel, nevertheless I perceived there to be considerable tension between such submissions on the one hand and the respondents’ professed contrition on the other hand.

13    I informed the respondents’ counsel that this affidavit and its attachments would be treated by me as having probative value and weight only to the extent that it was not inconsistent with the statement of agreed facts and the detail of the contemporaneous communications set out in the relevant attached emails.

14    It is appropriate to set out the factual template and the agreed position between the parties.

Factual Foundation

15    OmniBlend Australia at relevant times has carried on business as an online retailer of goods, including OmniBlend V blenders TM-800, TM-800A and TM-800A (PC jug) (OmniBlend Blenders), through its website www.omniblendaustralia.com.au and eBay store http://stores.ebay.com.au/omniblend-australia. It has also been supplied with OmniBlend Blenders by TSI and/or a subsidiary of TSI, JTC Electronics Corp (JTC).

16    Mr Bowhay is and has been the sole director and shareholder of OmniBlend Australia. It is not disputed that he engaged in the conduct described on behalf of OmniBlend Australia within the scope of his actual or apparent authority as the sole director of OmniBlend Australia.

17    Athena Solutions Pty Ltd (Athena) at all material times has carried on business as an online retailer of goods, including OmniBlend Blenders, through the websites www.froothie.com.au (Froothie Website) and www.omniblenderaustralia.com.au (OmniBlender Australia Website). At all material times until around 5 April 2013 Athena was supplied with OmniBlend Blenders by TSI.

18    Mario Nawfal (Mr Nawfal) is and has at all material times been the sole director of Athena.

19    TSI is and has at all material times been a company incorporated under the laws of Taiwan and the parent company of JTC. It has carried on business as the supplier of TM800 and TM800A blenders sold both as OEM blenders for rebranding and as OmniBlend Blenders (also known as “JTC brand” blenders) to retailers within Australia.

20    JTC has at all material times been the manufacturer of OmniBlend Blenders and based in the People’s Republic of China. It is a subsidiary company of TSI.

21    At all material times Kenneth Lee (Mr Lee) was a General Manager at TSI, Pinky Mok (Ms Mok) was a Manager at TSI, Rebecca Lin (Ms Lin) was an employee of TSI, and Dianne Lee (Ms Lee) was a Global Export Manager of TSI and/or JTC.

22    On 16 January 2013, Mr Bowhay sent an email to Ms Lin stating concerns that Mr Nawfal:

(a)    sent him a threatening letter under a false name;

(b)    had posted false reviews against OmniBlend blenders and against OmniBlend Australia under the false name of Sonja; and

(c)    was advertising Optimum blenders with false specifications.

23    On 20 January 2013, Mr Bowhay sent an email addressed to Ms Lin and her manager with more detailed information for the statements in his email of 16 January 2013 and added information about how Mr Nawfal:

(a)    denigrated the OmniBlend brand in order to promote his Optimum machines;

(b)    linked his OmniBlend Google adwords ads to his Optimum machines; and

(c)    listed OmniBlend machines for sale on eBay prior to having any OmniBlend stock and used the listing to redirect customers to machines he was selling from another manufacturer under another brand.

24    On 13 February 2013 Mr Nawfal sent Mr Bowhay an email stating that Athena was seriously considering buying the OmniBlend Australia business.

25    On 14 February 2013 Mr Bowhay sent an email to Mr Nawfal stating the price for his business would be “in the region of $1M” and asked if Mr Nawfal’s proposal to purchase was serious. Mr Bowhay also informed Mr Nawfal that his choice of OmniBlender as a trading name was “passing off”.

26    On 21 February 2013, Mr Bowhay rang the ACCC’s Infocentre, and reported his concerns about Mr Nawfal’s alleged passing off and his alleged false and misleading advertising of his Optimum blenders as being BPA-free. The ACCC Infocentre informed Mr Bowhay these may be legislative breaches, however the ACCC generally pursues matters of broad consumer detriment and that he should contact Mr Nawfal and try to resolve them directly with him.

27    On 21 February 2013 Mr Bowhay had an email exchange with Mr Nawfal in which he informed him of his complaint to the ACCC and offered to settle the matter amicably. Mr Nawfal accused Mr Bowhay of taking an aggressive approach.

28    On 24 February 2013, Mr Bowhay sent an email to Mr Lee and Ms Lin in which he:

(a)    said that before OmniBlend Australia could go ahead with its Australian orders, JTC needed to be aware of a problem in Australia and then stated that Athena has started a second website called OmniBlenderaustralia.com.au selling only OmniBlend brand machines which Mr Bowhay considered was a direct copy of his company name;

(b)    said Athena had slashed the prices of OmniBlend Blenders and was selling the TM-800A model for $201 and offering to beat this price by $50 if anyone matched Athena’s price and stated that once you factored in all overheads $201 is cost price or below;

(c)    said that this would destroy other businesses in Australia selling JTC blenders and that selling the brand at a discount would make people in Australia believe OmniBlend Blenders were an inferior product;

(d)    said that if JTC continued to supply Athena with unlimited JTC machines then Athena would be able to create a very difficult business environment for other JTC sellers; and

(e)    asked whether TSI planned to continue supplying OmniBlend Blenders to Athena as it would affect the future of OmniBlend Australia’s business and said that OmniBlend Australia did not ask for exclusive supply of OmniBlend Blenders in Australia.

29    On 1 March 2013, Mr Lee sent an email in response to Mr Bowhay in which he said that to help OmniBlend Australia solve its problems, TSI planned to:

(a)    discuss setting a minimum sales price with all Australian distributors;

(b)    limit all distributors from selling below the minimum sales price by stopping the supply of goods to those distributors who sold too low; and

(c)    write to Mr Nawfal and advise Athena not to compete against OmniBlend Australia.

30    On 1 March 2013, Mr Bowhay sent an email in response to Mr Lee in which he said that OmniBlend Australia thought TSI’s plan was a very good idea and said that OmniBlend Australia was happy to participate in it.

31    On 3 March 2013, Mr Bowhay sent an email to Mr Lee attaching a completed suggested price list for OmniBlend Blenders in which he:

(a)    said that it was necessary for TSI to speak to Athena;

(b)    said that Athena’s ongoing price of $201 for OmniBlend Blenders was very damaging; and

(c)    asked for TSI to act as soon as possible to end the ongoing $201 price advertised by Athena.

32    On 4 March 2013, Mr Bowhay sent an email to Mr Lee in which he said that it was important for TSI to set a minimum shipping charge of $18 on machines and $7 for spare parts, otherwise it would be possible for distributors to charge a false low shipping price in order to reduce the final price and this would defeat the point of the new prices.

33    On 5 March 2013, Mr Bowhay sent an email to Mr Lee in which he:

(a)    asked whether TSI had contacted Athena;

(b)    said he had previously assumed manufacturers could set prices for their own product;

(c)    referred to the law in Australia against resale price maintenance and the “loss leader” exception; and

(d)    suggested Mr Lee be careful how he presented things to Mr Nawfal.

34    On 5 March 2013, Ms Lin sent an email to Mr Bowhay in which she said that it was better for OmniBlend Australia not to contact Athena as Athena might not be friendly to a competitor, and that as manufacturer, TSI could suggest that the distributors set a price for OmniBlend Blenders.

35    On 7 March 2013, Mr Bowhay sent an email to Mr Lee in which he complained again about Athena’s prices of OmniBlend Blenders and said that there was no point in OmniBlend Australia doing any marketing or sales for OmniBlend Blenders because customers will buy his “Prices-Slashed” OmniBlends, or be persuaded to buy Optimum instead. That Mr Nawfal could not support the long warranties he offered with machines sold for no profit and that on top of Athena’s damaging, cheap prices this would make JTC look bad for years to come. Mr Bowhay said if he matched Athena’s prices he would have to sell for no profit and be unable to support the warranty.

36    On 8 March 2013, Mr Lee sent an email to Mr Nawfal in which he said that:

(a)    TSI had received complaints from other Australian customers about the price at which Athena was selling OmniBlend Blenders; and

(b)    to avoid an OmniBlend Blender price war and for the benefit of all JTC distributors, TSI planned to suggest a retail and wholesale price for OmniBlend Blenders for the Australian market and asked Mr Nawfal to give Athena’s suggested price for the OmniBlend Blenders.

37    On 10 March 2013, Mr Nawfal sent an email to Mr Lee in which he said that he believed that TSI setting a fixed price for OmniBlend Blenders in Australia would harm TSI’s business and lead to reduced sales.

38    On 14 March 2013, Mr Lee sent an email to Mr Nawfal in which he asked Mr Nawfal again for Athena’s suggested price for OmniBlend Blenders and said that TSI’s goal was to avoid any OmniBlend Blender price war and to allow its distributors to be successful.

39    On 15 March 2013, Mr Bowhay sent an email to Mr Lee in which he said that OmniBlend Australia had matched Athena’s prices and Athena had responded by dropping its prices another $10.

40    On 15 March 2013, Mr Lee sent an email to Mr Nawfal in which he said that:

(a)    he had suggested to Mr Bowhay that OmniBlend Australia not sell OmniBlend Blenders at a price lower than Athena’s price;

(b)    Mr Bowhay had complained to Mr Lee that Athena had dropped their price by another $10; and

(c)    Mr Nawfal was not to reduce Athena’s prices again.

41    On 15 March 2013, Mr Lee sent an email to Mr Bowhay in which he said that he would keep on persuading Mr Nawfal to stop the price war.

42    On 15 March 2013, Mr Bowhay sent an email to Mr Lee in which he said that:

(a)    Mr Nawfal had said to him directly that either he wanted to buy Mr Bowhay’s business or put him out of business;

(b)    Mr Nawfal had asked Mr Bowhay not to market or promote his company by, for example, advertising against Vitamix;

(c)    Mr Bowhay’s biggest complaint was that Mr Nawfal did things deliberately to harm the OmniBlend brand;

(d)    higher pricing placed OmniBlend Blenders correctly in the market place;

(e)    OmniBlend Australia had matched Athena’s $10 reduction in price for OmniBlend Blenders;

(f)    OmniBlend Australia did not want to go lower but wanted to go back up much higher and not just by $10;

(g)    the current prices were damaging the reputation of OmniBlend Blenders and would continue to do so until they were changed significantly; and

(h)    he was happy to compete with anyone fairly.

43    On 15 March 2013, Mr Lee sent an email to Mr Bowhay in reply in which he said that he was trying to persuade Mr Nawfal to increase Athena’s prices and told Mr Bowhay if he reduced OmniBlend Australia’s price, he should only match Athena’s prices and not go any lower.

44    On 15 March 2013, Mr Lee sent an email to Mr Nawfal in which he said that TSI had advised OmniBlend Australia and Mr Bowhay not to sell OmniBlend Blenders at prices lower than Athena’s prices.

45    On 16 March 2013, Mr Bowhay sent an email to Mr Lee in which he said that:

(a)    after being unable to purchase OmniBlend Australia, Mr Nawfal was trying to reduce the value of OmniBlend Australia and the OmniBlend brand instead;

(b)    if Mr Nawfal really wanted to sell machines cheaply why was he selling his Optimum 9200 (the same machine as the OmniBlend) for $431;

(c)    Mr Nawfal stated on his OmniBlender website regarding OmniBlend machines, “importing the product is simple and affordable” and refers to OmniBlend Blenders as “domestic machine not commercial”;

(d)    OmniBlend Australia hoped that TSI would see the damage to the brand and stop Athena from keeping prices of OmniBlend Blenders low;

(e)    as the supplier, TSI could insist on the price Athena charged and OmniBlend Australia asked that TSI do so;

(f)    until prices were raised, OmniBlend Australia would stop advertising OmniBlend Blenders;

(g)    because of the low prices Athena was charging, OmniBlend Australia was looking at machines from other manufacturers that OmniBlend Australia could get an exclusive agreement to sell; and

(h)    Mr Nawfal was funding himself by selling his own exclusive machines and playing games.

46    On 16 March 2013, Mr Lee sent an email to Mr Nawfal in which he said that:

(a)    OmniBlend Australia had agreed not to sell OmniBlend Blenders at a price lower than Athena;

(b)    he hoped that Athena could increase its price of OmniBlend Blenders by $10; and

(c)    if Athena increased its price by $10, he would inform Mr Bowhay to increase OmniBlend Australia’s price to match Athena’s price.

47    On 16 March 2013, Mr Nawfal sent an email in reply to Mr Lee in which he said that Athena would not increase its prices until an agreement was reached.

48    On 16 March 2013, Mr Nawfal sent an email in reply to Mr Lee in which he said that he agreed to increase his price by $10 and asked Mr Lee to let him know when OmniBlend Australia increased its price.

49    On 18 March 2013, Mr Nawfal sent an email to Mr Lee in which he asked when Athena could increase its price and said that Athena was waiting for OmniBlend Australia to increase its prices first.

50    On 18 March 2013, Mr Lee sent an email in reply to Mr Nawfal in which he said that TSI would push both Athena and OmniBlend Australia to increase the price of OmniBlend Blenders.

51    On 18 March 2013, Mr Lee sent an email to Mr Nawfal in which he said that:

(a)    as soon as Athena increased its price by $10, he would request OmniBlend Australia to increase its price; and

(b)    TSI believed that there was still room to increase the price of OmniBlend V Blenders because Mr Nawfal was selling them for much lower than his JTC TM 767 blenders which Mr Lee thought was really unreasonable and hoped that Athena would go the next step to increase the price again.

52    On 18 March 2013, Mr Lee sent an email to Mr Nawfal in which he told Athena to increase its price by $10 as soon as possible and would instruct Mr Bowhay to do the same.

53    On 19 March 2013, Ms Lin sent an email to Mr Bowhay in which she said that Athena had agreed to increase prices by US$10 and asked OmniBlend Australia to increase its prices by US$10, saying this was the first step.

54    On 19 March 2013, Mr Bowhay sent an email to Ms Lin in reply in which he advised that OmniBlend Australia had put its prices up by $10 but Athena had not changed its prices yet.

55    On 19 March 2013, Ms Mok sent an email to Mr Nawfal in which she told Athena to increase its price by $10 immediately.

56    On 19 March 2013, Mr Nawfal sent an email in reply to Ms Mok in which he said that Athena would increase its price by $10 that night.

57    On 19 March 2013, Mr Lee sent an email to Mr Bowhay in reply in which he said that:

(a)    TSI were pushing Athena to increase its prices by $10;

(b)    TSI wanted both Athena and OmniBlend Australia to increase their prices to $279 for TM-800A and $289 for TM-800 and asked Mr Bowhay to comment on these prices; and

(c)    Mr Lee said the final step was to ask Mr Nawfal to remove all his bad words about OmniBlend from social media and his website, otherwise Mr Lee would withdraw the OmniBlend brand, but still supply Mr Nawfal with his Optimum brand.

58    On 19 March 2013, Mr Bowhay sent an email to Mr Lee and Ms Lin in which he said that:

(a)    the prices TSI had suggested were a good start and that OmniBlend Australia considered that the prices eventually should be $339 for TM-800 and $329 for TM-800A; and

(b)    with regard to Mr Lee’s point about removal of harmful comments, there was a new bad sounding review on Product Review that Mr Bowhay believed had been initiated by Mr Nawfal that stated incorrectly that the OmniBlend Blender is not as good as Vitamix, it smells, it does not blend and that the jug leaked.

59    On 20 March 2013, Mr Nawfal sent an email to Ms Mok in which he said that Athena would increase its price by $10 by 10:00 pm that night.

60    On 20 March 2013, Mr Lee sent an email to Mr Bowhay in which he said that:

(a)    suddenly increasing prices for OmniBlend Blenders would not be good for TSI’s image but that incremental increases to prices should be accepted by most customers; and

(b)    TSI’s suggested retail prices were $289 for TM-800 and $279 for TM-800A.

61    On 20 March 2013, Mr Bowhay sent Mr Lee an email in response in which he said that TSI’s proposal sounded good but complained that Athena had not put up its prices by $10.

62    On 21 March 2013, Mr Lee sent an email to Mr Bowhay in which he asked Mr Bowhay to let him know if Athena violated its promise to increase the price of OmniBlend Blenders by $10 and said that, if TSI had evidence, TSI could temporarily stop offering OmniBlend Blenders to Athena. Mr Lee said he would ask Mr Nawfal to remove all bad OmniBlend reviews and that if he did not like the JTC OmniBlend it would be better if he sold the Optimum brand only.

63    On 21 March 2013, Mr Bowhay sent an email to Mr Lee:

(a)    in which he complained that Athena had dropped the price of TM-800A (Black) from $237 to $232; and

(b)    which attached a document entitled “OmniBlend Australia Proposal”, which proposed an agreement between TSI and OmniBlend Australia under which TSI would cease supplying OmniBlend Blenders to Athena. It was also proposed that, for a year, JTC agreed to not take on any more OmniBlend brand customers in Australia but could sell other brands of blenders to other Australian retailers. OmniBlend Australia stated that knowing it does not face aggressive competition against the brand name gives it the confidence to invest strongly. OmniBlend Australia further encouraged efforts to acquire a Trademark for the brand name “OmniBlend” to stop Mr Nawfal from using the name to advertise negatively about it on the internet as he has in the past.

64    On 21 March 2013, Mr Lee sent an email to Mr Nawfal in which he:

(a)    said that he was not happy that the Froothie website promoted Optimum brand machines but not OmniBlend brand machines and that Mr Nawfal presented OmniBlend as the cheaper less impressive option. Mr Lee said Mr Nawfal was only using the OmniBlend name to increase sales of Optimum;

(b)    said that Athena’s prices of OmniBlend Blenders were too low and unreasonable;

(c)    asked Athena to modify its prices of OmniBlend Blenders as follows within three days:

(i)    TM-800 — US$289;

(ii)    TM-800A (BPA free jug) — US$289; and

(iii)    TM-800A (PC jug) — US$279; and

(d)    said that TSI knew there was room to increase the price of OmniBlend Blenders by $50 again.

65    On 22 March 2013, Mr Lee sent an email to Mr Bowhay in which he said that:

(a)    he had instructed TSI not to supply any OmniBlend Blenders to Athena temporarily;

(b)    he was thinking of changing Mr Nawfal’s JTC brand orders to Optimum brand;

(c)    if Mr Nawfal wanted to sell unsold stock of Optimum 9200 blenders, he should reduce the price of this type of blender and not reduce the prices of JTC OmniBlend Blenders; and

(d)    if Athena did not increase its prices, TSI would have a very good excuse to stop supplying OmniBlend Blenders to him permanently.

66    On 22 March 2013 Mr Nawfal sent an email to Mr Lee in which Mr Nawfal complained:

(a)    Mr Bowhay was informing customers that Mr Nawfal was rebranding the OmniBlend which hurt his business; and

(b)    there was a review which stated the Optimum looked like a rebranded OmniBlend which he blamed on Mr Bowhay.

67    On 23 March 2013 Mr Lee sent an email in response to Mr Nawfal in which Mr Lee said that judging from Mr Nawfal’s website and Facebook he only sold Optimum and ruined the OmniBlend name and prices. Therefore it was better that TSI sold OmniBlend Blenders to others and only sell Optimum-branded blenders to Mr Nawfal.

68    On 5 April 2013, Ms Mok sent an email to Mr Nawfal in which she said that Mr Lee had instructed TSI not to provide OmniBlend Blenders to Athena anymore because Athena sold OmniBlend Blenders at an extremely unreasonable price. She said JTC would continue to supply Athena with Optimum brand machines.

69    On 13 April 2013, Ms Lee sent an email to Mr Bowhay in which she said that, as requested by OmniBlend Australia in its proposal to TSI (referred to in [63(b)] above), TSI had terminated sales of OmniBlend Blenders to Athena.

70    It is agreed that:

(a)    the conduct of Mr Lee in sending the emails referred above, is deemed to be the conduct of TSI by operation of ss 84(2)(a), 96(4)(a) and 96(6) of the Act;

(b)    the conduct of Ms Mok in sending the emails referred to above, is deemed to be the conduct of TSI by operation of ss 84(2)(a), 96(4)(a) and 96(6) of the Act;

(c)    the conduct of Ms Lin in sending the emails referred to above, is deemed to be the conduct of TSI by operation of ss 84(2)(a), 96(4)(a) and 96(6) of the Act; and

(d)    the conduct of Ms Lee in sending the email referred to in [69], is deemed to be the conduct of TSI by operation of ss 84(2)(a) and 96(6) of the Act.

71    By sending the emails referred to above, TSI induced and attempted to induce Athena not to sell OmniBlend Blenders at a price less than the price specified by TSI, being the price that was US$10 more than the price Athena was selling OmniBlend Blenders for at that time.

72    By sending the email referred to in [64], TSI induced and attempted to induce Athena not to sell OmniBlend Blenders at a price less than the price specified by TSI, being:

(a)    for model TM-800 — US$289;

(b)    for model TM-800A (BPA free jug) — US$289; and

(c)    for model TM-800A (PC jug) — US$279.

73    TSI has since 5 April 2013 withheld supply of OmniBlend Blenders to Athena.

74    TSI engaged in the conduct alleged for the reason that:

(a)    Athena had not agreed not to sell OmniBlend Blenders at a price less than:

(i)    the price specified by TSI, identified in [71] above; and/or

(ii)    the prices specified by TSI, identified in [64] above; and/or

(b)    Athena had sold, or was likely to sell, OmniBlend Blenders at a price less than:

(i)    the price specified by TSI, identified in [71] above; and/or

(ii)    the prices specified by TSI, identified in [64] above.

75    The conduct referred to in [70], [71] and [72] was engaged in by TSI in relation to the supply by TSI of OmniBlend Blenders to Athena in Australia, within the meaning of s 5(2) of the Act.

76    By reason of the matters alleged at [16] above, the conduct of Mr Bowhay in sending the emails referred to above, is deemed to be the conduct of OmniBlend Australia by operation of s 84(2)(a) of the Act.

77    By sending the emails referred to above, OmniBlend Australia aided, abetted, counselled and procured TSI, within the meaning of ss 76(1)(c) and 80(1)(c) of the Act, to engage in the conduct alleged at [70] to [74] which amounted to resale price maintenance in contravention of s 48 of the Act.

78    By sending the emails referred to above, Mr Bowhay aided, abetted, counselled and procured TSI, within the meaning of ss 76(1)(c) and 80(1)(c) of the Act, to engage in the conduct alleged at [70] to [74] which amounted to resale price maintenance in contravention of s 48 of the Act.

Penalty Principles and Analysis

79    The Court may impose a pecuniary penalty on a person who has aided, abetted, counselled or procured a person to contravene s 48 of the Act (see s 76(1)(c)).

80    The maximum pecuniary penalty that may be imposed on OmniBlend Australia for each act or omission to which s 76(1)(c) of the Act applies is $10 million (s 76(1A)(b)).

(a)    Factors relevant to the assessment of a penalty

81    Section 76(1) of the Act provides that, in determining the appropriate penalty, the Court must have regard to all relevant matters, including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;

(b)    the circumstances in which the act or omission took place; and

(c)    whether the person has previously been found by a court in proceedings under Part IV or Part XIB of the Act to have engaged in any similar conduct.

82    In addition, it is necessary to consider the following additional factors:

(a)    the size of the contravening company;

(b)    the degree of its power, evidenced by its market share and the ease of entry into the relevant market;

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

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

(e)    whether the company had a corporate culture conducive to compliance with the Act;

(f)    whether the contravener has shown a disposition to co-operate with the ACCC in relation to its investigation and prosecution of the relevant contravention;

(g)    whether the respondents have engaged in similar conduct in the past;

(h)    the respondents’ financial position; and

(i)    whether the conduct was systematic, deliberate or covert.

(b)    The principal object — deterrence

83    The principal object of imposing a pecuniary penalty is deterrence, both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence) (see Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65] per French CJ, Crennan, Bell and Keane JJ). This informs the assessment of the appropriate penalty to be imposed.

84    In relation to both specific and general deterrence, French J (as he then was) stated in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152:

The principal, and I think probably the only, object of the penalties imposed by s. 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the [Trade Practices] Act.

85    The Full Federal Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission at 294 to 295 stated:

The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay …

86    There is a need to impose penalties of a sufficient quantum to deter businesses from weighing up the risks of a penalty being ordered as a strategic business cost. In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at [62], the Full Federal Court reinforced the primacy of deterrence in the setting of a penalty and said, amongst other things, the following:

There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business.

87    A penalty must be of a sufficient magnitude to satisfy the object of deterrence.

88    This is particularly so concerning contraventions of s 48 of the Act which are necessarily serious. As the Full Court in Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR 42-091 at [7] explained:

[Section] 48 was indeed enacted on the premise that competition is important in the distribution of goods and that vertical price fixing, or resale price maintenance (supplier regulation of the price at which goods are resold), eliminates that competition. Several reasons have been put forward to explain why resale price maintenance is undesirable. One is that it permits the supplier to take advantage of retailers by denying them the freedom to set a price most advantageous to themselves. Another is that resale price maintenance is often a manifestation of price fixing among retailers themselves. A third reason is that a powerful supplier may insist that minimum prices be imposed on its retail goods. Yet another view is that resale price maintenance inevitably eliminates dealer competition with the undesirable consequence that consumers are limited in the range of choices they have with respect to price.

(c)    The calculation

89    The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing by the High Court in Markarian v The Queen (2005) 228 CLR 357. This process provides, by analogy and with adjustment, guidance as to how the Court may approach the assessment of pecuniary penalties in the present case. In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held the following:

(a)    Assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]);

(b)    It will rarely be appropriate to start with the maximum penalty and to proceed by making a proportional deduction from that maximum (at [31]);

(c)    The Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen (2001) 207 CLR 584 at 611 to 612 per Gaudron, Gummow and Hayne JJ);

(d)    It is not appropriate to determine an “objective” penalty and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities; and

(e)    The Court “may not add and subtract item by item from some apparently subliminally derived figure” to determine the penalty to be imposed (at [39]).

90    The ACCC has asserted that there were two contraventions of s 48 in the present case. Contrastingly, the respondents have contended that there was only one contravention.

91    It may not matter for present purposes whether there are two contraventions or one contravention. Even if there were two contraventions, which in my view is the case, there was only the one course of conduct.

92    The “course of conduct” principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [39], [41] and [42] by Middleton and Gordon JJ in the following terms:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry.

…

In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion: Johnson v R (2004) 205 ALR 346; [2004] HCA 15 at [3]–[4] and [34] and Attorney-General v Tichy (1982) 30 SASR 84 at 92–3 (Tichy). It is a tool of analysis (Tichy at 93) which a court is not compelled to utilise: Royer v Western Australia [2009] WASCA 139 at [21]–[34] and [153]–[156] (Royer).

A court is not compelled to utilise the principle because, as Owen JA said in Royer at [28], “[d]iscretionary judgments require the weighing of elements, not the formulation of adjustable rules or benchmarks”. The exercise of the sentencing discretion does not fall to be exercised in a vacuum. It is a matter of judgment to be exercised according to the facts of each case and having regard to conflicting sentencing objectives: see McHugh J in AB v R (1999) 198 CLR 111; 165 ALR 298; [1999] HCA 46 at [14]. For the same reasons, and contrary to the appellants’ submissions, even if offences are properly characterised as arising from the one transaction or a single course of conduct, a judge is not obliged to apply concurrent terms if the resulting effective term fails to reflect the degree of criminality involved. Or, in the case of fines, a judge is not obliged to start from the premise that if there is a single course of conduct, the maximum fine is, in the present case, $110,000 for the CFMEU and $22,000 in the case of Mr Mates.

93    In the present circumstances and given the significant overlap in the wrongdoing, it is appropriate to look at how the proposed penalties for the course of conduct sit against the maximum for a single contravention.

(d)    Nature and extent of conduct

94    OmniBlend Australia aided, abetted, counselled and procured TSI to engage in two kinds of resale price maintenance conduct and as I say consequently two contraventions of s 48 of the Act being:

(a)    TSI first inducing Athena not to sell OmniBlend Blenders at a price less than the price specific by TSI; and

(b)    TSI then withholding the supply of OmniBlend Blenders to Athena.

95    The act of withholding supply amounted to an escalation of the resale price maintenance conduct.

96    OmniBlend Australia’s conduct occurred from about the end of January 2013 to approximately mid-April 2013. On one view this is a relatively short period. But the nature and extent of the conduct should be judged not by reference to the length of the conduct, but also by the effects or consequences of such conduct. Whilst the conduct itself took place over a relatively short period, it resulted in a key competitor no longer being able to obtain the supply of OmniBlend Blenders. This appears likely to have resulted in a financial benefit to OmniBlend Australia. I reject OmniBlend Australia’s assertion that I may not infer this.

(e)    The deliberateness of the contravention and the period of the conduct

97    OmniBlend Australia’s conduct was deliberate. It involved TSI engaging in the practice of resale price maintenance at the instigation of and induced by the conduct of OmniBlend Australia.

98    OmniBlend Australia submits that its conduct was in part due to its lack of attention to compliance with, and knowledge of, the Act and not a deliberate disregard for the prohibition against resale price maintenance. But as the ACCC has submitted to me, in my view such an assertion is inconsistent with one or more emails sent by Mr Bowhay.

99    The respondents have sought to excuse their conduct on the basis that:

(a)    it was provoked by the conduct of Athena; and

(b)    they acted in defence of their commercial interests which they have asserted had been or would be damaged by Athena’s conduct.

100    But it is no excuse in law for the respondents to have acted as they have, even if I accept their characterisation of Athena’s behaviour and the commercial explanation for the respondents’ conduct. Even if I accept everything that has been said by Mr Bowhay in his affidavit at [4] to [36], that at best provides ameliorating circumstances and a lower penalty than otherwise.

(f)    The involvement of senior management

101    Mr Bowhay at all relevant times has been the sole director and shareholder of OmniBlend Australia. He has admitted the involvement set out above. By definition, the present case clearly involved senior management.

(g)    The amount of loss or damage caused

102    The respondents in the affidavit of Mr Bowhay have exhibited various materials for the period from 2012 to 2015.

103    The affidavit contains the financial records for the OmniBlend Australia Family Trust for the financial year ending 30 June 2013 which record that for that year sales totalled $329,621 with the operating profit being $74,433. For much of this period, Athena competed with OmniBlend Australia in the retail sale of OmniBlend Blenders. I accept though that in substance these figures were in reality for only a part of that financial year.

104    Further, the financial records for OmniBlend Australia as the trustee for the OmniBlend Australia Family Trust for the financial year ended 30 June 2014 record that for that year sales totalled $1,509,436 with export sales totalling $565,426 and operating profit of $251,699. During this period Athena was no long a vigorous competitor with OmniBlend Australia in relation to the retail sale of OmniBlend Blenders. It may be inferred in my view in the absence of evidence to the contrary that part of the increase in OmniBlend Australia’s profit from 2013 to 2014, and a significant proportion of the increase in OmniBlend Australia’s sales in 2013 to 2014, were attributable to the fact that Athena was no longer in competition with OmniBlend Australia in relation to the retail sale of OmniBlend Blenders. This is so even though in substance it may be said that the 2013 figures were only for approximately six months.

105    OmniBlend Australia has asserted that there was no evidence of such a causal connection. But I am entitled to infer it to some extent. After all, it was within the power of OmniBlend Australia to prove that there was no causal connection. It failed in my view to lead probative evidence to that effect.

106    As to the question of market share, I accept, however, the market data prepared by BIS Shrapnel to the effect that throughout 2012 to 2014:

(a)    OmniBlend Blenders had less than 0.5% market share of the Australian blender market; and

(b)    OmniBlend Australia as a retailer had less than 0.5% market share of the Australian retail blender market.

107    But even accepting these very modest market share percentages does not detract from the force of the inference that I am prepared to draw and have drawn that it is likely that the conduct of the respondents has caused some, although unquantified, loss and damage whether to Athena or to the market generally.

(h)    The size of the contravener and its financial position

108    Although OmniBlend Australia does not conduct a large business, the materials exhibited to the Bowhay affidavit, being the profit and loss statement and balance sheet to 31 May 2015, show an annual turnover to that point of some $1,659,439.

109    Nevertheless, for the OmniBlend Australia Family Trust (with OmniBlend Australia as trustee) there is also the following other financial material in the affidavit of Mr Bowhay:

(a)    As at 30 June 2013, its total assets were only $109,759 with its net assets being $100;

(b)    As at 30 June 2014, its total assets were $170,587 with its net assets being again $100;

(c)    As at 31 May 2015, although domestic sales were $1,087,739 and export sales were $570,298 for the financial year to date (11 months), net profit was negative $46,897. This appears to have been caused in large part by legal fees relating to the present proceeding which were booked as expenses in an amount of $244,978. Further, as at 31 May 2015 there were negative net assets at $176,762.

110    The present position of OmniBlend Australia is not strong. But it is partly explained by the extraordinary item for legal expenses that will not appear in the accounts for the next financial year. Moreover, the underlying business of OmniBlend Australia appears strong.

111    I am satisfied that OmniBlend Australia has the financial capacity to pay, by instalments, the pecuniary penalty that I have fixed in the amount of $17,500.

(i)    Corporate culture of compliance

112    There is no evidence before the Court that OmniBlend Australia had a compliance program or corporate culture conducive to compliance with the Act.

(j)    Prior convictions

113    OmniBlend Australia has not been found to have contravened the Act previously.

(k)    Co-operation with the ACCC

114    OmniBlend Australia has co-operated with the ACCC by a willingness to resolve liability by consent thus limiting the issues now contested between the parties. However, I cannot overlook the fact that its co-operation in terms of agreeing to make various admissions in the proceedings has been belated. But I do accept its argument that the proceedings were contested for some time because of a separate set of allegations that the ACCC no longer presses.

(l)    Parity principle

115    The parity principle requires that when penalties are imposed “[t]here should not be such an inequality as would suggest that the treatment meted out has not been even-handed” (NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission at 295). However, the Court has emphasised that caution needs to be exercised in comparing penalties imposed in different cases. It is trite to observe that every case necessarily turns on its own facts. In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission, the Full Court observed at [60] that:

the court is not assisted by Optus’s citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case.

116    On the question of parity, both parties have put before me extensive lists of comparable cases dealing with penalties that have been set in respect of s 48 contraventions.

117    Most are not that helpful given that they deal with the setting of penalties for principal contraveners rather than accessories.

118    Nevertheless, the parties accepted that Australian Competition and Consumer Commission v High Adventure Pty Ltd [2005] FCA 762 (at first instance) and (2006) ATPR 42-091 (on appeal) provided some guidance as to the order of magnitude for the penalty (see on appeal at [14]) in a case that had some but limited analogy with the present case. Moreover, the order of magnitude imposed in Australian Competition and Consumer Commission v Oobi Baby Pty Ltd [2008] FCA 1488 and Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710 is not unhelpful to my consideration in the present case.

(m)    Totality principle

119    The totality principle is to be applied as a final check to ensure that the penalty is appropriate for all of the offences. The total penalty for related offences ought not to exceed what is proper for the entire contravening conduct.

120    I am satisfied that the total penalty for the two contraventions is appropriate in all the circumstances. And as I have indicated earlier, whether there were one or two contraventions, I would have imposed the same penalty in total.

(n)    Respondents’ “no penalty” contention

121    The respondents have contended that no penalty should be imposed at all on OmniBlend Australia. They have sought to justify their position by the content of the affidavit of Mr Bowhay. But in my view, the seriousness of the conduct justifies a pecuniary penalty fixed in a modest amount.

122    First, it is necessary to fix a penalty for general deterrence. The respondents submit that I do not need to fix a penalty for specific deterrence given the other orders that I propose to make, the substantial legal expenses that the respondents have incurred and the damage already to the respondents’ reputation. But even if I accept such a submission as having some force in the context of specific deterrence, it says nothing about general deterrence.

123    Second, the effect of the conduct in excluding a competitor was serious, notwithstanding the professed excuses and motivation proffered by the respondents for their behaviour.

124    Third, I accept that OmniBlend Australia and Mr Bowhay only acted as accessories rather than as principal contraveners. Nevertheless, their conduct as accessories brought about and encouraged the primary contraventions.

125    Fourth, I have rejected the respondents’ contention that no damage was likely to be suffered.

126    Fifth, although I have accepted that the relevant conduct was for a limited period, nevertheless it had an effect beyond.

127    In my view, the fixing of a pecuniary penalty is appropriate, but for a modest sum only. In my view the submission that no penalty should be fixed is untenable.

128    Doing the best I can and applying the appropriate amount of intuitive synthesis to the task including all of the factors discussed earlier, it seems to me that a penalty fixed at $17,500 is appropriate. I will also permit it to be paid by instalments.

Other Orders

129    In relation to the orders sought by consent, I note the following:

(a)    There is no doubt that I have power to make such orders.

(b)    I have independently scrutinised such orders and the settlement reached between the parties on the form thereof and consider them to be appropriate.

(c)    The undertakings are appropriately formulated in lieu of injunctions; in form they would otherwise have been appropriate to impose as injunctions if that had otherwise been sought.

(d)    The declarations are appropriate. They are specifically tailored to real issues and conduct rather than hypotheticals. Moreover, there has been a proper contradictor. Further, it is in the public interest for the ACCC to have sought and obtained such declarations. Finally, it is appropriate to make the declarations as they record the Court’s disapproval of the contravening conduct and have, by such a record, appropriate deterrence force and effect.

(e)    Finally, the compliance training program has a sufficient connection to the admitted contraventions.

130    I will make the orders sought by consent in addition to the order for a pecuniary penalty as discussed earlier.

Associate:

Dated:    18 August 2015