FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (Remedies) [2019] FCA 786

File number:

NSD 955 of 2009

Judge:

PERRAM J

Date of judgment:

30 May 2019

Catchwords:

COMPETITION collusive arrangement – exclusive dealing – respondent found to have contravened s 45 of the Trade Practices Act 1974 (Cth) – enforcement and remedies – application for declarations, injunctions and pecuniary penalties – consideration of relevant principles

PUBLIC INTERNATIONAL LAW – act of state doctrine – distinction between foreign state immunity and act of state doctrine – whether commercial acts of respondent airline had sovereign aspect to them

PUBLIC INTERNATIONAL LAW – where respondent submitted injunctions and pecuniary penalties would be contrary to customary international law – where respondent argued customary international law relevant to Court’s discretion and power to grant remedies – where respondent argued relevance of principles of ‘accommodation, mutuality and proportionality’

STATUTORY INTERPRETATION – factors relevant to imposition of pecuniary penalty – loss or damage flowing from contravention of competition law – consideration of deeming provision in s 45A of the Trade Practices Act 1974 (Cth) – whether s 45A can inform assessment of loss or damage under s 76 or limited to establishing breach of s 45 – consideration of Federal Commissioner of Taxation v Comber [1986] FCA 92; 10 FCR 88 and Re Levy; Ex parte Walton (1881) 17 Ch D 746

Legislation:

Acts Interpretation Act 1901 (Cth) s 8

Competition and Consumer Act 2010 (Cth) ss 76, 80

Evidence Act 1995 (Cth) s 55

Federal Court of Australia Act 1976 (Cth) s 21

Trade Practices Act 1974 (Cth) ss 4E, 5, 45, 45A, 45DA

Agreement between the Government of Australia and the Government of the Republic of Indonesia (7 February 2013) 2016 ATS 25 (entered into force 30 December 2016)

Cases cited:

Australian Competition and Consumer Commission v Air New Zealand [2014] FCA 1157

Australian Competition and Consumer Commission v Air New Zealand (No 15) [2018] FCA 1166

Australian Competition and Consumer Commission v British Airways PLC [2008] FCA 1977

Australian Competition and Consumer Commission v Cargolux Airlines International SA [2009] FCA 342

Australian Competition and Consumer Commission v Cathay Pacific Airways Ltd [2012] FCA 1392

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; 327 ALR 540

Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1730; ATPR 42-140

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) [2007] FCAFC 146; 161 FCR 513

Australian Competition and Consumer Commission v Emirates [2012] FCA 1108

Australian Competition and Consumer Commission v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42-097

Australian Competition and Consumer Commission v Leahy Petroleum (No 2) [2005] FCA 254; 215 ALR 281

Australian Competition and Consumer Commission v J McPhee & Son (Aust) Pty Ltd (No 5) [1998] FCA 310; ATPR 41-628

Australian Competition and Consumer Commission v Koninklijke Luchtvaart Maatschappij NV (KLM) [2009] FCA 341

Australian Competition and Consumer Commission v Korean Air Lines Co Ltd [2011] FCA 1360

Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] FCA 683; ATPR 42-070

Australian Competition and Consumer Commission v Malaysia Airline System Berhad (No 2) [2012] FCA 767

Australian Competition and Consumer Commission v Martinair Holland NV [2009] FCA 340

Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 1425; ATPR 42-031

Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693; 207 ALR 329

Australian Competition and Consumer Commission v Qantas Airways Limited [2008] FCA 1976; 253 ALR 89

Australian Competition and Consumer Commission v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395

Australian Competition and Consumer Commission v Société Air France [2009] FCA 341

Australian Competition and Consumer Commission v Telstra Corporation Ltd [2010] FCA 790; 188 FCR 238

Australian Competition and Consumer Commission v Thai Airways [2012] FCA 1434

Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 357 ALR 55

Australian Competition and Consumer Commissioner v Japan Airlines International Co Ltd [2011] FCA 365

BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167; 207 ALR 452

Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482

Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 194 IR 461

Federal Commissioner of Taxation v Comber [1986] FCA 92; 10 FCR 88

Firebird Global Master Fund II Ltd v Republic of Nauru [2015] HCA 43; 258 CLR 31

Flight Centre Ltd v Australian Competition Commission (No 2) [2018] FCAFC 53; 356 ALR 389

Hunter Douglas Australia Pty Ltd v Perma Blinds (1968) 122 CLR 49

International Association of Machinists and Aerospace Workers v Organization of Petroleum Exporting Countries 649 F2d 1354 (9th Cir 1981)

Markarian v The Queen [2005] HCA 25; 228 CLR 357

Mill v The Queen (1988) 166 CLR 59

Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383

Muller v Dalgety & Co Ltd [1909] HCA 67; 9 CLR 693

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285

PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2011] FCAFC 52; 192 FCR 393

PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240

R v Kilic [2016] HCA 48; 259 CLR 256

Re Levy; Ex parte Walton (1881) 17 Ch D 746

Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481

Rural Press v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53

Singtel Optus v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249

Spectrum Stores Inc v Citgo Petroleum 632 F3d 935 (5th Cir 2011)

Tax Practitioners Board v Su [2014] FCA 731

Trade Practices Commission v CSR Ltd [1990] FCA 762; (1991) ATPR 41-076

Visy Paper Pty Ltd v Australian Competition and Consumer Commission [2003] HCA 59; 216 CLR 1

Date of hearing:

22 and 25 June 2018

Date of last submissions:

16 May 2019 (Applicant)

23 May 2019 (Respondent)

Registry:

New South Wales

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

Economic Regulator, Competition and Access

Category:

Catchwords

Number of paragraphs:

267

Counsel for the Applicant:

Mr J A Halley SC, Ms H Younan and Mr J L Clark

Solicitor for the Applicant:

Australian Government Solicitor

Counsel for the Respondent:

Mr J Gleeson SC and Mr T Brennan

Solicitor for the Respondent:

Norton White

ORDERS

NSD 955 of 2009

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND:

PT GARUDA INDONESIA LTD (ABRN 000 861 165)

Respondent

JUDGE:

PERRAM J

DATE OF ORDER:

30 MAY 2019

THE COURT ORDERS THAT:

1.    The Respondent pay the Commonwealth of Australia, within 28 days, pecuniary penalties of $19 million.

2.    The Respondent pay the Applicant’s costs as taxed or agreed.

3.    The parties provide an agreed minute of order to give effect to the Court’s conclusions on declaratory relief within 21 days.

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

REASONS FOR JUDGMENT

PERRAM J:

1    INTRODUCTION

1    After more than nine years of litigation including, at least to this stage, a six month trial, two appeals to the Full Court of the Federal Court and two appeals to the High Court, the Australian Competition and Consumer Commission (‘the Commission’) has succeeded in demonstrating that PT Garuda Indonesia Ltd (‘Garuda’) contravened s45(2)(a)(ii) and 45(2)(b)(ii) of the then Trade Practices Act 1974 (Cth) (‘the TPA’), now the Competition and Consumer Act 2010 (Cth), by reaching and implementing a number of understandings with other international airlines to impose various pre-determined surcharges on the supply of air cargo services from overseas ports to ports in Australia. Those contraventions occurred variously between October 2001 and October 2006. The question which now arises is one of remedy. These reasons assume a familiarity with the primary judgment: Australian Competition and Consumer Commission v Air New Zealand [2014] FCA 1157 (‘Trial Reasons’).

2    At the relevant time s 45(2) of the TPA provided:

45 Contracts, arrangements or understandings that restrict dealings or affect competition

(2)    A corporation shall not:

(a)    make a contract or arrangement, or arrive at an understanding, if:

(i)    the proposed contract, arrangement or understanding contains an exclusionary provision; or

(ii)    a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or

(b)    give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:

   (i)    is an exclusionary provision; or

(ii)    has the purpose, or has or is likely to have the effect, of substantially lessening competition.

3    The reference in s 45(2) to an understanding which has the purpose, effect or likely effect of substantially lessening competition must be read in light of s 45A(1) which at the relevant time provided:

45A Contracts, arrangements or understandings in relation to prices

(1)    Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.

4    Taken together, ss 45(2) and 45A had the effect that an understanding by the airlines to impose predetermined air freight fuel surcharges infringed s 45(2)(a)(ii).

5    The Commission’s case against Garuda concerned its activities in Hong Kong and Indonesia; that is to say, the understandings to fix fuel surcharges at predetermined levels physically took place at meetings at which Garuda was represented in Hong Kong or Indonesia. The Commission also succeeded in showing not only that Garuda reached understandings with other international airlines to set fuel surcharges at predetermined levels but that in a number of instances it gave effect to those understandings too. These acts of implementation constituted a set of distinct contraventions of s 45(2)(b)(ii).

6    In addition to its case about the fuel surcharges, the Commission also succeeded in demonstrating that Garuda had entered into, and implemented, understandings with other international airlines to impose certain security charges, a customs fee and, in one instance, an actual air freight rate.

7    The Commission was not wholly successful. Certain aspects of its case were rejected (for example, its case that the relevant market was the market for air freight services on routes out of Hong Kong or Indonesia to routes to places other than Australia). Because Garuda contends that this consideration is relevant to penalty I will deal, later in these reasons, with the extent of the Commission’s failures. One can say even at this early stage, however, that by and large it was Garuda which was unsuccessful rather than the Commission.

8    The Commission now seeks the imposition upon Garuda of remedial orders for its contraventions. It asks the Court to declare that Garuda’s conduct was unlawful, to restrain it from engaging in the conduct again, to impose upon it a civil penalty in the range of somewhere between $20 and $28 million, and to order that it pay the Commission’s costs at first instance (it already has costs orders in its favour in all four of Garuda’s unsuccessful appeals).

9    These reasons are set out as follows:

1 INTRODUCTION

[1]

2 THE CONTRAVENTIONS

[10]

2.1 The Indonesian contraventions

[10]

2.2 The Hong Kong contraventions

[12]

3 THE ACT OF STATE DOCTRINE

[14]

4 OTHER INTERNATIONAL LAW CONSIDERATIONS

[25]

4.1 Discretion and power

[25]

4.2 Accommodation, mutuality and proportionality

[36]

4.3 Additional arguments

[42]

5 GARUDA’S FACTUAL CONTENTIONS

[43]

5.1 The basis for Garuda’s inculpation

[44]

5.2 Passage of time

[67]

5.3 Risk of repetition

[75]

5.4 Garuda’s cargo business

[78]

5.5 The Indonesian understandings

[81]

5.6 The Hong Kong understandings

[94]

5.7 Effect in Australia

[99]

5.8 Garuda’s status

[104]

6 PRINCIPLES RELEVANT TO PECUNIARY PENALTIES

[112]

6.1 Primacy of deterrence

[113]

6.2 Maximum penalties

[116]

6.3 Penalty factors

[118]

7 APPLICATION OF PENALTY PRINCIPLES TO GARUDA’S CONDUCT

[122]

7.1 Penalty factors

[122]

7.1.1 Nature and extent of the contravening conduct

[122]

7.1.2 The circumstances in which the contraventions took place

[127]

7.1.2.1 Indonesia

[127]

7.1.2.2 Hong Kong

[154]

7.1.3 Size, financial position and market power of the contravening company

[167]

7.1.4 Loss or damage

[171]

7.1.5 Involvement of senior management

[173]

7.1.6 Whether the conduct was systematic, deliberate or covert

[179]

7.1.7 Culture of compliance and previous conduct

[180]

7.1.8 Cooperation and contrition

[201]

7.1.9 Costs incurred to date

[202]

7.2 Course of conduct

[206]

7.3 Parity and comparable decisions

[214]

7.4 Totality principle

[229]

8 DECLARATORY RELIEF

[234]

9 INJUNCTIONS

[241]

10 COSTS

[252]

11 EVIDENTIARY RULINGS

[255]

2    THE CONTRAVENTIONS

2.1    The Indonesian contraventions

10    Insofar as Garuda’s activities in Indonesia are concerned at trial I found that Garuda had engaged in a number of contraventions in relation to the fuel surcharges, the security surcharges, an air freight rate and the customs fee. Some of these contraventions occurred before a time at which the relevant limitation period permits the imposition of a penalty. That does not prevent, however, the grant of other remedies relating to these contraventions.

11    The contraventions are set out in the table below. The form of the contraventions often involved the fixing of the surcharges across whole regions including Australia. The table reflects this. However, the contraventions were only unlawful to the extent that they applied to routes into Australia. For convenience, I have included a column indicating the extent to which each contravention is within time for the imposition of a penalty and the relevant parts of the Trial Reasons where the contraventions were dealt with.

No

Summary of contraventions

Penalty Period

Trial Reasons

FUEL SURCHARGES

1

October 2001 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[1146]-[1148]

2

April 2002 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[1157], [1165], [1175]

3

June 2002 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[1177]

4 & 5

September 2002 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

Not in time for penalty

[1178]

6 & 7

January 2003 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

Not in time for penalty

[1179]

8 & 9

May 2003 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): not in time for penalty

s 45(2)(b)(ii): in time insofar as conduct occurred between 2 September 2003 and 30 June 2004

[1182]-[1184], [1187], [1189]

10 & 11

September 2004 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 29 September 2004

s 45(2)(b)(ii): 16 October 2004 to 30 April 2005

[1207]-[1208]

12 & 13

April 2005 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 4 April 2005

s 45(2)(b)(ii): 1 May 2005 to 14 July 2005

[1210]-[1213]

14 & 15

July 2005 Indonesia Fuel Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 15 July 2005

s 45(2)(b)(ii): 16 July 2005 to 30 September 2005

[1214]-[1215]

SECURITY SURCHARGES

16 & 17

October 2001 Indonesia Security Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

Not in time for penalty

[1229]

18 & 19

January 2003 Indonesia Security Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

Not in time for penalty

[1230]

20 & 21

May 2003 Indonesia Security Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): not in time for penalty

s 45(2)(b)(ii): in time for penalty insofar as the conduct occurred between 2 September 2003 and 15 October 2004

[1231]-[1232]

22 & 23

September 2004 Indonesia Security Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 29 September 2014

s 45(2)(b)(ii): 16 October 2004 to 14 July 2005

[1233]-[1234]

24 & 25

July 2005 Indonesia Security Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 15 July 2005

s 45(2)(b)(ii): 1 August 2005 to at least October 2005

[1235]-[1236]

AIR FREIGHT RATES AND CUSTOMS FEE

26

October 2001 Indonesia Air Freight Rate Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[1149]-[1155]

27 & 28

May 2004 Indonesia Customs Fee Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): 6 May 2004

s 45(2)(b)(ii): 16 May 2004 to at least October 2005

[1197], [1204]

2.2    The Hong Kong contraventions

12    The equivalent table for Garuda’s activities in Hong Kong is as follows:

No

Summary of contraventions

Penalty Period

Trial Reasons

FUEL SURCHARGES

29

Hong Kong Imposition Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[650]-[658], [704]

30

Hong Kong Imposition Understanding: implementation of HKD1.20/kg fuel surcharge (s 45(2)(b)(ii))

Not in time for penalty

[634], [658], [704]

31

Hong Kong Imposition Understanding: implementation of HKD1.60/kg fuel surcharge (s 45(2)(b)(ii))

Not in time for penalty

[637], [658], [704]

32

Hong Kong Imposition Understanding: implementation of HKD1.20/kg fuel surcharge (s 45(2)(b)(ii))

Not in time for penalty

[640], [658], [704]

33

Hong Kong Imposition Understanding: implementation of HKD0.80/kg fuel surcharge (s 45(2)(b)(ii))

In time for penalty insofar as the conduct occurred between 2 September 2003 and 18 December 2003

[641], [658], [704]

34

Hong Kong Imposition Understanding: implementation of HKD1.20/kg fuel surcharge (s 45(2)(b)(ii))

19 December 2003 to 10 May 2004

[643], [658], [704]

35

Hong Kong Imposition Understanding: implementation of HKD1.60/kg fuel surcharge (s 45(2)(b)(ii))

11 May 2004 to 8 August 2004

[644], [658], [704]

36

Hong Kong Imposition Understanding: implementation of HKD2.00/kg fuel surcharge (s 45(2)(b)(ii))

9 August 2004 to 15 September 2004

[646], [658], [704]

37

Hong Kong Imposition Understanding: implementation of HKD2.40/kg fuel surcharge (s 45(2)(b)(ii))

16 September 2004 to November 2004

[646], [658], [704]

38

Hong Kong Imposition Understanding: implementation of HKD2.80/kg fuel surcharge (s 45(2)(b)(ii))

6 November 2004 to 15 November 2004

[646], [658], [704]

39

Hong Kong Imposition Understanding: implementation of HKD3.20/kg fuel surcharge (s 45(2)(b)(ii))

16 November 2004 to 6 December 2004

[646], [658], [704]

40

Hong Kong Imposition Understanding: implementation of HKD2.80/kg fuel surcharge (s 45(2)(b)(ii))

7 December 2004 to January 2005

[646], [658], [704]

41

Hong Kong Imposition Understanding: implementation of HKD2.40/kg fuel surcharge (s 45(2)(b)(ii))

4 January 2005 to 21 March 2005

[646], [658], [704]

42

Hong Kong Imposition Understanding: implementation of HKD2.80/kg fuel surcharge (s 45(2)(b)(ii))

22 March 2005 to 4 April 2005

[646], [658], [704]

43

Hong Kong Imposition Understanding: implementation of HKD3.20/kg fuel surcharge (s 45(2)(b)(ii))

5 April 2005 to 11 July 2005

[646], [658], [704]

44

Hong Kong Imposition Understanding: implementation of HKD3.60/kg fuel surcharge (s 45(2)(b)(ii))

12 July 2005 to 5 September 2005

[646], [658], [704]

45

Hong Kong Imposition Understanding: implementation of HKD4.00/kg fuel surcharge (s 45(2)(b)(ii))

6 September 2005 to 26 September 2005

[646], [658], [704]

46

Hong Kong Imposition Understanding: implementation of HKD4.40/kg fuel surcharge (s 45(2)(b)(ii))

27 September 2005 to 27 October 2005

[646], [658], [704]

47

Hong Kong Imposition Understanding: implementation of HKD4.80/kg fuel surcharge (s 45(2)(b)(ii))

28 October 2005 to 21 November 2005

[646], [658], [704]

48

Hong Kong Imposition Understanding: implementation of HKD4.40/kg fuel surcharge (s 45(2)(b)(ii))

22 November 2005 to 28 November 2005

[646], [658], [704]

49

Hong Kong Imposition Understanding: implementation of HKD4.00/kg fuel surcharge (s 45(2)(b)(ii))

29 November 2005 to 5 December 2005

[646], [658], [704]

50

Hong Kong Imposition Understanding: implementation of HKD3.60/kg fuel surcharge (s 45(2)(b)(ii))

6 December 2005 to 20 February 2006

[646], [658], [704]

51

Hong Kong Imposition Understanding: implementation of HKD4.00/kg fuel surcharge (s 45(2)(b)(ii))

21 February 2006 to 8 May 2006

[646], [658], [704]

52

Hong Kong Imposition Understanding: implementation of HKD4.40/kg fuel surcharge (s 45(2)(b)(ii))

9 May 2006 to 15 May 2006

[646], [658], [704]

53

Hong Kong Imposition Understanding: implementation of HKD4.80/kg fuel surcharge (s 45(2)(b)(ii))

16 May 2006 to 9 October 2006

[646], [658], [704]

54

Hong Kong Imposition Understanding: implementation of HKD4.40/kg fuel surcharge (s 45(2)(b)(ii))

10 October 2006 to 17 October 2006

[646], [658], [704]

55

First Hong Kong Surcharge Extension Understanding: making or arriving at the understanding (s 45(2)(a)(ii))

Not in time for penalty

[665]

56

First Hong Kong Surcharge Extension Understanding: implementation of HKD0.80/kg fuel surcharge (s 45(2)(b)(ii))

In time for penalty insofar as conduct occurred between 2 September 2003 and 18 December 2003

[667]

57

First Hong Kong Surcharge Extension Understanding: implementation of HKD1.20/kg fuel surcharge (s 45(2)(b)(ii))

19 December 2003 to 18 January 2004

[667]

INSURANCE SURCHARGES

58 & 59

October 2001 Hong Kong Insurance Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

Not in time for penalty

[697]

60 & 61

December 2002 Hong Kong Insurance Surcharge Understanding: making or arriving at the understanding (s 45(2)(a)(ii)) and implementation (s 45(2)(b)(ii))

s 45(2)(a)(ii): not in time for penalty

s 45(2)(b)(ii): in time insofar as conduct occurred between 2 September 2003 and 21 January 2004

[700]-[701]

13    It is useful then to begin with Garuda’s principal submission that the Court should forbear from granting some of the relief because of the act of state doctrine.

3    THE ACT OF STATE DOCTRINE

14    Garuda submitted that the act of state doctrine requires the Court not to impose the remedies of injunction or civil penalty upon it. It accepted, however, that the doctrine does not prevent the Court from making findings on the ‘bare question of liability’; that is, finding that contraventions occurred and making declarations to that effect.

15    The argument in relation to the injunctions and penalties went as follows: first, the conduct of a commercial airline can constitute the sovereign act of a foreign state. In this case, the Full Court had already held that Garuda was an emanation of the Republic of Indonesia and, further, that it was the means by which Indonesia carried on the business of an airline: PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2011] FCAFC 52; 192 FCR 393 (‘FC1’) at 430 [170] per Rares J (Lander and Greenwood JJ agreeing at 404 [49]). Secondly, purely commercial conduct, such as price fixing, if engaged in for the purpose of performing a public function of a state, could be subject to the doctrine. In this case, Garuda’s price fixing conduct took place in the course of its business, which was the fulfilment of its statutory purpose of ‘benefitting the public by providing high quality and satisfactory services fulfilling the needs of the people’. That purpose was stipulated by Indonesian Law No 19 of 2003 (‘Law No 19’) Art 2(1)(a): FC1 at 430 [169]. Garuda was owned as to at least 95.5% by Indonesia and the state had ultimate control over Garuda’s board of commissioners (the other 4.5% was owned by a state owned limited liability enterprise, BUMN Persero). Four out of the five members of its board of commissioners were senior members of the Executive Government of Indonesia.

16    I do not accept the submission that Art 2(1)(a) of Law No 19 required that the activities of Garuda be directed to the advancement of the interests of the Indonesian state. What it says, in fact, is that Garuda is to benefit the public by providing services and thereby fulfil the needs of the Indonesian people. These are not the same. I do not accept, therefore, that Garuda’s actions in conducting a commercial airline are, per se, acts of state of the Republic of Indonesia.

17    It is not difficult to imagine scenarios in which actions by Garuda might be protected by the act of state doctrine. For example, if Indonesia utilised Garuda to bring aid to the victims of a tsunami in some outlying reach of the archipelago this activity might well involve Garuda aiding in the performance of state acts. In such a case, Garuda’s operations would more closely resemble the facts in International Association of Machinists and Aerospace Workers v Organization of Petroleum Exporting Countries 649 F2d 1354 (9th Cir 1981) to which Garuda pointed. In that case, the plaintiffs claimed that the member states of the Organisation of the Petroleum Exporting Countries (‘OPEC’) had violated US anti-trust laws through the use of mechanisms to stabilise the price of oil in light of a natural disaster. A plea of sovereign immunity was problematic in that case due to a reservation in the Foreign State Immunity Act (28 USC §1608) which made the plea unavailable in respect of the commercial activities of a foreign state. The Court of Appeal for the Ninth Circuit nevertheless concluded that the act of state doctrine was applicable. At 1360 Circuit Judge Choy said this:

The act of state doctrine is not diluted by the commercial activity exception which limits the doctrine of sovereign immunity. While purely commercial activity may not rise to the level of an act of state, certain seemingly commercial activity will trigger act of state considerations. As the district court noted, OPEC’s “price-fixing” activity has a significant sovereign component. While the FSIA ignores the underlying purpose of a state’s action, the act of state doctrine does not. This court has stated that the motivations of the sovereign must be examined for a public interest basis When the state qua state acts in the public interest, its sovereignty is asserted. The courts must proceed cautiously to avoid an affront to that sovereignty. Because the act of state doctrine and the doctrine of sovereign immunity address different concerns and apply in different circumstances, we find that the act of state doctrine remains available when such caution is appropriate, regardless of any commercial component of the activity involved.

(footnotes omitted)

18    So even if an activity is commercial it may, at least in principle, yet have a sovereign element to it such that it is protected by the doctrine. The Court of Appeals for the Fifth Circuit accepted that proposition in Spectrum Stores Inc v Citgo Petroleum 632 F3d 935 (5th Cir 2011), another OPEC case: at 951. The High Court referred to these statements in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; 247 CLR 240 at 252-253 [35]-[36] per French CJ, Gummow, Hayne and Crennan JJ without apparent disapproval. I accept therefore that the act of state doctrine can apply even where a plea of foreign state immunity is not otherwise available because of the commercial activities exception.

19    It remains nevertheless necessary for the Court to be satisfied that the activity in question has a sovereign element to it. That a commercial activity may have a sovereign element to it does not seem to be especially controversial. The decisions of the Fifth and Ninth Circuits to which I have referred show as much. In a different context, the High Court seems to have accepted a similar point in Firebird Global Master Fund II Ltd v Republic of Nauru [2015] HCA 43; 258 CLR 31.

20    The difficulty for Garuda lies in establishing what the sovereign element in Garuda’s conduct actually was. I do not think that it is enough that Garuda’s purposes included being operated for the benefit of the people in Indonesia or that that purpose was provided for by legislation. Mr Gleeson SC, who with Mr Brennan of junior counsel appeared for Garuda, also sought to underscore the sovereign nature of Garuda’s activities by reference to its precarious financial position and the Indonesian Government’s role in addressing that issue. The first of these matters was to be found in Garuda’s 2005 Annual Report. The relevant passage appeared in the section headed ‘Corporate Information’:

Throughout the year, we also made important progress in our financial restructuring efforts. However, due to various negative factors affecting Garuda’s performance that include record fuel prices, the weakening of the Rupia, increased interest rates and intensified competition, in December 2005 Garuda Indonesia announced that it will declare a standstill on payments of principal on certain financial indebtedness due at the end of December 2005. Garuda Indonesia will continue to pay interest on its financial indebtedness and will continue to make required payments to aircraft lessors. The decision has been discussed with and agreed by the Government of Indonesia, Garuda’s shareholder. We will continue to work with the Government and our creditors to find the best solutions to the carrier and its stakeholders. I want to stress that Garuda Indonesia remains committed to following international debt restructuring principles in Indonesia and to deal with its stakeholders in a fair and transparent manner.

21    This showed, so it was submitted, that Garuda was in a difficult situation. It was said that the financial statements for that year also showed that its operating expenses exceeded operating income (which appears to be correct) and that there was a deficit of current assets over liabilities (which does not appear to be correct but which I will assume in its favour). By 2006, the situation had deteriorated. The report for that year revealed that Garuda had stopped making repayments of principal on its facilities and obtained support from the Government ‘to rescue the company’.

22    Consequently, Indonesia had appointed a new board of management and board of commissioners and had given Garuda an equity injection of 500 billion Rupia (about $48 million). Garuda submitted that this showed that the decision as to whether Indonesia would even continue to have an airline had been made at the governmental level.

23    I do not accept that these matters show any more than that Garuda, like many other international commercial airlines, was unprofitable (particularly in 2006 when fuel prices started to increase) and that its shareholders were obliged to inject further funds to keep it going.

24    Whilst I accept therefore that, in principle, it is possible that Garudas activities could fall within the act of state doctrine if they were pursued for sovereign ends, I do not accept that all of its activities necessarily bear that character. In that regard, fixing surcharges on air freight services is not like a state-owned company fixing the price of oil for an OPEC nation. Consequently, the conduct of Garuda, as a commercial airline, is not in itself an act of state. I do not accept therefore that the imposition of a penalty upon Garuda would impinge upon the sovereignty of Indonesia. For completeness, I reject the submission that Garuda’s conduct in fixing the price of surcharges on cargo is to be seen as an act of the Republic of Indonesia designed to help bail out Garuda for state ends. There was simply no evidence to this effect.

4    OTHER INTERNATIONAL LAW CONSIDERATIONS

4.1    Discretion and power

25    Although at the hearing Garuda indicated that the bulk of what it wished to say on international law issues was encompassed in its oral and written submissions on the act of state doctrine, it is useful to address the balance of its submissions lest that position shift on appeal. Garuda’s first submission was that the Court should decline to grant the relief sought by the Commission in the exercise of its discretion. Why? Because each of the remedies sought (declarations, injunctions and civil penalties) was exorbitant under customary international law; because the provision enabling the Court to grant the remedies (s 21 of the Federal Court of Australia Act 1976 (Cth)) would be construed so as not to authorise the granting of remedies which would put Australia in breach of its obligations under customary international law; and because the grant of injunctions or civil penalties would require the Court to inquire into activities which were properly to be seen as acts of the Republic of Indonesia and hence falling within the act of state doctrine.

26    Although most of Garuda’s submissions on this cluster of issues were framed as going to the Court’s discretion, at times they seemed perhaps to slide towards the Court’s power (for example, ‘the Court should construe its powers to grant the requested remedies as confined, as a matter of discretion, to…’). I will proceed on the basis that both submissions were advanced.

27    In the Trial Reasons I considered extensively identical submissions made on behalf of Garuda (and, at that time, Air New Zealand). At [359]-[386] I discussed the submission then made by Garuda that the TPA would not be interpreted in such a way as would result in the Commonwealth being in breach of its obligations under customary international law. I accepted that there was such a principle of statutory interpretation: at [386]. However, I did not accept that the extra-territorial reach of the TPA involved Australia in any breach of customary international law (at [381]-[384]) because, as a matter of customary international law, there was nothing unlawful in legislating with extra-territorial effect so long as there was a proper nexus with the legislating state: at [382]. There were several different kinds of nexus which could justify this kind of extra-territorial legislative activity but the existence of a territorial nexus was a well-established justification in customary international law.

28    At [350] I concluded that s 5(1) of the TPA provided a sufficient territorial nexus. That section provided:

Part IV, Part IVA, Part V (other than Division 1AA), Part VB and Part VC extend to the engaging in conduct outside Australia by bodies corporate incorporated or carrying on business within Australia or by Australian citizens or persons ordinarily resident within Australia.

29    I was explicit at [347]-[350] that the ‘market in Australia’ requirement in s 4E did not give the TPA an extraterritorial operation and that that work was instead done by s 5(1). That conclusion was not reversed on appeal.

30    The submission that Garuda then made at the penalty hearing was that the reasoning on these issues no longer has any currency because the High Court reversed the conclusion that there was no market in Australia. That reasoning was said to be pivotal to my conclusions on whether the TPA should be read so as not to place the Commonwealth in breach of its obligations under customary international law.

31    However, that is not correct. My reasoning about territorial nexus was based on s 5(1) and explicitly not s 4E. I therefore reject the argument whether it be one of power or discretion.

32    Next it was submitted that since the time of the trial a new air services agreement between Australia and Indonesia had come into force. This was the Agreement between the Government of Australia and the Government of the Republic of Indonesia (7 February 2013) 2016 ATS 25 (‘the 2013 ASA’). It came into force on 30 December 2016.

33    As I understood the argument advanced at the hearing, the 2013 ASA was said to form part of a reason not to grant a remedy as a matter of discretion. This was because Art 14.1 required Australia not to apply its competition laws to activities in Indonesia (or Hong Kong). Article 14.1 provides:

The competition laws of each Party, as amended from time to time, shall apply to the operation of the airlines within the jurisdiction of the respective Party.

34    Assuming in Garuda’s favour that as a matter of public international law this imposes an obligation on the Commonwealth not to apply its competition laws in Indonesia, it has nothing to say in this case. The present proceeding is concerned with the application of the TPA in Indonesia in the period 2001-2006. As I have said, Art 14.1 came into force on 30 December 2016.

35    Garuda then submitted that the Court would exercise restraint in enquiring into the conduct of Garuda’s business because it was an emanation of the Republic of Indonesia and the means by which Indonesia carried on an airline. This submission is separate to Garuda’s submission considered above that it is entitled to rely upon the act of state doctrine. However, I reject the argument on the same basis. Garuda was not engaged in any sovereign activity when it engaged in the impugned conduct.

4.2    Accommodation, mutuality and proportionality

36    Garuda next submitted that there was a competition law in Indonesia at the relevant time which was being enforced. That enforcement extended to proceedings against airlines for price fixing in relation to fuel surcharges. It also submitted that the Supreme Court of Indonesia had held that agreements to fix surcharges did not contravene Indonesian competition law. The point of these submissions was that this Court would exercise its discretion in accordance ‘with the principles of accommodation, mutuality and proportionality’. The submission did not identify the source or content of those principles.

37    I reject the submission. As I explain below at [118]-[121], the Supreme Court of Indonesia did not hold that an agreement to fix fuel surcharges did not infringe Indonesian competition law and accordingly Garuda’s submission is wrong. Garuda has not, therefore, proven that Indonesian competition law did not proscribe the reaching of an understanding to set fuel surcharges at predetermined levels. The premise for its submission is not established.

38    Garuda also submitted that it was a fact that its conduct in Hong Kong had been reported to the regulator in Hong Kong. This was said to be relevant to the exercise of the discretions involved. I take it into account.

39    Next it was submitted that the power in s 80 to grant an injunction does not have extra-territorial operation. This was because it was contained in Pt VI and Pt VI was not mentioned in s 5(1). I reject this argument. Section 5(1) extends the operation of the TPA to conduct outside Australia in certain circumstances. Part VI does not proscribe conduct but instead provides remedies. When there is a contravention by extra-territorial conduct, Pt VI permits a remedy.

40    It was also submitted that the Court would take into account in granting any civil penalty under s 76 that the order would result in the judicial power of the Commonwealth being extended into an area of jurisdiction which according to the comity of nations belongs to another sovereign. I reject this submission because as I explained in the Trial Reasons at [382] the only jurisdictional requirement is that there be a territorial nexus which is present in this case in the form of s 5(1). The comity of nations has no effect on the present issue.

41    I therefore reject the submission that the granting of remedies in this case would ‘exceed the accepted bounds of prescriptive jurisdiction under international law’. There is no principle of customary international law which makes unlawful the regulation of extra-territorial affairs involving (as here) persons with a proper nexus to the state just because that regulation is superimposed on another state’s domestic legislation. After extensive debate that was what I held in the Trial Reasons at [338] from which there has been no successful appeal. I also reject the related submission that the same approach should be applied to the Court’s powers of enforcement. The suggested overreach as a matter of customary international law does not exist, Garuda has already lost this point in the Trial Reasons and, in any event, it would not, even if established, provide an independent discretionary ground because notions of comity are dealt with under the act of state doctrine (which also has no application).

4.3    Additional arguments

42    Some other arguments may be briefly dispatched. First, I do not accept the relevance of Garuda’s submission that there is a lack of internationally agreed standards by which to judge the acts of Indonesia. Garuda is not Indonesia. The question of agreed international standards by which a state might be sanctioned does not therefore arise. Secondly, I do not accept that Garuda’s role as the chair of the ACRB in Jakarta has any sovereign element to it. It chaired the ACRB because it was the local carrier. Its activities as such had nothing to do with assertions of sovereignty by the Indonesian state. Thirdly, I reject the submission that the conduct had no Australian dimension. As discussed below, Garuda operates a substantial business in Australia employing hundreds of people. It flies between Australia and Indonesia and through Australian airspace under a licence issued by the Commonwealth Government. Its contraventions took place in a market in Australia and, further, its conduct is taken to have been likely substantially to lessen competition in that Australian market.

5    GARUDA’S FACTUAL CONTENTIONS

43    Garuda sought 23 additional findings of fact which it contended were relevant to the question of relief.

5.1    The basis for Garuda’s inculpation

44    First, Garuda submitted that I should find as a fact on the penalty hearing that it had not engaged in any of the conduct which had been held by the High Court to give rise to a market in Australia under s 4E. It also submitted that I should find that it did not know that the other airlines were engaging in such conduct.

45    It is necessary first to put the issues about the market in Australia in context.

46    Part of the Commission’s case on whether there was a market in Australia for the purposes of s 4E involved a factual contention that the airlines in the TC3 area actively pursued larger shippers. This was part of a case that the market participants included not only airlines and freight forwarders but also these larger shippers. Although I rejected the Commission’s case on whether there was a market in Australia I accepted its factual contentions on this issue. The findings at first instance included that:

    the airlines were interested in what shippers were doing: Trial Reasons at [283]-[284];

    the marketing operations of the airlines in the Asian market were focussed in large part on the activities of the larger shippers who were perceived by them to be the source of demand: at [284];

    the airlines recognised that the shippers had demand for capacity: at [287];

    the airlines recognised that the shippers were the economic foundation of the market: at [287];

    there were consignees who were actively considered as revenue sources by the airlines: at [288];

    some shippers were able to influence the choice of airline or flight: at [290];

    the airlines had direct contact with some shippers on price and service: at [291];

    the airlines sales and marketing activities were directed at shippers: at [293];

    in the general Asian market, airlines, freight forwarders and shippers sometimes entered into tripartite contractual arrangements: at [297]; and

    the airlines competed with each other in relation to particular shippers: at [298].

47    Each of these findings was the result of a submission made by the Commission. Although there are a number of distinct findings it is convenient in the interests of economy to refer to all of these findings collectively as the shipper demand issues. At trial, Garuda made almost no submissions, either in writing or orally, on the shipper demand issues. This was surprising because Garuda had in fact called two witnesses on these issues: Mr Haddad and Mr Mandala. However, in its written and oral submissions at trial it made almost no mention of either of these gentlemen. Indeed, its entire answer to the Commission’s case on the shipper demand issues was confined to one paragraph of its written submissions. And of that paragraph only a single sub-paragraph dealt with the role of the shippers as market participants. That paragraph simply said this:

Thirdly, it is said that airlines marketed to the demands of shippers: CS D paragraph 239.2. So too Kellogs’ markets to consumers of breakfast cereal, yet it participates in a wholesale market.

48    No oral submission was made on this point at all. Thus was Garuda’s case on the pivotal factual issues which would ultimately underpin the High Court’s conclusion that there was a market in Australia. On the current penalty hearing, Garuda sought to imply that in some ways the High Court’s conclusion was surprising, and perhaps even unforeseeable. But this is not so. The case the High Court embraced was the case the Commission vigorously ran. Large quantities of documents were involved and many witnesses were cross-examined by its counsel on this precise issue including, as I have said, Mr Haddad and Mr Mandala. It was for that reason that even though I favoured the airlines theory that the market was located where the switching decisions were made (at the ports of origin) I was careful to make findings in the alternative on the shipper demand issues lest my view prove, as it ultimately did, erroneous. Both Air New Zealand and the Commission exchanged detailed submissions on the issue. But Garuda was content to let Air New Zealand do its work for it on the shipper demand issues. In doing so, Garuda overlooked the significance of its own witnesses, Mr Haddad and Mr Mandala. Since Air New Zealand was not involved in the Indonesian aspects of the case this evidence fell into a gap which Garuda, at the heel of the hunt, now seeks to plug.

49    In that regard, no attempt was made by Garuda at trial to submit that the Commission’s case on the shipper demand issues was contradicted by the evidence of Mr Haddad or Mr Mandala. No submission was developed that on its routes from Indonesia to Australia it did not seek to market to shippers and dealt only with freight forwarders. This was surprising as there was evidence to support that proposition in the form of Mr Mandala’s affidavit evidence which was to the effect that as the cargo manager in Jakarta he did not deal with shippers in Australia. The Commission’s cross-examination of Mr Mandala did not result in him resiling from that evidence. Similar evidence by Mr Haddad that, as the cargo manager in Sydney, he did not seek to deal with shippers was exposed under cross-examination to be incorrect and I did not ultimately accept his affidavit evidence about it: Trial Reasons at [283].

50    So it was quite open to Garuda to make this point at the trial but it did not do so. I proceeded to make the findings set out above which were couched at an industry wide level. That reflected the fact that the shipper demand issues were industry wide issues. The Commission did not need to prove what Garuda and Air New Zealand in particular were doing. It had to prove a much larger proposition about the existence of the market in which the price-fixing behaviour of the airlines was alleged to have occurred. Its submissions were pitched at that level of abstraction as were my findings.

51    In the Commission’s successful appeal from my determination that there was no market in Australia Garuda filed a notice of contention challenging a large number of the factual findings made at trial. It is not clear to me whether any of those challenges extended to this issue but it does not matter because all of Garuda’s factual challenges were rejected by the Full Court. The subsequent appeal to the High Court did not disturb any of the findings made at the trial.

52    In that circumstance, I accept the Commission’s submission that it is not open to Garuda now to seek to ventilate this issue which was determined adversely to it at trial and not subsequently overturned on appeal.

53    Even it were now open to entertain this issue I would have rejected Garuda’s attempts to prove that it did not pursue shippers in Australia from Jakarta and was not, therefore, aware either of the facts which gave rise to a market in Australia or of the fact that other airlines were pursuing shippers in Australia.

54    Garuda sought to prove these matters in two ways. It first submitted that the way the High Court had dealt with the matter left it procedurally open for Garuda to prove that its Jakarta operations had no dealings with shippers and dealt exclusively with freight forwarders. The basis of this submission was that the High Court had not expressly adverted to any of the evidence about Garuda’s activities in Jakarta vis-a-vis shippers. The short answer to this submission is that the facts about airlines and shippers as found at trial (and set out above) extended to all airlines operating in Asia on all routes. This included Garuda and its activities in Jakarta. I referred to the evidence of Mr Haddad in the Trial Reasons at [283] in these terms:

Oral testimony given the during the trial suggested that airlines were interested in what the shippers were doing even if they denied that there was any direct contact with them. Mr Gregg’s evidence was to this effect in relation to Air NZ, and Mr Haddad gave similar evidence for Garuda.

55    Neither my general findings about the relationship between the shippers and the airlines nor my specific finding about Mr Haddad were reversed on appeal. Garuda submitted that my finding at [283] had not formed any part of the High Court’s reasoning. However, again, as was very often the case with Garuda’s submissions, this is simply not factually correct. Gordon J expressly referred to [283] in her Honour’s reasons at [113] in footnote 149 to make good the proposition that the airlines pursued some shippers. The plurality expressly stated their agreement with Gordon J on her Honour’s analysis of the facts: see [1] per Kiefel CJ, Keane and Bell JJ.

56    So the issue is not that the High Court did not have regard to Mr Haddad. The issue is that Garuda did not do so at trial. That Garuda itself decided to ignore the shipper demand issues at trial (apart from a largely unhelpful reference to cornflakes) provides no warrant for now permitting it to agitate what everyone else in this litigation dealt with some years ago.

57    Garuda secondly pointed to evidence at trial (and fresh evidence filed at the penalty hearing) which suggested that in Jakarta Garuda’s cargo manager did not deal with shippers but only with freight forwarders. There was evidence from Mr Mandala at both hearings which supported this. I made no findings about Mr Mandala on the market evidence because Garuda did not refer to him on the shipper demand issues and because the Commission’s submissions about him were very minor in nature. The way the case was framed in final submissions was such that Mr Mandala’s evidence on his dealing with shippers was not germane to any issue that Garuda then sought to ventilate.

58    On the assumption (contrary to my view) that this issue should now be considered, I would not in any event be disposed to accept Mr Mandala’s evidence about shippers. He was cross-examined before me on this issue at the trial. His more recent affidavit expanded on his earlier affidavit in much greater detail. The gist of this evidence was that Mr Mandala did not know that importers of goods in Australia could influence the selection of carriers; that Garuda in Jakarta did not seek to approach shippers directly or to influence shippers in that way; that its only dealings were with freight forwarders; and that Garuda knew nothing about its exposure under Australian law.

59    This evidence is inconsistent with the evidence of Mr Haddad who was the Sydney cargo manager at the relevant time. Although in his affidavit he gave similar evidence to Mr Mandala he was cross-examined and it was obvious after that cross-examination that Garuda’s Sydney operations were focussed on shippers. Mr Haddad also gave evidence of being aware of the practices of other airlines. The question then becomes why, if the rest of the airline industry in Asia operated with an eye on what shippers were doing (including Garuda in its operations from Australia to Indonesia), there would be any reason for Garuda’s head office plausibly to remain ignorant of these matters. It is true that the documentary evidence for Jakarta’s involvement with shippers or its knowledge of standard industry practice was very thin. But I do not derive from that matter much assistance beyond the fact that the documentary record is incomplete. Responsibility for that does not self-evidently lie with the Commission.

60    Ultimately I do not accept Mr Mandala’s evidence because it is literally unbelievable. Garuda pointed to the fact that it had a poor reputation in the cargo market. Two freight forwarders gave evidence that they would not have used Garuda to ship cargo because of a perception to that effect. This submission went, I suppose, to add credibility to the otherwise striking notion that Garuda’s head office could be engaged in the international cargo business without having the slightest degree of knowledge about how that business operated (even though its subordinate Sydney office plainly did). However, even accepting Garuda’s cargo business is as hopeless as it alleges, this is not enough to permit me to embrace the deep ignorance of the industry which Mr Mandala’s evidence necessarily implies.

61    In that circumstance, had it been necessary or appropriate to make findings about this matter I would have concluded that across its network Garuda was conscious of the role of shippers and their significance to Garuda’s business. Just like all of the other airlines and its own Sydney office, Garuda in Jakarta understood that shippers were significant market participants. Further, it understood that this was the attitude of the entire industry in Asia.

62    I therefore reject Garuda’s submission that I should find as a fact that the Commission failed to prove that Garuda had engaged in any of the conduct which gave rise to there being a market in Australia, or that the Commission had failed to prove that Garuda knew that other airlines were engaging in that conduct. I should add for completeness that the question of whether Garuda engaged in the behaviour which gave rise to the existence of a market in Australia is, in all likelihood, something of a red herring. It has no relevance to its liability for the contraventions. It was only put as going to the issue of penalty. Since what is to be penalised is the contravention rather than the conduct which gave rise to the market, its relevance is not at once obvious.

63    Secondly, Garuda pursued a finding that it was not aware that there was any prospect that its conduct in Hong Kong and Indonesia could give rise to a contravention of Australian domestic law. Mr Mandala has now given evidence to this effect in his most recent affidavit. Knowledge of the provisions of Australian domestic law is beside the point. Garuda knew it was price fixing on routes into Australia. As I discuss later, its Vice President, Cargo, Mr Poeloengan, knew that Garuda was engaging in agreements to fix the surcharges in Hong Kong and Indonesia.

64    To the extent that Mr Mandala’s evidence suggests that he had no idea that there might be legal risk associated with price fixing in the international cargo market, I reject it. Again, it is implausible. More importantly, Mr Mandala is not the right person to give this evidence. Garuda has never called the persons who engaged in the conduct or those who knew about it at the upper reaches of the airline (such as Mr Poeloengan).

65    Thirdly, Garuda sought a finding that prior to the conduct in question there was no court decision or statement by the Commission that indicated that such conduct meant that Garuda was operating in a market in Australia and was thereby in breach of the TPA. I accept this is so.

66    The fourth factual matter for which Garuda contended was that it was not put to Mr Haddad or Mr Mandala that they should have appreciated that there was a market in Australia. This is true but there was no reason for the Commission to do so as it was not part of its case which did not have as any of its elements subjective awareness on Garuda’s part. In fact, the whole issue of whether Garuda was aware of the market in Australia is a defence case pursued by Garuda to lessen its liability on penalty.

5.2    Passage of time

67    The fifth factual finding sought was that the conduct all occurred between (at that time) 12 and 16 years ago. I accept this.

68    The sixth matter is Garuda’s contention that the statute which it has been found to have contravened was repealed 10 years ago and has not been replaced in like terms in the current statute. To the extent that this involves a suggestion that Garuda’s actions would no longer be unlawful today I reject it. Garuda itself accepted in its supplementary submissions that ‘its conduct which constituted contraventions of the [TPA] prior to the amendments of 24 July 2009 would again constitute contraventions of the [TPA] if engaged in on or after 6 November 2017’.

69    That does not dispose of the submission in its entirety. It is therefore necessary to attend to the relevant provisions. The provision which Garuda was found to have contravened was the former s 45(2) read with s 45A. Those sections are laid out above at [2]-[3].

70    These provisions were accompanied by other provisions affecting their jurisdictional reach. Section 4E imposed the requirement that a reference to a market was a reference to a market in Australia. Also relevant was s 5(1) which extended the operation of the TPA to conduct engaged in by bodies corporate carrying on business within Australia.

71    On 24 July 2009 amendments were made to the TPA by the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth). Relevantly, it removed the requirement that there be a market in Australia. Since that requirement was a restriction on liability the effect of these amendments was only to expand liability.

72    On 6 November 2017, a new s 45DA was inserted into the TPA (more precisely, an earlier provision, s 44ZZRD, was amended and renumbered). There is no need to set it out. Relevantly for present purposes, it is not in dispute that it thereafter required a territorial connection consisting of the rival parties to the relevant agreement competing in relation to the supply of goods or services in trade or commerce within Australia or between Australia and another country.

73    It is therefore correct of Garuda to say that ss 45(2) and 45A have been long repealed. But in their place are provisions whose content is essentially the same and underneath which lies an even broader touchstone of extra-territorial operation.

74    The upshot of this is that if Garuda repeated its conduct under the current regime it would be acting in contravention of what is now the Competition and Consumer Act 2010 (Cth) (‘the CCA’). As I have said, Garuda accepted that this was so in its oral submissions and supplementary written submissions although it was denied in its initial written submissions.

5.3    Risk of repetition

75    The seventh matter which Garuda wished to be found was that there was no evidence that it had engaged in like conduct before or after the period in question. That seems uncontroversial and I am content so to find. Garuda also sought a finding that its conduct in Indonesia ‘was found to have ended before the period in question’. This was referenced to [1226] of the Trial Reasons. That was the final paragraph of a section dealing with the September 2005 Fuel Surcharge Understanding. It said:

Apart, therefore, from the absence of a market in Australia I would have found contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) with respect to this understanding in relation only to TC1/2.

76    This does not establish that the conduct was found to have ended before the period in question. Indeed, as far as I understand it the contraventions were all found to have occurred during the period in which they were alleged. This submission by Garuda does not really make sense. I decline to make such a finding.

77    Of more substance was Garuda’s submission that there was no evidence that it was threatening to repeat the conduct. I accept there is no direct evidence that Garuda is threatening to repeat the conduct and I find that Garuda is presently making no such threat.

5.4    Garuda’s cargo business

78    The eighth finding for which Garuda contended was that throughout the period 2003-2006 and in 2016 it operated at a loss. The evidence for this was a document entitled Garuda Information Response. This was in fact a letter from Garuda’s solicitors to the Commission’s solicitors setting out Garuda’s response to a request for information sent by the Commission. It contains assertions by Garuda about its profitability across the period 2003-2006 and in 2016. I propose to accept this evidence which I have no reason to doubt. It shows that in 2003-2006 Garuda had a profit margin across its whole business of -0.07%, -8.00%, -7.75% and -4.97% respectively whilst in 2016 it had a profit margin of 0.04%. I therefore accept that across the period Garuda as a whole operated at a loss.

79    However, the overall profitability of Garuda is of less relevance than the profitability of its cargo division. It is necessary for the Court, in setting a penalty, to ensure that it is pitched at a level sufficient to ensure that the penalty is not just seen as a cost of doing business: see below at [125]. The business here was the business of commercial airfreight and it would therefore be more useful to know how profitable that part of the business was. Unfortunately, Garuda has not provided any evidence about that. I would not go so far as to accept the Commission’s submission that the overall profitability of Garuda is entirely irrelevant. It may, for example, have some bearing on the capacity of the organisation to pay a penalty.

80    The ninth finding sought by Garuda was that across the period 2003-2006 and in 2016, Garuda’s cargo operations accounted for between 6.30% and 6.80% of Garuda’s overall revenues, the vast bulk coming from passenger operations. Of that, the international cargo division accounted for around 25%. I accept this and the consequent submission that this means that the business in which the contraventions occurred was around 2% of Garuda’s overall business.

5.5    The Indonesian understandings

81    The tenth finding sought by Garuda was that the Indonesian contraventions affected only a very small field of commerce and were not shown to have resulted in any increase in revenue for Garuda. It submitted that the total revenue on the cargo carried from Indonesia to Australia in 2003-2006 was US$3.8 million.

82    Dealing first with the submission that only a small field of commerce was affected by Garuda’s conduct, the Commission submitted that it was wrong to focus only on the carriage of cargo from Indonesia (or Hong Kong) to Australia. The understandings were all couched in terms which did not distinguish routes from Indonesia to any particular port in TC1, TC2 or TC3 (including Australian ports). On this view, the relevant measure of field of commerce was concerned with all outward bound air cargo operations originating in Indonesia or Hong Kong.

83    The resolution of this debate turns on the text of s 45(2) (set out above at [2]). Recourse to it shows that the prohibition it contains is on a corporation reaching a contract arrangement or understanding if ‘a provision’ of that contract, arrangement or understanding ‘has the purpose or would have or would be likely to have the effect of substantially lessening competition’. A similar requirement exists when an understanding is implemented: s 45(2)(b).

84    It follows that it is not the understanding which must satisfy the requirements of s 45(2); it is a provision of the understanding. From this it would appear that the understanding may include matters apart from the ‘provision’. Further, the word ‘competition’ in s 45(2) is defined in s 45(3) to mean ‘competition in a market’ and ‘market’ is defined in s 4E to mean a market in Australia. Unpacked in that way, the contravening consists of reaching an understanding which contains a ‘provision’ (not the understanding itself) which has the proscribed qualities in s 45(2).

85    It is true, as the Commission submits, that many of the understandings reached by Garuda related to freight rates or routes going to places other than Australia. Almost all of the Indonesian understandings took the explicit form of an agreement to impose a particular fuel surcharge across TC1, TC2 or TC3. And, whilst a more elaborate methodology was utilised in Hong Kong, nevertheless that methodology still operated to produce a rate to be applied in the various tariff conference areas. The actual form of the various understandings was therefore about routes generally rather than any particular route between Hong Kong or Indonesia, on the one hand, and Australia, on the other.

86    The effect of s 45(2) therefore is that entry by Garuda into an understanding with other airlines to impose a fuel surcharge at a predetermined rate in TC3 is not the relevant contravention. Instead, one must identify within that understanding a ‘provision’ which has the qualities proscribed by s 45(2).

87    What was that provision in this case? As a matter of form, of course, the understandings reached did not explicitly refer to routes into Australia. However, the provision of an understanding may be textually separate from the understanding of which it is part: Visy Paper Pty Ltd v Australian Competition and Consumer Commission [2003] HCA 59; 216 CLR 1 (‘Visy’) at 12-13 [32]-[33] per Gleeson CJ, McHugh, Gummow and Hayne JJ (a case concerned with s 45(6)). Consequently, in this case it seems to me that the relevant provisions of the various understandings must concern only air freight on unidirectional routes to individual ports in Australia (see Trial Reasons at [235] and [336]) originating in Hong Kong or Indonesia. Whilst I accept therefore the submission of Mr Halley SC on behalf of the Commission that there is a degree of artificiality about this approach, I do not accept that this (relevantly lawful) conduct of Garuda can be used to seek to increase the penalty imposed on it by bringing in the much larger quantities of cargo being carried on these other routes. As I note below at [136], there are some first instance decisions where single judges of this Court have taken into account routes not terminating in Australia in assessing civil penalties for other airlines who were involved in related cartel conduct. However, since they were cases in which the penalty was agreed and there was no dispute about the matter, I do not think they provide any useful guidance where the issue is in dispute.

88    Returning then to Garuda’s factual contention which gave rise to thisthat the field of commerce affected by its conduct was smallit seems that I should to some extent accept it. The collection of markets in Australia for air freight services on unidirectional routes to Australia from Indonesia or Hong Kong is much smaller than the collection of markets for air freight services on unidirectional routes originating in Hong Kong and Indonesia to any international airport in TC1-3. On the other hand, whilst I accept the former collection of markets is smaller than the latter, I hesitate to say that that collection is, in absolute terms, small. Neither party took me to any evidence at this hearing about the absolute size of these markets. The consequence is that I cannot determine how large they are. As a matter of common sense, whilst I might be willing to infer that the market for the carriage of goods by air freight from Denpasar to Hobart is likely to be small I do not think I can plausibly say that about the air freight market from Jakarta to Sydney or from Hong Kong to Sydney.

89    The second aspect of this factual contention was Garuda’s submission that it had not been shown that the conduct had increased its revenues. I do not accept this submission. The effect of the fuel surcharges and the customs fee was to increase the overall freight rates. At trial Garuda argued that these imposts would have been competed away by reducing freight rates to lessen the impact of the surcharges. I rejected this argument at [1174] in the Trial Reasons and the Full Court did not disturb that finding. It is not open to Garuda now to run this argument again. Even if it were, for the reasons I gave at [1174] it was not established on the evidence.

90    The eleventh additional finding sought by Garuda was that the revenue that Garuda derived from the Indonesian understandings was the total of the surcharges and fees charged by Garuda between September 2003 and October 2005, which totalled US$366,000. I accept this submission. For the reasons I have already given I reject the Commission’s submission that the correct revenue figure should have focussed on Garuda’s revenues on outward-bound flights originating in Hong Kong and Indonesia across TC1-3. The relevant contravening conduct was confined to Garuda’s activities in the port specific markets on Australia-bound flights out of Indonesia and Hong Kong.

91    Garuda made a submission that the surcharges had been set at 10 cents per kilo and that its freight rates had fluctuated by more than that amount. In circumstances where it has not been demonstrated that the various fees were competed away by events in the underlying freight market, this is not relevant.

92    The twelfth finding for which Garuda contended was that no profits could be attributed to Garuda’s carriage of cargo from Indonesia to Australia in the relevant period. This submission was unsupported by any evidence. As it was ultimately pressed the submission was only that Garuda’s air cargo operations ‘cannot be disaggregated from [its] principal business of carrying passengers’. However, no evidence was led to prove that any such disaggregation was impossible and it is far from a self-evident proposition. The Commission submitted that, as Garuda’s cargo business is incremental to its passenger business (in that it relies on taking advantage of available hold space on scheduled passenger flights which would otherwise be unused), as a matter of commercial common sense, Garuda would have no incentive to continue to operate a cargo business unless it positively contributed to revenue. However, this may not necessarily be so. There can sometimes be sound commercial reasons to run a business at a loss for a period (i.e. increasing market share). I decline to make the finding.

93    The thirteenth additional finding sought by Garuda was that its conduct (and that of the other international airlines) in making and giving effect to the Indonesian understandings was ‘overt, transparent and documented’ so that ‘there was no difficulty in regulators detecting and establishing that the conduct occurred’. In the Trial Reasons I noted that the understandings had frequently been reduced to writing in the form of minutes of the meetings. In practical terms this made it easier to prove the conduct. I would not, however, call that behaviour overt or transparent. In particular, it was not so overt or transparent that any of Garuda’s cargo customers were aware that it was going on. Further, to the extent that expressions such as ‘overt’ and ‘transparent’ carry with them a connotation that somehow Garuda’s conduct is to be perceived as having some positive aspect to it, this needs to be balanced against the fact that the structure of holding meetings and keeping minutes had the effect of promoting compliance by the cartelists with the understandings.

5.6    The Hong Kong understandings

94    The fourteenth additional finding sought by Garuda was that Garuda’s market share from Hong Kong to Australian ports was less than one half of a percent. This is so.

95    The fifteenth additional finding sought was that the maximum benefit that it could have derived from the Hong Kong understandings was US$328,500 comprising US$320,000 of fuel surcharges and US$8,500 in insurance surcharges. I accept that this is the direct revenue derived from the conduct and I reject the Commission’s related submission that the analysis should instead be TC1-3-wide.

96    The sixteenth additional finding sought by Garuda was that there was no profit attributable to Garuda’s carriage of cargo from Hong Kong to Australia. As I have already explained in the case of Indonesia, there is no evidence for this contention.

97    The seventeenth additional finding sought by Garuda was that its conduct with the other airlines in Hong Kong was overt, transparent and documented. I accept this. The airlines used the local aeronautical regulator as the medium through which they were able to collude and the freight forwarders were aware it was taking place. It was the transparency of the arrangement which allowed the cartel to develop. Although transparent in that sense, the conduct by reason of being open had a tendency to increase adherence to the cartel.

98    The eighteenth additional finding sought by Garuda was that the other airlines joined in the Hong Kong fuel surcharge understandings before Garuda did so and without reference to whether Garuda would do so. I assume this a reference to the fact that I concluded in the Trial Reasons at [594] that there was insufficient evidence to find that Garuda was represented at the meeting held on 23 July 2002 at which other airlines reached the first understanding alleged by the Commission, the 2002 Hong Kong Lufthansa Methodology Understanding. Given that, I propose to make this finding.

5.7    Effect in Australia

99    The nineteenth finding of fact for which Garuda contended was that there was no allegation, finding or evidence supporting a finding that any of Garuda’s conduct affected any person in Australia. It is correct that I made no such finding in the Trial Reasons. Nonetheless, it seems to me that two kinds of effects may have been involved, being competitive and non-competitive. As to competitive effects, leaving aside the terms of the statute, this would devolve into an inquiry into the effect the price fix had upon the competitive state of the market. As a matter of fact, it has not been proven that there was any negative effect upon the competitive state of the relevant markets. However, the Commission never sought to demonstrate such a case since it relied upon the statutory deeming in45A.

100    Garuda first submitted that I should ignore s 45A in this analysis. This was because, as noted already, s 45A was repealed on 24 July 2009. Prima facie, the repeal of s 45A on 9 July 2009 has no impact on Garuda’s liability because s 8 of the Acts Interpretation Act 1901 (Cth) had the effect of preserving Garuda’s liabilities incurred in respect of conduct between 2001 and 2006 under s 45A despite it having been repealed in 2009. Garuda submitted that its repeal remained nevertheless relevant to the assessment of the penalty. Here the argument was that I should not approach the imposition of the penalty on the basis that Garuda’s conduct was taken to have the effect of substantially lessening competition in the market or to have had that purpose (presumably because s 45A had been repealed). I do not accept this. I concluded that 45 was breached because Garuda had engaged in conduct which had the qualities specified in s 45(2). I did so because of s 45A. Garuda’s submission invites me to impose a penalty on a basis which would be inconsistent with the basis upon which its liability has been determined.

101    Garuda secondly submitted that the Court could not infer from s 45A that any persons in Australia were affected by Garuda’s conduct or that there was any adverse impact on the competitive state of the relevant markets. The Commission submitted the opposite. The various agreements reached by Garuda were agreements deemed by s 45A for the purposes of s 45(2) ‘to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition’. It therefore includes three concepts which qualify the substantial lessening of competition: purpose, effect and likely effect. It is true that s 45A operates as a deeming provision but it is unusual in that it deems three alternative states to be the case. Analytically, this makes it impossible to know precisely what has been deemed. This oddity does not matter so far as s 45(2) is concerned because it is expressed in the same terms. The same unusual structure can be seen in these two laws:

(1)    It is an offence to bring a cat or dog into a hotel.

(2)    A ferret is deemed to be a cat or dog for the purposes of s 1.

102    Seeking to understand whether the effect of s 2 is to deem a ferret to be a cat or, instead, a dog is an arid exercise. So too is the case with s 45A. One cannot know whether a contract, arrangement or understanding to which it applies is one with the purpose of substantially lessening competition or with that effect or with that likely effect. The interstices of the deeming wrought by s 45A are forever unknowable.

103    That suggests that the deeming brought about s 45A occurs only for the purposes of s 45(2) and is not to be seen as informing any factual state of affairs. That observation is consistent with the text of s 45(2) which, as I have already observed, explicitly refers to the deeming as being ‘for the purposes of s 45’. Consequently, I do not think it is practically or legally possible to use the deemed state of affairs flowing from s 45A for any purpose beyond apprehending that a contravention of s 45(2) has occurred.

104    I do not need to say any more about the practical problems involved. So far as the legal problems are concerned, apart from the explicit terms of s 45A requiring the deeming to be for the purposes of s 45(2), there is authority for the proposition that deeming clauses are to be used only for the purpose for which they operate: see, e.g., Federal Commissioner of Taxation v Comber [1986] FCA 92; 10 FCR 88 at 96 per Bowen CJ; Re Levy; Ex parte Walton (1881) 17 CH D 746 at 756 per James LJ. Where a law includes a deeming clause (even if the word ‘deem’ is not used) it often creates a statutory fiction (although not invariably). Where it does create a statutory fiction ‘it becomes very important to consider the purpose for which the statutory fiction is introduced’: Muller v Dalgety & Co Ltd [1909] HCA 67; 9 CLR 693 at 696 per Griffiths CJ. There is a rich jurisprudence about the meaning of deeming clauses and their operation. Windeyer J traced much of it in Hunter Douglas Australia Pty Ltd v Perma Blinds (1968) 122 CLR 49 at 65-67 in terms which are enlightening. There is no need to rehearse these cases. This is because s 45A is explicit in the purposes for which it operates and that is only for the purposes of s 45. Thus, even if it were practically feasible, it would not be appropriate to use s 45A for any purposes other than the purposes of s 45.

105    It follows that it is not permissible to use s 45A to reach any conclusions about the effect that Garuda’s conduct had on the competitive state of the relevant markets or whether any consumers were affected by the conduct. Consequently, I must accept Garuda’s submission that it has not been shown that the competitive condition of the relevant markets was deleteriously affected or that any consumers were affected either.

106    That is not the end of the issue, however. In this case, because the Commission relied on s 45A the facts as found at trial never needed to assay what kind of contraventions of s 45(2) had taken place. It was never necessary to ask which of the three separate prohibitions in s 45(2) had been contravened. Thus, at no point, did any party at trial seek to prove or disprove that Garuda had reached agreements with the other airlines with the purpose of substantially lessening competition, the likely effect of doing so, or even the effect of doing so. It will be apparent from the three-pronged nature of the prohibition that only one prong concerns itself with the actual effect of substantially lessening competition. Although the Commission did not do so, it would have been open to it to seek to demonstrate that Garuda had contravened s 45(2) because it reached the impugned agreements with the purpose of substantially lessening competition and without any allegation about actual effect. Had it taken this course, it would have been no part of its case to prove that there had been any negative impact on competition.

107    I make that observation because Garuda submitted that it was to its benefit that the Commission had not shown in the present case that there had been any negative impacts on the competitive state of the relevant markets. This is no doubt true and is a result which largely, although not entirely, derives from the fact that the Commission relied on the deeming brought about by s 45A to further its case. The Commission, on the other hand, submitted that the absence of evidence of adverse competitive effects was not a matter which was to Garuda’s benefit but was instead merely neutral.

108    I accept the Commission’s submission. Once it is appreciated that an adverse impact on the competitive state of a market is not actually an element in a contravention of s 45(2) except when the Commission actually seeks to prove directly that an agreement had that effect (as to which see below), it becomes apparent that it would denude the provision of much of its operation if it were to be accepted that an absence of any proof of competitive detriment was to be seen as a mitigating factor. For example, in a case based on an agreement alleged to have the purpose of substantially lessening competition, it could scarcely be to the point when it came to assessing how serious that breach was to submit that there had been no actual substantial lessening of competition resulting from the conduct. In a similar vein, it would not be a mitigating factor on being sentenced on conviction for murder to point out that the murder had been committed without anyone being robbed. The fact that no-one was robbed is neutral in that context because it is irrelevant. Actual substantial lessening of competition stands in the same position in relation to a breach of s 45(2) based only on the purpose limb; it is irrelevant to the contravention.

109    Of course, this works both ways. In a case where the agreement is alleged to have the actual effect of substantially lessening competition, it would be relevant on penalty to know how substantial the effect had been. Its relevance springs, however, from the nature of the contravention alleged.

110    This case, of course, is concerned not with any particular case under the three-pronged prohibition in s 45(2). What has happened instead is the enlivenment of the deemed state of affairs flowing from s 45A. And, as I have endeavoured to explain, since the nature of what is deemed by that provision can never actually be known, it also cannot be known which of the three distinct prohibitions in s 45(2) has been infringed. Instead, all one knows is the mysterious trinitarian conclusion that s 45(2) has been contravened. And, if no more than that is known, it is simply not logically possible to ascertain what the relevance would be of evidence that competition in the relevant markets had not been adversely affected (or, as here, an absence of evidence that they had been so affected). In essence, the problem is that the answer to the relevance inquiry vanishes over the event horizon into the inaccessible innards of s 45A and with it any possibility of knowing whether one is dealing with a case of purpose, effect or likely effect.

111    Consequently, in a case based on s 45A it will generally not be relevant to inquire into the impact of the conduct on the competitive state of the markets. I say ‘generally’ because there is an obvious qualification. Where it is shown that the impugned conduct did have an adverse impact on the competitive state of the relevant markets this will be relevant. But the same logic will continue to apply with the result that in that context evidence of this kind will be evidence of aggravation. To return to crime for a moment, just as the absence of robbery is irrelevant in sentencing a felon for murder so too the fact that the felon was robbing someone when they murdered them is relevant as an aggravation. In this case, the key takeaway is that the absence of an aggravating factor is not itself a mitigating factor.

112    The course of authority in this Court confirms the conclusion that evidence of the competitive state of the market in a case based on s 45A is irrelevant except as an aggravating matter: Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 1425; ATPR 42-031 (‘McMahon Services’) at [16]; Australian Competition and Consumer Commission v Leahy Petroleum (No 2) [2005] FCA 254; 215 ALR 281 at 287 [20]; Australian Competition and Consumer Commission v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42-097 at [23]. These somewhat brief statements have tended to emphasise the per se nature of a breach resulting from s 45A as the basis for the principle. Some of them seem also to proceed on a misreading of s 45A as in fact deeming that there has been a substantial lessening of competition when, closely read, it does not say that. It is for that reason that I have preferred to try and explain my own textual route to the same conclusion.

113    For completeness, this issue of whether this was a neutral matter only came to be debated in written submissions received after judgment was reserved. The three authorities referred to in the preceding paragraph were raised by the Commission in those submissions and were most likely, as Garuda submitted, not strictly in response to the questions raised by the Court. Garuda objected to the submission being received but made submissions about them nevertheless. I am satisfied that the Court will not be denying Garuda procedural fairness by entertaining the issue and that Garuda has been heard on the point.

114    I then turn to the second issue of non-competitive effects. Although I have found that I cannot, as a matter of fact, find that there was a substantial lessening of competition by reason of the impugned conduct, there may be other non-competitive effectsfor example, a price increase in goods sold in Australia caused by increased freight rates. The evidence does not permit such a finding, however. Nothing is known of any particular goods or their importers or even the prices concerned. The debate never descended to that level of particularity.

115    In those circumstances, I find that no person in Australia was affected by the conduct. However, as explained above, this is a neutral matter.

5.8    Garuda’s status

116    The twentieth additional finding proposed was that Garuda is domiciled and ordinarily resident in Indonesia. I find that is so. I do not find as a fact, as Garuda suggested I should, that the public policy of Australia requires foreign airlines not to be resident in Australia but rather resident in their state of origin. It was said that this policy was to be evidenced by Art 2(2) of the 2013 ASA. The ASA is not evidence of Australian public policy.

117    The twenty-first additional fact for which Garuda contended was that the Indonesian Minister for State Owned Enterprises had general regulatory power in respect of Garuda’s work plans and budgets. This was the evidence of Professor Butt, an expert in Indonesian law. I see no reason not to make the finding.

118    The twenty-second additional finding sought was that the Indonesian Supreme Court had held in Decision 613 KPDT.SUS/2011 that an agreement between airlines to fix fuel surcharges was not a determination of price in terms of the relevant Indonesian competition law, Art 5(1) of Law Number 5 of 1999. This finding was sought to buttress Garuda’s submission that it had good reason to believe its conduct was lawful.

119    This is not, however, what the Supreme Court held. Even if it were, its decision was in 2011 which was some years after the conduct in question in 2001-2006. As such it cannot have had any impact on Garuda’s understanding in that period.

120    Garuda led expert evidence from Professor Butt on the meaning of the Supreme Court decision which was contrary to the submissions then made on its behalf. The Central Jakarta District Court had held on the facts that it was not satisfied that the (different) airlines involved had engaged in price fixing conduct. This was because it was not satisfied that the parallel conduct which it did find was sufficient to reach the conclusion that there had been collusive conduct. That conclusion is the same as in Australian competition law; that is to say, parallel conduct by itself is not enough: Trial Reasons at [466]. The Supreme Court of Indonesia affirmed the correctness of this conclusion:

The reasons and objections for the cassation from the Cassation Applicant cannot be justified because the judex facti (the District Court), was correct in its evaluation of the evidence and in its legal considerations, where evidence [showed] that a written contract relating to a fuel surcharge dated 4 May 2006 which was signed by the Chairperson of the INACA Council INACA Secretary General Sub b) Air Transport company was revoked on 3 May 2006, and, moreover, that the agreement was not a price fixing [agreement] as mentioned in Article 5(1) of Law No 5 of 1999 [(the Competition Law)] because the elements contained in Article 5(1) are not fulfilled and the existence of a CARTEL cannot be proved.

Therefore, the [District Court] was not wrong in the application of the law.

Based on the above considerations, it is clear that the [District Court] Decision did not conflict with the law and/or statutes, so the cassation application lodged by the Cassation Applicant, [the KPPU], must be rejected

121    Consequently, I do not accept that I should find that the Indonesian Supreme Court held as Garuda submits.

122    The twenty-third and final finding of fact sought was that the 2013 ASA had entered into force on 30 December 2016. I have already found this to be so at [32] above.

123    I then turn to the relief sought by the Commission.

6    PRINCIPLES RELEVANT TO PECUNIARY PENALTIES

124    Section 76(1)(a)(i) of the CCA authorises the Court to impose a civil penalty on a person who has contravened a provision of Pt IV. Sections 45(1)(a)(ii) and 45(2)(b)(ii) of the TPA which Garuda contravened were contained in Pt IV. At the time of the contraventions s 76(1A)(b) provided that the maximum penalty for a body corporate such as Garuda was relevantly $10 million for each contravention. However, s 77(2) also required that any proceeding for a penalty be commenced within six years of the contravention. In this case, the present proceeding was commenced on 2 September 2009. Consequently of the contraventions identified in Section 2 above, only those which occurred after 2 September 2003 can support the imposition of a civil penalty on Garuda. There are 39 such contraventions.

6.1    Primacy of deterrence

125    The method by which the Court is to approach the formulation of civil penalties is well established. The purpose for which a civil penalty is imposed is primarily if not wholly protective in promoting the public interest in compliance: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (‘Commonwealth v Director’) at 503 [45] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. In practice, this means setting the penalty at a level which will deter not only the Respondent but others who might be tempted to engage in similar conduct (Commonwealth v Director at 506 [55]); that is to say, specific and general deterrence. Consequently, the penalty must be fixed at a level such that it will not simply be treated as an acceptable cost of doing business’: Singtel Optus v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at 265 [62]-[63] per Keane CJ, Finn and Gilmour JJ.

126    In approaching that task, one should bear in mind that in many cases (and the present is one) the risk of detection is low so that a slap on the wrist will not do; more so when the profits to be made may be high: Australian Competition and Consumer Commission v J McPhee & Son (Aust) Pty Ltd (No 5) [1998] FCA 310; ATPR 41-628 at 40-891 to 40-892 per Heerey J. In the anti-trust area where substantial profits frequently flow from contravening conduct the requirements of general deterrence will therefore be important: McMahon Services at [15] per Selway J. The penalty must also reflect the object of protecting the integrity of markets and preventing the ‘subversion and distortion thereof’ by conduct which has the purpose or effect of adversely affecting competition: Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693; 207 ALR 329 at 333 [22] per Lee J. However, the penalty must not be so high as to be oppressive: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285 (‘NW Frozen Foods’) at 293 per Burchett and Kiefel JJ.

127    In this case, this has the consequence that the penalty to be imposed upon Garuda must be such as to make crystal clear to international commercial airlines engaged in air freight that collusive price fixing is not profit enhancing.

6.2    Maximum penalties

128    I am required to determine the penalties by means of an instinctive synthesis in which all the relevant features, including those which are incommensurable with one and other, are brought to account: Markarian v The Queen [2005] HCA 25; 228 CLR 357 at 373-375 [37], applied in the s 76 context in, for example, Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] FCA 683; ATPR 42-070 at 43-116 [68].

129    I begin with the maximum penalty for each contravention which was, at the time of the contraventions, $10 million. This penalty will be appropriate in the most serious of contraventions. I reject the Commission’s submission that one should eschew asking that question and ask instead the question posed in R v Kilic [2016] HCA 48; 259 CLR 256 at 266 [20], being whether the contravention is so grave as to warrant the maximum penalty. All one gets from that case is that: (a) it is an error to consider an offence to be in the worst category of offence for penalty purposes if it does not invite the imposition of the maximum penalty; and, (b) once a case is in the worst category it does not cease to be such just because one can imagine one that was even worse. Plainly, Garuda’s conduct does not warrant the imposition of the maximum penalty for any of the contraventions.

6.3    Penalty factors

130    In determining the appropriate penalty, s 76(1) of the CCA requires the Court to have regard to ‘all relevant matters’, including the nature and extent of the act or omission, any loss or damage suffered as a result, the circumstances in which the act or omission took place, and whether the respondent has previously been found to have engaged in similar conduct.

131    In Trade Practices Commission v CSR Ltd [1990] FCA 762; (1991) ATPR 41-076, French J considered the following to be relevant to the assessment of an appropriate pecuniary penalty (from 52-153):

(a)    the nature and extent of the contravening conduct;

(b)    the amount of loss or damage caused;

(c)    the circumstances in which the conduct took place;

(d)    the size of the contravening company;

(e)    the degree of power the contravening company has, as evidenced by its market share and ease of entry into the market;

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

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

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

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

132    Those factors were expanded upon by the Full Court in NW Frozen Foods at 290 to include:

(a)    whether the respondent has engaged in similar conduct in the past;

(b)    the effect on the functioning of the market, and other economic effects, of the conduct;

(c)    the financial position of the contravening company; and

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

133    However, these factors do not exhaust potentially relevant considerations or otherwise confine the Court’s discretion: see Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; 327 ALR 540 at 544 [9] per Allsop CJ.

7    APPLICATION OF PENALTY PRINCIPLES TO THE CONDUCT IN THIS PROCEEDING

7.1    Penalty factors

7.1.1    Nature and extent of the contravening conduct

134    It is first necessary to ask precisely what the contravening conduct was. In the case of both Indonesia and Hong Kong what Garuda did was to agree with other airlines what fuel surcharges would be levied. These remarks apply equally to the customs fee, the security surcharge and the insurance surcharges. These were charges to be levied on flights out of Indonesia and Hong Kong to many places around the world and not just ports in Australia. However, as I have explained above, a contravention of s 45(2) requires the identification of a provision of each understanding which has the effect of substantially lessening competition in a market in Australia. In this case, each provision relates to the conduct of Garuda in providing air freight services along the unidirectional routes to individual ports in Australia from ports in Indonesia and Hong Kong. Consequently, what is to be penalised is not the entry by Garuda into price fixing arrangements applying across TC1-3. Rather, it is entry into such an arrangement where there was a provision of that arrangement which had the purpose, or would have or be likely to have the effect, of substantially lessening competition in a market in Australia. It is the provision which offends s 45(2), not the arrangement which contains it. have explained above how the provision may be textually separate from the arrangement of which s 45(2) assumes it to be part. No doubt this is linguistically awkward but it is sanctioned by the High Court’s decision in Visy.

135    I reject the Commission’s submission that consideration of the impact on routes in TC1-3 not involving markets in Australia (e.g. Jakarta to Manila) was relevant to the formulation of any penalty because such conduct was part of ‘all of the circumstances’. It cited Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73; 357 ALR 55 (‘Yazaki Corporation’) at 59-62 [5]-[22], 108 [244] and 109 [253] as authority for the proposition that all of the circumstances were to be considered. That may be accepted. The real problem for the Commission is in sorting the relevant from the irrelevant. The fact that Garuda reached an understanding with other commercial airlines to set the level of surcharges and other imposts across TC1-3 is irrelevant except to the extent that it had the purpose, or had or was likely to have the effect, of substantially lessening competition in a market in Australia. As I have already noted, it was not contrary to Australian law for Garuda to engage in conduct which had the purpose, effect or likely effect of substantially lessening competition in a market which was not in Australia. Hence, it cannot be relevant to the penalty assessment process to have regard to such conduct.

136    The Commission then sought to outflank that observation with other decisions of this Court. It submitted that this Court had taken into account revenues on routes not terminating in Australia in four cases arising from the fuel surcharge cartel litigation, citing Australian Competition and Consumer Commission v Korean Air Lines Co Ltd [2011] FCA 1360 at [29] per Stone J, Australian Competition and Consumer Commission v Emirates [2012] FCA 1108 at [43] per Katzmann J, Australian Competition and Consumer Commission v Malaysia Airline System Berhad (No 2) [2012] FCA 767 per Emmett J, and Australian Competition and Consumer Commission v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395 at [27] per Katzmann J. The first of these does not contain any treatment of this issue. The second assumes the position for which the Commission now contends but is the result of an agreed position between the parties rather than a reasoned conclusion by the Court. The third decision at the cited paragraph is concerned with routes to Australia, contrary to the Commission’s submission. The final decision again merely assumes that the correctness of the Commission’s submission and was the result of an agreed position between the parties rather than any process of reasoning.

137    In that circumstance, I decline to take into account any conduct of Garuda in price fixing which did not occur in a market in Australia.

138    Next it is useful to put the contraventions in their proper context by considering the circumstances in which they occurred. It is convenient to consider the position in Indonesia separately from that in Hong Kong.

7.1.2    The circumstances in which the contraventions took place

7.1.2.1    Indonesia

139    Starting with the position in Indonesia, the price fixing conduct emerged as a direct result of meetings of the ACRB. It met at Garuda’s cargo centre in Jakarta on a roughly monthly basis. The first meeting of the ACRB was on 30 May 2001. At trial I rejected a submission that the raison dꞌêtre of the ACRB was to engage in price fixing behaviour. As with the HK BAR CSC there were legitimate reasons for cargo airlines to meet and have discussions: Trial Reasons at [1139]. As was the practice in other jurisdictions, the local national airline took the chair which in this case was Garuda. Often this was Mr Azhar who reported to Mr Poeloengan, the Vice President, Cargo, at Garuda. This fact links the contravening conduct to the upper levels of management within Garuda which I expand upon below.

140    Garuda submitted that I should take it as a mitigating factor that the conduct took place entirely in Indonesia. Whilst I accept that the conduct took place entirely in Indonesia, given the extra-territorial operation of the TPA in this case, I do not think this matters very much. It is difficult to see that a conspiracy to fix prices becomes less serious when committed outside of the jurisdiction. The fact that it is committed outside of the jurisdiction may in some cases mean that it is not actionable because the relevant law does not have any extra-territorial impact. But once it appears that the relevant law is extra-territorial in operation (as here), the physical location of the conspiracy does not seem to me to be capable as a matter of logic as impacting on its seriousness.

141    The Commission’s case in Indonesia did not involve an allegation that the fuel surcharges would be determined by reference to an identified methodology. This is in contrast to the situation in Hong Kong where the airlines (apart from Garuda) were found to have reached an overarching understanding to use a particular index methodologythe revised Lufthansa methodology deployed in 2002, which was the subject of the Hong Kong Imposition Understanding and its subsequent extension to January 2004.

142    Of the contraventions which were found in relation to the fuel surcharges that are within time in Indonesia (and hence able to be penalised) each involved an understanding to impose a fuel surcharge (FSC) at a specified level. However, how that specified level was reached is unclear. In its submission on whether a course of conduct existed for penalty purposes the Commission did submit that the Indonesian Understandings had involved a similar mechanism to Hong Kong and that both had given rise to a situation where each decision to impose a surcharge was not the result of intentions or decisions of the cartelists but rather the result of movements in the price of fuel. The idea here was that once the cartelists had settled upon a predetermined methodology no decisions were necessary as the methodology dictated the appropriate fuel surcharge movement as the price of jet fuel varied.

143    In the Trial Reasons at [1141]-[1243] relating to the position in Indonesia I did not make a finding, as I did in Hong Kong, that the airlines had adopted one or more methodologies. On the other hand, at [17] in the introductory part of the Trial Reasons I indicated that the Lufthansa index had been used in Indonesia. Given that uncertainty, I propose to proceed on the basis that the Commission’s current submission is correct and that some kind of methodology was behind each fuel surcharge decision in Indonesia. The consequence is that the fuel surcharge understandings can therefore be seen as practically dictated by an underlying, although predetermined, methodology. Further, once a methodology was in place this made each understanding more mechanistic and less like a fresh outbreak of cartel behaviour. This is to Garuda’s advantage in the present context.

144    It will be necessary to return to this issue when considering the question of whether the fuel surcharge episodes formed part of a course of conduct. Again, the fact that I am content to assume there was an underlying methodology is to Garuda’s benefit in that context since it connects each understanding to all of the others.

145    The same cannot be said of the customs fee, the insurance charges or the air freight understanding. These were not the result of earlier decision making. They stand on their own.

146    It is then useful to say something of Garuda’s role in the determination of all of the surcharges and other imposts. Whilst it was certainly the chair of the ACRB and provided the premises at which the price fixing behaviour occurred, I do not think it would be fair to describe it, as the Commission submitted it was, as the ringleader of the cartel. Every international airport had a cargo representative body of some kind which was almost invariably chaired by the local national airline. This was merely an administrative arrangement driven by practicality.

147    Whilst I therefore accept that Garuda’s conduct took place whilst it filled the position of the chair of the ACRB, I do not accept the submission that this makes any difference. I have already rejected the proposition that somehow the fact that it filled the chair should be seen as giving its price fixing behaviour some sovereign element since it filled that position because it was the local flag carrier. Nor do I think that its role as chair in Indonesia increases or decreases the seriousness of its conduct. It does not decrease it because Garuda was just as much engaged in the conduct as the other airlines present at the meeting. Its conduct in organising the meetings does not increase the seriousness of the conduct as its role was largely administrative. It was not the leader of a cartel in the sense of being the driving force behind the cartel. It is much more likely that the real power behind the cartel was being exercised by Singapore Airlines and Lufthansa, with Garuda filling a subordinate role to those airlines.

148    Accordingly, apart from the fact that Garuda organised the meetings administratively and circulated the minutes I am unpersuaded that its role in conspiring to fix the various charges was any greater than the other airlines who were present. In that regard, two further matters are relevant. First, Garuda itself cheated on the cartel in April/May 2003 and was subject to complaint by other airlines as a result of which it changed its behaviour: Trial Reasons at [1180]-[1183]. I accept the Commission’s submission that this shows the cartel needed Garuda but it is also not the conduct of a ringleader. Secondly, there were plenty of airlines at the ACRB meetings with much larger cargo businesses (in a worldwide sense) who had larger motives to engage in the price fixing behaviour. In my opinion, Garuda’s role in the cartel was on the same footing as the other airlines; there was no ringleader. Its role should be seen as marginally increased by its modest administrative activities in the cartel but that effect is slight.

149    Turning then to the precise contraventions which are to be penalised, one may begin by rejecting the Commission’s invitation to take into account the contravening conduct by Garuda which is outside the limitation period in which a penalty may be imposed. That conduct simply cannot be the subject of a penalty. In assessing the penalty to be imposed for contraventions which are within time, to take into account conduct which is not within time would create a risk that Garuda would be penalised for conduct regarding which Parliament has been quite clear should not be subject to penalty. Nevertheless, because the Commission also seeks declaratory relief in relation to the out of time contraventions I will mention them in this section but I do not take them into account for penalty purposes.

150    The position in relation to the fuel surcharge understandings and their implementation is as follows.

151    The first understanding was the October 2001 Indonesia Fuel Surcharge Understanding. This was reached at a meeting of the ACRB held on 4 October 2001 and involved an agreement to impose a fuel surcharge of USD0.05/kg in TC3. This was a contravention of s 45(2)(ii). The second understanding was the April 2002 Indonesia Fuel Surcharge Understanding. This was reached at a meeting of the ACRB held on 9 April 2002 and involved an agreement to impose a fuel surcharge of USD0.05/kg on all routes except those to Japan. This was a contravention of s 45(2)(a)(ii). The third understanding was the June 2002 Indonesia Fuel Surcharge Understanding. It was reached at a meeting of the ACRB held on 4 June 2002 and involved an agreement to maintain the fuel surcharge at its current level of USD0.05/kg. This was a contravention of s 45(2)(a)(ii). The fourth understanding was the September 2002 Indonesia Fuel Surcharge Understanding. This was reached on 13 September 2002 at a meeting of the ACRB and involved an agreement to implement a floor under the fuel surcharge in TC3 of USD0.05/kg. This was a contravention of s 45(2)(a)(ii). I also concluded that the understanding had been implemented and that a breach of s 45(2)(b)(ii) was established. The fifth understanding was the January 2003 Indonesia Fuel Surcharge Understanding. This was reached at a meeting of the ACRB held on 29 January 2003 and involved an agreement to maintain the fuel surcharge at its current level. This was a contravention of s 45(2)(a)(ii). This understanding was also implemented by Garuda in contravention of s 45(2)(b)(ii). Each of the contraventions with respect to those five understandings is out of time for penalty purposes.

152    The sixth understanding was the May 2003 Indonesia Fuel Surcharge Understanding. It will be recalled that Garuda had unilaterally stopped charging an FSC on 23 April 2003. Following complaint, inter alia, by Singapore Airlines, a meeting of the ACRB was convened on 8 May 2003 whereby the airlines reached an understanding that the FSC would be reimposed. The effect of this was to impose an FSC of USD0.05/kg in TC3. This rate of USD0.05/kg had been the rate imposed in September 2002 and continued until Garuda’s sudden unilateral withdrawal. The decision of 8 May 2003 to reimpose the FSC of USD0.05/kg was a contravention of s 45(2)(a)(ii) but is now out of time for penalty. The understanding was implemented by Garuda on 12 May 2003. This was a contravention of s 45(2)(b)(ii) but is also out of time. However, it continued to charge that rate after the limitation cut-off date of 2 September 2003 and is liable for a penalty from that day to 30 June 2004. This is a period of approximately 10 months.

153    The seventh understanding was the September 2004 Fuel Surcharge Understanding. This was reached on 29 September 2004 at a meeting of the ACRB and was a contravention of s 45(2)(a)(ii). It was decided that an FSC of USD0.05/kg would be maintained in TC3. This decision was given effect on 16 October 2004 and remained effective until 30 April 2005 which was a contravention of s 45(2)(b)(ii). At that meeting, the rate for TC1 and TC2 were changed unlike TC3 and these changes also commenced on 16 October 2004this explains the otherwise curious nature of a decision to maintain a rate having a start date. The period of implementation is 6.5 months. Both the understanding and the implementation are within time for penalty purposes.

154    The eighth understanding was the April 2005 Indonesia Fuel Surcharge Understanding. This was reached in contravention of s 45(2)(a)(ii) on 4 April 2005 at a meeting of the ACRB. Changes were made to TC1 and TC2 but the decision in TC3 was to keep the rate the same, i.e., USD0.05/kg. This was implemented between 1 May 2005 and 14 July 2005 in contravention of s 45(2)(b)(ii), a period of 2.5 months. The contraventions are both within time for penalty.

155    The ninth understanding was the July 2005 Indonesia Fuel Surcharge Understanding. This was reached in contravention of s 45(2)(a)(ii) on 15 July 2005 and involved an understanding to keep the FSC at USD0.05/kg in TC3. It was implemented across TC3 from 16 July 2005 to 30 September 2005 in contravention of s 45(2)(b)(ii), being a period of two months.

156    All in all, in considering contraventions which are within time, the fuel surcharge conduct in Indonesia resulted in the FSC being fixed in TC3 at USD0.05/kg for the period of 2 September 2003 to 30 June 2004 and from 16 October 2004 to 30 September 2005. Apart from a brief period between 1 July 2004 and 15 October 2004, this means the FSC in TC3 was fixed at USD0.05/kg for approximately two years. During that two year period, the price fixing was kept in place by Garuda reaching three separate price fixing understandings. In my view this conduct is serious.

157    Whilst I accept that the understandings kept the surcharge at the same rate across the period, I do not think that this matters as Garuda contended it does. Price fixing behaviour does not cease to have its anti-social consequences merely because the cartel keeps the price steady. In many circumstances, maintaining price stability may be much more serious than allowing a certain degree of volatility. The only submission of this genre which would be effective is not that the price was maintained at a constant level, but rather that the price would have remained steady even if the cartel had not operated; that is to say, a submission that the price fixing behaviour was not causative of any anti-competitive effects.

158    Next it is useful to turn to the security surcharges. The first understanding about a security surcharge was reached in October 2001 but this is out of time. The second understanding was the January 2003 Indonesia Security Surcharge Understanding. This understanding is also out of time. The third understanding was the May 2003 Security Surcharge Understanding. It was reached in the following fashion. On 8 May 2003 there was a meeting of the ACRBthis was the meeting at which the FSC was reimposed after Garuda’s short-lived unilateral decision to stop charging it. At the same meeting a decision was made to impose (or to keep in place) a security charge. The formal decision was to maintain the insurance and security surcharge (ISS) which was already in place (which was USD0.05/kg in TC3). The reaching of this understanding, whilst a contravention of s 45(2)(a)(ii), is out of time for penalty purposes. It was implemented shortly afterwards in breach of s 45(2)(b)(ii) but that is also out of time. However, the charge was maintained from 2 September 2003 to 15 October 2004 which is within time. The period involved is around 13 months.

159    The fourth understanding was the September 2004 Indonesia Security Surcharge. This was reached in breach of s 45(2)(a)(ii) at a meeting of the ACRB held on 29 September 2004. The decision was to maintain an ISS of USD0.05/kg in TC3. This was given effect to in contravention of s 45(2)(b)(ii) across the period 16 October 2004 to 14 July 2005, being a period of about nine months.

160    The fifth understanding was the July 2005 Indonesia Security Surcharge. This was reached at a meeting of the ACRB held on 15 July 2005 and involved a decision to maintain the ISS at USD0.05/kg in contravention of s 45(2)(a)(iii). It was implemented across the period of 1 August 2005 to at least October 2005 in contravention of s 45(2)(b)(ii), a period of approximately two months.

161    The effect of this conduct was to maintain an ISS at USD0.05/kg for a period from 2 September 2003 to October 2005, a period of around 2 years. During this period, the maintenance of the ISS had involved two further collusive understandings.

162    Next it is necessary to turn to the customs fee understanding. This was the May 2004 Indonesia Customs Fee Understanding and was reached on 6 May 2004 in contravention of s 45(2)(a)(ii). The circumstances of the customs fee are set out at [1190] of the Trial Reasons. At a meeting of the ACRB held on 6 May 2004 Garuda reached an understanding to impose a fee of USD5.00 on each air waybill referred to as a ‘Customs Charges Data Processing’ on exports from Indonesia. That was inside the penalty period. This decision was implemented between 16 May 2004 and October 2005, a period of about 17 months.

163    Finally, insofar as Garuda’s conduct in Indonesia is concerned there is the separate October 2001 Indonesia Air Freight Rate Understanding. The circumstances of its making are set out at [1149]-[1155] of the Trial Reasons. It was reached on at a meeting of the ACRB held on 29 October 2001 chaired by Garuda. The airlines present, including Garuda, agreed to set a floor on various air freight rates including on routes to destinations in Australia. This was a contravention of s 45(2)(a)(ii) but is out of time. Implementation in contravention of s 45(2)(b)(ii) was not alleged.

164    It is then useful to gauge how much revenue was made by Garuda from the imposition of the FSC, the ISS and the customs fee over the relevant period, being approximately from September 2003 to September 2005. That date range does not fit the period set out above (which extends to October) but its fit is sufficient for present purposes. The approximation is necessary due to deficiencies in the evidence.

165    I have already explained above at [90] that it is only Garuda’s revenues on routes to Australia which are material for penalty purposes. The total of all of the charges (FSC, ISS and customs fee) was $366,000 across that period. This was constituted by $160,000 for fuel, $180,000 in relation to ISS and USD$26,000 for the customs fee.

7.1.2.2    Hong Kong

166    For consideration in Hong Kong are a large number of understandings relating to fuel surcharges and one relating to an insurance surcharge. It is useful to begin with Garuda’s role in Hong Kong. Although Garuda was a member of the HK BAR CSC I do not think that it was a significant player in the market in Hong Kong. The Commission accepted that Garuda did not have a significant share of the Hong Kong to Australia cargo market. The total amount made from the FSCs across the relevant period was USD$320,000 and on the insurance surcharge USD$85,000 (as I have said I do not regard its revenues on other routes as material to the present task).

167    Garuda submitted that all of the conduct that Garuda had engaged in in Hong Kong had been dictated as a result of instructions given by Mr Sudarmadi, its general manager of cargo revenue management. This instruction to all stations had been to the effect that they should impose the same surcharges as the national or host airline in each port. This was said to matter because Mr Sudarmadi’s actions were said to be part of the governance of Garuda by Indonesia (presumably because Mr Sudarmadi was in Indonesia and a manager). However, as I have explained Garuda is not Indonesia and its activities in carrying on its cargo business have no sovereign element to them. It hardly helps, therefore, that what had occurred in Hong Kong had been dictated by Mr Sudarmadi (although it may bear on how high up in the company the conduct extended to).

168    Turning then to the FSC conduct, in the Trial Reasons I concluded that Garuda and the other airlines had entered into what may shortly be called index methodology understandings to control the fixing of FSCs. An explanation of these index methodologies appears in the Trial Reasons commencing at [508].

169    The first of these methodologies was the 2002 Hong Kong Lufthansa Methodology Understanding. However, I concluded that it was not shown that Garuda was a party to this first understanding because it was not proven to have been at a meeting of the HK BAR CSC on 23 July 2002.

170    The Hong Kong Lufthansa Methodology Understanding had used the index originally published by Lufthansa as the mechanism by which the airlines would alter the levels of their fuel surcharges in response to movements in the price of jet fuel. The Commission pursued an additional case which in somewhat simplified terms was that the airlines had also reached an understanding that they would impose fuel surcharges in accordance with alterations to the fuel surcharges approved by the HK CAD (i.e. independently of the index). This was referred to as the Hong Kong Imposition Understanding. It was dealt with at [623]-[658] in the Trial Reasons and Garuda was found to have reached it in contravention of s 45(2)(a)(ii). The Commission alleged at trial that it had been reached between February 2003 and February 2005. I did not make a finding about the time at which this complex understanding was reached as there was no issue about the limitation period in the liability phase of the hearing. At the penalty hearing, the Commission accepted, however, that it had been reached before the relevant cut-off date of 2 September 2003. Consequently, it is not necessary to make a finding about the precise time when it was reached.

171    This was an important understanding because it operated as the overarching mechanism under which all the fuel surcharge fluctuations thereafter occurred. So far as the airlines other than Garuda are concerned, they were party to both understandings. For those airlines, the two understandings may be seen as effectively operating in parallel since the price movements they resulted in were identical. At trial, I concluded that Garuda had been a party to the Hong Kong Imposition Understanding and that it had, on 22 occasions, implemented it as the price of fuel fluctuated. I set out the price movements below.

172    There is then a slight twist. The 2002 Hong Kong Lufthansa Methodology Understanding had, on its own terms, contained only four levels and was due to expire on 19 July 2003. The Commission also alleged that the airlines had subsequently reached further understandings to extend the fuel index upon which the methodology rested. This involved the repeated addition of new levels to it and the extension of its duration. As I noted at [677] of the Trial Reasons, these were not understandings about the fuel surcharges but rather were understandings about changes to the fuel index itself. These amendments were driven by the fact that the fuel price went higher than the original index had contemplated. The Commission alleged that each of these extensions to the index constituted a fresh understanding. There were eight of these understandings which the Commission referred to as the First to Eighth Hong Kong Surcharge Extension Understandings. The first of these was reached on 12 June 2003 shortly before the approval granted by the HK CAD to the use of the Lufthansa Methodology was due to expire on 19 July 2003. It was an understanding to extend the duration of the current index for a period, most likely 12 months. In the event, the HK CAD granted approval to extend the operation of the index only to 18 January 2004, a period of approximately six months. Garuda was found to be a party to this extension understanding and as such to have contravened s 45(2)(a)(ii). Between 2 September 2003 (the date after which Garuda’s conduct can be subject to a penalty) and 18 January 2004 (when the HK CAD’s approval expired), Garuda implemented this understanding by imposing a fuel surcharge of HKD0.80/kg on routes to Australia between 2 September 2003 and 18 December 2003 and a fuel surcharge of HKD1.20/kg on routes to Australia between 19 December 2003 and 18 January 2004. The Commission failed to prove that the Second to Eighth Hong Kong Extension Understandings were reached.

173    So far as the fuel surcharges are concerned Garuda’s conduct consisted of being a party to the Hong Kong Imposition Understanding and a party to the understanding to extend by six months the operation of the original 2002 Hong Kong Lufthansa Methodology Understanding after its nominal expiry on 19 July 2003. These were both breaches of s 45(2)(a)(ii). Garuda’s conduct in reaching these two understandings occurred before the relevant cut-off date of 2 September 2003 and may not, however, be penalised. On the other hand, it was found to have contravened s 45(2)(b)(ii) by implementing the Hong Kong Imposition Understanding. It did so on three occasions before the cut-off time for the imposition of a penalty: HKD1.20/kg on 21 February 2003; HKD1.60/kg on 27 March 2003; and HKD1.20/kg on 22 April 2003. It did so on a further 22 occasions which may be subject to a penalty (although the first of these commenced before 2 September 2003 and may only be penalised after that date). The implementations were as follows:

FSC to Australia

From

To

HKD 0.80/kg

2 September 2003

18 December 2003

HKD 1.20/kg

19 December 2003

10 May 2004

HKD 1.60/kg

11 May 2004

8 August 2004

HKD 2.00/kg

9 August 2004

15 September 2004

HKD 2.40/kg

16 September 2004

5 November 2004

HKD 2.80/kg

6 November 2004

15 November 2004

HKD 3.20/kg

16 November 2004

6 December 2004

HKD 2.80/kg

7 December 2004

3 January 2005

HKD 2.40/kg

4 January 2005

21 March 2005

HKD 2.80/kg

22 March 2005

4 April 2005

HKD 3.20/kg

5 April 2005

11 July 2005

HKD 3.60/kg

12 July 2005

5 September 2005

HKD 4.00/kg

6 September 2005

26 September 2005

HKD 4.40/kg

27 September 2005

27 October 2005

HKD 4.80/kg

28 October 2005

21 November 2005

HKD 4.40/kg

22 November 2005

28 November 2005

HKD 4.00/kg

29 November 2005

5 December 2005

HKD 3.60/kg

6 December 2005

20 February 2006

HKD 4.00/kg

21 February 2006

8 May 2006

HKD 4.40/kg

9 May 2006

15 May 2006

HKD 4.80/kg

16 May 2006

9 October 2006

HKD 4.40/kg

10 October 2006

17 October 2006

174    The first entry in the above table was also an implementation of the First Hong Kong Surcharge Extension. A part of the second entryfor the period between 19 December 2003 and 18 January 2004was also an implementation of that understanding. The same conduct should not be punished twice. Nevertheless, there were 22 FSC price moves over the period 2 September 2003 to 17 October 2006; throughout that lengthy period of over three years, the level of the FSC was controlled by the cartel.

175    Next there is the October 2001 Hong Kong Insurance Surcharge. This was reached on 3 October 2001 and involved an agreement to impose an insurance surcharge of HKD0.50/kg from 11 October 2001. This was understanding was implemented by Garuda so that it contravened ss 45(2)(a)(ii) and (b)(ii). However, both contraventions occurred before the penalty cut-off date of 2 September 2003.

176    Finally, there is the December 2002 Hong Kong Insurance Surcharge Understanding. At a meeting held on 2 December 2002, members of the HK BAR CSC, including Garuda, decided to decrease the insurance surcharge to HKD 0.25/kg in contravention of s 45(2)(a)(ii). However, 2 December 2002 lies outside the penalty range. Each surcharge was implemented on 11 January 2003 which is also outside the limitation range. However, it remained in place between 2 September 2003 and 21 January 2004 which is inside the penalty range, being a period of 4 months of implementation.

177    Garuda submitted that all of the conduct had occurred in Hong Kong at those of the meetings of the HK BAR CSC which it had attended (i.e. not the meeting on 23 July 2002). This is correct. Next it submitted that the only connection to Australia was that the conduct had occurred in a market in Australia. This is not correct. There were other significant connections. One is that Garuda conducted scheduled international airline services in Australian airspace pursuant to a licence issued under s 12 of the Air Navigation Act 1920 (Cth) by the Secretary of the Commonwealth Department of Transport. Furthermore, these services were not theoretical but actual—it employed a cargo manager in this country as maintaining regular international flights through Australian airspace. Consequently, it carried on business in Australia and was therefore required to be registered as a foreign corporation under 601CD of the Corporations Act 2001 (Cth). It was in fact so registered.

178    Its conduct in reaching understandings with other airlines to fix the level of the surcharges was therefore (a) directly part of the business which was being conducted pursuant to its Australian licence, i.e., the part involved in flying through Australian airspace en route from Hong Kong; (b) as part of the business being operated by Garuda in Australia as a registered foreign corporation in this country (including the employment of a cargo manager in Australia); and (c) in markets which were in Australia. Contrary to Garuda’s submission, it seems to me that the connections between Australia and the conduct in question is strong.

7.1.3    Size, financial position and market power of the contravening company

179    There are two points which are relevant here. First, Garuda is a large entity. It is the national airline of Indonesia. During the relevant period it offered passenger and cargo services to over 40 different cities around the world. It had between 4,200 and 5,500 employees worldwide. Of these, 350 worked in its cargo operations. In Australia, it had around 90 to 100 employees of whom three worked in cargo.

180    Through the relevant period its annual gross revenue exceeded US$1 billion. This is, of course, different to income or profit but gross revenue is still a useful proxy for size. So too is the fact that Garuda held assets of between USD$550 million and USD$590 million between 2004 and 2006. Garuda’s cargo business was not large by international standards but across the relevant period it made revenues of between $60 and $80 million. Its gross revenues in the relevant period and in 2016 were as follows:

Year

Gross Revenue (Total)

Gross Revenue (Cargo)

2003

USD $977,061,918

USD $66,873,794

2004

USD $1,083,343,124

USD $68,737,519

2005

USD $1,173,770,714

USD $74,527,470

2006

USD $1,261,440,102

USD $80,554,723

2016

USD $3,065,207,091

USD $202,926,165

181    Secondly, Garuda’s market share in Indonesia was substantial but the market was comparatively small. Approximately 3,600-3,750 tonnes of cargo were carried by all airlines from Indonesia to Australia in the period 2004-2005. Of this, some 1,600-1,700 tonnes were carried by Garuda—i.e. 45% of the total, generating total revenue of approximately US$3.8 million. This made it the most significant carrier in that market. Consistent with that market share is the fact to which I have adverted above at [148] that when Garuda cheated on the cartel in April/May 2003 the other airlines quickly complained. This indicates that the cartel in Indonesia needed Garuda.

182    It is a different situation in Hong Kong. In the period 30 June 2004 to 30 June 2006 the total amount of air cargo carried from Hong Kong to Australia was estimated to be between 90,000 and 110,000 tonnes (excluding transhipments). This is at least 24 times as large as the markets from Indonesia to Australia. Garuda’s share of this much larger market was less than half a percent. It had little significance in the markets for air freight services from ports in Hong Kong to ports in Australia. I do not accept as the Commission submitted that the cartel in Hong Kong needed Garuda. It was truly a fringe player. Had Garuda declined to take part in it, the cartel would have continued without it. This is because of Garuda’s very small market share but also because, as it sought prove at the trial, its reputation in that cargo market was poor. I think it unlikely that entities shipping goods from Hong Kong to Sydney would have been minded to shift their cargo needs from Cathay Pacific or Lufthansa to Garuda just because Garuda was charging a more competitive fuel surcharge.

7.1.4    Loss or damage

183    Garuda also submitted both in relation to Indonesia and Hong Kong that there was no evidence that its conduct had caused loss or damage to any person. I accept this is so. For the reasons I have given above at [99]-[115] I regard this as a neutral matter.

7.1.5    Involvement of senior management

184    Earlier in the proceeding I permitted the Commission to interrogate Garuda. One of these interrogatories was as follows:

What was the highest level of Garuda management at which it was known that Garuda and its employees were attending meetings with competitor airlines in Indonesia or Hong Kong at which:

(a)    The rates, surcharges or customs fees the subject of the contraventions found by the Court were discussed; and/or

  (b)    The conduct the subject of the contraventions found by the Court occurred.

185    Garuda answered this interrogatory ‘Vice President, Cargo’—that is, Mr Poeloengan. At the present hearing, Garuda objected to the tender of interrogatories on the basis of the act of state of doctrine and related submissions about comity. Since I have rejected the application of all of those doctrines that objection cannot succeed. Consequently, the evidence shows awareness of contravening conduct at a high level of management within Garuda.

186    The Commission submitted that Mr Poeloengan reported directly to the President of Garuda. Garuda submitted that this was not correct and that there was a person interposed between the President and Mr Poeloengan. The evidence of Garuda’s witnesses at trial was to the contrary. Mr Haddad accepted that Mr Poeloengan’s position as Vice President, Cargo had directly reported to the President since 2000. Mr Mandala accepted that Mr Poeloengan himself reported directly to the President. At the present hearing Mr Gleeson pointed to the annual report of Garuda for 2005. The relevant pages are 54-56. I do not obtain from those pages a statement that Mr Poeloengan reported to someone other than the President.

187    I find that Mr Poeloengan reported directly to the President of Garuda. It may be fairly said therefore that the level of management aware of the contravening conduct was very high. Garuda itself submitted that the Court ought not to inquire into Mr Poeloengan’s position because of his role in the ‘senior management in the conduct of the business of Indonesia’ as part of its act of state submissions.

188    In addition, as I found above at [155], Garuda’s conduct in Hong Kong was a result of instructions given by a general manager of cargo revenue, Mr Sudarmadi. This is another member of management aware of, and involved in, Garuda’s contraventions.

189    I do not find that the President of Garuda was aware of the conduct or that the airline’s board was aware. I do find, however, that very senior management—persons directly reporting to the President—were aware. This is a significant aggravating factor.

7.1.6    Whether the conduct was systematic, deliberate or covert

190    All of Garuda’s conduct was deliberate and systematic. Its actions in Indonesia were covert. In no sense were any of its actions accidental or unintended. It intended to agree the FSC, ISS and customs fees and insurance charges with its competitors and, as I have noted above at [93] and [97], it disclosed to none of its customers that it had entered into collusive arrangements with its competitors to fix the charges.

7.1.7    Culture of compliance and previous conduct

191    Garuda submitted both in relation to Hong Kong and Indonesia that it had not previously been found to have contravened the TPA or any other competition law. I accept this submission.

192    However, the question of deterrence, both general and specific, throws up the question of what conduct is to be deterred. Garuda submitted that it could not reasonably have known at the time of the contraventions that Pt IV of the TPA would be held to apply to its air freight operations insofar as they involved cargo flights terminating at ports in Australia. Further, Garuda submitted that the Indonesian Supreme Court had held that fixing the level of fuel surcharges did not infringe Indonesian law. Consequently, it had no reason to believe that its conduct was unlawful. There would be no specific deterrence purpose served by punishing an entity for conduct which it had no reason to think was unlawful.

193    This is a complex submission. I have already rejected at [118]-[121] above the submission that the Indonesian Supreme Court found that fixing the levels of FSCs did not infringe Indonesia’s competition law. On the other hand, since the conduct to be punished is the conduct constituting contraventions of Pt IV, the question of whether the same conduct is also a contravention of Indonesian law seems to be something of a sideshow. I do not think that one could say that the contravention of Pt IV was more or less serious depending on whether it was, or was not, unlawful under Indonesian competition law.

194    The fact that an entity is ignorant of the operation of Pt IV is irrelevant to whether there is a contravention of it. Whether ignorance of the operation of Pt IV is irrelevant to the assessment of a penalty is a more difficult question. The Commission submitted that ignorance of Pt IV was either irrelevant to the assessment of remedies or otherwise simply revealed a failure of compliance, that is to say, assuming that Garuda was ignorant as it alleged, this simply revealed a failure to ascertain what its legal obligations were.

195    The Commission interrogated Garuda about this topic. The questions and answers were as follows:

Interrogatory 3: Was any disciplinary action or sanction taken by Garuda against any of the persons employed by it anywhere in the world in respect of their knowledge of, or involvement in, any of the conduct the subject of the contraventions found by the Court?

[Answer:] No.

Interrogatory 4: If the answer to 3 is ‘yes’, provide details of the person, the disciplinary action or sanction taken, and when it was taken.

[Answer:] N/A.

196    Those answers, whilst showing that Garuda took no disciplinary steps, do not establish what Garuda knew about Australian law. I have found this a difficult question to resolve. However, at the end of the day, it comes down to the evidence. The only evidence led by Garuda on this topic came from Mr Mandala. He is a senior manager in cargo sales for Garuda’s strategic business. At the times relevant to the contraventions he was the manager of cargo capacity for Garuda. He gave this evidence about what he understood of the operation of Australian law:

25.    During the period 1 September 2002 to 17 April 2005 and subsequently although to a lesser extent, I was in regular contact with the General Manager, Revenue, and senior staff in Garuda's cargo business, including staff who represented Garuda at the Air Cargo Representative Board meetings ("ACRB") in Indonesia. On one occasion, I attended a meeting of the ACRB on behalf of Garuda.

26.    Prior to 2006 I did not contemplate, believe or have any knowledge that the conduct by Garuda in Hong Kong or Indonesia connected with prices or surcharges for the carriage of cargo could constitute a breach of Australian law. Nor did any employee of Garuda ever say anything to me to indicate that he or anyone else employed by Garuda contemplated, believed or had knowledge that such conduct could constitute a breach of Australian law.

27.    From my experience as an employee of Garuda for 28 years, I expect that if any employee of Garuda had suspected or believed that conduct of Garuda could have constituted a breach of Australian law, there would have been a report and consideration of the issue at high level of management, including minutes and other written records relating to the consideration of the issue. At no time before the commencement of this proceeding did I become aware of any report or consideration by management in Garudas cargo business concerning the possibility that conduct by Garuda in Indonesia or other places outside Australia could constitute a breach of Australian law. The policy of Garuda was to comply with the laws of the countries to which it operated. There was surprise in the cargo department at the allegations that Garuda had been in breach of Australian law.

28.    I have reviewed the financial statements for Garuda for the years 2003-2004, 2005-2006 and 2015-2016 and I say that from those documents and my own knowledge and experience the cargo business as a proportion of the total business of Garuda was approximately 6.5%. As Garuda did not operate freighters, the cargo business was dependent upon the availability of space on the lower deck on passenger aircraft and that space was also used for the carriage of passenger luggage. The revenue from the carriage of international cargo was about 35% of the total revenue for the carriage of cargo for Garuda.

197    I accept that Mr Mandala did not know about the application of Australian law. But he was a cargo manager so that is unsurprising. More important than the evidence which Garuda has led is the evidence which it has not. Mr Poeloengan was not calledand he knew the conduct was going on and was far further up the corporate ladder than Mr Mandala.

198    Garuda led no evidence about how it informs itself of the legal regimes of the various nations to which it flies. For an international commercial airline, compliance with overseas legal regimes is a fact of life. Not the least of the regimes which they must be across are those regulating aeronautical matters. I would not, for example, find convincing, from Garuda’s perspective, any claim that it was ignorant of the requirements of the Air Navigation Act 1920 (Cth). This is because it is an airline which flies through Australian airspace and is required to hold, and does hold, a licence under that Act.

199    Many nations have competition laws. However, no evidence has been put before the Court as to which nations through whose airspace Garuda conducted air freight services had competition laws. Garuda has led no evidence as to how it approaches the liabilities it might have under the competition laws of different nations including Indonesia. It has not led any evidence that it did not ever consider those liabilities. I do not know therefore whether Garuda ever considered its liability on Australian-bound routes under Pt IV or whether it did consider its liability under Pt IV and decided it did not apply. I do not even know if there is a department within Garuda which considers its regulatory exposures.

200    Viewed through that prism, the evidence of Mr Mandala that he did not know that Pt IV applied is underwhelming. There is no reason to think that he would know.

201    The question then is whether I should accept Garuda’s submission that it had no reason to think that Pt IV applied to it at the relevant time. I do not accept that Garuda has proved anything about its attitude to compliance with Pt IV. Accordingly, I do not accept the submission. That leaves the Court in the position, however, that it knows nothing about how Garuda approached the question of the application of Pt IV to its Australian-bound routes. I do not think that a rejection of Garuda’s submission entails acceptance of its oppositethat is, I do not think that I can find that Garuda did know that Pt IV applied. This would be to invert the onus of proof which rests on the Commission.

202    However, it is clear that Garuda did not detect that its conduct was in breach of Pt IV. The question then is whether this failure was a reasonable or unreasonable failure. This is a question on which the Commission bears the onus. Nonetheless, there is evidence from which one could infer that Garuda’s compliance arrangements were not reasonable. The Commission administered an interrogatory to Garuda about the instructions given by Garuda to its employees in the relevant period about competition laws. The question and Garuda’s answer were as follows:

Interrogatory 6: What, if any, instruction in Australian or Indonesian trade practices or competition law requirements was given by Garuda to its employees in Hong Kong or Indonesia at any time in the period from 1 January 2002 until 17 October 2006?

[Answer:] None.

203    I was told by Mr Halley that the discussions between the parties resulted in this answer being limited to confirmation that there was no instruction given with respect only to Australian trade practices law. Assuming that to be so, one cannot use this as evidence that Garuda did not have regard to its liabilities under Indonesian competition law.

204    I am prepared to infer from this evidence that Garuda was not aware that its conduct on routes originating in ports outside Australia and terminating at ports in Australia was regulated by Pt IV of the TPA. If it had been aware that it had such a liability, I think it unlikely that it would not have informed its employees in its cargo division of this exposure. The question then becomes why Garuda was unaware of this exposure. The significance of this evidentiary vacuum may be illustrated. There are several possible scenarios:

(a)    it had systemic mechanisms in place for assessing its legal liabilities arising from the provision of its services on flights to other countries but these mechanisms failed for some reason to cause advice to be obtained about the application of Australian competition law to Garuda’s services on flights to Australian ports;

(b)    it had systemic mechanisms in place for assessing its legal liabilities arising from the provision of its services on flights to other countries and these mechanisms did cause advice to be obtained about the application of Australian competition law to services on its flights to Australian ports. The advice, however, incorrectly told Garuda that there was no risk of the application of Pt IV to such flights;

(c)    it had systemic mechanisms in place for assessing its legal liabilities arising from the provision of its services on flights to other countries and these mechanisms caused advice to be obtained about the application of Australian competition law to services on its flights to Australian ports. The advice was that there was a risk that Pt IV did apply to flights to Australian ports. However, Garuda either (i) failed to implement the advice or (ii) deliberately ignored it; or

(d)    it had no systemic mechanisms for assessing its legal risks on flights to other nations. It failed to detect the potential for liability under Pt IV because there was no mechanism within the company which would cause that question to be asked.

205    I think (b) may be excluded as may (c)(ii). If Garuda had received legal advice that Pt IV did not apply to it, that advice would have been put before the Court since it would be significantly to Garuda’s benefit. Likewise, I have seen nothing to suggest that Garuda would have deliberately flouted Pt IV had it known it applied. That leaves (a), (c)(i) and (d). Although these all differ in degree they are, nevertheless, systemic compliance failures. Put another way, Garuda either had no compliance mechanisms relevant to its legal risk on flights to Australia, or if it did have such mechanisms they either failed to detect the risk or, if they detected it, the airline failed to act upon it. I therefore accept the Commission’s submission that what is involved is a compliance failure. I am unable to accept the submission that Garuda had no culture of compliance since I am unable on the evidence before me to ascertain which of (a), (c)(i) or (d) is actually the case on the balance of probabilities. I accept scenario (d) would establish that Garuda had no culture of compliance but it is only one of three equally available inferences and hence is not established on the balance of probabilities.

206    I have considered whether it may be possible to mount an argument that such a conclusion is irrelevant because assuming that Garuda should have obtained advice about the application of Pt IV, it would have been told that it had no such exposure. If one accepted the correctness of that proposition, it would follow that any compliance failure on its part was not causally connected to the contraventions.

207    This argument involves a factual contention that if advice had been sought in the relevant period as to whether Pt IV applied to Garuda’s cargo operations into Australia the answer would have been that it did not. However, I am not satisfied that that is what a competent legal advisor would have informed Garuda in the period 2001 to 2006. A competent advisor would have told Garuda that there was a significant risk that Pt IV did apply to traffic into Australia and that price fixing on those routes was unwise. For example, the 2001 edition of Ray Steinwall, Annotated Trade Practices Act 1974 (Butterworths, 2001) says this about the meaning of the word ‘market’ in s 4E (at p 58):

The geographic dimension of a market comprises the geographic area in which sellers of the particular product operate and to which purchasers can practically turn for such products.

208    That statement, of course, reflects the language of Re Queensland Co-operative Milling Association Lt(1976) 8 ALR 481 at 490. My view of statements of that kind, in the Trial Reasons, was that they invited an analysis of where the ‘turning’ could occur, i.e., where the switching decisions were made. However, no case established that view and the contrary view was easy to understand and plainly available. No competent advisor would have expressed the view that during the relevant time Pt IV did not apply to Garuda in relation to its air freight operations to ports in Australia. The only competent advice would have been that the question was an open one and that there was a real risk that it did apply. That view of the contestability of the issue sits comfortably with the fact that of the nine judges who have looked at the question, seven have been of the view that Garuda’s Australia-bound air freight operations were in a market in Australia.

209    I do not accept therefore that the High Court’s decision that a market in Australia could extend to operations outside Australia was unforeseeable. That being so, I do not think that one can say it is possible to submit that the contraventions are causally disconnected from any compliance failure on its part.

210    For completeness, I reject the Commission’s submission at the hearing that Garuda should have been aware of the unlawfulness of what it was doing because of the approach which had been taken to Resolution 116ss and the advice of the United States Department of Trade that use of an index methodology would not be given approval in the United States: see Trial Reasons [497]-[503]. I do not think that by itself a resolution of the Department of Trade of Resolution would have meant very much to Garuda when it did not conduct any services to the United States. However, for the reasons I have already given, this does not matter.

211    Additionally, although Garuda submitted that the May 2004 Indonesia Customs Fee Understanding had been authorised by the IATA authorisation (see Trial Reasons at [1255]-[1258]) this was never established. I held at trial that the IATA authorisation did not apply to the customs fee and that, in any event, there was no evidence that the customs fee was ever arrived at under the auspices of the authorisation. The Full Court reached a different view on the first issue but upheld my conclusions on the second. I reject Garuda’s submission.

7.1.8    Cooperation and contrition

212    There has been no cooperation by Garuda with the Commission. Its resistance of these proceedings has been total, as was its right, but correspondingly it will receive no discount for cooperation. It has also not displayed any signs that it regrets its conduct. The submission Garuda made to me at the penalty hearing was that I should impose no penalty. This suggests that it does not accept that it has done anything wrong. Combined with the fact, as I have found, that the conduct originated at the upper reaches of Garuda this suggests that there is a significant need in this case to address specific deterrence.

7.1.9    Costs incurred to date

213    There is authority for the proposition that the legal costs incurred by the party to be penalised are a permissible consideration in the assessment of the penalty. Principle suggests that it is a material consideration where there is a suggestion that the size of a costs order may impact on the ability of a defendant to pay the penalty imposed. In such case, the issue of costs imposed on the defendant emerges as directly relevant to the issue of whether the penalty might be excessive or oppressive, although it by no means determines that issue. An example of this style of reasoning may be seen in Tax Practitioners Board v Su [2014] FCA 731 at [19] per Jagot J. But a broader form of the principle, not limited to cases where hardship may be suggested, was accepted by Middleton J in Australian Competition and Consumer Commission v Telstra Corporation Ltd [2010] FCA 790; 188 FCR 238 at 288 [279] (‘Costs are a relevant matter to take into account in considering the final penalty’).

214    More recently, the Full Court accepted that a defendant’s costs incurred in defending a penalty proceeding were relevant to the assessment of the penalty where they were incurred ‘in the defence of a position where the contrary view involved a degree of novelty’: Flight Centre Ltd v Australian Competition Commission (No 2) [2018] FCAFC 53; 356 ALR 389 at 406 [68] per Allsop CJ, Davies and Wigney JJ. I do not read that statement as implying that costs are only relevant to the issue of penalty where the defendant has been required to meet an argument by a regulator which involves a degree of novelty. Rather, the Full Court merely thought that the facts before it made costs relevant to the assessment of the penalty. The Full Court was not setting down a negative rule excluding costs from being relevant in all other circumstances.

215    In this case, it is relevant both that Garuda succeeded on a number of its defences and that, whilst it ultimately lost the market in Australia point in the High Court, that was by no means a foregone conclusion. Later in these reasons I conclude that Garuda should be ordered to pay the Commission’s costs of the proceedings. Together with its own costs, there is no doubt that this will be a very substantial sum of money. I need not determine that amount for present purposes. It is enough to know that it will be a heavy burden. I take this into account in the assessment of the appropriate penalty.

216    However, I also take into account that Garuda has incurred very substantial legal fees in defending these proceedings unsuccessfully. Its defeat has not been total. A number of the Commission’s arguments were successfully repelled: the Second to Eighth Hong Kong Extension Understandings; the 2002 Hong Kong Lufthansa Methodology Understanding; the May 2004 Customs Fee Understanding in Indonesia; and the Indonesia Overarching Understanding. Further, significant parts of the Commission’s claims for penalties are statute-barred. More significantly, Garuda’s contention that it should be entirely exonerated because there was no market in Australia was a difficult and novel issue only ultimately resolved by the High Court.

7.2    Course of conduct

217    Thus was the application of the penalty factors to Garuda’s conduct. Next it is useful to consider the application of the principles relating to courses of conduct. Where there is an interrelationship between the legal and factual elements of two or more contraventions it is necessary to be alert to the possibility that the contravener may be punished twice for the same conduct. In some cases this situation will be very clear. This case provides two useful examples: the implementation of the Hong Kong Imposition Understanding and the First Hong Kong Surcharge Extension Understanding on 2 September 2003. These are exactly the same although they constitute different contraventions.

218    But other cases may be much less clear. That this might be so results inevitably from the very concept of interrelationship which is flexible and evaluative. It is no surprise then either that the course of conduct principle is merely a tool to guide the Court in the exercise of its discretion or that it demands no particular answer to a given set of facts. In particular, it does not require that upon the conclusion that there is present a course of conduct the matter be approached on the basis that there is a single contravention. These propositions are really only a corollary of the necessity of avoiding double punishment: see Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39; 194 IR 461 at 473-474 [39]-[42]; Yazaki Corporation at 106 [234]-[235].

219    In this case, I accept that this principle is of assistance in a number of ways and irrelevant in others.

220    For reasons I have touched upon already, there should be no separate penalty for the implementation of the First Hong Kong Surcharge Extension Understanding between 2 September 2003 to 1 January 2004 since it is precisely the same conduct as is involved in the implementation of the Hong Kong Imposition Understanding across the same dates.

221    Looking at Hong Kong as a whole, I accept the Commission’s submission that the various implementation decisions were all responsive to fluctuations in the price of fuel and were driven largely by the relevant methodology which had been determined in advance. This does not make them part of a single contravention but it does show that they are factually intertwined. It is not the case that each implementation was part of a freestanding cartel arrangement. Each did involve separate wrongdoing in that implementation did not have to occur—but it did constitute the particular species of wrongdoing which consists of keeping to a pre-existing and unlawful arrangement. The fact that all of these contraventions are interrelated and that the wrongdoing involved in the subsequent contraventions rested upon earlier wrongdoing must be recognised and brought to account in Garuda’s favour. I do not however accept that they should be treated as a single contravention.

222    In Indonesia, at least in relation to the fuel surcharge contraventions, I think the same remarks are apposite. Although I have noted in relation to Indonesia that there is some uncertainty as to whether a methodology was being used, I propose to proceed on the view favourable to Garuda that the price movements were reactions to changes in the price of jet fuel. The Commission nevertheless accepted that each of the understandings was to an extent interconnected so that a similar approach should be taken since Garuda was on each occasion reacting to movements in the fuel price. I propose to approach the matter the same way, at least so far as fuel surcharges are concerned.

223    Insofar as the ISS are concerned, these did not result from a methodology. Instead what occurred was a single charge across the period. Nevertheless, whilst each implementation was separate there was again a considerable overlap in the wrongdoing involved. Keeping the fee in place is not the same as putting it in place for the first time. Again, I propose to recognise the interrelationship of this set of contraventions and the slightly lesser wrongdoing involved in the later contraventions but, once more, not so as to treat them globally as a single contravention.

224    The course of conduct issue does not arise in relation to the customs fee.

7.3    Parity and comparable decisions

225    There have been number of penalty proceedings against airlines arising from the FSC and other surcharges. They were all agreed penalties and ranged from $3 million to $20 million. The decisions and penalties imposed were:

    Australian Competition and Consumer Commission v Qantas Airways Limited [2008] FCA 1976; 253 ALR 89 (‘Qantas’) $20 million;

    Australian Competition and Consumer Commission v British Airways PLC [2008] FCA 1977 $5 million;

    Australian Competition and Consumer Commission v Martinair Holland NV [2009] FCA 340 $5 million;

    Australian Competition and Consumer Commission v Société Air France [2009] FCA 341 $3 million;

    Australian Competition and Consumer Commission v Koninklijke Luchtvaart Maatschappij NV (KLM) [2009] FCA 341 $3 million;

    Australian Competition and Consumer Commission v Cargolux Airlines International SA [2009] FCA 342 $5 million;

    Australian Competition and Consumer Commissioner v Japan Airlines International Co Ltd [2011] FCA 365 $5.5 million;

    Australian Competition and Consumer Commission v Korean Air Lines Co Ltd [2011] FCA 1360 – $5.5 million;

    Australian Competition and Consumer Commission v Malaysian Airline Systems Berhad [2012] FCA 767 – $6 million;

    Australian Competition and Consumer Commission v Emirates [2012] FCA 1108 – $10 million;

    Australian Competition and Consumer Commission v Cathay Pacific Airways Ltd [2012] FCA 1392 (‘Cathay Pacific’) – $11.25 million;

    Australian Competition and Consumer Commission v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395 (‘Singapore Airlines’) $11.75 million;

    Australian Competition and Consumer Commission v Thai Airways [2012] FCA 1434 (‘Thai Airways’) $7.5 million; and

    Australian Competition and Consumer Commission v Air New Zealand (No 15) [2018] FCA 1166 (‘Air New Zealand’) $16 million.

226    Garuda submitted that general deterrence did not require a penalty to be imposed on Garuda because the other airlines had been penalised in the 14 other cases arising from the cartel. In effect, everyone had already been punished. I do not accept this submission. Those 14 airlines do not exhaust the universe of airlines. Even in relation to those 14 there are lessons to be learnt from the spectacle of what is shortly to happen to Garuda. The trial has exposed the internal heights to which knowledge of its conduct extended and it will expose what the possible penalties are for this kind of conduct. The capacity of the penalty to be imposed on Garuda to deter other airlines from such conduct in the future remains in my view substantial. Further, it is not just other airlines who are to be deterred. The onlookers at Garuda’s penalty include all persons or entities who might contemplate price-fixing or other contraventions of competition law.

227    The Commission submitted that four of these decisions were useful as comparators. It was submitted that the decision in Air New Zealand involved the same cartel operating in the air freight services market on routes from Hong Kong to Australia and Air New Zealand was the only other airline which, like Garuda, had contested its liability. The Commission also submitted that the decisions in Cathay Pacific, Singapore Airlines and Thai Airways were of some relevance on the basis that those airlines had only admitted liability just before, or shortly after, the commencement of the hearing.

228    I agree with the observation of the Commission that little may be gained from Cathay Pacific with respect to the Hong Kong contraventions. The contravention in that case involved a single unsuccessful attempt by a middle ranking employee to reach an understanding with Qantas about air freight rates. It did not involve fuel surcharges, fuel surcharge indexes, meetings of the HK BAR CSC nor did it proceed from the upper echelons of Cathay Pacific.

229    Some use may be made of Singapore Airlines for the Indonesian contraventions. Relevantly it was found that the airline had reached three sets of price fixing understandings. Two of these were alleged to have occurred in markets for air freight in unidirectional routes from Indonesia to Australia. One understanding was reached, however, in a market consisting of routes between Australia and Indonesia (i.e. not unidirectional). The contraventions occurred across the period October 2001 to October 2005. It agreed that it had entered into price fixing understandings with respect to fuel surcharges, the security charge and the customs fee. It also admitted to having implemented these understandings. Although Singapore Airlines is a much larger airline than Garuda, the Commission submitted, and I accept, that Garuda had the largest market share of any of the airlines on air freight operations out of Indonesia. I have already rejected the Commission’s submission that Garuda was the ringleader of the cartel in Indonesia although I have accepted that it did have a more tepid role as its administrative organiser. Unlike Garuda, Singapore Airlines’ conduct was not found to have been known at the level of upper management. There is, in that circumstance, much to be said for the view that Garuda’s conduct is more serious than that of Singapore Airlines. For its Indonesian contraventions Singapore Airlines was penalised $8 million.

230    Thai Airways is also instructive for the Indonesian contraventions. It was penalised for engaging in similar conduct to Garuda’s on routes from Indonesia to Australia over a two year period in relation to fuel and security surcharges and 1.5 years in relation to the customs fee. The penalty was $7.5 million. Although Thai Airways’ conduct was similar, it was found to have occurred in a broader market than merely the route specific markets I concluded existed in the case before me. Garuda submitted this was a material distinction. However, the fact that Thai Airways’ conduct took place in a larger market tends to suggest that its conduct was a smaller proportion of the overall market than it would have been in smaller route specific markets. On this view, Thai Airway’s conduct might be seen as being less serious because of the larger market in which it had happened. Arguments are available in the opposite direction—it is more serious to engage in price fixing behaviour in larger markets because the economic impact may be more widespread. Ultimately, I think both views are speculative without economic evidence and propose to treat the matter as neutral. Like Singapore Airlines, it was not found that the conduct was known about by upper management.

231    In relation to Hong Kong, there is a good comparator in the case of Air New Zealand. It was penalised for very similar conduct in Hong Kong by Gleeson J. Her Honour imposed a civil penalty of $11.5 million for Air New Zealand’s giving effect to the Hong Kong Lufthansa Methodology Understanding and the Hong Kong Imposition Understanding. This involved the market for air freight from Hong Kong to Australia. The conduct alleged against Air New Zealand in Hong Kong is essentially the same as that found against Garuda with the exception that one of the contraventions (relating to the 23 June 2002 meeting) was not made out against Garuda. However, unlike the present case, there was no finding that upper management was aware of the conduct. I take into account too the fact that while the two understandings operated in the same way at a factual level, Garuda was not a party to the former.

232    It is useful to compare the position of the two airlines in Hong Kong. Information provided by Garuda in its Information Response under the heading ‘Gross Revenue – Cargo figures’ suggested its international cargo business constituted about one quarter of its overall cargo business. On this basis the Commission suggested, and I agree, that the best one can do is to divide the cargo business figures by four. Garuda did not submit this was inappropriate. Using that approach the Commission submitted the following:

(a)    in 2003-2006 Garuda generated estimated annual revenues of between $USD17 and US$20 million from the carriage of international air cargo;

(b)    between September 2003 and September 2005 Garuda generated US$3.8 million in revenue from the carriage of air cargo from Indonesia to Australia. Of this $366,000 (around 10%) was made up of fuel surcharges, security surcharges and customs fees; and

(c)    between September 2003 and October 2006 the total revenue generated by Garuda on cargo carried from Hong Kong to Australia was approximately US$1.3 million. The revenue generated from the fuel and insurance surcharges over the period was about US$208,000, i.e., about 15% of the overall revenue.

233    In Air New Zealand Gleeson J found that the airline had generated NZ$11,997,141 in revenue on cargo carried from Hong Kong to Australia across the period 17 May 2004 to 31 October 2006. This may be contrasted with the figure for Garuda in (c) above of US$1.3 million across the slightly longer period September 2003 to 31 October 2006. It is apparent on those routes that Air New Zealand had a much larger operation.

234    I take into account the full range of penalties imposed in the suite of cases constituting the fuel surcharge litigation. As I have noted, that range runs from $3 million to $20 million. In relation to Indonesia, I find most useful the decisions involving Singapore Airlines ($11.75 million, of which $8 million concerned its Indonesian contraventions) and Thai Airways ($7.5 million). In relation to Hong Kong the most useful is Air New Zealand ($11.5 million). A key feature distinguishing Garuda from all of the other airlines is the knowledge of its Vice President, Cargo, Mr Poeloengan, that the conduct was occurring.

235    Whilst it would be possible to assess a penalty for each contravention which occurred in Hong Kong and Indonesia I do not think in light of the comments I have made about course of conduct above that would be a fruitful endeavour. I propose to treat the contraventions which are within the penalty period in a global fashion and to impose a single penalty per jurisdiction. To adopt a contravention by contravention analysis would involve a degree of arithmetic which would be artificial and would carry the risk of obscuring the actual decision-making process: see Yazaki Corporation at 106 [234]-[235].

236    An important matter to be considered is the fact that Garuda was the participant in the markets in Indonesia with the largest market share but these markets were small. It had around 25% of the markets which in 2004-2006 involved 3,600-3,750 tonnes of cargo, i.e. around 900 tonnes. On the other hand, it was a tiny player in the much larger markets in Hong Kong. As I have noted elsewhere, it had 0.5% of a market which in 2004-2006 involved 90,000 to 110,000 tonnes, i.e., around 500 tonnes in that period. More revenue was involved in Hong Kong because the surcharges were higher but more cargo was involved in Indonesia.

237    In Indonesia, Singapore Airlines was penalised $8 million and Thai Airways $7.5 million. Given Garuda’s role in Indonesia it seems to me that one must conclude that its conduct was more serious than that of Singapore Airlines and Thai Airways. Further, they obtained a substantial discount for co-operation and senior management was not aware of the conduct. I accept that the circumstances of the contraventions are not identical.

238    In Hong Kong, Air New Zealand was penalised $11.5 million. It received no discount for cooperation. On the other hand, its operations in Hong Kong seem to have been much larger than those of Garuda. Senior management did not know of the conduct.

239    In principle, I have concluded that it would be appropriate to impose a penalty of $15 million for Garuda’s conduct in Indonesia and $4 million for its conduct in Hong Kong.

7.4    Totality principle

240    Because the penalties are the result of aggregating a number of penalties which are related it is necessary to stand back and ask whether the total penalty of $19 million is unjust or out of proportion to the circumstances of the case. The need to do so derives from the totality principle which was explained in a criminal context by the High Court in Mill v The Queen (1988) 166 CLR 59 at 62-63. The application of the principle to the imposition of civil penalties is well established in the jurisprudence of this Court: see, e.g., Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383 at 397 [42]-[43] per Stone and Buchanan JJ.

241    The aggregate penalty proposed above is striking in that it is the second largest penalty imposed on any of the airlines involved the Australian fuel surcharge cartel litigation. It is just short of the $20 million penalty imposed on Qantas. It exceeds Garuda’s annual cargo revenue in the period 2003-2006 on all routes. Given that Garuda’s operations are so much smaller than most of the other airlines who were sued, this immediately requires one to ask whether the penalty is proportionate. However, the initial impression that the penalty is very large for a relatively small airline is dispelled somewhat when one brings to account, as one must, three critical features.

242    First, unlike all of the other airlines, it is only Garuda and Air New Zealand which defended the matter at a trial. The $20 million penalty imposed on Qantas has to be seen in a context where it reported itself to the Commission, made admissions when it need not have done so, cooperated with the investigation (including against the other airlines by the provision of 37 witnesses) and agreed to a penalty almost immediately. Further, it had paid a substantial fine in the United States of US$61 million arising from the same cartel and expected to have to pay a similar fine in Europe. Lindgren J discounted the $40 million penalty he was otherwise minded to impose by 50%: Qantas at [69]. Secondly, unlike any of the other airlines it was shown in Garuda’s case that the cartel conduct was known about at a very high level within the company. This is a significant aggravating matter which was not demonstrated in any of the other cases. Deliberate price fixing known about at the senior management level is a very serious matter and the requirements of deterrence are naturally engaged. Thirdly, Garuda’s conduct of the penalty hearing where it solemnly invited the Court to impose no penalty whatsoever well shows that it is in no way contrite and does not accept that it bears any responsibility for its conduct. Garuda’s pugnacious position is best captured by 13 of its written submissions on penalty:

The related consideration, which hardly needs stating, is that everything which Garuda has done in these proceedings, including these submissions, is done without prejudice to such rights as Garuda may have against the Commonwealth of Australia under international law and enforceable before international dispute resolution Courts or tribunals.

243    This posture of Garuda brings to the fore, more than might otherwise have been the case, the requirements of individual deterrence.

244    Whilst I accept that the aggregate penalty is high I do not think in light of these matters that the aggregate penalty is disproportionate or unjust.

8    DECLARATORY RELIEF

245    I have rejected all of Garuda’s arguments as to why no penalty should be imposed upon it. These were also advanced against the making of the declarations. I reject them for the same reasons. The Commission is entitled to declaratory relief in order to:

(a)    set out what the penalty relates to;

(b)    record the Court’s disapproval of the conduct;

(c)    vindicate the Commission’s claims about Garuda;

(d)    assist the ACCC to carry out its functions;

(e)    inform the public about the harm arising from Garuda’s conduct; and

(f)    deter other corporations from the conduct.

See as to (a), Rural Press v Australian Competition and Consumer Commission [2003] HCA 75; 216 CLR 53 (‘Rural Press’) at 92 [95] per Gummow, Hayne and Heydon JJ; as to (b)-(e), Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1730; ATPR 42-140 per Nicholson J.

246    The declarations the Commission has proposed are not acceptable, however, in their current form. At the moment, they refer to carriage on routes to places other than Australia which will need to be addressed to comply with these reasons, i.e., they should refer to routes from ports in Indonesia and Hong Kong to ports in Australia only. Although the declarations are long this reflects the complex nature of the proceeding. I am satisfied that they capture the gist of findings: Rural Press at [89]-[90].

247    Garuda submitted that the proposed declaratory relief was inappropriate for a number of reasons. First, it submitted that the way the case had been pleaded and the way the Trial Reasons dealt with the contraventions meant that there was only a single contravention of giving effect to each of the understandings. In the Trial Reasons, I dealt with each allegation of implementation alongside the corresponding arrangement or understanding. The way the Commission has approached the matter is correct.

248    Secondly, Garuda denied that the declarations should be made at all because it submitted that no person in Australia was affected by the contraventions. The presence of affected persons in the jurisdiction is not, however, the touchstone by which this issue is to be assessed. The critical matter is that markets in Australia were involved. This is a sufficient reason to make the declarations.

249    Thirdly, in its written submissions Garuda pursued an argument that the granting of the declaratory relief should be withheld because the conduct had occurred between (at that time) 12 and 16 years ago under a law which was repealed eight years prior. Much of the 12 to 16 years to which Garuda points was taken up by Garuda’s wholly unsuccessful and tenacious defence of the proceeding. Certainly the period between November 2011 and the present has been occupied by Garuda’s litigious endeavours. In that circumstance, I am disinclined to think that the age of the contraventions provides any good reason not to grant relief when at least half that delay has been brought about by Garuda’s own conduct. So far as the repeal of s 45A is concerned, as I understood it, by the end of the hearing Garuda had explicitly withdrawn its earlier contention that the conduct which it had been found to have engaged in was no longer unlawful.

250    Fourthly, I do not accept Garuda’s submission that the declarations need to identify the market in which the conduct occurred. Whilst the conduct must occur in a market in Australia before a contravention can be found to have occurred, this requirement is jurisdictional and is not an element of the contravention itself. In this case, subject to the clarification that the conduct occurred on routes from Hong and Indonesia to ports in Australia, that identification of the routes sufficiently shows that the conduct was within jurisdiction.

251    Fifthly, I also reject Garuda’s submission that in some cases the declarations sought by the Commission do not correctly disclose the ‘gist’ of the contraventions. It illustrated this argument by pointing to the fuel surcharge understandings in Indonesia. In fact, across the relevant period whilst there were nine contraventions by Garuda agreeing the level of the surcharge with other airlines, the decision was always to impose the same surcharge of 5 cents. Consequently, so the submission went, the gist of the contravention was that Garuda had reached understandings and imposed a 5 cent surcharge across the period September 2002 to August 2005. I do not agree. Whilst it is not irrelevant to the penalty issue that the surcharge agreed upon and then imposed was always 5 cents, this does not mean each agreement and implementation was not a separate contravention. I see no reason why the Commission’s contention that there were nine separate contraventions involved should not be vindicated.

9    INJUNCTIONS

252    The Commission sought the making of the following two injunctions:

THE COURT ORDERS THAT:

Injunctions

62.    The Respondent be restrained for a period of five years from the date of this order from making, arriving at, or giving effect to, any contract, arrangement or understanding with any of its competitors for the supply of air cargo services containing provisions which have the purpose, effect or likely effect of fixing, controlling or maintaining the price or any part of the price at which it or any of them will supply those services unless:

(a)    the said contract, arrangement or understanding does not involve or relate to the carriage of goods to or from Australia;

(b)    the said contract, arrangement or understanding is necessary for the purpose of interlining between two or more carriers in the course of supplying services of the carriage of international air cargo; or

(c)    the respondent is specifically authorized to do so under section 88 of the Act or any other Australian statute in accordance with section 51 of the Act.

63.    The Respondent be restrained for a period of five years from the date of this order, from entering into, or giving effect to, any contract, arrangement or understanding with any of its competitors for the supply of air cargo services containing provisions that any of them will propose, develop, prepare, follow, implement, adopt or otherwise use any index, model, methodology or formula for the change of prices or any part of prices to be charged by any of them for the supply or those services unless:

(a)    the said contract, arrangement or understanding does not involve or relate to the carriage of goods to or from Australia;

(b)    the said contract, arrangement or understanding is necessary for the purpose of interlining between two or more carriers in the course of supplying services of the carriage of international air cargo; or

(c)    the respondent is specifically authorized to do so under section 88 of the Act or any other Australian statute in accordance with section 51 of the Act.

253    The Court’s power to grant such relief comes from s 80(1) of the CCA. Subsection (4) is also relevant. Together they provide:

80    Injunctions

(1)    Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a)    a contravention of any of the following provisions:

(i)    a provision of Part IV;

(ii)    a provision of Division 2 or 5 of Part IVB;

(iii)    section 55B;

(iv)    section 60C;

(v)    section 60K; or

  (b)    attempting to contravene such a provision; or

(c)    aiding, abetting, counselling or procuring a person to contravene such a provision; or

(d)    inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or

(e)    being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f)    conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms as the Court determines to be appropriate.

Note:    Section 87AA provides that, if boycott conduct is involved in proceedings, the Court must have regard to certain matters in exercising its powers under this Part. (Boycott conduct is defined in subsection 87AA(2).)

(4)    The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:

(a)    whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind;

(b)    whether or not the person has previously engaged in conduct of that kind; and

(c)    whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.

254    Garuda resisted the granting of these injunctions. It submitted that the conduct captured by the injunctions would, in any event, be contrary to the CCA and would expose it to the risk of civil penalties if engaged in. There was no need, in that circumstance, to require Garuda in substance to comply with the CCA. This submission has a pedigree. In BMW Australia Limited v Australian Competition and Consumer Commission [2004] FCAFC 167; 207 ALR 452 at 466 [39] the Full Court (Gray, Goldberg and Weinberg JJ) noted that it was a relevant to the grant of an injunction under s 80 to consider whether:

the existing sanctions for the conduct to be the subject of the injunction, found in the Trade Practices Act itself, require to be supplemented by the availability of the range of sanctions applicable to contempt of court. The purpose of granting an injunction to restrain conduct already prohibited by legislation can only be to add to whatever consequences the legislation attaches to that conduct the additional consequences of a possible finding of contempt of court by failure to comply with an injunction. In each case, it is a question whether the conduct concerned warrants the application of those more stringent consequences.

255    It is possible the Full Court’s more recent decision in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) [2007] FCAFC 146; 161 FCR 513 (‘Dataline’) takes the matter further. At 543 [110] the Full Court (Moore, Dowsett and Greenwood JJ) accepted that the grant of an injunction could add the possibility of imprisonment as a consequence of a contravention where the Act itself did not provide for such a remedy. The Court continued:

However, if Parliament has not provided for imprisonment in connection with a contravention, it may not be appropriate for a court to enjoin such conduct simply in order to create the possibility of imprisonment. While Parliament has provided for an injunction as a possible remedy, it may be doubted that it intended that an injunction would be a remedy granted in the ordinary course in the face of the statutory sanctions Parliament has itself provided. Moreover, a Court has an interest in maintaining the efficacy of injunctive relief which requires that orders be respected. They will only be respected if they consistently serve a useful purpose and if breaches are discovered and punished. It may also be doubted that a court order requiring conduct which a statute otherwise requires will be seen to have some greater or different significance to the statutory requirement.

256    Their Honours continued at 544 [114]:

The experience of the law is that unlawful or illegal conduct does not lead to an injunction against repetition of such conduct being sought or granted. A range of other remedies exist in the civil and criminal law which are treated as adequate and appropriate sanctions for such conduct. Normally, it is only where there is a real risk of further misconduct that injunctive relief is contemplated. It is, we think, no answer to this experience to say that subss (4) and (5) provide that absence of any threat of further contravention is no longer a bar to the grant of such relief. An injunction should not be seen as a necessary vindication of the applicant’s conduct in bringing the proceedings. Other relief may better serve that purpose. Nor should an injunction be sought primarily for public relations purposes, however worthy such purposes may be.

257    I read this paragraph as indicating that there should be no injunction granted where the conduct to be restrained is, in any event, subject to penalty under the CCA unless there is a ‘real risk of further misconduct’. The Commission submitted that injunctive relief was appropriate in this case because: first, Garuda’s submissions showed that it exhibited no contrition and regarded its contraventions of Australian law as merely technical or happenstance. This was so because of Garuda’s submission that it had not taken part in the activities which showed there was a market in Australia for the purposes of s 4E; secondly, because Garuda had submitted that any further conduct would not be unlawful; and, thirdly, there was a significant public interest in preventing any repetition of the conduct in view of the harm it would cause.

258    Whilst I acknowledge the force of this submission, I do not accept it. The conduct which the Commission seeks to have restrained is already unlawful and would expose Garuda to substantial civil penalties. These penalties would be augmented by the fact that it would not be the first time that Garuda had been found to have breached the CCA. That fact is not to be ignored in assessing what Garuda is likely to do in the future.

259    Whilst it may be possible to grant an injunction where there is a real risk that the conduct might be repeated, it is not possible to describe the risk which Garuda presents as a real risk’ in the sense discussed in Dataline. Whilst it is true that Garuda did initially pursue an argument that if the conduct were repeated under the CCA as it now stands it would not be unlawful, that submission was ultimately withdrawn. So too, whilst I accept that its approach to the question of penalties reveals that it is not in any meaningful sense contrite, I do not think it shows that it is lawless either and will breach the CCA unless restrained. Garuda’s position has always been that it rejects the application to it of the TPA and now the CCA because the conduct was outside of Australia and because it is an emanation of the Republic of Indonesia.

260    Whilst both of those contentions has failed, one cannot fairly infer from the fact that Garuda made such submissions that it would now propose simply to ignore the statute. Another relevant fact to take into account in assessing this matter is the $19 million penalty the Court has imposed on Garuda. I think it highly likely that the effect of that penalty will be to deter Garuda from future price fixing behaviour in markets in Australia. The penalty was set with that end in mind and it is legitimate to assume that the penalty will be efficacious in that regard.

261    The Commission also submitted that injunctions had been granted in a number of the other Australian fuel surcharge cartel cases (i.e. Cathay Pacific, Singapore Airlines and Thai Airways). However, these were all consented to. None of those cases says anything where an injunction is opposed.

262    Consequently, I decline to grant injunctive relief under s 80.

10    COSTS

263    The Full Court remitted to me the question of the costs of the trial. The Commission was largely successful at trial other than on the market in Australia point, although as outlined above at [7] and [216] it did lose on some other discrete issues too. I accept Garuda’s submission that it succeeded at trial to the extent that the Court did not accept the broader market suggested by the Commission at trial. I rejected the Commission’s case that the relevant markets were those for air freight services from origin ports in Hong Kong and Indonesia to ports in other countries including Australia: see Trial Reasons at [234]-[235]. However, in the scheme of the trial this was a minor victory. Nor am I persuaded that the fact that the Commission dropped its global market allegation shortly before the trial commenced alters this outcome.

264    Despite that, there is no doubt in my opinion that the Commission was substantially successful and is entitled to costs of the proceeding (which will include the costs of this hearing as well as those of the trial). Both of those outcomes will be encompassed by an order that Garuda pay the Commission’s costs of the proceedings at first instance as taxed or agreed. Garuda submitted that I should also make an order that the Commission not be permitted to recover costs where it had already recovered the same cost from one of the other airlines. The most significant aspect of that I imagine is Air New Zealand’s agreement to pay $2 million towards the Commission’s cost of the proceeding against it. Such an order is unnecessary. Any taxation will be governed by the indemnity principle and the Commission will not receive more than it is entitled to.

265    The orders I will make now will impose the fine and require Garuda to pay the Commission’s costs. The parties are to bring in a minute of order giving effect to my conclusions on declaratory relief within 21 days.

11    EVIDENTIARY RULINGS

266    There was an issue between the parties as to the extent to which Garuda could seek to demonstrate that it was not involved in the conduct which gave rise to a market in Australia. The Commission submitted that it was not open to Garuda to pursue that argument in light of the procedural history of the matter and that all of this material was accordingly irrelevant. However, there was an issue before me at the hearing to which this evidence went, viz, whether Garuda was involved in the circumstances giving rise to a market in Australia if it were held that it was open to Garuda to pursue the matter. That was a fact in issue at the hearing and the evidence was accordingly relevant in the sense of55 of the Evidence Act 1995 (Cth). That I have concluded in these reasons for judgment that it is not procedurally open to Garuda to pursue this argument does not alter that conclusion. The evidence will be admitted. The objections to [15] and [18] of Mr Mandala’s affidavit sworn 14 March 2018 will be overruled. The remaining objections to Mr Mandala’s evidence were dealt with at the hearing.

267    In its written objections, the Commission also objected to reliance by Garuda upon a list of enumerated documents beginning with ACCC.020.002.0017. The objection was on the same basis as in the case of Mr Mandala. I admit the documents.

I certify that the preceding two hundred and sixty-seven (267) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate:

Dated:    30 May 2019