IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
No. VID 1650 of 2005
AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION
Applicant
VISY INDUSTRIES HOLDINGS PTY LTD
(ACN 005 787 968)
First Respondent
VISY INDUSTRIES AUSTRALIA PTY LTD
(ACN 004 337 615)
Second Respondent
VISY BOARD PTY LIMITED
(ACN 005 787 913)
Third Respondent
RICHARD PRATT
Fourth Respondent
HARRY DEBNEY
Fifth Respondent
ROD CARROLL
Sixth Respondent
SUBMISSIONS OF THE FIRST TO FIFTH RESPONDENTS
INTRODUCTION
1.
All of the respondents have filed amended defences in this proceeding.
2.
In respect of the third respondent (Visy Board), the fourth respondent (Mr Pratt), the fifth
respondent (Mr Debney) and the sixth respondent (Mr Carroll), the amended defences make
admissions in respect of the majority of the contraventions of the Trade Practices Act 1974 (Cth)
(TPA) alleged against them by the Australian Competition and Consumer Commission
(Commission) in its second further amended statement of claim.
3.
The Commission does not press the allegations against the first and second respondents, as only
Visy Board, and not those corporations, supplied corrugated fibreboard packaging (CFP) products
and was responsible for the contravening conduct.
4.
By its amended defence, Visy Board has admitted that it contravened the TPA by arriving at and
giving effect to the Over-arching Understanding with Amcor, pursuant to which the following
2
more specific understandings were arrived at and given effect to in the period January 2000 to
November 2004:
(a)
the general price increase understandings with Amcor in each of 2000, 2001, 2002 and
2003; and
(b)
the customer specific understandings with Amcor in respect of the following fourteen
companies: Inghams Enterprises Pty Ltd, Goodman Fielder Ltd, Nestle Australia Ltd,
Fosters Group Ltd, George Weston Foods Ltd, the NSW requirements of OSI
International Foods (Australia) Ltd, Merino Pty Ltd, The Mildura Food Company,
National Foods Limited, Eagle Boys Dial-A-Pizza Australia Pty Ltd (but only insofar as
effect was given to the Over-arching Understanding), Gillette Australia Pty Ltd, Parmalat
Australia Ltd, the food and beverage division of Cadbury Schweppes Pty Limited and the
Hardy Wine Company Limited.
In respect of Coca Cola Amatil Ltd, Visy Board admits that it made the Fosters and Coke
understanding as alleged by the Commission, but it denies that it gave effect to that understanding
in respect of Coca Cola Amatil Ltd and the Commission does not press that allegation.
5.
By his amended defence, Mr Pratt has admitted that he contravened the TPA by meeting with
Russell Jones, the then Chief Executive of Amcor, on 21 May 2001 at Mr Jones’ request and
communicating to Mr Jones that Visy Board would adhere to an understanding that Mr Debney
had reached with Peter Brown, being the Over-arching Understanding referred to above. By that
meeting, Mr Pratt, and through him Visy Board, gave effect to the Over-arching Understanding
with Amcor.
6.
By his amended defence, Mr Debney has admitted that he contravened the TPA by being
knowingly concerned in arriving at the Over-arching Understanding with Amcor and giving effect
to that Understanding by:
(a)
arriving at the general price increase understandings with Amcor in 2000 and 2003; and
(b)
arriving at the customer specific understandings with Amcor in respect of the following
five companies: Inghams Enterprises Pty Ltd, Fosters Group Ltd, Coca Cola Amatil Ltd,
George Weston Foods Ltd and the NSW requirements of OSI International Foods
(Australia) Ltd.
7.
By his amended defence, Mr Carroll has admitted that he contravened the TPA by being
knowingly concerned in giving effect to the Over-arching Understanding with Amcor by:
(a)
arriving at the general price increase understandings with Amcor in 2001 and 2002;
3
(b)
arriving at and giving effect to the customer specific understandings with Amcor in
respect of the following ten companies: Goodman Fielder Ltd, Nestle Australia Ltd,
George Weston Foods Ltd, the NSW requirements of OSI International Foods (Australia)
Ltd, The Mildura Food Company, National Foods Limited, Eagle Boys Dial-A-Pizza
Australia Pty Ltd (but only insofar as effect was given to the Over-arching
Understanding), Parmalat Australia Ltd, the food and beverage division of Cadbury
Schweppes Pty Limited and the Hardy Wine Company Limited;
(c)
arriving at the customer specific understandings with Amcor in respect of the following
two companies: Merino Pty Ltd and Gillette Australia Pty Ltd; and
(d)
giving effect to the customer specific understandings with Amcor in respect of the
following two companies: Inghams Enterprises Pty Ltd and Fosters Group Ltd.
8.
The Commission does not press any allegations made in its second further amended statement of
claim beyond the admissions contained in the respondents’ further amended defences.
9.
The Commission and the respondents have agreed the form of orders which they jointly seek from
the Court in respect of the contravening conduct. The orders comprise:
(a)
declarations reflecting the contraventions of the TPA admitted by the respondents in their
amended defences;
(b)
the imposition of pecuniary penalties against the following respondents in the following
amounts:
(c)
(i)
in respect of Visy Board, the amount of $36,000,000;
(ii)
in respect of Mr Debney, the amount of $1,500,000; and
(iii)
in respect of Mr Carroll, the amount of $500,000;
injunctions permanently restraining Visy Board and each of Messrs Pratt, Debney and
Carroll from engaging in similar contravening conduct in the future; and
(d)
a probation order requiring Mr Pratt and each of the first, second and third respondents to
implement a trade practices compliance program in a form agreed with the Commission
or approved by the Court.
10.
The Commission does not press its application under s.77 of the TPA for a pecuniary penalty
against Mr Pratt for the reasons set out below.
4
11.
In support of the proposed orders, the Commission and the respondents jointly rely on an agreed
statement of facts made pursuant to s.191 of the Evidence Act 1995 (Cth) which has also been
filed.
12.
The first to fifth respondents make the following submissions in support of the orders that are
jointly proposed by the Commission and all of the respondents. Except where stated to the
contrary, in these submissions a reference to the respondents is a reference to the first to fifth
respondents.
STATEMENT OF REGRET
13.
Mr Pratt and Mr Debney, on behalf of themselves and on behalf of Visy Board, sincerely regret
that they engaged in conduct that constituted a serious contravention of the TPA.
14.
Mr Pratt acknowledges that as Chairman of the holding company of Visy Board, it was his
responsibility to ensure that he did not engage in conduct that contravened the TPA and, to the
extent possible, to ensure that the executives of Visy Board implemented procedures to ensure
that Visy Board conducted its business in compliance with the TPA.
15.
Mr Debney acknowledges that as Chief Executive of the holding company of Visy Board, it was
his responsibility to ensure that he did not engage in conduct that contravened the TPA and, to the
extent possible, to ensure that the employees of Visy Board did not engage in conduct that
contravened the TPA.
16.
Each of Visy Board, Mr Pratt and Mr Debney consents to the orders jointly proposed to the Court,
recognising that such orders are appropriate to mark the community’s disapproval of the
contraventions of the law that have occurred, and as a deterrent against future contraventions by
the respondents and others.
THE PECUNIARY PENALTIES
Statutory power to impose a pecuniary penalty
17.
By s.77 of the TPA, the Commission is empowered to seek the recovery on behalf of the
Commonwealth of a pecuniary penalty referred to in s.76.
18.
As a result of the admissions that have been made by the respondents, the Commission seeks a
pecuniary penalty against Visy Board, Mr Debney and Mr Carroll, and no longer seeks a
pecuniary penalty against Mr Pratt.
5
19.
Under s.76, if the Court is satisfied that a person has contravened a provision of Part IV or has
been knowingly concerned in a contravention of such a provision, the Court may order the person
to pay to the Commonwealth such pecuniary penalty as the Court determines to be appropriate.
Relevant factors to be considered
20.
While s.76(1) provides that, in determining the appropriate penalty, the Court must have regard to
“all relevant matters”, the section refers to the following specific matters:
(a)
the nature and extent of the act or omission;
(b)
the nature and extent of any loss or damage suffered as a result of the act or omission;
(c)
the circumstances in which the act or omission took place; and
(d)
whether the person has previously been found by the Court in proceedings under Part VI
or Part XIB to have engaged in any similar conduct.
21.
In TPC v CSR Limited 1 , in a passage approved by the Full Court in NW Frozen Foods Pty Ltd v
ACCC 2 , French J identified the following additional factors as relevant:
(a)
the size of the contravening company;
(b)
the degree of power it has, as evidenced by its market share and ease of entry into the
market;
(c)
the deliberateness of the contravention and the period over which it extended;
(d)
whether the contravention arose out of the conduct of senior management or at a lower
level;
(e)
whether the company has a corporate culture conducive to compliance with the TPA, as
evidenced by educational programs and disciplinary or other corrective measures in
response to an acknowledged contravention; and
(f)
whether the company has shown a disposition to cooperate with the authorities
responsible for enforcement of the Act in relation to the contravention.
22.
In ACCC v NW Frozen Foods Pty Ltd 3 , Heerey J at first instance added the following
considerations:
1
(1991) ATPR 41-076 at 52,152 – 52,153
(1996) 71 FCR 285 at 292
3
(1996) ATPR 41-515 at 42,444 – 42,445
2
6
23.
(a)
similar conduct in the past;
(b)
the financial position of the respondents; and
(c)
the deterrent effect of the proposed penalty.
In addition to the above considerations, two other principles, drawn from the criminal law, 4 are
also relevant. 5
24.
The first is the totality principle: that the sum of the penalties imposed for several contraventions
does not result in the total of the penalties exceeding what is proper having regard to the totality of
the contravening conduct. 6 It has been a common, although not universal, practice of the Court,
where a respondent has committed a number of contraventions, to impose one penalty for all
contraventions. 7
25.
The second principle is that of parity: that is, where other things are equal, persons concerned in
the same contravention should receive the same penalty and that where other things are not equal,
due discrimination should be made. This principle operates on at least two levels. First, parity
between contravenors in the same case. 8 Second, parity between contravenors in different cases:
although, as Hill J observed in ACCC v Universal Music Australia Pty Ltd (No.2) 9 : “while
pecuniary penalties imposed in one case provide a guide, that guide will seldom, if ever, be able
to be used mechanically” 10 and, as the Full Court observed in NW Frozen Foods, “other things
are rarely equal where contraventions of the Trade Practices Act are concerned” 11 .
Penalties proposed to the Court pursuant to an agreed settlement
26.
Ultimately it is the responsibility of the Court to determine the appropriate penalty to be imposed
under s.76 for a contravention of the TPA.
27.
Where the parties jointly propose a penalty to the Court, the question for the Court is whether that
figure is, in the Court’s view, appropriate in the circumstances of the case. If it is within the
4
Schneider Electric (Australia) Pty Ltd v ACCC [2003] FCAFC 2 at paras [53] – [57].
ACCC v Admiral Mechanical Services Pty Ltd [2007] FCA 1085.
6
See generally TPC v TNT Australia Pty Limited (1995) ATPR 41-375 at 40,169 and ACCC v Australian Safeway Stores Pty
Limited & Ors (1997) ATPR 41-562 at 43,817.
7
ACCC v Rural Press Ltd (2001) ATPR 41-833, 43,290; ACCC v ABB Transmission and Distribution Limited (2002) ATPR 41872, 44,950 (ABB (No 3)).
8
See Schneider Electric (Australia) Limited v ACCC (2003) ATPR 41-957 at paras [10]-[17] per Sackville J and paras [52]-[60]
per Merkel J; ACCC v McMahon Services Pty Ltd (No 3) (2004) ATPR 42-031 at paras [32]-[38].
9
(2002) ATPR 41-862.
10
At para [34].
11
(1996) 71 FCR 285 at p.295
5
7
permissible range, it will be appropriate, even if the Court would not have arrived at that precise
figure in the absence of agreement. 12
28.
The Court not departing from an agreed figure merely because it might otherwise have been
disposed to select some other figure is a reflection of an important public policy. This was
articulated in NW Frozen Foods Pty Ltd 13 in the following way:
“When corporations acknowledge contraventions, very lengthy and complex litigation is
frequently avoided, freeing the courts to deal with other matters, and investigating
officers of the Australian Competition and Consumer Commission to turn to other areas
of the economy that await their attention. At the same time, a negotiated resolution in the
instant case may be expected to include measures designed to promote, for the future,
vigorous competition in the particular market concerned. These beneficial consequences
would be jeopardised if corporations were to conclude that proper settlements were
clouded by unpredictable risks.”
29.
The Full Court picked up this theme again in Mobil Oil: 14
“… the rationale for giving weight to a joint submission on penalty is said by the Court to
be the savings in resources for the regulator and the Court, as well as the likelihood that
a negotiated resolution will include measures designed to promote competition. As
Jeremy Thorpe points out, a related advantage is that the savings in resources can be
used by the regulator to increase the likelihood that other contraveners will be detected
and brought before the courts. This has the effect of increasing deterrence which is one of
the principal justifications, if not the only justification for imposing civil penalties under
the TP Act or the Sites Act: J Thorpe, "Determining the Appropriate Role for Charge
Bargaining in Part IV of the Trade Practices Act" (1996) 4 Comp & Cons LJ 69, at 7274. Of course the arguments in favour of negotiated settlements have to take account of
the fact that it is the Court that bears the ultimate responsibility for determining the
appropriate penalty.”
Application of principles to this case
30.
The Commission and Visy Board, Mr Debney and Mr Carroll jointly propose the following
pecuniary penalties to the Court:
31.
(a)
in respect of Visy Board, the amount of $36,000,000;
(b)
in respect of Mr Debney, the amount of $1,500,000; and
(c)
in respect of Mr Carroll, the amount of $500,000.
It is submitted that the penalties proposed are appropriate in the circumstances of this case and
should be accepted by the Court having regard to the following matters.
12
NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at pp 290-291; The Minister for Industry, Tourism & Resources v
Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at para [51(vi)]
13
At p.291, and approved in Mobil Oil.
8
The nature and extent of the contravening conduct
32.
The respondents acknowledge that the contravening conduct involves a very serious contravention
of the TPA, in that:
(a)
it involves price fixing and market sharing conduct, which is prohibited per se by the TPA
because their “inherently anti-competitive nature inevitably harms consumers and has a
deleterious and pernicious effect on economic efficiency”; 15
(b)
it continued for a period of four years;
(c)
it involved the most senior management of Visy Board; and
(d)
it occurred in a substantial market (in terms of revenue) and in which the parties to the
contravention (Amcor and Visy Board) constituted the major suppliers with combined
market shares of approximately 90%.
33.
The respondents further acknowledge that the nature and extent of the contravening conduct
warrants the imposition of very substantial pecuniary penalties by the Court.
The impact of the contraventions on the market and on customers
34.
The Commission has acknowledged that:
“In relation to the conduct of Visy alleged in respect of named customers specified in the
second further amended statement of claim, the ACCC does not allege as part of its case
in this proceeding that the conduct, insofar as it is admitted to constitute either making an
unlawful arrangement or giving effect to such an arrangement, had any negative
financial impact on or caused loss to any of the named customers.” 16
35.
The Court would be aware that a class action has been commenced in the Federal Court on behalf
of CFP customers (other than Cadburys Schweppes which has opted out) seeking relief against
various Amcor group companies (“Amcor”). In that proceeding, Amcor seeks contribution from
Visy Board and other Visy group companies. The claims made in that proceeding are for loss and
damage suffered by reason of the Over-arching Understanding, the general price increase
understandings and the customer specific understandings. Cadbury Schweppes Pty Ltd has also
commenced its own proceeding against Amcor seeking recovery of alleged loss or damages.
Again, in that proceeding Amcor seeks contribution from Visy Board and other Visy group
companies.
14
At para [55]
ACCC v Leahy Petroleum (No.2) (2005) 215 ALR 281 at [20] per Merkel J, cited with approval in ACCC v Australian Safeway
Stores Pty Ltd (No 4) (2006) ATPR 42-101 at [56]
16
Agreed Statement of Facts para [374]
15
9
36.
In the class action and the Cadbury Schweppes proceeding, both Amcor and Visy Board deny that
CFP customers have suffered any loss and damage. If loss and damage as a result of the
contraventions is proved in those proceedings then compensatory orders will be made. There
being a dispute in the civil proceedings brought on behalf of CFP customers as to whether any
loss and damage has been suffered, that question cannot be resolved for the purposes of this
proceeding. For present purposes, the agreed statement of facts includes the acknowledgement
referred to in paragraph [34] in relation to the named contract customers and the following facts in
relation to the general price increase understandings pertaining to the non-contract customers:
(a)
over the relevant period, non-contract customers represented approximately
of Visy Board’s customers, being approximately
value;
(b)
in value
million per annum by gross sales
17
the 2000 general price increase of 7% was applied to approximately
of Visy Board’s
non-contract customers; 18
(c)
the 2001 general price increase of 8.25% was applied to approximately
Board’s non-contract customers;
(d)
of Visy
19
the 2002 general price increase of 3.25%-3.5% was applied to approximately
of Visy
Board’s non-contract customers; 20
(e)
the 2003 general price increase of 2.5%-3.25% was applied to approximately
Board’s non-contract customers.
37.
of Visy
21
The following matters are also relevant in respect of the effect of the general price increases on
the non-contract customers:
(a)
although the general price increase of 7% in 2000 was higher than CPI, there had not been
a general price increase since 1 June 1998; 22
(b)
the 8.25% general price increase in 2001 was set in the post-GST environment when the
CPI was higher than non-GST impacted years; 23
(c)
the 3.5% general price increase in 2002 and 2.5%-3.25% general price increase in 2003
were closely related to the CPI 24 ; and
17
Agreed Statement of Facts para [62]
Agreed Statement of Facts paras [109], [386] and [387]
19
Agreed Statement of Facts paras [119], [392] and [393]
20
Agreed Statement of Facts paras [257], [398] and [399]
21
Agreed Statement of Facts paras [305], [404] and [405]
22
Agreed Statement of Facts para [382]
23
Agreed Statement of Facts para [390]-[391]
24
Agreed Statement of Facts paras [396] and [402]
18
10
(d)
the general price increases were implemented in a non-uniform manner with various
discretions being given to individual State Managers as to the manner of their
implementation within particular States. 25
38.
In the period leading up to the making of the Over-arching Understanding, Visy Board and Amcor
were engaged in a price war and they were selling CFP at unsustainable price levels. In the two
year period to late 1999, both Visy Board and Amcor had incurred significant net trading losses. 26
39.
It is not in contest that notwithstanding the presence of the Over-arching Understanding, Visy
Board took a number of Amcor customers during the relevant period. It is also clear that Visy
Board increased its share of the CFP market at the expense of Amcor. During the period from
January 2000 to October 2004, Visy Board took 250-300 customers from Amcor with an
estimated annual sales volume of between $75-$80 million, and Amcor took 100-125 customers
from Visy Board with an estimated annual sales volume of between $40-$45 million. 27
Generally, Visy Board increased its market share over the period 1999/00 – 2004/05 from 47% to
55%. 28 Correspondingly, over that same period, Amcor’s market share declined from 45% to
36%.
40.
The fact that Visy Board was not in all cases adhering to the Over-arching Understanding is also
clear from the concerns of the Amcor executives in relation to the conduct of Visy Board. 29
Previous contraventions of Part IV by Visy Board
41.
Visy Board has not been found to have contravened Part IV of the TPA on any previous occasion.
42.
A related company, Visy Paper Pty Ltd, has been found to have contravened Part IV of the TPA
on one previous occasion. 30 The contravention concerned an attempt on the part of Visy Paper Pty
Ltd between September 1996 and April 1997 to make an agreement with a person who supplied
waste paper to Visy Paper that would have prevented that person from acquiring waste paper from
certain third parties and from supplying the service of waste collection to those third parties. A
penalty of $500,000 was imposed on Visy Paper in respect of that contravention. 31
25
Agreed Statement of Facts para [68] and Attachment 1 generally
Agreed Statement of Facts para [70]
27
Agreed Statement of Facts paras [52]-[53]
28
Agreed Statement of Facts para [52]
29
Agreed Statement of Facts para [97]
30
Visy Paper Pty Ltd v ACCC (2003) 216 CLR 1
31
ACCC v Visy Paper (2004) 212 ALR 564
26
11
Admission of contravention
43.
A party’s admission of contravention is a relevant factor to be taken into account by the Court in
assessing penalty. Such action indicates a resolve by the contravening company to comply with
the TPA, and accordingly the requirement of specific deterrence is reduced. 32
44.
Although the admission of the contraventions by the respondents has only been made shortly prior
to the trial, it has resulted in a very lengthy and complex trial being avoided, with a clear public
benefit. As stated in NW Frozen Foods, this has the effect of “freeing the courts to deal with
other matters, and investigating officers of the Australian Competition and Consumer
Commission to turn to other areas of the economy that await their attention”. 33
Parity with comparable decisions
45.
The respondents submit that in determining the appropriateness of the proposed penalties, the
Court should have regard to any previous decisions of the Court that are comparable, while
recognising that no two cases are ever identical.
46.
The highest penalties previously imposed for contraventions of Part IV of the TPA are $15
million for a corporation and $225,000 for an individual.
47.
The $15 million penalty for a contravention by a corporation was imposed in ACCC v Roche
Vitamins Australia Pty Ltd 34 (ACCC v Roche), for a contravention by Roche of s.45 of the TPA in
relation to the supply of animal vitamins in Australia.
48.
The $225,000 penalty for a contravention by an individual was imposed in the ACCC v ABB
cases. In those cases there were penalty hearings arising from two proceedings relating to
collusive conduct engaged in by various parties in two distinct markets, the “Power Transformer
Proceedings” and the “Distribution Transformer Proceedings”. 35
49.
In ACCC v Roche the Court identified the following factors as relevant in determining that the $15
million penalty proposed by the ACCC and Roche was appropriate:
(a)
the arrangements were in place from 1994 (or earlier) to 1999;
32
ACCC v Leahy Petroleum (No 3) (2005) 215 ALR 301 at 309-10 per Goldberg J (at paras [40]-[41]). See also TPC v Carlton &
United Breweries (1990) 24 FCR 532 at 542; TPC v TNT Australia Pty Limited (1995) ATPR 41-375 at para [18].
33
(1996) 71 FCR 285 at 291
34
(2001) ATPR 41-809
35
ACCC v ABB Transmission and Distribution Limited (2001) ATPR 41-815, ACCC v ABB Transmission and Distribution
Limited (2001) ATPR 41-839, ACCC v ABB Transmission & Distribution Ltd (No. 2 Power Transformers) (2002) ATPR 41-871,
ACCC v ABB Transmission and Distribution Ltd (No. 2 Distribution Transformers) (2002) ATPR 41-873, Schneider Electric
(Australia) Pty Ltd v ACCC (2003) ATPR 41-957, ACCC v ABB Power Transmission Pty Ltd (2004) ATPR 42-011
12
(b)
senior executives and employees engaged in multiple contraventions throughout that
period;
(c)
the contravening conduct was “extremely serious”, which was accepted by the
respondents;
(d)
the respondents were doing the bidding of multinational parent companies who had
engaged in collusive conduct in the US and Canada and who might be tempted to offend
again in Australia;
(e)
the value of the sales that were affected was significant;
(f)
the respondents together controlled between 90-100 % of the market;
(g)
the respondents had co-operated with the Commission but only after the US and Canadian
proceedings had become public; and
(h)
50.
the respondents gave undertakings with respect to Trade Practices Compliance Programs.
In the ACCC v ABB cases there were two related companies, ABB Power Transmission Pty Ltd
and ABB Transmission and Distribution Ltd, which were treated by the Court as a single entity
for the purposes of assessing penalty. 36 The total penalty imposed on the ABB companies was
$14 million. 37 In determining that the total penalty of $14 million was appropriate, the Court
identified the following relevant factors: 38
(a)
the participants in the collusive conduct controlled 90 % of the markets;
(b)
none of the parties attempted to quantify the amount of any loss or damage caused by the
arrangements;
(c)
the conduct took place in a recently deregulated and declining market with substantial
over-capacity;
(d)
ABB had not been involved in contraventions previously;
(e)
the ABB group was substantial with an annual turnover of $1 billion;
(f)
the collusive conduct was engaged in by senior executives with the knowledge that it was
likely to contravene the TPA;
36
ACCC v ABB Power Transmission Pty Ltd (2004) ATPR 42-011 at [58]
ABB Power Transmission Pty Ltd had a $5.5 million imposed in the “Power Transformer Proceedings” and a $3 million
penalty imposed in the “Distribution Transformer Proceedings”, and ABB Transmission and Distribution Ltd had a $5.5 million
penalty imposed in the “Distribution Transformer Proceedings” – ACCC v ABB Power Transmission Pty Ltd (2004) ATPR 42011
38
Ibid at [58]-[77]
37
13
(g)
in the case of the power transformers, the contraventions extended over two and a half
years and in the case of distribution transformers, five years;
(h)
ABB did not approach the Commission of its own volition but filed defences containing
admissions;
(i)
the conduct by the other participants in the contraventions was no less serious than that
engaged in by ABB; and
(j)
the penalty was at least comparable with if not in excess of the penalties borne by the
other participants in the contravening conduct.
51.
Having regard to the factors identified in ACCC v Roche and the ACCC v ABB cases, and the
penalties imposed in those cases, it is submitted that the penalty of $36 million proposed for Visy
Board is within the permissible range and is appropriate.
Deterrence generally
52.
The primary object of pecuniary penalties is deterrence. 39 Deterrence has two aspects: specific
deterrence and general deterrence. Specific deterrence is designed to deter the contravening party
from a further contravention of the Act. General deterrence is “designed to deter others in the
community from contravening conduct by showing the seriousness with which the Court considers
such contravention”. 40
53.
While a penalty should be sufficiently high to achieve the objective of deterrence, the penalty
should “not be so high as to be oppressive”. 41 “Plainly, if deterrence is the object the penalty
should not be greater than is necessary to achieve this object; severity beyond that would be
oppression”. 42
54.
It is submitted that the record penalties which are proposed by the parties are appropriate to
adequately address the considerations of specific and general deterrence.
55.
These proposed penalties are far and away the highest imposed upon a corporation or individuals
for a contravention of Part IV of the TPA. The respondents accept that these record penalties
reflect the seriousness of the contraventions, and are appropriate.
56.
It is also relevant to note that the proposed orders provide for:
(a)
39
each of the respondents to be subject to a permanent injunction; and
TPC v CSR Limited (1991) ATPR 41-076 at 52,152 per French J
ACCC v Leahy Petroleum (No. 3) (2005) ATPR 42-052 at [35]
41
TPC v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896.
42
NW Frozen Foods Pty Ltd at p.293.
40
14
(b)
Mr. Pratt and each Visy corporate respondent being required to implement and undertake,
at Mr. Pratt’s expense, a trade practices compliance program,
which orders have a deterrent purpose and effect, as recognised by the Courts (see below).
57.
In so far as general deterrence is concerned, it is also submitted that the “resultant publicity
surrounding the conduct and the significant penalty package can be expected to significantly
heighten awareness of the requirements of the Act ….”. 43
Mr. Debney
58.
The maximum pecuniary penalty that may be imposed on an individual under s.76 is $500,000 for
each contravention. Mr Debney has agreed with the Commission to propose a penalty of
$1,500,000 to the Court.
59.
The size of this penalty reflects:
(a)
the seriousness of the contraventions in respect of which Mr Debney was knowingly
concerned;
(b)
the fact that Mr Debney arrived at the Over-arching Understanding with Mr Brown of
Amcor; and
(c)
60.
the fact that Mr Debney was the most senior executive at Visy Board.
Although Mr. Debney was not involved in many of the contraventions admitted by Visy Board,
Mr Debney accepts that the above facts warrant a very substantial penalty. 44
61.
Other facts are also relevant:
(a)
In January 2000, it was Mr. Debney on behalf of Visy Board who instigated a change of
direction in the market, coming off the back of a price war and substantial trading
losses. 45
(b)
Mr. Debney is not said to have any knowledge of the detailed exchange of information by
Messrs Carroll and Laidlaw.
(c)
During the period of the contraventions and despite one of the provisions of the Overarching Understanding being that Visy Board and Amcor would permit each other to
43
NW Frozen Foods Pty Ltd at p.289 (The quotation above is from one of the agreed facts recited in the judgment).
Agreed Statement of Facts para [333], Draft Orders para [36].
45
Agreed Statement of Facts paras [70] to [71].
44
15
maintain their current share of the CFP market, Visy Board took substantial CFP market
share from Amcor. 46
(d)
There is no allegation and no evidence of any negative financial impact on or loss to any
of the named contract customers (see paragraph [34] above).
62.
The penalty jointly proposed by the Commission and Mr Debney substantially exceeds the highest
penalties previously imposed on an individual for contraventions of Part IV of the TPA.
63.
In the ACCC v ABB cases Mr Wilson, the Managing Director of one of the corporations involved
in the contraventions, had penalties totalling $225,000 imposed. 47 The factors identified by the
Court as relevant to the quantum of penalty imposed on Mr Wilson included the following: 48
(a)
Mr Wilson was the Managing Director of Wilson Transformer Company Pty Ltd;
(b)
Mr Wilson was a willing participant in the contraventions;
(c)
the contraventions were exceptionally serious and included a large number of offences;
(d)
Mr Wilson would bear the brunt of the penalty imposed on Wilson, being its principal
shareholder;
(e)
whilst it was not possible to determine the losses to the consumers in a market that has a
turnover of $100 million, those losses could have been high; and
(f)
64.
it was unlikely that Mr Wilson would offend again.
Mr. Debney regrets his actions and contraventions of the TPA. It is most unlikely that he will in
the future contravene the TPA.
65.
Having regard to the penalties imposed on Mr Wilson in the ACCC v ABB cases, and the factors
identified by the Court as relevant to those penalties, it is submitted that the $1.5 million penalty
proposed for Mr Debney is in the permissible range and is appropriate.
Mr. Pratt
66.
46
The ACCC does not seek a separate penalty against Mr Pratt. 49
Agreed Statement of Facts para [52].
Mr Wilson had a penalty of $100,000 imposed in the “Power Transformer Proceedings” and $125,000 in the “Distribution
Transformer Proceedings” 47ACCC v ABB Transmission and Distribution Ltd (No. 2 Distribution Transformers) (2002) ATPR 41873; ACCC v ABB Transmission & Distribution Ltd (No. 2 Power Transformers) (2002) ATPR 41-871
48
ACCC v ABB Transmission and Distribution Ltd (No. 2 Distribution Transformers) (2002) ATPR 41-873; ACCC v ABB
Transmission & Distribution Ltd (No. 2 Power Transformers) (2002) ATPR 41-871
47
16
67.
The parties acknowledge that the basis for this is because:
(a)
the declaration of Mr Pratt’s involvement involves a single contravention namely:
meeting with the CEO of Amcor, Mr Russell Jones at his request on 21 May 2001 and
communicating to Jones that Visy would adhere to an understanding that the fifth
respondent Mr Debney had reached with Mr Peter Brown of Amcor, being the Overarching Understanding referred to in the Second Further Amended Statement of Claim;
(b)
the penalty imposed on Visy Board will be funded by Mr Pratt; and
(c)
the penalty that the Court might otherwise have imposed on Mr Pratt is incorporated in
the penalty imposed on Visy Board.
68.
Accordingly, the Court is not being asked to approve any pecuniary penalty in respect of Mr Pratt.
However, the Court is being asked to make the declaration of one contravention only by Mr Pratt
as set out in paragraph [35] of the proposed Declarations and Orders.
69.
It is submitted that the decision of the Commission not to seek a pecuniary penalty is appropriate
in the circumstances of this case. The relationship between an individual respondent and a
corporate respondent is a matter which should properly be taken into account by the Court in
determining the imposition of any pecuniary penalty on an individual. If the imposition of a
pecuniary penalty on a corporate entity will ultimately be borne by the individual that is a matter
which should be taken into account. 50
70.
Mr Pratt regrets the circumstances which have occurred. He regrets his involvement in the one
conversation referred to above.
He regrets the management failure and accepts ultimate
responsibility for the activities of Mr Debney and Mr Carroll.
DECLARATIONS
71.
Declarations should be framed to disclose the gist of the factual findings of the Court and the
basis upon which those findings contravene the relevant statutory provision. 51
72.
The respondents submit that it is appropriate to make the declarations sought which, in a
convenient and abbreviated form, identify the contravening conduct. To do so provides context
for the pecuniary penalties. In that fashion, the declarations operate with the pecuniary penalties
to achieve the objective of general deterrence.
49
Paragraph [44] of the ACCC’s Second Further Amended Application is not being pressed.
See ACCC v Ithaca Ice Works Pty Ltd (2000) ATPR 41-777 at [11] and [13] and ACCC v ABB Transmission & Distribution Ltd
(No .2 – Distribution Transformers) (2002) ATPR 41-872 at [45]
51
Rural Press Limited v ACCC (2003) 216 CLR 53 at [89]-[90] per Gummow, Hayne, Heydon JJ; BMW Australia Limited v
ACCC (2004) 207 ALR 452 at [35]
50
17
INJUNCTIONS
73.
The Court is empowered by s.80 of the TPA to grant an injunction in such terms as the Court
determines to be appropriate if the Court is satisfied that a person has engaged in conduct that
constitutes a contravention of a provision of Part IV.
74.
An injunction is a discretionary remedy which is not to be made as a matter of course, but only
after due consideration as to whether it is appropriate to do so. 52
75.
Under s.80 of the TPA, it is not a prerequisite to the grant of an injunction that there is a threat of
repeat contraventions; it is enough that a person has previously engaged in the conduct sought to
be enjoined. 53 Injunctions may be granted for the purposes of deterrence. 54
76.
If an injunction is granted based on past conduct then it must be limited to restraining repetition of
that conduct. 55
77.
An injunction should be framed so that the person enjoined knows precisely what conduct will
amount to a breach. 56
78.
An important factor for the Court to consider is whether the injunction should be permanent
(subject to rescission or variation by the Court under s.80(3)) or limited in time. Different judges
have expressed different views about the merits of the alternative approaches. 57
79.
The respondents consent to the form of the permanent injunctions in the proposed orders.
PROBATION ORDER
80.
The Court is empowered by s.86C to make a probation order (for a period of no longer than three
years) in relation to a person who has engaged in contravening conduct. A probation order
includes an order directing the person to establish a compliance program for employees or other
52
BMW Australia Limited v ACCC (2004) 207 ALR 452 at [35]
ACCC v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at [43]; BMW Australia Limited v ACCC (2004) 207 ALR 452 at [36]
54
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 268 per French J; ACCC v Midland
Brick Co Pty Ltd (2004) 207 ALR 329 at [46]
55
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 267 per Gummow J; Rural Press
Limited v ACCC (2003) 216 CLR 53 at [91] per Gummow, Hayne, Heydon JJ; BMW Australia Limited v ACCC (2004) 207 ALR
452 at [36]
56
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259 per Lockhart J; Melway Publishing
Pty Limited v Robert Hicks Pty Limited (2001) 205 CLR 1 at [60] per Gleeson CJ, Gummow, Hayne and Callinan JJ
57
See ACCC v Signature Security Group Pty Limited (2003) FCA 375 at [3]-[4] per Stone J; ACCC v Midland Brick Co Pty Ltd
(2004) 207 ALR 329 at [45] – [47]; ACCC v Liquorland (Australia) Pty Ltd (2005) FCA 683 at [69]-[71] per Gyles J; ACCC v
Liquorland (Australia) Pty Limited (No 2) (2006) FCA 1799 at [23] per Allsop J; ACCC v IPM Operation and Maintenance Loy
53
18
persons involved in the person’s business, being a program designed to ensure their awareness of
the responsibilities and obligations in relation to the contravening conduct, similar conduct or
related conduct.
81.
The Federal Court has previously expressed an unwillingness to make an order that a respondent
ensure that its program is consistent with AS 3806-1998 without a reasonable endeavours
qualification. 58
82.
The first to fourth respondents consent to the form of the probation order in the proposed orders.
83.
It should be noted that even before the Commission launched this proceeding, the respondents
were taking steps to ensure that there would be much greater understanding of the TPA and
compliance across the entire Visy business. Early last year the former Commission Chairman
Professor Allan Fels was appointed to chair Visy’s Trade Practices Compliance Committee.
Professor Fels continues to oversee ongoing TPA compliance and training programs. Every one
of the Committee’s recommendations has been acted on. Every relevant Visy employee has now
undergone Trade Practices compliance training. TPA education programs will continue under the
guidance of legal firm Blake Dawson Waldron.
12 October 2007
Jonathan Beach
David Collins
Philip Crutchfield
Michael O’Bryan
Yang Pty Ltd (2006) 157 FCR 162 at [233]-[234] per Young J; and most recently ACCC v CFMEU & Ors [2007] FCA 1546 at
[8] per Gyles J.
19
Daniel Crennan
Counsel for the First to Fifth Respondents
Filed by Arnold Bloch Leibler
Solicitors for the First to Fifth Respondents
58
ACCC v. Real Estate Institute of WA [1999] FCA 18 at [28] and (1999) 95 FCR 114 at [51] per French J; ACCC v.
Monza Imports Pty. Ltd. [2001] FCA 1455 at [19] per Carr J; ACCC v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548
at [7] per French J; ACCC v Econovite Pty Ltd [2003] FCA 964 at [17] per French J