Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 2)
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528
File number(s): NSD 2510 of 2013 Judge(s): JAGOT J Date of judgment: 16 May 2016 Catchwords: TRADE PRACTICES – competition law – restrictive trade practices – admitted contraventions of s 45(2) of Trade Practices Act 1974 (Cth) – whether order sought by consent appropriate in the circumstances – whether proposed pecuniary penalty appropriate Legislation: Building and Construction Industry Improvement Act 2005 (Cth)
Trade Practices Act 1974 (Cth) ss 45, 45A, 76, 86C
Cases cited: Australian Competition and Consumer Commission v Australian Medical Association (Western Australian Branch) Inc [2001] FCA 1471; (2001) 114 FCR 91
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2002] FCA 619; (2002) ATPR 41-880
Australian Competition and Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5; (2008) ATPR 42-212
Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; (1999) 95 FCR 114
Australian Competition and Consumer Commission v Sontax Australia (1988) Pty Ltd [2011] FCA 1202
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476
Date of hearing: 28 April 2016 Date of last submissions: 28 April 2016 (after hearing) 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: 29 Counsel for the Plaintiff: Dr RCA Higgins and Mr IJM Ahmed Solicitor for the Plaintiff: Norton Rose Fulbright Counsel for the First Respondent: Mr CE Bannan Solicitor for the First Respondent: King & Wood Mallesons Counsel for the Third Respondent: Mr M Walton SC Solicitor for the Third Respondent: Bird & Bird ORDERS
NSD 2510 of 2013 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Plaintiff
AND: COLGATE-PALMOLIVE PTY LTD ACN 002 792 163
First Respondent
PZ CUSSONS AUSTRALIA PTY LTD ACN 004 164 827
Second Respondent
PAUL ANSELL (and another named in the Schedule)
Third Respondent
JUDGE:
JAGOT J
DATE OF ORDER:
28 APRIL 2016
THE COURT DECLARES THAT:
1.[Deferred]
2.[Deferred]
3.Colgate engaged in conduct in contravention of section 45(2)(a)(ii) of the Trade Practices Act (the Act) by entering into an understanding (the Laundry Information Sharing Understanding) with Unilever containing a provision that they would share with each other confidential and commercially sensitive information relating to the price of their laundry detergent products (the Laundry Information Sharing Provision), which provision had the effect of controlling the price of laundry detergents supplied by Unilever in November 2008, within the meaning of section 45A(1) of the Act, and is therefore deemed by section 45A of the Act to have had the purpose, effect or likely effect of substantially lessening competition in the market in Australia for the wholesale supply of powdered and liquid laundry detergent products for domestic use (the laundry detergent market) within the meaning of section 45(2) of the Act.
4.Colgate engaged in conduct in contravention of section 45(2)(b)(ii) of the Act by giving effect to the Laundry Information Sharing Provision, by sharing confidential and commercially sensitive information regarding the price of Colgate’s laundry detergent products with Unilever in 2008.
5.The Third Respondent, Paul Ansell (Mr Ansell), was directly or indirectly, knowingly concerned in or party to, and involved in, the contraventions by Colgate referred in paragraphs 3 and 4 above within the meaning of sections 76(1)(e) and 86E(1) of the Act.
THE COURT ORDERS THAT:
5A. The application for declaratory relief otherwise be adjourned until finalisation of these proceedings against the Second and Fourth respondents, with notice of such finalisation to be given by the applicant to the Court and to the First and Third Respondents.
5B. Liberty to apply on 7 days’ notice, such notice to be exercised by the parties on the finalisation of this proceeding.
Pecuniary Penalties
6.Colgate pay to the Commonwealth of Australia:
(a)in respect of the contraventions referred to in paragraphs 4(1) to 4(2) of the Statement of Agreed Facts and Admissions, a pecuniary penalty in the amount of $12,000,000; and
(b)in respect of the contraventions referred to in paragraphs 3 and 4 above, a pecuniary penalty in the amount of $6,000,000.
7.The pecuniary penalties referred to in paragraph 6 above be payable within 28 days of the date of the Court’s order.
Compliance Program
8.Colgate:
(a)update its Compliance and Education / Training Program in accordance with Appendix A;
(b)maintain and administer, at its own expense, the updated Compliance and Education / Training Program set out in Appendix A for a period of three years from the date of the Court’s order; and
(c)provide, at its own expense, a copy of any documents to be provided to the Applicant pursuant to Appendix A.
Disqualification Order
9.Mr Ansell be disqualified from managing corporations for a period of seven years from the date of the Court’s order.
Other Orders
10.All previous orders as to costs as between the Applicant, Colgate and Mr Ansell be vacated.
11.Colgate pay a contribution to the Applicant’s costs of and incidental to this proceeding, fixed in the amount of $450,000, within 28 days of the date of the Court’s order.
12.Mr Ansell pay a contribution to the Applicant’s costs of and incidental to this proceeding, fixed in the amount of $75,000.
13.The contribution to costs specified in paragraph 12 above is to be paid by Mr Ansell in 24 monthly instalments of $3,125 per month, commencing 28 days after the date of the Court’s order.
14.In the event there is a default by Mr Ansell in the making of any of the instalment payments referred to in paragraph 13 above, the whole of the outstanding amount of the contribution to costs specified in paragraph 12 above is immediately due and payable by Mr Ansell.
15.There be no further order as to costs as between the Applicant, Colgate and Mr Ansell.
16.Subject to these Orders, the proceeding otherwise be dismissed as against Colgate and Mr Ansell.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JAGOT J:
These reasons for judgment explain why I made orders on 28 April 2016 imposing civil penalties on Colgate-Palmolive Pty Ltd (Colgate) and one of its employees, Paul Ansell. Amongst other orders I imposed on Colgate:
(1)a pecuniary penalty in the amount of $12,000,000 for its admitted contraventions of:
(a)s 45(2)(a)(i) of the Trade Practices Act 1974 (Cth) (TPA), by Colgate entering into an understanding with PZ Cussons Australia Pty Ltd (Cussons), and Unilever Australia Limited (Unilever) (the Withhold Supply Understanding) containing provisions with the substantial purpose of limiting the supply to Woolworths Limited (Woolworths), Coles Group Pty Ltd (Coles) and Metcash Limited (Metcash) of ultra-concentrated laundry detergents (Ultra Concentrates) until in or around February 2009 and standard-concentrated laundry detergents (Standard Concentrates) from in or around February 2009 (the Withhold Supply Provisions); and
(b)s 45(2)(b)(i) of the TPA, by Colgate giving effect to the Withhold Supply Provisions by limiting the supply of Ultra Concentrates to Woolworths, Coles and Metcash until in or around February 2009 and Standard Concentrates to Woolworths, Coles and Metcash from in or around February 2009;
(2)a pecuniary penalty in the amount of $6,000,000 for contraventions of:
(a)s 45(2)(a)(ii) of the TPA by entering into an understanding (the Laundry Information Sharing Understanding) with Unilever containing a provision that they would share with each other confidential and commercially sensitive information relating to the price of their laundry detergent products (the Laundry Information Sharing Provision), which provision had the effect of controlling the price of laundry detergents supplied by Unilever in November 2008, within the meaning of s 45A(1) of the TPA, and is therefore deemed by s 45A of the TPA to have had the purpose, effect or likely effect of substantially lessening competition in the market in Australia for the wholesale supply of powdered and liquid laundry detergent products for domestic use (the laundry detergent market); and
(b)s 45(2)(b)(ii) of the TPA by giving effect to the Laundry Information Sharing Provision, by sharing confidential and commercially sensitive information regarding the price of Colgate’s laundry detergent products with Unilever in 2008.
I also ordered that Mr Ansell, who admitted to being directly or indirectly, knowingly concerned in or party to, and involved in, the contraventions admitted by Colgate referred to in sub para (2) above, be disqualified from managing corporations for a period of seven years from the date of the Court’s order.
It is necessary to record that Colgate and Mr Ansell alone admitted the contraventions of the TPA described above for the purpose of these proceedings. No admissions have been made by the other entities identified above. Further, the orders I made reflected an agreed position of the parties as set out in a Statement of Agreed Facts and Admissions (SOAFA) and joint submissions on liability and relief.
The contravening conduct
Rather than repeating or attempting to summarise the comprehensive statements of fact and law in the SOAFA and joint submissions, I annex the documents to these reasons. They should be read as part of these reasons. They disclose the factual basis for the conclusion I reached that the orders proposed by agreement of the parties, and as made by me on 26 April 2016, were appropriate.
Colgate manufactures powdered and liquid laundry detergents for wholesale supply and marketing within Australia. During the relevant period, Mr Ansell held the position of “Customer Development Director” within Colgate. He was a senior manager responsible for the marketing, supply and pricing of Colgate’s laundry products. Colgate, together with its competitors, Cussons and Unilever, controlled approximately 80% of the relevant laundry detergent market.
In or around early 2008, Colgate and its competitors decided to replace what were previously marketed as “standard-concentrate” laundry detergent products with “ultra-concentrate” laundry products. Ultra Concentrates allow less detergent to be used to achieve a comparable level of product performance. They also yield significant cost savings and gross margin improvements for Colgate as a consequence of reduced expenditure on ingredients, packaging, transport and other logistics.
Colgate considered that the proposed transition meant that there was a risk that:
(1)but for a simultaneous industry wide transition of those laundry detergents that had not yet been replaced with Ultra Concentrates, consumers might be uncertain as to the value proposition of Ultra Concentrates relative to Standard Concentrates;
(2)confronted by laundry products and packaging of different sizes, at parity or closely equivalent retail prices, consumers may prefer Standard Concentrates in larger packages on the mistaken basis that they represented greater value for money than Ultra Concentrates in smaller packages; and
(3)Colgate would lose sales or market share if Colgate transitioned to Ultra Concentrates while other manufacturers continued to supply Standard Concentrates.
Through a series of meetings, telephone calls and correspondence between Colgate and its competitors throughout 2008, the Withhold Supply Understanding was reached to the effect that each manufacturer would participate in a coordinated transition from Standard Concentrates to Ultra Concentrates in February 2009 and that there would be a uniform in-store supermarket launch of Ultra Concentrates on the same date in March 2009.
From in or around early February 2009, in relation to the supply of laundry detergent products to Woolworths, Coles and Metcash:
(1)Colgate introduced powder and liquid Ultra Concentrate products across each of its brands except Love n Care, and ceased the supply of its previous powder and liquid Standard Concentrate products, save in respect of the sell-down of certain products and the supply of a small number of Standard Concentrate SKUs (stock keeping units) to Metcash and Coles;
(2)Unilever introduced powder Ultra Concentrate products across each of its brands, and ceased the supply of its previous powder Standard Concentrate products, save in respect of the sell-down of certain products; and
(3)Cussons introduced powder Ultra Concentrate products across each of its brands except Down to Earth and some additional liquid Ultra Concentrate products, and ceased the supply of most of its previous powder and liquid Standard Concentrate products, save in respect of the sell-down of certain products and the supply of a small number of Standard Concentrate SKUs to Woolworths, Coles and Metcash.
Colgate admits that Withhold Supply Understanding contained provisions with the substantial purpose of limiting the supply of Ultra Concentrates until in or around February 2009, and of Standard Concentrates from that date, and that supply of these goods was limited as a result.
Further, in 2008, Colgate wished to increase the wholesale price of its laundry products. Mr Ansell, with the apparent but not actual authority of Colgate, communicated to representatives of Unilever confidential and commercially sensitive information about the price of Colgate’s laundry detergents including Colgate’s proposed price increases. Unilever increased the wholesale list prices of specific laundry detergent products supplied by it with effect from 10 November 2008. Unilever decided to implement these price increases after receiving information from Mr Ansell to the effect that Colgate was going to introduce its own price increases. Colgate increased the wholesale list prices of specific laundry detergent products supplied by it with effect from 17 November 2008.
Colgate admits that by reason of these circumstances, and in contravention of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the TPA, it entered into the Laundry Information Sharing Understanding and the Laundry Information Sharing Provision which had the effect of controlling the price of laundry detergents supplied by Unilever in November 2008 and is thereby deemed by s 45A of the TPA to have had the purpose or effect, or been likely to have the effect, of substantially lessening competition in the laundry detergent market.
Discussion
In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476, the High Court held that the Building and Construction Industry Improvement Act 2005 (Cth), by providing for civil penalties, “implicitly assumes the application of the general practice and procedure regarding civil proceedings and eschews the application of criminal practice and procedure” (at [62]). As a result a court should be no “less willing to receive a submission as to the terms and quantum of penalty in a civil penalty proceeding than to receive a submission as to the terms and quantum of relief put up for approval by the court in any other kind of civil proceeding” (at [61]). In so deciding, French CJ, Kiefel, Bell, Nettle and Gordon JJ observed that:
(1)“Civil penalty proceedings are civil proceedings and therefore an adversarial contest in which the issues and scope of possible relief are largely framed and limited as the parties may choose” (at [53]);
(2)“…the purpose of a civil penalty… is primarily if not wholly protective in promoting the public interest in compliance” (at [55]);
(3)“…in civil proceedings there is generally very considerable scope for the parties to agree on the facts and upon consequences. There is also very considerable scope for them to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy…it is entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate” (at [57]);
(4)“…there is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers” (at [46]);
(5)“…the court is not bound by the figure suggested by the parties. The court asks “whether their proposal can be accepted as fixing an appropriate amount” and for that purpose the court must satisfy itself that the submitted penalty is appropriate” (at [48]);
(6)“Subject to the court being sufficiently persuaded of the accuracy of the parties' agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and…highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty” (at [59]);
(7)“…the regulator in a civil penalty proceeding is not disinterested…That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. …it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance” (at [60]);
The admitted facts sufficed to establish the existence of the contraventions.
Power to make the orders was not in doubt.
The appropriateness of the orders, to my mind, was manifest.
First, the joint submissions filed by the parties disclosed the careful consideration which the regulator, the Australian Competition and Consumer Commission (the ACCC), had given to the facts constituting the contraventions of the TPA, the consequences of those contraventions and the significance of those consequences, as well as the level of penalty necessary to achieve compliance with the relevant provisions having regard to the maximum penalties capable of being imposed, described as:
a)in respect of the contraventions referred to in paragraphs 1 and 2 of the Proposed Consent Order [now order 6(a)], the maximum pecuniary penalty is AUD$51.2 million, being 10% of Colgate’s turnover for the 12 months ending on 28 February 2009 of AUD$512.427 million; and
b)in respect of the contraventions referred to in paragraphs 3 and 4 of the Proposed Consent Order [now order 6(b)], the maximum pecuniary penalty is AUD$50.2 million, being 10% of Colgate’s turnover for the 12 months ending on 30 September 2008 of AUD$502.226 million.
Second, I accepted the joint submissions that once a court is satisfied that it has power to make the proposed orders and that those orders, including any pecuniary penalty, are appropriate, the desirability of doing so was reinforced in the present case by reason of the fact that the consenting parties are sophisticated, legally represented, and well able to understand and evaluate the desirability of the settlement.
Third, the joint submissions disclosed that the parties had identified and evaluated all relevant factors including those specified by s 76(1) of the TPA and as developed by judicial consideration.
Fourth, the evaluation disclosed in the joint submissions was demonstrably consistent with the principal object of a civil penalty, being to achieve compliance by way of deterrence, both specific and general. Of particular relevance to the need for deterrence in the present case is the agreed submission that Colgate obtained a number of benefits from the contravening conduct relating to the transition to Ultra Concentrates in that the unlawful conduct:
a)reduced or eliminated the risk of Colgate’s powdered Ultra Concentrate products, and to a lesser degree its liquid Ultra Concentrate products, competing with Standard Concentrate products supplied by either or both of the other two major suppliers;
b)reduced or eliminated the risk of consumers preferring Cussons or Unilever’s powdered Standard Concentrates or Cussons’ liquid Standard Concentrates in larger packages, over Colgate’s Ultra Concentrates on the mistaken belief that the larger Standard Concentrates ostensibly represented greater value for money than Colgate’s Ultra Concentrates;
c)reduced or eliminated the risk of loss of sales or market share or of not achieving optimal sales volume levels for Colgate’s Ultra Concentrates as quickly if Unilever or Cussons continued to supply Standard Concentrates; and
d)reduced expenditure on advertising to explain to consumers the value proposition of Ultra Concentrates compared to Standard Concentrates.
Further, by reason of the contravening conduct relating to the Laundry Information Sharing Provision, Colgate eliminated or reduced the risk to it of loss of sales or market share of its laundry detergent products to competitors, particularly Unilever.
Fifth, the joint submissions recognised the seriousness of the contraventions and their potential to harm markets and consumers of products within markets. While the benefits to Colgate could not be quantified, the contraventions meant that consumers paid higher prices for Unilever laundry detergent products and were deprived of having Standard Concentrates and Ultra Concentrates available at the same time. It is also likely that Colgate did gain financially by reason of the contraventions (albeit in an unquantifiable amount), although Mr Ansell did not. Significantly also, it was agreed that:
In 2008, the approximate market shares by volume, within the laundry detergent industry were: Colgate 45%, Cussons 20.5%, and Unilever 19.3%. The approximate markets shares by value were: Colgate 39.7%; Unilever 24.7% and Cussons 19.3%. Put simply, Colgate had the largest market share on any measure within the relevant industry.
Sixth, the joint submissions gave due weight to other relevant considerations including Colgate’s prior relevant conduct (it has not been found to have previously contravened provisions of Part IV of the TPA regarding cartel conduct, but has been found to have to have contravened the resale price maintenance provisions within Part IV of the TPA - see Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2002] FCA 619; (2002) ATPR 41-880). They also recognised that from prior to and during 2008 and 2009, Colgate had an extensive trade practices and competition law compliance programme, and that Colgate’s senior management were unaware of the nature and extent of Mr Ansell’s communications with Mr Campbell in relation to the admitted contraventions. If Colgate’s senior management were aware of those communications, they would have taken immediate disciplinary action against Mr Ansell, including recommending that his employment be terminated. Emphasis should also be given to the joint submissions which recorded that before the commencement of these proceedings, Colgate cooperated with the ACCC in its investigation of these matters, and continued to do so (including by agreeing to contribute $450,000 towards the ACCC’s costs of the proceedings), as did Mr Ansell after the proceedings were commenced. In this regard, I accepted that:
Colgate’s and Mr Ansell’s co-operation with the ACCC has saved the ACCC and the Court (and ultimately the community) the cost and burden of fully litigating these proceedings.
Seventh, and focusing on Mr Ansell, it was agreed that Mr Ansell has no prior relevant conduct. Further, his ability to secure and maintain work since the proceedings commenced in 2013 has been significantly adversely affected by the ACCC's investigation, these proceedings, and the publicity they have received. He is currently unemployed and at age 56 has little to no hope of working in the industry again, and if the proposed disqualification order was made, has no prospect of being engaged in a senior management role.
Taking into account these and all other matters in the SOAFA and joint submissions I accepted the position that was put in these terms:
… each component penalty is appropriate in all the circumstances and that a total penalty of $18 million is likewise appropriate. The parties jointly submit that the Court should be satisfied of this because the proposed penalty as a total or as component parts are:
a)within the permissible range of penalty in all the circumstances, albeit that, unassisted the Court may have selected a slightly different figure; and
b)within what an independent assessment of the appropriate range of penalties would have resulted in.
I also accepted the propriety of not imposing a pecuniary penalty on Mr Ansell having regard to the impact, financial and otherwise, which the proceedings have had on him, his co-operation with the ACCC including agreement to contribute $75,000 towards the ACCC’s costs of the proceedings, and the impact which will result from the disqualification order to which he consented. In respect of that order I accepted the joint submissions that:
a)disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards;
b)the banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office;
c)protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors;
d)the banning order is protective against present and future misuse of the corporate structure;
e)the order has a motive of personal deterrence, though it is not punitive;
f)the objectives of general deterrence are also sought to be achieved;
g)in assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company;
h)longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
i)in assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public;
j)it is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
k)a mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming;
l)the eight criteria to govern the exercise of the court’s powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess:
(i) character of the offenders;
(ii) nature of the breaches;
(iii) structure of the companies and the nature of their business;
(iv) interests of shareholders, creditors and employees;
(v)risks to others from the continuation of offenders as company directors;
(vi) honesty and competence of offenders;
(vii)hardship to offenders and their personal and commercial interests; and
(viii)offenders’ appreciation that future breaches could result in future proceedings;
m)factors which lead to the imposition of the longest periods of disqualification (that is disqualification of 25 years or more) were:
(i) large financial losses;
(ii)high propensity that defendants may engage in similar activities or conduct;
(iii)activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy;
(iv) lack of contrition or remorse;
(v) disregard to law and compliance with corporate regulations;
(vi) dishonesty and intent to defraud;
(vii)previous convictions and contraventions for similar activities;
n)in cases where the period of disqualification ranged from 7-12 years, the factors evident and which lead to the conclusion that these cases were serious though not “worst cases”, included:
(i) serious incompetence and irresponsibility;
(ii) substantial loss;
(iii)defendants had engaged in deliberate courses of conduct to enrich themselves at others’ expense, but with lesser degrees of dishonesty;
(iv)continued, knowing and wilful contraventions of the law and disregard for legal obligations;
(v)lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform;
o)the factors leading to the shortest disqualifications, that is disqualifications for up to 3 years were:
(i)although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated;
(ii)the defendants had no immediate or discernible future intention to hold a position as manager of a company;
(iii)in ASIC v Donovan (1998) 28 ASCR 583 at 602, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings.
As the joint submissions disclosed, the proposed banning order will prevent Mr Ansell from managing a corporation for seven years and, based on information provided by Mr Ansell, will effectively:
a)have a financial effect extending beyond any penalty which could be awarded against Mr Ansell as it translates into an effective amount of up to $2.8 million, on the basis that Mr Ansell is unable to earn an income of up to $400,000 per year for seven years;
b)prevent him from working in a management role in an industry he has worked in for nearly three decades; and
c)take him through to retirement given he is currently 56 years of age, and require him to live on his life savings.
Otherwise, I accepted that it was appropriate to make the declarations and orders as the parties proposed, including that Colgate update its compliance and education/training program. As the joint submissions said, s 86C of the TPA empowers the Court to make such an order. The purpose of compliance orders and the matters that must be assessed by the Court in reviewing a proposed order and determining whether they are within power and appropriate were summarised by Gordon J in Australian Competition and Consumer Commission v Sontax Australia (1988) Pty Ltd [2011] FCA 1202 at [36] as follows:
The purpose of a probation order is to ensure a company-wide awareness of responsibilities and obligations in relation to the contravening conduct or similar or related conduct: Australian Competition and Consumer Commission v Anglo Estates Pty Ltd [2005] FCA 20; (2005) ATPR 42-044 at [46]. There must be a nexus between the terms of the compliance program and the contravening conduct: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) ATPR 42-138 at [96]. The compliance program should set out the steps to be taken with sufficient clarity so that it is able to be performed. It should also be in the public interest that the respondent undertake the program: LG Electronics Australia [2006] FCA 1118 at [14].
Finally, I should explain that proposed declarations 1 and 2 were deferred because they referred to Woolworths and Cussons which have not made admissions necessary to found those declarations. This approach, proposed by the parties, reflects the position previously adopted in various other decisions of this court (for example, Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; (1999) 95 FCR 114 at [38]; Australian Competition and Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5; (2008) ATPR 42-212 at [49]-[50], and Australian Competition and Consumer Commission v Australian Medical Association (Western Australian Branch) Inc [2001] FCA 1471; (2001) 114 FCR 91).
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 16 May 2016
SCHEDULE OF PARTIES
NSD 2510 of 2013 Respondents
Fourth Respondent:
WOOLWORTHS LIMITED ACN 000 014 675
ANNEXURE - STATEMENT OF AGREED FACTS AND ADMISSIONS
Statement of Agreed Facts and Admissions
by the Applicant and First and Third Respondents
(21 March 2016)A. Introduction
1This Statement of Agreed Facts and Admissions (SAFA) is made for the purposes of section 191 of the Evidence Act 1995 (Cth) (Evidence Act) jointly by the Applicant, the Australian Competition and Consumer Commission (ACCC), the First Respondent, Colgate-Palmolive Pty Ltd (Colgate), and the Third Respondent, Paul Ansell (Ansell).
2This SAFA concerns conduct that took place in 2008 and early 2009 in relation to:
(1)the transition by Colgate, PZ Cussons Australia Pty Ltd (Cussons), and Unilever Australia Limited (Unilever) from standard-concentrated laundry detergents (Standard Concentrates) to ultra-concentrated laundry detergents (Ultra Concentrates); and
(2)the sharing between Colgate and Unilever of confidential and commercially sensitive information relating to the pricing of their laundry detergent products.
3This document identifies the facts relevant to the contraventions admitted by Colgate and Mr Ansell for the purpose of these proceedings only. The facts agreed to, and the admissions made, are agreed to and made for the purpose of these proceedings only and do not constitute any admission outside the context of these proceedings.
4For the purposes of these proceedings only, Colgate admits that:
(1)in contravention of s 45(2)(a)(i) of the Trade Practices Act 1974 (Cth) (TPA), Colgate entered into an understanding with Cussons and Unilever (the Withhold Supply Understanding) containing provisions with the substantial purpose of limiting the supply to Woolworths Limited (“Woolworths”), Coles Group Pty Ltd (“Coles”) and Metcash Limited (Metcash) of:
(a)Ultra Concentrates until in or around February 2009; and
(b)Standard Concentrates from in or around February 2009 (the Withhold Supply Provisions),
being exclusionary provisions within the meaning of section 4D of the TPA;
(2)in contravention of s 45(2)(b)(i) of the TPA, Colgate gave effect to the Withhold Supply Provisions by limiting the supply of:
(a)Ultra Concentrates to Woolworths, Coles and Metcash until in or around February 2009; and
(b)Standard Concentrates to Woolworths, Coles and Metcash from in or around February 2009;
(3)in contravention of s 45(2)(a)(ii) of the TPA, Colgate entered into an understanding with Unilever (the Laundry Information Sharing Understanding) containing a provision that they would share with each other confidential and commercially sensitive information relating to the price of their laundry detergent products (the Laundry Information Sharing Provision), which provision had the effect of controlling the price of laundry detergents supplied by Unilever in November 2008, within the meaning of section 45A(1) of the TPA, and is therefore deemed by section 45A of the TPA to have had the purpose, effect or likely effect of substantially lessening competition in the market in Australia for the wholesale supply of powdered and liquid laundry detergent products for domestic use within the meaning of section 45(2) of the TPA; and
(4)in contravention of section 45(2)(b)(ii) of the TPA, Colgate gave effect to the Laundry Information Sharing Provision by sharing confidential and commercially sensitive information regarding the price of Colgate’s laundry detergent products with Unilever in 2008.
5For the purposes of these proceedings only, Mr Ansell admits that he was directly or indirectly, knowingly concerned in or party to, and involved in, the contraventions admitted by Colgate referred to in paragraph 4 herein within the meaning of sections 76(1)(e) and 86E(1) of the TPA.
6Colgate and Mr Ansell note that no admissions are made by either of them regarding:
(1)the effect or likely effect upon competition of the Withhold Supply Understanding or any related conduct;
(2)the purpose or actual effect or likely effect upon competition of the Laundry Information Sharing Understanding or any related conduct; and
(3)any other contraventions of the TPA or conduct alleged by the ACCC in these proceedings other than as dealt with in this SAFA.
7For the purposes of s 191(3)(a) of the Evidence Act, the parties have reached agreement as to the terms of relief to be sought from the Court to resolve the proceedings. The parties acknowledge that, under s 76 of the TPA, it is for the Court to determine whether the contraventions occurred and the quantum of any pecuniary penalties and other relief that should be ordered.
8The ACCC, Colgate and Mr Ansell respectfully request that the Court make orders in the form set out in the attached draft orders which include the following:
(1)declarations;
(2)pecuniary penalties to be paid by Colgate;
(3)an order that Colgate will implement an updated compliance program;
(4)an order that Mr Ansell will be disqualified from managing any corporation for a period of 7 years; and
(5)contributions to the ACCC’s costs.
B. Parties
9The ACCC is a body corporate established by section 6A of the Competition and Consumer Act 2010 (Cth) (CCA), which was named the TPA prior to 1 January 2011, and is entitled to sue in its corporate name.
10Colgate:
(1)was and is an Australian proprietary company, limited by shares, registered in New South Wales; and
(2)is able to be sued.
11During the period 1 January 2008 to 31 December 2009, Colgate:
(1)was carrying on business within Australia in the manufacture, wholesale supply and marketing of a diversified range of fast moving consumer goods, including laundry products;
(2)manufactured powdered and liquid laundry detergents for wholesale supply within Australia; and
(3)engaged in the wholesale supply and marketing within Australia of domestic powdered and liquid laundry detergent products under certain brand names.
12Colgate no longer owns any laundry detergent brands in Australia, having sold its entire range of laundry detergents and pre-wash brands in Australia and New Zealand in 2015.
13Mr Ansell:
(1)was, between 1 January 2008 and 31 December 2009, Customer Development Director, Australia, also known as Sales Director, within Colgate;
(2)in his role as Customer Development Director, was, at all material times, amongst other things:
(a)one of the senior people at Colgate who together had responsibilities for decision-making in respect of marketing, supply and pricing of laundry products manufactured and supplied by Colgate;
(b)had overall responsibility for liaising with Colgate’s retailer customers, including Woolworths, Coles and Metcash, in respect of laundry products;
(3)was, between 1 January 2008 and 31 December 2009, a member of Colgate’s Management Committee;
(4)in engaging in the conduct set out herein:
(a)had the apparent authority of Colgate; and
(b)as a result, was, and acted as, an agent of Colgate; and
(c)is able to be sued.
14For the avoidance of doubt, in this SAFA:
(1)Woolworths does not include Big W; and
(2)Coles does not include K-Mart.
C. Facts relevant to liability
15Throughout 2008 and 2009, consumers within Australia acquired powdered and liquid laundry detergents for domestic use in front-load and top-load washing machines, and for hand washing, to clean fabrics.
16Throughout 2008 and 2009:
(1)approximately two thirds of the annual volume of laundry detergents sold in Australia comprised powdered laundry detergents; and
(2)approximately one third comprised liquid laundry detergents.
17Throughout 2008 and 2009, Colgate, Cussons and Unilever were the largest wholesale suppliers of laundry detergents in Australia, with a combined market share, measured both by value and by volume, of approximately 80%.
18Throughout 2008 and 2009, Colgate, Cussons and Unilever, along with other wholesale suppliers of laundry detergents in Australia, made laundry detergent products available for sale to:
(1)retailers within Australia, including Woolworths and Coles; and
(2)wholesalers within Australia, including Metcash.
Other retailers or wholesalers to whom at least some suppliers made laundry detergents available included Big W, K-Mart, Franklins, Statewide Independent Wholesalers, API, Sigma, Symbion, Priceline and smaller independent retailers. From time to time, particular laundry detergent products were supplied on an exclusive basis to a particular retailer.
19Throughout 2008 and 2009, most grocery product categories were reviewed within Woolworths and Coles, including the laundry detergent category. Most new products, including laundry detergent products, would ordinarily only be accepted for supply or introduced in stores by Woolworths and Coles at “category review” dates set by Woolworths and Coles. Category reviews for each major grocery category, including laundry detergents, were undertaken by Woolworths and Coles at least annually, but usually involved a “major” and a “minor” review, generally 6 months apart.
20Throughout 2008 and 2009, Colgate, Cussons, Unilever and other laundry detergent suppliers (including Kao Australia Pty Ltd (Kao) and Amway of Australia Pty Ltd (Amway)) were members of Accord Australasia Limited (Accord), the national industry association for the Australasian hygiene, cosmetic and specialty products industry.
21Mr Ansell was not a representative of Colgate at Accord and did not participate in any Accord meetings on behalf of Colgate.
22Throughout 2008, wholesale suppliers of laundry detergents in Australia, including Colgate, Cussons and Unilever, were experiencing rising costs of manufacturing laundry detergents, including increasing costs of sodium tripolyphosphate (STPP), an input for the production of powdered laundry detergents. Further, those suppliers were also experiencing extensive competition on the price of laundry detergents supplied by them, particularly in relation to retail promotional prices.
23Throughout 2008 and 2009, the majority:
(1)by volume;
(2)units sold; and
(3)value,
of the retail sales of laundry detergent products in Australia, including Colgate’s, Cussons’ and Unilever’s laundry detergent products, were retail sales at promotional prices.
Concentration of laundry detergents
24References in this SAFA to concentration of laundry detergents are references to a process of reducing the volume and/or weight of a laundry detergent product but retaining the level of active ingredients in a way that maintains (or approximately maintains) product performance.
25The term Standard Concentrates is used in this SAFA to refer to laundry detergents sold within Australia for domestic use during some or all of 2008 and 2009 that were:
(1)in the case of powdered laundry detergents, standard concentrated high density detergents, sometimes referred to within Colgate as SCHDDs or super concentrates; and
(2)in the case of liquid laundry detergents, heavy duty liquid laundry detergent products, sometimes referred to within Colgate as HDLs.
26A list of particular Standard Concentrate products is set out in Annexure A to this SAFA.
27The term Ultra Concentrates is used in this SAFA to refer to laundry detergents sold within Australia for domestic use, during some or all of 2008 and 2009, that were more highly concentrated than Standard Concentrates.
28A list of particular Ultra Concentrate products is set out in Annexure B to this SAFA.
29Prior to February 2009:
(1)the majority of powdered and liquid laundry detergent products sold within Australia for domestic use comprised Standard Concentrates; and
(2)a smaller proportion of laundry detergent products sold within Australia for domestic use were Ultra Concentrates.
30In particular, prior to February 2009:
(1)in respect of powdered laundry detergents:
(a)Cussons only supplied powdered Standard Concentrates;
(b)in the case of Unilever’s supplies:
1.(A) the large majority were powdered Standard Concentrates;
2.(B) a small proportion of its powdered laundry detergents were less concentrated than Standard Concentrates.
(c)in the case of Colgate’s supplies:
3.(A) the large majority were powdered Standard Concentrates;
4.(B) a small proportion of its powdered laundry detergents were less concentrated than Standard Concentrates, sometimes referred to within Colgate as low density powders (LDPs). During 2008, these were not supplied to Woolworths or Coles for retail sale in supermarkets; and
5.(C) a very small proportion were powdered Ultra Concentrates.
(2)in respect of liquid laundry detergents:
(a)Colgate only supplied liquid Standard Concentrates;
(b)Cussons only supplied liquid Standard Concentrates until around January 2008, when it commenced supply of liquid Ultra Concentrates in addition to continuing to supply liquid Standard Concentrates; and
(c)Unilever only supplied liquid Standard Concentrates until around January 2008, when it commenced supplying liquid Ultra Concentrates and commenced ceasing supply of liquid Standard Concentrates.
31The remaining Standard Concentrate products supplied by Colgate, Cussons and Unilever to Woolworths, Coles and Metcash for domestic use within Australia were, with minor exceptions, transitioned to Ultra Concentrate products commencing from in or around February 2009. Colgate and Cussons continued to supply a small number of Standard Concentrate products to Woolworths, Coles and Metcash after February 2009.
32A list of particular Ultra Concentrate products supplied by Colgate, Cussons and Unilever from in or around February 2009 vis-à-vis the previous equivalent Standard Concentrate products is set out in Annexure C to this SAFA.
The market for laundry detergent in Australia
33Throughout 2008 and 2009:
(1)powdered and liquid laundry detergents, for domestic use, were reasonably substitutable for, or in close competition with, each other; and
(2)Standard Concentrate products and Ultra Concentrate products, for domestic use, were reasonably substitutable for, or in close competition with, each other.
34There was, at all material times, within the meaning of section 4E of the TPA, a market in Australia for the wholesale supply of powdered and liquid laundry detergent products for domestic use (the laundry detergent market).
35Colgate, Cussons and Unilever were:
(1)at all material times, in competition with each other within the meaning of section 45(3) of the TPA; and
(2)at all material times, competitive with each other within the meaning of section 4D of the TPA;
within the laundry detergent market.
Key personnel
36Details of key personnel referred to in this SAFA are set out in Annexure H.
Background to Colgate’s introduction of Ultra Concentrates
37By late 2007, suppliers of laundry detergents in some other countries, including the United States, had transitioned to supplying more highly concentrated laundry detergents. By at least mid-2007 Colgate understood that, in the United States as part of a sustainability initiative, Walmart (a retailer) had set a date beyond which it would no longer accept non-concentrated laundry detergents from manufacturers and that, as a result of this initiative, all major manufacturers of laundry detergents in the United States decided to transition their laundry detergents to more highly concentrated detergents nationally.
38Colgate considered that a move by it to replace its Standard Concentrates with Ultra Concentrates, or a move by all suppliers and retailers of laundry detergents from Standard Concentrates to Ultra Concentrates across all laundry detergents brands sold within Woolworths, Coles and Metcash, would be likely to achieve the following benefits:
(1)significant cost savings and gross margin improvements for Colgate (if it moved), as a consequence of reduced expenditure on ingredients, packaging, transport and other logistics;
(2)Colgate’s customers, including Woolworths, Coles and Metcash, would be:
(a)likely to be able to achieve lower internal logistics and packaging costs, with resulting gross margin improvements; and
(b)able to reduce the shelf-space required for laundry detergent products, thereby creating additional shelf space for laundry detergents or for other products;
(3)benefits to consumers, including reduced weight and reduced environmental impact; and
(4)environmental benefits, including through reductions in the use of materials for packaging and transport volumes, with attendant reductions in carbon emissions.
39Colgate considered that:
(1)but for a simultaneous industry wide transition of those laundry detergents that had not yet been replaced with Ultra Concentrates, there was a risk that consumers might be uncertain as to the value proposition of Ultra Concentrates relative to Standard Concentrates. However, Colgate also considered that this risk might be managed to some degree by Colgate by communications at store level and in advertising as to the value proposition of Colgate’s yet to be introduced Ultra Concentrates relative to Standard Concentrates;
(2)there was a risk that, confronted by laundry products and packaging of different sizes, at parity or closely equivalent retail prices, consumers may prefer Standard Concentrates in larger packages on the mistaken basis that they represented greater value for money than Ultra Concentrates in smaller packages. However, Colgate also considered that this risk might be managed to some degree by Colgate by communications at store level and in advertising as to the value proposition of Colgate’s yet to be introduced Ultra Concentrates relative to Standard Concentrates;
(3)there was a risk that Colgate’s Ultra Concentrates may not have achieved as high sales if Standard Concentrates continued to be sold by its competitors due to the risks referred to in paragraphs 39(1) and 39(2) above. However, Colgate also considered that those risks might be managed to some degree by Colgate by communications at store level and in advertising as to the value proposition of its Ultra Concentrates relative to Standard Concentrates; and
(4)there was a risk that if Colgate transitioned to Ultra Concentrates while other manufacturers continued to supply Standard Concentrates, Colgate would lose sales or market share but that it would still achieve increased profits and margins.
40As of late 2007, Colgate’s preference was to have an industry wide transition from Standard Concentrates to Ultra Concentrates, led by a retailer or industry body initiative. However, by at least mid-2008, Colgate would have moved, or was likely to have moved, to replace its Standard Concentrates to Ultra Concentrates in early 2009 in the absence of an industry wide transition or the Withhold Supply Understanding, although that transition may not have occurred at the same time as the other manufacturers’.
8 January 2008 meeting of Colgate (including Paul Ansell) and Woolworths
41On 8 January 2008, a meeting was held that was attended by representatives of Colgate and Woolworths.
42The meeting was attended by:
(1)Paul Ansell, Sean Bone, Eric Jeanmaire, Nick Ryan, Adam Simmons and Simon Russell, as representatives of Colgate; and
(2)James Aylen, Gordon Duncan and Stan Fuchs, as representatives of Woolworths.
43Adam Simmons of Colgate prepared the Negotiating Tool Kit document COL.800.001.2597 prior to that meeting.
44The following documents were presented by representatives of Colgate at that meeting:
(1)COL.505.007.2566, being a document entitled ‘Colgate-Palmolive ultra detergents update’ (Ultra Detergents Update); and
(2)COL.703.004.1540, being a document entitled ‘Colgate-Palmolive ultra detergents update’ which was provided to James Aylen, Gordon Duncan and Stan Fuchs of Woolworths at the meeting.
45At the meeting, representatives of Colgate made statements orally and through slides to the effect of the following statements contained in the Ultra Detergents Update:
(1)“Recommend full category transition in January 2009” (slide 32);
(2)“Non-partisan category initiative” (slide 32);
(3)“Historically, partial transitions have either 1. Required > 10 years to achieve critical mass, or 2. Failed outright” (slide 33);
(4)“Both outcomes risk significant consumer confusion / rejection” (slide 33);
(5)“Staggered transitions promote ASP [Average Selling Price] decline – permanent price reductions to encourage trial, eroding category value” (slide 33);
(6)“Wal-Mart highlights a new paradigm for transition - All vendors to agree to transition by fixed date, Opportunity for industry sustainability initiative, Deliver significant environmental savings while reinvigorating category” (slide 33);
(7)If the transition to Ultra Concentrates was staggered, rather than simultaneous, Colgate’s estimate was that the value of:
(a)the laundry detergent category in Woolworths would be an estimated $62 million lower in total over the calendar years 2008 to 2013 (slide 38); and
(b)the “national detergent market value” would be an estimated $146 million lower in total over the calendar years 2008 to 2012 (slide 39);
(8)“Parity or better performance versus current, at half the dose weight” (slide 42);
(9)“Household Laundry Detergent Environmental PROPOSAL
Overview
Proposal to AFGC and/or ACCORD as enablers to an industry-wide, non-partisan sustainability initiative with agreement to transition to higher concentration formulas by end-January 2009
Scale and Scope
It is intended for this agreement to cover all manufacturers of laundry detergent in Australia and New Zealand (recognising near-universal common supply) and all retailers and wholesalers of those detergents. This includes, but is not limited to: 1. Woolworths Pty Ltd; 2. Coles Group Pty Ltd; 3. Metcash Pty Ltd; 4. Unilever Australasia; 5. Colgate-Palmolive Pty Ltd; 6. PZ Cussons Australia Pty Ltd.”” (slide 53);
(10)“Enable the rapid understanding, acceptance and adoption of this new generation of detergents, with a common goal of facilitating the transition of the entire detergent market to this more environmentally sustainable format in 2009. – Extract from draft Colgate-Palmolive Sustainability Proposal” (slide 58);
(11)“Propose all suppliers and retailers commit to full Ultra transition” (slide 60);
(12)“Target January 2009 transition (allow 12 months for development)” (slide 60);
(13)“Key success factors”, “Full category transition to Ultra concentrates - Powders and liquids” and “All vendors to align on category initiative - Trade partner or industry body to lead; Agreed transition date” (slide 63); and
(14)“Next Steps”, including that:
(a)“Woolworths: Confirm Jan 2009 transition plan”, “Seek stakeholder feedback from other vendors” and “Confirm timeline viability”; and
(b)“Colgate-Palmolive: Pursue legal approval for proposed industry sustainability initiative” (slide 64).
46At the meeting with Colgate on 8 January 2008:
(1)Woolworths’ response was to the following effect:
(a)“We will be very happy to support you, to stand up in a profession meeting and say that it sounds a very good way to do it, but not beyond this”;
(b)“We are 100% behind you”;
(c) “Next steps” included “Get the legal approvement to start the process particularly with industry approach”; and
(d)“Your timing is good: aligned with the 2009 category review timing (january)”;
(2)Woolworths agreed that Colgate would keep it informed of all steps in respect of the proposal; and
(3)Woolworths agreed that the proposed industry wide transition is good for the suppliers and good for the retailers.
47On 8 January 2008 at 8:22 pm, Eric Jeanmaire of Colgate sent the email COL.505.001.0935, attaching COL.505.001.0936 being a document entitled ‘WW Detergent ultra meeting minutes 8 jan [sic] 08’, to Paul Ansell and other Colgate recipients.
48On 9 January 2008 at 12:38 pm, Paul Ansell of Colgate sent the email COL.501.006.9791, attaching a copy of the minutes, to Andrea Lagioia and Andrew Shepard of Colgate. In Mr Ansell’s email, he said:
“We met with Wow yesterday to excite them on CP Ultra launch in Jan 2009
To quote them "no need to sell concept, we are on same page"
Sean Bone did a very good presentation
They also shared what a great job the light bulb industry has done
They also guided that we must have a PR response plan ready to answer potential media challenge
The net issue is that they WILL NOT provide retailer leadership in the same way as Walmart US has done. (this is what we were trying to acheive [sic])
They will be supportive on our launch, they will share and encourage others ( if we wish) but they WILL NOT take punitive action against any supplier who does not convert to Ultras in 2009.
They highlighted that Unilever and Cussons were showing leadership and taking risks in liquid currently and we can jump onto this now in liquids !”
8 January 2008 internal Unilever email
49On 8 January 2008 at 11:46 am, Dana Buchanan of Unilever sent the email UAL.006.0005.0119, attaching UAL.006.0005.0124 being a document entitled ‘NPD Brief_ Faster 8.01.08’, to Kerry Lynch of Unilever, copied to other Unilever recipients including Geoffrey Bellingham and Michelle Katz.
10 March 2008 meeting of Colgate and Accord
50A meeting was held on 10 March 2008 and attended by representatives of Colgate and Accord.
51The meeting was attended by:
(1)Sean Bone, Andrea Lagioia, Andrew Shepard and Sarah Whitaker of Colgate;
(2)Craig Brock and Bronwyn Capanna of Accord.
52Colgate prepared the following documents for the purposes of that meeting:
(1)the attachments to the email COL.530.001.1176 from Sean Bone sent on 29 February 2008 at 1:36 pm:
(a)COL.530.001.1177, being a document entitled ‘Household Laundry Detergent Environmental Policy (HLDEP) PROPOSAL’ (Colgate HLDEP Proposal);
(b)COL.530.001.1181, being a document entitled ‘Household Laundry Detergent Environmental Policy Proposal - avoiding TPA issues’; and
(c)COL.530.001.1182, being a document entitled ‘Ultra detergents sustainability initiative - Notes for discussion with Executive Director of ACCORD’; and
(2)the attachments to the email COL.561.001.1433 from Sean Bone sent on 10 March 2008:
6.(i) COL.561.001.1434, being a slideshow presentation entitled ‘household detergents sustainability initiative’; and
7.(ii) COL.561.001.1539, being a ‘key points’ summary page.
53The Colgate HLDEP Proposal was presented by representatives of Colgate at that meeting.
54The matters discussed at that meeting included, but were not necessarily limited to, the matters recorded in the following documents:
(1)COL.530.001.1182, being a document entitled ‘Ultra detergents sustainability initiative - Notes for discussion with Executive Director of ACCORD’;
(2)the Colgate HLDEP Proposal;
(3)COL.505.001.5170, being an email from Sean Bone to Colgate recipients on 10 March at 5:55 pm; and
(4)COL.521.002.0140, being an email from Sarah Whitaker to Colgate recipients on 19 March 2008.
55The Colgate HLDEP Proposal included the following statements:
(1)“Proposal to ACCORD as an enabler to an industry-wide, non-partisan sustainability initiative with non-mandatory agreement to transition to higher concentration detergent formulas by end-January 2009” (Page 1).
(2)“It is recognised that the best case scenario is for this agreement to be voluntarily entered into by all manufacturers of laundry detergent in Australia and New Zealand (recognising near-universal common supply) and all retailers and wholesalers of those detergents. This includes, but is not limited to:
1. Woolworths Pty Ltd
2. Coles Group Pty Ltd
3. Metcash Pty Ltd
4. Unilever Australasia
5. Colgate-Palmolive Pty Ltd
6. PZ Cussons Australia Pty Ltd
The agreement would of course be non mandatory.” (Page 2)
(3)“It is proposed that participants in this scheme will (1) Agree to adopt voluntary agreement to transition all currently non-complying laundry detergents by an agreed date in 2009” (Page 4).
(4)“Shelf impression (pack size) is recognised as a key area of competitive advantage in this market, due to its potential to influence the consumer price / value perception. As the key to improved sustainability is in reduced packaging it is proposed that a fixed duration (ie 12 month) non-partisan certification be adopted to ensure compliance with the above definition of sustainable concentration. While imposing a temporary constraint on market players, this action would in no way lessen the high and sustained level of competition already present in this market. It would however have the benefit of addressing the risk of non-compliant products being introduced during the time of the agreement. This will deter the incidence of misleading and deceptive conduct such as simply moving to a smaller dosage, without comparable increase in overall performance. Equally it will preclude attempts to gain a competitive advantage through reducing the density of products, such that while weight is reduced there is not a commensurate reduction in actual product volume/size, which would significantly lessen the intended benefit of concentration.” (Pages 2-3).
(5)“…this will need some visual reference for consumers and competitors, to ensure a fully informed market…This will allow clear, non-partisan communication of the sustainability benefit, rewarding those who comply and highlighting those products that do not comply or who may seek to engage in misleading or deceiving consumers.… This submission proposes this to 'enable' the rapid understanding, acceptance and adoption of this new generation of detergents, with a common goal of facilitating the transition of the entire detergent market to this more environmentally sustainable format in 2009. It is envisaged that common labelling and compliance stay in effect only so long as necessary to establish the initiative fully and permanently in the marketplace. This is likely to be no more than 18 months from first appearance on pack, or as agreed by parties to this agreement.” (Pages 3-4).
(6)“Next Steps” included “Target in-principal [sic] agreement from all suppliers and distributors – end Apr-08” and “All products transitioned to sustainable concentration by agreed date in 2009” (Page 4).
56At the meeting, Colgate made statements to Accord to the following effect:
(1)“Colgate-Palmolive has developed a proposal for an industry wide sustainability initiative in relation to higher concentration detergent formulas. We would like ACCORD to act as enabler for this initiative, based on its experience as enabler of the existing Phosphate labelling agreement.”
(2)“The initiative would involve industry participants agreeing, on a voluntary basis, to transition to higher concentration laundry detergent formulas by the end of January 2009. Industry participants would include Woolworths, Coles Group, Metcash, Unilever Australasia and PZ Cussons Australia as well as Colgate-Palmolive. The initiative would, however, be open to other industry or relevant participants.”
(3)“The change to detergent concentrations would be accompanied by the introduction of non-partisan certification to ensure compliance with standards”
(4)“Common labelling would stay in effect only for as long as is necessary to permanently establish the initiative, probably for no more than 18 months”.
57At the meeting, it was agreed that Accord would:
(1)take the Colgate HLDEP Proposal to the General Managers of each manufacturer of household laundry detergents using a proposal that was not attributed to Colgate; and
(2)organise and facilitate a meeting of household laundry detergent manufacturer General Managers to seek agreement and alignment on a proposal in similar terms to the Colgate HLDEP Proposal without attributing it to Colgate.
58Mr Bone’s email on 10 March 2008, sent immediately after meeting with Accord stated: “Obviously the critical element is to understand the interest among Unilever, PZ Cussons and all the other players, and their stance on timings. Still shooting for January 2009 as our 'best case'.”
18 April 2008 email from Accord to Colgate, Cussons, Unilever and others
59On 18 April 2008, at 2:32 pm, Bronwyn Capanna of Accord sent the email ACR.001.001.0012 to:
(1)Andrea Lagioia of Colgate;
(2)George Fatouros of Cussons;
(3)Jennifer Moss of Unilever;
(4)Doug French of Kao; and
(5)Ian Gamble of Amway.
60The email attached ACR.001.001.0013, being a document entitled ‘Household Laundry Detergent Sustainability Initiative (Proposal)’ (Accord Proposal). The Accord Proposal was similar to the Colgate HLDEP Proposal, but it was titled “Household Laundry Detergent Sustainability Initiative”, it did not identify Colgate as the author, and the “Scale and Scope” section did not refer to retailers and wholesalers being parties to the proposed voluntary agreement. In particular, the Accord Proposal includes the parts of the Colgate HLDEP Proposal quoted in paragraph 55 above, except that:
(1)in relation to the extract quoted at paragraph 55(1) above, the words “Proposal to ACCORD as an enabler to” were replaced with “ACCORD has been approached to enable” and “detergent formulas” were replaced with “household laundry detergent products”; and
(2)in relation to the extract quoted at 55(2) above, the words “and New Zealand” were deleted, the words “and all retailers and wholesalers” were replaced by “with the support of all retailers and wholesalers” and the list of proposed parties was Amway, Colgate, Kao, Cussons and Unilever.
28 April 2008 visit to Unilever Centre of Excellence by Woolworths in the United States
61On 28 April 2008, representatives of Unilever and Woolworths were present at a North American study tour organised between the two companies.
62The representatives of Unilever and Woolworths attending the North American study tour on 28 April 2008 were:
(1)James Aylen, Gordon Duncan and Brad McCarry of Woolworths; and
(2)Ken Basha, Peter Campbell and David McNeil of Unilever.
63On 28 April 2008, those representatives attended Unilever’s Centre of Excellence, located in New Jersey in the United States of America.
64At Unilever’s Centre of Excellence on 28 April 2008, the Unilever and Woolworths representatives attended a number of different sessions with representatives of Unilever USA, including:
(1)a presentation on new health and beauty products; and
(2)a briefing in respect of the launch of ultra concentrated laundry products in North America.
30 April 2008 meeting of Colgate, Cussons, Unilever and others
65A meeting was held on 30 April 2008 and attended by representatives of Colgate, Cussons, Unilever, Amway and Accord.
66The meeting was attended by:
(1)Andrea Lagioia of Colgate;
(2)George Fatouros of Cussons;
(3)Jennifer Moss of Unilever;
(4)Ian Gamble of Amway; and
(5)Craig Brock and Bronwyn Capanna of Accord.
67During that meeting, the attendees discussed the Accord Proposal, which was attached to the email sent to them by Accord on 18 April 2008.
68On 23 July 2008, Bronwyn Capanna sent the email UAL.008.0001.1323.
69The matters discussed and outcomes of that meeting included the matters recorded in that email UAL.008.0001.1323.
70In particular, the email noted the following “draft outcomes of the meeting held Wednesday 30th April 2008”:
“Companies were asked to express their initial views. Colgate Palmolive indicated that they had been the authors of the original proposal put to ACCORD, as historically the Australian market had been slow to move to concentrated format, and there were believed to be considerable environmental advantages and benefits of promoting to much more ‘ultra’ concentrated formulations, including reduced use of packaging and transport resources.
In summary the consensus of those present at the meeting was:
· In principle support was provided, noting that the project should be a part of ACCORD’s overarching sustainability framework and a component of the Washwise initiative …
· Any such code needs to be open to members and non-members, voluntary, and compliant with the Trade Practices Act…
· Specifics need to be considerably reviewed and redrafted e.g. needs to be simplified, less prescriptive, original timing is unrealistic, and a communication campaign would need to be better developed…
· Proposal should be recast into preferably a one/two page document, reviewed by the CEOs of this group prior to being sent for subsequent review by our lawyers Middleton’s
· Proposal then to be taken up with ACCC for discussion”.
15 May 2008 meeting of Colgate (including Paul Ansell) and Woolworths
71A meeting was held on 15 May 2008 and attended by representatives of Colgate, including Paul Ansell, and Woolworths.
72The meeting was attended by:
(1)Paul Ansell and Nick Ryan of Colgate; and
(2)James Aylen and Brad McCarry of Woolworths.
73At the meeting on 15 May 2008, Colgate made a presentation to Woolworths, COL.800.001.5053–001 entitled ‘Business Update 15th May 2008’, which contained slides stating that:
(1)“Proposal to Accord as enablers to an industry-wide, non-partisan sustainability initiative seeking agreement to transition to higher concentration detergent formulas in Q1 2009” (slide 17);
(2)“General Managers Meeting April 08 ü” (slide 18); and
(3)“In principle agreement between member companies May 08”.
74Colgate made statements to Woolworths during the meeting to the effect of the statements extracted in paragraph 73 above.
75On 21 May 2008 at 10.08 am, Nick Ryan sent the email COL.800.001.5053, which attached document COL.800.001.5067, to Brad McCarry, copied to Paul Ansell.
76Document COL.800.001.5067 is entitled “Colgate/Woolworths 15th May, 2008”, and is described in the email COL.800.001.5053 as “the minutes from last week”, being the meeting held on 15 May 2008.
19-22 May 2008 internal Colgate meetings
77There was a series of meetings held on 19, 20, 21 and 22 May 2008, attended by representatives of Colgate.
78The meetings held on 19, 20, 21 and 22 May 2008 were divided into different meetings and sessions, each of which was variously attended by a number of representatives of Colgate including, but not necessarily limited to, Paul Ansell, Sean Bone, Jose Manuel Estrada, Pierre Fonsny, John Garside, Andrea Lagioia, Lisa Mather, Maria Fernanda Mejia, Jane Plasman, Paul Rubenach, Andrew Shepard, Tina Stoian, Michael Tangney, Alec de Guillenchmidt, Katherine Hargrove Ramundo, Robert Wilson and Jenny Pan.
79At one of the meeting sessions on 21 May 2008:
(1)Sean Bone delivered a presentation which included, but was not necessarily limited to, slide 37 entitled “Issue 3: Execution of Smooth Transition to Ultra Detergents in 2009” (at .5774) onwards of document COL.703.005.5738; and
(2)the Colgate representatives who attended all or part of that meeting session included, but were not necessarily limited to: Sean Bone, Maria Fernanda Mejia, Michael Tangney, Alec de Guillenchmidt, Andrew Shepard, Pierre Fonsny, Robert Wilson and Jenny Pan.
80A discussion amongst some of the session attendees followed Sean Bone’s presentation. The matters discussed included, but were not necessarily limited to, the matters recorded in COL.505.002.1037, being a document entitled ‘Mid Year Review 2—8 Mega Home Care Presentation Comments From Division’.
22 May 2008 meeting of Unilever and Woolworths
81On 22 May 2008 at 2.41 pm, Geoff Bellingham sent the email UAL.006.0004.8764 with the subject “Follow Up from Today's Meeting” to Stan Fuchs and Susan Jones.
29 May 2008 meeting of Unilever and Woolworths
82A meeting was held on 29 May 2008 and attended by representatives of Unilever and Woolworths.
83The slideshow presentation UAL.009.0010.4184 entitled ‘Laundry Promotional Plan Discussion 29th May 2008’ was presented by Geoff Bellingham at that meeting.
84On 30 May 2008 at 10.03 am, Geoff Bellingham sent an email to Stan Fuchs attaching a copy of the presentation referred to above. A copy of that email is in document UAL.009.0010.4182.
13 June 2008 meeting of Cussons and Woolworths
85A discussion took place on or about 13 June 2008 between Stan Fuchs of Woolworths and representatives of Cussons.
86Ben Appleby and Kym Gill were the Cussons representatives involved in the discussion.
87The document PZC.051.002.0561, being an email from Kym Gill sent on 13 June 2008, contained notes of the discussion.
88The document PZC.051.002.0561, being an email from Kym Gill sent on 13 June 2008, contained the following statements:
“Notes from super concentrate discussion with Stan:
Super Concentrates
- communication is CRITICAL
- if Coles change to SC & WW don’t it would be disastrous (implement in all accounts at the same time) …
- Stan’s understanding is that the industry will move to SC in June/July 09 as a category hard change
- Colgate’s will move to SC liquid in Jan 09 & powder in June 09
- Unit pricing impact - concerned about impact if the whole category does not move to SC at the same time”
16 June 2008 internal Colgate Mancom Meeting
89On 16 June 2008, an internal Colgate management committee meeting was held, during which:
(1)a version of a presentation titled “Ultra Implementation Recommendation June 2008 Final” was presented by Robert Wilson and Sean Bone (COL.503.002.2425);
(2)the stated purpose of the meeting was to “Gain agreement to investigate a specific implementation option including completing full financial and cost analysis plus trade communication on launch plans”;
(3)as part of that presentation, it:
(a)was recognised that a “Con” accompanying a launch by Colgate of its Ultra Concentrate liquid and powder products in January 2009 is that it would be “before the ACCORD charter - Potential for sales loss if competitors don't move”;
(b)recognised Woolworths’ “Preference to go all in together in line with Category Review”;
(c)recognised Coles was “not interested in doing another layout in April- have to be inline with Category Reviews”;
(d)was recommended that the management committee decide that Colgate launch its Ultra Concentrate liquid and powder products in January 2009 “assuming validated implementation timeline”; and
(4)that recommendation was adopted by the management committee.
4 July 2008 telephone calls between Paul Ansell (Colgate) and Peter Campbell (Unilever)
90A number of telephone calls took place between Paul Ansell and Peter Campbell on 4 July 2008, with some of those calls made by Peter Campbell to Paul Ansell and some made by Paul Ansell to Peter Campbell.
91In particular, in the course of 4 July 2008, several telephone calls were made by Paul Ansell to Peter Campbell and by Peter Campbell to Paul Ansell:
(1)from Paul Ansell to Peter Campbell at 9:50 am for 1 minute 33 seconds;
(2)from Peter Campbell to Paul Ansell at 1:21 pm for 15 seconds;
(3)from Peter Campbell to Paul Ansell at 1:21 pm for 30 to 31 seconds;
(4)from Paul Ansell to Peter Campbell at 1:26 pm for 24 seconds;
(5)from Paul Ansell to Peter Campbell at 1:27 pm for 4 seconds;
(6)from Peter Campbell to Paul Ansell at 1:27 pm for 9 seconds;
(7)from Peter Campbell to Paul Ansell at 1:27 pm for 3 seconds;
(8)from Peter Campbell to Paul Ansell at 1:28 pm for 2 minutes and 37 seconds to 2 minutes and 39 seconds;
(9)from Paul Ansell to Peter Campbell at 1:31 for 2 minutes and 44 seconds; and
(10)from Peter Campbell to Paul Ansell at 1:41 pm for 3 minutes and 1 second.
92During those phone calls:
(1)Mr Campbell said words to the effect of “Where are you guys at with the launch of concentrated powders next year? We are hearing from Woolworths that we are dragging the chain and that everyone else is ready to go at the end of January”;
(2)Ansell said words to the effect of, “We will make the January date but I would personally prefer a February launch simply to get over the factory shutdown, clear old stock and avoid a clash with our annual conference.”; and
(vii) Culture of compliance
106From prior to and during 2008 and 2009, Colgate had an extensive trade practices and competition law compliance programme which included the following elements:[58]
[58] SAFA [247].
a)company policies and procedures, including in relation to attendance at industry events which advised employees that they must “never exchange or discuss information with competitors” regarding topics including prices, pricing methodology or any other matter relating to price, promotions or promotional timing, products, profits, costs, distribution plans, new products or product packaging;
b)education through manuals, orientation packs and ongoing staff training;
c)reporting and reviewing, including by compliance committees;
d)legal approval processes, including before employees attended functions at which competitors may be present;
e)various Colgate staff acknowledgements / certifications, for example, an annual requirement to review and certify compliance with Colgate’s Code of Conduct, which included a section on competition law;
f)access to advice and a “hotline” in order for staff to raise queries or questions about any trade practices or competition law related query or concern;
g)ad hoc compliance initiatives, such as ad hoc training conducted by external counsel, as well as memoranda, training, emails and guidelines on recent cases or legal developments; and
h)disciplinary procedures.
107Prior to the contraventions, Mr Ansell was required by Colgate to, and did, acknowledge and certify that he understood and accepted his obligations regarding trade practices and competition law and the use of confidential information. These acknowledgements and certifications included:
a)signing an acknowledgement that he had read and understood his letter of employment, which included terms to the effect that:
(i) he was to comply with Colgate’s trade practices compliance responsibilities, attend training when required and that failure to fulfil any of these responsibilities may be the subject of disciplinary action, including termination;
(ii) agreed to accept and be bound to comply with all applicable laws, and the various company policies and procedures; and
(iii)would maintain the confidentiality of all company related information;
b)providing written confirmation that he had received and read Colgate’s Trade/Industry Association Compliance Procedures, that he understood the contents of the procedures and obligations, that he would comply with them and that if he had any concerns or questions about the procedure or trade practices matters he would contact the Legal Department;
c)notifying and/or seeking approval for membership of and attendance at industry or trade association groups; and
d)attending, both as a participant and a trainer, more than a dozen compliance training sessions as part of Colgate’s Compliance Program during the period from 2007 to 2010.
108The Court looks not only to the existence of compliance programmes but their effectiveness: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 258 (Lockhart J, French J agreeing at 268); ACCC v George Weston Foods Ltd (2000) ATPR 41-763; [2000] FCA 690 at [20]-[23] and [44]-[53] (Goldberg J); ACCC v Origin Energy Electricity Ltd [2015] FCA 278 at [107]-[108] (Katzmann J).
109There is no reason to believe that Colgate’s compliance program was ineffective merely by virtue of these contraventions. It is accepted that Colgate’s senior management, apart from Mr Ansell, were unaware of the nature and extent of Mr Ansell’s communications with Mr Campbell in relation to the admitted contraventions. If Colgate’s senior management were aware of those communications, they would have taken immediate disciplinary action against Ansell, including recommending that his employment be terminated.[59]
[59] SAFA [248].
110Another factor which is potentially relevant to the effectiveness of Colgate’s Compliance Program is the fact that Mr Ansell was one of the trainers who conducted compliance training sessions as part of the program from 2007 to 2010.
111Further, Colgate has now agreed to a probation order under s 86C of the TPA, directing it to upgrade its compliance programme (dealt with in section G below).
(viii) Co-operation
112Prior to the commencement of these proceedings, Colgate cooperated with the ACCC in its investigation of these matters. In particular, Colgate co-operated in the following ways:
a)bringing four former employees of Colgate, who were at the time of interview based overseas, to Australia at its own expense to be interviewed by the ACCC as part of the s 155 investigation, despite the fact that they could not be compelled: see ACCC v British Airways PLC [2008] FCA 1977 at [33]; and
b)providing detailed, comprehensive, frank and carefully prepared responses to all of the section 155 notices issued by the ACCC: see ACCC v Cathay Pacific Airways Ltd (No 3) [2012] FCA 1392 at [40].
113 After the proceedings were commenced, Colgate cooperated with the ACCC, including by:
a)after all of the lay evidence in the proceedings had been filed, Colgate approached the ACCC and indicated that they were prepared to discuss settling the proceedings;
b)the ACCC and Colgate (and Mr Ansell) met on a several occasions to discuss settling the proceedings; and
c)as a result of those discussions, the ACCC, Colgate and Mr Ansell have reached agreement as to the contraventions of the TPA admitted by Colgate and Mr Ansell, and the penalty and non-penalty relief to be sought from the Court and the terms of the SAFA.
114After the proceedings commenced, Mr Ansell co-operated with the ACCC in respect of the section 155 notices issued by the ACCC, including travelling to Sydney at his own expense to attend one of the examinations. After the proceedings commenced, Mr Ansell co-operated with the ACCC by following Colgate's approach to engagement with the ACCC. Mr Ansell was prepared to discuss settlement with the ACCC and met with the ACCC on several occasions to discuss settlement of the proceedings.
115Colgate and Mr Ansell are entitled to credit for having sought to cooperate with the ACCC from an early stage and for having admitted to contravening the TPA, and agreeing with the ACCC on the SAFA and non-penalty orders to be sought from the Court: Trade Practices Commission v TNT Australia Pty Ltd. Colgate’s and Mr Ansell’s co-operation with the ACCC has saved the ACCC and the Court (and ultimately the community) the cost and burden of fully litigating these proceedings.
116There is a clear benefit to the ACCC’s investigations that respondents are encouraged to co-operate in appropriate cases. There is also a clear public interest in promoting settlement of litigation: Mobil Oil at [51].
(ix)Parity principle
117The parties do not contend that there is a clear case that is commensurable, as a matter of principle with the current case. The mandatory and discretionary factors to which the Court is to have regard provide sufficient guidance as to the appropriateness of the proposed penalty. Further, the proposed penalties are significant enough to achieve general deterrence without being oppressive to Colgate.
(x)Totality principle
118In determining the appropriate penalty, it is also relevant to take into account the “totality principle”. In Trade Practices Commission v TNT Australia Pty Ltd, the Court held that the total penalty for each offence ought not to exceed what is proper for the entire contravening conduct involved.[60]
[60] (1995) ATPR 41-375 at 40,169. See also ACCC v Baxter [2010] FCA 929 at [22]
119It is submitted that the penalties proposed in relation to Colgate’s contravening conduct are just and appropriate in all the circumstances of the case and appropriately take account of the entirety of Colgate’s conduct.
(xi) Maximum Penalty
120As noted above at paragraph 54, attention must be given to the maximum penalty that may be imposed in respect of an admitted contravention. The statutory maxima are stated at paragraph 70. Having regard to those maxima and the matters traversed in Sections (i) – (x) above, a penalty:
a)in respect of the contraventions referred to in paragraphs 1 and 2 of the Proposed Consent Order, in the amount of $12,000,000 represents approximately 23.4% of the maximum penalty of AUD$51.2 million; and
b)in respect of the contraventions referred to in paragraphs 3 and 4 of the Proposed Consent Order, in the amount of $6,000,000 represents 12% of the maximum penalty of $50.2 million.
121The parties respectfully submit that each component penalty is appropriate in all the circumstances and that a total penalty of $18 million is likewise appropriate. The parties jointly submit that the Court should be satisfied of this because the proposed penalty as a total or as component parts are:
a)within the permissible range of penalty in all the circumstances, albeit that, unassisted the Court may have selected a slightly different figure; and
b)within what an independent assessment of the appropriate range of penalties would have resulted in.
(xii)Proposed penalties
122As noted above, the ACCC and Colgate jointly submit that the Court should make orders imposing pecuniary penalties pursuant to section 76 of the TPA on Colgate as follows:
a)in respect of the contraventions referred to in paragraphs 1 and 2 of the Proposed Consent Order, a pecuniary penalty in the amount of $12,000,000; and
b)in respect of the contraventions referred to in paragraphs 3 and 4 of the Proposed Consent Order, a pecuniary penalty in the amount of $6,000,000.
123The present is a case, like ACCC v Visa, in which the Court can convey to large multinational corporations that have operations in Australia that whatever decisions may be made, Australia will not tolerate conduct that contravenes its competition laws.
124As noted above, the ACCC and Mr Ansell jointly submit that the Court should refrain from making an order imposing a pecuniary penalty pursuant to section 76 of the TPA on Mr Ansell for the reasons set out in section (xiii) below and for the reasons set out in section H concerning the appropriateness and effect of the disqualification order on Mr Ansell.
(xiii)Appropriateness of orders to be made against Mr Ansell
125No pecuniary penalty is sought against Mr Ansell. This is in the context of the actual effect that the proposed banning order will have on Mr Ansell.
126The proposed banning order will prevent Mr Ansell from managing a corporation for seven years and, based on information provided by Mr Ansell, will effectively:
a)have a financial effect extending beyond any penalty which could be awarded against Mr Ansell as it translates into an effective amount of up to $2.8 million, on the basis that Mr Ansell is unable to earn an income of up to $400,000 per year for seven years;
b)prevent him from working in a management role in an industry he has worked in for nearly three decades; and
c)take him through to retirement given he is currently 56 years of age, and require him to live on his life savings.
127Based on the information provided by Mr Ansell, the estimate provided at 126(a) above is based on a conservative package for a sales director in a multi-national or national company in Australia for someone who has overseas and Australian experience with a successful global company of approximately $500,000 per year (assuming that, if there is no disqualification order, Mr Ansell would now be able to obtain such a package) less an amount Mr Ansell could earn in a lower level position outside of the grocery industry estimated to be about $100,000 or less per year.
G. UPDATED COMPLIANCE PROGRAM
128By consent, the ACCC and Colgate seek an order requiring Colgate to update its compliance and education/training program, as set out in paragraph 8 of the Proposed Consent Order.
129 Section 86C of the TPA empowers the Court to make such an order.
130The purpose of compliance orders and the matters that must be assessed by the Court in reviewing a proposed order and determining whether they are within power and appropriate were summarised by Gordon J in Australian Competition and Consumer Commission v Sontax Australia (1988) Pty Ltd [2011] FCA 1202 at [36] as follows:
The purpose of a probation order is to ensure a company-wide awareness of responsibilities and obligations in relation to the contravening conduct or similar or related conduct: Australian Competition and Consumer Commission v Anglo Estates Pty Ltd [2005] FCA 20; (2005) ATPR 42-044 at [46]. There must be a nexus between the terms of the compliance program and the contravening conduct: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) ATPR 42-138 at [96]. The compliance program should set out the steps to be taken with sufficient clarity so that it is able to be performed. It should also be in the public interest that the respondent undertake the program: LG Electronics Australia at [14].
131In Australian Competition and Consumer Commission v LG Electronics Australia Pty Ltd [2006] FCA 1118, Siopis J ordered, by consent, that LG Electronics review its existing trade practices compliance program and implement an upgraded program in accordance with the proposed orders. The Court concluded that there was a sufficient nexus between the terms of the proposed program and the contravening conduct, that the program set out the steps to be taken with sufficient clarity and that it was in the public interest for LG Electronics to undertake the program.
132The proposed upgraded compliance program has a sufficient nexus with Colgate’s contravening conduct. The risk assessment to be conducted, and associated recommendations for improvements, focus on the provisions relevant to the contravening conduct, being sections 45(2)(a) and (b) of the CCA and the provisions of Part IV of the CCA which deal with similar or related conduct. The upgraded program also requires training of relevant Colgate employees to ensure their awareness of Colgate’s obligations and responsibilities in relation to those provisions.
133The minimum requirements for the upgraded program are set out in detail in the proposed form of order and Annexure A to the Proposed Consent Order. It is therefore clear to Colgate what steps it must undertake to comply with the order.
134 It is in the public interest that Colgate implement this upgraded program.
135The ACCC and Colgate submit that it is appropriate for the Court to make the order in the circumstances of this case.
H. Disqualification order
136Under section 86E(1) of the TPA, the Court has power to make an order disqualifying a person from managing corporations for a period that the Court considers appropriate if the Court is satisfied that:
a)relevantly, the person has been involved in a contravention of Part IV of the TPA; and
b)the disqualification is justified.
137The remedy of disqualification so conferred, like s 206C of the Corporations Act 2001 (Cth) on which it is modelled,[61] a civil remedy. The remedy is chiefly directed at achieving the end of public protection, of general and specific deterrence, and is now recognised to have an additional, punitive effect.
[61] ACCC v Halkalia Pty Ltd (No 2) [2012] FCA 5353 (Tracey J).
138In ACCC v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998, Barker J said this, at [86] and [88]:
Whether or not a person should be disqualified from managing corporations requires a court to consider the nature and seriousness of the contraventions, recognising that disqualification is a consequence imposed both to prevent future occurrences, as well as to provide deterrence to persons involved in managing corporations…
It is also well understood that the power to disqualify a person from managing corporations is not a power to be exercised purely for protective purposes, but also as a punitive measure. See Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129.
139In ACCC v South East Melbourne Cleaning Pty Ltd (in Liq) [2015] FCA 25, Murphy J observed, in similar terms, at [149], that:
following the decision in Rich at [53]…the objective of a disqualification order can no longer be characterised as purely protective. It is now clear that disqualification orders may also be imposed for the objectives of punishment and deterrence: Australian Securities and Investments Commission v Healey (No 2) (2011) 196 FCR 430 at [109] per Middleton J; Australian Securities and Investments Commission v Lindberg (2012) 91 ACSR 640 at [81] per Robson J; Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [35] per Finkelstein J. The need for general and specific deterrence is a central consideration in relation to whether to impose a disqualification order and if so for what period: Elliott v Australian Securities and Investments Commission and Another (2004) 10 VR 369 at [137] per Warren CJ, Charles JA and O’Bryan JA.
140In ASIC v Rich (2004) 220 CLR 129, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said this, at [37] (footnotes omitted):
If a disqualification order is made, the person against whom the order is made ceases to be a director, alternate director, or a secretary of a company, unless given permission under ss 206F or 206G of the 2001 Act to manage the corporation concerned. The order for disqualification thus causes the person against whom it is made to forfeit any office then held in a corporation and forbids that person from holding office in a corporation for the duration of the disqualification order. Those consequences, whether taken separately or in combination, when inflicted on account of a defendant’s wrongdoing, are penalties. That the penalty is not exacted in the form of a money payment does not deny that conclusion. As the authorities referred to earlier in these reasons reveal, equity’s concern with penalties was never confined to pecuniary penalties. If exposure to loss of office or exposure to dismissal from a police force is exposure to penalty, exposure to a disqualification order is exposure to a penalty.
141 The Court has recently made disqualification orders under the TPA/CCA in the following cases:
a)In ACCC v Halkalia Pty Ltd (No 2) [2012] FCA 535 (Halkalia), the Court exercised its power to disqualify a person from managing a corporation for 15 years in respect of his contraventions of the TPA.
b)In ACCC v Stott [2013] FCA 88 (Stott), the Court agreed with the submission made jointly by the parties that the respondent be disqualified from managing a corporation for five years in respect of his contraventions of the TPA/CCA.
c)In ACCC v Renegade Gas Pty Ltd (trading as Supagas NSW) [2014] FCA 1135, the Court agreed with the submission made jointly by the parties that one of the respondents be disqualified from managing a corporation for three years for his contraventions of the TPA.
d)In ACCC v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998, the Court exercised its power to disqualify a person from managing a corporation for four years in respect of her contraventions of the CCA.
e)In ACCC v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25 agreed to make an order by consent of the parties that a person be disqualified from managing a corporation for two years in respect of her contraventions of the CCA.
f)In ACCC v Safety Compliance Pty Ltd (in liq) and Ors(no 2) [2015] FCA 1469, the Court exercised its power to disqualify three separate respondents from managing a corporations for periods of eight years, 30 months and 18 months respectively for their contraventions of the TPA/CCA.
g)In ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62, the Court exercised its power to disqualify a person from managing a corporation for five years in respect of her contraventions of the CCA.
142The Court has also accepted undertakings to similar effect from respondents in proceedings involving contraventions of the TPA/CCA. In ACCC v Artorios Ink Co Pty Ltd (No 2)[62], the Court accepted undertakings from both Tuan Nguyen and Thuan Nguyen not to be involved in the management of, or be a director of, a company for five years. The Court noted[63] that the five year period sat at the lower end of the medium range for disqualifications imposed by the Courts under ss 206C and 206E of the Corporations Act 2001 (Cth) (Corporations Act).
[62] [2013] FCA 1292.
[63] At [36].
143A useful body of case law has developed in relation to the banning of officers under sections 206C and 206E of the Corporations Act. Section 206C of the Corporations Act is in relevantly identical terms to s 86E(1) of the TPA. In Halkalia, Tracey J stated that there was no reason to doubt that the principles developed under the Corporations Act will provide useful assistance when the court is considering applications under the TPA.[64]
[64] See also Stott at [75].
144In ASIC v Adler,[65] Santow J distilled into 15 key propositions the principles in relation to banning orders which had been developed under the Corporations Act. One of those principles, that banning orders were purely protective in nature and not punitive, was rejected by the High Court in Rich v ASIC.[66] However, the other propositions are still often applied.
[65] (2002) 42 ACSR 80 at [56].
[66] (2004) 220 CLR 129.
145 The propositions are set out below (citations omitted):
a)disqualification orders are designed to protect the public from the harmful use of the corporate structure or from use that is contrary to proper commercial standards;
b)the banning order is designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office;
c)protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors;
d)the banning order is protective against present and future misuse of the corporate structure;
e)the order has a motive of personal deterrence, though it is not punitive;
f)the objectives of general deterrence are also sought to be achieved;
g)in assessing the fitness of an individual to manage a company, it is necessary that they have an understanding of the proper role of the company director and the duty of due diligence that is owed to the company;
h)longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
i)in assessing the appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public;
j)it is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
k)a mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming;
l)the eight criteria to govern the exercise of the court’s powers of disqualification set out in Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519 have been influential. It was held that in making such an order it is necessary to assess:
(i) character of the offenders;
(ii) nature of the breaches;
(iii) structure of the companies and the nature of their business;
(iv) interests of shareholders, creditors and employees;
(v) risks to others from the continuation of offenders as company directors;
(vi) honesty and competence of offenders;
(vii) hardship to offenders and their personal and commercial interests; and
(viii)offenders’ appreciation that future breaches could result in future proceedings;
m)factors which lead to the imposition of the longest periods of disqualification (that is disqualification of 25 years or more) were:
(i)large financial losses;
(ii)high propensity that defendants may engage in similar activities or conduct;
(iii)activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy;
(iv)lack of contrition or remorse;
(v)disregard to law and compliance with corporate regulations;
(vi)dishonesty and intent to defraud;
(vii)previous convictions and contraventions for similar activities;
n)in cases where the period of disqualification ranged from 7-12 years, the factors evident and which lead to the conclusion that these cases were serious though not “worst cases”, included:
(i)serious incompetence and irresponsibility;
(ii)substantial loss;
(iii)defendants had engaged in deliberate courses of conduct to enrich themselves at others’ expense, but with lesser degrees of dishonesty;
(iv)continued, knowing and wilful contraventions of the law and disregard for legal obligations;
(v)lack of contrition or acceptance of responsibility, but as against that, the prospect that the individual may reform;
o)the factors leading to the shortest disqualifications, that is disqualifications for up to 3 years were:
(i)although the defendants had personally gained from the conduct, they had endeavoured to repay or partially repay the amounts misappropriated;
(ii)the defendants had no immediate or discernible future intention to hold a position as manager of a company;
(iii)in ASIC v Donovan (1998) 28 ASCR 583 at 602, the respondent had expressed remorse and contrition, acted on advice of professionals and had not contested the proceedings.
146The ACCC applies for, and Mr Ansell consents to, an order that Mr Ansell be disqualified from managing corporations for a period of seven years from the date of the Court’s order.
147This proposed period of disqualification is at the lower end of the medium range, but given Mr Ansell's age of 56, will effectively prevent him from being employed in a management role for the rest of his working life.
148The parties jointly submit that the disqualification order, and its duration, are appropriate having regard to:
a)Mr Ansell’s senior position at Colgate and his direct involvement by engaging in communications with Peter Campbell of Unilever over the course of 2008 which included sharing of confidential and commercially sensitive information relating to the prices of laundry detergent products;
b)the nature of the contraventions as described in the SAFA and as referred to in section C of these joint submissions;
c)the contributory conduct and position of Mr Campbell within Unilever which lead to the contraventions as described in the SAFA and as referred to in section C of these joint submissions;
d)the protective purpose of a disqualification order being well served by ensuring that Mr Ansell does not hold any senior management positions until retirement;
e)the specific and general deterrence purpose of a disqualification order being well served by ensuring general deterrence by signalling that conduct that contravenes the TPA can deprive a senior officer of the future opportunity to hold that or equivalent positions;
f)the effect of the disqualification order on Mr Ansell, which will prevent Mr Ansell from working in a management role in an industry he has worked in for nearly three decades of his life; and
g)the disqualification order having a financial impact that is effectively akin to a pecuniary penalty and would exceed any amount of pecuniary penalty likely to be awarded.
149Mr Ansell’s agreement to the proposed disqualification order provides compelling reason for the Court to grant the order in the form and for the term sought.[67]
[67] See Halkalia at [112].
I. Costs
150Colgate has agreed to make a contribution of $450,000 towards the ACCC’s costs of and incidental to the proceeding, to be paid within 28 days of the date of the Court’s order.
151Mr Ansell has agreed to make a contribution of $75,000 towards the ACCC’s costs of and incidental to the proceeding, to be paid in 24 monthly instalments commencing 28 days after the date of the Court’s order.
152Although these amounts do not reflect the ACCC’s true costs in the matter, the ACCC was prepared to not fully pursue its costs in the interests of an early settlement.[68]
[68] See ACCC v Pepe’s Ducks [2013] FCA 570 at [41]-[42].
Date: 21 March 2016
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 3) [2016] FCA 676
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