Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 4)

[2017] FCA 1590

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590

File number:

NSD 2510 of 2013

Judge:

WIGNEY J

Date of judgment:

22 December 2017

Catchwords:

TRADE PRACTICES – competition law – restrictive trade practices – cartel conduct – whether Respondent contravened ss 44ZZRK or 45(2) of the Trade Practices Act 1974 (Cth) – where Respondent and two other manufacturers and wholesale suppliers of laundry detergent in Australia transitioned to ultra concentrated laundry detergent and ceased supplying retailers with standard concentrates at about the same time – whether Respondent entered into an arrangement, or arrived at an understanding, with the other suppliers, in relation to the transition that included exclusionary provisions, or provisions that had the purpose, or had or were likely to have, the effect of substantially lessening competition in the market for laundry detergent in Australia – parallel conduct – exclusionary provisions – Jones v Dunkel inferences

Held: applicant did not discharge its burden of proving on the balance of probabilities that the respondent entered into any such arrangement or arrived at any such understanding

Legislation:

Trade Practices Act 1974 (Cth) (repealed) ss 4D, 4E, 4F, 44ZZRD, 44ZZRK, 45(2), 45(3), 76

Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth)

Evidence Act 1995 (Cth) ss 140, 191

Cases cited:

ACCC v Universal Music Australia Pty Ltd (2001) 115 FCR 442

Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission (2005) 159 FCR 452; [2005] FCAFC 161

ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460

Australian Competition and Consumer Commission v Air New Zealand Limited [2014] FCA 1157; (2014) 319 ALR 388

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (2003) 198 ALR 657

Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 92 FCR 375; [1999] FCA 954

Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183

Australian Competition and Consumer Commission v Leahy Petroleum Ltd [2007] FCA 794; 160 FCR 321

Australian Competition and Consumer Commission v Pfizer Australia Pty Ltd [2015] FCA 113; 323 ALR 429

Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304

Australian Securities & Investments Commission v Australian Lending Centre Pty Ltd (No 3) (2012) 287 ALR 693

Australian Securities and Investments Commission v Hellicar & Ors (2012) 247 CLR 345

Brandi v Mingot (1976) 12 ALR 551

Briginshaw v Briginshaw (1938) 60 CLR 336

British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 1 WLR 727; 2 All ER 807

Claremont Petroleum NL v Cummings (1992) 110 ALR 239

Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 44 ALR 173

Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385

Jones v Dunkel (1959) 101 CLR 298

L Grollo & Company Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81

News Limited v Australian Rugby Football League Limited (1996) 64 FRC 410

News Limited v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563

Norcast v Bradken (No 2) (2013) 219 FCR 14

Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53

Rural Press Limited v Australian Competition and Consumer Commission (2002) 118 FCR 236

Stationers Supply Pty Ltd v Victorian Authorised Newsagents Ltd (1993) 44 FCR 35

Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] ATPR 41-783

Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286

Trade Practices Commission v David Jones (Aust) Pty Ltd (1986) 13 FCR 446

Trade Practices Commission v Email Ltd (1980) 43 FLR 383

Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206

Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1

Dates of hearing:

7-10 June, 14-17 June, 20-23 June and 5-6 July 2016

Date of last submissions:

1 August 2016

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:

678

Counsel for the Applicant:

Mr C M Scerri QC with DR R C A Higgins and Mr I J M Ahmed

Solicitor for the Applicant:

Norton Rose Fulbright

Counsel for the Second Respondent:

Mr M R Scott QC with Mr A D Barraclough

Solicitor for the Second Respondent:

Allens

ORDERS

NSD 2510 of 2013

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND:

PZ CUSSONS AUSTRALIA PTY LTD (ACN 004 164 827)

Second Respondent

JUDGE:	WIGNEY J
DATE OF ORDER:	22 DECEMBER 2017

THE COURT ORDERS THAT:

1.The applicant’s originating application filed 12 December 2013 be dismissed insofar as it seeks relief against or concerning the second respondent, PZ Cussons Australia Pty Ltd, or has not otherwise previously been disposed of by order of the Court.

2.The applicant pay the second respondent’s costs.

3.Pursuant to r 1.39 of the Federal Court Rules 2011 (Cth) (Rules), the time within which the applicant must file and serve any notice of appeal pursuant to rr 36.02 and 36.03 of the Rules is to commence to run from 29 January 2018.

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

REASONS FOR JUDGMENT

THE COMMISSION’S PLEADED CASE IN SUMMARY	[6]
STATUTORY SCHEME	[33]
RELEVANT PRINCIPLES	[45]
Arrangement or understanding	[46]
Purpose	[55]
Substantial lessening of competition	[60]
Burden of and standard of proof	[68]
EVIDENCE AND FACTS	[73]
The Australian laundry detergent market	[87]
The genesis of the transition to ultra concentrates in the Australian market	[100]
The perceived risks and rewards of transitioning to ultra concentrates	[107]
Woolworths and Coles planning and review processes and timing	[121]
January 2008 meetings and communications	[127]
8 January 2008 meeting between Colgate and Woolworths	[128]
18 January 2008 meeting between Cussons and Coles	[135]
Colgate’s Accord proposal	[137]
10 March 2008 meeting between Colgate and Accord	[138]
18 April 2008 email from Accord to Colgate, Cussons, Unilever and others	[145]
Cussons’ initial reaction to the Accord proposal	[148]
Unilever’s initial reaction to the Accord proposal	[156]
30 April 2008 meeting of Accord attended by Colgate, Cussons, Unilever and others	[158]
Woolworths’ visit to Unilever’s Centre of Excellence in the United States	[169]
May 2008 meetings and communications	[172]
15 May 2008 meeting between Colgate and Woolworths	[173]
May 2008 internal Colgate meetings	[174]
22 and 29 May 2008 meeting between Unilever and Woolworths	[175]
June 2008 meetings and communications	[178]
Unilever “Fabric Summit” on 4 and 5 June 2008	[179]
13 June 2008 meeting of Cussons and Woolworths	[181]
Cussons’ ultra concentrate workshop on 16 June 2008	[183]
Colgate management committee meeting 16 June 2008	[189]
Meeting between Cussons and Coles on 23 June 2008	[193]
July 2008 meetings and communications	[195]
4 July 2008 telephone conversations between Mr Ansell (Colgate) and Mr Campbell (Unilever)	[196]
7 July 2008 internal Unilever email from Mr Campbell	[199]
Colgate July 2008 internal emails	[201]
Cussons’ July 2008 internal emails concerning “timelines”	[203]
23 July 2008 email from Accord to Colgate, Cussons and Unilever	[210]
24 July 2008 email from Cussons to Accord, Colgate and Unilever	[212]
Cussons’ Project Mastermind NPD Business Case – 28 July 2008	[216]
30 July 2008 meeting of Unilever and Woolworths	[220]
31 July 2008 meeting between Colgate and Woolworths	[229]
August 2008 meetings and communications	[230]
1 August 2008 - Woolworths “update” provided to Cussons	[231]
Cussons and Coles ultra concentrate “workshop” on 5 August 2008	[232]
Telephone calls by Mr Campbell (Unilever) to Mr Ansell (Colgate) on 7 August 2008	[234]
Meetings between Colgate and Woolworths on 8 and 11 August 2008	[235]
11 August 2008 telephone call by Mr Ansell (Colgate) to Mr Campbell (Unilever)	[238]
11 August 2008 email from Mr Fuchs of Woolworths to “all vendors”	[239]
Meeting between Unilever and Woolworths on 12 August 2008	[246]
12 August 2008 email from Mr Fuchs of Woolworths	[248]
Meeting between Unilever and Coles on 12 August 2008	[250]
12 August 2008 internal Cussons emails	[251]
August 2008 communications between Unilever and Woolworths	[254]
August 2008 communications between Colgate and Woolworths	[263]
19 August 2008 – Mr Basha (Unilever) calls Ms Gill (Cussons)	[271]
21 August 2008 - Mr Campbell (Unilever) calls Mr Courtier (Cussons)	[274]
21 August 2008 Cussons’ board meeting	[277]
25 August 2008 meeting between Cussons and Woolworths	[298]
The revised Accord proposal	[302]
Cussons’ legal advice concerning the revised Accord proposal	[303]
25 August 2008 meeting of Accord to discuss the revised proposal	[306]
28 August 2008 internal Unilever email	[316]
29 August 2008 internal Colgate email	[318]
September 2008 meetings and communications	[319]
5 September 2008 meeting between Unilever and Woolworths	[320]
8 September 2008 Cussons’ meeting of Project Mastermind steering committee	[321]
Unilever “stress test” workshop – 9 September 2008	[323]
Cussons’ guidelines to Project Mastermind employees	[327]
23 September 2009 meeting between Cussons and Woolworths	[330]
29 September 2008 meeting between representatives of Accord and the ACCC	[332]
October 2008 meetings and communications	[333]
Cussons’ Project Mastermind Steering Committee meetings 6 and 13 October 2008	[334]
Meeting between Cussons and Woolworths on 7 October 2008	[336]
Unilever communications	[337]
10 October 2008 meeting of Accord, Colgate, Cussons and Unilever	[341]
Mr Fatouros (Cussons) calls Mr Christopher Pedersen (Colgate)	[343]
21 October 2008 – Cussons’ “war gaming” session	[347]
31 October 2008 Woolworths’ (Mr Fuchs’) emails	[351]
November 2008 meetings and communications	[352]
Coles’ and Woolworths’ communications	[353]
Cussons’ further war gaming session – 11 November 2008	[356]
24 November Woolworths’ email to Colgate, Cussons and Unilever	[357]
Cussons’ board approves NPD2	[358]
December 2008 meetings and communications	[360]
Cussons	[361]
Unilever	[362]
Woolworths’ December 2008 communications to the Suppliers	[364]
January and February 2009 meetings and communications	[368]
Woolworths’ communications	[369]
The transition	[372]
Unilever and Woolworths’ video in late 2009	[379]
EXPERT EVIDENCE	[381]
Opinions about what would have occurred in the absence of coordinated action	[383]
Opinions concerning the effect of the Aligned Transition Arrangement	[409]
ISSUES FOR DETERMINATION	[415]
The Withhold Supply Arrangement issues	[416]
The Aligned Transition Arrangement	[417]
Other issues	[418]
The Withhold Supply Arrangement issues	[421]
Issues 1 and 2: did Cussons enter into an arrangement or understanding with Colgate and Unilever which included the Withhold Supply Provisions?	[422]
The circumstantial nature of the Commission’s case	[427]
When, by whom and how was the Withhold Supply Arrangement entered into?	[439]
The Unilever witnesses	[452]
Colgate and Woolworths	[465]
The relevance and significance of the Accord proposal and discussions	[467]
Direct communications between Cussons and the other Suppliers	[483]
Communications between Cussons and Woolworths	[485]
Communications between Cussons and Coles	[499]
Communications between Cussons and Woolworths in late 2008 and early 2009	[502]
“Hub and spoke” and vertical and horizontal arrangements	[507]
Cussons’ witnesses	[538]
Mr Davey	[539]
Mr Cunningham	[550]
Mr Wilson	[560]
Mr Freene	[563]
Other Cussons witnesses	[569]
Jones v Dunkel inferences	[570]
Parallel conduct, economic irrationality and motive	[588]
The Withhold Supply Provisions	[600]
The first of the alleged Withhold Supply Provisions – prevent etc. supply of ultra concentrates until March 2009	[602]
The second of the alleged Withhold Supply Provisions – prevent etc. supply of non-uniform ultra concentrates from March 2009	[607]
The third of the alleged Withhold Supply Provisions – prevent etc. the supply of standard concentrates after March 2009	[620]
Conclusion in relation to the alleged Withhold Supply Provisions	[633]
Conclusion in relation to issues 1 and 2 of the Withhold Supply Arrangement issues	[634]
Issues 3, 4 & 5 – were the Withhold Supply Provisions exclusionary provisions?	[635]
Issue 6 – giving effect to the Withhold Supply Arrangement	[637]
Issues 7 & 8 – contraventions	[638]
THE ALIGNED TRANSITION ARRANGEMENT ISSUES	[639]
Issues 1 & 2: did Cussons enter into an arrangement or understanding with Colgate and Unilever which included the Aligned Transition Provisions?	[640]
Issues 3 & 5: purpose of the Aligned Transition Arrangement and Provisions	[646]
Issue 4: the effect of the Aligned Transition Provisions	[652]
Issue 6: giving effect to the Aligned Transition Arrangement	[675]
Issues 7 & 8: contravention of s 45(2)(a)(ii), s 45(2)(b) and s 44ZZRK of the Act	[676]
CONCLUSION AND DISPOSITION	[677]

WIGNEY J:

1. In March 2009, there was a significant change in the market for laundry detergents in Australia. The three largest manufacturers and wholesale suppliers of laundry detergents in Australia, Colgate-Palmolive Pty Ltd, PZ Cussons Australia Pty Ltd and Unilever Australia Limited, each launched new formulations of their existing laundry powder brands which were twice the concentration of the existing standard concentration formulations.  Each of those three Suppliers began supplying the new “ultra concentrated” formulations of their branded laundry powders to their main customers, including the major retailers Woolworths Limited and Coles Group Pty Ltd, and the major wholesaler Metcash Limited.  The Suppliers also effectively ceased supplying their standard concentration detergents to Woolworths, Coles and Metcash, though they continued to supply some of those products to some independent and variety stores.

2. The Australian Competition and Consumer Commission alleged that the largely simultaneous and almost uniform transition from standard to ultra concentrated laundry detergents by the Suppliers in March 2009 was far from coincidental.  It contended that the simultaneous transition was the result of an anti-competitive arrangement or understanding between the Suppliers, aided and abetted by Woolworths and an officer of Colgate.  The alleged arrangement or understanding was said to be anti-competitive because it involved, in broad terms, the restriction of supply of each of the Supplier’s ultra concentrated detergents before March 2009, and the restriction of supply of standard concentration products thereafter. 

3. The Commission commenced proceedings against Colgate, Cussons, Woolworths and Mr Paul Ansell, who was the Sales Director at Colgate. The Commission alleged that Colgate and Cussons contravened ss 45(2)(a)(i) and (ii), 45(2)(b)(i) and (ii) and 44ZZRK of the Trade Practices Act 1974 (Cth) (the Act) (now the Competition and Consumer Act 2010 (Cth)) and that Mr Ansell and Woolworths were knowingly concerned in or a party to those contraventions. Proceedings were not commenced against Unilever, apparently because it was an immunity applicant. As events transpired, the Commission reached settlements with Colgate, Mr Ansell and Woolworths. Accordingly, only Cussons defended the proceedings.

4. The central and critical issue for resolution in the proceedings is whether Cussons was a party to any anti-competitive arrangement or understanding with Colgate and Unilever in relation to the transition to ultra concentrates. 

5. There could be little doubt that Cussons’ transition to the supply of ultra concentrated laundry powders to its major customers occurred largely in parallel with similar transitions by Colgate and Unilever.  It would also appear that, by late 2008, Cussons was proceeding on the basis that Colgate and Unilever were, or were likely to, transition at the same time and in the same manner as it was.  The central question, however, is whether that parallel conduct was the product of a collusive arrangement or understanding between Cussons and its competitors.  Was there a meeting of the minds between Cussons and the other two Suppliers, such that Cussons assumed obligations, or gave or received assurances or undertakings vis-à-vis the other Suppliers, concerning the simultaneous transition?  Or were Cussons’ actions in transitioning at the same time and in the same manner as Colgate and Unilever the product of independent strategic and commercial decisions made by it, albeit decisions influenced or conditioned by information and expectations about what its competitors were likely to do, and by the preferences or dictates of its major customers, Woolworths and Coles?

   THE COMMISSION’S PLEADED CASE IN SUMMARY

6. Colgate, Cussons and Unilever competed in the Australian market for the wholesale supply of powdered and liquid laundry detergent products for domestic use.

7. From about early 2008, each of Colgate, Cussons and Unilever was separately considering the possible transition to ultra concentrated laundry detergents in the Australian market.  Each of them considered that the transition to ultra concentrates would generate benefits, including significant cost savings and gross margin improvements as a consequence of reduced expenditure on ingredients, packaging, transport and other logistics.  It was also considered that retailers, consumers and the environment would benefit from the transition.  The transition had already occurred in Europe and in the United States.

8. The Commission alleged, however, that at some stage in 2008 or 2009, Colgate, Cussons and Unilever each came to the view that the transition would be unlikely to achieve the expected benefits unless they made the transition simultaneously.  In simple terms, that was said to be because, if one or more of the Suppliers continued to supply some standard concentrates, consumers would be unlikely to see the value or benefit in the ultra concentrates and would continue to buy the standard concentrates.  They would think that standard concentrates were better value because they were in bigger boxes but cost about the same.  Manufacturers who held back transitioning all their brands to ultra concentrates might capitalise on this consumer confusion and thereby increase sales and market share. 

9. That realisation, on the Commission’s case, led each of Colgate, Cussons and Unilever to consider that the success, and consequential benefits, of the transition to ultra concentrates would be optimised if six things occurred: first, each of them effected a full category transition simultaneously; second, that “initiative” was led by an industry association or major retailer; third, each of them simultaneously withdrew the supply of standard concentrates; fourth, the withdrawal occurred simultaneously with the introduction of ultra concentrates; fifth, the ultra concentrates manufactured and sold by each of them were as uniform as possible in terms of the degree of concentration, packaging and product claims; and sixth, there was an agreed transition date.      

1. In that context, the Commission alleged that in the period between 18 April 2008 and 31 January 2009, Colgate, Cussons and Unilever made or arrived at two arrangements or understandings concerning the transition.  The first is referred to in the Commission’s Amended Statement of Claim (ASOC) as the Withhold Supply Arrangement.  The second is referred to as the Aligned Transition Arrangement.  As will be seen, the two arrangements or understandings are really just alternative formulations of the one alleged arrangement or understanding.

2. The Commission’s pleaded case (ASOC [57]) was that the Withhold Supply Arrangement contained provisions, the Withhold Supply Provisions, which were to the effect that Colgate, Cussons and Unilever would prevent, restrict or limit the supply of laundry detergent to Woolworths, Coles and Metcash in three respects.  First, the supply of ultra concentrates would be restricted until a particular date, originally scheduled to be January 2009 but changed, before that date, to March 2009.  Second, the supply of ultra concentrates other than those which met certain parameters (including in relation to concentration level and pack communication), would be restricted, again originally from January 2009, but then March 2009.  Third, the supply of standard concentrates would be restricted from a particular date.  That date was again originally January 2009, but changed, before that date, to March 2009. 

3. The Commission alleged (ASOC [58]) that a substantial purpose of the Withhold Supply Provisions was to prevent, restrict or limit the supply of laundry detergent to Woolworths, Coles and Metcash, by Colgate, Cussons and Unilever. In simple terms, the purpose was to ensure that the new ultra concentrates would not be supplied before March 2009 (originally January 2009), and that the old standard concentrates, as well as ultra concentrates that did not meet certain specified parameters concerning concentration level, pack size and pack communication, would not be supplied after March 2009 (again originally January 2009). In those circumstances, it was contended that the Withhold Supply Provisions were exclusionary provisions within the meaning of s 4D of the Act (ASOC [59]) and satisfied the “purpose condition” in s 44ZZRD(3) of the Act (ASOC [60]). They were therefore “cartel provisions” for the purposes of s 44ZZRK of the Act (ASOC [61]).

4. The Aligned Transition Arrangement was alleged to contain similar, but slightly different provisions; the Aligned Transition Provisions. As already noted, the Aligned Transition Provisions were, in reality, simply a different or alternative formulation of the Withhold Supply Provisions. The Commission did not contend that there were two separate and distinct arrangements or understandings. The Withhold Supply Provisions were pleaded in such a way that they were likely to constitute an exclusionary provision as defined in s 4D of the Act, and therefore the Commission would not need to prove that the provisions had the purpose, or had or was likely to have the effect of, substantially lessening competition. The alternative formulation of the provisions, the Aligned Transition Provisions, would only give rise to a contravention if the Commission was able to prove that the provisions had that purpose or effect.

5. The Aligned Transition Provisions (ASOC [64]) were alleged to be that Colgate, Cussons and Unilever would, from a particular date, which was again originally January 2009, but then changed to March 2009, do three things: first, cease to supply standard concentrates to Woolworths, Coles and Metcash; second, simultaneously move to supply ultra concentrates to Woolworths, Coles and Metcash; and third, supply only ultra concentrates that met certain prescribed parameters in relation to concentration level, pack size and pack communication to Woolworths, Coles and Metcash. It was alleged that the Aligned Transition Provisions had a substantial purpose, or the effect or likely effect, of substantially lessening competition in the laundry detergent market for the purposes of s 45(2) of the Act (ASOC [65]), and the purpose of preventing, restricting or limiting the production or likely production of laundry detergent products for the purposes of s 44ZZRD(3)(a)(i) of the Act (ASOC [66]). They were therefore “cartel provisions” for the purposes of s 44ZZRK of the Act (ASOC [67]).

6. The Commission contended that, by making the arrangement, or arriving at the understanding, that contained the Withhold Supply Provisions, or the Aligned Transition Provisions, Cussons contravened s 45(2)(a)(i) of the Act (in the case of the Withhold Supply Provisions) (ASOC [114]) and s 45(2)(a)(ii) of the Act (in the case of the Aligned Transition Provisions) (ASOC [116]).

7. In the case of the Withhold Supply Provisions, as noted earlier, the Commission contended that such provisions would constitute exclusionary provisions as defined in s 4D of the Act. An arrangement containing such provisions would accordingly give rise to a per se contravention.  The Commission did not contend, however, that the Aligned Transition Provisions were exclusionary provisions.  Rather, it alleged that those provisions had a substantial purpose, or the effect or likely effect, of substantially lessening competition in the laundry detergent market (ASOC [65]).  In short terms, the Commission alleged that, but for the Aligned Transition Provisions, one or more of the Suppliers would have continued to supply standard concentrates, that would have led to price competition between standard concentrates and ultra concentrates, and that in turn would have led to reductions in the price of the ultra concentrates.  It also alleged that one or more of the Suppliers would have supplied laundry detergent with a variety of levels of concentration, with a variety of package sizes and with a variety of appearances.     

8. The Commission also alleged that, from January 2009 until 31 December 2009, Colgate, Cussons and Unilever gave effect to the Withhold Supply Provisions and the Aligned Transition Provisions (ASOC [62] and [68]).  The Commission’s case in that regard was that on 2 March 2009, each of Colgate, Cussons and Unilever introduced ultra concentrates across each of their brands, and withdrew all of their previous standard concentrates from supply, save in respect of the “sell-down” of certain products (ASOC [48(a), (c)]).  The ultra concentrates supplied by each of the Suppliers had two times (2x) the level of concentration of the previous standard concentrates; were priced in parity with the previous standard concentrates; and were marketed in similar packaging (ASOC [48(b), (d), (e)]). In giving effect to the Withhold Supply Provisions and the Aligned Transition Provisions, Cussons was alleged to have contravened s 45(2)(b)(i) or (ii) of the Act, respectively, and, from 24 July 2009 onwards, s 44ZZRK of the Act (ASOC [115] and [117]).

9. It should be noted that the Commission ultimately did not press the parity pricing allegations.

10. Needless to say, Cussons denied that it made any arrangement, or arrived at any understanding, with Colgate or Unilever that contained either the Withhold Supply Provisions or the Aligned Transition Provisions.  Equally, it denied giving effect to any arrangement or understanding containing those provisions.

11. Before embarking on a detailed consideration of the facts and evidence, it may be useful to note some features of the Commission’s pleaded case concerning the alleged arrangements or understandings.  The particulars that the Commission supplied in relation to the making of the Withhold Supply Arrangement and the Aligned Transition Arrangement were effectively identical.  Following are the important points.

12. First, the Commission did not, no doubt because it could not, plead or particularise exactly when the alleged arrangements were made, or the understandings arrived at.  The best the Commission could do was to contend that the arrangements were made, or the understandings were arrived at, some time between 18 April 2008 and 31 January 2009.

13. Second, the Commission did not, no doubt again because it could not, plead that certain specific officers or employees were responsible for causing Cussons to enter into the alleged arrangements, or arrive at the alleged understandings.  A corporation can only relevantly act, or have a state of mind, through its officers or employees.  Yet the Commission was unable to say, at least in its pleaded case, who the relevant officers or employees of Cussons were.  Indeed, it did not specify who the relevant officers or employees of Colgate or Unilever were either, save for Mr Ansell in Colgate’s case.  That was particularly unusual in the case of Unilever, since Unilever was an immunity applicant and its officers and employees gave evidence in the Commission’s case.

14. Third, the Commission’s case concerning Cussons’ entry into the arrangement, or its arrival at the understanding, was essentially circumstantial.  It relied on inferences that it contended could and should be drawn from a series or pattern of meetings and other communications which occurred between 18 April 2008 and 31 January 2009.  Most of those meetings and communications did not involve each of the Suppliers directly meeting or communicating with each other.  They mostly involved meetings or communications between one or other of the Suppliers and Woolworths.  Cussons was not directly involved in many of the meetings and communications relied on by the Commission. 

15. There was no real dispute that most of the meetings and communications relied on by the Commission occurred.  There was also, for the most part, very little dispute about what was said at the meetings or otherwise communicated between the Suppliers, Accord and Woolworths.  Almost all of the meetings and communications were documented in some way.  The main issue is what can and should be inferred from the pattern of meetings and communications, considered in the context of what in due course occurred in March 2009.

16. It is useful to briefly identify the specific meetings and communications that the Commission contended gave rise to, or resulted in, or somehow evidenced, the alleged arrangements or understandings.  The content of the meetings and communications will be considered in detail later.  The relevant meetings and communications were:

    ·A meeting on 8 January 2008 between representatives of Colgate and Woolworths (ASOC [13], [14]).

    ·A meeting held on 10 March 2008 between representatives of Colgate and Accord Australasia Limited (ASOC [15], [16]).  Accord was the national industry association for the Australasian hygiene, cosmetic and speciality products industry.

    ·An email from Accord to Colgate, Cussons, Unilever and others sent on 18 April 2008 (ASOC [17]).

    ·A meeting held on 30 April 2008 between representatives of Accord, Colgate, Cussons and Unilever (ASOC [22]).

    ·Telephone conversations on 4 July 2008 between a representative of Colgate and a representative of Unilever (ASOC [27]).

    ·An internal Unilever email sent on 7 July 2008 (ASOC [28]).

    ·A communication involving representatives of Colgate and Unilever on 7 August 2008 (ASOC [32]).

    ·An email sent by a representative of Woolworths on 11 August 2008 which was received by representatives of Colgate, Cussons, Unilever and other vendors who supplied laundry detergent to Woolworths (ASOC [36]).

    ·An email sent by a representative of Woolworths on 12 August 2008 to representatives of Colgate, Cussons, Unilever and other vendors who supplied laundry detergent to Woolworths (ASOC [37]).

    ·A telephone conversation on 19 August 2008 between a representative of Unilever and a representative of Cussons (ASOC [38]).

    ·A telephone conversation on 21 August 2008 between a representative of Unilever and a representative of Cussons (ASOC [39]).

    ·Telephone conversations on 21 and 22 August 2008 between representatives of Unilever (ASOC [40]).

    ·A conversation between a representative of Unilever and a representative of Woolworths on or about 21 August 2008 (ASOC [41]).

    ·A meeting between a representative of Woolworths and representatives of Cussons on 25 August 2008 (ASOC [42]).

    ·An email sent by a representative of Unilever to a representative of Woolworths on 26 August 2008 (ASOC [43]).

    ·A meeting between a representative of Woolworths and representatives of Unilever on 27 August 2008 (ASOC [44]).

    ·An email between representatives of Colgate sent on 29 August 2008 (ASOC [45]).

    ·Emails sent by a representative of Woolworths to representatives of Colgate, Cussons and Unilever on 22 December 2008 (ASOC [46]).

    ·An email sent by a representative of Woolworths to representatives of Colgate, Cussons and Unilever on 5 January 2009 (ASOC [47]).

17. As can be seen, less than half of the pleaded meetings or communications directly involved Cussons.  Even fewer involved a direct communication between Cussons and one of the other Suppliers.

18. It should be noted that the evidence concerning the specifically pleaded meetings and communications did not comprise the entirety of the evidence relied on by the Commission as supporting the inference or inferences that the alleged arrangements or understandings were made or arrived at.  Those were, however, the meetings or communications that the Commission specifically identified as supporting the alleged agreement or understanding (see particular 1 to ASOC [56] and [63], and ASOC [13]-[17], [19]-[22], [27], [28], [32] and [36]-[48]).

19. Fourth, the Commission’s case was that the Withhold Supply Arrangement and the Aligned Transition Arrangement were partly written and partly oral (particular 4 to ASOC [56] and [63]).  To the extent that they were in writing, the Commission identified the writing as being the pleaded written communications, mostly emails, to which reference has just been made.  Likewise, to the extent that they were oral, the Commission identified the discussions that occurred in the pleaded meetings and telephone conversations to which reference has just been made.

20. Fifth, the Commission also alleged that the Withhold Supply Arrangement and the Aligned Transition Arrangement were “wholly or partly implied from the facts, matters and circumstances” relating to the specifically pleaded meetings and communications (particular 5 to ASOC [56] and [63]).

21. In its submissions, the Commission sought, at times, to characterise the alleged arrangement or understanding as a “hub and spoke” arrangement whereby the individual Suppliers, Colgate, Cussons and Unilever, made or arrived at the arrangement or understanding by communicating not directly, but mostly through a common “hub”.  The “hub” was alleged to be Accord, in the first instance, and then later, Woolworths.  That submission was probably made in an effort to explain or account for the limited number of direct communications between Cussons and the other two Suppliers.

22. Cussons complained that the Commission’s “hub and spoke” submission went outside the Commission’s pleading.  It submitted that the Commission should be held to its pleaded case.  As will be seen, there was some merit in Cussons’ complaints in that regard, though ultimately it is unnecessary to consider the implications of that pleading point.

23. The final general point to note is that the Commission’s case at trial turned out to be largely documentary in nature.  While the Commission adduced affidavit evidence from a number of officers or employees of Unilever, ultimately their evidence added little, in terms of support for the Commission’s case, to the content of the documents.  That, in many respects, very much reflected the way that the case had been pleaded.

    STATUTORY SCHEME

24. Cussons admitted that, at the relevant time, there was a market in Australia for the wholesale supply of powdered and liquid laundry detergent products for domestic use within the meaning of s 4E of the Act. It also admitted that it was in competition with Colgate and Unilever in that market within the meaning of ss 45(3) and 4D of the Act and, from 24 July 2009 onwards, within the meaning of s 44ZZRD(4) of the Act.

25. The alleged arrangement and understanding (be it the Withhold Supply Arrangement or the Aligned Transition Arrangement) was said to have been entered into in the period 18 April 2008 to 31 January 2009. During that period, s 45(2) of the Act provided as follows:

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

    …

    (2)  A corporation shall not:

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

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

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

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

    (i)is an exclusionary provision; or

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

26. Section 4D of the Act defined the circumstances in which a provision of a contract, arrangement or understanding was taken to be an “exclusionary provision”. Section 4D provided as follows:

    4D  Exclusionary provisions

    (1)A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:

    (a)the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and

    (b)the provision has the purpose of preventing, restricting or limiting:

    (i)the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or

    (ii)the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;

    by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.

    (2)A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.

27. In relation to s 45(2)(b)(ii) and the element that the relevant provision of the contract, arrangement or understanding “has the purpose, or has or is likely to have the effect, of substantially lessening competition”, s 4F of the Act provided that a provision will be deemed to have a particular purpose if it was included in the contract, arrangement or understanding for that purpose, or for purposes that include or included that purpose and that purpose was or is a substantial purpose. Section 4G provided that references to the lessening of competition shall be read as including preventing or hindering competition.

1. It was alleged that Cussons gave effect to the relevant arrangement or understanding between 2 March 2009 to 31 December 2009. The Commission alleged that in the period up to 24 July 2009, by giving effect to either the Withhold Supply Arrangement or the Aligned Transition Arrangement, Cussons contravened s 45(2)(b)(i) and (ii) respectively.

2. Section 4 of the Act defined “give effect to”, in relation to a provision of a contract, arrangement or understanding, as including “do an act or thing in pursuance of or in accordance with or enforce or purport to enforce”.

3. With effect from 24 July 2009, the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth) inserted a new Division 1 in Part IV of the Act dealing with cartel conduct. Section 44ZZRK provided as follows:

   44ZZRK Giving effect to a cartel provision

   (1)  A corporation contravenes this section if:

   (a)  a contract, arrangement or understanding contains a cartel provision; and

   (b)  the corporation gives effect to the cartel provision.

   (2)Paragraph (1)(a) applies to contracts or arrangements made, or understandings arrived at, before, at or after the commencement of this section.

   (Note omitted.)

4. Section 44ZZRD defined the circumstances in which a provision of a contract, arrangement or understanding was a “cartel provision”. Section 44ZZRD(1) provided as follows:

   44ZZRD Cartel provisions

   (1)For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if:

   (a)  either of the following conditions is satisfied in relation to the provision:

   (i)  the purpose/effect condition set out in subsection (2);

   (ii)  the purpose condition set out in subsection (3); and

   (b)the competition condition set out in subsection (4) is satisfied in relation to the provision.

5. Section 44ZZRD(2) defined the circumstances in which the “purpose/effect condition” is satisfied. It is not relevant for present purposes. Section 44ZZRD(3) defined the circumstances in which the “purpose condition” is satisfied. Relevantly, for present purposes, s 44ZZRD(3)(a)(i) provided that the purpose condition is satisfied if the provision has the purpose of directly or indirectly preventing, restricting or limiting the production, or likely production, of goods by any or all of the parties to the contract, arrangement or understanding.

6. Section 44ZZRD(4) defined the circumstances in which the “competition condition” is satisfied. Relevantly, the effect of s 44ZZRD(4)(a), (b) and (f) was that where s 44ZZRD(3)(a)(i) applies, the competition condition is satisfied if two or more parties to the contract, arrangement or understanding are or are likely to be, or but for any contract, arrangement or understanding would be or would be likely to be, in competition with each other in relation to the production of the relevant goods.

7. Part VI of the Act contained provisions relating to enforcement and remedies for contraventions of Part IV, including relevantly contraventions of ss 45(2) and 44ZZRK of the Act. Section 76(1), which for present purposes remained relevantly identical before and after the July 2009 amendments, provided that if the Court is satisfied that a person has contravened, inter alia, a provision of Part IV, the Court may order the person to pay to the Commonwealth a pecuniary penalty. Section 76(1A) set out the maximum pecuniary penalties that could be imposed. In the case of contraventions of s 45(2) and, after 24 July 2009, s 44ZZRK, the maximum penalty, in broad terms, was the greater of $10 million and either three times the total value of the benefits attributable to or obtained as a result of the contravention, if the benefit is able to be determined by the Court, or otherwise 10% of the annual turnover of the body corporate.

8. The important point to note, for present purposes, is that if the Commission succeeded in proving that Cussons contravened s 45(2) or s 44ZZRK of the Act, Cussons would be liable to pay a pecuniary penalty of up to at least $10 million for each separate contravention.

   RELEVANT PRINCIPLES

9. The parties were in broad agreement concerning the relevant principles to be applied in addressing the Commission’s case.  The real issue was the application of those principles to the facts as found. 

   Arrangement or understanding

10. The words “contract, arrangement or understanding” are not relevantly defined in the Act. They embrace a “spectrum of consensual dealings” between two or more parties: Australian Competition and Consumer Commission v Leahy Petroleum Ltd [2007] FCA 794; 160 FCR 321 at [24]. The nature of a “contract”, which lies at one end of the spectrum, is well understood. In simple terms, a contract is made when an offer made by one party is accepted by another, supported by consideration, and there is an intention to create a legally binding relationship. Once made, a contract gives rise to enforceable legal obligations, subject to defences such as illegality. Perhaps not surprisingly, anti-competitive arrangements are rarely, if ever, enshrined in formal contracts. The Commission did not allege that Cussons entered into a contract with Colgate or Unilever.

11. Arrangements and understandings are, generally speaking, less formal and less clearly defined than contracts.     

12. An arrangement generally connotes a consensual dealing between parties that is less formal and lacks some or more of the elements that are necessary for the creation of a contract: Leahy at [26]. The parties need not, for example, intend to create a binding legal relationship. The use of the word “make” in s 45(2), in the case of both contracts and arrangements, would tend to suggest that, like a contract, an arrangement would generally require some degree of negotiation or communication between the parties concerning the terms of provisions of the arrangement: Leahy at [26]; Australian Competition and Consumer Commission v Air New Zealand Limited [2014] FCA 1157; (2014) 319 ALR 388 at [463] (overturned on appeal on findings of fact but without criticism of the primary judge’s recitation of principles in respect of “arrangement or understanding”) citing Leahy at [26], [27]-[28].

13. An “understanding”, which perhaps lies at the other end of the spectrum, generally connotes a consensual dealing between parties that is even less formal or less precise than an arrangement: Leahy at [26]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183 at [54]. That would appear to follow not only from the ordinary meaning of an understanding, but also from the fact that, for the purposes of s 45(2) of the Act, an understanding is “arrived at”, rather than made. The concept of an understanding is broad and flexible: Trade Practices Commission v David Jones (Aust) Pty Ltd (1986) 13 FCR 446 at 463 citing Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 25; see also Leahy at [27] citing L Grollo & Company Pty Ltd v Nu-Statt Decorating Pty Ltd (1978) 34 FLR 81 at 89.

14. Unlike an arrangement, an understanding “can be tacit, in the sense that it can be arrived at by each party, either by words or acts, signifying an intention to act in a particular way in relation to a matter of concern to another party”: Leahy at [28]. It can, in other words, be arrived at without any express negotiation or communication between the parties.

15. Discrete characteristics aside, a core element of both an arrangement and an understanding is that there must be some “meeting of the minds” of those who are said to be party to the arrangement or understanding, or some consensus as to what is to be done or not to be done: Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286 at 291. In that case, in a passage that has been cited and approved in many subsequent cases, Smithers J (with whom Evatt J agreed) said (at 291):

    … the existence of an arrangement of the kind contemplated in s.45 is conditional upon a meeting of the minds of the parties to the arrangement in which one of them is understood, by the other or others, and intends to be so understood, as undertaking, in the role of a reasonable and conscientious man, to regard himself as being in some degree under a duty, moral or legal, to conduct himself in some particular way, at any rate so long as the other party or parties conducted themselves in the way contemplated by the arrangement.

    It seems to me also that an understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act.

16. Both an arrangement and an understanding require that at least one party assume an obligation, or give an assurance or an undertaking, that they will act in a particular way; a mere expectation as a matter of fact that a party will act in a certain way is not enough: Air New Zealand at [463]; Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 92 FCR 375; [1999] FCA 954 at FCR 408 [141]; Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [79]; Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission (2005) 159 FCR 452; [2005] FCAFC 161 at FCR 464 [45]. An independently held belief will also not be sufficient to create an arrangement or understanding: Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 385.

17. Whether a degree of mutuality or reciprocity of obligations is a necessary component of an understanding is not entirely settled.  The authorities tend to suggest that, while it is in theory possible that an understanding might be established where one party has committed to behave in a certain way without some commitment by another party, in practice, reciprocity will ordinarily, if not always, be present: see Air New Zealand at 463; Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 230-231.

18. Two final observations can be made for the purposes of this case.  First, a meeting of the minds can be inferred from circumstantial evidence: ACCC v Universal Music Australia Pty Ltd (2001) 115 FCR 442 at [490]; News Limited v Australian Rugby Football League Limited (1996) 64 FRC 410 at 563 (the Super League Case).  Second, and more holistically, for the purpose of establishing whether an arrangement or understanding was reached, the Court must consider the documentary and testimonial evidence as a whole: Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304 at [77].

    Purpose

19. As has been explained, the Commission’s case in respect of the Withhold Supply Provisions was that they were exclusionary provisions as defined in s 4D of the Act, and had the purpose of preventing, restricting or limiting the supply of goods to particular persons or classes of persons, as well as the purpose of preventing, restricting or limiting the production or likely production of detergent products for the purpose of s 44ZZRD(3)(a)(i). In respect of the Aligned Transition Provisions, the Commission alleged that each had the purpose of substantially lessening competition in the whole laundry detergent market for the purpose of s 45(2) of the Act.

20. The purpose of a provision is the end sought to be accomplished by the provision; the subjective purpose of the participants in the arrangement or understanding: News Limited v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563 at [18]; [43]; [63], [212].

21. Section 4F of the Act provides that a provision will be deemed to have a particular purpose if it was included in the contract, arrangement or understanding for that purpose, or for purposes that include or included that purpose, and that purpose was a substantial purpose. That “requires one to look to the purpose of the individuals by whom that provision was included in the contract, arrangement or understanding in question”: ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 476. The proscribed purpose need only be one of a number of purposes, so long as it was substantial: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (2003) 198 ALR 657 at [30].

22. The effect of an arrangement or understanding is irrelevant to a consideration of its purpose: South Sydney District Rugby at 631.

23. The words “restricting” and “limiting”, in the context of the s 4D definition of “exclusionary provisions”, and the purpose condition in s 44ZZRD(3)(a)(i), do not have any discernibly different meaning; they connote a circumstance where supply is not prevented, but less than full supply is maintained: South Sydney District Rugby at 575-576 [25].

    Substantial lessening of competition

24. As explained earlier, the Commission’s case is that the Aligned Transition Provisions had, or were likely to have had, the effect of substantially lessening competition in the market for laundry detergents in Australia.

25. In assessing whether there has been a substantial lessening of competition, a “with and without” or “but for” approach or test is generally applied: the Court considers the likely state of competition in the relevant market “with” the relevant conduct (here, the making of an arrangement, or arrival at an understanding, including the Aligned Transition Provisions) and compares it with the likely state of the market “without” or “but for” the conduct: Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] ATPR 41-783 at [12]. The hypothetical market without the impugned conduct is commonly referred to as the “counterfactual”.

26. The test is not a “before and after” test, although “as a matter of fact, the existing state of competition in the market may throw some light on the likely future state of competition in the market absent the impugned conduct”: Stirling Harbour at [12].

27. Conduct “has the effect of lessening competition in a market only if it involves a reduction in the level of competition which would otherwise have existed in that market but for the conduct in question”: Stirling Harbour at [66]. In Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 44 ALR 173, Smithers J explained the relevant inquiry in the following terms (at 191-192):

    To apply the concept of substantially lessening competition in a market, it is necessary to assess the nature and extent of the market, the probable nature and extent of competition which would exist therein but for the conduct in question, the way the market operates and the nature and extent of the contemplated lessening. To my mind one must look at the relevant significant portion of the market, ask oneself how and to what extent it would have been competition therein but for the conduct, assess what is left and determine whether what has been lost in relation to what would have been, is seen to be a substantial lessening of competition … Accordingly, in my opinion, competition in a market is substantially lessened if the extent of competition in the market which has been lost, is seen by those competent to judge to be a substantial lessening of competition. Has competitive trading in the market been substantially interfered with?

28. The comparison should be conducted having regard to commercial realities and normal commercial practices, as opposed to theoretical models: Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385 at 421-422; Stirling Services at [66]. The focus is not on the effect of the conduct on particular competitors, but rather its effect on the state or condition of the market generally: Pont Data at 478.

29. The word “lessening” in this context should be construed qualitatively, as opposed to quantitatively, and involves forming judgments about the likely impact of the conduct on the market in general: Eastern Express at 421.

30. Section 4G provides that references to the “lessening of competition” shall be read as including preventing or hindering competition.  The phrase “preventing or hindering” should be given a broad construction: Australian Competition and Consumer Commission v Pfizer Australia Pty Ltd [2015] FCA 113; 323 ALR 429 at [74].

31. A “substantial” effect is one that is “substantial in the sense of meaningful or relevant to the competitive process”: Stirling Harbour at [114]; Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [41].

    Burden of and standard of proof

32. The Commission bears the burden of proving that Cussons contravened s 45(2)(a)(i) and (ii), s 45(b)(i) and (ii) and s 44ZZRK as alleged.

33. Given that this is a civil proceeding, the Court must find the Commission’s case proved if it is satisfied that the case has been proved on the balance of probabilities: s 140(1) of the Evidence Act 1995 (Cth).

34. There could be little doubt that the nature of the causes of action pleaded by the Commission, the subject matter of the proceeding, namely serious allegations of the Act by Cussons, and the gravity of the matters alleged, are all very serious. If the Commission proves its case, Cussons could be liable for pecuniary penalties of up to $10 million for each separate contravention. These are matters that the Court is required to take into account in deciding whether it is satisfied that the Commission has proved its case on the balance of probabilities: s 140(2) of the Evidence Act.

35. Section 140(2) of the Evidence Act in large measure encapsulates in statutory form the relevant observations of Dixon J (and the equivalent observations of Rich J) in Briginshaw v Briginshaw (1938) 60 CLR 336, including the following frequently cited passage (at 361-362):

    The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found.  It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality.  No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes.  Fortunately, however, at common law no third standard of persuasion was definitively developed.  Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal.  But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved.  The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.  In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

36. The so-called Briginshaw standard is apposite to the circumstances of this case.  The Commission did not suggest otherwise.  The nature of the allegations and the gravity of the consequences mean that a close examination and careful weighing of all the evidence and facts proved as a basis for inference is warranted.  All of the factual issues that require determination by the Court have been approached on that basis.          

    EVIDENCE AND FACTS

37. Many of the primary facts were not significantly in dispute.  The critical question is what inferences can and should be drawn from the primary facts. 

38. The parties produced and signed an agreed statement of facts for the purposes of s 191 of the Evidence Act 1995 (Cth). The facts in the agreed statement of facts, for the most part, concerned the meetings and communications relied on by the Commission and pleaded in the ASOC.

1. The Commission relied on affidavit evidence from eight lay witnesses.  Those witnesses were all former officers or employees of Unilever: Mr Sebastian Lazell, who was Chairman of Unilever Australia and New Zealand; Mr Peter Campbell, who was Vice President, Customer Development for Australia and New Zealand; Mr David McNeil, Vice President, Marketing; Mr Ken Basha, who was the Customer Director for Woolworths; Ms Jennifer Moss, who was Regional Design Centre and Technical Management Director; Mr Geoff Bellingham, who was Customer Manager for Woolworths; Ms Michelle Katz, who was Marketing Manager, Homecare; and Ms Amanda Tilley, who was a Customer Director for Coles.  As will be seen, the affidavit evidence in chief of those witnesses was to a large extent a chronological excursion through contemporaneous documentation of Unilever’s internal and external deliberations, discussions and dealings concerning its transition from standard to ultra concentrated laundry powder in early 2009.  In many respects, their evidence did not greatly travel beyond commentary on the documentation.  All of the Commission’s lay witnesses were cross-examined. 

2. Ultimately, there was no issue concerning the credit of any of the Commission’s lay witnesses, or the reliability of their evidence generally.  Cussons did not submit that any of their evidence should not be believed or accepted.  On the whole, each of the witnesses presented as a witness who was endeavouring to give an honest and accurate account of events that occurred some time ago.

3. The Commission also relied on expert opinion evidence from an economist, Professor Philip Williams.  The nature of Professor William’s opinion evidence will be addressed later. 

4. The Commission also tendered a very large volume of documentary evidence, mainly comprising documents that the Commission was able to obtain from Colgate, Cussons, Unilever and Woolworths in the course of its investigation.  The documentary evidence really provided the backbone of the Commission’s case.

5. It should be emphasised that it was and is important to carefully consider the statements in each of the documents relied on by the Commission in context.  The relevant context includes the author of the document, the date the document was created, the nature of the document in question and the circumstances in which the document was created.  Many of the documents were prepared by sales and marketing people, and comprised either internal presentations to persons involved in considering and making decisions about the transition to ultra concentrates, or external presentations to Woolworths and Coles.  There was, it must be said, a tendency in the Commission’s case, to seize on certain statements in some of the documents and consider them in isolation and out of context.

6. Cussons relied on affidavit evidence from seven witnesses.  Each of them was an officer or employee of Cussons at the time they gave evidence.  Those witnesses were: Mr Mark Davey, who was Director, Business Development; Mr Mark Cunningham, who was Product Development Manager, Homecare; Mr Guy Freene, who was National Field Manager and National Grocery Operations Manager; Mr Scott Wilson, who was General Manager of Sales or Sales Director; Ms Rebekah Phillips, who was Human Resources Advisor; Mr Steven Messina, who was the Customer Analyst – Woolworths; and Mr Matthew Stewart, who was General Manager, Finance and Information Technology.  Only Ms Phillips, Mr Messina and Mr Stewart, whose evidence did not directly relate to the relevant events, meetings and communications during the period 2007 to 2009, were not cross-examined.

7. With one exception, there was no real issue concerning the credibility and reliability of any of the witnesses called by Cussons.  Like the Commission’s witnesses, on the whole, the witnesses called by Cussons presented as honest and reliable witnesses who were endeavouring to give a truthful and accurate account of events that occurred some time ago.  The Commission did not submit otherwise. 

8. The one possible exception was Mr Davey.  The Commission submitted that, in the course of cross-examination, Mr Davey exhibited a willingness, either consciously or subconsciously, to give answers that he perceived to be beneficial to Cussons’ case and to refuse to give proper concessions that might harm Cussons’ case.  In the Commission’s submission, the Court should exercise caution before accepting Mr Davey’s evidence and should only do so in circumstances where it was corroborated by a contemporaneous document or evidence given by another witness.  In support of that submission, the Commission contended that Mr Davey’s evidence about two specific matters was implausible and unbelievable.  The first matter concerned the interpretation of an email that Mr Davey received from Ms Sarah Baldwin (the Category Marketing Manager for Laundry at Cussons) in July 2008.  The second concerned a document that Mr Davey received for the purposes of a board meeting in August 2008. 

9. Mr Davey’s evidence about those matters will be considered in detail and in context later.  It suffices at this stage to note that the Commission’s criticisms of Mr Davey’s evidence have little or no merit.  Indeed, the parts of Mr Davey’s evidence that were criticised by the Commission, when carefully analysed in context, were for the most part credible and not as implausible as contended by the Commission.  In any event, even if there was some merit in the Commission’s criticisms, it could not fairly be said that Mr Davey’s evidence about those matters infected the whole of his evidence. 

10. Like the other Cussons witnesses, on the whole Mr Davey presented as a credible and reliable witness who was endeavouring to give honest evidence about what he recalled.  Indeed, the Commission itself relied on some parts of Mr Davey’s evidence, even parts that may not have been fully corroborated by documentary or other evidence.  While his evidence, like the evidence given by all the witnesses, was required to be carefully weighed and analysed in the context of the evidence as a whole, the Commission’s submission that his evidence should only be accepted where it was corroborated by other evidence is rejected.    

11. Cussons also relied on some additional documentary evidence, though most of Cussons’ internal documents appeared to have been obtained by the Commission in the course of its investigation and were tendered as part of the Commission’s case.

12. Following is a summary of the evidence and facts.  Given the considerable length of the affidavit evidence and the very large number of documentary exhibits relied on by the parties (the Commission’s exhibits alone filled over 15 lever arch folders), it is obviously not possible to refer to all the evidence.  The evidence referred to in this summary is the evidence to which the parties gave particular emphasis in their respective submissions.  Other aspects of the evidence will be addressed in the context of considering whether the Commission made out its case.      

    The Australian laundry detergent market

13. It was common ground that, when the relevant events occurred during 2008 and 2009 there was a market in Australia for the wholesale supply of laundry detergent products for domestic use.  Although laundry detergent was manufactured and supplied in powder and liquid form, powder laundry detergents led the market and accounted for approximately two thirds of sales. 

14. A number of manufacturers made wholesale supplies of laundry detergent in Australia.  The manufacturers included Colgate, Cussons, Unilever, Kao Australia Pty Ltd and Amway of Australia Pty Ltd.

15. Colgate supplied laundry detergents under a number of brand names, including ‘Cold Power’, ‘Dynamo’, ‘Fab’, ‘Spree’, ‘Hurricane’ and, up to and including February 2009, ‘Love N Care’.  During 2008 and 2009, Colgate’s liquid laundry detergents were manufactured at plants in Villawood, New South Wales and its powdered laundry detergents were manufactured at plants in Labrador, Queensland.

16. Cussons supplied laundry detergents under the brand names ‘Radiant’, ‘Duo’ and ‘Down to Earth’.  During 2008 and 2009, Cussons’ laundry detergents were manufactured at a plant in Dandenong, Victoria.

17. Unilever supplied laundry detergents under the brand names ‘Omo’, ‘Surf’ and ‘Drive’.  During 2008 and 2009, Unilever’s laundry detergents were manufactured at a plant in Petone, located in the region of Wellington, New Zealand.

18. Kao supplied laundry detergents under the brand name ‘Biozet’.

19. Amway’s laundry detergents were sold directly to consumers and were not supplied wholesale to supermarkets and other stores.

20. Colgate, Cussons and Unilever were the major wholesale suppliers of laundry detergents in Australia.  Together, they accounted for approximately 80% of the market.  There was no dispute that Colgate, Cussons and Unilever were relevantly in competition with each other in relation to the production and wholesale supply of laundry detergents in Australia.  For the sake of simplicity, and because the other wholesale suppliers were generally considered to be “minor players”, Colgate, Cussons and Unilever have and will continue to be referred to collectively as the Suppliers unless stated otherwise.

21. Throughout 2008 and 2009, Colgate, Cussons, Unilever, Kao and Amway were members of Accord.  As noted earlier, Accord was the national industry association for the Australasian hygiene, cosmetic and speciality products industry.

22. The main retailers to whom the Suppliers supplied laundry detergents were Woolworths and Coles.  The main wholesaler to whom the Suppliers made supplies was Metcash.  Other retailers or wholesalers to whom at least some Suppliers made some supplies included Big W, 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.

23. In early 2008, the Suppliers were experiencing rising manufacturing costs.  The rising costs were in part due to the rising costs of sodium tripolyphosphate, one of the inputs for the production of powdered laundry detergents. 

24. At the same time, the Suppliers were experiencing extensive price competition.  Throughout 2008 and 2009, more than half of the retail sales of laundry detergents were at promotional or discounted prices. 

25. The result was that the laundry detergent market was generally considered to be performing poorly for both the Suppliers and their retailers.  The market had not experienced any growth for some time.  There was evidence that the Suppliers were faced with declining margins.

    The genesis of the transition to ultra concentrates in the Australian market

26. During 2008, the majority of powdered and liquid laundry detergent products sold in Australia for domestic use were formulated in a way that was, or came to be regarded, as standard concentration.  By at least January 2008, however, each of the Suppliers was aware of a global trend towards the introduction of so-called ultra concentrate laundry detergents.  In the previous year, there had been an industry-wide transition to ultra concentrated laundry detergents in Europe and the United States.

27. Ultra concentrated detergents, as the name would suggest, contained less inert or inactive ingredients, so a smaller quantity of the product could produce the same results or number of washes as a larger amount of standard concentrate detergents.  The commercial or economic benefits of ultra concentrates included lower production costs and lower costs of transportation and storage given the smaller packages that were required.  From the retailer’s perspective, the benefits of ultra concentrates included that they occupied smaller supermarket shelf space.  Ultra concentrates were also seen as being better for the environment and therefore “sustainable”.    

28. It should be noted, in the context of the global trend towards ultra concentrates, that each of the Suppliers was a subsidiary of a large multi-national corporate group.  In circumstances where the Suppliers’ parent or related companies overseas had transitioned to ultra concentrates in overseas markets, it is difficult to imagine that the transition to ultra concentrates in some form or another in the Australian market was anything other than inevitable.  The only real question was the timing and scope of the transition.    

29. By late 2007 or early 2008, each of the Suppliers had independently begun to explore the possibility of transitioning to ultra concentrates.  Each was aware that their competitors were likely to transition at some stage.  Each was weighing up the benefits and the risks of transitioning, including in light of the overseas experience.  A change to ultra concentrates was seen by the Suppliers as providing potentially significant cost savings, including packaging and logistic costs.

30. Colgate’s internal project for a complete transition to ultra concentrates was called (somewhat unimaginatively) Ultra.  It was well in train by late 2007.  An internal Colgate email in November 2007 noted that the preferred transition plan was to “encourage a paradigm shift towards a total market transition by Jan[uary] 2009”.  An accompanying presentation made it clear that Colgate did not know if or when its competitors would be launching ultra concentrates, though it plainly expected that they would do so in the not too distant future.  It also indicated that Colgate recognised that there were risks for it if the entire market did not move at the same time.  It noted that “Colgate does risk losing share and sales if the market does not move, so in a scenario where there is no indication of competitive launch in January 2009, Colgate’s transition could be reduced in scale, or postponed altogether” but that “[i]n the interim, it is imperative that we prepare so that we can meet a full transition in January 2009”.

31. Cussons’ internal project for the transition to ultra concentrates was called Project Mastermind.  Project Mastermind was approved by Cussons’ “New Activities Review Team” on 9 January 2008.  The “target implementation date” noted in the initial documentation was January or February 2009.  As will be seen, by as early as April 2008, Cussons had conducted a feasibility study which had concluded that “[c]oncentration (2X) of RADIANT and DUO is feasible and recommended by Feb[ruary] 2009”.

32. Unilever’s internal project for the introduction of ultra concentrated detergents was called Project Faster.  Unilever had initiated Project Faster by about November 2007.  An internal Unilever brief for approval by Unilever’s senior management in January 2008 recorded that “Project Faster is the development of a new “super [c]oncentrate range across the Unilever powders portfolio for launch in Q1 2009”.  It noted that it was “envisaged that the super [c]oncentrate range will supersede all current powder offerings, and will require a complete review of pack sizes and dosage”.  From as early as January 2008, the planned launch date for the introduction of ultra concentrated powders was February 2009.  The proposed timings included testing by the end of the second quarter of 2008, the product being market ready by the third quarter of 2008, production in the fourth quarter of 2008 and stock being available in the first quarter of 2009.

    The perceived risks and rewards of transitioning to ultra concentrates

33. It was clear that each of the Suppliers saw considerable commercial benefits in transitioning to ultra concentrates.  It was essentially common ground that each of the Suppliers saw that transitioning to ultra concentrates gave them the opportunity to increase their margins on the sale of their products because they would be able to significantly reduce their production, packaging and transportation costs.  That was seen as being particularly important in the face of the increasing manufacturing costs, discounting, poor growth and declining margins that each of the Suppliers had been experiencing. 

34. Equally, however, each of the Suppliers perceived that there were some risks involved in transitioning to ultra concentrates if one or other of their main competitors did not also fully transition to ultra concentrates at about the same time.  The perceived risks mostly related to the high potential of consumer confusion.  In simple terms, it was thought that a consumer, faced with two products, both at about the same price, but one of which was in a larger package and appeared to contain more detergent, would be more likely to purchase the product in the larger package.  That was thought to be the case even if the product in the smaller package was an ultra concentrate and could produce as many washes as the product in the larger package.  In simple terms, each of the Suppliers were concerned that if they fully transitioned to ultra concentrates and one or more of their competitors did not, they would lose sales to the Supplier or Suppliers who continued to supply some standard concentrates.

35. Mr McNeil of Unilever put the matter this way in his evidence:

    It was my view, upon taking responsibility for marketing of laundry, that this move to compaction was high on the agenda.  Although I cannot recall with whom I had the conversation, I believe that, early in 2008, I was told that a successful move to compaction would have to be conducted on an industry-wide basis.  The key concern communicated to me was that, if there were any standard concentrate available for purchase, in a large box, consumers would default to purchasing that product, as opposed to adopting ultra concentrates.  My view was that as long as there were options in the market that (even if incorrectly) appeared to be better value, that would slow down the process of consumers adopting ultra concentrates.  That is, my view, which was the commonly expressed view within Unilever at the time, was that the conversion was going to be better for Unilever if it was everything and everyone – all products and all suppliers, as this would minimise consumer confusion.

36. The evidence of Mr Lazell of Unilever was largely to the same effect. 

37. Internal Colgate documents record the same concerns.  An internal Colgate presentation slide from later 2007, for example, noted that the “[c]oncentration [r]isks” included “[m]essage complexity precludes ‘product +’ proposition” and “Price | Unit Size equation disrupted”.  Another slide, which dealt with the question of what was the “best range / bundle to go to the market with”, stated:

    Do we risk losing share and sales by moving entirely to Ultra?

    •  Anything less than a full transition to Ultra will result in increased manufacturing complexity, eroding the margin benefit of Ultra

    •  Colgate does risk losing share and sales if the market does not move, so in a scenario where there is no indication of competitive launch in January 2009, Colgate’s transition could be reduced in scale, or postponed altogether

    …

    (Emphasis in original.)

38. As for Cussons, Mr Davey, when examined by the Commission prior to the trial, frankly acknowledged that he saw that there was a risk for Cussons if it unilaterally lead the way to ultra concentrates:

    Q: Assuming technical feasibility and if the product was otherwise possible to manufacture, did you believe it was likely, as at June 2008, that Cussons could successfully unilaterally lead the way on a transition to concentrated laundry powders?

    A: No.

    Q: And why is that?

    A: The – the consumer behaviour change was – in my opinion, was too great that actually what would happen is the consumer would have ended up double dosing and – and then realise that, from a value point of view, they’re washing with – PZ Cussons was costing them a lot of money, or they would just see the smaller box, get confused and stick with – with whatever else they – they had.  For – for – for me, in my mind, the consumer education was so critical and bigger than PZ Cussons could do.

1. The difficulty with the Commission’s case that the Aligned Transition Provisions had the effect, or likely effect, of substantially lessening competition, at least insofar as it relied on Professor Williams’ evidence and opinions, is that Professor Williams’ opinions were premised on an assumed counterfactual that was unrealistic and contrary to what the evidence suggested would be the likely state of the laundry detergent market but for the Aligned Transition Provisions.  As has already been discussed in some considerable detail, Professor Williams appears to have been asked to assume that the counterfactual was a “world in which conduct is unilateral”.  Thus, Professor Williams’ analysis and opinions were based on his comparison between the laundry detergent market with the Aligned Transition Provisions, and the laundry detergent market where there was no explicit or implicit communication between the competitors in that market.  And, it will be recalled, implicit communications would include, for example, a situation where one competitor was able to obtain information about the plans and decisions of another competitor from a retailer to which that competitor had disclosed its plans and decisions.

2. There could be little doubt that, as a matter of economic theory and economic modelling, the concept of unilateral conduct is important.  Without wishing in any way to enter the academic debate between Professors Williams and Hay in respect of the Cournot and Bertrand models of oligopoly, it would appear that the concept of unilateral conduct is a useful concept in producing models for the purpose of predicting or analysing conduct in an oligopolistic market.  That is not to say, however, that it is necessarily appropriate to assume that the market that would exist in the absence of an anti-competitive arrangement or understanding would be a market in which there was only unilateral conduct.  Indeed, such an assumption would in many, if not most, cases be unrealistic.  As Professor Williams himself noted, models of unilateral conduct or behaviour are at one extreme in a continuum between unilateral behaviour and the perfect cartel that manages to co-operate as if it were a pure monopoly.  It is unlikely that many actual oligopolistic markets exist where there is only unilateral conduct – other than perhaps in textbooks or economic models.

3. There was no evidence to suggest that the laundry detergent market that would have existed in the absence of the Aligned Transition Arrangement would have been a market in which there was only unilateral conduct.  Indeed, the evidence relied on by the Commission suggested that indirect and implicit communications and other forms of “coordinated interaction”, which did not without more constitute or comprise the proscribed arrangements or understandings, were, and were likely to continue to be, commonplace in the laundry detergent market.  That was likely to be the case even in the counterfactual “world” without the Aligned Transition Agreement.  It was, for example, highly likely that in the counterfactual world, each of the Suppliers would continue to have the incentive and means to seek out and obtain market intelligence from the major retailers, Woolworths and Coles, about the plans and decisions of their competitors.  The counterfactual world that Professor Williams was asked to assume permitted no such forms of indirect communication or coordinated interaction.  It was, in that respect, artificial and unrealistic.  That was, in many respects, the very point that was implicit, if not explicit, in Professor Hay’s analysis. 

4. As Professor Hay put it in his report:

   It is well understood by economists that, especially in an oligopoly setting, there can be a wide range of behaviour that falls short of a collusive arrangement or understanding. Yet, it appears that when Dr. Williams refers to “unilateral” conduct as the hallmark of his “but-for” world, he is ruling out the possibility that oligopolistic interdependence might influence how firms behave. He therefore appears to be limiting the possibilities to a “but-for” world in which firms ignore their interdependence and act as if sitting in a hermetically sealed chamber ignorant of and/or uncaring about what their competitors are doing and how they might react to one another’s actions. Even aside from the ambiguity of what conduct would be permitted in Dr. Williams’ “unilateral” world, a world in which real oligopolists who have been interacting in the marketplace for some time are imagined to ignore their history and their mutual independence seems to me to be a poor benchmark for constructing a useful “but-for” world.

5. The evidence clearly showed that the Suppliers were never likely to operate in a “hermetically sealed chamber”.  Nor was that likely to be the state of the market in the absence of the Aligned Transition Arrangement.  The Commission submitted that the counterfactual that Professor Williams was asked to assume was “appropriately anchored in economic concepts”.  That was presumably a reference to the Cournet and Bertrand models of oligopoly behaviour.  Even if that be so, it does not mean that it was a relevant or appropriate counterfactual.  The Commission also submitted that Professor Williams’ counterfactual does not exclude benign communications, but does exclude a retailer passing on commercially sensitive information from one Supplier to another Supplier.  That was not how Professor Williams saw it. He gave the following evidence in cross-examination:

   Q: This may be obvious, Professor, but I just want to make sure that I get it clear, and it’s clear for his Honour. It follows I think from what you’ve just said and from what you say in your reports, that there’s no direct correlation between what you term “unilateral behaviour” and lawful or unlawful behaviour; is that correct?

   A: That’s my understanding, yes.

   Q: Because the alternative to unilateral behaviour, as I’ve understood your opinion, is that a world in which there is some communication between competitors in some way, if I can put it that way?

   A: Yes.

   Q: And that communication isn’t necessarily direct communication, for example?

   A: That’s right. It may be merely by signalling in a market or some form – without even direct speaking to each other.

   Q: So, for example, in a case like this where you’ve got three laundry detergent suppliers out of – I think there are five in the market at the time – and two major retailers, your analysis would classify market intelligence acquired by a retailer as a communication of sorts?

   A: Yes. It could be via a third party, yes.

   Q: And in this analysis, there’s no attribution of intent on the part of the supplier in either receiving information in that circumstance or, indeed, in providing it to its customer. Intent is irrelevant, in other words?

   A: Economics would be silent on intent.

6. On the whole, the evidence concerning the laundry detergent market, and the opinions of Professor Hay, show that the counterfactual that Professor Williams was asked to assume was unrealistic and flawed.  That flaw undermined his analysis and opinions. Professor Hay’s views concerning the appropriate counterfactual are to be preferred.

7. Putting Professor Williams’ evidence and views concerning the counterfactual to one side, the Commission contended that, but for the Aligned Transition Arrangement, Colgate, Cussons and Unilever would not have, or would not have been likely to, simultaneously transition all of their powdered and remaining liquid laundry detergents for domestic use to ultra concentrates.  Rather, in the Commission’s submission, the following things would have, or would have been likely to have, occurred: first, one or other of the Suppliers would have changed their laundry detergent product range to ultra concentrates before the others; second, one or more of the Suppliers would have offered ultra concentrates at a lower price than standard concentrates which had an equivalent or similar performance in the laundry detergent market; third, one or more of the Suppliers would have supplied laundry detergent products with a variety of levels of concentration; fourth, laundry detergent products with a variety of package sizes would have been supplied; and fifth, laundry detergent products with a variety of appearances (including pack communications) would have been supplied. 

8. In the Commission’s submission, the consequences of those occurrences, or that state of affairs in the counterfactual world, would have been threefold: first, it was likely that there would have been vigorous price competition between standard concentrates and ultra concentrates; second, there would, or would have been likely to have been, higher ongoing demand for standard concentrates in the laundry detergent market; and third, there would, or would have been likely to have been, reductions in the price of ultra concentrates following their introduction to the laundry detergent market by reason of the implementation of discounts to encourage consumers to purchase ultra concentrates rather than standard concentrates. 

9. There are a number of significant problems with those submissions, and the Commission’s case concerning substantial lessening of competition generally.  First and foremost, the evidence, considered as a whole, does not support the Commission’s contentions about what was likely to have happened had there been no Aligned Transition Arrangement.  The evidence has already been considered in considerable detail.  Without repeating what has already been said, the following points can be made.

10. First, to the extent that the Commission’s submissions rely on the opinion of Professor Williams concerning the likelihood of their having been a simultaneous transition if the Suppliers acted unilaterally, his opinion is not accepted for the reasons already given.  The opinions of Professor Hay are to be preferred.  It should be reiterated, in this context, that Professor Hay was not cross-examined.

11. Second, the Commission’s case appears to be that the evidence established that, if the Suppliers had acted unilaterally, Woolworths would have insisted that the transition occur in February 2009.  The suggestion appears to be that the Suppliers colluded with a view to pressuring Woolworths into moving the date to March 2009.  That submission is rejected for the reasons already given.  The evidence does indicate that Woolworths initially planned that the transition would occur in February 2009, but then moved the date to March 2009.  The evidence tends to suggest, however, that this occurred by reason of overtures from Unilever and possibly Colgate.  While Unilever and Colgate may have referred to their understanding of Cussons’ position in their discussions with Woolworths, there is insufficient evidence to prove that Cussons engaged in any form of coordinated or collusive conduct with Unilever and Colgate to force Woolworths to move the launch date.  There is also insufficient evidence that Woolworths agreed to change the date because it was somehow overwhelmed by the collective action of the Suppliers.

12. Third, for the reasons already given in detail, the evidence supports the proposition that both Woolworths and Coles made it clear to the Suppliers that, once ultra concentrated products were being supplied, they no longer wished to purchase standard concentrated brands from the Suppliers.  Thus, even if the Suppliers were required to meet an earlier launch date in February 2009, it does not follow that Woolworths and Coles would have continued to purchase and stock standard concentrates for supply to consumers.  They would have “de-ranged” any standard concentrates.  There would therefore have been no scope for price competition of the sort suggested by the Commission.  It should also be noted in this context that the evidence also tended to show that, while the Suppliers were each conscious of the risks of a complete transition to ultra concentrates if their competitors did not also completely shift to ultra concentrates at the same time, they also each saw considerable economic benefits in a complete transition to ultra concentrates.  This was also contrary to the Commission’s case that, in the counterfactual world, one or more of the Suppliers would have continued to supply standard concentrates for some time.

13. Fourth, the Commission did not point to any cogent or persuasive evidence in support of its contention that one or more of the Suppliers would have offered ultra concentrates at a materially lower price than standard concentrates.  The Commission’s contention in this regard also lacks clarity and precision.  It raised more questions than it answered.  If Woolworths had required the transition to have occurred in February rather than March 2009, which of the Suppliers would only have transitioned some of their brands, and how many brands would have remained in a standard concentrate format? For how long would that situation have continued?  Would the alleged “vigorous price competition” have occurred at the retail or wholesale level?  The Commission’s case as articulated answered none of those questions.  It amounted to little more than speculation.

14. Fifth, both Professor Williams and Professor Hay gave consideration to what had occurred in early 2008 when there was an incomplete transition to ultra concentrated liquid laundry detergents.  The evidence indicated that Unilever changed all its liquid brands to ultra concentrates, whereas Cussons continued to supply both standard and ultra concentrated liquids.  While there was some disagreement between Professors Williams and Hay in relation to the characterisation of the changes in pricing that occurred during or as a result of the transition to liquid ultra concentrates, it would appear to have been common ground that Cussons increased its price of liquid laundry detergents in February 2008, lost market share to Unilever, and did not subsequently decrease its prices in response.  Thus, the incomplete transition to liquid ultra concentrates did not result in significant price competition.  That would appear to be inconsistent with the Commission’s case concerning price competition.  It should also be noted in that regard that Professor Hay’s unchallenged view was that he found no support for Professor Williams’ prediction that an incomplete transition to ultra concentrated powder would have led to substantial discounting of ultra concentrates.  Professor Williams’ prediction was essentially unsupported by any empirical analysis.

15. Sixth, both Professor Williams and Professor Hay gave some consideration to the data concerning the pricing of laundry detergents following the March 2009 transition.  Professor Hay’s analysis of the available data, which related to the period commencing 20 months before March 2009 and ending 16 months after, was that average net wholesale prices of powder detergent fell 10.4% while average net wholesale prices of liquid detergent fell 4.2%.  At the retail level, the average price paid per factored kilogram of powder detergent fell 6.6% while the average retail price paid per factored litre of liquid detergent rose by 1.9%. 

16. Professor Hay’s unchallenged opinion was that the overall effect of the transition was to benefit both retailers and consumers and that the introduction of ultra concentrates had a significant procompetitive impact on average wholesale net prices per factored kilogram of powder detergent.  Professor Williams, in response, suggested that it was preferable to compare average prices over a shorter period.  Even that analysis, however, showed that the average retail price of powdered detergent decreased by 2.97%.  It does not appear that Professor Williams conducted the same analysis in relation to wholesale prices.

17. On the whole, Professor Hay’s analysis of the pricing data is to be preferred to the analysis conducted by Professor Williams.  Professor Williams’ analysis was unpersuasive.

18. Finally, it should also be noted that the Commission’s submissions barely dealt with the competition implications of the third of the Aligned Transition Provisions, which related to the supply of only ultra concentrates that met certain prescribed parameters.  There was virtually no meaningful analysis of the state of competition in the market with that provision, as compared with the likely state of competition in the counterfactual world without it.  That certainly did not feature in Professor Williams’ reports.  Nor did it feature in the Commission’s submissions.  There was, for example, no meaningful analysis of the likelihood of there being products with different levels of concentration in the counterfactual world, let alone any analysis of the likelihood or extent of any competition based on the different levels of concentration.  There was no, or at least no meaningful, analysis of the differences in pack sizes or pack communications that may have existed in the counterfactual world, or how that would have impacted on competition.  The absence of any analysis or submissions in relation to this aspect of the Commission’s case concerning the effect of the Aligned Transition Provisions perhaps reflects the fact that, on the whole, the evidence simply did not support the Commission’s case.

19. While it is perhaps possible to see some superficial attraction in the Commission’s contentions concerning the anti-competitive impact of a simultaneous and uniform transition to ultra concentrates by all the Suppliers, ultimately its case in that regard was unsupported by any persuasive economic analysis on the part of Professor Williams, was contrary to the effectively unchallenged evidence of Professor Hay, and was in any event unsupported by the evidence of what was likely to happen in the absence of the alleged Aligned Transition Agreement, and what in fact happened to prices when the transition in fact occurred in March 2009. 

20. Had it been necessary to consider and determine issue 4, it would have been determined adversely to the Commission.

    Issue 6: giving effect to the Aligned Transition Arrangement

21. Even accepting, for the sake of argument, that Cussons effectively fully transitioned to ultra concentrates at the same time as Unilever and Colgate, for the reasons already given the Commission failed to discharge its burden of proving that such conduct occurred as a result of Cussons giving effect to any arrangement or understanding it had made or arrived at with Unilever and Colgate.  The Commission failed to prove that Cussons was a party to the Aligned Transition Arrangement.  It therefore could not, in any relevant sense, give effect to any such arrangement.  The Commission did not advance any substantive submissions in relation to this issue.

    Issues 7 & 8: contravention of s 45(2)(a)(ii), s 45(2)(b) and s 44ZZRK of the Act

22. Given that the Commission failed to discharge its burden of proving, on the balance of probabilities, that Cussons made an arrangement, or arrived at an understanding, with Colgate and Unilever which included the Aligned Transition Provisions, it must follow that Cussons did not contravene any of s 45(2)(a)(ii), s 45(2)(b) and s 44ZZRK of the Act in respect of the Aligned Transition Arrangement issues.

    CONCLUSION AND DISPOSITION

23. The Commission failed to discharge its burden of proving, on the balance of probabilities, that Cussons contravened s 45(2)(a)(i) and (ii), s 45(b)(i) and (ii) and s 44ZZRK as alleged. The evidence, considered as a whole, does not prove to the requisite standard that Cussons made an arrangement, or arrived at an understanding, with Unilever and Colgate that included the alleged Withhold Supply Provisions, or the alleged Aligned Transition Provisions. Nor does the evidence prove that Cussons gave effect to any such arrangements or understandings. Even if the Commission had been able to prove that Cussons made an arrangement or arrived at an understanding that included the Aligned Transition Provisions, it nonetheless failed to prove that the Aligned Transition Provisions had the purpose, or had or were likely to have, the effect of substantially lessening competition in the relevant market.

1. The appropriate orders are that the Commission’s application, insofar as it related to Cussons, be dismissed with costs.   

I certify that the preceding six hundred and seventy-eight (678) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

Associate:

Dated:       22 December 2017