Australian Competition and Consumer Commission v D M Faulkner Pty Ltd - [2004] FCA 1666

FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v D M Faulkner Pty Limited [2004] FCA 1666
TRADE PRACTICES – exclusionary provisions – scrap metal industry – auctions – agreement among merchants – nominated bidder – controlled or restricted bidding at auction – subsequent allocation of a payment for goods – loss or damage unquantified – submitting respondents – defending respondents – market – whether the ‘purpose’ of provision in an arrangement should be approached subjectively or objectively – application of totality principle – where company is alter ego of individual – penalty – factors to be considered in determining penalties for contravention of Trade Practices Act – application of the “French factors” and the “Heerey factors” – permissible range – proposed penalties – whether variation from proposed penalty can be made where it is within the permissible range
PRACTICE AND PROCEDURE – substituted service appropriate where respondent determined not to accept service – nature of the Court’s discretion and power to grant injunctive relief – no case submission
Trade Practices Act 1974 (Cth) ss 4D, 4F, 45, 45A, 76, 80
Federal Court Rules O 7 r 10
ACCC v ABB (2002) ATPR 41-871
ACCC v FFE Building Services Limited [2003] FCA 154
ACCC v Ithaca Ice Works Pty Limited (2002) ATPR 41-851
ACCC v Roche Vitamins Australia Pty Ltd (2001) ATPR 41-809
ACCC v Tyco Australia Pty Ltd (2000) ATPR 41-789
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1)(1990) 27 FCR 460
Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc (2003) 199 ALR 423
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 165 ALR 468
Australian Competition & Consumer Commission v ABB Power Transmission Pty Ltd [2004] FCA 819
Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815
Australian Competition & Consumer Commission v Chaste Corporation Pty Ltd [2004] FCA 398
Australian Competition & Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) [2004] FCA 376
Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693
Australian Competition & Consumer Commission v NW Frozen Foods (1996) ATPR 41-515
Australian Competition & Consumer Commission v Pauls Ltd [2002] FCA 1586
Australian Competition & Consumer Commission v Universal Music Australia Pty Limited (No 2) [2002] FCA 192
Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730
Hughes v Western Australian Cricket Association (inc) (1986) 19 FCR 10
ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248
Jones v Dunkel (1959) 101 CLR 298
Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410
News Ltd & Ors v South Sydney District Rugby League Football Club Ltd & Ors (2000) 200 ALR 15
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
Postiglione v The Queen (1997) 189 CLR 295
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177
Schneider Electric (Australia) Pty Ltd v Australian Competition & Consumer Commission (2003) 127 FCR 170
Scoway Pty Ltd v Faxon Pty Ltd [2004] FCA 249
Trade Practices Commission v Allied Mills Pty Ltd (1981) APPR 40-241
Trade Practices Commission v Allied Mills Industries Pty Ltd (No 5)(1981) 60 FLR 38
Trade Practices Commission v CSR Limited (1991) ATPR 41-076
Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115
Trade Practices Commission v Pye Industries Sales Pty Ltd (1978) ATPR 40-089
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091
Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41-375
Universal Music Australia Pty Ltd v Australian Competition & Consumer Commission [2003] FCAFC 193; (2003) 201 ALR 636
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
v D M FAULKNER PTY LIMITED (ACN 077 373 712), DAVID MUNRO FAULKNER, RIVERSIDE METAL INDUSTRIES PTY LTD (ACN 002 537 537), PAUL LEONARD CLINGAN, MICHAEL WALTER NIETNER, FERNDALE RECYCLERS PTY LIMITED (ACN 056 303 130), RONALD CHRISTOPHER BAGNALL, AJAX SHEET METAL PTY LIMITED (ACN 000 466 713), SIDNEY NEVILLE FORRESTER, T & D METALS & DEMOLITIONS PTY LIMITED
(ACN 066 973 993), ANTHONY FRANKE, HENDRICUS FRANKE, ALLAN HIGGINS and WILLIAM ROBINSON
N1672 OF 2001
BENNETT J
30 SEPTEMBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N1672 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

D M FAULKNER PTY LIMITED (ACN 077 373 712)
FIRST RESPONDENT

DAVID MUNRO FAULKNER
SECOND RESPONDENT

RIVERSIDE METAL INDUSTRIES PTY LTD
(ACN 002 537 537)
THIRD RESPONDENT

PAUL LEONARD CLINGAN
FOURTH RESPONDENT

MICHAEL WALTER NIETNER
FIFTH RESPONDENT

FERNDALE RECYCLERS PTY LIMITED (ACN 056 303 130)
SIXTH RESPONDENT

RONALD CHRISTOPHER BAGNALL
SEVENTH RESPONDENT

AJAX SHEET METAL PTY LIMITED (ACN 000 466 713)
TENTH RESPONDENT

SIDNEY NEVILLE FORRESTER
ELEVENTH RESPONDENT

T & D METALS & DEMOLITIONS PTY LIMITED
(ACN 066 973 993)
THIRTEENTH RESPONDENT

ANTHONY FRANKE
FOURTEENTH RESPONDENT

HENDRICUS FRANKE
FIFTEENTH RESPONDENT

ALLAN HIGGINS
SIXTEENTH RESPONDENT

WILLIAM ROBINSON
SEVENTEENTH RESPONDENT

JUDGE:

BENNETT J

DATE OF ORDER:

30 SEPTEMBER 2004

WHERE MADE:

SYDNEY

THE COURT MAKES ORDERS:
1.With respect to the first and second respondents, the orders in Annexure A to these reasons.
2.With respect to the third and fourth respondents, the orders in Annexure B to these reasons.
3.With respect to the fifth respondent, the orders in Annexure C to these reasons.
4.With respect to the tenth and eleventh respondents, the orders in Annexure D to these reasons.
5.With respect to the thirteenth and fourteenth respondents, the orders in Annexure E to these reasons.
6.With respect to the seventeenth respondent, the orders in Annexure F to these reasons.
7.With respect to the sixteenth respondent, the orders in the notice of motion filed 23 March 2004.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N1672 OF 2001

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

D M FAULKNER PTY LIMITED (ACN 077 373 712)
FIRST RESPONDENT

DAVID MUNRO FAULKNER
SECOND RESPONDENT

RIVERSIDE METAL INDUSTRIES PTY LTD
(ACN 002 537 537)
THIRD RESPONDENT

PAUL LEONARD CLINGAN
FOURTH RESPONDENT

MICHAEL WALTER NIETNER
FIFTH RESPONDENT

FERNDALE RECYCLERS PTY LIMITED (ACN 056 303 130)
SIXTH RESPONDENT

RONALD CHRISTOPHER BAGNALL
SEVENTH RESPONDENT

AJAX SHEET METAL PTY LIMITED (ACN 000 466 713)
TENTH RESPONDENT

SIDNEY NEVILLE FORRESTER
ELEVENTH RESPONDENT

T & D METALS & DEMOLITIONS PTY LIMITED
(ACN 066 973 993)
THIRTEENTH RESPONDENT

ANTHONY FRANKE
FOURTEENTH RESPONDENT

HENDRICUS FRANKE
FIFTEENTH RESPONDENT

ALLAN HIGGINS
SIXTEENTH RESPONDENT

WILLIAM ROBINSON
SEVENTEENTH RESPONDENT

JUDGE:

BENNETT J

DATE:

30 SEPTEMBER 2004

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The proceedings have been brought by the Australian Competition and Consumer Commission (‘the ACCC’) against seventeen respondents for price fixing and collusive and anticompetitive conduct in the scrap metal market. The action was discontinued against the eighth respondent, Metals Recovery Pty Limited (ACN 003 270 666), the ninth respondent, Keith Brian Burnett (deceased), and the twelfth respondent, Peter Dunn. The amended statement of claim also alleged contraventions of s 52 of the Trade Practices Act 1974 (Cth) (‘the Act’). The s 52 allegations were not proceeded with, other than by way of consent orders in respect of some of the respondents.
Most of the respondents (the first to fifth, tenth to fourteenth and seventeenth respondents) (‘the submitting respondents’), for the purposes of these proceedings, admitted in substance the allegations in the amended statement of claim insofar as they related to contraventions of both as to factual matters and that those facts amounted to contravention of the Act and so enabled the court to proceed to impose penalties. I have referred to these agreed facts in some detail below as they contextualise the ACCC’s allegations. The ACCC and the submitting respondents negotiated penalties which they considered appropriate and submitted them to the Court.
BACKGROUND FACTS AGREED AS BETWEEN THE ACCC AND THE SUBMITTING RESPONDENTS
These allegations are of price fixing and collusive and anticompetitive conduct in the scrap metal market at the small-trader end of that market. In the market of the New South Wales scrap metal industry, the first and second respondents are small to mid-size traders when compared with the major traders Metalcorp Recyclers Pty Ltd (‘Metalcorp’) (a division of Smorgon Steel Group Limited (‘Smorgon’)) and Simsmetal Limited (‘Simsmetal’).
Scrap metal merchants and metal recyclers purchase items manufactured from metals such as steel, iron, copper, brass, stainless steel and aluminium for processing and reselling. Scrap metal items purchased are broadly those metal items that are no longer wanted by any entity for their original functional purpose. Metal items may be those that are derelict, off-cuts, in disrepair, new and unused metal goods or second hand reusable items such as plate, beams and railway lines.
Most scrap items must be processed by at least being cut into smaller pieces so that they are less bulky for loading into trucks and containers and removing contaminates and can be sorted into bundles of like metal. The process of sorting and cutting bulkier items is the area in which the respondents operate. The processed metals are then on sold to a limited number of larger operations: Metalcorp, Simsmetal, BHP Billiton Limited (‘BHP’) or Smorgon in the case of ferrous scrap and Simsmetal or Riverside Metal Industries Pty Ltd (‘Riverside Metal’) in the case of non-ferrous scrap. The end users of ferrous scrap are BHP and Smorgon. A small amount of non-ferrous scrap is exported.
Metals can be categorised into ferrous and non-ferrous metals. Ferrous metals, which include steel products (but not stainless steel) and cast iron goods, are almost always magnetic. For resale, ferrous metals need to be cut to small specifications, usually not larger than 800 mm x 800 mm. Railway line, steel beams and steel plates are processed by oxy-cutting and/or mobile shear excavators. Whitegoods and car bodies are processed through shredding machines, which remove the plastic, and other non-metal contents. Non-ferrous materials are non-magnetic and are processed differently, depending on the metal. They include copper, aluminium, brass and stainless steel.
Scrap metal merchants compete with one another to purchase scrap metal items from the following sources:
(a)       By:
(i)attending auctions where surplus trading stock or plant and machinery are sold;
(ii)tendering where businesses are liquidating trading stock or parts of their business; and
(iii)emptying metal off-cut bins from manufacturing sites (not all of the respondents engaged in this activity)
(b)       Government departments who are disposing of used goods by tender or auction;
(c)Tradesmen bringing in items to the dealer’s business premises such as old pipes, electrical cabling and roofing irons and members of the public disposing of old white goods, aluminium cans or cars;
(d)Businesses specialising in demolishing (not all respondents engaged in this type of business); and
(e)       Other scrap dealers.
The proportion of scrap metal acquired from these various sources will depend on the level of sophistication of a scrap dealer’s processing capacity and his relative size in the market.
The amended statement of claim describes what is alleged to be an arrangement or understanding known as the “ring” and the “knock” that operated among scrap metal dealers in New South Wales up to the end of 1999. The scrap metal merchants were competitive with each other. The relevant market is the scrap metal market.
Rings occurred and operated as follows:
(i)in the days preceding the auction and/or early on the day of the auction, scrap metal merchants agreed amongst themselves to participate in the ring for the duration of the auction;
(ii)the scrap metal merchants agreed amongst themselves who (from amongst them) would bid;
(iii) bids were made by the nominated bidder;
(iv)the other members of the ring should not bid against the nominated bidder for items purchased for their scrap value.
Knocks occurred as follows:
(i)after the auction, ring members reconvened at another location, usually a local hotel or club, to allocate amongst themselves the scrap metal purchased at the auction and to determine who (from amongst themselves) would pay for the goods purchased at the auction;
(ii)the goods purchased by the bidder at auction (as referred to in above paragraph) were known collectively as “the bill”;
(iii) each ring member was given the opportunity to nominate a sum;
(iv)the ring member who nominated the highest sum became entitled to the bill;
(v)the ring member who nominated the highest sum became obliged to pay the sum of the bill to the auctioneer, and became obliged to pay to each other member the highest sum which that member nominated at the knock.
These proceedings are concerned with five public auctions of scrap metal:
- Chiswick (10–11 February 1999) (‘the Chiswick auction’) where goods worth approximately $42,861.50 were purchased by the ring and approximately $18,540 paid at the knock to ring members;
- Bathurst (12 October 1999) (‘the Bathurst auction’) where goods worth approximately $358,198.90 were purchased by the ring and approximately $15,050 paid at the knock to ring members;
- Port Kembla (28 October 1999) (‘the Port Kembla auction’) where goods worth approximately $35,699 were purchased by the ring and approximately $20,120 paid at the knock to ring members;
- Newcastle (24 November 1999) (‘the first Newcastle auction’) where goods worth approximately $37,944.50 were purchased by the ring and approximately $25,000 paid at the knock to ring members; and
- Newcastle (25 November 1999) (‘the second Newcastle auction’) where goods worth approximately $18,000 were purchased by the ring and approximately $2,000 paid at the knock to ring members. None of the submitting respondents admitted to attending the second Newcastle auction as to participating in any alleged ring or knock.
The largest companies in the scrap metal industry, Simsmetal and Smorgon purchase more than 90% of scrap metal. Figures for scrap metal processed in the year ending 30 June 2003 are:

Company Scrap metal processed
(tonnes)

Sims Group 2,427,000

Smorgon 1,286,000

Riverside Metal 7,700

STATUTORY FRAMEWORK

Section 45 provides:-
‘(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)…
(ii)has the purpose, or has or is likely to have the effect, of substantially lessening competition.
(3)For the purposes of this section, … ‘competition’, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.’
The arrangement or understanding substantially lessened competition by fixing, controlling or maintaining the price of scrap metal within the meaning of s 45A as follows:
‘(1)Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.’
The expression “arrangement or understanding” in the above sections requires more than a “mere expectation” but requires that at least one party “assume an obligation” or give an “assurance” or “undertaking” that it will act in a certain way (Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 165 ALR 468 at 500). Justice Lindgren also held in that case at 504 that ‘an arrangement or understanding has the effect of “controlling price” if it restrains a freedom that would otherwise exist as to a price to be charged’. Furthermore, at 506, his Honour did not consider that ‘some specificity as to price is a necessary element of the notion of ‘controlling’ price within s 45A’.
‘Exclusionary provisions’ for the purposes of s 45 of the Act are defined in s 4D as follows:
‘(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 persons; or from, particular persons or classes of
(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.’
Section 4F of the Act provides:
‘(1) For the purposes of this Act:
(a)a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, or a covenant or a proposed covenant, shall be deemed to have had, or to have, a particular purpose if:
(i)the provision was included in the contract, arrangement or understanding or is to be included in the proposed contract, arrangement or understanding, or the covenant was required to be given or the proposed covenant is to be required to be given, as the case may be, for that purpose or for purposes that included or include that purpose; and
(ii)that purpose was or is a substantial purpose; and
(b) a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if:
(i) the person engaged or engages in the conduct for purposes that included or include that purpose or for reasons that included or include that reason, as the case may be; and
(iii)that purpose or reason was or is a substantial purpose or reason…’

The ACCC submitted that the mental element of ‘purpose’ was present in the allegedly anti-competative arrangements of the ring and the knock. Mr Faulkner SC, senior counsel for the ACCC, submitted that the provisions in the agreements between the alleged members of the ring and the knock, had the purpose of preventing or restricting the acquisition of goods from the vendor at each of the auction. Mr Faulkner SC referred me to News Ltd & Ors v South Sydney District Rugby League Football Club Ltd & Ors (2000) 200 ALR 15 where the High Court considered the meaning of ‘purpose’ in the context of s 4D of the Act. It was held by majority that purpose means nothing more than the effect which is ‘sought to be accomplished by the conduct’ at [18], [43], [60] and [212]. This is distinct, Gleeson CJ held, from ‘the reason from seeking that end’ at [18]. McHugh J at [41], refused to overrule the subjective interpretation of the section because it has ‘stood for 17 years and approved by the Full Court of the Federal Court and followed on numerous occasions’, despite stating (at [38]) that the objective interpretation appears ‘more in accord with the Act’s object of promoting competition’. His Honour expressed the view that there was probably little difference whether the objective or subjective test of purpose was applied because, in applying the subjective test, the Court will be considering the surrounding circumstances and therefore using objective considerations to determine the “purpose” of the parties (Hughes v Western Australian Cricket Association (inc) (1986) 19 FCR 10 at 38 and News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 576). Section 4D of the Act must be read in light of the legislative context in which the task is undertaken (see Gleeson CJ at [18]). In this case, the ACCC submitted that the purpose of the ring and the knock at the four auctions was to prevent or restrict the acquisition of goods from the vendor at each of the auctions.
Alternatively, Mr Faulkner SC submitted that the ‘deeming provision’ under s 45A applies to the arrangements between the respondents. Section 45A provides that a provision in a contract or an agreement will be regarded as a price fixing provision if it has the purpose or likely effect of fixing, controlling or maintaining the price of goods or providing for that to occur. Accordingly, it was submitted that it is sufficient for the purposes of establishing the contraventions of the Act, that the provisions in the arrangements between the respondents had the purpose or likely effect of controlling the price of scrap metal at the each of the five auctions.
FACTS AGREED BY THE ACCC AND THE SUBMITTING RESPONDENTS
To the extent that these agreed facts relate to allegations against the non-submitting respondents, they are not facts found as against those respondents except to the extent of the agreed facts in the affidavit of the fourth respondent, Paul Leonard Clingan (‘Mr Clingan’), tendered against the sixth, seventh, fifteenth and sixteenth respondents. Each submitting respondent agreed to the facts in respect of the auctions attended by him on his own behalf and, where relevant, on behalf of the company of which he was a director.
The evidence of the submitting respondents is that the formation of a ring took place before the auctions or at the early stages of the auctions. There was no evidence of any advance planning. It is fair to say that the arrangements were not complex.
The Chiswick auction
The Chiswick auction was held on behalf of BHP at the corner of Blackwall Point Road and Parkview Roads, Chiswick. The auctioneer was Masongreene Australasia Pty Limited (‘Masongreene’). It was held to dispose of items such as trucks, plant, services equipment, other equipment, site buildings and office furniture.
A ring was formed consisting of at least seventeen scrap metal dealers, including Anthony Franke (‘Mr Tony Franke’), Sidney Neville Forrester (‘Mr Forrester’), Ronald Christopher Bagnall (‘Mr Bagnall’) and Hendricus Franke (‘Mr Harry Franke’) (‘the Chiswick members’). In his agreed statement of facts, Mr Clingan does not admit to being present at the Chiswick auction or to taking part in a ring or a knock on that occasion. Other submitting respondents identified Mr Clingan as being present and active in the ring. However, that evidence was not tendered against Mr Clingan and is not taken into account in assessing his penalty. It is, however, relevant to the actions of the other non-corporate respondents who were also Chiswick members.
At the Chiswick auction, $292,403 was paid by various bidders for the goods available. Mr Bagnall bid on behalf of the ring and purchased goods for a total of $42,861.50 on its behalf.
After the auction, the ring members went to a nearby hotel to take part in the knock. Once a first bid was made, the other ring members each stated whether they would accept that amount to “drop out” of the bidding process or whether they would make a higher bid to stay in. The highest bidder was entitled to purchase the bill and had to pay each other ring member the sum at which that member dropped out of the bidding process. The total payment made at the knock was $18,540.
But for the ring and the knock in respect of the Chiswick auction, each of the Chiswick members would have been or would be likely to have been in competition with each other to acquire scrap metal at the Chiswick auction. By reason of the formation of the ring, each of the Chiswick members refrained from bidding for goods purchased on behalf of the ring.
The Bathurst auction
The Bathurst auction was held on behalf of the Commonwealth of Australia (the Department of Defence) (‘the Department’) at Lloyde Street, Bathurst. The auction was held to dispose of items no longer required by the Department, such as tent poles, aluminium boats, refrigerators, field cool rooms, platform scales and air-conditioning units. Many of the items for sale had a resale value as second hand items so that many of the bidders at the auction were purchasing goods for their second hand rather than their scrap value.
A ring of scrap dealers was formed of at least twenty scrap dealers (‘the Bathurst members’). They included the second respondent, David Faulkner (‘Mr Faulkner’); the fourth respondent, Mr Clingan; the fifth respondent, Michael Nietner (‘Mr Nietner’); the eleventh respondent, Mr Forrester; the fourteenth respondent, Mr Tony Franke; and the sixteenth respondent, Allan Higgins (‘Mr Higgins’).
Mr Keith Burnett and Mr Les Kilpatrick bid on behalf of the ring. The bidding by Mr Kilpatrick was undertaken on the registration of Mr Forrester. This was not disclosed to the auctioneer. Mr Burnett and Mr Kilpatrick purchased goods for $358,198.90 on behalf of the ring. At the Bathurst auction $983,095 was paid for goods that were sold to 120 purchasers.
After the auction, the ring members met at the Bathurst RSL Club to take part in the division of goods at the knock. The total price for the bill was $358,198.90. The name of each ring member was written on a card taken from a pack of playing cards. When a card with a ring member’s name on it was drawn from the pack, that member was asked to nominate a sum that he would be prepared to pay to each other ring member in order to purchase the bill. Once the first member had nominated a sum, the other ring members stated whether they would accept that amount to “drop out” of the bidding process or whether they would bid higher to stay in the bidding process. The next member then bid a higher sum and the remaining members stated whether they accepted that sum or bid a higher sum. Ultimately one member of the group remained. That member was then required to purchase the bill and pay each other member the sum at which that member had dropped out of the bidding process.
Mr Clingan was successful in purchasing the bill on behalf of Riverside Metal. The fact that this was on a 50/50 basis with Mr Faulkner was not disclosed to the other ring members. Mr Faulkner wrote out cheques on an account of the first respondent, D M Faulkner Pty Limited (‘D M Faulkner’), to each ring member, paying a total of $15,050 to the Bathurst members for their unsuccessful bids to acquire the bill at the knock. Riverside Metal, the third respondent, a company associated with Mr Clingan, paid the auctioneer for the goods purchased on behalf of the ring. D M Faulkner reimbursed Riverside Metal for its half share. Riverside Metal reimbursed D M Faulkner for the money paid to the participants in the knock.
At the auction there was an arrangement or understanding amongst the scrap metal merchants in respect of the scrap metal sold at the auction:
(a) to engage in controlled or restricted bidding at the auction; and
(b) after the auction, to allocate and pay for the goods purchased at auction.
But for the ring and the knock in respect of the Bathurst auction, each of the Bathurst members would have been or would be likely to have been in competition with each other to acquire scrap metal at the Bathurst auction. By reason of the formation of the ring, each of the Bathurst members refrained from bidding for goods purchased on behalf of the ring.
The Port Kembla auction
The Port Kembla auction was held on behalf of BHP at the company’s steelworks in Five Islands Road, Port Kembla. BHP was disposing of the Clyde-Caruthers Plant and surplus equipment. The auction was conducted by Masongreene. It included a roll production plant, electroplating and effluent plant, general engineering plant and equipment, foundry equipment and transformers. Some of the plant and equipment had value predominantly as scrap metal.
Fifty-five people registered to bid at the auction. $143,235 was paid by various bidders for the goods available.
Mr Clingan and Vince Baldini bid on behalf of a ring of eight people including Mr Clingan and Mr Tony Franke (‘the Port Kembla members’). Mr Clingan also identified the fifteenth respondent (‘Mr Harry Franke’) and Mr Higgins as members of the ring. The Port Kembla members purchased goods for $35,699 on behalf of the ring. After the auction, those goods were placed in the bill at the knock at the Port Kembla Leagues Club. Each member made a bid to purchase the bill or accepted an offer to drop out.
Mr Tony Franke of T & D Metals and Demolitions Pty Ltd (‘T & D Metals’) acquired the bill. Greg Cook of Metalcorp paid each of the other ring members their drop out amounts on behalf of Tony Franke. The total of the knock payments was $20,120. Tony Franke paid Masongreene for the goods purchased on behalf of the Port Kembla members and repaid Metalcorp for the moneys paid on his behalf at the knock.
At the auction there was an arrangement or understanding amongst the scrap metal merchants:
(a) to engage in controlled or restricted bidding at the auction; and
(b) after the auction, to allocate and pay for the goods purchased at auction.
But for the ring and the knock in respect of the Port Kembla auction, each of the Port Kembla members would have been or would be likely to have been in competition with each other to acquire scrap metal at the Port Kembla auction. By reason of the formation of the ring, each of the Port Kembla members refrained from bidding for goods purchased on behalf of the ring.
The first Newcastle auction
On 24 and 25 November 1999 an auction was held on behalf of BHP at the company’s plant in Newcastle. The auction was advertised in many newspapers. It was a large auction in that approximately 1000 tonnes of metal and metal items were for sale instead of the more usual 30 or 40 tonnes. The auction ran over two days. Over that time, at least $383,215 was paid for goods sold to 86 purchasers.
At the first Newcastle auction, the submitting respondents claim that the seventh respondent (‘Mr Bagnall’) bid for items on behalf of a ring consisting of at least seventeen members including D M Faulkner, Riverside Metal, Mr Nietner, and the seventeenth respondent (‘Mr Robinson’) (‘the first Newcastle members’). Mr Clingan, Mr Faulkner and Mr Nietner also identified as members at this auction, the seventh respondent (‘Mr Bagnall’), the fifteenth respondent (‘Mr Harry Franke’) and Mr Higgins as ring members. Mr Bagnall purchased scrap metal items for $37,944.50.
At the conclusion of the first Newcastle auction, the ring members retired to the Phoenix Sports Club at Mayfield in Newcastle (‘the Phoenix Club’) to take part in the knock. The bidding was commenced with a ring member nominating a bid. Other ring members were approached to nominate a bid. Those members who did not want to bid higher nominated an amount at which they would drop out of the bidding. Richard Best of Metalcorp was successful in acquiring the bill. D M Faulkner made payments to the ring members for their unsuccessful bids at the knock by cheque on behalf of Metalcorp. Metalcorp paid the auctioneer at the first Newcastle auction for the goods purchased on behalf of the ring and reimbursed D M Faulkner for the sums advanced at the knock.
At the auction there was an arrangement or understanding amongst the scrap metal merchants in respect of the scrap metal sold in the auction:
(a) to engage in controlled or restricted bidding at the auction; and
(b) after the auction, to allocate and pay for the goods purchased at auction.
But for the ring and the knock in respect of the first Newcastle auction, each of the first Newcastle members would have been or would be likely to have been in competition with each other to acquire scrap metal at the first Newcastle auction. By reason of the formation of the ring, each of the first Newcastle members refrained from bidding for goods purchased on behalf of the ring.
Submitting personal respondents
The submitting respondents agreed that, at the auctions they had attended, they had formed a ring with certain other scrap metal dealers and that, after the auction, the members of the ring participated in a knock. By agreeing to be part of the ring, each personal respondent knew:
(a)that he was expected not to bid against the dealer appointed to bid on behalf of the ring (‘ring bidder’) unless the ring bidder had dropped out of the bidding or he intended to buy the goods at a higher price for their functional purpose and not for their scrap value.
(b)that he was entitled to participate in the “knock” after the conclusion of the auction.
(c)that the knock comprised a secondary auction system whereby the goods purchased on behalf of the ring acquired by a member or group of members of the ring. The successful purchaser could (after the knock) seek to resell some of the items to other ring members or get another ring member to sell items in his market.
Submitting corporate respondents
D M Faulkner admitted attending the Bathurst and first Newcastle auctions, through the director Mr Faulkner; Riverside Metal admitted that it attended the Bathurst, first Newcastle and Port Kembla auctions; Ajax Sheet Metal Pty Ltd (‘Ajax’) agreed that it attended the Bathurst and Chiswick auctions; and T & D Metals admitted that it attended the Bathurst, Chiswick and Port Kembla auctions. The admissions by each of the corporate submitting respondents, Riverside Metal and D M Faulkner, T & D Metals and Ajax are that, at the respective auctions (the Chiswick and/or Bathurst, and/or first Newcastle and/or Port Kembla auctions), the agreed facts prove:
(a)that, with respect to the auctions it attended, it made or arrived at an arrangement or understanding with the Chiswick members, the Bathurst members, the Port Kembla members and the first Newcastle members to be members of a ring, to conduct itself as a member of that ring and to engage in the knock, as described herein (with respect to Riverside Metal) or as described in the amended statement of claim (with respect to D M Faulkner, Ajax and T & D Metals);
(b)that each arrangement or understanding contained a provision that had the purpose of preventing, restricting or limiting the acquisition of scrap metal from persons in the scrap metal market by the ring members;
(c)that, but for the provisions, the ring members would have been or would be likely to have been in competition with each other in relation to the acquisition of scrap metal at the Chiswick auction, the Bathurst auction, the Port Kembla auction and the first Newcastle auction respectively, such that, by reasons of the matters in (a), (b) and (c), Riverside Metals, D M Faulkner, Ajax and T & D Metals contravened s 45(2)(a)(i) of the Act;
(d)that a provision of each arrangement or understanding had the purpose or would have or would be likely to have had the effect of substantially lessening competition by reason that the provision had the purpose or had or was likely to have had the effect of controlling the price for goods to be acquired by Riverside Metal, D M Faulkner, Ajax and T & D Metals and each of the other of the Chiswick members, the Bathurst members, the Port Kembla members and the first Newcastle members respectively, in competition with each other; such that, by reason of the matters in (a) and (d), Riverside Metal, D M Faulkner, Ajax and T & D Metals contravened s 45(2)(a)(ii) of the Act;
(e)that each corporate submitting member together with the persons referred to in sub-paragraph (a) above, gave effect to:
(i)the provisions referred to in (b) such that, by reason of the matters in (a), (b), (c) and (e), it contravened s 45(2)(b)(i) of the Act; and
(ii)the provisions referred to in (d) such that, by reason of the matters in (a), (d) and (e), it contravened s 45(2)(b)(ii) of the Act.
The submitting respondents entered into an understanding and assumed the obligation not to bid against the bidder nominated by the ring and after the auction bid amongst themselves for the goods at the knock. These actions thereby restrained the freedom they otherwise would have had as individual bidders at the auction and controlled or limited the price raised at the auction for the goods by ensuring that the ring members were not bidding against each other.
In so making this arrangement or arriving at this understanding, the submitting respondents agreed that the submitting corporate respondents contravened s 45(2)(a)(i) of the Act.
Each of Mr Clingan, Mr Faulkner, Mr Forrester and Mr Tony Franke admitted that the agreed facts establish that he engaged in conduct whereby he aided, abetted, counselled or procured the contraventions of the corporate respondent of which he was a director, and that he was a person who has been directly, knowingly concerned in, and party to, the contraventions of that corporate respondent within the meaning of s 76 of the Act.
Mr Nietner admitted that the agreed facts proved:
(a)that he arrived at an understanding with the Bathurst members and the first Newcastle members to be members of a ring, to conduct himself as a member of that ring and to engage in the knock, as described in respect of each relevant auction in the amended statement of claim;
(b)that each understanding contained a provision that had the purpose of preventing, restricting or limiting the acquisition of scrap metal from persons in the scrap metal market by the ring members;
(c)that, but for the provisions, the ring members would have been or would be likely to have been in competition with each other in relation to the acquisition of scrap metal at the Bathurst auction and the first Newcastle auction respectively; such that, by reason of the matters in (a), (b) and (c), each of D M Faulkner, Riverside Metal, Ferndale Recyclers Pty Limited (‘Ferndale’), Ajax and T & D Metals contravened s 45(2)(a)(i) of the Act;
(d)that a provision of each understanding had the purpose or would have or would be likely to have had the effect of substantially lessening competition by reason that the provision had the purpose or had or was likely to have had the effect of controlling the price for goods to be acquired by Mr Nietner and each of the other Bathurst members and the first Newcastle members respectively, in competition with each other; such that, by reason of the matters in (a) and (d), each of D M Faulkner, Riverside Metal, Ferndale, Ajax and T & D Metals contravened s 45(2)(a)(ii) of the Act;
(e)that Mr Nietner, together with the persons referred to in sub-paragraph (a) above gave effect to:
(i)the provisions referred to in (b) such that, by reason of the matters in (a), (b), (c) and (e), each of D M Faulkner, Riverside Metal, Ferndale, Ajax and T & D Metals contravened s 45(2)(b)(i) of the Act; and
(ii)the provisions referred to in (d) such that, by reason of the matters in (a), (d) and (e), each of D M Faulkner, Riverside Metal, Ferndale, Ajax and T & D Metals contravened s 45(2)(b)(ii) of the Act.

Mr Nietner admitted that the agreed facts set out above prove that he engaged in conduct whereby he aided, abetted, counselled or procured the contraventions of D M Faulkner, Riverside Metal, Ferndale, Ajax and T & D Metals referred to above, and that he was a person who has been directly, knowingly concerned in, and party to, the contraventions of each of those corporate respondents, within the meaning of s 76 of the Act.
Mr Robinson admitted that the agreed facts set out above prove that he engaged in conduct whereby he aided, abetted, counselled or procured the contraventions of D M Faulkner, Riverside Metal and Ferndale referred to above, and that he was a person who has been directly, knowingly concerned in, and party to, the contraventions of each of those corporate respondents, within the meaning of s 76 of the Act.
MATTERS RELEVANT TO THE AMOUNT OF PECUNIARY PENALTY
The individual respondents participated in the rings and the knocks in varying degrees and the penalties imposed must reflect that.
Section 76 of the Act provides that:
‘(1)      If the Court is satisfied that a person:
(a)      has contravened any of the following provisions:
(i)        a provision of Part IV;
(ii)       section 75AU or 75AYA;
(b)      has attempted to contravene such a provision;

(c)       has aided, abetted, counselled or procured a person to contravene
such a provision;

(d)      has induced, or attempted to induce, a person, whether by threats or
promises or otherwise, to contravene such a provision;

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

(f)        has conspired with others to contravene such a provision;
the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.’
Justice French in Trade Practices Commission v CSR Limited (1991) ATPR 41-076 at 51,152–51,153 (‘CSR’) referred to a number of factors that should be considered in the assessment of appropriate penalties for infringements under Part IV of the Act (‘the French factors’). The first three factors are expressly mentioned in s 76 and the remainder relate to factors considered in a significant number of decisions relating to the operation of s 76, including Trade Practices Commission v Pye Industries Sales Pty Ltd (1978) ATPR 40-089 (‘Pye Industries Sales’); Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091; Trade Practices Commission v Allied Mills Industries Pty Ltd (No 5) (1981) 60 FLR 38 (‘Allied Mills’); and Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177. These factors include:
‘1.       The nature and extent of the contravening conduct.
2.       The amount of loss or damage caused.
3.       The circumstances in which the conduct took place.
4.       The size of the contravening company.
5.The degree of power it has, as evidenced by its market share and ease of entry into the market.
6.The deliberateness of the contravention and the period over which it extended
7.Whether the contravention arose out of the conduct of senior management or at a lower level
8.Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9.Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.’
In Australian Competition & Consumer Commission v NW Frozen Foods (1996) ATPR 41-515 (‘ACCC v NW’) at 42,444 – 42,445, Justice Heerey considered the following additional factors (‘the Heerey factors’):
‘(x)     ‘Similar Conduct in Past
(xi)     Financial Position
(xii)     Deterrent Effect’
The Heerey factors were not subject to adverse comment by the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 (‘NW Frozen Foods’). The relevant factors as discussed by French J and Heerey J need to be applied, as relevant, to each respondent.
An early example of the practice of the court considering and making orders based upon joint submissions by the respondent on allegations of price fixing under s 76 of the Act can be found in Allied Mills. In that case, the trial Judge made orders in accordance with the consent orders, although he did not consider he was bound by the proposed figure: ‘Uninformed of their agreement, I may have selected a different figure, but I am satisfied that it would not have been very different from theirs’ (at 41). Similarly in Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730 at 733 the Court did not object to the joint submission on penalty or to the negotiations because of the public interest in concluding the litigation. It was accepted that it was for the Court to determine the penalty with regard to such considerations as the nature and the extent of the act or omission and the nature and extent of any loss or damage suffered because of the act or admission (at 736–737).
The penalties imposed need to reflect the benefit to the community due to the time and expense saved by the admission of liability. However, this ‘does not imply any doctrine that would increase a penalty because there was no admission…The contravenor who fights the case to the bitter end will obtain no discount, but the penalty imposed will be the proper penalty, and no more’ (see Burchett J in Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41-375 (‘TNT Australia’) at 40,170).
In NW Frozen Foods the Full Court held that the primary Judge had erred in rejecting the proposed penalty and substituting a higher penalty and in treating the quantum of penalty imposed in another case as guidance for imposing the penalty in the instant case (at 295). In this context, the primary judge erred in ignoring significant factual differences between the cases, including the fact that the ACCC in the case before him had not been previously found by the Court to have engaged in similar conduct under Pt VI, in contrast to the case which his Honour applied. The issue was not whether, unaided by the agreement of the parties, the Court would have arrived at the figure proposed by the parties. Rather, as explained by the Court at 298 – 299:
‘…it is simply whether, in the performance of the Court’s duty under s 76, this particular penalty, proposed with the consent of the corporation involved and of the Commission, is one that the Court should determine to be appropriate.’
Further Burchett and Kiefel JJ explained at 291:
‘A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case…’
Justice Finkelstein in Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815, a decision concerning tender arrangements in the power transformer market, held, in finding that the suggested penalties were appropriate, that departure from a penalty figure agreed by the parties ‘should only occur in a clear case’, such as where the proposal was outside the range of penalties that a court would have fixed, even though the court would not itself have imposed the suggested penalty (at 41,936).
In Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 (‘Mobil Oil’), the Full Court considered the powers and responsibilities of the Court where there are joint submissions on penalties. The Court addressed the question of whether it was bound by the decision in NW Frozen Foods to impose the proposed penalty if it is within the permissible range. The decision in NW Frozen Foods was held to contain no error of principle. It was, however, made clear that the Court is not obliged to take the proposed penalty as the starting point for analysis or to limit the inquiry to whether the proposed penalty is within the appropriate range [81]. Nor should the Court be ‘bound to consider the proposed penalty simply on the basis of information provided by the parties’ [81]. It is open to the Court to determine the permissible range independently of the proposed figure in all the circumstances and to depart from the suggested penalty if the circumstances require a different figure to be imposed. As stated by the Full Court at [54], ‘[it] does not mean, in our opinion, that the Court must commence its reasoning with the proposed penalty and limit itself to considering whether that penalty is within the permissible range. A Court may wish to take that approach. However, it is open to a Court, consistently with the reasoning in NW Frozen Foods, first to address the appropriate range of penalties independently of the parties’ proposed figure and then, having made that judgment, determine whether the prepared penalty falls within the range.’ The joint submission is merely a relevant matter for the Court to consider [29].
In Australian Competition & Consumer Commission v Chaste Corporation Pty Ltd [2004] FCA 398 Spender J said of the function of the Court where there were agreed penalties [at 5]:
‘…the Federal Court has looked with favour upon negotiated settlements, provided that their terms recognise that the ultimate responsibility for the terms and making of the orders that resolve the proceedings lies with the Court.’
His Honour followed the decision in NW Frozen Foods and Mobil Oil in relation to the imposition of penalties. His Honour also observed ‘Judges of the Federal Court, in making orders imposing penalties, do not simply rubber stamp agreements between the parties’.
In June 2003, the ACCC issued the “ACCC leniency policy for cartel conduct” as a guide to penalties. The aim of the policy is to encourage businesses to disclose cartel behaviour and to seek lesser penalties against companies and individuals who provide assistance and co-operation in the identification and prosecution of conduct by cartels that contravened the Act. It is described as a “compliance tool” which will provide ‘benefits to all Australians by identifying, stopping and deterring harmful and illegal behaviour’. This policy was discussed by Lee J in Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd [2004] FCA 693 where his Honour assessed the penalties for contravention of s 45(2)(a)(ii) for companies and individuals who had come to arrangements or understandings to fix, control or maintain the price of clay brick products. Justice Lee expressed his understanding that the ACCC leniency policy was developed to encourage disclosure of contravening conduct. Nevertheless he stated at [16]:
‘…it remains the responsibility of the Court to determine that the orders made by the Court are the appropriate orders in all the circumstances. At the same time the Court will give due regard to the obvious public interest in the preservation of resources and the more efficient use of Court time that may flow from accords reached by the parties that obviate the need for a lengthy trial and for judicial time to be spent on preparation of detailed reasons for judgment.’
Further, Lee J referred to Mobil Oil and to the discussion at [77] of the similarities between agreements on penalties in criminal cases and civil penalty cases where the views of both parties are considered. In such cases, the Court is not relieved of its responsibility of exercising its own judgment in the imposition of penalties and ‘…should be satisfied that it is being given accurate, reliable and complete information on critical questions’ (Mobil Oil at [77]).
There is a long line of authority holding that special consideration in relation to the reduction of the amount of the penalty that would otherwise be assessed is appropriate when a respondent makes submissions acknowledging liability. This is the case even when ‘the admissions arise by withdrawal of a denial, a substantial time after the proceedings were launched’ (Australian Competition & Consumer Commission v ABB Power Transmission Pty Ltd [2004] FCA 819 at [73]).
In Australian Competition & Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) [2004] FCA 376 at [37] and [38] Heerey J discussed mitigating factors, including an assertion that the party in question had co-operated with the ACCC early in the proceedings and had ceased its illegal conduct. However, the circumstances were that the party chose to ignore earlier warnings and defended the proceedings for almost eighteen months resulting in considerable expenses for the ACCC. The withdrawal of the defence was considered to be more likely the result of financial collapse than “remorse”. His Honour commented that, ‘While a party is not to be penalised for defending itself (other than by an award of costs), the present case is not one for allowing any discount for co-operation’.
The starting point in the assessment of the appropriate level of penalty is a consideration of the express provisions of s 76 and the related factors outlined in [50] of this judgment. Any special consideration applied because of admissions made is subsequent to this assessment. Similarly, where no admissions have been made, special consideration is not applied to increase the penalty. Rather, the penalty remains the proper figure within the permissible range. Failure to make admissions neutralises any mitigation of the penalty imposed rather than leading to an aggravation of penalty (see French J, The Culture of Compliance – A Judicial Perspective, The Australian Compliance Institute 3 – 5 September 2003 at 23).
In the proceedings before me, the only evidence of loss or damage caused by the anti-competitive conduct was the sums of the payments made to those participating in the knock. It was suggested by the ACCC that these sums represented the additional amount which the successful bidder at the knock would otherwise have paid at the auction to obtain the lots. The ACCC did, however, concede that the loss or damage could not be quantified precisely. Absence of evidence of loss or damage will not necessarily be a mitigating factor in the imposition of penalties (cf Australian Competition & Consumer Commission v Universal Music Australia Pty Limited (No 2) [2002] FCA 192 (‘Universal Music Australia’) at [17] Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115 at 119). Furthermore, as Hill J observed at [17] in Universal Music Australia this rule applies:
‘…particularly so in cases where the conduct is discontinued on intervention by the ACCC but where it can be inferred (as it can here) that the conduct would have continued but for that intervention and in circumstances where it would be likely that loss would be suffered to some extent by those who might be expected to be affected by that continuance.’
Although the orders were varied on appeal, the primary judge was not overruled on this point (Universal Music Australia Pty Ltd v Australian Competition & Consumer Commission [2003] FCAFC 193; (2003) 201 ALR 636).
The primary object of imposing penalties has been described in much of the case law as being deterrence. Justice French in CSR at [51-152] referred to the ‘primacy of the deterrent purpose in the imposition of penalty’ which was identified in Pye Industries Sales. Similarly, Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 240 stated:
‘The deterrent aspect of a penalty is both specific and general. It is calculated to deter repetition by the party penalised and to serve as a warning to the community at large.’
In NW Frozen Foods at 294-295, Burchett and Kiefel JJ emphasised the importance of deterrence for the parties and ‘others who might be tempted to think that contravention would pay, and detection lead merely to a compliance program for the future’. Justice Sackville in Schneider Electric (Australia) Pty Ltd v Australian Competition & Consumer Commission (2003) 127 FCR 170 (‘Schneider Electric’) referred to the different views regarding the possibility that penalties could be seen as punishment for contravention of the Act by Burchett and Kiefel JJ on the one hand and by Carr J on the other in NW Frozen Foods and by Goldberg J in Australian Safeway. Sackville J concluded at [4] that the difference of opinion regarding the object of imposing penalties is more apparent than real because, ‘Even proponents of the deterrence theory have acknowledged that the deliberateness of the contravention and the period over which it has extended are matters to be taken into account in determining penalty.’
Injunctions
The ACCC has submitted that it would be appropriate for the Court to grant injunctions as well as imposing pecuniary penalties. The submission was that an action would serve two purposes; it would protect the public interest and prevent specific contraventions of the Act. The Act, by s 80, provides a wide discretion for the Court to grant injunctions in terms it considers appropriate when it is satisfied that a person is engaged in or is proposing to engage in conduct that constitutes or would constitute contravention of the Act. This includes attempting to contravene a provision, aiding, abetting or procuring a person to contravene provisions or in any way directly or indirectly being knowingly concerned in contravention or conspiring with others to contravene the provisions of the Act:
‘(4)The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
(a)whether or not it appears to the Court that the person intends to engage again, or continue to engage, in conduct of that kind;
(b)whether or not the person has previously engaged in conduct of that kind; and
(c)whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.’
In ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 the Full Court considered the nature of the discretionary power to grant injunctive relief in cases involving retail price maintenance. It was held that ‘injunctions should be granted in clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the injunction’ (per Lockhart J at 259). Section 80 was described by French J at 268 to be a “widely drawn” and “flexible” provision that may be applied to a ‘variety of functions to support the policy of the Act’. It can restrain conduct affecting the public interest and ‘deter an offender from repeating the offence’.
THE PROPOSED PENALTIES
The ACCC has alleged that, at each auction attended by each submitting respondent, the various scrap metal dealers:
(a)       made an arrangement or arrived at an understanding with each of the named respondents (‘the ring’) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
(i)        nominating one or more of the parties to the ring to bid at the auction
(ii)       not bidding against the nominated bidder/s
(iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (‘the knock’), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock
(b)      gave effect to the arrangement or understanding by one or more of:
(i)        acting as a nominated bidder for the ring
(ii)       bidding for lots at an auction on behalf of the ring
(iii)      not bidding for lots against the ring
(iv)      participating in the subsequent knock
(v)       purchasing the goods at the knock

As a result of an agreement reached between the ACCC and each of the submitting respondents, each of the submitting respondent:
(a)consents to declarations that it or he (as appropriate) contravened or were involved in contraventions of some or all of ss 45(2)(a)(i), ss 45(2)(a)(ii), ss 45(2)(b)(i), ss 45(2)(b)(ii);
(b)consents to the imposition of injunctions permanently restraining it or he (as appropriate) from making an arrangement or arriving at an understanding of the nature set out in [8] of these reasons;
(c)jointly submit with the ACCC that a pecuniary penalty of a specified amount be imposed on it or him (as appropriate) pursuant to s 76 of the Act in relation to the contraventions of ss 45(2)(a)(i), ss 45(2)(a)(ii), ss 45(2)(b)(i), ss 45(2)(b)(ii);
(d)consents to orders that it or he (as appropriate) pay a specified amount towards the ACCC’s costs.
The first and tenth respondents consented to declarations that they had contravened s 52(1) of the Act. The second and eleventh respondents consented to declarations that they had aided and abetted such contraventions.
No pecuniary penalty was sought to be imposed in relation to admitted contraventions of s 52, the relief in respect of which is confined to the proposed declarations and injunctions (as applicable).
The penalties which the ACCC and the submitting respondents jointly submit should be made are as follows:

Auctions Per Auction Total

D M Faulkner 2 $40,000 $80,000

Mr Faulkner 2 $5,000 $10,000 $90,000

Riverside Metal 3 $40,000 $120,000

Mr Clingan 3 $5,000 $15,000 $135,000

Ajax Sheet Metal 2 $2,500 $5,000

Mr Forrester 2 $2,500 $5,000 $10,000

T & D Metals 3 *$3,333 $10,000

Mr Tony Franke 3 $5,000 $15,000 $25,000

Mr Robinson 1 $5,000 $5,000 $5,000

Mr Nietner 2 $5, 000 $10, 000 $10, 000

* $2,500 for two auctions and $5,000 for one auction

I will deal with the French factors as well as the Heerey factors.
THE SUBMITTING RESPONDENTS
A number of these factors are common in principle to each submitting respondent. Those are:
(a)       The circumstances in which the conduct took place.
(b)       The amount of loss or damage caused.
(c)       Market share and market power.
(d)      The deliberateness of the contravention and the period over which it extended.
(e)Whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
(f)       The deterrent effect of the proposed penalty.
(g)       Parity.
(h)       The joint submission.
(a)       The circumstances in which the conduct took place
The arrangements or understandings were only made on the morning of or during the conduct of the auctions. The relevant auctions were public auctions attended by a significant number of purchasers who also bid. At the Bathurst auction and at the first Newcastle auction in particular, there were a significant number of bidders who were not part of the ring. There was no significant prior planning nor was the arrangement particularly complex. While the conduct was deliberate, in the sense of advertent and covert to the extent that the existence of the ring was not made known to the vendor, auctioneer or other bidders, the ACCC does not contend that the respondents knowingly contravened the Act.
The conduct was concerned only with scrap metal items. In the case of Riverside Metal, the auctions represented less than 1% of its source of scrap metal for processing. Riverside Metal’s market share is less than 0.5% of scrap metal acquired in Australia.
(b) The amount of loss or damage caused
The vendors of the goods sold at the various auctions are the Department (Bathurst and Chiswick), BHP (Port Kembla and first Newcastle). The ACCC has not presented any evidence of directly quantifiable loss or damage having been caused by the conduct of the ring members. So far as the Department was concerned, the items auctioned at Bathurst “had no economical benefit”.
It is of some relevance, in considering the effect of the loss to the vendor, to take into account the size of the loss and the identity of the vendors: Trade Practices Commission v Allied Mills Pty Ltd (1981) APPR 40-241 at 43,181-43,182 although the evidence is that the rings have been operating in the scrap metal market over an extended period of time.
Some indication of loss to the vendor is the sum of the payments made to the knock participants, being the additional amount which the successful bidder at the knock may otherwise have paid at the auction to obtain those goods. Sometimes, the vendor received more than the value of the goods. The amounts paid out at the knock in respect to the relevant auctions were: Bathurst auction, $15,050; Newcastle auctions, $25,000; Chiswick auction, $18,540 and Port Kembla auction, $20,120.
There was no evidence of any damage or loss having been caused to consumers or, for that matter, to competitors by the contravening conduct.
Some guide to the loss or damage is the size of the payments to knock participants, although this is not a precise indication. In the case of D M Faulkner, it could be said that the value of the discount that D M Faulkner obtained by participating in the ring at the auction was approximately $7,525, or alternatively this is the additional amount that it would have had to bid to obtain the same lots at the auction. Similarly, the additional amount paid by the successful bidder at the Chiswick auction was $18,540, at the Port Kembla auction $20,120 and the first Newcastle auction $25,000.
In addition, as Mr Faulkner, Mr Forrester, Mr Tony Franke and Mr Robinson were aware, the ring may overpay on some items to discourage bidders outside the ring from competing with it. The effect of such conduct may well be to reduce the level of competition for goods being offered and the net effect is likely to result in less money being bid for the totality of goods on offer to the detriment of the vendor. It is impossible to attempt to quantify the extent of any such loss.
There are many cases where the Court has proceeded to assess the level of appropriate penalties without recourse to quantified loss or damage (see the cases referred to at [41] in ACCC v Roche Vitamins Australia Pty Limited (2001) ATPR 41-809 (‘Roche Vitamins’) per Lindgren J).
(c) Market share and market power
D M Faulkner had a very small market share in the scrap market generally. Riverside Metal’s market share was less than 0.5% Australia wide. They cannot be said to have possessed substantial market power in the scrap metal market in Australia. However, they had more market power (although still not substantial) in the market of scrap metal auctions in New South Wales. They were, at the relevant auctions, relatively large organisations when compared with a number of the other respondents, such as Ferndale, Ajax and T & D Metals but small by comparison with Metalcorp and Simsmetal. The formation of the ring enabled the smaller scrap metal merchants to take part in the auctions to a greater extent than they would have been able to otherwise.
Mr Nietner is a minor participant in the scrap metal market. His business is run in partnership with his brother. Scrap metal comprises only 50% of the business. He had neither a substantial market share nor market power. Mr Nietner’s share of profits from the partnership for the years ended 30 June 2000 and 2001 was $15,000 and $17,000 respectively.
On any basis, Ajax is a small participant in the scrap metal market, both by comparison to organisations such as Metalcorp and, more particularly, by comparison to several of the other respondents such as D M Faulkner and Riverside Metal. It cannot be said to have market share or market power. Nonetheless it did have the financial capacity to make a reasonably large purchase of aluminium boats at the Bathurst auction for $63,851, which suggests it had both a level of resources and the capacity to on-sell those boats.
T & D Metals is a small participant in the scrap metal market, both by comparison to organisations such as Metalcorp, and more particularly by comparison to several of the other respondents such as D M Faulkner and Riverside Metal. It cannot be said to have any substantial market share or market power. Nonetheless, T & D Metals had enough resources to make a reasonably substantial acquisition of scrap metal at the Port Kembla auction – paying a total of $55,819 for the bill (which was made up of $27,049 for the purchases made by Mr Clingan and $8,650 for the purchases made by Mr Baldini together with the $20,120 paid to the unsuccessful knock participants).
Mr Robinson is a minor participant in the scrap metal market. He does not conduct his own business but rather acts as a consultant to another dealer. He works mainly in demolition so that his participation in buying and selling scrap metal is limited. This was the first auction he had attended for seven years.
(d) The deliberateness of the contravention and the period over which it extended
It is accepted that the conduct was deliberate in that it was not inadvertent. However, each personal respondent was unaware that what he was doing was in breach of the Act. This is not challenged by the ACCC.
In relation to the period over which the contravention extended, there were three auctions all occurring in October and November 1999. The Chiswick auction was some eight months earlier than the Port Kembla and first Newcastle auctions but there is no evidence of any contravention in the intervening period. There is no evidence that the conduct continued after that time. No interlocutory relief was sought by the ACCC.
(e) Whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention
Again, in the case of what is effectively, in each case, a one-man company, this is a factor of little relevance. The ACCC has not sought the imposition of a trade practices compliance program as, very sensibly, it has acknowledged the lack of utility of such a program in each case. There is no evidence that any of the submitting respondents had any knowledge of the Act. Each of the corporate submitting respondents except Ajax has received legal advice.
D M Faulkner is no longer involved in the scrap metal business. If, for whatever reason, it were to become involved in the future, it has consented to the imposition of a permanent injunction by the Court. Mr Faulkner is in semi-retirement. He too has consented to the imposition of a permanent injunction.
(f) The deterrent effect of the proposed penalty
The total penalties are a significant sum in terms of the financial position of these respondents, the damage caused and the potential benefit to be derived from engaging in the conduct.
Counsel for Mr Faulkner and D M Faulkner submitted that the proposed penalty is appropriate when consideration is given to those cases which have considered contravention by small companies without significant market shares in the relevant market. Counsel provided an analysis of such cases.
It was submitted by counsel for Mr Clingan and Riverside Metal and is relevant to all of the submitting respondents, so far as specific deterrence is concerned, that the conduct engaged in was not entered into “in blatant disregard of the Act” and “with knowledge that it was illegal”: ACCC v Ithaca Ice Works Pty Limited (2002) ATPR 41-851 (‘Ithaca Ice Works’) at [51]. Insofar as general deterrence is concerned, it was submitted that the level of penalty considered appropriate by the ACCC and by Riverside Metal and Mr Clingan is proportionate to other penalties imposed in other cases in respect of other contraventions of the Act. This is not a case of serious cartel behaviour. It was submitted by Riverside Metal that it is far removed from other instances of contraventions that have come before the courts in recent years, for example, the tender rigging in the electricity distribution and transmission markets (ACCC v ABB (2002) ATPR 41-871) the various tender rigging in the fire protection services markets (ACCC v Tyco Australia Pty Ltd (2000) ATPR 41-789; and ACCC v FFE Building Services Limited [2003] FCA 1542) and the international price fixing cartel-vitamins case, Roche Vitamins. It was submitted that the more moderate penalties in this case are consistent with the general deterrence aim.
(g) Parity
The different proposed penalties as between various respondents reflect the differences between the circumstances of the various respondents, but in particular:
(a)       the number of auctions attended;
(b)the role played in the ring and knock (participation involving recruiting for the ring, bidding for the ring, purchasing the bill at the knock or paying out cheques to the unsuccessful bidders at the knock incurring greater penalties than merely not bidding against the ring and receiving a knock cheque); and
(c)       the personal and financial circumstances of the various respondents.
(h)      The joint submission
The ACCC and each submitting respondent (save for Mr Nietner) have jointly submitted that the proposed penalties are appropriate. Written submissions were also provided.
I will now turn to a consideration of the individual circumstances of each respondent.
D M Faulkner Pty Limited (first respondent) and David Munro Faulkner (second respondent)
The agreed contraventions occurred at auctions at Bathurst on 12 October 1999 and at Newcastle on 24 November 1999. In each case, an arrangement or understanding was reached with other members of the ring. The ring members sought to prevent, restrict or limit the purchase of scrap metal by persons outside the ring. The formation of the ring did not actually prevent the members from competing with one another but it was generally agreed that they would not do so. D M Faulkner contravened s 45(2)(b)(ii) of the Act because the arrangement or understanding had the purpose or was likely to have the effect of substantially lessening competition by controlling the price for the scrap metal.
Mr Faulkner has been involved in the scrap metal market since about 1959. After working as an employee with Simsmetal, he purchased an existing business in 1976. In 1981, he and his brother Michael Faulkner operated and were directors and, through several entities, principal shareholders of what became Balcombe Recyclers Pty Limited (‘Balcombe Recyclers’). Balcombe Recyclers became part of Metalcorp Ltd which was floated as a public company in 1993 and became Metalcorp Recyclers (Metalcorp). Metalcorp was acquired by Smorgon in about February 2000 and became a division of Smorgon. Since July 1997 Metalcorp and Simsmetal have been the two largest metal recyclers in Australia.
Upon the sale to Smorgon, Mr Faulkner and the D M Faulkner Family Trust sold their interests in Metalcorp. Since then, D M Faulkner has traded on a smaller scale with some processing and demolishing activities. D M Faulkner and Mr Faulkner are small to mid-size traders in the scrap metal market, involved in the sorting and cutting of bulkier scrap metal. These processed metals are then sold on to the few larger operators, including Metalcorp, Simsmetal, BHP or Smorgon. D M Faulkner’s assets as at June 2001 were approximately $10 million with $10.6 million of liabilities, including a loan from D M Faulkner Family Trust of $10,282,916.96. Mr Faulkner, together with his wife and D M Faulkner have assets, mainly real estate. Mr Faulkner is the sole director and shareholder of D M Faulkner. From 1999, D M Faulkner has purchased and re-sold scrap metal and scrapped items of equipment, undertaking demolition cartage and some scrap metal processing.
The trading figures for D M Faulkner are as follows:

2000 2001 2002 2003

Sales $1,382,770 $551,113 $303,258
Ceased

operating

Gross profit (loss) from trading $392,815 $103,852 ($279,717)

These sales and gross profit (loss) figures do not include non-recycling/scrap recovery activities of D M Faulkner, land development activities and rental properties. D M Faulkner is no longer in the scrap metal business.
D M Faulkner had a small market share compared to the larger companies, such as Smorgon, Simsmetal and Metalcorp. Simsmetal and Metalcorp have a market share in excess of 40-45% and 50-55% respectively. However, with its market share of less then 0.5%, it was relatively large compared to other members of the ring, such as Ajax and Mr Robinson. D M Faulkner no longer conducts business in the scrap metal industry.
There is no evidence that D M Faulkner had any educational programs in place nor that Mr Faulkner had any knowledge of the Act or compliance programs. D M Faulkner and Mr Faulkner began co-operating with the ACCC in early 2002 and agreed to facts and admissions, so saving costs related to an involved in a prolonged trial.
The agreement submitted by the ACCC suggests that the appropriate pecuniary penalty for D M Faulkner should be, $40,000 for the Bathurst auction and $40,000 for the Newcastle auction. The submitted penalty for David Faulkner is $5,000 for the Bathurst auction and $5,000 for the Newcastle auction. The total proposed costs to be paid by D M Faulkner and Mr Faulkner are $10,000.
(aa) Nature and extent of the contravening conduct
Mr Faulkner’s involvement covered only a two month period and there is no evidence that he was involved either before or after the Bathurst and first Newcastle auctions. He did not act as the bidder at either auction and did not recruit scrap dealers into the ring. That is, he did not organise either the ring or the knock. However, he knew the rules and, by his participation, facilitated the occurrence of the ring and the knock.
Mr Faulkner had a significant involvement at the Bathurst knock. The ring had purchased goods for $358,199 out of total purchases of $983,095 comprising some 36.4%. He, together with Mr Clingan, on behalf of the companies of which they were directors, successfully bid for those goods at the knock and paid an additional $15,050 to unsuccessful bidders at the knock. Cheque payments at the knock were made by Mr Faulkner on behalf of D M Faulkner. Mr Faulkner and Mr Clingan also bid together for items unrelated to the ring and the knock.
Mr Faulkner’s involvement at the first Newcastle auction was less significant. On this occasion he purchased some goods on his own account. The ring had purchased scrap metal for $37,945 out of total purchases (over two days) of $383,215 comprising about 10%. Mr Faulkner participated in the knock but, as an unsuccessful bidder there, received a cheque for $1,500.
Mr Faulkner and D M Faulkner accept that their conduct was deliberate, in the sense of not inadvertent. Mr Faulkner was not, however, aware at the time that the conduct was in breach of the Act and it is not alleged that he was so aware.
(bb) The size of the contravenor
At the time of the contravention D M Faulkner had a reasonably significant level of annual sales (in the vicinity of $1.4 million) and gross profit (in the vicinity of $392,000). Since that time its trading activities have reduced significantly (as set out in [102]). D M Faulkner had only 0.5% of the scrap metal market.
(cc) Participation of senior management
The contravening conduct was undertaken by the director of D M Faulkner. However, this factor is of little relevance as Mr Faulkner is the sole director, shareholder and employee of D M Faulkner. To a significant extent D M Faulkner is simply Mr Faulkner’s alter ego for the purpose of conducting his personal scrap metal dealing business.
(dd) Disposition to co-operate

ii)participating in the subsequent knock at a nearby hotel

c)by the acts referred to in (a)(i) and (ii) and (b)(i), it represented in trade and commerce to those conducting and attending the auction that the bids made on behalf of the nominated bidder were genuine and were made in the absence of any agreement or understanding with other persons at the auction as to price control, which representation was not true.

46.The Tenth Respondent admits by the acts of its Managing Director, the Eleventh Respondent, on 12 October 1999, at an auction in Bathurst by the Commonwealth of Australia (Department of Defence) for the sale of goods including scrap metal:
a)it made an arrangement or arrived at an understanding with certain other scrap metal dealers (“the ring”) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction
ii)not bidding against the nominated bidder/s
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock

b)it gave effect to the arrangement or understanding by:
i)permitting its bidder registration number to be used by the ring bidder
ii)not bidding for lots against the ring
iii)participating in the subsequent knock at the Bathurst RSL Club

c)by the acts referred to in (a)(i) and (ii) and (b)(i) and (ii), it represented in trade and commerce to those conducting and attending the auction that the bids made on behalf of the nominated bidder were genuine and were made in the absence of any agreement or understanding with other persons at the auction as to price control, which representation was not true.

47.The Eleventh Respondent admits that he made the arrangement or arrived at the understanding referred to in paragraph 1(a) and engaged in the conduct referred to in paragraph 1(b) on behalf of the Tenth Respondent.
48.The Eleventh Respondent admits that he made the arrangement or arrived at the understanding referred to in paragraph 2(a) and engaged in the conduct referred to in paragraph 2(b) on behalf of the Tenth Respondent.

THE COURT DECLARES THAT:
49.By making the arrangement or arriving at the understanding referred to in paragraph 1(a) the Tenth Respondent:
a)made an arrangement or arrived at an understanding containing an exclusionary provision in contravention of section 45(2)(a)(i), when read with section 4D, of the Trade Practices Act 1974 (“the Act”)
b)made an arrangement or arrived at an understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(a)(ii), when read with section 45A(1), of the Act.

50.By engaging in the conduct referred to in paragraph 1(b) the Tenth Respondent
a)gave effect to an arrangement or understanding containing an exclusionary provision in contravention of section 45(2)(b)(i), when read with section 4D, of the Act
b)gave effect to an arrangement or understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(b)(ii), when read with section 45A(1), of the Act.

51.In the circumstances described in paragraph 1(c) the Tenth Respondent, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s52(1) of the Act.
52.By making the arrangement or understanding referred to in paragraph 1(a) and engaging in the conduct referred to in paragraph 1(b) the Eleventh Respondent:
a)aided, abetted or procured the Tenth Respondent to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the Tenth Respondent of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act.

53.By making the arrangement or understanding referred to in paragraph 2(a) the Tenth Respondent:
a)made an arrangement or arrived at an understanding containing an exclusionary provision in contravention of section 45(2)(a)(i), when read with section 4D, of the Trade Practices Act 1974 (“the Act”)
b)made an arrangement or arrived at an understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(a)(ii), when read with section 45A(1), of the Act.

54.By engaging in the conduct referred to in paragraph 2(b) the Tenth Respondent
a)gave effect to an arrangement or understanding containing an exclusionary provision in contravention of section 45(2)(b)(i), when read with section 4D, of the Act
b)gave effect to an arrangement or understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(b)(ii), when read with section 45A(1), of the Act.

55.In the circumstances described in paragraph 2(c) the Tenth Respondent, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of s52(1) of the Act.
56.By making the arrangement or understanding referred to in paragraph 2(a) and engaging in the conduct referred to in paragraph 2(b) the Eleventh Respondent :
a)aided, abetted or procured the Tenth Respondent to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the Tenth Respondent of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act.

THE COURT ORDERS THAT:
57.The Tenth Respondent, by its servants or agents or otherwise howsoever, is restrained from
a)making an arrangement or arriving at an understanding with other scrap metal dealers (“the ring”) which contain a provision that the parties to the ring will engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction; and
ii)not bidding against the nominated bidder/s; and
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock.

58.The Eleventh Respondent is restrained from
a)making an arrangement or arriving at an understanding with other scrap metal dealers (“the ring”) which contain a provision that the parties to the ring will engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction; and
ii)not bidding against the nominated bidder/s; and
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock.

59.The Tenth Respondent pay to the Commonwealth a pecuniary penalty in the sum of $2,500. in respect of the conduct referred to in paragraphs 1 - 2 above.
60.The Eleventh Respondent pay to the Commonwealth a pecuniary penalty in the sum of $5,000 in respect of the conduct referred to in paragraphs 1 - 4 above.
61.The Tenth and Eleventh Respondents jointly pay the Applicant the sum of $2,500 towards its costs in these proceedings.

Date: 30 September 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES No N 1672 of 2001
DISTRICT REGISTRY

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

T & D METALS & DEMOLITIONS PTY LIMITED
(ACN 066 973 993)

Thirteenth Respondent

ANTHONY FRANKE

Fourteenth Respondent

AND OTHERS

ORDERS
(THIRTEENTH AND FOURTEENTH RESPONDENTS)
THE COURT NOTES THAT:
62.The Thirteenth Respondent admits that, by the acts of its Managing Director, the Fourteenth Respondent, on 11 February 1999, at an auction in Chiswick by BHP Limited for the sale of goods including scrap metal:
a)it made an arrangement or arrived at an understanding with certain other scrap metal dealers (“the ring”) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction
ii)not bidding against the nominated bidder/s
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock

b)it gave effect to the arrangement or understanding by:
i)not bidding for lots against the ring
ii)participating in the subsequent knock at a nearby hotel.

63.The Thirteenth Respondent admits by the acts of its Managing Director, the Fourteenth Respondent, on 12 October 1999, at an auction in Bathurst by the Commonwealth of Australia (Department of Defence) for the sale of goods including scrap metal:
a)it made an arrangement or arrived at an understanding with certain other scrap metal dealers (“the ring”) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction
ii)not bidding against the nominated bidder/s
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock

b)it gave effect to the arrangement or understanding by:
i)not bidding for lots against the ring
ii)participating in the subsequent knock at the Bathurst RSL Club.

64.The Thirteenth Respondent admits by the acts of its Managing Director, the Fourteenth Respondent, on 28 October 1999, at an auction in Port Kembla by BHP Limited for the sale of goods including scrap metal:
a)it made an arrangement or arrived at an understanding with certain other scrap metal dealers (“the ring”) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction
ii)not bidding against the nominated bidder/s
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock

b)it gave effect to the arrangement or understanding by:
i)not bidding for lots against the ring
ii)participating in the subsequent knock at the Port Kembla Leagues Club
iii)purchasing the goods at the knock.

65.The Fourteenth Respondent admits that he made the arrangement or arrived at the understanding referred to in paragraph 1(a) and engaged in the conduct referred to in paragraph 1(b) on behalf of the Thirteenth Respondent.
66.The Fourteenth Respondent admits that he made the arrangement or arrived at the understanding referred to in paragraph 2(a) and engaged in the conduct referred to in paragraph 2(b) on behalf of the Thirteenth Respondent.
67.The Fourteenth Respondent admits that he made the arrangement or arrived at the understanding referred to in paragraph 3(a) and engaged in the conduct referred to in paragraph 3(b) on behalf of the Thirteenth Respondent.

THE COURT DECLARES THAT:
68.By making the arrangement or arriving at the understanding referred to in paragraph 1(a) the Thirteenth Respondent:
a)made an arrangement or arrived at an understanding containing an exclusionary provision in contravention of section 45(2)(a)(i), when read with section 4D, of the Trade Practices Act 1974 (“the Act”)
b)made an arrangement or arrived at an understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(a)(ii), when read with section 45A(1), of the Act.

69.By engaging in the conduct referred to in paragraph 1(b) the Thirteenth Respondent
a)gave effect to an arrangement or understanding containing an exclusionary provision in contravention of section 45(2)(b)(i), when read with section 4D, of the Act
b)gave effect to an arrangement or understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(b)(ii), when read with section 45A(1), of the Act.

70.By making the arrangement or understanding referred to in paragraph 1(a) and engaging in the conduct referred to in paragraph 1(b) the Fourteenth Respondent:
a)aided, abetted or procured the Thirteenth Respondent to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the Thirteenth Respondent of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act.

71.By making the arrangement or understanding referred to in paragraph 2(a) the Thirteenth Respondent:
a)made an arrangement or arrived at an understanding containing an exclusionary provision in contravention of section 45(2)(a)(i), when read with section 4D, of the Trade Practices Act 1974 (“the Act”)
b)made an arrangement or arrived at an understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(a)(ii), when read with section 45A(1), of the Act.

72.By engaging in the conduct referred to in paragraph 2(b) the Thirteenth Respondent
a)gave effect to an arrangement or understanding containing an exclusionary provision in contravention of section 45(2)(b)(i), when read with section 4D, of the Act
b)gave effect to an arrangement or understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(b)(ii), when read with section 45A(1), of the Act.

73.By making the arrangement or understanding referred to in paragraph 2(a) and engaging in the conduct referred to in paragraph 2(b) the Fourteenth Respondent :
a)aided, abetted or procured the Thirteenth Respondent to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the Thirteenth Respondent of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act.

74.By making the arrangement or understanding referred to in paragraph 3(a) the Thirteenth Respondent:
a)made an arrangement or arrived at an understanding containing an exclusionary provision in contravention of section 45(2)(a)(i), when read with section 4D, of the Trade Practices Act 1974 (“the Act”)
b)made an arrangement or arrived at an understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(a)(ii), when read with section 45A(1), of the Act.

75.By engaging in the conduct referred to in paragraph 3(b) the Thirteenth Respondent
a)gave effect to an arrangement or understanding containing an exclusionary provision in contravention of section 45(2)(b)(i), when read with section 4D, of the Act
b)gave effect to an arrangement or understanding containing a provision that had the purpose, or had or was likely to have the effect, of substantially lessening competition, by reason that the provision had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining the prices of goods to be acquired by the parties to the arrangement, in contravention of section 45(2)(b)(ii), when read with section 45A(1), of the Act.

76.By making the arrangement or understanding referred to in paragraph 3(a) and engaging in the conduct referred to in paragraph 3(b) the Fourteenth Respondent :
a)aided, abetted or procured the Thirteenth Respondent to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the Thirteenth Respondent of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Act.

THE COURT ORDERS THAT:
77.The Thirteenth Respondent, by its servants or agents or otherwise howsoever, is restrained from
a)making an arrangement or arriving at an understanding with other scrap metal dealers (“the ring”) which contain a provision that the parties to the ring will engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction; and
ii)not bidding against the nominated bidder/s; and
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock.

78.The Fourteenth Respondent is restrained from
a)making an arrangement or arriving at an understanding with other scrap metal dealers (“the ring”) which contain a provision that the parties to the ring will engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction; and
ii)not bidding against the nominated bidder/s; and
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock.

79.The Thirteenth Respondent pay to the Commonwealth a pecuniary penalty in the sum of $10,000 in respect of the conduct referred to in paragraphs 1 - 3 above.
80.The Fourteenth Respondent pay to the Commonwealth a pecuniary penalty in the sum of $15,000 in respect of the conduct referred to in paragraphs 1 - 6 above.
81.The Thirteenth and Fourteenth Respondents jointly pay the Applicant the sum of $10,000 towards its costs in these proceedings.

Date: 30 September 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES No N 1672 of 2001
DISTRICT REGISTRY

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

WILLIAM ROBINSON

Seventeenth Respondent

AND OTHERS

ORDERS
(SEVENTEENTH RESPONDENT)
THE COURT NOTES THAT:
82.The Seventeenth Respondent admits that he, together with each of the First, Third and Sixth Respondents and others, on 24 November 1999, at an auction in Newcastle by BHP Limited for the sale of goods including scrap metal:
a)made an arrangement or arrived at an understanding with certain other scrap metal dealers (“the ring”) which contained a provision that the parties to the ring would engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction
ii)not bidding against the nominated bidder/s
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock

b)gave effect to the arrangement or understanding by:
i)not bidding for lots against the ring
ii)participating in the subsequent knock at the Phoenix Sports Club.

THE COURT DECLARES THAT:
83.By making the arrangement or understanding referred to in paragraph 1(a) and engaging in the conduct referred to in paragraph 1(b) the Seventeenth Respondent:
a)aided, abetted or procured each of the First, Third and Sixth Respondents to contravene ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act; and/or
b)has been directly or indirectly knowingly concerned in or a party to the contravention by the First, Third and Sixth Respondents of ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii) and 52 of the Act.

THE COURT ORDERS THAT:
84.The Seventeenth Respondent is restrained from
a)making an arrangement or arriving at an understanding with other scrap metal dealers (“the ring”) which contain a provision that the parties to the ring will engage in controlled or restricted bidding at the auction by:
i)nominating one or more of the parties to the ring to bid at the auction; and
ii)not bidding against the nominated bidder/s; and
iii)after the auction, bidding amongst themselves for the goods purchased by the nominated bidder/s (“the knock”), on the basis the unsuccessful bidders at the knock would be paid for their participation in the ring and knock.

85.The Seventeenth Respondent pay to the Commonwealth a pecuniary penalty in the sum of $2,500 in respect of the conduct referred to in paragraph 1 above.
86.The Seventeenth Respondent pay the Applicant the sum of $5,000 towards its costs in these proceedings.

Date: 30 September 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1672 OF 2001

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	D M FAULKNER PTY LIMITED (ACN 077 373 712) FIRST RESPONDENT DAVID MUNRO FAULKNER SECOND RESPONDENT RIVERSIDE METAL INDUSTRIES PTY LTD (ACN 002 537 537) THIRD RESPONDENT PAUL LEONARD CLINGAN FOURTH RESPONDENT MICHAEL WALTER NIETNER FIFTH RESPONDENT FERNDALE RECYCLERS PTY LIMITED (ACN 056 303 130) SIXTH RESPONDENT RONALD CHRISTOPHER BAGNALL SEVENTH RESPONDENT AJAX SHEET METAL PTY LIMITED (ACN 000 466 713) TENTH RESPONDENT SIDNEY NEVILLE FORRESTER ELEVENTH RESPONDENT T & D METALS & DEMOLITIONS PTY LIMITED (ACN 066 973 993) THIRTEENTH RESPONDENT ANTHONY FRANKE FOURTEENTH RESPONDENT HENDRICUS FRANKE FIFTEENTH RESPONDENT ALLAN HIGGINS SIXTEENTH RESPONDENT WILLIAM ROBINSON SEVENTEENTH RESPONDENT
JUDGE:	BENNETT J
DATE OF ORDER:	30 SEPTEMBER 2004
WHERE MADE:	SYDNEY

JUDGE:	BENNETT J
DATE:	30 SEPTEMBER 2004
PLACE:	SYDNEY

Company	Scrap metal processed (tonnes)
Sims Group	2,427,000
Smorgon	1,286,000
Riverside Metal	7,700

Auctions	Per Auction	Total
D M Faulkner	2	$40,000	$80,000
Mr Faulkner	2	$5,000	$10,000	$90,000
Riverside Metal	3	$40,000	$120,000
Mr Clingan	3	$5,000	$15,000	$135,000
Ajax Sheet Metal	2	$2,500	$5,000
Mr Forrester	2	$2,500	$5,000	$10,000
T & D Metals	3	*$3,333	$10,000
Mr Tony Franke	3	$5,000	$15,000	$25,000
Mr Robinson	1	$5,000	$5,000	$5,000
Mr Nietner	2	$5, 000	$10, 000	$10, 000