Australian Competition and Consumer Commission v Eurong Beach Resort Ltd

[2005] FCA 1900

FEDERAL COURT OF AUSTRALIA

ACCC v Eurong Beach Resort Ltd [2005] FCA 1900

STATUTES

Trade Practices Act 1974 (Cth) ss 46, 45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii), 47(2)

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v EURONG BEACH RESORT LTD (NOW ACN 084 540 858 PTY LTD) (ACN 084 540 858), JAIGEAR PTY LTD (ACN 010 400 503), OSER PTY LTD (ACN 010 946 719), SIDNEY ALBERT MELKSHAM and ANGELA KAY BURGER
QUD 147 OF 2002

KIEFEL J
BRISBANE
15 DECEMBER 2005

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 147 OF 2002

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

EURONG BEACH RESORT LTD (NOW ACN 084 540 858 PTY LTD)
(ACN 084 540 858)
FIRST RESPONDENT

JAIGEAR PTY LTD
(ACN 010 400 503)
SECOND RESPONDENT

OSER PTY LTD
(ACN 010 946 719)
THIRD RESPONDENT

SIDNEY ALBERT MELKSHAM
FOURTH RESPONDENT

ANGELA KAY BURGER
FIFTH RESPONDENT

JUDGE:

KIEFEL J

DATE OF ORDER:

15 DECEMBER 2005

WHERE MADE:

BRISBANE

THE COURT DECLARES THAT:

1.The first respondent (‘EBR’), being a corporation that:

1.1.at all material times had a substantial degree of power in the market for the supply of transportation services by self-propelled barge for vehicles and their passengers between Inskip Point on the Queensland mainland and Hook Point on Fraser Island (‘the Market’); and

1.2.prior to 21 December 2000 was charging $70 return for the said transportation services and was the sole supplier in the Market;

by taking advantage of that power for the purpose of eliminating or substantially damaging a competitor in the Market which commenced offering services in the Market in competition with EBR on 21 December 2000, by:

1.3.from 21 December 2000 until 3 October 2002, implementing and maintaining a pricing policy of decreasing and continuing to decrease its prices in the Market, such that EBR’s advertised prices were kept at $10 less per return journey than the competitor’s prices from time to time; and

1.4. from 29 January 2002, supplying the said transportation services for $20 return which was less than its costs of fuel and wages in providing the services;

1.5. after at least 1 July 2002 until 3 October 2002, supplying the said transportation services from time to time for as little as $10 return;

in circumstances where:

1.6. EBR incurred losses in respect of the supply of the said transportation services in the 2002 financial year, and from 1 July 2002 until 3 October 2002;

1.7. at all material times, EBR engaged in the said conduct without regard to its costs or returns;

1.8. EBR would have been able to return to monopoly pricing had the competitor exited the Market;

has contravened s 46 of the Trade Practices Act 1974 (‘the Act’).

2.Each of the fourth and fifth respondents, being the owners, managers and controllers of the first respondent, who caused it to engage in the conduct referred to in declaration 1, was knowingly concerned in and party to the first respondent’s contravention of s 46 of the Act set out in declaration 1.

3.Each of the second and third respondents, by entering into an arrangement or understanding, in September 1996, with Robert Elmer and Desley Allen, being their competitor or potential competitor in the Market, and by extending the same for 12 months in September 1997 and again in September 1998, which arrangement or understanding contained a provision to the effect that Robert Elmer and Desley Allen would not supply barge services within the Fraser Island area including the Market, except outside the normal hours of operation of the second and third respondents or at the direction of the second and third respondents, in return for a payment of $15 000 per annum from the second and third respondents, made an arrangement or arrived at an understanding which contained an exclusionary provision, and further, contained a provision which was likely to have had the effect of substantially lessening competition in the Market, and thereby on each occasion contravened s 45(2)(a)(i) and s 45(2)(a)(ii) of the Act.

4.Each of the second and third respondents, by making payments to Robert Elmer and Desley Allen in accordance with the arrangement or understanding set out in declaration 3 of $15 000 on 21 September 1996 and $15 000 on 27 September 1997, gave effect on each occasion to that arrangement or understanding which contained an exclusionary provision, and further, gave effect to that arrangement or understanding which contained a provision which was likely to have had the effect of substantially lessening competition in the Market, and thereby on each occasion contravened ss 45(2)(b)(i) and 45(2)(b)(ii) of the Act.

5.The first respondent, in or about November 1998, by adopting the arrangement or understanding set out in declaration 3, and by extending that arrangement on its own behalf for 12 months in about September 1999 and again in September 2000, which arrangement or understanding contained a provision to the effect that Robert Elmer and Desley Allen would not supply barge services within the Fraser Island area including the Market, except outside the normal hours of operation of the second and third respondents or at the direction of the second and third respondents, in return for a payment of $15 000 per annum from the first respondent, made an arrangement or arrived at an understanding which contained an exclusionary provision, and further, contained a provision which was likely to have had the effect of substantially lessening competition in the Market, and thereby on each occasion contravened s 45(2)(a)(i) and s 45(2)(a)(ii) of the Act.

6.The first respondent, by making payments to Robert Elmer and Desley Allen in accordance with that arrangement or understanding set out in declaration 5, of $12 500 on 5 January 1999, $6 000 on 24 January 2000, $6 000 on 14 April 2000, $6 000 on 21 July 2000 and $6 000 on 23 October 2000, gave effect to that arrangement or understanding which contained an exclusionary provision, and further, entered into and gave effect to that arrangement or understanding which contained a provision which was likely to have had the effect of substantially lessening competition in the Market, and thereby on each occasion contravened ss 45(2)(b)(i) and 45(2)(b)(ii) of the Act.

7.Each of the fourth and fifth respondents, being the owners, managers and controllers of the first, second and third respondents, who knowingly caused those companies to make and to give effect to the arrangements or understandings referred to in declarations 3, 4, 5, and 6 was knowingly concerned in and party to each of the first, second and third respondents’ contraventions of s 45(2) of the Act set out in declarations 3, 4, 5, and 6.

8.Each of the second and third respondents by, in the period from September 1996 to October 1998, offering to enter into, and entering into approximately 100 contracts each of 3 years duration with customers or potential customers for the supply of the said transportation services including most of the largest users of those services, which contracts offered discounts to those customers or potential customers, on the condition that those customers or potential customers not acquire such services from a competitor of the respondents, which conduct had the effect of substantially lessening competition in the Market, has engaged in the practice of exclusive dealing, contrary to s 47(2) of the Act.

9.The first respondent, by adopting the contracts referred to in declaration 8 already entered into by the second and third respondents and by supplying the said transportation services in accordance with those contracts in the period from November 1998 to 3 October 2002, which conduct had the effect of substantially lessening competition in the Market, has engaged in the practice of exclusive dealing, contrary to s 47(2) of the Act.

10.The first respondent, through its agents the second and third respondents, by offering to enter into and entering into in the period from December 2000 to 24 April 2002 approximately 60 contracts each of 3 years duration with customers or potential customers for the supply of the said transportation services including most of the largest users of those services, which contracts offered discounts to those customers or potential customers, on the condition that those customers or potential customers not acquire such services from a competitor of the first respondent, which conduct had the effect of substantially lessening competition in the Market, has engaged in the practice of exclusive dealing, contrary to s 47(2) of the Act.

11. Each of the fourth and fifth respondents, being the owners, managers and controllers of the first, second and third respondents, who knowingly caused those companies to engage in the conduct referred to in declarations 8, 9 and 10 was knowingly concerned in and party to each of the first, second and third respondents’ contraventions of s 47(2) of the Act set out in declarations 8, 9 and 10.

THE COURT ORDERS THAT:

12. In respect of the first respondent’s contraventions of sections 45(2), 46 and 47(2) of the Act as declared in these orders, a single pecuniary penalty of $500 000 in respect of all contraventions be imposed on the first respondent, such pecuniary penalty to be paid to the Commonwealth of Australia within 14 days of the date of these orders.

13. In respect of the second respondent’s contraventions of sections 45(2) and 47(2) of the Act as declared in these orders, a single pecuniary penalty of $100 000 in respect of all contraventions be imposed on the second respondent, such pecuniary penalty to be paid to the Commonwealth of Australia within 14 days of the date of these orders.

14. In respect of the third respondent’s contraventions of sections 45(2) and 47(2) of the Act as declared in these orders, a single pecuniary penalty of $100 000 in respect of all contraventions be imposed on the third respondent, such pecuniary penalty to be paid to the Commonwealth of Australia within 14 days of the date of these orders.

15. In respect of the fourth respondent being knowingly concerned in and party to the contraventions by the first, second and third respondents of sections 45(2), 46 and 47(2) as declared in these orders, a single pecuniary penalty of $100 000 in respect of being knowingly concerned in and party to those contraventions be imposed on the fourth respondent, such pecuniary penalty to be paid to the Commonwealth of Australia within 14 days of the date of these orders.

16. In respect of fifth respondent being knowingly concerned in and party to the contraventions by the first, second and third respondents of sections 45(2), 46 and 47(2) as declared in these orders, a single pecuniary penalty of $100 000 in respect of being knowingly concerned in and party to those contraventions be imposed on the fifth respondent, such pecuniary penalty to be paid to the Commonwealth of Australia within 14 days of the date of these orders.

17. The first to fifth respondents pay the applicant’s costs of and incidental to these proceedings, including reserved costs, agreed in the amount of $100 000 within 14 days of this order being made.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 147 OF 2002

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

EURONG BEACH RESORT LTD (NOW ACN 084 540 858 PTY LTD)
(ACN 084 540 858)
FIRST RESPONDENT

JAIGEAR PTY LTD
(ACN 010 400 503)
SECOND RESPONDENT

OSER PTY LTD
(ACN 010 946 719)
THIRD RESPONDENT

SIDNEY ALBERT MELKSHAM
FOURTH RESPONDENT

ANGELA KAY BURGER
FIFTH RESPONDENT

JUDGE:	KIEFEL J
DATE:	15 DECEMBER 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. I have read the detailed statement of agreed facts and the joint submissions of the applicant and the respondents, a copy of them is attached to these reasons and marked ‘A’.  I have discussed aspects of the matter with senior counsel for the parties and received further submissions, in particular, as to the level of sophistication of the respondents in their business dealings; the lack of any real cynical aspect in their conduct; and, at least to an extent, the purpose which they had in mind in engaging in some of the conduct.

2. I have indicated to the parties that I would have thought higher penalties would, all other things being equal, be warranted.  I accept however that it is appropriate in this case to make allowance for the co-operation of the respondents, even at this point in the proceedings, and for the very substantial savings of resources and costs which that has brought about.

3. In all the circumstances, I am satisfied that the penalties proposed are appropriate and will make orders in those terms together with the declarations proposed.

I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

Associate:

Dated:             15 December 2005

Counsel for the Applicant:	Mr Kieran Dorney QC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Mr David JS Jackson QC with Mr RPS Jackson
Solicitor for the Respondent:	Carswell & Co
Date of Hearing:	15 December 2005
Date of Judgment:	15 December 2005