Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi S.R.L. (No 12)
[2016] FCA 822
•20 July 2016
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi S.R.L. (No 12) [2016] FCA 822
File number: SAD 145 of 2009 Judge: BESANKO J Date of judgment: 20 July 2016 Catchwords: COMPETITION – alleged contravention of Trade Practices Act 1974 (Cth) and Competition Codes of the States – price fixing and market sharing – where relevant markets are for land cables and submarine cables in Australia – where alleged overarching international cartel arrangement or understanding – whether subsequent alleged arrangement or understanding relating to a tender on a specific project contravened Act – whether subsequent alleged arrangement or understanding gave effect to alleged overarching cartel arrangement or understanding – whether issuing a price guidance and submitting a tender gave effect to alleged arrangements or understandings – Trade Practices Act 1974 (Cth), ss 45(2)(a), 45(2)(b)
COMPETITION – price fixing and market sharing – consideration of elements of prohibited arrangement or understanding – whether parties undertook the level of commitment necessary for purposes of establishing an arrangement or understanding – whether there was competition in a market in Australia – whether the arrangement or understanding contained an exclusionary provision – whether there are “particular persons or classes of persons” for purposes of s 4D - whether arrangement or understanding had the purpose or was likely to have the effect of fixing or controlling prices – Trade Practices Act 1974 (Cth), ss 45, 45A, 4D
COMPETITION – price fixing and market sharing – attribution of conduct – whether natural persons alleged to be involved in conduct were representatives of company respondents – consideration of agency principles – consideration of principles in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 - where respondent companies part of large company groups – where alleged natural persons not employees of respondent company – where no delegation of authority or powers or functions to alleged natural persons – Trade Practices Act 1974 (Cth), s 84(2)
COMPETITION – extra-territorial application of Trade Practices Act 1974 (Cth) – where alleged conduct was engaged in outside of Australia – whether respondents were foreign corporations carrying on business within Australia – whether respondent carried on business within Australia indirectly through a subsidiary in Australia – whether respondent carried on business within Australia directly by providing services to a subsidiary in Australia - Trade Practices Act 1974 (Cth), s 5
EVIDENCE – objections to evidence – whether evidence should be excluded under the general discretion to exclude evidence – whether evidence was admissible as an opinion based on what a person saw, heard or otherwise perceived – Evidence Act 1995 (Cth) ss 135, 78.
Legislation: Competition Policy Reform (New South Wales) Act 1995 s 8
Evidence Act 1995 (Cth) ss 56, 76, 78, 135, 140
Federal Court of Australia Act 1976 (Cth) s 21
Interpretation Act 1987 (NSW)
Trade Marks Act 1995 (Cth) s 8
Trade Practices Act 1974 (Cth) ss 4, 4C, 4D, 4E, 5, 6A, 45, 45A, 76, 80, 84
Cases cited: Adams v Cape Industries plc [1990] Ch 433
Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 161; (2005) 159 FCR 452
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460
Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd [2008] FCA 1458; (2008) 251 ALR 166
Australian Competition and Consumer Commission v Air New Zealand Ltd and Another (2012) 207 FCR 448
Australian Competition and Consumer Commission v Air New Zealand Limited [2014] FCA 1157; (2014) 319 ALR 388
Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd and Others (No 6) [2010] FCA 704; (2010) 270 ALR 504
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2003] FCAFC 149; (2003) 129 FCR 339
Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (and Others) (1999) 92 FCR 375
Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165
Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Limited and Others [2009] HCA 19; (2009) 239 CLR 305
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183
Australian Competition and Consumer Commission v Liquorland (Australia Pty Ltd) [2006] FCA 826; (2006) ATPR 42‑123
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 4) [2012] FCA 1323; (2012) 298 ALR 251
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 8) [2014] FCA 376
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 9) [2015] FCA 623
Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi S.R.L. (No 11) [2015] FCA 876
Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd and Others [2011] FCA 973; (2011) 196 FCR 212
Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd and Others (No 3) [2007] FCA 1617; (2007) 244 ALR 673
Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304
Australian Securities and Investments Commission v Mariner Corporation Ltd and Others [2015] FCA 589; (2015) 106 ACSR 343
Bilta (UK) Ltd (in liquation) and others v Nazir and others [2015] UKSC 23; [2015] 2 All ER 1083
Bray v F Hoffman-La Roche Ltd and Others [2002] FCA 243; (2002) 118 FCR 1
Bray v F Hoffman-La Roche Ltd and Others [2003] FCAFC 153; (2003) 130 FCR 317
Briginshaw v Briginshaw (1938) 60 CLR 336
Christian Youth Camps Ltd and Another v Cobaw Community Health Services Ltd [2014] VSCA 75; (2014) 308 ALR 615
Consolo Limited and Others v Bennett [2012] FCAFC 120; (2012) 207 FCR 127
Eastern Express Pty Limited v General Newspapers Pty Limited and Others (1991) 30 FCR 385
Erlich v Leifer [2015] VSC 499
Flight Centre Ltd v Australian Competition and Consumer Commission (2015) 234 FCR 367
Hope v The Council of the City of Bathurst (1980) 144 CLR 1
Jones v Dunkel (1959) 101 CLR 298
Krakowski v Eurolynx Properties Limited and Another (1995) 183 CLR 563
Lithgow City Council v Jackson [2011] HCA 36; (2011) 244 CLR 352
Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Others [1992] HCA 66; (1992) 110 ALR 449
News Limited and Others v South Sydney District Rugby League Football Club Limited and Others [2003] HCA 45; (2003) 215 CLR 563
Nexans S.A. v Nex 1 Technologies Co. Ltd [2012] FCA 180
Rural Press Limited and Others v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53
Smith, Stone & Knight Ltd v Lord Mayor, Alderman and Citizens of City of Birmingham [1939] 4 All ER 116
South Sydney District Rugby League Football Club Ltd v News Ltd and Others [2000] FCA 154; (2000) 177 ALR 611
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286
Trade Practices Commission v David Jones (Australia) Pty Ltd and Others (1986) 13 FCR 446
Walplan Pty Ltd v Wallace (1985) 8 FCR 27
Dates of hearing: 13-16, 21-23 July 2015, 14-15 September 2015 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Economic Regulator, Competition and Access Category: Catchwords Number of paragraphs: 290 Counsel for the Applicant: Mr N O’Bryan SC with Mr T Duggan SC Solicitor for the Applicant: Australian Government Solicitor Counsel for the First Respondent: Mr I Wylie Solicitor for the First Respondent: Johnson Winter & Slattery Counsel for the Second Respondent: Mr M Hoffmann QC with Mr M Burnett Solicitor for the Second Respondent: Clayton Utz ORDERS
SAD 145 of 2009 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: PRYSMIAN CAVI E SISTEMI S.R.L. (FORMERLY PRYSMIAN CAVI E SISTEMI ENERGIA S.R.L.)
First Respondent
NEXANS SA RCS PARIS 393 525 852
Second Respondent
JUDGE:
BESANKO J
DATE OF ORDER:
20 JULY 2016
THE COURT ORDERS THAT:
1.The applicant’s claim against Prysmian Cavi e Sistemi S.r.L. (formerly Prysmian Cavi e Sistemi Energia S.r.L.) (“Prysmian”) be adjourned to a date to be fixed.
2.The applicant file and serve proposed minutes of order within 10 days reflecting the conclusions in these reasons insofar as they relate to Prysmian.
3.The applicant’s claim against Nexans SA RCS Paris 393 525 852 be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Introduction
[1]
The Parties and the Market
[5]
The ACCC’s Case
[13]
Witnesses and Evidence
[30]
Mr Osada and the evidence concerning the A/R Cartel Agreement and the Snowy Hydro Project Agreement
[44]
The Snowy Hydro Project Tender Process
[116]
Mr Noonan and the evidence concerning Nexans SA and the Nexans Group of Companies
[128]
The A/R Cartel Agreement
[167]
An Arrangement or Understanding
[169]
A Market in Australia
[174]
An Exclusionary Provision
[176]
A Price Fixing Provision
[184]
The Snowy Hydro Project Agreement
[190]
An Arrangement or Understanding
[191]
A Market in Australia
[204]
An Exclusionary Provision
[210]
A Price Fixing Provision
[211]
Conclusions to this Point
[212]
Attribution of Conduct
[215]
General Principles
[215]
Prysmian
[230]
Nexans SA
[235]
Conduct Outside Australia
[243]
General Principles
[243]
Prysmian
[251]
Nexans SA
[252]
Conclusions
[288]
BESANKO J:
Introduction
This is an application by the Australian Competition and Consumer Commission (“ACCC”) against two overseas companies for relief under the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) and the Competition Codes of the States of Australia and the Australian Capital Territory. The conduct alleged against the two companies may be broadly described as market sharing and price fixing and is alleged to have occurred in September and October 2003. The conduct is alleged to have involved contraventions of s 45(2) of the Trade Practices Act. The two overseas companies are Prysmian Cavi e Sistemi S.r.L (formerly Pirelli Cavi e Sistemi Energia S.p.A.) (“Prysmian”) and Nexans SA RCS Paris 393 525 852 (“Nexans SA”). Each of these companies is part of a large group of companies which operate at a global level. In the case of Nexans SA, it is the ultimate holding company of the Nexans Group of companies. Each group is a major supplier in the world of land and submarine energy cables.
There was another respondent to the proceeding, Viscas Corporation (“Viscas”). However, the ACCC’s claim against that company has been resolved.
The ACCC seeks injunctions pursuant to s 80 of the Trade Practices Act and the Competition Codes, declarations pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) and pecuniary penalties pursuant to s 76 of the Trade Practices Act or, in the alternative, the Competition Codes.
The anti-competitive conduct provisions of the Trade Practices Act and the Competition Codes are identical. The Competition Codes will only become relevant if the extra-territorial provisions of the Trade Practices Act are not engaged in the case of Nexans SA.
The Parties and the Market
The ACCC is a body corporate established under s 6A of the Trade Practices Act.
Prysmian has undergone a number of changes of name since it was incorporated as Pirelli Cavi e Sistemi Energia S.p.A under the laws of Italy on 27 November 2001. It is not necessary for me to set out the changes of name in the case of Prysmian. It is sufficient to note that from October 2001 to October 2003 it was known as Pirelli Cavi e Sistemi Energia S.p.A. During that period, it was a majority owned subsidiary of Pirelli S.p.A. until 30 July 2003, and from 31 July 2003 it was a majority owned subsidiary of Pirelli & C. S.p.A. At all material times since its incorporation, Prysmian has been a foreign corporation within s 4 of the Trade Practices Act.
Between 10 July 2003 and 20 June 2006, Prysmian was a foreign corporation registered in Australia and under the law of Victoria, and between at least 10 July 2003 and 20 June 2006, the company carried on business in Australia and in a State or Territory of Australia. Since 27 November 2001, Prysmian has had a wholly owned subsidiary in Australia, being Prysmian Power Cables and Systems Australia Pty Ltd which, until 29 September 2005, was named Pirelli Power Cables and Systems Australia Pty Ltd (“Pirelli Australia”). Since 27 November 2001, Prysmian has supplied and offered to supply products, including high voltage and extra high voltage land‑based electrical cables and accessories (“land cables”) and medium voltage, high voltage and extra high voltage electrical cables and accessories (“submarine cables”) to customers in places, including Australia.
At all times material to this proceeding, Nexans SA is and has been a body corporate incorporated pursuant to the laws of France and it is and has been a foreign corporation within s 4 of the Trade Practices Act. Nexans SA denies that it carried on business in Australia and in a State or Territory in Australia and it denies that it supplied and offered to supply products, including land cables and submarine cables to customers in places, including Australia.
Viscas, which I have already mentioned, is a Japanese company which competes with J‑Power Systems Corporation (“JPS”) in relation to the supply of high voltage land and submarine cables in various countries, including Australia. Exsym Corporation (“Exsym”) is in the same position as Viscas. JPS was incorporated in June 2001 as a joint venture between Sumitomo Electric Industries (“Sumitomo”) and Hitachi Cable Limited (“Hitachi”). It is a body corporate incorporated pursuant to the laws of Japan and a foreign corporation within s 4 of the Trade Practices Act. From October 2001, JPS supplied and offered to supply products, including land cables and submarine cables to customers in places, including Australia.
In its Further Amended Statement of Claim (“Statement of Claim”), the ACCC pleads that there was a market for land cables in Australia at the relevant time and a market for submarine cables. In the alternative, it pleads that there was a market in Australia for land and submarine cables which it describes as “the Australian cable market”. It also pleads that certain parties, including the respondents, were participants in those markets. Prysmian and Nexans SA respond very differently to those pleas.
Prysmian admits that at all material times, there has been demand in Australia for land cables from customers, including generators and distributors of electricity, and major construction, mining and development companies and that there are no other products closely substitutable for land cables. Prysmian admits that the demand in Australia has been met by manufacturers and suppliers of land cables, including from at least 2001, Nexans SA, Prysmian, Viscas and JPS, and from at least 2002, Exsym. Prysmian admits that at all material times, there was a market in Australia for the supply of land cables by persons, including from at least October 2001, Nexans, a member of the Pirelli Group of companies (being Prysmian from in or about November 2001), Viscas and JPS, and from in or about April 2002, Exsym. Prysmian makes the same admissions in relation to the same allegations in relation to the market in Australia for submarine cables, save that it alleges that the demand for submarine cables from customers is not limited geographically to Australia or any other region, but is expressed project by project by such customers. However, Prysmian denies the ACCC’s alternative allegation of an “Australian cable market”.
Nexans SA admits that at the relevant time, there was a demand for land cables in Australia, but it pleads that the demand in Australia arose from time to time from customers on a project by project basis from each customer for each relevant project. It admits that there are no other projects closely substitutable for land cables. As to the parties who met the demand in Australia for land cables, it pleads that it did not manufacture or supply any cables of any kind in any place in the world and that it did not meet the demand in Australia for land cables. It admits that at the relevant time there was a market in Australia for the supply of land cables, but denies that it was a participant in that market. Its pleas are to the same effect in relation to the ACCC’s allegations that there was a demand in Australia for submarine cables and there was a market in Australia for the supply of submarine cables. Nexans SA denies the ACCC’s alternative allegation of an “Australian cable market”.
The ACCC’s Case
The ACCC alleges that as at October 2001, there was an arrangement or understanding between Nexans SA, a member or representative of the Pirelli group of companies, Viscas and Sumitomo which contained a number of provisions. The ACCC described this arrangement or understanding as the A/R Cartel Agreement. I will use that description and refer to the making of the A/R Cartel Agreement. I do this for convenience and it must be borne in mind that the precise allegation is that an arrangement was made or an understanding arrived at.
The ACCC alleges that the provisions of the A/R Cartel Agreement were as follows:
16.1.that the cartel members, by their nominated representatives, would meet and communicate as a cartel to co-operate with one another in markets for land cables and submarine cables worldwide, including in the Australian land cable market and the Australian submarine cable market, alternatively the Australian cable market (the A/R Cartel);
16.2. that one group of the A/R Cartel, referred to by the cartel members as the “A Group”, consisted of the Japanese companies Viscas and Sumitomo;
16.3.that the other group of the A/R Cartel, referred to by the cartel members as the “R Group”, consisted of the European companies, including a member or representative of the Pirelli group of companies and Nexans;
16.4.that a natural person who was the secretary of the A Group, and a natural person who was the secretary of the R Group, would each be the principal point of contact for communications between the A Group and the R Group;
16.5.that the A/R Cartel members would not compete with one another on price in tendering for projects for the supply of land cables or submarine cables, but would reach agreements when particular projects arose as to which of them would be the successful tenderer for the project, referred to as the Allottee;
16.6.that when a member of the A/R Cartel received an initial inquiry, request for budgetary price, or quotation or invitation to tender from a customer for, or otherwise first became aware of, a potential project for the supply of land cables or submarine cables, that member would provide a Notification, by notifying the other members as soon as possible, either directly or through the member’s group secretary, of the identity of the customer, the country where the project was located and the basic specifications of the project;
16.7.that if the project was at a preliminary or budgetary price stage only, the A/R Cartel members would agree a minimum price above which they would each submit their budgetary prices if invited to do so by the customer, which minimum price was referred to as the Floor Price;
16.8.that if the project was at a quotation or tender stage, the project would be allocated by the A/R Cartel members agreeing either:
16.8.1. as to a particular Allottee; or
16.8.2.that the project would be allocated to either the A Group or the R Group, which was referred to as giving the project an A Preference or R Preference respectively;
16.9.that allocations to a particular Allottee would occur by the A/R Cartel members reaching agreement as to which of the members who were invited to tender for the project would be the Allottee for that project, taking into account factors including:
16.9.1.whether the project was in a geographic region close to a particular member’s production facilities, or otherwise favoured by a member, which was sometimes referred to as a home territory or home market;
16.9.2.whether the project was for a customer with whom a particular member had a strong existing relationship;
16.9.3.whether a member was already associated with the project, by assisting in preparing specifications, or because the project was to connect to or upgrade existing cable supplied by that member;
16.9.4.capacity and workloads of particular members;
16.9.5.requests by particular members to be allocated the project, which were referred to as Preferences;
16.10.if a project was given an A Preference or R Preference, the members of the A Group or the R Group respectively would then agree between themselves as to which of them would be the Allottee;
16.11.the A/R Cartel members would communicate in relation to prices for the project, to ensure the Allottee submitted the lowest price of the members tendering, with the intended consequence that the Allottee would be the successful tenderer for the project;
16.12.the Allottee would notify the other A/R Cartel members, either directly or via the secretaries, of the prices at or above which they should submit their tenders for the project, so as to ensure the Allottee’s price was the lowest of the members tendering, which notification was referred to as the Price Guidance for the project;
16.13.the A/R Cartel members who were not the Allottee for the project either:
16.13.1. would not submit a bid for the project; or
16.13.2. would submit a bid in accordance with the Price Guidance provided to them;
with the intended consequence that the Allottee would be the successful tenderer for the project;
16.14.that if agreement could not be reached as to the Allottee, or whether a project should be allocated to A Group or R Group, the project could be expressly agreed to be a “Free Fight”, which meant that any member could tender for the project at their own price without consulting further with the other members.
The ACCC alleges that from approximately October 2001 and following the formation of JPS, that company was a cartel member, a member of the A Group, and a party to the A/R Cartel Agreement. It took the place of Sumitomo, and Sumitomo was no longer a cartel member. The ACCC alleges that from approximately November 2001, Prysmian (following its formation on 27 November 2001), became a member of the cartel, a party to the A/R Cartel Agreement as the representative of the Pirelli Group of companies, and a member of the R Group.
The ACCC alleges that from at least October 2001, the A/R Cartel members communicated by their individual representatives as follows. The representatives of Nexans SA were Mr Jeanmarie Jay and Mr Alain Romand. The representatives of the Pirelli Group of companies (being Prysmian from in or about November 2001) were Mr Gianfranco Acquaotta, Mr Federico Corbellini, Mr Alan Jones and Mr Robert Comber. The representative of Viscas was Mr Tsubaki. The representatives of JPS were Mr Joji Yamaguchi and Mr Takeo Osada. The ACCC alleges that from at least October 2001, Mr Jay was the secretary of the R Group and Mr Yamaguchi was the secretary of the A Group assisted by Mr Osada. The ACCC alleges that Exsym became a member of the cartel in April 2002 as a member of the A Group and that its representative for the purposes of communications within the cartel was Mr Toshihisa Inoue.
The ACCC alleges that the purpose or effect or likely effect of the A/R Cartel Agreement was to fix, control or maintain prices for land cables and submarine cables and, therefore, to substantially lessen competition within s 45(2)(a)(ii) and s 45A(1) of the Trade Practices Act and Competition Codes. In addition, the ACCC alleges that the A/R Cartel Agreement contained an exclusionary provision within s 45(2)(a)(i) and s 4D because it had the purpose of preventing, restricting or limiting the supply of land cables and submarine cables.
At the times relevant to this proceeding, ss 45 and 45A of the Trade Practices Act provided:
45Contracts, arrangements or understandings that restrict dealings or affect competition
…
(2) A corporation shall not:
(a)make a contract or arrangement, or arrive at an understanding, if:
(i)the proposed contract, arrangement or understanding contains an exclusionary provision; or
(ii)a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
(b)give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
(i) is an exclusionary provision; or
(ii)has the purpose, or has or is likely to have the effect, of substantially lessening competition.
(3)For the purposes of this section and section 45A, 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.
…
45AContracts, arrangements or understandings in relation to prices
(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.
…
Section 4D contained a definition of an exclusionary provision and, at the relevant times, it was in the following terms:
4D Exclusionary provisions
(1)A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if:
(a)the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and
(b)the provision has the purpose of preventing, restricting or limiting:
(i)the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or
(ii)the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions;
by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate.
(2)A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first‑mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates.
At the relevant times, s 4 contained a non-exhaustive definition of “competition” and market was defined (unless a contrary intention appeared) in s 4E as a market in Australia.
The ACCC does not seek relief in relation to the making of the A/R Cartel Agreement. However, it claims that Prysmian and Nexans gave effect to the A/R Cartel Agreement in contravention of s 45(2)(b) of the Trade Practices Act and, to succeed, it must show that the agreement fell within the terms of the subsection. The definition section in the Trade Practices Act (s 4) provided that the concept of “give effect to” included doing an act or thing in pursuance of or in accordance with or enforce or purport to enforce.
The ACCC alleges that on 24 September 2003, the A Group members and the R Group members arrived at an arrangement or understanding which it describes as the Snowy Hydro Project Agreement. Again, for convenience, I will use that description. The Snowy Hydro Project Agreement related to the Snowy Hydro Project which the ACCC alleges was as follows. Snowy Hydro Limited was the owner and operator of the Snowy Mountains Scheme, an integrated water supply and hydro-electric power business located principally in Victoria and New South Wales. In or about September 2003, Snowy Hydro required land cables and accessories for use in the Snowy Mountains Scheme. Snowy Hydro Limited issued an invitation to tender for a contract described as “Contract no. 90061 for spare 330kV Cable and Accessories” which tender process closed on 10 October 2003. The ACCC refers to this as the Snowy Hydro Project and, again, for convenience, I will use that description.
The ACCC alleges that Snowy Hydro Limited issued the invitation to tender for the Snowy Hydro Project to the following companies:
(1)Prysmian;
(2)JPS;
(3)Mitsui & Co (Australia) Ltd (“Mitsui Australia”), which was a subsidiary of Mitsui & Co Ltd (“Mitsui”). Mitsui is a construction company incorporated in Japan; and
(4)Midland Metals Overseas Pte Ltd, which is a company incorporated in Singapore.
The ACCC alleges that the circumstances leading to the Snowy Hydro Project Agreement were that on 12 September 2003, Mr Osada of JPS notified Prysmian, Exsym, Nexans and Viscas by email of the receipt of the invitation to tender. It alleges that that notification to these companies was given pursuant to the provisions of the A/R Cartel Agreement as was the notification Exsym sent JPS on 16 September 2003 that it had also received the invitation to tender. The ACCC alleges that in his email, Mr Osada, on behalf of the A Group, made a request that the Snowy Hydro Project be allocated to the A Group as an A preference.
The ACCC alleges that the Snowy Hydro Project Agreement was made on 24 September 2003 and it alleges that it contained the following provisions:
34.1.the Snowy Hydro Project would be allocated to a member of the R Group as an R Preference;
34.2 pursuant to the provisions of the A/R Cartel Agreement:
34.2.1. the R Group would be entitled to nominate the Allottee;
34.2.2.the R Group would notify the A Group of the Price Guidance, being the price at or above which a member of the A Group who was tendering for the Snowy Hydro Project should submit its tender, so as to ensure the R Group Allottee was the tenderer with the lowest price of the members tendering for the project;
34.2.3.the A Group representative would communicate the Price Guidance to the A Group members, if they were not already copied in to the original communication from the R Group representative concerning the Price Guidance;
34.2.4.any A Group members submitting tenders for the project would tender in accordance with the notified Price Guidance for the project.
Particulars
The agreement that the R Group would be the allocated group was confirmed by an email from Takeo Osada dated 24 September 2003, 5.44am, as secretary and representative of the A Group, addressed to Jay, as secretary and representative of the R Group, and also sent to Corbellini, Comber, Yamaguchi, Watanabe, Tsubaki and Inoue.
The ACCC alleges that between 24 September 2003 and 3 October 2003, the members of the R Group reached agreement that Prysmian would be the allottee for the Snowy Hydro Project.
The ACCC alleges against Prysmian and Nexans that the Snowy Hydro Project Agreement contravened s 45(2)(a) of the Trade Practices Act because it fixed, controlled or maintained prices and thereby substantially lessened competition and was an exclusionary provision because it prevented, restricted or limited the supply of land cables.
The ACCC alleges against Prysmian and Nexans that their conduct in relation to the Snowy Hydro Project amounted to a giving effect to of the A/R Cartel Agreement.
As I understand the authorities, the same conduct may amount to making an arrangement or arriving at an understanding that contravenes s 45(2)(a) of the Trade Practices Act and giving effect to a prior arrangement or understanding in contravention of s 45(2)(b) of the Trade Practices Act, although ultimately, there may be only one penalty. As I said in Australian Competition and Consumer Commission v Yazaki Corporation (No 2) [2015] FCA 1304 (“Yazaki”) at [50], there is nothing conceptually wrong in having a general arrangement or understanding followed by a specific arrangement or understanding in a particular case (see also Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd and Others (No 3) [2007] FCA 1617; (2007) 244 ALR 673 per Heerey J at [41]-[47]; Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd and Others (No 6) [2010] FCA 704; (2010) 270 ALR 504 (“ACCC v April International Marketing Services Australia”) at 529 [92] per Bennett J).
The ACCC makes further allegations against Prysmian. It alleges that Prysmian gave effect to the Snowy Hydro Project Agreement and the A/R Cartel Agreement by submitting a Price Guidance to other members of the A/R Cartel on 3 October 2003 and by its agent, Pirelli Australia, lodging a tender for the Snowy Hydro Project with Snowy Hydro Limited on or about 8 October 2003.
Witnesses and Evidence
There were a number of significant pre-trial interlocutory disputes between the parties. It is not necessary for me to mention all of these disputes. However, the following rulings should be noted.
In Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 4) [2012] FCA 1323; (2012) 298 ALR 251 Lander J dismissed applications to set aside service of the originating application and statement of claim outside the jurisdiction. His Honour’s reasons set out in detail the ACCC’s case as it was then pleaded, and addressed a number of the issues which were raised at the trial before me.
In Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 8) [2014] FCA 376, I rejected the ACCC’s application against Prysmian for an order for further and better discovery. It is not necessary for me to discuss in detail my reasons for rejecting the application. It is sufficient to say that I rejected the suggestion that in terms of the obligation to make discovery, one could treat as one a holding company and its subsidiary or all the companies in a particular business unit of a group of companies.
In Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi S.R.L. (No 11) [2015] FCA 876, I dismissed an application made by the ACCC during the trial for Nexans SA to make further and better discovery of documents within its control Again, I do not need to discuss in detail my reasons for rejecting the application. It is sufficient to say that, although I was satisfied “there are documents which are relevant to whether Mr Jay and Mr Romand engaged in the conduct alleged in the Statement of Claim, or at least there are reasonable grounds for being fairly certain that there are such documents which have not been discovered by Nexans SA”, I was not satisfied to the required degree that they were within the control of Nexans SA.
The ACCC does not suggest that I can draw adverse inferences against the respondents from their failure to make proper discovery. However, it does submit that there are other relevant documents which are not before me, particularly in the case of Nexans SA, and that I should take that into account and not entertain a submission that there are no other documents as distinct from a submission that there are no other documents before me.
One of the important issues in this case is whether certain individuals from the Prysmian Group of companies were acting for Prysmian and whether certain individuals from the Nexans Group of companies were acting for Nexans SA. In order to assist it to prove its case in this respect, the ACCC made an application for leave to interrogate both companies shortly before trial. I granted leave to interrogate (Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi Energia S.R.L. (No 9) [2015] FCA 623). The ACCC tendered the answers to interrogatories from each of the respondents as part of its case.
The ACCC’s main witness was Mr Takeo Osada who worked for JPS between 2001 and February 2006. Between 2001 and sometime in 2004 or 2005, he had a sales and marketing role with the title of Specialist, and from 2004 or 2005 until 2006 he was Group Manager with responsibilities for export worldwide, including Australia. In both those roles, Mr Osada’s position in relation to cables covered the export of high voltage land cables and medium and high voltage submarine cables. I do not need to detail the other positions Mr Osada held with either Sumitomo or JPS at times other than those I have identified. It is sufficient to say that he commenced employment with Sumitomo in 1983 and that at the time of the trial, he was employed by Sumitomo in the position of “General Manager in the Social Infrastructure Sales and Marketing Unit”. As I have said, in 2001 Sumitomo and Hitachi Cable Ltd established JPS as a joint venture vehicle and its business was the manufacture and supply of electric power cables and accessories, including high voltage and extra high voltage land cables and submarine cables.
Mr Osada gave evidence and produced documents which the ACCC contended established the A/R Cartel Agreement and the Snowy Hydro Project Agreement. Certain aspects of his evidence were criticised by Prysmian and Nexans SA. For reasons I will give, I reject those criticisms. I find that Mr Osada was generally a satisfactory witness. There are certain matters about which Mr Osada was not able to give direct evidence and, with respect to those matters, the ACCC’s case depends on the drawing of inferences.
The ACCC arranged for a number of documents to be translated from Japanese to English. Ms Melinda Hollingsworth and Ms Megan Shimoji carried out those translations. Their respective affidavits were tendered (with some paragraphs not pressed) and they were not required for cross-examination. The ACCC also tendered a number of documents.
Prysmian tendered a number of documents, but it did not call any witnesses.
Nexans SA called Mr Patrick Noonan as a witness. Mr Noonan is Senior Corporate Vice President, General Counsel, Secretary General and Secretary of the Board of Nexans, a société anonyme, RCS Paris 393 525 852. Mr Noonan did not have any involvement in the conduct alleged by the ACCC to be anti-competitive conduct. Mr Noonan’s evidence was directed towards the activities of Nexans SA and its board and employees and the activities of companies in the Nexans Group of companies, including Nexans France, Nexans Participations and Nexans Australia Pty Limited (“Nexans Australia”), and their employees. He gave evidence about the position of Mr Romand and of Mr Jay within the Nexans Group of companies. He gave evidence about a body or group within the Nexans Group of companies known as the Global Export Sales Organisation or GESO. Nexans SA also tendered a number of documents.
Mr Noonan was cautious to the point of being guarded about a number of matters which I will identify later in these reasons. I have concluded that he did not have any detailed knowledge of the GESO or its operations and, on this topic, I think the information in the documents is more reliable. Subject to these matters, I find that Mr Noonan was generally a satisfactory witness.
The ACCC carries the onus of proof and the standard of proof is on the balance of probabilities. That remains the position throughout the case regardless of the nature of the allegations (Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd and Others [1992] HCA 66; (1992) 110 ALR 449 at 449-450). However, the conduct alleged against Prysmian and Nexans SA is such that, if proved, may lead to the imposition of pecuniary penalties under s 76 of the Trade Practices Act. Pecuniary penalties clearly have a punitive aspect and that is a matter I must take into account in determining whether I am satisfied that the allegations have been proved (Evidence Act 1995 (Cth) s 140; Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 per Dixon J (as his Honour then was)).
The ACCC asked me to draw inferences adverse to Prysmian and Nexans SA from the failure of each of these companies to call witnesses that each of them might reasonably be expected to have called. In its written outline of closing submissions, the ACCC identified persons who could have been called, but were not, particularly in the case of Nexans SA (paragraph 31). For their part, Prysmian and Nexans SA identified certain persons whom they contended the ACCC could and should have called. The general principles where a party, without sufficient explanation of his or her absence, does not call a witness they might reasonably be expected to call and that person might be presumed to be able to put the true complexion on the facts are as follows. First, the evidence given on the other side might be more readily accepted because it has not been contradicted. Secondly, an inference in favour of the other party might be more readily drawn in the absence of the witness and it is open to conclude that the person not called would not have assisted in throwing doubt on the inference (Jones v Dunkel (1959) 101 CLR 298 at 308 per Kitto J). A party’s failure to call a person cannot be used to fill evidentiary gaps in the other party’s case (Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165 at [2960]). In the case of Nexans SA, the ACCC asked Mr Noonan about the whereabouts and availability of a number of persons. It did not have a similar opportunity in the case of Prysmian because it did not call any witnesses. Nevertheless, the onus was on Prysmian to explain the absence of relevant witnesses from the witness box and it did not discharge that onus (Heydon J, Cross on Evidence, 10th ed, LexisNexis Butterworths, Australia, 2015). For the most part where I have drawn inferences in favour of the ACCC’s case, I have been able to do so without any particular reliance on the failure of the respondents to call evidence. In those areas where I have not drawn inferences in favour of the ACCC’s case, and the most notable of these are the relationship between the Executive Committee and the GESO (at [166]) and Nexans SA’s action in relation to the Snowy Hydro Project (at [202]), I consider that there are evidentiary gaps which cannot be overcome by the application of the above principles.
Mr Osada and the evidence concerning the A/R Cartel Agreement and the Snowy Hydro Project Agreement
Mr Osada’s evidence-in-chief was directed to three main topics, being the operations of the A/R Cartel Agreement, the making of the Snowy Hydro Project Agreement, and three other projects in Australia in which the participants in the A/R Cartel Agreement were involved.
In his position at JPS of Specialist between 2001 and 2004 or 2005, Mr Osada reported to one of two group managers and those group managers, in turn, reported to the general manager of JPS who, at the relevant times, was a Mr Joji Yamaguchi. Mr Osada said that he was responsible for a specific geographic sales area which did not include Australia and that he did not have direct contact or dealings with customers in Australia. He said that after he became Group Manager at JPS in 2004 or 2005, he was directly involved in dealing with customers in Australia and that, from time to time, he travelled to Australia.
After Mr Osada had taken up his position with JPS in 2001, he began assisting Mr Yamaguchi with certain arrangements which JPS had with its competitors. Between 2001 and 2004, Mr Osada, on behalf of JPS, communicated with major competitors of JPS about the supply of high voltage (and in the case of land cables extra high voltage) land and submarine cables in various countries, including Australia (but not including the United States of America).
The competitors with whom Mr Osada communicated with were as follows:
(1)two Japanese companies, being Viscas and Exsym; and
(2)two European companies, being Prysmian (previously known as Pirelli) and Nexans.
Viscas, Prysmian and Nexans supplied both land and submarine cables. Exsym supplied mainly land cables and not submarine cables. Mr Osada referred to these companies, including JPS, as the “participants” and he referred to JPS, Viscas and Exsym as the Japanese participants, and Nexans and Prysmian as the European participants.
Before proceeding further, the following matter should be noted. I think that it was established in the cross‑examination of Mr Osada that he acted as Mr Yamaguchi’s assistant, rather than independently. In other words, he was acting under Mr Yamaguchi’s direction. Ultimately, I do not think that it makes a great deal of difference in terms of the effect of Mr Osada’s evidence.
Mr Osada’s understanding of the participants and their representatives was as follows:
(1)Viscas: Mr Tsubaki and Mr Morita;
(2)Exsym: Mr Toshihisa Inoue, Mr Nakamura and Mr Nakajima;
(3)Prysmian: Mr Gianfranco Acquaotta, Mr Federico Corbellini, Mr Alan Jones and Mr Richard Comber; and
(4)Nexans: Mr Jeanmarie Jay and Mr Alain Romand.
The representatives of the participants communicated with each other mainly by email, but on occasions they communicated by telephone or facsimile. The representatives of the participants also met in person from time to time, perhaps once every three to five months.
A person wishing to purchase a high voltage land cable or submarine cable might want a budgetary price or a quotation or might issue an invitation for a manufacturer or supplier to tender for the project. Where that occurred in the case of one of the participants, then the practice was that that participant would notify the other participants of the project. Mr Osada was involved in this process and he produced, as an example, the notification that he gave to the participants in relation to the Snowy Hydro Project on 12 September 2003. The email was as follows:
From: Takeo Osada ˂[email protected]˃
Sent: Friday, September 12, 2003 7:39 AM (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected]; [email protected]
Subject: Inquiry Notification, Australia
Dear Mr. Jay:
Inquiry Notification
Country; Australia
Project Name; Contract No. 90061
Customer; Snowy Hydro
Bid date; Oct. 10, 2003
Voltage; 330kV
Insulation; Fluid filled
Quantity; 525 meters plus 555 meters optionA is interested and would like to ask preference.
Best regards
T.Osada for J. Yamaguchi
As can be seen, with this particular notification was a request for an A preference.
Mr Osada said that he was the Japanese “window” for communications with the European participants. Mr Jay was the European “window”.
Mr Osada described how the arrangement or understanding between the participants worked in practice in paragraphs 17-30 inclusive of his affidavit. He described the steps in the process, including the following: receipt of an inquiry as to a project; a request from the A Group or the R Group for preference; agreement at the Group level as to which group would receive preference; agreement within the Group as to who would be the allottee; factors taken into account in deciding who would be the allottee; notification of prices, and the scope of projects covered by the agreement. The respondents objected to this evidence on the ground that it could not be admitted because it was irrelevant (s 56(2) of the Evidence Act) and that it infringed the opinion rule (s 76(1) of the Evidence Act). In addition, the respondents submitted that it should not be admitted because the probative value of the evidence was substantially outweighed by the danger that the evidence might be unfairly prejudicial to them, the evidence was misleading or confusing or would cause or result in undue waste of time (s 135 of the Evidence Act). I ruled that the evidence should be admitted and I said that I would give my reasons for that ruling in my reasons on the substantive application.
The evidence was plainly relevant because it went to the existence of the A/R Cartel Agreement. As I understood it, the gravamen of the respondents’ objection was that the statements by Mr Osada were expressions of opinion and were rendered inadmissible by the opinion rule. The statements were inferences from observed and communicable data (Lithgow City Council v Jackson [2011] HCA 36; (2011) 244 CLR 352 (“Lithgow City Council v Jackson”) at [27] per French CJ, Heydon and Bell JJ). I accept that Mr Osada’s evidence in paragraphs 17-30 is expressed in very general terms and I think that it does contain a number of conclusions which are properly characterised as opinions. However, I considered that the evidence was admissible because it fell within the terms of s 78 of the Evidence Act. I accept that Mr Osada, albeit Mr Yamaguchi’s assistant, was the Japanese “window” for or in relation to the arrangement or understanding, and I accept that he had sufficient knowledge of the events about which he was to give evidence. The evidence fell within the terms of s 78 of the Evidence Act because the facts that form the basis of the opinion were so numerous and evanescent that they could not be held in the memory and detailed to the Court as they appeared to Mr Osada at the time (Lithgow City Council v Jackson at [46] per French CJ, Heydon and Bell JJ; Australian Competition and Consumer Commission v Air New Zealand Ltd and Another (2012) 207 FCR 448 at [71] and [72] per Perram J). I considered whether the evidence should be excluded by reference to one of the grounds in s 135 of the Evidence Act. I considered that the evidence was clear and, therefore, it should not be excluded on the basis that it was misleading or confusing. Nor did I think that the evidence would cause or result in undue waste of time. Although the evidence is very general, I considered that it had substantial probative value, particularly when the contemporaneous documentation was taken into account. I did not consider that the probative value of the evidence was substantially outweighed by the danger that the evidence might be unfairly prejudicial to the respondents.
Mr Osada’s evidence was that when an inquiry in relation to a project was received, the following steps were taken. The first step involved the participants agreeing as to which of them would be allocated the project out of the group of participants who had been asked by a potential purchaser to quote or lodge a tender in relation to the project. This could involve agreement at two levels. The Japanese participants were referred to as the “A” Group and the European participants were referred to as the “R” Group. The A Group may ask the R Group for preference or vice versa. In the email dated 12 September 2003 (at [52]), the A Group asks for preference. If the Groups agreed as to which of them should have preference, then the companies within the particular group (i.e., the A Group or the R Group) would decide as between themselves which of them was to be given preference. In determining which participant would be the allottee in relation to a particular project, the following matters would be taken into account:
(1)whether a participant had been involved in assisting the company to put together the tender specifications at the pre-bid stage;
(2)whether a participant had a long relationship with the particular company;
(3)whether the project was a replacement or upgrade of work previously done by a participant; and
(4)work levels of the participants.
The decision-making usually occurred by an exchange of emails, sometimes telephone calls and, on occasions, meetings in person. Sometimes the Japanese participants met before communicating with the European participants.
If the participants could not agree about the allottee of a project, then they could agree a minimum price above which all of them would quote or agree that they could quote as they saw fit. Projects for which participants could set their own prices were referred to in communications between participants as “FF” or “fighting free” or “friendly free”.
The second step, once the allottee had been identified, was that that company would notify a price to the other participants. This was the price below which the notified party should not tender so as to ensure that the allottee secured the project. It could be a notification from group to group or from the allottee to other participants. The communication was referred to by the participants as a Price Guidance. It is important to note, having regard to one of the arguments advanced by the respondents, that Mr Osada said that not all participants submitted prices for a project and that the usual course was that it would only be those participants invited by the customer to do so who would submit a tender or price.
Mr Osada’s understanding was that the agreement between participants covered all projects for land cables above 220kV and all projects for submarine cables, although it was the case that some projects for land cables below 220kV were discussed and that the participants would try to make an arrangement if they thought they could.
A record in the form of a table was kept of the projects which were allocated and Mr Osada referred to this record or table as a Position Sheet. The practice was that initially the Position Sheet was prepared by the European “window” who sent it to Mr Osada from time to time and before and after meetings. At meetings, Mr Osada saw that other participants had copies of the Position Sheets and at times, the European “window” distributed the Position Sheets when the participants met in person. The European “window” updated the Position Sheets after meetings to record what had been agreed.
Mr Osada produced a number of emails passing between mainly Mr Jay at the email address [email protected] and himself dealing with the updating of the Position Sheets between November 2001 and March 2004. I do not need to deal with those emails in detail. It is sufficient to say that they show requests for current or amended Position Sheets before or after A/R meetings (which Mr Osada identified as meetings of the participants) and included responses from Mr Jay, including a response to which he attached a “tentative draft” and advice that he would bring paper copies to the meeting. There is a statement in an email in December 2001 to the effect that the position for R was totally unacceptable. There is also an email dated 20 February 2002 from Mr Jay to Mr Osada where Mr Jay seems to be discussing the possibility of involving another party in the A/R Cartel activities.
Mr Osada also produced emails which passed between participants in the A/R meetings, including emails which passed between Mr Acquaotta of Pirelli Cavi e Sistemi Energia S.p.A. and Mr Osada about A/R meetings in early 2002.
Mr Osada also produced a copy of a Position Sheet showing the information prepared by the European “window” and further information which he, Mr Osada, added. The Position Sheet contains various columns with headings, and the European “window” prepared the table up to the column headed “RA Totals” which showed the value in millions of US dollars of the projects allocated to the European participants. On 16 December 2002, Mr Osada added to the Position Sheet his own notes concerning the projects which were relevant to the Japanese participants. His reason for doing that was to compare the position among the Japanese participants and to record when they each received inquiries or were allocated projects or both. The Position Sheet as amended by Mr Osada was distributed by him to the Japanese participants.
Mr Osada produced the following additional Position Sheets:
(1)17 November 2003 which includes a reference to the Snowy Hydro Project;
(2)9 January 2004 (including his amendments) which includes a reference to the Snowy Hydro Project; and
(3)26 March 2004 which includes a reference to the Snowy Hydro Project.
Quite apart from the Position Sheets, Mr Osada kept his own table of all cable projects in which JPS had an interest. The projects included, but were not restricted to, the projects which were the subject of an allocation between the participants. For the Snowy Hydro Project, the table shows a reference number of L3, the country as Australia, the customer as Snowy Hydro, the project as Contract No 90061, the voltage as 330, the quantity as 0.5 km, the type as fluid filled, and the due date as 10 October 2003. The comments Mr Osada made in the table were as follows:
Reported and asked for A – Pref (JP 030912 [i.e., 12 September 2003]). Agreed on R-Pref. (030924 [i.e., 24 September 2003). Guidance received (031006 [i.e., 6 October 2003]).
Mr Osada, who said that the participants met at three to five monthly intervals, produced the notes he kept of the meetings which were held on 14 November 2002 and 27 November 2003 respectively.
The attendees at the first meeting were recorded in the notes by their initials and an abbreviation for the company name. I am satisfied that at the meeting on 14 November 2002, there were the following attendees:
(1)Nexans: Mr Romand and Mr Jay;
(2)Pirelli: Mr Jones and Mr Corbellini;
(3)Viscas: Mr Tsubaki and Mr Morita;
(4)JPS: Mr Yamaguchi and Mr Osada; and
(5)Exsym: Mr Toshihisa Inoue; Mr Nakamura and Mr Nakajima
The notes record details of various projects around the world.
At the meeting on 27 November 2003, the attendees were Mr Romand, Mr Jay, Mr Corbellini, Mr Tsubaki, Mr Inoue, Mr Yamaguchi and Mr Osada. Again, these notes record details of various projects around the world.
Mr Osada said, and I accept, that at some of the meetings he attended, the participants discussed submarine and land cables in Australia. He said, and I accept, that the meetings usually occupied most of a day and that they were arranged particularly for the purposes of the arrangements between the participants and, so far as he could recall, were not held in conjunction with conferences or meetings arranged for other purposes.
In Mr Osada’s notes of the meeting held on 27 November 2003, the following note appears under the heading “3. Current”:
“Australia, Snowy Hydro stop, 0.3M RP”.
I accept Mr Osada’s explanation of this note. The note related to a current project which was a project which was the subject of discussion or arrangements between the participants, but which had not yet been awarded to a particular supplier by a customer. The “0.3M” is a reference to a project value of US$300,000 and the “RP” is a reference to the fact that the allottee was Prysmian of the R Group of participants (i.e., the European participants). Mr Osada could not recall the meaning of the word “stop”.
It is convenient to record at this stage that I received into evidence notes of meetings held in Zurich on 18 February 1999, London on 26 July 1999 and Kuala Lumpur on 19 October 1999. These notes were produced by Sumitomo Electrical Industries Ltd which owned half of the shares in JPS between July 2001 and 31 March 2014 and was an applicant for immunity. I admitted the documents into evidence because I was satisfied that they had come from the business records of Sumitomo Electrical Industries Ltd.
I am satisfied that there was a meeting in Zurich and that representatives of Alcatel (Mr Romand), Pirelli (Mr Tessari) referred to as “R”, and Sumitomo (Mr Yamaguchi) and other parties referred to as “A” attended. Later in these reasons, I will identify the relationship between the Nexans Group of companies and Alcatel and Mr Tessari’s involvement in the Pirelli Group of companies. I am satisfied that at the meeting in Zurich, a Position Sheet was discussed.
I am satisfied that there was a meeting in London and that Mr Romand, Mr Tessari, Mr Yamaguchi and others attended and that there was reference to “A” and “R”. There is a reference in the notes to R agreeing that “[i]n principle, below 220kV is free” and “A/R have a routine and regular meeting to exchange the situation”. There is reference to “A/R” agreeing to the next meeting being held in Kuala Lumpur on 19 October 1999. In addition, the following appears in the notes:
R proposed that A should nominate authorised A-cordinator to avoid mis. communication because the last Egypt Tender (Composit one) had been Free due to the time limit and both cordinators’ absence. A noted but partially”.
I am satisfied that there was a meeting in Kuala Lumpur on 19 October 1999 and that Mr Romand, Mr Jay, Mr Tessari, Mr Yamaguchi and others attended the meeting. There is reference in the notes to “A coordinator” and “R strongly requested A to nominate A coordinator to avoid misunderstanding/miscommunication between A and R”. There is a reference to a Position Sheet and the allocation of two projects in Dubai and one in Kuwait which “A/R finally decided … would be free ...”.
The notes of these meetings support the conclusion that in 1999, there was an arrangement or understanding similar to that described by Mr Osada and referred to as the A/R Cartel Agreement between Sumitomo, Alcatel, a Pirelli company and others.
I turn now to Mr Osada’s evidence about the Snowy Hydro Project. Mr Osada’s notification of the project by email to the other participants is set out above (at [52]). Mr Osada’s email asks for an “A” preference. Mr Osada said that he could not recall discussing the matter with Viscas and Exsym, but thinks that he would have done so before asking for an “A” preference. He said that he would not have asked for such a preference from the European participants without discussions with Viscas and Exsym having occurred.
Mr Osada received an email from Mr Inoue of Exsym on 16 September 2003 and in that email, Mr Inoue advised that Exsym had also received notice of the project. Mr Inoue’s email is in the following terms:
From: Inoue Toshihisa ˂[email protected]˃
Sent: Tuesday, September 16, 2003 4.11 AM (GMT)
To: Takeo Osada ˂[email protected]˃
Subject: Re: Inquiry Notification, Australia
Dear Mr. Osada
Received same inquiry as reported below which is repalcement [sic] of BICC/Pirelli circuit installed in 1961 and 1959 respectively.
Thanks and best regards
EXM/T. Inoue
********************************************
EXSYM Corporation
T. Inoue
1-8-10, Azabudai, Minato-ku, Tokyo
106-0041, Japan
Tel: +81-3-4523-5030; Fax: +81-3-4523-5070
E-mail: [email protected]*********************************************
The reference to the “same inquiry as reported below” is a reference to Mr Osada’s email of 12 September 2003.
Mr Inoue’s email refers to the project as one involving the replacement of a “BICC/Pirelli circuit” and Mr Osada said, and I accept, that that would be a factor favouring allocation of the project to Prysmian.
Mr Osada received an email from Mr Tsubaki of Viscas dated 18 September 2003 which dealt with another project in Australia. However, it is convenient to refer to it at this point because it identifies the context in which Mr Tsubaki sent an email dated 22 September 2003. I will refer to this project as the Energex 110kV project. The email of 18 September 2003 was as follows:
From: Eiji Tsubaki ˂[email protected]˃
To:YAMAGUCHI(JPS) ˂[email protected]˃; WATANABE(JPS) ˂[email protected]˃; OSADA(JPS) ˂[email protected]˃
Cc:MORITA˂[email protected]˃
Sent:Thursday, September 18, 2003 11:42 AM
Subject:Inq. Not./Australia 110kV Oil-filled Cable
Dear Mr. Osada,
Please be notified that VC received following inq.;
Country … Australia
Customer … ENERGEX
Tender No. CJ57
Tender C/D … Oct. 8, 2003
Cable … 110kV AL-Oil Filled Cable 1Cx300mm2 … 1,680m
Best regards,
VC/E. Tsubaki
On 22 September 2003, Mr Osada received a second email from Mr Tsubaki of Viscas which read as follows:
From: Eiji Tsubaki ˂[email protected]˃
Sent: Monday, September 22, 2003 6.17 AM (GMT)
To:YAMAGUCHI(JPS) ˂[email protected]˃; WATANABE(JPS) ˂[email protected]˃; OSADA(JPS) ˂[email protected]˃
Cc: MORITA(???????) ˂[email protected]˃
Subject: Fw: Inq. Not./Australia 110kV Oil-filled Cable
Dear Mr. Osada,
I think that as yet the inquiry report below hasn’t been reported to R yet. Please check.
In OF cases even if less than 220kV reporting is required isn’t it?Can {you/they} back away from this for A instead of 330kV?
Tsubaki
The “inquiry report below” was a reference to the email dated 18 September 2003.
Mr Osada’s translation of this email differed from Ms Shimoji’s translation. He said that it read as follows:
Dear Mr Osada,
I believe that the inquiry below has not been reported to R. Please confirm. In the case of OF, is a report necessary even when it is less than 220kV? Can we have an A-preference for this instead of the 330kV one?
However, none of the parties suggested that anything turned on the difference in translations.
Mr Osada did not have an independent recollection of this email, but he was able to say that the Snowy Hydro Project was the only 330kV cable project which he had recorded in his notes as being on foot in Australia at the time. He understood Mr Tsubaki of Viscas to be asking whether the A Group could have preference for the Energex 110kV project rather than the Snowy Hydro Project.
Mr Osada sent an email to the other participants in relation to the Snowy Hydro Project on 24 September 2003. It read as follows:
From: Takeo Osada ˂[email protected]˃
Sent: Wednesday, September 24, 2003 5:44 Am (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected]; [email protected]
Subject: Aus. Snowy Hydro
Dear Mr. Jay:
We agree on R-Pref.
Please send guidance by September 30.
Best regards
Inquiry Notification
Country; Australia
Project Name; Contract No. 90061
Customer; Snowy Hydro
Bid date; Oct. 10, 2003
Voltage; 330kV
Insulation; Fluid filled
Quantity; 525 meters plus 555 meters optionT. Osada for J. Yamaguchi
Mr Osada said that he could not have advised Mr Jay that the Japanese participants agreed on an “R‑Pref.” (i.e., an R preference) without the European participants requesting such a preference (although he does not have a record of such a request) and without the Japanese participants having discussed the request and agreed to it.
Mr Osada’s email dated 24 September 2003 asks for guidance by 30 September 2003. On 3 October 2003, Mr Comber of Pirelli sent the guidance by email and it was in the following terms:
From: Comber Robert, IT ˂[email protected]˃
Sent: Friday, October 3, 2003 12:19 PM ( GMT)
To:Takeo Osada ˂[email protected]˃; [email protected]; [email protected]; [email protected]; Corbellini Federico, IT ˂[email protected]˃ [email protected]; [email protected]
Subject: Re: Aus. Snowy Hydro
Dear Mr. Osada,
I apologize for rather late reply.
Hereunder you will find DDP prices in AUS Doll (inclusive of your commission and GST):
-cable: 510/m
-Outdoor termination: 121,000.
-Oil imm termination: 101,500.
-Joint: 60,400
Thanks.
Best regards,Robert L.P. Comber
HV Systems
Ph 0039-02-64422936Fax 0039-02-64422682
Mr Osada said, and I accept, that “oil imm” refers to “oil immersed termination” which is a reference to the particular type of end to the cables. I will refer to Mr Comber’s email as the Price Guidance.
Mr Osada said that when JPS prepared its own tender for the Snowy Hydro Project, he would then have notified the person in JPS responsible for the Australian market of the pricing level that it was agreed that JPS would tender at. He does not have a record of that communication in relation to the Snowy Hydro Project. I think that the evidence of Mr Osada is admissible based, as it is, on his practice. Mr Osada said that for some projects in Australia, JPS manufactured cable for supply by Mitsui & Co, Japan, or Mitsui’s Australian subsidiary, to the customer in Australia. Prior to the formation of JPS, there had been a similar relationship between Sumitomo and Mitsui in Australia, and Mitsui was frequently the representative of Sumitomo for land cable projects in Australia. After the formation of JPS, this relationship continued between JPS and Mitsui. JPS had a similar relationship with Marubeni Metals in relation to submarine cable projects. Mr Osada said that neither Mitsui nor Marubeni Metals were involved in the arrangements between the participants.
Mr Osada produced an email from Mr Hideki Matsuura of JPS to Mitsui & Co, Japan, dated 8 October 2003. Mr Matsuura was a member of the sales staff of JPS who reported to a group manager and whose role included preparing quotations for JPS projects. The email was to Mitsui Japan and attached documents for “Snowy Hydra [sic]/Australia”. It referred to a price or total amount of “about A$690K”.
I turn now to Mr Osada’s evidence about other projects in Australia in which the participants in the A/R Cartel Agreement were involved. There were three such projects. The evidence of the other projects was tendered by the ACCC as evidence of the existence of the A/R Cartel Agreement not of other contraventions. The respondents submitted that the evidence can only be evidence of Mr Osada’s understanding of the identity of the participants and this was accepted by the ACCC. Nexans SA submitted that the evidence of the other projects could not be used as evidence of it carrying on business in Australia because it had not been pleaded.
The first project is the Energex 110kV project. I have already referred to two emails from Mr Tsubaki of Viscas (at [82] and [83]). Mr Osada advised the European participants of this project by email dated 22 September 2003. The email was in the following terms:
From: Takeo Osada ˂[email protected]˃
Sent: Monday, September 22, 2003 6:58 AM (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected];
Subject: Inq. Not./Australia 110kV Oil-filled Cable
Dear Mr. Jay,
Inquiry Notification
Country … Australia
Customer … ENERGEX
Tender No. CJ57
Tender C/D … Oct. 8, 2003Cable … 110kV AL-Oil Filled Cable iCx300mm2 … 1,680m
Best regards,
T. Osada for J. Yamaguchi
By email dated 23 September 2003, Mr Inoue of Exsym advised Mr Osada that Exsym had had the same inquiry. Mr Tsubaki of Viscas wrote to Mr Osada and others with respect to this project by email dated 7 October 2003 in the following terms:
From: Eiji Tsubaki ˂[email protected]˃
Sent: Tuesday, October 7, 2003 1:27 AM(GMT)
To:YAMAGUCHI(JPS) ˂[email protected]˃; WATANABE(JPS) ˂[email protected]˃; OSADA (JPS) ˂[email protected]˃
Cc: MORITA ˂[email protected]˃
Subject: Fw: Inq. Not./Australia 110kV Oil-filled Cable
Dear Mr. Osada,
Please send the following message to R.
QUOTE:
As there has been no response from any of you for the below-mentioned case, this sould [sic] be treated as FF. Please confirm.
Best regards,
UNQUOTE:
VC/E Tsubaki
As Mr Osada explained, “FF” means “fighting free” or “friendly free” and that means that the project is not subject to the arrangement as to prices and that those participants submitting tenders or quotes in response to an approach from the customer could submit such prices as they wished.
Mr Osada wrote to Mr Jay and the other participants with respect to this project by email dated 7 October 2003 in the following terms:
From: Takeo Osada ˂[email protected]˃
Sent: Tuesday, October 7, 2003 2:45 AM (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected]; [email protected]
Subject:Inq. Not./Australia 110kV Oil-filled Cable
Dear Mr. Jay:
As there has been no response from any of you for the below-mentioned case, this sould [sic] be treated as FF. Please confirm.
Best regards,
T. Osada for J. Yamaguchi
Mr Osada could not recall whether JPS or the other participants submitted competitive tenders for this project and nor could he remember the outcome of the project.
The second project involved two small projects for the supply of cable joints to Energy Australia in April 2003. I will refer to this as the Energy Australia Cable Joint Project. Mr Osada gave notice of this project to Mr Jay and the other participants by email dated 1 April 2003 which was in the following terms:
From: Takeo Osada ˂[email protected]˃
Sent: Tuesday, April 1, 2003 4:03 AM (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected]; [email protected]
Subject: Inqiry [sic] Notification (Cable Joints)
Dear Mr. Jay:
Inqiry [sic] Notification (Cable Joints)
End User: Energy Australia
Products: 12 x Transition Joints to connect existing BICC FF Cable and new OLEX XLPE.Please advise your comments
The same customer also requested us to quote 6 x 132kV Trnsition [sic] Joints (existing Sumitomo’s FF and new OLEX XLP). We would like you to cover if you are asked for quotation.
T. Osada for J. Yamaguchi
Mr Osada said that Pirelli was the most likely allottee for that part of the project which involved the supply of 12 transition joints because the project involved an existing BICC cable (Pirelli had taken over their existing cable plants) and that JPS had requested preference for that part of the project which involved the supply of six transition joints because it involved an existing Sumitomo cable.
Mr Comber of Pirelli wrote to Mr Osada and others by email dated 1 April 2003 in the following terms:
From: Comber Robert, IT ˂[email protected]˃
Sent: Tuesday, April 1, 2003 8:24 AM (GMT)
To:Takeo Osada ˂[email protected]˃ [email protected]; [email protected]; [email protected]; Corbellini Federico, IT ˂[email protected]˃; e‑[email protected]; [email protected]
Subject:RE: Inqiry [sic] Notification (Cable Joints)
Dear Mr. Osada,
Thanks for your mail.
We confirm having the first enquiry calling for 12 trans joints. We will provide you with our relevant offer.
We do not have the second enquiry for the time being, but would appreciate receiving your offer anyway.
I believe we should possibly coordinate in order not to submit conflicting offers.
Kindly comment. Thanks.
Best regards,
Robert L.P. Comber
HV Systems
Ph.0039-02-64422936
Fax 0039-02-64422682
E-mail: [email protected]
Mr Comber wrote again on 3 April 2003 in the following terms:
From: Comber Robert, IT ˂[email protected]˃
Sent: Thursday, April 3, 2003 11:46 AM (GMT)
Cc:Corbellini Federico, IT ˂[email protected]˃; [email protected]
Subject: FW: Inqiry [sic] Notification (Cable Joints)
Dear Mr Osada,
Following my email of Tue, please be advised we have quoted the 12 trans joints at a CFR price of 16,500 €. We would appreciate A adding a 6-7% commission.
Thank you.
Best regards,
Robert L.P. Comber
HV Systems
Ph.0039-02-64422936
Fax 0039-02-64422682
E-mail: [email protected]
Of particular note in this email, is Mr Comber’s request that A add a 6-7% “commission”.
Mr Osada passed on Mr Comber’s email of 3 April 2003 to the Japanese participants on that day.
On 29 April 2003, Mr Comber advised Mr Osada and others that Pirelli had lost against CCC “who quoted substantially lower”. CCC was a manufacturer of accessories for power cables and was based in Europe. On the following day, Mr Osada passed that information on to the Japanese participants.
The third project involved the supply of 900 metres of fluid-filled cable for Energy Australia. I will refer to this project as the Energy Australia 900 metres fluid-filled cable project. Mr Osada sent a notification in relation to the project in the following terms:
From: Takeo Osada ˂[email protected]˃
Sent: Wednesday, October 8, 2003 5:57 AM (GMT)
To:[email protected]; [email protected]; [email protected]; [email protected]; e‑[email protected]; [email protected]; [email protected]
Subject: Inquiry Notification (Australia)
Dear Mr. Jay:
Inquiry Notification
Country; Australia
Project Name; Green Square
Customer; Energy Australia
Bid date; Budgetary
Voltage; 132kV
Insulation; FFQuantity; 900m
Diversion work for old Sumi line. Request A-pref when out. If anyone is asked for budgetary price, please ask for guidance.
Best regards,
T.Osada for J. Yamaguchi
The project related to an “old Sumi line” (i.e., Sumitomo line) and, therefore, the most likely allottee was JPS. Mr Osada believes that he would have discussed the fact that it should be a JPS project with the other Japanese participants.
Mr Osada agreed in cross-examination that as a result of arrangements made with the ACCC, he had been interviewed about the matters in his affidavit in September 2009 and that he affirmed his affidavit in October 2014. He agreed that he was required to cooperate under a grant of conditional immunity. He agreed that he was aware that the immunity of his employer was in part conditional on his cooperation with the ACCC and that his own immunity was conditional on his cooperation. It seems that the ACCC also made arrangements to interview Mr Yamaguchi.
Mr Osada agreed in cross-examination that another person had drafted his affidavit, although he could not identify that person. He agreed that he could not be sure that some of the words in his affidavit were his words. He said that he had no idea what a “loose agreement” was which was a term he had used in his affidavit.
Mr Osada agreed in cross-examination that it was Mr Yamaguchi who coordinated the matters which he addressed in his affidavit and that he was Mr Yamaguchi’s assistant. Basically he acted on Mr Yamaguchi’s instructions and he had no authority to commit JPS to any particular course of action. When he referred in his affidavit to the fact that “we reached agreement” he was referring to Mr Yamaguchi reaching agreement.
In cross-examination, Mr Osada was shown the business cards of Mr Romand and Mr Jay which refer to them being from Nexans France and he agreed that he understood them to be from Nexans France.
Mr Osada agreed that the arrangement between the participants came to an end in about the middle of 2004. He agreed that Mr Yamaguchi was the coordinator and that he, Mr Osada, attended to the daily emails and the exchange of information by telephone. Mr Osada agreed that, in relation to a particular project, there was no commitment by a participant until there was some agreement or arrangement between participants. Mr Osada apparently agreed with the proposition that if a particular participant was not invited to tender on a particular project, then “this company has nothing to do with the project”. I will need to come back and carefully consider the effect of this evidence.
Mr Osada agreed that he did not have any involvement in the Snowy Hydro Project. The parties who were invited to tender for the project were Mitsui & Co (Australia) Ltd, JPS, Pirelli and Midland Metals.
Prysmian submitted the ACCC had chosen not to call Mr Yamaguchi who was the coordinator of the arrangements even though it appears that it interviewed him. Mr Osada basically did as Mr Yamaguchi instructed and he did not have authority to commit JPS to arrangements. It submitted that Mr Osada had no direct contact or dealings with customers in Australia between 2001 and 2004 or 2005, and he did not have any involvement in the Snowy Hydro Project. It submitted that Mr Osada’s affidavit and annexures was prepared by the ACCC and Mr Osada did not have reference to other documents in checking it. Nexans SA added to these submissions the fact that Mr Osada was not interviewed until 2009 and not asked to affirm his affidavit until 2014.
Prysmian also submitted that Mr Osada’s recollection was deficient bearing in mind that the ACCC’s case is that on 24 September 2003, the A Group members and the R Group members made an arrangement or arrived at an understanding that the Snowy Hydro Project would be allocated to a member of the R Group as an R Group preference. Mr Osada had no recollection or record of the R Group communicating and asking for an R Group preference. Mr Osada had no recollection of discussing the Snowy Hydro Project with the Japanese companies (i.e., Viscas and Exsym), although by reference to his practice, he thinks that that must have happened. He assumed the Japanese companies had agreed. He agreed that he would not have been the one to reach agreement with the Japanese companies. The other important point made by Prysmian in relation to Mr Osada’s evidence is that (as I have already said) he agreed that if a company was not invited to tender, then it had “nothing to do with the project”. Viscas and Exsym were not invited to tender for the Snowy Hydro Project.
Nexans SA was more critical of Mr Osada’s evidence describing his evidence-in-chief as “plainly unreliable, indeed misleading, in fundamental respects”.
In addition to a number of submissions similar to those made by Prysmian, Nexans SA made the following criticisms of Mr Osada’s evidence. First, it submitted a number of expressions used by Mr Osada in the affidavit were expressions he had no real knowledge or understanding of, for example, “loose agreement”, “arrangement” and he could not be sure whether the words “there were also other communications between the representatives about the participants’ competitive behaviour” were his words. Secondly, it submitted that Mr Osada failed to mention the involvement (albeit lesser) of other companies. I record at this stage that I reject that criticism. The evidence suggested (and it went no further than that) that there might have been other companies interested in joining the A/R Cartel Agreement or companies which might have had a more limited involvement in the arrangement or understanding. Mr Osada did not mention that in his affidavit, but I do not think he is to be criticised for that. It is not as if the evidence establishes that there was a regular and major participant he neglected to mention. Thirdly, Nexans SA submitted that Mr Osada provided no explanation of the various Position Sheets. That is true, but of no particular significance if the substance of his evidence is accepted. Fourthly, Nexans SA submitted that, in light of the matters it identified, Mr Osada’s evidence about how the A/R Cartel Agreement worked in practice must be qualified by the preceding matters. I am not sure what it means by that submission. I think Mr Osada was able to give the evidence he did. He was involved in the arrangement and the contemporaneous documentation supports his evidence.
The ACCC’s alternative argument is based on s 84(2)(b) of the Trade Practices Act. As I understand it, the argument is that servants or agents of Nexans SA, being the Executive Committee, acting through the GESO (and the organisation which replaced it in about June 2003) gave directions or consented or agreed to the activities of Mr Romand and Mr Jay, and that in so doing, they were acting with the actual or apparent authority of Nexans SA.
There is a good deal of force in the submission of Nexans SA that this basis of attribution is not pleaded. However, I will deal with the argument on the merits. I have already set out my findings in relation to the GESO (at [165]). It seems to me that the argument fails because the evidence does not establish that the Executive Committee was involved in the sales of cables, including negotiations, fixing of prices etc. In other words, the evidence does not enable me to infer that the conduct of Mr Romand and Mr Jay was carried out at the direction of the Executive Committee of Nexans SA as distinct from the board of directors or management of Nexans France.
Conduct Outside Australia
General Principles
Section 5 of the Trade Practices Act provides that Part IV of the Act (among other Parts of the Act) extends to the engaging in conduct outside Australia by bodies corporate incorporated in Australia or carrying on business within Australia. There is a similar provision in the Competition Policy Reform Acts which further provides that the Competition Codes extend to conduct outside the jurisdiction in relation to persons “otherwise connected” with the jurisdiction (see, for example, Competition Policy Reform (New South Wales) Act 1995 s 8). A reference to a person includes a reference to a body corporate (Interpretation Act 1987 (NSW) s 21).
In Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164, a case which concerned the validity of a company charge, Gibbs J (as his Honour then was) said that the expression “carrying on business” may have different meanings in difference contexts. His Honour said (at 178):
It would usually connote, at least, the doing of a succession of acts designed to advance some enterprise of the company pursued with a view to pecuniary gain.
It is to be noted that the word “business” was defined at the time in s 4 of the Trade Practices Act as including a business not carried on for profit.
In the well-known decision of the High Court in Hope v The Council of the City of Bathurst (1980) 144 CLR 1 at 8-9, Mason J (as his Honour then was) said that carrying on a business suggested activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis.
In Bray v F Hoffman-La Roche Ltd and Others [2002] FCA 243; (2002) 118 FCR 1 (“Bray v F Hoffman-La Roche Ltd and Others”) (which was upheld by the Full Court in Bray v F Hoffman-La Roche Ltd and Others [2003] FCAFC 153; (2003) 130 FCR 317), the applicant alleged that certain foreign corporations (among others) had contravened s 45 of the Trade Practices Act and a jurisdictional issue arose in the case as to whether the foreign corporations were carrying on business within Australia within s 5.
Justice Merkel said that the question of whether a corporation is carrying on business within Australia is very much a question of fact. His Honour said it was not a requirement of the concept of carrying on business that the foreign company have a place of business in the jurisdiction. Where the foreign company has a subsidiary within the jurisdiction (and assuming no other non-subsidiary activities by the foreign company) the question will be whether the local subsidiary was carrying on business on its own account, “or on behalf of, the European or the regional parent” (at [64]). His Honour discussed the authorities which have considered whether a subsidiary is carrying on its own business or a business on behalf of its parent (Smith, Stone & Knight Ltd v Lord Mayor, Alderman and Citizens of City of Birmingham [1939] 4 All ER 116 at 121; Adams v Cape Industries plc [1990] Ch 433 at 525 and 529-531). Justice Merkel said that it was not enough to establish agency, that there is a global enterprise involving a large number of companies supplying products in many jurisdictions and that the subsidiary is an integrated part of the global enterprise and is subject to the direction and control of its parent (at [72]). His Honour said (at [80]):
In my view something more than the indirect legal and commercial capacity of the parent companies to control and direct the subsidiaries, plus the parent's involvement in implementing the cartel arrangement, is required to lift the corporate veil between the subsidiaries and their parents or to find that each of the subsidiaries is carrying on its business as agent for the parent. That is particularly so where it is contended (as it is in the present case) that the parent, rather than the subsidiary, is carrying on business in Australia or, put another way, the subsidiary is engaging in all of its commercial activities on behalf of, and therefore as agent for, the parent.
In the following passage, his Honour identified the matters which led him to conclude that the Australian subsidiaries were not carrying on business as agents for their European or regional parents (at [77]):
In the present matter the Australian subsidiaries, in conducting their business activities in Australia, held their assets (including bank accounts) in their own names and employed employees and purchased and sold products in their own names. Their businesses were not confined to the class vitamins or to products supplied by other companies in the respective groups. The accounts of each of the subsidiaries were included in the Consolidated group accounts but that is commonplace with subsidiaries and accords with established accounting and regulatory requirements: see for example Industrial Equity Ltd v Blackburn (1977) 137 CLR 567 at 577. There may be some overlapping board appointments in respect of the subsidiaries and the regional or parent companies in the three groups but, for the most part, the subsidiaries had different boards to the European or regional parent. The evidence does not suggest that the Australian subsidiaries were not maintained as distinct or separate entities or that the parents have disregarded corporate boundaries.
I considered the issue of whether a foreign corporation was carrying on business in Australia in Yazaki. In that case, I concluded that the subsidiary was not carrying on all of its business as agent for its overseas parent and that it would not be appropriate to pierce the corporate veil as to all of the subsidiary’s business. I reached that conclusion even though the Australian subsidiary was really only able to survive because of the support of the overseas parent. However, I concluded that the overseas parent and the subsidiary were jointly carrying on business within Australia in terms of one particular customer.
Prysmian
The ACCC accepts that the making of the Snowy Hydro Project Agreement and the issuing of the Price Guidance was conduct engaged in outside Australia. However, the Trade Practices Act and the Competition Codes apply to Prysmian’s conduct in relation to those matters because it admits that between 10 July 2003 and 20 June 2006, it was a foreign corporation registered in Australia, and under the law of Victoria with the registration ARBN 105 479 589 and that, during the same period, it carried on business in Australia, and in a State or Territory of Australia. That registration as a foreign corporation was said to be associated with the “Basslink project”, a project involving the laying of a submarine cable between the Australian mainland and Tasmania.
Nexans SA
In the case of Nexans SA, the conduct by the company which is said to have contravened the Trade Practices Act and Competition Codes occurred outside Australia. The particular conduct of Nexans SA was alleged to be the Snowy Hydro Project Agreement reached on 24 September 2003, and then the alleged agreement with Prysmian to the effect that Prysmian would be the allottee between that date and 3 October 2003 occurred outside Australia. Nexans SA disputes that it carried on business within Australia or a State or Territory of Australia or is otherwise connected with the jurisdiction of a State or Territory of Australia.
Before the trial, the ACCC provided particulars of the respects in which it alleges that Nexans SA carried on business in Australia or a State or Territory of Australia or was otherwise connected with the jurisdiction of a State or Territory. Those particulars are set out in the ACCC’s Statement of Claim. Nexans SA submitted that the ACCC was not permitted to go beyond the particulars. For example, Nexans SA submitted that Mr Osada’s evidence about other Australian projects (see [91-103] above) could not be relied upon to establish that Nexans SA was carrying on business within Australia because it is not referred to in the particulars. I reserved my decision on whether the evidence, which was otherwise admitted, could be used for this purpose and I will address this issue later in these reasons.
I will proceed by first addressing each of the particulars in the Statement of Claim and make findings as to whether the factual allegation is made out. I will then consider whether the facts as found constitute carrying on business within Australia or being otherwise connected with the jurisdiction of a State or Territory of Australia.
The first general particular in the Statement of Claim is that Nexans SA carried on business within Australia directly. In support of this general particular, there are a series of specific particulars.
The first two specific particulars involve an allegation that Nexans SA provided services to its subsidiaries, including Nexans Australia. The relevant part of this allegation is the provision of services by Nexans SA to Nexans Australia. The services were those provided under the General Relations Agreement between Nexans SA subsidiaries within the Nexans Group. These services are described above (at [139]). Further details are set out in the Nexans Group Annual Report for 2001. In that report, it is said that Nexans SA is the Group’s holding company and it also fulfils financing and centralised cash management functions in support of the Group’s operations. The General Relations Agreement is said to cover the sharing of research and development expenses and under the agreement, Nexans, on behalf of the Group, collects royalty payments from Group companies and redistributes these payments among Group subsidiaries through the implementation of research and development programs of collective importance for the Group. Later in the report, there is a reference to the General Relations Agreement governing the sharing of research programs, and the administrative services rendered by Nexans SA to its subsidiaries. Nexans SA contributes to the cost of the research and development programs and receives a percentage of the company’s sales. It renders administrative services and, again for this service, receives a percentage of the company’s sales.
The third specific particular is, in fact, I think no more than an example of the first two. It is the fact that as at 31 October 2001, Nexans Australia owed Nexans Corporate an R and D (research and development) fee and a contract service charge.
The fourth specific particular is that in 2002 and 2003, the “Nexans Worldwide Group” paid premiums in respect of directors and officers insurance policies, which covered all directors and officers of the Group’s companies worldwide, including Australia. There is such a policy and the policyholder is Nexans SA and the insurer is Chubb Insurance Company of Europe.
The fifth, sixth and seventh particulars relate to Nexans SA ownership of two trade marks under the Trade Marks Act 1995 (Cth) and the litigation in this Court in relation to those trade marks. The details of this are as follows.
Nexans SA was involved in a trade mark dispute with a company called Nex 1 Technologies Co Limited. Nexans is the registered owner of two marks in Australia, being the word NEXANS and the word NEXANS in stylised form.
The background to the trade mark action is that Nex 1 Technologies Co Limited applied to register a logo in relation to certain goods. Nexans SA opposed the registration, but their opposition was rejected. Nexans SA appealed to this Court and Murphy J allowed the appeal (Nexans S.A. v Nex 1 Technologies Co. Ltd [2012] FCA 180). Nexans filed material in support of its opposition and in support of its appeal. Mr Michel Rosseau made a statutory declaration on 30 October 2008. He stated that he was the Corporate VP Technical of Nexans and that he had been associated with the company for eight years and had held his position for five years. He stated that Nexans Australia Pty Ltd was Nexans SA authorised user of the NEXANS mark. He stated that Nexans Australia Pty Ltd commenced use of the NEXANS mark throughout Australia in 2001 in relation to cables and cabling systems. He referred to the approximate retail sales for goods sold in Australia under the NEXANS mark in 2005 and 2006. He stated that in 2006 Nexans SA acquired Olex Cables, Australia’s leading producer of energy cable and a major exporter into China and the Asia Pacific region. He stated that the company had factories located in Lilydale and Tottenham in Victoria and that the company’s major customers in Australia included the Australian Defence Department, Alcatel Australia, and Alstom Areva. He stated that Nexans SA had approximately 20,000 employees worldwide and operated manufacturing plants in 29 countries on five continents. He stated that it had commercial and marketing activities in more than 70 countries. He stated that Nexans SA was vigilant in protecting its NEXANS mark and had “a policy of opposing ...Nex… marks in the name of third parties throughout the world if it considers that there was a risk of confusion with its mark”.
Mr Thierry Roucher swore an affidavit in support of Nexans SA’s appeal to this Court. Mr Roucher stated that he was the marketing and communications director of Nexans SA and that he had been employed by Nexans in this position for 11 years. He said that he was responsible for planning, organising and developing and coordinating marketing communication plans and corresponding budgets for Nexans to develop brand attractiveness, promote business offers, and support sales forces in their customer approach for all priority markets of Nexans worldwide. This also included managing the Nexans brand portfolio. He annexes to his affidavit the financial records of Nexans showing the worldwide sales figures for goods sold under the NEXANS mark in the years 2000 to 2010, and he sets out the figures in a table.
Effective from 1 January 2001, Nexans as the owner of the word NEXANS and the stylised version of the word NEXANS, licensed the use of the licensed marks to Nexans Australia Pty Ltd. The initial fee for the rights granted was a lump sum of 10 euros, and the term of the agreement was a period of 10 years.
The second general particular in the Statement of Claim is that Nexans SA carried on business within Australia indirectly through Nexans Australia. There are three specific particulars of this allegation.
First, it is alleged that Nexans SA holds itself out as having a presence in Australia, among other countries. It is said that Nexans SA does that in the annual reports of the Nexans Group. The annual report for 2001 states that “Nexans employs 18,000 people in 28 countries and benefits from a commercial presence in 65 countries” and Australia is identified as one such country. The annual report for 2002 states the Nexans has production plants in 28 countries and operations in more than 65 and has 17,150 employees and Australia is identified as one such country. The annual report for 2003 contains a statement in materially similar terms.
Secondly, it is alleged that in relation to a development at Daydream Island in Australia, Nexans Australia supplied products under the Nexans brand, manufactured by and acquired from other companies within the Nexans Group. The circumstances surrounding the project at Daydream Island are as follows. There is a holiday resort on Daydream Island and, in 2002, it was undergoing a major redevelopment. The redevelopment included the laying of a submarine energy cable to the island in order to secure a dedicated and reliable power supply to the development. The cable was described in documents in evidence as “4,720 metres of 6.35/11kV, 3-core copper conductor, steel wire-armoured submarine energy cable”. Nexans made an announcement from Paris on 9 April 2002 that Nexans had been awarded the contract to supply the submarine energy cable. It seems that the cable had been manufactured at a Nexans facility in Hanover, Germany and in November, a company called Downer RML commenced laying the cable. The order for the submarine energy cable was given to Nexans Australia and was its first order. It seems that in its promotions, Nexans referred to itself as Nexans or the Nexans Group. The press release contains a quote from Mr Yvon Raak who was a member of the Executive Committee with responsibility for “Energy” and one of the contacts is Mr Michel Gedeon who works in the head office.
Thirdly, it is alleged that Nexans Australia was dependent on Nexans SA financially and otherwise, such that Nexans Australia was not carrying on its own business, but that of the Nexans Group, and of its ultimate parent, Nexans. The following is established on the evidence. On 10 July 1999, the Australian Securities and Investments Commission issued a class order which was said to provide “relief to small proprietary companies which are controlled by a foreign company from the requirement to prepare and lodge an audited financial report provided that they are not part of a large group”. One of the conditions of the entitlement to proceed in accordance with the class order was that the directors of the company had resolved, no earlier than three months before the commencement of the relevant financial year, that the relief available under the class order be applied in respect of the relevant financial year. The directors of Nexans Australia resolved as required by the class order for the financial years ending 31 December 2000, 31 December 2001, 31 December 2002 and 31 December 2003.
Nexans Australia produced documents on subpoena and some of the documents were put into evidence. The documents put into evidence included the company’s financial reports from incorporation on 10 October 2000 to 31 December 2001, from 1 January 2002 to 31 December 2002, and from 1 January 2003 to 31 December 2003. These reports show that the company made losses in the first two periods and a small profit (i.e., excess of revenue over expenses) during the third period. In all three periods covered by the financial reports, there is a note in the reports that there are non-trade interest bearing amounts due to related entities which are repayable on demand and that Nexans Australia is dependent on continued financial support from “its ultimate parent company, Nexans SA, or from an alternative source …”. The directors of Nexans Australia express the view that the company can continue to operate as a going concern partly because of the likelihood that financial support will continue to be provided by Nexans SA or its related entities. The documents produced by Nexans Australia and put into evidence included minutes of directors’ meetings. On 22 December 2003, the directors of Nexans Australia resolved that Mr Martin Lynn’s consent to act as secretary and director of the company was subject to Nexans Corporate continuing to support Nexans Australia, even when it is in a negative equity position. Furthermore, the same minutes record that Nexans Australia’s largest liability was to Nexans Corporate central treasury and that, in the event of the closure of the company, all creditors would be paid with any shortfall in net assets, reducing the amount repaid to Nexans central treasury. Finally, the ACCC pointed out by reference to the minutes of the meetings of the directors of Nexans Australia that between 10 October 2000 and 1 January 2004, the minutes do not record “any strategic decision-making of the board as to the operations and business of Nexans Australia”. The contention appears to be correct as a matter of fact, although there are only minutes of only a handful of directors’ meetings.
The fourth specific particular of Nexans SA carrying on business within Australia indirectly through Nexans Australia is that Nexans Australia held itself out to customers in Australia as not being a separate profit centre within the Nexans Group. The ACCC relies on the statements in documents put into evidence.
On 4 October 2001, the managing director of Nexans Australia said to a representative of Aero and Military Products Pty Ltd:
… one of my main roles is to ensure Nexans marketing & sales channel harmony - in all markets … to ensure the Nexans’ [sic] messages to local customers are consistent. …
Our team is here to assist ALL Nexans customers, regardless of product, market or sales channel.
On 13 June 2003, a representative of Nexans Australia said to a customer, Bale Defence Industries, the following:
Nexans Australia is located in Sydney and Brisbane and represents all the Nexans Factories around the world …
Our role in Australia is to facilitate the various factories activities in Australia. We are not a profit centre but are part of the worldwide Global Export Sales Organization”.
Finally, the ACCC relies on the fact that in the financial statements for Nexans Australia, for 2002 and 2003, there is a statement to the effect that the company is in “the business of promoting awareness of the Nexans brand and generating sales of Nexans products into the Australia [sic], New Zealand and Pacific Islands”. I note a similar (but not identical) statement was made in the 2001 financial statements.
The third general particular in the Statement of Claim is that Nexans SA carried on business within Australia indirectly through Nexans Deutschland (i.e., Nexans Deutschland Industries GmbH & Co KG). The specific particular is that Nexans Deutschland supplied products under the Nexans brand, manufactured within the Nexans Group, to a customer in Australia. It seems that in 2003, Nexans Deutschland were providing goods to Bale Engineering Pty Ltd and invoicing it for those goods. A similar relationship existed between Nexans Deutschland and Aero and Military Products Pty Ltd in 2001.
The ACCC states in its Statement of Claim that it may supplement the particulars following discovery and interrogatories.
The ACCC “supplemented” these particulars in its closing submissions. First, the ACCC relied on the fact that the Nexans Group was in the habit of issuing press releases apparently from Paris announcing projects secured by the Group around the world. Most of the press releases related to projects in 2003. Mr Noonan agreed that typically when Nexans or any part of Nexans secured a contract of any size or substance anywhere in the world, its head office, Nexans SA, would issue a press release in connection with that project. The press releases refer to Nexans in a way that identifies the whole Group or at least it does not discriminate between various companies in the Group. The Group also announced to the public its preliminary consolidated results in 2002.
Secondly, the ACCC contended that the GESO was an instrument of Nexans SA which controlled “all aspects of the Nexans Group’s global sales activities”. I have already identified the facts relevant to the GESO and its operations. I should add that Mr Machledt, the President of the GESO, had a delegated authority from Mr Hauser dated 2 January 2001 (acceptance of delegation) to represent the company in commercial dealings with third parties within a limit of 500,000 euros.
Thirdly, the ACCC relied on the fact that Mr Machledt and Mr Francois Blandeau visited Nexans Australia between 22 June 2002 and 6 July 2002. One of the matters which they proposed to two members of the Executive Committee (Mr Michel Lemaire and Mr Bruno Thomas) as part of a restructure was that Mr David Chaney, who was a director of Nexans Australia from 10 October 2000, be laid off. The records of the Australian Securities and Investments Commission indicate that Mr Chaney ceased to be a director of Nexans Australia on 13 September 2002.
Fourthly, the ACCC relied on the fact that Nexans SA issued an external newsletter in June 2002 stating that it had been awarded a contract to install 1,200 points in Woolworths stores and that its ability to offer “the right performance and value for money with the support of a large global organisation was key to the successes”.
Finally, the ACCC relied on the fact that at the meeting of participants on 14 November 2002, a report about the Basslink project was provided, and at the meeting of participants on 27 November 2003, a report about the Snowy Hydro Project was provided, and of course, there were emails between participants about the project. In addition, there is evidence about the other three projects (at [91-103]). As I have said, Nexans SA claims that these matters are outside the particulars.
Before finishing this summary of the ACCC’s case, I should say that the ACCC made it clear in its oral submissions that it was not asserting that the Court should pierce the corporate veil.
It is convenient to start by identifying those matters which I think are of little or no significance in terms of the issue of whether Nexans SA was carrying on business within Australia at the relevant time.
I start with matters which are said to be relevant to whether Nexans SA was carrying on business within Australia directly. I do not think the fact that the ultimate holding company of a large worldwide Group, insures all of the directors and officers of the companies comprising the Group means that the ultimate holding company is carrying on business within all the jurisdictions where companies in the Group are operating or is even a reasonably strong indication of that fact. The registration of trade marks in Australia by an overseas company could be an indication that the company is carrying on business in Australia, but, of course, it is only the beginning of the inquiry. The fact is that here there is a licence to Nexans Australia which (depending on the precise circumstances) may be considered to be an authorised user of the registered trade marks under s 8 of the Trade Marks Act. Nor do I think the fact that Nexans SA took action in this Court to protect its rights as owner of the registered trade marks indicates that it was carrying on business within Australia.
I turn now to matters said to be relevant to whether Nexans SA was carrying on business within Australia indirectly through Nexans Australia. The fact that Nexans SA or the Nexans Group identified itself as having a commercial presence within a number of countries, including Australia, is not particularly significant. I think that, in fact, it was the Nexans Group that was claiming to have a commercial presence. The same thing may be said of the press releases generally and the press release in relation to the Daydream Island project. These matters involved the promotion of the Nexans Group and the Nexans brand, but I see no reason to conclude from them, that Nexans SA was holding itself out as carrying on business within Australia. Even if it was holding itself out in that way, ultimately that is not the issue. The issue is whether it was, in fact, carrying on business within Australia. The fact that Nexans Australia was not a separate profit centre does not advance the matter very far. It does not necessarily point to Nexans SA because, in the case of large worldwide groups of companies, there are often regional profit centres. I am disposed to think the fact that Nexans Deutschland had commercial relations with Bale Engineering Pty Ltd and Aero and Military Products Pty Ltd might suggest that it was carrying on business within Australia, but does not say anything about whether Nexans SA was doing so.
I come now to the significance of the GESO. I assume it is put forward as evidence of Nexans SA carrying on business within Australia indirectly through Nexans Australia. There is no evidence of the GESO as a body directing subsidiaries as to how they were to proceed commercially, for example, that they were to enter into particular contracts. There may well have been persons on GESO who had significant influence in terms of how companies within the Nexans Group carried out their activities, but I cannot see any evidence of it as a body directing companies within the Group and, most relevantly, Nexans Australia.
I do not think that there is sufficient evidence to conclude that Nexans Australia carried on business as agent for Nexans SA. I do not think the financial support by way of an undertaking provided by Nexans SA to Nexans Australia was sufficient of itself to support the conclusion that the business Nexans Australia was carrying on was, in fact, the business of Nexans SA. There is, in any event, an additional complication in this case in that Nexans Participations held all the shares in Nexans Australia. It is true that Nexans SA held all of the shares in Nexans Participations, but there is no evidence of the relationship between those companies that would enable me to conclude that Nexans Participations was the agent of Nexans SA and that, in turn, Nexans Australia was the agent of Nexans Participations.
It seems to me that the issue comes down to the question whether Nexans SA was carrying on business within Australia by reason of the fact that Nexans SA was providing services to Nexans Australia under the General Relations Agreement and the Central Treasury Agreement. In my opinion, by providing services under the General Relations Agreement to Nexans Australia, Nexans SA was carrying on business in Australia (Bray v F Hoffman-La Roche Ltd and Others at [81]) per Merkel J; ACCC v April International Marketing Services Australia (at [171] per Bennett J).
In the circumstances, I do not need to consider whether the ACCC is entitled to rely on the evidence of other projects as evidence of carrying on business in Australia and, if so, the effect of that evidence. Nor do I need to consider whether Nexans SA was “otherwise connected” with a State or Territory in Australia (see my consideration of “otherwise connected” in Yazaki at [365]-[376]).
Conclusions
In making the Snowy Hydro Project Agreement, Prysmian contravened s 45(2)(a)(i) and (ii) of the Trade Practices Act and gave effect to the A/R Cartel Agreement in contravention of s 45(2)(b)(ii) of the Trade Practices Act. In issuing the Price Guidance, Prysmian gave effect to the Snowy Hydro Project Agreement in contravention of s 45(2)(b)(i) and (ii) of the Trade Practices Act and gave effect to the A/R Cartel Agreement in contravention of s 45(2)(b)(ii) of the Trade Practices Act.
The application against Nexans SA should be dismissed.
I will hear the parties as to other orders and costs.
I certify that the preceding two hundred and ninety (290) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 20 July 2016
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