Australian Competition and Consumer Commission v Tubemakers of Australia Ltd

[1999] FCA 1787

FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Tubemakers of Australia Ltd [1999] FCA 1787

TRADE PRACTICES - Price fixing - consideration of penalties under s 76 of the Trade Practices Act 1974 (Cth) where agreement between the Australian Competition and Consumer Commission and the parties on proposed orders - matters relevant in assessing penalty.

Trade Practices Act 1974 (Cth) ss45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii), 76

NW Frozen Foods v Australian Competition and Consumer Commission (1997) 71 FCR 285 FC Foll

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v
TUBEMAKERS OF AUSTRALIA LIMITED, COASTLINE FOUNDRY (QLD)
PROPRIETARY LIMITED, ASSOCIATED WATER EQUIPMENT PROPRIETARY
LIMITED, GEOFF CLEGG ENTERPRISES PROPRIETARY LIMITED, PETER
PITTARD, GEOFFREY COLIN CLEGG AND PATRICK JOHN McAULIFFE
Q202 OF 1999

COOPER J
BRISBANE
12 NOVEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q202 OF 1999

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

TUBEMAKERS OF AUSTRALIA LIMITED
First Respondent

COASTLINE FOUNDRY (QLD) PROPRIETARY LIMITED
Second Respondent

ASSOCIATED WATER EQUIPMENT PROPRIETARY LIMITED
Third Respondent

GEOFF CLEGG ENTERPRISES PROPRIETARY LIMITED
Fourth Respondent

PETER PITTARD
Fifth Respondent

GEOFFREY COLIN CLEGG
Sixth Respondent

PATRICK JOHN McAULIFFE
Seventh Respondent

JUDGE:

COOPER J

DATE OF ORDER:

12 NOVEMBER 1999

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1(a)The first respondent shall pay to the Commonwealth on or by 3 December 1999 a pecuniary penalty in the sum of $1,200,000 and

(b)The second respondent shall pay to the Commonwealth on or by 3 December 1999 a pecuniary penalty in the sum of $550,000

in respect of the contraventions of ss 45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) described in paragraphs 17, 19, 24, 27, 29, 33, 37, 41, 44 and 47 of the amended statement of claim herein.

2.        Each of the first and second respondents be and are hereby restrained for a period of three years, whether by its directors, servants or agents or otherwise howsoever, from :

(a)       making or arriving at;
(b)       giving effect to;  or
(c)       attempting to make, arrive at or give effect to

any contract, arrangement or understanding with one or more competitors for the supply and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes to local government authorities, civil contractors, wholesalers or retail purchasers, carrying on business anywhere in Australia which contract, arrangement or understanding contains a provision that :

(a)has the purpose or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of the prices offered or charged for the supply of and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes anywhere in Australia.

(b)has the purpose of preventing, restricting or limiting the supply of and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes to acquirers of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes.

3.        The fifth respondent is hereby restrained for a period of three years, from being in any way, directly or indirectly, knowingly concerned in, or a party to

(a)       making or arriving at;
(b)       giving effect to;  or
(c)       attempting to make, arrive at or give effect to

any contract, arrangement or understanding between two or more competitors for the supply and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes to local government authorities, civil contractors, wholesalers or retail purchasers, carrying on business any where in Australia which contract, arrangement or understanding contains a provision that :

(a)has the purpose or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of the prices offered or charged for the supply and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes anywhere in Australia.

(b)has the purpose of preventing, restricting or limiting the supply of and delivery of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes to acquirers of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes.

4.        The first and second respondents shall pay the applicant’s costs of and incidental to these proceedings fixed in the sum of $20,000.

5.        The fifth respondent shall pay the applicant’s costs of and incidental to these proceedings fixed in the sum of $5,000.

5A.     The confidential schedule marked “A” shall be placed in an envelope and sealed and shall not be opened without the prior order of the Court or a Judge.

5B.      The confidential schedule marked “B” shall be placed in an envelope and sealed and shall not be opened without the prior order of this Court or a Judge.

THE COURT NOTES THAT:

6.        The first and second respondent undertake to offer to refund such amounts to or to seek other directions in respect of payment thereof from the purchasers of valves and pipe fittings for ductile iron cement lined pipes and plastic pipes in the affected period being the parties nominated in the confidential schedule marked “A” attached in accordance with the methodology in the schedule marked “B” which will be made available to those parties at their request.

7.        The first and second respondents have improved their national compliance program which is designed to promote their and their directors’, officers’ and other employees’ compliance with the provisions of the Trade Practices Act 1974.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q202 OF 1999

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant

AND:

TUBEMAKERS OF AUSTRALIA LIMITED
First Respondent

COASTLINE FOUNDRY (QLD) PROPRIETARY LIMITED
Second Respondent

ASSOCIATED WATER EQUIPMENT PROPRIETARY LIMITED
Third Respondent

GEOFF CLEGG ENTERPRISES PROPRIETARY LIMITED
Fourth Respondent

PETER PITTARD
Fifth Respondent

GEOFFREY COLIN CLEGG
Sixth Respondent

PATRICK JOHN McAULIFFE
Seventh Respondent

JUDGE:	COOPER J
DATE:	12 November 1999
PLACE:	BRISBANE

EX TEMPORE REASONS FOR JUDGMENT

1. This is an application for the imposition of pecuniary penalties pursuant to s 76 of the Trade Practices Act 1974 (Cth) (“the Act”) and for injunctive relief in consequence of breaches of s 45(2)(a)(i), s 45(2)(a)(i), s 45(2)(b)(i) and s 45(2)(b)(ii) of the Act.

2. The conduct complained of arises out of price fixing, market sharing and tender rigging in the market for the supply of fittings and valves suitable for use with ductile iron cement line pipe, and plastic pipe used in water supply systems, irrigation systems, and sewerage systems.  The conduct in issue began in December 1993 and continued until December 1994. 

3. The overall size of the market for the supply of the relevant fittings and valves in 1994 is estimated at $85 million, and sales by the first and second respondents in that year are estimated at $28.2 million.  The percentage share of purchases of the valves and fittings sold are estimated at: public utilities twenty-six per cent of the value of the valves and fittings sold;  civil pipeline installation contractors, forty-two per cent of the value of the valves and fitting sold; wholesale or resellers of the fittings, ten per cent of the value of the valves and fittings sold.

4. The first, second and fifth respondents admit the conduct alleged against them in the statement of claim. Such admissions are contained in the defences filed by them. They also accept their conduct involved major breaches of the Act. The seventh respondent has also admitted the allegations contained in the statement of claim, and that such conduct constituted serious contraventions of the Act. The applicant and the first, second and fifth respondents have filed joint submissions on penalty and injunctive relief for consideration of the court. The applicant and the seventh respondent filed separate joint submissions. The submissions contained proposed penalties in specific amounts and particular injunctive relief. The parties submit such orders should be made as part of the agreement made between the applicant and the first, second, fifth and seventh respondents to resolve, as between them, the issues raised in the proceedings.

5. The question of appropriate penalty and orders for contravention of Part IV of the Act is for the Court and not the parties. However, the Court will often act on the view of the parties if the Court is satisfied, on the material placed before it, that what has been agreed is in accordance with the range of penalties and orders which the Court on its own assessment of the relevant facts and circumstances of the contravention would make: see NW Frozen Foods v Australian Competition and Consumer Commission (1997) 71 FCR 285, where the relevant principles are discussed.

6. The conduct of the first, second, fifth and seventh respondents, which is admitted, is set out in detail in the joint submissions and in the substantial affidavit material filed by the applicant in support of its claims.  I do not propose to set all that material out in detail.  I have had regard to it in coming to the decision in this matter.  Additionally, the joint submissions specifically address the following issues: 

   1.        The nature and extent of the contravening conduct;

   2.        The circumstances in which the conduct took place;

   3.        The size of the contravening company;

   4.The degree of market power as evidence by market share and ease of entry into the market;

   5.        The deliberateness of the contravention and the period over which it extended;

   6.Whether the contravention arose out of the conduct of senior management or at a lower level;

   7.Whether the company has a corporate culture conducive to compliance with the Act;

   8.Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to contravention;

   9.The manner in which the first and second respondents have dealt with culpable management;

   10.The nature of the goods, their relative importance to the community and its dependence on the goods;

   11.Whether the first, second and fifth respondents have volunteered to do anything to address the effectiveness of their compliance program;

   12.The first, second and fifth respondent's self-reporting of their own offending conduct and

   13.      The remedial costs incurred by the first, second and fifth respondents.

7. Having considered carefully the material and each of the submissions under these heads, I am satisfied:

   (a)       the contraventions were serious contraventions;

   (b)the first, second, fifth and seventh respondents have fully co-operated with the applicant in revealing the full nature and circumstances of the contraventions;

   (c)the first, second, fifth and seventh respondents have fully co-operated in taking remedial action to remedy, so far as is possible, the consequences of the conduct;

   (d)the fifth and seventh respondents have shown contrition for their participation in the conduct have been removed from the managerial positions they have previously held and have suffered financial loss from loss of managerial salaries.

8. Both have agreed to pay $5,000 towards the applicant’s costs.  I am satisfied that the agreed penalty of $1,200,000 to be paid by the first respondent is an appropriate penalty in all the circumstances.  I am satisfied that the agreed pecuniary penalty of $550,000 to be paid by the second respondent is an appropriate penalty in all the circumstances.  I am satisfied that no pecuniary penalty order should be made against the fifth and seventh respondents and that the seriousness of their conduct is adequately dealt with by the making of orders for injunctive relief against them and by ordering that they make substantial payments towards the costs of the applicant.

9. In respect of the first, second and fifth respondents, I make orders in terms of the draft orders initialled by me and placed with the papers.  In so far as the seventh respondent is concerned, it is unnecessary to make any additional orders beyond those made by me on 4 October 1999.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.

Associate:

Dated:             12 November 1999

Counsel for the Applicant:	H Fraser QC
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First, Second and Fifth Respondents:	R Wright
Solicitor for the First and Second Respondents:	Blake Dawson Waldron
Solicitor for the Fifth Respondent:	Phillips Fox
Date of Hearing:	12 November 1999
Date of Judgment:	12 November 1999