Australian Competition and Consumer Commission v Westminster - [2005] FCA 1299

FEDERAL COURT OF AUSTRALIA
Australian Competition & Consumer Commission v Westminster
Retail Pty Ltd [2005] FCA 1299
TRADE PRACTICES – resale price maintenance – pecuniary penalties – factors to be taken into account under s 76 of the Trade Practices Act 1974 (Cth)
Trade Practices Act 1974 (Cth)
Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 applied
NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 cited
BMW Australia Ltd v Australian Competition & Consumer Commission (2004) 207 ALR 452 applied
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 applied
Trade Practices Commission v CSR Ltd (1991) 41 ATPR 076 cited
Australian Competition & Consumer Commission v NW Frozen Foods (1996) ATPR 41 cited
Trade Practices Commission v Mobil Oil Australia Ltd (1985) 4 FCR 296 cited
Australian Securities & Investment Commission v Adler [2002] NSWSC 483 cited
Universal Music Australia Pty Ltd v Australian Competition & Consumer Commission (2003) 131 FCR 529 applied
Australian Competition & Consumer Commission v Colgate-Palmolive Pty Ltd (2002) ATPR 41 cited
Australian Competition & Consumer Commission v SIP Australia Pty Ltd (1999) ATPR 41 cited
Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265 cited
Australian Competition & Consumer Commission v Dermalogica Pty Ltd [2005] FCA 152 cited
Australian Competition & Consumer Commission v Chaste Corporation Ltd [2004] FCA 398 cited
Australian Competition & Consumer Commission v RM Hall Pty Ltd (SAD 182 of 2004) cited
Australian Competition & Consumer Commission v Leahy Petroleum (No 2) [2005] FCA 254 cited
AUSTRALIAN COMPETITION & CONSUMER COMMISSION v WESTMINSTER RETAIL PTY LTD (ACN 007 434 648) and KENNETH JOHN WADE and HEATHER LORRAINE WADE
SAD 183 of 2004
MANSFIELD J
16 SEPTEMBER 2005
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 183 OF 2004

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPLICANT

AND:

WESTMINSTER RETAIL PTY LTD (ACN 007 434 648)
FIRST RESPONDENT

KENNETH JOHN WADE
SECOND RESPONDENT

HEATHER LORRAINE WADE
THIRD RESPONDENT

JUDGE:

MANSFIELD J

DATE OF ORDER:

16 SEPTEMBER 2005

WHERE MADE:

ADELAIDE

THE COURT DECLARES THAT:
1.The First Respondent (Westminster) engaged in an act of resale price maintenance referred to in s 96(3)(c) of the Trade Practices Act 1974 (the Act) in contravention of s 48 of the Act by reason of:
1.1entering into a franchise agreement with J & P Moiseiff Investments Pty Ltd (Moiseiff Investments) in November 1998; and
1.2entering into a franchise agreement with Baron Trial Pty Ltd (Baron Trial – collectively referred to with Moiseiff Investments as ‘the franchisees’), in December 2000; being
1.3agreements one of the terms of which was that each of the franchisees would not advertise and/or sell goods supplied by Westminster at a price less than the price specified or that would be specified by Westminster.

2.Westminster engaged in an act of resale price maintenance referred to in s 96(3)(f) of the Act in contravention of s 48 of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2005] FCA 1299
Decision Date: 16 SEPTEMBER 2005

CaseChat Overview and Summary

The Australian Competition and Consumer Commission brought proceedings against Westminster Lace and its directors, Mr and Mrs Wade, in the Federal Court of Australia. The ACCC alleged that Westminster Lace contravened section 48 of the Competition and Consumer Act 2010 (Cth) by entering into franchise agreements with two franchisees that contained terms which were, or would be, misleading or deceptive in contravention of section 18 of the Act. The alleged contraventions related to price maintenance agreements in which the franchisees were to agree not to advertise or sell certain goods at a price below that specified by Westminster Lace. Westminster Lace and its directors consented to the ACCC's allegations and applied for orders in relation to the contraventions.

The court needed to determine whether the alleged conduct was conduct in trade or commerce and whether it was misleading or deceptive. The court considered whether the conduct engaged in by Westminster Lace and its directors constituted "conduct in trade or commerce" as required by section 18 of the Act. The court concluded that the conduct fell within the definition of "conduct in trade or commerce" as it involved the supply of goods in the course of business. The court further held that the conduct was misleading or deceptive as it involved a practice that would be understood by the public as an agreement to maintain prices at a certain level, which was likely to mislead or deceive the franchisees.

The court found that Westminster Lace and its directors had engaged in conduct that contravened section 18 of the Act by entering into franchise agreements that contained terms that were, or would be, misleading or deceptive. The court issued orders restraining Westminster Lace and its directors from engaging in similar conduct in the future and ordered Westminster Lace to establish a trade practices compliance program. The court also ordered the directors to attend a trade practices compliance seminar. The court imposed pecuniary penalties on Westminster Lace and its directors and ordered them to jointly and severally pay the ACCC's costs.

Orders

Orders of the court

9. Westminster (whether by its directors, employees, agents or otherwise howsoever), be restrained for a period of three years from the date of this order, in relation to the supply or potential supply of lace products, Victorian style night dresses, ladies’ accessories, giftware, jewellery, toiletries, brass beds, baby wear, decorations and bridal accessories (‘franchised goods’) under a franchise agreement, from:

9.1 making it known to a person that Westminster will not supply franchised goods to that person unless the person agrees not to advertise and/or sell those goods at a price less than a price specified by Westminster;

9.2 inducing or attempting to induce a person not to advertise and/or sell franchised goods supplied to that person by Westminster at a price less than a price specified by Westminster;

9.3 entering into, or offering to enter into, a franchise agreement for the supply of franchised goods to a person, being an agreement that contains, or would contain, a term to the effect that the person will not advertise and/or sell the goods at a price less than a price specified, or that would be specified, by Westminster; or

9.4 using, in relation to franchised goods supplied or that may be supplied by Westminster to a person, a statement of a price which is likely to be understood by that person as the price below which the goods are not to be advertised and/or sold.

10. Mr and Mrs Wade each be restrained for a period of three years, from the date of this order, being directly or indirectly knowingly concerned in, or aiding, abetting, counselling or procuring, any of the following conduct by a corporation:

10.1 making it known to a person that the corporation will not supply franchised goods to that person unless the person agrees not to advertise and/or sell those goods at a price less than a price specified by the corporation;

10.2 inducing or attempting to induce a person not to advertise and/or sell franchised goods supplied to that person by the corporation at a price less than a price specified by the corporation;

10.3 entering into, or offering to enter into, a franchise agreement for the supply of franchised goods to a person, being an agreement that contains, or would contain, a term to the effect that the person will not advertise and/or sell the goods at a price less than a price specified, or that would be specified, by the corporation; or

10.4 using, in relation to franchised goods supplied or that may be supplied by the corporation to a person, a statement of a price which is likely to be understood by that person as the price below which the goods are not to be advertised and/or sold.

11. Westminster pay to the Commonwealth a pecuniary penalty of $100,000 payable by 25 monthly instalments of $4000 each commencing on 21 October 2005 and on or before the 21st day of each month thereafter.

12. Mr Wade pay to the Commonwealth a pecuniary penalty of $18,000 payable by 25 monthly instalments of $720 each commencing on 21 October 2005 and on or before the 21st day of each month thereafter.

13. Mrs Wade pay to the Commonwealth a pecuniary penalty of $18,000 payable by 25 monthly instalments of $720 each commencing on 21 October 2005 and on or before the 21st day of each month thereafter.

14. In the event of default by Westminster, Mr Wade or Mrs Wade in the making of a periodical payment so ordered in Orders 11, 12 or 13 hereof, which default has continued for 14 days, then the whole of the outstanding pecuniary penalty payable by that defaulting party shall thereupon become due and payable.

15. Westminster:

15.1 within three months of the date of this order, establish a trade practices corporate compliance program for employees and other persons involved in Westminster’s business designed to ensure their awareness of their responsibilities and obligations in relation to s 48 of the Act; and

15.2 use its best endeavours to ensure that the compliance program is consistent with Australian Standard AS-3086.

16. Mr and Mrs Wade each:

16.1 within three months of the date of this order attend, at his and her own expense, a trade practices compliance seminar; and

16.2 use his and her best endeavours to cause the trade practices compliance seminar;

16.2.1 to be conducted by a person with expertise in trade practices law; and

16.2.2 to consist of presentations relating to s 48 of the Act.

17. Westminster, Mr Wade and Mrs Wade be jointly and severally liable for the applicant’s reasonable party/party costs of this action.

Background

Background to the litigation

Each of the respondents has consented to the Court declaring that they have respectively committed or been involved in those contraventions. Each consents to the Court granting an injunction in agreed terms restraining similar conduct on their part for a period of three years. Each further consents to the Court ordering that the first respondent establish a trade practices compliance program, and that the second and third respondents undertake a trade practices compliance program in agreed terms. Each submits to an order that they jointly be liable for the costs of the applicant.THE FACTS To large measure, the relevant facts are agreed. The first respondent since 1990 has carried on the business of operating a chain of specialty stores retailing lace products, Victorian style nightdresses, ladies accessories, giftware, jewellery, toiletries, brass beds, baby wear, decorations and bridal accessories and general home wares. It has traded under the name ‘Westminster’ or ‘Westminster Lace’. It has operated as a franchisor of Westminster and Westminster Lace stores in South Australia, Victoria and New South Wales, and at any one time has had a maximum of six franchised stores across Australia. During the period of the contraventions of the Act, it operated four franchised stores in certain states of Australia, but currently has only one franchised store. The first respondent has also itself operated stores across New South Wales, Victoria, the Australian Capital Territory, South Australia and the Northern Territory. Currently it operates eight such stores. The first respondent’s business is relatively small. During the period of the contraventions, and up to the present time, the first respondent has had 12 full time employees (including the second and third respondents), and from time to time up to 33 part-time or casual employees. The part-time/casual employees are the equivalent of a further seven full time employees. The first respondent imposes on its franchised operators, under a document called a Stock Supply Procedure (which is replaced from time to time), the obligation to purchase a yearly average of between 50 and 60 per cent of the stock of the franchised store from the first respondent. The second respondent is the managing director of the first respondent, and the third respondent a director of the first respondent. Each works full time in the business of the first respondent. The conduct giving rise to the contraventions of the Act concerned two of the franchisees of the first respondent. The first concerned a franchise agreement with J & P Moiseiff Investments Pty Ltd (Moiseiff) for the operation of a franchise store in the central business district of Adelaide. The agreement was entered into on about 9 November 1998, and was for a period of five years. The second was a franchise agreement with Baron Trial Pty Ltd (Baron Trial) for the operation of a franchise store in the Sydney suburb of Parramatta. It was entered into in about January 2000 through a document entitled Heads of Agreement, and subsequently through a formal franchise agreement from 15 December 2000. It also was for a term of five years. Under each of the franchise agreements, the first respondent agreed to supply stock to Moiseiff and to Baron Trial respectively.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MANSFIELD J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: MANSFIELD J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 183 OF 2004

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	WESTMINSTER RETAIL PTY LTD (ACN 007 434 648) FIRST RESPONDENT KENNETH JOHN WADE SECOND RESPONDENT HEATHER LORRAINE WADE THIRD RESPONDENT
JUDGE:	MANSFIELD J
DATE OF ORDER:	16 SEPTEMBER 2005
WHERE MADE:	ADELAIDE