Australian Competition & Consumer Commission v Mobil Oil Australia Ltd
[1997] FCA 480
•5 Jun 1997
CATCHWORDS
TRADE PRACTICES - strikeout application - alleged price fixing arrangement between oil companies to increase or maintain retail prices - including agreement to force franchisees to increase or maintain prices by increase of wholesale price or withdrawal of "price support" - no adequate particulars of withdrawal of support - no adequate particulars of making of arrangement - language pleaded that of putting arrangement into effect - implementation alleged not consistent with arrangement pleaded - whether allegation of parallel pricing equivocal - reliance on discovery to provide further particulars - examinations already conducted under s 155 Trade Practices Act 1974 (Cth) - whether discovery fishing - whether abuse of process - whether leave to re-plead should be granted
PRACTICE AND PROCEDURE - contravention of Part IV Trade Practices Act 1974 (Cth) - reliance on discovery to provide further particulars - whether fishing - examination already conducted under s 155
Federal Court Rules: O 11, r 16
Trade Practices Act 1974 (Cth) ss 45(2)(a)(ii), 45(2)(b)(ii), 155
Hamilton v Whitehead (1988) 166 CLR 121
Mallan v Lee (1949) 80 CLR 198
Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No. 3) (1980) 47 FLR 163
Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328
Trade Practices Commission v Email Limited (1980) 43 FLR 383
Yorke v Lucas (1985) 158 CLR 661
Australian Competition and Consumer Commission -v- Mobil Oil Australia Limited & Ors
(No. 411 of 1994)
Judge: Heerey J
Date: 5 June 1997
Place: Melbourne
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY No. VG 411 of 1994
GENERAL DIVISION
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
- and -
MOBIL OIL AUSTRALIA LIMITED
First Respondent
-and-
BP AUSTRALIA LIMITED
Second Respondent
-and-
THE SHELL COMPANY OF AUSTRALIA LIMITED
Third Respondent
-and-
NOEL ROBERT CONSTANTINE
Fourth Respondent
JUDGE: Heerey J
DATE: 5 June 1997
PLACE: Melbourne
MINUTES OF ORDER
The Court orders that:
The applicant's further amended statement of claim dated 7 October 1996 be struck out.
Leave to re-plead is refused.
The applicant pay the respondents' costs of the respondents' notices of motion, such costs to be paid forthwith.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY No. VG 411 of 1994
GENERAL DIVISION
B E T W E E N:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
- and -
MOBIL OIL AUSTRALIA LIMITED
First Respondent
-and-
BP AUSTRALIA LIMITED
Second Respondent
-and-
THE SHELL COMPANY OF AUSTRALIA LIMITED
Third Respondent
-and-
NOEL ROBERT CONSTANTINE
Fourth Respondent
JUDGE: Heerey J
DATE: 5 June 1997
PLACE: Melbourne
REASONS FOR JUDGMENT
This proceeding is brought by the Australian Competition and Consumer Commission, hereafter referred to as "the Commission" -a term which, where the context so indicates, is intended to signify the applicant's predecessor the Trade Practices Commission.
The Commission alleges that in or about 1991, and by the latest in or about September of that year, three oil companies, Mobil, BP and Shell, entered into a price-fixing arrangement. The Commission seeks orders against those companies for pecuniary penalties and injunctive relief. Also joined as a respondent is
the fourth respondent, Mr Noel Robert Constantine, who was a director of BP and its General Manager, Retail for Australasia.
The Commission conducted investigations under s 155 of the Trade Practices Act 1974 (Cth) ("the Act"). On 18 December 1992 the Commission served a s 155 notice on BP. That company provided two responses in February 1993. On 2 August 1993 a similar notice was served on Mr Constantine and on 22 February 1994 he was examined before the then Deputy Chairman of the Commission.
The present proceeding was commenced by the filing and serving of an application and statement of claim on 23 November 1994. Shortly afterwards, on 21 December 1994, the Commission filed an amended application and amended statement of claim. On 20 and 21 March 1995 Ryan J heard a motion to strike out the amended statement of claim. At the conclusion of oral argument his Honour granted the Commission leave to file and serve a draft further amended statement of claim. This was done on 3 April. On 9 September 1996 his Honour delivered a judgment ordering that the amended statement of claim filed on 12 December 1994 be struck out and that
the applicant have leave to file and serve within 28 days a further amended statement of claim preserving such of the amendments embodied in the draft pleading filed herein on 3 April 1995 and incorporating such further amendments as the applicant may be advised, having regard to the reasons for judgment published this day.
On 7 October 1996 the Commission filed and served a further amended statement of claim. That pleading is the subject of further strikeout motions brought by BP (6 November), Shell (11 November) and Mobil (13 November). The respondents rely on O 11 r 16 of the Federal Court Rules, which provides:
Where a pleading:-
(a)discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading;
(b)has a tendency to cause prejudice, embarrassment or delay in the proceeding; or
(c)is otherwise an abuse of the process of the Court;
the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out.
Further, the respondents say that the Commission has demonstrated that it is unable to formulate properly a claim in this proceeding and that no leave to re-plead should be granted.
The Commission's Complaint
The three respondent oil companies market petroleum products to retail customers in the metropolitan areas of Sydney and Melbourne. The companies' retail sites fall into two categories. First, there are sites owned by the company and operated either by an employee or an agent operating on commission. These are known as "CA sites". At these sites the oil company directly sets the retail price. Secondly, there are sites operated by tenants. These are called "franchisee sites". The franchisee purchases petroleum products from the oil company and re-sells to the retail customer.
In broad terms the essence of the alleged contract, arrangement or understanding which the Commission seeks to establish is as follows. The oil companies are said to have agreed between themselves that each would raise, or maintain, retail prices at its CA sites at agreed levels and direct its franchisees to raise their prices to, or maintain their prices at, the same levels. A vital element of the arrangement alleged (for the sake of brevity and clarity I shall hereafter use the term "arrangement" as comprehending as well contract and/or understanding) is an agreement that each oil company would ensure that its franchisees followed the price at its CA sites by putting economic pressure on them to do so. This pressure, it is said, took the form of either increasing wholesale prices to the franchisee or withdrawing "price support".
The Further Amended Statement of Claim
Paragraphs 1 to 15 ("A. Parties and participants") identify and describe the parties and also a number of individuals employed in various capacities by Mobil, one individual employed by Shell, and a Mr Grant Conroy who was a Mobil franchisee in Sydney.
Paragraphs 16 to 35, under the heading "B. Markets", allege various features of the retail markets for petroleum products in the Sydney and Melbourne metropolitan areas. Paragraph 16 alleges that there was a demand for such products, that no other products were substitutable for them, that consumers in the two areas purchased retail petroleum products within the metropolitan area in which they resided except on those occasions when they travelled outside those areas, and that Mobil, BP, Shell and "other oil companies" were in competition with each other in the two areas in the supply through their respective franchisees and CA sites of retail petroleum products to consumers residing within each of those areas. Particulars sub-joined to that paragraph identify the "other oil companies". It is said the Commission is unable to provide any further particulars until after discovery. Paragraph 17 pleads an identification of the Sydney and Melbourne metropolitan markets in summary form.
Paragraphs 18 to 23 allege in more detail the way Mobil participated in the two markets. Paragraph 18(b) describes the price support said to have been provided by Mobil to its franchisees. This took the form of:
rebates, allowances or discounts off the wholesale or rack price of petroleum products supplied to franchisees; and/or
(ii)other services and facilities, including profitability assistance to its franchisees which took the form of a payment made to a particular franchisee at the end of each month calculated upon turnover and profitability of that franchise for the preceding month.
(In this and other passages subsequently quoted from the further amended statement of claim underlining indicates an addition by
amendment.)
Paragraph 19 alleges that from time to time during the period September 1991 to June 1992 Mobil increased, or maintained at existing levels, the prices at which Mobil CA sites sold retail petroleum products in the Sydney and Melbourne markets as set out in certain schedules. The particulars sub-joined to para 19 refer to schedules A1 and A2 and give certain periods, for Melbourne: 12 to 25 September 1991, 28 October to 1 November 1991, 10 to 17 January 1992, 21 to 28 February 1992, 11 to 21 May 1992, 3 to 11 June 1992. The same periods are given in respect of Sydney. It is stated that the Commission "is unable to provide any further particulars until after discovery".
Paragraph 20 needs to be quoted in full. It is as follows:
At or shortly after the time or times when Mobil increased or maintained the prices at the Mobil CA Sites referred to in paragraph 19 hereof, Mobil withdrew Mobil price support to its franchisees in such markets or increased its wholesale or rack price of petroleum products supplied to its franchisees in such markets:-
(a)which withdrawal of price support or increase in the wholesale or rack price had the likely effect of causing such franchisees to increase their prices of retail petroleum products for supply in the retail markets referred to in paragraph 17 hereof to or towards a similar level of retail prices to that charged by franchisees of BP, Shell and other oil companies in the same markets at or about that time;
(b)with the purpose of causing franchisees to increase their prices of retail petroleum products for supply in the retail markets referred to in paragraph 17 hereof to or towards a similar level of retail prices to that charged by franchisees of BP, Shell and other oil companies in the same markets at or about that time.
PARTICULARS
(i)Wholesale or rack prices
The Applicant refers to the individual daily pricing information and individual daily price movements for wholesale prices provided in Schedules A1 & A2 previously supplied to the Respondents, particulars whereof exceed 3 folios. Mobil had a procedure pursuant to which franchisees were notified of any alteration to wholesale or rack prices by means of:-
(a)either a recorded telephone message service that was changed daily;
(b)notification by the area managers by verbal communication.
The Applicant is unable to provide any further particulars until after discovery.
(ii)Price Support
The Applicant is unable to detail each instance in respect of each franchisee in which price support was given, the type of price support given, and precisely how and when it was withdrawn. Such details can only be given after discovery from Mobil. The Applicant is, however, able to say the following:-
(A)It was the general practice of Mobil during the periods referred to in the particulars to paragraph 19 to provide the types of price support referred to in paragraph 18(b), however the type varied depending upon the franchisee.
(B)When Mobil increased or maintained the prices at the Mobil CA Sites in circumstances where such increased or maintained price was above the prices charged by Mobil franchisees, the Mobil CA Sites were uncompetitive and "out of the market" unless and until, inter-alia, Mobil franchisees increased prices to or
near the same levels as those charged by the Mobil CA Sites. The Applicant infers from the fact that the prices at the Mobil CA Sites were increased or maintained that, correspondingly, and it would not have made commercial sense for Mobil to do otherwise, Mobil's practice was to either withdraw price support or increase the wholesale or rack prices to franchisees at the same time and that this practice was followed in respect of the periods referred to in the particulars to paragraph 19.(C)Notification of the withdrawal of price support was done verbally by area managers to franchisees.
(D)Examples of this mechanism are set out and pleaded in paragraphs 58-64 hereof in respect of certain Mobil franchisees. The Applicant further infers from the specific examples there given the said practice referred to in paragraph (B).
The Applicant is unable to give any further details until after discovery. Although Mobil has provided some information to the Applicant concerning its price support mechanisms, it is not capable of being analysed to provide more specific details in respect of each franchisee.
(iii)Purpose of Mobil
The purpose of Mobil is to be inferred from the fact that it withdrew such price support or caused its wholesale or rack price to increase when it knew that it was likely that this would cause or induce franchisees to increase their prices.
Paragraph 21 alleges that the increase or maintenance of prices by Mobil as referred to in para 19 had the effect of increasing, or maintaining at existing levels, the prices at which Mobil CA sites sold petroleum products to consumers in the two markets.
Paragraph 22 alleges that the level of pricing at the Mobil CA sites
could not be maintained unless, inter alia, BP and Shell maintained price parity at their CA sites with Mobil in respect of retail petroleum products sold
to consumers in the two markets. Particulars given are as follows:
The price levels of the sale of petroleum products at the Mobil CA Sites could not be maintained by Mobil unless BP and Shell maintained price parity with Mobil since in the absence of the same Mobil CA Sites would have lost sales and market share to BP and Shell CA Sites and suffered a loss in revenue and profitability accordingly. The applicant is unable to provide any further particulars until after discovery.
Paragraph 23 also needs to be quoted in full. It is as follows:
Further, the increases or maintenance of prices by Mobil at its CA Sites as referred to in paragraph 19 hereof and the actions of Mobil in either withdrawing Mobil price support to its franchisees or increasing its wholesale or rack price to its franchisees as referred to in paragraph 20 hereof:-
(a)had the effect of increasing the prices at which Mobil franchisees sold retail petroleum products to members of the public and/or consumers in the markets referred to in paragraph 17 hereof; but
(b)would not be likely to continue to have the effect referred to in sub-paragraph (a) hereof unless BP and Shell at or about the same time similarly increased or maintained or caused to be increased or maintained the prices at which their CA Sites and franchisees sold retail petroleum products to members of the public and/or consumers in the markets referred to in paragraph 17 hereof; and
(c)would be likely to be detrimental to the financial interests of Mobil and its franchisees if BP and Shell did not at or about the same time similarly increase or maintain or cause to be increased or maintained the prices at which their CA Sites and franchisees sold retail petroleum products to members of the public and/or consumers in the markets referred to in paragraph 17 hereof.
PARTICULARS
As to paragraph 23(b)
The effect referred to in sub-paragraph (b) hereof would not be likely to continue unless BP & Shell increased or maintained their CA Sites prices since in the absence of the same Mobil franchisees would have lost sales and market share to the BP and Shell CA Sites and franchisees and suffered a loss in revenue and profitability accordingly. In such circumstances the Mobil franchisees would in all likelihood have then reduced their prices in order to ensure that they maintained their revenue, profitability and market share.
As to paragraph 23(c)
If BP and Shell did not increase or maintain their CA Sites prices, it would be likely to be detrimental to Mobil and its franchisees as referred to in sub-paragraph (c) hereof since in the absence of the matters referred to in sub-paragraph (c) hereof, Mobil CA Sites and Mobil franchisees would have lost revenue and market share to BP and Shell CA Sites and franchisees. Mobil would have suffered a direct loss in revenue and profit from the loss of revenue
and market share of the Mobil CA Sites. Mobil would have sold less petroleum product by wholesale to its franchisees by reason that the franchisees would have required less volume because of the loss of market share. The Applicant is unable to provide any further particulars until after discovery.
Paragraphs 24 to 29 and 30 to 35 plead essentially the same matters, mutatis mutandis, in relation to BP and Shell respectively. The only difference that need be mentioned is that the alleged form of price support varies. In the case of BP (para 24(b)(ii)) it is:
other services and facilities, including a form of profitability assistance to its franchisees in the form of rent rebates and the lowering of the list price for wholesale supply to franchisees as a form of profitability assistance.
The open-ended nature of this allegation will be obvious.
In the case of Shell (para 30(b)) the price support appears to be limited to rebates, allowances or discounts off the wholesale or rack price.
Paragraphs 36 to 38 are headed "C. Infringement of Section 45(2)(a)(ii)". Paragraph 36 is the allegation on which the whole case turns. It is in these terms:
In or about 1991 and by the latest in or about September 1991, Mobil, BP and Shell made a contract, arrangement, or arrived at an understanding, which contained provisions that:-
(a)each of Mobil, BP and Shell would inform each other in advance of the prices to which one or more of them proposed to increase or maintain (as the case may be) the retail prices at which it or they (as the case may be) sold petroleum products from service station sites in the metropolitan area of Sydney and Melbourne operated by it or them as CA Sites; and
(b)on being so informed by one or other of them that it or they (as the case may be) proposed to increase or maintain (as the case may be) its or their retail prices, the other party or parties would increase or maintain (as the case may be), at about the same time to or at approximately the same level as the first mentioned party or parties, the retail prices at which petroleum products were sold from service station sites in the metropolitan areas of Sydney and Melbourne operated by that other party or parties as CA Sites;
(c)on being so informed by one or other of them that that party or parties (as the case may be) proposed to increase or maintain (as the case may be), its or their retail prices the other party or parties would take steps to cause its or their franchisees to increase or maintain (as the case may be), their retail prices to or towards or at a similar level of retail prices to that charged by franchisees of the first mentioned party or parties in the same markets at or about that time by, inter-alia, withdrawing price support to its or their franchisees or by increasing its or their wholesale or rack prices to its or their franchisees.
PARTICULARS
The contract, arrangement or understanding is partly oral and partly to be implied.
Insofar as it is oral, it is constituted by:-
(i)the conversation between Constantine of BP and James of Shell, details whereof are alleged in paragraph 39 hereof;
(ii)the conversation between Constantine of BP and Plant of Mobil, details whereof are alleged in paragraphs 40 & 41 hereof.
Insofar as it is to be implied, it is to be implied by or inferred from:-
(i)the retail price movements referred to in paragraph 49 hereof combined with the fact that such retail price movements were the same or similar to those referred to and anticipated in the conversations alleged in paragraphs 39-41 hereof.
(ii)the fact that generally such retail price movements referred to in paragraph 49 hereof demonstrate parallel pricing between Mobil, BP and Shell;
(iii)the further parallel pricing alleged in paragraphs 65A-65B hereof.
The applicant is unable to provide any further particulars until after discovery.
I shall hereafter refer to the arrangement alleged in this paragraph as "the para 36 arrangement". Paragraph 37(a) alleges that the provisions of the para 36 arrangement are provisions to which s 45A of the Act applies in that they had the purpose or effect of fixing, controlling or maintaining retail prices for
the products supplied by the oil companies "whether directly through their CA sites or indirectly through their franchisees". Paragraph 37(b) alleges that the provisions had the purpose or effect of substantially lessening competition by causing retail prices to increase to, or remain at, levels at which they would not increase or remain if no such arrangement had been entered into or implemented. Particulars given are as follows:
The purpose alleged is that each of BP, Shell and Mobil is to be inferred from the making of the contract, arrangement or understanding alleged in paragraph 36 hereof and the facts referred to in the particulars sub-joined thereto. The Applicant is unable to provide any further particulars until after discovery.
Paragraph 38 alleges that the making of the para 36 arrangement contravened s 45(2)(a)(ii) of the Act and that each of Mobil, BP and Shell contravened that provision.
Paragraphs 39 to 69 are headed "D. Infringement of Section 45(2)(b)(ii)". This part is broken into sub-parts as follows.
"I Mobil, BP & Shell - September 1991 Conduct" (paras 39 to 50). Paragraph 39 alleges a meeting in Melbourne at 9.00 am on 13 September 1991 between Mr Constantine and Mr Stuart James, the National Reseller Manager of Shell. It is alleged that Mr James told Mr Constantine that Shell had agreed to increase the prices at which it sold retail petroleum products from the Shell CA sites in Sydney
to allow reasonable dealer margins in Sydney effective on the following Tuesday 17 September 1991
and that
Independents had discussed with Shell the possibility of an upward movement in posted prices with Shell on condition that the posted prices at the Shell CA sites moved first.
The particulars given are that
James used words which conveyed to Constantine the information referred to in paragraphs 39(a) and (b) above.
Paragraphs 40 and 41 allege a telephone conversation between Mr Constantine of BP and Mr John Plant, who was Mobil's General Manager of Operations in Melbourne. Mr Constantine told Mr Plant that BP on the following Monday (16 September) would be moving the prices up at its CA sites in Melbourne "to allow reasonable dealer margins in Melbourne", that Shell had agreed to increase prices at its CA sites in Sydney "to allow reasonable dealer margins in Sydney" effective on the following Tuesday (17 September) and that
Independents had discussed with Shell and BP the possibility of an upward movement in posted prices with Shell and BP on condition that the posted prices at the Shell CA sites and BP CA sites moved first.
The sequence of events then alleged in the further amended statement of claim is as follows. After completion of his conversation with Constantine, Mr Plant telephoned Mr Anthony Hartnett, the Strategies and Administration Manager of Mobil, and conveyed the substance of the conversation with Mr Constantine (para 42). At about 6.00 pm on 13 September Mr Hartnett sent on Mobil's internal e-mail system a note of the Constantine/Plant conversation to Mr Kenneth Stumbles, (Mobil's General Manager for Retail Marketing), Mr Thomas Abernathy (Mobil's Regional Retail Manager for Victoria), Mr Ian Thomson (Mobil's Regional Retail Manager for New South Wales and the Australian Capital Territory) and Mr Peter Jane (Mobil's Regional Retail Manager for Queensland) "so that they could be informed of the conversation and act on it accordingly" (para 43). Mr Abernathy discussed the contents of the e-mail with Mr Hartnett, passed on the information contained in the e-mail to Melbourne area managers by telephone and instructed the area managers that it be acted on by those area managers "and to watch the Melbourne market as appropriate" (para 44). The particulars are as follows:
The Melbourne area managers at the relevant times were: John Nicholls, Marjorie Mantle and Doug Miles. In the usual and ordinary course of events of the operation of Mobil's business Abernathy would have passed on to these individuals the information contained in the Hartnett E-mail either in whole or in part.
The speculative element in these particulars will be apparent.
Mr Thomson at about 6.43 pm on 13 September sent the Hartnett e-mail to Mr Peter Batcheler (Mobil's Retail Area Manager for the western areas of metropolitan Sydney), Mr Anthony Broome (Mobil's Retail Area Manager for the southern areas of metropolitan Sydney, Wollongong and the Australian Capital Territory) and Mr Paul Roati (Mobil's Retail Area Manager for the northern areas of metropolitan Sydney), adding a covering note of his own which contained instructions that the recipients of the note "should keep a watchful eye on the Sydney market because it might mean some relief for Mobil's franchisees in that market", that Mobil had no CA sites below 67.4 cpl (cents per litre), but that the industry had 41 CA sites at 67.3 cpl and below, that it was "the industry" including BP and Shell who "had the work to do" but that Mobil should support any move to improve Mobil's franchisees' margins and that Mobil should follow the movements "on a market by market basis" and that it was "in Mobil's interests to do so in the then climate" (para 45). Mr Batcheler responded to the Thomson e-mail by deleting it from his computer terminal and passing on the information contained in it to territory managers with the instruction to them that it be "acted upon by (them) and/or to watch the market as appropriate" (para 46). Particulars identify by name five territory managers and assert that "in the usual and ordinary course of events in the operation of Mobil's business, Mr Roati would have passed on this information to these individuals". Similarly Mr Roati (para 47) and Mr Broome (para 48) responded to the e-mail by passing it on to their territory managers with identical instructions. In each case the particulars are substantially the same as those sub-joined to para 46.
Paragraph 49 alleges that "(i)n accordance with the statements and the intention and purpose of the statements in the Hartnett e-mail and the Thomson e-mail and as a consequence thereof":- (a) retail prices of petroleum products in the Sydney and Melbourne markets increased in the week beginning 16 September 1991, (b) on 17 September Shell moved its prices up at its CA sites in Sydney, (c) on 16 September BP moved its prices up at its CA sites in Melbourne, and (d) during the week beginning 16 September Mobil maintained its CA prices in Sydney and Melbourne. Particulars sub-joined to that paragraph rely on the price
movements set out in the Schedule. Particulars are given of the "intention" and "purpose" of the Hartnett and Thomson e-mails. In essence, such intention and purpose is said to be derived from the two men bringing the e-mails into existence and transmitting them.
Paragraph 50 alleges that on 18 September Mr Thomson telephoned Ms Glenda Hemming, a Senior Retail Marketing Officer reporting to Thomson, and told her that she should contact the retail area managers Roati, Batcheler and Broome and tell them that
Mobil did not want the increase to 68.3 cpl in the retail price of petrol set by Shell on that day to collapse and that the retail area managers should do whatever they could on a trading area by trading area basis to prevent such a collapse.
Ms Hemming acted on this instruction.
Under the sub-heading "II Mobil - Post September 1991 Conduct" paras 51 to 64 allege various conduct by Mobil personnel in the periods (a) October 1991, (b) January 1992, (c) February 1992, (d) May 1992, (e) June 1992, (f) other occasions.
In October 1991 Mr Thomson told Mr Broome that retail prices at competing sites in the southern Sydney area had increased, particularly along the Hume Highway, but not at Mobil franchisee sites. Mr Thomson told Mr Broome to ensure that the prices charged at Mobil's franchisee sites were "in the market". Mr Thomson told Mr Broome
he didn't want Pricewatch reports for the next day to show that Mobil franchisee sites had not matched the market and that Thomson's
`backside would be kicked' if the reports indicated that Mobil sites had not increased their retail prices in line with those charged by competing oil company sites.
Mr Broome contacted franchisees in his area and requested them to immediately increase their prices "to match the posted prices of competing oil company sites". Mr Broome then told Mr Thomson his demands had been put into effect. (Paras 51-54)
On 13 January 1992 Mr Ralphsmith, a Mobil Territory Manager, told one of his franchisees, Mr Grant Conroy, that Mobil and other major oil companies would be increasing their CA prices. On 14 January Mr Thomson demanded that Mr Broome contact Mobil's "key franchisee sites on the Hume Highway" and asked them to increase their retail prices immediately. Mr Broome did so. He requested four named Mobile franchisees on the Hume Highway to "put their prices up to match the posted price of their competitors". He also requested Mr Conroy to "increase his prices to match the market". (Paras 55-57)
On 21 February 1992 Mr Ralphsmith told Mr Conroy that Mobil price support would be withdrawn on the morning of 24 February because he (Ralphsmith) had been told by his superiors that Mobil's competitors' CAs would be increasing their retail price so Mobil had decided to withdraw Mobil price support. On 24 February Mobil withdrew its price support to Conroy and as a consequence Conroy increased his retail prices. Particulars state that the price support withdrawn "was support to maintain a margin of less than [sic - not less than ?] 3 cents per litre". It is said that
the Commission "is unable to provide any further particulars until after discovery". The form of the price support is not particularised. (Paras 58-59)
On 14 May 1992 at a meeting in Epping, New South Wales, Mr Ralphsmith told Mobil franchisees (who included Conroy but are not otherwise identified) that price support was being stopped to take effect that day, that Mobil was "leading the price up" with Mobil CA sites and Quiks Food going up to 67.9 cpl and that he expected all other Mobil sites to go up as well. The franchisees protested at the price support being withdrawn on a Friday. On the following Monday 18 May Mobil withdrew its price support to Conroy and as a consequence he increased his prices. (Paras 60-62)
On 4 June 1992 Ralphsmith told Conroy and other franchisees that Mobil price support would cease on 9 June and that "retail petroleum products at Mobil CA Sites would be moving". On 9 June Mobil withdrew its price support to Conroy and as a consequence he increased his prices. (Paras 63-64)
On other occasions between September 1991 and June 1992 Mr Stumbles told Mr Thomson that Mobil franchisees in the Sydney metropolitan area could expect relief on certain specified occasions in the future, Mobil CA prices would be moved up on certain specified occasions in the future and Mobil price support would be removed on certain specified occasions in the future. There were similar conversations between Mr Thomson and his
predecessor and Mr Broome. It is said the Commission is unable to give any further particulars of these conversations. (Para 65)
Under the heading "III Mobil, BP and Shell Conduct - Further Parallel Pricing" para 65A alleges that in the Sydney market during five specified periods, each of a week or thereabouts between October 1981 and June 1992,
each of BP, Shell and Mobil increased to or maintained at their CA sites, similar or identical retail prices for the sale of petroleum products with prior knowledge of the proposed or anticipated similar price movements or changes of the other two companies at their CA Sites and thereby engaged in parallel pricing.
Particulars given are as follows:
The Applicant refers to and repeats the particulars subjoined to paragraphs 19, 25 and 31 hereof.
Mobil's prior knowledge is to be inferred from the following facts:-
(a)The fact that it increased or maintained prices at its CA Sites to or at identical or similar levels to BP and Shell which increase or maintenance took place at the same time or very close to the same time as the increases or maintenance of prices by the other 2 companies;
(b)The fact that as set out in paragraphs 55, 58 & 65 hereof Mobil had in its possession proposed or anticipated price change information of BP and Shell which was commercially sensitive and which there was no commercial reason from the perspective of BP and Shell for Mobil to be given unless it was part of a mutual exchange of information. It is to be inferred from the fact that Mobil had in its possession commercially sensitive price information from BP and Shell, that the same was given to it by BP and Shell and as a part of a mutual exchange of pricing information between Mobil, BP and Shell in both the Sydney and Melbourne markets.
Each of BP's and Shell's prior knowledge is to be inferred from the following facts:-
(a)The fact that each of them increased or maintained prices at its CA Sites to or at identical or similar levels to the other 2 companies which increase or maintenance took place at the same time or very close to the same time as the increases or maintenance of prices by the other 2 companies;
(b)The fact that as set out in paragraphs 55, 58 & 65 hereof Mobil had in its possession proposed or anticipated price change information of BP and Shell which was commercially sensitive and which there was no commercial reason from the perspective of BP and Shell for Mobil to be given unless it was part of a mutual exchange of information. It is to be inferred from the fact that Mobil had in its possession commercially sensitive price information from BP and Shell,
that the same was given to it by BP and Shell and as a part of a mutual exchange of pricing information between Mobil, BP and Shell in both the Sydney and Melbourne markets.
Paragraph 65B pleads similar allegations in relation to the Melbourne market, notwithstanding that paras 55, 58 and 65, relied on in the particulars sub-joined to para 65B, are only concerned with the Sydney market.
Under the heading "IV General" para 66 alleges that in engaging in the conduct described in paras 41-65B Mobil gave effect to the provisions of the para 36 arrangement in contravention of s 45(2)(b)(ii) and contravened that provision. Particulars state that the Commission
refers to and repeats paras 41-65B hereof and the particulars given in support thereof. The applicant is unable to provide any further particulars until after discovery.
Paragraphs 67 and 68 make similar allegations in relation to BP and Shell. Paragraph 69 alleges threatened continued contra-vention. Under the heading "E. Aiding and Abetting" para 70 alleges that by engaging in the conduct described in paras 36, 41-50, 65A and 65B, Mobil aided and abetted, induced or attempted to induce, was directly etc concerned in, and conspired with BP and Shell to engage in their contraventions of the Act. Particulars state that the Commission relies on the conduct of Mobil set out in the paras mentioned but that the Commission "is unable to provide any further particulars until after discovery". Paragraphs 71 and 72 make like allegations in respect of BP and Shell respectively.
Under the heading "F. Constantine", para 73 alleges that Mr Constantine acted as set out in paras 39 to 41 with the intention of making the para 36 arrangement and giving effect to it. Particulars state that the Commission relies on the conduct of Mr Constantine set out in paras 39 to 41 and says that the intention is to be inferred therefrom. Further, the Commission "is unable to provide any further particulars until after discovery". Paragraph 74 raises against Mr Constantine, allegations of aiding, abetting, inducing, being directly concerned in and conspiring in respect of contraventions by Mobil, BP and Shell.
I now turn to the principal arguments advanced by the various respondents.
Particulars of Withdrawal of Price Support
Ryan J said (judgment 7 September 1996 at 37):
Withdrawal of price support by Mobil, BP and Shell is critical to the allegations against each of them because it is one of the only two modes of performing the agreement alleged in para 36(c) to cause franchisees to increase or maintain their prices. Allegations of the withdrawal of price support, including profitability support, should therefore specify the form it is alleged to have taken and should be fully particularised so as to identify the date on and from which it occurred and the precise way in which it impinged on each affected franchisee.
As has been seen, the response of the Commission in sub-para (ii) of the particulars sub-joined to para 20, and the corresponding paragraphs for BP and Shell, is to state that it is unable to detail "each instance in respect of each franchisee" in which price support was given, the type of price support given, or
"precisely" how and when it was withdrawn. The language is disarming. Subsequent paras mention only one franchisee (Conroy) in respect of one respondent (Mobil) and only three occasions of withdrawal (24 February, 18 May and 9 June 1992) and even then one is not told what form the price support took. The first instance of withdrawal alleged is five months after the para 36 arrangement.
In its written submissions (para 3.3) the Commission seeks to minimise this deficiency by disputing the respondents' submission that withdrawal of support is a "central allegation". It is merely, says the Commission, "part of the dynamics of the market pleaded, but it is not the central allegation". The "central allegations" are said to be the making of the para 36 arrangement, the putting it into effect in September 1991, and the further putting it into effect after September 1991.
The argument is revealing. Taxed with the embarrassing lack of particularity for the withdrawal of support allegation, the Commission seeks to downplay its importance. Yet the only allegation that the Commission can point to as being more important, or "central", is the ultimate and conclusionary allegation of contravention of the Act. It is akin to a plaintiff in an industrial accident action saying that he cannot give any particulars of what is alleged to be an unsafe system of work, but anyway the "central" allegation is that the defendant was negligent.
In my opinion, the allegation of withdrawal of support is central. Ryan J said it was "critical", which is much the same thing. The Commission's case amounts to this. Prices at a company's CA sites go up or stay up. Those prices would not go up or stay up unless its franchisees' prices also went up or stayed up. Ergo, the company must have withdrawn support or increased wholesale prices to force its franchisees to increase or maintain prices. Further, the oil company's CA and franchisee prices would not be increased or maintained unless the other two competitors increased or maintained their CA and franchisee prices as well. If the prices of different companies' CA and franchisee sites are the same, it must be because the companies entered into an arrangement to keep them the same. In each case, a provision of that arrangement must have been, as para 36(c) alleges, each company agreeing that it would force its franchisees to raise their prices by means of wholesale price increase or withdrawal of price support.
Instead of providing the particulars directed by Ryan J, the Commission has fallen back on theory rather than fact. It is said that further particulars will be provided after discovery. This is a recurrent theme in the pleading. It appears on 37 occasions in the further amended statement of claim. I shall return to it at a later stage.
The Para 36 Arrangement
The arrangement, the making and putting into effect of which is said to have contravened the Act, was an arrangement made "in or
about 1990-1991 and by the latest in or about September 1991". Particulars sub-joined to this paragraph (which replace particulars struck out by Ryan J) do not support the arrangement pleaded because they are not particulars of an arrangement made in or prior to September 1991. True it is the conversation between Mr Constantine and Mr James, and between the latter and Mr Plant, are alleged to have occurred on 13 September 1991. But what is alleged is not the language of arrangement making. Mr James is simply passing on to Mr Constantine in Melbourne news of what Shell had done in Sydney with its CA sites, together with some information about Sydney Independents. Insofar as Constantine informs Plant of BP's plans to raise prices at its Melbourne CA sites, at the very most the language might amount to implementing a prior arrangement - but not necessarily an unlawful one, and certainly not the para 36 arrangement.
The last observation is prompted by the fact that the information that BP would be "moving the prices up", without any further detail as to what those prices are to be, is a long way short of the alleged provision of the para 36 arrangement that each of the companies would inform each other "in advance of the prices to which one or more of them proposed to increase or maintain" retail prices at CA sites (emphasis added). (Note also the reference in para 65A to "proposed or anticipated price change information ... which was commercially sensitive".)
This departure from the terms of the para 36 arrangement is also a feature of the later parts of the further amended statement of claim which allege implementation of the arrangement. At most, such paras allege Mobil having knowledge (and passing that knowledge on within its own ranks) that another respondent was going to increase prices. There is no allegation of Mobil having knowledge of what those prices are going to be. Still less is there an allegation of a passing on of such knowledge to Mobil managers and franchisees. On the contrary, the admonition is to "keep a watchful eye". If there was a passing of details of anticipated price changes between the oil companies pursuant to the para 36 arrangement, one would expect each company to be passing that information - in the form of specific prices - down the line to Managers and franchisees rather than exhorting them to match the posted prices of competitors.
Moreover, the alleged references to "allow(ing) reasonable dealer margins" (para 40) and obtaining "some relief" for franchisees and "improv(ing) Mobil's franchisees' margins" (para 45) are inconsistent with the alleged provisions of the para 36 arrangement as to increasing wholesale prices and withdrawing price support. If retail prices go up, but at the same time it is desired that margins are to be improved, the logic is that wholesale prices not be increased and price support not be withdrawn. Conversely, if retail prices go up, to the extent that wholesale prices go up also, or price support is withdrawn, margins will not be improved.
The second group of particulars sub-joined to para 36 again do not constitute any particulars of the making of any arrangement.
Such particulars are confined to allegations of parallel pricing. Ryan J (at 19) put the matter bluntly:
In view of (the Commission's) acceptance that para. 36 and the particulars appended to it require some further amendment, it is undesirable that I do more, at this stage, than observe that any particulars appended to the new version should not go beyond what is appropriate to support the substantive allegation. Where the Commission is unable to provide particulars of that kind, it should frankly say so and not dress up as particulars of the contract or understanding, the circumstantial evidence from which it says the making of the contract or understanding should be inferred.
Shortly before the passage just cited, Ryan J referred to the decision of Lockhart J in Trade Practices Commission v Email Limited (1980) 43 FLR 383 at 386. Lockhart J observed:
Parallel conduct may constitute circumstantial evidence from which an arrangement or understanding may be inferred. It depends on the facts of each case. ...
In the United States there is powerful authority for the proposition that, while parallel business conduct may provide circumstantial evidence from which an inference as to the existence of an unlawful agreement may be drawn, it is not sufficient by itself to support an allegation of conspiracy under the Sherman Act and it may be the result of independent decisions of competitors or other economic forces [authorities cited].
Instances where parallel pricing in respect of homogenous products has resulted, not from parallel business conduct, but from independent decisions of competitors and intense competition are [authorities cited].
The retail petroleum products market, with its highly visible price boards and mobile customers, is one where a trader's prices and the fluctuations thereof are as readily apparent to competitors as they are to customers. Therefore parallel pricing in itself, in this particular market, is as likely to follow from the observation and independent decision of rival traders as from prior arrangement. As has been already noted, much of what the Commission would seek to rely on as a putting into effect an unlawful arrangement amounts to no more than that. For example, para 45 alleges that Mr Thomson told his Retail Area Managers to
keep a watchful eye on the Sydney market because it might mean some relief for Mobil's franchisees in that market.
Likewise para 52 relates how Mr Thomson heard reports that competitors along the Hume Highway in the southern Sydney area had increased their prices but Mobil franchisees had not. He told Mr Broome that he did not want "Pricewatch reports" [presumably some marketing report] for the next day to show that Mobil franchisee sites had not "matched the market".
In my view it is an abuse of process to present a pleading centred on an allegation of an arrangement in contravention of s 45 when, either ignoring or forgetting the earlier decision of Ryan J, all that is presented as particulars are conversations which cannot support the arrangement and particulars of parallel pricing which seem at best inherently equivocal.
I therefore accept the argument of counsel for BP, adopted by counsel for the other respondents, that even if the Commission succeeded in proving the matters particularised in para 36 such proof would not establish the making of the arrangement there alleged.
There is a further aspect, namely that the conduct alleged in paras 39, 40, 41, 49, 65A and 65B, which is relied on in the particulars sub-joined to para 36, is exactly the same conduct relied on in para 67 as constituting giving effect to the same arrangement. But it cannot constitute both. Again Ryan J made this clear: see his Honour's judgment at 14-15, an observation
which seems at the time to have been accepted by counsel for the Commission.
Reliance on Discovery
Section 155 of the Act confers on the Commission extensive investigative and evidence-gathering powers not available to most litigants. The Commission can compel the answering of questions and the production of documents and examine witnesses orally on oath. In contrast to discovery and interrogation, the privilege against self-incrimination is not available: s 155(7), Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328. The constraints of relevance are much less strict than those applicable to litigants exercising the forensic procedures of discovery and interrogation. In Melbourne Home of Ford Pty Ltd v Trade Practices Commission (No. 3) (1980) 47 FLR 163 at 173 the Full Court said:
In the present case, the investigative power of the Chairman is being exercised in an investigation into a matter that may constitute a contravention of s 45. Proof of a contravention of that section often depends upon circumstantial evidence. Section 45 is itself expressed in general terms, and when an investigation into such a matter commences with little information, the range of inquiries may need to be broad rather than specific. There is no analogy to be made with interrogatories in litigation. Rules which are entirely appropriate to limit discovery with respect to issues defined by pleadings provide no sure guide to the manner of exercise of a power to ascertain facts which may or may not result in litigation. The investigative power may properly be exercised by inquiring into the existence of facts which do not themselves constitute a contravention or deny the possibility of a contravention. The power may properly be exercised to ascertain facts which may merely indicate a further line of inquiry, or which may tend to prove circumstances from which an inference can be drawn as to the existence of other facts which have a more immediate and proximate relationship to the matter under investigation. The width of the power and the possibility of its abuse both justify judicial examination of an allegation that the power is used to produce an undue burden or oppression, and render that examination difficult to perform.
...
The Court cannot undertake the task of determining the way in which an investigation should be carried out, for that is a task which the legislature has confided to the Commission, the Chairman or the
Deputy Chairman. The Court's jurisdiction is not to set the course of an investigation but to call a halt if it is shown that the investigation exceeds the powers conferred. Short of that point, the protection of the corporate citizen from harassment rests in the good sense of the repository of the power.
In the present case, although the Commission has used its powers under s 155, its further amended statement of claim lacks in fundamental respects particularity of the case sought to be made. Instead, the Commission hopes to be able to make a case by the process of discovery in this litigation. Discovery would be a mammoth exercise, extending at least arguably to every document relating to the pricing of petroleum products (both wholesale and retail) at every Mobil, BP and Shell service station in Sydney and Melbourne between September 1991 and June 1992.
What the Commission is seeking to do fits precisely the homely but apt metaphor which the law has long used. Its pleading shows that the Commission does not have a case, but hopes by the discovery process to fish around in the hope that something will turn up. And this notwithstanding that, as pointed out in Melbourne Home of Ford (No.3), discovery is much less effective than s 155 procedures. In my opinion, this would be an abuse of process of this Court, oppressive to the respondents, and damaging to the interests of litigants (including the Commission itself in other cases) who must be accommodated within the finite resources of this Court.
Giving Effect to the Arrangement
The paragraphs of the further amended statement of claim which deal with the allegation of putting the para 36 arrangement into effect must fall once it is concluded that no acceptable case of the understanding itself has been pleaded. In any case, and without descending to detail, much of that pleading is clearly flawed. Almost all of the allegations deal with discussions internal to Mobil. Insofar as it is pleaded that someone at Mobil says that information has been received from some other respondent, that would not be admissible against such other respondent. As has already been noted, much of what is alleged to have been said in the Mobil camp is consistent more with close observation of the operation of the market than putting into effect any unlawful arrangement.
Argument of Mr Constantine
A separate submission was put on behalf of Mr Constantine. Counsel argued that he could not be liable for aiding and abetting because he was the "doer of the forbidden acts". Reference was made to Mallan v Lee (1949) 80 CLR 198 at 215-216 and Yorke v Lucas (1985) 158 CLR 661 at 671. However this argument is no longer tenable because of the decision of the High Court in Hamilton v Whitehead (1988) 166 CLR 121 at 124.
Orders
There will be orders that the further amended statement of claim dated 7 October 1990 be struck out. For the reasons already mentioned, further pursuit of this proceeding would be an abuse of process. Leave to re-plead is refused. The Commission must pay the respondents' costs of the notices of motion. These costs are to be paid forthwith.
I certify that this and the preceding thirty (30) pages are a true copy of the reasons for judgment of the Honourable Justice Heerey.
Dated:
Associate
Appearances
Counsel for the applicant: Mr J I Fajgenbaum QC and Mr
J Beach
Solicitor for the applicant: Australian Government
Solicitor
Counsel for the first respondent: Mr A C Archibold QC and Mr
T J North
Solicitor for the first Barker Gosling
respondent:
Counsel for the second respondent: Mr W J Young QC and Mr P D
Santamaria
Solicitor for the second Clayton Utz
respondent
Counsel for the third respondent: Mr R A Finkelstein QC and Mr
C M Scerri
Solicitor for the third Freehill Hollingdale Page
respondent
Counsel for the fourth respondent: Mr David Shavin QC
Solicitor for the fourth
respondent:Clayton Utz
Date of hearing: 21 - 22 April 1997
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