Commonwealth Director of Public Prosecutions v Kawasaki Kisen Kaisha Ltd

[2019] FCA 1170

FEDERAL COURT OF AUSTRALIA

Commonwealth Director of Public Prosecutions v Kawasaki Kisen Kaisha Ltd [2019] FCA 1170

File number:

NSD 1932 of 2017

Judge:

WIGNEY J

Date of judgment:

2 August 2019

Catchwords:

CRIMINAL LAW – sentencing – cartel conduct – giving effect to a cartel provision against s 44ZZRG(1) of the Competition and Consumer Law Act 2010 (Cth) – where offender is a corporation – where employees of corporation not residents or citizens of Australia – where offending conduct occurred outside Australia – where offender plead guilty to a single rolled-up offence against s 44ZZRG(1) – consideration of appropriate sentence – where offender provided bulk shipping services of “roll on, roll off” cargo to Australia – where penalties imposed on offender in overseas jurisdictions – where statement of contrition made – where offender gave evidence of measures implemented to strengthen compliance – consideration of sentencing factors in s 16A(2) of the Crimes Act 1914 (Cth) – where multiple offences committed against s 44ZZRG over many years – where sentence proceedings conducted on the basis of agreed facts – consideration of appropriate discounts for mitigating factors including plea of guilty, cooperation with law enforcement agencies and remorse – consideration of specific and general deterrence in sentencing cartel conduct – consideration of totality principle and parity with sentence imposed on co-offender.

Legislation:

Competition and Consumer Act 2010 (Cth) ss 4F, 5, 44ZZRB, 44ZZRD(1), 44ZZRD(2), 44ZZRD(4), 44ZZRG(1), 44ZZRG(2), 44ZZRG(3), 44ZZRK, 45AK, 76(1), 76(1A), Pt X ss 10.17 and 10.17A

Crimes Act 1914 (Cth) ss 16A(1), 16A(2)(a), 16A(2)(c), 16A(2)(d), 16A(2)(e), 16A(2)(f), 16A(2)(g), 16A(2)(h), 16A(2)(j), 16A(2)(ja), 16A(2)(k), 16A(2)(m), 16A(2)(n), 16AC, Part IB

Criminal Code Act 1995 (Cth) ss 5.3, 5.6(1)

Criminal Procedure Act 1986 (NSW) s 91

Evidence Act 1995 (Cth) s 191

Cases cited:

Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; 190 ALR 169

Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2016] FCA 1516

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640

Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (No 5) [1998] FCA 310

Australian Competition and Consumer Commission v Visa Inc [2015] FCA 1020; 339 ALR 413

Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) [2007] FCA 1617; 244 ALR 673

Barbaro v The Queen (2014) 253 CLR 58

Bui v Director of Public Prosecutions (Cth) (2012) 244 CLR 638

Cameron v The Queen [2002] HCA 6; 209 CLR 339

CMB v Attorney General for the State of New South Wales (2015) 256 CLR 346

Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876

Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482

Environment Protection Authority v Truegrain Pty Ltd (2013) 85 NSWLR 125

Direction of Public Prosecutions (Cth) v El Karhani (1990) 21 NSWLR 370

Elias v The Queen [2013] HCA 31; 248 CLR 483

Green v The Queen [2011] HCA 49; 244 CLR 462

Hartman v R [2011] NSWCCA 261

J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 365; 172 ALR 532

Lin v R; Ng v R [2016] NSWCCA 200

Ma v R [2010] NSWCCA 320

Markarian v The Queen [2005] HCA 25; 228 CLR 357

Matthews v The Queen [2014] VSCA 291; 44 VR 280

McMahon v The Queen [2011] NSWCCA 147

Mill v The Queen (1988) 166 CLR 59

Postiglione v The Queen (1997) 189 CLR 295

R v Adler [2005] NSWSC 274; 53 ACSR 471

R v Barrientos [1999] NSWCCA 1

R v Cartwright (1989) 17 NSWLR 243

R v Curtis (No 3) [2016] NSWSC 866

R v Daetz [2003] NSWCCA 216; 139 A Crim R 398

R v De Leeuw [2015] NSWCCA 183

R v Donald [2013] NSWCCA 238

R v El-Hani [2004] NSWCCA 162

R v Ellis (1986) 6 NSWLR 603

R v Gallagher (1991) 23 NSWLR 220

R v Gay [2002] NSWCCA 6

R v Geddes (1936) 36 SR (NSW) 554

R v Glynatsis [2013] NSWCCA 131

R v Hannes [2000] NSWCCA 503; 158 FLR 359

R v Hannigan [2009] QCA 40; 193 A Crim R 399

R v Knight [2004] NSWCCA 145

R v M [2005] NSWCCA 224

R v Pang [1999] NSWCCA 4; 105 A Crim R 474

R v Pogson (2012) 82 NSWLR 60

R v Richard [2011] NSWSC 866

R v Ronen [2006] NSWCCA 123; 161 A Crim R 300

R v Stanbouli [2003] NSWCCA 355; 141 A Crim R 531

R v Sukkar [2006] NSWCCA 92; 172 A Crim R 151

R v Thomson (2000) 49 NSWLR 383

R v Todd [1982] 2 NSWLR 517

R v Whitnall (1993) 42 FCR 512

R v Wilhelm [2010] NSWSC 378

R v Williams [2005] NSWSC 315; 152 A Crim R 548

Ryan v The Queen [2001] HCA 21; 206 CLR 267

Silvano v R [2008] NSWCCA 118; 184 A Crim R 593

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249

SZ v R [2007] NSWCCA 19; 168 A Crim R 249

Tsang v Director of Public Prosecutions (Cth) [2011] VSCA 336; 35 VR 240

Tyler v R [2007] NSWCCA 247

Wang v R [2010] NSWCCA 319

Wong v the Queen [2001] HCA 64; 207 CLR 584

Xiao v R [2018] NSWCCA 4; 96 NSWLR 1

Zhang v R [2011] NSWCCA 233

Date of hearing:

15 November 2018

Registry:

New South Wales

Division:

General Division

National Practice Area:

Federal Crime and Related Proceedings

Category:

Catchwords

Number of paragraphs:

414

Counsel for the Prosecutor:

Ms S McNaughton SC with Dr RCA Higgins SC and Ms G Wright

Solicitor for the Prosecutor:

Commonwealth Director of Public Prosecutions

Counsel for the Accused:

Mr C Moore SC with Mr D Jordan SC and Ms J Roy

Solicitor for the Accused:

Gilbert + Tobin

ORDERS

NSD 1932 of 2017

BETWEEN:

COMMONWEALTH DIRECTOR OF PUBLIC PROSECUTIONS

Prosecutor

AND:

KAWASAKI KISEN KAISHA LTD

Accused

JUDGE:	WIGNEY J
DATE OF ORDER:	2 AUGUST 2019

THE COURT ORDERS THAT:

1.Kawasaki Kisen Kaisha Ltd is convicted of giving effect to a cartel provision contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth).

2.Kawasaki Kisen Kaisha Ltd is fined the sum of $34.5 million.

3.Kawasaki Kisen Kaisha Ltd has 28 days to pay the fine in Order 2.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WIGNEY J:

1. Kawasaki Kisen Kaisha Ltd (K-Line) is a large Japanese company which supplies global shipping services, including the shipment of “roll-on, roll-off” cargo including motor vehicles, trucks, buses and other commercial vehicles on routes to and from Australia.  It ostensibly competed with other large global shipping companies who also supplied services in that market.  From as early as February 1997, however, K-Line and a number of the other global shipping companies had made or entered into an arrangement or understanding which had the effect of limiting or distorting that competition.  That arrangement or understanding only came to an end in September 2012 when action was taken by the Japan Fair Trade Commission and the United States Department of Justice.  The Australian Competition and Consumer Commission (ACCC) subsequently conducted an investigation into the conduct of K-Line and the other shipping companies.  That investigation culminated in the laying of criminal charges against two of the companies.

2. On 3 August 2017, one of the other parties to the arrangement or understanding, Nippon Yusen Kabushiki Kaisha (NYK) was convicted of intentionally giving effect to cartel provisions contrary to s 44ZZRG(1) of the Competition and Consumer Act 2010 (Cth) (Competition Act).  NYK was fined the sum of $25,000,000: Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876 (CDPP v NYK).

3. On 5 April 2018, K-Line pleaded guilty to a single rolled-up charge of intentionally giving effect to cartel provisions contrary to s 44ZZRG of the Competition Act. That charge, which was in essentially the same terms to the charge against NYK, was in the following terms:

   Between about 24 July 2009 and about 6 September 2012, in Japan and elsewhere, in connection with the transport of vehicles to Australia, Kawasaki Kisen Kaisha Ltd intentionally gave effect to cartel provisions in an arrangement or understanding with others, known as the “Respect Agreement”, in relation to the supply of ocean shipping services, knowing or believing that the arrangement or understanding contained cartel provisions.

4. The general nature or effect of the so-called Respect Agreement was that parties to it would not seek to alter their existing market shares or otherwise try to win existing business from each other.  The parties to the Respect Agreement, in addition to K-Line and NYK, were Mitsui O.S.K. Lines Ltd, Toyofuji Shipping Co. Ltd, Nissan Motor Car Carrier Co. Ltd (Nissan MCC) and Wallenius Wilhelmsen Logistics AS.  The cartel provisions in the Respect Agreement to which K-Line gave effect related to the fixing of freight rates in respect of ocean shipping services supplied to eleven major vehicle manufacturers: Maruti Suzuki India Limited, Asian Honda Motor Co Ltd, Honda Motor Company Limited, Nissan Motor Co. Ltd, Suzuki Motor Corporation, General Motors Holdings LLC, Hino Motors Ltd, Mitsubishi Fuso Truck & Bus Corporation, Toyota Motor Corporation, UD Trucks and Isuzu Linex Co Limited.  Five shipping routes for vehicles to Australia were covered by the cartel provisions, being routes from India, Thailand, Japan, Indonesia and South Korea.  The cartel provisions covered the contract years 2009, 2010, 2011 and 2012.

5. The contracts or shipments affected by K-Line’s offending conduct involved the shipping of 106,247 new vehicles to Australia.  While it is not possible to determine the total value of the benefits obtained that are reasonably attributable to the conduct, K-Line derived revenue of AU$97.4 million from the commerce affected by the conduct. 

6. This was, on any view, a very serious offence against Australia’s laws prohibiting cartel conduct.

7. The task for the Court is to impose a penalty that is of a severity appropriate in all the circumstances.  The maximum penalty for the offence, in K-Line’s circumstances, is a fine not exceeding $100 million.  While the central issue is the size of the fine that K-Line should be ordered to pay having regard to, amongst other things, the nature and circumstances of the offence and K-Line’s subjective circumstances, consideration must also be given to the issue of parity with the fine which was imposed on the co-offender, NYK.

   FACTS RELATING TO THE OFFENCE

8. The primary facts relating to the offence upon which K-Line is to be sentenced were not in dispute.  The Commonwealth Director of Public Prosecutions tendered a Statement of Agreed Facts which was made for the purposes of s 191 of the Evidence Act 1995 (Cth). The Statement of Agreed Facts is a very lengthy, detailed and comprehensive document. It is unnecessary to rehearse the facts in their entirety in these reasons. Following is a summary, albeit a fairly detailed summary. Unless otherwise noted, the facts relate to the period covered by the charge.

9. All of the facts contained in the Statement of Agreed Facts have been considered.  If a particular fact is not included in the following summary, it does not follow that it has been ignored.  There were some relatively minor differences between the parties in relation to some inferences that might or might not be drawn from the facts in the Statement of Agreed Facts.  The areas of disagreement and the inferences that have been drawn will be noted where relevant.

   Overview of the offending conduct

10. K-Line is a Japanese company which supplies global shipping services, including the roll-on, roll-off shipment of motor vehicles, trucks, buses, commercial vehicles, agricultural equipment and construction equipment, including on routes to and from Australia.

11. From at least 1997, K-Line, NYK, Mitsui, Toyofuji, Nissan MCC and Wallenius Wilhelmsen Logistics were parties to an arrangement or understanding the general effect of which was that they would not seek to alter the existing market shares of customers’ cargo that was carried by each of them, or otherwise win existing business from each other.  That conduct was referred to within some of the shipping companies as “maintaining the status quo” or giving and receiving “respect”.  It is for that reason that the arrangement or understanding has been referred to generally as the “Respect Agreement”.

12. The Respect Agreement related to the supply of ocean transport services for cargo that can be either driven or rolled on and off specialised vessels.  The cargo included completed passenger cars, trucks, buses, commercial vehicles, agricultural equipment and construction machinery.  The Respect Agreement applied to various international shipping routes, including to and from Australia.

13. The Respect Agreement relevantly contained a cartel provision within the meaning of s 44ZZRD(2) of the Competition Act. That cartel provision had the purpose, effect or likely effect of directly or indirectly fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of the price of the services supplied or likely to be supplied, by any or all of the carriers who were party to the Respect Agreement. It may conveniently be referred to as the price fixing provision.

14. The parties to the Respect Agreement would from time to time engage in conduct which gave effect to the Respect Agreement generally and the price fixing provision specifically.  That conduct included the following.

15. First, the parties would share information with one another about freight rates or proposed changes to freight rates charged or proposed to be charged to customers or potential customers for the supply of services on the routes to Australia.

16. Second, they would reach agreement about freight rates, approximate freight rates, proposed changes or approximate changes to freight rates to be charged and bids or proposed bids to customers or potential customers for the supply of services on the routes to Australia.

17. Third, they would submit bids, or decline to submit bids in accordance with the agreements that had been reached so as to fix, control or maintain prices and maintain existing market shares.

18. Fourth, they would enter into contracts with their customers for the supply of services on the routes to Australia which reflected the bids submitted to those customers.

19. The charge to which K-Line ultimately pleaded guilty involved 20 instances between 24 July 2009 and 6 September 2012 where K-Line gave effect to the price fixing provision in the Respect Agreement.  Each of those instances related to contracts with specific customers in respect of routes to Australia for certain years.  The following table summarises those 20 instances. 

Customer	Route	Year
Maruti Suzuki	India to Australia	2012
Asian Honda	Thailand to Australia	2010
		2011
Honda	Japan to Australia	2010
		2011
Nissan	Japan to Australia	2010
	Indonesia to Australia	2011
	Thailand to Australia	2010
Suzuki	Japan to Australia	2010
		2011
	Thailand to Australia	2012
General Motors	South Korea to Australia	2012
Hino	Japan to Australia (small, mid-sized and large trucks)	2010
Mitsubishi Fuso	Japan to Australia	2010
Toyota	Japan to Australia	2010
	Thailand to Australia	2009-2011
UD Trucks (Volvo)	Japan to Australia	2011
Isuzu	Japan to Australia	2010
		2011
		2012

1. The specific facts relating to each of the 20 instances will be detailed later.

2. The start date for the charge, 24 July 2009, is the date that amendments to the Competition Act, then called the Trade Practices Act 1974 (Cth), which provided criminal sanctions for cartel conduct came into effect. The end date for the charge, 6 September 2012, is the date the Respect Agreement was effectively terminated following action taken by competition authorities in Japan and the United States of America.

   K-Line

3. K-Line is a Japanese transportation company with headquarters in Tokyo, Japan.  K-Line and related companies, which may conveniently be referred to as the K-Line Group, owns and operates different types of cargo ships, including dry bulk carriers, gas carriers, car and heavy equipment carriers and gas tankers.

4. K-Line’s business was at the relevant time divided into nine different divisions or businesses including a containership business, a port business, a logistics business, a dry bulk business, a car carrier business, a liquid natural gas carrier and tanker business, a short sea and coastal business, an offshore energy business and a heavy lifter business.  In 2016, K-Line, NYK and Mitsui announced plans to merge their respective containership businesses.  At that time, NYK and Mitsui also supplied roll-on, roll-off cargo services on routes to and from Australia.  The resulting joint venture company, Ocean Network Express, began trading on 1 April 2018.

5. Prior to the formation of Ocean Network Express, the K-Line Group collectively employed over 8,000 employees.  Around the time it pleaded guilty to the charge, the K-Line Group employed approximately 2,000 employees.  K-Line’s containership business accounted for approximately 50% of K-Line’s consolidated revenues in the fiscal years ending 31 March 2014 to 31 March 2017.

6. K-Line’s car carrier business included vehicle transportation services around the world with companies located in Europe, Africa, North East Asia, South East Asia, Japan, North America, Central and South America, India, Middle East and Oceania.  That business was managed by an internal division in K-Line referred to as the Car Carrier Group.  As of August 2012, the Car Carrier Group had 78 employees.

7. K-Line’s Car Carrier Group operated a fleet of specialised car carrying vessels providing ocean transport services for vehicles, including cars, trucks, and machinery.  The Car Carrier Group was comprised of two main groups, the Car Carrier Business Group and the Car Carrier Planning and Development Group.  Both those groups were headquartered in Tokyo, Japan.  The Car Carrier Business Group managed K-Line’s car shipping business around the world.  It was responsible for negotiating K-Line’s agreements with customers for car shipments on all routes that operated in the area known as the trans-Pacific Ocean, which included Australia, except the cross-trade routes, which were routes which did not terminate or originate in Japan or Korea.  The Car Carrier Planning and Development Group was responsible for long term strategy and business planning.

8. The most senior officer in K-Line who was directly responsible for supervising the Car Carrier Group, along with several other business units, was the Senior Managing Executive Officer.  The most senior positions within the Car Carrier Group in respect of day-to-day operations were the Executive Officers and Managing Executive Officers.  Executive Officers reported to Managing Executive Officers and the Managing Executive Officers reported to the Senior Managing Executive Officer.

9. The Car Carrier Business Group had a General Manager who reported to an Executive Officer and an Assistant General Manager who reported to the General Manager.  The Car Carrier Business Group was divided into several “teams” each of which was responsible for a particular geographical region.  Those teams relevantly included an Asia & Oceania team which was responsible for routes to and from Australia.

   Services on routes to Australia

10. In 2012, approximately 1.1 million new motor vehicles, including passenger motor vehicles, SUVs, light trucks and heavy vehicles, were sold in Australia.  In 2012, the total value of automotive imports to Australia was AU$34.8 billion, consisting of both vehicle imports (AU$26.4 billion) and component imports (AU$8.4 billion).  Automotive imports from Japan comprised the largest share of total automotive imports in 2012 (30%) with a value of AU$10,565 million, followed by Europe (AU$7,582 million), North America (AU$5,936 million), South East Asia (AU$5,075 million), Korea (AU$2,740 million) and China (AU$1,546 million). 

1. Approximately 80% of sales of new passenger vehicles to private and fleet purchasers in Australia were passenger motor vehicles that had been imported into Australia.

2. Nine companies supplied roll-on, roll-off shipping services on routes to and from Australia, either by way of space chartering arrangements or by operating car carrying vessels.  Those companies, who will be referred to generally as the Carriers, were: K-Line, NYK, Mitsui, Wallenius Wilhelmsen, Nissan MCC, Eukor Car Carriers Inc, Höegh Autoliners Holdings AS, Toyofuji and Hyundai Glovis Co Ltd.  Toyofuji was majority owned and controlled by Toyota.  Nissan MCC was originally owned and controlled by Nissan, but during the charge period was majority owned by Mitsui.

3. K-Line, Mitsui and NYK were all Japanese companies.  They were referred to within the shipping industry as the “Three Js”.

4. During the charge period K-Line’s global share of capacity for roll-on, roll-off services, based on the number of specialised car carriers, was between 11.6% and 11.9%.  Mitsui’s share of capacity was between 12.1% and 14.1% and NYK’s share was between 15.5% and 17.2%.  The Three Js accordingly accounted for a significant share of the global capacity for the supply of roll-on, roll-off shipping services.  By comparison, Wallenius Wilhelmsen’s share was between 8.2% and 10.5%; Eukor’s share was between 10.9% and 11.6%; Höegh’s share was between 6.3% and 8.8%; Toyofuji’s share was between 0.9% and 1%; Hyundai Glovis’ share was between 1.9% and 7%; and Nissan MCC’s chare was between 1.9% and 2.8%.

   Conference Agreements and Part X of the Competition Act

5. Part X of the Competition Act provides certain exemptions from competition laws to enable shipping lines to coordinate their liner shipping services and agree freight rates. Where parties have entered into and registered a conference agreement pursuant to Part X of the Competition Act, they are partially and conditionally exempted from the operation of the cartel provisions in the Competition Act in respect of conduct which gives effect to a provision of that conference agreement, or involves the making and levying of freight rate charges in a freight rate agreement between all of the parties to that conference agreement.

6. The Three Js were party to a registered conference agreement called the Australian and New Zealand/Eastern Shipping Conference or ANZESC.  The other parties to ANZESC were ANL Container Shipping Line Pty Limited, ANL Singapore Pte Ltd and Orient Overseas Container Line, though none of those other companies provided roll-on, roll-off services.  Nissan MCC, Willenius Wilhelmsen, Höegh, Eukor, Hyundai Glovis and Toyofuji were not parties to ANZESC.

7. The parties to ANZESC were able to agree common freight rates, referred to as conference tariffs, for the supply of shipping services on routes from Japan, Korea, China, Taiwan, Hong Kong, Borneo and the Philippines to Australia.  They were required to levy those tariffs and not to offer or levy any other freight rates on the routes covered by the agreement unless the parties agreed otherwise.  They were also able to charge surcharges or adjustment factors in accordance with an agreed formula.

8. The Three Js submitted bids and contracted for the supply of services on the routes from Japan to Australia as percentage discounts off tariffs which were set pursuant to ANZESC.  They also applied adjustment factors in accordance with ANZESC.  

9. Importantly, however, none of the instances of conduct referable to the charge to which K-Line pleaded guilty fell within the exemptions of Part X of the Competition Act.

   Relationship between Japanese vehicle manufacturers and carriers

10. Motor vehicle manufacturers required reliable, high-frequency roll-on, roll-off shipping services.  In selecting carriers, the manufacturers, particularly the Japanese manufacturers, focused on the quality of services and damage rate, the consistency and frequency of the sailing schedule and the space allocations and the freight rates charged by the respective carriers.   Japanese vehicle manufacturers traditionally built close and deeply integrated relationships with their carriers.  K-line, for example, held planning meetings with each of its major Japanese vehicle manufacturers at which they discussed operational issues such as space allocations, vessel schedules and safety and damage concerns.

11. In Japan, many companies belonged to a ‘corporate group’, sometimes referred to as a ‘keiretsu’.  The member companies typically, but not always, had small shareholdings in each other.  The members of each keiretsu generally built deep relationships with each other.  Although K-Line did not have any customers of the Car Carrier Group within its “keiretsu” corporate group, K-Line was a member of Toyota’s “Eihokai” suppliers’ organisation, along with NYK, Mitsui and Toyofuji.

    Market structure and characteristics

12. During the charge period, the market for ocean transport service for roll-on, roll-off cargo was characterised by high capital costs with ‘lumpy’ investment, meaning that capacity could not be smoothly adjusted in response to demand.  

13. The market was also characterised by long investment lead times.  That was because the length of time required to commission and build a specialised car, or car and truck vessel was approximately two to three years per vessel.  Such vessels were also not generally available for short term lease or charter, though in some instances space on vessels was made available between particular carriers pursuant to space chartering arrangements.

14. In world terms, Australia is regarded as a relatively small market for motor vehicles.  It is also geographically isolated from other markets, at least when compared to markets in Europe, Asia or the United States. The small size of the Australian market for motor vehicles and the substantial scale of operations necessary to offer the high frequency roll-on, roll-off shipping service desired by vehicle manufacturers meant that there were high barriers to entry to the market for the provision of services on routes to and from Australia.

15. The Three Js accounted for approximately 85% of roll-on, roll-off vessel capacity operated directly from Japan to Australia and 100% of the capacity operated from Thailand to Australia.

16. There was some degree of lawful cooperation and coordination between the Three Js in relation to scheduling and operational matters in respect of the various shipping routes to Australia.  That cooperation and coordination was relevantly reflected in three agreements: the Japan-East Australia Agreement, the Thailand-Australia Agreement and the Japan-West Australia Agreement.  

17. Each of the Three Js was a party to the Japan-East Australia Agreement.  That agreement related to the supply of services in respect of the Japan and South Korea to south and east Australia route.  The Three Js coordinated their sailing schedule, met to discuss operational issues, customer preferences and upcoming capacity requirements, and sold capacity to each other pursuant to space chartering arrangements, all in accordance with this agreement.  Four sailings were provided each fortnight.  On average, K-Line contributed slightly more than one third of the operated capacity on this route.  NYK contributed approximately one third of the operating capacity on this route and Mitsui contributed slightly less than one third.  Toyofuji had space charter arrangements with each of the Three Js that allowed it to acquire capacity on the vessels operated by the Three Js on this route.

18. K-Line and NYK operated their services from Thailand to Australia pursuant to the Thailand-Australia Agreement.  Under that agreement, K-Line and NYK coordinated their sailings to offer a weekly combined schedule to which they contributed equally, met to discuss operational issues, customer preferences, requirements and upcoming capacity requirements, and sold capacity to each other pursuant to space charter arrangements.

19. The Three Js were also parties to the Japan-West Australia Agreement, which related to the Japan to north and west Australia route.  Under that agreement, the Three Js coordinated their sailings to offer a regular combined schedule and met to discuss operational issues and customer preferences and requirements.  In each five month period, K-Line operated three services on this route and each of NYK and Mitsui operated one service.

20. In addition to the three agreements just referred to, the Three Js entered into space chartering agreements with each other and other carriers in relation to the routes in question.  The Three Js had space chartering arrangements with each other so as to meet their contractual obligations to manufacturers including on the Thailand to Australia route; Toyofuji had space charter arrangements with each of the Three Js that enabled it to acquire capacity on those carriers’ services from Japan and Thailand to Australia; and Nissan MCC had space charter arrangements with each of the Three Js that enabled it to acquire capacity on those carriers’ services from Japan, Thailand or Indonesia to Australia.

21. On the Japan to south and east Australia route, the Three Js operated a joint schedule, space chartered on one another’s vessels and called at the same ports.  Between Thailand and Australia, K-Line and NYK operated a joint schedule, space chartered on one another’s vessels and called at the same ports.  Between Thailand and Australia, however, Mitsui operated a different schedule to K-Line and NYK.  On the route from Japan to north and west Australia, the Three Js had different schedules.

22. Some customers announced to all carriers how their business had been awarded between the carriers in relation to the number of vehicles each was carrying and, at least in relation to Asian Honda and Maruti Suzuki, also sometimes shared information about the price bid by the other carriers.  The Three Js therefore had a level of visibility of which carrier was carrying which vehicles on the routes from Japan to south and east Australia, Thailand to Australia, Europe to Australia, India to Australia, and Indonesia to Australia.

23. Each of the vehicle manufacturers who dealt with the carriers was a large foreign organisation.  Those vehicle manufacturers could exercise a degree of bargaining power in negotiations, including in responding to requests from carriers to increase or maintain price, or attempts by carriers to resist rate reductions.  Toyota, Honda and Nissan all had shareholdings in their own carriers.  In addition, Toyota’s carrier, Toyofuji, operated its own services between Japan and Australia.  As a result, the vehicle manufacturers had a degree of understanding of shipping costs.

24. The majority of contracts with most Japanese vehicle manufacturers were renewed annually in March or April, in line with the Japanese financial year.

25. The demand for the relevant services fluctuated during the charge period.  The global economic downturn which commenced in 2008 resulted in a period of excess capacity from 2009 to sometime in 2010 due to a sharp decline in car freight movement at the global level.  That led K-Line to demolish or return over 20 vessels in order to downsize its car carrier fleet.

    K-Line’s operations in relation to Australia

26. K-Line was a foreign corporation which carried on business in Australia within the meaning of s 5 of the Competition Act.

27. K-Line’s subsidiary, K-Line (Australia) Pty Limited (K-Line Australia) acted as K-Line’s general agent in Australia pursuant to an agency agreement.  While K-Line was responsible for providing the relevant shipping services on the relevant routes to Australia, K-Line Australia managed and operated the vessels while they were in Australian ports and provided port and landside services.

28. K-Line operated direct services on the routes from Japan and Thailand to Australia.  On other routes, K-Line provided services to Australia via Singapore.  In Singapore the vehicles were transferred to a vessel operated by one of the Three Js which was travelling from Thailand to Australia, either pursuant to the Thailand-Australia Agreement or K-Line’s separate space charter arrangements with Mitsui on that route.  Transhipping increased transit times, cost and the risk of damage to vehicles in comparison with a direct service.    

    General operation of the Respect Agreement

29. The overarching arrangement or understanding which has been referred to as the Respect Agreement was in existence from at least February 1997.  The general nature and effect of the Respect Agreement, including the price fixing provision, was referred to earlier.  The specific incidents where K-Line gave effect to the Respect Agreement are detailed later.  Following is a description of the general operation of the Respect Agreement.

30. The relevant vehicle manufacturers usually renewed their shipping contracts annually through direct negotiations with one or more of the carriers.  It was generally during the months preceding the renewal of the annual shipping contracts that communications between carriers would occur.

31. There was a “lead carrier” for most vehicle manufacturers.  The lead carrier on a route was typically the carrier which had the strongest historical relationship with the manufacturer, or in some cases, the largest share of the manufacturer’s cargo.  It was the lead carrier which often, but not always, took the lead in giving effect to the Respect Agreement by contacting each of the other carriers when shipping contracts were up for renewal.

32. The range of actions which the lead carrier would engage in so as to give effect to the price fixing provision in the Respect Agreement included the following.

33. First, confirming or reaching agreement with one or more of the other carriers that they did not intend to respond to a tender or request for price by one of the vehicle manufacturers, or did not intend to alter their price from a previous year.

34. Second, discussing freight rates with the other carriers, determining what it considered to be the appropriate freight rates or approximate freight rates or range of freight rates for each of the other carriers to bid to the customer, and then taking the lead in reaching agreement with each carrier about how they would respond to the customer.

35. Third, discussing with other carriers whether freight rates on a route for a particular manufacturer should either generally remain unchanged, increase by an amount or approximate amount, or decrease by an amount or approximate amount, and then seeking to reach agreement with some or all of the carriers to respond accordingly, without necessarily disclosing the actual rates at which each carrier was providing or would provide services to that customer.

36. Where no carrier had incumbent business in relation to a particular customer or route, or a new route was introduced, that business was considered to be “new business”.  The carriers might then do their best to obtain as much of that business as they could in competition with each other.  After a particular carrier provided services for that customer on that route for a period of time, the business would generally then be considered existing business to which the Respect Agreement would apply.

37. Sometimes the carriers would not reach any consensus about the appropriate freight rates, or the bids to be submitted, or whether ‘respect’ had been given, or whether a contract involved “new business”.  Sometimes this lack of consensus was escalated to more senior management.  Sometimes that resolved the dispute.  There were, however, instances where the dispute could not be resolved.

38. There were also occasions where a carrier did not comply with an agreement to fix or maintain prices that had been reached pursuant to the Respect Agreement.  For example, on occasion agreement was reached in relation to the freight rates to be submitted to a car manufacturer by each of the carriers, but one of the carriers would nevertheless submit rates which differed from those which had been agreed, or would engage in subsequent negotiations with the manufacturer about the rate.

39. According to one senior executive at Mitsui, NYK and Wallenius Wilhelmsen almost never failed to comply or acted inconsistently with the Respect Agreement.  Mitsui, on the other hand, acted inconsistently with the Respect Agreement approximately once a year or once every two years on average, and K-Line violated the Respect Agreement generally three or four times a year, but usually only in respect of small volumes of cargo. 

40. Specific instances of non-compliant conduct by K-Line will be detailed later.

    K-Line’s conduct in giving effect to the Respect Agreement – General

41. K-Line gave effect to the price fixing provision in the Respect Agreement through face-to-face and telephone discussions with manager-level employees or senior executives of the other carriers.  The specific instances in which the price fixing provision was given effect to are detailed later.  Following is a general description of K-Line’s approach to the price fixing provision.

    Knowledge of the Respect Agreement and antitrust laws

42. Employees at the Manager level and above, including some Executive Officers, were aware of the Respect Agreement.  Some member of K-Line’s board of directors were also aware of its existence.  The Car Carrier Group held a weekly meeting in which Managers reported to senior management.  At those meetings, Managers or Assistant Managers responsible for each sales team presented reports.  On occasion that included reports concerning conduct which gave effect to the Respect Agreement.

43. Senior employees in the Car Carrier Business Group would occasionally inform more junior employees of agreements reached with their counterparts at other carriers.  At least one of the General Managers in the Car Carrier Business Group understood that the purpose of superiors reporting to more junior employees was to give effect to such agreements and ensure that K-Line acted in accordance with what had been agreed with the other carriers.  Junior employees in the Car Carrier Business Group would occasionally inform their superiors of the outcomes of discussions with their counterparts at other carriers and their superiors would indicate that they approved of such discussions.

44. Most of K-Line’s officers and employees had received training in relation to antitrust law.  Most K-Line employees in the Car Carrier Group were aware that communications between K-Line and other carriers in relation to freight rates and responses to tenders might contravene antitrust laws in some jurisdictions.

    Internal communications

45. The internal communication of important matters within the Car Carrier Business Group, such as contract renewals, generally occurred through the preparation and circulation of written memoranda.  Most employees of the Car Carrier Business Group, however, did not generally report in writing about the communications they had with their counterparts at the other carriers which gave effect to the Respect Agreement.  Those communications were instead reported orally.  It was the General Manager of the Car Carrier Business Group’s view that such communications were not recorded in writing because it was known that they were improper and most likely illegal.  At least some K-Line employees understood that the purpose of limiting such written communications was to make detection of communications more difficult.

46. There were occasions when a K-Line employee in the Car Carrier Business Group did report in writing on communications he or she had with a counterpart at another carrier in order to give effect to the Respect Agreement.  Such reports were often marked with words to the effect of “Confidential. Dispose of after Reading”.  Written records were marked in that way because of an awareness that those communications were most likely improper or illegal under competition law.  It was the practice of the General Manager of the Car Carrier Business Group to delete and destroy documents which recorded communications with the other carriers.

    Communications with other carriers

1. Employees in the Car Carrier Business Group had discussions with their counterparts at the other carriers about freight rates and co-ordinating the carriers’ responses to requests for tenders in order to give effect to the price fixing provision of the Respect Agreement.  Managers had primary responsibility for communications and agreeing freight rates with other carriers.  Occasionally, the Manager might assign a small amount of trade to an Assistant Manager who would be responsible for communicating with the other carriers for the purpose of agreeing freight rates.  The Manager was responsible for finalising the freight rate to be bid, after seeking the necessary approval from senior management including the General Manager and sometimes Executive Officer level as to the rate.

2. Where K-Line did not already carry a particular customer’s cargo on a route, the lead carrier would generally initiate a discussion with K-Line to confirm that K-Line agreed to show “respect” to that lead carrier.  That would generally mean that K-Line would either not change its bid from the previous year, or else would offer a freight rate at or in a range suggested by the lead carrier.  Where K-Line was the lead carrier on a route and one of the other carriers carried the customer’s cargo on the route, K-Line would generally initiate a discussion with the other carriers to confirm that they would show respect to K-Line.  If both K-Line and the other carriers shipped a particular customer’s cargo on a route, discussions would generally be engaged in with the other carriers in order to attempt to maintain existing market shares in relation to the route.

   Complaints about noncompliance by some K-Line managers

3. K-Line was not always trusted by NYK and Mitsui, whose employees were at times wary about K-Line’s compliance with the Respect Agreement.  Mitsui and NYK employees discussed K-Line’s noncompliance between themselves and with K-Line directly on more than one occasion, including in respect of noncompliance in relation to Australian routes.

4. The Car Carrier Business Group General Manager was particularly distrusted by some NYK and Mitsui employees because he would sometimes compete aggressively for market share and on occasion attempt to depart from agreements reached with the other carriers.  Complaints were made to K-Line on a number of occasions about that particular manager.  On one occasion, a Senior Executive of NYK complained about that manager’s actions to the General Manager of Toyota’s logistics department.  In 2010, the manager was threatened by an NYK employee with coordinated retaliatory action by NYK, Wallenius Wilhelmsen and Eukor if he continued to engage in conduct contrary to the Respect Agreement.

   Attempts to limit communications

5. In 2008, K-Line held a global marketing meeting at its headquarters in Tokyo.  That meeting was attended by Japan-based staff at the manager level and above, together with other senior employees who were based around the world.  There was discussion and debate concerning communications with competitors.  Those discussions culminated in the then Senior Managing Executive Officer of the Car Carrier Business Group instructing staff that communications with competitors should continue in a careful manner and should be limited to those at the General Manager level and above.  Communications continued between managers and their respective counterparts at the other carriers despite that instruction.

6. Sometime after April 2010, a Manager in one of the regional teams in the Car Carrier Business Group proposed to the Managing Executive Officer of the Car Carrier Business Group that K-Line should consider ceasing its communications with other carriers because such communications were risky for K-Line and its employees and K-Line should focus on having a strong sales force.  The Managing Executive Officer subsequently discussed that proposal with other senior management of K-Line.  Senior management did not agree with the proposal and communications with the other carriers accordingly continued.

7. In 2011, the Managing Executive Officer, the Executive Officer and the General Manager of the Car Carrier Business Group agreed that junior employees of K-Line should not have to communicate with their counterparts at the other carriers.  The General Manager was aware that such conversations were probably illegal and he wanted to protect the more junior staff at K-Line from the consequences of being involved in such conduct.  The General Manager subsequently instructed the Managers of each sales team in the Car Carrier Business Group that only the General Manager or the Executive Officer should have those communications.  That instruction, however, had limited effect and communications at the manager level generally continued.  On some occasions, however, NYK employees who attempted to make contact with K-Line managers after this time were told by the K-Line manager that they could no longer communicate with them.

8. In April 2012, the General Manager of the Car Carrier Planning and Development Group and Executive Officer of the Car Carrier Business Group agreed that communications with counterparts at K-Line’s competitors should be stopped.  They instructed their subordinates accordingly.  That instruction was followed for some period of time, though communications subsequently recommenced in respect of some routes prior to the end of the charge period.

   Specific instances of giving effect to the price fixing provision

9. The 20 specific incidents of K-Line giving effect to the price fixing provision in the Respect Agreement were summarised in the table earlier in these reasons.  Following is the relevant details of each of those incidents.

10. All of the officers and employees of the carriers, including K-Line, who were involved in the communications and other conduct that comprise these specific incidents were foreign nationals.  All of the relevant communications and other conduct occurred outside Australia.  The vehicle manufacturers which acquired services on the relevant routes from the carriers were all foreign corporations located outside Australia. 

    Maruti Suzuki – India to Australia 2012

11. In December 2011, Maruti Suzuki requested bids for the provision of shipping services for Maruti Suzuki cargo on the route from India to Australia for the period 1 May 2012 to 30 April 2013.  By early January 2012, K-Line and Mitsui agreed that they should seek a freight rate increase of US$60 per unit on the route to compensate for the increase in fuel prices.

12. During January 2012 and April 2012, Maruti Suzuki engaged in negotiations with K-Line in order to resist the proposed increase of US$60 per unit to freight rates.  Those negotiations ultimately resulted in K-Line submitting a revised bid which involved an increase of US$15 per unit and Maruti Suzuki indicating to K-Line that it would accept that rate increase.

13. In its negotiations with Mitsui, Maruti Suzuki informed Mitsui that K-Line and NYK were both willing to accept a rate increase of US$15.  On or around 23 April 2012, a Mitsui employee called his counterpart at K-Line to ask if it was true that K-Line was going to agree to Maruti Suzuki’s $US15 proposal.  The K-Line employee said “Yes”.

14. On 1 May 2012, Maruti Suzuki entered into a contract with K-Line for the provision of services for Maruti Suzuki cargo on the route from India to Australia for the period 1 May 2012 to 30 April 2013 at a freight rate of $425 per unit, which was an increase of US$15 from the previous year’s contract.

15. During the period from 1 May 2012 until 30 April 2013, K-Line provided services to Maruti Suzuki for 328 vehicles on the route from India to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$136,319.

    Asian Honda – Thailand to Australia 2010 and 2011

16. K-Line engaged in conduct which gave effect to the price fixing provision in the Respect Agreement in respect of services provided to Asian Honda on the route from Thailand to Australia in both 2010 and 2011.

    2010 contract

17. On about 18 February 2010, Asian Honda issued a request for bids for the provision of services for Asian Honda cargo on the route from Thailand to Australia for the period 1 April 2010 to 31 March 2011.  K-Line had previously carried 45% of Asian Honda cargo on the Thailand to Australia route, but that had dropped to 40% in 2010.

18. Prior to submitting bids, the general manager of K-Line’s Singapore subsidiary had separate telephone conversations with his counterparts at Mitsui and NYK.  During those telephone conversations, it was agreed that the Three Js would each offer the same freight rate to Asian Honda during the first round of bidding.  That rate was US$44/m³, which was the same rate as the previous year.

19. As events transpired, K-Line submitted a first-round bid of US$42/m³, which was not in accordance with the agreement.  That came about because K-Line’s General Manager was informed that Asian Honda was unhappy with K-Line’s service standards and that if K-Line did not offer a competitive price it would not maintain its existing market share.  Mitsui and NYK, on the other hand, bid US$44/m³ in accordance with the agreement that had been reached. 

20. Mitsui subsequently learnt that K-Line had undercut its bid and questioned the K-Line General Manager, who denied bidding US$42.  The K-Line General Manager then agreed with his counterparts at Mitsui and NYK that they would each bid US$40 in the second round of bids. 

21. K-Line ultimately submitted a second bid at US$40 in accordance with the agreement reached with NYK and Mitsui.  It subsequently entered into a contract with Asian Honda for the provision of services for Asian Honda cargo on the route from Thailand to Australia for the period 1 April 2010 to 31 March 2011 at a freight rate of US$40/m³.  K-Line ended up losing 5% of its market share on that route for the contract period because of service issues.     

22. During the period 1 April 2010 to 31 March 2011, K-Line provided services to Asian Honda for 11,831 vehicles on the route from Thailand to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$5,565,514.

    2011 contract

23. On about 16 February 2011, Asian Honda issued a request for bids for the provision of services for Asian Honda cargo on the route from Thailand to Australia for the period 1 April 2011 to 31 March 2012.

24. Prior to 3 March 2011, a Mitsui employee spoke to his counterpart at NYK and they agreed to offer US$44/m³.  The US$44/m³ price was calculated to reflect a 25% increase in oil prices.  The Mitsui employee subsequently contacted his K-Line counterpart by telephone and asked if K-Line agreed to offer US$44/m³ in the first round of bids.  He emphasised that K-Line should absolutely adhere to the agreed freight rate because he considered that K-Line had not adhered to the agreed bid in the previous contract period.  The K-Line employee said he “understood”.  The Mitsui employee considered that the Three Js had reached agreement to bid US$44/m³. 

25. This process was repeated in respect of the second round of bids.  K-Line, Mitsui and NYK each agreed to bid the same freight rate of US$44/m³ in order to maintain their respective market shares.  In its second round of bids, however, K-Line offered Asian Honda a bid of US$44/m³, with the option of a further US$0.50/m³ discount in exchange for increasing K-Line’s market share by 5%.  

26. On 15 March 2011, K-Line entered into a contract with Asian Honda for the provision of services for Asian Honda cargo on the route from Thailand to Australia for the period 1 April 2011 to 31 March 2012 at a freight rate of US$43/m³.  The contract was for a 45% share of the market, which restored the 5% market share that K-Line had lost in the previous year.

27. Mitsui subsequently discovered that K-Line had undercut it in the second round of bids.  Internal Mitsui communications reveal considerable displeasure about K-Line’s actions.  A Mistui employee subsequently complained about K-Line’s actions to the General Manager of K-Line’s Car Carrier Business Group.

28. During the period from 1 April 2011 to 31 March 2012, K-Line provided services to Asian Honda for 2,858 vehicles on the route from Thailand to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$1,440,632.

    Honda – Japan to Australia 2010 and 2011

29. K-Line engaged in conduct which gave effect to the price fixing provision in the Respect Agreement in respect of services provided to Honda on the route from Japan to Australia in both 2010 and 2011.

30. Mitsui was the lead carrier in relation to Honda cargo on the route from Japan to Australia.

    2010 contract

31. In about February 2010, Honda issued a request for bids for the provision of services for Honda cargo on the routes from Japan to Australia for the period 1 April 2010 to 31 March 2011. Following that request, a Mitsui employee telephoned his K-Line counterpart and said words to the effect: “Let us keep the rates at the same level as those of 2009”.  K-Line acquiesced to Mitsui’s request.  K-Line submitted a bid to Honda at the 2009 rates in accordance with the understanding that had been reached.

32. On 1 April 2010, K-Line entered into a contract for the provision of services for Honda cargo on the routes from Japan to Australia for the period 1 April 2010 to 31 March 2011 at the same rates that had applied in the previous year.

33. During the period from 1 April 2010 to 31 March 2011, K-Line provided services to Honda for 3,122 vehicles on the routes from Japan to Australia. K-Line’s total revenue on the carriage of these vehicles was approximately AU$2,512,267.

    2011 contract

34. In about February 2011, Honda issued a request for bids for the provision of services for Honda cargo on the routes from Japan to Australia for the period 1 April 2011 to 31 March 2012.  That included a request for bids for services which involved stopping at a new port on the south and east Australia route, Townsville.  After receiving the request for bids, a K-Line employee had a conversation with his counterpart at Mitsui.  During that discussion, the Mitsui employee suggested that K-Line and Mitsui should offer a discount off the conference tariff for the provision of services from Japan to Townsville which was lower than the discount they had offered for other ports on routes from Japan to south and east Australia.  The K-Line employee agreed.  K-Line subsequently submitted a bid to Honda which was consistent with that agreement.

35. On 1 April 2011, K-Line entered into a contract for the provision of services for Honda cargo on the route from Japan to Townsville for the period 1 April 2011 to 31 March 2012.  The freight rate was a 15% discount off the conference tariff, which was less than the discount for other ports on that route.

36. During the period from 1 April 2011 to 31 March 2012, K-Line provided services to Honda for 148 vehicles on the routes from Japan to Townsville.  K-Line did not provide services to Honda in relation to any other ports in Australia in this period.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$147,187.

    Nissan – Japan to Australia 2010 and 2011

37. Mitsui was the lead carrier in relation to Nissan cargo on the routes from Japan to Australia.

38. In about early February 2010, Nissan issued a request for bids for the provision of services for Nissan cargo on various routes for the period from 1 April 2010 to 31 March 2011, including the route from Japan to north and west Australia.  K-Line subsequently engaged in discussions with Nissan during which Nissan made it clear that a freight rate reduction was non-negotiable.

39. During April 2010 a Mitsui employee initiated several discussions with his counterpart at K-Line.  During those discussions, the Mitsui employee informed the K-Line employee that Mitsui was intending to accept a decrease in the freight rate and requested that K-Line decrease its freight rate for Nissan cargo on the route to the level the rates were at prior to 2008.  K-Line agreed.

40. Consistent with that agreement, on about 27 April 2010, K-Line submitted a final bid to Nissan which increased the discount off the conference tariff for the route from Japan to north and west Australia from 9% to 13%.  K-Line subsequently entered into a contract for the provision of services for Nissan cargo on the route from Japan to north and west Australia for the period 1 June 2010 to 31 March 2011 at that freight rate.  The contract was subsequently extended until June 2011.

41. During the period from 1 June 2010 to 31 March 2011, K-Line provided services to Nissan for 1,181 vehicles on the route from Japan to north and west Australia.  K-Line’s total revenue on the carriage of these vehicles was approximately AU$1,531,478.

    Nissan – Indonesia to Australia 2011 and 2012

42. K-Line engaged in conduct which gave effect to the price fixing provision in the Respect Agreement in respect of services provided to Nissan on the route from Indonesia to Australia in both 2011 and 2012.

43. Nissan MCC was originally wholly owned by Nissan.  In 2009, it became a subsidiary of Mitsui, though Nissan retains a 10% interest.  Nissan MCC owned and operated its own car and truck carrying vessels, but also subcontracted with other carriers as necessary.  Nissan historically had delegated ocean transportation services for all routes to Nissan MCC with the understanding that Nissan MCC would then subcontract any services beyond its capacity to other carriers.

    2011 contract

44. In late 2010, Nissan was proposing to move part of its production of the Micra model vehicle from Thailand to Indonesia.  At that time, Nissan did not ship any cars from Indonesia to Australia.  Nissan MCC had previously been awarded 100% of the Nissan cargo on the route from Thailand to Australia and had entered into subcontracting arrangements with each of the Three Js because it did not operate its own vessels on that route.

45. In late December 2010, Nissan issued an initial request for quotes to K-line, Mitsui, NYK, Höegh, Wallanius Wilhelmsen and Nissan MCC for the provision of services for Nissan cargo on the route from Indonesia to Australia.  That request required each of the carriers to submit proposed indicative freight rates for the provision of services on this route.

46. Following that request, on about 6 January 2011, a senior manager at Nissan MCC contacted a K-Line representative and asked K-Line to submit a freight rate of US$50/m³ for the direct shipment of vehicles from Indonesia to Australia and US$55/m³ for transhipment.  The Nissan MCC General Manager also indicated that he would approach NYK and Mitsui and ask that they submit the same bids.  K-Line agreed to submit the freight rates proposed by Nissan MCC.  Nissan MCC subsequently submitted freight rates to Nissan for both direct shipment and transhipment based on the rates submitted to it by K-Line, Mistui and NYK.   

47. On about 13 July 2011, Nissan issued a request for bids for the provision of services for Nissan cargo on the route from Indonesia to Australia for the period 1 October 2011 to 31 March 2012.  In response, K-Line submitted a bid to Nissan of US$51/m³ on an all-in basis for every port.  Nissan later requested that K-Line review its offer.  In response, K-Line revised its offer to a base freight rate of US$49.31/m³, plus the applicable bunker adjustment factor stipulated by Nissan.

48. On 30 September 2011, K-Line entered into a contract with Nissan MCC for the provision of services for Nissan cargo on the routes from Indonesia to Australia at a freight rate of $49.31/m³ plus the applicable bunker adjustment factor stipulated by Nissan, for the period 1 October 2011 to 31 March 2012.

49. In the period from 1 October 2011 to 31 March 2012, K-Line provided services to Nissan for 258 vehicles on the route from Indonesia to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$127,376.

    2012 contract

50. On about 26 February 2010, Nissan issued a request for bids to the Three Js and Höegh for the provision of services for Nissan cargo on the route from Thailand to Australia for the period 1 April 2010 to 31 March 2011.  Nissan requested that freight rates be reduced from US$41/m³ to US$40/m³.  At that time, Nissan MCC had been awarded 100% of the Nissan cargo on the route from Thailand to Australia, but entered into space-chartering arrangements with the Three Js because it did not operate its own vessels on that route. 

1. Following Nissan’s request, a General Manager at K-Line had a telephone conversation with his counterpart at NYK during which they agreed that K-Line and NYK would maintain existing freight rates and not offer a reduced rate as requested by Nissan.  The K-Line manager also had a telephone discussion with an employee at Nissan MCC during which he indicated that K-Line would maintain the existing rate for Nissan cargo on the route from Thailand to Australia.  K-Line believed that Nissan MCC would coordinate Mitsui’s bid in a way which was consistent with the agreement reached between K-Line and NYK.

2. K-Line submitted a bid to Nissan which, consistent with the agreement that had been reached, was at the existing freight rate of US$41/m³.  Nissan agreed to contract with K-Line at that freight rate for the period 1 April 2010 to 31 May 2010 while negotiations continued.  Ultimately K-Line agreed to reduce its freight rate to US$40.50/m³ for the period from 1 June 2010 to 31 March 2011 and entered into a contract accordingly.

3. In the period from 1 April 2010 to 31 March 2011, K-Line provided services to Nissan for 4,494 vehicles on the routes from Thailand to Australia.  K-Line’s total revenue on the carriage of these vehicles was approximately AU$2,724,545.

   Suzuki – Japan to Australia 2010 and 2011

4. K-Line engaged in conduct which gave effect to the price fixing provision in the Respect Agreement in respect of services provided to Suzuki on the route from Japan to Australia in both 2010 and 2011.

   2010 contract

5. By early April 2010, Suzuki had issued a request for bids from the Three Js for the provision of services for Suzuki cargo on the routes from Japan to Australia for the period 1 April 2010 to 31 March 2011.  Following Suzuki’s request, a representative of Mitsui had a conversation with his counterpart from K-Line during which K-Line agreed with Mitsui’s proposal that they would each maintain their existing freight rates.  K-Line submitted a bid on 12 April 2010.

6. K-Line subsequently entered into a contract with Suzuki for the provision of services for Suzuki cargo on the routes from Japan to Australia for the period 1 April 2010 to 31 March 2011 at freight rates calculated by reference to a discount from the conference tariff.  On the route from Japan to south and east Australia the rates employed the same discount that had applied in the previous year and on the route from Japan to north and west Australia the rates employed a greater discount than the previous year.

7. In the period from 1 April 2010 to 31 March 2011, K-Line provided services to Suzuki for 11,542 vehicles on the routes from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$7,473,627.

   2011 contract

8. In about February or March 2011, Suzuki requested bids for the provision of services for Suzuki cargo on the routes from Japan to Australia for the period 1 April 2011 to 31 March 2012.  A representative of K-Line subsequently had conversations with his counterparts at Mitsui and NYK confirming that K-Line’s freight rates would remain unchanged.

9. On 1 April 2011, K-Line entered into a contract for the provision of services for Suzuki cargo on the routes from Japan to Australia for the period 1 April 2011 to 31 March 2012 at the same discounts off the conference tariff it had applied in the previous year.

10. During the period from 1 April 2011 to 31 March 2012, K-Line provided services to Suzuki for 7,145 vehicles on the routes from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$5,717,428.

    Suzuki – Thailand to Australia 2012 and 2013

11. In late August 2012, Suzuki issued a request for bids for the provision of services on the route from Thailand to Australia.  This was a new route for Suzuki which had become necessary because Suzuki was shifting its production of the Swift model vehicle from Japan to Thailand.  On about 28 August 2012, a K-Line representative had a telephone conversation and a subsequent meeting with a counterpart at NYK.  NYK and K-Line agreed to submit bids to Suzuki of around US$45/m³ to US$50/m³.  The K-Line employee then had a telephone conversation and subsequent meeting with his counterpart at Mitsui.  The K-Line employee sought Mitsui’s agreement to a collaborative approach whereby K-Line and NYK would contract with Suzuki and share the cargo, and then sublet cargo to Mitsui.  Mitsui did not agree.

12. In late August 2012, K-Line submitted freight rates to Suzuki of US$48/m³ on the route from Japan to south and east Australia and US$53/m³ on the route from Japan to north and west Australia.  Those rates were consistent with the agreement that had been reached with NYK.  Following feedback from Suzuki, K-Line subsequently submitted a revised proposal of US$45/m³ on the route from Japan to south and east Australia and US$48/m³ on the route from Japan to north and west Australia.  K-Line eventually entered into a contract with Suzuki and supplied services on the route from Thailand to Australia at a freight rate of US$45/m³.

13. In the period from 1 January 2013 to 31 December 2013, K-Line provided services to Suzuki for 2,111 vehicles on the route from Thailand to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$933,508.

    General Motors – South Korea to Australia 2012 to 2014

14. Mitsui was the lead carrier in relation to General Motors cargo on the route from South Korea to Australia and typically carried all the cargo on that route.

15. In about May 2012, General Motors conducted a global tender process which included the provision of services for General Motors cargo on the route from South Korea to Australia for the period 1 January 2013 to 31 December 2014.  In about June 2012, a representative of K-Line had a telephone conversation with his counterpart at Mitsui during which K-Line representative indicated that K-Line would “respect” Mitsui’s existing contract with General Motors on the South Korea to Australia route.  Mitsui was subsequently chosen by General Motors as the successful carrier.  K-Line did not provide any services to General Motors on the route from South Korea to Australia during the period 1 January 2013 to 31 December 2014.

    Hino – Japan to Australia 2010

16. Hino manufactured small, mid-sized and large trucks.  On the route from Japan to south and east Australia NYK was historically the lead carrier in respect of large and mid-sized Hino trucks and Mitsui was the lead carrier in respect of small trucks.  K-Line did not carry any Hino cargo on the route from Japan to south and east Australia.  Each of the Three Js carried Hino cargo on the route from Japan to north and west Australia on a rotating basis.  K-Line carried about 60% of the cargo and Mitsui and NYK both carried about 20%.

    Small truck cargo

17. By early February 2010, Toyota, on behalf of Hino, had issued a request for bids for the provision of services for Hino small truck cargo for the period 1 April 2010 to 31 March 2011 on the routes from Japan to south and east Australia and Japan to north and west Australia.  Following that request a Mitsui employee had a discussion with his counterpart at K-Line.  During that discussion K-Line agreed to bid at a freight rate which, by employing a lower discount off the conference tariff, was effectively a higher rate than the rate bid by Mitsui.  That was done in order to maintain Mitsui’s status as sole carrier on each route.  K-Line submitted bids in accordance with that agreement.

18. K-Line entered into a contract with Hino for the provision of services for Hino cargo on the route from Japan to north and west Australia for the period 1 April 2010 to 31 March 2011 at a freight rate of 5% discount off the conference tariff for small trucks.  K-Line did not carry any Hino cargo on the route from Japan to south and east Australia for the period 1 April 2010 to 31 March 2011.

    Mid-sized and large truck cargo

19. By early February 2010, Hino had issued a request for bids for the provision of services for Hino mid-sized and large truck cargo on the route from Japan to south and east Australia for the period 1 April 2010 to 31 March 2011.  Following Hino’s request, an NYK employee had a discussion with a K-Line employee.  In that discussion K-Line agreed that it would bid a freight rate specified by NYK so as to “respect” NYK’s market share.  K-Line submitted a bid in accordance with that agreement and NYK retained 100% of the services in respect of this route.

20. During the period from 1 April 2010 to 31 March 2011, K-Line transported one vehicle for Hino on the route from Japan to north and west Australia.  K-Line’s total revenue on the carriage of this vehicle was approximately AU$1,593.

    Mitsubishi Fuso – Japan to Australia 2010

21. NYK was the lead carrier in relation to Mitsubishi Fuso cargo on the Japan to Australia route.  NYK carried all of the Mitsubishi Fuso cargo on the Japan to south and east Australia route.  On the route from Japan to north and west Australia, the Three Js all carried Mitsubishi Fuso cargo as part of a joint service which involved sending one vessel on the Japan to north and west Australia route per month on a five month rotational basis.  The cargo was shipped on the vessel of the carrier whose turn it was in the rotation.  Despite this, each of the Three Js would submit a separate bid and reach a separate agreement on freight rates with the customer.

22. In about March 2010, Mitsubishi Fuso issued a request for freight rate reductions from the Three Js on all routes, including the route from Japan to north and west Australia.  On about 25 March 2010, representatives of K-Line, NYK, and Mitsui met at NYK’s Tokyo office and shared information about their proposed responses to Mitsubishi Fuso.  NYK had already agreed to the rate reduction sought by Mitsubishi Fuso.  K-Line had been inclined to accept the full rate reduction sought by Mitsubishi Fuso, however K-Line agreed to resist the requested freight rate reduction by limiting the additional discount it would offer Mitsubishi Fuso to 2% off the conference tariff.  A representative of K-Line subsequently advised his counterpart at Mitsui that K-Line intended to offer Mitsubishi Fuso a further 4% discount. K-Line and Mitsui agreed on the reduction that each would offer Mitsubishi Fuso.

23. K-Line subsequently submitted a bid to Mitsubishi Fuso which involved a discount of an additional 6% off the conference tariff for the period from 1 April 2011 to 31 December 2011.

24. In the period from 1 January 2011 to 31 December 2011, K-Line provided services to Mitsubishi Fuso for 214 vehicles on the routes from Japan to Australia. K-Line’s total revenue on the carriage of those vehicles was approximately AU$782,164.

    Toyota – Japan to Australia 2010

25. Toyota entered into six monthly contracts for services in March and September each year.  NYK was the lead carrier in relation to Toyota cargo.

26. In 2010, Toyota requested an overall freight rate reduction in order to reduce its overall global expenditure.  Prior to responding to Toyota’s request for a freight rate reduction, a K-Line employee had a telephone conversation with his counterpart at NYK regarding proposed adjustments to freight rates on routes from Japan to Australia.  During that conversation K-Line and NYK agreed to resist the freight rate reduction requests.

27. During the period 1 October 2010 to 31 March 2011, K-Line provided services to Toyota for 25,442 vehicles on the routes from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$21,945,999.

    Toyota – Thailand to Australia 2009 to 2011

28. Toyota requested NYK, K-Line and Toyofuji to provide their freight rates for the shipment of cargo from Thailand to Australia each time it renewed its six month freight contracts during the period from 2009 to 2011.  Toyofuji did not operate its own vessels on this route and instead entered into space chartering arrangements with K-Line and NYK.  Toyofuji’s bid to Toyota was based on an average of the rates it received from K-Line and NYK pursuant to the space chartering arrangements with an added premium.

29. After contracts for the shipment for Toyota cargo came up for renewal, but before bids were submitted to Toyota, a K-Line employee had conversations with his counterpart at Toyofuji.  During those conversations, Toyofuji enquired as to the freight rate K-Line intended to submit to Toyota and K-Line told Toyofuji whether it would keep freight rates the same as in previous years, or whether it was slightly increasing or decreasing the freight rates.  NYK and K-Line calculated their rates separately to one another, but employees from each company confirmed their respective bids before submitting them to Toyofuji.

30. On some occasions after bids were submitted, representatives of K-Line and NYK had further discussions during which they exchanged information about whether Toyota had accepted their existing bid or if their respective bids were too high.  K-Line and NYK were thereby able to reach an understanding in relation to any freight rate adjustments that they needed to make in order to maintain existing market shares for Toyota cargo from Thailand to Australia.

31. In the period from 24 July 2009 to 31 March 2011, K-Line provided services to Toyota for 16,973 vehicles on the route from Thailand to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$12,513,433.

    UD Trucks (Volvo) – Japan to Australia 2011 and 2012

32. UD Trucks was a subsidiary of Volvo.  Volvo Logistics conducted tenders for shipping services for UD Trucks’ cargo each year in around September or October.  NYK was the sole carrier of this cargo.

33. Volvo Logistics issued a request for bids for the provision of services in relation to UD Trucks cargo on the route from Japan to Australia for the contract period from 1 October 2011 to 30 September 2012.  After that request was issued, a representative of K-Line had a discussion with his counterpart at NYK.  During that discussion, the NYK representative gave the K-Line representative details about NYK’s proposed bid.  The K-Line representative indicated that K-Line would “respect” NYK’s market share on this route.  NYK was subsequently awarded 100% of UD Trucks’ cargo on this route.

34. K-Line did not transport any UD Trucks’ cargo on the route from Japan to Australia for the period from 1 October 2011 to 30 September 2012.

    Isuzu – Japan to Australia 2010 to 2012

35. K-Line was the lead carrier in relation to Isuzu cargo on the routes from Japan to Australia.  Isuzu generally commenced freight rate negotiations by first contacting K-Line.

    2010 contract

36. In about March 2010, Isuzu commenced freight rate negotiations with K-Line for the provision of services on the routes from Japan to south and east Australia and Japan to north and west Australia.  Before settling final rates with K-Line, Isuzu made enquiries with NYK and Mitsui.  K-Line informed NYK and Mitsui what rate it had submitted to Isuzu and requested NYK and Mitsui to respond to Isuzu with a higher rate.  K-Line understood that NYK and Mitsui would submit bids in accordance with this request.  

37. K-Line was ultimately awarded 100% of the cargo on the route from Japan to south and east Australia and entered into a contract with Isuzu for the provision of services on that route for the period 1 April 2010 to 31 March 2011.

38. During the period from 1 April 2010 to 31 March 2011, K-Line provided services to Isuzu for 5,347 vehicles on the routes from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$8,709,512.

    2011 contract

39. In about March 2011, Isuzu commenced freight rate negotiations with K-Line for the provision of services on the routes from Japan to south and east Australia and from Japan to north and west Australia for the contract period from 1 April 2011 to 31 March 2012.  In about March 2011, an NYK employee received a phone call from his counterpart at K-Line requesting NYK to submit freight rates to Isuzu for the transportation of cargo from Japan to south and east Australia which were higher than the rates that K-Line had submitted to Isuzu.  K-Line understood that NYK would act in accordance with that request.  The K-Line employee also contacted his counterpart at Mitsui.  The K-Line representative informed Mitsui of the freight rates it had submitted to Isuzu for the transportation of Isuzu cargo from Japan to south and east Australia and asked whether Mitsui would respect K-Line.  The Mitsui representative agreed that it would.

40. K-Line subsequently entered into a contract with Isuzu for the provision of services for Isuzu cargo on routes from Japan to Australia for the period 1 April 2011 to 31 March 2012.  It was awarded 100% of the cargo on the route from Japan to south and east Australia.

41. During the period from 1 April 2011 to 31 March 2012, K-Line provided services to Isuzu for 6,779 vehicles on the routes from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$12,516,615.

    2012 contract

42. In or around March 2012, Isuzu commenced freight rate negotiations with K-Line for the provision of services on the route from Japan to Australia for the period 1 April 2012 to 31 March 2013.  The K-Line Managers responsible for those negotiations did not have any contact with their counterparts at NYK and Mitsui.  K-Line and Isuzu agreed to an increase in freight rates for the transportation of Isuzu cargo on the route and entered into a contract accordingly.

43. On 31 March 2012, NYK entered into a contract with Isuzu for the provision of services for Isuzu cargo on routes from Japan to north west Australia for the period 1 April 2012 to 31 March 2013.  In or around April or May 2012, a K-Line employee was contacted by his counterpart at NYK.  The NYK employee indicated that Isuzu had requested price estimates from NYK in order to check the reasonableness of the price it had agreed with K-Line.  The K-Line employee nominated the rates that NYK should submit to Isuzu in response to that request.

44. During the period from 1 April 2012 to 31 March 2013, K-Line provided services to Isuzu for 6,473 vehicles on the route from Japan to Australia.  K-Line’s total revenue on the carriage of those vehicles was approximately AU$12,622,444.

    Action by regulators

45. On 6 September 2012, officers of the Japan Fair Trade Commission and the United States Department of Justice conducted dawn raids on the offices of K-Line and a number of other shipping companies.  Those raids were the subject of substantial press coverage.  K-Line ceased to give effect to the Respect Agreement following those raids, though most of the contracts it had entered into during the previous year continued in force after that date.

    ELEMENTS OF THE OFFENCE

46. The elements of the offence created by s 44ZZRG of the Competition Act were analysed in some detail in CDPP v NYK at [171] to [188]. It is unnecessary to repeat that detail here. It perhaps suffices to observe again that while the offence provision in s 44ZZRG itself appears beguilingly straightforward, the devil is in the detailed and complex definition of the term “cartel provision” in s 44ZZRD of the Competition Act. To fully appreciate the scope of the offence it is also necessary to have regard to other relevant definitional provisions in s 4F and s 44ZZRB of the Competition Act, as well as provisions of the Criminal Code Act 1995 (Cth) which provide for, amongst other things, the fault elements applicable to federal criminal offences, including those in the Competition Act. It should also perhaps be added that in November 2017 the relevant offence provisions were renumbered.

47. Since K-Line committed its offence, the criminal cartel provisions in the Competition Act have been renumbered. The former s 44ZZRG is now s 45AG of the Competition Act.

48. In short and simple terms relevant to the particulars of the offence to which K-Line has pleaded guilty, the relevant elements of the offence are as follows.

1. There was relatively limited evidence or other information in relation to K-Line’s size at relevant times.  Perhaps most significantly, it was agreed that K-Line’s annual turnover during the 12 month period prior to date that it began committing the offence (23 July 2008 to 24 July 2009), relevantly excluding supplies not connected with Australia, was approximately AU$1 billion.  That fact would suggest that, on just about any view, K-Line was or must have been a very large corporation at the time the offence was committed.  Small corporations do not tend to have such a large turnover.

2. Other facts relevant to size include that during the period when the offence was committed, the K-Line Group collectively employed over 8,000 employees.  As at the time of sentence, however, it employed about 2,000 employees.  During the period when the offences were committed, K-Line’s share of the market for the supply of roll-on, roll-off shipping services was between about 11.6% and 11.9%.  It shipped just over 600,000 vehicles to Australia during that period, earning revenue of just over $630,000.

3. As for its size at the date of the sentence hearing, in the Japanese fiscal year ending 31 March 2018, being the relevant fiscal year immediately prior to the sentence hearing, K-Line’s consolidated operating revenue was almost US$11 billion, its operating income was almost US$68 million and its profit attributable to the owners of the parent company was US$98 million.

4. K-Line was clearly a very large corporation.

5. K-Line submitted that it was a materially smaller corporation than NYK.  That submission will be considered later in the context of parity.

   Need for adequate punishment: s 16A(2)(k) of the Crimes Act

6. The need to impose an adequate punishment in all the circumstances is largely self-evident and requires little elaboration.  One issue that requires consideration in this context, however, is the relevance or weight that is to be attached to the fact that K-Line has been penalised in other jurisdictions in respect of conduct relating to or arising from the cartel the subject of this matter.  Those penalties were detailed earlier.

7. There is no doubt that in sentencing an offender, the Court can take into account “extra-curial” punishment.  Extra-curial punishment is “loss or detriment imposed on an offender by persons other than the sentencing court, for the purpose of punishing the offender for his [or her] offence or at least by reason of the offender having committed the offence”: Silvano v R [2008] NSWCCA 118; 184 A Crim R 593 at [29]; see also R v Wilhelm [2010] NSWSC 378 at [21]. The weight to be given to any extra-curial punishment will depend on the particular facts and circumstances of the case. Relevant considerations include the nature and size of the extra-curial punishment, the extent to which the penalty related to the conduct the subject of the offence, the capacity of the offender to pay, the effect that the other penalty had in real terms on the offender and other questions of hardship. In some circumstances, extra-curial or extra-judicial punishment may attract very little or no weight: R v Daetz [2003] NSWCCA 216; 139 A Crim R 398 at [62].

8. Administrative penalties imposed on an offender may be considered to be a form of extra-curial punishment: R v Whitnall (1993) 42 FCR 512 at 517-518; R v Gay [2002] NSWCCA 6 at [23]-[24]; R v Ronen [2006] NSWCCA 123; 161 A Crim R 300 at [50]-[52]; R v Hannigan [2009] QCA 40; 193 A Crim R 399 at [25].

9. In CDPP v NYK (at [278]-[283]) it was accepted that the substantial penalties that had been imposed on NYK in overseas jurisdictions should be afforded weight, but not significant weight. That was so for four reasons. First, with the exception of the surcharge payment order imposed by the Japan Fair Trade Commission, the overseas penalties were not imposed in respect of the conduct the subject of the charge or offence for which NYK was being punished. Second, the penalty that was to be imposed was required to be sufficient to act as a deterrence and “[l]arge multinational corporations who engage in global cartels or other anti-competitive conduct must be sent a clear and strong message that they will be punished in Australia in respect of Australian-related conduct irrespective of what penalties may have been imposed in other jurisdictions” (at [281]). Third, insofar as extra-curial punishment was relevant to specific deterrence, that was not a particularly significant consideration given that it was accepted that NYK had been deterred and rehabilitated. Fourth, while the overseas penalties were large, so too was NYK.

10. The same considerations apply in relation to the overseas penalties imposed on K-Line and the weight that should be afforded to them in the exercise of the sentencing discretion.

11. K-Line advanced two submissions in relation to the approach taken to the overseas penalties in CDPP v NYK.

12. The first submission was that the relevance of the overseas penalties was not limited to extra-curial punishment and specific deterrence.  In K-Line’s submission, the other penalties bore “substantively on the application of the totality principle”.  K-Line relied, in support of that submission, on what was said about the totality principle in Mill v The Queen (1988) 166 CLR 59. In Mill, the offender had committed a series of armed robberies over a six week period.  Two were committed in Victoria and one in Queensland.  The offender was convicted and sentenced in Victoria in respect of the Victorian offences.  On release after serving a sentence of eight years imprisonment in Victoria, the offender was arrested, tried and convicted in Queensland in respect of the Queensland offence.  He was sentenced to another lengthy term in prison.  The High Court held, amongst other things, that the sentencing judge in Queensland erred and that “the proper approach which his Honour should have taken was to ask what would be likely to have been the effective head sentence imposed if the [offender] had committed all three offences of armed robbery in one jurisdiction and had been sentenced at one time” (at 66).

13. It is unclear exactly how the totality principle was supposed to operate in the circumstances of this case.  K-Line accepted that it would not be “feasible to commence the sentencing exercise in this case by reference to the hypothetical penalty that would be imposed for all of the conduct in respect of which K-Line has received criminal and civil penalties around the world”.  So much so may readily be accepted.  It was nevertheless submitted by K-Line that the decision in Mill “demonstrates the need for the court to craft a sentence which gives effect to the principle of totality even in respect of different, but related, offending that has been previously punished in different jurisdictions”.  The effect, so it was said, was to “decrease the penalty that would otherwise be necessary to adequately reflect the seriousness of the crime in respect of which it is imposed”.  Indeed, the totality principle was said to require a “substantial downward adjustment on penalty”.

14. That submission is rejected.  There is no doubt that the penalties imposed on K-Line overseas must be afforded some weight as a mitigating factor and that the penalty that would otherwise be imposed on K-Line must be reduced accordingly.  It is, however, at best doubtful that the overseas penalties and the appropriate reduction in the sentence to reflect them should be approached through the prism of the totality principle in the way contended by K-Line.  More significantly, even if it was somehow necessary to approach the issue having regard to the totality principle, the application of the totality principle in the circumstances of this case would not warrant a “substantial downward adjustment” as contended by K-Line.  That is so for a number of reasons.

15. First, it is not settled law that the totality principle as formulated in Mill applies in respect of offences committed in overseas jurisdictions, as opposed to State and federal offences committed in different States or Territories.

16. The totality principle is reflected in s 16B of the Crimes Act, which provides as follows:

    16B     Court to have regard to other periods of imprisonment required to be served

    In sentencing a person convicted of a federal offence, a court must have regard to:

    (a)any sentence already imposed on the person by the court or another court for any other federal offence or for any State or Territory offence, being a sentence that the person has not served; and

    (b)any sentence that the person is liable to serve because of the revocation of a parole order made, or licence granted, under this Part or under a law of a State or Territory.

17. In Postiglione v The Queen (1997) 189 CLR 295, McHugh J held (at 314 footnote 47) that the sentencing judge was entitled to take into account a sentence imposed on the offender by an Italian court as a mitigating factor, but was not entitled to take it into account “under the totality principle recognised by s 16B of the [Crimes] Act” because s 16B was confined to sentences imposed for federal, State or Territory offences”. His Honour also held that the sentencing judge was not entitled to take the Italian sentence into account under the totality principle as formulated in Mill.  While McHugh J dissented in Postiglione, none of the judges in the majority suggested that the Italian sentences were required to be taken into account either pursuant to s 16B of the Crimes Act or pursuant to the totality principle as formulated in Mill. Justices Dawson and Gaudron held (at 303) that the convictions for offences under Italian law “properly justify a difference in sentencing outcomes”, though their Honours did not refer to the totality principle in that context. Similarly Kirby J (at 343) had regard to the fact that the appellant would have to serve a sentence of imprisonment in Italy, but not in the context of the totality principle.

18. K-Line did not identify any authority for the proposition that the totality principle as articulated in Mill applied where the relevant offences were committed in several different overseas jurisdictions.  There is, however, at least one case where it appeared to be accepted that the totality principle might apply to foreign sentences.  In Tsang v Director of Public Prosecutions (Cth) [2011] VSCA 336; 35 VR 240, the Court of Appeal of Victoria considered whether a sentencing judge had erred in not taking into account a period of imprisonment that the appellant had served in Canada. The Court held that Mill was distinguishable because the offences for which the appellant was sentenced in Canada were of a different nature to the offences for which he was being sentenced in Victoria.  They had also been committed at a different time.  The Court did not, however, distinguish Mill on the basis that the totality principle considered in Mill related to offences that occurred across state borders, not international borders.

19. Second, other than the sentence that was imposed on K-Line in the United States, all of the other foreign penalties or orders appeared to be entirely administrative or civil in nature.  They were not penalties or sentences imposed in respect of criminal convictions.  K-Line did not cite any authority for the proposition that the totality principle as articulated in Mill applies to civil or administrative penalties imposed in foreign jurisdictions.

20. Third, the Court was provided with incomplete, inadequate and insufficient information in relation to the overseas penalties and orders to enable it to realistically assess the overall or total criminality involved in K-Line’s international conduct.  As already noted, all but the United States convictions appeared to involve some form of administrative or civil penalty.  The precise nature of the orders or penalties was also, for the most part, unclear, as was the precise nature and details of the law which was transgressed in each foreign jurisdiction and the precise nature and details of the conduct which gave rise to the order or penalty, including the maximum penalties that may have been applicable to the transgressions.  

21. Fourth, the facts and circumstances of this case were far removed and distinguishable from the facts in Mill and similar cases such as R v Todd [1982] 2 NSWLR 517. Those cases involved the situation where an individual offender had committed multiple offences which, but for the intrusion of State or territory borders, would most likely have been sentenced for all the offences at the same time. Provision could then have been made for sentences of imprisonment for the separate offences to be served concurrently or partly concurrently.

22. What is involved here, however, is a global cartel which was given effect to, or implemented, in multiple foreign jurisdictions in ways that gave rise to different transgressions of different laws, mostly civil or administrative, which were applicable in those jurisdictions.  The orders or penalties imposed in the different foreign jurisdictions were likely to have been imposed having regard to the particular anti-competitive effects in each of the separate jurisdictions.  One can readily understand why it would be unfair to an offender to sentence him or her as if the offences committed in the separate states were entirely discreet.  It is difficult to see why, in imposing a sentence on K-Line in respect of its offence against Australian law, the Court should give substantial weight to the fact that different types of mostly civil or administrative penalties have been imposed on K-Line by different authorities, courts and tribunals in different countries, for having engaged in different anti-competitive conduct in those countries, albeit that the anti-competitive conduct in Australia and those other countries all occurred under the general umbrella of the Respect Agreement.  It is, as K-Line effectively conceded, entirely unrealistic and impractical to envisage that the Court could somehow stand back and attempt to comprehend some overall penalty that would reflect the overall criminality of K-Line’s conduct and “craft” a sentence accordingly.

23. That is not to say that the imposition of the foreign penalties should be ignored or given little or no weight.  As was accepted in CDPP v NYK, and has already been accepted, those penalties should be given some weight and should be reflected in the fine that it ultimately imposed.  Whether they are considered and afforded weight as instances of extra-curial punishment, or pursuant to the totality principle in Mill is ultimately immaterial.  The main point is that K-Line has failed to identify or articulate any basis for its contention or submissions that the affect would be a “substantial downward adjustment”.     

    The character and antecedents of the offender: s 16A(2)(m) of the Crimes Act

24. K-Line does not have a prior record of corporate criminal misconduct in Australia.  There is also no evidence that it has any such record anywhere overseas.  That is no doubt an important consideration.  It does not necessarily follow that K-Line should be sentenced on the basis that it was of good character – that it was a good corporate citizen – at the time of the conduct the subject of the charge: cf. R v Adler [2005] NSWSC 274; 53 ACSR 471 at [51]. The fact that it had been a party to the Respect Agreement since at least 1997 rather suggests otherwise. K-Line had not been a good corporate citizen prior to the commission of this offence: it just had not been caught. Prior good character is also not generally given significant weight in sentencing for offences where general deterrence is a significant consideration: R v Williams [2005] NSWSC 315; 152 A Crim R 548 at [60]; McMahon v The Queen [2011] NSWCCA 147 at [76]; ABB Transmission at [28].

    The prospect of rehabilitation of the offender: s 16A(2)(n) of the Crimes Act

25. Rehabilitation is undoubtedly an important purpose of criminal sentencing.  The fact that an offender has good prospects of rehabilitation, or has already demonstrated rehabilitation at the time of sentence and is unlikely to reoffend, is an important mitigating consideration.

26. As has already been noted, it may be accepted that K-Line has largely rehabilitated itself, or has at the very least demonstrated good prospects of rehabilitation.  There is unchallenged evidence that in the six years since its offending behaviour was detected, K-Line has taken significant steps to change its corporate culture of compliance, has renounced its wrongdoing and has established structures, systems and programs to prevent any reoffending.  It has remodelled its corporate thinking and behaviour so that it may re-establish itself as a good corporate citizen: cf. R v Pogson (2012) 82 NSWLR 60 at [122]-[123].

    Parity

27. K-Line and its co-offender NYK each pleaded guilty to a single rolled-up count involving 20 instances of giving effect to a cartel provision in the same overarching arrangement or understanding.  The maximum penalty for both K-Line and NYK was $100 million as they both had the same relevant annual turnover in the 12 months preceding the offending conduct.

28. The sentence imposed on NYK was a fine of $25 million.  That fine incorporated a global discount of 50% for NYK’s early plea of guilty and past and future assistance and cooperation, together with the contrition inherent in the early plea and cooperation.  But for the early plea and past and future assistance and cooperation, the fine would have been $50 million.  Of the 50% discount, 10% related to future cooperation.  But for the discount for future assistance, NYK’s fine would have been $30 million.

29. In imposing a sentence on K-Line, the Court must have regard to the principle of parity.  That principle requires that like offenders should be treated in a like manner, though allows for different sentences to be imposed upon like offenders to reflect different degrees of culpability and/or different circumstances: Green v The Queen [2011] HCA 49; 244 CLR 462 at [28]. The notion of equal justice “requires that, as between co-offenders, there should not be a marked disparity which gives rise to ‘a justifiable sense of grievance’”: Postiglione at 301. Disparity between the sentences imposed on co-offenders will be justified by differences such as “age, background, criminal history, general character and the part each has played in the relevant criminal conduct”: Green at [30].

    The parties’ submissions concerning parity

30. There was a substantial divide between the parties’ submissions concerning parity.

31. The Director submitted that the objective criminality of the offences committed by K-Line and NYK was relevantly the same and that there were no significant differences between the levels of criminality or the seriousness of the offending conduct engaged in by each of them.  As for the respective subjective circumstances, the Director submitted that NYK pleaded guilty at a much earlier stage than K-Line and gave substantially greater cooperation and assistance to the authorities than K-Line, including future assistance in relation to other matters.  The Director accepted that K-Line’s retraction in size in recent times was a relevant subjective factor to take into account, though in the Director’s submission that consideration was not such as to substantially mitigate the penalty.   

32. K-Line submitted that the objective criminality or objective seriousness of its offending conduct was “substantively less” than that of NYK.  It also submitted that there were relevant differences between K-Line’s and NYK’s subjective circumstances.  In support of those submissions K-Line relied on what it contended were four material differences.

33. First, it submitted that its participation in the cartel was “less enthusiastic, less extensive and less rigorous” than NYK’s participation.  Its submissions in that regard focussed on the instances where individual K-Line employees bid less than the freight rate which had been discussed and agreed with their counterparts at the other carriers.  It also relied on facts which suggested that some K-Line employees were, at times, not fully trusted by their counterparts to implement the agreements.  The facts and findings concerning the instances of “cheating” and the distrust of certain NYK employees were discussed in detail earlier.

1. Second, K-Line noted that, in its sentence hearing, NYK had agreed that a proportion of the higher freight rates caused by the cartel would have been passed through to corporations or consumers in Australia in the form of increased wholesale or retail prices for motor vehicles.  In contrast, K-Line did not agree to any such fact and submitted that it could not or should not be inferred that there was any relevant pass-through of higher freight rates to Australian consumers.

2. Third, K-Line pointed out that the cartel provisions in the Respect Agreement, that NYK gave effect to, included not only a price fixing provision, but also anti-competitive provisions involving bid rigging and customer allocation.  K-Line only gave effect to the price fixing provision.

3. Fourth, K-Line submitted that it was a smaller company than K-Line, both at the time of the commission of the offence and at the time of sentencing.  It relied, in that regard, on the following facts: NYK held a slightly higher market share in respect of the relevant services during the charge period; K-Line shipped less cars to Australia in the freight contracts affected by the cartel behaviour; K-Line’s consolidated operating revenue and profits since the merger of its containership business with the containership business of NYK and Mitsui have been considerably smaller than NYK’s; and the number of its employees has shrunk from 8,000 prior to the merger to 2,000 at the time of sentence.  The NYK Group employed about 33,000 people at the time of the offending.

4. While K-Line submitted that its cooperation and assistance shouldn’t be approached by reference to the parity principle, or by simply comparing or contrasting it with the cooperation and assistance provided by NYK, it nevertheless submitted that the discount that it should be given should not be significantly less than the 40% discount given to NYK in respect of its past cooperation and assistance.

   Parity – Consideration  

5. K-Line’s submission that the objective criminality or seriousness of its offending conduct was substantially less than that of is co-offender NYK has no merit and is not supported by a close consideration and analysis of the facts and circumstances of the respective cases.  The Director’s submission that the objective criminality of the offences committed by K-Line and NYK is essentially the same should be accepted. 

6. It may be accepted that K-Line employees were involved in more individual instances of cheating or departing from price fixing agreements entered into under the Respect Agreement.  It may also be accepted that some K-Line employees were not always trusted by the counterparts to give effect to, or not depart from, the price fixing agreements.  For the reasons given in detail earlier, however, it cannot be accepted that this feature of K-Line’s participation in the cartel significantly or materially mitigated the seriousness of the offending behaviour.  Nor can it be accepted that K-Line was an outlying participant or a disruptive influence in the cartel.  The instances of cheating were fairly isolated, minor and, at times, ineffective.  In any event, cheating on a cartel should not generally be considered to be a significant mitigating circumstance.

7. K-Line’s submission concerning whether the higher freight rates which were the product of the cartel were passed through to Australian consumers also does not support a finding that the seriousness of K-Line’s offending was less than NYK’s.  It is true, as K-Line pointed out, that NYK agreed or admitted that the higher freight rates were likely to have been passed onto Australian consumers and that K-Line did not make any such admission or concession.  It may also be accepted that it cannot necessarily be inferred from the agreed facts that the higher freight rates were directly passed on to Australian consumers.  As discussed earlier, however, it may nevertheless be inferred that there was at least a risk that Australian consumers would have been impacted in some way by the fact that the motor vehicle manufacturers’ costs of shipping their vehicles were increased by the collusive behaviour pursuant to the Respect Agreement.  The slight differences in the factual findings concerning the impact on Australian consumers does not mean that K-Line’s offending conduct should be viewed any less seriously than NYK’s.  That is all the more so given that the nature of the offending behaviour by NYK and K-Line was relevantly the same.

8. Finally, in terms of objective considerations, it is of little or no significance that the particulars of NYK’s offending involved not only the price fixing provision of the Respect Agreement, but also provisions involving bid rigging and customer allocations, whereas K-Line’s offending only involved the price fixing provision.  The underlying nature of the conduct engaged in by K-Line was relevantly the same as the conduct engaged in by NYK.  The slightly different characterisation of it as involving only price fixing, and not also bid rigging or customer allocation, is largely immaterial in terms of assessing the objective seriousness of the conduct.

9. While the objective seriousness of K-Line’s offending conduct was relevantly the same as the seriousness of NYK’s offending, there is a difference, albeit a relatively minor one, between the relevant subjective circumstances of K-Line and NYK.  That difference is that, while K-Line may not have been relevantly or materially smaller than NYK at the time of the offending, it may be accepted that K-Line is now a smaller company than NYK.   

10. While K-Line had a smaller share of the global capacity for ocean transport services than NYK at the time of the offences, K-Line and NYK had the same annual turnover in the 12 months prior to the offending.  There is, in those circumstances, no sound basis for finding that K-Line was a materially smaller corporation at that time.  Since the merger of the containership businesses of K-Line, NYK and Mitsui in 2016, however, it would appear that K-Line has shrunk in size.  It has less employees and its consolidated operating revenue, operating income and profits have generally been significantly less than NYK’s in recent years.

11. As has already been noted, it is generally accepted that the size of the offending corporation is a relevant consideration in fixing the penalty for offences or contraventions of cartel provisions and other restrictive trade practices.  In the particular circumstances of this case, however, the comparative differences in the size of K-Line and its co-offender NYK is not a particularly significant consideration.  There is no question that K-Line is still a very large corporation with substantial resources.  While it may readily be accepted that a sentence which involves a large fine will cause it some hardship or financial pain, that is essentially what is necessary to ensure that the punishment achieves not only specific deterrence, but importantly also general deterrence.  K-Line did not submit that it did not have the capacity to pay a large fine.  Nor was there any evidence to suggest as much.

12. Finally, it is necessary to have regard to the different subjective considerations arising from the respective cooperation and assistance provided by K-Line and NYK.  There could be no doubt that K-Line pleaded guilty at a much later stage than NYK.  K-Line’s cooperation and assistance to the authorities was also of materially less significance than NYK’s cooperation. 

13. The agreed findings concerning K-Line’s plea of guilty and the cooperation and assistance it provided to the ACCC were discussed in detail earlier.  It suffices to reiterate that K-Line’s plea of guilty was only entered after a lengthy committal process and after its trial was set down for hearing in this Court.  Perhaps more significantly, contrary to K-Line’s contention, the cooperation and assistance it provided to the ACCC could not accurately be characterised as “substantial” or “high level”.  Rather, its cooperation was for the most part essentially responsive, rather than active, was at times provided somewhat reluctantly and in an untimely manner and was not entirely fulsome.  It did not include the provision of a waiver in respect of the information which it had provided to the Japan Fair Trade Commission, did not include all information or documentation requested by the ACCC, the admissions that were provided appeared not to be particularly comprehensive or decisive and the assistance that was provided in terms of interviewing employees or former employees was quite limited.

14. The assistance and cooperation provided by NYK was of an entirely different character and nature.  NYK pleaded guilty at the earliest possible opportunity; before the ACCC had compiled a brief of evidence and in circumstances which obviated the need for a committal hearing in the Local Court.  The cooperation it provided to the ACCC was also found to be timely, full, frank, truthful and, in most instances, expeditious.  Its cooperation concerned both its own offending and the offending of other persons and entities and included assistance in relation to another matter.  NYK also gave an undertaking to assist in future prosecutions.  NYK’s cooperation and assistance could fairly be described as high-level and substantial, if not, exceptional.

    The parties’ submissions in relation to the appropriate penalty

15. It was open to K-Line to make submissions concerning the appropriate penalty range in all the circumstances: Barbaro v The Queen (2014) 253 CLR 58; Matthews v The Queen [2014] VSCA 291; 44 VR 280; CMB v Attorney General for the State of New South Wales (2015) 256 CLR 346 at [38] (per French CJ and Gageler J) and at [64] (per Kiefel, Bell and Keane JJ). It did not do so in terms. Instead, it effectively put to the Court what it considered the relevant penalty should be having regard to the maximum penalty, the purposes of sentencing, the objective features of the offence, K-Line’s subjective circumstances and the penalties or orders it has been subject to in other jurisdictions. That sentence was a fine “in the order of” $30 million.

16. It was not open to the Director to provide a sentencing range for the Court’s consideration.  It was, however, open to the Director to respond to the range proposed in K-Line’s submissions: Matthews at [25]. The Director’s response was, in effect, a statement of what was not submitted. The Director’s response was that “no submission is made on behalf of the Crown that the Court would fall into appellable error if a fine of $30 million or more is imposed”.

    The appropriate sentence in this case

17. In sentencing K-Line, the Court must consider and weigh up or balance all the factors that are relevant to the sentence and make a value judgment as to the appropriate sentence.  The relevant factors or features in this matter have been discussed at considerable length throughout these reasons.  Findings or observations have been made concerning the significance and weight that should be given to those factors in the particular circumstances of this case.  In short summary, the factors which tend to weigh in favour of a more severe punishment include:  the maximum penalty (fine of $100 million); the very serious nature of the offence, involving as it did deliberate, systematic and covert conduct by relatively senior management over a lengthy period of time and involving a large number of shipments; the damage, or potential damage, to the integrity of Australia’s markets and economic system caused by such conduct; and the need for specific and general deterrence.  The mitigating factors include K-Line’s contrition and rehabilitation, including the steps taken by it to change its corporate culture to prevent any reoffending; K-Line’s plea of guilty; the cooperation and assistance it provided to the ACCC during the investigation; the penalties and other orders that have been imposed on K-Line by courts, tribunals and competition authorities in other jurisdictions in respect of its participation in or implementation of the relevant cartel in those jurisdictions; and the fact that K-Line has not previously been convicted of any offence in Australia or overseas.

18. Having regard to all of the relevant features and factors, and giving them appropriate weight, the appropriate sentence in all the circumstances is a fine of $34.5 million.  That fine incorporates a global discount of just over 28% for K-Line’s early plea of guilty and assistance and cooperation, together with the contrition inherent in the early plea and cooperation: meaning that but for the early plea and past cooperation, the fine would have been $48 million.  The slightly lower starting point, as compared to the starting point for the sentence imposed on NYK, primarily reflects the slightly different objective seriousness of the offending conduct and the slightly different subjective circumstances of K-Line, in particular the fact that it is now a smaller company than NYK was at the time it was sentenced. 

19. It is important to reiterate that cartel conduct of the sort engaged in by K-Line warrants stern denunciation and condign punishment.  It is inimical to and destructive of the competition that underpins Australia’s free market economy.  It is ultimately detrimental to, or at least likely to be detrimental to, Australian businesses and consumers.  The penalty imposed on K-Line should send a powerful message to multinational corporations that conduct business in Australia that anti-competitive conduct will not be tolerated and will be dealt with harshly.  That is so even where, as here, the decisions and conduct are engaged in overseas and as part of a global cartel. 

    CONCLUSION AND DISPOSITION

20. K-Line has been convicted of an offence of giving effect to a cartel provision contrary to s 44ZZRG(1) of the Competition Act. The sentence imposed in respect of that conviction is a fine of $34.5 million.

I certify that the preceding four hundred and fourteen (414) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.

Associate:        

Dated:        2 August 2019