Trade Practices Commission v Autoglass Pty Ltd

Re: TRADE PRACTICES COMMISSION
And: AUSTRALIA AUTOGLASS PTY LIMITED; O'BRIEN GLASS INDUSTRIES LIMITED;
WINDSCREENS O'BRIEN (WHOLESALE) PTY LIMITED; HAMILFAIR PTY LIMITED; NIELSEN
AND MOLLER PTY LIMITED and OTHERS
No. VG 380 of 1986
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1) J.

CATCHWORDS

Trade Practices - anti-competitive arrangement - replacement windscreens - adoption of common wholesale discounts to distributors and to the trade - arrangements for review and control of scheme - application for injunctions and penalties - factors affecting determination of penalties.

Trade Practices Act 1974 ss.45(2)(a)(ii),45A(1),76 and 80

HEARING

MELBOURNE

#DATE 19:7:1988

Counsel for the applicant: Mr A.C. Chernov QC & Mr N.J. Young

Solicitors for the applicants: Australian Government Solicitor

Counsel for the first respondent: Mr R.A. Finkelstein & Mrs S. Crennan

Solicitors for the first respondent: Arthur Robinson & Hedderwicks

Counsel for the second & third respondents: Mr D. Shavin

Solicitors for the second & third respondents: Blake Dawson Waldron

Counsel for the fourth respondent: Mr R. Macaw

Solicitors for the fourth respondent: Marshall Marshall & Dent

Counsel for the fifth respondent: Mr N. Cotman

Solicitors for the fifth respondent: Messrs Madgwicks

ORDER

The first respondent pay to the Commonwealth the pecuniary penalty of $65,000.

The second respondent pay to the Commonwealth the pecuniary penalty of $65,000.

The fourth respondent pay to the Commonwealth the pecuniary penalty of $40,000.

The fifth respondent pay to the Commonwealth the pecuniary penalty of $25,000.

The first respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by Australian Autoglass Pty Ltd and by any one or more of O'Brien Glass Industries Ltd, Windscreens O'Brien (Wholesale) Pty Ltd, Hamilfair Pty Ltd and Nielsen & Moller Pty Ltd in competition with each other, other than a contract, arrangement or understanding the only parties to which are the first respondent and a corporation that is, or corporations that are, related to the first respondent within the meaning of the Trade Practices Act 1974.

The second respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by O'Brien Glass Industries Ltd and by any one or more of Australian Autoglass Pty Ltd, Windscreens O'Brien (Wholesale) Pty Ltd, Hamilfair Pty Ltd and Nielsen & Moller Pty Ltd in competition with each other, other than a contract, arrangement or understanding the only parties to which are the second respondent and a corporation that is, or corporations that are, related to the second respondent within the meaning of the Trade Practices Act 1974.

The third respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by Windscreens O'Brien (Wholesale) Pty Ltd and by any one or more of Australian Autoglass Pty Ltd, O'Brien Glass Industries Ltd, Hamilfair Pty Ltd and Nielsen & Moller Pty Ltd in competition with each other, other than a contract, arrangement or understanding the only parties to which are the third respondent and a corporation that is, or corporations that are, related to the third respondent within the meaning of the Trade Practices Act 1974.

The fourth respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by Hamilfair Pty Ltd and by any one or more of Australian Autoglass Pty Ltd, O'Brien Glass Industries Ltd, Windscreens O'Brien (Wholesale) Pty Ltd and Nielsen & Moller Pty Ltd in competition with each other, other than a contract, arrangement or understanding the only parties to which are the fourth respondent and a corporation that is, or corporations that are, related to the fourth respondent within the meaning of the Trade Practices Act 1974.

The fifth respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from

(a) aiding, abetting, counselling or procuring any person to make or give effect to;

(b) inducing any person to make or give effect to;

(c) being in any way directly or indirectly knowingly concerned in, or party to, any person making or giving effect to; and

(d) conspiring with others to give effect to any contract, arrangement or understanding that has a purpose, or has or is likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by any two or more of Australian Autoglass Pty Ltd, O'Brien Glass Industries Ltd, Windscreen O'Brien (Wholesale) Pty Ltd and Hamilfair Pty Ltd, in competition with each other, other than a contract, arrangement or understanding the only parties to which are one of the aforesaid corporations and a second corporation that is, or other corporations that are, related to that first corporation within the meaning of the Trade Practices Act 1974.

The applicant's costs of the proceedings, including
its costs in relation to the sixth to fourteenth respondents, be paid by the first to fifth respondents.

The fifth respondent's share of the costs referred
to in the previous order be fixed at $15,000. Liberty to apply as to this order is reserved.

Note: Settlement and entry of orders is dealt with in Order

36 of the Federal Court Rules.

JUDGE1

This is an application pursuant to Part IV of the Trade Practices Act 1974 ('the Act'), claiming pecuniary penalties from, and injunctions against, the respondents for contraventions of sub-s.45(2) of the Act. That sub-section, so far as is relevant for present purposes, provides:

"45.(2) A corporation shall not -

(a) make a contract or arrangement, or arrive at an understanding, if

(i) ....

(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; ...."

Sub-section 45A(1) of the Act provides:

"45A.(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other."

In this matter an arrangement has been reached between the applicant, the Trade Practices Commission, and the respondents. As a result, an agreed statement of facts has been provided to the Court. After the completion of that document, the applicant amended its application and statement of claim. In effect, the proceedings against the sixth to fourteenth respondents have been discontinued, and all the remaining respondents are corporations. The remaining respondents have admitted contraventions of s.45(2)(a)(ii) - the entry into of prohibited arrangements or understandings, and the allegations concerning contraventions of s.45(2)(b)(ii) - the carrying out of those arrangements or understandings, have been withdrawn.

A. CIRCUMSTANCES OF CONTRAVENTIONS
Australian Autoglass Pty Ltd ("Autoglass"), O'Brien
Glass Industries Limited ("Windscreens O'Brien"), Windscreens O'Brien (Wholesale) Pty Ltd ("O'Brien Wholesale"), Hamilfair Pty Ltd ("Windscreen World") and Nielsen & Moller Pty Ltd ("Nielsen & Moller") are the remaining respondents. Of these, all except Windscreen World carried on business at all material times as suppliers of motor vehicle replacement windscreens. Windscreen World carried on such a business between 16 September 1983 and 20 December 1984. Autoglass, Windscreens O'Brien and Nielsen and Moller are the major suppliers to the industry.
The respondents market various types of windscreens to fit particular makes and models of motor vehicles. Between the respondents, approximately 3000 types of either laminated or zone-toughened replacement windscreens are marketed. None of the respondents sells all possible windscreens replacements, because of the costs involved and the limited demand for many types of windscreens. Each major supplier relies on other major suppliers to provide windscreens which it does not manufacture. Thus there is regular contact between major suppliers concerning the price of windscreens.
The major suppliers (except Australian Autoglass) and another company not party to these proceedings, Protector Glass Industries Pty Ltd, manufacture motor vehicle replacement windscreens. A small quantity of windscreens are imported. The distributors are either companies related to, or franchisees of, the major suppliers, or are independent distributors.
Replacement windscreens are supplied by distributors to windscreen fitters, panel beaters and other wholesale purchasers. The market for these windscreens is Australia-wide. Although it is not possible to be precise, the approximate market shares in the total Australian market are as follows:-

. Windscreens O'Brien - 35%

. Australian Autoglass - 30%

. Nielsen & Moller - 25%

. Protector Glass Industries - 7%

. Imports - 3%

Within Australia, one identifiable market for the product is known as 'Southern Queensland', which encompasses a region from Mackay in Central Queensland south to Tweed Heads in New South Wales. This includes the Brisbane metropolitan area ('the Brisbane Region'). Another identifiable market relates generally to the State of Victoria. These are the markets with which these proceedings are concerned. Sales of replacement windscreens in these markets are measured in millions of dollars each year.
At the relevant times, Australian Autoglass distributed windscreens through company-owned outlets, to franchised outlets and to independent distributors. Windscreens O'Brien distributed windscreens through company-owned outlets, through O'Brien Wholesale and through independent distributors. Nielson & Moller appointed independent distributors for the distribution of its windscreens in each state. One such distributor in Southern Queensland was Kohlmead Pty Ltd, trading as Action Automotive Glass ('Action Glass'). Another, in both Southern Queensland and Victoria, was Windscreen World.
During 1983, 1984 and 1985 each major supplier and Protector Glass distributed price catalogues throughout Australia, which contained recommended prices for each type of windscreen supplied by that company.

The Southern Queensland Market
Motor vehicle replacement windscreens were supplied to the trade in this market by the first, second and third respondents, by the independent wholesalers appointed as distributors by Nielson & Moller and by other independent distributors. Before July 1984 the one distributor appointed by Nielsen & Moller was Action Glass, and after July 1984 the distributors were Action Glass and, until 20 December 1984, Windscreen World. Each of the first, second, third and fourth respondents was in competition with each of the others in this market.

The Victorian Market
Motor vehicle replacement windscreens were supplied to the trade in this market by the first, second and third respondents, by the independent wholesalers appointed as distributors by Nielson & Moller, the principal one of which from 1 July to 20 December 1984 was Windscreen World (the fourth respondent), and by other independent distributors. Each of the first, second, third and fourth respondents was in competition with each of the others in this market.

The Pricing of Windscreens
The prices at which windscreens were sold to distributors and to the trade were generally arrived at by applying a particular level of discount to the relevant retail price set out in the relevant major supplier's catalogue. The level of discount was generally expressed as a percentage off the catalogue price. I shall refer to the discount allowed to distributors as "the distributors' discount" and to the discount allowed to the trade as "the trade discount". The level of discount applicable to distributors was ordinarily greater than the level of discount applicable to the trade. Where windscreens were supplied to the trade on a 'supply and fit' basis, a fitting charge was added to the price of the windscreens.
During the period between 1 January 1983 and 30 April 1983 the major suppliers agreed between themselves that, in or about April 1983, they would adopt substantially identical recommended retail prices for each type of windscreen.
Each of Australian Autoglass and Windscreens O'Brien published and distributed throughout Australia, in or about April 1983, a price catalogue in which the recommended price for each type of windscreen was substantially identical. Nielson and Moller published and distributed such a price catalogue in about July 1983.
Arising from further communications during the period between July 1983 and 1 February 1984, the major suppliers agreed between themselves that they would again adopt substantially identical recommended prices ("the 1983 recommended prices"), which would be used as the base price to which discounts to distributors and discounts to the trade would be applied.

THE FIRST ARRANGEMENT ALLEGED TO BE A CONTRAVENTION
On 14 and 15 December 1983, Mr Sundell of Action Glass went to Nielsen & Moller's premises and met its distributors. Sundell was told by Jack Moller, Managing Director of Nielson and Moller, that he had had discussions with Gosling (Operations Manager - Replacement of Australian Autoglass) and Robertson (Divisional General Manager of the Motor Glass Division of Windscreens O'Brien and a Director of Windscreens O'Brien) in an attempt to stop the price war which was occurring between distributors in Southern Queensland. Those discussions had resulted in an arrangement to try to have distributors in each State agree to levels of prices and discounts.
In the following months, Sundell was directed by Moller and his brother to come to such an arrangement with Australian Autoglass and Windscreens O'Brien in Southern Queensland.
On or about 1 February 1984, a meeting was held between representatives of Australian Autoglass, Windscreens O'Brien, O'Brien Wholesale and Action Glass at which there was discussion concerning the prices and discounts at which windscreens would be supplied by distributors in the Southern Queensland market. The meeting, which was arranged between Gosling, Robertson and Jack Moller, was held at the Crest International Hotel, Brisbane, and was attended by the following:-

Person Corporation Position

Gosling Australian Autoglass General Manager

Steele Australian Autoglass State Manager

Robertson Windscreens O'Brien Director

Garvin Windscreens O'Brien State Manager

Sundell Action Glass Director

Two later meetings were held during February and March 1984 at Windscreens O'Brien's premises at Eagle Farm, Queensland, and were attended by Steele, Garvin and Sundell. Each of the persons who attended the relevant meetings did so as an authorised representative of the company which employed him.
At these meetings, Australian Autoglass, Windscreens O'Brien, O'Brien Wholesale and Action Glass made an arrangement that each would base the price of windscreens supplied by them in the Southern Queensland market upon the 1983 recommended prices, fix the amount of a common trade discount at a level significantly below the general level of trade discounts which then prevailed in the Southern Queensland market, determine the price of each type of windscreen supplied by them to the trade by reducing the relevant 1983 recommended price by the common trade discount, and take whatever measures were appropriate from time to time to ensure the effective operation of the arrangement.
The arrangement made during the meetings included provisions to the following effect:-

. No more than 55% would be allowed off the recommended retail prices in the major suppliers' catalogues;

. The longer term objective would be to limit major customers to a maximum discount of 45%.

Following these meetings, Jack Moller had a telephone conversation with Sundell in which Jack Moller expressed satisfaction at Sundell's having reached agreement on discounts with Australian Autoglass, Windscreens O'Brien and O'Brien Wholesale.

THE SECOND ARRANGEMENT

On or about 1 February 1984, the same day as the first meeting referred to at the Crest International Hotel, a meeting was held at the Homestead Hotel, Zillmere, in Brisbane, which was attend by Gosling, Robertson, Steele, Garvin, and Leonard Vincent Rixon, who was then employed as Manager of Windscreen World, and Gibbs, also of Windscreen World. Each of those persons attended that meeting as an authorised representative of the respondent which employed him.
At that meeting, an arrangement concerning common discounts, based upon the 1983 recommended prices, was made in relation to windscreen suppliers in the Brisbane region. The arrangement included provisions to the following effect:-

. No more than 50% discount off the recommended retail prices in the major suppliers' catalogues would be allowed to the trade, except to the larger motor trade customers that were already getting 55%;

. The longer term objective would be to limit all customers to a maximum 25% discount;

. Other non-trade people were to be allowed 25% discount;

. The trade and retailers were to be allowed 40% discount;

. Fitting and kit prices were arranged;

. Meetings between Steele, Garvin and Rixon were to be held on a monthly basis to review the agreed levels of discounts;

. The discounts were to be put into effect two weeks after the meeting.

THE THIRD ARRANGEMENT

During the period between 1 May 1984 and 30 June 1984 the major suppliers agreed between themselves that they would adopt, in or about July 1984, substantially identical recommended prices for each type of windscreen. Each of them published and distributed throughout Australia a price catalogue ("the 1984 recommended prices"), in which the recommended retail price for each type of windscreen was substantially identical, generally exceeded existing recommended prices, and was to be used as the base price to which discounts to distributors and discounts to the trade would be applied.
On or about 1 August 1984, in Brisbane, authorized representatives of the first, second and fourth respondents attended a meeting. A further arrangement was made, fixing the amount of common trade discounts which each would use in the Brisbane region, based on the 1984 recommended prices.
The arrangement made during the meeting included provisions to the following effect:-

. Discounts to apply were to be as follows:-

. Panel Shops 45%

. Small Car Yards 50% Laminated 45% Zone Toughened

. Big Car Yards 55% Laminated 45% Zone Toughened

. Service Stations 45%

. Trucking Companies 45% - 50%

. Full Retail 10% maximum

. Fitting charges were fixed.

. Where discounts other than those agreed were allowed, the parties were to telephone each other to discuss the reasons for not adhering to the arrangement.

THE FOURTH ARRANGEMENT

On or about 1 November 1984, another meeting took place, this time at Australian Autoglass premises in Brisbane. Once again, authorized representatives of the first, second and fourth respondents were present.
The arrangement made during the meeting, based on 1984 recommended prices, included provisions to the following effect:-

. A maximum 45% off the prices in the major suppliers' catalogues would be allowed to customers, except those customers specifically mentioned at the meeting, who were to be allowed higher discounts which were specified at the meeting;

. Retail customers were to receive a discount of 10%;

. Fitting charges were again determined.

THE SIXTH ARRANGEMENT

During the period of April-July 1985 a further meeting took place in Brisbane where the same authorised representatives, and another who was an employee of a corporation not party to these proceedings, were present.
An arrangement was arrived at, basing the price of windscreens supplied by them in the Brisbane region on the substantially identical 1985 recommended prices of the major suppliers. A uniform system of discounting, at a figure of 40%, was arranged.

THE FIFTH ARRANGEMENT
A meeting attended by representatives of the first to fourth respondents was held in Melbourne on 4 May 1984. The purpose of this meeting was to agree to the prices and discounts of windscreens in the Victorian market. Present at the meeting were:-

Individual Corporation Position
Gosling Australian Autoglass General Manager
Kilpatrick Australian Autoglass State Manager
Stewart Windscreens O'Brien State Manager
Rixon Windscreen World State Manager
Stratton Windscreen World Director
Two later meetings were held to further the agreement, the first of these was in or about July 1984 at the Doncaster Hotel, Doncaster, Victoria and the second was held on or about 24 July 1984 at the Auburn Hotel, Auburn, Victoria. These meetings were attended by Kilpatrick, Stewart and Stratton. Each of those persons attended the relevant meetings as an authorised representative of the respondent which employed him.
At these meetings Australian Autoglass, Windscreens O'Brien, O'Brien Wholesale and Windscreen World made an arrangement that each would base the price of windscreens supplied by them in the Victorian market upon the 1984 recommended prices, fix the amount of a common trade discount, determine the price of each type of windscreen supplied by them to the trade by reducing the relevant 1984 recommended price by the common trade discount, and take whatever measures were appropriate from time to time to ensure the effective operation of the arrangement.
The arrangement made during the meetings included
provisions to the following effect:-

. Kilpatrick, Stewart and Stratton were to meet regularly to discuss any problems relating to discounts;

. The companies represented at the meeting would not undercut each other;

. If one of the companies allowed a discount that was to be lower than previously provided to that customer, the representative of that company would telephone each of the other companies which would then reduce their discounts to that customer;

. Eventually, no discounts greater than 60% off the 1984 recommended prices would be allowed to any customer.

A meeting on 10 September 1984 took place for the purpose of instructing David Wilson Lummis in the nature of the arrangement and of his obligations, as he was replacing Stratton as Victorian State Manager of Windscreen World.
A further meeting was held in November 1984, between authorised representatives of Windscreens O'Brien and Windscreen World, when windscreen prices and discounts were further discussed.

B. FACTORS RELEVANT TO PENALTY
Sub-section 76(1) of the Act provides, so far as is
relevant:

"76.(1) If the Court is satisfied that a person -

(a) has contravened a provision of Part IV;

(b) ....

(c) has aided, abetted, counselled or procured a person to contravene such a provision;

(d) ....

(e) ....

(f) ....

the Court may order the person to pay to the Commonwealth such pecuniary penalty (not exceeding .... $250,000 in the case of a body corporate, in respect of each act or omission by the person to which this section applies) as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part to have engaged in a similar conduct."

In addition to the matters referred to in the sub-section, the Court must also bear in mind the importance of fixing a penalty sufficient to deter others from engaging in similar conduct.
The "relevant matters" to be taken into account in determining a pecuniary penalty will vary from case to case, even within the confines of contraventions of s.45 of the Act. In the present case I would list them as follows:

1. Potential for harm to public interest
The replacement windscreen market is generally highly competitive. However there is obviously great scope for harm to public interest in a situation where three major suppliers have between them 90% of the total market and, should a price-fixing arrangement or understanding take effect, there are no other options for the buyers of most windscreens but to use one of those suppliers.

2. Period over which course of conduct continued
It has been admitted by the respondents that, from as early as January 1983, the major suppliers began planning their contravening conduct. In April 1983, Australian Autoglass and Windscreens O'Brien distributed their price catalogues in which the recommended prices for each type of windscreen were substantially identical. Meetings to discuss the understandings concerning the Southern Queensland region were held in early 1984, as was one relating to the Brisbane region, and meetings continued up until some time between 1 April 1985 and 31 July 1985, when the first, second and third respondents and another corporation entered into a further arrangement concerning the Brisbane region. In all, upwards of 18 months is a lengthy period of time for such conduct to continue.

3. Level at which activity occurred
The meetings at which the arrangements were arrived at were attended by authorised representatives of the respondents, all of whom held senior management positions.

4. Actual harm caused
Allegations of giving effect to the contravening arrangements were withdrawn by the applicant. In affidavit evidence, Mr Moller swore that it was not possible that any arrangement could have been reached that would have effectively maintained fixed prices above the minimum level sufficient to support viable operations by distributors.
Mr R.J. Cardiff, Marketing Manager of Pilkington
ACI, swore on behalf of the first respondent that little, if any, practical effect was given to the arrangements. He also stated that prices in each manufacturer's catalogue are substantially identical as they are subject to similar costs in manufacturing the windscreens and the market is extremely competitive. The retail sector of the industry is also highly competitive, because of low barriers to entry. Similar evidence was given on behalf of the second and third respondents.
It was accepted by the applicant that the various arrangements had no significant, lasting, commercial effect in the market-place.

5. Previous contraventions
There have been no previous proceedings for penalties brought against any of the respondents by the Commission.

6. Difficulty of commercial situation
The respondents claim that they were in a difficult comercial situation at the relevant times. As the level of competition in the industry is so high, profit margins are always low, and high sales volume is necessary. Most of each supplier's products are easily interchangeable with the others'. Commercial difficulties are increased by the fact that entry into the retail end of the market can be achieved with little capital outlay, and with no previous commercial training. Thus insolvencies are many, and suppliers are left with unpaid accounts.
I am prepared to accept the general thrust of these submissions, but no evidence of resulting financial hardship for any of the respondents was put before the Court.

7. Admissions of contravention
All respondents have admitted contraventions of s.45(2)(a)(ii) of the Act, and appear to have been generally co-operative in the preparation of the agreed statement of facts during the weeks leading up to the hearing.

8. Steps taken to avoid future contraventions
In an effort to prevent future contraventions of the Act, the first respondent has conducted in-house seminars about the Act and the ramifications of contravention. Seminars were given with the co-operation and input of the Commission. The first respondent's executive and retail staff have been told of the need to comply with the Act, and staff have been warned of the Company's future refusal to indemnify individuals should they participate in contravening conduct.
The second and third respondents have impressed upon their employees the importance of complying with the Act, and have threatened dismissal should the Act be breached knowingly.
The fourth respondent was only engaged in the replacement windscreen industry in 1983 and 1984, at the end of which year it sold its interest.
The fifth respondent is a closely-controlled family company, and therefore does not see a need to educate its staff in any formal way in the requirements of the Act.
However, regret is expressed by both the fourth and fifth respondents concerning their contraventions, and assurances have been given that there will be no repetition of breaches of the Act.

9. Costs to be paid
It was submitted by respective counsel for the respondents that, in deciding the penalties, the court should have regard to the amount of costs that would be awarded against them. It was stated by counsel for the applicant that its costs amount to $120,000.
The respondents argued, therefore, that the award of costs against them would itself be a substantial penalty for having contravened the Act.
Although accurate details were not submitted, counsel for the applicant indicated that agreement had largely been reached concerning the division of costs. The first and second respondents are to pay approximately equal amounts, with the fourth respondent paying approximately one-third less. However an agreement with the fifth respondent has not been reached.

10. Submission to injunctions
It was submitted for the applicant that injunctions, as well as penalties, were appropriate in this case. This argument was put forward on the basis that some effect was given to the arrangements, and the injunctions would emphasise the Court's attitude to such contraventions.
Draft forms for proposed injunctions were in fact handed up to the Court with the consent of the first to fourth respondents. However, it was argued for the fifth respondent that such an injunction was not appropriate. It is an offence in itself to contravene the relevant sections of the Act, but to grant an injunction against such a contravention would also make such a contravention a contempt of Court. This was said to be inappropriate.
Counsel for the applicant submitted that the Court should treat the fifth respondent in the same manner as the other respondents.

C. FACTORS DISTINGUISHING RESPONDENTS

1. Shares of market

The first, second and fifth respondents are the
major suppliers in Australia, sharing approximately 90% of the market between them. The fourth respondent was the principal distributor for the fifth respondent in Victoria from 1 July 1984 to 20 December 1984, as well as distributing their product in Southern Queensland for part of the relevant time. The third respondent is a wholly-owned subsidiary of the second respondent.

2. Extent of involvement
The first, second and third respondents were present at all meetings and involved in all contraventions of the Act with which this application is concerned. The fourth respondent was involved in four of the six arrangements only. The fifth respondent, it was submitted, aided and abetted the first contravention in respect of the Southern Queensland region. One of its distributors was present at the meetings in February and March of 1984. In fact it seems that the fifth respondent played a significant role in bringing about this first arrangement.

D. PECUNIARY PENALTIES

1. Summary of major factors
The most important factor operating to mitigate the respondents' contraventions is that their attempts to break the law met with little, if any, success. There was no significant, lasting effect in the market place, presumably because the forces of competition proved too strong. The general willingness of the respondents to co-operate with the applicant, and to give strong assurances as to their future conduct, also serve to reduce significantly the seriousness of the contraventions.
Nevertheless, the contraventions were serious and were maintained in a deliberate way, over a considerable period, by senior officers of the respective companies - which between them dominate the industry. The penalties to be imposed must be significant.
It was agreed that I should approach this task on the basis that there was one continuing contravention, involving different parties at certain times, rather than six separate contraventions. I agree that this is the most convenient approach.

2. Penalties in other cases
It is important that the penalties imposed by the Court for breaches of the Act should be consistent. I was referred to over 30 cases in which the Court has imposed such penalties; some of them were much more relevant than others to the circumstances I have to consider. It was conceded by all parties that the decision of Sweeney J in Trade Practices Commission v Pioneer Concrete 1985 ATPR 40-590 was most nearly in point and provided the clearest guidance. However, as might be expected, the applicant suggested that the penalties in that case, which centred around $50,000 for each respondent, should be seen as a floor in the present case, whereas the respondents argued that this was an appropriate ceiling. I am satisfied that the penalties imposed in that case were consistent with those in the other cases to which I was referred, and that it provides a convenient yardstick for the Court in this case.
The facts in that case appear sufficiently from the following extracts from the headnote:

"The five corporate respondents had between 1 January 1978 and 31 August 1979 carried on business, inter alia, as producers and suppliers of pre-mixed concrete in the Melbourne metropolitan area. At that time, the corporate respondents together supplied approximately 90% of the pre-mixed concrete produced in the agreed relevant market (that for pre-mixed concrete in the Melbourne metropolitan area).

At all times in this period the price of pre-mixed concrete produced and supplied by the corporate respondents was made up of two basic components - production costs and delivery costs. Production costs included costs associated with the purchase of raw materials, labour and overheads. Delivery costs were the subject of an agreement between the National Ready Mixed Concrete Association

(Vic.) ('NRMCA') representing the producers and the Concrete Carters Association

(Victoria) ('CCA') representing the concrete carters. This agreement was authorized by the Trade Practices Commission.

.....

From mid-1978, a severe price war broke out in the market. Between July and early October 1978, the price was caused prices for 20 mpa pre-mixed concrete to fall as low as $28 per cubic metre delivered, i.e. below production cost.

Between October and December 1978, a series of meetings was held in Melbourne between representatives of each corporate respondent. The series of meetings was convened expressly for the purpose of ending the price war and reaching an arrangement or understanding. Under this arrangement or understanding the corporate respondents would increase the price for supply and delivery of pre-mixed concrete in the market over time, would cease to quote and charge all-inclusive prices for the supply and delivery of pre-mixed concrete in the market, would adopt a common pricing formula the terms of which would be refined from time to time in light of experience and would adopt under the formula (as refined from time to time) an agreed minimum pricing level.

The meeting achieved the desired result. A common pricing formula was adopted and refined twice. The initial formula adopted the cartage rates as agreed from time to time between the NRMCA and the CCA. Under the later two formulae, the price for supplying and delivering pre-mixed concrete to a particular to a particular delivery site would vary depending upon the zone within which that delivery site was located. The corporate respondents would in substance, quote and charge the same price for deliveries within any particular zone.

The pricing formulae were adopted. The prices for pre-mixed concrete were increased twice by each of the respondents during the period up to July 1979.

....

Each of the corporate respondents admitted, inter alia, that they had made an arrangement or arrived at an understanding as to the common pricing formula. They also admitted that the arrangement or understanding had the purpose or effect of fixing, controlling or maintaining the price for pre-mixed concrete supplied by the corporate respondents in competition with each other."

The applicant submitted that the penalties should be higher in the present case because,

(a) the value of money has changed in the three years

since that case was decided (17 July 1985),

(b) the agreements in the present case were maintained

over a longer period,

(c) the markets affected were wider geographic markets,

and

(d) there was some evidence that the respondents in the

Pioneer Concrete case were being forced by competition to sell their product below cost price, before the arrangements to be penalised were entered into; there was no such evidence in the present case.

As against these arguments, the respondents variously stressed,

(a) there was evidence in the Pioneer Concrete case

that some profits had resulted from the arrangements - there had been some significant effect in the market-place; that was not so in this case,

(b) there was very vigorous competition in the Southern

Queensland market for windscreens, which had made the position of some distributors precarious,

(c) because the companies concerned were forced to deal

with each other and regularly discuss prices in the ordinary course of trade, they had not gone out of their way to produce the results which the Court now had to consider, and

(d) even if the arrangements in the present case had

significantly affected the market, which they did not, there would not have been any flow-on effect to other goods or services, as would be the case with many services or commodities, including concrete.

Apart from the obvious need to make allowance for the changing value of money, I do not find any of these arguments for departing - either upwards or downwards - from the 'tariff' applied in the Pioneer Concrete case to be particularly persuasive. Insofar as they have validity, they tend to cancel each other out. I am left with the conviction, having studied a number of the cases to which I was referred, that the penalties I impose on the major offenders should be at least as significant as those imposed by Sweeney J, but should be of a similar order - after allowing for changing money values.

Accordingly I fix a penalty of $65,000 to be paid by the first and second respondents. Since the third respondent is a wholly-owned subsidiary of the second, the applicant accepts that no further penalty on it is necessary.
With regard to the fourth respondent I have regard to the following significant facts,

(a) it was not involved in the first or the last

arrangements which the Court has to consider, because it was only relevantly concerned in the Brisbane (as distinct from Southern Queensland) and Victorian markets and ceased to operate at the end of 1984, and

(b) it was not a major supplier, operating mainly as an

independent distributor of the fifth respondents' windscreens in Brisbane and Victoria.

On the other hand I must bear in mind that the fourth respondent was an equal participant in four arrangements involving two substantial markets. In the circumstances, I think $40,000 would be an appropriate penalty in its case.
The fifth respondent was only involved in the first arrangement and, not being a distributor of its own windscreens, it was only involved in that arrangement in the sense that it aided and abetted it or, in the words of counsel for the applicant, 'fostered' it.
The fifth respondent is, however, one of the major suppliers, having some 25% of the Australian market; and it did play a major role at the outset of the first arrangement, although it now says it was concerned only to put an end to a price war which was threatening to ruin its distributor.
In my view a penalty of $25,000 would be appropriate in the case of the fifth respondent.

E. INJUNCTIONS
All but the fifth respondent have consented to the grant of injunctions against them, pursuant to s.80 of the Act, in an agreed form, although they have submitted that they are not really necessary in view of the assurances they have given and the steps they have taken to ensure that there will be no repetition of their past conduct.
The fifth respondent stresses the same point and argues that an injunction against aiding and abetting a particular offence is especially onerous because it is so open-ended in its relation to the conduct of others.
However, having regard to the arrangements reached between the applicant and the respective respondents and to the desirability of a uniform approach to penalties unless cogent reasons for differences are established, I believe that injunctions in the following forms should go against all parties:

"Applicable to the first to fourth respondents

The (first) respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by (Australian Autoglass Pty Ltd) and by any one or more of (O'Brien Glass Industries Ltd, Windscreen O'Brien (Wholesale) Pty Ltd, Hamilfair Pty Ltd and Nielsen & Moller Pty Ltd) in competition with each other, other than a contract, arrangement or understanding the only parties to which are the (first) respondent and a corporation that is, or corporations that are, related to the (first) respondent within the meaning of the Trade Practices Act 1974. (The words enclosed within square brackets will vary according to which of the four respondents is the subject of the Order).

Applicable to the 5th respondent

2. The fifth respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from

(a) aiding, abetting, counselling or procuring any person to make or give effect to;

(b) inducing any person to make or give effect to;

(c) being in any way directly or indirectly knowingly concerned in, or party to, any person making or giving effect to; and

(d) conspiring with others to give effect to -

any contract, arrangement or understanding that has a purpose, or has or is likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of, the prices for, or discounts applicable to, any type of replacement motor vehicle windscreen supplied or to be supplied by any two or more of Australian Autoglass Pty Ltd, O'Brien Glass Industries Ltd, Windscreen O'Brien (Wholesale) Pty Ltd and Hamilfair Pty Ltd, in competition with each other, other than a contract, arrangement or understanding the only parties to which are one of the aforesaid corporations and a second corporation that is, or other corporations that are, related to that first corporation within the meaning of the Trade Practices Act 1974."

F. COSTS

Costs have been agreed between the applicant and all respondents other than the fifth. Since this leaves an awkward gap, which could require the taxation of all the applicant's costs and further argument as to how they are to be borne, I propose to order that the fifth respondent pay the sum of $15,000 towards the applicant's costs. This is a course which counsel for the fifth respondent invited me to take and, from what I have been told of the nature of the arrangement between the applicant and the other respondents, it should fit comfortably into that arrangement. In case it does not, I reserve liberty to apply as to that order.

[1988] FCA 375

19 JULY 1988