Trade Practices Commission v BP Australia Ltd

[1985] FCA 607

Re: TRADE PRACTICES COMMISSION
And: BP AUSTRALIA LIMITED
No. G2 of 1985
Trade Practices (Restrictive Practices)

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.

CATCHWORDS

Trade Practices (Restrictive Practices) - resale price maintenance - pecuniary penalty - factors to be taken into account.

HEARING

SYDNEY
#DATE 11:12:1985

ORDER

The respondent pay to the Commonwealth of Australia a pecuniary penalty of $20,000 in respect of the matters alleged against it in paragraph 15 of the amended statement of claim.

Pursuant to s.77 of the Trade Practices Act a judgment be entered for the applicant on behalf of the Commonwealth of Australia against the respondent for the sum of $20,000.

The respondent pay to the applicant its costs of the hearing on penalty.

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

JUDGE1

On 22 October 1985, for the reasons then given, it was declared that the respondent had engaged in the practice of resale price maintenance in regard to the supply of motor spirit in contravention of s.48 of the Trade Practices Act (1974) ("the Act") in the respect alleged in para.15 of the amended statement of claim. The contravention found was that on 8 November 1983, Mr. Brennan, one of the respondent's Sydney metropolitan territory managers, communicated to Mr. Robert Khoury a statement of price that was likely to be understood by Punic Investments Pty. Ltd. ("Punic") as the price below which the motor spirit was not to be sold (see s.96(3)(f)). The Commission now seeks the imposition of a pecuniary penalty pursuant to s.76(1) of the Act.

1. In prescribing a maximum penalty of $250,000 in the case of a body corporate, s.76(1) empowers the court to impose such pecuniary penalty as it determines to be appropriate having regard to all relevant matters including the nature and extent of the act and of any loss or damage suffered as a result of the act, the circumstances in which the act took place and whether the person has previously been found by the Court in proceedings under Part IV to have engaged in any similar conduct. The general approach to be adopted by the Court in the present type of matter was described by Toohey, J. in Trade Practices Commission v. Mobil Oil Australia Ltd. (1985) ATPR 40-503 at pp 46,026-7 and I would respectfully adopt that analysis for present purposes.

2. It should be noted at the outset that the respondent has not previously been found by the Court to have engaged in similar conduct. Nor was it suggested by the Commission that, as a result of the contravention, any particular loss or damage was suffered by any person: Punic's supply was not dislocated in any way and no endeavour was made to show that any consumer suffered any detriment at the retail level.

3. Although the contravention found took place in the context of the respondent's temporary price support scheme, the scheme itself did not involve a contravention. Conversely, as has already been held, the implementation of the scheme can afford no answer to the Commission's allegation that the retail price of product had been maintained in the form of the communication which took place between Mr. Brennan and Mr. Khoury on 8 November 1983. This distinction was recognized by the management of the respondent in a memorandum from its managing director to certain "graded" staff dated 10 August 1984 circulated at about the time of the decision by Toohey, J. in Mobil, supra:
   
   

"Whether or not rebate systems structured to encourage prices above a certain level constitute resale price maintenance has not yet been conclusively determined by the courts. In a case involving Mobil, the Federal Court seemed to suggest that such a system might be permissible. However what was more important to the Court than the theoretical rebate system was what was actually said to the reseller in question by the Territory Manager, (TPC v. Mobil). In other words, it will be no use having a complicated stepped rebate system if the Territory Manager does not properly understand how the system works and merely tells a reseller that BP does not want him to sell below a certain price and is using the rebate system to enforce this."

1. The memorandum thus points up the need for staff operating in the field, as Mr. Brennan was, to be instructed in the appreciation of the distinction between the policy of the scheme on the one hand and the maintenance of a retail price on the other. Although there is evidence that staff of the respondent were given instruction at a general level as to the scope and operation of the Act, there is no evidence that field staff and, in particular, Mr. Brennan, were given any explicit instruction as to the necessity, in the context of the price support scheme, of avoiding any reference which could be understood as an attempt to maintain the retailer's resale price at a particular level. It must have been obvious to the senior management of the respondent at the time that, when discussing the scheme with retail operators, there was a real risk that field officers in the position of Mr. Brennan could lead those operators to believe that the respondent was at least seeking to influence them as to the retail prices they should charge. Yet it seems that in 1983 no specific attempt was made on the part of the respondent to ensure that its territory managers understood the position as described in the later memorandum (cf. Trade Practices Commission v. Malleys Ltd. (1979) ATPR 40-118 per Lockhart, J. at p 18,293).

2. Reference was made in the course of submissions to a letter written by the respondent to Punic on 10 November 1983 endeavouring to explain its position in these terms:
   
   

"This letter confirms that with effect on the day immediately prior to the 9th November BP withdrew the temporary support which was being allowed to you for the purpose of assisting you to meet a retail price or prices offered to the public by one or more of your competitors.

This letter should not be taken as an attempt on our part to induce you to sell either grade of motor spirit or any other motor fuel at a particular price. The fixing of levels of retail prices at which you sell any petroleum or other product is entirely a matter for your own judgement."

1. The respondent can gain no comfort from the assertions there made. Since the letter must be seen as self-serving for present purposes, it cannot improve the respondent's position so far as concerns the complexion to be placed upon the events of 8 November which have already been held to constitute resale price maintenance.

2. There was evidence that the respondent is a member of a group of companies of significant size and resources. I propose to take this matter into account when fixing a penalty.

3. It was submitted on behalf of the respondent that the case should be treated as on one analogous to a test case on a novel point of law which, it was suggested, should therefore attract a small penalty only. The point was said to be the construction and operation in the present context of the relevant provisions of the Petroleum Marketing Franchise Act, 1980 ("the Franchise Act").

4. There are at least two answers to this argument. In the first place, the respondent chose to contest the case vigorously on the facts. Mr. Khoury's credit was challenged and he was cross-examined as to his version of the critical conversation relied on by the Commission. Even if the Franchise Act is put aside for the moment, this is not a case of an admitted contravention in which the respondent fully co-operates with the Commission (cf. Malleys, supra).

5. Secondly, as early as 1980, the respondent was aware that the construction of the Franchise Act for which it contended was by no means universally accepted. This is illustrated in a telex sent in that year from the respondent's retail outlets branch to the manager of its marketing division in the several States of the Commonwealth as follows:
   
   

"AS YOU ARE AWARE OUR INTERPRETATION OF SUB-SECTION (2)(B)(ll) OF SECTION 20 (PRICE DISCRIMINATION) OF THE FRANCHISING ACT IS THAT WE MAY ONLY ASSIST A FRANCHISEE TO PRECISELY MATCH THE PUMP PRICE OF A COMPETITOR.

ACCORDINGLY WHERE A FRANCHISEE HAS SOUGHT ASSISTANCE TO LOWER HIS PUMP PRICE BUT NOT TO THE EXACT PRICE OF A COMPETITOR WE HAVE HAD NO ALTERNATIVE BUT TO REFUSE ASSISTANCE IN ANY FORM.

AN ALTERNATIVE VIEW TO OUR INTERPRETATION HAS BEEN OBTAINED. THIS IS THAT A FRANCHISOR MAY IN GOOD FAITH ASSIST A FRANCHISEE TO MEET A PRICE WHETHER OR NOT THE FRANCHISEE ACTUALLY MATCHES THE PRICE OF ONE OF HIS COMPETITORS. THIS ALTERNATIVE VIEW IS STILL SUBJECT TO THE GOOD FAITH QUALIFICATION I.E. THE FRANCHISEE BEING ASSISTED SHOULD GO SOME WAY TOWARDS MEETING THE COMPETITORS PRICE. NOTE, HOWEVER, THAT WE COULD NOT ASSIST IF OUR FRANCHISEE PROPOSED TO SELL BELOW THE PRICES OF HIS COMPETITOR. THE VIEW IS SUPPORTED BY THE COMMONWEALTH ATTORNEY-GENERALS DEPT. BUT UNTIL A COURT DECIDES THE POINT THERE REMAINS A DOUBT ABOUT THE CORRECT INTERPRETATION OF THE WORDS QUOTE ASSIST TO MEET UNQUOTE USED IN THE ACT..."

1. The telex thus shows that since the respondent was placing itself at odds with a construction of the Franchise Act adopted by the Department of the Attorney-General, it was exposing itself to the risk of prosecution if it adhered to its own view of the matter.

2. In all the circumstances, I am of the opinion that an appropriate penalty in the present case is in the sum of $20,000.

3. I make the following orders -
   
   

1. The respondent pay to the Commonwealth of Australia a pecuniary penalty of $20,000 in respect of the matters alleged against it in paragraph 15 of the amended statement of claim.

2. Pursuant to s.77 of the Trade Practices Act a judgment be entered for the applicant on behalf of the Commonwealth of Australia against the respondent for the sum of $20,000.

3. The respondent pay to the applicant its costs of the hearing on penalty.