Trade Practices Commission v Commodore Business Machines Pty Ltd

[1989] FCA 406

CATCHWORDS

TRADE PRACTICES ACT - resale price maintenance - restrictions on advertising at discount price - relevance of legal advice to penalty - one penalty for same conduct - penalties - injunction.

Trade Practices Act 1974 - ss 48,	76 ,	80,	9 6 ( 3 )
TRADE PRACTICES COMMISSION

Applicant

- v -

COMMODORE BUSINESS MACHINES

PTY LTD

Respondent

PLACE :	Sydney
C O R M	:	Einfeld J
DATE :	3 August  1 9 8 9
IN TEE FED=	COURT OF A U S T U I A	)
1

NEW SOUTH WALES REGISTRY	1 1
GENERAL DIVISION	1 No. G 977 of 1988

TRADE PRACTICES COMMISSION

Applicant

COMMODORE BUSINESS MACHINES

PTY LTD

Respondent

C O W : Einfeld J
DATE: 3 August 1989

PLACE: Sydney

MINUTE OF ORDERS

1. Declare that the respondents engaged in the practice of resale price maintenance in respect of Amiga computers in contravention of section 48 of the Trade Practices Act 1974 in the manner alleged in the statement of claim.

2.	Order that the respondent pay to the Commonwealth of Australia a pa@miary penalty of 525,000 in respect of the matters alleged in' ,'we particulars supplied in the statement of claim as
follihra: paragraphs 6(a). 13(a). 21(d). 25(a), 30(a), 34(a), 38(a), 42(a), 46(a), 48(a) and 52(a).

3.       Order that the respondent pay to the Commonwealth of Australia a pecuniary penalty of $40,000 in respect of the matter alleged in paragraphs 7 and 8 of the statement of claim.

4.       Order that the respondent pay to the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the matter alleged in paragraphs 13(c) and 14 of the statement of claim.

5.       Order that the respondent pay to the Comonwealth of Australia a pecuniary penalty of $30.000 in respect of each of the three incidents alleged in paragraphs 25(d) and 26 of the statement of claim.

6.       Order that the respondent pay to the Commonwealth of Australia a pecuniary penalty of $5000 in respect of the matters alleged in paragraphs 15 and 16 of the statement of claim.

7.       Order that the respondent pay to the Commonwealth of Australia a pecuniary penalty of $60,000 in respect of the matter alleged in paragraph 22A of the statement of claim.

8.       Order that the respondent be restrained from engaging in the practice of resale price maintenance in the manner alleged in the statement of claim or any similar manner.

9.       Order that the respondent pay the costs of the applicant to be agreed or taxed.

NOTE:  Settlement and entry of orders are dealt with in accordance with
order 36 of the Federal Court Rules.

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-1	IN TEE FEDEW& COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )

1

GENERAt DIVISION 1

BETWEEN:	TRADE PRACTICES COMMISSION Applicant
AND :	COMMODORE BUSINESS MACHINES PTY LTD

Respondent

CORAM: Einfeld .l

DATE: 3 August 1989

PLACE: Sydney

REASONS FOR JUDGMENT

In this application the Trade Practices Commission (the Commission)

seeks the imposition of penalties and an inlunction against Commodore

Business Machines Pty Ltd (the respondent) for alleged contraventions of

section 48 of the Trade Practices Act 1974 (Cth) (the Act). As its name

implies, the respondent carries on the business of importing and supplying~.,~offlce and other machines for commercial and other	.	* I
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enterprises, including the AMIGA range of computers. It operates

through dealerships.

TEE LEGISLATION

Section 48 appears in Part IV of the Act and provides:

A corporation or otner person shall not engage in

the practlce of resale prlce mlntenance.

Section 96 identifies the acts which constitute engaging in the practice of resale price maintenance. The Commission alleges that the respondent engaged in conduct wlthln sections 96(3)(a),(b), (c), (d), and (f). They provide:

96(3)

The acts referred to in sub-sectlons (1) and

( 2 ) are the following

(a)	the suppller mklng lt known to a second person that the suppller wlll not supply gods to the second person unless the second person agrees not to sell those gods at a price less than a price specified by the suppller;
(b)	the suppller inducing, or attempting to lnduce, a second person not to sell, at a prlce less than a prlce speclfled by the suppller, goods supplled to the second person by the suppller or by a third person who, dlrectly or inhrectly, has obtalned the goods from the suppller;
(c)	the suppller enterlng lnto an agreement, or offerlng to enter Into an agreenent, for the supply of goods to a second person, belng an agreement one of the tern of which IS, or would be, that the second person wlll not sell the goods at a prlce less than a price speclfled, or that would be seeclfled, by the

suppller ,

(d)	the supplier mthholdlng the supply
of goods to a ss-orui person for the reason that the second person -
(1) has not agreed as mentioned in paragraph (a),
(11) has sold, or is llkely to

sell, gods supplled to h ~ m
by the supplier, or goods
supplled to him by a thlrd
person who, directly or
~ndirectly, has obtained the
goods from the suppller, at
a prlce less than a prlce
speclfled by the supplier as

the price below which the

goods are not to be sold;

( f ) the suppller uslng, in relatlon to any goods supplied, or that m y be

supplied, by the suppller to a

second person, a statement of a price that is llkely to be understood by that person as the prlce below whlch the gods are not

to be sold

The alleged contraventions arise from the respondent's requirement that

a document entitled "Terms and Conditions of Amiga Dealership" (the

document) be signed by all or certain of its dealers. By virtue of section 76(3), the same conduct constituting a contravention of two or more provisions of Part IV can only lead to one pecuniary penalty. The Commission concedes that sending out the document to many dealers is one piece of conduct, but it seels separate penalties in relation to later telephone conversations between representatives of the respondent and various dealers. Section 76(1) Provides a maximum penalty for contraventions by corporations of $250 ,000 . The evidence is that one hundred and fifty dealers signed, or were asked to sign, the document.

Section 80 empowers the Court to grant an injunction where it is

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satisfied "Slpter alia that a corporation has engaged in conduct in contravention of Part IV of the Act. The injunction would restrain the respondent from engaging in the practice of resale price maintenance in respect of the supply of Amiga computers.

Section 9 6 ( 7 ) expands for the purpose of section 96(3) the selllng of goods .to include advertising them for sale. So far as is presently relevant, it states:

( 7 ) A reference ln any of paragraphs ( 3 ) (a) to (e)

lncluslve, lncludlng a reference in negatlve fom,
to the selllng of goods at a prlce less than a prlce
speclfled by the suppller shall be construed as

~ncludlng	references to -
(a)	the advertising of goods for sale at a prlce less than a prlce speclfled by the suppller as the price below whlch the goods are not
to be advertised for sale . . .

TEE FACTS

The Commission has brought evidence, and the respondent does not deny, that from April to November 1986, the respondent required all of its dealers who received Amiga computers to sign the document. Clause four of the document said:

Any advertlsing of Armga by the dealer mst state the recomnded retail prlce of Armga. The price must be the only price whlch appears m the

advertisement

This clause is clearly in contravention of the resale price maintenance provlslons of the Act.

In addition to one penalty for the imposition of the document on its dealers, S&e Commission seeks penalties with regard to the following ' .

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incidents that it says amount to seven separate contraventions:

1.      1 May 1986 - the Five Star incident

Miss Ellls, an employee of the respondent, telephoned Miss Barnes at Five Star Computers Pty Ltd and told her that Five Star's dealership would be cancelled because it had advertised Amiga computers at five dollars below the recommended retail

price. Miss Ellis then had a similar conversation with Mr
O'Neill, the manager of Five Star.

2.       19 July 1986 - the Civic Entertainments/Aamilton incident

Mr K Hamilton, a senior officer of the respondent, told Mr B Dainton of Civic Entertainments Pty Ltd that Civic had been refused supply of Amiga computers because it was advertising one hundred dollars below the recommended retail price. Mr Dainton then sent a telex saying he would abide by the document in order to be supplied.

3-5.

July to November 1986 - three Firth incidents

In telephone discussions with Mr Firth of Software-to-Go, who had asked whether there was any way to get around clause four, the respondent's Mr K Bamilton twice and Miss Ferguson once told Mr Firth that any advertising of Amiga computers by him for a price below the recommended retail price would result in the respondent not supplying him with any more Amiga computers. The evidence does not establish whether Mr Firth actually engaged in

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suck,ydvertising.	.L

6.       27 August 1986 - the Civic Entertainments/Nardi incident

Mr K Dainton of Civic Entertainments was told by Mr S Nardi of

the respondent that an order for computers placed by Civic had been cancelled because it had advertised Amiga computers at a price below the recommended retail price. This conversation is denied by the respondent which says that the cancellation was an error. Mr Dainton had cancelled another order and there may have been some confusion over which order was in fact cancelled.

27 November 1986 - the Data Management incident

Miss Tolcon of the respondent told Mr Scobie of Data Management Pty Ltd on the telephone that she had received complaints from other dealers that Data Management had advertised four hundred dollars below the recommended retail price, and that this was in breach of the dealership agreement as comprised in the document. It appears that Mr Scobie had never actually signed the document. In another telephone conversation said to have been made on Mr Iiamllton's instructions, Miss Tolcon advised Mr Scobie that he would no longer be supplied with Amigas. Mr Hamilton seems to have been the senior executive in charge of sales at the time.

The respondent admits all the allegations except the Civic Entertainments/Nardi incident on 27 August 1986 (number 6 above). The respondent's explanation for its conduct is that it acted on legal advice.

Legal Advice

When the document was originally drafted, the respondent's Managing Director Mr Serra asked his financial controller, MS Agnes Li, to refer clause four to the company's solicitors, Messrs Sly and Russell (as they were known then). Mr Serra said in evidence that he had a vague idea that the Act was concerned with pricing, and on that basis believed it should be cherked by their legal advisers. He said that clause four was

designed to control the advertised price of Amiga computers, not the selling price. In particular, it was designed to control the maxlmum price at which Amigas could be advertised. This was because the marketing strategy for P~ig.3 was to compete with Apple Macintosh by selling a similar machine at a lower price. Mr Serra spoke of achieving small profits on volume sales rather than a large profit on smaller numbers.

Sly and Russell's advice to the respondent of 10 April 1986 was that clause four was legal, provided the dealers were aware that they could sell Amiga at whatever price they chose. Mr Anderson of Sly and Russell said that when he gave the advice, he turned his mind to the problem of parallel importing, that is, the importing of Amiga computers by traders outside the Commodore dealer network who were reselling at prices considerably above the prices at which the respondent had hoped to launch the Amiga range in Australia. Fie said that he did not direct his mind to the possibility that the clause was capable of meaning that dealers could not advertise and sell below the recommended retail price. It is agreed that the advice was incorrect or misleading; but the respondent took no steps to ensure that the dealers or its own staff

knew the intended purpose and legal interpretation of clause four.

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On 24 November 1986, Mr Anderson received instructions from the respondent to reconsider the clause in light of the fact that the Commission had approached the respondent about its trading terms and conditions. As a result Mr Anderson advised the respondent to circulate its Amiga dealers with a letter advising that such dealers were free to

advertise and offer Amiga products for sale at less than the recommended
retail price.

The respondent thus wrote to its dealers on 4 December 1986. The letter stated that there had been some confusion regarding clause four. It said that the aim of clause four was to protect the consumer from belng overcharged and the product from being overpriced and that therefore Commodore had decided to set a maximum retail price or a price above which the dealer would not be permitted to advertise the product. The letter went on to say: "Naturally you may advertise and offer the Amiga product for sale at less than the recommended resale (SIC) price". This was sent with a covering letter on 9 January 1987. The obviously erroneous use of "resalem for "retail" may be significant.

TEE COMMISSION'S ARGUMENTS

Injunction

The Commission argued that despite the fact that the relevant conduct occurred two and a half years ago and therefore that an injunction might appear to be wholly theoretical and academic, it was supported by authority. It relied on the blessing given to such injunctions by Barwick CJ in Mikasa (NSW) Pty Ltd v Festival Stores L19721 127 CLR 617 at 632 . Whilst it is true that restraint by injunction of the practice

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of resale maintenance found to have been engaged in by the party

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before the Court was there authorised, no criteria were deflned for the
exercise of this power.

The Commission argued that an injunction was appropriate in this case for a number of reasons:

1. The resale price maintenance provisions of the Act are among the most important parts of the Act and have been in Australian law since 1971.

2.       The history shows that the respondent turned a blind eye to the legislation and made little attempt to acquaint itself with its requirements. Although the previous Managing Director of the respondent was interviewed by officers of the Commission in 1984 in relation to the matter, they were a mystery to the current Managing Director.

3.       When breaches occurred and came to attention, no disciplining or trainlng of employees followed.

4.       An injunction will ensure that such conduct does not occur

again.

Penalty

The Commission submitted that there are three ways of characterising the

culpability of the respondent: 

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1.       morally innocent,

2.       extremely careless, or

3.       something in the nature of a deliberate breach.

The Commission said that despite the rellance on legal advice, the Court should impose substantial penalties. It submits that the evidence at least supports a conclusion that the clause was drafted carelessly. Regardless of the legal advlce, the fact that the respondent dld not follow the advice to the letter contributed in part to the conduct in question.

The Commission says that it may be possible to go further and find a design in clause four to stop the advertising of prices both above and below the recommended retail price. It says Mr Serra may have been aware that if his company dealt with the advertising of prlces, he was also, in a sense, able to control the selling prices themselves. Evidence of this is suggested by the reference in the letter of 4 December 1986 to the supposed "confusion" over clause four. Of course if the legal advice had been different, the respondent would presumably have abandoned clause four. The Commission says that the respondent's

attitude may have been to sail as close to the wind as the law would allow, but concedes that the evidence does not lend itself readlly to this proposition. In my opinion, conclusions should not be drawn in this type of proceeding on the basis of suspicion.

TEE RESPONDENT'S APPROACH

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Evidence , -I

The explanation given by Mr Serra for not following the advice was that the respondent never discussed price with the dealers. In combination with the discounting ethos of the computer industry, this meant that the respondent did not perceive it to be necessary to explain to the dealers that they were free to price Amiga computers at whatever level they chose. Mr Serra said that the reference in the 4 December 1986 letter to "confusion" over clause four was prompted by his belief that some

dealers thought that the respondent was trying to control the actual

sale price of Amiga computers.

Injunction

The respondent submits that there is no occasion for the Court to issue an injunction against the company. It says that the company stopped the conduct as soon as it received the notice from the Commission, and notified the dealers as soon as it could after it received the revised legal advice. It has co-operated with the Commission throughout the proceedings and has made a full and frank answer and confession. It has not defended these proceedings other than to explain its conduct by reference to the erroneous legal advice it received. It maintains that the company's record apart from this period is enough to guarantee future compliance and that an injunction is unnecessary.

The respondent distinguishes Mikasa as a case where the Court considered an injunction appropriate to stop the defendant doing what throughout proceedings it claimed to be entitled to do. The present case also differed with Caltex (below) where there were continuing breaches at a

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middle ma-nt level and an injunctlon was thought appropriate to

..

alert senior management to their responsibilities under the Act.

Penalty

The respondent submits that the appropriate finding is that it was concerned with advertising above the recommended retail price, and that that is what provoked clause four and the request for legal advice. Section 96 is concerned with the setting of a minimum price, so that one half of clause four, viz. that concerned with advertising above the recommended price, was lawful. The other half which sought to prevent advertising below the recommended retail price was a contravention of sections 48 and 96. The respondent says that I should accept, as a credible reason for this, Mr Serra's evidence that the respondent was seelclng to position the Amlga computer in the market at significantly below the price of the competitive Apple Macintosh.

The respondent naturally agreed with the Commission that the sending of all the documents was one piece of conduct. However, the respondent says that having included clause four believing it to be legal, it was only to be expected that the company staff would and should seek to enforce it. Indeed having signed it, the dealers themselves would expect it to be enforced. The respondent submits therefore that in terms of culpability, nothing in regard to penalty turns on the enforcements of clause four by employees of the respondent.

The respondent urges that, in the present case, all the conduct can be traced back to the document and the reliance by the respondent on the deficient legal advice. Despite what appears to me to be the heavy handed manner in which the employees sought to enforce clause four, the . '< '

respondent'rpbPits that no dealerships wels actually cancelled, and that

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the actlvitles of the employees only appear to be heavy handed if the facts are approached with the hindsight that what they were doing at the time was illegal while the company's servants assumed that the clause they were enforcing was legal.

The respondent said that there was no restraint on competition with respect to chain stores which accounted for half of the turnover, and

that on the wider market, full competition existed with Apple Macintosh. With regard to the duration of the breaches identified, the respondent submitted that although the conduct took place over some eight months, it ceased rapidly once the company became aware that its legal advice had been mistaken. The respondent argued that companies cannot be expected to advise themselves about the full extent of their obligations under the Act. They can only be expected to recognise dangerous ground, and seek legal advice from a firm with a specialist reputation in the area. On the facts of this case, they submit that their culpability is therefore negligible and technical. They pointed to the absence of evidence of damage to the public apart from the fact that any contraventions of section 48 are presumed to be against the public interest. Although Mr Scobie had thirty or forty inquiries about Amiga computers advertised by him at four hundred dollars below the recommended retail price, and about twelve stronger expressions of interest, there seems to be no direct evidence of a dealer actually refusing a discount to an actual or potential purchaser because of clause four.

COMMENT

Injunction

In Trade Practices Commission v Mobil (Aust) [l9851 4 FCR 296, Toohey J said at 299-300:

Section 8 0 ( 4 ) provides that the power of the court to grant an injunction restraining a person from engaging in conduct may be exercised:

"(a) whether or not it appears to the Court that

the person Intends to engage again, or to continue to engage, in conduct of that kind,

(b)	whether or not the person has prev~ously engaged in conduct of that kind; and
(c)	whether or not there is an umunent danger of substantial a g e to any person if the first-mntioned person engages in conduct of that kind "

It is clear therefore that in determining whether to grant an injunction, the court is not restricted because the factors mentioned in subs ( 4 ) are absent. The question must still be asked - where those factors are absent, what purpose is an injunction intended to serve' The imposition of an injunction m y , in an appropriate case, be an additional sanctlon to a pecuniary penalty For instance, in the case of a particularly flagrant breach, even though there was no evldence to indicate the offender's intention to continue the offending conduct, it mght be appropriate to mark the court's disapproval by an injunction as well as a monetary penalty.

The present case is not one of flagrant contravention of the Act Furthennore, it 1s not m issue that when the Conmission drew the attention of

Mobil to the allegations of Mr Quayle, Mobil co-

operated with the Comnission m providing infomtion I am not persuaded that an lnjunctlon is either necessary or appropriate in the present case.

On the other hand, in Trade Practices Commission v Caltex Oil (Aust)

ATPR 40-000, a case with similar facts to the present matter, ~ust&e Sir Reginald Smithers said at page 17,071:

Pty Ltd ~ 'm741

The evidence supports the view that the attitude of Caltex has been to tolerate, without safeguards, a situation in which retail price pressures by its field officers, including and apart from those proved, were more than probable.

In the circwtances therefore, in my opinion, the respondent should be restrained by injunction from engaging in the practice of resale price maintenance in respect of mtor spirit mrketed by it under the brand name "Caltex"

The respondent has different management now than at the time of the events in question, but the Commission argued that there 1s no indication that the present management has taken steps or is otherwise

seeking to ensure an absence of repetition of the impugned conduct. In
a similar circumstance in Trade Practices Commission v Pye Industries
Sales Pty Ltd [l9781 ATPR 40-089, St. John J said at page 17,859:

The newly constituted board of &rectors has not by one of its mdxrs or by production of minutes indicated its attitude towards future supervision of mnagement in order to prevent breaches In the absence of this evidence I feel it appropriate to

grant an injunction . . . .

St. John J stated that the company could apply for rescission at any time and that he would favour rescission after two years if there were no further breaches in the meantime.

It might be added that a corporation as a body has a life independent of the particular people around at the time to administer and conduct its activities, and that this company has offered no undertakings as to the

future 0r:l'autlined any steps it has taken and is enforcing to prevent	, :.<
repetition.
Penalty

A number of matters are relevant to the assessment of penalty. The

usual criteria include punishment, deterrence to the offender and the community as a whole, due reflection of the intention of Parliament, proper regard for the victims, and public interest and expectations.

In Trade Practices Commission v Australian Autoglass Pty Ltd C19881 ATPR
40-881, Woodward J said at page 49,553:

In addltion to the matters referred to in the subsection, the Court mst also bear in nund the

importance of fixlng a penalty sufficient to deter

others from engaglng in slrmlar conduct

The "relevant ratters" to be taken into account in determining a pecuniary penalty will vary from case to case, even within the conflnes of contraventions of sec. 45 of the Act

His Honour listed the matters to be considered as follows:

1.       The potential harm to the public interest.

2.       The period over which the course of conduct occurred.

3.       The level at which the activity occurred.

4.       The actual harm caused.

5.       Any previous contraventions.

6.       The difficulty of the commercial situation.

7.       Any admissions of contravention.

8.       The steps taken to avoid future contravention.

9.       The costs to be paid.

10.      Any submission to injunctions.

In Trade Practices C o ~ i s s l o n v.Genera1 Corporation Japan (Aust) Pty Ltd

[l9891 ATPR 40-922, Fisher J established these criteria at pages 49,976-

1.       Whether the conduct was deliberate.

2.        The damage suffered by the retailer or the public.

3.       The policy of the company in relation to its obligations under the Act.

4.       The steps taken by the company to educate, inform or direct its employees before the contravention.

5. The steps taken since the contraventions to alert employees to their obligations cnder the Act and to ensure no repetition.

6.       Whether the company has made full disclosure and given full co- operation to the Commission.

In Pye Industries, St.John J said at page 17,859:

It is clear that the nwUmurn penalty of S250,OOO was arrived at by the legislature so that large corporations could be m d e to feel the impact of a pecuniary penalty which would deter the defendant ccanpany and others from corrmitting breaches of the Act which nught otherwise be profitable if mall penalties only were provided. I bear this in nund and the other matters to which I have adverted in ordering the defendant ccanpany to pay to the Cmnwealth a pecuniary penalty of $120,000.

That case involved action taken by a large manufacturer of television receivers against a small television retailer in an attempt to stop advertising below the recommended retail price.

In Trade Practices Conmission v The Beating Centre Pty Ltd 119851 ATPR 40-563 at page 46,543, Beaumont J adopted a global approach to penalty.

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Quoting his,- earlier remarks when finding contraventions (C19851 ATPR

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40-516 at p. 46,173; 4 E R 197 at 204). his Honour said:

Although I have made a separate finding on the point here and elsewhere because the statement of clam alleges distinct contraventions, the circumstance that the conduct relied on in sane cases is the same will, in accordance m t h the course of authority on the question, be taken into account on penalty. At any rate, for the purpose of fixing a pecuniary penalty, the respondents' conduct, when viewed as a whole, m y be seen as the engagement in the proscribed practice of resale price maintenance during the period in question rather than a series of isolated contraventions.

The appeal from this decision is not relevant here: L19861 65 ALR 429 .

In Trade Practices COUItniSSiOn v Mobil Aust Ltd	119851	ATPR 40-503,
Toohey J said at page 46,027:

The seriousness with whlch the legislature views a contravention of Pt IV of the Act may be found in the rnaxlrmrm penalty of $250,000 in the case of a body corporate. The penalty should be such as to deter not only the particular offender but others who m y be disposed to engage in prohibited conduct of a slmilar kind The range of penalties imposed in cases of resale price mintenance m y be gauged from the schedule prepared by counsel for the aaulicant This shows Denalties as low as $3.000

extent to which resale price mlntenance has been carried on and the m e caused to anyone by that conduct. At the same t m one must not lose sight of the fact that sec. 76 of the Act is not directly concerned with ccnnpensation; that is the role of sec 82. There is the wider public Interest in ensuring that the provisions of the Act are observed.

The seriousness of a contravention may also be measured by the degree to whlch it was initiated or acquiesced in by senior management.

,

In ~ e n e r a k b ~ o r a t i o n Japan, where there was no initial agreement from

whlch the conduct flowed, Fisher J said at page 49 ,978 :

In detenninlng appropriate penalties in this matter
I do not think that I should treat the offences

whlch occurred on innumerable occasions as if they related to a series of isolated and distinct occurrences. I am of opinion that I should approach the mtter of penalty on the basis that on four occasions there occurred a pattern or course of conduct which munted to four contraventions W i n g 1984 and 1985 Mr Chlappin attempted m n y times to induce Whyalla Video to ccanply with his requirements concernlng advertising and one penalty should be Lmposed on both General Corporation and on

him in respect of this period. This conduct when it failed to achieve its objective culminated in a threat and then two actual refusals to supply This

conduct warrants the ~mposition on each of them of a

single substantial penalty Mr Chlappln resumed his attempts to induce compliance in February 1987 and agaln his conduct culminated in refusals to supply

Two penalties should again be imposed on each

contravener

In my opinion, the conduct of General Corporation which armunted on two occasions to a refusal to supply should be visited with two penalties each of $40,000 The conduct during each of the two perlods in which attempts were made to induce compliance warrants a penalty of $25,000 for each period Thus penalties totalling $130,000 will be imposed upon General Corporation. In the same nmnner I impose

penalties on Mr Chiappin being two penalties of

$8,000 in respect of the two periods of refusal to supply and $5,000 in respect of each of the two periods of attempts to induce compliance Penalties

imposed on Mr Chiappin total $26,000

In Coonan and Denlay Pty Ltd v Superstar Pty Ltd No 2 (1981) 57 PLR 118

at 126. Sheppard J said that if legal advice was sought, and presumably that it was acted on and caused the predicament being examined, "it would be proper to take that matter into account as a mitigating

circumstance." See also Re Mileage Conference Group of Tyre

Manufacturers Ltd's Agreement [l9661 1 WLR 1137; Worthington v Ad Lib Club Ltd 119641 3 ALL ER 6; Newspapers Proprietors Association Ltd and National Federation of Retail Newsagents' Booksellers and Stationers

Agreement.WS611 1 WLR 1149. 4 '

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CONCLUSIONS

Penalties

I do not accept the explanation that these offences are rendered insignificant by the fact that the respondent sought and acted in part on legal advice. The legal advice was only partially misleading, and is more correctly categorised as inadequate or incomplete. In my view it does not explain away or excuse a sharp business practice which manifestly and seriously damaged consumers. It is one thing to argue that clause four was thought to be legal; this may entitle the respondent to some mitigating effect in the penalty for the distribution of the documents alone. It is quite another matter to use this to justify multiple efforts by employees to impose a quite crude regime of

enforcement clearly outlawed by the Act and exposed by the considerable publicity given to this practice over many years. To try to explain that this was done to ensure that consumers could buy the respondent's

AMIGA product for less than its nearest or most aggressive competitor, when the dealers' actions which attracted the respondent's opprobrium were aiming to give consumers an even better deal, stretches credulity. One of the dealers involved had not even signed the document, yet was treated as if he had.

The respondent's further explanation that it was concerned with advertising, not selling, practices is also quite far fetched. In what all parties admit is a highly competitive market, bent on quite large scale and aggressive promotion and discounting, this distinction seems to me to be at best fatuous. Customers, or many customers, are intended

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to be, and.'nBrdoubt are, attracted by advertising, both in the media and in the stores themselves. When the respondent's dealers are prevented from advertising AMIGA computers at a price less than the price nominated by the respondent, they are effectively prevented from attracting customers who have less money to spend but enough to buy AMIGAs if discounting was permitted. The fact that there was no evidence of any actual refusal to glve a discount must be viewed in the light of the dealers' fears of offering discounts, the buyers' likely lack of knowledge that they were entitled to ask for them, and the freedom to offer discounts enjoyed by large stores

It thus seems to me that the respondent's activities represent a significant and deliberate interference with the rights of both dealers and the ordinary public which are protected and defined by the Act. The fact that the large chains were not asked to sign the document and did not do so leads to two further conclusions. One is that the retailers with whom this case is concerned, in the main, are presumably small business proprietors. The second is that they were disadvantaged in relation to large stores by having their capacity to compete on price reduced or removed.

The criteria developed in the authorities to which I have referred require me to take into account, in addition to the category of retailer involved, that the products concerned were of a type and price as to be likely to attract younger or less affluent members of the community in disproportionate numbers. The actual and potential harm of the conduct to this sector of the public, and to the broader public interest, by denying discounts to these persons, was considerable. There was more than a month's delay in advising dealers of the correct position after

of the yeak::wcember/January) when both ~'~1.1 retailers and the public	the revised legal advice was received. This is the busiest retail month
would in their respective ways suffer the most from this unlawful conduct. The respondent gave no satisfactory explanation for this unjustified prolongation of its dealers' and their customers' deprivations. If "confusion" was the cause of the respondent's seeking further legal advice on 24 November 1986 as alleged in the letter of 4
December 1986, it is difficult to understand why Mr Scobie for example, rather than being threatened and intimidated over a $ 4 0 0 discount, was not clearly advised of the supposedly correct intention when he was

spoken to by the respondent's representative 3 days later, on 27
November 1986.

There is no evidence of any steps taken by the respondent to avoid these or future contraventions or to inform dealers or staff at the time of what the legal advice actually was. No undertakings were or have been offered in relation to the future. and an injunction was strenuously resisted. I do not see why this approach was or would have been taken if there existed the substantive innocence claimed for the past breaches and absolutely no danger of any future breach.

I take into account that no previous contraventions by the respondent

have been evidenced, although its previous Managing Director was apparently interviewed in 1984 on the same general conduct. Some allowance must be given for the inadequate legal advice, especially in the light of its apparently reputable source, as well as for the limited time frame and number of occurrences relied on. I also take into consideration in the respondent's favour that despite the threats to do so, no dealerships were apparently actually cancelled, that these proceedings have not been defended, and that apparently the respondent has co-operated with the Commission from the outset.	On the matter Of penalty, the parties are agreed that I should consider	only one penalty for the use of the documents and seven separate
penalties for the enforcement actlvites of the respondent's staff. The respondent sought to deny one of these seven interventions but only brought evidence to prove that it may have been an error.
For contravening section 48 in seeking and procuring dealers' signatures on multiple editions of the document containing clause four between the first legal advice and the letter dated 4 December 1986 but not sent out until 9 January 1987, there will be a penalty of $25,000. Without the legal advice, this sum would have been considerably more. For the double threat to Five Star that its dealership would be cancelled because it had cut five dollars from the recommended retail price, I impose a penalty of $40,000. The contraventions involved in the Civic Entertainments/Eamilton and the three Firth incidents each warrant a penalty of $30,000. Although the proximity and similarity of the Civic Entertainmentr/Nardi incident to Civic's earlier confrontation by the respondent's senior executive M Bamilton make accidental breach somewhat suspicious, the onus of proof in matters of penalty and sentence leads me to treat this possibility as calling only for the relatively nominal penalty for this incident of $5000. On the other hand, the Data Management incident was in my opinion the most serious contravention of all because of the absence of a signed document and the persistence, aggressiveness and direct high level authorisation of the breach. The penalty for this incident will be $60,000. The total penalties payable to the Commonwealth by the respondent will thus be $250.000.
Relevant matters to consider here include:

(a)	the company's failure to respond to and heed the Commission's earlier warning in 1984;
(b)	its failure to take steps then, later and now to prevent breaches and discipline the staff involved;
(c)	its refusal to institute education and training for its staff in these respects right up to the present time;
(d)	the delay in sending out the revised legal advice until after the ChristmaslNew year period in 198617; and
(e)	Its strong resistance to the application for the injunction coupled with its failure to offer any undertakings or lead evidence designed to give the Court any confidence that further breaches are unlikely.

This and other evidence leads me to conclude that this case calls for an injunction to restrain the respondent from engaging in the practice of resale price malntenance in the manner alleged in the statement of claim or in any similar manner.

I propose to declare that the respondent engaged in the practice of

resale price malntenance in respect of AMIGA computers in contravention of section 48 of the Trade Practices Act 1974 in the manners alleged in the Statement of Claim.

.".X

I will a- order that the respondent pay the Conmission's costs

'I.' .

estimated by the Conmission to be of the order of $37.000.	These costs
are to be agreed or taxed.

I certify !hat this and the +u*dy lh*cc

preceding pages are a true copy of the

Reasons for Judgment hereln of his Honour

Jusr~ce E nfe!d

A S S C C I ~ : ~ <@yea

Dated 3 A u y j s t 1yy-l

Counsel and solicitors for	Mr J D Eeydon QC
the applicant	Mr A J L Bannon instructed by Australian Government Solicltor
Counsel and solicitors for	Mr K Bandley QC
the respondent	Mr P Gray Instructed by Sly C Weigall Solicltors
Date of hearing	15 May 1989
Date of judgment	3 August 1989