Trade Practices Commission v Culley, Frank Thomas

[1983] FCA 267

Re: TRADE PRACTICES COMMISSION
And: FRANK THOMAS CULLEY
And: KEITH JAMES GREENWELL
WA No. G 19 of 1983
Restrictive Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Morling J.

CATCHWORDS

Restrictive Trade Practices - attempt to fix prices - retail sale of petrol - severe discounting - attempt not successful - ignorance that conduct infringed Act - factors relevant to determination of penalty

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

HEARING

PERTH

#DATE 11:10:1983

ORDER

1. The respondents each pay to the Commonwealth of Australia a pecuniary penalty of $500 in respect of the matters alleged against them in paragraph 8 of the Statement of Claim.

2. The respondents each pay to the applicant one half of its costs of the application, to be taxed as one set of costs.

JUDGE1

In these proceedings the Trade Practices Commission seeks the imposition upon the respondent of pecuniary penalties in respect of alleged breaches of s.45(2)(a)(ii) of the Trade Practices Act 1974 ("the Act"). The respondents do not deny that they infringed the relevant provisions of the Act in the respects alleged by the Commission and the only question which arises in the proceedings is the amount of the pecuniary penalties which should be imposed by the Court pursuant to s.76(1) of the Act.

As will appear from the facts to which I shall briefly refer this is not a case which calls for the imposition of substantial penalties. Indeed, counsel for the Commission very fairly submitted to the Court that substantial penalties were not called for.

The facts lie within a small compass. The respondents are the proprietors of service stations trading within the Perth metropolitan area. The selling of petrol is a major part of their businesses. In November 1982 the price of petrol sold by service stations in the Perth metropolitan area was being severely discounted. The stage had been reached where petrol was being sold by retail at prices roughly equivalent to the approved wholesale price. In consequence it was rapidly becoming uneconomic for service station proprietors to continue selling petrol at the discounted prices. The respondents and a number of other service station proprietors held meetings to consider whether anything could be done about this situation.

There are over 500 service stations in the Perth metropolitan area, but only about 15 persons appear to have attended the meetings. An informal decision was taken at one of the meetings that an attempt should be made to persuade service station proprietors to reduce the level of discounting and to sell at a price not less than 2 cents a litre above the approved wholesale price.

Another, and perhaps the major, reason for the calling of the meetings was to discuss the possibility of forming some type of association which could represent service station proprietors in negotiations to obtain lower wholesale prices when dealing with oil companies. As at November 1982 the State government then in office had announced its intention of passing legislation enabling service station proprietors to purchase one half of their gasoline requirements from oil companies of their choice, irrespective of any contractual ties which might otherwise restrict them from making such purchases.

It appears that neither the respondents nor other persons who attended the meeting appreciated that attempts to induce other service station proprietors to raise their retail prices could give rise to conduct infringing s.45(2)(a) of the Act. The view was apparently taken that as other traders, such as proprietors of liquor stores, had banded together into associations to facilitate bulk-buying, service station proprietors could do the same. This view was no doubt correct, but insufficient thought was given to the legality of attempting to persuade proprietors of service stations to raise their prices.

The only action taken by the respondents to further the matters discussed at the meetings they attended was to interview Mr John Eaton, a director of a company which owned and operated a liquor store at Maida Vale. The store also had two petrol pumps through which it sold petrol by retail. The sale of petrol appears to have been a minor part of the store's business. On 18 November 1982 the respondents approached Mr Eaton. They suggested to him that he would make more profit from his petrol sales if he raised the retail price to 42.9 cents per litre. He replied that turnover was more important to him than profit. Mr Culley said to him: "Give it a try for a couple of days and let us know if it is not working." Mr Eaton said he would think about it and Culley and Greenwell then left his store. Neither man approached Mr Eaton again. There is some evidence in an affidavit sworn by Mr Eaton that the respondents suggested that if he did not increase his prices he could suffer some unpleasant consequences. This allegation is not made out. It was denied on oath by both respondents. They impressed me as frank and truthful witnesses and I accept entirely that they made no threat of any kind to Mr Eaton. Mr Eaton was not called in evidence.

In the events that happened nothing came of the proposals discussed at the meetings which the respondents attended. Discounting of retail petrol prices continued throughout the Perth metropolitan area. Mr Eaton did not increase his prices as a result of the visit paid to him by the respondents. There is no evidence that any retailer other than Mr Eaton was approached with the suggestion that he should increase his prices.

Both respondents offered unqualified undertakings to the Court that they would not embark upon conduct of a similar kind in the future. Counsel for the Trade Practices Commission informed the Court that in the light of the undertakings the Commission did not press its claim for injunctive relief. He submitted that, whilst the case was not one which called for the imposition of substantial pecuniary penalties, the Court should impose modest penalties upon the respondents to mark the Court's disapproval of their conduct.

I agree that this is the proper approach to take. I am satisfied the respondents' conduct was motivated by an understandable desire on their part to achieve a reasonable level of profitability in their businesses without causing harm to the public. They believed that there was nothing wrong in what they were doing, but they were mistaken in that belief. Whilst their conduct was clearly in breach of the Act, it is difficult not to have some sympathy with retailers who seek to do no more than sell by retail at prices marginally above government-approved wholesale prices. It is a real question whether cut-throat price competition which makes it impossible for retailers to trade economically is in the public interest in the long term, even if there are short term price advantages to consumers.

In all the circumstances I think a pecuniary penalty of Five hundred dollars ($500) should be imposed upon each of the respondents in respect of the matters alleged against them in paragraph 8 of the Statement of Claim. These penalties are sufficient to mark the Court's disapproval of the respondents' conduct and to make plain to the commercial community that difficult and unprofitable trading conditions do not justify infringements of the Act. In determining the penalties I have taken into account the relatively modest financial circumstances of the respondents, their family commitments, and the fact that no harm or damage was caused to the public by their conduct. Each respondent must pay to the applicant one half of its costs of the application, to be taxed as one set of costs.