Trade Practices Commission v General Corporation Japan (Aust) Pty Ltd
[1988] FCA 680
•11 Aug 1988
C A T C H W O R D S
TRADE PRACTICES - Resale Price Maintenance - Inducing retailer not to advertise goods below specified prices - Withholding goods
because retailer advertised below such prices - Proceedings for
penalties - Contraventions denied but admitted at trial - Assessment of penalties - Whether grant of injunction necessary or appropriate.
Trade Practices Act 1974 66.40, 76, 00, 96. B E T W E E N :
Applicant COMMISSION PRACTICES TRADE - and -
GENERAL CORPORATION JAPAN (AUST) PTY. LIMITED First Respondent - and -
| Respondent | Second | CHIAPPIN | JOHN |
| Fisher J. | |||
| Adelaide | |||
| |||
|
1
SOUTH AUSTRALIA DISTRICT REGISTRY ) No.Gl49 of 1987 )
DIVISION GENERAL 1 B E T W E E N :
TRADE PRACTICES COMMISSIONApplicant
- and -
GENERAL CORPORATION JAPAN
~ A U S T ) PTY. LIMITED
First Respondent
- and -
JOHN CHIAPPIN
MINUTES OF ORDER
JUDGE MAKING ORDER FISHER J. WHERE HADE ADELAIDE DATE OF ORDER 8 NOVEMBER 1988 THE COURT ORDERS THAT:
1. respondent The General Corporation the pay o
Commonwealth of Australia a pecuniary penalty of
$25,000.00 in respect of the matters alleged against it in paras 9 to 14 inclusive of the Statement of Claim.
2. respondent The General Corporation the pay o
Commonwealth of Australia pecuniary penalty of
$40,000.00 in respect of the matters alleged against it in paras 15 and 17 of the Statement of Claim.
3. respondent The General Corporation the pay o
Commonwealth of Australia a pecuniary penalty of
$25,000.00 in respect of the matters alleged against it in paras 18 to 22 inclusive of the Statement of Claim.
4. respondent The General Corporation the pay o
Commonwealth of Australia pecuniary penalty of $40,000.00 in respect of the matters alleged against it
in paras 23 and 24 of the Statement of Claim.
That the respondent MT. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $5,000 in respect of
the matters alleged against him in paras 9 to 14 inclusive of the Statement of Claim.
6. That the respondent Mr. Chiappin pay to the Commonwealth of Australia a pecuniary penalty of $8,000.00 in respect of the matters alleged against him in paras 15 and 17 of the Statement of Claim,
7. That the respondent Mr. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $5,000.00 in respect
of the matters alleged against him in paras 18 to 22
inclusive of the Statement of Claim. 8. That the respondent Mr. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $8,000.00 in respect
of the matters alleged against him in paras 23 and 24 of
the Statement of Claim. 9.
Pursuant to s.77 of the Trade Practices Act judgment be entered for the applicant against General Corporation
for $130,000 and Mr. Chiappin $26,000 which amounts are
to be paid to the District Registrar of this Court
within 28 days of this date. 10.
That the respondent General Corporation pay to the
Commission the costs of and incidental tohe proceedings against it.
11.
That the respondent Mr. Chiappin pay to the Commission the costs of and incidental to the proceedings against
him.
Note: Settlement and entry of orders is dealt with in Order 36 of =Federal Court Rules.
,: . r '
IN THE FEDERAL COURT OF AUSTRALIA ) 1
SOUTH AUSTRALIA DISTRICT REGISTRY ) No.Gl49 of 1987 1
DIVISION GENERAL 1 B E T W E E N :
TRADE PRACTICES COMMISSIONApplicant
- and -
GENERAL CORPORATION JAPAN IAUST) PTY. LIMITED
First Respondent
- and -
JOHN CHIAPPIN
Second Respondent
REASONS FOR JUDGMENT
CORAM: Fisher J.
8 November 1988
These are proceedings by the applicant Trade Practices
Commission ("The Commission") against each of them the
respondents General Corporation Japan (Australia) Pty. Ltd.
("General Corporation") and John Chiappin ("Mr. Chiappin"). The
Commission claims against each of them pecuniary penalties and an injunction restraining them from contravening the provisions of 6.48 of the Trade Practices Act 1974 ("The Act"). That section, which appears in Part 1V of the Act, provides very shortly that "Corporation or other person shall not engage in the practice of
resale price maintenance". Practices which constitute resale
price maintenance are set out in 6.96. The particular provisions
II , t 2 .
relied upon by the Commission were as follows:
"96(1) Subject
to
section called "the supplier") engages in the practice
of resale price maintenance if that corporation does anthis Part, a corporation (in this
act referred to in any of the paragraphs of sub-section (3).
(2) Subject to this Part, a person (not being a
corporation and also in this section called 'the
supplier') engages in the practice of resale price
maintenance if that person does an act referred to in
any of the paragraphs of sub-section (3) where the
second person mentioned in that paragraph is a corporation.
(3) The acts referred to in sub-sections (1 and (2) are the following:
(a) ...
(b) the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods
supplied to the second person by the supplier
or by a third person who, directly or
indirectly, has obtained the goods from the supplier;
( c ) ... (d) the supplier withholding the supply of goods to a second person for the reason that the second
person -
(i) has not agreed as mentioned in paragraph (a); or (ii) has sold, or is likely to sell, goods
supplied to him by the supplier, or goods supplied to him by a third person who,
directly or indirectly, has obtained the goods from the supplier, at a price less
than a price specified by the supplier as
the price below which the goods are not to
be sold;
(e) the supplier withholding the supply of goods to
a second person for the reason that a third
person who, directly or indirectly, has
obtained, or wishes to obtain, goods from the second person -
(i) has not agreed not to sell those goods at
a price less than a price specified by the supplier; or
(ii) has sold, or is likely to sell, goods supplied to him, or to be supplied to him,
by the second person, at a price less than
a price specified by the supplier as the
price below which the goods are not to be sold; and
(f) ...
( 4 ) ...
(5) ...
(6) For the purposes of sub-section ( 3 1 , anything
done by a person acting on behalf of, or by
arrangement with, the supplier shall be deemed to have been done by the supplier.
( 7 ) A reference in any of paragraphs (3) (a) to (e), inclusive, including a reference in negative
form, to the selling of goods at a price less than
a price specified by the supplier shall beconstrued as including references to -
(a) the advertising of goods for sale at a price less than a price specified by the supplier as the price below which the goods are not to be advertised for sale;
(b) ...
(c) the offering of goods for sale at a price less
than a price specified by the supplier as the
price below which the goods are not to be offered for sale,
and a reference in paragraph (3) (d), (e) or (f) to
a price below which the goods are not to be sold shall be construed as including a reference to the
price below hich the goods are not o be advertised for sale, to the price below which the
goods are not to be displayed for sale and to the price below which the goods
for sale." are not to be offered
Section 76 defined the pecuniary penalties which may be
ordered to the extent here relevant as follows: "76. (1) if the Court is satisfied that a person -
(a) has contravened a provision of part IV; (b) ...
(c) ... (d) ... (e) has been
in
any way, directly
or indirectly,
knowingly concerned in, or party to, the contravention by a person of such a provision;
or
(f) has conspired with others to contravene such a provision.
The Court may order the person to pay to the
Commonwealth such pecuniary penalty (not exceeding $50,000 in the case of a person not being a body corporate, or $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 p rson has
previously been found by the Court in
proceedings under this Part to have engaged in a similar conduct.
( 2 ) ...
(3) If conduct constitutes a contravention of two
or more provisions of Part IV, a proceeding may be instituted under this Act against a person in
relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct."
When the matter was called on for hearing counsel on
behalf of both of the respondents filed in court, with leave, a
notice of withdrawal of his clients' defences. He also formally
admitted on their behalf each of the contraventions alleged in
the statement of claim. However no finding was sought from the Court on an allegation pleaded in paragraph 16 thereof. The
Commission had pleaded that on occasions during the years
1984-1987 inclusive General Corporation had by its South
. . . . 5.
Australian Manager Mr. Chiappin engaged in the practice of resale
price maintenance contrary to s.48 of the Act. On many occasions Mr. Chiappin had orally attempted to induce a retailer not to
advertise or sell goods supplied by General Corporation at a price less than a specified price. On a number of other
occasions Mr. Chiappin refused to supply certain products of
General Corporation to the retailer. These contraventions occurred in the following circumstances.
General Corporation is a substantial company which
imports into Australia nd istributes electrical products manufactured in Japan by its parent company. Electrical products
are also imported from other overseas sources. These products include colour television sets, video cassette recorders, room air conditioners and electronic cash registers. It distributes
these products to buying groups and bulk stores as well as to
retailers. It has its head office in Sydney with branches in four o,ther States including South Australia. In the financial
year 1987/88 it had a sales turnover of $32,365,000.00 which turnover had progressively increased each year since 1983/84 in which year it was $19,477,000. The turnover in South Australia
and the Northern Territory which was Mr. Chiappin's area of responsibility represented 10.5% of General Corporation national
turnover in 1984/85 and 13.4% in 1987/88. One of the retail customers of General Corporation in South Australia during this
period was Whyalla Video Hire Pty. Ltd. which company changed its name in November 1985 to Whyalla Electrical Discounters Pty. Ltd.
(in each instance hereinafter called "Whyalla Video"). It conducted in Whyalla a relatively small business as a retailer of
I . , . 6.
domestic electrical appliances, buying the products of General
Corporation either directly or through finance a company
Borg-Warner Acceptance Corporation (Australia) Ltd. Thomas
Anthony Antonio ("Mr. Antonio") and Roger Victor Thompson ("Mr.
Thompson") were at all material times directors of Whyalla Video.
Mr. Chiappin was at all relevant times South Australian State
Manager of General Corporation which position he had held since
November 1983. He had previously been employed by Sunbeam,
General Accessories and Saverys, and had worked in all for approximately 25 years in the electrical industry. During the
years in question he was responsible for the day to day
operations of the business of General Corporation in South
Australia and the Northern Territory. ne was directly responsible to John Green a director of General Corporation who
for his part was responsible for that company's sales and marketing operations throughout Australia. He had been employed
by General Corporation since December 1975.
The facts which gave rise to the contraventions and the
dates on which they occurred can be stated relatively briefly although some conversations must be set out in full. As will become apparent the contraventions occurred during two periods, each of which culminated in a refusal or refusals to supply
products to Whyalla Video. The first period was from February
1984 to November 1985 and the second was during the months of February and March 1987.
Furthermore on most of the occasions upon which
"attempts to induce" Whyalla Video were made, the attempts were
*. . , . , l .
specifically directed to the advertising of goods. Subsection 96(7) specifically provides that references to selling of goods in paragraphs (a) to (e) of sub.s 96(3) shall be construed as
including references to the advertising of goods.
During the month of February 1984 Mr. Antonio on behalf
of Whyalla Video telephoned Mr. Chiappin and placed an order for
a variety of products for a new store that he was opening. Mr.
Chiappin said in regard to 14" colour television sets:
"Remember, you can sell at whatever price you like on
the shop floor, within reason. By that I mean within
$10 of the prices I have given you. But on no account
are you to go advertising at a discount. These prices I
have given you are the prices at which you can
advertise. I don't want you stuffing me around by advertising at prices below that."
On or about 3 September 1984 Mr. Chiappin telephoned Mr.
Antonio and offered him some air-conditioners. During the
course of the conversation he said to Mr. Antonio: "0.K Tom but I don't want the 16 AT 2 horsepower cooling
units advertised at anything less than $799. The 1 1/2 horsepower unit can be advertised at $749 and the 2 horsepower reverse-cycle at $899, Make money on them. Don't discount them Tom."
On 17 October 1984 Mr. Antonio telephoned Mr. Chiappin.
In reference to an order for General Corporation refrigerators Mr. Chiappin said:
"The lowest I want to see them advertised at Tom, is
$699. " Mr. Antonio replied "John, Harding and Manning have
been advertising that General 350 litre fridge at $639."
Mr. Chiappin said: "I don't care what dog fight you get in with Harding and Manning, you will not advertise at
less than $699."
8 . . . I 8.
Later in the conversation concerning the General
Corporation refrigerator Mr. Chiappin said:
"You will advertise my products on its features, both on
the name 'General'. Its got a 3 year warranty - sell
on the warranty. .. you can go $10 or $20 of f on the
floor but don't advertise below $699."
In respect of an order for 2 horsepower cooling units
Mr. Chiappin said on that occasion to Mr. Antonio -
"Tom sell them for $799. No one else will give you
trouble at $799. Sell them at $799 and youfll get every cent."
On or about 9 November 1984 Mr. Antonio again telephoned
Mr. Chiappin to place an order for General Corporation
refrigerators. Subsequently in the conversation Mr. Chiappin
said in relation to colour television sets which he was urging Mr. Antonio to purchase -
"Sell the GC 146 at $389 and not a cent less. Its got a
5 year warranty on the tube and there should be no need
to carve it up. You should get top dollar so sell it at $389."
In his statement admitted into evidence by consent Mr.
Antonio said that when Mr. Chiappin said "sell at $389" he
understood him to mean not to advertise it below $389. On or about 5 December 1984 Mr. Antonio again spoke with
Mr. Chiappin. In respect of an order for television sets Mr. Chiappin said:
"Look mate, the GC 145 is an AC/DC set and at this price
Tom, under no circumstances should you be giving it
away. You should be making big dollars at $399."
Mr. Antonio replied everybody else is doing at the
"John,
it depends
on
what
moment."
Mr. Chiappin said: "Tom, you should sell at $399, no problems at all, so go $399. Don't carve it up...
$399 is the bottom line I want to see on it. Give the staff a couple of dollars on the floor but don't carve
it up. On the 146's sell it at $389 and you should get the money. no problems at all."
In the same conversation in respect of refrigerators Mr.
Chiappin said:
"Toml I've got some 34 JW's for you. The price is going
up in the new year... sell them at $699 and you'll have
no hassles... If you take all you can, you'll get the
good price and you'll be able to sell them for $699."
On or about 21 June 1985 Mr. Antonio advertised on
television the GC 146 colour television set at $319. Within a
few days of the advertisement appearing Mr. Chiappin telephoned Mr. Antonio. He said:
"Tom, did you advertise the GC 146 T.V. at $3197" Mr. Antonio said: "Yes John" Mr. Chiappin said: "Why did you advertise at such a low
price Tom?"
Mr. Antonio replied "Were just beating the competition
John"
Mr. Chiappin said: "Tom, I'm not going to tolerate my
T . W s being advertised at that price. You will advertise the 146 at $389 or you won't advertise at
all. You're not going to screw up my product." Mr. Antonio said: "Listen John, if anything we're
praising your T.V. set... aren't you pleased it is selling? You shouldn't haggle. You shouldn't give me
a hard time."
Hr. Chiappin said: "No way Tom. You're not going to do
that at those prices. You get in a hassle with Harding and Manning or Gil Finlay, you don't do it in your own backyard, you don't do it on T.V., and involve all the other retailers in the f... gulf. If you haven't got
the stock you won't be f...ing around, will you?"
On 29 July 1985 which Mr. Antonio said was shortly after
the latter conversation he telephoned Mr. Chiappin. He said, concerning refrigerators: "I want some ER 46's"
Mr. Chiappin said: "Sorry Tom, I've got no stock".
In October 1985 Mr. Antonio again telephoned Mr.
Chiappin concerning refrigerators.
He said: "John, I want to order some ER 46 fridges"
Mr. Chiappin said: "I've got no stock, My fridges are all presold to 'Parafield Electrical' and 'Fridge and
Worker World"
In November 1985 Mr. Antonio tried to order from Mr.
Chiappin some air conditioners but Mr. Chiappin said words to the effect that he had no stock, as it had all been presold.
In February 1986 Mr. Antonio telephoned Mr. Chiappin to order an amplifier/cassette deck.
He said "John, I'd like to order Kerokee 2 amplifier/cassette decks"
Mr. Chiappin said: "Tom, I haven't got stocks. I can't
help" Mr. Antonio said: "John, its only 2 I want. I know we
have had our problems. I know we have had our differences".
Mr. Chiappin said: "I can't help you. I have no stock".
Mr. Antonio said that with the exception of one
occasion in May 1986 Whyalla Video did not approach General Corporation for its products although it continued to advertise
. . a . . 11.
in newspapers and on television. The next contact was in the month of February 1987.
On Thursday 5 February 1987 Mr. Antonio on his return
from Adelaide met Mr. Chiappin in Port AUgUSta. During a discussion arising out of a request by Mr. Antonio for 14" T.V. sets, he said to Mr. Chiappin -
"I would like to sell them for $449 if possible." Mr. Chiappin said: "no that's too cheap. You will not
sell them or advertise them at anything less than $469 or I won't supply you."
Mr. Antonio said: "O.K. we need your products as
we're a bit short on stock at the moment."
Mr. Chiappin said: "O.K. Tom we will supply you but remember you must sell them for at least $469 and I'm
not going to tolerate any form of discounting
whatsoever. I'm not going to have you carve up my
products like you've done before. If you carve up
General products Tom you will never ever get a red razoo from me. again."
Mr. Antonio said: "John, look, we will get he
product. We wont discount it. But we will sell it for
a competitive price. we need your products."
Hr. Chiappin said: "Well you better do that. I had SO
many problems with you in the past, with your
discounting and carving up. I'm not going to have my products stuffed around any more. If you sell them for
the price that I General and we'll get on just fine."
suggest
you
will
make
profit
on
Mr. Antonio said: "O.K. John I'm sure we can work something out." Hr. Chiappin said: "Look we're both involved in the
same scene, and I'm not going to have you prostitute my product. You will not discount it. You will sell it for the price that I recommend to you. I don't mind so
much what price you sell it for on the floor within
reason. I don't mind the salesman taking $10 off the price on the floor to get the sale. But you must not
advertise the price at which you're going to sell it.
I'm not going to have you getting on TV and bastardizing my products, selling them at low prices
and stuffing me around."
After an interval the conversation resumed and Mr.
Chiappin said: "Listen Tom, the account is open. But if I find, or I hear anything about you discounting the price of my product then you lose that account, if you do any discounting or get on TV or advertise in the
Whyalla News without notifying me first of what your
intentions are then you just won't get any stock. If
you do any sort of price cutting then you're not going
to get any stock. I will just not have stock available
for you at all. I'm not going to have you bastardize
my products and carve it up like you did before. If
you stuff me around again then I'm just going to cut
your account off .'I
Mr. Antonio said: "O.U. John. Lets just get he
account open. We'll put all your products on the floor
and we'll support you but you'll also have to support me and I'll show you how much business you've been missing out on."
Mr. Chiappin said: "If you look after my products and don't prostitute them, if you maintain the sort of prices that I suggest and just do that, that you will be able to make good profits. Mr. Antonio said: "But John, you've got to realize
that Aarding and Manning and Finlays are selling your goods cheaper on the floor. It's difficult for me to
make a good profit with the market so tight."
Mr. Chiappin said: "O.U. what we will do for you is
that I will supply the goods at the previous price, but
you'll only get one bite at it. That is, I'll supply them at the price you would have got them before the
last price rise. Here's the prices. This will make
you a bit more competitive in the market place." At the end of the conversation Kr. Chiappin said to Kr.
Antonio -
"Well O . K . Tom we'll supply you with these goods but
remember I don't want you discounting them at all. If
you don't advertise and sell them at the prices I say
then I'm just not going to be able to supply you and this is definitely the last and final chance you're going to get with my products. I won't have any stock
left for you at all if you carve my products up. O.K."
On 11 February 1987 during a conversation when an order
was placed for refrigerators Mr. Chiappin said to Kr. Antonio -
"These are the prices at which you will sell Tom, the ER
46 must not be advertised at anything less than $1,399."
. .
13.
On 25 February 1987 a conversation took place between
Mr. Antonio and Mr. Chiappin. An officer of the Trade Practices Commission was present and with the assistance of a loud speaker attached to the telephone was able to hear what was said by Mr.
Chiappin. Prior to the making of the call Mr. Antonio had
prepared a television advertisement with the price of a General
Corporation television set stated at $449. Having told Mr.
Chiappin of this advertisement and having been informed by him that the price was too cheap, the following conversation took place :
Mr. Antonio said: "Well what should I be doing the T.V's for?"
Mr. Chiappin said: "Not a zack under $469; do it my way, offer a fry pan or something ..."
Later Mr. Chiappin said: "Don't let it go to air O K we will fall out again".
On 4 March 1987 Mr. Chiappin telephoned Mr. Antonio
seeking orders for coloured television sets and videos. Durlng
the conversation Mr. Chiappin said:
"I'll give it to you if you sell at $799. Make sure you
stick to that price. The T.V. will only go to you and
Radio Rentals and with the UBA deal, it will only cost you $630." Mr. Antonio said: "Come on John, Retravision have got it in their catalogue for $798."
Mr. Chiappin said: "Well Tom, you can go $10 under the Retravision catalogue."
Mr. Antonio said: "I think that's too much. I reckon
$699. "
Mr. Chiappin said: "NO way Tom, sell it at $789."
Mr. Antonio said: "Well, it sounds great, I could buy
I.. .. 14.
20 of those. But I'll have to speak to Roger. I'll
get Roger to ring you back." Mr. Chiappin said: "O.K. Tom."
On 11 March 1987 Mr. Antonio telephoned Mr. Chiappin
with a request that he be permitted to sell a limited number of
14" television sets at $399. The conversation was heard by M r .
Thompson and another employee with the assistance of a telephone
loud speaker and was recorded on a cassette tape. After a
violent conversation studded with bad language on the part of Mr.
Chiappin when he rejected Mr. Antonio's suggestion that the television be sold at $399, Mr. Antonio said:
"well can we do it at $4497". Mr Chiappin replied "NO, look the cheapest I'll agree to you doin' it is four five...".
Later in reference to a statement from Mr. Antonio that
he proposed to sell at $399 Mr. Chiappin said:
"If you do it I am going to cut your bloody account off
again, without any doubt. I have told you what I have agreed to, the mimimum that you can advertise that
would be $459 and I am allowing you $10 cheaper than Radio Rentals, no less."
Later he also said, "Oh yes, well I am pleased you have phoned me because you know how I feel about discounting
its just not on."
On 11 March 1987 Mr. Antonio advertised the General Corporation 14" television set for $399.
On 17 March Mr. Thompson received a telephone call from
Mr. Chiappin. Upon being told by Mr. Thompson that the General Corporation 14" television set had been advertised at $399
Mr. Chiappin said: "You know the arrangements." Mr. Thompson said: "Sorry?"
Mr. Chiappin said: 'You know the arrangements that Imade with him ."
Mr. Thompson said: "What's that?"
Mr. Chiappin said: "That he was not to do it at that price. "
Mr. Thompson said: "Yer, but I mean, that's something that I've... I've heard some of the conversations." Mr. Chiappin said: "Look you advertise it and say what you want, 0.K."
Mr. Thompson said: "Yes."
Mr. Chiappin said: "AS you know we're out of stock."
Mr. Thompson said: "You are out of stock of what?" Mr. Chiappin said: "Everything."
Mr. Thompson said: "You saying you won't supply me." Mr. Chiappin said: "Well I'm not saying anything, O.K.
Now I went through it with Tom last week, I told him
how to do it. I told him..."
Mr. Thompson said: "John if the market's dead, I
mean. . . Mr. Chiappin said: "Look. Please, go and do business
with someone else."
Later Mr. Chiappin said: "I'm not going to supply you
because I can't tell you that I can't supply you but
what I am telling you is that I don't have any stock". Subsequently Mr. Thompson said: "Look if we advertise it below that we no longer get any stock from you?'
Later in the conversation Mr. Chiappin said: "Look all
I'm saying to you, Roger, is that I just haven't got
any stock. My warehouse is empty".
On 19 March 1987 Hr. Antonio spoke on the telephone with Mr. Chiappin on his call.
Mr. Antonio said: " ... Roger told me something about
ordering two T.V's and something about you going off
because we went at $399 on our T.V's". Mr. Chiappin said "And you don't think that's any cause for it Tom". In response to a statement by Mr. Antonio said that he
was selling Toshiba sets at $399 Mr. Chlappin said:
"But I don't want you to do it with mine"
Subsequently he said: "So I'll just leave it with you from now on 0.K".
The conversation eventually ended after Mr. Chiappin
said:
"Let me say this to you, lets see when you get the next
one".
Mr. Antonio said: "Next what"
Mr. Chiappin relied "Next one of mine".
Taken in context the totality of which has not been set
out in these reasons, there is no doubt and no dispute that once again Mr. Chiappin was stating that he refused to supply products to Whyalla Video.
The Commission in its tatement of claim alleged
contraventions of s.48 in that in each of the abovementioned
conversations held with Mr. Antonio in February 1984, on 3
September 1984 and 28, and 29 June 1985 (which dates hereafter
comprise "the first period"). Mr. Chiappin said words which were intended to induce Whyalla Video not to advertise or sell certain
products at a price less than the particular price specified for these products on each date. The respondents withdrew at trial their defence denying the allegations and admitted that they were
true. It also alleged that on or about 29 July 1985 General Corporation by Mr. Chiappin refused to supply to Whyalla Video certain specified products for the reason that Whyalla Video had
advertised or sold or was likely to advertise or sell General
Corporation's products at prices less than the prices specified
by General Corporation. On a number of subsequent occaslons
during the period September, October and November 1985 further conversations took place during each of which it was alleged Mr. Chiappin refused to supply products to Whyalla Video for the same
reason. Each of these allegations, whether they be of
inducement or refusal to supply was admitted by the respondents.
It is therefore apparent that after a number of attempts to
induce Whyalla video not to advertise or sell which attempts were
on most occasions unsuccessful General Corporation refused to supply both on 29 July and during the months of September,
October and November 1985.
The second period in which contraventions were in the
statement of claim alleged to have occurred commenced on or about
5 February 1987. On this occasion and on 11 February, 25
February, 4 March and 11 March 1987 Mr. Chiappin said words which were intended to induce Whyalla Video not to advertise or sell specified products at a price less than that prescribed by him.
It was also alleged that on or about 17 March 1987 Mr.
Chiappin had a conversation with Mr. Thompson. All of the other
abovementioned conversations took place with Mr. Antonio. On this occasion and on 19 March 1987 when he spoke to Mr. Antonio
of General Corporation, Mr. Chiappin refused to supply its products to Whyalla Video because the company had advertised or sold or was likely to advertise or sell General Corporation's products at less than the prices specified therefor. In respect
of all of these allegations made in respect of the second period the respondents also withdrew the defences and admitted the truth
of the allegations. It is apparent that in the second period
there were five attempts to induce Whyalla Video not to advertise
or sell followed by a refusal to supply stated to Mr. Thompson and a like refusal stated to Mr. Antonio.
The statement of claim also alleged that on 31 July 1985
a conversation took place between Mr. Chiappin and Mr. Calikes an
employee of Whyalla Video. However the Commission did not seek to establish that a contravention occurred on this occasion. The statement of claim finally alleged that General Corporation had engaged in the practice of resale price maintenance contrary to s.48 of the Act and that Mr. Chiappin was knowingly concerned in
or a party to these contraventions by General Corporation. There is no doubt these contraventions constituted conduct of the kind referred to in paragraphs 76 (l)(e) and 80(l)(e) of the Act. By virtue of the withdrawal of their defences and admission of
the allegations in the statement of claim these contraventions
must be found submissions on penalty a query was
to
have
been
established.
However
during
raised whether Mr. Chiappin
could be personally liable to a penalty in addition to the liability of General Corporation on which ompany's behalf he had
made the various statements. However no point was in effect
taken by Mr. Chiappin's counsel and I have not given
consideration to the question. These are in my opinion serious contraventions of the
Act in respect of which substantial penalties must be imposed. Counsel for the Commission identified ten considerations which he
said I should take into account in determining the appropriate
.. ..
19.
amounts of penalty. Counsel for the respondents did not
challenge the propriety of any of these considerations which in my opinion accord with authority. The first question is whether the evidence established
that the conduct was deliberate. In my opinion the conduct of
fir. Chiappin was deliberate. He admitted in his affidavit filed
at trial that in saying the words alleged he knew he was probably
committing offences under the Act. This makes the fact that he
committed a second period of like offences more reprehensible. However the same can not be said of General Corporation as the
evidence was that it was not aware of what Mr. Chiappin was
doing. However this factor has not much impact upon the
responsibility of General Corporation for the contraventions which occurred.
A relevant consideration is the damage suffered by the
retailer or the public. There was no evidence upon which a
finding of damage to the public can be made. In respect of
Whyalla Video a deed was tendered to the Court which established
that General Corporation had agreed t o pay to Whyalla Video
$13,649 in satisfaction of its claims arising out of the contraventions.
General Corporation is a company of considerable size
having in the last financial year sales a turnover of
$32,365,000.00 and a gross profit of $3,769,201.00. It is a
substantial supplier of its products both in South Australia and
in Whyalla and is vastly larger than Whyalla Video. It is
.. ..
20.
fortunate that Whyalla Video dealt with other manufacturers or distributors otherwise the damage it suffered might have been much more serious.
Mr. Chiappin as manager in South Australia was
answerable directly to a member of the board of directors and had
the status of amember of senior management of General
Corporation. As such he initiated all the actions which
comprised the contraventions. However it would not be correct to
say that any members of the board were at all aware of his conduct and in any way prompted his actions.
It is proper that I also pay regard to such steps, if
any, as were taken to educate employees prior to the contraventions. This aspect of the matter is particularly significant because I find that totally inadequate steps to
educate employees were taken by General Corporation. There had been no directions and no material placed before employees subsequent to 1974 at which time a memorandum had been issued.
However, no copy of this memorandum was available to be placed
before the Court and in any event there have been very
substantial amendments to the Act since 1974. Doubtless also new
staff including, very significantly, Mr. Chiappin, had entered into employment with General Corporation since that year. These matters are very serious and must have a significant impact upon
the appropriate levels of penalty. The seriousness of General
Corporation's conduct in this regard is reflected in the fact that an officer of Mr. Chiappin's standing had not been made aware or fully aware of the company's obligations under the Act
..
21.
and its policy of compliance therewith.
It can be accepted that General Corporation had a pollcy requiring compliance with the Act and there was evidence that
at
the level of the board of directors it took seriously its
obligations. However its failure to impress upon its employees and its
senior culpable. Furthermore
management
these
obligations
is particularly
it could not be said that the conduct was
the result of any mistake or misunderstanding on the part of Mr.
Chiappin. He engaged in the activities for the purpose of furthering the interests of General Corporation and was aware
that he was probably contravening the Act. However it must be
acknowledged that there was no uggestion that General
Corporation had on any occasion in the past engaged in similar
conduct under s.40 or contravened any other provision of the Act.
Since the occurrence very considerable steps in
establishing controls and initiating educational processes have
been taken by General Corporation to alert employees to their
obligations under the Act and to ensure that there is no
repetition of the conduct. It is only unfortunate that serious contraventions had to occur before these steps were taken. On the question whether General Corporation has made a
full and final disclosure and co-operated with the Commission it is pertinent to note that defences were entered on 10 February
1988 on behalf of both respondents unequivocably denying all the
crucial allegations in the Commission's statement of claim. Two
memoranda from Mr. Chiappin to Mr. Green were before the Court on the basis of which the defences were filed.
However on 22 February 1988 the Commission's schedule of
discoverable documents disclosed the existence of the tape
recordings of certain conversations which have earlier in these
reasons been Corporation became aware of
identified.
When
the
directors
of
General
these tapes a full investigation of
the matter was undertaken. Mr. Chiappin was required to attend
before a solicitor for General Corporation was present took place on
meeting
of
directors.
This
meeting
at
which
the
6
April 1988. Subsequently conferences between Mr. Chiappin and counsel for General Corporation were held as a result of which Mr. Chiappin admitted having had the conversations alleged by
the Commission. Subsequently General Corporation advised the Commission that it would be withdrawing the defences.
Severe disciplinary action has been taken by General
Corporation against Mr. Chiappin, stopping short however of dismissal, the particular reasons for which were placed before
the Court. General Corporation has however agreed to indemnify him against the penalties which will be imposed on him and his
legal costs.
The end result of my consideration of these matters is
that the contraventions by General Corporation and Mr. Chiappin were very serious and substantial penalties must be imposed. The legislature has made very apparent its view that
contraventions of Part IV of the Act are to be treated as most . I
23.
serious. This is demonstrated by the fact that it is posslble to impose a penalty of $250,000 in respect of each breach by a
Corporation and $50,000 if the contravenor is a natural person.
In this matter the offending conduct extended over a considerable period of time and was perpetrated by General Corporation's Manager in South Australia. Mr. Chiappin attempted unlawfully to
persuade Whyalla Video during two periods to refrain from
advertising its discount prices and when these persuasions failed he took the ultimate step of refusing supplies.
The public has a particular interest in maintaining a
system of free price competition between dealers and only realistic penalties will deter persons minded to contravene the
resale price maintenance provisions of the Act. In determining appropriate penalties in this matter I do not think that I should treat the offences which 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 matter of penalty on the
basis that on four occasions there occurred a pattern or course of conduct which amounted to four contraventions. During 1984
and 1985 Mr. Chiappin attempted many times to induce whyalla
Video to comply with his requirements concerning advertising and one penalty should be imposed 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 imposition on each of them of a single substantial penalty. Mr. Chiappin resumed
h i s attempts to induce compliance in February 1987 and again his
conduct culminated in refusals to supply. Two penalties should
* . I ..' 24.
again be imposed on each contravenor.
In my opinion the conduct of General Corporation which
amounted 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 periods 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 manner I impose penalties on Nr.
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.
The Commission has sought injunctive relief but in my
opinion it is not necessary or appropriate that it be granted.
Substantial penalties have been imposed and I do not consider
that an additional sanction is necessary. There was no
suggestion that the board of directors and senior management in
Sydney contemplated OK were even aware of Nr. Chiappin's conduct.
In fact as soon as the true facts became apparent General
Corporation acted responsibly and took action ultimately to
withdraw the defences. In addition General Corporation agreed to submit to an injunction if the Court considered it necessary to make such an order. Furthermore there was no suggestion that the company or its employees other than Nr. Chiappin had anywhere in Australia previously contravened any of the provisions of the
Act. In my opinion an injunction would not add anything of profit
to the penalties imposed in this matter. It is extremely
unlikely that General Corporation will again offend. As far as
Mr. Chiappin is concerned the threat of dismissal is a
substantial deterrent. Furthermore I would not be prepared to
impose an injunction in the wide and uncertain terms put forward
by the Commission. No other more specific or certain order was suggested. I therefore order:
The r spondent General Corporation pay to the
Commonwealth of Australia pecuniary penalty of $25,000.00 in respect of the matters alleged against it in paras. 9 to 14 inclusive of the Statement of Claim.
The respondent General Corporation pay to the
Commonwealth of Australia pecuniary penalty of
$40,000.00 in respect of the matters alleged against it in paras. 15 and 17 of the Statement of Claim.
The r spondent General Corporation pay to the Commonwealth of Australia pecuniary penalty of $25,000.00 in respect of the matters alleged against it in paras. 18 to 22 inclusive of the Statement of Claim.
The r spondent General Corporation pay to he
Commonwealth of Australia pecuniary penalty of
$40,000.00 in respect of the matters alleged against it in paras. 23 and 24 of the Statement of Claim.
That the respondent M r . Chiappin pay to the Commonwealthof Australia a pecuniary penalty of $5,000.00 in respect
of the natters alleged against him in paras. 9 to 14 inclusive of the Statement of Claim.
That the respondent Mr. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $8,000.00 in respect
of the matters alleged against him in paras. 15 and 17 of the Statement of Claim.
( 7 ) . That the respondent Mr. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $5,000.00 in respect of the matters alleged against him in paras. 18 to 22 inclusive of the Statement of Claim.
( 8 ) . That the respondent Mr. Chiappin pay to the Commonwealth
of Australia a pecuniary penalty of $8,000.00 in respect
of the matters alleged against him in paras. 23 and 24 of the Statement of Claim. ( 9 ) .
Pursuant to s.77 of the Trade Practices Act judgment be
entered for the applicant against General Corporation for $130,000.00 and Mr. Chiappin $26,000.00 which amounts are to be paid to the District Registrar of this
Court within 28 days of this date.
(10). That he respondent General Corporation pay to the
Commission the costs of and incidental to the proceedings against it.
(11). That the respondent Mr. Chiappin pay to the Commission
the costs of and incidental to the proceedings against
him. I certify that this and the 27
preceding pages are a true copy of the Reasons for Judgment of
Mr. Justice Fisher. , Associate &%',lik
Counsel for the Applicant Mr. J. Mansfield Q.C. Mr. A. Besanko Solicitors for the Applicant : Australian Government
Solicitor
Counsel for the Respondent : Mr. C.S.C. Sheller Q.C. Mr. S.D. Robb
Solicitors for the Respondent: Baker McKenzie Date of Hearing 18th L 19th July 1988
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0
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