Trade Practices Commission v Lois (Australia) Pty Ltd

[1985] FCA 561

Re: TRADE PRACTICES COMMISSION
And: LOIS (AUSTRALIA) PTY LTD
No. WAG 20 of 1985
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Forster J.

CATCHWORDS

Trade Practices - Resale price maintenance - breaches of s.48 Trade Practices Act - considerations to be taken into account in assessment of penalty.

Trade Practices Act, ss.48, 96(3)(a), (c) and (f).

Trade Practices Commission v. Stihl Chain Saws (Aust) Pty Ltd (1978) 3 A.T.P.R. 306.

HEARING

ADELAIDE
#DATE 7:11:1985

ORDER

1. The respondent pay to the Commonwealth of Australia within 30 days a pecuniary penalty of $5,000. 2. The respondent pay the applicant's costs to be taxed.

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

JUDGE1

The Trade Practices Commission has brought an action against the respondent Lois (Australia) Pty Ltd seeking the imposition of a pecuniary penalty with respect to the commission by the respondent of acts of the kind described in s.96(3)(a), (c) and (f) of the Trade Practices Act constituting engaging in retail price maintenance contrary to s.48 of the Act. Two days before the hearing I ordered that the parties have leave to file amended pleadings. By its amended defence the respondent admitted the allegations against it contained in the amended statement of claim and admitted that the applicant was entitled to the relief claimed. A statement of agreed facts was filed.

1. At material times the respondent carried on business as a wholesale supplier of high quality jeans and jackets. A Mr and Mrs Oliver carried and carry on business in partnership with each other at Mt Lawley in Western Australia and as a separate business in partnership with Sargeant Nominees Pty Ltd in Hay Street, Perth. Both partnerships carried on the business of retailing jeans and casual fashion clothing. A Mr Bishop was at all material times after 5 May 1983 national sales manager for the respondent and a Mr Bowran was at all material times after 12 September 1983 the Western Australian agent for the respondent.

2. In October 1983 Bowran informed Oliver that the respondent would be unhappy to supply its products to either of the partnerships knowing that the goods would be discounted to a mark up of 75% above the wholesale price. On about 28 November 1983 Oliver spoke to Bowran on three occasions. Bowran informed Oliver that he would have trouble getting supplies of goods from the respondent because of the way in which the partnerships were discounting and intended to discount the respondent's goods because the respondent did not want its merchandise to be discounted except at the end of the season. Bowran said that the respondent was not happy to supply goods to the partnerships so long as the partnerships' discounting practices continued. Bowran also said that he thought that any discounting should be to a minimum mark up of 80 to 85%. In response to a question from Oliver, Bowran said that he thought that the respondent would be satisfied with a mark up of 80% but did not want any early season discounting below a mark up of 100%. On about 29 November 1983 Bishop spoke to Oliver on the telephone and said that other retailers in Perth operated on a minimum mark up of 90% and that anything less was unacceptable to the respondent. Bishop also told Oliver that if he were prepared to enter into a verbal gentlemen's agreement that the partnerships would mark up the respondent's products by 90% of the wholesale price the respondent would be satisfied and would arrange to show Oliver the range of the respondent's products for the forthcoming season. On about 18 January 1984 Oliver spoke again by telephone to Bishop complaining that he had not been shown the 1984 winter range of products. Bishop told him that Bowran had been too busy with other retailers and that some of the range had been sold out. In the course of the conversation Bishop reiterated that the respondent would supply the partnerships with goods if Oliver would guarantee to sell the goods at the recommended mark up. In February 1984 the Oliver's solicitors wrote to the respondent terminating business between the partnerships and the respondent and demanding the return of moneys held by the respondent to the credit of the partnerships. The solicitors said in their letter -
   
   

"We have been instructed by our clients that you are no longer willing to supply them with Lois products as a result of our clients' discount policy. Unfortunately our clients can not comply with your requirement to mark up your product by a minimum of 90%".

Bishop signed a letter to one of the partnerships returning the money due but making no denial of what the solicitors had alleged.

1. It will be seen from this brief digest of the statement of facts that there have been a number of contraventions of the Trade Practices Act by the respondent in its dealings with the partnerships each one of which amounts to a separate offence. Counsel for the applicant however said that his client considered that there was what amounted to one course of conduct with respect to one supplier and that only one penalty should be imposed.

2. This was a deliberate course of conduct engaged in by senior management of the respondent and was undertaken pursuant to a deliberate policy to prevent discounting beyond a maximum of 10% of a mark up of 100% in order to preserve what the respondent perceived to be its image in the market of a supplier of high quality goods. There was an effective threat to refuse supply and the retailer was not supplied. There were very clear breaches of s.48 of the Trade Practices Act. I adopt with respect the remarks of Smithers J. in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) 3 ATPR 306 at p 324 -
   
   

"It is clearly the intention of Parliament to lay down conditions for the conduct of corporate trade and commerce which will ensure that traders operate in competitive conditions and that the public has the benefits which flow therefrom. So far as resale price maintenance is concerned the object of the Act is to create conditions in which the public will benefit from traders competing with each other in respect of prices unfettered by price restraints imposed by suppliers of goods upon retailers."

1. The Trade Practices Commission does not contend that this is so serious a case as to warrant a substantial penalty but rather is a case meriting but a modest penalty. There was no quantified loss shown with respect to the two partnerships but they lost the opportunity to sell a modest volume of the respondent's goods. During the six month period prior to the contraventions commencing less than $7,000 worth of stock had been supplied by the respondent to the partnerships.

2. The respondent has been guilty of no prior contraventions and although it is established that there was a deliberate policy with respect to the partnerships there is no evidence that any other retailer was similarly treated. The respondent is a relatively small supplier of jeans and jackets in the market as a whole. The respondent was not operating on a retail basis so that there was no direct pecuniary advantage to be gained by the contraventions. The advantage, if any, was a rather more intangible one of preserving its image in the market which no doubt it hoped would lead to some future financial benefit. I should and do take into account that the respondent has frankly admitted its fault and when it finally realised what it had done offered to resume supply of goods to the partnerships.

3. It is said that the respondent is impecunious and financial papers exhibited to an affidavit of Mr Olleros indicate that this is so. The respondent was incorporated in 1980 but did not commence operations until 1982. It has fairly considerable accumulated losses due no doubt to the costs of getting established. I take the relative impecuniosity of the respondent into account.

4. In Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (supra) Smithers J. says at p 325 -
   
   

"The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality, and it should be kept in mind that the Act operates in a commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive."

1. I bear his Honour's words in mind and take all relevant circumstances into account and in particular the attitude of the Trade Practices Commission. I assess the penalty to be paid by the respondent at $5,000 and order that the respondent pay the applicant's costs to be taxed.