Trade Practices Commission v Mobil Oil Australia Ltd

[1984] FCA 403

Re: TRADE PRACTICES COMMISSION
And: MOBIL OIL AUSTRALIA LIMITED
No. WA G41 of 1983
Trade Practices
(1985) ATPR para 40-503 / 4 FCR 296

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1)

CATCHWORDS

Trade Practices - resale price maintenance - sale of petroleum by respondent to dealer - penalty - relevant matters - two contraventions of Act - same officer of company involved - both contraventions in relation to one dealer - whether injunction appropriate - additional penalty

Trade Practices Act 1974 ss. 76, 77, 80

Trade Practices - Resale price maintenance - Penalty - Whether injunction should go - Trade Practices Act 1974 (Cth), ss 76, 77, 80.

HEADNOTE

Observations concerning matters relevant to the quantum of a penalty for engaging in resale price maintenance and concerning whether an injunction should go and the terms of any such injunction.

HEARING

1984, November 16, 23. #DATE 23:11:1984

APPLICATION

Application for penalties and injunctions for contravention of s 48 of the Trade Practices Act 1974 (Cth).

C J Carr, for the applicant.

D Williams QC and P Marbius, for the respondent.

Cur adv vult

Solicitor for the applicant: Australian Government Solicitor.

Solicitor for the respondent: Stone James Stephen Jaques.

GFV

ORDER

1. The respondent pay to the Commmonwealth of Australia a pecuniary penalty of $30,000 in respect of the matters alleged against it in para. 8 of the statement of claim.

2. The respondent pay to the Commonwealth of Australia a pecuniary penalty of $20,000 in respect of the matters alleged against it in paras 13, 14 and 15 of the statement of claim.

3. Pursuant to s.77 of the Trade Practices Act 1974 judgment be entered for the applicant on behalf of the Commonwealth of Australia against the respondent for the sum of $50,000.

4. The respondent pay to the applicant its costs of the application.

Orders accordingly

JUDGE1

In an earlier judgment (see (1984) ATPR 40-482) the Court concluded that the respondent had contravened s.48 of the Trade Practices Act 1974. The question of the penalties to be paid by the respondent to the Commonwealth and of other relief sought by the applicant was adjourned. Counsel have now made submissions regarding those matters.

1. The facts on which contraventions of s.48 were found appear in the earlier reasons for judgment. I shall not repeat what is said there except to say that in a telephone conversation on 7 March 1981 an officer of the respondent induced Mr. and Mrs. Quayle, who then carried on the business of retailing petroleum at a service station site in Wanneroo Road, Yokine, not to sell supergrade petroleum at a price less than 37.5 cents a litre. Further, by telephone conversations on 27 April, 29 April and 5 May 1982 officers of the responent used a price namely 38.5 cents a litre which was likely to be understood by Mr. Quayle, and was understood by him, as the price below which supergrade petroleum was not to be sold.

2. In my earlier reasons for judgment I regarded the telephone conversation of 7 March 1981 as one act and the conversations in 1982 as constituting one act. In their recent submissions counsel for the parties did not dissent from that approach; indeed it was endorsed by them.

3. Thus I approach the question of penalties on the basis that there have been two contraventions of s.48. Of the two, the earlier is the more serious. It was initiated by Mr. Ross, then Mobil's metropolitan area manager; it was initiated at a time when the Quayles were not receiving TDAR support (the nature and operations of Mobil's Temporary Dealer Assistance Rebate scheme are described in the earlier reasons for judgment); and the conversation had the result that the Quayles lifted their price albeit that they reduced it somewhat shortly afterwards.

4. The conversations in 1982 were with Mr. Totaro, then Mobil's territory manager for the area in which the Dog Swamp site lay, and with Mr. Ross. They took place in connection with the operation of the TDAR scheme. I was not satisfied that either Mr. Ross or Mr. Totaro acted with the intention of specifying a price below which petroleum was not to be sold though I was satisfied that they did use a price which was likely to be understood by Mr. Quayle and was understood by him, as the price below which petroleum was not to be sold. In respect of these conversations there was no allegation of inducement.

5. In the earlier reasons for judgment I rejected a submission that the TDAR scheme was "a sham or at best, ... a carefully contrived scheme to increase the prospects of maintaining resale prices for petrol". I did so on the basis that such a submission did not arise from the pleadings. Nothing said in the present reasons departs from that approach. But it does seem to be a vice inherent in the scheme that it is difficult for Mobil's officers to discuss it with dealers without, at the very least, appearing to suggest a price below which petrol should not be sold. From affidavits filed on behalf of Mobil in the present proceedings it is apparent that the company is now seeking to bring home to its staff the need to avoid that danger.

6. Sub-section 76(1) prescribes a maximum pecuniary penalty of $250,000 in the case of a body corporate, in respect of each act or omission to which the section applies. The penalty is to be such 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 person has previously been found by the Court in proceedings under this Part to have engaged in a similar conduct".

7. It may be said immediately that Mobil has not been previously found by the Court to have engaged in similar conduct. Nor was it suggested by the applicant Commission that as a result of the contraventions any particular loss or damage had been suffered.

8. The injunction to have regard to "all relevant matters" is a wide one. However, from a number of decisions, particular matters have emerged as bearing on the appropriateness of the penalty to be imposed. All except the most recent cases are collected in Freiberg :Monetary Penalties Under The Trade Practices Act 1974 (Cth) (1983) 11 A.B.L.R. 4.

9. The statement by Smithers J. in Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) ATPR 40-091 at pp 17895-17896 that:
   
   

"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".

has been endorsed in a number of decisions and expresses the philosophy of the legislation, in the light of which appropriate penalties must be considered.

1. The seriousness with which the legislature views a contravention of Part IV of the Act may be found in the maximum 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 may be disposed to engage in prohibited conduct of a similar kind. The range of penalties imposed in cases of resale price maintenance may be gauged from the schedule prepared by counsel for the applicant. This shows penalties as low as $3,000 (Trade Practices Commission v. Gorenje Pacific Pty. Ltd. (1983) ATPR 40-430) and as high as $120,000 (Trade Practices Commission v. Pye Industries Sales Pty. Ltd. (1978) ATPR 40-089). Clearly much depends on the deliberateness of the offender's conduct, the extent to which resale price maintenance has been carried on and the damage caused to anyone by that conduct. At the same time one must not lose sight of the fact that s.76 of the Act is not directly concerned with compensation; that is the role of s.82. There is the wider public interest in ensuring that the provisions of the Act are observed.

2. The seriousness of a contravention may also be measured by the degree to which it was initiated or acquiesced in by senior management. In the present case the main instigator of the contraventions was Mr. Ross. As already mentioned, his position at the time was that of metropolitan area manager. He had below him five retail territory managers, known as "reps", one of whom was Mr. Totaro. Mr. Ross' position lay in the area of middle management; it would not be accurate to describe him as a senior executive. Mr. Totaro was of course more junior still. It was not established that any officer of Mobil more senior than Mr. Ross participated in either of the contraventions. Nor would it be fair on the evidence to say that any acquiesced in them though I have already adverted to the dangers implicit in the TDAR scheme.

3. Mobil has, for the purpose of the present proceedings, filed four affidavits. One is sworn by Mr. Wilson, Mobil's director of marketing; another by Mr. Densley, Mobil's dealer agents relations manager; another by Mr.Teys, Mobil's retail area manager; and the fourth by Mr. Ross. Mr. Ross' affidavit is primarily directed to an assurance of compliance with the Act in the future. The other affidavits largely relate to steps taken by the company to bring home to its employees what is involved in resale price maintenance, with a warning to avoid conduct that might be construed as a contravention of the Act. Mr. Wilson's affidavit refers to the fact that Mobil has a staff throughout Australia of some 2,200, that there are about 1,400 retailers to whom it sells petroleum products and that it employs about 130 territory managers whose responsibility is to liaise with retailers.

4. Mobil had an after tax loss of $53.2 million in 1983. Its chairman, Mr. Pusack reported:
   
   

"Mobil's $53 million loss resulted in great part from the squeezing of profit margins on petroleum products to a point where business was almost strangled.

The pressure came from two sources: price cutting and government price control which between them, cost us $31 million.

Price-cutting is largely the product of a market where growth in demand has slowed almost to a standstill. In an industry with very high fixed costs, this is a great problem. We have to sell a large amount of product to break even and only then do we begin to generate profit on the extra litres of throughput. But with demand down right across the board, every oil company has been chasing those extra litres. This is the plague of our industry, and it leads to the fierce price cutting we have suffered for several years now."

1. There is no doubt that resale price maintenance can be a difficult concept and that the line to be drawn when a scheme such as TDAR is in existence can be a very fine one indeed. I accept that the proceedings brought by the Commission against Mobil have heightened the company's appreciation of the need to ensure that its staff keep the relevant provisions of the legislation in mind.

2. In summary then, there have been two contraventions of the resale price maintenance provisions of the Act. Both emanated from the same officer of the company and both related to the one dealer. One arose in the course of discussions relating to a scheme of assistance to dealers; the other, while not arising directly from such a discussion, was no doubt influenced by the existence of the scheme. In all the circumstances it would be appropriate to impose a penalty of $30,000 in the case of the first contravention and $20,000 in the case of the second.

3. The Commission also seeks an injunction against Mobil. In terms of the prayer for relief in the statement of claim, what is sought is:
   
   

"An injunction restraining the Respondent from engaging in the practice of resale price maintenance in the supply of petroleum in Australia".

1. On no account would I grant an injunction in terms so wide and uncertain. No doubt conscious of the objections to an injunction in such terms, counsel for the Commission suggested as an alternative an injunction restraining Mobil, until further order, from:
   
   

"(a) inducing or attempting to induce any person not to sell petroleum supplied by the respondent (or by a third person who directly or indirectly obtained such petroleum from the respondent) at a price less than the price specified by the respondent, and

(b) using in relation to petroleum supplied or that may be supplied by it to a second person a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold".

1. If I were minded to grant an injunction in those terms, it would not be "until further order". Such a provision seems inconsistent with the notion of a final judgment; it is more appropriate to an interlocutory injunction. In any event sub-s.80(3) of the Act empowers the Court to rescind or vary an injunction granted under the preceding sub-sections.

2. Sub-section 80(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 previously engaged in conduct of that kind; and

(c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind".

1. It is clear therefore that in determining whether to grant an injunction the Court is not restricted because the factors mentioned in sub-s.(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 may, in an appropriate case, be an additional sanction to a pecuniary penalty. For instance, in the case of a particularly flagrant breach, even though there was no evidence to indicate the offender's intention to continue the offending conduct, it might be appropriate to mark the Court's disapproval by an injunction as well as a monetary penalty.

2. The present case is not one of flagrant contraventions of the Act. Furthermore, it is not in issue that when the Commission drew the attention of Mobil to the allegations of Mr. Quayle, Mobil co-operated with the Commission in providing information. I am not persuaded that an injunction is either necessary or appropriate in the present case.

3. In the course of his final address, counsel for Mobil argued against the imposition of an injunction but suggested that, if the Court were minded to grant one, his client should have the opportunity to consider the giving of an appropriate undertaking. I do not accept this approach. A respondent faced with a claim for an injunction may oppose the granting of an injunction in the form claimed or at all. Alternatively the respondent may offer the Court an undertaking and in this way seek to obviate the grant of an injunction. But I do not think that the Court should be asked to reach a tentative conclusion and then give the respondent an opportunity to offer an undertaking to avoid the otherwise inevitable result. As it happens, in the present case there will be no injunction against Mobil.

4. The order of the Court will be that:
   
   

(1) The respondent pay to the Commonwealth of Australia a pecuniary penalty of $30,000 in respect of the matters alleged against it in para. 8 of the statement of claim.

(2) The respondent pay to the Commonwealth of Australia a pecuniary penalty of $20,000 in respect of the matters alleged against it in paras 13, 14 and 15 of the statement of claim.

(3) Pursuant to s.77 of the Trade Practices Act 1974 judgment be entered for the applicant on behalf of the Commonwealth of Australia against the respondent for the sum of $50,000.

(4) The respondent pay to the applicant its costs of the application.