Trade Practices Commission v Pioneer Concrete (Vic) Pty Ltd
[1985] FCA 332
•17 JULY 1985
Re: TRADE PRACTICES COMMISSION
And: PIONEER CONCRETE (VIC.) PTY. LTD.; APEX QUARRIES LTD.; BORAL RESOURCES
(VIC.) PTY. LTD.; THE READYMIX GROUP LTD.; BARRO GROUP PTY. LTD.; BARRY
MONTGOMERY; WILLIAM RODERICK PARR; ALAN GEORGE RASMUSSEN; CHRISTOPHER JOHN
AVERY and JOHN DAVID CASEY
No. VG 73 of 1984
Trade Practices
(1985) ATPR para 40 - 590
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Sweeney J.
CATCHWORDS
Trade Practices - respondents carrying on business as producers and suppliers of pre-mixed concrete in Melbourne metropolitan area in competition with each other - price "war" - agreement or understanding to fix minimum pricing levels - adoption of common pricing formula to be "refined" from time to time - arrangement or understanding having purpose or likely to have effect of substantially lessening competition - pecuniary penalties - injunctions.
Trade Practices Act 1974 ss.45(2)(a)(ii), 45(8), 45A, 76
HEARING
MELBOURNE
#DATE 17:7:1985
ORDER
1. The first respondent pay to the Commonwealth the pecuniary penalty of $53,000.
2. The second respondent pay to the Commonwealth the pecuniary penalty of $47,000.
3. The third respondent pay to the Commonwealth the pecuniary penalty of $51,000.
4. The fourth respondent pay to the Commonwealth the pecuniary penalty of $49,000.
5. The fifth respondent pay to the Commonwealth the pecuniary penalty of $50,000.
6. The first respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Pioneer Concrete (Vic.)Pty. Limited and by any one or more of Apex Quarries Limited, Boral Resources (Vic.) Pty. Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another, other than a contract, arrangement or understanding the only parties to which are Pioneer Concrete (Vic.) Pty. Limited and Apex Quarries Limited so long as they shall remain related corporations within the meaning of the Act.
7. the second respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Apex Quarries Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Boral Resources (Vic.) Pty. Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another, other than a contract, arrangement or understanding the only parties to which are Apex Quarries Limited and Pioneer Concrete (Vic.) Pty. Limited so long as they shall remain related corporations within the meaning of the Act.
8. The third respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Boral Resources (Vic.) Pty. Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another.
9. The fourth respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by The Readymix Group Limited and by one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, Boral Resources (Vic.) Pty. Limited and Barro Group Pty. Limited in competition with one another.
10. The fifth respondent, for period of 3 years from the date hereof whether by its directors, officers, servants or agents or otherwise howsoever be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Barro Group Pty. Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, Boral Resources (Vic.) Pty. Limited and The Readymix Group Limited in competition with one another.
11. Liberty to apply be reserved to all parties.
12. the respondents pay the costs of the applicant of and incidental to the application, including reserved costs, to be taxed if not agreed.
Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is an application by the Trade Practices Commission ("the Commission") for injunctions and penalties in respect of alleged contraventions of s.45(2)(a)(ii) of the Trade Practices Act ("the Act") against each of the first to fifth respondents ("the corporate respondents").
The case has proceeded on the basis of an agreed statement of facts, in the following terms:
"1. This Agreed Statement of Facts is agreed between the Applicant and the First to Fifth Respondents, (hereinafter "the Corporate Respondents"). The Corporate Respondents have amended their respective defences and the proceedings against the Sixth to Tenth Respondents have been discontinued.
Definitions
2. Expressions used in this Agreed Statement of Facts shall, unless the contrary intention appears, have the same meaning as in the Statement of Claim.
3. The following expressions shall, unless the contrary intention appears, have the meaning set out below:
"the relevant period" means the period 1 January 1978 to 31 August 1979 inclusive;
"the industry" means the pre-mixed concrete industry.
4. The relevant market is the market for pre-mixed concrete in the Melbourne Metropolitan area.
Initial Proceedings
5. During early 1979 representatives of Ro-Mix Concrete Pty Ltd approached the Trade Practices Commission with allegations of price fixing conduct engaged in by the Corporate Respondents. During 1979 and 1980 extensive industry investigations were undertaken by Commission staff.
6. During early 1980 Notices under Section 155 of the Trade Practices Act 1974 ("the Act") were prepared and subsequently issued to all Respondents and others in June 1980. In August 1980 Barro Group Pty Ltd ("Barro") responded partially to the Section 155 Notice directed to that Respondent. However declaration proceedings were subsequently instituted by all recipients of the Notices, including Barro.
7. The proceedings were heard before the Federal Court and appeals were subsequently filed and heard before the Full Federal Court and High Court in the ensuing three years. As none of the challenges to those Section 155 Notices was ultimately successful, responses to those Notices were provided in mid 1983. Following analysis of the Section 155 responses by the Commission's staff these proceedings were instituted on 5 April 1984.
Background
8. Pioneer Concrete (Vic) Pty. Limited ("Pioneer"), Apex Quarries Limited ("Apex"), Boral Resources (Vic) Pty Limited ("Boral") and Barro Group Pty. Limited ("Barro") are and were at all material times incorporated pursuant to the laws of the State of Victoria and were and remain trading corporations within the meaning of the Act.
9. On or about 13 September 1978 Pioneer Concrete Services Limited (Pioneer Services), the holding company of Pioneer, purchased 40.4 percent of the issued share capital of Apex, as a result of which it was required to and did, on 21 November 1978, make an offer for the outstanding shares held by the public, which bid was recommended by the directors. Towards the end of September 1978 the Board of Apex was increased from three to six members by the addition of three directors nominated by Pioneer Services. From in or about December 1978 Apex became a subsidiary of Pioneer Services and has at all material times since remained a subsidiary of Pioneer Services. On 15 January 1979 two of the original directors resigned from the Board of Apex and were not replaced.
10. The Readymix Group Limited ("Readymix") was incorporated in 1940 pursuant to the laws of the State of Western Australia and was at all material times a trading corporation within the meaning of the Trade Practices Act. From 1963 until 1 October 1981, Readymix carried on business in Victoria as, inter alia, a producer and supplier of sand, aggregate and other quarry products, and as a producer and supplier of pre-mixed concrete. Readymix carried on these businesses under the registered business name of The Readymix Group (Vic.). Readymix carried on similar businesses in other States and Territories of Australia.
11. During the relevant period, one-half of the issued share capital of Readymix was held, legally and beneficially, by a company that was related to, and controlled by, CSR Limited
("CSR"); the other half of Readymix's issued share capital was held by a company that was related to, and controlled by, BMI Limited ("BMI"). In the relevant period, Readymix was, in effect, a joint venture of the CSR group of companies and the BMI group of companies. In October 1981, CSR and BMI agreed that the joint venture should be dissolved, and that the undertaking business and assets of Readymix throughout Australia should be divided between CSR and BMI and integrated into their respective corporate structures. In Victoria, the business and assets of Readymix were transferred to the BMI group; the shares in Readymix held by the BMI group were transferred to the CSR group. These transfers took effect on 1 October 1981. Since 1 October 1981, Readymix has been wholly owned and controlled by the CSR group. Further, Readymix ceased to carry on the business of the production and supply of pre-mixed concrete in the Melbourne Metropolitan Area of Victoria on 1 October 1981.
12. Each of the Corporate Respondents in the relevant period carried on business, inter alia, as a producer and supplier of pre-mixed concrete in the Melbourne Metropolitan Area of Victoria.
The Product
13. The product comprises a mixture of sand, aggregate, cement, water and on occasion various admixtures. Each corporate respondent obtained its supplies of sand and aggregate, wherever practicable, from its own quarries or from related companies engaged in quarrying activities. At each of the pre-mixed concrete plants operated by the corporate respondents, there was a stock pile of raw materials. Generally, the raw materials were prepared for delivery by placement into a revolving barrel attached to a truck, with the process of mixing to produce concrete occurring in the truck during delivery. The final product is poured from the truck at the relevant site and is commonly referred to as pre-mixed concrete.
14. Pre-mixed concrete has a wide range of uses, including major construction projects, roadwords and paving, housing and smaller domestic requirements. Reflecting this fact, pre-mixed concrete is available in various grades. The proportions of raw material used in manufacture differs from one grade of pre-mixed concrete to another. The grades are differentiated by measuring the compressive strength, that is the load per unit area (measured in megapascals) which causes a test sample of poured concrete, stored in curing conditions in site for 28 days, to crumble. The grades generally range from 10 mpa (megapascal) to 50 mpa. The most common grade for pre-mixed concrete is 20 mpa. The differing grades are suitable for different uses; for example 17.5 mpa might be specified for use in driveways and pavements; 20 mpa for building slabs; 35 mpa for high rise buildings and 50 mpa for bank vaults. For many years it has been the practice within the pre-mixed concrete industry that prices for all grades of pre-mixed concrete are based on the price of 20 mpa pre-mixed concrete. This was the practice during the relevant period.
The Market
15. Each corporate respondent operated a number of pre-mixed concrete plants in the Melbourne Metropolitan area. Each plant was located so as to minimise delivery distances and cartage costs.
16. Pioneer in the relevant period operated fourteen pre-mixed concrete plants. The location of each of those plants is marked on the map attached hereto and marked Attachment "A".
17. Apex in the relevant period operated five pre-mixed concrete plants. The location of each of those plants is marked on the map attached hereto and marked Attachment "A".
18. Boral in the relevant period operated six pre-mixed concrete plants. The location of each of those plants is marked on the map attached hereto and marked Attachment "A".
19. Readymix in the relevant period operated eight pre-mixed concrete plants. The location of each of those plants is marked on the map attached hereto and marked Attachment "A".
20. Barro in the relevant period operated seven pre-mixed concrete plants. The locations of each of those plants is marked on the map attached hereto and marked Attachment "A".
21. Each Corporate Respondent was in competition with each other Corporate Respondent in the market for pre-mixed concrete in the Melbourne Metropolitan area. Together the Corporate Respondents supplied approximately 90 percent of the pre-mixed concrete produced in that market. In the period from 1 January 1978 to 31 December 1978 the approximate share of the said market held by each of the Corporate Respondents was as follows:
Pioneer 26% to 29%
Apex 10%
Boral 18%
Readymix 13% to 16%
Barro 13% to 16%
A total quantity of approximately 1.9 million cubic metres of pre-mixed concrete was produced in the market in the period from 1 January 1978 to 31 December 1978. (During the hearing the parties agreed that the Melbourne Metropolitan area should be taken, for the purposes of the case, to be the coloured Areas in Attachment B, to the Agreed Statement of Facts).
The Price Components
22. At all times in the relevant period, the price of pre-mixed concrete produced and supplied by the Corporate Respondents was made up of two basic components - production costs and delivery costs. Production costs included costs associated with the purchase of raw materials, labour and overheads. Delivery costs were the subject of an agreement between the National Ready Mixed Concrete Association (Vic) ("NRMCA") representing the pre-mixed concrete producers and the Concrete Carters Association (Victoria)
("CCA") representing the concrete carters. This agreement was the subject of an authorisation granted under the provisions of the Act. The delivery costs or cartage costs for which provision was made by the said agreement included a load fee, a charge per kilometre and other miscellaneous charges, for example a charge for waiting time.
The Pricing Structure
23. Industry practice for some years before the relevant period had generally been to charge a fixed price per cubic metre of pre-mixed concrete, inclusive of delivery charge. During July 1978 the Prices Justification Tribunal ("PJT") approved applications for price increases by Pioneer, Boral and Readymix. In effect the PJT approved a delivered price of approximately $40.00 per cubic metre for 20 mpa pre-mixed concrete. The Corporate Respondents allege that although each issued a set list price, they frequently charged before and throughout the relevant period, a price less than list price upon sales to a substantial number of customers. Where the said list price was not charged, the amount charged would, it is alleged, be determined by a number of factors including the size and nature of the job, the customer in question and likely prices offered by competitors. (The parties agreed that the last sentence in paragraph 23 should be read so as to convey that where the said list price was not charged, the amount charged would, it is agreed that the Corporate Respondents alleged, be determined by the factors set out therein).
The Price War
24. Commencing in mid 1978, a severe price war occurred within the market. This "war" was characterised by fierce price competition between the corporate respondents and between each of them and other suppliers of pre-mixed concrete, with each of them undercutting its competitors to obtain sales and maintain market share. In the period between July 1978 and early October 1978, the price war caused prices for 20 mpa pre-mixed concrete to fall to as low as $28.00 per cubic metre delivered. Prices for other grades fell correspondingly. Each Corporate Respondent competed on price during this period and at times undercut the prices being charged or quoted by the other Corporate Respondents. Whilst the price war continued, the Corporate Respondents were not prepared to increase their price because of the risk that they would lose their market share to the other participants in the market.
25. During the price war, each of the Corporate Respondents fought to maintain its respective market share, i.e. its share of the total volume of concrete sold and supplied in the market. Market share was important to each of the Corporate Respondents. In the first place, any loss of market share would directly affect the profits it earned by selling and supplying pre-mixed concrete. In addition a loss of market share would affect any profits which it, or a related company, derived from supplying raw materials, such as sand and aggregate, for use in the manufacture of pre-mixed concrete. Each of the Corporate Respondents, or companies related to them, were engaged in the production and supply of sand, aggregate and other quarry products.
The Arrangement or Understanding
26. A series of meetings was held between representatives of each of the Corporate Respondents in and between October 1978 and December 1978 in Melbourne. The said meetings were held at various locations including Pioneer's premises in High Street, Prahran, Boral's office at the offices of Cyclone Wire and Steel, Marine Parade, Abbotsford, Readymix's premises at Burwood Road, Burwood and at the private residence of the Ninth Respondent at Lilydale, Victoria. The initial such meetings were held on or about 6 October, 9 October, the morning of 10 October and afternoon of 10 October 1978. This series of meetings was convened expressly for the purpose of ending the price war and reaching an understanding or arrangement whereby the Corporate Respondents would increase the price for supply and delivery of pre-mixed concrete in the market over time, cease to quote and charge all-inclusive prices for the supply and delivery of pre-mixed concrete in the market, adopt a common pricing formula the terms of which would be refined from time to time in light of experience and adopt under the said common pricing formula, as refined from time to time, an agreed minimum level of pricing for pre-mixed concrete in the market. As a result of these meetings such an arrangement was made or an understanding was arrived at. The said arrangement or understanding involved representatives of each of the Corporate Respondents meeting at various times throughout the period from October to December 1978 for the purpose of settling upon or revising the common pricing formula to be adopted by the Corporate Respondents for pre-mixed concrete.
27. Each of the persons named and described in the table set forth below attended all or some of the meetings between October and December, 1978 as the authorised representative of the Corporate Respondent who employed him. Each of the meetings was attended by the representative, or one of the representatives, of each of the Corporate Respondents set forth in the table below.
Individual Corporation Position Period Barry Montgomery Pioneer Concrete Area Manager 1/1/78-
(Vic) Pty Ltd (Concrete 31/10/78 Division)
Victorian 1/11/78- State manager 31/8/79 (Concrete Division)
Director 30/11/78- 31/8/79
William Roderick Pioneer Concrete Victoria 1/1/78- Parr (Vic) Pty Ltd State Manager 31/12/78 (Concrete Division)
Apex Quarries Ltd General 1/1/79- Manager 31/8/79
Alan George Apex Quarries Ltd Manager 1/1/78- Rasmussen (Concrete 31/12/78 Division)
Area manager 1/1/79- (Concrete 31/8/79 Division)
Christopher John Boral Resources General 1/1/78- Avery (VIC) Pty Ltd Manager 31/8/79 (Concrete Division)
John David Casey The Readymix Group Marketing and 1/1/78- Ltd Sales Manager 31/8/79
Peter Kinsella Boral Resources Sales Manager 1/1/78-
(Vic) Pty Ltd (Concrete 31/8/79 Division)
Ian Dexter Barro Group Finance 1/1/78- Dunkerly Pty Ltd Director 29/12/78
The Common Pricing Formula
28. As a result of the arrangement or understanding a common pricing formula, the precise terms of which would be refined by the Corporate Respondents from time to time, was to be adopted by the Corporate Respondents.
It was a part of the arrangement made between all the Corporate Respondents that prices for grades of pre-mixed concrete other than 20 mpa would be adjusted accordingly and that the Corporate Respondents would consider the position at a later date with a view to refining, or further refining, the formula establishing the price of pre-mixed concrete.
29. The result of these meetings at which the initial common pricing formula was settled upon was that, in respect of all new work undertaken after 11 October 1978 or thereabouts, the prices to be quoted and/or charged by the Corporate Respondents for pre-mixed concrete would be increased to an amount equal to $30.00 per cubic metre of 20 mpa pre-mixed concrete, plus an amount calculated to cover the cost of cartage from the pre-mixed concrete plant to the delivery site.
30. It was a part of the understanding or arrangement reached by and between all of the Corporate Respondents that the cartage rates applicable under the initial common pricing formula would be those agreed from time to time between the NRMCA and the CCA. Under the NRMCA/CCA agreement, the cartage charge applicable to distances not exceeding two kilometres was approximately $4.70. Under the common pricing formula adopted in early October 1978, the minimum delivered price was therefore approximately $34.70 per cubic metre and ranged to approximately $43.80.
Full Melway Formula
31. Subsequently, in about October or November 1978, and in accordance with the agreement or understanding referred to in paragraph 26 above, meetings were held between representatives of each of the Corporate Respondents with a view to refining the common pricing formula referred to in paragraphs 29 and 30 hereof. Each of the persons referred to in paragraph 27 hereof attended all, or some, of these meetings. In doing so, they acted for and on behalf of their respective employers.
32. At these meetings part of the understanding or arrangement reached by and between the Corporate Respondents, pursuant to the arrangement or understanding referred to in paragraph 26 above, was that the common pricing formula referred to in paragraphs 29 and 30 should be refined. The refinement adopted was to the effect that the common price to be charged thereafter for pre-mixed concrete should be determined by a formula known as the "Full Melway Formula".
33. The Full Melway Formula was based upon a division of the Melbourne Metropolitan area into zones, each zone being comprised of the area covered by a particular map or group of maps (identified by map numbers) in the Melway Street Directory of Greater Melbourne, Geelong and the Mornington Peninsula. A map showing the zones, and the prices in respect of each such zone, adopted by one of the Corporate Respondents under the Full Melway Formula is attached hereto and marked Attachment "B". Having divided the market into zones, each Corporate Respondent was to adopt a price for each particular zone which was the same as, or which differed only marginally from, the price adopted for that zone by each of the other Corporate Respondents. Under the Full Melway Formula, the prices quoted and charged by each of the Corporate Respondents for supplying and delivering pre-mixed concrete to a particular delivery site would vary depending upon the zone within which that delivery site was located. But the Corporate Respondents would, in substance, quote and charge the same price for deliveries within any particular zone. For example, in respect of the zone comprised by Melway Map No. 79, the price adopted for 20 mpa pre-mixed concrete by each Corporate Respondent was as follows:-
Pioneer $37.07 per cubic metre
Apex $37.07
Barro $37.60
Readymix $37.07
Boral $37.05
34. Depending upon the relevant zone, the adoption of the Full Melway Formula resulted in an increase in the list price of 20 mpa pre-mixed concrete to between approximately $37.00 and $44.00 delivered.
Quarter Grid Melway Formula
35. Further meetings between representatives of each of the Corporate Respondents were held towards the end of 1978. Each of the persons referred to in paragraph 27 attended some or all of these meetings and in doing so each was acting for and on behalf of their respectve employers. At these meetings, pursuant to the arrangement or understanding referred to in paragraph 26, the Corporate Respondents further refined the common pricing formula. The refinement was to the effect that the common price to be quoted and charged by each of the Corporate Respondents for pre-mixed concrete should thereafter be determined by a formula known as the "Quarter Grid Melway Formula". This formula differed from the Full Melway Formula in that under the Quarter Grid Melway Formula the Melbourne Metropolitan area was divided into smaller zones each comprising one quarter or thereabouts of each Melway map. The map attached hereto and marked Attachment "C" shows the zones adopted by the Corporate Respondents under the Quarter Grid Melway Formula.
36. In other respects, the Quarter Grid Melway Formula was very similar to the Full Melway Formula. Each Corporate Respondent was to adopt a price for each particular zone which was the same as, or which differed only marginally from, the price adopted for that zone by each of the other Corporate Respondents. As with the Full Melway Formula, the effect of the Quarter Grid Melway Formula was that the price quoted and charged by each of the Corporate Respondents for supplying and delivering pre-mixed concrete to a particular delivery site would vary depending upon the zone within which that delivery site was located, and for deliveries of pre-mixed concrete within any particular zone, the Corporate Respondents would, in substance, quote and charge the same price.
37. The adoption of the Quarter Grid Melway Formula resulted in a general increase in list prices above those calculated under the Full Melway Formula. The following table shows the prices adopted by each of the Corporate Respondents under the Quarter Grid Melway Formula in respect of the four zones covered by Melway Map No. 79:-
Sector 1 Sector 2 Sector 3 Sector 4 $ $ $ $
Pioneer 41.06 41.76 41.41 41.41
Barro 41.10 41.75 41.45 41.45
Readymix 41.03 41.73 41.39 41.39
Boral 41.10 41.80 41.30 41.30
The prices set forth above were taken from price lists distributed by each of the abovementioned Corporate Respondents. In relation to Apex, it adopted prices under the Quarter Grid Melway Formula that were substantially the same as those adopted by Pioneer. Depending upon the zone, the prices adopted by each of the Corporate Respondents under the Quarter Grid Melway Formula ranged from approximately $40.70 per cubic metre of 20 mpa concrete to approximately $51.20 per cubic metre of 20 mpa concrete, in each case inclusive of delivery charges.
38. In or about April or May 1979, as a consequence of the arrangement or understanding referred to in paragraph 26, the price applicable to each zone under the Quarter Grid Melway Formula was increased by each of the Corporate Respondents by between $1.75 and $1.80 per cubic metre of pre-mixed concrete. Each of the Corporate Respondents issued circular letters advising their customers of price increases, as follows:
RESPONDENT DATE OF LETTER PRICE EFFECTIVE INCREASE DATE
Pioneer 10.4.1979 $1.80 1st May 1979
Apex 20.4.1979 $1.75 1st May 1979
Boral undated $1.76 15th May 1979
Readymix 10.4.1979 $1.75 17th April 1979
Barro 2.5.1979 $1.75 16th May 1979
The following table show the prices in respect of each zone encompassed by Melway Map No. 79 adopted by each Corporate Respondent:-
Sector 1 Sector 2 Sector 3 Sector 4 $ $ $ $
Pioneer 42.86 43.56 43.21 43.21
Barro 42.85 43.50 43.20 43.20
Readymix 42.78 43.48 43.14 43.14
Boral 42.86 43.56 43.06 43.06
In relation to Apex, it adopted prices that were substantially the same as those adopted by Pioneer. Depending upon the zone, the prices adopted by each of the Corporate Respondents ranged from approximately $42.45 per cubic metre of 20 mpa concrete to approximately $53.00 per cubic metre of 20 mpa concrete, in each case inclusive of delivery charges.
39. In or about July 1979, as a consequence of the arrangement or understanding referred to in paragraph 26, each of the Corporate Respondents further increased the prices applicable to each zone under the Quarter Grid Melway Formula by between $2.50 and $2.80 per cubic metre of pre-mixed concrete. Each of the Corporate Respondents issued circular letters advising their customers of price increases, as follows:
RESPONDENT DATE OF LETTER PRICE EFFECTIVE INCREASE
Pioneer 12.6.1979 $2.60 1st July 1979
Apex 22.6.1979 $2.70 1st July 1979
Boral 20.6.1979 $2.55 2nd July 1979
Readymix 25.6.1979 $2.80 1st July 1979
Barro 15.6.1979 $2.50 1st July 1979
The following table shows the prices in respect of each zone encompassed by Melway Map No. 79 adopted by each Corporate Respondent:-
Sector 1 Sector 2 Sector 3 Sector 4 $ $ $ $
Pioneer 45.46 46.16 45.81 45.81
Apex 45.50 46.20 45.85 45.85
Readymix 45.58 46.28 45.94 45.94
Boral 45.41 46.11 45.61 45.61
Barro 45.35 46.00 45.70 45.70
The prices set forth were taken from price lists distributed by each of the abovementioned Corporate Respondents. Depending upon the zone, the prices adopted by each of the Corporate Respondents ranged from approximately $44.95 per cubic metre of 20 mpa concrete to approximately $55.80 per cubic metre of 20 mpa concrete, in each case inclusive of delivery charges."
Each of the Corporate Respondents admitted the following allegations in the Commission's amended Statement of Claim-
"14. For some years prior to October 1978, each of the Corporate Respondents charged a fixed price per cubic metre for pre-mixed concrete which did not vary-
(a) according to the location of the delivery site relative to the location of the supplying plant; or
(b) providing the delivery site was within a particular distance from the supplying plant.
(Hereinafter such fixed prices are referred to as "all-inclusive prices").
15. Between about June 1978 and about September 1978, each of the Corporate Respondents, in order to undercut its competitors and/or to remain competitive, reduced its prices for supplying and delivering pre-mixed concrete.
PARTICULARS
Although the prices charged by the Corporate Respondents for the supply and delivery of pre-mixed concrete having a density of 20mpa (megapascal) had been at about a general level of $39.00 - $40.00 per cubic metre in or about June 1978, pre-mixed concrete of this grade was supplied in or about September 1978 at prices as low as $28.00 per cubic metre. Concrete having a density of 20 mpa the most commonly supplied mix, and prices for other grades of pre-mixed concrete are based upon the price of 20 mpa concrete. Prices for such other grades of pre-mixed concrete fell correspondingly between June 1978 and September 1978.
16. In consequence of the reduction in prices referred to in paragraph 15 hereof meetings were held in and between October and December 1978 between representatives of each of the Corporate Respondents, at which the Corporate Respondents and each of them made an arrangement, or alternatively arrived at an understanding, that:
(a) the price for supply and delivery of pre-mixed concrete in the market would be increased over time;
(b) they would cease to quote and charge all-inclusive prices for the supply and delivery of pre-mixed concrete in the market;
(c) they would adopt a common pricing formula the terms of which would be refined from time to time in light of experience; and
(d) they would adopt under the said common pricing formula, as refined from time to time, an agreed minimum level of pricing for pre-mixed concrete in the market."
In its amended Application the Commission, on the grounds appearing in its Amended Statement of Claim, sought against each of the Corporate Respondents:
"A. 1. A pecuniary penalty in respect of the contravention by the Respondent of the provisions of the Trade Practices Act 1974 alleged in the said Amended Statement of Claim.
2. Costs.
B. 1. An injunction restraining the Respondent, whether by its directors, officers, servants or agents or otherwise howsoever, from making or giving effect to the arrangement or understanding referred to in paragraph 16 of the Amended Statement of Claim.
2. An injunction restraining the Respondent, whether by its directors, officers, servants or agents or otherwise howsoever, from making or giving effect to:-
(a) any contract, arrangement or undertaking that has a purpose, or has or is likely to have an effect substantially similar to the purpose, effect or likely effect of the arrangement or understanding referred to in paragraph 16 of the Amended Statement of Claim;
(b) any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by the Respondent and by any one or more of the First, Second, Third, Fourth and Fifth Respondents, in competition with each other."
Each of the Corporate Respondents admitted the allegations contained in paragraph 17 of the Amended Statement of Claim that the arrangement or understanding referred to in paragraph 16 "had the purpose, or had or was likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for pre-mixed concrete supplied or to be supplied by the Corporate Respondents, or by some of them, in competition with each other".
In paragraph 18 of the Amended Statement of Claim, which was admitted by each of the Corporate Respondents, the Commission alleged that "In the premises, and by virtue of Section 45A of the Act, the Corporate Respondents and each of them have contravened Section 45(2)(a)(ii) of the Act by making the arrangement or understanding referred to in paragraph 16 hereof".
Section 45(2)(a)(ii) of the Act reads as follows:-
"A corporation shall not-
make a contract or arrangement, or arrive at an understanding, if-
.....
a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competion".
Section 45A(1) provides:-
"Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other."
Mr Sneddon's affidavit, filed on behalf of the first respondent, contained the following paragraphs:
"5. The evidence which I give in this Affidavit is not proffered by way of justification for the conduct which has been admitted by the First and Second Respondents but the Court is respectfully requested to take it into consideration in mitigation of any penalty which the Court may deem appropriate to impose.
6. Industry practice for some years before the time of the alleged contravention had generally been to charge the same price per cubic metre of a particular grade of pre-mixed concrete, inclusive of a delivery charge anywhere within the Melbourne metropolitan area. The most common grade of pre-mixed concrete is 20 mpa and the price of all other grades are set by reference to its price. Generally, the greater the strength of the concrete, the higher its price per cubic metre due to the increase in the cement content involved. During July 1978 the Prices Justification Tribunal
("PJT") approved applications by, inter alia, the First Respondent to increase the price of pre-mixed concrete. In effect the PJT approved a delivered price of approximately $40.00 per cubic metre for 20 mpa pre-mixed concrete, exclusive of any surcharge.
7. For many years industry practice has been, and still remains, to impose a surcharge above the agreed delivered price for those deliveries of pre-mixed concrete that:-
(a) are of quantities of less than three cubic metres; or
(b) are required outside usual working hours; or
(c) cannot be completed within the time allocated for that delivery.
8. For the purposes of this Affidavit the "Market" means the Market for pre-mixed concrete in the Melbourne Statistical Division, a term used by the Australian Bureau of Statistics ("the ABS") to include each of the local government shires in and around metropolitan area of Melbourne. Exhibited to me at the time of swearing this affidavit and marked "WKS1" is a true copy of a map produced by the ABS showing the Statistical Divisions of Victoria, including a detailed map of the Melbourne Statistical Division. The Market, as defined by the Melbourne Statistical Division, is larger than the market defined in paragraph 13 of the Amended Statement of Claim. It is my understanding and belief that despite this difference in geographical size, the total annual production of pre-mixed concrete within the two markets, as defined in this my Affidavit and the Amended Statement of Claim respectively, does not differ to a degree which would affect the significance or relevance of any of the statements made in this Affidavit.
9. In the two year period ending 30 June, 1978 the Market for pre-mixed concrete had been modestly increasing in size. In the following two years, ending 30 June, 1980, that Market declined by 23%. I have based my information concerning the size of the Market on monthly production statistics published by the ABS Victorian Office for the State of Victoria ("the ABS Satistics").
10. Commencing in mid 1978, a severe price war occurred within the Market. This war was characterised by fierce price competition between the Corporate Respondents and between each of them and other suppliers of pre-mixed concrete, with each of them undercutting its competitors to obtain sales and maintain market share. In the period between July 1978 and early October 1978, the price war caused prices for 20 mpa pre-mixed concrete to fall to as low as $28.00 per cubic metre delivered. Prices for other grades fell correspondingly. Each Corporate Respondent competed on price during this period and at times undercut the prices being charged or quoted by the other Corporate Respondents. Whilst the price war continued, the First Respondent was not prepared to increase its price because of the risk that it would lose its market share to the other participants in the Market.
11. During the price war, each of the Corporate Respondents fought to maintain its respective market share, i.e. its share of the total volume of concrete sold and supplied in the Market. The First Respondent strove to maintain its market share because any loss of market share would directly affect the profits it earned by selling and supplying pre-mixed concrete. In addition, a loss of market share would affect any profits which it, or a related company, derived from supplying raw materials, such as sand and aggregate, for use in the manufacture of pre-mixed concrete.
12. The table set out in the document exhibited to me at the time of swearing this Affidavit and marked "WKS2" is a summary of the trading operations of the First Respondent for the five year period ending 30 June, 1980. The table set out in the document exhibited to me at the time of swearing this Affidavit and marked "WKS3" is a summary of the monthly trading operations of the First Respondent for the period immediately before, during and after the price war."
Exhibit WKS2 read as follows: (table omitted)
Exhibit WKS3 read as follows: (table omitted)
Mr Sneddon's affidavit continued:
"13. The information contained in the summaries set out in Exhibits WKS2 and WKS3 was derived by me from the ABS Statistics and from Company records. The latter information is collected by me in the course of my duties as Divisional General Manager responsible for the First Respondent's activities. The figures in column 2 of the tables in Exhibits WKS2 and WKS3 headed "Total Production: Melbourne Statistical Division" are the yearly and monthly totals respectively of all pre-mixed concrete produced in the Market, as published in the ABS Statistics. The fall in annual production for the Market, from 2,068,000 cubic metres in 1976 to 1,630,000 cubic metres in 1980 represents a net reduction of 21% over the period. The figures set out in the remaining columns of both summaries (columns 3-8 in Exhibit WKS2 and columns 3-7 in Exhibit WKS3) have been derived by me from Company files and records prepared by the Company in the ordinary course of and for the purpose of its business. Those business records and files are extensive in volume and relate to many matters not relevant to this proceeding. Annual production by the First Respondent fell by 23% over the five year period, as shown in the summary table in Exhibit WKS2.
14. Column 4, entitled "Market Share", shows the total production of the First Respondent (column 3) as a percentage of the total production of the Market (column 2) for each of the relevant periods. In the two year period ending 30 June 1977 the share of the Market held by the First Respondent was between 27% and 29%. In the twelve months ending June 1978 that share dropped to 24.1% on an annual basis and, in particular, in the month of May 1978, to 21.7%. To the best of my knowledge the 5-7% loss of market share by the First Respondent from June 1977 to May 1978 was a result of the entry of new competitors to the Market. The number of and level of activities of these new entrants had been increasing from June, 1975. The number of new entrants over that period and the extent of their activities in the market cannot be precisely stated by me but I have formed my opinion as to their effect on the Market on the basis of my own recollection and upon discussions with various employees of the First Respondent.
15. The "Average Invoiced Selling price" listed in column 5 of the summaries set out in Exhibits WKS2 and WKS3 is the sum of all prices invoiced to customers, including all the surcharges referred to in paragraph 7, during the respective periods, divided by the number of cubic metres of pre-mixed concrete sold during those periods. The "Average Credit Notes" listed in column 6 of the summaries is the average deduction allowed to customers from their invoiced charge as a result of errors in prices and/or surcharges charged on the invoices and is calculated by dividing the total sum of all credits allowed to customers during the period by the total quantity of concrete sold in that period. No figures have been included in the Average Invoiced Selling Price or Average Credit Note columns in the table in Exhibit WKS2 for the financial years ending 30 June 1976 and 1977 because prior to the financial year ending 30 June 1978, figures for the Credit Notes were subtracted from the Invoiced Selling Price without a separate record being kept of either. The "Average net Selling Price" listed in column 7 of the summaries is the net average of the price per cubic metre of pre-mixed concrete charged by the First Respondent in the relevant period calculated by subtracting the average credit notes extended per cubic metre in that period (column 6) from the average invoiced sales price per cubic metre (column 5).
16. In the five year period covered by the summary in Exhibit WKS2 there were increases in the costs of raw materials, cartage and manufacturing expenses. These cost increases were a contributing factor in increasing the average price of pre-mixed concrete sold by the First Respondent (net of credits) from $31.13 to $46.24 per cubic metre, an increase of 48.54%. During the same five (5) year period the Consumer Price Index (as published by the ABS as a six city average) rose from 193.3 to 287.2, an increase of 48.58%.
17. The average net price charged by the First Respondent for all grades of pre-mixed concrete during the year July 1978 to June 1979 was $38.18 per cubic metre (inclusive of all surcharges) whereas the price approved by the PJT in July 1978 had been approximately $40.00 per cubic metre of 20 mpa pre-mixed concrete (exclusive of any surcharge). The two prices cannot be directly compared because they do not necessarily take account of the same factors, in particular:
(a) The First Respondent's average net selling price is an average of the selling price of all grades of concrete sold by it (that is; 10 mpa to 50 mpa inclusive) in the relevant period. Approximately 60% of the First Respondent's production is 20 mpa strength concrete. Of the remaining 40%, more concrete of grades in excess of 20 mpa is sold than concrete of grades less than 20 mpa. The average actual strength of the concrete sold by the First Respondent would therefore be of a strength in excess of 20 mpa. The price approved by the PJT in July, 1978 was for delivered concrete of 20 mpa strength. As stated in paragraph 7 hereof, higher prices are charged for greater strength concrete because costs, expecially raw material costs, increase proportionally with the strength of concrete.
(b) The price approved by the PJT in July 1978 was a delivered price but excluded any surcharge component whereas the average net selling price listed in column 7 of each summary table includes all surcharges charged by the First Respondent during the relevant period.
It is not possible to precisely state the average amount by which these two factors would have increased the average selling price per cubic metre at the relevant time, but to the best of my knowledge and belief I estimate that increase to be in the order of $2.00 per cubic metre.
18. The yearly profit and loss figures for the First Respondent are set out in column 8 of the summary in the Table in Exhibit WKS2 hereof. Profit remained relatively stable for the first three years in the period in absolute terms, which represents a real decline in profit after inflation has been taken into account. In the twelve months to June, 1979 the First Respondent made a substantial loss, despite significantly increasing its market share (column 4). The factors contributing to the loss were the falling size of the total Market available to cover fixed costs, escalating manufacturing expenses, and the need to be competitive on price, especially with the independent producers in the Market.
19. When profitability was restored in the twelve months ending June, 1980 the profit was modest. Despite a significant increase in average net selling price (column 7) and a return to its 1976-78 market share size (column 4) the profit earned by the First Respondent represented less than 1% of turnover; profit of $174,000 for 443,000 cubic metres produced is $0.40 profit per cubic metre. The average net selling price in that financial year was $46.24 per cubic metre.
20. Neither the First nor the Second Respondent has incurred any pecuniary penalty under the Trade Practices Act, 1974 prior to the present proceedings.
21. In 1974 when the Trade Practices Act first came into operation, a memorandum prepared by the Company's solicitors was circulated to Company Managers and Secretaries under cover of a memorandum from Sir Tristan Antico, the Company's Chairman and Chief Executive. Exhibited to me at the time of swearing this Affidavit and marked "WKS4" are true copies of those memoranda.
22. In June 1980 a further memorandum from the then Chief General Manager, Mr. F.R. Price, dealing with compliance with the Trade Practices Act was circulated to General Managers, Managers and State Secretaries. Exhibited to me at the time of swearing this Affidavit and marked "WKS5" is a true copy of that memorandum. It is the intention of the Company to revise that memorandum and reissue it to all General managers, Divisional Managers and State Managers in Australia.
23. Soon after the present proceeding was commenced the First and Second Respondents decided, on their own initiative, to instruct their solicitors to approach the Trade Practices Commission to see if it would be possible to comprise(sic) the proceeding. That approach was made and discussions were held over a lengthy period, resulting in the resolution of the proceeding, subject only to the present hearing as to penalty.
24. After the present proceeding was settled, Mr. John Forbes, Chief General Manager (Australian Operations) of the Company, instructed me to arrange a seminar to be attended by Mr. Forbes, Divisional General Managers from all States, relevant General Managers, and such other senior Company personnel as were available, at which the impact and operation of the Trade Practices Act on the Company's business could be further explained. The personnel in attendance at the seminar were then to be responsible for passing on the information they receive to those reporting to them. I arranged such a seminar and it was conducted in Melbourne on 7 November, 1984. A representative of the Company's solicitors attended to assist with the conduct of the seminar.
25. In addition, I have instructed the Company's solicitors to have discussions with officers of the Trade Practices Commission in relation to establishing a procedure whereby any complaints which may be made to the Commission concerning the conduct of the Company or any of its subsidiaries may be raised directly with certain senior personnel of the Company and efficient and effective responses made to them."
An affidavit was filed on behalf of The Readymix Group Limited (the fourth respondent) by Mr Street, the secretary of C.S.R. Limited (CSR) and of C.S.R. Investments Pty Limited, a wholly owned subsidiary of CSR and the legal and beneficial owner of all the issued capital of Ready Mixed Concrete Limited (RMC) which was acquired by BMI Limited (BMI) and CSR in 1964 in equal shares.
Mr Street's affidavit continued as follows:
"2 (b) In 1973 RMC began a major rationalisation of its Australian activities.
(c) The Readymix Group (Australia) Limited (then called National Contractors Pty. Limited) a company incorporated in Western Australia (and which is a wholly-owned subsidiary of Australian Blue Metal Limited which is a wholly-owned subsidiary of RMC) became the operating company for RMC's Australian quarrying and concrete business. At that time, it changed its name to Construction Materials (Australia) Limited and then in early 1977 it changed its name to "The Readymix Group Limited". It changed its name to its present name "The Readymix Group
(Australia) Limited" ("Readymix") in August 1984.
3. From 1974 until 1st October, 1981 Readymix carried on business in Victoria as, inter alia, a producer and supplier of sand, aggregate and quarry products and as a producer and supplier of pre-mixed concrete. Readymix carried on this business under the registered business name of The Readymix Group
(Vic.). Readymix carried on similar businesses in other states of Australia, the Australian Capital Territory and the Northern Territory.
4. During the period 1st January, 1978 to 31st August, 1979 inclusive ("the relevant period") the number of directors on the board of RMC representing each of CSR and BMI were equal. Neither CSR nor BMI was in a position to control the constitution or the activities of the board of Readymix. The operations of RMC and its subsidiaries were not regarded as a division or activity of CSR but as an autonomous joint undertaking with BMI: in effect a joint venture of CSR and its subsidiaries and BMI and its subsidiaries.
5. In October, 1981 CSR and BMI agreed to end their association through RMC.
(a) The shares in RMC held by or on behalf of BMI were transferred to CSR. CSR subsequently transferred its shares in RMC to CSRI. Since October 1981, Readymix has been an indirectly wholly-owned subsidiary of CSR.
(b) Effective from 1st October, 1981, the whole of Readymix's business records and all its employees and virtually all its assets in Victoria were transferred to BMI or a corporation related to and controlled by BMI.
6. On 1st October, 1981 Readymix ceased to carry on the business of the production and supply of pre-mixed concrete in the Melbourne metropolitan area of Victoria. Readymix no longer trades in Victoria or elsewhere. CSR proposes to put Readymix into liquidation in the near future.
7. The financial information set out below has been provided to me by Mr. J. Parsons, a financial analyst employed by CSR. As stated above all business records of Readymix were transferred to BMI or a related corporation. However two sources of financial information concerning Readymix have been available within CSR for the purpose of preparing this affidavit. The first comprises the Prices Justification Tribunal files relating to Readymix which were available through CSR's solicitors. These files contain costing data appropriate to support applications for price approvals from the Tribunal. The second are confidential annual trading reviews copies of which fortuitously had been retained by two CSR personnel into whose possession they came. The annual trading reviews contained comprehensive and detailed financial information compiled from regional accounting centres and were prepared for the purposes of management review and internal budget control. The trading reviews contain, inter alia, information relating to an area of operation described as the "Victorian metropolitan region" which included the eight Readymix plants shown on Attachment "A" to the Agreed Statement of Facts together with the Sugarloaf, Hastings, and Melton plants and in the year ending 30th June, 1980, the Bacchus Marsh plant. The source material relating to the Victorian metropolitan region from which the relevant sections of the trading reviews were compiled are no longer in the possession of Readymix. I believe that the trading reviews accurately reflect the financial position of Readymix for the periods they cover and although the information contained in the trading reviews relates to the Victorian metropolitan region I believe that those statistics reflect the conditions in the Melbourne metropolitan market. Mr. Parsons has analysed these sources of financial information in order to represent the financial position of Readymix in relation to its activities in the Melbourne metropolitan market in the relevant period. I believe the matters deposed to below are accurate.
8. Readymix produced concrete in various grades differentiated by a measurement of compressive strength. Readymix does not have in its possession information by which it could establish the number of cubic metres of each grade of concrete sold during the relevant period by each plant in the Melbourne metropolitan area. The most common grade of pre-mixed concrete is 20 megapascals ("mpa"). For many years, it has been the practice in the pre-mixed concrete industry to base the price of all grades of concrete on the price of 20mpa concrete. During the 12 months to July 1978 the Prices Justification Tribunal ("PJT") approved price increases for 20mpa pre-mixed concrete totalling $3.91 per cubic metre from price including cartage ("delivered price") of $36.23 cubic metre to delivered price of $40.14 per cubic metre. A delivered price of $28.00 per cubic metre for 20mpa pre-mixed concrete (being the figure referred in paragraph 24 of the Agreed Statement of Facts) represented a significant loss per cubic metre as at July 1978.
9. From July 1977 to June 1980 the Melbourne Consumer Price Index All Groups Index for the Melbourne metropolitan area published by the Australian Bureau of Statistics ("Index") rose as follows:-
Index % Change for Year
June 77 73.4 14.3
June 78 79.3 8.0
June 79 85.8 8.2
June 80 94.9 10.6
By reference to that index, during the period July 1978 to July 1979, Readymix's price for producing 20 mpa pre-mixed concrete would have risen by approximately $3.29 per cubic metre. The application of the Index to a delivered price of $40.14 produces a delivered price of $43.43 as at July 1979.
10. A comparison of average costs of production per cubic metre for pre-mixed concrete produced in the Victorian metropolitan region and average selling price of that product shows an overall loss as follows for the years 1977/78, 1978/79 and 1979/80.
77/78 78/79 79/80
Costs of Production 31.62 33.07 38.04
Average Selling Price 30.75 29.26 37.55
Profit/(Loss) (0.87) (3.81) (0.49)
Costs of production comprise costs of raw materials, plant operation and regional administrative overhead. For this purpose 25% of Victorian regional administrative overhead (which included the administrative cost of Readymix's raw materials and asphalt activities in Victoria and its pre-mixed concrete activities in the Victorian metropolitan region and in the Victorian country region) has been attributed to the Victorian metropolitan region. This is a conservative allocation because raw materials and asphalt tended to be sold in bulk and pre-mixed concrete tended to be sold in small lots. A percentage of head office administration costs and finance costs has not been included in the cost of production figures. The average selling price is an average ex-metropolitan plant price which excludes cartage. Now produced and shown to me and marked "RFS1" is a copy of the financial statements at 30th June, 1979 together with reports of directors and auditors of RMC and its subsidiary companies.
11. During the relevant period, because Readymix was an autonomous entity and not controlled by CSR, no CSR employee programmes were extended to Readymix employees.
CSR is conscious of its obligations under the Trade Practices Act ("the Act") and is active in ensuring compliance with those obligations. CSR conducts an internal education programme aimed at increasing its employees awareness of the Act and ensuring full compliance with it. In 1980 CSR published a volume entitled Trade Practices Act - A Guide a copy of which is now produced and shown to me marked "RFS2". That volume has been widely distributed amongst CSR personnel.
In addition CSR's legal department periodically publishes and circulates a "Law Notes" publication, a number of the issues of which have directed attention to the obligations of the company and its personnel under the Act. Now produced and shown to me in a bundle marked "RFS3" are copies of the May 1982, November 1982, August 1983 and June 1984 issues of Law Notes. Copies of Law Notes are sent to approximately 500 employees throughout all regional activities and managers are directed to circulate their copies of Law Notes to their staff.
In addition senior staff have conducted a number of seminar presentations to employees at various levels of management. The object has been better to educate staff about their obligations under the Act and the importance of immediate reporting to the Legal Department through their line manager of any matter which might be of concern under the Act.
One of CSR's divisions in Victoria involves the production of pre-mixed concrete. The seminar presentations have in 1983 and 1984 included four seminars presented to middle and senior managers involved in that division."
Mr David Barro's affidavit, filed on behalf of Barro Group Pty Limited (the fifth respondent) read as follows:
"1. I am and have at all times material been one of the managing directors of Barro Group Pty. Limited the fifth respondent ("Barro") and I am authorised by it to make this affidavit on its behalf.
2. Barro is a private company incorporated in the State of Victoria and is the trustee of a trust the beneficiaries in which are my brother Mark Barro and me and our respective families. For the year ended 30th June 1979 Barro made a net profit of $431,714. Now produced marked D.B.1 is a copy of the balance sheet for that year.
3. The first respondent, Pioneer Concrete (Vic.) Pty Limited ("Pioneer"), is a wholly owned subsidiary of Pioneer Concrete Services Limited, a substantial public company, with a group revenue of over $446 million for the year ended 30th June 1979 and a net profit for that year of over $24 milion. Now produced marked D.B.2 is a document containing the Pioneer Group's financial statements for the year ended 30th June 1979.
4. The third respondent, Boral Resources (Vic) Pty Limited ("Boral"), is a wholly owned subsidiary of Boral Limited, a substantial public company, with a group revenue of over $389 million for the year ended 30th June 1979 and an operating profit for that year of over $28 million. Now produced marked D.B.3 is a document containing the Boral Group's financial statements for the year ending 30th June 1979.
5. Although in the period 1st January 1978 to 31st December 1978 Barro's approximate share of the pre-mixed concrete market in the Melbourne metropolitan area was between 13 and 16 per cent, Barro was at that time supplying pre-mixed concrete to the Melbourne Underground Rail Loop Authority. The volume of concrete supplied by Barro to the Authority was about 5 per cent of the market. The contract with the Authority concluded in or about December 1978, and Barro did not then have and did not subsequently obtain any further contracts with the Authority.
6. In or about July 1978, on the application of Pioneer, Boral and The Readymix Group Limited, the Prices Justification Tribunal approved a delivered price of approximately $40.00 per cubic metre of 20 mpa pre-mixed concrete in the Melbourne and metropolitan area.
7. In mid 1978, as a consequence of the price war referred to in paragraph 24 of the Agreed Statement of Facts, Barro had lost 10 to 15 per cent of its sales volume and that lower level continued throughout the price war. This was because during this period Barro did not sell concrete below $30 delivered except on one occasion when it sold at $29 delivered.
8. After the meetings held between the representatives of each of the corporate respondents in October 1978, on or about 1st November 1978 Barro issued a price list in which it quoted a price of $30.00 per cubic metre of 20 mpa concrete plus cartage. That price was considerably lower than the price authorised by the Prices Justification Tribunal and was less than a reasonable price for such concrete."
Section 76 of the Act provides that if the Court is satisfied that a person has contravened a provision of Part IV, in which s.45 is found, the Court may order the person to pay to the Commonwealth such pecuniary penalty, not exceeding $250,000 in the case of a body corporate, in respect of each act by the person to which s.76 applies, as the Court determines to be appropriate having regard to all relevant matters, including the nature and extent of the act and of any loss or damage suffered as a result of the act, the circumstances in which the act took place and whether the person has previously been found by the Court in proceedings under Part VI to have engaged in any similar conduct.
It is common ground that there has been no such finding by the Court against any of the corporate respondents, and there has been no similar conduct by any of them before or since the conduct involved in the present case.
There is no provision in the Act empowering the Commission to authorize conduct such as that of the corporate respondents which is the subject of this proceeding (cf s.88). The Act absolutely forbids such conduct and indicates the seriousness of the view taken of it by the legislature by the provision of a pecuniary penalty not exceeding $250,000 in the case of a body corporate.
The Court is to have regard to all relevant matters and the parties have assisted it by arriving at the agreed statement of facts, which has been supplemented by the affidavits filed on behalf of the respondents other than Boral Resources (Vic) Pty Limited (the third respondent). The deponents have not been cross-examined.
The allegation made against the corporate respondents, which they have admitted, is that they made the arrangement, or alternatively arrived at the understanding set out in para 16 of the Amended Statement of Claim, in breach of s.45(2)(a) of the Act. There is no allegation that, contrary to s.45(2)(b), they gave effect to the arrangement or understanding. However, the Commission has alleged and the corporate respondents have admitted that the arrangement or understanding included a term that "they would adopt a common pricing formula which would be refined from time to time in light of experience, and they would adopt, under the said common pricing formula, as refined from time to time, agreed minimum level of pricing for pre-mixed concrete in the market." The various "refinements" adopted have been set out in the Agreed Statement of Facts.
The arrangement or understanding resulted from a series of meetings held between October and December 1978 and the initial common pricing formula was in respect of all new work undertaken after 11 October 1978 or thereabouts. In or about April or May 1979, as a consequence of the arrangement or understanding, the price applicable to each zone was increased by each of the corporate respondents by between $1.75 and $1.80 per cubic metre. A further increase of between $2.50 and $2.80 was made by each of them in or about July 1979, after which the prices adopted by them ranged between approximately $44.95 to $55.80 per cubic metre of 20 mpa concrete depending upon the delivery zone. The price charged by the corporate respondents for supplying and delivering concrete of that density had been at about a general level of $39.00 to $40.00 per cubic metre in or about June 1978 but as a result of a severe price war had fallen in or about September 1978 to prices as low as $28.00 per cubic metre. There is no doubt that the arrangement or understanding and its "refinements" led to substantial increases in prices but it would not be just to regard them as responsible for the whole of the increases which occurred, as inflationary pressures would have tended to produce some increases.
The corporate respondents were responsible for the supply of 90% of the pre-mixed concrete sold in the Melbourne metropolitan market, the size of which may be seen from the fact that in 1978 its consumption amounted to 2.12 million cubic metres. Increased prices for delivery in such quantity plainly had a multiplier effect on and through the purchasers of ready mixed concrete and their customers.
The arrangement or understanding, and the "refinements" which were envisaged by it were arrived at with deliberation at meetings attended by senior representatives of the corporate respondents.
Management of the corporate respondents at high levels can hardly have been unaware of these decisions, the effects of which were plainly reflected in their profit and loss accounts.
One of the circumstances in which the acts of the corporate respondents took place was the severe price war, which had taken prices below the cost of production. The increases in prices which occurred as a result of the arrangement or understanding are to be considered in this context, which is not, of course, to be taken as a justification of that arrangement or understanding, but is relevant to the question of penalty.
Other circumstances relied upon by the corporate respondents were set out in the Agreed Statement of Facts and the affidavits. They included the fact that when the price increases took effect they resulted either in reduced losses or a modest profit. The respondents relied upon the approval of the Prices Justification Tribunal during July 1978 of a delivered price of $40 per cubic metre for 20mpa pre-mixed concrete, exclusive of any surcharge. During the currency of the arrangement or understanding and its refinements some credit notes were still given to purchasers by way of reduction from the agreed prices. They also relied upon the fact that at the end of the years of litigation earlier referred to, they co-operated in the preparation of the Agreed Statement of Facts, admitted that they were liable to penalties and agreed to pay costs.
My attention was properly directed to the evidence given on behalf of Pioneer, Apex and Readymix of the steps taken to prevent any further contravention of the Act. All respondents pointed to the facts that a competitor had drawn the Commission's attention to the matter and that there was no evidence of any complaint by their customers.
The 1978 shares of the market held by the respondents were as follows:
Pioneer 26% to 29%
Apex 10%
Boral 18%
Readymix 13% to 16%
Barro 13% to 16% "less rail contract".
These figures gave rise to the question whether the differing shares should have an effect on the amounts to be fixed by way of penalties. In my opinion it should have some effect, as it appears to me to be relevant to the loss or damage suffered by and through the customers of each respondent and to the benefit which each respondent gained. However, the dominant facts were that no respondent was a ring-leader or brought pressure to bear upon the others, each respondent held a significant share of the market and freely entered into the agreement or arrangement, to produce the result which it desired, that prices be raised and be subject to the control of the group who between them supplied 90% of the market. By becoming a party to the arrangement or understanding and a member of the group each respondent obtained the benefit of its combined strength.
It was submitted on behalf of Pioneer and Apex that they should be considered as one offender. I do not think that it would be correct to take this view, as they entered into the agreement or arrangement as unrelated corporations and each made its own corporate decision to adopt the various "refinements" of it.
Had they chosen after the take over of Apex by Pioneer to limit the agreement or arrangement to themselves alone, they would have then been entitled, as related corporations, to the benefit of s.45(8) of the Act, but they did not do so.
Separate consideration must be given to the case against each respondent and it is necessary to take into account the circumstances of each, to which counsel have carefully referred me.
Any penalty must be sufficient to have a deterrent effect, must be proportionate to the conduct of each respondent and must be seen to be consistent with the policy of the Act and with the view which the legislature has taken of the seriousness of conduct of the kind involved in this case.
In my opinion the appropriate penalties are as follows:
Pioneer $53,000
Apex $47,000
Boral $51,000
Readymix $49,000
Barro $50,000
The Commission sought injunctions against each respondent. In February 1985 Readymix stated that it was prepared to consent to an injunction, limited to three years and this limitation was accepted by the Commission. Pioneer and Apex did not oppose an injunction. Boral and Barro resisted the making of such an order, pointing, amongst other things, to the fact that no further breach had occurred during the long history of the litigation. It was further submitted that if an injunction were ordered, it should be limited in each case to three years. Counsel for the Commission in his reply said that, having accepted the three year period for Readymix, the Commission conceded that it would be appropriate in respect of the other respondents.
In my opinion, the circumstances of the matter clearly justify the exercise of the Court's discretion in favour of the grant of an injunction against each respondent, always bearing in mind in the cases of Pioneer and Apex the provisions of s.45(8) of the Act.
The Court orders that:
1. the first respondent pay to the Commonwealth the pecuniary penalty of $53,000.
2. the second respondent pay to the Commonwealth the pecuniary penalty of $47,000.
3. the third respondent pay to the Commonwealth the pecuniary penalty of $51,000.
4. the fourth respondent pay to the Commonwealth the pecuniary penalty of $49,000.
5. the fifth respondent pay to the Commonwealth the pecuniary penalty of $50,000.
6. the first respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Pioneer Concrete (Vic.) Pty. Limited and by any one or more of Apex Quarries Limited, Boral Resources
(Vic.) Pty. Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another, other than a contract, arrangement or understanding the only parties to which are Pioneer Concrete (Vic.) Pty. Limited and Apex Quarries Limited so long as they shall remain related corporations within the meaning of the Act.
7. the second respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Apex Quarries Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Boral Resources (Vic.) Pty. Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another, other than a contract, arrangement or understanding the only parties to which are Apex Quarries Limited and Pioneer Concrete (Vic.) Pty. Limited so long as they shall remain related corporations within the meaning of the Act.
8. the third respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Boral Resources (Vic.) Pty. Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, The Readymix Group Limited and Barro Group Pty. Limited in competition with one another.
9. the fourth respondent, for a period of 3 years from the date hereof, whether by its directors, officers, servants or agents or otherwise howsoever, be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by The Readymix Group Limited and by one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, Boral Resources (Vic.) Pty. Limited and Barro Group Pty. Limited in competition with one another.
10. the fifth respondent, for a period of 3 years from the date hereof whether by its directors, officers, servants or agents or otherwise howsoever be restrained from making or giving effect to any contract, arrangement or understanding that has the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price of pre-mixed concrete supplied or to be supplied by Barro Group Pty. Limited and by any one or more of Pioneer Concrete (Vic.) Pty. Limited, Apex Quarries Limited, Boral Resources (Vic.) Pty. Limited and The Readymix Group Limited in competition with one another.
11. liberty to apply be reserved to all parties. The Court further orders by consent that:
12. the respondents pay the costs of the applicant of and incidental to the application, including reserved costs, to be taxed if not agreed.
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