Trade Practices Commission v Service Station Association Ltd

TRADE PRACTICES COMMISSION v. SERVICE STATION ASSOCIATION LIMITED; JOHN ALICK
LANGLEY and BRIAN ERNEST MARK
No. G591 of 1993
FED No. 582
Number of pages - 37
Trade Practices
(1993) ATPR 41-260
(1993) 116 ALR 643
(1993) 44 FCR 206

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1), Spender(2) and Lee(2) JJ

CATCHWORDS

Trade Practices - Whether retailers of petroleum products made an arrangement or arrived at an understanding to fix, control or maintain retail prices of petrol - whether professional association induced or attempted to induce contravention - whether it is necessary for application of s. 45 that each party accepts an obligation qua the other - ss. 45, 45A, 76 Trade Practices Act 1974 (Cth).

Petroleum Retail Marketing Sites Act 1990 (Cth)

HEARING

SYDNEY, 15-16 February 1993

#DATE 26:8:1993

Counsel for the Appellant : C A S Sweeney QC

P Comans

Solicitors for the Appellant : Australian Government

Solicitor

Counsel for the Respondents : B Oslington QC

C C Hodgekiss

Solicitors for the Respondents: Mallesons Stephen Jaques

ORDER

The Court orders that:

1. The appeal be dismissed;

2. Trade Practices Commission pay the costs of the appeal of Service Station Association Limited, John Alick Langley and Brian Ernest Mark.

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

JUDGE1

LOCKHART J The Trade Practices Commission ("the Commission") alleges that in the latter half of 1990, retailers of petroleum products in the Sydney Metropolitan Area made an arrangement or arrived at an understanding with each other and with the first respondent, Service Station Association Limited ("SSA"), to fix, control or maintain retail prices of petrol contrary to s. 45(2)(a)(ii) of the Trade Practices Act 1974 ("the Act"). The Commission also alleges that the SSA and the second and third respondents, John Alick Langley and Brian Ernest Mark, induced or attempted to induce the retailers and the SSA to contravene s. 45(2)(a)(ii) and are liable to pay to the Commonwealth a pecuniary penalty pursuant to s. 76(1)(d) of the Act.

The petrol retailers are not parties to the proceeding, so no claims are made against them by the Commission, which propounds its case solely against the three respondents as persons who have induced or attempted to induce the alleged contravention of the Act.
The learned trial Judge (Heerey J) found that there had been no contravention of s. 45(2)(a)(ii) by the retailers and that the respondents had not induced or attempted to induce a contravention. His Honour dismissed the application with costs. It is from his Honour's judgment that this appeal is brought by the Commission.
As the Commission challenges findings both of law and fact by the trial Judge it is necessary to state the principal findings of his Honour.
His Honour examined the structure of the Sydney retail petrol market and the conditions which prevailed in the market at that time. The principal suppliers of petrol and other petroleum products to service stations for retail sale were the major oil companies: Shell, BP, Caltex, Mobil, Esso and Ampol (collectively referred to as the "oil companies").
The service stations to which the oil companies supplied petrol fell into three broad categories. The first category consisted of stations operated by the oil companies themselves through employees or by commission agents who received a fixed amount per litre of petrol sold. These stations are generally referred to in the trade as "CA sites". The oil companies which operated CA sites had complete control over the setting of retail prices of petrol from those sites. The number of CA sites was limited to approximately 5% of the total sites in the Sydney metropolitan area as a result of the Petroleum Retail Marketing Sites Act 1990 (Cth). Nevertheless, they played an important role in influencing price fluctuations.
The second category consisted of franchised sites in which the franchisee was tied to a particular oil company. The franchisee could set its own retail price, but had no choice as to the source of supply and had to pay the price set by its oil company.
The third category consisted of independent operators, some of whom carried the signs of a particular oil company, but were under no obligation to do so or to buy from that company.
Service stations differed markedly with respect to the terms of their relationships with the oil companies and as to size and style of operation. Types of operations included large self-service stations and smaller stations providing "driveway service". Some provided mechanical repairs and servicing. In addition there were "convenience stores" such as Food Plus and 7-Eleven which were essentially miniature supermarkets with petrol sales as an adjunct. Some stations were sited in close proximity to competitors, others were more isolated. Sydney service stations thus displayed widely differing characteristics. Commercial decisions, including the setting of retail prices, were affected by these different characteristics. His Honour found that "objectively speaking, a particular decision might be sensible for one dealer but not for others".
The SSA was the trade association of petrol retailers in New South Wales with approximately 1,100 members. It was a member of the Australian Service Station Association ("ASSA"), the trade association of service station operators at the helm of the hierarchy.
The second respondent, Mr Langley, was the president of the SSA. He had been in the service station trade for some 30 years. The third respondent, Mr Mark, was the full time Executive Officer of the SSA. Amongst his other duties he was responsible for a monthly journal called "Service Station" published by the SSA.
At service stations, the retail price was usually posted on large boards to attract passing motorists. The price which the dealer paid the oil companies was called the rack price. The rack price system is of comparatively recent origin and was intended to overcome what was seen as the unfairness of discriminatory pricing by oil companies as between dealers. Each oil company set its rack price and dealers could ascertain the rack price on a particular day by simply telephoning the oil company. The rack price was not treated as confidential information. The difference, usually expressed in terms of cents per litre ("cpl"), but sometimes as a percentage, between the retail price and the rack price, was referred to as the margin.
Informed Sources Pty Limited ("Informed Sources") carried on the business of obtaining daily information as to the retail prices and margins obtained by dealers. This information was obtained by daily physical observation of posted prices and by ascertaining rack prices by telephone from the oil companies. Informed Sources did not purport to report as a precise matter of fact what margins were being obtained. It provided valuable information as to prices and margins prevailing from time to time in the Sydney Metropolitan Area.
By the first half of 1990, profitability for Sydney service stations had sunk to a disastrously low level. Margins were 3 cpl or less. It appears that a minimum of 4.5 cpl was necessary for most petrol retailers to break even. The situation was so bad that retailers were seeking help from the SSA. Their margins had fallen to what were considered to be "poverty level". There were about 200 service stations available for sale; banks were calling up mortgages and the average overdraft of petrol retailers was reaching critical proportions. The morale amongst members of the SSA was very low.
One of the factors which depressed profitability of petrol retailers was the issue by oil companies of credit cards which entitled the holders to buy petrol at fixed prices, with the dealer receiving only a small commission per litre sold. Though the posted retail prices were paid by customers, the credit card companies charged their usual commission to the dealers.
Franchisees had no disposable goodwill at the expiration of the term of the franchise following the decision of this Court in Ranoa Pty Limited v BP Oil Distribution Limited (1989) 91 ALR 251. In the result, the only financial benefit to be obtained by petrol retailers was profit earned during the term of their franchise.
The ASSA was concerned about the low profitability of its members. It held a meeting in Adelaide on 5 April 1990. Messrs Langley and Mark were present, along with representatives from a number of other States. The minutes of that meeting under the heading "Prosper from Petrol" record that:

"A lengthy discussion took place around the proposed re-education of dealers in determining petrol prices. All agreed there are a number of factors causing low profitability - oil company credit cards, high rents, franchise fees."

The minutes record also that it was resolved:-

"That ASSA members consolidate and co-ordinate the 'Prosper from Petrol' proposal and that a project of re-education of service station dealers and other sectors of the petroleum industry be embarked upon in order to achieve sensible profit objectives."

Later that year, in his annual report to members of the SSA dated 3 September 1990, Mr Langley referred to the Adelaide meeting as having discussed "a national profitability awareness campaign", the purpose of which was:-

"to educate dealers in the need to address their lack of profitability due to ill informed pricing decisions that were driven by the philosophy of 'volume at any price'."

It appears that at the 5 April meeting Mr Mark and a representative from Victoria were allocated the task of holding discussions with oil companies. In Mr Langley's annual report this was described as "a non-stop round of discussion with individual oil companies until their support was guaranteed".
His Honour found that it was obvious enough that, if the oil companies were not to increase prices at their CA sites, it would be more difficult for other dealers to increase prices.
His Honour rejected the submission of counsel for the Commission that it could be inferred that Mr Mark was to:

"extract an undertaking from the oil companies not to discount through CA agents and to move CA prices upwards in the event that prices generally rose; or at the very least that Mr Mark and the SSA gained the confidence that the oil companies would so behave."

His Honour found that there was no suggestion that the meetings between Mr Mark and the oil companies and themselves breached the Act and that:

"the only direct evidence of what took place at such meetings (as distinct from admissions alleged to have been made by Mr Langley and Mr Mark) is contained in a letter from Esso to the TPC dated 5 October 1990."

This letter of 5 October 1990 was in response to letters from the Commission concerning its investigation "into reseller margins and the SSA's recommended pricing scheme in Sydney". Esso in its letter reported that meetings took place on 17 and 22 May 1990, the first at SSA's office and the second at Esso's office. As to the first meeting, Esso's letter stated that the topics discussed included:

"SSA's concern at the plight of retailers and their poor profitability in the face of distributor supplies causing strong retail price competition, dealer owned service station price advantages and company owned service stations with aggressive dealers. SSA's view that competition had got to the stage where average costs of retailers were frequently not being covered by margins. With expensive overdrafts, the situation was clearly a problem facing the industry. The possibility of the SSA recommending a retail price as a reseller guide was raised by the SSA. This would be at a level which would cover typical average costs and a reasonable return on capital invested. No discussion as to the implicit retail margin or a particular retail price took place."

At the second meeting (22 May), the topics discussed were the poor profitability of retailers; the impact of distributors on the retail market; the impact of oil company credit cards on retailers, the effect of high interest rates; the need for change as retailers were suffering significantly; and the potential value of the wider industry forum to discuss and recognise this issue.
Esso stated in its letter of 5 October:

"No agreements were reached. Esso acknowledged that a range of retailer issues were of concern and that Esso would be mindful of these in formulating future policy. The meeting was informal, reached no agreements and did not warrant the taking of minutes or diary notes at the time. I (Mr S L Tregonning, the General Manager Retail) recall saying to Mr Ledlie after the meeting something like 'that it was a bit of a non event'."

There were responses from the other oil companies in much the same terms as the Esso letter. His Honour found that the tone of the Esso letter rather corroborates the rueful comment of Mr Mark in his s.155 examination that "the day I can persuade an oil company to do anything will be a miraculous day indeed".

The Commission relied before the trial Judge on a statement of Mr Langley in his annual report when speaking of price rises which occurred from July 1990 onwards. He said:

"The oil companies proved true to their undertaking to support their dealers and move CA prices in accordance with the various markets in which they operate."

His Honour noted that the "undertaking" referred to related to an undertaking given by the oil companies at a meeting at the Southern Cross Hotel on 1 June 1990 chaired by Professor Robert Baxt (the then Chairman of the Commission). This meeting is discussed in Mr Mark's editorial in the July 1990 issue of "Service Station" to which reference will be made later. His Honour found that it was plain from that account (the accuracy of which was not challenged) that a number of issues other than price was discussed and no undertaking in relation to CA site retail prices was given.
A "training day for trainers" was held on 29 May 1990 for the purpose of training SSA's counsellors in presentation of the forthcoming "Prosper from Petrol" campaign. This was organized by SSA and attended by 15 to 20 people. Mr Langley addressed the people present. He was asked in his s. 115 examination what he intended the trainers were to do and he answered:

"Quite obviously if we were going to have any success at all with the campaign there needed to be, first of all, a change of attitude, if you like, both with oil companies and with our members. You must remember that at the particular time a vast majority of our members knew no other marketing scheme other than a discount scheme. It was a question of an attitudinal change in their thinking, from one of volume, which had been drummed into them ever since they had gone into the service station by their particular oil company, to one of profit. They started thinking profit. So the whole ideal of establishing this 'Prosper from Petrol' campaign, and more particularly, getting back to your question, at the (meeting) I ran through the campaign with the councillors that were present, and then indicated to them that if the campaign had any chance of success at all, then they and our members had to get off their backsides and starting doing a bit of work themselves to try to get some profit into their own businesses."

Following the "training day for trainers" there were "numerous small meetings" of dealers held, before a large meeting was held on 2 July, to which reference will be made shortly. The persons who had attended the "training day for trainers" were expected to co-ordinate and hold their own training for people in their own areas. It was understood that they would report back to the SSA on the results of their local meetings.
His Honour noted that a central part of the Commission's case concerned the communications which the SSA, principally through Mr Langley and Mr Mark, had with its members in the course of promoting the "Prosper from Petrol" campaign.
In the June 1990 issue of "Service Station" there appeared an article "Profit or Volume?". The theme of the article was described as "How dealers' reluctance to insist on realistic margins is slowly sending them out of business". The article noted what it called "Rule 1", namely, "Oil companies are managed to maximize returns for their shareholders and not to provide profits for their service station operators". It referred to the recent Ranoa Case which was said to have the effect that:

"service station operators have zero goodwill at the expiry of their lease. Therefore they must make their profit through the operation of their business rather than through its ultimate sale".

The article continued:

"As a service station operator you have two choices. You can maximize volume or you can maximize overall profit for your site. It is not possible to do both at the same time. For years the oil companies (and some misinformed service station operators) would have had us believe that high volumes generate high profits because of the increased customer traffic on the site. We sell a few more Mars Bars and cigarettes which compensates us for the losses we make on fuel.

The MTA of South Australia has released an excellent paper which proves that this 'extra aftermarket' theory is completely incorrect. The MTASA paper supports the Coopers and Lybrand W D Scott finding that aftermarket sales cannot compensate for the enormous economic losses being suffered on fuel sales at a normal service station site.

The studies all show that you need a margin of about 5 cpl in order to break even on fuel sales. That's not to make a profit: it's just to break even.

Driveway service sites sell very little aftermarket and can't take advantage of this alleged increase in non-fuel profit. They do, however, have to employ extra driveway staff to cope with the extra customers ........ ........

Dealers who are serious about staying in business and about looking after the interests of their own families should be operating at a minimum margin of 10%. That means that, if you buy at 61 cpl, you should be selling at 67.8 cpl. If you were to double your margin overnight, you would have to lose 50% of the volume before you became worse off. On the other hand, you'd need less working capital and, quite possibly, fewer staff. The same amount of petrol will be sold in Australia regardless of whether the retail price is 65 cpl or 70 cpl. If you're dearer than the opposition then you will have to make up for it with service and cleanliness. Remember, if you increase your gross margin from 5% to 10%, you would have to lose half of your volume before you were worse off. In the last 12 months we have seen a 40% increase in the price of fuel. The oil company take has doubled and, at the same time, dealer margins have dropped through the floor. Dealer margins have gone from 6.5% (3 cpl on 46.4 cpl) in January 1989 to 4.2% (2.7 cpl on 64.9 cpl) in April 1990.

Dealers who were hurting a year ago are now going broke. Dealers who were going broke a year ago are now out of business. As service station operators, we have only ourselves to blame. Under the new so-called Rack Pricing system, we are free to set our own margins. If the servo down the street wants to sell at one or two cpl margin, then let him. The way the industry is going, he won't be there for much longer."

Also in the June issue there was an editorial by Mr Mark under the heading "Profit and Value". After referring to trends (towards large self service stations and convenience stores and the belief that the public would prefer a freedom of choice), Mr Mark said:

"It is my view that high volume self-serves, convenience stores and full service outlets can exist in harmony. This will not happen, however, unless there is a fundamental change of attitude by oil companies, dealers and the general public.

Oil companies must recognize that all classes of operation cannot survive if they are all expected to post identical retail prices. It is patently stupid, for example, to expect a dealer who cannot possibly expect to sell the same volume as a big self serve to cover the additional labour costs of providing driveway service with the same retail margin. It is equally stupid to expect him to compete on price with a full-blown convenience store which looks to its grocery lines as the principal source of income. Oil companies should therefore positively encourage retail price differentials according to the service provided. Dealers must understand that the majority of motorists will pay a higher price if, and only if, they believe that they are receiving value for their money. The general public must understand that, if they don't want the demise of neighbourhood service stations and freedom of choice, they must be prepared to pay a premium.

The message, then, is clear: price for profit but always give good value."

In the July issue of "Service Station" Mr Mark's editorial under the heading "Recipe for Disaster" refers to the Southern Cross Hotel meeting on 1 June 1990 which had been chaired by Professor Baxt. According to the editorial, the meeting was attended by senior marketing personnel from each of the six major oil companies, representatives of the Prices Surveillance Authority and of service station organizations. It was recorded that the practices which were contributing "in a major way to the abysmal profitability of service station dealers" included oil company credit cards; bonus special allowances to some distributors; pricing policies at CA sites in unfair competition with oil companies' own dealers; pressure by field representatives who encouraged dealers to pursue volume at any price even though retail margins were insufficient to cover operating costs; and provision of selective or conditional price/profitability support to dealers or distributors. The editorial concluded:

"The SSA is optimistic that the goodwill demonstrated by all parties at the Southern Cross meeting, due in no small measure to the support and encouragement of the TPC which reiterated its desire to see the elimination of unfair or unjust business practices and the avoidance of harsh and unconscionable behaviour of any description, will provide an opportunity for restoration of some profitability to service stations. It must be said, however, that unless and until dealers begin to make individual business decisions to post a price for their petrol that will provide for a satisfactory level of profit, all the goodwill in the world will not prevent bankruptcy. The entrenched and ingrained idea that simply matching the price of a competitor is the only answer or a substitute for making hard business decisions must inevitably end in disaster."

In the August issue of "Service Station" there appeared Mr Mark's editorial under the heading "The Corpse Revived". His Honour noted that the Commission placed considerable reliance upon this; it reads as follows:

"Just when it appeared that Sydney dealers had made a commercial suicide pact by pricing themselves into oblivion, a spark was ignited to revive the corpse.

Retail margins had reached an all-time low, with 2.4 cpl representing the average gross profit throughout the metropolitan area. Many dealers were seriously contemplating the prospect of walking away from their sites, or facing bankruptcy. The SSA, in conjunction with other associations throughout the nation, had embarked on a comprehensive education policy to convince dealers that they were free to set their own margin of profit according to their individual costs and profit aspirations. They no longer had to rely on subsistence levels of price support, or face unrelenting pressure from their oil company supplier to pursue additional volume at any price. At the same time, the associations maintained a non-stop lobby of the oil companies to speed up the process of eliminating all pricing practices that created obstacles to the achievement of a fair and orderly market.

However, despite all the effort put into the campaign, margins were continuing to shrink to levels that simply could not be sustained, and spelt disaster for literally hundred of dealers across the metropolis.

To my mind, the associations had provided all the fuel, but the 'fire' was still 'dead' until the oil companies took a collective decision to publicly acknowledge the merits of the argument that had been put, and spoke out in support of sensible dealer margins of profit. The result has been nothing less than spectacular, with average margins being almost doubled in a few short days, and at the time of writing they are still on an upward curve. It would be foolish, of course, to believe that all of the problems have been overcome and that competitive forces will not be brought into play. A valuable lesson can be learned, however, in that it has been proved sensible that, if dealers possess the will and determination, they can achieve a satisfactory level of profit to survive in what is arguably the most difficult retail industry in the world."

His Honour said that the reference to "competitive forces" in the last paragraph is not a reference to competition between dealers, but to competition between oil companies which would result in pressure for volume at any price and harsh and unfair behaviour towards dealers.
His Honour said that:

"Viewed as a whole, the material in 'Service Station' certainly promotes the view that dealers ought, as individual traders, to consider carefully whether they are charging enough to stay in business and whether they should raise their prices. It is not suggested that such conduct, or the inducing thereof, contravenes the Act. Moreover the evidence strongly suggests that the commercial setting was such that there was every reason for the SSA to convey such a message to its members, the advancement of whose interests was the SSA's raison d'etre. However I do not see on any reasonable construction of the "Service Station" material that it contains any encouragement to dealers to fix, control or maintain prices. On the contrary, the emphasis is on competition. There is reference to differing retail prices as being both inevitable and desirable. There is reference to competition by non price means such as driveway service. There is reference to the possibility of a positive decision to charge a higher price than a competitor because his price might be seen as too low.

The constantly repeated theme is that the individual dealer will be better off with an increase in price at the expense of volume -the necessary corollary being that the drop in volume is to occur because other dealers might charge lower prices."

On 2 July 1990 a meeting attended by approximately 200 dealers took place in the Sydney Town Hall. The meeting was organized by the SSA. Mr Langley addressed the meeting. He gave an account of this speech, or, as his Honour said, "perhaps more accurately a repeat performance", at his s. 155 examination.
Essentially the same speech was repeated at about 25 local area meetings after the Town Hall meeting. His Honour said that the accuracy of the account given in the s. 155 examination was not challenged by the Commission and that it was substantially corroborated by Mr Stephen Bailey, the only witness who attended that meeting. He said it may be accepted that "practised repetition has resulted in an accurate version". Counsel for the Commission challenged the accuracy of his Honour's statement that counsel then appearing for the Commission at the trial did not challenge the accuracy of the account given in Mr Langley's s. 155 examination. Senior counsel who appeared for the Commission on appeal before us also appeared for the Commission at the trial. I am not persuaded that any inaccuracy has been established in relation to his Honour's statement.
Mr Langley described the mood of the meeting as "fairly rowdy". This was a critical meeting and a great deal of reliance was placed upon it by the Commission, both at the trial and on appeal. It is necessary to set out its text, regrettably at some length.

"Now, look, we're here, not to discuss price, but we're here because the market's ratshit. It's in a mess financially, we're all in a mess, and we're here to talk about profitability, profitability alone, and price is of no consequence. We're not concerned about price at all. But just let me say this: there's no need for me to tell you out there how your businesses are going at the moment, because none of us are probably conducting very viable or worthwhile successful businesses at the moment. I just want to start off by saying this: that prolonged discounting ultimately results in business failure, as many of you out there now will attest, and unfortunately many have already succumbed to that and have gone out of business. To reinforce that, currently we're told by the SSA business brokers that there are something like 200 service stations on the market for sale at the moment. Now if that number of businesses are up or sale, that gives an idea of what the actual market is like. Nobody's interested in them because they're just not profitable. I refer you to the June article of our 'Service Station' magazine which went into more detail with that.

But just let me go on to the national scene, if I may, that perhaps there may be a glimmer of hope on the horizon. Let's hope so in any case, because the lack of profitability basically is a problem that's facing every dealer throughout Australia at the moment, without exception, so we figured that a national approach had to be made. Each State will have to play their part in this national approach.

Just to give you an indication of what's been going on in other states, the University of Queensland in a study they've conducted into service stations indicate that just to break-even, in Queensland, you need 14.5 percent gross profit margin - just to break-even. So obviously the boys in Queensland are suggesting they need 21 percent as a gross profit margin to make their businesses viable. Another well known accounting company in Victoria, Coopers and Lybrand, have suggested that a minimum of 4.5 cents a litre is necessary to break-even. The figures I'm giving you, ladies and gentlemen, are break-even, not profit - break-even. Remember that. Even in South Australia their indications have supported those of Coopers and Lybrand of Victoria. So what is a fair margin? What is a recommended price? What price do you need to set ........ ........ ........ ....... Look, it's for you to determine what margin you want to post, and this is the way to do it. Let's imagine, say that's your buying price, 60 cents. We'll go up to one cent sectors. So that's 61, 62, 63, 64, 65, 66, 67, etcetera. That's your starting point; that's your base buying price. Now, you want to relate everything back to your volume. Everybody knows what volume you're doing, so you have to relate all your expenses back to a percentage of your volume, or a cents per litre break-down of your volume. So in other words let's start off with rent. You know what rent you pay. Now, that might equate to about one and a half cents, right, on your volume. Now we'll go into the other costs of the service station. You've got your franchise fee; that might be half a cent. That you've got your fixed costs; that might be say another 1.75 cents, expressed as on the throughput of what you're doing. Then you've got your wages of course, which is a very big component of expenses in your business; that might equate out to something like one and a half cents a litre. Then after wages you've got your incidental costs, like uniforms, advertising; let's say another two cents. At the moment, roughly, we're up to 6 cents and we haven't even looked at a profit or return on investment. Do you get the gist of what I'm trying to say? You have to sit down and analyse your own businesses, work out how much the business is costing you to operate and then put a margin on top of that sufficient to make it viable and to get a decent return on your investment. Now, none of us are doing that, because for time immemorial the oil companies have tried to drum into us to use petrol as a loss leader. Now, that's not on, ladies and gentlemen; that's not on. From here on petrol should be a stand alone profit commodity.

There's nobody in their right mind or anybody in small business would suggest that a margin of 4 percent, and remember - remember, that when we're talking about petrol, that constitutes 75 to 80 percent of the turnover of the business. You tell me any other business in small business where their main product which constitutes 80 percent of their turnover grosses 4 percent. You won't find any because they don't exist. So that's why it's very, very necessary that you examine critically - critically - examine your own businesses and post a margin that you consider necessary to make your business viable. Now, what you should do is, not express it as a cents per litre, but express it as a percentage, because all your returns from your accountant come back as a percentage. The oil companies when they post their profits in their annual reports express their profits as a percentage against funds invested. So we should do the same. Besides that, part of the thing I'll get into later on is public awareness. We want the public to understand that we're not rip-off merchants. That 4 cents, 5 cents, 6 cents, whatever it is, is not exorbitant, and the only way we can express that is by way of percentage, because people understand percentages, they don't understand cents per litre. We just can't stop anyone wanting to make only a cent a litre. It's called free enterprise. So we know and understand there'll be those out there in the market place who want to operate on one cent a litre and others can't under any circumstances do that. They might need 8 cents a litre. Because we all know credit cards are playing a big part in the business now. You take Amex; they're three percent. If you're in a discount scene you're selling it for nothing. So you have to consider that very, very important aspect.

Unfortunately some of our members don't have to make a profit on petrol, because we know that they're in other activities besides petrol, and they use it merely for cash flow purposes only. This is a problem, and I don't know how to overcome it.

But once again there's always going to be discounting in the market place. It's called free enterprise. So it's up to you to decide what you want to do as far as your own business is concerned. And just remember, we can no longer afford the luxury of having petrol bleeding off the profits from other sources of your business; it's not on.

We have to educate ourselves to understand the changing market place. We've done some studies into buying habits and we know only five to six percent of customers chase price over a margin of two and a half cents a litre. Unfortunately we have no muscle power like the unions, so we must protect ourselves by any other means. We get no joy from governments, we get no joy from the PSA, we get no joy from the TPC - and heaven only knows most of the public think we're rip-off merchants and profiteers. But that's not the case. But because of the advent of rack pricing we've now got the freedom, if you like, the freedom to set your own price in line with market forces, but we're just not using it at all. Rack pricing has given you the opportunity to price according to your own needs, regardless of what anybody else says.

........ ........ ........ ........ ........ Now if I can just move on to the 'Prosper from Petrol' campaign, all States have embraced this concept of 'Prosper from Petrol' because every dealer in every State is in the same boat. Remember, nobody is going to help us except ourselves. Various States have got their own responsibilities. Every State of course has got the job of educating their numbers into what we want to do.

And here you get back to attitude. For this to be a success, ladies and gentlemen, we have to create a shift of emphasis from a perception of good business being volume or throughput to a focus on mark ups and profit made. We have to create a shift of emphasis from oil company control of the business to petrol retailer control of the business. We have to create a change of emphasis from autocratic management by the oil companies to a more laissez faire approach to the retailers. We have to create a change of emphasis from oil company responsibility for the performance of 'their' outlets to retailers' responsibilities for their own businesses.

We have to create a shift of emphasis from oil companies having or providing all the skills required to run retail outlets to retailers having the required skills to run their own businesses. We have to create a shift of emphasis from the focus of the business's selling price or discounting to the focus of business's customer service and all the extras that go with it. We have to create a shift of emphasis from a high level of government regulation and control to a changing if not lower level of government intervention and control. And above all, ladies and gentlemen, above all we have to create a shift of emphasis from a low self-esteem, which we have now, to a high level of self-esteem and self-worth - 'I'm proud to pump petrol'.

For this, ladies and gentlemen, to be a success we've got to try and create the shift of emphasis on those areas.

........ ........ ........ ........ ........ The VACC and SSA of New South Wales have the responsibility of talking to the oil companies. The CA sites' pricing policies need to be looked at. You know, it's a poor situation in our industry where your own landlord, who we pay the rent to and supplies the same product, goes into competition with his own dealers by pricing under what we're able to price ourselves. So they'll be looking at the CA sites and the pricing policies.

........ ........ ........ ........ ........ .. So that's roughly a break-down of the campaign. You'll be hearing more about this later, but other matters crucial to the success of this campaign are a public awareness and an acceptance that service stations need to make a reasonable margin. If we're able to make a reasonable margin, do you know because of this discounting scene which has been with us for years, we've had to prune costs, we've had to put off staff. Here's one of the things this government could really do to take a bit of heat off the unemployment. If we had a decent margin we could employ people on the driveway to give service again. We have no facility at the moment to do that, as you well and truly know. So we've got to try and somehow create a public awareness and get their acceptance that, say, a 10 percent gross profit margin, five percent gross profit margin, whatever it is , is not unreasonable and we're not ripping them off. There's got to be some fairness in our industry. Oil company credit cards - we're doing something on that, of which one state is investigating that, and that will be communicated to you at a later date. But I don't have to tell you now, you know, the insidious roads that oil company cards are making into your market, and your profit particularly, where we only get a piddling handling fee of, say, two cents or two and a half cents a litre and we're supposed to carry the credit. They've got it their own way. Price signs - there's nothing in your agreements nor the Petroleum Retail Marketing Franchise Act to say that you have to display a price board. If you don't want it up there, take it down, because all you're doing is telling the customers: Don't come in here, you can get it cheaper down the road. You don't have to display a sign.

We want the opportunity to buy from branded distributors, because obviously we can buy from branded distributors a damn sight cheaper than we can from our landlord supplier. But each State is working pretty hard on this campaign, but the success is in your hands. We've got to convince you to price according to your own site's needs - nothing more, nothing less. You've got to determine what you need in your business to make a profit. Just remember this - nothing is more valuable than your margin. it's a whole lot better than volume and litres. Thank you."

His Honour said that:

"Counsel for the TPC did not subject Mr Langley's speech to any critical analysis. There was no suggestion that it conveyed anything other than its ordinary and natural meaning. No sub-text, code or nod and wink meaning was alleged. This is not surprising. A 'rowdy' meeting of 200 service station operators in the Sydney Town Hall would be an unlikely occasion for subtle nuance and hidden irony."

This passage from his Honour's judgment was challenged by counsel for the Commission.

His Honour proceeded:

"There was debate on the floor at the meeting at which various margins were put forward as being desirable. Reference was made to a Queensland campaign arguing for a 21 per cent margin. However some speakers from the floor said that they would be happy with 10 per cent and that a claim for 20 per cent might 'ruin the credibility of the campaign'."

Following the Town Hall meeting, as mentioned earlier, Mr Langley attended about 25 local area meetings with dealers, which occurred at locations stretching from Hornsby in the north to Campbelltown in the south and as far west as Mt Druitt. At those meetings Mr Langley repeated the speech he had made at the Town Hall meeting.
One of the local meetings attended by Mr Langley was a meeting held at Forestville on 25 July 1990, a meeting attended by dealers from the Northern Beaches, an area extending from Palm Beach to Manly and including Northbridge and Forestville. Most of the dealers had service stations on or in the vicinity of Pittwater Road and Condamine Street. Mr Stephen Bailey who operated, through a family company, a BP franchised service station in Pittwater Road, Brookvale attended the meeting. He was a member of the SSA and had attended the Sydney Town Hall meeting. About 70 to 80 people were present. Mr Langley spoke for about 20 to 25 minutes. Mr Bailey recalled him saying that "the petrol retail industry was really going down the gurgler and that to maintain viability we'd probably have to have a 10 per cent margin on our fuel". After his speech, Mr Langley "suggested we break up into groups and just discuss what was happening in our area". Mr Bailey then walked up to some other dealers whom he knew and each wrote his telephone number on a piece of paper. After the meeting Mr Bailey used the information on that piece of paper to compile a list of service stations in the area. In the course of discussion in the small group some of the dealers said: "It was probably a good idea to have 10% margin on our fuel price". Mr Bailey said that he "somehow felt part of a team in that group". Mr Langley had spoken of a recommended retail price line being put forward by the SSA, so Mr Bailey said to the group: "OK, I've got the paper here. I will ascertain the recommended retail price from time to time and pass it on to the people in the group."
Counsel for the Commission asked his Honour to infer that "what happened at the Forestville meeting (the division of the meeting into small groups) happened as a rule at all these meetings". His Honour said with respect to that submission that no other basis for such an inference was suggested. He said the only direct evidence as to what occurred at those meetings related to the Forestville meeting, this being the meeting which was attended by the witnesses Mr Bailey and Mr Rossi. He said in particular that he was not directed to any admission to support this inference by Mr Langley in his s. 155 examination; that having regard to the Briginshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336) he did not think he should draw the suggested inference; and that it was not a case where the happening of an event on many occasions might support an inference that a similar event occurred on the one occasion in question: the position was rather the reverse.
The import to Mr Bailey of the Town Hall and Forestville meetings, which he put into practice, was referred to by the trial Judge who quoted his evidence in cross examination as follows:

"The emphasis of Mr Langley was that each individual ought to go down and work out their own costs in the manner he described and work out what margin they needed having regard to their business to make their business profitable, is that correct? --- It appears to be that way, sir. Yes.

And that's the impression you came away with from that Town Hall meeting wasn't it? --- Yes. And that's the impression you came away with after the Forestville meeting wasn't it? --- Yes. And indeed that's what you endeavoured to do with your own business, following the Town Hall meeting, isn't it? --- I was frightened of going bankrupt. Yes, so - but you went through the exercise of analysing what your own costs were, I suppose you got a fright when you did that, did you? --- I really didn't analyse anything I just knew the requirement was to increase the margin on fuel to make a profit, or to try and make a profit. Were you going out backwards before that? --- My - I have a certain overdraft at the bank it didn't go anywhere, it just stayed. Were you saving any money? --- No, not really. You were at best treading water? --- We were paying the bills."

Later he was asked:

"So, Mr Langley certainly didn't say that all service station proprietors ought to get together and simply charge the same price? --- No, he did not.

And you didn't take that impression away with you from either of those meetings, did you? --- No. And as I think you agree of yesterday, the emphasis of Mr Langley's speech, as you recall it, was that individual service stations ought to make an assessment of their own costs and work out a margin so they can make a profit in selling gasoline? --- Yes.

You were acutely aware when you attended at the Town Hall meeting that the sort of margins which you were achieving weren't really profitable to you? --- That's correct."

His Honour said it was not suggested by counsel for the Commission that Mr Bailey was a witness unworthy of belief or that the meaning he says was conveyed to him by Mr Langley's speeches at the Town Hall and Forestville was not reasonably open. His Honour accepted Mr Bailey's evidence as to what Mr Langley said and he found that Mr Langley's intention when he gave those speeches was to convey the meaning which Mr Bailey says he received.
From time to time after the Town Hall meeting the SSA published recommended retail prices by means of advertisements in the Sydney daily press and in "Service Station". From 10 August a telephone recording at the SSA office gave the price to a caller who dialled the "retail price line". During the period with which this case is concerned (July to October 1990) the price recommended was given as a single figure. Later it was given as a range and the qualification was added "members should adopt a price according to the nature of their businesses".
His Honour found that the recommended retail prices published by the SSA were prices which carried with them the recommendation of the SSA of a reasonable price to achieve reasonable profitability for dealers, but they carried no obligation, express or implied, to follow them.
His Honour referred to the evidence, and in particular to material in "Service Station" and the speeches of Mr Langley, which showed that the SSA stressed that decisions as to retail prices were ultimately a matter for individual dealers. He said that the way in which recommended retail prices were published was quite consistent with that theme, and that there was no suggestion of compulsion or sanction.
After the Town Hall meeting retail prices and margins in the Sydney metropolitan area rose quite sharply.
In a television interview on 9 August Mr Mark said that margins had doubled from "suicidal levels of about two and a half cents per litre". His Honour found that graphs prepared by Informed Sources substantially supported that conclusion. However the impact on the public was compounded by the Iraqi invasion of Kuwait in early August. This resulted in a substantial rise in the rack price with a consequent increase in the retail price.
After the Town Hall meeting Mr Bailey took his price board down from his garage site and "decided to put the margin up a couple of cents". He said that he got the idea from the meeting at the Town Hall. He noticed that some other dealers had taken petrol prices off their boards. Mr Bailey put his price back after a week to 10 days. After the Forestville meeting on 25 July Mr Bailey ascertained the recommended retail price from the SSA price line and passed it on to the dealers on his list.
About six weeks after the meeting on 25 July Mr Bailey organised another meeting of dealers at the same venue in Forestville. About eight or nine attended. He expressed to the meeting a concern "that prices were falling back into the discounting" as well as concern about credit card commissions. Some of the other dealers expressed concern about prices "going back into the discounting". Some other dealers had telephoned him in the July to September period about lower prices. This second Forestville meeting was something Mr Bailey organized on his own initiative, independently of any instruction or advice from the SSA, Mr Langley or Mr Mark.
Informed Sources provided a detailed analysis of the prices charged by 21 service stations in the Northern Beaches area, including 11 of the 13 on Mr Bailey's list, over the period 1 June to 31 October. No other area of metropolitan Sydney was the subject of evidence of this kind. A schedule of the information in this analysis was tendered. The schedule also showed the date and amount of recommended retail prices published by the SSA, commencing at 64.9 cpl on 16 July.
His Honour found that it appeared from the schedule that the recommended retail price was by no means universally, or even generally, followed. Of a total of 1549 service station days on which prices were recorded (between the commencement of recommended prices and 31 October) only 509 (32.86%) were days on which the recommended price was charged.
Some stations, including some members of the Bailey group, hardly ever charged the recommended price. For 5 out of the 21 stations, compliance with the recommended price on the 77 trading days recorded was as follows:

Station Compliance Compliance Percentage Dates Days # * Esso, Harbord Rd 26 July 3 3.8 Harbord 31 August 27 September * Mobil, 612 20 July 7 9.1 Pittwater Road 23-26 July Brookvale 27 September 3 October * BP Food Plus, 922 30 August 1 1.3 Pittwater Road

Dee Why

Shell, 198 Harbord 30-31 August 6 7.8 Road Brookvale 3 September 11 September 26-27 September Mobil, 702 nil nil 0.0 Warringah Road

Forestville

# Only 75 trading days are recorded * Members of the Bailey Group

His Honour noted that for almost a quarter of the Northern Beaches stations, the compliance rate never exceeded 10% and averaged 4.4%; and that the price variations in the Northern Beaches area did not appear to manifest any particular pattern. Rises in the recommended price seemed to result in varying degrees of support. Thus, from 10 to 28 August the recommended price was 69.9 cpl which was followed for the whole of the period by 7 out of the 21 stations. From 29 August to 7 September the price went up to 73.9 cpl with 12 stations following the price for that period or a substantial part thereof. Yet by the time the highest recommended price was reached (88.9 cpl on 19 October) only two stations followed and one of these dropped back after the first day.
His Honour concluded that, for the only area of metropolitan Sydney for which detailed evidence was tendered (the Northern Beaches), recommended prices may well have been a contributing cause of the rise in retail prices which took place. He said that the distinct lack of uniformity pointed against a conclusion that there was any arrangement or understanding as between the dealers in that area to fix, control or maintain those prices.
At trial, the Commission's case was pleaded in various alternative paragraphs, none of which sits comfortably with the way the case was argued before us on appeal. I propose to approach the case in the same way as his Honour approached it when he said "in substance the Commission alleged that there was between July and October 1990 an arrangement or understanding as follows":

"That dealers in Sydney should or would thereafter increase their retail margins for petrol above those which had obtained in the period January to July 1990, and, more specifically, that a retail margin in the order of 10 per cent in the selling price, or alternatively approximately 6.5 cpl, was appropriate."

The parties who made that arrangement or arrived at that understanding are said to have been:

Many dealers in Sydney with each other, or alternatively with each other and the SSA.

It is also alleged in the alternative that those parties gave effect to such arrangement or understanding.

As against the SSA, it is alleged that the SSA, and Messrs Langley and Mark on behalf of the SSA, breached s. 76(1)(d) of the Act by attempting to induce, or alternatively inducing, dealers:

- to make such arrangement or arrive at such understanding with each other or alternatively with the SSA; - to give effect to that arrangement or understanding.

As against Messrs Langley and Mark, it is said that each of them attempted to induce, or alternatively induced, dealers to engage in the same conduct.
His Honour said that he understood the Commission's case to be that the arrangement or understanding was alleged as being one and not two, that is to say not merely a general arrangement or understanding to increase margins over those in January/July and a second and more specific alternative variation, namely, an arrangement or understanding to increase in the order of 10% or approximately 6.5 cpl. He said if that were the case, then a general arrangement or understanding merely to increase margins over those existing at some previous period could not in his view "conceivably constitute an arrangement or understanding to fix, control or maintain prices", a finding which was challenged by counsel for the Commission before us. His Honour then said that, even treating the second part as integral to the definition of a single arrangement or understanding, obvious problems are raised by the qualifications "in the order of" and "approximately". His Honour said that in appropriate circumstances there may be an arrangement to fix, control or maintain prices notwithstanding that there is no agreement to charge literally identical prices. He said that some features of the retail petrol market pointed against such a conclusion in the particular setting of this case because:

"Here, one might think, precise price is a critical factor. The motorist customer, at any rate in a metropolitan area, usually has the mobility to choose between competing prices. The blandishments of television advertising notwithstanding, the customer may perceive no benefit in buying one brand as against another. Small differentials in price may be critical in determining a decision to purchase. The fact that movements in the recommended price between 16 July and 31 October were almost always by one or two cpl steps suggests a market in which fine adjustment of price is important."

His Honour found that the evidence did not justify a finding, having regard to the Briginshaw standard, that the arrangement or understanding alleged, or indeed any arrangement or understanding, in fact occurred. He said that it was difficult to infer an arrangement or understanding to fix, control or maintain prices when the evidence failed to show that prices were in fact fixed, controlled or maintained. This appeared to be the case with the Northern Beaches area. His Honour found further that insofar as there was some uniformity in prices charged by some service stations, such a phenomenon was explicable by a factor other than the existence of an arrangement or understanding to fix, control or maintain prices, namely, the recommended retail price system. His Honour said, in my opinion correctly, that this is something which need not necessarily involve a breach of the Act. His Honour went on to find that it did not do so in the present case. He said there was an absence of any evidence of mutual promises or undertakings as between dealers or as between dealers and the SSA. There was not that element of each party having "raised an expectation in the mind of the other, and for each to have accepted an obligation qua the other: Trade Practices Commission v Nicholas Enterprises Pty Limited (1979) 40 FLR 83 per Fisher J at 89."
His Honour found that the communications from the SSA (which came primarily in the form of Mr Langley's speeches and the material in "Service Station") did not urge such mutual binding of dealers between themselves; on the contrary the explicit and repeated message was that dealers had to make their own decisions with the consequence, again specifically stated, that differing prices would often be charged. But it was not surprising, his Honour said, that individual dealers did not do something they were not urged to do. He found that the only real attempt of the Commission to erect an arrangement or understanding from direct evidence was its reliance on the arrangement in Mr Bailey's group at the first Forestville meeting that he would ascertain the SSA recommended retail price from time to time and pass it on. His Honour found that this was not inconsistent with this small group of people simply agreeing that Mr Bailey would, as a matter of convenience, do on their behalf what they could equally do themselves, namely, obtain the recommended price from the SSA. What they did when they got that price and whether they followed it wholly or partly was to remain a matter for each individual without obligation to other members of the group or other members of the SSA or the SSA itself.
His Honour found that the evidence did not establish that this was a case where traders agreed between themselves that each will follow published recommended prices. He said the message from the SSA was that ultimately the decision was a matter for each dealer and that there was no evidence that dealers agreed between themselves that each would follow the recommended price.
His Honour said that the only evidence of an attempt to enforce an arrangement or understanding was that of Mr Talal Rossi, also a member of the Bailey group. Mr Rossi said that Mr Bailey and his (Mr Bailey's) brother came to his service station and asked "Why is your price so low for?" Mr Rossi explained to them that the price was out of his control. His Honour found that this was a truthful answer because Mr Rossi operated a Mobil CA site. His Honour found that the evidence fell well short of an attempted enforcement of an arrangement or understanding of the kind alleged.

His Honour found, relying on the cases which deal with s. 75B of the Act, that for a person to be liable to pay a pecuniary penalty under s. 76 by reason of inducing or attempting to induce a person to contravene a provision of Part IV, the person must have the requisite intent to induce or attempt to induce the contravention. His Honour relied in particular upon Yorke v Lucas (1983) 49 ALR 672 and Trade Practices Commission v Mobil Oil Australia Limited (1984) 3 FCR 168 at 183. His Honour held that for the purposes of s. 76(1)(d) the Commission had to establish intention on the part of the respondents, that is, that the conduct complained of had to be engaged in by those respondents with the intention of bringing about the making by dealers of the arrangement alleged or the arrival by them at the understanding alleged. He found that the relevant intent had not been established, that the intent of Mr Langley in his speeches and the material in "Service Station" establish that the intent was a different one, and one that was lawful. Their purpose and intent was to:

"bring about a willingness among dealers to examine their individual businesses and the retail prices charged and to increase their retail margins, even at the expense of volume".

His Honour found that it was not sufficient to show that the natural, probable and inevitable consequences of the respondents' conduct was the making or arriving at the impugned arrangement or understanding. Such a contention was in his Honour's view inconsistent with the principle that the concept underlying ss. 75B(1) and 76(1) are derived from the criminal law and as such require proof of actual intent.

His Honour therefore dismissed the application with costs.
The Commission's submissions on appeal fell broadly into two categories. First, counsel for the Commission submitted that the trial Judge erred in his interpretation of relevant provisions of Part IV of the Act in a number of respects which, so it was argued, must necessarily have led his Honour erroneously to find the principal facts. Second, it was argued that, whatever may be the fate of these submissions as to errors of law, his Honour made findings of fact which were not open on the evidence. I turn first to the submission that his Honour erred in his interpretation of ss. 45 and 45A.
Those sections, so far as relevant for present purposes, provide as follows:

"45(1) ...

(2) A corporation shall not -

(a) make a contract or arrangement, or arrive at an understanding, if -

(i) ... or

(ii) 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 competition; or

(b) ...

(3) For the purposes of this section and s. 45A, 'competition', in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.

(4) ...

(5) ...

(6) ...

(7) ...

(8) ...

(9) ..."

Section 45A:

"(1) 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.

(2) ...

(3) Sub-section (1) does not apply in relation to a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, to the extent that the provision recommends or provides for recommending, or would recommend or provide for recommending, the price for, or a discount, allowance, rebate or credit in relation to, goods or services, where the parties to the contract, arrangement or understanding, or the proposed parties to the proposed contract, arrangement or understanding, include -

(a) not less than 50 persons (bodies corporate that are related to one another being counted as a single person) who supply, in trade or commerce, goods or services to which the provision applies; or

(b) not less than 50 persons (bodies corporate that are related to one another being counted as a single person) who acquire, in trade or commerce, goods or services to which the provision applies.

(4) ...

(5) ...

(6) ...

(7) ...

(8) ..."

The Act is concerned to promote and stimulate competition between business people and to discourage and remove unfair business practices which inhibit competition: see Radio 2UE Sydney Pty Limited v Stereo FM Pty Limited (1982) 62 FLR 437 at 444. Section 45 relevantly prohibits corporations from making contracts or arrangements or arriving at understandings if they have a purpose of, or would have or be likely to have the effect of, substantially lessening competition. It is designed to promote a fair and competitive market for goods and services by proscribing anti-competitive conduct. Section 45A declares illegal per se provisions of contracts, arrangements or understandings or proposed contracts, arrangements or understandings if the provision 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 for, or a discount, allowance, rebate or credit in relation to, goods or services.
Section 45A operates within the general framework of s. 45. Section 45A in terms prohibits nothing; that is the work of s. 45. What s. 45A(1) does is provide that the specific matters to which it is addressed shall constitute the necessary elements of substantial lessening of competition for the purposes of s. 45 without additional or other proof. The remaining sub-sections of s. 45A in the main provide exceptions to the operation of sub-s. (1). The relevant sub-section in this case is sub-s. (3). If the facts of a case fall within sub-s. (3), its only operation is to prevent the application of sub-s. (1). The general operation of s. 45 is not affected and is not diminished. In other words a contravention of s. 45(2) may be established notwithstanding the operation of s. 45A(3); but it must be established without the benefit of the facilitation of proof that s. 45A(1) would otherwise have provided. Section 45A(3) exempts from the operation of s. 45A(1) provisions of contracts, arrangements or understandings in respect of recommendations of retail price where at least 50 competitors are party to the provision in question. The work performed by sub-s. (3) is therefore merely to render inapplicable the deeming provision of sub-s. (1) of s. 45A. But if s. 45A(3) does not apply, the relevant provision of the contract, arrangement or understanding will still be open for consideration under s. 45 of the Act.
Counsel for the Commission submitted that the trial judge had erred in law on six grounds. The first ground was that a general understanding or agreement "to increase margins over those existing at some previous period" could, contrary to his Honour's findings, be caught by s. 45 when read with s. 45A.
A second and related criticism of his Honour's reasoning was what was said to be his finding, in essence, that s. 45A could not apply to an understanding between dealers which provided for the retail price of petrol to be raised so as to achieve a price of "approximately" or "in the order of" the specified amount, as there could not be a transgression of s. 45A unless a particular "price" was agreed.
The relevant passages in his Honour's judgment that are impugned by counsel for the Commission appear in the context of his Honour's definition of the arrangement or understanding alleged by the Commission to be the relevant understanding, namely, the understanding between July to October 1990 (to use the words of his Honour summarizing the substance of the Commission's case):

"that dealers in Sydney should or would thereafter increase their retail margins for petrol above those which had obtained in the period January to July 1990, and, more specifically, that a retail margin in the order 10 per cent in the selling price, or alternatively, approximately 6.5 cpl, was appropriate."

His Honour said that if the Commission's case was that there were two arrangements (a general arrangement or understanding to increase margins over those in January-July 1990 and a second, and alternative, but more specific arrangement or understanding to increase margins in the order of 10 per cent or approximately 6.5 cpl) then:

"A general arrangement or understanding merely to increase margins over those existing at some previous period could not in (his) view conceivably constitute an arrangement or understanding to fix, control or maintain prices."

This statement was made by his Honour in the context of ascertaining which of the two alternative constructions of the Commission's case was open for it to assert. He rejected the construction that the relevant arrangement or understanding was a general one unsupported by a specific component of an understanding to increase in the order of 10 per cent or approximately 6.5 cpl. By construing the Commission's case as if it contained two integers, a general integer and a specific integer, he put the Commission's case at its highest.
His Honour construed the Commission's amended statement of claim as he understood it to be, namely, an assertion of one arrangement of a general kind to increase margins over those in January-July, but with a second integral component to the definition of this arrangement, namely, an arrangement or understanding to increase in the order of 10 per cent or approximately 6.5 cpl. His Honour said of such an arrangement that obvious problems arose by the qualifications "in the order of" and "approximately". His Honour recognized in the sentence that followed this statement that:

"In appropriate circumstances of course there may be an arrangement to fix, control or maintain prices notwithstanding that there is no agreement to charge literally identical prices; cf, in the context of s. 96, Trade Practices Commission v Mobil Oil Australia Limited (1984) 3 FCR 168 at 183 and the authorities there cited. However, some features of the retail petrol market point against such a conclusion in this particular setting. Here, one might think, precise price is a critical factor. The motorist customer, at any rate in a metropolitan area, usually has the mobility to choose between competing prices. The blandishments of television advertising notwithstanding, the customer may perceive no benefit in buying one brand as against another. Small differentials in price may be critical in determining a decision to purchase. The fact that movements in the recommended price between 16 July and 31 October were almost always by one or two cpl steps suggests a market in which fine adjustment of price is important.

Therefore in the Sydney metropolitan retail petrol market an arrangement or understanding to increase margins 'in the order of 10 cents or approximately 6.5 cpl' as against those which had obtained over the previous six month period (in itself a notably vague starting point) may lack the degree of certainty inherent in the concept of fixing, controlling or maintaining prices. I am of course not dealing with a striking out application. The ultimate issue remains whether there was an arrangement or understanding to fix, control or maintain prices. But the definitional problems I have mentioned rather highlight to difficulty of establishing that an arrangement or understanding of the proscribed kind occurred in such a market."

His Honour did not find that there could never be transgression of s. 45, aided by s. 45A, unless there was an agreement or understanding as to a particular price in the sense of a precise price. His Honour specifically recognized that there may be a relevant arrangement to fix, control or maintain prices notwithstanding there is no agreement to charge literally identical prices. What his Honour said was that on the facts of this case a decision as to price is a critical factor because of the reasons which he gave and to which I have referred. In short, small differences in price may be critical to a motorist in determining from which service station petrol will be purchased. A motorist probably attaches no particular loyalty to any specific brand as against another. The movements in the recommended price between 16 July and 31 October were almost always by 1 or 2 cpl steps. This suggested to his Honour a market in which fine adjustment of price is important.
I perceive no error in those statements of his Honour; in my opinion they are correct. I reject the argument that his Honour was saying that in the absence of an arrangement or understanding as to a specific price there could never be a transgression of s. 45, aided by s. 45A.
The third ground of challenge to his Honour's interpretation of the relevant sections was that he failed to appreciate the limited nature of s. 45A(3) which makes provision with respect to recommended prices. In particular, it was submitted that his Honour, having concluded that, for the only area of metropolitan Sydney for which detailed evidence was tendered (the Northern peninsular suburbs) recommended prices may well have been a contributing cause of the rise in retail prices which took place, should have analysed the effect on competition of the recommended prices over the whole Sydney metropolitan area and concluded there necessarily must have been a contravention of s. 45. It was said that his Honour basically misunderstood the true effect of s. 45A in its application to s. 45. In particular, it was said that any arrangement or understanding between competitors to end a price war between them would constitute a contravention of s. 45 when read with s. 45A. Even a "genuine" recommended price scheme would contravene s. 45, so it was argued, if it has, or is likely to have, an effect of substantially lessening competition.
An arrangement or understanding that falls outside the deeming provision of s. 45A(1) may nevertheless contravene s. 45(2) if the relevant anti-competitive purpose or effect is proved on the facts of the case, rather than by mere reliance on the deeming provisions of s. 45A(1). But his Honour recognized this in his reasons. No error has been shown.
Fourth, it was argued that his Honour erred in finding that the publication of recommended prices is in some circumstances expressly permitted by the Act, namely, s. 45A(3).
As to this criticism, it is clear that that is exactly the work that s. 45A(3) achieves. Recommended price agreements or arrangements come within the general purview of s. 45A; but if there are recommended price arrangements or agreements where the arrangement is between at least 50 suppliers or purchasers of the relevant goods or services, there is an exception to the application of sub-s. (3). This exception is plainly intended to protect the case of price recommendations by trade associations per se. But the operation of sub-s. (3) is simply to render the deeming provision in sub-s. (1) of s. 45A inapplicable. There may still, of course, be a contravention of s. 45 if the relevant anti-competitive purpose or effect is established. It simply means that the deeming provision of s. 45A(1) is inapplicable. All of this was plainly recognised by his Honour in his reasons for judgment.
It was submitted fifthly that his Honour erred in assuming (as it was said he did) that there can be no arrangement or understanding in breach of the Act without each party raising in the mind of the other and accepting an obligation qua the other. The source of this alleged error is a statement by his Honour in his reasons for judgment where he adopted an approach to this effect taken by Fisher J in Trade Practices Commission v Nicholas Enterprises Pty Limited (1979) 40 FLR 83 at 89.
His Honour adopted the view of Fisher J in Nicholas Enterprises that it is necessary for there to be a contravention of s. 45, that each party has raised an expectation in the mind of the other and each has accepted an obligation qua the other. The trial Judge referred to Nicholas Enterprises in a passage where he said that there was no evidence that each party raised its expectation in the mind of the other and each accepted an obligation qua the other.
Whether it is necessary for the application of s. 45 that each party to the alleged arrangement accepts an obligation qua the other is a matter on which there is some difference of opinion in this Court. Fisher J was of the view that there is a necessity for mutuality of acceptance of obligation. The Full Court of this Court, in dismissing the appeal from Fisher J's judgment in Nicholas Enterprises (reported as Morphett Arms Hotel Pty Limited v Trade Practices Commission and Nicholas Enterprises Pty Limited (1980) 30 ALR 88) said at 91-2 (Bowen CJ gave the judgment of the Court):

"I wish to add one qualification to my general statement of agreement with his Honour's reasons and findings in so far as they relate to the appellant. That qualification is in respect of the nature of an 'understanding' for the purposes of s. 45 of the Act. Fisher J reached the conclusion that it is a necessary ingredient of such an 'understanding' that there be an element of mutual commitment between two or more parties in the sense that each must have accepted an obligation qua the other or others. As at present advised, it seems to me that one could have an understanding between two or more persons restricted to the conduct which one of them will pursue without any element of mutual obligation, in so far as the other party or parties to the understanding are concerned. It is not, however, necessary that I reach or express any final view on this question since Mr Justice Fisher's view that such an element of mutual commitment was required plainly imposed a heavier burden on the respondent Commission, and thereby favoured the appellant."

In Trade Practices Commission v Parkfield Operations Pty Limited (1985) 59 ALR 589 Fox J said at 593:

"While it may not be necessary to have a mutuality of obligation, this would be the common situation. At the least, one or more parties will be expected to take steps about prices on the footing that a course is followed, or maintained, by another or others. A 'meeting of minds' may be sufficient, provided that there is an expression of what is in the mind, or some activity reflecting it."

This question came before me in Trade Practices Commission v Email Limited (1980) 43 FLR 383 where at 395-7 I considered the question of whether it was necessary for their to be reciprocity of obligation. I referred to the judgment of Fisher J and the qualification expressed by Bowen CJ on appeal in Morphet Arms. I referred also to Federal Commissioner of Taxation v Lutovi Investments Pty Limited (1978) 140 CLR 434 (an income tax case) and to a number of other cases touching the question and said at 397:

"For my part I find it difficult to envisage circumstances where there would be an understanding involving a commitment by one party as to the way he should behave without some commitment by the other party. Unless there is reciprocity of commitment I do not readily see why the parties would come to an arrangement or understanding. Particularly is this so when it is remembered that the alleged parties to the arrangement or understanding in the present case are two large companies. Presumably, if they were to reach an understanding or arrangement each would have some commercial objective beneficial to itself in mind. I see no point in an arrangement bare of reciprocity.

Although there is much force in the submissions on behalf of the respondents that it is difficult to imagine a practical example in trade or commerce of a party to an arrangement being subjected to a burden qua the other and that other being under no obligation himself, I incline to the view that there is no necessity for an element of mutual commitment between the parties to an arrangement or understanding such that each accepts an obligation qua the other; although in practice such cases would be rare."

Whether there is a necessity for reciprocity of obligation has not been decided other than by single Judges of the Court, although the Full Court in Morphet Arms expressed the reservation which I have mentioned as to the correctness of the proposition that mutuality of obligation is required for there to be a relevant arrangement or understanding under s. 45. The trial Judge did not refer to the authorities which touched this question as to whether there is a need for reciprocity of obligation. He confined his reference to authority to the judgment of Fisher J in Nicholas Enterprises. But when his Honour's reference to that case is seen in the context in which it appears, it is plain that what he said was that there was no evidence in this case either of communication by one party to another raising an expectation in the mind of the other or of communication with each other to have accepted an obligation by the other. Even if his Honour's acceptance of the proposition that a relevant arrangement must involve positive and clearly recognized reciprocal obligations (a proposition which in my view is erroneous: see Email at 395-7) I do not think it led his Honour into error, because it is plain that he found an absence of each of the two integers which he regarded as relevant for a s. 45 arrangement or understanding.
Before considering the submissions with respect to the facts I should mention one remaining submission of law, namely, that his Honour was said to have erred in his application of the standard of proof required to be discharged by the Commission, in effect equating the proceeding with criminal proceedings, and adopting a test equivalent to satisfaction beyond reasonable doubt.
His Honour said in his reasons that the evidence did not justify a finding (having regard to the Briginshaw standard) that the arrangement or understanding alleged, or indeed any arrangement or understanding, in fact occurred. I see nothing in his Honour's reasons to support a contention that he regarded the Commission as being bound to prove its case beyond a reasonable doubt. Indeed, I find quite the contrary. His Honour referred to the Briginshaw standard twice in his reasons. As I read them, they do not suggest that he was applying the criminal standard of proof beyond reasonable doubt. At p 37 of his Honour's reasons he said this:

"insofar as there was some uniformity in the prices charged by some service stations, such a phenomenon is explicable by a factor other than the existence of an arrangement or understanding to fix, control or maintain prices."

This passage does not demonstrate some misconception by his Honour of the Briginshaw test. Certainly it does not suggest that he applied the criminal standard.

I turn to the balance of the submissions of counsel for the Commission which seek to attribute error to the trial Judge in his findings of fact. They raise what are essentially questions of fact. This is a case where his Honour had before him a large amount of evidence, both oral and documentary, where he formed views of his impressions of witnesses with all the attendant advantages that that gives a trial Judge over an appellate court. I have therefore approached the remaining submissions with these matters in mind.
I have examined the documents and the evidence of witnesses to which we were referred, but on the footing that, unless some error of principle by the primary Judge has been exposed which may have vitiated one of his findings, the task of this Court, sitting as an appellate court in a case where there is such a volume of evidence both oral and documentary, is not to approach the case from the inception as it confronted the trial Judge but upon examination of the material to see if there is any substance in the contention that his Honour erred in his material findings: see Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359 at 369.
The critical finding of fact made by the trial Judge was that there was no relevant arrangement or understanding within the meaning of s. 45. This finding was challenged by the Commission. It was submitted on its behalf that the finding was not reasonably open on the evidence. Various matters were relied upon by the Commission in support of its submission, but the principal matters to which it pointed in argument as supporting its submission were those to which I now turn.
It was said that his Honour erred in finding that the respondents had not obtained a commitment from the oil companies to follow the market up in price. The trial Judge's finding that, if oil companies did not increase prices at CA sites, it would be more difficult for dealers to increase prices was accepted as correct; but counsel for the Commission submitted that the SSA set out to ensure that dealers would have the confidence to increase their margins to end the price war and that it did so by "squaring away" the oil companies. Only when the SSA had undertakings from the oil companies not to continue vigorously to compete in the retail market, did the SSA take its campaign to its dealers.
It was not submitted that the "competitive forces" between dealers were diminished by the SSA campaign. This is a reference to the editorial in the August issue of "Service Station" which focused on the unrelenting pressure of oil companies on retailers to pursue additional volume "at any price", and on the SSA's education campaign to convince dealers that they were free to set their own margin of profit according to their "individual costs and profit aspirations". As mentioned earlier, his Honour concluded that the phrase in the editorial "competitive forces" was a reference to competition between the oil companies. It was submitted on behalf of the Commission that his Honour erred in this respect as the context in which the reference occurred was to competitive forces between dealers. I concluded earlier that in my view his Honour's construction of the phrase as being a reference to competition between the oil companies was one that was open on the evidence and one which his Honour construed in the light of the whole of the evidence. I am not satisfied that he erred.
It was also submitted that the material in "Service Station" did contribute to dealers reaching an understanding that margins could be lifted and held at the higher level. It was submitted that the material should be read in the context of the publication of a recommended price, the issue of press releases and the holding of "dealer meetings" by the SSA. The real importance of the SSA material, so it was submitted, was not its exhortation to dealers to look at individual pricing or margins, but its suggestions that price advertising could or should cease (ie. priceboards be removed), as it was no longer necessary to be price competitive, and that a minimum 10 per cent margin was required.
It was also submitted that the dealers in the Northern Beaches area made an arrangement or reached an understanding that they would charge prices approximating the SSA recommended price. The arrangement or understanding was said to be reached or arrived at as the result of the speech to the dealers by Mr Langley.
The Commission argued that his Honour displayed a fundamental error when he analysed the evidence relating to Mr Langley's speech in that he proceeded on the basis that precise correspondence to a recommended price was necessary in order to be brought within the terms of the section. The Commission argued that the critical point was that although the margins in fact increased significantly, pricing differences remained. The point is, so it was argued, that the market as a whole rose: the band or range of prices in which competition took place after the SSA campaign was above the band or range previously in existence. It was argued that there is a very high degree of correlation between the SSA recommended price and prices charged in the Northern Beaches area in the relevant period.
The Commission submitted that it was the intention of the respondents that dealers should come to an understanding that margins be raised to approximately 10 per cent or 6.5 cpl and that these intentions can be and are to be inferred from the evidence.
The Commission's case was that the escalation in margins across Sydney which occurred in July 1990, immediately after the commencement of the SSA "Prosper from Petrol" campaign is explicable only as the result of an understanding between dealers that higher prices (margins) could be sustained. No one dealer or group of dealers in Sydney could lift its price or their prices and hence improve margins significantly unless it or they felt confident that virtually all others would do so at the same time and to a corresponding level. It was argued that the SSA campaign was more than just a recommending of the retail price.
This is a sufficient summary of the principal arguments advanced on behalf of the Commission.
I am satisfied that there is ample evidence to support his Honour's findings that there was:

"an absence of any evidence of mutual promises or undertakings as between dealers or as between dealers and the SSA".

His Honour concluded that the communications from the SSA did:

"not urge such mutual binding of dealers between themselves; on the contrary, the explicit and repeated message is that dealers have to make their own decisions with the consequence (again specifically stated) that differing prices will often be charged."

These findings are supported by the evidence and by his Honour's analysis of it. The principal evidence is the material in "Service Station" and Mr Langley's speeches.

His Honour's finding that there was no evidence of attempted sanction or enforcement against any dealer in relation to any arrangement or understanding is also amply supported by the evidence.
The Commission's case (as pleaded and as conducted before the trial Judge) did not assert that there was any arrangement by retailers to adhere to a recommended price; nor was there any evidence to support any such conclusion. The case for the Commission was based on an alleged arrangement with respect to retail margins for petrol. Margins are essentially a component of retail price, so that it is plainly relevant in considering whether or not an arrangement with respect to margins existed to consider whether there was an arrangement to adhere to a recommended price. A negative finding on this point does not necessarily lead to a conclusion that there was no arrangement as to margins. His Honour plainly understood the Commission's case with respect to margins. No error has been demonstrated as to the way in which his Honour treated it. In my opinion his Honour was justified in concluding that "The message from the SSA was that ultimately the decision was a matter for each dealer." Nor has his Honour's conclusion that there was no evidence of any attempt to enforce any alleged arrangement been shown to be in error.
His Honour analysed the evidence to determine whether prices were in fact fixed, controlled or maintained and concluded that they were not. There is evidence to support his Honour's finding.
His Honour considered whether, because there was some uniformity in the prices charged by some service stations, such phenomenon was explicable by a factor other than the existence of an arrangement, namely, the recommended price system. He concluded that it was so explicable. The recommended prices were recommended during the SSA's educational campaign. His Honour found that the recommended prices were prices which carried with them the recommendation of the SSA as reasonable prices to achieve reasonable profitability for dealers, but they carried no obligation express or implied to follow them. His Honour found that in the Northern Beaches area (which was the only area in respect of which the Commission sought to lead any detailed evidence of the conduct of retailers) Mr Bailey did as a matter of convenience what others could do themselves, namely, obtain the recommended price from the SSA. Whether the other retailers followed that price was a matter for each individual without obligation to any other retailer. His Honour found that the purpose and intent of the respondents was to bring about a willingness among dealers to examine their individual businesses and the retail prices charged and to increase their retail margins, even at the expense of volume. Again this is a finding which depended very much upon his Honour's assessment of witnesses when viewed in the light of relevant documents. His Honour performed the task of examining this evidence and weighing it correctly and there is plainly sufficient evidence to support his findings.
The escalation in margins was in his Honour's view explicable as the result of a hope or belief by some retailers that higher margins could be sustained. His Honour found that there was willingness among dealers to examine their individual businesses and the retail prices charged and to increase their retail margins, even at the expense of volume.
His Honour did not approach the case on the basis that there must be established an agreement to charge a precise price. He accepted that in appropriate circumstances there may be an arrangement to fix prices notwithstanding there is no arrangement to charge literally identical prices. He relied upon the absence of identical pricing as simply one of the factors pointing against the existence of an agreement. His Honour's analysis of pricing in the Northern Beaches area is a further illustration of the use which he made of the evidence pointing to lack of uniformity of price.
His Honour considered the Commission's case based on an intent to induce relevant understanding (which intent is a necessary ingredient); and he found that the intention of the respondents was not that alleged by the Commission; but rather it was more likely that the respondent's purpose and intent

"was to bring about a willingness among dealers to examine their individual business and the retail prices charged and to increase their retail margins, even at the expense of volume".

His Honour reached the conclusion that the Commission had failed to prove any agreement by direct evidence and the inference which the Commission contended was rejected.

There is ample evidence that oil companies used retailers' margins to compete among themselves for volume. An example is to be found in the editorial in the August issue of "Service Station" which was considered by his Honour. That was an editorial which focused on the unrelenting pressure of oil companies on retailers to pursue additional volume at any price, and on the SSA's education campaign to convince dealers that they were free to set their own margin of profit according to their individual costs and profit aspirations. It was in this context that his Honour concluded that the phrase "competitive forces" where appearing in this issue was a reference to competition between the oil companies, a construction which in my opinion is supported by the evidence.
His Honour's reasons were criticized by counsel for the Commission on the basis that his Honour was said to have accepted without qualification and uncritically what was described as the "self-serving material" contained in the transcript of the examination of Mr Langley and Mr Mark pursuant to s. 155 of the Act. Yet this evidence was tendered by the Commission and its truthfulness and accuracy was not, so far as I can discern, questioned before his Honour. In particular, Mr Langley's speech which played an important part in the reasoning process of the trial Judge was not, as his Honour observed, subjected to any critical analysis by the Commission; nor does the Commission suggest that it conveyed anything other than its ordinary and natural meaning. It must be remembered that this evidence was contained in the transcript of examinations conducted under oath by the Commission pursuant to its powers under s. 155 of the Act, during which the Commission was represented by counsel and had the opportunity fully to examine the examinees.
Related to this criticism of his Honour's reasons is the further criticism that he is said by the Commission to have relied on the "self-serving material" to reach the conclusion that Mr Mark did not extract an undertaking from oil companies to move prices upwards in the event that prices rose generally and not to "discount to CA sites". His Honour was also criticized by counsel for the Commission for accepting what was described by counsel as the "self-serving material" contained in the letter from Esso to the Commission dated 5 October 1990, passages from which appear earlier in my reasons. This letter was referred to by his Honour as the only direct evidence of what took place at the meetings between Mr Mark and the oil companies as distinct from the evidence in the s. 155 examinations of Mr Langley and Mr Mark. I should add at this point that his Honour's judgment was further criticized by counsel for the Commission on the ground that he is said to have excluded certain admissions alleged to have been made by Mr Langley and Mr Mark in their s. 155 examinations. The need to support this proposition is the expression in his Honour's reasons before considering the letter of 5 October "that it was evidence as distinct from admissions alleged to have been made by Mr Langley and Mr Mark". This is an erroneous criticism of what his Honour's said. What he was doing was dealing with the evidence piece by piece. He was not excluding the admissions alleged to have been made by Mr Langley and Mr Mark. Indeed, his Honour dealt with their evidence and the alleged admissions. The letter was in response to letters from the Commission concerning its investigation "into reseller margins and the SSA's recommended pricing scheme in Sydney". The letter was tendered by the Commission and its accuracy was not challenged by it at the trial. The Commission did not seek to lead oral evidence from officers of the oil companies and deliberately withdrew from its proposed tender bundle responses from other oil companies.

Another piece of evidence relied upon by his Honour to make his conclusions mentioned above with respect to Mr Mark and the position of the oil companies, is his Honour's interpretation of Mr Langley's statement in the 1990 Annual President's Report when speaking of price rises which occurred from July 1990 onwards where Mr Langley said:

"The oil companies proved true to their undertaking to support their dealers and move CA prices in accordance with the various markets in which they operate."

This report was tendered by the Commission and its accuracy was not challenged at the trial. His Honour found that the "undertaking" referred to related to an undertaking given by the oil companies at the meeting at the Southern Cross Hotel on 1 June 1990 chaired by Professor Baxt. In evidence given by Mr Mark in his s. 155 examination Mr Mark said that the undertakings were "to refrain, or to actively instruct their representatives (sic) oil companies, to resist the urge, what they believed was common practice of persuading dealers that they should be pricing down". Mr Mark was asked "Did you come to understand that undertakings had been given as a result of the series of meetings prior to 2 July which you held at the oil companies?" His answer was:

"No, I prefer to think that essentially it was in recognition of their undertakings in front of the Trade Practices Commission that they would act more responsibly, but equally, and realistically, I have no doubt that they were grateful for the opportunity to recover some costs as well, as well as dealers."

Later in his examination Mr Mark was asked whether he sought to reconfirm the commitments that the oil companies had apparently made at the meeting of 1 June and he replied:

"We did. We certainly wanted assurances, which is virtually what Professor Baxt suggested we do, that is seek an on-going commitment from the companies but on an individual basis, because it was getting a bit close to the bone getting it done on a collective basis."

Mr Mark wrote an article in the "Service Station" journal which set out the practices which the oil companies agreed to cease. They are referred to in his Honour's judgment so I need not set them out. The evidence of Mr Mark in his s. 155 examination and the article in the "Service Station" journal were tendered by the Commission which did not challenge the accuracy of the statements in the article nor the answers given in the s. 155 examination. Professor Baxt was not called to give evidence to challenge Mr Mark's explanation, yet he was at the meeting at which the undertakings were given. Indeed it was Professor Baxt who appears to have been the moving force in organizing the meeting at the Southern Cross Hotel. It was a meeting obviously called in all good faith.

Related to these attacks on the findings of the trial Judge is the submission that his Honour erred in finding that the prices recommended by the SSA carried with them the recommendation of the SSA as being a reasonable price to achieve reasonable profitability for dealers; but they carried no obligation express or implied to follow them. His Honour found that the publication of those prices was consistent with the material in "Service Station" and the speeches of Mr Langley, in all of which the SSA stressed that decisions as to retail prices were ultimately a matter for individual dealers.
Mr Mark gave detailed evidence as to how he arrived at a recommended price. His Honour considered that evidence and the evidence relating to the Commission's case based on events in the Northern Beaches area of Sydney. His Honour considered whether the evidence of the conduct in that area pointed to the existence of an arrangement or understanding and concluded that recommended prices may well have been a cause contributing to the rise in retail prices which took place, but that the lack of uniformity pointed against the conclusion that there was any relevant arrangement or understanding. His Honour did not consider the recommended prices in isolation from the other evidence, but considered it in the context of the evidence as a whole. It was argued on behalf of the Commission that his Honour erred in that he considered the recommended price published by the SSA in isolation from the other evidence and failed to consider that it was calculated at a margin of approximately 10% or 6.5 cpl above rack price. There is no substance in this contention.
It was submitted that his Honour erred in that he gave no or no sufficient weight to the actual increase in retail margins throughout the Sydney metropolitan area in the relevant period. His Honour accepted in his reasons that there was an increase in margins. He considered amongst other evidence the graphs prepared by Informed Sources on which great reliance was placed by counsel for the Commission before us. His Honour took all that into account when reaching his conclusion. He did not ignore it or give it insufficient weight. His Honour is said to have erred in his treatment of the analysis of Informed Sources' data in respect of service stations in the Northern Beaches area in that he should have found a substantial degree of uniformity in pricing in that area, being pricing close to the SSA recommended retail price as published from time to time. His Honour considered all this material at some length. I see no basis for this criticism made of his Honour's reasons.
It is true, as the Commission argued, that there was a distinct rise in margins at the relevant times following the alleged making of the agreement or arriving at the alleged understanding the subject of this proceeding. It is also true that the alleged agreement or understanding was to set retail margins by reference to an approximate gross margin of 10 per cent or 6.5 cpl and that this margin was significantly higher than the then prevailing margin. It is no doubt true that dealers hoped that other dealers would also raise their margin to a higher level and that they expected others to do so, but in the end it is a question of fact whether the rise in margins was because of or in response to a relevant understanding or arrangement of the kind proscribed by s. 45 or made by individual dealers, acting alone and not in concert, in response to the recommendations made by the SSA as to their prices and margins. The trial Judge concluded that the latter was the occasion and reason for the rise and he concluded that in fact there was no relevant arrangement or understanding made or agreement reached.
I am not persuaded that his Honour erred in any material respect in his findings of fact or of law. I would dismiss the appeal with costs.

JUDGE2

SPENDER AND LEE JJ We have had the benefit of reading in draft form the reasons for judgment of Lockhart J. We agree that the appeal should be dismissed with costs, for the reasons which his Honour gives.

We respectfully share Lockhart J's view that it is difficult to envisage circumstances where there would be an understanding within s. 45 of the Trade Practices Act 1974 involving a commitment by one party as to the way it should behave, without some reciprocal obligation by the other party.
However, the question of whether it is necessary that there be an element of mutual commitment before s. 45 can have application is not one which, in the circumstances of this case, it is necessary to decide.

[1993] FCA 582

26 AUGUST 1993

Key Legal Topics

Areas of Law

Competition Law

Legal Concepts

Breach of Contract

Restraint of Trade

Judicial Review