Trade Practices Commission v Sony (Australia) Pty Ltd

[1990] FCA 222

JUDGMENT No. ...-9;2?/..?.;-2

IN THE FEDERAL COURT OF AUSTRALIA	)
QUEENSLAND DISTRICT REGISTRY	) QLD G42 of 1989
GENERAL DIVISION	)

BETWEEN: TRADE PRACTICES COMMISSION

Applicant

AND: SONY (AUSTRALIA) PTY LIMITED

First Respondent

AND: ALEXANDER FRANCIS PAGONIS

Second Respondent

AND: MICHAEL BAXTER

Third Respondent

PINCUS J.

REASONS FOR JUDGMENT

The applicant clalms relief under the Trade Practices Act 1974 in respect of alleged breaches of s.48:

"A corporation or other person shall not engage in

the practice of resale price maintenance."

In respect of each alleged breach, the applicant asks for an order for payment of a pecuniary penalty under s.76 against all the	are sued under the provisions of ss.76(l)(e) and 80(l)(e) of the	respondents; the second and thlrd respondents (natural persons)
Under interlocutory orders, the applicant's case was put on affidavit and, further, it was ordered that the questlon of liability be tried first, with assessment of penalty (if any) to be determined later. The respondents were not ordered to file any affidavits; they adduced no evidence.
At the hearing, there was but little challenge to the assertions made in the applicant's affidavits. Three of the applicant's deponents were briefly cross-examined by counsel for the third respondent, but counsel for the first and second respondents did not cross-examine. There was thus no substantial dispute about the facts, except that in some respects the applicant's deponents gave rather varying accounts of some conversations which occurred. As to the basic factual position, however, no doubt can reasonably be entertained: there were, as the applicant alleges, attempts by various means to enforce compliance with the first respondent Sony's recommended prices for certain goods. It must also be accepted that the second respondent Pagonis, Sonyrs Queensland manager, threated to cut off supplies to dealers in Sony products who did not comply with Sonyrs recommended prices; there is evidence that that punishment
was in fact administered.
It does not necessarily follow that the respondents have contravened s.48 in the respects alleged, and it is necessary to set out the facts in some detail.
It should be added that the pleadings filed by the respondents proved to be of no use to one attempting to ascertain, in advance of the argument of the case, what the substantial questions in issue might be. Counsel for the respondents objected at the outset to some of the content of the affldavlts, as not being sufficiently relevant to any question in the case, and some of those objections succeeded. It was, I thlnk, suggested by counsel for the applicant, after the respondentsr addresses, that not all of those rulings then appeared to be correct. I have not thought it necessary to review them in detail, but as to at least one point, I should say that the submission just mentioned seems right: evidence was excluded which tended to show that Sony, at times other than those directly in question, issued a list of recommended prices. The argument eventually put for the first respondent was, in my opinion, such that the evidence in question should have been admitted, as giving some support to the existence of a practice of issuing lists of recommended prices. The case has been decided, however, on the basis of the evidence which was not excluded.
The evidence related to Sony's dealings with two business organisations. "Alsound" 1s Triken Wholesale Distributors (Qld) Pty Ltd, a company which trades under the name
Alsound Discount Electronics and Alsound Tax and Duty Free at two retail stores, one in Brisbane and one in Ipswich.
Photo-Continental Pty Ltd ("Photo-Continental") is a Brisbane retailer. There is also an associated company called Photo-Continental's Photographic Warehouses Pty Ltd, which I shall call "the warehouse company" and which sells goods to Photo-Continental itself. Sonyrs sales were to the warehouse company which onsold to Photo-Continental, and that complication,
potentially advantageous to the respondents, is discussed below.
The main witness in relatlon to the Alsound dealings was M Uldis Sirovs, whose evidence I accept. Slrovs has been, at material tlmes, the manager of Alsound, and is also described as its principal executive officer. Alsound dealt with Sony from 1976 and its relations with Sony were satisfactory until about mid-1987. From time to time Alsound sold Sony products at less than retail prices recommended by Sony, and that practlce ultimately caused a breaking of the business relationship. Before about July 1987, Sony used communicate its recommended prices to Alsound by one Musgrave, its then Queensland manager. Musgrave would call on Alsound and inform Sirovs, among other things, of the Sony prices; Sirovs entered them into a folder in which he kept current prlce lists. Alsound's practice was to respect the Sonyrs prices, in general, when customers inquired on the telephone, but when a customer came in and said "that they have already been quoted a lower price than Sonyls recommended retail price" Alsound would match the lower price.
In late July or early August 1987, Slrovs noticed that with respect to goods ordered by Alsound. Details of the unfilled Sony was, with increasing frequency, claiming to be out of stock
orders are not available, but it is plain from the evidence of Mr
C.J. Swift and Mr R.S. Richardson that in substantial part, these
claims that Sony had no stock to fill an Alsound order were related to a new policy instituted on behalf of Sony by Pagonis. Speaking generally, the reason for the apparent enhanced difficulty in obtaining stock was Pagonls' dlssatisfaction with Alsound's marketing methods, and in particular its not selling at Sonyls recommended retail prices; Pagonls told Swift thls.
About late August 1987, Sirovs went to Sony's office in South Brisbane and there spoke to the third respondent Baxter and to Pagonis, the latter leading the discussion.
Sirovs was told that Alsound would thenceforth be supplied only with "portables", a group of products which included radios and excluded video cameras, "hi-fi", vldeo cassette recorders and television sets. Pagonis told Sirovs that sonyrs purpose was to stamp out discounting and that "Sony was trying to bring some order to the retail area by controlling retail prices". Pagonis also explained that the new arrangement as to supply was being done "to make sure that prices were maintained". Baxter said that it was being done in every State to control pricing.
Then there was a threat, namely that Alsound would be supplied with the portables only if they were sold at Sony's recommended retail prices.
Notwithstanding what he was told, Sirovs trled from time to time to get products other than portables from Sony, but the items requested were said to be out of stock; at least in general, that was untrue.
About late September 1987, Pagonis came to see Sirovs and reaffirmed that Alsound could still be supplied with portables but said that "if he found me discounting these portables, he
would make an example of me to the industry and not supply me at all". After that meeting, Pagonls and Slrovs had no further contact with each other. It is not dlsputed that orders glven by Alsound were not filled thereafter, although some limited supplies were given.
Pagonis discussed Alsound's position on 28 October 1987 with representatives of Photo-Continental. During the course of a long discussion, of which more detail is given below, Pagonis informed those representatives that supplles to Photo-Contznental and other retailers were belng cut off. He complained to them of Alsoundfs conduct in price cutting. It was mentioned that Alsound had been refused supply and Pagonis commented that they were "upsetting the market place". He said, in effect, that for twelve years Sony had had "no incldents from anyone, that whole time barring Alsound and we took action then". The nature of that action was specified:

"Neither Georges or Alsound are now being supplied.

Both of the accounts have been closed . . . We

ceased supply to Alsound because we found that, we believe that, it is costing us a million dollars' worth of business a year in that particular area by cutting the hell out of Sony's price."

At the same meeting there was some discussion of the legality of

Sony's actions. Pagonis said:

"Bear in mind that if you go around waving a maintaining price flag it obviously is not really the accepted practice and would in fact be frowned on by Government sources."

One Schleicher, who was present, remarked:

"Well, it's illegal."

Pagonis then said:

"Obviously, we are careful about that, obviously,
but we do it in respect of our own dealers."

As to Photo-Continental, I have mentioned that it buys goods from the warehouse company. M W.R. Tadrowski is the managing director of both companies and his wife, Mrs Karen Tadrowski, is described as the manageress. W.R. Tadrowskl took over control of the company in 1981 when his father died, and still occupies that position.

In May 1987, after earlier approaches were rejected, Musgrave told Photo-Continental that Sony was agreeable to opening an account under which Photo-Continental would sell Sony products. Musgrave told Tadrowski that he would not give Tadrowski a Sony price list until an account with Sony for the warehouse company had been approved; that occurred about July 1987.

On or about 7 July, Mr R. Haramubara came to see Photo-Continental on Sonyrs behalf and left the then current price list, pages of which had typed at the top: "Effective - 1 April 1987". Haramubara also advised on that occasion of some "updated prices" - i.e. altered prices which were noted on the list. On or about 26 October 1987, Pagonis told Tadrowski that he had received complaints about Photo-Contintental selling Sony products too cheaply. Tadrowski swore that Pagonis "said that he didn't want us going below the 'go prices"'. The expression "go prices" is one which is not clearly defined by the evidence, but I infer that it is a price which is in some sense alternative to that contained on the formal list; it may be higher or lower than the listed price.

On 28 October 1987, as I have mentioned, when discussing the relationship between Sony and Alsound, there was a conversation at which Pagonis discussed relevant matters with representatives of Photo-Continental; that was recorded by a small recorder whlch was placed on a desk, Pagonis being unaware that it was in use. A transcript of the conversation was put in evidence, and its correctness was not challenged.

It is impractical to summarise all the relevant parts of this conversation, participants in which, in addition to Paqonis, were Tadrowski, Mrs Tadrowski, Haramubara and R.M. Schlelcher, the assistant manager of Photo-Continental. The general burden of what Pagonis conveyed to those present was that he was annoyed by

price-cutting on the part of Photo-Continental and others and

proposed to cut off their supply until some time in November -

i.e. the following month - when he would reconsider the matter. He expressed a preference for dealing with retailers who would co-operate with respect to price. Pagonls mentioned early in the conversation that Schlelcher had spoken wlth Haramubara and Pagonis had also had a conversation "about the maintenance of the price of the thing" [sic]. He sald that on inquiry being made of Photo-Continental, a price had been quoted on a product identified as "CCDV30, namely $2,520". Pagonls commented:

"The go price was $2,699, recommended $2,659."

Then Pagonis said that he had been quoted $3,650 in respect of another Sony product, as to which "the recommended retail is $3,999". He expressed disappointment and said:

"1 had to take action similar in an earlier

incident, with another company, who were basically
doing the same thing".

Tadrowski and Schleicher explained that when complaint was made by Haramubara, Photo-Continental's computer was adjusted to key in the "basic price". Pagonis said that, as to the product last-mentioned:

"Now everyone we have been quoting under $3999 does

not get supplied at this stage."

In further discussion, Pagonis said, in effect, that he was not naive enough to think that price cutting was not golng to	happen, and on "V30sW (whlch I infer to be the product on which a	price of $2,520 had been quoted), he could "almost accept it".
The implication from this and other passages was that not every departure on the part of a retailer from Sony's recommended price would necessarily attract retribution, or even complaint. Pagonis said, in effect, that he would have expected that "a retall prlce" would have been given in response to a telephone inquiry which might have been reduced later, but not to the extent of "more than $ 3 0 0 under the price simply over the phone". The reference to
" $ 3 0 0 " seems plainly enough to be based on the difference between
the recommended price and that in respect of the second product, just discussed.

Pagonis repeated his complaint as to the flrst product,

saying:

"... what I see is straight away we place a phone call YOU are advised $220 underneath our recommended, certainly our go price is $2699."

Tadrowski defended Photo-Continental by saying, among other things:

"There was no mention that we were to hold our prices at close to recommended retail selling prices and we just made up competitive prices ..."

But Pagonis would not accept "that you cut $ 2 2 0 off the recommended retail right from the word go ..."

Schleicher said that Photo-Continental had acted as they

did to compete with a couple of stores, one belng called "Georges"
and the other Alsound. Pagonis sald:

"Neither Georges nor Alsound are now being supplied

... Alsound was becoming a $50,000 account with

Sony prior to three months back. And I ceased
supplying to Alsound for the exact same reason."
Discussion turned to whether it was possible for those

whose supplies had, according to Pagonis, been cut off to obtain supplies from Sydney; but Pagonis said in effect that if a dealer in Sydney did so, supply to him would also be stopped; Pagonis remarked that he had done that in Brisbane.

Schleicher asked:

"So is this just a Queensland thlng this price bit

or is this national?"

Pagonis replied to the effect that, because of price cutting by

companies such as Alsound in particular, he was "probably heavier

handed at the moment than what the other States are ..."

There was further discussion of the Georges store, and

Pagonis said:

"If they are to go under the recommended retail on our products then they will suf fer the consequences".

clear to Photo-Continental's representatives that they would be The purpose of thls, plainly enough, was to make it	likely to be treated similarly if they sold under the recommended
retail price.
Discussion turned again to what had been said to Photo-Continental at the outset of its relationship with Sony. Tadrowski said that there was "not really any agreement when the account was opened" but Haramubara claimed that Tadrowski had been told that the company did not like to see price cutting and that:

"if that is the situation and we find that out, we could eventually stop the supply of products, and I did actually answer that question to you."

Pagonls explained to the Photo-Continental

representatives that he intended to "stay out at the moment until

I could guarantee the stock". He claimed, falsely in my view, to

have been motivated by a lack of available stock. He described that as "problem one", but I am satisfied that it was a Sony tactic, in dealing with those who persistently or (in its view) excessively ignored the prices Sony recommended, to claim to have

insufficient stock.

Pagonis explained that he proposed to cut off supply to camera dealers generally until he reconsidered their position. When Tadrowski objected that "photographics" - 1.e. camera stores, were not alone to blame, Pagonis said:

"No no, it happened long before you guys ever came

along, I suppose, it really could happen, and probably always will. But that doesn't mean that I	will stop trying to take action, to try and get our
prices back up so people can make their set margins. The margins you would make if you didn't
discount. l'

Plainly, the word "set" makes no sense unless someone has prescribed margins; in my view, it was Sony's practice, amply evidenced by the conversation being discussed, to set a retail sale price which would, if the wholesale price were deducted, produce a set margin.

More generally, Pagonis complained of a lack of "co-operation throughout the camera area". The sort of co-operation he had in mlnd consisted wholly or largely of conformity with respect to price. Pagonls also said that he was unimpressed with the camera retailers and went on:

"And that is probably the main reason for concern and I can assure that if any of the other people within the camera area as well, are going to get into the price cutting for whatever reason then I am going to have to rake similar action to that.It

He added that Yamaha "chop franchise dealers the day price cutting starts".

Pagonls, in the course of a discussion with Tadrowski, argued, in effect, that because of lack of regard for "maintenance of retail prices" Sony did not wlsh to sell to camera retailers. However, he vacillated about that, saying a little later:

"I think it is an area we can get into, but, it

needs certain restraints ... Where one person we

go with, that person gets drawn into our dealer	meetings, our meetings with our dealers, and that
as between them they agree to maintain a price so that we have all got something to use, we would provide ..."

The discussion then reverted to the quotation of $2,520 given over the phone, which was described by Pagonis as "$220 wrong". That echoes the earlier statement that it was "$220 underneath our recommended".

Pagonis did not suggest that the cessation of supply would be permanent. He sald, in effect, he needed time to consider the problem:

"If I can come up with a system or procedure that

negates to me the instances of price cutting, then
we are solved, we don't have the problem."

The preclse nature of the "go price" is not elucidated by the discussion. For example, Pagonis said:

"What I'm saying is that within our hi-fi group we have no problem with dicussions about Sony products, at all. We have SRP, suggested recommended, and we have a go price and everybody operates to that, and we have no problems."

The circumstances in which the "suggested recommended" price governs and that in which the go price governs remain unclear, but my view is that the latter is simply a variation, advised by Sony, between issues of complete llsts, of the price of a particular item.

It was suggested by counsel for the first respondent that the transcript from which this discussion is taken is, in some respects, obscure. The evidence is, however, that it was carefully checked and I infer that, insofar as it contains errors, they are probably errors made by the speaker rather than the transcriber. For example, Pagonis said:

"Like every other retailer, we promise faithfully
that we will maintain prices ..."

Since "we" might be thought to stand for Sony, thls statement makes no literal sense; Sony is not a retailer. But the general effect of what Pagonls has to say is, from the polnt of view of the respondents, only too clear.

The next contact between Tadrowski and Pagonis occurred on 5 November 1987, when Pagonis told Tadrowski that he had decided to supply Photo-Continental " ~ f we stuck to Sonyts recommended retail prlces". He added:

"in instances where other stores go below those prices, he knew we would have to go below them too, but that was alright then because everybody did it. He said that Sony would supply their products on an unrestricted basis provided we complied with his wishes not to sell at less than the go prices. He said he didn't want us quoting over the phone at less than the go prices."

He added that if any other retailer quoted lower than go prices, he would "stop supply or do whatever was necessary to ensure it didn't continue happening".

A price list on which was typed "Effective - 1st October

1987" was then handed to Tadrowskl.

In April 1988, Pagonis told Schleicher on the telephone that Sony would not supply Photo-Continental with any vldeo cameras "as we had sold Sony vldeo cameras at cheaper prices than Sony's go prices". Schleicher passed this on to Tadrowskl, who telephoned the third respondent Baxter to complain. I am satisfied that he did so, and that Baxter told Tadrowski he would look into the matter and get back to him. Tadrowski's recollection is that Baxter also said on that occasion that it was "Sonyrs policy in Australia to try to control the market including the selling prices". I am not prepared to find that to be so, having regard to the standard of proof.

Baxter did not contact Tadrowski again, although he had promised to do so, and on 10 May 1988, Tadrowski telephoned him agaln. He referred to Pagonls and to a handshake and went on to say that he had appointed Pagonis who was doing a good job in Queensland and that he did not appreciate Tadrowski's havlng gone over Pagonis' head. Baxter said he dld not want to get further involved and did not know why Tadrowskl had not heard from Pagonis. The same line was taken by Pagonis a few days later when Pagonis referred to Tadrowski's conversation with Baxter and sald that he (Pagonis) would prefer not to deal wlth Photo-Continental at all.

Schleicher went with one R.J. Holliday, the then retall

manager of Photo-Continental, to see Pagonis on or about 18 May,

and Pagonis was asked why he was not supplying Sony products to

Photo-Continental. Pagonis said that he had a certain number of

dealers who sold at the suggested retail price, that there was enough stock to satisfy them and he did not like Photo-Continental selling at lower than the suggested retall price. He also said that Sony had a pollcy of tryrng to ensure that all of its products were sold "at the suggested selling prices and/or go prices set by Sony". When Schlelcher said that dealers who were supplied by Sony often discounted, Pagonis replied that he was:

"... sure that these dealers may occasionally reduce

their selling prices by a matter of a few dollars, but that he firmly believed that all price cutting had been instigated by Photo-Continental and that the easiest way to keep his other dealers happy was simply not to supply Photo-Continental"

Pagonis added that he had lnqulred the selling prlce of a "Sony Bicentennial camera" and had been told that it was $1,888 "which was $100 below the suggested selling price". After further discussion, Pagonis told Holliday and Tadrowski that Photo-Continental would be supplied again "provided that we agreed to quote the suggested selling prlce". He added:

' l . . . if the customer stated that he could buy a Sony

video camera from a competitor for a less expensive price, we would be free to sell the product for an even cheaper price than our competitor, but that we should then give him a call explaining what had happened and he would look into it. He further stated that if we agreed to comply with Sonyfs recommended selling price, he would be able to give us better promotions, improve product information, instigate stock allocations and generally ensure good relations between our companies."

There arose a dlspute between Sony and Photo-Continental over accounts. Briefly, the dlspute was that Photo-Continental	claimed that Sony had agreed to meet certain advertising costs;
Sony rejected that. Since the applicant's case in this respect is credible and uncontradicted, I accept it. The inference is open that Sony, having raised a dispute about the matter, was merely a pretext to justify refusal of supply. I have decided, having regard to the whole history of the matter, that this inference is regard to the whole history of the matter, that this inference is a correct one. It should be mentioned that Sony sent Photo-Continental its price llst marked "Effective - 1st October 1988", apparently on the assumption that Photo-Continental was still being supplied. However, that was not so. Photo-Continental consulted its solicitors, who complained to Sony without getting any satisfaction.
Section 96 contains what is, in effect, a definition of the "practice of resale price maintenance", which is proscribed by s.48. I do not quote it in full here. It is necessary to note, however, that the construction of some of the provisions relled on by the applicant may be affected by others not relied on; see, for example, the difference of view as to the bearing of s.96(4) on the meaning of "price specified" in s.96(3) in Heating Centre Pty Ltd v. TPC (1986) 65 ALR 429 at 432, 446.
First Allegation
The statement of claim alleges, in para.7, that at the meeting between Sirovs, Pagonis and Baxter in August 1987, Pagonis said that certain sorts of goods would not be supplied to Alsound;
that in August 1987, Alsound was not suplied with a video camera which had been ordered, that in September 1987 Pagonis told Sirovs that Sony would withhold supply of certain goods and that on various occasions, between August 1987 and August 1988, Sony did not supply requested goods. It is alleged that this is withln s.96(3)(d)(ii):

"the supplier withholding supply of goods to a second person for the reason that the second person

-

(ii)    has sold, or is likely to sell, goods supplied to him by the supplier, or goods supplied to him by a third person who, directly or indirectly, has obtained the goods from the supplier, at a price less than a price specified by the supplier as the price below which the goods are not to be sold".

On the face of it, the evidence establishes a breach of the provision in question, but counsel for the first respondent raised a number of arguments, of w h ~ c h the more substant~al were the following.

It was contended that it had to be shown that there was a "price specified by the supplier" and what that price was. In support of that proposition, reliance was placed on what I said in the Heating Centre case (above) concerning the meaning of "price specified" in para.3(b).

Before discussing that case, it is convenient to ment~on some earlier authorities. In Mikasa (NSW) Pty Limited v. Festival

Stores (1972) 127 CLR 617, the High Court had to consider construction of s.66B(2) of the former Trade Practices Act 1965-1971. That provision used words which differed in no significant way from para.3(d) which is relied on by the applicant. There, the evidence d ~ d not show that the appellant

communicated "a list of retail prices which it ~nsisted that the

respondent should undertake to observe as a condition of obtaining supplies". However, the appellant recommended prices. Menzies J. remarked:

"It is not my reading of s.66B(Z)(d) that the

supplier's price must be specified, before the withholding of supplies occurs or that a supplier's prices could not be specified in a recommendation. It is sufficient for the provision if there be a withholding of supply because of the likelihood that the person seeking the goods would not observe the price which it is the firm policy of the supplier to specify." (645)

Walsh J. (650) and Gibbs J. (652) agreed with the reasons of
Menzies J., as to matters including that just referred to.

In Trade Practices Commission v. Bata Shoe Company of Australia Pty Ltd (No. 2) (1980) 44 FLR 149 at 160, Lockhart J. said:

"The fact that the specification of a price is couched in terms of recommendation does not prevent

it from being a price specified by the supplier I,

. . .

The remarks I made in the Heating Centre case were, so

far as relevant, that: 

"... the mention of 'price specified' in para.(b)

means, subject only to the qualification in sub-s.(4), not merely that the supplier says that there is a price but that he says what it is" (446).

However, the view just expressed was not that of the majoril of the Court, which held that:

"To attract s.96(3)(a), (b) or (f) it is not

necessary that a particular price be specified or that a formula be specified from which a particular price may be ascertained" (432).

~t seems clear that the oplnion I expressed as to the meaning of "price specified" In para.3(b) was rejected by the other judges comprising the Full Court. It follows, in my opinion, that there can be a breach of para.3(b), even if no particular price is mentioned.

More importantly, what was said about para.3(b) in the Heating Centre case cannot apply here, but para.(d)(ii) covers not only withholding of supply for the reason that the second person has sold goods below a specified prlce, but such withholding by reason that he is likely to do so. In the latter case, there need be no evidence that the supplier has told the second person what the specified price is; he might well not do so if he dld not intend to supply anyway.

As to "has sold", as opposed to "likely to sell" in
sub-para.(d)(ii), it is true that the evidence of receipt of prlce

lists by Alsound is a little exiguous. But it has to be kept in

mind that sub-para.(d)(ii) refers back to the reason mentioned in

the introductory part of the paragraph. The reason for

withholding of supply was explained more than once by Pagonrs. ~t is plaln from the evidence that Sony issued lists of recommended prices from time to time and also that it informed dealers of "go" prices, being variants of the prices shown on the lists. It was, I have no doubt, precisely because Alsound was thought by Pagonls to be taking insufficient notice of the specified prices that supply was discontinued. To quote Pagonis again:

"We ceased supply to Alsound because we found that, we believe that it is costing us a million dollars worth of business a year in that particular area by cutting the hell out of Sony's price."

"Sonyls price" is the price specified by Sony and it is proved, not only on the balance of probabilities, but (in my opinion) beyond reasonable doubt, that Sony did specify prices, although precisely what its specifications were from time to time is not proved in detail.

Complaint was also made, on behalf of the respondent, about other incomplete areas of evidence. It was said that the evidence was vague as to what Sony goods were sold by Alsound before August 1987, but it does not appear to me necessary for the applicant to show that. The evidence is clear and uncontradicted that Alsound bought Sony goods for years before the difficulty arose in 1987. The applicant's case included proof of all invoices received by Alsound from Sony from about 1 July 1986 to about 27 February 1989. It was submitted by counsel for the first

certain consequences were said to flow from that. However, the	respondent that before 1987 no portables had been supplied and
submission is incorrect, for many examples can be found, by comparing the October 1987 price list with the invoices, of purchase of "portables".
In my opinion, the evidence that there was a withholding of supply as alleged, for the reason alleged, is clear and I find that there was from in or about August 1987 untll about August 1988 a withholding of supply of Sony goods to Alsound, for the reason mentioned in s.96(3)(d)(ii). The witholding in truth went past the latter date.
Second Allegation

This alleges a breach of para.3(b) of s.96. It is said

that Sony, about late September 1987, induced or attempted to induce Alsound not to sell at a price less than the price specified by Sony.

As explained above, at the meeting in question, Pagonis threatened Alsound concerning the consequences of discounting. The first respondent contended, and I agree, that it was not shown that any inducement was successful; the question is whether the alternative allegation of attempting to induce is made out.

Counsel for the first respondent argued that I should reject Sirovs' account of the matter because of the differing account given by Swlft. I prefer to rely on Sirovs' recollection; he appeared to me a particularly impressive wltness.

The applicant's counsel argued that I should find that there was a price specified, namely that of July 1987. My view on this point has fluctuated, but I have determined, in the end,

(having regard, again, to the standard of proof) not to find this allegation to be made out. It is true that the reference to discounting was, in somewhat similar circumstances in the Heatinq Centre case, held to refer back to a price list previously supplied, and it is not easy to distinguish the present facts from those there considered. However, in vlew of the gap in time and other circumstances, I am not prepared to make a finding against Sony, as to the second allegation.

Third Allegation

This alleges a breach in relation to Photo-Continental

of para.3(a):

"the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier".

Counsel for the applicant, at the outset, candidly drew

my attention to the difficulty facing him under this provision,

namely that Sony did not supply to Photo-Continental itself, but	to the warehouse company. I was invited to read the paragraph
broadly, so as to achieve the result that the words "second person" where they secondly appear in the paragraph are read as "second persons". That would not solve the problem, because there is no question of Sony supplying to Photo-Continental and the warehouse company, whether "second person" is singular or plural. In my opinion, the natural meaning of the paragraph is such that "second person" where it secondly appears identifies the same person or persons as "second person" where it thirdly appears. It follows that this allegation is not made out and it is unnecessary to consider other points raised in relation to it by the respondents.
Fourth Allegation
This is another allegation relying on para.3(b), but in relation to Photo-Continental; the date alleged is 28 October 1987, the date of the long conversation discussed in detail above. Here, the wording of the paragraph is such as to cover an inducement of Photo-Continental in relation to goods obtained, not from Sony itself, but from the warehouse company. The point taken by the first respondent is that there was not an inducement or intended inducement, but a unilateral cutting off of supply. In my opinion, that is not so, on the facts. What Pagonis said, in essence, was that there was to be a temporary cessation of supply only, in view of Photo-Continental's past conduct, but that if it was repeated, a more severe punishment could follow. The
discontinuation of supply and the threat that it could be repeated or made permanent were both intended to induce Photo-Continental
to sell at the right price in future. The alternative view is that Pagonis was simply explaining to Photo-Continental elaborately and repetitively why supply had been discontinued, but that is not what he intended. His whole purpose was to encourage Photo-Contintental to behave in future - i.e. to comply with the recommended prices.
Although it was not a polnt specifically taken, it appears to me that another consideration arises. This is that to some extent Pagonis gave the impression that departure from the recommended prices would be likely to be tolerated. In my opinion, there was nevertheless an attempt to Induce Photo-Contintental to adhere in future to specified prices. Pagonis did not condone any departure from the specified prices, but was prepared to acknowledge that, provlded Sony was kept informed, some departures from the price list might occur without penalty.

In the Bata Shoe Company case (above), Lockhart J.

remarked:

"The fact that a price is stated to be within a range of a particular figure, or that otherwise an element of approximation is introduced, does not detract from the true character of the price as being a specified price: see Trade Practices Commission v. Pye Industries Sales Pty Ltd (1978)

ATPR 40-088. " (159-160)

In the Pye Industries case, there was evidence of a "go

price" which could vary $10 or $15 up or down; that was held to be

a specified price below which goods were not to be sold (17,854).	That view was approved in Peter Williamson Pty Ltd v. Capital
motors Pty Ltd (1982) ATPR 40-921 at 43,635. These cases support the view that a price may be one which is "specified" although the evidence does not show rigid insistence upon precrse adherence to it.

In my opinion, the evidence establishes the fourth

allegation.
Fifth Allegation

This alleges a contravention of sub-para.3(e)(ii):

"the supplier withholding the supply of goods to a second person for the reason that a third person who, directly or indirectly, has obtained, or wishes to obtain, goods from the second person -

(ii)    has sold, or is likely to sell, goods supplied to him, or to be supplied to him, by the second person, at a price less than a price specified by the supplier as the price below which the goods are not to be sold..."

The allegation is that there was a withholding of
supply, as foreshadowed by Pagonls in the meeting of 28 October

1987, because Photo-Continental sold below the specified price;

there was plainly a withholding of supplies.

A number of answers were made by counsel for the first

respondent.

Firstly, he argued that Photo-Continental indicated that withholding was not because Photo-Continental was llkely to cut	it was willing to adhere to the prices and therefore the
the price. In my opinion, that is not so. It is true that representatives of Photo-Continental made conciliatory statements, but it seems to me that the proper inference is that the withholding of supply was not merely because of past conduct, but because of apprehended future conduct. Pagonis did not accept the assurances he was given.
Secondly, it was argued that Pagonis cut off supplies because he needed time to decide whether he should supply cameras to dealers who were not part of the traditional network. It is true that Pagonis made statements to this effect, but they were not the "real reason", as Sonyrs counsel put it, for withholding suply. The Court must look to the substantial reason for
proscribed conduct: s.4F(b). (The application of s.4F(b) to s.48
was considered in the Heating Centre case (above) at p.442.) The substantial reason for the withholding, was concern about past and possible future price cutting.
Next, it was argued that no price was specified, the contention being somewhat along the lines of that discussed above, in relation to the first allegation. It was pointed out by counsel for the first respondent that there were suggestions during the conversation with Pagonis of 28 October 1987 that Sony had not initially made it clear to Photo-Continental that it insisted upon adherence to the recommended prices. What the applicant has to show is not that Photo-Continental in fact breached any understanding with Sony about price, but that the
proof of a state of mind which is relebant to success under cutting off of supply was ordained for a certain reason; it is
para.(e)(ii). It is not necessary for the applicant to show that that state of mind was reasonably held - that, for example, it was true that (as Pagonis believed) Photo-Continental was likely to sell under the specified prices.
Lastly, it was said that there was nothing in the conversation to suggest "a concern about retail recommended prlce, or even about certain types of price cutting". I do not agree. It seems to me plain that it was the prices recommended by Sony which were the standard - whether they were the prices on the comprehensive lists issued from time to time, or the "go prices". The substantial reason for what Sony dld was in my view precisely that mentioned in sub-para.(e)(ii) and thls allegation is made out
Sixth Allegation
This relies on the evidence, referred to above, of the meeting about 5 November 1987 between Pagonis and representatives of Photo-Continental. It is said that at that meeting a breach of s.96(3)(a) took place. In my oplnion, the answer is that glven above in relation to the third allegation. There was no contravention of para.3(a) because there was no question of Sony's supplying Photo-Continental itself; it had been supplying the warehouse company, whose sales to Photo-Continental were of no concern to Sony.

This allegation fails.

Seventh Allegation

This sets up another breach of para.3(b) asserting that at the meeting of 5 November 1987 there was an inducement or attempted inducment of Photo-Continental within that paragraph. The first respondent says that "the price specified in November 1987 was not a retail recommended prlce but a go price, and even the mention of the go price was not a specification". It is perhaps repetitive to say so, but the so-called "go price" was in my opinion a type of recommended retail price, although that was not the language the parties applied to it.

A more substantial point taken by the first respondent

is whether the suggestion of some leniency or flexibility takes the matter outside the provision. In my view, reading the evidence as a whole, it does not. Pagonis was attempting to achieve the result that the relevant recommended prices were adhered to. He by no means suggested that he wished Photo-Continental not to adhere to them, but merely recognised the possibility that Photo-Continental might be forced to match others' lack of adherence. He also said:

". . . that if any other retailer quoted lower than go

prices he would take some action against them. He said he would stop supply or do whatever was necessary to ensure it didn't continue happening."

I am satisfied that this allegation of breach of para.3(b) is made

out.

Eighth Allegation

This is another assertion that sub-para.(e)(ii) was breached; it is said that from about 24 February 1988, Sony withheld supply from the warehouse company for a reason of the kind mentioned in the sub-paragraph; viz. that Photo-Continental had sold or was likely to sell at a price below the specified price. The question here is an evidentiary one.

Again, the fact that evidence referred to "go prices" is relied on; it is unnecessary to say anything more about that.

The pleading relies upon a series of events, not all of which have equal strength. In particular, the conversation of 29 April 1988 between Tadrowskl and Baxter is relied on; I have explained that I am not prepared to find that Baxter made one of the statements attributed to him on that occasion. Nevertheless, there is more than enough in the rest of the circumstances relled on to demonstrate the truth of the allegation. I find it unnecessary to go over the account of it which is given above. This allegation is made out.

Ninth Allegation

This is an alleged breach of para.(3)(a) in relation to Photo-Continental. It is unnecessary to discuss the detalls, because the allegation must fail, for the reason mentioned above in discussing the third and sixth allegations.

Tenth Allegation

This alleges a breach of para.3(b) in relation to Photo-Continental, regarding the meeting of 18 May 1988 between Schleicher and Holliday on the one hand, and Pagonis on the other. It was submitted that "Pagonis made it plain that it was all right to cut prlces down to the go price". That assumes that the "go price" was necessarily lower than the list price, whereas it may have been higher. It is also said that it is not proved that the attempt to induce was successful. It appears to me that this is correct, but I am of the view that the second part of the allegation is made out - i.e. an attempt to induce Photo-Continental not to sell at less than the Sony price.

Again, the first respondent relies on a suggestion by Pagonis that there mlght be some flexibility on Sony's part. However, there seems no reason to doubt that Pagonis was encouraging adherence to the Sony price. Schleicher said that Pagoni s :

". . . further stated that if we agreed to comply with

Sony's recommended selling prices, he would be able

t o give us better promotions, improve product

information, instigate stock allocations and generally ensure good relations between our two companies."

I am therefore satisfied that there was an attempt to

induce of the kind mentioned in para. ( 3 ) (b) as indeed Sony's

counsel conceded, if the points above were found agalnst them.

In summary, the first, fourth, fifth, seventh, elghth and tenth allegations are made out and the second, third, sixth and ninth are not.

Second and Third Respondents

Counsel for Pagonis advanced no argument on hls behalf additional to those put forward by counsel for Sony. It seems clear that Pagonis was involved in each of the contraventions I have found to have occurred in such a way as to fall withln the provisions of s.76(1)(e) and s.80(l)(e) of the Act. The former requires that the Court be satisfied that Pagonis -

"has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision".

The words "such a provision" are a reference back to the words "provision of Part IV' in para.(l)(a) of the section. Section 80(l)(e) establishes the same test.

In Yorke v. Lucas (1985) 158 CLR 661, the High Court had to construe the words of s.75B(c), which are to the same effect. The Court held that the word "knowingly" in the paragraph qualifies only the words "concerned in" and that to be a "party

facts constituting the particular contravention in question" and	to" a contravention, one must have knowledge of "the essential
be an "intentional participant" (670). There does not appear to be any argument open to Pagonls that he falls outside these descriptions. I find that he was party to the contraventions mentioned above.
The allegations against Baxter, however, require more detailed consideration. It is common ground that he has, at all material times, been Sonyls national sales manager in its consumer products division. Since no evidence was called on behalf of the respondents, however, it is not easy to determine to what extent Pagonis acted at Baxter's direction and to what extent he acted on his own initiative. It was contended for the applicant that I should find that Baxter knew and approved of what was done in relation to Photo-Continental and Alsound because of the evldence of Tadrowski, Slrovs and Swift.
As I have explained, I accept Sirovs' evidence and prefer to rely upon the accuracy of his recollection rather than that of Swift, where the two differ. Sirovs' account of the meeting at Sonyrs offlce in late August 1987, referred to above, makes it impossible to hold that Baxter was at that stage unaware of Pagonis' activities.
Pagonls told Sirovs that he would only get portables because other retailers were complaining that he had been price cutting. He later said that this was belng done to make sure that prices were maintained and Baxter then said that:

'l... Sony was doing this in every State to control

pricing and that their strategy was to have a smaller number of dealers so that they could control prices".

Pagonis said that Sony was "splitting up the catalogue Australia wide" and that Sirovs would "only get the portables if he sold them at Sony's recommended retail prices".

On a number of occasions during that meeting, Pagonis asked for and received conf~rmation from Baxter.

In the absence of any evidence to throw doubt upon the inferences that one would otherwise draw from this conversation, it appears to me that it must be found that Baxter was a party to the only contravention I have found to have occurred in relation to Alsound, namely withholding of supply at dates following that meeting. I am of opinion that Baxter was a party to that contravention and so find.

All the other contravent~ons (the fourth, fifth, seventh, eighth and tenth) involve Photo-Continental and not Alsound. One would tend to assume, of course, in the absence of evidence suggesting otherwise, that Baxter's connect~on with Pagonis' dealings with Photo-Continental was the same as that relating to Alsound. However, having regard to the standard of proof, I am not satisfled that he has been shown to be sufficiently involved, as to Photo-Continental. I have already discussed the contacts between Tadrowski and Baxter, w h ~ c h the applicant relies on, namely those in April and May 1988, and in

view of what I have said about the former, it is necessary to	refer now only to the conversation of 10 May 1988. I am sat~sfied
that a conversation occurred substant~ally along the l ~ n e s which Tadrowski swore to, and in reaching that view, I rely upon Tadrowski's note of the conversation. Nevertheless, it appears to me that what is attributed to Baxter is not enough to warrant a finding against him, with respect to Photo-Continental. The impression Baxter tried to create, whether a true or misleading one, was that Tadrowski's problem with Pagonis was a matter to be sorted out between the two of them and he did not want "to get further involved".
In the result, I flnd Baxter to have been a party to the flrst contravention but not the others.
I propose to afford the parties an opportunity to lead evidence on penalty and to address me on that subject and as to costs.

I certify that this and the thirty-five

preceding pages are a true copy of the
reasons for judgment herein of His Honour

Mr. Justice Pincus.

Dated 3/ &%+J /*q0

Counsel for the applicant:	Mr P.A. Keane Q.C. and Mr. M. Stewart
Solicitors for the applicant:	Australian Government Solicitor
Counsel for the 1st respondent:	Mr J.D. Heydon O.C. and Mr A.J.L. Bannon
Solicitors for the 1st respondent:	Blake Dawson Waldron
Counsel for the 2nd respondent:	Mr P. Dutney
Solicitors for the 2nd respondent:	Adamson Bernays Kyle and Jones
Counsel for the 3rd respondent:	Mr C. Hodgekiss
Solicitors for the 3rd respondent:	Sly & Weigall

Dates of Hearing:  14 & 15 May 1990