Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 27; (1985) 5 FCR 140 Trade Practices (13 February 1985)

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES COMMISSION v. PARKFIELD OPERATIONS PTY. LTD. (1985) 5 FCR 140
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
NEW SOUTH WALES DISTRICT REGISTRY
Fox J.(1)

CATCHWORDS

Trade Practices - Restrictive trade practices - Price fixing - Attempt to contravene the Act - Inducing contraventions of the Act - Trade Practices Act 1974 (Cth), ss45A, 76(1)(b), 76(1)(d). Observations upon the requirements for findings of:
1. Price fixing in contravention of s 45A of the Trade Practices Act 1974.

2. An attempt within s 76(1)(b) of the Trade Practices Act 1974.
3. Inducing a contravention within s 76(1)(d) of the Trade Practices Act

1974.

HEARING

1985, February 11, 12, 13. 13:2:1985

APPLICATION

Proceedings for pecuniary penalty.

A P Whitlam, for the applicant.

R D Giles QC and K Lindgren, for the respondents.

Solicitors for the applicant: Australian Government Solicitor.

Solicitors for the respondent: Hill Turnbull Hill Partners.
GFV

DECISION

13 February 1985
Fox J. These proceedings for a penalty are brought in reliance upon ss 45(2), 45A(1) and 76(1) of the Trade Practices Act 1974 (Cth). The first respondent (Parkfield) owns and operates several petrol service stations in the Newcastle and Maitland area. The second respondent (Mr Chapman) was at all material times the manager and a director of the first respondent. XL Petroleum Pty. Ltd. (XL) owns petrol stations in Maitland and in Hamilton, near Newcastle. Mr Sykes was at all material times managing director of XL.

2. The petrol station at Maitland was operated by Mr Foley who worked on a commission basis with XL, which supplied the petrol to that outlet. Mr Foley was not regarded as an employee os XL, but he accounted to it for petrol sold, having first withdrawn his commission from the proceeds of sale. While he was responsible for the conduct of the business on those premises, the price of the petrol sold was determined by him in conjunction with Mr Sykes.

3. The petrol station at Hamilton was conducted similarly, the operator there being Mr Prudius. XL sells its petrol at a discount price, that is to say, it customarily undersells its competitors. Late in April or early in May 1983, Mr Foley was in receipt of a document at the Maitland premises and later received a telephone call. These were the matters relied upon in support of this part of the case, but the evidence failed to link them with either of the respondents. The case concerning the Maitland petrol station turns then to later conversations with Mr Sykes, although, as only the Newcastle area was mentioned in the vital parts of these conversations it would seem that they may not have been intended to embrace sale prices at Mr Foley's service station. There was a conversation between Mr Chapman and Mr Prudius at the Hamilton site, apparently after conversations with Mr Sykes. I will return to it later.

4. Mr Chapman rang Mr Sykes from Newcastle in early May and subsequently saw him in Melbourne. The case turns very largely on the content of these conversations. Mr Sykes, in my estimation, gave his evidence honestly and to the best of his ability, but he himself issued a caveat about it expressed by him in the following terms:

"Well, I can no longer of course remember the exact words so, even
though I am supposed to be quoting, I put the caveat on my remarks to
say the words may have been somewhat differently ordered, and
individual words may be different, but I remember the person
introduced himself as Neil Chapman from Newcastle."

5. While this qualification was related to a particular answer, it was repeated in one form or another by Mr Sykes on a number of occasions. He was in doubt as to whether an important conversation took place over the telephone or later when he saw Mr Chapman. His evidence about what was said over the telephone (expressly made subject to the caveat I have mentioned) was as follows:

"Yes, Mr Chapman said that - would it not be better if we could
raise our prices four cents or six cents a litre. I think he named the
price of - I think it was 45.3 cents a litre or something like that, and
he said - if you did you would be able to make five or six cents a litre
more profit, would that not be better?"

6. In response to my question "How much was the raise?", he answered:

"Five or six cents a litre. I think at that stage we were selling at
somewhat below forty cents a litre, so 45.3 cents would be a rise of
well over five cents. I think he said five or six cents a litre, would we
not all make more profit? I said well, we would. He said would we
agree to going up to - I think he named a price of - 44.8 cents a litre
if everybody else in Newcastle went up to 45.3 cents a litre. I said,

'No,

I will not have a bar of any arrangement like that'. Mr Chapman then
said, 'Well, I will be shortly coming to Melbourne. Would it be all right
if I call in to see you personally?' I said, 'You would be most welcome
to see me at any time'."

7. The evidence proceeded:

Q. "Was anything said about the other retailers in this telephone
conversation? A. Yes, well either at that telephone conversation or a
subsequent meeting Mr Chapman said that he had got the other
retailers to agree to go to - I think the price was - 45.3 cents a litre
and he had a qualification about that, because I asked him another
question later, and the question I asked was at the meeting and not at
the first phone call - I am not sure whether he said that - I just
forget - at the phone call or the next meeting.

Q. I am asking you now about the telephone call? A. I am sorry, I
do not recall when that was said."

Q. "You said you would not have a bar of it. Was anything said
about why? A. Yes."

Q. "What was that? A. I said that XL policy was to never make
arrangements or bargains between other brands or other service
stations because we thought, and we had been told, it had been illegal."

8. Concerning the visit by Mr Chapman, said to be in early May, a principal part of Mr Sykes evidence-in-chief was as follows:

Q. "What was said? A. Mr Chapman said that he had got the
agreement of other petrol - he said all - all other petrol retailers
except XL to move up to 45.3, I think it was, provided we moved up to
44.8, and I said no, we were not prepared to make any bargains like
that. Our attitude was the same, and we could not do it. I said, 'We set
our own prices, in our own way, and at our own time. We might
change if the market goes up or down, but that is up to us. We cannot
make a bargain like that. It would be very surprising if you have an
agreement with Solo like that. Have you asked Solo, when you say all
the sites in Newcastle?' He said, 'Yes, I have asked Solo and both their
sites have agreed to go to 44.8'."

9. A few weeks later he received another telephone call from Mr Chapman and the more important part of his evidence relating to it is as follows:

Q. "What was said? A. Mr Chapman said if XL or you do not raise
your price then the whole of the Newcastle market is going to come
down again. I think at that stage I might have said: 'Our price is a bit
higher already at 43.5' perhaps, or something like that.

Q. Now, where was that? A. At Hamilton. Some were 44.8 and all
the other companies were 45.3. I said to Mr Cahpman, 'If the market
comes down, it comes down'."

10. He was a little later asked and answered the following question:

Q. "What I meant to say: was anything put to you by why (sic) of
specific price? A. Either at that phone call or the one before or at

both,

I can no longer remember, it was mentioned that everybody else would
be happy if XL was 44.8. I cannot remember which time that was said
or whether it was said at both. It was said at either the meeting then; I
cannot remember any more. I said 'I was not going to that price; XL
was going to set its own price'."

11. As XL did not agree to any arrangement, the pleadings charge attempts, in reliance upon s 76(1)(a) and (d) of the Act. In relation to Parkfield, they charge:

1. An attempt to make an arrangement or arrive at an understanding between itself and XL for XL to increase prices.

2. The same as in 1. except that the arrangement was with XL and other petrol retailers in the area.

3. An attempt to induce XL to make an arrangement with the first respondent to increase prices.

4. The same as in 3. except that the arrangement was to be between the first respondent and itself and other petrol retailers in the area

12. Charges of attempting to induce were made against Mr Chapman, similar to those in 3. and 4., Parkfield remaining as the corporation to be involved in the arrangement. Following from what I have already said, I do not have a comfortable satisfaction concerning the words used in the conversations deposed to by Mr Sykes or as to the particular occasions on which important parts of them took place. I accept that Mr Chapman was pressing Mr Sykes to increase the price of XL petrol. It was assumed, I think, and has been assumed in argument before me, that Mr Sykes could achieve this result, without depending on the independent agreement of anyone else. There is no doubt, also, that Mr Chapman on an occasion or occasions said something to the effect that he had, or could get the agreement of other retailers for a general price increase. He also mentioned actual prices, for XL petrol and for that of others. It is a small illustration of the problem about Mr Sykes' evidence that in his recitation of what Mr Chapman first said about prices the latter is said to have stated that all but XL would sell at a certain price. On challenge by Mr Sykes, Mr Chapman said that Solo would also be selling at a discount price. Mr Chapman was not called to give evidence, and I am not prepared to accept the truth of what he said, or that he believed it to be true, but so far as concerns the particular evidence of Mr Sykes to which I have referred, it involved either the mistake of Mr Chapman or the inaccuracy of Mr Sykes' recollection.

13. Put in its best light, the arrangement suggested by Mr Chapman was extremely nebulous. The other traders were not identified, either by name, or by any reasonably precise reference to the area or areas in which they operated.

14. It seems that the Newcastle area, in general, was being referred to, and not the Maitland area, although the evidence suggests that they were distinct retail markets, and, so far as I know, it may not be correct to regard the whole Newcastle area as one retail market. There is no doubt that there were a great number of retailers in the Newcastle area. I therefore have difficulty in understanding the proposition stated, or said to have been stated, by Mr Chapman. It seems that Mr Sykes was at least somewhat sceptical about the proposition Mr Chapman was putting, and, as I have said, I do not believe what the latter said about having the agreement of the others. Mr Sykes was of course clear in his own response, - he would not be party to any arrangement about prices. One imagines that if Mr Chapman had any knowledge of the trade (the successful part of his operations was in supermarket stores) he would have known in advance the response he would get.

15. The respondents submit that the terms of the prohibition would not in any case be satisfied because, accepting Mr Sykes' evidence in full, there was still no price to be "fixed", within the meaning of s45A(1). I think, contrary to the argument, that prices can be "fixed" even if all that is proposed is an increase to a certain figure, without any provision as to when, or by what machinery or what amount, a further change may take place. Assurance of permanency, or long duration, or constant relativity, is not necessary. The absence of reference to the duration of operation of the proposed prices, and how, or when, changes might be made, is, however, meaningful in the present context, because it is only another feature of the vagueness of what was being suggested.

16. None of the proprietors or operators of other petrol service was called. The fact is that one does not know who they were, or whether, or on what terms, they were prepared to come to some price-fixing arrangements. While it is plain that the matter is not to be approached as if the law of contract were being applied, it is still necessary that there be sufficient evidence to find that there is an "arrangement" or "understanding", between different parties, or that one is proposed.

17. The reference in s 45A(1) to a "proposed" arrangement or understanding, as an alternative to one which is in existence, does not mean that there can be greater vagueness about the proposal. At least there must be parties, and sufficient clarity about what is proposed, and a sufficient measure of consensus. I think this need is emphasised by the fact that what s 45A(1) relates to is a "provision" of an arrangement, or understanding or proposed arrangement or understanding. Further, it is necessary to look to its purpose or effect. The need for a plurality of parties is expressed directly in the subsection. 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. It is not necessary for me to pursue the refinements of these alternative ways of regarding the language in question because here there were no parties, there was no mutuality of obligation, and there was no consensus.

18. One of the alternative ways in which the case is pleaded is that there was an arrangement or understanding solely with Parkfield or Mr Chapman. This is refuted by the evidence. One thing which is clear is that Mr Chapman did not want any arrangement to which only Mr Sykes or XL, on the one hand, and he or Parkfield on the other, were parties. The suggestions were always for a wider group, and nothing less would have been acceptable to Mr Chapman or his company.

19. Reliance is then placed on attempted contravention (s 76(1)(b) and attempt to induce contravention (s 76(1)(d). These provisions refer to "contravention" and are to be related to the totality of that which constitutes a contravention. The basic prohibition is in s 45, in this case s 45(2)(a)(ii). It is interesting to see that this subparagraph, having been introduced by the words of proscription "a corporation shall not make a contract or arrangement, or arrive at an understanding", refers to a proposed contract, etc. This is done so that the focus is on the making of a contract, etc. or the attempt to make it, after the Act came into operation, although it is acknowledged in s 45(2)(b) that a contract may validly be made. Section 45A(1) is a deeming provision, of conclusive effect in relation to the situations to which it applies. When it is sought to apply the paragraphs of s 76(1), which subsection of course applies to many and diverse provisions of the Act, the contravention can in this case be expressed as being the making of an arrangement or understanding, if the proposed arrangement or understanding contains a provision which has the purpose, or has, or is likely to have, the effect of fixing, or providing for the fixing of the price in relation to goods supplied or acquired or to be supplied or acquired by the parties to the arrangement or understanding.

20. In my view an attempt within s 76(1)(b) must be at a reasonably advanced stage of carrying out that which is charged as being attempted. The analogy of the criminal law, where a test often stated is that the acts constituting attempt must be proximate to the commission of the crime, offers some guidance. An exhortation or incitement to another to enter into an arrangement or understanding with another or others, who are so far strangers to any such arrangement or understanding, is not an attempt. In the present case Mr Chapman did not, for himself or his company, attempt to enter into an arrangement or understanding. If he had secured Mr Sykes' agreement, there still remained much to be done. So far as appears, the proposal may always have been impossible of achievement. What he did do was to try to get Mr Sykes' agreement to participate in a proposed scheme; the reality of which, on the evidence, was totally at large. It is not possible to talk of a proposed arrangement, except that Mr Chapman had voiced a proposal. This does not in my opinion offend against s 45A or s 76(1)(b).

21. Similar observations apply in relation to the operation of s 76(1)(d). Inducing a person to contravene a provision envisages success, both because the inducement produces results and because there is the arrangement. Attempting to induce a person to contravene suggests to me conduct which does not amount to inducement because it does not produce results, notwithstanding an arrangement could readily be made. There is no attempt to induce if, despite invitation or exhortation, or threats or promises, there is no arrangement which is in place and can be effected, or can readily be effected. Invitations, however pressing, to start to see if an arrangement can be made, are not in my view within the paragraph. That is in substance the position here. Mr Chapman mentioned prices, but he did not speak for others, and what he said does not have any effect beyond being a suggestion of his, notwithstanding he said others had agreed, or would agree to those prices.

22. A separate conversation is alleged with Mr Prudius, who operated the Hamilton outlet. This conversation provides even less evidence of an offence. There was no suggestion of an arrangement or understanding with anyone. Mr Chapman asked Mr Prudius when he was going to put his prices up, and the latter, with slight elaboration, said he could not.

23. A further point is taken by the respondents, namely that Mr Prudius was not a servant of XL, but, in relation to petrol sales, operated independently. This does, I think, constitute a further difficulty in the way of the applicant.

24. I am of the view, therefore, that the application should be dismissed.

ORDER

Application dismissed with costs