Re Trade Practices Commission v Leslievale Pty Limited; Bowstrom Pty Limited; Axpress Pty Limited; Mobil Oil Australia Limited; Thomas Henry Little; Vincent John Smith; Keith Leslie Schulte and David Franklin Newman [1986] FCA 119 (18 April 1986)

FEDERAL COURT OF AUSTRALIA

Re: TRADE PRACTICES COMMISSION
And: LESLIEVALE PTY. LIMITED; BOWSTROM PTY. LIMITED; AXPRESS PTY. LIMITED;
MOBIL OIL AUSTRALIA LIMITED; THOMAS HENRY LITTLE; VINCENT JOHN SMITH; KEITH
LESLIE SCHULTE and DAVID FRANKLIN NEWMAN
No. QLD G93 of 1985
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.

CATCHWORDS

Trade Practices - arrangement restricting competition - price-fixing agreement - whether proved - whether mutual obligation necessary.

Trade Practices Act, 1974, ss.45(2), 45A, 76

HEARING

BRISBANE
18:4:1986

ORDER

The application be dismissed.

The applicant pay the respondents' costs of and incidental to this application to be taxed.

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

DECISION

The applicant claims pecuniary penalties in respect of alleged contraventions of s.45(2) of the Trade Practices Act and injunctive relief. All the respondens, except the fourth, are and were in February 1984 operators of service stations in Gladstone in this State, or persons associated with such operators. To be more specific, the first, second and third respondents are companies of which the sixth, seventh and eighth respondents, respectively, are directors; the fifth respondent conducts a service station in partnership with his wife. The fourth respondent is Mobil Oil Australia Limited, whose representative in Gladstone at the time was Mr. Carl Schweppes. The applicant complains that on 3 February 1984 there was a meeting at the office of the sixth respondent which was attended by him and by the fifth, seventh and eighth respondents, together with certain other people, being retailers and depot operators carrying on business supplying fuel in Gladstone.

2. The applicant claims that at or as a result of the meeting, an arrangement or understanding was made or arrived at between two or more of the first, second, third, fourth and fifth respondents. The arrangement or understanding was, it is alleged, to the effect that the retail price at which super-grade petrol would be sold by the parties would be at least 48.9 cents per litre for "full service" and at least 47.9 cents per litre for "self-service". It is said, further, that the arrangement or understanding was that fuel depots would charge at least 46.9 cents per litre.

3. To establish that the arrangement or understanding was arrived at, the applicant relies upon the evidence of two witnesses, Messrs Sibley and Zelinski, who were at the meeting in question and also upon evidence as to the activities of the fourth respondent, Mobil. The pleaded case against the fourth respondent is that, by its agent Mr. Schweppes, it told Mr. Zelinski that the meeting was to take place and that it knew the retail price of super grade petrol was to be discussed at the meeting and might increase as a result of the meeting. It is also alleged that about 11 a.m. on the day of the meeting, 3 February 1984, the sixth respondent, Mr. Smith, telephoned Mr. Schweppes and told him that the arrangement or understanding had been arrived at and that Mr. Schweppes then directed Mr. Zelinskii to increase the price to be charged at a service station called the Mobil Big Wheel Service Station. This conduct on the part of the fourth respondent was, it was said, such as to bring it within one or more of the paragraphs of sub-s. 76(1) of the Act.

4. The provisions of s.45(2) which are relied on are sub-pars.(a) (ii) and (b) (ii):

"A corporation shall not -

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

. . .

(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) give effect to a provision of a contract,
arrangement or understanding, whether the
contract or arrangement was made, or the
understanding was arrived at, before or after
the commencement of this section, if that
provision -

. . .

(ii) has the purpose, or has or is likely to
have the effect, of substantially
lessening competition.

The applicant relies upon s.45A as definitive of the expression "the purpose or . . . effect of substantially lessening competition". The immediately relevant part of s.45A is sub-s.(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 maintaing, 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."

To state its effect summarily, s.45A(1) deems price-fixing arrangements to have the purpose or actual or likely effect of substantially lessening competition.

5. There was some reference in argument to a point discussed by Fisher J. in Trade Practices Commission v. David Jones (Australia) Pty. Ltd. (unreported, 6 February 1986). His Honour referred to an opinion he had earlier expressed, that there must be an "element of mutual commitment" for there to be an "understanding" within the meaning of s.45. He considered the possibility that in some rare cases, that might be unnecessary, as suggested by Lockhart J. in Trade Practices Commission v. Email Ltd. (1980) 31 ALR 53 at 66. If it matters, I favour the suggestion of Lockhart J; however, it does not appear to me that the point is of critical importance in this case, where the difficulty is to obtain any clear notion of what was said at the meeting discussed below. The provisions in question require, of course, that more than one person be a party to the arrangement or understanding; it is not enough for the applicant to show, in order to succeed on these pleadings, that Mr. Smith proposed an arrangement.

6. The central point in the case is whether at or as a result of that meeting an arrangement or understanding was arrived at of the kind pleaded. Of those men present at the meeting, eight have been called before me and six of them, being those called on behalf of the respondents, gave no support to the suggestion that there was such an arrangement or understanding.

7. The standard of proof is the balance of probabilities, keeping in mind the gravity of the matter alleged: The Heating Centre Pty. Ltd. v. Trade Practices Commission (unreported, 17 March 1986, Full Court).

8. The evidence dealt with a number of issues which turned out to be of peripheral relevance. In the end, the main question to be considered is what happened at the meeting and on that the evidence is, in general, vague and conflicting; nor is much light shed upon the matter by consideration of external events, such as the prices at which petrol was sold after the meeting.

9. Mr. D. J. Sibley, who attended the meeting, gave evidence that it was chaired by the sixth respondent, Mr. Smith. According to Mr. Sibley, Mr. Smith said that Mobil had indicated that they would like stability of price and that he (Mr. Smith) "thought that we possibly should all get together to achieve that . . .". According to Mr. Sibley, Mr. Smith said he thought an acceptable level would be 49.9, and 48.9 for the "self-serves". That meant that the stations which provided "full-service", including washing the windscreen and services of that kind, were to charge 49.9 cents per litre, the others 48.9 cents per litre. There followed some discussion which it is not necessary to mention, and then, according to Mr. Sibley, Mr. Smith said, "Can we get - can we come to some agreement on what price, you know, we should be at". There was some further discussion and then, according to Mr. Sibley, Mr. Smith said, "Well, we've agreed on 48.9, 47.9 and 46.9".

10. The reference to 46.9 was, if it was made, without doubt intended to refer to the price to be charged by depot operators - that is, by dealers who sold directly to the public as well as selling to retailers of petrol.

11. Despite the terms of the pronouncement attributed to Mr. Smith, this passage in the evidence did not include any assertion that a member of the group other than Mr. Smith expressed agreement on those figures. In particular, of those alleged in the statement of claim to have agreed, the only one implicated by Mr. Sibley's evidence was Mr. Newman who, he claims, said that "49.9 and 48.9 would be acceptable". It will be noted that these prices do not correspond with those alleged to have been last mentioned by Mr. Smith.

12. Mr. Sibley claims that Mr. Smith then rang Mr. Schweppes and said, "We've got 48.9, 47.9 and 46.9, but Errol said he won't budge." The reference to "Errol" is to Mr. Zelinski, whose evidence is mentioned below. One thing which clearly emerges from the various accounts of the meeting is that he made no agreement to sell at a price mentioned by Mr. Smith.

13. Mr. Schweppes gave evidence of having received a telephone call about the time sworn to by Mr. Sibley. According to Mr. Schweppes' version, Mr. Smith said that "he had heard dealers and agents had settled their dispute and there would be some price changes back to the previous current market price that morning . . . The second thing he said was that Errol had apparently stood up and said certain things regarding him being told by Mobil that he could price at 46.9 cents per litre . . . ".

14. The evidence as to what Mr. Smith said he had "heard" derives some support from exhibit 35 which, according to the evidence of Mr. Schweppes, is a memorandum he wrote on the day in question. It reads, in part:

"Dealer John Smith had rung to state that apparently
the disputing dealers and agents (see attached
newspaper article) had seen the wisdom in all of
them pricing at a common price - 48.9 c.p.l. and
49.9 c.p.l."

15. The note just quoted was used by Mr. Schweppes, according to him, in preparing a report to his superior in which the relevant telephone conversation is recorded as follows:

"Mobil dealer, John Smith, rang T.M. to say that he
had heard that disputing dealers and agents (see
attached newspaper article no. 1) had settled their
problems and had agreed to return to the previously
current market price of 48.9 and 49.9 c.p.l."

"T.M." means "Territory Manager" and refers to Mr. Schweppes. This later version of the conversation uses the word "agreed", which exhibit 35 does not. The later version constitutes strong evidence, in my view, that Mr. Schweppes thought, on 3 February, that a substantial number of the fuel dealers and agents in Gladstone had made such an agreement as mentioned in his report. However, it should be noted that the prices mentioned in the documents are different from those last mentioned by Mr. Sibley.

16. In cross-examination concerning the alleged agreement, Mr. Sibley was asked:

"There was really no resolution at all, was there?"

To that he replied:

"Only the fact that John decided to ring Carl with
what he thought the service station operators would
do."

It will be noted that that answer may be able to be reconciled with Mr. Schweppes' first note of what Mr. Smith told him, but cannot be reconciled with his formal report.

17. In cross-examination by senior counsel for the fourth respondent, Mr. Sibley said, in effect, that "there would have been general agreeance (sic)" with Mr. Smith's proposal.

18. As will appear in more detail, I do not accept that there was general agreement with any proposal made by Mr. Smith. I think Mr. Schweppes understood Mr. Smith to tell him, in the telephone conversation referred to above, that a number of dealers and agents intended to sell at a common price. However, I am not satisfied that a substantial number of persons said so at the meeting. Whether any did is a question discussed below.

19. The same meeting was deposed to by Mr. E.W. Zelinski, but he, it is common ground, left before its end. According to his version of events, Mr. Smith told the meeting that "we were trying to lift the market, wanted to get the market up to 49.9 and 48.9 respectively and these chaps in the depot were asked 'Would you lift your price?'" The direction of such a question to the controllers of the depots is a common theme throughout much of the evidence about the meeting. The depot operators, in my view, had so acted as to cause dissatisfaction among the retailers. One was apparently selling at retail without the necessary licence to do so and that was an important cause of the calling of the meeting. Both the depot operators were under-cutting the general level of petrol prices in Gladstone. Mr. Zelinski stated that Mr. Ryalls (one of the depot operators) said "they would possibly lift theirs to around 46 to 47.9 but they were not happy to do it". Mr. Zelinski said that just before he (Mr. Zelinski) walked out of the room he said, "I am going to sell at 46.9". In response to specific questions as to the attitudes of Messrs Little, Shulte and Newman, Mr. Zelinski said that each of them agreed to 49.9.

20. The evidence just mentioned is the only evidence that each of Messrs Little, Shulte and Newman specifically agreed to sell at 49.9 cents per litre. There is no other evidence that they did so and, in particular, the other witness called for the applicant, Mr. Sibley, gives no support to the assertion, except as to Mr. Newman - but at a different price. I found Mr. Zelinski not to be a very convincing witness.

21. Mr. Newman was called and firmly denied the allegation against him, just mentioned. Although I was left with considerable uncertainty as to the accuracy of much of the evidence given by other witnesses, I thought Mr. Newman to be a truthful witness and am satisfied, in particular, of the truth of his denial that he entered into a price-fixing agreement. Senior counsel for the applicant relied, as against Mr. Newman, on the fact that the price of the petrol sold by Axpress Pty. Limited, the company of which he is a director, was changed between 3 February 1984 and 4 February 1984, being 49.9 cents per litre on the former date and 48.9 cents per litre on the latter. That fact, however, appears to me to have no weight as against Axpress Pty. Limited and Mr. Newman, because if there were such price-fixing agreement as is alleged, that could have been complied with by simply leaving the price as it was on 3 February. Further, Mr. Newman gave an explanation of the change, namely that the wholesale price had been reduced and I see no reason to reject that.

22. Mr. Schulte gave evidence and said that the discussions started with people asking Carr, a depot operator, why he had dropped his price and why he was selling fuel to the public when not legally entitled to do so. Apart from that, according to Mr. Schulte, there was no mention of price and no suggestion that anyone should sell at a particular price. However, I formed the impression that Mr. Schulte was not overly anxious to give the court the benefit of such recollection of the matter as he had. Mr. Little's evidence was broadly to similar effect, but he added that Mr. Zelinski said that he was going to sell at 46.9 cents and "to hell with all the rest of you". Again, I did not find Mr. Little a particularly convincing witness.

23. From the records of sales produced, it seems clear that Mr. Schulte dropped his price to 45.9 cents on 1 February and Mr. Little dropped his to the same figure on 2 February. That ties in reasonably well with evidence given by Mr. Little, to the effect that he followed Mr. Schulte's prices. Mr. Little's records show that on 3 February his price went up during the day from 45.9 to 49.9 cents. A change during the course of the working day was, according to all the evidence, rather a lot of trouble and I think Mr. Little's price was probably increased on 3 February because of the meeting. However, his records show it as going down again to 45.9 cents on the following day, presumably because Mr. Schulte was selling at that figure.

24. In the end, I am left with a comfortable satisfaction that there was more said about price at the meeting than witnesses such as Messrs Little and Schulte would have me accept. I cannot be satisfied, however, that there was any such arrangement or understanding as is alleged. No doubt one of the purposes of the meeting, at least as far as some of the participants were concerned, was to deal with the question of price-cutting, particularly that engaged in by the depots. It seems to me unlikely, however, that any firm understanding was reached. Those said to have participated in the understanding were all trading in Toolooa Street, Gladstone and there they traded in competition with Mr. Zelinski. He, it is clear, was adamant that he would sell at 46.9 cents. An understanding as to price, not including Mr. Zelinski, which involved other Toolooa Street self-service stations selling significantly above his price would have made little commercial sense. Further, there is enough substantial contrary evidence, from straightforward witnesses such as Mr. Newman mentioned above, and Mr. K.R. Bailey, to make it impossible to have any real confidence that the applicant's allegations are correct.

25. I can see the difficulty under which the applicant labours when trying to proce a case of this sort. It must not be at all easy to persuade witnesses, at least those who propose to stay in the area, to give evidence against their colleagues or former colleagues, but the onus is on the applicant. It must satisfy the Court that there was, if not a series of mutual obligations entered into, at least a definable understanding. While I think it likely that what was said at the meeting gave Mr. Little the impression that he had at least an interest, if not a moral duty, to put his price up, I am left with no clear notion of what it was that put him in that state of mind.

26. Since I am not satisfied that there was any such arrangement or understanding as alleged, between the respondents or any of them, it is not necessary to deal with the case against the fourth respondent, Mobil. However, it seems desirable, in the circumstances, to make findings with respect to that segment of the case. Each of Messrs Sibley and Zelinski swore to conversations with Mr. Schweppes, the Mobil representative, which, if accepted, tended to implicate Mobil in an effort to fix prices. It is not, I think, necessary to set out all the details, but enough to mention one piece of such evidence. Mr. Sibley claimed to have been telephoned on the morning, Friday 3 February 1984, by Mr. Schweppes who asked, "When are you going up in price?" Mr. Sibley says he replied, "When everybody else does." Then, according to Mr. Sibley's evidence, Mr. Schweppes said:

"We have had a gutful of you and the way you
carry on. We have got enough sites in town to
break you. If we have to we will go to 42.9."

There is other evidence suggesting that Mr. Schweppes had foreknowledge of the meeting and, perhaps, helped to promote it.

27. I found Mr. Schweppes to be a rather puzzling witness. On the one hand, his evidence was impressively given, and he seemed not to have a strong motive to mislead me, since he no longer works for Mobil. On the other hand, he admitted having told untruths to the applicant's investigators and that the account of events given to his superior and mentioned above (exhibit 35) was, in at least one respect, falsified. The report said that Mr. Schweppes rang Mr. Zelinski at 11.10 a.m. "to inform him of his new buying price of 47.20 cpl . . . " Mr. Schweppes admitted, in cross-examination by senior counsel for the applicant, that he then informed Mr. Zelinski of no such thing and that the notion that Mr. Zelinski should be told a new buying price emerged from a conversation he had with a Mr. Thomson that afternoon. I am not satisfied, however, that where Mr. Schweppes' recollection differs from that of Messrs Zelinski and Sibley I should accept them rather than Mr. Schweppes. In particular, I am not satisfied that the conversation just mentioned, sworn to by Mr. Sibley, took place.

28. That still leaves the applicant with a case against Mobil on the assumption that (contrary to the finding made above) there was such an arrangement or understanding reached at the meeting as is alleged. That is so because the note, exhibit 34, the relevant part of which is quoted above, is strong evidence that Mr. Schweppes beleived there was a price-fixing arrangement under which self-service sites were to sell at 48.9 cents per litre and it is clear that, shortly after that, he told Mr. Zelinski, who sold as an agent of Mobil, to sell at 48.9 cents per litre. Senior counsel for the applicant argued that the direction to Mr. Zelinski was a clear attempt to implement the agreement which Mr. Schweppes believed to have been made.

29. Between the two events just mentioned - i.e. the Schweppes-Smith phone conversation and the Schweppes-Zelinski conversation - the report, exhibit 34, asserts that another significant event occurred, namely that Mr. Schweppes surveyed the "competition sites" in the vicinity of Mr. Zelinski's site and found that all the sites on Tooloola Street had returned to 48.9 and 49.9 cents per litre. That is inconsistent with the trading records produced by Mr. Schulte but is able to be reconciled with the other trading records tendered. Senior counsel for the applicant argued that the alleged survey of the sites was merely a subterfuge, designed to dispel the impression that Mr. Schweppes' direction to Mr. Zelinski was an implementation of the agreement Mr. Schweppes believed had been made at the meeting. That argument has some force, but I do not accept it. If Mr. Schweppes had, when he prepared these documents, been concerned not to record events in an incriminating way, he could simply have omitted all reference to the report by Mr. Smith of the result of the meeting; so far from doing that, Mr. Schweppes stated in his report to his superior that the "disputing dealers and agents" had "agreed to return to the previously current market price . . . " whereas his rough notes said nothing about any agreement.

30. I think it is true, as senior counsel for the applicant argued, that Mr. Schweppes' report was in some respects so drawn as to give an account of events which would assist Mobil's position, but I do not believe Mr. Schweppes then had in mind the possibility of an accusation of being a party to price-fixing. What he was concerned about was the risk of a litigious dispute with Mr. Zelinski. Although I am not satisfied of the accuracy of Mr. Schweppes' record, or recollection, of the price survey he did before giving the direction to its agent Mr. Zelinski. I think that direction was prompted by the price survey rather than the information from Mr. Smith. In my view, Mr. Schweppes would have insisted that Mr. Zelinski come up to the price others were charging, whether or not he had heard from Mr. Smith. I accept that, as Mr. Schweppes said in evidence, Mobil did not want to lead prices up or down but was content to sell at the generally prevailing price - as indeed it was entitled to do. It was that policy rather than any agreement he thought had been made which, in my belief, Mr. Schweppes sought to implement by giving the direction to Mr. Zelinski.

31. It may be convenient to summarise my principal factual findings.

1. Mr. Schweppes believed, from a conversation with Mr. Smith, that a general understanding had been arrived at with respect to petrol prices, on 3 February 1984.

2. There was in fact no such general understanding, although discussion had taken place on that subject, at a meeting at Mr. Smith's premises.

3. I am positively satisfied that Mr. Newman was no party to any price-fixing arrangement or understanding. As to Messrs Little and Schulte, I am not prepared to find that any such arrangement or understanding as is alleged was made.

4. Mr. Schweppes' direction to Mobil's agent Mr. Zelinski to raise his price was not prompted by the belief mentioned in finding 1., but by Mr. Schweppes' observations as to the prevailing level of prices and his desire to have Mr. Zelinski sell Mobil's petrol at about that level.

32. The application must be dismissed with costs.