Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (No 4) [2006] FCA 21 (31 January 2006)

Last Updated: 31 January 2006

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v

Australian Safeway Stores Pty Limited (No 4)

[2006] FCA 21

TRADE PRACTICES – pecuniary penalties – misuse of market power – price-fixing arrangement – factors relevant to imposition of penalty – whether participation by senior management – application of totality principle where separate but related incidents – whether parent company relevant to capacity to pay – whether trade practices compliance program effective – whether parity with penalties imposed in related decision


Trade Practices Act 1974 (Cth): Pt IV, ss 45(2)(a)(ii), 46(1)(c), 76, 86C


Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1, discussed
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd and Anor [2003] FCAFC 149; (2003) 129 FCR 339, discussed
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076, applied
Australian Competition and Consumer Commission v NW Frozen Foods (1996) ATPR 41-515, applied
Trade Practices Commission v CC (New South Wales) Pty Limited & Ors (1994) ATPR 41-363, cited
Australian Competition and Consumer Commission v D M Faulkner Pty Ltd [2004] FCA 1666, cited
Australian Competition and Consumer Commission v Ferndale Recyclers Pty Ltd [2004] FCA 1597, cited
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301, applied
Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296, cited
Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763, cited
NW Frozen Foods v Australian Competition and Consumer Commission (1996) 71 FCR 285, applied
Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815, applied
Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247, applied
Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd (2002) ATPR 41-851, cited
Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 2; (2003) 127 FCR 170, applied
Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375, cited
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41-562; 75 FCR 238, discussed
Australian Competition and Consumer Commission v McMahon Services Pty Ltd (No 1) (2004) ATPR 42-022, cited
Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) 190 ALR 169, cited
Australian Competition and Consumer Commission v Leahy Petroleum (No 2) (2005) 215 ALR 281, cited
Australian Competition and Consumer Commission v McMahon Services Pty Ltd (2004) ATPR 42-031, applied
Australian Competition and Consumer Commission v SIP Australia Pty Limited (2003) ATPR 41-937, applied
Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532, cited
Australian Competition and Consumer Commission v Rural Press Ltd (2001) ATPR 41-833, cited
Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd No 2 (2002) 201 ALR 618, cited
Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; (2003) 131 FCR 529, cited
Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) (2004) ATPR 41-983, cited
Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59, applied
Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256, cited
McDonald v The Queen (1994) 48 FCR 555, cited
Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993, cited


Thomas, Principles of Sentencing, (2nd ed) (1979) pp 56-57
R G Fox and A Freiberg, Sentencing: State and Federal Law in Victoria, (2nd ed) (1999) pp 229-230













AUSTRALIAN COMPETITION & CONSUMER COMMISSION v AUSTRALIAN SAFEWAY STORES PTY LIMITED & ORS (No 4)

VID 762 of 1996

GOLDBERG J
31 JANUARY 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 762 of 1996

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	AUSTRALIAN SAFEWAY STORES PTY LIMITED (ACN 004 319 939) First Respondent GEORGE WESTON FOODS LIMITED (ACN 008 429 632) Second Respondent MARK JONES Third Respondent BERNIE BROOKES Fourth Respondent
JUDGE:	GOLDBERG J
DATE OF ORDER:	31 JANUARY 2006
WHERE MADE:	MELBOURNE

THE COURT DECLARES THAT:

1. On or about 27 and 28 April 1995 the third respondent was knowingly concerned in making or arriving at the arrangement or understanding between the first respondent and George Weston Foods Limited trading as ‘Tip Top Bakeries’ (‘Tip Top’) whereby Tip Top would sell at its Preston Market stall code C plain wrap bread at $1.50 per loaf and code D plain wrap bread at $1.90 per loaf, being an arrangement or understanding that contained a provision having the purpose, or being likely to have the effect, of substantially lessening competition in contravention of s 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) ("the Act").

THE COURT ORDERS THAT:

2. The first respondent pay a pecuniary penalty of:

(a) $900,000 in respect of its contravention of s 45(2)(a)(ii) of the Act on or about 27 and 28 April 1995.

(b) $1,900,000 in respect of its contravention of s 46(1)(c) of the Act at Albury and Wodonga from 10 May to 14 May 1995.

(c) $2,100,000 in respect of its contravention of s 46(1)(c) of the Act at Frankston from 16 May until 6 July 1994.

(d) $1,900,000 in respect of its contravention of s 46(1)(c) of the Act at Cheltenham from 16 July to 25 July 1994.

(e) $2,100,000 in respect of its contravention of s 46(1)(c) of the Act at Vermont from 16 July to 25 October 1994.

3. The third respondent pay a pecuniary penalty of $50,000 in respect of his knowingly being concerned on or about 27 and 28 April 1995 in making or arriving at the arrangement or understanding between the first respondent and the second respondent in contravention of s 45(2)(a)(ii) of the Act referred to in paragraph 1 of this declaration and order.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 762 of 1996

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	AUSTRALIAN SAFEWAY STORES PTY LIMITED (ACN 004 319 939) First Respondent GEORGE WESTON FOODS LIMITED (ACN 008 429 632) Second Respondent MARK JONES Third Respondent BERNIE BROOKES Fourth Respondent
JUDGE:	GOLDBERG J
DATE:	31 JANUARY 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 On 21 December 2001 I ordered that the application brought by the applicant ("the Commission") against the first respondent ("Safeway") and the third respondent ("Mr Jones") for contraventions of various provisions under Pt IV of the Trade Practices Act 1974 (Cth) ("the Act") be dismissed: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1. On 22 October 2002 I ordered that the Commission pay Safeway and Mr Jones’ costs of and incidental to the application. The Commission appealed to the Full Court of the Federal Court and on 30 June 2003 the Full Court delivered judgment in the appeal, allowing it in part: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd and Anor [2003] FCAFC 149; (2003) 129 FCR 339. On 1 August 2003 the Full Court made orders giving effect to its earlier reasons.

2 The Commission, Safeway and Mr Jones filed applications with the High Court seeking special leave to appeal in respect of the judgment of the Full Court. On 10 September 2004 the High Court refused those applications. Consequently the orders of the Full Court remain in full force and effect.

3 Ten incidents involving allegations of contraventions of the Act had been raised before me. Of those ten incidents the Full Court allowed the appeal in respect of five of them. The Full Court made declarations that there had been five specific contraventions of the Act, ordered that the orders made on 21 December 2001 and 22 October 2002 be set aside and that the proceeding be remitted for further hearing and determination in relation to the imposition of pecuniary penalties in respect of the contraventions declared, injunctive relief, the liability of Mr Jones and the costs of the trial.

4 The Full Court made the following declarations:

"1. Declares that the first respondent by ceasing to acquire, display and sell bread products of Quality Bakers Australia Pty Ltd trading as Buttercup Bakeries (‘Buttercup’) at the first respondent’s two supermarkets in the Karingal Hub Shopping Centre in Frankston:

1.1 from 16 May 1994 until 6 July 1994;

1.2 for the purpose of deterring Buttercup from selling Code C 680 gram plain wrap or generic bread branded ‘Quadara’ to the Quadara store in Ashleigh Street, Frankston (‘the Quadara store’) at a discounted price,

has taken advantage of its substantial degree of market power in the market in Victoria for the supply, on a wholesale basis, of bread to food retailers (‘the wholesale bread market in Victoria’) for the purpose of deterring or preventing Buttercup and the operator of the Quadara store from engaging in competitive conduct in the wholesale bread market in Victoria and the retail bread market in Frankston, respectively, in contravention of s 46(1)(c) of the Trade Practices Act 1974 (Cth) (‘the Act’).

2. Declares that the first respondent by ceasing to acquire, display and sell Buttercup’s bread products at the first respondent’s Cheltenham supermarket at Southland Westfield Shoppingtown:

2.1 from 16 to 25 July 1994;

2.2 for the purpose of deterring Buttercup from selling Code C 680 gram bread branded ‘Black & Gold’ to Cheapa Food Barn at the Cheltenham Market at a discounted price,

has taken advantage of its substantial degree of market power in the wholesale bread market in Victoria for the purpose of deterring or preventing Buttercup and the operator of the Cheltenham Cheapa Food Barn from engaging in competitive conduct in the wholesale bread market in Victoria and the retail bread market in Cheltenham, respectively, in contravention of s 46(1)(c) of the Act.

3. Declares that the first respondent by ceasing to acquire, display and sell Buttercup’s bread products at the first respondent’s Vermont supermarket at Brentford Square shopping centre:

3.1 from 16 July 1994 to 25 October 1994;

3.2 for the purpose of deterring Buttercup from selling Code C 680 gram bread branded ‘Black & Gold’ to Cheapa Food Barn at Brentford Square shopping centre at a discounted price,

has taken advantage of its substantial degree of market power in the wholesale bread market in Victoria for the purpose of deterring or preventing Buttercup and the operator of the Vermont Cheapa Food Barn from engaging in competitive conduct in the wholesale bread market in Victoria and the retail bread market in Vermont, respectively, in contravention of s 46(1)(c) of the Act.

4. Declares that the first respondent by ceasing to acquire, display and sell bread products of George Weston Foods Ltd trading as Tip Top Bakeries (‘Tip Top’):

4.1 from 10 to 14 May 1995 at the first respondent’s Albury and Lavington supermarkets and from 12 to 14 May 1995 at the first respondent’s Wodonga supermarket;

4.2 for the purpose of deterring Tip Top from selling 750 gram bread branded ‘Mighty White’ to Bob’s IGA Festival Supermarket in David Street, Albury (‘Bob’s IGA’) at a discounted price,

has taken advantage of its substantial degree of market power in the wholesale bread market in Victoria for the purpose of deterring or preventing Tip Top and the operator of the Bob’s IGA from engaging in competitive conduct in the wholesale bread market in Victoria and the retail bread market in Albury, respectively, in contravention of s 46(1)(c) of the Act.

5. Declares that the first respondent by its arrangement or understanding with Tip Top made or arrived at on 27 and 28 April 1995 whereby Tip Top would sell at its Preston market stall Code C plain wrap bread at $1.50 per loaf and Code D plain wrap bread at $1.90 per loaf made an arrangement or arrived at an understanding that contained a provision having the purpose, or being likely to have the effect, of substantially lessening competition in contravention of s 45(2)(a)(ii) of the Act."

5 When the remitted matters came on for hearing before me, injunctive relief and costs were no longer in issue. The liability of Mr Jones in respect of the Frankston, Cheltenham, Vermont and Albury incidents ("the four incidents") was not pursued by the Commission. Mr Jones accepted liability under s 76 of the Act in respect of Safeway’s contravention of s 45(2)(a)(ii) of the Act in the Preston Market incident and agreed with the Commission in a joint submission to the Court that $30,000 was an appropriate penalty to be imposed. The Commission and Mr Jones agreed to the Court making the following declaration:

"... that on or about 27 and 28 April 1995 the third respondent was knowingly concerned in making or arriving at the arrangement or understanding between the first respondent and George Weston Foods Limited trading as ‘Tip Top Bakeries’ (‘Tip Top’) whereby Tip Top would sell at its Preston Market stall code C plain wrap bread at $1.50 per loaf and code D plain wrap bread at $1.90 per loaf, being an arrangement or understanding that contained a provision having the purpose, or being likely to have the effect, of substantially lessening competition in contravention of s 45(2)(a)(ii) of the ... Act..."

6 I do not propose to rehearse the factual background to, and findings in respect of, the various incidents or the circumstances in which each of them came about. They are set out in my earlier reasons and in the reasons of the Full Court. I do, however, refer to findings and conclusions of the Full Court which are relevant in the context of the penalties to be imposed.

7 In summary, the majority of the Full Court concluded that in relation to the four incidents involving deletions of bread products at Safeway supermarkets at Frankston, Vermont, Cheltenham and Albury, I had erred in not finding that Safeway had taken advantage of its market power in the wholesale bread market for a proscribed purpose, in contravention of s 46(1)(c) of the Act. The majority of the Full Court reasoned at [333]-[334]:

"[333] ... In each of the four instances with which we are concerned Safeway deleted all or most of the plant baker's products from one of its supermarkets. Its reason for doing so was to induce the plant baker to cease supplying discounted bread to an independent retailer in competition with a Safeway supermarket. As we have explained, there would have been no purpose in Safeway acting in this manner in a competitive market. On the contrary, had Safeway done so it would have inflicted economic harm on itself for no gain. Safeway’s conduct in the four instances was therefore materially facilitated by the existence of its market power even though that same conduct would not have been ‘absolutely impossible’ without that power.

[334] For those reasons, we are satisfied that his Honour was in error in finding that Safeway did not take advantage of its power in the Wholesale Market."

8 It was the unanimous view of the Full Court that in relation to the Preston Market incident I had erred in not finding that Safeway and Tip Top made an arrangement that contained a provision having the purpose or likely to have the effect of substantially lessening competition in a market in contravention of s 45(2)(a)(ii) of the Act. The majority of the Full Court reasoned at [443]-[445]:

"[443] An arrangement or understanding was made or reached between Mr Feldgen and Mr Lovett at the meetings of 27 and 28 April 1995. The making or reaching of that arrangement or understanding was authorised by Mr Jones for Safeway and Mr Gunton for Tip Top. Mr Feldgen and Mr Lovett had the necessary meeting of minds, as did Mr Jones and Mr Gunton. This is not a case, for example, where the Safeway representatives had a mere hope or expectation that Tip Top would act in a particular way. Safeway gave approval, through Mr Feldgen, for the prices to be charged at the Preston Market stall and in return Tip Top was readmitted as a supplier to Safeway Preston.

[444] Although the primary Judge was not satisfied that Mr Feldgen and Mr Jones had the requisite intention to make an arrangement or arrive at an understanding, this finding seems to have been based on his view that Mr Jones had not instructed Mr Feldgen to meet Mr Lovett. In any event, the critical question is whether an arrangement was made or an understanding arrived at between Safeway and Tip Top. On the facts of this case it was.

[445] Given that finding, there was no dispute that a provision of the arrangement or understanding had the purpose or was likely to have the effect of fixing, controlling or maintaining the price for bread supplied by Tip Top, one of the parties to the arrangement or understanding. Accordingly, s 45A(1) of the Act deems the provision, for the purpose of s 45(2), to have the purpose or to be likely to have the effect of substantially lessening competition. It follows that the Commission has made out its case that Safeway contravened s 45(2)(a)(ii) of the Act by making an arrangement or arriving at an understanding having the purpose or likely to have the effect of substantially lessening competition."

9 The Commission seeks orders that Safeway be ordered to pay penalties totalling $15.5 million as follows:

• $3.5 million in respect of each of the four incidents at Frankston, Vermont, Cheltenham and Albury.
• $1.5 million in respect of the Preston Market incident.

Safeway contended that these penalties were grossly excessive.

10 The principles applicable to the imposition of penalties for a contravention of Pt IV of the Act are not in issue.

11 Section 76(1) of the Act provides that:

"If the Court is satisfied that a person...has contravened...a provision of Part IV...the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct".

12 French J identified a further six factors to be taken into account in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 ("TPC v CSR") at 52,152 (commonly known as the "French factors"):

(1) the size of the contravening company;
(2) the degree of power it has, as evidenced by its market share and ease of entry into the market;

(3) the deliberateness of the contravention and the period over which it extended;

(4) whether the contravention arose out of the conduct of senior management or at a lower level;

(5) whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

(6) whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

13 In Australian Competition and Consumer Commission v NW Frozen Foods (1996) ATPR 41-515 at 42,444-42,445, Heerey J considered the following additional three factors (commonly known as the "Heerey factors"):

(1) similar conduct in the past;
(2) financial position;
(3) deterrent effect.
These factors are not exhaustive; other factors may be relevant in a particular case depending upon the issues raised: Trade Practices Commission v CC (New South Wales) Pty Limited & Ors (1994) ATPR 41-363 at 42,723.

14 The French factors and the Heerey factors have been applied in numerous subsequent Federal Court decisions: see, for recent examples, Australian Competition and Consumer Commission v D M Faulkner Pty Ltd [2004] FCA 1666 at [53]; Australian Competition and Consumer Commission v Ferndale Recyclers Pty Ltd [2004] FCA 1597 at [7]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 ("ACCC v Leahy") at [32]–[33].

15 It has been accepted for some considerable time that the principal object of s 76 penalties is deterrence, both specific and general: Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 per Toohey J at 298; TPC v CSR at 52,152; Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 at 40,986; NW Frozen Foods v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 294-295 ("NW Frozen Foods"). In Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815 ("ACCC v ABB No 1"), Finkelstein J said at 42,938:

"If general deterrence is the principal object of imposing a penalty, the number of cases that still come before the court, and the seriousness of the conduct that is involved in some of them, suggests that past penalties are not achieving that object. For a penalty to have the desired effect, it must be imposed at a meaningful level. Most antitrust violations are profitable. Accordingly, the penalty must be at a level that a potentially-offending corporation will see as eliminating any prospect of gain."

More recently in Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247, the Full Court of the Federal Court said at [11]:

"As the cases to which the judge was referred show, the principal, if not the sole, purpose for the imposition of penalties for a contravention of the antitrust provisions in Part IV is deterrence, both specific and general. This rule is so well entrenched that citation of authority is unnecessary. Moreover, as deterrence (especially general deterrence) is the primary purpose lying behind the penalty regime, there inevitably will be cases where the penalty that must be imposed will be higher, perhaps even considerably higher, than the penalty that would otherwise be imposed on a particular offender if one were to have regard only to the circumstances of that offender."

These observations are pertinent in the present circumstances.

16 There has also been some debate as to whether the issue of punishment ought to also be considered: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41-562 at 43,810–43,811; ACCC v ABB No 1 at 42,936. In Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd (2002) ATPR 41-851 at 44,543, the Full Court raised the issue of the dispute in relation to the role of punishment in imposing penalties. The Full Court noted:

"...we see little or indeed no difference between taking into account, in computing the penalty, the deliberate nature of the conduct in question (a matter the relevance of which is not in dispute) and taking into account the fact that the penalty should act as a punishment of the offender."

17 In general terms it may be said that the penalties imposed for contravention of the provisions in Pt IV of the Act should be sufficiently substantial so that the parties on whom the penalties are imposed recognise the seriousness of their conduct and are not disposed to repeat such conduct. This proposition also raises for consideration the size of a contravening company, which has been regarded as a relevant consideration to take into account in determining what is an appropriate penalty to impose.

18 In NW Frozen Foods the majority of the Court observed at 293:

"In TNT (at 40,168), it was pointed out that some other factors which have been regarded as important actually flow from what French J called in CSR Ltd (at 52,152) ‘[t]he primacy of the deterrent purpose in the imposition of penalty’. One of those factors is the size of the corporation involved, since ‘[w]hat would deter a small company might have little effect on a very large one’.
...
As Smithers J emphasised in Stihl Chain Saws (at 17,896), insistence upon the deterrent quality of a penalty should be balanced by insistence that it ‘not be so high as to be oppressive’. Plainly, if deterrence is the object, the penalty should not be greater than is necessary to achieve this object; severity beyond that would be oppression."

19 In Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 2; (2003) 127 FCR 170 ("Schneider v ACCC") Sackville J said at 174-175:

"Secondly, I would not place particular emphasis on the size of Schneider’s Australian business, as such, as an additional factor distinguishing it from WTC and Tyree. Schneider’s size and profitability doubtless explain why it did not dispute its capacity to pay any penalty that might reasonably be expected to be imposed and, to that extent, its size has already been taken into account. As I have said, from the point of view of deterrence, it is the nature of the contravening conduct that is the central determinant in determining an appropriate penalty. The size of a corporation may bear on the assessment of the seriousness of the contravening conduct, as when a large corporation has substantial market power which it uses to intimidate or cajole others to join in contravening conduct."

20 Two further matters need to be taken into account, the totality principle (see Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169 per Burchett J and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41-562 at 43,817) and the parity principle (see Australian Competition and Consumer Commission v McMahon Services Pty Ltd (No 1) (2004) ATPR 42-022 at [84]-[85] ("ACCC v McMahon")). In ACCC v Leahy, I said at [43]:

"When dealing with several respondents whose situation and culpability are not the same, it is inevitable that different penalties will be imposed. Nevertheless it is necessary to bear in mind what is generally referred to as the parity principle. All other things being equal, similar conduct should be deserving of similar penalties. Of course, as the Full Court said in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission ...‘other things are rarely equal where contraventions of the Trade Practices Act are concerned’. It is also desirable to bear in mind the penalties that have been imposed in past cases. A dramatic departure from previous practice might be seen as representing unjustifiable disparity but may also demonstrate that a level or quantum of previous penalties may, now in the present circumstances under consideration, be regarded as inadequate."

21 The Commission submitted that although the penalties sought for Safeway’s contraventions were substantial, the penalties were appropriate having regard to the available maximum and the importance of deterring the abuse of market power that is the essence of s 46. The Commission relied on the observations of Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) 190 ALR 169 at [13]:

"... antitrust legislation is founded on the underlying premise that free competition is essential for the welfare of the state. Conduct that affects the public, such as the anti-competitive behaviour that is outlawed by the Trade Practices Act, can never really be considered as anything other than serious."

and Merkel J on appeal in Schneider v ACCC at 184:

"... it is appropriate to emphasise the need to ensure that penalties are not fixed in sums that do not have adequate regard to the nature and extent of the contravention, the losses caused by the contravention and the need to deter not only the offending parties but also others from engaging in similar conduct."

I agree with these observations.

22 The Commission submitted that large and wealthy corporations such as Safeway should expect high penalties, and that general deterrence is of particular significance as relatively few cases have considered the imposition of penalties for contraventions of s 46 of the Act. A contravention of s 46 of the Act is particularly serious where a substantial degree of market power is taken advantage of by a major and significant corporation in a market such as a market for food, which can have an impact on the purchases of thousands of consumers. More particularly is this so where the market power is exercised for the purpose of deterring competitive conduct by smaller operators who are competing for custom with the larger corporation. An exercise of a substantial degree of market power for the purpose of insulating a corporation from the effects of competition is to be condemned.

23 Safeway submitted that before deterrence can be a relevant factor, it must be found that the circumstances which gave rise to the contraventions merit deterrence. Safeway submitted that:

• the contraventions arose from the actions of officers, who have not been shown to be part of senior management not following policy;

• Safeway’s policy of deleting products of plant bakers ceased in November 1995;
• there was no realistic prospect that such conduct would re-occur nor was there any evidence of recurrence;

• it should be inferred that there was no prospect of similar conduct occurring again.

These submissions fail to take into account the significance of the nature of the contraventions, their distorting effect on the relevant markets and the consequences for consumers who patronised the relevant supermarkets. Further, the four separate incidents of conduct contravening s 46 of the Act occurred over a period of twelve months and the repetition of the conduct over that period of time warrants the application of a specific deterrent component in the penalties.

24 I do not accept Safeway’s submission that because such conduct is unlikely to re-occur, deterrence does not need to be taken into account. Although it may be less likely that after this long and complex proceeding Safeway will again participate in the particular prohibited conduct, it is important to note that contraventions were found against Safeway with respect to five separate incidents, and not just one isolated incident. In any event general deterrence cannot be disregarded especially having regard to Safeway’s size and relative position as a purchaser in the wholesale market and as a seller in the retail food market.

25 The Commission is correct in submitting that even if Safeway is unlikely to participate in similar conduct again, one of the main objectives of penalties is general deterrence. Regardless of any need to deter Safeway itself from again engaging in prohibited conduct, it is imperative to ensure that participants in the business and commercial community are made aware that contraventions of Pt IV of the Act are serious. Any penalties imposed should be significant enough to deter those who may be considering contravening the Act.

26 The Commission submitted that Safeway’s contraventions of s 46 could only be regarded as extremely serious unlawful conduct. The Commission said that there were four separate incidents of contravening conduct which:

• were broad ranging in time and space across Victoria in 1994 and 1995;
• were terms of trade to induce the plant baker to cease supplying discounted bread to an independent retailer in competition with Safeway;

• extended beyond the limited geographical areas where each deletion occurred and the temporal period of each individual deletion.

27 The Commission submitted that the level of penalties for which it contended were appropriate having regard to accepted principles in relation to the fixing of penalties. In particular, the Commission pointed to:

• the Court’s concern for both specific and general deterrence;
• the Court’s disapproval of the nature of the anti-competitive conduct underlying the contraventions, particularly the deliberate nature of the conduct and the real adverse consequences to the targets of it and consumers generally;

• the Court’s disapproval of a corporation of Safeway’s size, financial position and market power having engaged in the contravening conduct;

• the Court’s disapproval of the participation of senior management (Mr Brookes) and an employee of mid-level seniority (Mr Jones);

• the Court’s concern for the ineffectiveness of Safeway’s trade practices compliance program at the time of the contraventions and the lack of a culture of compliance.

28 The Commission noted that the penalties of $3.5 million were less than half of the maximum penalty available in respect of each s 46 contravention and that $1.5 million in respect of Preston Market was only 15% of the maximum.

29 The s 46 contraventions were extremely serious as they involved Safeway taking advantage of its market power for the purpose of deterring or preventing the plant bakers and the independent retailers from engaging in competitive conduct. The seriousness of the contraventions was demonstrated by the observations of the majority of the Full Court that:

"[331] Furthermore, Safeway’s conduct involved not just deletion from the relevant supermarket of bread comparable to that supplied by the plant baker to the independent retailer, but the deletion of most if not all the plant baker’s products and the introduction of a price-fighting bread manufactured by a different plant baker. Safeway’s conduct in the four instances is only rationally explicable as the use of the leverage it had in the market to inflict pain on the plant baker concerned and thereby dissuade it from continuing to supply discounted bread to Safeway’s local competitor.
...
[338] These findings lead to the conclusion that Safeway, in these four instances (Frankston, Cheltenham, Vermont and Albury (May 1995)), took advantage of its power in the Wholesale Market for the purpose of deterring or preventing both the plant bakers and the independent retailers from engaging in competitive conduct, in contravention of s 46(1)(c) of the Act...The raison d’etre of Safeway’s over-deletions and purchase of other price-fighting bread was to put pressure on the plant bakers in order to stop them providing discounted bread to independents (in itself a form of competitive conduct) and, in turn, to prevent or deter the independents from engaging in competitive conduct at the retail level."

30 Safeway accepted that any contravention of the Act was serious but did not agree that the contraventions found against Safeway were ‘extremely serious’ because it had not been shown that the contraventions resulted from the deliberate implementation of a policy devised by senior management knowing that the implementation of the policy was for a purpose of contravening the Act. That may be so, but as the majority of the Full Court pointed out it was the purpose of each deletion which was decisive.

31 The Commission submitted that what was before the Court was not the case of a single isolated contravention. That is correct in the sense that there are five separate contraventions to be considered. However, those contraventions should not be seen as the implementation of a general policy. The Full Court did not regard the policy in respect of which I made findings as decisive of whether Safeway had contravened s 46(1) of the Act. Relevantly, the Full Court said:

"[39] ... The critical question posed by s 46(1) of the Act is whether Safeway took advantage of a substantial degree of power in the relevant market for one of the proscribed purposes. That question requires attention to be focussed on Safeway’s actions and the purpose or purposes with which those actions were carried out. Clearly enough, the fact that a senior officer of Safeway devised a particular policy and had an identifiable purpose in doing so might have an important evidentiary bearing on the purpose or purposes for which Safeway engaged in conduct carried out in conformity with that policy. But whether Safeway’s conduct was or was not by way of implementation of a preexisting policy cannot be decisive of whether it contravened s 46(1). Certainly it is not a necessary precondition to a contravention of s 46(1) that a corporation has implemented a predetermined policy of some kind.
...
[43] ...If it was Safeway’s conduct in the nine incidents that was critical in determining whether it had taken advantage of a substantial degree of market power, Mr Brookes’ intentions in formulating his incompletely implemented policy could hardly be decisive in characterising Safeway’s purpose in undertaking that conduct."

32 The Commission submitted that due to the Full Court’s finding at par [338] (par [29] above), the Full Court acknowledged that the conduct of Safeway was directed to deter bakers generally from engaging in competitive conduct in the way they supplied their independent retail customers. It was submitted that behind the judgment of the Full Court was the recognition that this was the imposition of statewide conduct. I do not consider that the majority of the Full Court put it so broadly.

33 Paragraph [338] of the majority’s judgment in the Full Court deals with the conclusion that Safeway, in four instances, contravened s 46(1)(c). It is in the context of discussing the four incidents that the majority refers to the plant bakers and independent retailers. Paragraphs [331] and [333] of the Full Court’s reasons support the proposition that the Full Court considered that Safeway’s conduct was to deter the particular plant baker and not plant bakers generally:

"[331] ...Safeway’s conduct in the four instances is only rationally explicable as the use of leverage it had in the market to inflict pain on the plant baker concerned and thereby dissuade it from continuing to supply discounted bread to Safeway’s local competitor.
...
[333] ...In each of the four instances with which we are concerned Safeway deleted all or most of the plant baker’s products from one of its supermarkets. Its reason for doing so was to induce the plant baker to cease supplying discounted bread to an independent retailer in competition with a Safeway supermarket."

(emphasis added)

34 The Commission submitted that Safeway had a term of trade for all dealings between it and the three plant bakers, and it was the breach of that term of trade in the four incidents that resulted in a contravention of s 46(1)(c). I do not agree with the Commission’s submission. It is not supported by the reasoning of the majority of the Full Court.

35 The majority of the Full Court does not go so far as to say that this was a term of trade that applied to all dealings with respect to the particular plant bakers but rather says "Safeway can be said to have imposed that term of trade in four of the nine instances." I do not consider that on the basis of that finding of the majority of the Full Court, I can conclude that Safeway imposed such a term of trade generally, and as such, the conduct was statewide. I consider that it is appropriate that I only consider the four incidents in imposing penalties, recognising that they were separate incidents occurring over a twelve month period.

36 The Commission submitted that the contraventions extended beyond the limited geographical areas where each deletion occurred and beyond the temporal period of each individual deletion. The Commission cites pars [322]–[323] of the judgment of the majority of the Full Court in support of these submissions. I do not consider that this passage supports the proposition for which the Commission contends. Each of the four s 46 incidents must be considered as an incident where the effect of Safeway’s conduct impacted on the particular plant bakers which were the object of Safeway’s conduct and on the particular Safeway store from which the plant baker’s products were deleted.

37 Safeway submitted that the contraventions had a limited geographical and temporal effect. That is true in the sense that the effect was not statewide and over a uniform period. Nevertheless the deletions had a distorting effect on the market in which each of the relevant supermarkets operated and they had a significant impact on the relevant plant bakers.

38 The period during which Safeway’s conduct had an effect on the plant bakers in the wholesale market generally varied. The deletions lasted for the following periods:

• Frankston – seven weeks
• Vermont – fourteen and a half weeks
• Cheltenham – nine days
• Albury – four days
• Preston Market – five weeks.

The deletions had an effect not only upon the plant bakers but also upon the opportunity for consumers’ choices to be exercised in the relevant Safeway stores.

39 The Commission submitted that:

• the deletions resulted in losses of sales and income for the deleted plant baker;
• Safeway knew the deletions would cause harm to the plant bakers;
• the deletions had an adverse effect upon consumers’ choice of bread products from the affected Safeway stores.

I accept these submissions; they are supported by the evidence.

40 It is clear that plant bakers suffered economic loss. As the majority of the Full Court found at par [314], each loaf which was not baked and delivered to Safeway and sold to a consumer represented a return that was lost to the baker forever. The majority observed:

"It is important to appreciate that although Safeway was unable to reduce the price at which it purchased bread from the plant bakers, it could reduce the quantity of bread sold by them. By deleting a plant baker’s products from a particular supermarket, Safeway was able to reduce the quantity of products sold by that plant baker. Just as refusal to supply a customer can indicate both the existence and use of market power (as in Queensland Wire), so can a refusal to acquire products from a supplier. Moreover, bread is a staple which is sold and consumed (both in the economic and literal sense) day by day. Each plant baker’s loaf which was not baked and delivered to Safeway and sold to a consumer represented a return which was lost to the plant baker forever. This feature, accentuated by the over-deletions and loss of price-fighting bread sales, would increase the pressure on plant bakers to comply with Safeway’s wishes: see the observations on the significance of perishable commodities in the exercise of monopsonistic power by R D Blair and J L Harrison, above, (at 313-314)."

This passage highlights the serious nature of each of the s 46 contraventions.

41 Conduct in contravention of s 46 is regarded by the Act as inherently anti-competitive. This is supported by the fact that such conduct cannot be authorised under the Act. The general effect of anti-competitive behaviour must be considered in imposing penalties in addition to the particular effect of the relevant transactions.

42 Safeway’s conduct in the s 46 incidents exploited a critical feature of the wholesale bread market, the substantial over-capacity in bread baking. This was known to Safeway through Mr Brookes. This over-capacity enabled Safeway to engage in the contravening conduct which was a deliberate use of its market power.

43 As the majority of the Full Court said at [330]–[331]:

"So in the present case, in a competitive wholesale market without excess capacity, Safeway would obtain no leverage by deleting a particular plant baker’s bread. Safeway did not delete simply for the sake of doing so or because of any problems with quality of product, reliability of supply or other legitimate business considerations. It is clear that in the four instances with which we are concerned, Safeway’s deletion of the plant baker’s products was directed to the plant baker’s conduct in supplying discounted bread to Safeway’s retail competitor. A firm without market power would not have pursued a policy of deletion because to do so would have produced harm for itself without any countervailing benefit. A firm without market power would commercially be compelled to stock the full range of products in order to satisfy consumer demand. The only consequence of the deletion would be the adverse reaction of customers, of which there was ample evidence.
...
Safeway’s conduct in the four instances is only rationally explicable as the use of the leverage it had in the market to inflict pain on the plant baker concerned and thereby dissuade it from continuing to supply discounted bread to Safeway’s local competitor."

44 Although the retail bread market in Victoria was highly competitive at the time of the contravening conduct and it continued to be so notwithstanding Safeway’s conduct, there was an anti-competitive consequence in each of the four s 46 incidents which resulted from misuse of Safeway’s market power.

45 In determining the appropriate level of penalties I take into account, in particular, the following circumstances:

• Safeway had substantial power in the market in Victoria for the supply of bread products on a wholesale basis to food retailers.

• Safeway’s conduct in breaching s 46 was deliberately calculated to restrict competitive conduct. The majority of the Full Court said at [344]:

"What Safeway did was not the sort of thing that happens by accident in a large commercial organisation. As we have discussed, the fact that the deletions had adverse consequences for Safeway strongly suggests that there must have been a rational purpose underlying its conduct. That purpose could only have been to persuade the plant bakers to cease supplying discounted bread to the independent retailers and, in turn, to end discounting by those retailers."

46 The Commission submitted that although Safeway, a wholly owned subsidiary of Woolworths Ltd ("Woolworths"), is a separate legal entity, it is essentially part of the one economic entity that is Woolworths. This was because, among other things, Safeway was considered by Woolworths to be a division of Woolworths. For example, Woolworths’ 2004 Annual Report described its supermarkets division as "trading as Woolworths and Safeway". Accordingly, the Commission submitted that the position of the parent company was relevant to the quantum of penalty having regard to the manner in which Safeway was incorporated into the Woolworths corporate and business structure.

47 In the present circumstances, I consider it of little relevance to the imposition of the penalties to take into account the fact that Safeway is a wholly-owned subsidiary of a major public company. Safeway is a large company in its own right. At the relevant time it operated some 130 supermarkets in Victoria and Albury. It employed approximately 18,000 to 20,000 employees and had some 28,000 product lines and 1,500 suppliers. I adopt and apply the observation of Merkel J in Schneider v ACCC at 181:

"The size of a parent may be of relevance where, for example, the parent bore some responsibility for the subsidiary’s conduct or where it is relevant to the subsidiary’s capacity to meet a substantial pecuniary penalty. However, I do not regard the size of Schneider’s parent company, or of the group of which it forms part, to be a relevant factor in the present case for three reasons. First, it is not suggested that the parent had any involvement in Schneider’s contraventions. Second, Schneider did not put in issue its capacity to pay any penalty that may be imposed. Third, it is clear that Schneider operates a substantial business in Australia in its own right. In 2000 it employed 420 employees and had an annual turnover in excess of $200 million. Since 1996, other than in 2000, it has regularly earned net annual profits before tax well in excess of $18 million. Thus, the present case is not one in which it is necessary to determine the circumstances in which the size of a parent of an offending subsidiary will be relevant to the quantum of the penalty that is appropriate."

48 The relevant fact remains – Safeway is a very large corporation, with a significant presence in the commercial community.

49 The Commission submitted that the involvement of Mr Brookes, merchandise manager for Safeway, in the four s 46 incidents was an exacerbating factor that the Court ought to take into account in imposing penalties. The Commission said that Mr Brookes was directly involved in the Frankston incident as he made the decision to delete.

50 In relation to the incidents at Frankston, Albury and Preston Market, Mr Jones, category manager, was the actor for Safeway who undertook the critical conduct giving rise to the contraventions. Safeway’s proprietary bread category was the direct responsibility of Mr Jones. Whilst the position of category manager was not regarded as part of senior management, it was a position of importance and responsibility, given the tasks for which the category manager was responsible. At the relevant times, Mr Jones was responsible for buying and merchandising the designated products sold by Safeway in Victoria, negotiating promotions, recommending whether new products should be ranged and existing products should be discontinued or deleted, and the marketing issues affecting products in the category such as pricing and shelf management. Mr Jones reported to Mr Brookes, and the line of authority was directly to senior management.

51 It is clear that Mr Jones had the authority to delete products. Although Mr Jones may not be described by Safeway as being in a position of senior management, he was a senior staff member and in a management position in the sense that he had authority to make decisions which impacted significantly on the operations of Safeway in all its supermarkets. Although it may have been Mr Jones’ purpose that was attributed to Safeway with respect to the Frankston incident, Mr Brookes participated in and approved of the decision to delete at that store.

52 There was no finding as to whom on behalf of Safeway directed the deletions in the Cheltenham and Vermont incidents. The Commission submitted that those incidents occurred as part of the practices that had been directly implemented by Mr Brookes and Mr Jones at Frankston in 1994. However, the Full Court said in relation to the Cheltenham and Vermont incidents at [246]:

"The fact that the primary judge could not identify who within Safeway ordered the deletion is of little consequence to Safeway’s position, since it can be readily inferred that it must have been someone with the authority to do so."

53 The significant point in relation to the five incidents is that the particular actor involved was in a position that he or she could bring about a particular result. In those circumstances, it is appropriate that I take into account that persons in management positions, senior or otherwise, participated in the contraventions.

54 I turn to the Preston Market incident. The Full Court held that on the findings made, I erred in concluding that no arrangement or understanding had been made between Safeway and Tip Top. The Full Court found at [443]:

"An arrangement or understanding was made or reached between Mr Feldgen and Mr Lovett at the meetings of 27 and 28 April 1995. The making or reaching of that arrangement or understanding was authorised by Mr Jones for Safeway and Mr Gunton for Tip Top. Mr Feldgen and Mr Lovett had the necessary meeting of minds, as did Mr Jones and Mr Gunton."

55 It follows that Mr Jones for Safeway was directly involved in the breach of s 45 at Preston Market, and that that conduct is attributed to Safeway.

56 As a result of the Preston Market incident consumers paid more for bread at the Preston Market stall and were denied the benefit of competition in relation to branded bread. This incident was inherently anti-competitive, although the extent of the anti-competitive consequence cannot be quantified. That does not alter the significance of the contravention. As Merkel J observed in Australian Competition and Consumer Commission v Leahy Petroleum (No 2) (2005) 215 ALR 281 at [20]:

"Any determination of the actual quantum of the higher retail prices paid for petrol by reason of the understanding would necessarily be speculative and would be unlikely to serve any useful purpose. The important point is that price-fixing arrangements and understandings of the kind made and given effect to in the present case have been treated by the legislature as per se contraventions of the Act because their inherently anti-competitive nature inevitably harms consumers and has a deleterious and pernicious effect on economic efficiency."

57 The observations of Selway J in Australian Competition and Consumer Commission v McMahon Services Pty Ltd (2004) ATPR 42-031 are also pertinent in this context. At [16] Selway J said:

"... [T]he actual market outcome in a particular case is not necessarily an important issue in determining the appropriate penalty, except, perhaps, as a matter of aggravation. In relation to price fixing agreements, the law itself assumes that the purpose and/or the effect of the proscribed behaviour is to "substantially lessen competition": s 45A of the TPA and see Brunt Economic Essays on Australian and New Zealand Competition Law (2003) at 133. Given that assumption, it cannot be a factor in mitigation of a pecuniary penalty for engaging in price fixing that no such purpose or effect occurred in the particular case. If it is true that the uncompetitive purpose and effect did not result in a measurable or ascertainable loss to a particular individual, that is necessarily fortuitous and coincidental. It is not a matter of mitigation. Further, as already noted, the reason for the prohibition is the effect of the behaviour on the overall market, not on a particular transaction. Collusive bidding practices are unacceptable whatever their effect in a particular transaction. Those involved in them must expect significant penalties."

58 With respect to the Preston Market incident, consumers were affected in a true economic sense as the price-fixing arrangement resulted in consumers paying a higher price for bread at the Preston Market stall.

59 The Commission submitted that Safeway did not have any substantial trade practices compliance program in place, and to the extent it had any at all, it was ineffective. The Commission contended that Safeway did not call evidence or tender any contemporaneous documents that showed any substantial or systematic program of compliance at the time of the contraventions.

60 At relevant times Safeway did not have any substantial or systematic compliance program in place. It did not appear that employees at the level of Mr Jones had any significant training in, or understanding of, trade practices law, nor was there a culture of compliance. Mr Jones acknowledged in cross-examination that he never thought that Safeway should not try and influence the prices at which plant bakers should try and sell bread to its customers. He said that it was never an issue that had come to his mind. Yet he was the category manager who dealt with suppliers and made agreements for the supply of products in respect of around 130 supermarkets and in respect of a number of categories of which bread was only one.

61 Mr Brookes only recalled attending two trade practices seminars. Further, the Commission contended that it was significant that Mr Brookes recognised that a consequence of the "policy" was that plant bakers might react against independent retailers.

62 Safeway led evidence that it had a substantial compliance program in place at the time of the contraventions which had been actively implemented. Although the contraventions occurred despite the existence of Safeway’s compliance program, it does not follow that the program was completely ineffective. Mr Jones obviously knew that price-fixing was contrary to the Act, and appreciated the significance of discussing prices.

63 Safeway’s evidence as to its trade practices compliance program and trade practices training, adduced through Mr Gerard Rohl, at relevant times a corporate lawyer employed by Woolworths Ltd, disclosed an ongoing formal trade practices compliance program since 1988. A Compliance Program Manual was prepared and it dealt with, inter alia, price fixing agreements and misuse of market power.

64 However, prior to 1996, trade practices compliance training was only given to senior management and relatively few senior employees. It was only after 1996, after the contraventions had occurred, that an updated compliance program was extended to all levels of management. From 1993 to 1996, save for one memorandum, there appears to have been no development of, or addition to, Woolworths’ or Safeway’s trade practices compliance program until March/April 1996. As Mr Rohl said in his affidavit:

"In April 1996, as a result of consent orders made in relation to legal action taken by the Applicant against Woolworths Limited concerning certain contraventions of Part V of the Trade Practices Act, Woolworths introduced a fresh Trade Practices Compliance Program. At that time, Woolworths acknowledged that its trade practices compliance program needed to include direct training for middle and lower levels of employees, in addition to the senior management to whom training had been provided directly prior to that time. The fresh program was designed to have increased coverage to all management levels, covering in excess of 1,500 employees, including store managers and category managers."

However, Mr Rohl did not address the training or knowledge of Messrs Jones or Brookes since the contraventions.

65 The key points the Court needs to consider are the nature and extent of the program, its effectiveness and whether it permeated through the corporation. It was only in 1996 that an updated compliance program was introduced and training was provided to all levels of management. In circumstances where those persons in management positions would already have been in situations, likely on a daily basis, where knowledge of trade practices was essential I consider that the compliance program was lacking in the period, at the least, up until 1996. Any program that was in existence could certainly not be said to be comprehensive or appropriate for an organisation such as Woolworths/Safeway.

66 It is important to also consider whether any program that did exist was successfully implemented. Of crucial significance in this regard is that the Court is not dealing with one isolated incident in the present case. Five contraventions of the Act have been found. That alone is indicative that any compliance program in place had not permeated through the organisation.

67 A more comprehensive compliance program is presently in place and has been in place for some time. This is why the Commission does not seek an injunction or a non-punitive order under s 86C of the Act. However, the present existence of a comprehensive program does not negate the fact that an inadequate program was in place at the time of the contraventions.

68 It is appropriate that the Court take into account and allow a discount on penalty, where appropriate, where a party has admitted the contraventions instead of forcing the Commission to engage in lengthy litigation. In the present case Safeway contested every legal and factual issue. This does not mean that a more significant penalty is to be imposed in respect of the established contraventions. Rather it means that a discount on penalty, otherwise available, is not available.

69 Safeway submitted that it should not be penalised more severely than the total penalties imposed on George Weston Foods Limited ("Tip Top") in this proceeding: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238. I reject that submission. The only penalty imposed on Tip Top that could be relevant to any penalties imposed on Safeway is the contravention of s 45 at Preston Market. Tip Top’s other contraventions were for contraventions of s 48 of the Act. There were no allegations of breach of s 46 as against Tip Top. It would be plainly wrong to compare penalties in circumstances where the contraventions relate to different sections of the Act and different types of conduct.

70 Tip Top was ordered to pay $300,000 in respect of the making of the price-fixing agreement and $450,000 in respect of the implementation of it. However, Safeway’s contravention was substantially more serious than Tip Top, given that it was Safeway’s conduct which brought about the events which led to the contravening conduct.

71 Safeway identified nine matters which it submitted were significant when assessing the penalties against Tip Top:

• the contraventions were brought about by senior people in the Victorian division of Tip Top;

• none of the senior officers at Tip Top acted as a check or control on the others involved;

• the contraventions did not occur as result of one Tip Top officer acting on a frolic of his own;

• Tip Top operated a compliance program which made clear that the contraventions were strictly prohibited and could be the subject of severe penalties, and the program was found to be ineffective and was ignored or disregarded;

• it was because the compliance program was disregarded by senior officers that a significant deterrent element was required;

• the size of George Weston Foods Ltd (Tip Top) was significant as its commercial activity permeated the commercial and consumer life of the public;

• Tip Top’s conduct in resale price maintenance was engaged in with a conscious appreciation that it was intended to ensure that the discounting of bread by retailers was discouraged or prevented, and was aimed directly towards small businesses;

• Tip Top’s conduct was deliberate and systematic and engaged in for commercial reasons; Tip Top (on the agreed facts) anticipated Safeway’s reaction and did not seek to resist Safeway; and

• with respect to the Preston market incident, the contravention of s 45 was (on the agreed facts) admitted and the agreement on prices was reached at senior management level.

Although these matters were particularly relevant to the fixing of penalties against Tip Top there are many points of difference between Tip Top’s contraventions and Safeway’s contraventions and their respective circumstances which render comparison of little value.

72 In considering the parity principle, the remarks of Burchett and Kiefel JJ in NW Frozen Foods at 295 are apposite:

"A hallmark of justice is equality before the law, and, other things being equal, corporations guilty of similar contraventions, should incur similar penalties: Trade Practices Commission v Axive Pty Ltd (at 42,795). There should not be such an inequality as would suggest that the treatment meted out has not been even-handed: cf the criminal case Lowe v The Queen [1984] HCA 46; (1984) 154 CLR 606. However, other things are rarely equal where contraventions of the Trade Practices Act are concerned. In the present case, differing circumstances, size, market power and responsibility for the contraventions, as well as other factors, complicate any attempt to compare the penalties imposed on the appellant with those imposed on the other corporations.

Another form of comparison is not appropriate. The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case."

These observations are applicable in the present circumstances.

73 I also draw in aid the approach I took in Australian Competition and Consumer Commission v SIP Australia Pty Limited (2003) ATPR 41-937 at [57]-[58]:

"There is no basis for considering that there should be any parity with, or relationship between, the penalties imposed upon Baker Bros and its two directors and the penalties to be imposed upon SIP and Mr Ippaso. In the present circumstances there are significant differences between the position of Baker Bros and its directors on the one hand and SIP and Mr Ippaso on the other. In particular, Baker Bros admitted its contraventions at a very early stage of the proceeding, as did its directors in relation to their participation in those contraventions. Baker Bros was a much smaller company than SIP by reference to factors such as financial resources and commercial resources generally and SIP’s market share between 1994 and 1998 and its turnover were significantly greater than Baker Bros’ turnover. Further, Baker Bros and its two directors actively co-operated with the Commission in finalising the case against them and assisting it in prosecuting its case against SIP and Mr Ippaso. Although SIP and Mr Ippaso co-operated with the Commission when s 155 notices were served on them, they contested the proceeding. They are not to be penalised for so doing but they are not entitled to any discount in respect of co-operating with the Commission so as to obviate the necessity for a trial. Further, although Baker Bros committed the contraventions, it did so only after significant commercial pressure was placed upon Messrs Baker by Mr Ippaso. The role played by Mr Ippaso and SIP in procuring and implementing the March 1994 agreement was significantly different in that it was the initiating factor and the factor which drove the negotiations which culminated in the agreement. This difference warrants SIP and Mr Ippaso being given significantly and substantially greater penalties than Baker Bros and their directors. Mr Ippaso’s culpability is significantly greater than that of the two directors of Baker Bros.

I am therefore satisfied that a more substantial penalty should be imposed upon SIP and Mr Ippaso than was imposed upon Baker Bros and Messrs Baker."

74 There are significant differences between the position of Tip Top and the position of Safeway. On one view comparing their positions is akin to comparing apples with oranges. In particular, Tip Top admitted the contraventions at an early stage and co-operated with the Commission and so became entitled to a significant discount in the penalties to be imposed. Further, the penalties imposed upon Tip Top were based on an agreed statement of facts, which were not tested by cross-examination. It is inappropriate to use those facts, which were agreed, as relevant to Safeway’s position in this penalty hearing.

75 The allegations against Tip Top were contraventions of ss 45 and 48, and not s 46. The contraventions differed in fundamental ways:

• Tip Top’s contraventions did not involve the exercise of substantial market power, whereas it was a fundamental element of Safeway’s four s 46 incidents that it both had, and took advantage of, market power in order to deter or prevent competitive conduct;

• Tip Top’s conduct was a response to the deletion of its products by Safeway. In the four incidents, Safeway’s purpose was to deter or prevent supply, whereas Tip Top did not have such a purpose.

76 In a number of respects Safeway’s conduct was significantly more serious and calls for substantially higher penalties than those imposed on Tip Top. For example:

• Safeway had substantial market power and took advantage of it, whereas there was no analogous finding or agreed fact in relation to Tip Top;

• the Court imposed penalties on the basis that it was a concern about Safeway reprisals which motivated the Tip Top officers to commit the contraventions;

• the effect of Safeway’s conduct was qualitatively different and more serious given Safeway’s over-deletions and its contravention of s 45 where a large number of bread products were not available for sale for the period of the deletions.

77 Further, the significance of a number of the Tip Top matters raised by Safeway is limited by the following factors:

• although a category manager is not regarded as senior management, it is still a position of importance and responsibility within Safeway;

• there was participation by Mr Brookes in the Frankston incident;

• the purpose of Safeway in the four incidents was found to be to deter and prevent competitive conduct;

• Tip Top admitted the contraventions and co-operated with the Commission at an early stage; and

• it is erroneous to say that the adverse effect of Tip Top’s conduct was greater than that of Safeway’s conduct.

For the reasons I have set out above, I do not accept the submission that the penalties to be imposed on Safeway ought not exceed those imposed on Tip Top.

78 The Commission submitted that having regard to the authorities a high penalty is generally appropriate for contraventions of s 46. The Commission referred to the cases of Trade Practices Commission v Carlton United Breweries Ltd (1990) 24 FCR 532, TPC v CSR, Australian Competition and Consumer Commission v Rural Press Ltd (2001) ATPR 41-833, Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd No 2 (2002) 201 ALR 618 (and on appeal: Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; (2003) 131 FCR 529) and Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) (2004) ATPR 41-983 ("ACCC v Fila") in support.

79 Safeway submitted that if the penalties sought by the Commission are imposed, such penalties would be in stark contrast to those imposed in the ACCC v Fila decision, given that the contraventions in that case were more damaging, intentional, sustained and widespread. In ACCC v Leahy I said at [43]:

"... All other things being equal, similar conduct should be deserving of similar penalties...It is also desirable to bear in mind the penalties that have been imposed in past cases. A dramatic departure from previous practice might be seen as representing unjustifiable disparity but may also demonstrate that a level or quantum of previous penalties may, now in the present circumstances under consideration, be regarded as inadequate".

Little attention has been paid in recent times to the level or quantum of penalty appropriate for contraventions of s 46 of the Act.

80 There are several difficulties in the application of the parity principle. The first is that all of the authorities referred to by the parties differ in some way, and in some instances many ways from the present circumstances. I do not consider that it is useful to use any one case as a determinant of the quantum of penalty for another.

81 Secondly, a number of the authorities referred to were decided when the maximum penalty for corporations for contraventions of ss 45 and 46 was $250,000. This is in contrast to the maximum penalty of $10 million that is now available. If an appropriate case were identified, the question arises as to how one compares a penalty that was imposed at a time when the maximum penalty was different. The Commission approached the issue on a percentage basis, and identified what percentage of the maximum penalty was imposed. I doubt that this is the correct approach, as the Court is not engaged in a mathematical exercise in which precise calculations are derived from specified or identified integers. Rather the Court is engaged in a weighing and balancing exercise.

82 The "totality" principle requires the Court, after determining an appropriate sentence or penalty for specific offences or contraventions in accordance with proper principles, to review the total of the sentences or penalties and consider "whether the aggregate is ‘just and appropriate’": Mill v The Queen [1988] HCA 70; (1988) 166 CLR 59 at 63, approving of the description of the totality principle in Thomas, Principles of Sentencing, (2nd ed) (1979) pp 56-57. The totality principle finds its genesis in the criminal law but it has also been applied in the context of fixing penalties for contravention of the Act: Trade Practices Commission v Allied Mills Industries Pty Ltd (1981) 37 ALR 256 at 258; ACCC v McMahon at [90]. However, an application of the totality principle in the present circumstances must take into account, and make an allowance for the fact, that there are a number of contraventions of the Act which did not arise out of one, or a single, plan, arrangement, proposal or sequence of conduct. It should also be recognised that one of the explanations for the application of the totality principle is that:

"...if the totality of the prisoner’s liability to incarceration produces figures that crush any hope of reformation and any reasonable expectation of a useful life after release, the sentences must be made concurrent or partially concurrent with each other to avoid disproportion, given the finite length of human lives": R G Fox and A Freiberg, Sentencing: State and Federal Law in Victoria, (2nd ed) (1999) pp 229-230.

This rationale has little application in the context of the determination of the appropriate level of penalties for contraventions of Pt IV of the Act and in particular, in relation to large companies with very substantial financial resources. This is not to say that the determination of the appropriate penalties should be disproportionate to the severity and significance of the contraventions established. The total of penalties fixed for separate and discrete contraventions of Pt IV of the Act should not be disproportionate to the severity and significance of the various contraventions which have been established. Nevertheless, it must be remembered that there are separate and discrete contraventions not linked in point of time or causation.

83 In having regard to all of the above factors, I have nevertheless borne in mind the totality principle. That is, I have ensured that having determined an appropriate penalty for each contravention, I have, as a check considered whether the aggregate is appropriate for the various acts of contravening conduct involved: McDonald v The Queen (1994) 48 FCR 555 and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) ATPR 41-562 at 43,817.

Penalties imposed

84 Having regard to all of the above circumstances, I am of the view that Safeway’s conduct does not warrant the penalties sought by the Commission. I do not, however, accept Safeway’s submission that the penalties to be imposed ought to be no greater than those imposed upon Tip Top. Having regard to all of the factors explored above, and having particular regard to the seriousness, deliberateness, and recurring nature of the four s 46 contraventions and their effect on the competitive process, and the relevant periods of deletion of bread products, I consider that the penalties imposed on Safeway ought to be substantial and reflective of the need, in particular, for general deterrence. In those circumstances I have determined that the appropriate penalties to be imposed are as follows:

• $1.9 million in respect of the s 46(1)(c) incident at Albury. In this incident the period of deletion was four days;
• $2.1 million for the s 46(1)(c) incident at Frankston. In this incident there was participation of more senior management than in the other three s 46(1)(c) incidents, namely Mr Brookes, and the period of the deletion was seven weeks;
• $1.9 million in respect of the s 46(1)(c) incident at Cheltenham. In this incident the period of deletion was nine days;
• $2.1 million in respect of the s 46(1)(c) incident at Vermont. In this incident the period of deletion was fourteen and a half weeks;
• $900,000 for the Preston Market incident.

Mr Jones

85 The Commission and Mr Jones jointly submitted that Mr Jones should be ordered to pay a penalty of $30,000 for the Preston market incident. This submission was made on the basis that Mr Jones accepted liability for the Preston market incident, and the Commission did not pursue Mr Jones in relation to Safeway’s contraventions of s 46.

86 The joint submission of the Commission and Mr Jones was, in summary:

• the object of deterrence, both specific and general, will be achieved, without being so high as to be oppressive;

• on the Full Court’s findings, Mr Jones’ conduct at Preston market was an isolated occurrence in which he was found to have had a meeting of minds with Mr Gunton and authorised Mr Feldgen to make the price-fixing arrangement;

• Mr Jones gained nothing personally from the conduct in question;

• whilst a category manager is not regarded as part of senior management, it is still a position of some importance and responsibility;

• Mr Jones suffers from diabetes and high blood pressure and has been subject to the stress and uncertainty of this litigation for ten years;

• Mr Jones’ conduct was deliberate, not inadvertent; and

• a penalty of $30,000 conforms with the parity principle, having regard to relevant cases.

87 The Commission and Mr Jones correctly point out that imposing penalties pursuant to s 76 of the Act is a matter for the Court. When a court is presented with an agreed penalty, the proper task is to determine whether the proposed penalty comes within the permissible range: NW Frozen Foods at 290-291 per Burchett and Kiefel JJ and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993 per Branson, Sackville and Gyles JJ at 48,627.

88 I have considered whether it is appropriate to give Mr Jones any discount in penalty by virtue of his admission of the contravention at Preston market. Once the Full Court made its findings with respect to Mr Jones’ role in the Preston market incident, Mr Jones had little option but to admit liability. In those circumstances, it cannot be said that Mr Jones’ admission has saved any substantial amount of court time.

89 There was no evidence before me as to Mr Jones’ financial position. Accordingly I am unable to take into account the ability of Mr Jones to pay any particular penalty.

90 I do however consider it relevant for specific deterrence that Mr Jones has been subject to these proceedings for ten years. I have little doubt that the experience will act as a deterrent for Mr Jones in engaging in similar conduct in the future. I must also, however, consider the element of general deterrence. In ACCC v Leahy I said at [87]:

"It should not be thought that because a middle or lower management level employee is proceeded against for being involved in a contravention of a Pt IV provision, that the penalty will bear a relativity to the employee’s financial resources and that a penalty appropriate having regard to the seriousness of the contravention and the need for a general deterrence component to be included will not be imposed."

91 I consider that $30,000 is too light a penalty to impose in the circumstances. The commercial community needs to be aware that persons in management positions, whether they are senior management positions or middle management positions, must observe their obligations with respect to the Act. Mr Jones was in a position of authority and responsibility. His conduct was deliberate and serious. In those circumstances, and having considered all other relevant factors, I consider that the proposed penalty of $30,000 is not within the permissible range. I consider that the lower end of the permissible range is no less than $50,000 and in all the circumstances I consider that a penalty of $50,000 should be imposed on Mr Jones.

I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate:
Dated: 31 January 2006

Counsel for the Applicant:	Mr J I Fajgenbaum QC, Mr R Brett QC & Mr D Star
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the First and Third Respondents:	Mr R M Smith S.C. & Mr A I Tonking
Solicitor for the First and Third Respondents:	Clayton Utz
Date of Hearing:	6 June 2005
Date of Judgment:	31 January 2006