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Australian Competition & Consumer Commission v Roche Vitamins Australia Pty Ltd [2001] FCA 150 (28 February 2001)

Last Updated: 28 February 2001

FEDERAL COURT OF AUSTRALIA

Australian Competition & Consumer Commission v Roche Vitamins Australia Pty Ltd [2001] FCA 150

TRADE PRACTICES - civil penalties for contravention of Part IV of Trade Practices Act 1974 (Cth) - anti-competitive arrangements made by overseas parent companies implemented in Australia by their Australian subsidiaries - factors relevant to level of civil penalty appropriate to be imposed.

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v ROCHE VITAMINS AUSTRALIA PTY LIMITED (ACN 000 991 793)

N 1009 OF 2000

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BASF AUSTRALIA LIMITED (ACN 008 437 867)

N 1140 OF 2000

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v AVENTIS ANIMAL NUTRITION PTY LIMITED (FORMERLY KNOWN AS RHONE-POULENC ANIMAL NUTRITION PTY LIMITED) (ACN 009 718 245)

N 1175 OF 2000

LINDGREN J

28 FEBRUARY 2001

SYDNEY (Delivered by video-link in Perth)

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1009 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	ROCHE VITAMINS AUSTRALIA PTY LIMITED (ACN 000 991 793) RESPONDENT
JUDGE:	LINDGREN J
DATE OF ORDER:	28 FEBRUARY 2001
WHERE MADE:	SYDNEY (Delivered by video-link in Perth)

THE COURT DECLARES THAT:

1. The respondent, in making and giving effect to the arrangements referred to in paragraphs 27 and 28 of the Statement of Agreed Facts filed in the proceeding, contravened section 45 of the Trade Practices Act 1974 (Cth).

THE COURT FINDS THAT:

2. For the purposes of section 83 of the Trade Practices Act 1974 (Cth), the relevant facts in the proceeding are those set out in the Statement of Agreed Facts filed in the proceeding.

THE COURT ORDERS BY CONSENT THAT:

3. The respondent (whether by its directors, servants, agents or otherwise) be restrained for a period of four years from:

(a) making or arriving at;

(b) giving effect to; or

any contract, arrangement or understanding between manufacturers or suppliers of vitamins and other nutritional additives used in animal feeds and of pre-mix containing such vitamins and additives ("animal vitamins and pre-mix") that contains a provision that has:

(d) the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of:

(i) the prices of tenders for animal vitamins and pre-mix submitted by such manufacturers or suppliers in Australia; or

(ii) the prices otherwise charged by such manufacturers or suppliers for animal vitamins and pre-mix in Australia;

(e) the purpose of preventing, restricting or limiting the supply of animal vitamins and pre-mix to particular purchasers or potential purchasers of such products in Australia, including by allocating to particular manufacturers or suppliers of such products the business, either wholly or in part, of supplying the products to particular purchasers of the products in Australia.

4. The respondent (whether by its directors, servants, agents or otherwise) be restrained for a period of four years from organising, attending or otherwise participating in, any meeting of representatives of manufacturers or suppliers of animal vitamins and pre-mix (being competitors of the respondent or a related corporation of the respondent) or any meeting attended by such representatives, being a meeting held for the purpose, or for purposes that include the substantial purpose of:

(a) fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of:

(i) the prices of tenders for animal vitamins and pre-mix submitted by such manufacturers or suppliers in Australia; or

(ii) the prices otherwise charged by such suppliers for animal vitamins and pre-mix in Australia;

(b) allocating to particular manufacturers or suppliers of animal vitamins and pre-mix the business, whether wholly or in part, of supplying such products to particular purchasers of the products in Australia.

THE COURT ORDERS THAT:

5. The respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Trade Practices Act 1974 (Cth) in the sum of $15,000,000 within 30 days of this order.

6. The respondent pay the applicant's costs in the proceeding in the amount of $65,000 as agreed between the applicant and the respondent, within 30 days of this order.

THE COURT NOTES THAT:

7. The respondent undertakes to the Court that the respondent will, as soon as is practicable:

(a) comprehensively review and upgrade its current Trade Practices Compliance Program; and

(b) use its best endeavours to ensure that the upgraded Program conforms to the Australian Standard, AS 3806-1998.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1140 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	BASF AUSTRALIA LIMITED (ACN 008 437 867) RESPONDENT
JUDGE:	LINDGREN J
DATE OF ORDER:	28 FEBRUARY 2001
WHERE MADE:	SYDNEY (Delivered by video-link in Perth)

THE COURT DECLARES THAT:

1. The respondent, in making and giving effect to the arrangements referred to in paragraphs 23, 24, 28 and 29 of the Statement of Agreed Facts filed in the proceeding, contravened section 45 of the Trade Practices Act 1974 (Cth).

THE COURT FINDS THAT:

2. For the purposes of section 83 of the Trade Practices Act 1974 (Cth), the relevant facts in the proceeding in relation to the respondent are those set out in the Statement of Agreed Facts filed in the proceeding.

THE COURT ORDERS BY CONSENT THAT:

3. The respondent (whether by its directors, servants, agents or otherwise) be restrained for a period of four years from:

(a) making or arriving at;

(b) giving effect to; or

(d) the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of:

(i) the prices of tenders for animal vitamins and pre-mix submitted by such manufacturers or suppliers in Australia; or

(ii) the prices otherwise charged by such manufacturers or suppliers for animal vitamins and pre-mix in Australia;

(a) fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of:

(i) the prices of tenders for animal vitamins and pre-mix submitted by such manufacturers or suppliers in Australia; or

(ii) the prices otherwise charged by such suppliers for animal vitamins and pre-mix in Australia;

THE COURT ORDERS THAT:

5. The respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Trade Practices Act 1974 (Cth) in the sum of $7,500,000 within 30 days of this order.

6. The respondent pay the applicant's costs in the proceeding in the amount of $65,000 as agreed between the applicant and the respondent, within 30 days of this order.

THE COURT NOTES THAT:

7. The respondent undertakes to the Court that the respondent will, as soon as is practicable use its best endeavours to ensure that its current Trade Practices Compliance Program conforms to the Australian Standard, AS 3806-1998.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1175 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	AVENTIS ANIMAL NUTRITION PTY LIMITED (FORMERLY KNOWN AS RHONE-POULENC ANIMAL NUTRITION PTY LIMITED) (ACN 009 718 245) RESPONDENT
JUDGE:	LINDGREN J
DATE OF ORDER:	28 FEBRUARY 2001
WHERE MADE:	SYDNEY (Delivered by video-link in Perth)

THE COURT DECLARES THAT:

1. The respondent, in making and giving effect to the arrangements referred to in paragraph 16 of the Statement of Agreed Facts filed in the proceeding, contravened section 45 of the Trade Practices Act 1974 (Cth).

THE COURT FINDS THAT:

2. For the purposes of section 83 of the Trade Practices Act 1974 (Cth), the relevant facts in the proceeding are those set out in the Statement of Agreed Facts filed in the proceeding.

THE COURT ORDERS BY CONSENT THAT:

3. The respondent (whether by its directors, servants, agents or otherwise) be restrained for a period of four years from:

(a) making or arriving at;

(b) giving effect to; or

(d) the purpose, or has or is likely to have the effect, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of the prices charged by such manufacturers or suppliers for animal vitamins and pre-mix in Australia;

(a) fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of the prices charged by such manufacturers or suppliers for animal vitamins and pre-mix in Australia;

(b) preventing, restricting or limiting the supply of animal vitamins and pre-mix to particular purchasers or potential purchasers of such products in Australia, including by allocating to particular manufacturers or suppliers of such products the business, whether wholly or in part, of supplying such products to particular purchasers of the products in Australia.

THE COURT ORDERS THAT:

5. The respondent pay to the Commonwealth of Australia a pecuniary penalty pursuant to section 76 of the Trade Practices Act 1974 (Cth) in the sum of $3.5 million within 30 days of this order.

6. The respondent pay the applicant's costs in the proceeding in the amount of $65,000 as agreed between the applicant and the respondent, within 30 days of this order.

THE COURT NOTES THAT:

7. The respondent has comprehensively reviewed and upgraded its Trade Practices Compliance Program by conducting training for its staff in or about July 2000.

8. The respondent undertakes to the Court that the respondent will, as soon as is practicable, use its best endeavours to ensure that its current Trade Practices Compliance Program conforms to the Australian Standard, AS 3806-1998.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1009 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	ROCHE VITAMINS AUSTRALIA PTY LIMITED (ACN 000 991 793) RESPONDENT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1140 OF 2000

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION APPLICANT
AND:	BASF AUSTRALIA LIMITED (ACN 008 437 867) RESPONDENT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1175 OF 2000

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

APPLICANT

AND:

AVENTIS ANIMAL NUTRITION PTY LIMITED (FORMERLY KNOWN AS RHONE-POULENC ANIMAL NUTRITION PTY LIMITED) (ACN 009 718 245)

RESPONDENT

JUDGE:	LINDGREN J
DATE:	28 FEBRUARY 2001
PLACE:	SYDNEY (Delivered by video-link in Perth)

REASONS FOR JUDGMENT

INTRODUCTION

1 I heard these three proceedings together. Although the evidence in each was not evidence in either of the others, it is convenient to deliver these reasons for judgment in respect of each of the three.

2 The applicant ("the Commission") seeks the imposition of penalties under s 76 of the Trade Practices Act 1974 (Cth) ("the TP Act") and other relief in relation to alleged price fixing and market sharing arrangements or understandings to which the three respondents were parties in contravention of s 45 of the TP Act. The Court has jurisdiction to hear and determine the applications by reason of s 86 of that Act.

3 In each proceeding there is a "Statement of Agreed Facts and Admission of Contraventions by the Respondent", joint submissions and short minutes of consent orders. It is clear, as the parties accept, that it is a matter for the Court what level of penalty should be imposed and indeed what other relief should be granted.

4 For reasons that will appear below, I will call the first two documents "the Principal Statement" and "the Principal Submission" respectively.

5 The material under the following heading, "Factual Background," is based on the Principal Statement in each proceeding. In each case, there is annexed to that document one or more "Confidential Annexures" containing financial and market share figures relating to the particular respondent. I made "confidentiality orders" in relation to those documents.

FACTUAL BACKGROUND

Summary of the Contravening Conduct

6 The anti-competitive conduct affected the supply of animal vitamins A and E (and pre-mix containing these vitamins) in Australia by the respondents, Roche Vitamins Australia Pty Ltd ("RVA"), BASF Australia Ltd ("BASFA") and Aventis Animal Nutrition Pty Ltd (formerly known as Rhone-Poulenc Animal Nutrition Pty Ltd ("AANA"). The conduct derived from arrangements entered into overseas between F. Hoffmann-La Roche Limited ("FHLR"), an affiliate of RVA, BASF Aktiengesellschaft, a related corporation of BASFA, and Aventis Animal Nutrition SA ("AANSA") (formerly known as Rhone-Poulenc Animal Nutrition SA), an affiliate of AANA ("the Overseas Arrangements"). The Overseas Arrangements were entered into relevantly for the purpose of the sharing of market and fixing of prices for the supply of animal vitamins A and E in Australia and elsewhere. The Overseas Arrangements continued in part until early 1999. Animal vitamins A and E (and pre-mix containing those vitamins) were supplied in Australia by BASFA, RVA and AANA in accordance with ancillary arrangements ("the Australian Arrangements") made by those companies to reflect the Overseas Arrangements. RVA and BASFA participated in the Australian Arrangements from August - October 1994 until mid 1998, a period of some four years, whereas AANA did so from August - October 1994 only up to and including 1996, a period of a little over two years. That is, those periods were the relevant periods of contravening conduct in Australia for each of RVA, BASFA and AANA for the purposes of section 76 of the TP Act.

The Relevant Parties

The Roche Group

7 F. Hoffmann-La Roche Limited ("Roche") is a corporation organised and existing under the laws of Switzerland and is a wholly owned subsidiary of Roche Holding Limited, a public listed corporation also organised under Swiss law. Roche has responsibility for supervising and coordinating the operations of corporate members of the Roche Group, including RVA, carrying on business in various parts of the world as a manufacturer and supplier of animal vitamins and of additives (including such vitamins) for animal pre-mix.

8 RVA is a trading corporation formed under the laws of, and carrying on business in, Australia and subject to the provisions of the TP Act. RVA is a wholly owned subsidiary of Roche Finance Limited, which, in turn, is a wholly owned subsidiary of Roche Holding Limited. RVA imports, packages and supplies animal vitamins in Australia. RVA also manufactures and supplies pre-mixes containing animal vitamins for such foods and stock feeds.

The BASF Group

9 BASF Aktiengesellschaft ("BASF AG") is a public company organised under the laws of the Federal Republic of Germany. The BASF group comprises BASF AG and over 100 major companies in which BASF AG has a direct or indirect shareholding of at least 50 per cent. Throughout the relevant period, BASF AG, among other commercial activities, manufactured and supplied animal vitamins in various parts of the world.

10 BASFA is an unlisted Australian public company and is a wholly owned subsidiary of BASF AG. Throughout the relevant period, BASFA, among other commercial activities, sold animal vitamins in "straight" and pre-mix form in Australia, purchasing the vitamins from BASF AG and from other companies within the BASF group.

The Aventis Group

11 Aventis Animal Nutrition S.A. (formerly known as Rhone-Poulenc Animal Nutrition S.A.) ("AAN SA") is a société anonyme organised under the laws of France. AAN SA is indirectly wholly owned by Aventis S.A. (formerly known as Rhone-Poulenc S.A.) ("ASA"). AAN SA manufactures and supplies animal vitamins A and E around the world, including in Australia.

12 Like RVA and BASFA, AANA is also an Australian trading corporation. Throughout the relevant period, AANA was a wholly owned subsidiary of Rhone-Poulenc Australia Holdings Pty Limited, which, in turn, was indirectly wholly owned by ASA. AANA, among other commercial activities, also supplies animal vitamins in Australia, in both straight and pre-mix forms.

Animal vitamins and supply of animal vitamins in Australia

13 Animal vitamins are added to animal feeds to enhance the efficacy of the feeds. For some animal feed applications, the vitamins are distributed as part of a "pre-mix", that is, a specific formulation of animal vitamins and other nutritional additives supplied in a vegetable or other carrier.

14 During the relevant period

* Roche, BASF AG and AAN SA competed with each other in many parts of the world for the supply of animal vitamins to manufacturers of animal feeds and others in a number of countries including Australia; and

* RVA, BASFA and AANA competed with each other for the supply of animal vitamins to manufacturers of animal feeds and others in Australia.

15 RVA, BASFA and AANA do not manufacture animal vitamins. They obtain most of the animal vitamins they sell from other companies within their respective corporate groups.

The Overseas Arrangements

16 For each of vitamins A and E, during the period from January 1990 to early 1999 senior executives and employees of Roche, BASF AG, and AAN SA reached agreements to fix regional wholesale prices and to allocate market share or to set specific volumes of vitamins A and E that those respective companies would supply in Australia and elsewhere. These were the Overseas Arrangements referred to earlier. The Overseas Arrangements were given effect in Australia by the Australian Arrangements described below.

The Australian Arrangements

Meetings and other discussions from 1994 (or earlier) to end of 1996

17 During the period from 1994 or earlier until about the end of 1996, various representatives of RVA and representatives of either BASFA or AANA or both:

(a) reached understandings concerning the prices at which RVA, BASFA and AANA would sell animal vitamins A and E in Australia;

(b) agreed or reached understandings as to the allocation of future sales volumes of animal vitamins A and E in Australia as between RVA, BASFA and AANA to accord with market shares determined by the Overseas Arrangements;

(c) agreed or reached understandings as to the allocation among the respective three companies of tenders for the supply of animal vitamins A and E and pre-mix containing these two vitamins to certain major purchasers of such pre-mix; and

(d) agreed or reached understandings on the prices at which each of the three companies would tender for the supply of animal vitamins A and E singly and in pre-mix to particular major purchasers of pre-mix.

The 1994 (or earlier) to end of 1996 unlawful arrangements

18 By the conduct referred to in the immediately preceding paragraph, RVA, BASFA and AANA made arrangements or arrived at understandings in contravention of section 45 of the TP Act (the "Australian Tripartite Arrangements"). RVA, BASFA and AANA gave effect to the Australian Tripartite Arrangements by:

(a) each of them supplying animal vitamins A and E at or about the agreed prices;

(b) each of them supplying animal pre-mix containing vitamins A and E at prices that were affected by those agreed prices for animal vitamins A and E;

(i) as to which company would be likely to be the successful tenderer for the business or part of the business of a particular purchaser of animal vitamins A and E or of animal pre-mix containing those vitamins;

(ii) as to the price at which one or other of the three companies was likely to be the successful tenderer for the business or part of the business;

(d) each of the three of them submitting tenders to particular major purchasers of animal pre-mix containing vitamins A and E in accordance with the understandings referred to in paragraph (c).

Meetings and other discussions from early 1997 to mid/late 1998

19 From about early 1997 to about mid to late 1998 representatives of RVA and BASFA held meetings and had telephone conversations at or during which they agreed or reached understandings to the effect of those set out in par 16 above, but only as between RVA and BASFA.

The early 1997 to mid/late 1998 unlawful arrangements

20 During the course of the meetings and telephone discussions referred to immediately above, RVA and BASFA made arrangements or arrived at understandings in contravention of section 45 of the TP Act (the "Australian Bilateral Arrangements"). RVA and BASFA gave effect to the Australian Bilateral Arrangements by doing the things referred to in par 17 above, with necessary modifications having regard to the fact that only two companies, RVA and BASFA, were involved.

Admissions of contravention

21 Each of RVA, BASFA and AANA admits that its conduct in entering into the Australian Tripartite or the Bilateral Arrangements, or both, as the case may be:

(a) constituted making arrangements or arriving at understandings containing exclusionary provisions, in contravention of section 45(2)(a)(i) of the TP Act;

(b) constituted making arrangements or arriving at understandings containing provisions:

(i) to which section 45A of the TP Act applied; and

(ii) which, accordingly, had the purpose, or would have had or been likely to have had the effect, of substantially lessening competition between RVA, BASFA and AANA (in the case of the Australian Tripartite Arrangements) or between RVA and BASFA (in the case of the Australian Bipartite Arrangements) in the supply of animal vitamins A and E in Australia;

in contravention of section 45(2)(a)(ii) of the TP Act;

22 Each of RVA, BASFA and AANA also admits that its conduct in giving effect to the Australian Tripartite or Bilateral Arrangements, or both, as the case may be:

(a) constituted giving effect to arrangements or understandings containing exclusionary provisions, in contravention of s 45(2)(b)(i) of the TP Act;

(b) constituted giving effect to arrangements or understandings containing provisions:

(i) to which section 45 of the TP Act applied; and

in contravention of section 45(2)(b)(ii) of the TP Act;

THE PRINCIPAL SUBMISSIONS

23 Again, it is possible for me to outline the Principal Submissions together rather than separately in respect of the respective respondents.

24 The Principal Submissions state that the Commission regards the contraventions as "extremely serious", and in the case of the contraventions by BASFA and RVA, as "uniquely serious in Australia's trade practices history." The reason is that the contraventions involved local companies giving effect to global arrangements made by multinational corporate groups.

25 The Commission also considers that the contraventions, at least in the cases of RVA and BASFA, are more serious than the contraventions that the Commission brought before the Court in the Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Limited (1996) ATPR ¶41-457, in respect of the pre-mixed concrete cartel the subject of that case. A penalty of $6.6 million was imposed against each of the three corporate respondents in that case (a total of $19.8 million) in respect of conduct, at least half of which occurred prior to January 1993 (- in that case, penalties were imposed on individuals too). The maximum penalty applicable to the portion of the conduct occurring before January 1993 was $250,000 per contravention, as compared to $10 million per contravention applicable to conduct, such as that in the present case, which occurred after that time.

26 Each of RVA, BASFA and AANA accepts that its conduct, constituting as it does, contravention of per se provisions of the Act, namely, subs 45(2) (read with ss 4D and 45A), is "extremely serious." The Principal Submissions continue:

"Such contraventions must be seen as the most serious of the non-criminal contraventions of the Act, given that Parliament has deemed such conduct to substantially lessen competition. The prohibitions against price fixing, market sharing and exclusionary conduct contained within the Act have been the subject of numerous proceedings by the Commission. A number of these proceedings have resulted in multi-million dollar penalties, which have been extensively and widely publicised."

27 The Commission and each respondent have agreed to submit that it would be appropriate for the Court to make findings and orders and to note undertakings in accordance with short minutes of orders attached to their Principal Submission. In relation to penalty, they respectively ask me to impose the following penalties:

RVA $15,000,000

BASFA $7,500,000

AANA $3,500,000

In addition, it is agreed in each case that the respondent should be ordered to pay $65,000 (a total of $195,000) representing the Commission's costs of the proceeding.

28 As noted above, the maximum penalty for each act of making or giving effect to the collusive arrangements is $10,000,000: see par 76(1A)(b) of the TP Act.

29 The parties refer to a well-known line of authority in the Court to the effect that it is appropriate for the Commission and a respondent to negotiate a "settlement", that is, to reach agreement as to the relevant facts and submissions to be placed before the Court, and as to orders which are to be suggested as appropriate, provided it is recognised that the ultimate decision as to the orders to be made lies with the Court: see, for example, Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR ¶41-375; TPC v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256 at 259; NW Frozen Foods Pty Ltd v ACCC (1997) 71 FCR 285 at 290, 291, 298-299. I referred to this line of authority in TPC v CC (NSW) Pty Ltd (1994) ATPR ¶41-363; (1995) ATPR ¶41-406; (1995) ATPR ¶41-415; and (1995) ATPR ¶41-431.

30 Section 76 of the TP Act provides that the Court may order payment to the Commonwealth of such pecuniary penalty, in respect of each act or omission, 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."

31 In Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 at 52,152-3, French J gave the following list of factors which had been referred to in the cases as relevant to level of penalty:

"1. The nature and extent of the contravening conduct.
2. The amount of loss or damage caused.
3. The circumstances in which the conduct took place.
4. The size of the contravening company.
5. The degree of power it has, evidenced by its market share and ease of entry into the market.
6. The deliberateness of the contravention and the period over which it extended.
7. Whether the contravention arose out of the conduct of senior management or at a lower level.
8. 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.
9. 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."

In Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR ¶41-375, Burchett J referred (at 40,169) to two other factors relevant to the amount of penalty:

* the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved (the `totality principle' as known in the criminal law); and
* the extent to which, by admitting the allegations, the respondents saved the community the burden of litigating a lengthy and expensive case.

32 It has been accepted in the cases that both specific and general deterrence can be of importance. According to the joint submission, general deterrence is of paramount importance in the present case, because of the Overseas Arrangements. Each joint submission states:

"There is a need for a significant level of penalty well in excess of any quantum of penalties previously imposed in Australia in respect of cartel arrangements to deter the multinational corporate groups behind the Australian contraveners from engaging [in the case of the joint submissions by RVA and the Commission, "permitting those contraveners to engage"] in similar conduct affecting Australia in the future. A high level of penalty is also required for general deterrence of similar conduct affecting Australia by other large multinational corporate groups."

Heerey J explained in ACCC v McPhee & Son (Australia) Pty Ltd (1998) ATPR ¶41-628 at 40,891-40,892 in the following terms, why, in relation to the price fixing aspects of collusive arrangements, deterrence is important:

"This form of contravention commonly occurs in secret and between parties who seek a mutual benefit. The risk of detection is often low and the potential gain to the contravenors, and damage to the community, large. Therefore the penalty needs to be correspondingly high."

Each joint submission contains the following paragraph:

"Another reason why deterrence is specially significant in this case is that the conduct continued after:
(a) the Federal Court had handed down multi million dollar penalties in respect of cartel arrangements in the Australian express freight and pre-mixed concrete industries (TPC v TNT Australia P/L (1995) ATPR ¶41-375, TPC v Pioneer Concrete (Qld) Pty Ltd (1994) ATPR ¶41-345); and
(b) the 40 fold increase in the maximum penalty to $10 million for corporations for a single contravention of the Act that applied from January 1993.
It is quite evident that the record level of penalties imposed in the freight and concrete cases and the massive increase in the maximum level of penalty had no deterrent effect on the Australian participants in the collusive arrangements in this case, nor on the international participants in the [Overseas Arrangements]."

33 The parties submit, and I accept, that I should take into account:

* the nature and extent of the contravening conduct, including its deliberateness and its manifestation in Australia of the Overseas Arrangements;
* the fact that the value of sales affected was significant;
* the influence of each respondent in the market;
* the period over which the contravening conduct extended (some four years in the case of RVA and BASFA, and some two years in the case of AANA);
* the fact that RVA, BASFA and AANA between them controlled between 90 to 100 per cent of the market for the supply of vitamins A and E in Australia (whether by straight sales or inclusion in pre-mix) during the relevant period so that Australian customers had no real alternative source of supply;
* the participation of senior management;
* the cooperation of each respondent with the Commission, although only after United States and Canadian proceedings in respect of the collusive arrangement became public in mid 1999; and
* an undertaking proffered to the Court by each respondent to use its best endeavours to ensure that current Trade Practices Compliance Programs conform to Australian Standard AS3806-1998.

SUPPLEMENTARY STATEMENT OF AGREED FACTS AND SUPPLEMENTARY JOINT SUBMISSIONS

34 I was troubled by the fact that in each proceeding neither the Principal Statement nor the Principal Submission addressed the following questions, even by giving reasons why they did not do so:

(a) By how much was each respondent better off as a result of its contraventions?; and

(b) What was the additional amount the market paid to each respondent as a result of its contraventions?

Accordingly, I caused each proceeding to be re-listed on 19 December 2000 and directed that the parties supply by 1 February 2001, a supplementary statement of agreed facts and supplementary joint submissions, or supplementary individual statements of facts and supplementary individual submissions in relation to these questions, as the case might permit. The parties to each proceeding have now supplied a Supplementary Statement of Agreed Facts ("Supplementary Statement") and Supplementary Joint Submissions ("Supplementary Submission"), although in one proceeding, N 1140 of 2000, BASFA has also provided a short individual submission. Annexed to the Supplementary Statements were "Confidential Annexures" and annexed to the Supplementary Submissions were "Confidential" documents. These documents contained further internal financial data relating to the respective respondents. I made further "confidentiality orders" in relation to such documents in each proceeding.

35 The Supplementary Statement in each case informs the Court that the accounting practices and records of the respondent do not enable it to provide the information required to answer precisely the questions posited, although the confidential documents contained such information as is available in the respondent's records from which inferences may be drawn relevant to the appropriateness of the level of penalty suggested.

36 The difficulties the respondents have in answering the questions are of two kinds. First, the profit generated by the sales of the relevant animal vitamins A and E, and pre-mix containing those two vitamins cannot be isolated. That is, although sales figures are available for those products during the relevant period, there do not exist figures for costs appropriate to be deducted from those sales figures to arrive at a "profit". Secondly, even if the profit attributable to those sales could be isolated, it would remain impossible to identify that part of the profit which would not have been made if the contravening conduct had not occurred, or to identify what additional amount the market paid above what it would have paid, absent the contravention.

37 In the cases of BASFA and AANA, not all relevant costs are known. In those cases, the parties have calculated "variable costs" but do not know the figures for all fixed costs. Accordingly, in those proceedings the parties have not attempted to estimate "net profit" or "operating profit" but have calculated a "gross margin" (or "contribution margin").

38 In the case of RVA, the relevant costs cannot be isolated from the general costs of RVA's "Vitamins and Fine Chemicals Division". Accordingly, in that case the parties have estimated the profitability of RVA's business arising from the subject sales of animal vitamins A and E and pre-mix containing them by using a percentage derived from figures relating to the Division as a whole. This has enabled the parties to that proceeding to provide figures for "indicative profits".

39 For convenience, I will use the expression "estimated profit" to refer to both the "gross margin" (or "contribution margin") of the BASFA and AANA proceedings and the "indicative profits" of the RVA proceeding.

40 The confidential documents provide, or enable me to calculate, the ratio or percentage relationship between estimated profit and sales. The ratio or percentage relationship between suggested penalty and sales was already available from the Principal Statement. In the light of the Supplementary Statement, it is now also possible to know the ratio or percentage relationship between suggested penalty and estimated profit. As well it is possible to compare the various ratios or percentages mentioned, as between the respective proceedings.

41 The following is an extract from the Supplementary Submission in proceeding N 1140 of 2000 - that against BASFA (the content of pars 13 to 24 are almost identical to passages to be found in the Supplementary Submission in the proceedings against RVA and AANA, but pars 25, 27 and 28 and parts of par 26 do not appear in the Supplementary Submission of the ACCC and RVA, while they appear, with the exception of par 28 which does not appear, in a modified form in the Supplementary Submissions of the ACCC and AANA):

13. The Parties submit that, as in this case where such information is unavailable or unable to be calculated for the purposes of answering His Honour's questions, the Court can nevertheless proceed to assess what the appropriate penalty should be by considering sales and profit figures of the kind set out in the Confidential Annexures to the Principal and Supplementary Statements.
14. There are a number of previous cases where the Court has taken this approach, where either there has been no evidence of the profits made as a result of contraventions of the Act or it has been accepted that it would be difficult, if not impossible, to calculate such profits. In Australian Competition and Consumer Commission v Pioneer Concrete (Qld) Pty Limited (1996) ATPR ¶41-457, where the Court imposed the highest penalties against any corporate contravener to date, the only material put to the Court on this issue consisted of the value of the sales of the pre-mix concrete the subject of the collusive arrangements admitted in that proceeding.
15. In ACCC v Tyco Australia Pty Ltd & Ors (2000) ATPR ¶41-740, where the Court imposed corporate penalties of $3.3 million and $1.4 million, as recommended by the parties, the Court noted that no "attempt had been made to give any estimate of the order of magnitude of the losses imposed by these anti-competitive arrangements on consumers ... " (page 40,573).
16. In ACCC v Foamlite (Australia) Pty Ltd (1998) ATPR ¶41-615, the Court, after finding that the loss or damage caused to customers could not be precisely determined, judged the deterrent effect of the corporate penalties suggested by the parties ($1.2 million and $600,000) by comparing such penalties to post tax profits.
17. In ACCC v Tubemakers Australia Pty Ltd (2000) ATPR ¶41-745, the Court looked to the overall size of the relevant market in dollar terms and to the sales of the corporate respondents of the relevant product in assessing and approving the recommended penalties of $1.2 million and $550,000.
18. On at least one occasion the Court has imposed a substantial penalty where it was clear from the evidence that there could have been no actual loss to customers or profit made by the corporate respondent as a result of the contravening conduct because that conduct consisted of an unsuccessful attempt to enter into a market sharing arrangement: TPC v Simsmetal & Ors (2000) ATPR ¶41-764. In that case the Court imposed a $2 million penalty on the corporate respondent, as jointly recommended by the parties.
19. Other cases where the Court has imposed penalties without, it appears from the reported judgments, making any estimate of the profits made or losses sustained as a result of contraventions of the Act, include TPC v TNT & Ors (1995) ATPR ¶41-375 and TPC v Hymix Industries (1995) ATPR ¶41-369 and (1996) ATPR ¶41-465.
20. In ACCC v NW Frozen Foods (1996) ATPR ¶41-515, the Court noted that "[i]n view of the period of conduct in question it is not possible to determine what the price would have been were it not for the price fixing agreements." (page 42,442) The Court did however have access to invoice material that indicated what prices had been when discounted, which were significantly lower than the agreed prices. These were not matters that were subject to the subsequent appeal in NW Frozen Foods v ACCC (1997) 71 FCR 285.
21. In TPC v Simsmetal & Ors (1996) ATPR ¶41-449, the Court was "satisfied that the penalties that have been agreed by the respondents and the TPC have a sufficient deterrent effect to counter balance the profit apparently derived from the contravening conduct." (page 41,512) It is not clear from the reported judgment whether any specific profit figures were received into evidence.
22. The Parties acknowledge that in other cases the Court, on the basis of the evidence before it, has been able to identify the profits made or loss occasioned as a result of contraventions of the Act and has had the advantage of using such information to assess the appropriate level of penalty to be imposed. Even in these cases, however, the Court has recognised that the identified profits and losses constitute only one of the factors to be considered by the Court when assessing the appropriate level of penalty to be imposed, which factors are comprehensively listed in paragraphs 24 to 26 of the Principal Submissions.
23. Such cases, which usually involve the contravening parties agreeing on specific identifiable increases to prices, include TPC v CC (NSW) Pty Limited & Ors (No 2) (1995) ATPR ¶41-406; TPC v CC (NSW) Pty Limited & Ors (No 4) (1995) ATPR ¶41-431; ACCC v George Weston (2000) ATPR ¶41-763 (unsuccessful attempt to induce an increase of prices by a specific amount); and ACCC v Alice Car & Truck Rentals Pty Ltd & Ors (1997) ATPR ¶41-582 (where the parties agreed not to discount prices by an identifiable amount). In ACCC v J McPhee & Son (Australia) Pty Ltd (1998) ATPR ¶41-628, the Court was able to compare the value of a successful competitive quote to assess the loss that would have been sustained had the customer been induced to accept the respondent's higher quote (page 40,896).
24. In contrast in the present case, there is no evidence before the Court of any benchmarks or other criteria by which to estimate the hypothetical prices at which the parties to the Arrangements would have sold the vitamin products in question had the Arrangements not been made and put into effect. The Parties have not uncovered evidence of this kind, such as evidence of the prices during periods when the Arrangements may have broken down or the prices of other competitors not parties to the Arrangements.
25. It is clear from the Principal Statement that tenders for the supply to certain major pre-mix customers were the subject of the Arrangements, as was the price of the animal vitamin A and E components in such pre-mix. It is not clear, however, to what extent tenders to other pre-mix customers were the subject of the market sharing provisions of the Arrangements, albeit that there is no dispute that the animal vitamin A and E components of such pre-mix were the subject of the price fixing provisions of the Arrangements. The Parties have not be able to uncover evidence on precisely what proportion of all tenders submitted by [BASFA] during the relevant period were the subject of the market sharing provisions of the Arrangements.
26. Accordingly, the Parties submit that any attempt to arrive at hypothetical estimates of the prices at which [BASFA] would have sold the vitamin products in question had the Arrangements not been made and put into effect would involve a time consuming, complex and expensive accounting exercise, the results of which would be, at best, speculative or unreliable and possibly even misleading.
27. Further, if such a task were undertaken it would involve adducing evidence from experts and third parties. It would also require the parties to gather pricing and costing information over a lengthy period of time from both Australia and elsewhere including: fluctuations in exchange rates between the currency of the country of origin of the vitamins and the Australian dollar; the effects of inflation; the price elasticity of the products affected by the Australian Arrangements. Information about barriers to entry and production capacity would also be needed. The Parties do not currently have much of this kind of information available to them and the information may not be readily available or even available at all.
28. As indicated in paragraph 6 of the Supplementary Statement, the above exercise requires the application of certain assumptions to the relevant information. The Parties have no basis on which to form a view and come to an agreement on such assumptions."

REASONING

42 I accept the thrust of the submission set out in the lengthy passage set out above.

43 In my opinion, the levels of penalty jointly proposed by the parties to each proceeding is not so low compared to any profit made as a result of the contravening conduct of the respondent in question that the penalty would not operate as both a general and a specific deterrent. The suggested penalty either exceeds, or is a significant percentage of, the estimated profit figure. It is also a significant percentage even of the sales figure.

44 There are two other indications that the levels of penalty proposed are appropriate. First, a fine of Can$14.5 million was imposed on AAN SA by the Federal Court of Canada in connection with collusive conduct of that company which affected sales of certain vitamins in Canada. A confidential annexure to the Supplementary Statement in proceeding N 1175 of 2000, that against AANA, gives me the total sales of the vitamins affected by that conduct. The percentage which the penalty represents of the total affected sales is not inconsistent with the ratio between the level of penalty proposed for AANA ($3,500,000) and AANA's sales of animal vitamins A and E and pre-mix containing those vitamins during the period of its contravening conduct in this case. I make a similar observation in relation to the levels of fine proposed in the proceedings against RVA ($15,000,000) and BASFA ($7,500,000).

45 The other indication to which I referred arises from a "Memorializing Opinion - Re: final approval of settlement" of United States District Judge Thomas F Hogan, in the United States District Court for the District of Columbia in March 2000. That Opinion supported the grant of the Court's final approval of a class action settlement in a proceeding intituled, In re: Vitamins Antitrust Litigation. According to the Opinion, in that proceeding a class of direct purchasers of vitamins alleged that as early as 1990 and continuing into 1998, the world's largest manufacturers of vitamins, vitamin pre-mixes and other bulk vitamin products had conspired to fix prices, allocate markets, and engage in other illegal conduct with respect to vitamin products in violation of section 1 of the Sherman Act, 15 USC §1. On 3 November 1991, the class plaintiffs presented the Court with a Settlement Agreement along with a motion seeking its approval. The part of the Opinion which is relevant for present purposes is the following:

"The Settlement Agreement before this Court achieves for the class a recovery of approximately 18 to 20 percent of the dollar value of the class purchases of the affected vitamins from the Settling defendants. This Settlement, which had a maximum dollar recovery of $1.05 billion, will fully and finally resolve the claims of more than 3,900 class members and will result in a distribution of approximately $325 million. In addition, the class Settlement has also resulted in approximately 35 settlements with opt-out plaintiffs representing more than $700 million in purchases of vitamin products from Settling defendants. The Settlement is unprecedented for many reasons: the percentage rate on which the Agreement is predicated is in the highest tier of settlements for price-fixing class actions; the total dollar value to the class is the largest settlement of a price-fixing class action; the Settlement is a totally cash settlement and calls for immediate payment by defendants; the Agreement was reached at a relatively early stage in the litigation; the class purchases from non-settling defendants remain in the case as to the non-settling defendants; the release of claims does not cover foreign sales of vitamins or indirect purchaser claims; the Settlement contains a provision for three-year injunctive relief barring future collusive behavior by these defendants; the Agreement contains a most-favored-nations clause ("MFN clause") with a two-year duration; and the Settlement provides for a separate fund for attorneys' fees.
...
This Court finds that the Settlement in this case is the product of extensive arm's length negotiations by experienced counsel, undertaken in good faith, and after substantial factual investigation and legal analysis. Moreover, given the substantial risks inherent in every litigation and the benefits to the class in achieving an early resolution to this dispute, the Court finds that the terms of the Agreement are fair in relation to the strength of the plaintiffs' case. Plaintiffs' expert economist Dr. Beyer has submitted a detailed affidavit summarizing his investigation, statistical analysis and opinion with respect to the probable range of damages that would be presented to a jury if plaintiffs' claims had gone to trial; and the Settlement payments, representing an 18-20 percentage rate, far exceed recoveries approved in other price-fixing antitrust actions. Based upon the representations made by counsel and the Court's own experience with antitrust litigation, this proposed Settlement ranks near the top of the highest tier of antitrust settlements."

In its additional individual submission, BASFA submits that

"[a]s damages in the United States for antitrust violations are trebled, it can be inferred that the Court accepted that the damage caused by the vitamins cartel in the United States was of the order of 6-7% of sales of vitamins affected by the anti-competitive conduct."

As I said earlier, I do not know what additional amount, if any, buyers in Australia during the relevant periods of animal vitamins A and E and pre-mix containing them paid by way of price to the respondents for those products as a result of the contravening conduct. The suggested penalty in each case exceeds 6-7 per cent of sales. Accordingly, if the additional price paid is of the order of 6-7 per cent of sales, the suggested level of penalty is again supported as appropriate.

46 It must be emphasised that while I thought it important that the two questions which I put to the parties should be addressed by them, it does not surprise or alarm me that they cannot be answered with precision. They call for speculation about how the market would have behaved if a particular respondent whose conduct is under consideration had conducted itself in any one or more of several available non-contravening manners. I do not think that the parties should be put to the further cost of pursuing, through expert evidence, what seems to be an inherently unattainable degree of precision.

47 The Supplementary Statements and the Supplementary Submissions satisfy me that the levels of penalties proposed are appropriate.

CONCLUSION

48 For the above reasons, I think it appropriate, in each proceeding, to impose the penalty and to make the other orders suggested by the parties.

I certify that the preceding forty eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated: 28 February 2001

Counsel for the Applicant (in each proceeding):	Mr J S Hilton SC and Mr S T White

Solicitor for the Applicant (in each proceeding):	Australian Government Solicitor

Counsel for Roche Vitamins Australia Pty Ltd (the Respondent in N1009/00):	Mr W R McComas

Solicitor for Roche Vitamins Australia Pty Ltd (the Respondent in N1009/00):	Clayton Utz

Counsel for BASF Australia Ltd (the Respondent in N1140/00):	Ms E Hollingworth

Solicitor for BASF Australia Ltd (the Respondent in N1140/00):	Blake Dawson Waldron

Counsel for Aventis Animal Nutrition Pty Ltd (formerly known as Rhone-Poulenc Animal Nutrition Pty Ltd) (the Respondent in N1175/00):	Mr N Hutley SC

Solicitor for Aventis Animal Nutrition Pty Ltd (formerly known as Rhone-Poulenc Animal Nutrition Pty Ltd) (the Respondent in N1175/00):	Baker & McKenzie

Date of Hearing:	5 December 2000

Date last written submissions received:	2 February 2001

Date of Judgment:	28 February 2001

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