FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v Visy Industries Holdings
Pty Limited (No 3) [2007] FCA 1617
TRADE PRACTICES – cartel conduct – Visy companies and Amcor companies held 90 per
cent of the corrugated fibreboard packaging market in Australia – between January 2000 and
October 2004 Visy and Amcor engaged in price-fixing and market sharing contrary to s 45 of
Trade Practices Act 1974 (Cth) – Amcor received conditional immunity from action by the
Australian Competition and Consumer Commission – Commission brought action against
Visy companies and three of its senior officers four categories of contraventions: Overarching Understanding in 2000 to maintain market share and increase prices; Annual Price
Increase Understandings each year for 2000 to 2003, Customer Price Understandings and
Compensation Understandings – respondents admitted liability – parties submitted an agreed
statement of facts
Held
1.
2.
3.
4.
5.
6.
Visy committed 69 contraventions of the Trade Practices Act;
Pecuniary penalties imposed on Visy for 37 contraventions that came from
different conduct for the purposes of s 76(3);
Penalty of $36 million imposed for the 37 contraventions;
Mr Pratt was knowingly concerned in Visy’s contraventions, however, no
pecuniary penalty against him because as owner of Visy he will bear the burden of
the corporate penalty;
Mr Debney was knowingly concerned in 14 contraventions; penalty of $1.5
million;
Mr Carroll was knowingly concerned in 49 contraventions; penalty of $500,000.
Corporations Act 2001 (Cth), ss 199A(2)
Evidence Act 1995 (Cth) s 191
Industrial Relations Reform Act 1993 (Cth) s 46
Sherman Act 15 U.S.C.
Trade Practices Act 1974 (Cth) ss 4D, 45, 45A, 76, 77A, 77B, 80
Trade Practices Legislation Amendment Act (No. 1) 2006 (Cth), Sch 9 Pt 1.
Trade Practices Legislation Amendment Act 1992 (Cth) s 10
Australian Competition and Consumer Commission v Commercial and General Publications
Pty Ltd (No 2) (2002) ATPR 41-905 cited
Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd (2000)
ATPR 41-777 cited
Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd
(No 5) (1998) ATPR 41-628 cited
Australian Competition and Consumer Commission v NW Frozen Foods Pty Ltd (1996)
ATPR 41-515 cited
Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 2)
[2007] FCA 444 referred to
-2Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR
41-993 cited
The Queen v Shannon (1979) 21 SASR 442
Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 cited
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 cited
Warner, K Sentencing in Tasmania, 2nd ed, The Federation Press, 2002
Organisation for Economic Co-operation and Development, Hard Core Cartels – Third
Report on the Implementation of the 1988 Recommendation, Paris, 2006
The Dawson Committee, Review of the Competition Provisions of the Trade Practices Act,
April 2003
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
INDUSTRIES HOLDINGS PTY LIMITED & ORS (No 3)
VID 1650 OF 2005
HEEREY J
2 NOVEMBER 2007
MELBOURNE
v VISY
GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 1650 OF 2005
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION
Applicant
AND:
VISY INDUSTRIES HOLDINGS PTY LIMITED
First Respondent
VISY INDUSTRIES AUSTRALIA PTY LIMITED
Second Respondent
VISY BOARD PTY LIMITED
Third Respondent
RICHARD PRATT
Fourth Respondent
HARRY DEBNEY
Fifth Respondent
ROD CARROLL
Sixth Respondent
JUDGE:
HEEREY J
DATE OF ORDER:
2 NOVEMBER 2007
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.
The Third Respondent ("Visy"), by making a contract or arrangement or arriving
at an understanding with Amcor Limited ("Amcor") in approximately January to
April 2000 containing provisions that:
(i)
Visy and Amcor would permit each other to maintain approximately their then
current share of the market in Australia for the supply of corrugated fibreboard
packaging ("CFP");
(ii)
Visy and Amcor would not seek to enter into contracts for the supply of CFP
with each other's principal CFP customers;
-2(iii)
if, for one reason or another, Visy did enter into a contract for the supply of
CFP with a principal CFP customer of Amcor, then Visy would not prevent or
seek to prevent Amcor from entering into a supply contract with a customer or
customers of Visy in order to replace the share of the market in Australia
for the supply of CFP ("CFP Market") that Amcor had lost as a result of
losing the supply contract to Visy;
(iv)
if, for one reason or another, Amcor did enter into a contract for the
supply of CFP with a principal CFP customer of Visy, then Amcor would
not prevent or seek to prevent Visy from entering into a supply contract with
a customer or customers of Amcor in order to replace the share of the CFP
Market that Visy had lost as a result of losing the supply contract to Amcor;
(v)
Visy and Amcor would, in future, collaborate with each other in order to
increase the prices at which they supplied CFP in the CFP Market from their
then current levels;
(vi)
Visy would appoint the Sixth Respondent ("Carroll") as its nominated contact
person with Amcor for the purpose of effecting the implementation of
the contract, arrangement or understanding; and
(vii) Amcor would appoint Edward Laidlaw as its nominated contact person with
Visy for the purpose of effecting the implementation of the contract,
arrangement or understanding,
made a contract or arrangement or arrived at an understanding (the "Over-arching
Understanding") which:
(A)
contained an exclusionary provision, within the meaning of section 4D of
the Trade Practices Act 1974 (Cth) (“TPA”), and thereby engaged in
conduct in contravention of section 45(2)(a)(i) of the TPA; and
(B)
contained a provision that had the purpose or the effect or was likely to have
the effect of substantially lessening competition in the CFP Market, and
thereby engaged in conduct in contravention of section 45(2)(a)(ii) of the
TPA.
-32.
By engaging in each instance of:
(a)
the conduct alleged in paragraphs 22-27, 29, 30, 32 and 33 of the Second
Further Amended Statement of Claim;
(ab) the conduct constituted by the Fourth Respondent (“Pratt”) meeting with the
CEO of Amcor, Mr Russell Jones (“Jones”) at his request on 21 May 2001 and
communicating to Jones that Visy would adhere to an understanding that the
Fifth Respondent (“Debney”) had reached with Mr Peter Brown of Amcor
(“Brown”) being the Over-arching Understanding referred to in paragraph 1
above;
(b)
the conduct alleged in paragraph 37 of the Second Further Amended Statement
of Claim;
(c)
the conduct alleged in paragraphs 41, 42 and 44 of the Second Further Amended
Statement of Claim;
(d)
the conduct alleged in paragraph 49 of the Second Further Amended Statement
of Claim;
(e)
the conduct alleged in paragraphs 54 and 56 of the Second Further Amended
Statement of Claim;
(f)
the conduct alleged in paragraph 60 of the Second Further Amended Statement
of Claim;
(g)
the conduct alleged in paragraphs 64, 65, 67 and 69 of the Second Further
Amended Statement of Claim;
(h)
the conduct alleged in paragraph 73 of the Second Further Amended Statement
of Claim;
(i)
the conduct alleged in paragraphs 77, 78 and 85 of the Second Further Amended
Statement of Claim;
(j)
the conduct alleged in paragraph 91 of the Second Further Amended Statement
of Claim;
-4(k)
the conduct alleged in paragraphs 95, 96 and 99 of the Second Further Amended
Statement of Claim;
(l)
the conduct alleged in paragraph 107 of the Second Further Amended Statement
of Claim;
(m) the conduct alleged in paragraphs 111, 111A, 111B, 111C, 112, 112B, 112C,
113 and 113A of the Further Amended Statement of Claim;
(n)
the conduct alleged in paragraph 119A of the Second Further Amended
Statement of Claim;
(o)
the conduct alleged in paragraphs 119E, 119G and 119H of the Second Further
Amended Statement of Claim;
(p)
the conduct alleged in paragraph 120 of the Second Further Amended Statement
of Claim;
(q)
the conduct alleged in paragraphs 127 and 130 of the Second Further Amended
Statement of Claim;
(r)
the conduct alleged in paragraph 135 of the Second Further Amended Statement
of Claim;
(s)
the conduct alleged in paragraphs 139, 140, 142, 143, 145, 146 and 147 of the
Second Further Amended Statement of Claim;
(t)
the conduct alleged in paragraph 153 of the Second Further Amended Statement
of Claim;
(u)
the conduct alleged in paragraphs 158 and 160 of the Second Further Amended
Statement of Claim;
(v)
the conduct alleged in paragraph 163A of the Second Further Amended
Statement of Claim;
(w)
the conduct alleged in paragraphs 163E, 163G, 163H and 163I of the Second
Further Amended Statement of Claim;
-5(x)
the conduct alleged in paragraph 163AA of the Second Further Amended
Statement of Claim;
(y)
the conduct alleged in paragraphs 163EA, 163EE, 163KK and 163MM of the
Second Further Amended Statement of Claim;
(z)
the conduct alleged in paragraph 164 of the Second Further Amended Statement
of Claim;
(aa) the conduct alleged in paragraphs 169 and 171 of the Second Further Amended
Statement of Claim;
(bb) the conduct alleged in paragraph 175 of the Second Further Amended Statement
of Claim;
(cc) the conduct alleged in paragraphs 181 and 183 of the Second Further Amended
Statement of Claim;
(dd) the conduct alleged in paragraph 187A of the Second Further Amended
Statement of Claim;
(ee) the conduct alleged in paragraphs 187F, 187G, 187I, 187J, and 187N of the
Second Further Amended Statement of Claim;
(ff)
the conduct alleged in paragraph 188 of the Second Further Amended Statement
of Claim;
(gg) the conduct alleged in paragraphs 194, 195 and 198 of the Second Further
Amended Statement of Claim;
(hh) the conduct alleged in paragraph 204 of the Second Further Amended Statement
of Claim; and
(ii)
the conduct alleged in paragraphs 208, 210, 213 and 214 of the Second Further
Amended Statement of Claim,
Visy gave effect to a provision of the Over-arching Understanding that:
-6(i)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(ii)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
3.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately January to March 2000 containing provisions that:
(a)
Visy would increase its prices for CFP supplied to its non-contract customers
by approximately 7% with effect from about May 2000; and
(b)
Amcor would increase its prices for CFP supplied to its non-contract
customers by approximately 7% with effect from about May 2000,
Visy made a contract or arrangement or arrived at an understanding (the "2000 Price
Increase Understanding") which contained a provision that had the purpose or
the effect or was likely to have the effect of substantially lessening competition
in the CFP Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
4.
By engaging in the conduct alleged in paragraphs 41, 42 and 44 (in respect of most of
its non-contract customers) of the Second Further Amended Statement of Claim, Visy
gave effect to a provision of the 2000 Price Increase Understanding that was a
provision that had the purpose or the effect or was likely to have the effect of
substantially lessening competition in the CFP Market, and thereby engaged in
conduct in contravention of section 45(2)(b)(ii) of the TPA.
5.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately October 2000 to approximately January 2001 containing provisions
that:
(a)
Visy would increase its prices for CFP supplied to its non-contract customers
by approximately 8.25% with effect from about early April 2001; and
-7(b)
Amcor would increase its prices for CFP supplied to its non-contract
customers by approximately 8.5% with effect from about mid March 2001.
Visy made a contract or arrangement or arrived at an understanding (the "2001 Price
Increase Understanding") which contained a provision that had the purpose or the
effect or was likely to have the effect of substantially lessening competition in the CFP
Market, and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of the
TPA.
6.
By engaging in the conduct alleged in paragraphs 54 and 56 (in respect of most of its
non-contract customers) of the Second Further Amended Statement of Claim, Visy
gave effect to a provision of the 2001 Price Increase Understanding that was a
provision that had the purpose or the effect or was likely to have the effect of
substantially lessening competition in the CFP Market, and thereby engaged in conduct
in contravention of section 45(2)(b)(ii) of the TPA.
7.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately early 2001 containing provisions that:
(a)
Amcor would compensate Visy for the CFP volume Visy had lost as a result
of Amcor entering into a supply agreement with Visy's former customer,
Lion Nathan Australia Pty Ltd ("LNA"); and
(b)
Amcor would allow Visy to enter into a CFP supply agreement with Inghams
Enterprises Pty Ltd ("Inghams"), an existing customer of Amcor,
as compensation to Visy for Amcor entering into a CFP supply agreement
with LNA,
Visy made a contract or arrangement or arrived at an understanding ("the Inghams
Compensation Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
-8(ii)
contained a provision that had the purpose or the effect or was likely
to have the effect of substantially lessening competition in the CFP
Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
8.
By engaging in the conduct alleged in paragraphs 64, 65, 67 and 69 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the Inghams
Compensation Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
9.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately early 2001 containing provisions that:
(a)
Visy would not seek to enter into contracts for the supply of CFP to
Goodman Fielder Ltd ("GFL") and Nestle Australia Ltd ("Nestle"), two of
Amcor's principal customers; and
(b)
if GFL or Nestle requested Visy to provide a quote for the supply of CFP,
Visy would quote prices higher than the prices Amcor quoted to GFL and
Nestle,
Visy made a contract or arrangement or arrived at an understanding (the
"GFL & Nestle Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of
section 4D of the TPA, and thereby engaged in conduct in
contravention of section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP
-9Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
10.
By engaging in the conduct alleged in paragraphs 77, 78 and 85 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the GFL &
Nestle Price Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
11.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately January 2001 to approximately March 2001 containing provisions that:
(a)
Amcor would not seek to enter into a contract for the supply of CFP to Fosters
Brewing Group Ltd ("Fosters"), a principal customer of Visy;
(b)
Amcor would quote prices to Fosters higher than the prices Visy quoted
to Fosters;
(c)
Amcor would not seek to enter into a contract for the supply of CFP to Coca
Cola Amatil Ltd ("Coke"), a principal customer of Visy; and
(d)
Amcor would quote prices to Coke higher than the prices Visy quoted to Coke,
Visy made a contract or arrangement or arrived at an understanding (the "Fosters &
Coke Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
- 10 and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
12.
By engaging in the conduct alleged in paragraphs 95, 96 and 99 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the
Fosters & Coke Price Understanding (insofar as it relates to Fosters) that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
13.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately mid 2001 containing provisions that:
(a)
Visy would compensate Amcor for the CFP volume Amcor had lost as a result
of Visy entering into supply agreements with Amcor's former customers
Inghams and The Smith's Snackfood Company Ltd ("Smith's"); and
(b)
Visy would allow Amcor to enter into a CFP supply agreement with
George Weston Foods Ltd ("GWF"), an existing customer of Visy, as
compensation to Amcor for Visy entering into CFP supply agreements with
Inghams and Smiths,
Visy made a contract or arrangement or arrived at an understanding (the "GWF
Compensation Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
- 11 and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
14.
By engaging in the conduct alleged in paragraphs 111, 111A, 111B, 111C, 112, 112B,
112C, 113 and 113A of the Second Further Amended Statement of Claim, Visy
gave effect to a provision of the GWF Compensation Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
15.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately mid 2001 containing provisions that:
(a)
Visy would compensate Amcor for the CFP volume Amcor had lost as a result
of Visy entering into supply agreements with Amcor's former customers
Inghams and Smith's; and
(b)
Visy would allow Amcor to enter into a CFP supply agreement with
OSI International Foods (Australia) Ltd ("OSI"), an existing customer
of Visy, in respect of OSI's CFP requirements in NSW, as compensation to
Amcor for Visy entering into CFP supply agreements with Inghams and
Smith's,
Visy made a contract or arrangement or arrived at an understanding (the "OSI/Hans
Compensation Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section
4D of the TPA, and thereby engaged in conduct in contravention
of section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
- 12 and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
16.
By engaging in the conduct alleged in paragraphs 119E, 119G and 119H of the
Second Further Amended Statement of Claim, Visy gave eff ect to a provision
of the OSI/Hans Compensation Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of the
TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
17.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately late August 2001 to approximately December 2001 containing
provisions that:
(a)
Visy would compensate Amcor for the CFP volume Amcor had lost as a result
of Visy entering into a supply agreement with Mrs Crockett's Kitchen Pty Ltd
("Mrs Crockett's"), formerly a customer of Amcor; and
(b)
Visy would allow Amcor to enter into a CFP supply agreement with Merino
Pty Ltd (formerly Paper Converting Pty Ltd) ("Merino"), an existing customer
of Visy, as compensation to Amcor for Visy entering into a CFP supply
agreement with Mrs Crockett's,
Visy made a contract or arrangement or arrived at an understanding (the "Merino
Compensation Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely
to have the effect of substantially lessening competition in the CFP
- 13 Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
18.
By engaging in the conduct alleged in paragraphs 127 and 130 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the Merino
Compensation Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
19.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately early December 2001 containing provisions to the effect that:
(a)
both Visy and Amcor would seek a continuation of the their then current supply
of CFP to Mildura Fruit Company ("MFC") whereby part of the
customer's requirements was supplied by Visy and the remainder was
supplied by Amcor;
(b)
Amcor would increase its prices for CFP supplied by it to MFC by
approximately the same amount as Visy with effect from the expiration of
the term of Amcor's then current supply agreement with MFC on 31 May
2002; and
(c)
Visy would increase its prices for CFP supplied by it to MFC by approximately
the same amount as Amcor with effect from the expiration of the term of Visy's
then current supply agreement with MFC on 31 March 2002,
Visy made a contract or arrangement or arrived at an understanding (the "MFC Price
Increase Understanding") which:
- 14 (i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
20.
By engaging in the conduct alleged in paragraphs 139, 140, 142, 143 and 145 to 147
of the Second Further Amended Statement of Claim, Visy gave effect to a provision
of the MFC Price Increase Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
21.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately December 2001 to approximately February 2002 containing provisions
that:
(a) subject to making some exceptions of its own choosing, Amcor would increase
its prices for CFP supplied to its non-contract customers by approximately
3.75% with effect from about mid March 2002; and
(b) subject to making some exceptions of its own choosing, Visy would
increase its prices for CFP supplied to its non-contract customers by
approximately 3.25% with effect from about early April 2002,
Visy made a contract or arrangement or arrived at an understanding (the "2002 Price
Increase Understanding") which contained a provision that had the purpose or the
effect or was likely to have the effect of substantially lessening competition in the
- 15 CFP Market, and thereby engaged in conduct in contravention of section 45(2)(a)(ii)
of the TPA.
22.
By engaging in the conduct alleged in paragraphs 158 and 160 (in respect of most of
its non-contract customers) of the Second Further Amended Statement of Claim, Visy
gave effect to a provision of the 2002 Price Increase Understanding that was a
provision that had the purpose or the effect or was likely to have the effect of
substantially lessening competition in the CFP Market, and thereby engaged in
conduct in contravention of section 45(2)(b)(ii) of the TPA.
23.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately mid to late April 2002 containing provisions that:
(a)
both Visy and Amcor would seek a continuation of their then current supply
of CFP to National Foods Limited ("National Foods") whereby part
of the customer's requirements was supplied by Amcor and the remainder was
supplied by Visy;
(b)
both Visy and Amcor would ensure that their tender prices to supply CFP
to National Foods reflected the additional CFP manufacturing costs which
would be required to meet National Foods product specifications;
(c)
Visy and Amcor would discuss with each other the prices each proposed to
include in its tender to supply CFP to National Foods; and
(d)
in respect of the parts of National Foods CFP requirements supplied by the
other (the “incumbent supplier”), both Visy and Amcor would submit CFP
tender prices to National Foods which were generally higher than those
submitted to National Foods by the incumbent supplier.
Visy made a contract or arrangement or arrived at an understanding (the "National
Foods Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
- 16 (ii)
contained a provision that had the purpose or the effect or was likely
to have the effect of substantially lessening competition in the CFP
Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
24.
By engaging in the conduct alleged in paragraphs 163E, 163G to 163I of the
Second Further Amended Statement of Claim, Visy gave effect to a provision
of the National Foods Price Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of the
TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
25.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately December 2002 to approximately January 2003 containing provisions
that:
(a)
subject to making some exceptions of its choosing, Amcor would increase its
prices for CFP supplied to its non-contract customers by approximately 3.5%
with effect from about early March 2003; and
(b)
subject to making some exceptions of its choosing, Visy would increase its
prices for CFP supplied to its non-contract customers by approximately 3.25%
with effect from about mid March 2003,
Visy made a contract or arrangement or arrived at an understanding (the "2003 Price
Increase Understanding") which contained a provision that had the purpose or the
effect or was likely to have the effect of substantially lessening competition in the
CFP Market, and thereby engaged in conduct in contravention of section 45(2)(a)(ii)
of the TPA.
- 17 26.
By engaging in the conduct alleged in paragraphs 169 and 171 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the 2003
Price Increase Understanding that was a provision that had the purpose or the effect or
was likely to have the effect of substantially lessening competition in the CFP Market,
and thereby engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
27.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately July 2003 containing provisions that:
(a)
Visy would compensate Amcor for the CFP volume Amcor had lost as a result
of Visy entering into a suppl y agreement with Huhtamaki
Australia Ltd ("Huhtamaki"), formerly a customer of Amcor; and
(b)
Visy would allow Amcor to enter into a CFP supply agreement with
Gillette Australia Pty Ltd ("Gillette"), an existing customer of Visy, as
compensation to Amcor for Visy entering into a supply agreement with
Huhtamaki,
Visy made a contract or arrangement or arrived at an understanding (the "Gillette
Compensation Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
28.
By engaging in the conduct alleged in paragraphs 181 and 183 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the Gillette
Compensation Understanding that:
- 18 (a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of the
TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
29.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately early 2003 containing provisions that:
(a)
Visy would not seek to enter into a contract for the supply of CFP to Parmalat
Australia Limited ("Parmalat"), one of Amcor's then principal customers;
(b)
Visy would discuss with Amcor the prices Visy proposed to include in its
tender to Parmalat; and
(c)
Visy would submit CFP tender prices to Parmalat which were higher than
those submitted by Amcor to Parmalat,
Visy made a contract or arrangement or arrived at an understanding (the
"Parmalat Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely
to have the effect of substantially lessening competition in the CFP
Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
30.
By engaging in the conduct alleged in paragraphs 187F, 187G, 1871, 187J and 187N
of the Second Further Amended Statement of Claim, Visy gave effect to a provision
of the Parmalat Price Understanding that:
- 19 (a) was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of the
TPA; and
(b) was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
31.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately May 2004 to approximately June 2004 containing provisions that:
(a)
Visy would not seek to enter into a contract for the supply of CFP to the Food
& Beverage division of Cadbury Schweppes Pty Limited ("Cadbury
Schweppes"), one of Amcor's then principal customers;
(b)
Visy would discuss with Amcor the prices Visy proposed to include in its tender
to Cadbury Schweppes; and
(c)
Visy would submit CFP tender prices to Cadbury Schweppes which were
higher than those submitted by Amcor to Cadbury Schweppes
Visy made a contract or arrangement or arrived at an understanding (the "Cadbury
Schweppes Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely
to have the effect of substantially lessening competition in the CFP
Market, and thereby engaged in conduct in contravention of section
45(2)(a)(ii) of the TPA.
32.
By engaging in the conduct alleged in paragraphs 194, 195 and 198 of the Second
Further Amended Statement of Claim, Visy gave effect to a provision of the Cadbury
Schweppes Price Understanding that:
- 20 (a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
33.
By making a contract or arrangement or arriving at an understanding with Amcor in
approximately July 2004 to approximately October 2004 containing provisions that:
(a) both Visy and Amcor would seek a continuation of their then current
supply of CFP to Hardy Wine Company Pty Limited ("Hardy")
whereby part of the customer's requirements was supplied by Visy and the
remainder was supplied by Amcor;
(b)
Visy and Amcor would discuss with each other the prices each proposed
to include in its tender to supply CFP to Hardy; and
(c)
in respect of the parts of Hardy's CFP requirements supplied by the other (the
"incumbent supplier"), both Visy and Amcor would submit CFP tender prices
to Hardy which were generally higher than those submitted to Hardy
by the incumbent supplier,
Visy made a contract or arrangement or arrived at an understanding (the "Hardy
Price Understanding") which:
(i)
contained an exclusionary provision, within the meaning of section 4D
of the TPA, and thereby engaged in conduct in contravention of
section 45(2)(a)(i) of the TPA; and
(ii)
contained a provision that had the purpose or the effect or was likely to
have the effect of substantially lessening competition in the CFP Market,
and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of
the TPA.
- 21 34.
By engaging in the conduct alleged in paragraphs 208, 210, 213 and 214 of the
Second Further Amended Statement of Claim, Visy gave effect to a provision of the
Hardy Price Understanding that:
(a)
was an exclusionary provision, within the meaning of section 4D of the TPA,
and thereby engaged in conduct in contravention of section 45(2)(b)(i) of
the TPA; and
(b)
was a provision that had the purpose or the effect or was likely to have the
effect of substantially lessening competition in the CFP Market, and thereby
engaged in conduct in contravention of section 45(2)(b)(ii) of the TPA.
35.
Pratt was directly or indirectly, knowingly concerned in the contravention of the TPA
by Visy referred to in sub-paragraph (ab) of paragraph 2 above, within the meaning of
sections 76(1)(e) and 80(1)(e) of the TPA.
36.
Debney was, directly or indirectly, knowingly concerned in, or party to, the
contraventions of the TPA by Visy referred to in:
(a)
paragraph 1 above;
(b)
sub-paragraph (a) of paragraph 2 above;
(c)
sub-paragraph (b) of paragraph 2 above;
(d)
sub-paragraph (f) of paragraph 2 above;
(e)
sub-paragraph (j) of paragraph 2 above;
(f)
sub-paragraph (l) of paragraph 2 above;
(g)
sub-paragraph (n) of paragraph 2 above;
(h)
sub-paragraph (z) of paragraph 2 above;
(i)
paragraph 3 above;
(j)
paragraph 7 above;
- 22 (k)
paragraph 11 above;
(l)
paragraph 13 above;
(m)
paragraph 15 above; and
(n)
paragraph 25 above,
within the meaning of sections 76(1)(e) and 80 (1) (e) of the TPA.
37.
Carroll was, directly or indirectly, knowingly concerned in, or party to, the
contraventions of the TPA by Visy referred to in:
(a)
sub-paragraph (a) of paragraph 2 above, insofar as it refers to paragraphs 22-26
and 33 of the Second Further Amended Statement of Claim;
(b)
sub-paragraph (d) of paragraph 2 above;
(c)
sub-paragraph (g) of paragraph 2 above;
(d)
sub-paragraph (h) of paragraph 2 above;
(e)
sub-paragraph (i) of paragraph 2 above;
(f)
sub-paragraph (k) of paragraph 2 above, save that paragraph 96 of the Second
Further Amended Statement of Claim is to be taken to be amended to accord
with paragraph 168 of the Agreed Statement of Facts dated 5 October 2007
agreed by the parties to this proceeding pursuant to s 191 of the Evidence Act
1995 (Cth) (“Agreed Statement of Facts”)
(g)
sub-paragraph (l) of paragraph 2 above;
(h)
sub-paragraph (m) of paragraph 2 above;
(i)
sub-paragraph (n) of paragraph 2 above;
(j)
sub-paragraph (o) of paragraph 2 above;
(k)
sub-paragraph (p) of paragraph 2 above;
- 23 (l)
sub-paragraph (r) of paragraph 2 above;
(m) sub-paragraph (s) of paragraph 2 above;
(n)
sub-paragraph (t) of paragraph 2 above;
(o)
sub-paragraph (v) of paragraph 2 above;
(p)
sub-paragraph (w) of paragraph 2 above;
(q)
sub-paragraph (x) of paragraph 2 above;
(r)
sub-paragraph (y) of paragraph 2 above;
(s)
sub-paragraph (z) of paragraph 2 above;
(t)
sub-paragraph (bb) of paragraph 2 above;
(u)
sub-paragraph (dd) of paragraph 2 above;
(v)
sub-paragraph (ee) of paragraph 2 above;
(w) sub-paragraph (ff) of paragraph 2 above;
(x)
sub-paragraph (gg) of paragraph 2 above, save that paragraph 194 of the Second
Further Amended Statement of Claim is to be taken to be amended to accord
with paragraphs 343 and 344 of the Agreed Statement of Facts;
(y)
sub-paragraph (hh) of paragraph 2 above;
(z)
sub-paragraph (ii) of paragraph 2 above;
(aa) paragraph 5 above;
(bb) paragraph 8 above;
(cc) paragraph 9 above;
(dd) paragraph 10 above;
- 24 (ee) paragraph 12 above, save that paragraph 96 of the Second Further Amended
Statement of Claim is to be taken to be amended to accord with paragraph 168
of the Agreed Statement of Facts;
(ff)
paragraph 13 above;
(gg) paragraph 14 above;
(hh) paragraph 15 above;
(ii)
paragraph 16 above;
(jj)
paragraph 17 above;
(kk) paragraph 19 above;
(ll)
paragraph 20 above;
(mm) paragraph 21 above;
(nn) paragraph 23 above;
(oo) paragraph 24 above;
(pp) paragraph 25 above;
(qq) paragraph 27 above;
(rr)
paragraph 29 above;
(ss) paragraph 30 above;
(tt)
paragraph 31 above;
(uu) paragraph 32 above, save that paragraph 194 of the Second Further Amended
Statement of Claim is taken to be amended to accord with paragraphs 343 and
344 of the Agreed Statement of Facts;
(vv) paragraph 33 above; and
(ww) paragraph 34 above,
- 25 within the meaning of sections 76(1)(e) and 80 (1) (e) of the TPA.
Pecuniary Penalties
38.
An order that Visy pay a pecuniary penalty in the sum of $36 million.
39.
An order that Debney pay a pecuniary penalty in the sum of $1,500,000.
40.
An order that Carroll pay a pecuniary penalty in the sum of $500,000.
Injunctive orders
41.
Visy be permanently restrained, whether by its directors, servants or agents or
otherwise howsoever, from:
(a)
making a contract or arrangement or arriving at an understanding with Amcor
containing one or more of the following provisions or provisions to like effect,
namely that:
(i)
Visy and Amcor permit each other to maintain approximately their
current share of the market in Australia for the supply of CFP;
(ii)
Visy and Amcor not seek to enter into contracts for the supply of CFP
with each other's CFP customers;
(iii)
if, for one reason or another, Visy entered into a contract for the supply
of CFP with a CFP customer of Amcor, then Visy not prevent or seek
to prevent Amcor from entering into a supply contract with a customer
or customers of Visy in order to replace the share of the CFP Market
that Amcor had lost as a result of losing the supply contract to Visy;
(iv)
if, for one reason or another, Amcor entered into a contract for the
supply of CFP with a CFP customer of Visy, then Amcor not prevent
or seek to prevent Visy from entering into a supply contract with a
customer or customers of Amcor in order to replace the share of the
CFP Market that Visy had lost as a result of losing the supply contract
to Amcor; or
- 26 -
(v)
Visy and Amcor collaborate with each other in order to increase the
prices at which they supplied CFP in the CFP Market from their then
current levels;
(b)
giving effect to any contract, arrangement or understanding with Amcor
containing any provision or provision to like effect as one or more of the
provisions set out in sub-paragraph (a) above;
(c)
requesting Amcor to quote a price or prices to a purchaser or potential
purchaser of CFP at or above a level proposed by Visy;
(d)
requesting Amcor to compensate Visy for the loss by Visy to Amcor of
any account for the supply of CFP; or
(e)
communicating to Amcor any price or prices at which Visy supplies or
proposes to supply CFP to a customer or customers in Australia pursuant to
any contract, arrangement or understanding with Amcor containing any
provision referred to in sub-paragraph (a) above or provision to like effect.
42.
Each of Pratt, Debney and Carroll be permanently restrained, by themselves, their
servants or agents or otherwise howsoever, from being in any way, directly or
indirectly, knowingly concerned in, or party to, any conduct of Visy in:
(a)
making a contract or arrangement or arriving at an understanding with Amcor
containing one or more of the following provisions or provisions to like effect,
namely that:
(i) Visy and Amcor permit each other to maintain approximately their
current share of the market in Australia for the supply of CFP;
(ii) Visy and Amcor not seek to enter into contracts for the supply of CFP
with each other's CFP customers;
(iii) if, for one reason or another, Visy entered into a contract for the
supply of CFP with a CFP customer of Amcor, then Visy not prevent
or seek to prevent Amcor from entering into a supply contract with a
- 27 customer or customers of Visy in order to replace the share of the
CFP Market that Amcor had lost as a result of losing the supply
contract to Visy;
(iv) if, for one reason or another, Amcor entered into a contract for the
supply of CFP with a CFP customer of Visy, then Amcor not prevent
or seek to prevent Visy from entering into a supply contract with a
customer or customers of Amcor in order to replace the share of the
CFP Market that Visy had lost as a result of losing the supply
contract to Amcor; or
(v) Visy and Amcor collaborate with each other in order to increase the
prices at which they supplied CFP in the CFP Market from their then
current levels;
(b)
giving effect to any contract, arrangement or understanding with Amcor
containing any provision or provisions to like effect as one or more of the
provisions set out in sub-paragraph (a) above;
(c)
requesting Amcor to quote a price or prices to a purchaser or potential purchaser
of CFP at or above a level proposed by Visy;
(d)
requesting Amcor to compensate Visy for the loss by Visy to Amcor of any
account for the supply of CFP; or
(e)
communicating to Amcor any price or prices at which Visy supplies or proposes
to supply CFP to a customer or customers in Australia pursuant to any contract,
arrangement or understanding with Amcor containing any provision referred to
in sub-paragraph (a) above or provision to like effect.
Other orders
43.
Pratt and each of the first, second and third respondents shall implement within four
months from the date of these orders, and undertake, at Mr Pratt’s expense, for a
period of three years from the date of implementation, a trade practices compliance
program that is in accordance with the Australian Standard for Compliance Programs
AS-3806-1998 and provides for implementation of the program to be audited by an
independent auditor, and is in a form agreed with the ACCC or approved by the
Court, with regard to section 45 of the TPA.
- 28 44.
Visy shall pay the costs of the ACCC of and incidental to this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 1650 OF 2005
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER
COMMISSION
Applicant
AND:
VISY INDUSTRIES HOLDINGS PTY LIMITED
First Respondent
VISY INDUSTRIES AUSTRALIA PTY LIMITED
Second Respondent
VISY BOARD PTY LIMITED
Third Respondent
RICHARD PRATT
Fourth Respondent
HARRY DEBNEY
Fifth Respondent
ROD CARROLL
Sixth Respondent
JUDGE:
HEEREY J
DATE:
2 NOVEMBER 2007
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
TABLE OF CONTENTS
1.0
Introduction .................................................................................................................... [1]
2.0
The CFP market .............................................................................................................. [9]
3.0
Visy’s CFP operations .................................................................................................. [16]
4.0
Visy personnel .............................................................................................................. [31]
5.0
Amcor personnel .......................................................................................................... [35]
6.0
The Over-arching Understanding ................................................................................. [41]
6.1 Giving effect to the Over-arching Understanding ................................................. [48]
7.0
Annual Price Increase Understandings ....................................................................... [61]
-2-
7.1 2000 Price Increase Understanding ....................................................................... [61]
7.1.1 Arriving at the 2000 Price Increase Understanding ..................................... [61]
7.1.2 Giving effect to the 2000 Price Increase Understanding ............................. [63]
7.2 2001 Annual Price Increase Understanding .......................................................... [69]
7.2.1 Arriving at the 2001 Price Increase Understanding ..................................... [69]
7.2.2 Giving effect to the 2001 Price Increase Understanding ............................. [72]
7.3 2002 Price Increase Understanding ....................................................................... [76]
7.3.1 Arriving at the 2002 Price Increase Understanding ..................................... [76]
7.3.2 Giving effect to the 2002 Price Increase Understanding ............................. [79]
7.4. 2003 Price Increase Understanding ....................................................................... [83]
7.4.1 Arriving at the 2003 Price Increase Understanding ..................................... [83]
7.4.2 Giving effect to the 2003 Price Increase Understanding ............................. [89]
8.0
Customer Price Understandings .................................................................................. [93]
8.1 Goodman Fielder and Nestlé ................................................................................. [93]
8.1.1 Arriving at the Goodman Fielder and Nestlé Price Understanding ............. [95]
8.1.2 Giving effect to the Goodman Fielder and Nestlé Price Understanding ..... [97]
8.2 Fosters and Coke Price Understandings .............................................................. [109]
8.2.1 Arriving at the Fosters and Coke Price Understanding ............................. [113]
8.2.2 Giving effect to the Fosters and Coke Price Understanding ...................... [115]
8.3 Mildura Fruit Co Price Understanding ................................................................ [123]
8.3.1 Arriving at the Mildura Fruit Co Price Understanding .............................. [124]
8.3.2 Giving effect to the Mildura Fruit Co Price Understanding ...................... [126]
8.4 National Foods Price Understanding................................................................... [139]
8.4.1 Arriving at the National Foods Price Understanding ................................. [140]
8.4.2 Giving effect to the National Foods Price Understanding ......................... [142]
8.5 Parmalat Price Understanding ............................................................................. [149]
8.5.1 Arriving at the Parmalat Price Understanding ........................................... [150]
8.5.2 Giving effect to the Parmalat Price Understanding ................................... [152]
8.6 Cadbury Schweppes Price Understanding .......................................................... [165]
8.6.1 Arriving at the Cadbury Schweppes Price Understanding ........................ [166]
8.6.2 Giving effect to the Cadbury Schweppes Price Understanding ................. [168]
8.7 Hardy Price Understanding ................................................................................. [176]
8.7.1 Arriving at the Hardy Price Understanding ............................................... [178]
-3-
8.7.2 Giving effect to the Hardy Price Understanding........................................ [182]
9.0
Compensation Understandings ................................................................................... [194]
9.1 Inghams Compensation Understanding............................................................... [194]
9.1.1 Arriving at the Inghams Compensation Understanding............................. [195]
9.1.2 Giving effect to the Inghams Compensation Understanding ..................... [199]
9.2 George Weston Compensation Understanding ................................................... [208]
9.2.1 Arriving at the George Weston Compensation Understanding ................. [209]
9.2.2 Giving effect to the George Weston Compensation Understanding .......... [215]
9.3 OSI/Hans Compensation Understanding............................................................. [227]
9.3.1 Arriving at the OSI/Hans Compensation Understanding........................... [228]
9.3.2 Giving effect to the OSI/Hans Compensation Understanding ................... [232]
9.4 Merino Compensation Understanding................................................................. [241]
9.4.1 Arriving at the Merino Compensation Understanding............................... [242]
9.4.2 Giving effect to the Merino Compensation Understanding ....................... [246]
9.5 Gillette Compensation Understanding ................................................................ [255]
9.5.1 Arriving at the Gillette Compensation Understanding .............................. [256]
9.5.2 Giving effect to the Gillette Compensation Understanding ....................... [259]
10.0 Conduct Concerning Eagle Boys................................................................................ [268]
11.0 Contraventions ............................................................................................................ [286]
12.0 Accessories ................................................................................................................. [293]
13.0 Penalties proposed ...................................................................................................... [297]
14.0 Assessment of penalties .............................................................................................. [302]
15.0 Cartel conduct ............................................................................................................. [306]
16.0 Visy’s conduct ............................................................................................................ [312]
17.0 Mr Pratt’s conduct ...................................................................................................... [322]
18.0 Mr Debney’s conduct ................................................................................................. [327]
19.0 Mr Carroll’s conduct .................................................................................................. [332]
20.0 Other orders ................................................................................................................ [333]
-41.0
1
Introduction
The applicant Australian Competition and Consumer Commission alleges that
between January 2000 and October 2004 companies in the Visy Group and certain
officers of those companies engaged in price fixing and market sharing with
companies in the Amcor Group, contrary to s 45 of the Trade Practices Act 1974
(Cth). The respondents have admitted liability. The Court has been asked to impose
penalties and make other appropriate orders. The parties have tendered an agreed
statement of facts. This means that the parties agree that, for the purposes of this
proceeding, the facts in this statement are not to be disputed: see Evidence Act 1995
(Cth) s 191. The parties say that this agreement is not to be taken as an admission to
those facts outside the context of this proceeding. I am not bound to accept facts
merely because they have been agreed between the parties.
Also I can draw
inferences from such of the agreed facts as are accepted.
2
Visy and Amcor were the major participants in the market for the supply of
corrugated fibreboard packaging (CFP) products in Australia. Between them they
held over 90 per cent of that market.
3
Broadly speaking, the contraventions fall into four categories.
4
First, there was an Over-arching Understanding made in early 2000 under
which Amcor and Visy agreed to maintain their respective market shares and not to
deal with each other’s customers.
If a customer did change suppliers, the firm
receiving that new customer would provide one of its own to the other by way of
“compensation”. In effect, there would be a swapping of customers (although the
customers were not to know this). Further, Visy and Amcor would collaborate with
each other in order to increase prices.
5
Secondly, there were Annual Price Increase Understandings whereby
increases in prices were agreed in each of the years 2000, 2001, 2002 and 2003.
6
Thirdly, there were Customer Price Understandings whereby prices were
agreed in respect of particular customers.
-5-
7
Fourthly, there were Compensation Understandings whereby, in respect of
particular customers who had changed from one supplier to the other, that supplier
would provide another customer or customers in exchange. It worked this way. If,
say, Amcor customer X decided to switch to Visy, Amcor and Visy would get
together and decide on a Visy customer, say Y, who would be provided to Amcor as
“compensation” for the loss of X. When Y’s contract came up for renegotiation, Visy
and Amcor would exchange details of proposed prices and other terms so as to ensure
that the deal offered to Y by Visy was much less attractive than Amcor’s. Y would
then, as Visy and Amcor intended, accept Amcor’s offer.
8
The Commission has not proceeded against those on the Amcor side of this
cartel because in late 2004 Amcor approached the Commission and admitted liability.
The Commission applied its Leniency Policy for Cartel Conduct, published in 2003,
under which the first party to disclose a cartel of which the Commission is unaware
will receive an immunity, provided it is not the “clear leader”, gives full and frank
disclosure, and continues to cooperate with the Commission. In unrelated litigation
Amcor had sued former executives and obtained a Court order for a search of their
premises. Incriminating material, including tape recordings of conversations, was
discovered and on its solicitors’ advice Amcor approached the Commission. Details
of these events will be found in my earlier judgment on an interlocutory application:
Australian Competition and Consumer Commission v Visy Industries Holdings Pty
Ltd (No 2) [2007] FCA 444 at [7]-[52].
2.0
9
The CFP market
A vast range of consumer goods are packaged in CFP.
They include
groceries, beverages, dairy products, fruit, produce, meat, poultry, seafood and
confectionery. Returnable plastic crates, shrink wrap and other packaging products
compete in segments of the CFP market, but otherwise there are no packaging
materials which are reasonably substitutable for, or in close competition with, CFP
products in relation to the packaging of the goods mentioned. CFP is used to make
the ubiquitous cardboard box.
10
The type of CFP products and associated services supplied by Visy and Amcor
-6-
would vary substantially between customers due to differing customer requirements in
terms of board paper type, strength, construction, sheet size, design style, print
characteristics and method of assembly. Different board grates were used in the
manufacture for supply of CFP products to suit the different applications of the
products. Corrugated boxed were supplied in a number of different styles. CFP
products could have printing applied either in a pre-print or post-print process.
11
In most cases CFP products were supplied to the customer’s specifications. In
particular industries, some standard sized CFP boxes were used, such as fruit and
other produce.
However, further value adding could be required such as the
individual customer’s logo or product information.
12
The CFP services supplied by Visy and Amcor in connection with the supply
of CFP products included performance and quality testing, art graphics and printing
services, packaging design, performance and cost optimisation, development services,
tooling and packaging systems, transport and delivery, warehousing of stock and
supply chain cost analysis services.
13
The cost of supplying different CFP products is affected by product type,
dimensions, board grade, printing, order quantity, freight and other factors.
14
From 2000 to 2004 the value of the CFP market was between $1.8 and $2
billion per annum. Details of some individual customers’ requirements have been the
subject of confidential evidence. However, it can be said that some of the larger
customers would have annual purchases of the order of $20 million or more. There
were thousands of non-contract customers who contributed approximately $212
million per annum in gross sales, constituting 30 per cent in value of Visy’s customers
15
Visy and Amcor were in competition with each other in the CFP market,
except where such competition was reduced or eliminated as a result of the cartel
conduct with which this case is concerned.
-73.0
Visy’s CFP operations
The relevant company of the Visy Group is the third respondent Visy Board
16
Pty Limited to which I shall refer hereafter simply as Visy. Visy manufactures CFP
products from both recycled and kraft (ie virgin) paper. It has manufacturing plants at
Dandenong, Campbellfield and (since 2002) Wodonga in Victoria, Warwick Farm
and Smithfield in New South Wales, Carole Park in Queensland; Gepps Cross in
South Australia, and O’Connor in Western Australia.
Visy is a vertically integrated operation. It purchases packaging paper from
17
another member of the Visy Group, Visy Pulp and Paper Pty Ltd, which operates
seven manufacturing establishments in Australia. They produce annually more than 1
million tonnes of packaging paper, of which 750,000 tonnes is made from recycled
paper and 300,000 tonnes from kraft.
Since 2000 the Visy Group has increased its production capacity and
18
production of both pulp and paper products and CFP products.
Since 1995 Visy increasingly experienced production capacity constraints,
19
particularly in Queensland. Transport of products across State borders alleviated
these constraints, but this added to distribution costs. In 2002 Visy’s new Wodonga
plant commenced operation. This substantially increased Visy’s production capacity
for Victoria, New South Wales and South Australia.
The best available estimate of market share of CFP supplied is the estimated
20
share by volume per square metre of CFP sheet manufactured. The following table
sets out the approximate share of the CFP market in Australia between the financial
years 1999 and 2005:
1999
2000
2001
2002
2003
2004
2005
Visy
46
47
49
51
52
53
55
Amcor
47
45
44
42
40
38
36
-8-
21
During the period January 2000 to October 2004 Visy supplied approximately
250 to 300 companies that had been customers of the Amcor Group immediately
beforehand. The estimated annual sales value of those customers was $75 to $80
million per annum. During the same period Visy ceased supplying approximately 100
to 125 companies by reason that they had entered into supply arrangements with the
Amcor Group. Estimated annual sales value of those customers was $40 to $45
million per annum. The numbers of customers moving between Amcor and Visy
during that period includes customers referred to hereafter as having been transferred
as “compensation”.
22
Most of Visy’s and Amcor’s largest customers were supplied under
specifically negotiated contracts. These contracts specified the manner in which
prices would be reviewed during the term of the contract. Typically, prices were held
constant for a period and then increased by a specified fraction of CPI increases or
cost movements.
23
The contracts negotiated between suppliers of CFP and individual customers
dealt with a number of practical matters, including technical specifications of each
product which for some of the large customers could run to sometimes thousands of
different products, order quantities, special palletising requirements, special
packaging equipment, delivery, and timing of deliveries.
24
Such matters affected the price to be charged by suppliers of the CFP for the
products and services to be supplied. The charges could be affected by terms as to the
period during which prices would be held constant and the manner of the increase,
charges for the cost of tooling, volume rebates, discounts for early payment, sign on
fees and contribution to capital requirements of a customer. Contracts sometimes
included a “meet the market” clause by which the customer was entitled to seek prices
from another supplier and, if the supplier did not agree to meet that price, the
customer could obtain supply from the other supplier.
25
The majority of contracts with customers are renewed or extended with the
-9-
existing supplier.
However a customer might seek an offer from an alternative
supplier under a “meet the market” clause. In such a case supply may not change but
the method is used to market check the price levels or competitiveness.
26
If a customer decides to seek an offer or tender from an alternative supplier,
the tender process typically lasts several months and requires substantial expenditure,
both for the potential alternative supplier and the customer. This is because typically
the customer purchases a large number of CFP products and the alternative supplier
must undertake a process of learning about the customer’s requirements and its
current products.
27
An incumbent supplier has a number of advantages during that tender process,
including the existing commercial relationship, a better understanding of the
customer’s product requirements, forecasting schedule and order patterns, current
equipment on site, less transaction costs for the customer, familiarity with the
customer’s intellectual property and technology and the operation of the “better the
devil you know” factor.
28
Costing an offer for a new customer depends on a number of factors including
board grades, box design, printing requirements, the number of passes in the separate
manufacturing task, minimum quantities for each order, the number of stock keeping
units (SKU) that is an individual CFP product with a designated order number,
delivery times and waste levels.
29
During 2000 to 2003 Visy implemented a general price increase to its noncontract customers once a year. Its standard terms and conditions permitted Visy to
increase prices on giving 30 days notice. Visy would determine the amount and date
of the increase and advise its State managers to write to non-contract customers. State
mangers had the discretion to determine whether to implement in respect of any
particular customer the four general price increases which occurred from 2000 to
2003. That discretion was in fact exercised on some occasions.
30
In the two year period to late 1999 both Visy and Amcor had incurred
significant net trading losses due in part to a price war between them. From January
- 10 -
2000 Visy adopted some strategies to return the business to profit including cessation
of free equipment deals, improved trading terms, increased charges for tooling
services and volume focus to shift to retention of large accounts and growth in
small/medium accounts.
4.0
Visy personnel
At the time of the contraventions, the fourth respondent Mr Richard Pratt was
31
a director of Visy. It is a private company owned by Mr Pratt and his family. As can
be seen from the brief description of its operations, Visy is a very large company.
The Visy Group of which it is a member is larger again.
The fifth respondent Mr Harry Debney was the Chief Executive Officer of
32
Visy.
33
The sixth respondent Mr Rod Carroll was the General Manager of Visy.
34
Mr Pratt is still a director of Visy. Mr Debney and Mr Carroll have resigned
their respective positions.
5.0
Amcor personnel
Mr Russell Jones was the Managing Director and Chief Executive Officer of
35
Amcor Limited, the holding company of the Amcor Group and a company listed on
the Australian Stock Exchange.
Mr Peter Brown was the Managing Director of Amcor Australasia, a division
36
of Amcor Limited which conducted the business of manufacturing and supplying
CFP.
37
Mr Peter Sutton was from 1 July to 30 September 2003 Deputy Managing
Director of Amcor Australasia and from 1 October 2003 until 6 December 2004 the
Managing Director of that division.
38
From 1 February 2000 until 30 June 2000 Mr James Hodgson was Group
- 11 -
General Manager, Corrugating, Northern Region, of Amcor Fibre Packaging
Australasia (AFPA), a subdivision of Amcor Australasia. From about 1 July 2000
until 1 October 2004 Mr Hodgson was Group General Manager of AFPA.
From January to July 2000 Mr Edward Laidlaw was General Manager
39
Sales/Group Marketing Executive of Amcor Australasia. From August 2000 until
September 2002 he was General Manager - Sales and Marketing of AFPA. On 2
September 2002 he was appointed General Manager, Sales - Beverage and Processed
Food Packaging of AFPA until 28 February 2003. From 1 March 2003 until 30
November 2004 Mr Laidlaw was Group General Manager, Marketing and
Technology of Amcor Australasia.
From July to December 2001 Mr Ian Sangster was Regional General Manager,
40
Northern Region of AFPA. From January until December 2002 Mr Sangster was
National Marketing Manager for CFP for fresh foods of AFPA. He was Acting
General Manager, Sales and Marketing of AFPA from December 2002 until August
2003. He then was appointed General Manager Sales and Marketing Australia of
Amcor Australasia and remained in this position until October 2004.
6.0
The Over-arching Understanding
Between January and April 2000 Visy and Amcor arrived at the Over-arching
41
Understanding. It contained the following provisions:
(a)
Visy and Amcor would permit each other to maintain approximately their then
current share of the CFP market;
(b)
Visy and Amcor would not seek to enter into contracts for the supply of CFP
with each other’s principal CFP customers;
(c)
If, for one reason or another, Visy did enter into a contract for the supply of
CFP with a principal CFP customer of Amcor, then Visy would not prevent or
seek to prevent Amcor from entering into a supply contract with a customer or
customers of Visy in order to replace the share of the CFP market that it had
lost as a result of losing the supply contract to Visy;
- 12 -
(d)
The converse would apply when Amcor entered into a contract with a
principal CFP customer of Visy;
(e)
Visy and Amcor would, in future, collaborate with each other in order to
increase the prices at which they supplied CFP;
(f)
Visy would appoint Mr Carroll as its nominated contact person with Amcor to
effect the implementation of the Over-arching Understanding; and
(g)
Amcor would appoint Mr Laidlaw as its nominated contact person with Visy.
In these reasons, where there is an account of a conversation, such account is
42
based on the agreed statement of facts. Unless otherwise indicated, the statement of
agreed facts records what was the substance of conversations. It uses the formula “X
said words to the effect that”. It does not purport to be an agreement as to the actual
words used. Also it seems unlikely that the term “Over-arching Understanding” was
actually used at the time.
However, the term captures the essence of the
understanding which the parties arrived at. It is convenient to use it in this descriptive
sense.
43
The Over-arching Understanding was arrived at as a result of a series of
meetings between Mr Debney and Mr Brown at Mr Brown’s home in Glen Iris,
Melbourne between January and April 2000. Mr Debney said to Mr Brown that he
believed it was not in Visy’s interests to continue the price war with Amcor and that
Visy intended to increase its CFP prices to more realistic levels. He said he wanted
the intense competition between Visy and Amcor to cease so that each company could
then sell CFP at sustainable price levels.
44
Mr Debney proposed that Visy and Amcor would continue to enjoy roughly
the current share each had of the CFP market. They would not poach each other’s
customers and prices would be increased from their current unsustainable levels. Mr
Debney said that these proposals were the basic principles which Visy and Amcor
should agree to and abide by. They should comply with those principles and not take
any action which would precipitate a return to price war conditions. He intended to
- 13 -
ensure that Visy abided by these principles.
Mr Brown said that Amcor would agree to act in accordance with the
45
principles proposed by Mr Debney, subject to Visy also agreeing to so act. Mr
Debney said that Visy would. (For the purposes of this proceeding only, Mr Debney
agrees with the version of events generally set out in [42]-[44] save and except that he
does not agree with the precise chronological sequence of the discussions.)
Mr Debney said that he would appoint Mr Carroll to be the Visy nominated
46
contact person between Visy and Amcor on the issues raised. Mr Brown said that he
would appoint Mr Laidlaw to be the Amcor contact person.
In this and other instances of Understandings, the agreed statement of facts
47
says, and I accept, that the Understanding is proved not only by the conversations, but
is also to be implied from the conduct which constitutes giving effect to the
Understandings.
6.1
48
Giving effect to the Over-arching Understanding
Mr Debney told Mr Carroll that he was Visy’s nominated contact person with
Amcor and at around the same time Mr Brown told Mr Laidlaw that he was Amcor’s
nominated contact person.
49
In July 2000 Mr Carroll met with Mr Hodgson and Mr Laidlaw at Rockman’s
Regency Hotel in Melbourne. Mr Carroll or Mr Hodgson said to the other that Visy
and Amcor had agreed that they would not poach each other’s principal CFP
customers, that their respective shares of the CFP market would remain at roughly
their current levels and each would focus on increasing its prices for CFP.
50
Mr Carroll said that he had been appointed as the contact person at Visy with
whom Amcor could discuss issues and that Mr Laidlaw should deal with him. He
said that he would buy Mr Laidlaw a pre-paid mobile phone so that he and Mr Carroll
could contact each other. Mr Hodgson said to Mr Carroll that Visy and Amcor should
agree on minimum floor prices for CFP. Mr Carroll responded that Visy and Amcor
- 14 -
should give some thought to the suggestion and talk about it later.
51
Between July 2000 and November 2004 Mr Carroll and Mr Laidlaw met some
30 to 40 times to discuss issues or matters arising from the Over-arching
Understanding.
These meetings were held at Rockman’s Regency Hotel in
Melbourne, the Tudor Motel in Box Hill, the Elizabethan Lodge in Blackburn North,
Westerfolds Park on Fitzsimons Lane, Templestowe, the Templestowe Park on Porter
Street, Templestowe, the Cherry Hill Tavern in East Doncaster and Myrtle Park on
Severn Street, North Balwyn. Mr Carroll and Mr Laidlaw also discussed matters
arising from the Over-arching Understanding by telephone on numerous occasions.
The telephone discussions were generally initiated from public telephones and
received on Mr Carroll’s or Mr Laidlaw’s mobile telephones. They had exchanged
mobile telephone numbers either at the meeting referred to at [49] – [50] or soon after.
(For the purposes of this proceeding only, Mr Carroll agrees with the version of
events generally set out in this paragraph, save and except that he does not agree that
he and Mr Laidlaw met or spoke on average more than once per month.)
52
In late 2000 Mr Carroll provided Mr Laidlaw with an Optus pre-paid mobile
telephone and the telephone number for it and a new mobile number on which Mr
Laidlaw was to contact him. Mr Carroll told Mr Laidlaw he should use the Optus
mobile for the purpose of contacting him in relation to the Over-arching
Understanding.
53
Between late 2000 and late 2001 Mr Carroll and Mr Laidlaw used their mobile
telephones to contact each other to discuss issues arising from the Over-arching
Understanding.
54
Later in these reasons there is frequent reference to discussions between Mr
Carroll and Mr Laidlaw. Those discussions occurred either at the various venues
referred to in [51] above or by telephone.
55
Between July 2000 and October 2004 Mr Hodgson attended about five to ten
of the meetings between Mr Carroll and Mr Laidlaw.
- 15 -
56
Between mid 2000 and September 2003, about twice to three times per year,
Mr Debney met with Mr Brown to discuss various industry matters and issues or
matters arising from the Over-arching Understanding. These meetings were generally
held at Crown Towers, Southbank.
57
Towards the middle of 2001 Amcor became concerned that the Over-arching
Understanding was in danger of collapsing. On 21 May 2001 at Mr Jones’ request Mr
Pratt met with Mr Jones at the All Nations Hotel in Richmond.
Mr Pratt
communicated to Mr Jones that Visy would adhere to an understanding that Mr
Debney had reached with Mr Brown, that is to say, the Over-arching Understanding.
58
On 27 September 2002 Mr Debney met with Mr Brown at the Crown Crystal
Club in Crown Towers, Southbank. Mr Brown said that Mr Hodgson had some
concerns about Visy’s behaviour in the CFP market and that Mr Hodgson wanted to
meet with Mr Debney to discuss these matters and to have Mr Debney confirm that
Visy would continue to honour the Over-arching Understanding. Mr Debney agreed.
As a result, on 20 October Mr Debney met with Mr Hodgson at Crown Towers to
discuss the Over-arching Understanding.
59
On 3 September 2003 Mr Debney met with Mr Brown and Mr Sutton at the
Crown Crystal Club. Mr Brown said that Mr Sutton had his full confidence and that
he believed that Mr Sutton would be able to work with Mr Debney to continue
implementing the Over-arching Understanding to maintain a stable market.
Mr
Debney said that he believed he could work with Mr Sutton to maintain the stable
market. Mr Sutton said the same thing.
60
Between January and October 2004 Mr Sangster attended about three to five
of the meetings between Mr Carroll and Mr Laidlaw.
- 16 7.0
Annual Price Increase Understandings
7.1
2000 Price Increase Understanding
7.1.1
Arriving at the 2000 Price Increase Understanding
Between January and mid-March 2000 Visy and Amcor arrived at the 2000
61
Price Increase Understanding. It contained provisions to the effect that Visy would
increase its prices for CFP supplied to its non-contract customers by about 7 per cent
with effect from about May 2000 and Amcor would increase its prices by
approximately 7 per cent with effect from the same time.
The 2000 Price Increase Understanding was arrived at as a result of meetings
62
between Mr Debney and Mr Brown between January and mid-March 2000. At the
meetings Mr Debney said to Mr Brown that Visy had conducted an evaluation that a
general price increase was justified and had determined to implement such an
increase. Mr Debney said Amcor should agree to implement a price increase for noncontract customers from around May 2000 and that Visy would lead with an increase
of its prices for non-contract customers of 7 per cent if Amcor would agree to follow
that increase. Mr Brown said to Mr Debney that Amcor would follow a price increase
by Visy for non-contract customers of 7 per cent but Visy must go first.
7.1.2
Giving effect to the 2000 Price Increase Understanding
On 8 March 2000 Visy notified certain of its non-contract customers that its
63
prices for the supply of CFP wax boxes would increase by 8 per cent with effect from
10 April 2000. Wax boxes constitute a very small percentage of boxes supplied to
non-contract customers.
On 21 March 2000 Visy notified certain of its non-contract customers that its
64
prices for the supply of CFP would increase by 7 per cent with effect from 1 May
2000.
65
From about 21 March 2000 Visy sent letters to its non-contract customers
(with some exceptions) informing them that Visy would increase its prices for the
supply of CFP by 7 per cent with effect from 1 May 2000.
- 17 -
From about 11 April 2000Amcor sent letters to its non-contract customers
66
informing them that it would increase its prices for the supply of CFP by 7 per cent
with effect from 8 May 2000.
From about 1 May 2000 Visy increased its prices for the supply of CFP to
67
many of its non-contract customers by 7 per cent.
From about 8 May 2000 Amcor increased its prices for the supply of CFP to
68
its non-contract customers by approximately 7 per cent.
7.2
2001 Annual Price Increase Understanding
7.2.1
69
Arriving at the 2001 Price Increase Understanding
Between October 2000 and January 2001 Visy and Amcor arrived at the 2001
Price Increase Understanding. It contained provisions to the effect that Visy would
increase its prices for CFP supplied to its non-contract customers by approximately
8.25 per cent with effect from about early April 2001 and Amcor would increase its
price for CFP supplied to its non-contract customers by approximately 8.5 per cent
with effect from about mid-March 2001.
70
The 2001 Price Increase Understanding was arrived at in discussions between
Mr Carroll and Mr Laidlaw between about October 2000 and January 2001. Mr
Laidlaw said to Mr Carroll that Amcor wished to increase its prices for its noncontract customers and he was seeking confirmation that Visy would support the
proposed price increase. Mr Laidlaw said that Amcor would lead the proposed price
increase by increasing its prices for non-contract customers by 8.5 per cent in midMarch 2001 and that Visy should follow Amcor’s price increase promptly.
71
Mr Carroll said to Mr Laidlaw that Visy was also proposing to increase its
price to its non-contract customers by a similar percentage and would do so with
effect from the anniversary of the 2000 price increase, on 1 May 2001.
7.2.2
72
Giving effect to the 2001 Price Increase Understanding
From about 19 February 2001 Amcor sent letters to its non-contract customers
- 18 -
advising them that Amcor would increase its prices for the supply of CFP by 8.5 per
cent with effect from 20 March 2001.
From about 5 March 2001 Visy sent letters to its non-contract customers (with
73
some exceptions) informing them that Visy would increase its prices for the supply of
CFP by 8.25 per cent with effect from 9 April 2001.
From about 20 March 2001 Amcor increased its prices for the supply of CFP
74
to its non-contract customers by approximately 8.5 per cent.
From on or about 9 April 2001 Visy increased its prices for the supply of CFP
75
to many of its non-contract customers by approximately 8.25 per cent.
7.3
2002 Price Increase Understanding
7.3.1
76
Arriving at the 2002 Price Increase Understanding
Between December 2001 and February 2002 Visy and Amcor arrived at the
2002 Price Increase Understanding. It contained provisions to the effect that, subject
to making some exceptions of its own choosing, Amcor would increase its prices for
CFP supplied to its non-contract customers by approximately 3.75 per cent with effect
from about mid-March 2002 and, subject to making some exceptions of its own
choosing, Visy would increase its prices for CFP supplied to its non-contract
customers by approximately 3.25 per cent with effect from about early April 2002.
77
The 2002 Price Increase Understanding was arrived at discussions between Mr
Carroll and Mr Laidlaw between December 2001 and February 2002. Mr Laidlaw
said to Mr Carroll that Amcor wished to increase its prices for non-contract customers
in early 2002 by a percentage about equal to the increase in the CPI and Amcor
proposed that the price increase be 3.75 per cent in March 2002.
78
Mr Carroll said that the 3.75 per cent price increase was higher than the price
increase proposed by Visy, that Visy would increase its prices for non-contract
customers but only by about 3.25 per cent. He also said that Visy would make
exceptions for unspecified customers in applying the price increase.
- 19 -
7.3.2
Giving effect to the 2002 Price Increase Understanding
From about 13 February 2002 Amcor sent letters to its non-contract customers
79
of its choosing informing them that it would increase its price for the supply of CFP
by 3.75 per cent with effect from 18 March 2002.
From about March 2002 Visy sent letters to non-contract customers of its
80
choosing informing them that it would increase its prices for the supply of CFP by
between 3.25 and 3.5 per cent with effect from 8 April 2002.
From about 18 March 2002 Amcor increased its prices for the supply of CFP
81
to non-contract customers of its choosing by approximately 3.75 per cent.
From about 8 April 2002 Visy increased its prices for the supply of CFP to
82
some of its non-contract customers of its choosing, by approximately 3.25 to 3.5 per
cent.
7.4.
2003 Price Increase Understanding
7.4.1
Arriving at the 2003 Price Increase Understanding
In the period from approximately October 2002 to January 2003 Visy and
83
Amcor arrived at the 2003 Price Increase Understanding. It contained provisions to
the effect that, subject to making some exceptions of its choosing, Amcor would
increase its prices for CFP supplied to its non-contract customers by approximately
3.5 per cent with effect from about early March 2003, and subject to making some
exceptions of its choosing, Visy would increase its prices for CFP supplied to noncontract customers by approximately 3.25 per cent with effect from about mid-March
2003.
84
The 2003 Price Increase Understanding was arrived at as a result of
discussions between Mr Debney and Mr Hodgson at Crown Towers on or about 20
October 2002. Mr Debney said that Visy was prepared to have another moderate
price increase for non-contract customers. Mr Hodgson said that the increase should
be 3.5 per cent.
- 20 -
85
Mr Debney said that he agreed the increase should be about CPI and the
increase should be announced in the first quarter of 2003 and implemented in March
2003. He said that he did not care whether Visy or Amcor led the price increase and
if Amcor wanted Visy to lead then it would.
86
Mr Hodgson said that Amcor would notify its non-contract customers of the
2003 price increase by a letter in January or February 2003 and implement the
increase in March 2003. Mr Debney responded that Visy would take the same action
for its non-contract customers.
87
In a further discussion between Mr Carroll and Mr Laidlaw between about
December 2002 and January 2003 Mr Laidlaw said that Amcor wished to increase its
prices for its non-contract customers in March 2003 by a percentage about the same as
the increase in CPI, which it expected to be 3.0 to 3.5 per cent and that he was seeking
confirmation that Visy would support the proposed increase.
88
Mr Carroll said to Mr Laidlaw that Visy was also proposing another general
price increase for its non-contract customers, but the increase must be subject to
exceptions, and Visy would increase its prices to its non-contract customers by 3.25
per cent subject to some exceptions.
7.4.2
89
Giving effect to the 2003 Price Increase Understanding
From late January 2003 Amcor sent letters to non-contract customers of its
choosing informing them that Amcor would increase its prices for the supply of CFP
by 3.5 per cent with effect from 3 March 2003.
90
From about mid-February 2003 Visy sent letters to non-contract customers of
its choosing informing them that Visy would increase its prices for the supply of CFP
by 2.5 to 3.25 per cent with effect from 17 March 2003.
91
From 3 March 2003 Amcor increased its prices for the supply of CFP to noncontract customers of its choosing by approximately 3.5 per cent.
- 21 -
From 17 March 2003 Visy increased its prices for the supply of CFP to many
92
non-contract customers of its choosing by approximately 2.5 to 3.25 per cent.
8.0
Customer Price Understandings
8.1
93
Goodman Fielder and Nestlé
Goodman Fielder Limited is one of the largest consumer food manufacturers
in Australia. Its range includes dairy products, bread and frozen foods. It operates a
number of manufacturing sites across Australia.
94
Nestlé Australia Limited is a manufacturer of fast moving consumer goods
such as snack foods, dairy products and powdered beverage products. It also operates
a number of plants across Australia.
8.1.1
95
Arriving at the Goodman Fielder and Nestlé Price Understanding
In early 2001 Visy and Amcor arrived at the Goodman Fielder and Nestlé
Price Understanding. It contained provisions to the effect that Visy would not seek to
enter into contracts for the supply of CFP to Goodman Fielder and Nestlé, two of
Amcor’s principal customers and, if Goodman Fielder or Nestlé requested Visy to
provide a quote for the supply of a quote, Visy would quote prices higher than
Amcor’s prices.
96
The Goodman Fielder and Nestlé Price Understanding was arrived at as a
result of discussions between Mr Carroll and Mr Laidlaw in early 2001. Mr Laidlaw
said to Mr Carroll that he understood that Visy was to “cover” Amcor on the
upcoming tenders for the Goodman Fielder and Nestlé CFP accounts. Mr Carroll
responded that Mr Laidlaw’s understanding was correct.
8.1.2
97
Giving effect to the Goodman Fielder and Nestlé Price
Understanding
In about March to April 2001 Mr Carroll and Mr Laidlaw had a discussion in
which Mr Laidlaw gave Mr Carroll some Amcor pricing levels for use in the
preparation of Visy’s tender for the Goodman Fielder account. Mr Carroll said that
- 22 -
Visy was not interested in picking up the account and would quote prices above the
prices provided by Mr Laidlaw.
98
Goodman Fielder gave Visy a period of time in which to prepare its tender.
The time was particularly short in light of the fact that the tender provided for the
supply of about 1950 stock keeping units (SKUs) (products for which prices were to
be provided).
99
On 11 April 2001 Visy submitted a tender to Goodman Fielder. Amcor
submitted its tender on 27 April.
100
On 22 May Visy submitted a revised proposal to Goodman Fielder. It reduced
its prices by 3.8 per cent across the board by changing quantity breaks and removing
freight costs. Goodman Fielder held the belief that Visy’s prices were higher than
Amcor’s. (I note here that in this and many other instances the statement of agreed
facts uses the formula “Visy’s (or Amcor’s) prices were higher than Amcor’s (or
Visy’s) prices and/or the customer held the belief that the prices were higher”. On
enquiring of senior counsel for the Commission I was told that this formula was the
best agreement that could be reached. Often, he said, it was difficult to tell which
price was, objectively speaking, “higher” because there were not only the dollar
figures, but other elements such as volume discounts, early payment discounts,
minimum orders and the like. It seems to me that at a minimum the statement of
agreed facts accepts that the customer held a belief that one supplier’s prices were
higher than the other. This is the important fact for present purposes. What counts is
what the customer was led to believe as a result of Visy and Amcor putting the
relevant Understanding into effect.)
101
On 8 June Mr Hodgson and Mr Laidlaw of Amcor reached informal
agreement with Mr Rodney Hill of Goodman Fielder for Amcor to supply CFP.
102
On 23 November Amcor and Goodman Fielder entered into a written
agreement for Amcor to supply CFP. The contract was for a term of seven years.
Under the contract Amcor provided substantial benefits to Goodman Fielder such as a
“sign on” payment of $5.794 million and in return Goodman Fielder agreed to price
- 23 -
increases averaging about 10 per cent for its Australian operations.
103
In June 2001 Nestlé requested Visy to participate in a benchmarking exercise
involving providing prices for a limited number of products including bulk bins
currently supplied by Visy. Visy’s primary concern was to retain supply of those
products.
104
Amcor had a five year contract for the supply of CFP to Nestlé which
commenced in 1998. The benchmarking exercise was a mid-term price check. Visy
provided the prices to Nestlé. The prices were generally higher than Amcor’s then
current prices.
105
A benchmarking exercise is difficult because Visy does not know the volume
of business that will be available to it and accordingly cannot factor in the potential
for volume discounts or the potential to deliver cost savings to the customer. Also, in
most benchmarking exercises Visy assumes that the customer is acting under a “meet
the market” clause and that the existing supplier will have the right to match any price
offered by Visy.
106
On 16 July 2001 Amcor informed Nestlé that its existing supply contract had
commenced on 1 January 1999 and had been entered into during the Visy-Amcor
price war.
107
Between October 2001 and February 2002 Mr Carroll and Mr Laidlaw
discussed the Nestlé account on a number of occasions. Mr Laidlaw said that he
wanted to know whether Visy’s negotiations with Nestlé had progressed. Mr Carroll
said that they had not progressed and that he expected Amcor to retain the account.
108
On 11 February 2002 at a meeting between Mr Laidlaw and Nestlé officers,
Amcor and Nestlé reached an informal agreement for Amcor to supply CFP to Nestlé
with a 37 per cent price increase over the three year term of the agreement, without
Nestlé seeking a formal proposal from Visy.
agreement on 23 December 2002.
This was confirmed in a written
- 24 -
8.2
Fosters and Coke Price Understandings
Fosters Group Limited is a manufacturer of alcoholic beverages including beer
109
and wine. It operates a number of manufacturing sites across Australia.
Visy had a seven year contract to supply Fosters’ CFP requirements expiring
110
on 30 June 2003. This agreement provided for half yearly price increases of 80 per
cent of CPI. Having acquired other businesses that purchased CFP from Visy, Fosters
began considering the possibility of consolidating the various agreements. Mr Ron
Brown of Fosters did not consider the existing contracts were uncommercial, but
believed it should be possible to negotiate better terms. He was particularly interested
in annulling further price increases that were due every six months from July 2001
until the expiration of the existing agreement.
In mid-2000 Visy proposed consolidating the existing agreements, extending
111
the agreement to June 2008 and with existing prices to be held firm until 30 June
2002.
112
Coca Cola Amatil Limited (Coke) manufactures carbonated soft drinks, juice
and mineral waters and operates a number of manufacturing sites around Australia.
8.2.1
113
Arriving at the Fosters and Coke Price Understanding
Between January and March 2001 Visy and Amcor arrived at the Fosters and
Coke Price Understanding. It contained provisions to the effect that Amcor would not
seek to enter into a contract for the supply of CFP to Fosters, Amcor would quote
prices to Fosters higher than the prices quoted by Visy, Amcor would not seek to
enter into a contract for the supply of CFP to Coke and Amcor would not quote prices
to Coke higher than the prices Visy quoted.
114
The Fosters and Coke Price Understanding was arrived at meetings between
Mr Debney and Mr Brown between January and March 2001. During those meetings
Mr Debney said to Mr Brown that Amcor should not cause trouble for Visy in the
upcoming tenders to Fosters and Coke.
Mr Brown said that Amcor would not
compete with Visy for Fosters and Coke accounts because they were Visy’s
- 25 -
customers.
8.2.2
Giving effect to the Fosters and Coke Price Understanding
In the period between February and March 2001 Mr Carroll and Mr Laidlaw
115
had a discussion. Mr Laidlaw said to Mr Carroll that he understood Amcor was to
assist Visy to renew its CFP supply contract with Fosters by Amcor quoting prices
higher than Visy’s. Mr Carroll said that Mr Laidlaw’s understanding was correct.
Mr Laidlaw also said that Fosters had requested Amcor to quote on a few
116
product lines and if Amcor’s quote was competitive Fosters would ask Amcor to
quote for all its CFP requirements. Mr Carroll said to Mr Laidlaw that he would
provide the general level of Visy’s prices on the Fosters account to Mr Laidlaw so
that Amcor could “cover” Visy’s prices.
In March 2001 Mr Carroll and Mr Laidlaw had a discussion in which Mr
117
Laidlaw informed Mr Carroll of the Fosters product lines on which Fosters had
requested Amcor to quote and Mr Carroll told Mr Laidlaw the general level of Visy’s
pricing for the Fosters account.
On 22 March 2001 Amcor submitted indicative prices to Fosters for the
118
product lines nominated by Fosters.
In February and March 2001 Visy submitted the proposal to Fosters for a new
119
supply agreement which included incentives additional to those previously offered.
The proposal included:
(a)
that Visy would fund an RA Jones Packer, an item of plant, at a cost to Visy of
$2 million;
(b)
foregoing three half yearly price increases which Visy would have been
entitled to under the existing supply agreement so that prices would not
increase from 1 July 2000 to 30 June 2002 (a saving of approximately $4
million to Fosters for the remainder of the existing contract term to 30 June
2003);
(c)
that Visy would contribute $200,000 to the decommissioning of equipment in
- 26 -
Sydney;
(d)
rebates worth $300,000 per month would continue during the term of the
agreement;
(e)
payment of $900,000 to be used for capital expenditure at Fosters in the
Vinpac and Mildara divisions; and
(f)
a growth rebate in the event sales to Beringer Blass (Fosters wine business) to
exceed $8 million per annum.
Fosters held the belief that Amcor’s prices were higher than Visy’s. This
120
belief was formed in March 2001 by Mr Brown and Mr Chris Anderson of Fosters on
the basis of their review of prices of Visy and Amcor.
In May 2001 Visy entered into a CFP supply agreement with Fosters which
121
included the incentives mentioned.
In respect of Coke, it is not alleged that Visy gave effect to the Fosters and
122
Coke Price Understanding.
8.3
123
Mildura Fruit Co Price Understanding
MFCT Pty Limited, which trades under the name Mildura Fruit Company, is a
fruit packing business in Mildura which acquires citrus fruits from 120 growers along
the Murray River.
8.3.1
124
Arriving at the Mildura Fruit Co Price Understanding
In early December 2001 Visy and Amcor arrived at the Mildura Fruit Co Price
Understanding. It contained provisions to the effect that both Visy and Amcor would
seek the continuing of their then current supply of CFP to Mildura Fruit Co, part of
the customer’s requirements being supplied by Visy and the remainder by Amcor.
Each of Amcor and Visy would increase its prices by approximately the same amount
from the expiration of the term of their then current supply agreements, Visy’s on 31
March 2002 and Amcor’s on 31 May 2002.
125
The Mildura Fruit Co Price Understanding was arrived at after discussions
- 27 -
between Mr Carroll and Mr Laidlaw in early December 2001. One of them said that
Visy and Amcor needed to increase prices for citrus boxes in the Murray River
region, including the price of citrus boxes that they supplied to Mildura Fruit Co. The
other agreed and said they should agree on a target price.
8.3.2
126
Giving effect to the Mildura Fruit Co Price Understanding
Prior to the 2001 to 2002 contract renewal negotiations between Visy and
Mildura Fruit Co that firm’s CFP requirements, including a product called the C-6
citrus box, were jointly supplied by Visy and Amcor.
127
In the period from early December 2001 to early January 2002 Mr Laidlaw
asked Mr Carroll whether Visy was prepared to increase its price for the C-6 box by
about 12 per cent above the current level in the first year of its new contract.
128
Mr Carroll said that Visy would increase its price for the C-6 box by about 12
per cent as proposed. Mr Laidlaw said Amcor would also increase its price for the C6 box by about 12 per cent.
129
On 12 December 2001 Visy submitted a proposal to Mildura Fruit Co for the
supply of CFP by Visy for three years commencing on 1 April 2002 at prices
approximately 12 per cent higher than the current prices.
130
On 13 December Mr Craig Madden and Mr Ian Hengsen of Amcor met with
Mr Russell Witcombe of Mildura Fruit Co in Mildura. Mr Madden said to Mr
Witcombe that Amcor would need to increase the prices it charged to Mildura Fruit
Co by 50 per cent over the life of the new supply contract in order for Amcor to
recover its costs.
131
Also on 13 December Mr George Chrisakis of Visy met Mr Witcombe at
Mildura. Mr Chrisakis tabled the proposal referred to in [128] above and said to Mr
Witcombe that the proposal represented a 12.45 per cent price increase on existing
prices, that the price increase was the aggregate of the price increases for Visy’s noncontract customers during the period of Mildura Fruit Co’s contract, less the 2.8 per
- 28 -
cent price increase that Mildura Fruit Co had received in 2001 and that the prices
would be held firm for two years.
132
On 21 December 2001 during telephone discussion between Mr Chrisakis and
Mr Witcombe Visy withdrew its original proposal and submitted a revised supply
proposal which did not contain a fixed percentage or minimal annual sales
requirement and was for a term of twelve months with a price increase of
approximately 12.45 per cent.
133
On 18 January 2002 Amcor submitted a supply agreement proposal for
Mildura Fruit Co incorporating, amongst other things, a price increase of 12 per cent
in the first year of the contract.
134
On 29 January Visy submitted a supply agreement to Mildura Fruit Co for a
term of three years incorporating a price increase of 12.45 per cent in the first year of
the agreement and containing several variations from Visy’s then current supply
agreement, including the absence of any fixed percentage or minimum annual sales
requirement.
135
On about 4 February Visy submitted prices to Mildura Fruit Co by fax
incorporating a 12.45 per cent price increase over its current prices. Visy’s prices
with respect to the C-6 and C-31 citrus boxes as quoted to Mildura Fruit Co for 2000
and 2001 supply were similar to or less than the prices charged to a large number of
Visy’s non-contract fruit grower customers in South Australia.
136
In early February 2002 Mr Laidlaw and Mr Carroll had a discussion in which
Mr Carroll confirmed to Mr Laidlaw that Visy would increase its prices to Mildura
Fruit Co by 12 per cent in the first year of its new supply contract.
137
On 15 February Mr Laidlaw, Mr Madden and Mr Curtain of Amcor met with
Mr Witcombe in Mildura and reached and in principle agreement for Amcor to supply
CFP, which agreement included a price increase of approximately 10 per cent in the
first year of the supply.
- 29 -
In March 2002 Amcor and Mildura Fruit Co executed a formal contract for
138
Amcor to supply CFP which provided for the price increase of approximately 10 per
cent in the first year of supply and included a requirement for Mildura Fruit Co to
purchase at least 50 per cent of its annual CFP requirements from Amcor, a four year
term, a price increase of 6 per cent from 1 March 2003, 6 per cent from 1 March 2004
and a CPI price increase from 1 March 2005 and 10,000 minimum order quantities.
8.4
139
National Foods Price Understanding
National Foods Limited is a manufacturer of dairy products and related foods.
It has a number of manufacturing plants across Australia. In early 2002 Amcor
supplied most of National Foods’ CFP requirements. Visy supplied CFP to National
Foods’ Vitasoy division in Wodonga under a contract expiring on 31 August 2003
and to three other small locations.
8.4.1
140
Arriving at the National Foods Price Understanding
In mid to late April 2002 Visy and Amcor arrived at the National Foods Price
Understanding. It contained provisions to the effect that both Visy and Amcor would
seek continuation of their then current supply of CFP to National Foods whereby part
of the customer’s requirements were supplied by Amcor and the remainder by Visy
and, both Visy and Amcor would ensure that their tender prices reflected the
additional CFP manufacturing costs which would be required to meet National Foods’
product specifications. Visy and Amcor would discuss with each other the prices
each proposed to include in its tender. In respect of the parts of the National Foods’
CFP requirements supplied by the other, both Visy and Amcor would tender prices to
National Foods which were generally higher than those submitted by the incumbent
supplier.
141
The National Foods Price Understanding was arrived at in discussions
between Mr Carroll and Mr Laidlaw in mid to late April 2002. One of them said to
the other that in their respective responses to a request for tender to supply National
Foods, which was particularly complex as it specified many quantity breaks on many
products lines, both Visy and Amcor should ensure that product specifications in the
National Foods request that would increase the cost of supply were reflected in the
- 30 -
tender prices submitted by each of them. The other agreed. One of them said that
they would need to meet again and spot check the tender prices each proposed to
submit so that each would be well positioned to obtain its existing share of National
Foods’ business. The other agreed to this proposal.
8.4.2
Giving effect to the National Foods Price Understanding
In late April or early May 2002 Mr Carroll and Mr Laidlaw had a discussion
142
in which Mr Laidlaw asked Mr Carroll the prices Visy proposed to submit to National
Foods in respect of approximately twelve to fifteen product lines then supplied by
Amcor. Mr Carroll informed Mr Laidlaw of those prices. Mr Laidlaw said that
Amcor would “cover” Visy’s prices for the National Foods’ sites then supplied by
Visy. Mr Carroll responded that Visy would “cover” Amcor’s prices for the National
Food sites then supplied by Amcor.
In May 2002 Amcor submitted a proposal to National Foods for the supply of
143
CFP. Visy supplied a proposal on 10 May 2002. On 21 May Visy submitted a
revised price schedule.
On 3 June Visy submitted a further revised price schedule reducing its pricing
144
for certain product lines. On 24 June Amcor submitted a revised price proposal.
Amcor entered into a supply agreement with National Foods which did not
145
include the Vitasoy division (which remained under contract to Visy). Amcor’s
agreement included the following terms: a $1 million sign on fee, reduced pricing on
certain product lines at the Morwell site as compared to the pricing included in
Amcor’s proposal and a 6 per cent rebate on volume greater than 8.2 million square
metres.
146
In relation to the prices for CFP in Visy’s revised proposal of 3 June 2002 and
Amcor’s proposal of 24 June 2002 ([144] above), National Foods, through its
representatives Mr Paul Pafumi and Mr David Koch, believed that Visy’s average
prices were higher than Amcor’s average prices for the sites supplied by Amcor
(except for the Salisbury site).
- 31 National Foods, though Mr Pafumi and Mr Koch, held the belief that Amcor’s
147
average prices were higher than Visy’s for the sites then supplied by Visy.
On 20 June 2002 National Foods informed Amcor that it accepted its proposal.
148
In June or July 2002 National Foods informed Visy that National Foods accepted its
proposal.
8.5
149
Parmalat Price Understanding
Parmalat Australia Limited is a manufacturer of dairy products. It operates
sites located in Queensland, Victoria and the Northern Territory.
8.5.1
150
Arriving at the Parmalat Price Understanding
In early 2003 Visy and Amcor arrived at the Parmalat Price Understanding. It
contained a provision to the effect that Visy would not seek to enter into a contract for
the supply of CFP to Parmalat, one of Amcor’s then principal customers.
The
Parmalat Price Understanding also contained provisions that Visy would discuss with
Amcor the prices Visy proposed to include in its tender to Parmalat and Visy would
submit CFP tender prices to Parmalat which were higher than those submitted by
Amcor to Parmalat.
151
The Parmalat Price Understanding was arrived at as a result of discussions
between Mr Carroll and Mr Laidlaw in early 2003. Mr Laidlaw said that Amcor was
concerned to retain the Parmalat account as Amcor had recently lost volume to Visy.
Either Mr Carroll or Mr Laidlaw said that they should compare the prices that they
would each quote to Parmalat so as to ensure that Amcor obtained the Parmalat
account. The other one agreed.
8.5.2
Giving effect to the Parmalat Price Understanding
152
On 11April 2003 Parmalat issued an invitation to Visy and Amcor to tender.
153
Between April and late June Mr Carroll and Mr Laidlaw had a discussion
during which Mr Laidlaw told Mr Carroll the prices that Amcor proposed to quote
Parmalat. Mr Carroll said that he considered Amcor’s prices were too high.
- 32 -
Shortly after this discussion Mr Carroll and Mr Laidlaw had further
154
discussions during which Mr Carroll told Mr Laidlaw the prices Visy would tender to
Parmalat for certain Parmalat product lines. Mr Laidlaw said that he was concerned
that Visy’s prices for some product lines were below Amcor’s current prices and that
the Visy tender prices were too low.
On 1 July 2003 Amcor submitted a proposal to supply CFP to Parmalat
155
incorporating a price increase over Amcor’s then current supply prices. Mr Laidlaw
was not directly involved in the tender negotiations.
156
In July 2003 Visy submitted a proposal to Parmalat.
157
Later that month Mr Carroll and Mr Laidlaw had further discussions in which
they discussed the prices that Visy and Amcor were quoting to Parmalat.
158
In July or early August Amcor submitted a revised proposal to Parmalat.
159
Parmalat, through its representative Mr Kevin Goos, held the belief, on the
basis of his review of the proposed prices of Visy and Amcor, that Visy’s prices were
higher.
160
In July or August 2003 Mr Goos had a discussion with Mr Lloyd in which Mr
Goos said that Visy’s prices in the Northern Territory and Victoria were too high and
much higher than Parmalat’s current prices. Mr Lloyd said he would check the prices.
161
On 8 August 2003 Visy submitted a revised proposal to Parmalat.
162
In relation to Visy’s revised proposal of 8 August 2003 some of the products
which were to be supplied in the Northern Territory had initially been priced for
supply out of Carole Park in Queensland. Some of those products were re-priced for
supply from Gepps Cross in South Australia. Visy’s revised proposal showed a 14.2
per cent reduction of the prices to be supplied in the Northern Territory, the effect of
revising prices for lower board grades for some products and a correction of an
anomaly for one of the product lines in which an amount more than ten times the
- 33 -
correct price had initially been concluded.
Parmalat through Mr Goos held the belief, on the basis of the review of the
163
proposed prices of Visy and Amcor, that Visy’s prices were higher than Amcor’s.
On about 2 August 2004 Amcor entered into a supply agreement with
164
Parmalat for the supply of CFP with effect from 1 January 2004.
8.6
165
Cadbury Schweppes Price Understanding
Cadbury Schweppes Pty Limited is a manufacturer of non-alcoholic beverages
and confectionery products. It operates a number of plants across Australia.
8.6.1
166
Arriving at the Cadbury Schweppes Price Understanding
Between May and June 2004 Visy and Amcor arrived at the Cadbury
Schweppes Price Understanding. It contained a provision to the effect that Visy
would not seek to enter into a contract for the supply of CFP to the food and beverage
division of Cadbury Schweppes, one of Amcor’s then principal customers. The
Cadbury Schweppes Price Understanding also contained provisions that Visy would
discuss the prices it proposed to include in its tender to Cadbury Schweppes and that
it would submit CFP tender prices to Cadbury Schweppes which were higher than
those submitted by Amcor. The understanding did not extend to CFP products known
as “microflute”.
167
The Cadbury Schweppes Price Understanding was arrived at, or as a result of,
meetings between Mr Carroll and Mr Laidlaw between May and June 2004. Mr
Carroll said to Mr Laidlaw that Cadbury Schweppes had asked Visy to quote on some
selected product lines of CFP under a new supply agreement. One or the other said
that they needed to compare Amcor’s current prices with the prices Visy proposed to
quote to Cadbury Schweppes and the other agreed.
8.6.2
168
Giving effect to the Cadbury Schweppes Price Understanding
In about May 2004 Amcor submitted a proposal to Cadbury Schweppes
incorporating an 8.4 per cent price increase over Amcor’s then current prices.
- 34 -
169
Mr Carroll and Mr Laidlaw had a meeting at Myrtle Park at which Mr Laidlaw
asked Mr Carroll what price Visy proposed to quote to Cadbury Schweppes for
certain product lines. Mr Carroll told him Visy’s level of pricing. Mr Laidlaw said
the Visy proposed levels were too low. Mr Carroll said he would take Mr Laidlaw’s
comments on board.
170
On 11 June Visy submitted a proposal to Cadbury Schweppes for
approximately 21 product lines (none of which were microflute lines) based on the
minimum order quantity of 2000 units.
171
In relation to the prices proposed by Amcor and Visy, Cadbury Schweppes,
through its representative Mr Rick Thorpe, held the belief, on the basis of his review
of the proposed prices by the two companies, that Visy’s average prices were higher
than Amcor’s.
172
In late June Mr Thorpe told Mr Lloyd that Visy’s proposal was uncompetitive
and invited Visy to submit a revised proposal.
173
On 1 July Visy submitted a revised proposal containing prices for
approximately 21 product lines. It restated the prices in the June proposal for a
minimum order quantity of 2000 units and also quoted reduced prices for a minimum
order quantity of 5000 units (again not including microflute). The amount of the
reduction varied depending on carton style ranging from 3 per cent to 5 per cent.
174
In relation to the prices proposed by Amcor in May and prices proposed by
Visy on 1 July, Cadbury Schweppes held the belief, on the basis of its representatives’
review of the proposed prices, that Visy’s average prices were higher than Amcor’s.
175
On 17 August 2004 Mr Laidlaw and Mr Thorpe reached an in principle
agreement with Cadbury Schweppes for the supply of CFP. The terms included a five
year term (Visy only offered a three year term as per the tender request), a $2 million
signing on fee, extending Folding Carton board contract for a further three years and a
2.5 per cent rebate on incremental sales.
- 35 -
8.7
Hardy Price Understanding
Hardy Wine Company Limited is a wine producer with wineries in New South
176
Wales, Victoria, South Australia and Western Australia.
In 2004 it operated its business out of Reynella and Berri in South Australia,
177
Houghton in Western Australia and Buronga in New South Wales.
Its CFP
requirements were supplied by both Amcor and Visy. Visy supplied about 15 per
cent of the total requirements. It supplied Berri, 30 per cent of Reynella and 10 per
cent or less of Houghton. Hardy desired to have at least two suppliers. In mid-2004
Hardy was acquired by the Constellation Group. On 28 July 2004 Hardy issued a
request for a proposal to Visy placing all its CFP requirements in Australasia up for
tender.
8.7.1
178
Arriving at the Hardy Price Understanding
Between July and October 2004 Visy and Amcor arrived at the Hardy Price
Understanding. It contained provisions to the effect that both Visy and Amcor would
seek continuation of their then current supply of CFP to Hardy whereby part of the
customer’s requirement was supplied by Visy and the remainder by Amcor, and that
Visy and Amcor would discuss with each other the prices each proposed to include in
its tender to supply CFP.
179
The Hardy Price Understanding also contained a provision to the effect that in
respect of parts of Hardy’s CFP requirements supplied by the other, both Visy and
Amcor would submit tender prices which were generally higher than those submitted
by the incumbent supplier.
180
The Hardy Price Understanding was arrived at in discussions between Mr
Carroll and Mr Laidlaw between July and October 2004.
181
Either Mr Carroll or Mr Laidlaw said to the other that it would be a fair
outcome that the existing supply arrangements for each Hardy production site should
be maintained so that Amcor would continue to supply the Buronga site and the
majority requirements for the Reynella site. Visy would continue to supply Berri, a
- 36 -
minority share at Reynella and the Houghton site. Either one or the other said that
they would need to exchange prices in dollars per tonne for each Hardy production
site in order to cover each other’s prices so that the current supply positions would be
maintained. The other agreed to the exchange of prices.
8.7.2
182
Giving effect to the Hardy Price Understanding
On about 28 July 2004 Visy received a Request for Proposal from
Constellation Brands Inc in respect of the supply of CFP for Constellation Brands in
North America, Europe, Canada, Australia and New Zealand.
183
On about 6 or 9 August Mr Carroll and Mr Laidlaw had a discussion in which
they informed each other of the prices in dollars per tonne each proposed to submit to
Hardy in respect of sites it currently supplied. Each agreed to cover the other’s prices.
184
On 13 August each of Amcor and Visy submitted proposals to Hardy for the
supply of CFP.
185
Between 30 August and about November Mr Mick Scammell and Ms Meg
Molenaar of Hardy met with Mr Chrisakis and Mr Neil Furniss of Visy at Visy’s
Gepps Cross plant and at Hardy’s Reynella production site in South Australia. The
participants identified product lines which Mr Scammell said were okay and product
lines to which Mr Scammell said Visy’s prices were higher than Amcor’s prices. Mr
Scammell invited Visy to submit an amended tender with lower prices for the latter
product lines. Visy subsequently resubmitted lower prices for various lines.
186
Between 30 August and 16 November Mr Scammell and Ms Molenaar met
with Mr Gerry Peterson of Amcor on at least six occasions at Amcor’s South
Australian plant and Hardy’s Reynella production site.
Mr Scammell and Ms
Molenaar identified product lines for which Amcor’s tendered price was higher than
Visy’s tender price and invited Amcor to submit an amended tender with lower prices
for those product lines.
187
In mid to late September
Mr Carroll and Mr Laidlaw had a discussion
- 37 -
concerning the feedback Amcor had received from Hardy about the tender prices
Amcor had submitted. Mr Laidlaw’s intention was to check whether the information
Mr Scammell had provided about Amcor’s competitiveness was correct. Mr Laidlaw
said that Amcor’s prices for some product lines at Hardy’s Reynella site were higher
than some of Visy’s prices and they should compare tender prices. Mr Carroll said he
would compare those tender prices with Mr Laidlaw.
188
On about 5 or 6 October Mr Carroll and Mr Laidlaw had a further discussion
in which, at Mr Laidlaw’s request, Mr Carroll informed Mr Laidlaw of Visy’s prices
and product lines for which Amcor’s tender price were higher than Visy’s. This
exchange confirmed to Mr Laidlaw that the Visy prices provided by Mr Scammell to
Amcor were correct.
189
On 8 October Amcor submitted a revised tender process to Hardy
incorporating the lower prices for product lines referred to in the meetings with Mr
Scammell and Ms Molenaar.
190
In October Visy also submitted revised prices. On certain product lines the
prices were reduced by 4.8 per cent.
191
On about 26 November Mr Scammell and Mr Gerry Peterson, Amcor’s Sales
Manager for South Australia, had a telephone discussion in which Mr Scammell
informed Mr Peterson of the CFP business that Hardy had decided to award to
Amcor. Hardy was conscious of staying above the minimum annual spent with
Amcor to ensure it continued to obtain the advantage of receiving a 9 per cent rebate
on all purchases from Amcor.
192
On 26 November Ms Molenaar sent an email to Mr Neil Furniss and Mr Tony
Kane of Visy informing them that Visy would retain its current share of supply of
CFP to Hardy’s Berri site and would increase its share of supply of CFP products to
the Reynella site. When the tender was determined, Amcor succeeded in obtaining
approximately $13.3 million of Hardy’s business.
Visy succeeded in obtaining
approximately $2.9 million of the business including approximately 150 lines
formerly supplied by Amcor equating to an annual spend of $633,000.
- 38 -
In December 2004 Visy provided Hardy with a draft contract which contained
193
an additional term offering a volume rebate of 5 per cent on sales exceeding $3.25
million.
9.0
Compensation Understandings
9.1
194
Inghams Compensation Understanding
Inghams Enterprises Pty Limited is the largest producer of chicken and turkey
meat in Australia. It operates a number of processing sites across Australia.
9.1.1
195
Arriving at the Inghams Compensation Understanding
In early 2001 Visy learned that its former contracted CFP customer Lion
Nathan Australia Pty Limited had awarded its CFP business to Amcor. Visy and
Amcor arrived at the Inghams Compensation Understanding. It contained provisions
to the effect that Amcor would compensate Visy for the CFP volume Visy had lost as
a result of Amcor entering into a supply agreement with Lion Nathan and Amcor
would allow Visy to enter into a CFP supply agreement with Inghams, an existing
customer of Amcor, as compensation.
196
The Inghams Compensation Understanding was arrived at in discussions
between Mr Debney and Mr Brown. In early 2001 Mr Brown and Mr Debney met at
a hotel in Melbourne. The meeting may have been at Mr Brown’s request. Mr Brown
told Mr Debney that Amcor had won the account for supply of CFP to Lion Nathan.
Mr Debney said that he was upset that Amcor had taken the Lion Nathan account and
that he and Mr Brown had agreed that it was a term of the arrangement between Visy
and Amcor that there would be no poaching of major customers. Mr Debney also said
that Amcor had breached this term by taking the Lion Nathan account and that Visy
required Amcor to compensate it for the volume that Amcor had taken.
197
Mr Brown believed that it was in Amcor’s interest to placate Visy because
Amcor wanted to have price stability in the market and did not want to return to a
price war. Mr Brown requested Mr Hodgson and Mr Laidlaw to identify accounts
that were not considered to be highly profitable to Amcor, or that Amcor considered
- 39 -
Visy was likely to gain in any event. Mr Brown and Mr Hodgson decided to offer
Visy a number of accounts including Inghams and some smaller accounts.
198
In a subsequent discussion held by telephone or at Crown Towers, Southbank
in February 2001 Mr Brown said to Mr Debney that Amcor would allow Visy to take
the Inghams account as compensation for Lion Nathan.
9.1.2
199
Giving effect to the Inghams Compensation Understanding
In about late January or February 2001 Mr Carroll and Mr Laidlaw had a
discussion by telephone in which Mr Laidlaw confirmed that Amcor would allow
Visy to take the Inghams supply contract and Mr Carroll confirmed that Visy would
target the Inghams contract in an attempt to take it from Amcor.
200
During this discussion Mr Laidlaw said to Mr Carroll that Amcor would allow
Visy to take a package of CFP accounts, including Inghams, the Amcor part of the
Effem Foods Pty Limited account (approximately 10 per cent), Chisholm & Co Pty
Limited’s Queensland operation, Bush’s Pet Foods Pty Limited, P&M Quality
Smallgoods Pty Limited and Hansell’s (New Zealand) Limited. Mr Laidlaw said that
in total the tonnage of these packages was the same as the tonnage for the Lion
Nathan account and that he understood that Mr Brown and Mr Debney had spoken
and agreed in principle to the package.
201
Mr Carroll said that he accepted the Inghams account but that the other
accounts offered were unacceptable. He said he wanted a more prestigious account
instead of the others offered.
202
After February 2001 Mr Carroll and Mr Laidlaw had a meeting at which Mr
Laidlaw told Mr Carroll the average dollar per tonne price that Amcor proposed to
quote to Inghams in its proposal to supply CFP.
203
In the period from approximately February to May 2001 Amcor submitted a
supply contract proposal to Inghams.
It provided for a price increase of
approximately 14 per cent from its then current prices.
- 40 -
In about May 2001 Visy submitted a proposal to Inghams. The proposal
204
included an innovative product, relating to the box tray and other high use items
which were advantageous to Inghams. The proposal included firm prices until 30
June 2002, transition tooling being absorbed by Visy, and a volume rebate.
In
addition packaging systems worth $507,000 were to be funded by Visy (initially
proposed $932,000).
On 29 May Visy reviewed the proposal, reducing some prices and removing
205
some product lines. The final proposal submitted to Inghams provided for prices
approximately 7 per cent less than Amcor’s then current prices to Ingham’s and
greater with rebate.
206
Inghams held the belief that Amcor’s prices were higher than Visy’s prices.
207
On about 24 September 2001 Visy entered into a contract for the supply of
CFP to Inghams with effect from 1 July 2001.
9.2
208
George Weston Compensation Understanding
George Weston Foods Limited is a manufacturer of fast moving consumer
goods, including bakery, dairy and meat products. In mid-2001 Amcor supplied
George Weston’s bakery and cakes division (approximately 70 per cent of the
company’s CFP requirements) and Visy supplied CFP to George Weston’s meat and
dairy division.
9.2.1
209
Arriving at the George Weston Compensation Understanding
In about May 2001 Visy acquired and Amcor lost the account to supply CFP
to The Smith’s Snackfood Company Limited as compensation for Amcor taking Lion
Nathan from Visy. In about June or July 2001 Amcor formed the view that Visy had
been over-compensated for its loss of the Lion Nathan account by the acquisition of
the Inghams and Smith’s accounts. In mid-2001 Visy and Amcor arrived at the
George Weston Compensation Understanding. It contained a provision to the effect
that Visy would compensate Amcor for the CFP volume Amcor had lost as a result of
Visy entering into supply agreements with Inghams and Smith’s.
- 41 -
210
The George Weston Compensation Understanding also contained a provision
to the effect that Visy would allow Amcor to enter into a CFP supply agreement with
George Weston’s meat and dairy division, to which Visy supply CFP, as
compensation to Amcor for Visy entering the supply agreements with Inghams and
Smith’s.
211
The George Weston Compensation Understanding was arrived at in discussion
between Mr Debney and Mr Brown in June or July 2001. Mr Brown said to Mr
Debney that by getting Inghams and Smith’s, Visy had recovered more than the
volume it had lost as a result of Amcor taking Lion Nathan and Visy would therefore
need to compensate Amcor. Mr Debney said to Mr Brown that Visy had recovered
more volume from Amcor than it should have and Mr Carroll and Mr Laidlaw could
address this imbalance in their discussions.
212
Following this discussion, there was a further meeting between Mr Carroll and
Mr Laidlaw in July 2001 in which Mr Carroll said that Visy took Smith’s because it
wanted Inghams and a second prestigious account as compensation for the loss of the
Lion Nathan account, and that Smith’s was appropriate and the timing was right. Mr
Carroll also said to Mr Laidlaw that he understood that the Inghams and Smith’s
account jointly represented more than the Lion Nathan account in volume and that he
and Mr Laidlaw would need to agree on what Visy customers would be offered to
Amcor as compensation for Visy taking that excess volume.
213
In a series of further discussions between Mr Carroll and Mr Laidlaw in July
and August they each discussed the accounts that Amcor could receive as
compensation.
214
At a further discussion in August Mr Laidlaw said that Amcor would accept
the George Weston meat and dairy division account and the OSI (NSW) division
account as compensation for Visy taking the Inghams and Smith’s accounts. Mr
Carroll said that he would not object and would not react strongly if Amcor took the
accounts.
- 42 -
9.2.2
215
Giving effect to the George Weston Compensation Understanding
In the period from September 2001 to March 2002 Mr Carroll and Mr Laidlaw
had a discussion in which Mr Carroll told Mr Laidlaw the prices at which Visy
proposed to quote for the George Weston meat and dairy division following the
expiry of Visy’s CFP supply agreement with George Weston on 31 December 2001.
216
On about 8 January 2002 Visy submitted a proposal to George Weston for the
continued supply of CFP to George Weston’s meat and dairy division at prices above
Visy’s then current prices.
217
On 13 February Visy submitted a revised proposal to George Weston for the
continued supply of CFP to George Weston’s meat and dairy division at increased
prices. The letter offered two options to George Weston. Option 1 was that existing
price levels would increase by 7 per cent effective 1 March 2002 and would remain in
place until 31 December 2002. Option 2 was that the existing price levels would be
increased by 3 per cent effective 1 March 2002 and then by a further 3 per cent
effective 1 March 2003 and then remain firm. The term of the agreement under
Option 2 was to be two years commencing 1 March 2002. The Don Smallgoods
subdivision of George Weston’s meat and dairy division had received a 19 per cent
reduction (taking into account a volume rebate, subject to its applicability) from Visy
in December 2000 and Visy’s prices to George Weston had otherwise been held firm
for two years (whereas non-contract customers had received price increases).
218
On 25 March Mr Peter Lloyd, National Marketing Manager of Visy, sent an
email to Mr Maurice Hibbert of George Weston informing him that Visy wanted to
implement the price increases for the continued supply of CFP to George Weston’s
meat and dairy division with effect from 1 April 2002.
219
On 27 March Mr Lloyd sent an email to Mr Hibbert stating that Visy would
increase the prices at which it supplied CFP to George Weston’s meat and dairy
division with effect from 1 May 2002.
220
In March on or about 11 and 17 April and 14 May Amcor submitted proposals
- 43 to George Weston for the supply of the whole of George Weston’s CFP requirements.
On or about 24 April Visy submitted a proposal to George Weston for the
221
supply of CFP in respect of George Weston’s meat and dairy division manufactured at
George Weston’s plant in Altona, Victoria.
On about 26 and 29 April Visy submitted proposals to George Weston for the
222
supply of CFP to George Weston’s baking division and biscuit and cake division.
On 29 April Visy again informed George Weston by way of a letter from Mr
223
Carroll to Mr Hibbert that Visy would increase the prices at which it supplied CFP to
George Weston’s meat and dairy division with effect from 1 May 2002.
On or about 15 May 2002 Amcor submitted a revised proposal to George
224
Weston for the supply of the whole of George Weston’s CFP requirements. Amcor’s
price was based on the use of kraft paper, which is more expensive but stronger and
therefore does not require as much paper in terms of weight per metre. Amcor did not
need to obtain Visy’s prices because George Weston provided Visy’s pricing to
Amcor.
In relation to the prices for CFP proposed by Visy and Amcor, George
225
Weston’s representative Mr Hibbert formed a belief in about April or May 2002, on
the basis of his review of the proposed prices of Visy and Amcor, that Visy’s prices
were higher.
In about August 2002 Amcor entered into a contract for the supply of the
226
whole of George Weston’s CFP requirements.
9.3
227
OSI/Hans Compensation Understanding
OSI International Foods (Australia) Limited is a manufacturer of delicatessen
and smallgoods products. It has manufacturing sites down the Eastern Seaboard.
Hans Continental Smallgoods Pty Limited purchased OSI’s business in New South
Wales prior to December 2003.
- 44 -
9.3.1
228
Arriving at the OSI/Hans Compensation Understanding
In about mid-2001 Visy and Amcor arrived at the OSI/Hans Compensation
Understanding. It contained a provision to the effect that Visy would compensation
Amcor for the CFP volume Amcor had lost as a result of Visy entering into supply
agreements with Amcor’s former customers Inghams and Smith’s. The OSI/Hans
Compensation Understanding also contained a provision that Visy would allow
Amcor to enter into a CFP supply agreement with OSI, an existing customer of Visy,
in respect of OSI’s CFP requirements in New South Wales, as compensation to
Amcor for Visy entering into CFP agreements with Inghams and Smith’s.
229
The OSI/Hans Compensation Understanding was arrived at as a result of a
number of discussions including a meeting between Mr Debney and Mr Brown in
June or July 2001.
230
The OSI/Hans Compensation Understanding was also discussed between Mr
Carroll and Mr Laidlaw in the discussions about the George Weston Compensation.
231
In August 2001 Mr Carroll and Mr Laidlaw had a further meeting at which the
OSI/Hans Compensation Understanding was discussed.
Mr Laidlaw said to Mr
Carroll that Amcor would accept the OSI account in New South Wales as
compensation for Visy taking the Inghams and Smith’s account. Mr Carroll said he
would not object and not react strongly if Amcor took the George Weston meat and
dairy division account and the OSI (NSW) division as compensation for Visy taking
the Inghams and Smith’s accounts.
9.3.2
232
Giving effect to the OSI/Hans Compensation Understanding
From late 2001 to mid-2003 Mr Carroll and Mr Laidlaw had a number of
discussions in which Mr Laidlaw enquired as to what, if any, negotiations Visy had
with OSI regarding that firm’s business in New South Wales. Mr Laidlaw also said to
Mr Carroll that he was frustrated at the time being taken to finalise the transfer of the
OSI business from Visy to Amcor.
233
Notwithstanding the discussions in 2001, from 2001 until early 2004 Visy
- 45 -
continued to supply the requirements of OSI in New South Wales and South
Australia.
On about 9 December 2003 Hans, which had acquired the OSI business in
234
New South Wales, issued a request to tender to Visy and Amcor to supply CFP to
Hans, including the OSI New South Wales business.
Shortly afterwards Mr Carroll and Mr Laidlaw had a discussion in which Mr
235
Carroll said to Mr Laidlaw that Visy would submit prices in response to the request at
Visy’s then current prices so as to enable Amcor to secure the Hans account.
On 22 December 2003 Amcor submitted a proposal to Hans for the supply of
236
CFP. Mr Laidlaw was not directly involved in the tender negotiations.
237
On 23 December Visy submitted a proposal to Hans.
238
During the tender process, at a presentation on 2 February 2004, Visy
proposed a carton rationalisation program estimating the cost savings which could be
achieved to be approximately $140,000. By letter dated 3 February 2004 Visy offered
a volume rebate of 2.5 per cent for annual net sales in excess of $2.45 million and a 1
per cent discount for payments within 14 days.
Hans, through its representative Ms Michelle Yates, held the belief, based on
239
her review of the proposed prices, that Visy’s prices were higher than Amcor’s prices.
On 16 February 2004 Amcor entered into a contract for the supply of CFP to
240
Hans. Amcor included a rebate of 10 per cent on all sales if sales exceeded $4 million
in the first year.
9.4
241
Merino Compensation Understanding
Merino Pty Limited is a manufacturer of various paper, plastic and non-woven
consumer products. It operates at sites in Queensland and New South Wales.
- 46 -
9.4.1
Arriving at the Merino Compensation Understanding
In about August and September 2001 Amcor learned that it had lost the
242
business of Mrs Crocket’s Kitchen Pty Limited to Visy. Between late August to
December 2001 Visy and Amcor arrived at the Merino Compensation Understanding.
It contained a provision to the effect that Visy would compensate Amcor for the CFP
volume Amcor had lost as a result of Visy entering into a supply agreement with Mrs
Crocket’s. Visy would allow Amcor to enter into a CFP supply agreement with
Merino, an existing customer of Visy, as compensation for Mrs Crocket’s.
The Merino Compensation Understanding was arrived at as a result of
243
meetings between Mr Carroll and Mr Laidlaw between late August and December
2001. Mr Laidlaw said to Mr Carroll that Visy had undercut Amcor on its prices for
the supply of CFP to Mrs Crocket’s and had taken Mrs Crocket’s account from
Amcor. Mr Laidlaw said that Amcor wanted compensation for the CFP volume it had
lost.
244
Mr Carroll said that he accepted that Visy had gained Mrs Crocket’s account
from Amcor and that Visy would compensate Amcor for the loss of the account. He
also said that Visy would allow Amcor to have the Paper Converting/Merino account
as compensation.
245
Mr Laidlaw said that the Paper Converting/Merino was an acceptable trade for
the Mrs Crocket’s account.
9.4.2
246
Giving effect to the Merino Compensation Understanding
Visy supplied Merino’s CFP requirements under an agreement negotiated
during the price war with Amcor and entered into in 2000. The prices were low and
generated a negative margin. Visy’s prices had been reduced by an aggregate of 31.5
per cent from the previous supply agreement. Visy’s prices were fixed for two years.
Also, under the then current agreement, Visy provided $60,000 capital.
247
In November or December 2001 Visy received from the Grocery Sellers
Buying Group a request for quotation on behalf of some of its members, including
- 47 -
Merino, which included a request for quotation for the supply of CFP to Merino for
two years commencing 1 January 2002. Amcor also received this request.
248
On 7 December, in response to this request, Amcor submitted a proposal to
Merino for the supply of CFP containing prices based on the prices that Amcor
believed Visy was then supplying to Merino. Amcor’s belief was based on previous
quotes by Amcor to supply CFP to Merino, information obtained by Amcor
representatives from the CFP market and Amcor’s relationship with Merino. Mr
Laidlaw was not directly involved in the tender negotiations.
249
Merino, through its representative Mr Steve Childs, held the belief that
Amcor’s prices were higher than Visy’s prices under Visy’s then current supply
contract.
250
On 14 December, in response to the request, Visy made an offer to the three
members of the Grocery Sellers Buying Group that were existing customers of Visy,
including Merino, for the supply of CFP to them on their own account and not as
members of the Grocery Sellers Buying Group.
251
Mr Childs of Merino, on the basis of his review of the offer by Visy, held the
belief that the prices referred to in the offer in the preceding paragraph were
approximately 37 per cent higher than Visy’s prices under its then current supply
contract with Merino.
252
On 4 January 2002 Mr Childs had a meeting with Mr Michael Cannon of Visy
at Merino’s office in Crestmead, Queensland in which Mr Childs said to Mr Cannon
that he thought Visy’s proposed price increase of 37 per cent was too high and that he
did not understand the basis for the increase. Mr Cannon said to Mr Childs that he
would review the quoted prices.
253
Shortly after this meeting Mr Cannon and Mr Childs had a telephone
discussion in which Mr Cannon said that he was not able to make any amendment to
the prices that had been quoted and that Visy management were firm on the prices
offered.
- 48 -
On 7 August 2002 Amcor entered into a contract to supply CFP to Merino.
254
9.5
Gillette Compensation Understanding
Gillette Australia Pty Limited is a manufacturer of household personal care
255
items including shaving products, oral care and batteries. It operates from sites in
Victoria and New South Wales.
9.5.1
Arriving at the Gillette Compensation Understanding
In about July 2003 Amcor learned that it had lost the business of Huhtamaki
256
Australia Limited to Visy. Huhtamaki purchased around $4 million worth of CFP per
annum.
About this time Visy and Amcor arrived at the Gillette Compensation
Understanding. It provided that Visy would compensate Amcor for the CFP volume
Amcor had lost as a result of Visy entering into a supply agreement with Amcor’s
former customer Huhtamaki and that Visy would allow Amcor to enter into an
agreement with Gillette, an existing customer of Visy, as compensation.
257
The Gillette Compensation Understanding was arrived at as a result of
meetings between Mr Carroll, Mr Hodgson, Mr Sangster and Mr Laidlaw held in July
2003. At the meetings Mr Laidlaw said to Mr Carroll that Amcor wanted to be
compensated by Visy for the volume Amcor had lost as a result of Visy gaining the
Huhtamaki account.
258
Mr Carroll said that he understood Visy needed to compensate Amcor for the
Huhtamaki account and that the Gillette account was an account Visy could trade to
Amcor. Mr Carroll also said that Visy would not react strongly if Amcor sought to
take the Gillette account from Visy.
9.5.2
259
Giving effect to the Gillette Compensation Understanding
On account 15 January 2004 Gillette issued a “Request for Proposal –
Corrugated Board” to Visy, Amcor, Carter Holt Harvey Limited and Echo Cartons
Pty Limited inviting those companies to submit a proposal for the supply of CFP. In
the request for tender Gillette changed the minimum order quantities, reducing them
- 49 to smaller quantities in comparison to the quantities in Visy’s existing supply
agreement.
260
In February 2004 Amcor submitted the tender to Gillette for the supply of CFP
containing prices at around the prices that Amcor believed Visy was then supplying.
Amcor’s belief was based on previous quotes by Amcor to supply CFP to Gillette,
information obtained by Amcor representatives from the CFP market and Amcor’s
relationship with Gillette.
Mr Laidlaw was not directly involved in the tender
negotiations.
261
On about 6 February Visy submitted a tender to Gillette and on 9 February, at
the request of Gillette, the same prices were submitted in a different format.
262
To go back a little in time, towards the end of the previous year, Mr Paul
Meldrum of Visy and the Visy account manager, Mr Scott Kerr, had attended a
meeting at Gillette’s plant and head office in Scoresby, Victoria with Ms Nevenka
Odnoral at which Ms Odnoral said that Gillette had obtained some prices from
competitors of Visy and that Visy’s current prices were higher than the price Gillette
had received.
263
Shortly after 9 February 2004 Mr Meldrum received a phone call from Mr
Michael Sirakoff of Gillette who told him that Visy’s prices were not the most
competitive and invited him to submit a revised tender.
264
On 16 February Visy submitted a revised price schedule to Gillette reflecting a
5 per cent reduction in respect of the price of certain products and services.
265
Gillette through its representative Mr Sarakoff held the belief, on the basis of
his review of the proposed prices of the two companies, that Visy’s prices were higher
than Amcor’s.
266
In late February Mr Sirakoff had a discussion with Mr Meldrum by telephone.
Mr Sirakoff told him that Gillette had received Visy’s tender and wanted to know
whether Visy was interested in revising its tender to offer lower prices. Mr Meldrum
- 50 responded to the effect that Visy’s prices were firm and he would not submit any
further revised prices.
267
On 20 July 2005 Gillette entered into a CFP supply agreement with Amcor for
a period of three years commencing on 20 July 2004.
10.0
268
Conduct concerning Eagle Boys
Eagle Boys Dial-A-Pizza Australia Pty Limited is a takeaway and delivery
pizza company located in south east Queensland. It operates approximately 170
franchised stores around Australia, mostly in Queensland, Western Australia and New
South Wales.
269
Between about mid-2002 and November 2002 Mr Laidlaw told Mr Carroll
that the prices that Amcor proposed to quote to Eagle Boys. Either Mr Carroll or Mr
Laidlaw said to the other that they should continue to discuss the prices to be
submitted to Eagle Boys. The other said he agreed.
270
By engaging in the conduct referred to in the preceding paragraph Visy gave
effect to the Over-arching Understanding.
271
In August 2002 Visy submitted a proposal to Eagle Boys for the supply of
CFP. On 14 November it submitted a revised proposal.
272
On 27 November 2002 Amcor submitted a proposal to Eagle Boys.
273
Eagle Boys representatives Mr Tom Potter and Mr Ian Smallwood, on the
basis of their review of the proposed prices, held the belief that Visy’s average prices
were higher than Amcor’s prices.
274
On 28 January 2003 Mr Potter informed Mr Peter Allen of Visy that Visy’s
proposals were uncompetitive. He invited Visy to submit a revised proposal.
275
After that conversation, and before 6 February, Mr Allen telephoned Mr Potter
and offered to reduce Visy’s price for a 12 inch pizza box by a specified amount and
- 51 -
said that if the resulting price was attractive to Eagle Boys, Mr Allen would
reconsider Visy’s prices for other size pizza boxes.
276
On about 6 February Mr Potter sent to Mr Allen a letter attaching a table
purporting to compare Visy’s prices for large pizza cartons with those that Potter
believed Visy charged Pizza Hut and Domino’s for the same product. Mr Potter also
referred to the original quote and a subsequent reduced quote for that product
provided by Visy to Eagle Boys.
277
On 19 February Mr Allen wrote to Mr Potter rejecting Mr Potter’s comments
and reconfirming the prices quoted by Visy.
278
On 26 February Mr Potter informed Mr Carroll that Visy’s proposal to Eagle
Boys was higher than the prices at which Visy supplied Eagle Boys’ competitors
Pizza Hut and Domino’s.
279
Visy believed throughout the period 2000 to 2003 that Visy’s supply
arrangements with Domino’s and Pizza Hut were not comparable to Eagle Boys.
Eagle Boys required 8 million boxes per annum as against 30 million for Domino’s
and 28 million for Pizza Hut. Eagle Boys required distribution to regional centres in
New South Wales whereas Domino’s and Pizza Hut generally required distribution to
capital city distribution centres only. Eagle Boys’ printing requirements were more
difficult. Eagle Boys sought the more expensive B Flute rather than the E flute
supplied to Pizza Hut.
280
On 28 February Visy submitted confirmation of its lower quote.
281
In relation to the prices proposed by Amcor, Eagle Boys’ representatives Mr
Potter and Mr Smallwood held the belief, on the basis of their review of the proposed
prices of Visy and Amcor, that Visy’s average prices were higher than Amcor’s.
282
Between late February and early March 2003, Mr Carroll and Mr Laidlaw had
a discussion in which Mr Carroll told Mr Laidlaw the prices Visy had quoted to Eagle
Boys. Mr Laidlaw asked Mr Carroll not to lower the prices that Visy had quoted and
- 52 -
to increase those prices. Mr Carroll said that Eagle Boys had told him that it believed
that the prices Visy had quoted were not as competitive as Visy supplied to other
customers in the pizza industry, including Pizza Hut, such that Visy would not
increase the prices that it had quoted to Eagle Boys. Mr Carroll said Amcor was
seeking to obtain unrealistically high prices from Eagle Boys and would need to lower
its prices to finalise the supply agreement. Mr Laidlaw said that Amcor would
consider what Mr Carroll had proposed and try to reach an agreement with Eagle
Boys.
283
On about 3 March and 17 March Amcor submitted a revised proposal to Eagle
Boys containing prices and a rebate structure.
284
On about 16 April Amcor entered into a supply agreement with Eagle Boys.
285
By engaging in the conduct referred to in [271]-[282] above Visy gave effect
to the Over-arching Understanding.
11.0
286
Contraventions
Relevantly for present purposes, s 45 of the Trade Practices Act prohibits
corporations arriving at, or giving effect to, anti-competitive understandings as therein
defined.
287
Section 45(2)(a) provides that a corporation shall not “arrive at” an
understanding if it contains
(i)
an “exclusionary provision”; or
(ii)
a provision which has the purpose, or would be likely to have the
effect, of “substantially lessening competition”.
288
Section 45(2)(b) provides that a corporation shall not “give effect to” a
provision of an understanding if the provision
(i)
is an “exclusionary provision”; or
(ii)
has the purpose, or has or is likely to have the effect, of “substantially
lessening competition”.
- 53 -
289
“Exclusionary provision” is defined in s 4D. A provision of an understanding
is an “exclusionary provision” if (again, relevantly for the circumstances of this case)
(a)
the understanding was arrived at between persons competitive with
each other; and
(b)
the provision has the purpose of preventing, restricting or limiting the
supply of goods to particular persons.
290
Section 45A deals specifically with price fixing. Section 45A(1) provides that
a provision which has the purpose, or is likely to have the effect, of fixing, controlling
or maintaining prices is deemed to have the purpose or effect of substantially
lessening competition. So once price fixing is established, the “substantial lessening
of competition” test is satisfied, without any need for further evidence.
291
In arriving at the Understandings with Amcor which concerned the fixing of
prices, Visy contravened s 45(2)(a)(ii), as it applies by virtue of s 45A. Insofar as the
Understandings involved market sharing, swapping of customers and the like, they
contained exclusionary provisions because they prevented or restricted the supply of
goods by Visy and Amcor to particular customers.
In arriving at such
Understandings, Visy contravened s 45(2)(a)(i). By its conduct in applying those
Understandings in the case of particular customers, Visy gave effect to the unlawful
Understandings and thus contravened s 45(b)(i) and (ii).
292
The orders I pronounce today are in a form agreed by the parties.
They
record the Court’s declaration as to what the Court finds to be the contraventions of
the various respondents. The formal orders are made by reference to the paragraphs
in the Commission’s statement of claim. The orders include declarations that Visy
has committed 69 contraventions. However, s 76(3) provides that a person is not
liable for more than one pecuniary penalty in respect of the same conduct. The net
result is that penalties may be imposed for a total of 37 contraventions by Visy.
12.0
293
Accessories
Under s 76(1)(e) of the Trade Practices Act a person who has been knowingly
concerned in, or a party to, a contravention of certain provisions of the Act, including
- 54 -
s 45, is liable to a pecuniary penalty. Under s 80(1)(e) the Court may grant an
injunction against such a person.
294
By meeting with Amcor’s CEO Mr Jones at the All Nations Hotel and
confirming that Visy would adhere to the Over-arching Understanding, Mr Pratt was
knowingly concerned in Visy’s giving effect to that Understanding. The Commission
does not seek the imposition of a pecuniary penalty on Mr Pratt because he and his
family are the owners of Visy and thus the burden of the penalty on the company (not
to mention legal costs) will fall on him personally. Decisions of this Court recognise
that it is legitimate to avoid double counting where an individual contravenor is an
owner of a corporate contravenor: Australian Competition and Consumer Commission
v Ithaca Ice Works Pty Ltd (2000) ATPR 41-777 at [13], Australian Competition and
Consumer Commission v Commercial and General Publications Pty Ltd (No 2)
(2002) ATPR 41-905 at [27]-[29]. I accept this should be so in the present case.
However, Mr Pratt’s ownership of Visy has other significance for this case. I shall
return to this aspect.
295
Mr Debney was knowingly concerned in, or a party to, 14 contraventions.
296
Mr Carroll was knowingly concerned in, or a party to, 49 contraventions.
13.0
297
Penalties proposed
The maximum penalties applicable at the time of the contraventions in this
case were, in respect of each contravention, $10 million for a corporation and
$500,000 for an individual: s 76(1A)(b) and (1B).
In 1993 and 1994 the maximum
penalties had been increased to their present level from $250,000 and $50,000
respectively: s 10 of the Trade Practices Legislation Amendment Act 1992 (Cth) and
s 46 Industrial Relations Reform Act 1993 (Cth).
As from 1 January 2007 the
penalties for a corporation may exceed $10 million where the Court can determine the
benefit obtained as a result of the contravening. The maximum penalty is three times
the value of that benefit or 10 per cent of annual turnover, whichever is the greater:
Trade Practices Legislation Amendment Act (No. 1) 2006 (Cth), Sch 9 Pt 1.
However, these penalties only apply to contraventions committed after 1 January
- 55 -
2007.
In the case of Visy, the Commission proposes, and Visy does not contest, a
298
penalty of $36 million. It is sufficient to impose one penalty rather than separate
penalties for each contravention. The Commission arrives at the proposed figure as
follows:
1.
The single most serious contravention was Visy’s arriving at the Over-arching
Understanding. It should attract a significant penalty, and the Commission
submits that a penalty in the vicinity of $7 million is appropriate (in the
context of the maximum available penalty being $10 million);
2.
The measures subsequently taken by Visy over the relevant period to give
effect to the Over-arching Understanding (putting to one side the specific
conduct relied upon as constituting the arriving at and giving effect to the 16
sub-understandings admitted by the respondents, addressed in the next three
sub-paragraphs) should attract a penalty in the vicinity of $4 million;
3.
The four annual Price Increase Understandings (2000 to 2003) were very
serious contraventions involving price fixing. The conduct of Visy in arriving
at the 2000 and 2001 Price Increase Understandings on the one hand was, to a
certain degree, more serious than its conduct in arriving at the 2002 and 2003
Price Increase Understandings, because the latter understandings were
expressly qualified so as to allow each of Visy and Amcor to make “some
exceptions [to the implementation of the price increase] of its choosing”,
whereas the former understandings were not qualified. Visy’s contravention
in arriving at the 2000 Price Increase Understanding should attract a $2
million penalty, and its contravention in arriving at the 2001 Price Increase
Understanding should attract a further $2 million penalty.
Visy’s two
contraventions in arriving at the 2002 and 2003 Price Increase Understandings
should attract a $1.5 million penalty for each contravention. In the case of all
four annual Price Increase Understandings, Visy’s penalty for giving effect to
the understandings should be $1.25 million each. The total of the penalties
which should be imposed in respect of the four annual Price Increase
Understandings is therefore in the vicinity of $12 million;
- 56 -
4.
The Mildura Fruit Co Price Increase Understanding stands outside the
contraventions by Visy in relation to the other named customer
understandings, as it involves price fixing, and is a more serious set of
contraventions. It should attract a penalty of $2 million, made up of $1
million in respect of arriving at the understanding, and $1 million in respect of
giving it effect;
5.
The 11 instances of arriving at further understandings in relation to named
customers, and giving effect to them, should attract $1 million penalties each,
$500,000 being attributable to arriving at the understanding, and $500,000
being attributable to giving effect to the understanding.
Each instance
involves a pair of contraventions, independent from the fact that the same
conduct constituted giving effect to the Over-arching Understanding;
6.
The Over-arching Understanding was largely given effect by Visy arriving at,
and giving effect to, the 16 further understandings admitted in the proceeding.
However, by reason of s 76(3) of the Trade Practices Act, it is not submitted
that any further penalties should be attributed to each instance of giving effect
to the Over-arching Understanding constituted by the same conduct which
constituted the contraventions referred to in the preceding three subparagraphs.
In the case of Mr Debney, the Commission proposes, and he accepts, a total
299
penalty of $1.5 million as follows:
1.
Arriving at the Over-arching Understanding is in the category of the most
serious conduct in the subject of this case. A penalty of $400,000 should be
imposed;
2.
Giving effect to the Over-arching Understanding (viewed separately from
arriving at the separate understandings) should attract a substantial penalty
near the top end of the range: $320,000;
3.
His other conduct, arriving at six understandings, should incur a penalty of
$130,000 each, totalling $780,000.
300
In the case of Mr Carroll, the Commission proposes, and he accepts, a total
- 57 -
penalty of $500,000. He was a senior Visy executive who had a very substantial role
in giving effect to the Over-arching Understanding over almost five years. He was
appointed by Mr Debney to have the day to day management of that understanding.
He was involved in making or giving effect to 15 of the 16 sub-understandings.
301
The Commission accepts that Mr Carroll was appointed to his position by Mr
Debney after the latter had arrived at the Over-arching Understanding and at all times
he reported to Mr Debney and was acting under his instructions.
14.0
302
Assessment of penalties
Section 76(1) of the Trade Practices Act provide that the Court may order the
payment of such pecuniary penalty as the Court determines to be appropriate “having
regard to all relevant matters” including four matters expressly mentioned:
(i) the nature and extent of the act or omission constituting the contravening conduct;
(ii) the nature and extent of any loss or damage suffered as a result of the
contravening conduct;
(iii) the circumstances in which the act or omission took place; and
(iv) whether the contravenor has previously been found by the Court to have engaged
in similar conduct.
303
Decisions of this Court have identified additional relevant factors which can
be taken into account (see Trade Practices Commission v CSR Ltd (1991) ATPR 41076, at 52,152-52,153; Australian Competition and Consumer Commission v NW
Frozen Foods Pty Ltd (1996) ATPR 41-515 at 42,444-42,445):
(v) the size of the contravening company;
(vi) the degree of its power, evidenced by its market share and the ease of entry into
the market;
(vii) the deliberateness of the contravention and the period over which it extended;
(viii) whether the contravention arose out of the conduct of senior management or at a
lower level;
- 58 -
(ix) whether the company had 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;
(x) whether the contravenor has shown a disposition to co-operate with the
authorities responsible for the enforcement of the Act in relation to the
contravention;
(xi) similar conduct in the past;
(xii)financial position;
(xiii) deterrent effect.
304
Section 76 imports into the penalty fixing process concepts of moral
responsibility long known to the criminal law. Ordinary sentencing principles apply:
Trade Practices Commission v Axive Pty Ltd (1994) ATPR 41-368 at 42,794,
Australian Competition and Consumer Commission v J McPhee & Son (Australia)
Pty Ltd (1998) ATPR 41-628 at 40,891.
305
The fact that the Commission and the respondents have proffered a penalty
agreed as between themselves is relevant, although not of course conclusive, since the
responsibility of imposing penalties is conferred by the Trade Practices Act on the
Court: see generally Minister for Industry, Tourism and Resources v Mobil Oil
Australia Pty Ltd (2004) ATPR 41-993.
15.0
306
Cartel conduct
Cartel behaviour of the kind with which this case is concerned is extremely
destructive of the competition on which the prosperity of a free market economy
depends. Often the profits can be immense, and the risk of detection slight. Of its
nature, cartel behaviour is likely to occur in secret and between parties who seek
mutual benefit.
In the present case, detection occurred purely by chance when
Amcor’s solicitors, in the course of quite unrelated litigation, stumbled across
incriminating material. Even then the present resolution may not have been reached
were it not for two additional factors. First, the Commission’s immunity policy and,
secondly, the fact that there were not only witnesses prepared to give evidence, but
- 59 -
also tape recordings of damning conversations.
307
The progressive increase in the maximum penalties mentioned above shows
how gravely the legislature regards this kind of conduct. Price fixing and market
sharing are not offences committed by accident, or in a fit of passion. The law, and
the way it is enforced, should convey to those disposed to engage in cartel behaviour
that the consequences of discovery are likely to outweigh the benefits, and by a large
margin.
308
Critical to any anti-cartel regime is the level of penalty for individual
contravenors. We tend to overlook the fact that corporations are constructs of the
law; they only exist and possess rights and liabilities as a consequence of the law.
Heavy penalties are indeed appropriate for corporations, but it is only individuals who
can engage in the conduct which enables corporations to fix prices and share markets.
309
Many countries with free market economies have recognised this reality by
enacting laws which make cartel conduct by individuals subject to criminal sanctions,
including imprisonment. In the United States this happened as long ago as 1890 with
the Sherman Act 15 U.S.C.
More recently, as shown by the Organisation for
Economic Co-operation and Development report Hard Core Cartels – Third Report
on the Implementation of the 1988 Recommendation, Paris, 2006, the following
countries have laws providing for terms of imprisonment for cartel conduct: Canada,
France, Germany, Ireland, Israel, Japan, South Korea, Mexico, Norway, Slovak
Republic and the United Kingdom.
310
The Australian Government appointed an expert committee chaired by former
High Court Justice Sir Daryl Dawson to report on Australia’s competition laws. In
April 2003 the Dawson Committee in its report (Review of the Competition Provisions
of the Trade Practices Act) recommended (Report p 163) that, in the light of
submissions made to it and growing overseas experience, criminal sanctions deter
serious cartel behaviour and should be introduced.
311
On 2 February 2005 the Treasurer, the Honourable Peter Costello MP,
announced acceptance of the recommendations of the Dawson Committee and stated
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that the Government would amend the Trade Practices Act to provide for a term of
five years imprisonment, as well as increases in other penalties. The Treasurer noted:
Dishonesty goes to the heart of serious cartel conduct, where
customers are deceived when purchasing goods or services unaware
that the price and supply of those goods and services were determined
by collusion, rather than competition.
Although, as already mentioned, the Act was amended last year to raise corporate
penalties, the Government hasn’t yet got around to introducing criminalisation.
16.0
312
Visy’s conduct
Every day every man, woman and child in Australia would use or consume
something that at some stage has been transported in a cardboard box. The cartel in
this case therefore had the potential for the widest possible effect.
313
The agreed statement of facts includes the following:
NO ALLEGATION OF LOSS
374. In relation to the conduct of Visy alleged in respect of named
customers specified in the Second Further Amended Statement of
Claim, the ACCC does not allege as part of its case in this proceeding
that the conduct, insofar as it is admitted to constitute either making an
unlawful arrangement or giving effect to such an arrangement, had any
negative financial impact on or caused loss to any of the named
customers.
314
That statement may be accepted.
The Commission’s case sought the
imposition of penalties, the making of declarations, the granting of injunctions and
other relief. It did not set out to prove that any particular customer of Visy suffered
any particular loss. However, that is not to say that the conduct in which Visy
engaged was victimless. The whole point of price fixing and market sharing is to
obtain the benefit of prices greater than those which would be obtained in a
competitive market. It must follow that customers pay more than they would in a
competitive market, and so suffer loss. The conduct involved here was inherently
likely to cause loss. The fact that no particular loss has been alleged in respect of any
particular customer cannot alter that.
315
The cartel here went on for almost five years. Had it not been accidentally
- 61 -
exposed, it would probably still be flourishing. It was run from the highest level in
Visy, a very substantial company. It was carefully and deliberately concealed. It was
operated by men who were fully aware of its seriously unlawful nature.
316
It is appropriate to make some allowance for the fact that the respondents have
admitted liability and thus saved a great deal of public expense for a trial which could
well have lasted six months or more. Traditionally criminal courts are inclined to
give less weight to a plea of guilty when it does not result from genuine remorse,
repentance or contrition: The Queen v Shannon (1979) 21 SASR 442 at 452-453,
Warner, K, Sentencing in Tasmania, 2nd ed, The Federation Press, 2002, at 3.603.
Also the weight to be given to an admission of guilt might be less when it comes late,
or when it is virtually bowing to the inevitable.
317
I shall say something about remorse in the context of consideration of the
individual respondents. In the meantime, I note that the principal positive defence
pleaded, and maintained until recently, was that any communications between Visy
and Amcor were “commercial tactics” against Amcor aimed at “camouflaging” what
Visy was doing and a means of obtaining “market intelligence” from its rival
(amended defence par 222 (c) and (d)).
318
In light of what is now admitted to be the facts, it may be doubted that this
John Le Carré defence had any prospects of success. Section 45 prohibits contracts,
arrangements or understandings containing provisions of a specified kind, whether or
not a party harboured a secret intention to cheat. Moreover, entering into a prohibited
contract, arrangement or understanding is a free-standing contravention in itself,
whether or not it has been given effect. In any case, a contract, arrangement or
understanding can still be given effect even if there is some cheating between the
parties (as distinct from cheating the customers, which is the raison d’être of a cartel)
or the cartel does not work as well as some of the parties might have hoped.
319
The corporate culture of Visy in relation to its obligations under the Trade
Practices Act was non-existent. None of the most senior people hesitated for a
moment before embarking on obviously unlawful conduct. There was in evidence a
Visy document entitled “Trade Practices Compliance Manual” dated February 1998.
- 62 -
It was signed by Mr Pratt. It bears a distribution list, signed by Mr Debney, with the
names of 50 or so personnel covering every State and Head Office.
On the front
cover it is said:
This is an important document. It is essential that it be read and
understood by you. Visy Industries requires strict compliance with its
policy on the Trade Practices Act.
The document includes the stern warning that price fixing and market sharing are
“strictly prohibited” and that readers of the document “must never make (such)
arrangements with a competitor”. Further, it is said Visy personnel
should avoid all contact with competitors or their employees other than
contact approved by senior management or Visy Industries’ Legal Counsel.
All necessary contact with competitors should be conducted in formal settings.
I doubt that Westerfolds Park and the Cherry Hill Tavern could be regarded as formal
settings. The Visy Trade Practices Compliance Manual might have been written in
Sanskrit for all the notice anybody took of it.
Parity with penalties imposed in other cases is a relevant consideration.
320
Counsel referred to a number of other cases. I do not think it necessary to analyse
these in detail. Ultimately each case turns on its own facts. Suffice it to say that the
penalty proposed is more than twice the highest previous penalty imposed by this
Court. That is reflective of the fact that this must be, by far, the most serious cartel
case to come before the Court in the 30 plus years in which price fixing has been
prohibited by statute.
The penalty of $36 million proposed for Visy is appropriate in the
321
circumstances. I accept the analysis by which the Commission has arrived at this
figure.
17.0
322
Mr Pratt’s conduct
Visy, Mr Pratt, Mr Debney and Mr Carroll through their counsel accepted
responsibility for their conduct.
They expressed contrition, accepted the serious
nature of the contraventions and accepted that they warranted a very substantial
penalty. They apologised for their conduct, regretted the circumstances which had
- 63 occurred and repented their contraventions. They accepted that they stepped “well
over the line of the boundaries prescribed by the Act”. However, contrition here
probably has a substantial element of regret at being found out.
323
While Mr Pratt’s conduct, as revealed in the statement of agreed facts, was
limited to the one meeting with the Amcor CEO at the All Nations Hotel, that was of
major importance to the operation of the cartel.
It would not be expected that
somebody in his position would get involved in the day to day running of the cartel,
like Mr Debney or, to a greater extent, Mr Carroll. Yet he gave his personal sanction
to this obviously unlawful arrangement and an assurance of its continued operation. It
would not have continued without his approval.
324
In a public statement which went out to Visy staff and customers over Mr
Pratt’s name as Chairman of the Visy Group on 8 October, and after it had become
public knowledge that the respondents would admit liability, it was said:
Visy takes its obligations under the TPA very seriously. The company
deeply regrets what happened and its poor appreciation of the
complexities and application of the various provisions.
Later in the statement it is said:
Visy’s actions were motivated by a desire to take advantage of our
competitor.
This appears to be an attempt to revive Visy’s defence which, for the reasons already
stated, I think to be quite without merit.
In any case, the statement is hardly
consistent with a frank admission of wrongdoing.
325
More importantly, there is nothing complex about the law that prohibits price
fixing and market sharing. Mr Debney and Mr Carroll certainly knew about this law.
That is why they met with their competitor in parks and suburban hotels and used prepaid mobile phones. There cannot be any doubt that Mr Pratt also knew that the
cartel, to which he gave his approval, and in which he has admitted to being
knowingly concerned, was seriously unlawful.
326
There is also the factor that the cartel was to operate for Mr Pratt’s personal
benefit, via his ownership, or part ownership, of Visy. This was not the case of an
- 64 -
employee acting out of some misguided sense of corporate loyalty.
18.0
327
Mr Debney’s conduct
Mr Debney was a joint instigator of the cartel. He personally directed his
subordinate, Mr Carroll, to operate it (to Mr Carroll’s great cost, apart from anything
else). From time to time Mr Debney personally participated in it. He was the senior
officer of a large company operating in a market which affects the whole community.
His conduct showed no regard for the law.
328
The proposed penalty of $1.5 million is appropriate.
329
I was informed that Mr Debney’s (and Mr Carroll’s) penalties will be borne by
a Visy entity or a related entity. Such indemnities are now unlawful by virtue of ss
77A and 77B of the Trade Practices Act. These sections were introduced by the 2006
amendments following recommendations in the Dawson Committee Report. They
only apply to contraventions committed after 1 January 2007.
330
However, s 199A(2) of the Corporations Act 2001 (Cth), effective from 1 July
2004, provides:
(2) A company or a related body corporate must not indemnify a
person (whether by agreement or by making a payment and whether
directly or through an interposed entity) against any of the following
liabilities incurred as an officer or auditor of the company:
(a) a liability owed to the company or a related body corporate;
(b) a liability for a pecuniary penalty order under section 1317G or a
compensation order under section 1317H or 1317HA;
(c) a liability that is owed to someone other than the company or a
related body corporate and did not arise out of conduct in good
faith.
This subsection does not apply to a liability for legal costs.
331
Paragraph (a) would not be applicable.
Paragraph (b) is concerned with
pecuniary penalties payable under the Corporations Act. However par (c) would
seem to apply to a liability to pay a pecuniary penalty to “someone other than the
company” (ie the Commonwealth) under s 76 of the Trade Practices Act. Unlawful
cartel conduct would not be “conduct in good faith”. The section would seem to
- 65 -
apply to the time when the indemnity is given and not to the time of the underlying
conduct which gave rise to the indemnity. Anyway, Visy and any other related
corporate entity will have to satisfy themselves that any indemnity to Messrs Debney
and Carroll is lawful.
19.0
Mr Carroll’s conduct
Although he committed the largest number of contraventions, Mr Carroll’s
332
conduct, because of his lower position in the company and the fact that he was not an
instigator, is less blameworthy than Mr Pratt’s or Mr Debney’s. Nevertheless, he
engaged over a long period in knowingly unlawful conduct. The proposed penalty of
$500,000 is appropriate.
20.0
Other orders
There will be declarations as to the contraventions, injunctions, an order for a
333
trade practices compliance program and an order that the respondents pay the costs of
the Commission of and incidental to this proceeding.
I certify that the preceding three
hundred and thirty-three (333)
numbered paragraphs are a true copy
of the Reasons for Judgment herein
of the Honourable Justice Heerey.
Associate:
Dated:
2 November 2007
Counsel for the applicant:
P J Jopling QC C M Caleo SC, K Judd, P R D Gray and P
Wallis
Solicitor for the applicant:
Australian Government Solicitor
Counsel for the first to fifth J Beach QC, D G Collins SC, P D Crutchfield, M H
respondents:
O’Bryan and D Crennan
- 66 -
Solicitors for the first to fifth Arnold Bloch Leibler
respondents:
Counsel for the sixth
J W K Burnside QC and D Clough
respondent:
Solicitors for the sixth
respondent:
Date of Hearing:
Minter Ellison
Date of Judgment:
2 November 2007
16 October 2007