a — are Sb CATCHWORDS Trade Practices —- resale price maintenance - undertaking proffered to court ~ imposition of injunction - contraventions arising out of one course of conduct - imposition of pecuniary penalty. Trade Practices Act, 1974 (Cth.) s. 76, 80, 96 (3) (a) (b) (£) TRADE PRACTICES COMMISSION ~— Applicant BATA SHOE COMPANY OF AUSTRALIA PTY. LIMITED NO. G 16 OF 1979 LOCKHART J. FRIDAY 2 MAY 1980 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW_ SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION IN THE MATTER OF BETWEEN : AND: ORDER JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: THE COURT ORDERS THAT: 1. The respondent by itself its servants and agents be restrained No. G 16 of 1979 THE TRADE PRACTICES ACT 1974 TRADE PRACTICES COMMISSION Applicant BATA SHOE COMPANY OF AUSTRALTA PTY, LIMITED Respondent LOCKHART J. FRIDAY, 2 MAY 1980 SYDNEY until further order from withholding the supply of Bata branded leather footwear from any retailer for the reason that such retailer has sold or is likely to sell such footwear supplied to it by the respondent at a price less than a price specified by the respondent as a price below which such footwear , 1s not to be sold; 2. The respondent pay to the Commonwealth of Australia by way of penalty in respect of the contraventions of s. 48 of the Trade Practices Act 1974 alleged in the statement of claim herein the following pecuniary penalties:- (a) fave thousand dollars ($5,000.00) in respect of the contravention alleged in paragraph 73 (b) five thousand dollars ($5,000.00) in respect of the contravention alleged in paragraph 8; «22/2 (c) five thousand dollars ($5,000.00) 1n respect of the contravention alleged in paragraph 9; two thousand dollars ($2,000.00) in respect of the contravention alleged in paragraph 213 two thousand dollars ($2,000.00) an respect of the contravention alleged in paragraph 22; two thousand dollars ($2,000.00) in respect of the contravention alleged in paragraph 23; and thirty thousand dollars ($30,000.00) in respect of the contravention alleged in paragraph 253 Pursuant to s. 77 of the Trade Practices Act 1974 that judgment be entered for the Trade Practices Commission on behalf of the Commonwealth of Australia for the sum of fifty-one thousand dollars ($51,000.00); and The respondent pay to the applicant two-thirds of the applicant's costs of and incidental to these proceedings including two-thirds of all costs previously reserved by the court. Liberty to apply is reserved to both parties. IN THE FEDERAL COURT OF AUSTRALIA ' NEW SOUTH WALES DISTRICT REGISTRY No. G 16 of 1979 GENERAL DIVISION IN THE MATTER OF THE TRADE PRACTICES ACT 1974 BETWEEN: TRADE PRACTICES COMMISSION Applicant AND: BATA SHOE COMPANY OF AUSTRALIA PTY, LIMITED Respondent REASONS FOR JUDGMENT 2 May 1980 LOCKHART J. Sydney On 12 March 1980 I gave judgment in this matter and adjourned the further hearing to a date to be fixed when the remaining questions of injunction, pecuniary penalty and costs could be dealt with. The hearing was resumed on 15 April 1980 when some further evidence was adduced by the respondent and submissions made by both parties on the remaining questions. Injunction Counsel for the applicant submitted that an injunction should be granted pursuant to s. 80 to restrain the respondent from engaging in the practice of resale price maintenance in the future. He submitted that the remedy of injunction is an additional sanction to the imposition of a pecuniary penalty and that the protection of the public requires that the respondent be enjoined. .../2 Counsel for the respondent, although not conceding that an injunction should be granted, informed me that the respondent was prepared to give an undertaking to the court, but in narrower terms than the injunction sought by the applicant. I have held that the discussion of November 1976 between Mr. Adnam, Mr. Smart and Mr. Clegg fell within the terms of sub-s. 96 (3) of the Act in that the respondent made it known to Woolworths that the respondent would not supply goods to Woolworths unless Woolworths agreed not to sell those goods at a price less than a price specified by the respondent (paragraph 96 (3) (a) )s3 that the respondent price less than a induced and attempted to induce Woolworths not to sell at a/ price specified by the respondent goods supplied to Woolworths by the respondent (paragraph 96 (3) (b) ); and that the respondent used, in relation to its goods supplied and that may be supplied by it to Woolworths, a statement of a price that was likely to be understood by Woolworths as the price below which the goods were not to be sold (paragraph 96 (3)(f)). Following that discussion, Woolworths increased its price for Bata shoes to a level a few cents below the price charged by Gowings, thereby ensuring the continuity of supply by the respondent to Woolworths. Supply of Bata branded leather footwear to Woolworths ceased in about May 1977. It has not been resumed, nor has any attempt been made by the respondent to resume it. In my opinion the undertaking proffered by the respondent should not be accepted, and an injunction should ---/3 be granted. There 1s no difference between the two in operation or effect 1f breach of either occurs; but the undertaking was not proffered until the eleventh hour, namely the resumption of the hearing on 15 April 1980, and then in narrow terms. I do not suggest for one moment that the proffer was otherwise than bona fide or that the , respondent would not honour its terms; nevertheless in all the circumstances injunctive relief is appropriate. I asked counsel for both parties for their assistance in formulating the terms of the injunction because in my opinion the question is not so much whether an injunction should be granted, but what its terms should be. Counsel for the applicant suggested the following form:— "That the respondent by itself, its servants and agents or otherwise be restrained until further order from withholding the supply of Bata branded leather footwear from any retailer for the reason that that retailer has sold or is likely to sell such footwear supplied to it by the respondent at a price less than a price specified by the respondent as the price below which such footwear 1s not to be sold." Counsel for the respondent did not oppose those terms except to submit that the words "Woolworths Limited" should be substituted for the word "retailer" or the words "any retailer". In my opinion the form of injunctive relief suggested by counsel for the applicant is generally acceptable. Although the evidence is silent as to whether the supply of Bata branded leather footwear has been withheld from large discounters in addition to Woolworths for a resale prace ; maintenance reason, there is evidence that other large oo fh discounters are not being supplied with such footwear. in ail the circumstances the public anterest requires than an injunction be grated in the wider form suggested by counsel for the applicant. Pecuniary Penalty Section 76 of the Act provides a maximum pecuniary penalty of $250,000.00 against a corporation in respect of a contravention of Part IV of the Act. In determining the pecuniary penalty to be imposed, s. 76 requires the court to have:- ",..regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the court in proceedings under this Part to have engaged in any similar conduct." Counsel for the respondent submitted that although the court has found seven contraventions of the resale price maintenance provisions of the Act (three relating to the November 1976 conversation; three relating to the conversation of 22 April 1977; and one relating to the withholding of supply of Bata branded leather footwear from Woolworths from about May 1977), on the question of penalty they should all be considered together and only one penalty imposed because in a broad sense they all relate to the same conduct of resale price maintenance by the respondent in its dealings with Woolworths. Counsel for the respondent submitted alternatively that the seven contraventions should be considered for the purpose of penalty as if they were two contraventions (the three relating to the November 1976 conversation as 1f they -2-/5 were one and the remainder as if they were the other); or perhaps as three contraventions (the three relating to the November 1976 conversation as one contravention, the three relating to the 22 April 1977 conversation as a second I contravention and the non-supply to Woolworths from about May 1977 as the third). In one sense, the contraventions arose out of the one course of conduct in that it was directed to Woolworths and reflected the adherence by the respondent to a policy of engaging in resale price maintenance in relation to Woolworths. Guidance is given in the field of sentencing for criminal offences by the well-known principle that where several offences are heard together and arise out of the same transaction it is a sound working rule that the sentences imposed for those offences should be made concurrent; it is inappropriate to sentence consecutively when the offences were all really involved in the same episode: see R. v. Duff a decision of the full court of this court, judgment delivered 6 December 1979; R. v. Walsh (1965) 109 Sol. J. Part 1 150; R. v. Melville (1956) 73 W.N. (N.S.W.) 579; R. v._Hussain Crim. L. R. 7123; R. v. Hally (1965) 58 Q.R. 582 and Re: P. J, Kastercum (1972) 56 Cr. App. R. 298. I accept that the contraventions arose out of the one course or pattern of conduct. Although it is necessary to look at each contravention separately, nevertheless consideration must be given to the facts common to each contravention: see Eva v. Mazda Motor (Sales) Pty. Limited (1974-1977) 1 A.T.P.R. 17,302; Eva v. Southern Motors Box Hill Pty. Limited (1977) 15 A.L.R. 428; T.P.C. v. Maddad Pty. Limited (1979) 2 A.T.P.R. 18,054 per Keely J. at p. 18,059. In my opinion the three contraventions of the Act which relate to the conversation of November 1976 may properly be viewed together for the purpose of assessing the appropriate pecuniary penalty; but although those contraventions all relate to the respondent's dealings with Woolworths, it must not be forgotten that, following that conversation, Woolworths increased its prices in New South Wales for Bata footwear to a level a few cents below the praces charged by Gowings. The burden of this price increase was borne by the public. The three contraventions in relation to the 22 April 1977 conversation similarly should be viewed together for the purpose of determining the appropriate pecuniary penalty. Those contraventions are separate from the breach of the resale price maintenance provisions of the Act involving the non-supply of Bata branded leather footwear to Woolworths after about May 1977, a continuing contravention. Although the respondent, through its agent, communicated to Woolworths during the 22 April 1977 conversation that the respondent would not supply Bata branded leather footwear to Woolworths in the future, nevertheless it was in that conversation that the representatives of Woolworths were informed that Woolworths would be supplied with P.V.C. footwear only if it would sell it at a price comparable to the maximum price permitted in South ---/7 Australia, It ais this, rather than the communication of the intention of the respondent not to supply Bata branded leather footwear to Woolworths in the future, that is the essence of the contraventions that relate to the 22 April 1977 conversation. Hence for purposes of determining the appropriate pecuniary penalty or penalties, I shall regard the seven contraventions as falling into the three categories suggested by counsel for the respondent in the third of his alternative submissions. Counsel for the respondent pointed to a number of matters which he submitted the court should take into account an mitigation of penalty. I shail deal with them in turn. 1. Counsel submitted that as these proceedings were commenced on 28 March 1979 and were preceded by the applicant aunvoking the procedures of s. 155 and as the respondent has protested at all times that it did not contravene the resale price maintenance provisions of the Act, the period of about twelve months from 28 March 1979 to 12 March 1980 should not be held against the respondent. The respondent did not suggest that the applicant has been dilatory or that this period of time is unreasonable; rather that it 1s the inevitable result of litigation. I regard it as proper to take this into account to some extent in mitigation of penalty. 2. It was submitted that there 1s no evidence of any loss or damage having been suffered by Woolworths by reason of any of the contraventions by the respondent and no .../8 evidence that any other corporation or person has suffered any loss or damage by reason of the contraventions. It is true that there is no evidence that Woolworths has sustained any loss or damage. It is true that there has been no quantification of any loss or damage that any member of the public has sustained by reason of the contraventions of the respondent; but it cannot be denied that the public paid a higher price for the respondent's footwear purchased in Woolworths! stores in New South Wales after November 1976 and before supply terminated in about May 1977. It was during this period that Woolworths, in order to maintain supply, increased its price to a level a few cents below the price charged by Gowings. Notwithstanding the absence of any evidence as to the numbers of people who purchased Bata footwear from Woolworths during this period and as to the extent of the increased price they have been charged, clearly the fact remains that Woolworths, a large discounter, has sold Bata footwear to customers during the period and they have paid a higher price than otherwise would have been the case. More serious is the fact that since about May 1977 Woolworths has been denied supply of Bata branded leather footwear, and this position has not changed. Although there is no evidence as to the quantities of such footwear that Woolworths would have ordered or as to the effect in the market place occasioned by this non-supply, I repeat what I said in T.P.C. v. Malleys Limited (1979) A.T.P.R. 18,290 at p. 18,292:- 0/9 "In my opinion, the inability of any party to quantify the damage under a breach of the retail price maintenance provisions of the Act is a consideration to be given due weight; but I do place some reliance upon the economic philosophies underlying the Act which prima facie suggest that the actions of resale price maintenance lead to a distortion of the market mechanism 1 and to economic waste." 3. The respondent has not committed any other breaches of the Act. I accept this submission and take it into account. 4, It was submitted that the financial position of the respondent is such that its financial return upon capital 1s of a relatively low dimension. Evidence was given that an the fanancial year to 31 December 1977 the respondent earned a return of only 7.23% per annum on invested capital, ats operating profit having been $190,895.00. In the financial year to 31 December 1978 the respondent made an operating profit of $242,028.00. Its accounts for the year ended 31 December 1979 have not yet been finalised but Mr. Thring estimates that its operating profit will be about $303,834.00. Mr. Thring gave evidence that for some considerable time the shoe industry in Australia has been "of diminishing expansion and profitability and the number of shoe manufacturers has significantly increased as have the number of people employed by the shoe industry." On the other hand, the respondent is a large and substatial corporation and a member of the world-wide Bata organisation. I do not have the impression that it is suffering undue financial hardship. «.2/10 -10- 5. Counsel submitted that as I have held, in relation to the contravention of withholding supply of Bata branded leather footwear to Woolworths after May 1977, that the decision not to supply Woolworths was made both because Woolworths did not provide the services and facilities regarded by the respondent as appropriate and because it was a major discounter, the court could not say that the public had suffered any loss or damage occasioned by the contravention. In my opinion this submission is misconceived. The fact that it 1s a substantial reason for the withholding of supply that Woolworths had sold or was likely to sell Bata branded leather footwear at a price less than the price which the respondent had specified to Woolworths as being the price below which the footwear was not to be sold, itself demonstrates that the public has suffered from the action of resale price maintenance because of the consequent dis-— tortion of the market mechanism, However, I take anto account by way of mitigation of penalty that where there are mixed reasons for the conduct such as I have found here; it is a matter which has some mitigating effect. 6. Mr. Thring gave evidence on 15 April 1980 that since my reasons for judgment were given on 12 March 1980 the respondent has terminated its sales agency agreement with Adnam and Pockley Pty. Lamited and has appointed new sales agents for the State of New South Wales. He said: oe e/11 -11- " "The defendant has taken steps to ensure that its employees and agents are aware of the provisions of the Trade Practices Act and will ensure so far as possible that no statements whatsoever of retail price are made by its agents or employees f or on its behalf. It is proposed that new written agreements will be entered into shortly between the defendant and its sales' agents to further strengthen the control which the defendant itself wi11 be able to exercise in respect of the marketing of its products...The defendant appreciates the seriousness of the findings which have been made against it in this action and w111 not engage in the future in conduct prohibited by the Trade Practices Act." I take these matters into account by way of mitagation, Counsel for the applicant submitted that the following matters called for the imposition of a substantial pecuniary penalty:- 1. That following the November 1976 conversation, Woolworths in fact increased its prices for Bata branded leather footwear in New South Wales to ensure continuity of supply; that although this breach is now spent in the sense that, since May 1977 there has been no supply nevertheless the breach covered a number of months between November 1976 and May 1977. 2. Wathholding of supply of Bata branded leather footwear commenced after May 1977 and is still continuing. I have dealt with matters 1. and 2. earlier in these reasons for judgment and shall not say anything further. 3. There has been no attempt by the respondent to oeef/12 -12- restore supply to Woolworths notwithstanding that more than one month has elapsed since the delivery of my reasons for judgment on 12 March 1980. I place little weight on this point because there may be a number of reasons why restoration of supply has not been offered to Woolworths since 12 March 1980. The respondent may still be taking legal advice as to its position in relation to Woolworths and as to whether it should appeal from my decision. As no orders were made by me on 12 March 1980 there was then no appellable decision. 4, The determination of an appropriate penalty is a matter of considerable importance to the public and the following passage from the decision of Smithers J. in T.P.C. v. Stahl Chain Saws (Aust. ) Pty. Limited (1978)2A.T.P.R. 40-091 at p. 17,896 should be borne in mind: "So far as resale price maintenance is concerned the object of the Act ais to create conditions in which the public will benefit from traders! competing with each other in respect of prices unfettered by price restraints imposed by suppliers of goods upon retailers." I agree with his Honour and shall take this matter unto account. The contraventions are serious. Having regard to ail the circumstances, including those to which I have referred in my reasons for judgment, and the importance of deterring similar contraventions of the resale price maintenance provisions of the Act, in my opinion the sum of fifteen thousand dollars ($15,000.00) represents the appropriate total penalty to be paid by the responbnt in respect of the three contraventions relating to the November 1976 discussion; the ---/13 -13- sum of six thousand dollars ($6,000.00) represents the appropriate total penalty in respect of the three contraventions relating to the conversation of 22 April 19773; and the sum of thirty thousand dollars ($30,000.00) is the appropriate penalty for the contravention relating to the withholding of supply of Bata branded leather footwear after May 1977. Costs The applicant has substantially won the case. I have found that the contraventions alleged in paragraphs 7, 8 and 9 of the statement of claim were made out - all relating to the November 1976 conversation; that the contraventions alleged in paragraphs 21, 22 and 23 were made out - relating to the 22 April 1977 conversation; and that the contravention alleged 1n paragraph 23 as to the withholding of supply since about May 1977 was made out. Those allegations took most of the time at the hearing. The allegations made in paragraphs 10 and 11 - as to the withholding of supply in November 1976; in paragraphs 12, 13 and 14 - relating to a conversation in mid March 19773 in paragraphs 15, 16 and 17 - as to a conversation on or about 7 April 1977; in paragraphs 18, 19 and 20 ~ as toa conversation on or about 19 April 1977; and in paragraph 24 as to the withholding of supply since about May 1977 for the reason therein mentioned, have not been made out. In all the circumstances, in my opinion the appropriate order for costs is that the respondent pay two-thirds of the applicant's costs. -.-/14 r I make the following orders:- 1. That the respondent by itself its servants and agents be restrained until further order from withholding the supply of Bata branded leather footwear from any retailer for the reason that such retailer has sold or is likely to sell such footwear supplied to it by the respondent at a price iess than a price specified by the respondent as a price below which such footwear is not to be sold; 2. That the respondent pay to the Commonwealth of Australia by way of penalty in respect of the contraventions of s. 48 of the Trade Practices Act 1974 alleged 1n the statement of claim herein the following pecuniary penalties:- (a) five thousand dollars (85,000.00) in respect of the contravention alleged in paragraph 73 (b) fave thousand dollars ($5,000.00) in respect of the contravention alleged in paragraph 8; (c) five thousand dollars ($5,000.00) an respect of the contravention alleged in paragraph 9; (ad) two thousand dollars ($2,000.00) in respect of the contravention alleged in paragraph 21; {e) two thousand dollars ($2,000.00) an respect of the contravention alleged in paragraph 223 (f£) two thousand dollars ($2,000.00) an respect of the contravention alleged in paragraph 23; and (g) thirty thousand dollars ($30,000.00) an respect of the contravention alleged in paragraph 253 wee f/15 -15- ; 3. Pursuant to s. 77 of the Trade Practices Act 1974 that judgment be entered for the Trade Practices Commission on behalf of the Commonwealth of Australia for the sum of fifty-one thousand dollars ($51,000.00); and 4, That the respondent pay to the applicant two-thirds of the applicant's costs of and incidental to these proceedings ancluding two-thirds of all costs previously reserved by the court. 5. Laberty to apply is reserved to both parties. 1 ec. *y thar uns and the freer (4) preccc.ng pages are a true copy ct the Reasons fe. Judgment herein of his Honour Mr. Justice Lockhart.