xs --—~R CATCHWORDS Trade Practices - resale price maintenance - pecuniary penalty - mitigation - factors to be taken into account. Practice and procedure - whether penalties against each respondent should he determined by the Court constituted by the same Judge - whether possible legal bias. Trade Practices Act 1974 (C'th.) ss.48, 76 Federal Court Rules 029 TRADE PRACTICES COMMTSSION v. ICI AUSTRALIA PETROCHEMICALS LIMITED and NORRIS WIGHTMAN INDUSTRIFS PTY. LIMITED 10 June 1983 Northrop J. Melbourne IN THE FEDERAL COURT OF AUSTRALI VICTORIA DISTRICT REGISTRY Ve. No. G.127 of 1980 eee ws GENERAL DIVISION BETWEEN: . ~ TRADE PRACTICES COMMISSION Applicant and ICL AUSTRALTA PETROCHEMICALS LIMITED and NORRIS WIGHTMAN INDUSTRIES PTY. LIMITED Respondents ORDER CORAM: Northrop J. DATE: 10 June 1983 WHERE: Melbourne THE COURT ORDERS THAT: 1. The first named respondent, ICI Australia Petrochemicals Limited, in respect of the contraventions of s.48 of the Trade Practices Act 1974 alleged in paragraphs 6 and 7 of the amended statement of claim, pay to the Commonwealth a pecuniary penalty in the sum of $20,000. ace Pursuant to s.77 of the Trade Practices Act 1974, judgment be entered for the Trade Practices Commission on behalf of the Commonwealth against the first named respondent, ICI Australia Petrochemicals Limited, for the sum of $20,000. The second named respondent, Norris Wightman Industries Pty. Limited, in respect of the contraventions of s.48 of the Trade Practices Act alleged in paragraphs 9, 10 and 11 of the amended statement of claim, pay to the Commonwealth a pecuniary penalty in the sum of $10,000. Pursuant to s.77 of the Trade Practices Act 1974, judgment be entered for the Trade Practices Commission on behalf of the Commonwealth against the second named respondent, Norris Wightman Industries Pty. Limited, for the sum of $10,000. The respondents pay the applicant's costs to be taxed. .-~ IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V. No. G.127 of 1980 GENERAL DIVISION weve wv ev BETWEEN: . TRADE PRACTICES COMMISSION Applicant and ICL AUSTRALIA PETROCHEMICALS LIMTTED and NORRIS WIGHTMAN INDUSTRIES PTY. LIMITED Respondents CORAM: Northrop J. DATE: 10 June 1983 WHERE: Melbourne REASONS FOR JUDGMENT The Trade Practices Commission, "the Commission", brought these proceedings under the Trade Practices Act 1974, "the Act", against ICI Australia Petrochemicals Limited, which, together with its related companies, is in .these reasons called "ICI", and Norris Wightman Industries Pty. Ltd., ""Norris-Wightman". By its application the Commission sought the imposition of pecuniary penalties under sections 76 and 77 of the Act against each respondent alleging that eack responfent had engagel in the practice of resale price =< - 2- maintenance in contravention of s.48 of the Act. Tn addition, the Commission sought injunctions under s.80 of the Act to restrain each of the respondents from engaging in that practice. Tn addition, the Commission sought an injunction under s.80 of the Act restraining ICI from aiding and abetting a person to engage in the practice of resale price maintenance. By its statement of claim accompanying the application, the Commission alleged facts supporting the claims made against each respondent. Subsequently, the Commission filed and served an amended statement of claim in which it alleged the facts supporting the claims for the pecuniary penalties and the injunctions to restrain each of the respondents from engaging in the practice of resale price maintenance. The amended statement of claim did not contain allegations supporting the claim for an injunction restraining ICI from aiding and abetting. Each respondent has filed and served an amended defence to the amended statement of claim by which each respondent admitted the allegations made against it. In the result, the only matters to be determined at the hearing of the application were the amount of penalty to be imposed on each respondent and whether the injunctions should be granted. Pacem cone = ~ 1 ee - 3- When the applications came on for hearing, counsel for ICI, pursuant to notice, moved the Court for orders that the application, insofar as it was brought against ICI, be heard and determined separately from the application insofar as it was brought against Norris-Wightman and that the Court hearing and determining the application, insofar as it was brought against Norris-Wightman, should be constituted by a judge other than the judge hearing the other part of the application. After hearing submissions on the motion, the Court announced that the motion wes refused and that the reasons for that refusal would be published later. Those reasons are now given. ICI is the manufacturer of certain chemicals known as Baquacil and Poolperoxide, the latter chemical being commonly known as "BQ Algene". At all material times prior to September 1978, ICI had supplied Baguacil and BQ Algene directly to retailers in South Australia and Queensland. The facts giving rise to the claim against ICI occurred in South Australia in the months of October and November 1978. At all material times after September 1978 ICI supplied Baquacii and BQ Algene to Norris-Wightman as its distributor in Queensland. At all material times Norris-Wightman supplied those chemicals to retailers in Queensland. The facts giving rise to the claim against Norris-Wightman occurred in -4- Queensland between the months of September 1978 and January 1979. As a result of the pleadings and in accordance with the practice of the Court, the Commission and each of the respondents had filed affidavits relating to the matters the subject of the claim made by the Commission. Affidavit material referable to the claim against Norris-Wightman contains material which tends to establish that ICI was involved in or was a party to the practice in Queensland by Norris-Wightman which it was admitted constituted the practice of resale price maintenance and which, it was submitted, might have an unfair and prejudicial effect upon ICI if both parts of the application were heard by the Court constituted by the same judge. Counsel for ICI hased his submissions on Order 29 of the Federal Court Rules. That order empowers the Court to make orders for the decision of any question separately from any other question whether before, at, or after any trial. No reference was made by counsel to Order 6, rules 1, 2, 6 or 9 of the Rules. The foundation of the submission by counsel was that the claims against each respondent were discrete being limited to South Australia so far as ICI was concerned and to Queensland so far as Norris-Wightman was concerned. The only link common to each respondent, so it was urged, was the identity of the goons, the subject of the practice, being ~35. supplied by the respondents to retailers. Those facts are true, but it is important to remember that in the Federal Court, State boundaries do not have the importance attached to them in proceedings in the Supreme Courts of the States. Further, after the motion had been refused the Court looked at all the material and in the circumstances that material, too, justified the refusal of the motion, as will become apparent later in these reasons. The submission in support of the motion was based on the contention that if the one judge determined the penalty to be imposed on each respondent, there would be an appearance of bias by reason of the judge having, or being seen to have, regard to what may be relevant to the imposition of the penalty against Norris-Wiqhtman but which material was inadmissible against ICT, was not relevant and was prejudicial. In other words, counsel contended that if one judge determined the penalty in respect of each respondent he would appear to be biased against ICI. In support of his submissions, counsel referred to a number of authorities involving the issue of legal bias. The most recent decision was Livesey v. The New South Wales' Bar Association, High Court of Australia, 20 May 1983, unreported. In that case the Court, Mason, Murphy, Brennan, Deane and Dawson JJ., in a joint judgment stated the relevant principle at p.4 as follows: -6- "It was common ground between the parties to the present appeal that the principle to be applied in a case such as the present is that laid down in the majority judgment in Req. v. Watson; Ex parte Armstrong (1976) 136° C.L.R. 248, at pp.258-263. That principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial] and unprejudiced mind to the resolution of the question invoJved in it. That principle has subsequently been applied in this Court (see, e.g., Re Judge heckie: Ex parte Felman (1977) 52 A.L.d.R. 155, at p-158; Re Shaw; Ex parte Shaw (1980) 55 'A. L.J.R. 12, at pp.14 and 16) and in the Supreme Court of New South Wales (see, e@.g., Barton v. Walker [19791 2 N.S.W.L.R. 740, at pp.748-9). Although statements of the principle commonly speak of "suspicion of bias', we prefer to avoid the use of that phrase because it sometimes conveys unintended nuances of meaning." In the same case their Honours said at pp.4-5: "If a judge at first instance considers that there is any real possibility that his participation in a case might lead to a reasonable apprehension of pre-judgment or bias, he should, of course, refrain from sitting. On the other hand, it would be an abdication of judicial function and an encouragement of procedural abuse for a judge to adopt the approach that he should automatically disqualify himself whenever he was requested by one party so to do on the grounds of a possible appearance of pre-judgment or bias, regardless of whether the other party desired that the matter be - dealt with by him as the judge to whom the hearing of the case had been entrusted by the ordinary procedures and practice of the particular court." -7- The present application seeks the imposition of a penalty. Each respondent had admitted a contravention of the Act. The proceedings may be compared to a trial on a eriminal matter where the accused have pleaded guilty and stand for sentence. In many cases, in making a plea, one accused tends to blame a co-accused. That of itself does not prevent the trial judge from sentencing each of the accused. In the present case the respondents may not be in the same position as co-accused in a criminal trial, but the position is the same as if the application had gone to trial, after the hearing each respondent had been found to have contravened the Act and the matter had been stood over to enable submissions to be made on the issue of penalty. In those circumstances, it is almost inconceivable that a judge should be disqualified from imposing a penatty on each respondent because one respondent relied upon material which tended to implicate the other respondent in a contravention for which he had not been found guilty, and which was irrelevant to the particular contravention for which the other respondent had been found guilty. On the facts of the present case there is no case to support the view that ICI or the public could entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the quantum of penalty to be imposed upon each respondent. Judges of the Court should be jealous not to abdicate their judicia] function and encourage procedural] -8- abuse by automatically disqualifying themselves whenever they are requested by one party so to do on the grounds of a possible appearance of bias. The Court turns to consider the claim aqainst ICI. The material before the Court shows that JCI is a major manufacturer and distributor within Australia of chemicals. Its management has been assiduous in its concern to ensure that it does not contravene the provisions of the Trade Practices Act. Other than in these proceedings, ICI has not been the subject of any other penalty proceedings or prosecutions for contravention of the Act. Baquacil is a trademark of a chemical manufactured by the Company. Its sole use is in treating swimming pool water. It was conceived in Australia in about 1970 and was developed as an alternative to the chlorine chemicals which traditionally had been used for that purpose. BQ Algene is manufactured also by ICI and is used in treating swimming pool water. Marketing of Baquacil first commenced in Queensland and South Australia in September 1976. The marketing was very haphazard and Baquacil was sold through retail outlets normally serving the swimming pool trade. Initially response was poor. ICI then advertised in newspapers with very successful results. Demand for Baquacil "increased dramatically. Thereafter, ICI supplied Baquacil to any retailer seeking supplies. Disadvantages in that system of -9- marketing soon became apparent. Many retailers did not have the expert knowledge to advise customers on the proper use of the chemical, to provide after-sales service or to advise customers on problems arising from the use of the chemicals. As a result, many complaints about the chemicals were received by ICI and the product began to get a bad name. The complaints resulted from improper use of Baquacil and the absence of proper advice and servicing from retailers. Late in 1977 ICT took steps to resolve the technical and marketing problems which had arisen. Eventually, by about June 1978, ICI resolved to reappraise the marketing procedure with the object of establishing and preserving the good name of Bagquacil and ensuring proper sales advice and service. A Mr. Elsworth was appointed Division Manager of the Organics Division within the appropriate group of ICI to take responsibility for marketing Baquacil. Expert advice was sought from an outside advertising body and based on detailed market research. A decision was made that Baquacil should be distributed only through retailers who were prepared to learn about the product, to impart that knowledge to customers and to ensure after-sales service by advising customers on problems arising from the use of Baquacil. That decision was implemented in the latter part of 1978. at - 10 = To give effect to the new marketing policy, ICI decided that for the 1978-79 swimming season it would supply the products to a single distributor in Queensland, Norris-Wightman, who would supply the goods to a select group of retailers in Queensland and that ICI would supply the products directly to a select group of retailers in South Australia. To enable the policy to be implemented ICI caused to be prepared a document dated 24 August 1978 headed "Retailer Criteria". A draft document was prepared by Elsworth in conjunction with the outside experts. The document listed the qualities a retailer should have before being permitted to sell Baquacil. The criteria included the following: "Product Commitment . A genuine enthusiasm for the product and a belief in its future Trained Sales Personnel . Preparedness to allow sales staff to attend an ICJ conducted technical training programme (approx 1/2 day duration) Price Adherence . A history of orderly retailing, not - deep price cuts. Promotional Flair . An understanding of merchandising techniques, display and advertising. -l1j- Business Compatability . Presently carrying a range that is in sympathy with pool chemicals. Customer Confidence . Acceptable reputation in the community and a commitment to follow through customer ongoing/complaints with the distributor." Copies of that draft were forwarded to ICI's State Sales Managers in South Australia and Queensland. The draft was submitted by ICI to its legal section which advised that resale price maintenance was prohibited by the Act, that retailers should not be selected by criteria such as price adherence, orderly marketing and an absence of price cutting and that the draft criteria should be varied accordingly. Thereafter the State Managers were told not to implement the draft criteria but that new criteria were being prepared and would be forwarded to them. This was done. The revised form was dated 30 August 1978. The reference to "price adherence" was deleted. The revised form was as follows: " ICI AUSTRALIA LTD ORGANIC CHEMICALS GROUP BAQUACIL DISTRIBUTION FOR 1978/79 SEASON To improve the customer image of the Baquacil system in the markets and ovrovide a more effective technical summort to pool owners in - 12 = South Australia and Queensland, a new system of distribution of Baquacil in these markets is being proposed. In South Australia, IcI Australia will distribute the Baguacil system directly to retailers. To avoid the previous 2 years' experiences of lack of technical competence of a large number of the retail outlets used, the following criteria should be used to decide the suitability of a particular retail outlet. Product Commitments A genuine enthusiasm for the product and a belief in its future. Technical Competence An ability to understand the basis of pool treatment and pool management with particular reference to the Baquacil system. Training To be prepared to release sales staff to attend technical training programmes of approximately 1/2 day duration. Promotional Flair An understanding of merchandising techniques display and advertising. Business Compatibility Presently carrying a range that is in sympathy with pool chemicals. Company Stability A stable business which is credit worthy. Customer Confidence A good reputation in the community and a commitment to follow through ongoing business and complaints with the customer referring back to the distributor for advice when necessary." wt J ICI approved the new distribution system and its -13- implementation in September 1978. At the same time JCI approved the selection and appointment of Norris-Wightman as its sole distributor to retailers of Baquacil in Queensland. In September 1978, ICI decided to conduct seminars in Adelaide, Brisbane and Townsville at which the new distribution arrangements were to be introduced to the selected retailers in those two States. The seminar in Adelaide was to be conducted by ICI. Because Norris-Wightman was to be the sole distributor of Baquacil in Queensland, it was to conduct the seminars in Brisbane and Townsville. The following extract was taken from the affidavit sworn by Peter Adams, the General Manager, Organic Chemicals Group of ICI. In fact, the summary of relevant matters set out above is taken from his affidavit, but the following extract is set out since it illustrates the problems faced by ICI and the difficulties arising in resolving those problems without contravening the provisions of the Act. «++ the Company [ICI] in about mid-September 1978 decided to hold the seminars. It did so for a number of reasons:- (a) The Company by this stage was wel} aware that retailers had in general become so disenchanted with Baquacil that they were threatening to cease supporting the product. Indeed, the general attitude of retailers in South Australia and Queensland was one of antagonism towards the product. The Company believed that the seminars were an essenttal step in winning back the confidence of retailers, -~14~- particularly as this was to be the second change in the Company's distribution arrangements for Baquacil in less than six months. (b) It was also apparent to the Company that the success of the new distribution arrangements would depend upon the retailers; in particular upon their preparedness to educate customers in the use of Baquacil and to provide service and technical assistance to consumers who encountered difficulties in using it. The Company also recognized that before retailers could be expected to inject a lot of effort into selling the product and providing technica] support for it, they would have to satisfy themselves that the Company itself had great faith in the product and had committed itseif to an overall marketing strategy which warranted the extra effort the Company expected of then. Retailers would naturally be concerned to know of the Company's advertising and promotional Plans for the product. But above all else, it was likely that their fundamental concern would be whether, having reqard to the sales and support effort they were being asked to undertake, the margin that the Company was recommending to them was reasonable. There is nothing unusual in this; retailers are always fundamentally concerned with the margin they will receive on selling a product. In all the circumstances, the Company decided that the best and most expeditious way of launching the new distribution system, and of providing material information to the retailers concerned, would be to hold a seminar or seminars in each of the test States." The seminars were organized. The Adelaide seminar was organized by Mr. Ken McKinnon (the State Manager). Messrs. McKinnon, Elsworth and other officers of ICI attended the seminar, including a Mr. Tan Wilson and Mr. Alan Summers -~15 - (a sales representative in Adelaide who reported to McKinnon). Also present was a Mr. Dutton from the advertising agency. On the day of the seminar, Elsworth canvassed with Summers the topics on which Summers was to speak, but no guidance was given to him as to what to say. The facts giving rise to the contravention of the Act occurred at the Adelaide seminar and in an incident which occurred shortly thereafter. The Court has seen a transcript of what was said at the seminar. It was in accord with the revised "Retailer Criteria", but went further. The number of retailers of Baquacil in South Australia had been reduced from a high of 520 in March 1978 to some 25 in December 1978 all being supplied directly from ICI. The seminar was designed to enable this limited number of retailers to be told of the new marketing procedures. Paragraph 6 of the amended statement of claim alleges the facts constituting the contravention of the Act by IcrI. Those facts are admitted in the amended defence filed by ICI. The paragraph is set out: "At a seminar in Adelaide on or about 12 October 1978 conducted or arranged by the first Respondent one Alan Summers and/or one Peter Douglas Elsworth: (a) made it known to the retailers attending : the seminar that the first Respondent would not supply Baquacil or BQ Algene to - 16- them unless they agreed not to sell Baquacil or BQ Algene at prices less than prices specified by the first Respondent; (b) further or alternatively, induced, or attempted to induce, the said retailersnot to sell, at prices less than prices specified by the first Respondent, Baquacil or BQ Algene supplied to them by the first Respondent." Particulars were given. Those particulars are supported by a reference to a transcript of what was said at the seminar. Paragraph 7 of the amended statement of claim alleges further facts constituting a contravention of the Act by ICI. Those facts are admitted in the amended defence of IcI. The paragraph is set out: "In or about October and November, 1978 in South Australia the said Summers: (a) made it known to one Gaythorne Templer, a retailer of Bagquaci] and BQ Algene, that the first Respondent would not supply Baquacil or BQ Algene to him untess he agreed not to sell Baquacil or BQ Algene at prices less than prices specified by the first Respondent; (b) further or alternatively, induced, or attempted to induce, the said Templer not to sell, at prices less than prices specified by the first Respondent,- Baquacil or BQ Algene supplied to him by the first Respondent;" Particulars were given. Those particulars are supported by an affidavit sworn by Templer. PA4T3 -~-17 - On these facts it is clear that ICI contravened a provision of Part 1V of the Act, namely s.48. Under s.76 of the Act the Court may order ICI to pay to the Commission such pecuniary penalty not exceeding $250,000: »». as the Court determines to be appropriate Raving 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." In his affidavit, Adams hypothesises how the contravention occurred: "The new distribution arrangements for Baquacil involved a number of elements which had to be 'sold' to retailers who had become thoroughly dissatisfied with Baquacil and the Company. For marketing purposes, Elsworth and Dutton simplified the essential features of the new distribution arrangements down to a kind of 'hip-pocket argument'. The argument went as follows: retailers would only provide effective service and technical support for Baquacil if they made good profits from its sale; and this would only occur if retailers charged sensible prices, protected their margins, and did not engage in price cutting. The use of this argument was not authorised by me or, as far as I am able to ascertain, by any other officer of Fthel Company. Moreover, neither I nor any other senior executive or director of the Company (other than Elsworth) was aware before the Adelaide Seminar that an argument in these simplified terms would be presented or that comments would be made to retailers about the need to avoid price eutting. - 18 ~ With the benefit of hindsight, it is now apparent to me that the relationship between retail margins and the ability and preparedness of retailers to provide technical support to users of Baquacil was a sensitive area which should have been addressed with special care. Instead of relying solely upon Elsworth to carry these sensitive matters into effect at the seminar I should have taken part in the formulation of guidelines for their assistance and the assistance of other representatives of the Company who were scheduled to speak -at the seminar. Ultimately, the responsibility for taking the necessary precautions to ensure that such statements were not made at the Adelaide Seminar was mine. The directors of the Company in fact reprimanded me for not taking precautions which would have ensured that the Company was not placed in its present position." Mr. Templer did not attend the Adelaide Seminar but was appointed a retailer for Baquacil. In fact, shortly after the events of October and November 1978 Templer was told by Mr. McKinnon that he was free to sell Baquacil at a discount, that ICI was not engaged and did not intend to engage in resale price maintenance. Further, after the Commission had written to ICI in April 1979, ICI notified all retailers of Baquacil in South Australia that it was not the policy of ICI to engage in resale price maintenance. Further, after the 1978-79 pool season, Adams has settled all + decuments containing references to prices of Baquacil. There is no material before the Court showing that the senior management of ICI participated directly in the contravention of s.48 of the Act. Nor is there any if fons ~ 19 - suggestion that senior management turned a blind eye to a perceived contravention of the Act. Nevertheless, senior management approved a new marketing policy for Baquacil and was aware of the sensitivity that could arise in implementing that policy and the real possibility that the implementation could, unless carefully planned, contravene the Act. Senior management did not take sufficient steps to ensure that other officers of the Company did not, in their enthusiasm in implementing the policy, contravene the Act. ICI must take responsibility for the inactivity of its senior management as well as the direct activity by its other officers which conduct resulted in ICI engaging in the practice of resale price maintenance. The Court is satisfied that senior management of ICI have attempted to comply with the requirements of the Act. In the present case the contravention arose because of the urgent need to resolve a difficult marketing problem involving adverse publicity affecting a new product being marketed by ICI. Control by senior management to ensure that all relevant officers of ICI should comply with the provisions of the Act was not as strict as it should have been. When discovered, the laxity in control was overcome and active steps implemented to ensure that in the future there would be strict compliance with the Act. -~ 20 - Since early 1979 ICI has introduced methods to ensure that all relevant officers are aware of the provisions of the Act and they are directed to do nothing which could constitute a contravention of the Act. This is not a case where an injunction should be granted: Nevertheless, a serious contravention of the Act has occurred. The maximum penalty is large, $250,000, and must reflect the serious nature of a contravention of the Act. ICI is a major company in Australia and was selling a product manufactured by it. That product was in competition with other products, some of which were manufactured by ICI. There is no evidence of any loss or damage suffered as a result of the contravention. In aJll the circumstances a penalty of $20,900 should be imposed on ICI. The Court turns now to consider the claim against Norris-Wightman. Much of what has been said is relevant to this claim. As part of its new marketing arrangements, ICT appointed Norris-Wightman its sole distributor of Baquacil in Queensland. The difficulties arising from the previous marketing arrangement had to be overcome. The wholesale distributors had been decreased from an estimated nineteen in June 1978 to one in September 1978. The number of retailers had been reduced from about 200-300 in June 1978 to some 60-70 in September 1978. The draft document "Retailer Criteria" had been forwarde? to the Oueenstand State Manager - 21 - of ICI and had been forwarded to Norris-Wightman. There is no material before the Court showing that the revised "Retailer Criteria" dated 30 August 1978 had been received by Norris-Wightman. ICI had arranged for Norris-Wightman to conduct seminars in Queensland. Mr. Elsworth, Mr. Wilson and other officers of ICI, together with Mr. Dutton from the advertising agency, all attended the seminar conducted in Brisbane by Norris-Wightman. The facts constituting the contravention of s.4f of the Act by Norris-Wightman are set out in paragraphs 9, 10 and 11 of the amended statement of claim and are admitted by the amended defence of Norris-Wightman. Those paragraphs, omitting the particulars appended to them, are set out: "At a seminar in Brisbane on or about 29 September, 1978, conducted or arranged by the second Respondent, one Alan James Cocker and/or one John Wightman: (a) made it known to the retailers attending the seminar that the second Respondent would not supply Baquacil or BQ Algene to them unless they agreed not to sell Baquacil or BQ Algene at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent; - (b) further or alternatively, induced, or attempted to induce, the said retailers not to sell, at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent, Baquacil or BO Algene supplied to them by the second Respondent; (c) (a) 10. -~ 22 - further or alternatively, offered to enter into agreements for the supply of Baquacilt and BQ Alqene to the _ said retailers, being agreements one of the terms of which was, or would be, that they would not sell Baquacil or BQ Algene at prices less than prices specified, or that would be specified, by the second Respondent, alternatively at prices less than prices specified, or that would be specified, by the first Respondent; further or alternatively, used, in relation to Baquacil and BQ Algene supplied, or that might be supplied, by the second Respondent to the said retailers, statements of prices that were likely to be understood by them as the prices below which the Baquacil and BO Algene were not to be sold. In or about September and October 1978 in Queensland the said Wightman: (a) (b) (c) made it known to one William David Lovelock and PP [Priority Products Pty- Ltd.] by its director Damon Richard Bickle, both retailers of Baquacil and RO Algene, that the second Respondent would not supply Baquacil or BOQ Algene to them unless they agreed not to sell Baquacil or BQ Algene at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent; further or alternatively, induced, or attempted to induce, the said Lovelock and the said PP not to sell, at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent, Baquacil or BQ Algene supplied to them by the second Respondent; further or alternatively, offered to enter into agreements for the supply of Baquacil and BOQ Alqene to the said Lovelock and the said PP, peing agreements one of the terms of which was, - 23 - or would be, that they would not sell Baquacil or BO Algene at prices less than prices specified, or that would be specified, by the second Respondent, alternatively at prices less than prices specified, or that would be specified, by the first Respondent; (ad) further or alternatively, used, in relation to Baquacil and BQ Algene supplied, or that might be supplied, by the second Respondent to the said Lovelock and the said PP, statements of prices that were likely to be understood by them as the prices below which the Baquacil and BO Algene were not to be sold. ll. In or about November and December, 1978 and January, 1979 in Queensland the said Cocker: (a) made it known to M. Scarrone, $.T. Pitt, (b) (c) K.N. Hill, G. Mullane and R. & S.d. Strous, all retailers of Baquacil and BQ Algene, that the second Respondent would not supply Baquacil or BQ Algene to them unless they agreed not to sell Baquacil or BQ Algene at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent; further or alternatively, induced, or attempted to induce, the said retailers not to sell, at prices less than prices specified by the second Respondent, alternatively at prices less than prices specified by the first Respondent, Baquacil or BO Algene supplied to them by the second Respondent; further or alternatively, offered to enter into agreements for the supply of Baquacil and BO Algene to the said retailers, being agreements one of the terms of which was, or would be, that they would not sell Baquacil or BQ Algene at prices less than prices specified, or that would be specified, by the second =~ 24 - Respondent, alternatively at prices less than prices specified, or that would be specified, by the first Respondent; (d) further or alternatively, used, in relation to Baquacil and BQ Aigene supplied, or that might be supplied, by the second Respondent to the said retailers, statements of prices that were likely to be understood by them as the prices below which the Baquacil and BQ Algene were not to be sold." A transcript of what was said at the seminar is before the Court. The letters containing the allegations in paragraph 11 of the amended statement of claim are before the Court. Those letters were sent to retailers who had not attended the seminar. They referred to the request to be appointed a Baquacil retailer, the fact that the matter had been discussed with ICI and that they were to be resellers. The letter then continued: "Enclosed please find a copy of our current price list which includes details on 'Baquacil' price structures. Please note the recommended retail prices for 'Baquacil Process' products as we would ask you to observe these seliing prices strictly. Adequate supplies of promotional material will be supplied as soon as available." In all the circumstances the Court accepts the particulars given in each of the three paragraphs of the amended statement of claim. - 25 - Affidavits sworn by John Wightman and Alan Cocker are before the Court. At all material times Wightman was the managing director and chief executive of Norris-Wightman. Mr. Cocker had been employed by that company as a sales representative and in June 1976 was appointed a director. Norris-Wightman carried on its business through seven separate divisions, one of which related to swimming pool products. At all relevant times Norris-Wightman acted as wholesaler and retailer of chlorine under the trade names of HTH Chlorine and Norris Pool Clor Products in direct competition with Baquacil. Those chemicals and other swimming pool products were supplied by WNorris-Wightman to most of the retailers to whom it supplied Baquacil. Mr. Wightman describes the difficulties experienced in Queensland concerning the sales of Baquacil prior to September 1978. Those difficulties are similar to those described by Mr. Adams. In December 1976 Norris-Wightman wrote to ICI referring to the difficulties and suggesting a solution along the lines of ICI appointing one or two mayor distributors in Queensland to open up the market and to ensure proper information as to the use of Baquacil and proper and adequate after-sales service. During 1978 ICI introduced the new marketing policies. They were described to Mr. Cocker and another employee of Norris-Wightman who attended meetings with ICI officers concerning technical matters. The number cf wholesale distributors of Baquacil was reduced and eventually, in September, Norris-Wightman became the sole -~ 26 - wholesale distributor. Between August and October Wightman and Cocker attended meetings in Brisbane with ICI representatives including Elsworth. Wightman received his copy of the draft "Retailer Criteria". Norris-Wightman notified its retailers of the change- in the marketing arrangements of Baquacil. The letter explaining the change contained the following paragraph: "This change in system is being made in the public interest in order to better meet the consumer needs, and to enable I.C.I. Australia as a prime supplier, and Norris Wightman Industries as their distributor to carry out their responsibility to those who use the Baquacil process." From what had been said by Wilson, Wightman believed that Norris-Wightman was obliged to observe the new price list and if not observed that ICI itself would distribute Baquacil in Queensland. He believed also that Norris-Wightman was required to discourage discounting by retailers to whom it supplied Baquacil. In September 1978, Wightman attended a meeting in Melbourne with officers of ICT in relation to technical matters affecting chemical products including Baquacil. The seminars in Queensland were discussed at that meeting. Mr. Cocker attended a similer meeting later in September 1978. - 27 - The thrust of the seminar held in Brisbane was to ensure enthusiastic and informative sales of Baquacil in Queensland and full and effective after-sales service. The purpose of the seminar was to improve the reputation of Baquacil and to ensure it established and maintained a good reputation. Messrs. Elsworth and Wilson, as well as other officers of ICI, attended the seminar. In addition, Mr. Dutton, a representative of the advertising agency engaged by ICI and who attended the Adelaide seminar, attended the Brisbane seminar. Senior management of Norris-Wightman attended the seminar and participated in the events subsequent. to the seminar. They participated actively in the contravention of the Act by Norris-Wightman. At the same time, senior management were carrying out the policy which they believed had been adopted and was being put into effect by ICI. They believed that Norris-Wightman formed a link in the new marketing scheme being implemented by ICI for its distribution of Baquacil. This belief does not exculpate Norris-Wightman from liability. Norris-Wightman in its own right engaged in the practice of resale price maintenance. After the seminar, Wightman was told by Wilson that - one retailer in Queensland was discounting and that that retailer should no longer be supplied with Baquacil. As a result, Norris-Wightman engaged in the conduct referred to in paragraph 10 of the amended statement of claim, but at all material times WNorris-Wigqhtman continued to supply that ~ 28 - retailer as well as all other retailers which had been approved by ICI. At no time did Norris-Wightman refuse to supply retailers with Baquacil or associated products because of infringement of the pricing policy. At the same time, Norris-Wightman supplied those retailers with other products in direct competition to Baquacil. Norris-Wightman is a small business compared with Icl. Apart from these proceedings it has never been prosecuted for the breach of any consumer protection legislation. There is no evidence of any loss or damage suffered as a result of the conduct by Norris-Wightman. The contravention ceased when the Commission commenced to investigate the contravention and has not been carried on since then. This is not a case where an injunction should be granted. Nevertheless, a serious contravention of the Act has occurred. The nature of the offence and the penalty provided for in the Act have been referred to already. In all the circumstances a penalty of $10,000 should be imposed of Norris-Wightman. oe ee pee: o . SOE TOD TRS tag hakewwee | Tosmu'y that dus and the bounty sree oy (29) ; ~ y pracdiug pages are a tue copy of the : ' g PE tr a: Reasons ier Jedgment here of the Honourable Mr. Justice No= thee P he ele OT ae J Associate ve Rated iO sone 1953 i SIRE LI FONG Vise NS OTTO Ge ERY ree See es *