CATCHWORODS TRADE PRACTICES - arrangement restricting competition - price-fixing agreement - whether proved - whether mutual obligation necessary. Trade Practices Act, 1974, ss.45(2), 45A, 76 TRADE PRACTICES COMMISSION v. LESLIEVALE PTY. LIMITED & ORS. QLD G93 OF 1985 PINCUS J. BRISBANE 18 April 1986 roa eatery pe ane aT So rosy ane een ae sooner ee . be. sere an IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION ) BETWEEN: TRADE PRACTICES COMMISSION AND: LESLIEVALE PTY. LIMITED AND: BOWSTROM PTY. LIMITED AND: AXPRESS PTY. LIMITED AND: MOBIL OTL AUSTRALIA LIMITED AND: THOMAS HENRY LITTLE AND: VINCENT JOHN SMITH AND: KEITH LESLIE SCHULTE AND: DAVID FRANKLIN NEWMAN QLD G93 of 1985 Applicant First Respondent Second Respondent Third Respondent Fourth Respondent Fifth Respondent Sixth Respondent Seventh Respondent Eighth Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 18 April 1986 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondents' costs of and incidental to this application to be taxed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. ne a aes Ww vt - « . . re . ce . > pam art IN_THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) ) GENERAL D IVISTION BETWEEN: TRADE PRACTICES COMMISSION AND: LESLIEVALE PTY. LIMITED AND: BOWSTROM PTY. LIMITED AND: AXPRESS PTY. LIMITED AND: MOBIL OTL AUSTRALIA LIMITED AND: THOMAS HENRY LITTLE AND: VINCENT JOHN SMITH AND: KEITH LESLIE SCHULTE AND: DAVID FRANKLIN NEWMAN PINCUS J. alleged c QLD G93 of 1985 Applicant First Respondent Second Respondent Third Respondent Fourth Respondent Fifth Respondent Sixth Respondent Seventh Responden Eighth Respondent 18 April 1986 REASONS FOR _JTDGMENT The applicant claims pecuniary penalties in respec t t of ontraventions of s.45(2) of the Trade Practices Act and injunctive relief. All the respondents, and were Gladstone in February 1984 operators in this State, or persons of except the fourth, service stations associated with are in such oa - eo be er eer ve . Aa . myycwee ce aor easy oye _ ft ete ' ry > operators. To be more specific. the first. second and third respondents are companies of which the sixth, seventh and eighth respondents. respectively. are directors: the fifth respondent conducts a service station in partnership with his wife. The fourth respondent is Mobil Oil Australia Limited, whose representative in Gladstone at the time was Mr. Carl Schweppes. The applicant complains that on3 February 1984 there was a meeting at the office of the sixth respondent which was attended by him and bv the fifth. seventh and eichth respondents. together with certain other people, being retailers and depot operators carrving on business supplying fuel in Gladstone. The applicant claims that at or asa result of the meeting. an arrangement or understanding was made or arrived at between two or more of the first, second. third. fourth and fifth respondents. The arrangement or understanding was. it is alleqed. to the effect that the retail price at which super-arade petrol would be sold by the parties would be at least 48.9 cents per litre for "full service" and at least 47.9 cents per litre for "self-service". It is said. further. that the arrangement or understanding was that fuel depots would charge at least 46.9 cents per litre. To establish that the arrangement or understanding was arrived at. the applicant relies upon the evidence of two witnesses, Messrs Sibley and Gelinski. who were at the meeting in question and also upon evidence as to the activities of the woe eas wpryere > Titers fourth respondent. Mobil. The pleaded case against the fourth respondent is that, by its agent Mr. Schweppes, it told Mr. Zelinski that the meeting was to take place and that it knew the retail price of super grade petrol was to be discussed at the meeting and miqght increase as a result of the meeting. It is also alleqed that about 11a.m. on the dav of the meeting, 3 February 1984, the sixth respondent. Mr. Smith. telephoned Mr. Schweppes and told him that the arrangement or understanding had been arrived at and that Mr. Schweppes then directed Mr. Zelinski ta increase the price to be charged at a service station called the Mobil Big Wheel Service Station. This conduct on the part of the fourth respondent was, it was said. such as to bring it within one or more of the paraqraphs of sub~s.76(1) of the Act. The provisions of s.45(2) which are relied on are sub-pars.(a)(i1) and (b)(ii): "A corporation shall not - (a) make a contract or arrangement, or arrive at an understanding, 1f - (ii) a provision of the proposed contract. arrangement or understanding has the purpose. or would have or be likelv to have the effect. of substantiallv lessening competition: or 'b} aive effect toa provision of a contract. arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after oe aa La wy. en A eae - . Yon -f the commencement of this section, if that provision - (ii) has the purpose, or has or is likely to have the effect, of substantially lessening competition. The applicant relies upon s.45A as definitive of the expression "the purpose or... effect of substantially lessenina competition". The immediately relevant part of s.45A is sub-s.(1): "Without limiting the qenerality of section 45, a provision of a contract. arrangement or understandina, or of a proposed contract, arranaement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect. of substantially lessenina competition if the provision has the purpose. or has or is likelv to have the effect. as the case mav be, of f1ixina,. controlling or maintaining. or providing for the fixing, controlling or maintaining of. the price for, or a discount, allowance. rebate or credit in relation to. qoods or services supplied or acquired or to be supplied or acquired by the parties to the contract. arranaement or understanding or the proposed parties to the proposed contract, arranaement or understanding. or bv anv of them, or by anv bodies corporate that are related to anv of Ehem, 1n competition with each other." To state its effect summarilv, s.45A(1) deems price-fixing arranaements to have the purpose or actual or likely effect of substantially lessening competition. There was some reference in arqument to a point discussed bv Fisher J. in Trade Practices Commission v. David Jones (Australia) Ptv. Ltd. (unreported, 6 February 1986). His Honour referred to an opinion he had earlier expressed. that there must be an "element of mutual commitment" for there to be an "understanding" within the meaning of s.45. He considered the possibility that in some rare cases, that might be unnecessary, as suggested by Lockhart J. in Trade Practices Commission v. Email Ltd. (1980) 31 A.L.R. 53 at 66. If it matters, I favour the suggestion of Lockhart J: however, it does not appear to me that the point is of critical importance in this case, where the difficulty is to obtain anv clear notion of what was said at the meeting discussed below. The provisions in question require, of course. that more than one person be a party to the arrangement or understandina: it is not enough for the applicant to show. in order to succeed on these pleadings, that Mr. Smith proposed an arrangement. The central point in the case is whether at or asa result of that meeting an arranagement or understandina was arrived at of the kind pleaded. Of those men present at the meeting, eight have been called before me and six of them, beina those called on behalf of the respondents, aave no support to the suacestion that there was such an arranqgement or understanding. The standard of proof is the balance of probabilities, keeping in mind the aravitv of the matter alleaed: The Heating Centre Ptv. Ltd. v. Trade Practices Commission (unreported, 17 March 1986. Full Court). Pye rapt os ee ote pe een arte oe ey ee aa The evidence dealt with a number of issues which turned out to be of peripheral relevance. In the end. the main question to be considered is what happened at the meeting and on that the evidence is, in general, vague and conflicting; nor is much light shed upon the matter by consideration of external events. such as the prices at which petrol was sold after the meeting. Mr. D. J. Sibley. who attended the meeting, dqave evidence that it was chaired bv the sixth respondent, Mr. Smith. According to Mr. Sibley, Mr. Smith said that Mobil had indicated that they would like stability of price and that he (Mr. Smith) "thought that we possibly should all qet together to achieve that vee Accordina to Mr. Siblev. Mr. Smith said he thought an acceptable level would be 49.9, and 48.9 for the "self-serves". That meant that the stations which provided "full-service", including washing the windscreen and services of that kind. were fo charae 49.9 cents per litre. the others 48.9 cents per litre. There followed some discussion which it is not necessary to mention, and then. according to Mr. Sibliev, Mr. Smith said. "Can we get - can we come to some aqreement on what price, vou know. we should be at". There was some further discussion and then, according to Mr. Siblev. Mr. Smith said, "Well, we've aqreed on 48.9, 47.9 and 46.9". The reference to 46.9 was, if it was made, without doubt intended to refer to the price to be charged bv depot operators - ase tre Se een en geen wt coe a aTT TY ra ' that is. by dealers who sold directly to the public as well as selling to retailers of petrol. Despite the terms of the pronouncement attributed to Mr. Smith, this passage in the evidence did not include any assertion that a member of the aqaroup other than Mr. Smith expressed agreement on those fiaures. In particular. of those alleqed in the statement of claim to have agreed, the only one implicated bv Mr. Sibley's evidence was Mr. Newman who. he claims. said that "49,9 and 48.9 would be acceptable". It will be noted that these prices do not correspond with those alleged to have been last mentioned bv Mr. Smith. Mr. Siblev claims that Mr. Smith then rang Mr. Schweppes and said, ""We've qot 48.9, 47.9 and 46.9. but Errol said he won't budge." The reference to "Errol" is to Mr. Zelinski., whose evidence is mentioned below. One thing which clearly emeraes from the various accounts of the meeting is that he made no aareement to sell at a price mentioned by Mr. Smith. Mr. Schweppes aave evidence of having received a telephone call about the time sworn to by Mr. Siblev. Accordinag to Mr. Schweppes' version. Mr. Smith said that "he had heard dealers and aaqents had settled their dispute and there would be some price changes back to the previous current market price that morning ... The second thing he said was that Errol had Ie |< F s Syren oe apparently stood up and said certain things regarding him being told by Mobil that he could price at 46.9 cents per litre ..."". The evidence as to what Mr. Smith said he had "heard" derives some support from exhibit 35 which, according to the evidence of Mr. Schweppes, is a memorandum he wrote on the day in question. It reads, in part: "Dealer John Smith had rung to state that apparently the disputing dealers and agents (see attached newspaper article) had seen the wisdom in all of them pricing at a common price - 48.9 c.p.1. and 49.9 c.p.1." The note just quoted was used by Mr. Schweppes, according to him, in preparing a report to his superior in which the relevant telephone conversation is recorded as follaws: "Mobil dealer, John Smith, rang T.M. to say that he had heard that disputing dealers and agents (see attached newspaper article no. 1) had settled their problems and had agreed to return to the previously current market price of 48.9 and 49.9 c.p.1." "T.M." means "Territory Manager" and refers to Mr. Schweppes. This later version of the conversation uses the word "agreed", which exhibit 35 does not. The later version constitutes strong evidence, in my view, that Mr. Schweppes thought, on 3 February, that a substantial number of the fuel dealers and agents in Gladstone had made such an agreement as mentioned in his report. However, it should be noted that the prices mentioned in the documents are different from those last mentioned by Mr. Sibley. t one le moe wattee mea eee ee ce ge a en 7 a one = ee, In cross~examination concerning the alleged agreement. Mr. Sibley was asked: "There was reallv no resolution at all, was there?" To that he replied: "Only the fact that John decided to ring Carl with what he thought the service station operators would It will be noted that that answer may be able to be reconciled with Mr. Schweppes' first note of what Mr. Smith told him, but cannot be reconciled with his formal report. In cross-examination by senior counsel for the fourth respondent. Mr. Siblev said, in effect, that "there would have been qeneral aqreeance (sic)"" with Mr. Smith's proposal. As will appear in more detail. I do not accept that there was qeneral agreement with anv proposal made by Mr. Smith. I think Mr. Schweppes understood Mr. Smith to tell him. in the telephone conversation referred to above. that a number of dealers and agents intended to sell at a common price. However, Tam not satisfied that a substantial number of persons said so at the meeting. Whether anv did is a question discussed below, The same meeting was deposed to bv Mr. E.W. Zelinski. but he, it is common ground. left before its end. According to his version of events, Mr. Smith told the meeting that "we were trying to lift the market. wanted to qet the market up to 49.9 and 48.9 respectively and these chaps in the depot were asked ' meee aie beleter der nT ae Year ? oar a Ln }. 10. ~ 'Would you lift your price?'" The direction of such a question to the controllers of the depots is a common theme throughout much of the evidence about the meeting. The depot operators, in my view, had so acted as to cause dissatisfaction among the retailers. One was apparently selling at retail without the necessary licence to do so and that was an important cause of the calling of the meetinga. Both the depot operators were under-cutting the general level of petrol prices in Gladstone. Mr. Zelinski stated that Mr. Rvalis (one of the depot operators) said "they would possibly lift theirs to around 46 to 47.9 but thev were not happy to do it". Mr. Zelinski said that iust before he (Mr. Zelinski) walked out of the room he said, "I am qoing to sell at 46.9". In response to specific questions as to the attitudes of Messrs Little. Shulte and Newman, Mr. Zelinski said that each of them aqreed to 49.9. The evidence Just mentioned is the onlv evidence that each of Messrs Little. Shulte and Newman specificallv aqreed to sell at 49.9 cents per litre. There is no other evidence that thev did so and, in particular, the other witness called for the applicant, Mr. Siblev, aives na support to the assertion, except as to Mr. Newman - but at a different price. I found Mr. Zelinski not to be a verv convincina witness. Mr. Newman was called and firmly denied the alleqation aqainst him, just mentioned. Although Io owas left with considerable uncertainty as to the accuracy of much of the v li. . evidence given by other witnesses, I thought Mr. Newman to be a truthful witness and am satisfied, in particular, of the truth of his denial that he entered into a price-fixing agreement. Senior counsel for the applicant relied, as against Mr. Newman, on the fact that the price of the petrol sold by Axpress Pty. Limited, the company of which he is a director, was changed between 3 February 1984 and 4 February 1984, being 49.9 cents per litre on the former date and 48.9 cents per litre on the iatter. That fact, however, appears to me to have no weight as against Axpress Pty. Limited and Mr. Newman, because if there were such price-fixing agreement as 1s alleged, that could have been complied with by simply leaving the price as it was on 3 February. Further, Mr. Newman gave an explanation of the change, namely that the wholesale price had been reduced and I. see no reason to reject that. Mr. Schulte gave evidence and said that the discussions started with people asking Carr, a depot operator, why he had dropped his price and why he was selling fuel to the public when not legally entitled to da so. Apart from that, according to Mr. Schulte, there was no mention of price and no suggestion that anyone should sell at a particular price. However, I formed the impression that Mr. Schulte was not overly anxious to give the court the benefit of such recollection of the matter as he had. Mr. Little's evidence was broadly to similar effect, but he added that Mr. Zelinski said that he was going to sell at 46.9 cents paar ae " f- 12. ; and "to hell with all the rest of you". Again, I did not find Mr. Little a particularly convincing witness. From the records of sales produced, it seems clear that Mr. Schulte dropped his price to 45.9 cents on 1 February and Mr. Little dropped his to the same figure on 2 February. That ties in reasonably well with evidence given by Mr. Little, to the effect that he followed Mr. Schulte's prices. Mr. Little's records show that on 3 February his price went up during the day from 45.9 to 49.9 cents. A change during the course of the working day was, according to all the evidence, rather a lot of trouble and I think Mr. Little's price was probably increased on 3 February because of the meeting. However, his records show it as going down again to 45.9 cents on the following day, presumably because Mr. Schulte was selling at that figure. In the end, I am 1laft with a comfortable satisfaction that there was more said about price at the meeting than witnesses such as Messrs Little and Schulte would have me accept. I. cannot be satisfied, however, that there was any such arrangement or understanding as 1s alleged. No doubt one of the purposes of the meeting, at least as far as some of the participants were concerned, was to deal with the question of price-cutting, particularly that engaged in by the depots. It seems to me unlikely, however, that any firm understanding was reached. Those said to have participated in the understanding were all trading in Toolooa Street, Gladstone and there they Rm wee ae seu Re ere rr : TN ee y fl TR erent er Oe eee mo ' wots 7 13. - traded in competition with Mr. @Gelinski. He. it is clear. was adamant that he would sell at 46.9 cents. An understanding as to price, not including Mr. Zelinski. which involved other Toolooa Street self-service stations selling significantly above his price would have made little commercial sense. Further, there is enough substantial contrary evidence, from straiqhtforward witnesses such as Mr. Newman mentioned above. and Mr. K.R. Bailey. to make it impossible to have any real confidence that the applicant's alleaations are correct. I can see the difficulty under which the applicant labours when trying to prove a case of this sort. It must not be at all easv to persuade witnesses, at least those who propose to stav in the area, to aqive evidence against their colleaaues or former colleaques, but the onus is on the applicant. It must satisfv the Court that there was. if not a series of mutual obligations entered into, at least a definable understanding. While I think it likelv that what was said at the meeting aave Mr. Little the impression that he had at least an interest, if not a moral dutv, to put his price up. I am left with no clear notion of what it was that put him in that state of mind. Since I am not satisfied that there was any such arrangement or understanding as alleded, between the respondents or any of them. it is not necessary to deal with the case against the fourth respondent. Mobil. However, it seems desirable, in the circumstances, to make findings with respect to that seqment © ee ee ee ee . adr Coane nenennnad SERA OE a te eooae : "oe oT ~ wa mee of the case. Each of Messrs Sibley and 4Gelinski swore to conversations with Mr. Schweppes, the Mobil representative, which, if accepted, tended to implicate Mobil in an effort to fix prices. It is not, I think, necessary to set out all the details, but enough to mention one piece of such evidence. Mr. Sibley claimed to have been telephoned on the mornind, Friday 3 February 1984, by Mr. Schweppes who asked, "When are you going up in price?" Mr. Sibley says he replied. "When evervbodv else does." Then, according to Mr. Siblev's evidence. Mr. Schweppes said: "We have had aautful of vou and the way vou Carry on. We have aot enough sites in town to break vou. If we have to we will qo to 42.9." There is other evidence suaqesting that Mr. Schweppes had foreknowledge of the meeting and. perhaps. helped to promote it. I found Mr. Schweppes to be a rather puzzling witness. On the one hand. his evidence was impressively qiven. and he seemed not to have a strong motive to mislead me, since he no longer works for Mobil. On the other hand. he admitted having told untruths to the applicant's investigators and that the account of events aqiven to his superior and mentioned above fexhibit 35) was. in at least one respect, falsified. The report said that Mr. Schweppes rang Mr. Zelinski at 11.10 a.m. "to inform him of his new buving price of 47.20 cpl..." Mr. Schweppes admitted, in cross-examination by senior counsel for the applicant, that he then informed Mr. 4Zelinski of no such thing and that the notion that Mr. GZelinski should be told a new wa € Ne z Cn he re epee ren ee seers 15, . buyina price emeraed from a conversation he had witha Mr. Thomson that afternoon. I am not satisfied. however. that where Mr. Schweppes' recollection differs from that of Messrs Zelinski and Sibley I should accept them rather than Mr. Schweppes. In particular. I am not satisfied that the conversation just mentioned, sworn to bv Mr. Sibley. took place. That still leaves the applicant with a case aqainst Mobil on the assumption that (contrary to the finding made above) there was such an arranaement or understanding reached at the meeting as is alleged. That is so because the note, exhibit 34, the relevant part of which is quoted above, is strona evidence that Mr. Schweppes believed there was a price-fixing arrangement under which self-service sites were to sell at 48.9 cents per litre and it ius clear that. shortlv after that, he told Mr. Zelinski. who sold as an agent of Mobil, to sell at 48.9 cents per litre. Senior counsel for the applicant araqued that the direction to Mr. Zelinski was a clear attempt to implement the aqreement which Mr. Schweppes believed to have been made. Between the two events just mentioned - i.e. the Schweppes-Smith phone conversation and the Schweppes-Zelinski conversation - the report, exhibit 34. asserts that another siqgnificant event occurred. namely that Mr. Schweppes surveved the "competition sites" in the vicinitv of Mr. Zelinski''s site and found that all the sites on Tooloola Street had returned to 48.9 and 49.9 cents per litre. That is inconsistent with the cre oe eee trading records produced by Mr. Schulte but is able to be reconciled with the other trading records tendered. Senior counsel for the applicant arqued that the alleged survey of the sites was merely a subterfuge, desianed to dispel the impression that Mr. Schweppes' direction to Mr. Zelinski was an implementation of the agreement Mr. Schweppes believed had been made at the meeting. That araument has some force, but I do not accept it. If Mr. Schweppes had, when he prepared these documents, been concerned not to record events in an incriminating way, he could simply have omitted all reference to the report bv Mr. Smith of the result of the meetina; so far from doing that, Mr. Schweppes stated in his report to his . superior that the "disputing dealers and adqents" had "agreed to return to the previously current market price ... whereas his rough notes said nothing about any aqreement. I think it is true, as senior counsel for the applicant araqued, that Mr. Schweppes' report was in some respects so drawn as to qive an account of events which would assist Mobil's position, but I do not believe Mr. Schweppes then had in mind the possibility of an accusation of being a party to price-fixina. What he was concerned about was the risk of a litiaious dispute with Mr. Zelinski. Although I am not satisfied of the accuracy of Mr. Schweppes' record. or recollection. of the price survev he did before aiving the direction to its agent Mr. Gelinski, Tf think that direction was prompted by the price survey rather than the information from Mr. Smith. In my view, Mr. Schweppes would zy! {ome ee Aa t Lon 17. . have insisted that Mr. Zelinski come up to the price others were charding, whether or not he had heard from Mr. Smith. I accept that, as Mr. Schweppes said in evidence. Mobil did not want to lead prices up or down but was content to sell at the generally prevailing price - as indeed it was entitled to do. It was that policv rather than any agreement he thought had been made which. in my belief. Mr. Schweppes sought to implement by aqiving the direction to Mr. Zelinski. It may be convenient to summarise mv principal factual findings. 1. Mr. Schweppes believed, from a conversation with Mr. Smith. that a aqeneral understanding had been arrived at with respect to petrol prices. on 3 Februarv 1984. 2. There was in fact no such general understanding, although discussion had taken place on that subiect. at a meeting at Mr. Smith's premises. 3. I am positively satisfied that Mr. Newman was no party to anv price-fixing arranqement or understanding. As to Messrs Little and Schulte. I am not prepared ta find that anv such arrangement or understanding as is alleged was made. qt iweges pete omnes, 1 ~ nn ce Try Soe eee at 18, Mr. Schweppes' direction to Mobil's agent Mr. Zelinski to raise his price was not prompted by the belief mentioned in finding 1., but by Mr. Schweppes' observations as to the prevailing level of prices and his desire to have Mr. Zelinski sell Mobil's petrol at about that level. The application must be dismissed with costs. 1 certify that this and the /7 preceding Pages are a true copy ot the reasons for judgment herein of His Honour, Mr. Justice Pincus _' 1 ff fit tet Coere Jafed =e ' ~ —- an | on enenea niin ener aaee purser ao sme ey