JUDGMENT No. 0./ Ooty ST CATCHWORDS TRADE PRACTICES - offences - pleas of guilty to contraventions of Act - proceedings for imposition of fines - factors relevant to assessment of punishment. Trade Practices Act 1974 Pt.IV, V; s.55, 76, 79; sub-s.53(a) Crimes Act 1914 s.16A Director of Public Prosecutions (Cth) v. Said XKhodor El Karhani (1990) 21 N.S.W.L.R. 370 Trade Practices Commission v. Stihl Chain Saws (Aust.) Pty. Ltd. (1978) A.T.P.R. 40-091 TRADE PRACTICES COMMISSION Vv. GOLDEN _AUSTRALTA PAPER MANUFACTURERS PTY. LTD. NO. WAG68 OF 1994 LEE J. PERTH 22 DECEMBER 1994 RECEIVED 29 DEC 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY Svar we IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) ) GENERAL DIVISION WAG68 OF 1994 BETWEEN: TRADE PRACTICES COMMISSION Prosecutor and GOLDEN AUSTRALIA PAPER MANUFACTURERS PTY. LTD. Defendant MINUTE OF ORDER JUDGE MAKING ORDER: LEE J. DATE OF ORDER: 22 DECEMBER 1994 WHERE MADE: PERTH THE COURT ORDERS THAT ON ITS OWN PLEA OF GUILTY: The defendant be convicted of each of the following offences being Counts 1-4 recited in the summons dated 2 June 1994: a) contravening sub-s.53(a) of the Trade Practices Act 1974 on 5 May 1993 (Count 1); b) contravening s.55 of the Trade Practices Act 1974 on 21 July 1993 (Count 2); c) contravening sub-s.53(a) of the Trade Practices Act 1974 on 21 March 1994 (Count 3); d) contravening sub-s.53(a) of the Trade Practices Act 1974 on 23 March 1994 (Count 4). AND FURTHER ORDERS THAT: 1. The defendant be fined the following amounts for each of the above convictions: a) Count 1 - $1,500 b) Count 2 - $1,500 c)} Count 3 ~ $3,000 d) Count 4 - $1,000. 2. The defendant pay the prosecutor's costs of the proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) ) GENERAL DIVISION WAG68 OF 1994 BETWEE N: TRADE PRACTICES COMMISSION Prosecutor and GOLDEN AUSTRALIA PAPER MANUFACTURERS PTY. LTD. Defendant CORAM: LEE J. DATE 22 DECEMBER 1994 PLACE: PERTH REASONS FOR _ JUDGMENT This is a prosecution of Golden Australia Paper Manufacturers Pty. Lid. ("the defendant") on four charges which allege that the defendant contravened sub-s.53(a) and s.55 of the Trade Practices Act 1974 ("the Act"). The defendant has pleaded guilty to all charges and convictions are to be recorded accordingly. I turn now to the penalty to be imposed. The defendant trades as a manufacturer, wholesaler and retailer of paper products, principally in Western Australia although its products are sold in other States. The defendant commenced manufacturing toilet tissues in approximately 1990. The tissues were manufactured from large tissue-paper rolls imported from China and said by the supplier to be composed of "100% cotton fibres". In January 1993 the defendant commenced manufacturing facial tissues from paper rolls imported from China also said by the supplier to consist entirely of cotton fibre. In 1991 a competitor of the defendant alleged that the toilet tissues manufactured by the defendant were contaminated by chemicals. Refutation of that allegation occasioned the defendant substantial expense. In 1993 the Trade Practices Commission ("the Commission") received a complaint from one of the defendant's competitors which alleged that representations by the defendant that its tissue products were made entirely from cotton were false. The competitor alleged that its tests had shown that the defendant's tissues were composed of 45% cotton, 50% softwood chemical pulp and 5% hardwood chemical pulp. As a result of that complaint the Commission obtained samples of the defendant's toilet and facial tissues and submitted them for analysis. The analysis showed that the toilet tissues were composed of cotton fibres but the facial tissues were a mixture of cotton (approximately 70-80%) and chemical wood pulp. In September 1993 the Commission met with the defendant and informed the defendant that the analysis of its facial tissues indicated that the tissues were not made entirely of cotton and that the defendant's promotion and supply of that product may have involved contravention of the Act. Copies of the relevant parts of the Act were provided to the defendant at that interview. In March 1994 the Commission became aware that the defendant was continuing to make representations that its facial tissues were made entirely of cotton fibre. Further samples of those tissues were obtained and submitted for analysis. That analysis confirmed that the contents of the product remained unchanged. The Commission met with the defendant in April 1994. The defendant stated that it had not had the product tested since the earlier meeting with the Commission in September 1993. In May 1994 the Commission noted that the defendant continued to sell its facial tissues to the public with the same representations being made on the packaging of the product as to the cotton content. In June 1994 this prosecution was commenced. Upon commencement of the prosecution the defendant provided an undertaking to the Court to cease promotion and distribution of the packaged tissues and to remove from the packages already distributed to retailers the representations the subject of the Commission's complaint. The defendant admits that on 5 May 1993, 21 March 1994 and 23 March 1994 it contravened sub~s.53(a) of the Act in connection with the supply of its facial tissues by representing falsely that the composition of the tissues was 100% cotton when the tissues were a mixture of cotton (approximately 70%) and wood fibres. The defendant also admits that on 21 July 1993 it contravened s.55 of the Act by engaging in conduct that was liable to mislead the public in that on that day it placed a newspaper advertisement which falsely represented that it was a characteristic of the facial tissues manufactured by the defendant that they were made from cotton fibre. I accept that until September 1993 the defendant may have had reason to believe that the representations it made about its facial tissues were true. That belief is not a defence to the charges but is a matter to take account in fixing the appropriate penalty. It is apparent that in September 1993 when the defendant was informed by the Commission of the true situation the defendant decided to run-out the packaging it had on hand rather than take any step to recall or amend the packaging, or commission new packaging for immediate use. It may be assumed that such a decision was made at a senior level of management. In an affidavit filed by the Marketing Manager of the defendant it was admitted that the defendant's conduct between September 1993 and June 1994 was influenced by its consideration of the adverse financial consequences the defendant would suffer if it removed the stock from retail sale. That element of the defendant's conduct indicates the need for the penalty imposed to be able to act as a deterrent to any other corporation engaged in trade or commerce which may face a similar decision in future and may be tempted to consider the financial outcome rather than the need to comply with the Act. However, it has not been suggested that the defendant is a major participant in the market of manufacturing, distributing and retailing facial tissues and the impact of the defendant's conduct on consumers and competitors was unlikely to have been significant. A director of the defendant has deposed that the defendant now obtains an analysis of each consignment of its imported stock and does not rely upon representations made by its suppliers. In addition, the defendant has undertaken to institute a programme to ensure compliance with the Act and to train its personnel according to guidelines issued by the Commission. Although I accept that the defendant will meet its undertakings to the Court, I note that the claim to a reformed attitude on the part of the defendant was rather undermined by the submission made on behalf of the defendant in mitigation of penalty that it was reasonable for the defendant to act as it did between September 1993 and June 1994. Pursuant to s.79 of the Act a fine not exceeding $200,000 may be imposed upon conviction of the offences to which the defendant has pleaded guilty. It has been accepted in a number of decisions of this Court that the following statement by Smithers J. in Trade Practices Commission v. Stihi Chain Saws (Aust.) Pty. Ltd. (1978) A.T.P.R. 40-091 at 17,896 represents an accurate summary of the purpose of s.76 in respect of the imposition of a pecuniary penalty for contravention of a provision of Pt.IV of the Act and it may be accepted that a similar purpose is to be found in s.79 of the Act in respect of the imposition of a fine for a contravention of Pt.V: "The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality, and it should be kept in mind that the Act operates in a commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive." In addition to the foregoing the Court must have regard to the indicia and principles set out in s.16A of the Crimes Act 1914, intended to assist the Court determine the appropriate order to be made in relation to conviction for a federal offence. (See: Director of Public Prosecutions (Cth) v. Said Khodor El Karhani (1990) 21 N.S.W.L.R. 370 at 374-378.) I accept that the offences were not the cause of any significant injury, loss or damage to any party and that to this point the defendant has been operating at a loss. I am also satisfied that the defendant cooperated with the Commission after proceedings were commenced. The defendant did not undertake any substantial advertising of its product to reinforce any representations made on its packaging. Although the defendant's offences cannot be dismissed as insignificant breaches of the Act, it should be remembered that in all the circumstances they do not represent offences at the higher end of the scale. In respect of the offences of contravening sub-s.53(a) and s.55 of the Act committed on 5 May 1993 and 21 July 1993 respectively, the fine to be imposed in respect of each conviction will be $1,500. With regard to the offences of contravening sub-s.53(a) of the Act committed on 21 March 1994 and 23 March 1994, the two offences charged represent elements of the one course of conduct and the total fine for that conduct, $4,000, will be imposed as a fine of $3,000 for conviction of the offence committed on 21 March 1994 and a fine of $1,000 for conviction of the offence committed on 23 March 1994. The defendant will be ordered to pay the Commission's costs of the proceedings. I certify that the preceding seven (7) pages are a true copy of the Reasons for Judgment of his Honour Justice Lee. Associate: '4 Putckord Dates 25 Oetombeel \AAA. APPEARANCES Counsel for the Prosecutor: J. McGrath Solicitors for the Prosecutor: Director of Public Prosecutions (Cth) Counsel for the Defendant: T1T.S. Su Solicitors for the Defendant: Messrs Su & Co. Date of Hearing: 24 October 1994 Date of Judgment: 22 December 1994 Woo 4