FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No. 2) [2002] FCA 558 TRADE PRACTICES – antitrust contraventions – penalties – principles to be taken into account Trade Practices Act 1974 (Cth) ss 45 and 76 AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v ABB TRANSMISSION AND DISTRIBUTION LIMITED and ORS V 553 of 1999 FINKELSTEIN J MELBOURNE 3 MAY 2002 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 553 of 1999 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: ABB TRANSMISSION AND DISTRIBUTION LIMITED First Respondent ALSTOM AUSTRALIA LTD Second Respondent WILSON TRANSFORMER COMPANY PTY LTD Third Respondent DAVID TOOGOOD Fourth Respondent CHRIS TAPE Fifth Respondent PAUL GRABHAM Sixth Respondent R G ELLIOT Seventh Respondent COLIN JAMES Eighth Respondent ROBERT WILSON Ninth Respondent DAVID PECK Tenth Respondent DOUGLAS PITT Eleventh Respondent ABB POWER TRANSMISSION PTY LTD (in liquidation) Twelfth Respondent JUDGE: FINKELSTEIN J DATE: 3 MAY 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is the second time this proceeding has been before the court for the imposition of penalties for contraventions of s 45 of the Trade Practices Act 1974 (Cth). Each of Alstom Australia Limited (the second respondent) and Wilson Transformer Company Pty Ltd (the third respondent) is, and, until its liquidation, ABB Power Transmission Pty Ltd (in liq) (the twelfth respondent) was, a manufacturer and supplier of power transformers. In 1993 they made an arrangement the effect of which was that they should maintain the following shares of the power transformer market: on one version Alstom 28 per cent, WTC 28 per cent, ABB 44 per cent and on another version 26, 26 and 48 per cent respectively. The arrangement was put into effect during the years 1993 to 1995. Senior executives of the corporations, including the managing director of WTC, Mr Wilson (the ninth respondent) and a manager from ABB, Mr Toogood (the fourth respondent) were involved in the contraventions. When the matter was previously before the court I imposed a penalty of $5.5 million on Alstom and $150,000 on Mr Elliot (the seventh respondent), who was the managing director of Alstom. Injunctions were granted against them and against two other executives (the sixth and eighth respondents) who were involved in the contraventions, restraining them from repeating that conduct. No monetary penalty was imposed on the sixth or the eighth respondent because none was sought by the Commission: see generally Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41-815. 2 Now I must deal with WTC, Mr Wilson and Mr Toogood for their part in the contraventions. I will not repeat the background. That can be found in my earlier judgment, and in the judgment that I will deliver today in the distribution transformer market case: Australian Competition and Consumer Commission v ABB Transmission and Distribution (No 2) [2002] FCA 559. Those judgments contain not only most of the background to this application, but also the principles to be applied and the matters to be taken into account in the determination of penalties for violations of antitrust legislation. 3 There are, however, one or two additional observations that should be made about the facts, all of which can be found in statements of agreed facts which are on the court file. The respondents (that is WTC, Mr Wilson and Mr Toogood) concede that the anti-competitive arrangement was given effect on at least twenty-five occasions between late 1993 and 1995. There is some dispute whether the first contract lies within the limitation period. The outcome of that dispute will have no effect upon the penalties that will be imposed so I will not deal with it any further. During the relevant period the total annual sales of power transformers in Australia was approximately $60 million, and the contracts that were affected by false bids and were allocated in accordance with the arrangement, were worth approximately $39 million. No-one has calculated the profits derived by the corporate respondents from their participation in the arrangement, nor the losses sustained by consumers. 4 It is necessary to say something about the corporate respondents, to put the position of WTC in its proper perspective. WTC is a family owned company with net assets of around $23 million. It has approximately 295 employees in its Australian operations and a further 85 in a joint venture in Malaysia. Alstom is a member of the Alstom group of companies which is one of the leading world-wide suppliers of components, systems and services in the following market sectors: transport, transmission and distribution, energy, marine, local contracting and industry. Before its liquidation, ABB was a member of the international ABB group of companies which operates throughout the world in the engineering and technology sectors. ABB was the largest Australian manufacturer of power transformers. In 1998 ABB had more than 700 employees and its annual revenue was around $220 million. 5 Dealing with the individual respondents, Mr Wilson's position is explained in the distribution transformer market proceeding. Mr Toogood was employed by ABB. From 1990 to 1993 he was its national marketing manager and from 1993 to 1997 he was its national business development manager. Although Mr Toogood was not involved in making the arrangement on behalf of ABB, was present at meetings during which this was done. He and other senior executives of ABB also attended meetings which were necessary to put the arrangement into effect. He was closely involved in the allocation of tenders for that purpose. The Commission accepts, however, that while Mr Toogood took principal responsibility for the implementation of the agreement on behalf of ABB, he was acting under the direction of its managing director. 6 Mr Toogood is reaching retirement age. He is married with two children. His present after tax income is around $80,000 per annum. His assets, including his half share of the matrimonial home and its contents, are worth around $350,000. If even a modest penalty is imposed, Mr Toogood may be forced to borrow the funds. 7 I propose the following penalties. For WTC it should be in the sum of $1.5 million. It is unlikely that the company will again contravene the provisions of Part IV. A comparison of its operations with those of Alstom, on which a penalty of $5.5 million was imposed, suggests that the imposition of a larger penalty on WTC would be unreasonably disproportionate to that imposed on Alstom, especially in view of the risk of financial instability that WTC may face, as explained in my reasons in the distribution transformer market proceeding. Mr Wilson should be required to pay $100,000. As I said in the distribution transformer market proceeding, he is, in a sense, being penalised twice, because he will ultimately bear the penalty imposed upon WTC. That his total effective penalty is far greater than $100,000, is as it should be. After all, Mr Wilson is the managing director of WTC and engaged in the contravening conduct knowing that it was illegal, but expecting significant financial gains from it. Having regard to Mr Wilson's financial position, if he does not suffer serious punishment, the punishment will have little deterrent value. 8 Finally I come to Mr Toogood. There are three factors which suggest that he should be shown some leniency. First, he is not among the most senior of the executives of ABB that were involved in the contravention, and he was acting under direction. Second, he is a man of modest means. Third, other executives who played a similar role in the contraventions as Mr Toogood have escaped without a monetary penalty. On the other hand, those executives provided greater cooperation to the Commission in its investigations than Mr Toogood, whose cooperation was less than enthusiastic, at least at the outset. So, it would be wrong to allow Mr Toogood to escape without punishment. The injunctions which will be imposed are of little utility as Mr Toogood will soon retire from the industry. If I impose a penalty of $35,000 (payable in instalments) that should send a message to other employees that the cost of a contravention will be outweighed by any benefits received. 9 I understand that the parties are in agreement as to the declarations that should be made, and the injunctions that should be granted. There will be orders to that effect. 10 The Commission should bring in short minutes of orders to give effect to these reasons within fourteen days. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 3 May 2002 Counsel for the Applicant: Mr B McClintock SC Mr S T White Solicitor for the Applicant: Australian Government Solicitor Counsel for the 3rd & 9th Respondents: Mr A Archibald QC Mr D Batt Solicitor for the 3rd & 9th Respondents: Allens Arthur Robinson Counsel for the 4th Respondent: Mr J Beech QC Dr M Collins Solicitor for the 4th Respondent: Clayton Utz Date of Hearing: 30 & 31 July 2001, 1 August 2001 Date of Judgment: 3 May 2002