FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltdand David Robert Carney & Anor [2006] FCA 1652 TRADE PRACTICES – Restrictive Trade Practices – Exclusive Dealing – Enforcement & Remedies – Pecuniary Penalty – Jointly proposed penalty – Principles to be applied by the Court in determining whether to order the imposition of a pecuniary penalty where parties propose a particular sum - Public interest in prompt resolution of trade practices litigation Trade Practices Act 1974 (Cth) Australian Competition and Consumer Commission v ABB Power Transmission Pty Ltd [2004] FCA 819; (2004) ATPR 42-011 considered Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) [2004] FCA 376 (2004); ATPR 41-983 referred to Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730 referred to Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 referred to N W Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1997) 71 FCR 285 applied Thomson Australian Holdings Pty Ltd v The Trade Practices Commission (1981) 148 CLR 150 followed AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v FILA SPORT OCEANIA PTY LTD AND DAVID ROBERT CARNEY & ANOR NSD 926 OF 2002 TRACEY J 5 DECEMBER 2006 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY 926 OF 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: FILA SPORT OCEANIA PTY LTD First Respondent DAVID ROBERT CARNEY Second Respondent CRAIG JAMES REIDY Third Respondent JUDGE: TRACEY J DATE OF ORDER: 27 November 2006 WHERE MADE: MELBOURNE THE COURT DECLARES THAT: 1. Between September or October 1999 and November 2000, the second respondent was a person involved in a contravention by the first respondent of s 47 of the Trade Practices Act 1974 (Cth). THE COURT ORDERS THAT: 2. The second respondent pay to the Commonwealth a pecuniary penalty pursuant to s 76 of the Trade Practices Act 1974 (Cth) in respect of his conduct referred to in para 1 above, in the amount of $20,000 by four yearly instalments of $5,000 each, the first such instalment payable on or before 30 June 2007, and the second, third and fourth instalments payable on or before 30 June 2008, 30 June 2009 and 30 June 2010 respectively, provided that if the second respondent defaults in any payment and the default continues for one month after written notice of the default, the total outstanding balance shall become immediately due and payable. 3. The applicant and the second respondent bear their own costs of and incidental to the proceeding against the second respondent. 4. The proceeding against the second respondent be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY 926 OF 2002 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: FILA SPORT OCEANIA PTY LTD First Respondent DAVID ROBERT CARNEY Second Respondent CRAIG JAMES REIDY Third Respondent JUDGE: TRACEY J DATE: 5 DECEMBER 2006 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 In this proceeding the Australian Competition and Consumer Commission ('the ACCC') sought various remedies against the second respondent ('Mr Carney') for contraventions of the Trade Practices Act 1974 (Cth) ('the Act'). The relief sought included declarations that Mr Carney had knowingly been concerned in contraventions of ss 46 and 47 of the Act and the imposition of pecuniary penalties for contraventions of those provisions. The ACCC alleged that Mr Carney was a person knowingly concerned in contraventions of the Act by the first respondent of which he was, at relevant times, the Managing Director. The proceeding, in so far as it involved the first respondent, was dealt with by Heerey J: see Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) [2004] FCA 376; (2004) ATPR 41-983. The circumstances in which the contraventions by the first respondent occurred (and in which it was alleged Mr Carney was knowingly concerned) are explained in his Honour's reasons at [5] to [19] and need not be repeated here. Suffice to say the contraventions were serious. They related to the marketing of sporting products to supporters of Australian Football League clubs and involved attempts by the first respondent (which were to a significant extent successful) to exclude competitor's products from retail outlets. The ACCC discontinued the proceeding against the third respondent and he gave evidence against Mr Carney. 2 The trial of the proceeding between the ACCC and Mr Carney commenced on 28 August 2006 and was estimated at that time to take three weeks. Mr Carney represented himself and cross-examined each of the witnesses who was called by the ACCC. On 15 September 2006, at the end of the three week period allotted for the trial, only about half of the ACCC's witnesses had given evidence. It was estimated that up to a further five weeks would be necessary to complete the hearing. The further hearing of the proceeding was adjourned until 27 November 2006. Before the trial was adjourned the parties had agreed to the suggestion that the matter be referred for mediation by a Court appointed mediator. When the hearing resumed on 27 November 2006 the parties announced that the mediation had been successful and invited the Court to make a declaration and orders in accordance with agreed minutes. Those minutes read: 'THE COURT DECLARES THAT: 1. Between September or October 1999 and November 2000, the second respondent was a person involved in a contravention by the first respondent of section 47 of the Trade Practices Act 1974 (Cth). THE COURT ORDERS THAT: 2. The second respondent pay to the Commonwealth a pecuniary penalty pursuant to section 76 of the Trade Practices Act 1974 (Cth) in respect of his conduct referred to in paragraph 1 above, in the amount of $20,000 by four yearly instalments of $5,000 each, the first such instalment payable on or before 30 June 2007, and the second, third and fourth instalments payable on or before 30 June 2008, 30 June 2009 and 30 June 2010 respectively, provided that if the second respondent defaults in any payment and the default continues for one month after written notice of the default, the total outstanding balance shall become immediately due and payable. 3. The applicant and the second respondent bear their own costs of and incidental to the proceeding against the second respondent. 4. The proceeding against the second respondent be otherwise dismissed.' 3 Having heard submissions I made the declaration and orders sought and indicated that I would publish my reasons at a later date. These are those reasons. 4 The Court is not, of course, bound to make orders giving effect to terms of settlement agreed on between the parties. The principles to be applied by the Court in determining whether to order the imposition of a pecuniary penalty for contravention of the Act, where parties propose a particular sum, are expounded in N W Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1997) 71 FCR 285 at 290-5. They are refined and elaborated upon in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51] to [58]; (2004) ATPR 41-993 at [51] to [58]. I am also mindful of the observations of Emmett J in Australian Competition and Consumer Commission v ABB Power Transmission Pty Ltd [2004] FCA 819 at [46] to [56]; (2004) ATPR 42-011 at [46] to [56]. In particular, I note the following observations made by his Honour in that case: '[53]… there is a public interest in prompting settlement of litigation, particularly litigation that is likely to be lengthy and complex. Thus, in giving weight to a joint submission on a proposal that would resolve a proceeding, the Court can have regard to the savings of resources both for a regulator, such as the Commission, and for the Court if the proposal were to be accepted. The savings in resources, for example, are capable of being used by the regulator to increase the likelihood that other contraveners will be detected and brought before the court. [54] The view of a regulator such as the Commission as a specialist body is relevant in determining the question of penalty, although it is by no means determinative. The Court will expect a regulator such as the Commission to explain to it the process of reasoning that has led to the resolution proposed. In particular, if a proposed penalty involves a discount from that which might otherwise be considered to be the appropriate penalty so as to reflect a degree of cooperation, the Court would expect the Commission to explain the basis upon which the discount had been calculated. … [56] The Court will be mindful that, where an agreed penalty is proposed, there may be elements of compromise involved in both sides. Thus, it may be that evidentiary difficulties perceived by the Commission would warrant the abandonment of some claims. Certainty of outcome for both parties may be a very significant factor in the reasoning process that leads to agreement on penalty. For reasons such as those, if the Court is not disposed to impose a penalty proposed by the parties, it would be appropriate to give the parties the opportunity to withdraw consent for all of the proposed orders and to permit the proceeding to continue on a contested basis." See also Commerce Commission v New Zealand Milk Corporation Ltd [1994] 2 NZLR 730 at 733. 5 The ACCC opened its case against Mr Carney on the basis that the same evidence would be relied upon in relation to the allegations that he was knowingly involved in the first respondent's contraventions of ss 46 and 47 of the Act. The proposed orders would declare that he was knowingly involved in a contravention of s 47 and impose a monetary penalty for such contravention. The proceeding would otherwise be dismissed. The proposed penalty is very much at the lower end of the proper range. 6 In determining to accept the proposed monetary penalty in this case I have had regard to the following considerations: · The likelihood that, if the trial were to continue about five more weeks would be needed in order to complete the evidence and hear final submissions. · The resources (both financial and legal) which would have to be deployed if the proceeding continued to judgment and the public interest in the ACCC's resources being applied to other investigations and prosecutions. · The complexity and uncertainty involved in conducting proceedings under Part IV of the Act and the difficult legal and factual issues involved in this case. They include the need to identify the relevant product market, market power for s 46 purposes and the effect upon competition of the alleged conduct for s 47 purposes. · Mr Carney has accepted that he was involved in the first respondent's contravention of s 47 of the Act. · Mr Carney has not previously been found to have contravened the Act. · At relevant times the first respondent did not have any 'in house' legal advisors. It relied on its external solicitors. Mr Carney had arranged for those solicitors to conduct staff seminars and to prepare a manual to instruct staff on the requirements of the Act. · Mr Carney is not presently in receipt of regular income and has a limited capacity to meet any penalty which might be imposed by the Court. · The public interest in promoting settlement of litigation. · The view of the ACCC that the proposed penalty is appropriate in the circumstances. 7 In agreeing to make the declaration and orders proposed by the parties I have also had regard to the evidence received during the first three weeks of the trial to the extent that it was not contested. I also treat Mr Carney's consent to the making of the orders as 'an admission of all facts necessary or appropriate to the granting of the relief sought': see Thomson Australian Holdings Pty Ltd v The Trade Practices Commission (1981) 148 CLR 150 at 164. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY J. Associate: Dated: 5 December 2006 Counsel for the Appellant: Mr S Marks SC & Mr P Renehan Counsel for the Second Respondent: Litigant in Person Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 27 November 2006 Date of Judgment: 5 December 2006