FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Bridgestone Corporation [2010] FCA 584 Citation: Australian Competition and Consumer Commission v Bridgestone Corporation [2010] FCA 584 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BRIDGESTONE CORPORATION, DUNLOP OIL & MARINE LIMITED, PARKER ITR S.R.L. and TRELLEBORG INDUSTRIES S.A.S. File number: VID 407 of 2009 Judge: FINKELSTEIN J Date of judgment: 11 June 2010 Catchwords: TRADE PRACTICES – cartel – penalties EVIDENCE – declaration of public right – whether available on admissions PRACTICE AND PROCEDURE – function of pleadings – Evidence Act 1995, s 191 – effect of Legislation: Evidence Act 1995 (Cth) s 191 Trade Practices Act 1974 (Cth) ss 45(2)(b), 76(1) Civil Procedural Rules UK, Practice Direction 14 Federal Court Rules, O 18 r (1)(2) Cases cited: Animatrix Ltd v Jeffrey O'Kelly [2008] EWCA Civ 1415 Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427 Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd [2009] FCA 960 Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710 Blay v Pollard and Morris [1930] 1 KB 628 Clarke v Yorke (1882) 31 WR 62 Hollis v Burton [1892] 3 Ch.226 Hoystead v Federal Commissioner of Taxation [1926] AC 155 NW Frozen Foods v Australian Competition and Consumer Commission (1996) 71 FCR 285 Palmer v Guadagni [1906] 2 Ch 494 Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise [1967] Ch 597 The Hardwick (1883) 9 PD 32 Thorp v Holdsworth (1876) 3 ChD 637 Trade Practices Commission v CSR Limited [1991] ATPR 41-076 at 52 Date of hearing: 10 December 2009 Date of order: 14 April 2010 Place: Melbourne Division: GENERAL Category: Catchwords Number of paragraphs: 47 Counsel for the Applicant: C Archibald Solicitor for the Applicant: Australian Government Solicitor Counsel for the 1st Respondent: C Caleo SC Solicitor for the 1st Respondent: Clayton Utz Counsel for the 2nd Respondent: A Paynes SC Solicitor for the 2nd Respondent: Gilbert + Tobin Counsel for the 3rd Respondent: P Gray Solicitor for the 3rd Respondent: Jones Day Counsel for the 4th Respondent: M O'Bryan Solicitor for the 4th Respondent: Freehills IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 407 of 2009 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: BRIDGESTONE CORPORATION First Respondent DUNLOP OIL & MARINE LIMITED Second Respondent PARKER ITR S.R.L. Third Respondent TRELLEBORG INDUSTRIES S.A.S. Fourth Respondent JUDGE: FINKELSTEIN J DATE: 11 June 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The respondents are large multinational companies who are the principal manufacturers of marine hose worldwide. Marine hose is used at offshore moorings for the transfer of crude oil, liquid petroleum and liquefied gases. As early as 1999, the respondents, together with the Yokohama Rubber Co Limited and Manuli Rubber Industries S.P.A., formed a cartel to share the marine hose market between them. This involved price fixing and bid rigging worldwide and, in consequence, in Australia. The cartel's objectives were to control the price of marine hose, to restrict members from bidding competitively and to share the markets for the supply of marine hose. 2 The cartel generally operated in the following way. Each member provided a coordinator to implement its part of the arrangement. Meetings of the coordinators took place in various locations around the world, including Miami, Bangkok and Houston. At those meetings, the coordinators designated, based on rules agreed by the cartel, which member would win a particular job, referring to that person as the "champion". After the champion had been designated, the coordinators provided the non-champion members with instructions regarding how much to bid on the job to ensure that the champion would win the job. The bidding process included the following provisions: each member would bid or tender at a price or on terms less favourable to the purchaser than those intended to be bid or tendered by the cartel member nominated as the champion ("the champion provision"); each member sought to ensure that jobs for marine hose worldwide were allocated between the cartel participants on a pre-agreed percentage ("the market share provision"); and each member would seek to supply or offer to supply marine hose to customers at a price set at or about a minimum price level, being 50% of the price levels for marine hose items stated in or calculated by reference to items stated in a price list ("the minimum price provision"). 3 The cartel members took measures to avoid detection, including assuming code names, avoiding email communication and minimising other forms of traceable communications. They imposed penalties on members who violated the arrangement. 4 Acts in furtherance of the cartel were carried out in Australia. In particular, in the period from 2001 to May 2007, the four respondents gave effect to the cartel arrangement as follows: (a) Bridgestone Corporation (Bridgestone) participated in the tender of four jobs. The total value of the offers made by Bridgestone was in the range of $6,871,492-$7,950,472. Bridgestone was not the supplier in any of the four jobs. In one of the tenders, there was no sale; (b) Dunlop Oil & Marine Ltd (Dunlop) participated in the offer or sale of seven jobs. The total value of the offers or sales made by Dunlop was $7,797,988; (c) Parker ITR S.R.L. (Parker) participated in the offer or sale of two jobs totalling $4,879,424; (d) Trelleborg Industries S.A.S. (Trelleborg) participated in the offer or sale of seven jobs. The total value of the sales or offers made by Trelleborg totalled $8,660,824, while the total value of the jobs sold by Trelleborg was $4,769,292.80. 5 The total value of the Australian contracts affected during the period 2000 to 2007 is in the order of $15.9 million. From 2000, the price of marine hose products significantly increased. Prior to 2000, the average level of prices was less than 50% of the Price List whilst by 2005 bid prices were around the Price List or exceeded it. Over the period, the activities of the cartel caused an increase over what would otherwise have been the market price under fair and open competition. It is not possible, however, to ascertain precisely the actual amount of additional cost to Australian customers, or the gains made by members of the cartel, because of other factors affecting prices and supply. 6 The cartel operated successfully until 2 May 2007. It was exposed when a member informed the United States Department of Justice of the cartel's existence. In the manner of a David Simon screenplay, authorities covertly recorded a meeting of cartel members during the annual Offshore Technology Conference in Houston, Texas. Six people were arrested. Two others, who were not at the meeting, were arrested later. 7 The cartel members were prosecuted in various jurisdictions, including in the European Union, the United States, Korea, Japan and Brazil. In the United States, the implementation of the cartel contravened s 1 of the Sherman and Trust Act, 15 USC §1 which provides that "every … combination … or conspiracy, in restraint of trade or commerce is declared to be illegal." The maximum penalty for a contravention is up to $100,000,000 for a corporation and up to $1,000,000 or 10 years of imprisonment for an individual. Legislation to a similar effect exists in Korea, Japan, the European Union and Brazil. 8 The following penalties were imposed on the cartel members, generally in accordance with a plea agreement entered into with the relevant prosecuting authority: Bridgestone Dunlop Parker Trelleborg Manuli European Union €58.5M €18M €25.610M €24.5M €4.9M United States USD $4.54M USD $3.5M USD $2M Korea USD $256,600 USD $117,400 USD $33,700 USD $40,200 Japan ¥2,380,000 Brazil 1,594,000 Real 9 In addition to the penalties imposed upon the corporations, nine individuals were convicted, fined and given prison sentences. Parker's representative was fined US$20,000 and sentenced to six months house arrest and probation for two years. Two Trelleborg representatives were fined US$100,000 and US$75,000 respectively. Two Dunlop representatives were sentenced to jail terms of two years and 20 months respectively. 10 Implementation of the cartel in Australia contravened s 45(2)(b)(i) and (ii) of the Trade Practices Act 1974 (Cth). Those sections provide, in summary, that a corporation shall not in trade or commerce give effect to a provision of an arrangement which is an exclusionary provision (relevantly a provision that restricts the supply of goods to particular persons) or which has the purpose of substantially lessening competition. 11 In this action, the ACCC sought declarations that the respondents contravened the Trade Practices Act, injunctions restraining further contraventions, the imposition of pecuniary penalties ($1.68 million for Bridgestone, $2.68 million for Dunlop, $0.675 million for Parker and $3.2 million for Trelleborg) and orders for costs. The respondents did not oppose the relief sought. Ultimately, the ACCC and each respondent submitted an agreed statement of facts and admissions and proposed the orders which ought be made in consequence of the admissions. In due course I made the orders sought. I propose now to explain why they were made. 12 I need to make some comments about the evidence. Initially the parties tendered only the agreed statements of facts and admissions to justify the making of the orders. In Australian Competition and Consumer Commission v Allergy Pathway Pty Ltd [2009] FCA 960, I decided that, generally speaking, it was necessary before a declaration of contravention could be made that evidence had to be tendered that justified the relief. In reaching that decision I had not been referred to Australian Competition and Consumer Commission v Skins Compression Garments Pty Ltd [2009] FCA 710, which is to a different effect. There, Besanko J said that that s 191 of the Evidence Act 1995 (Cth) altered the common law in that evidence was no longer required to obtain a declaration affecting public rights. For reasons which I will now explain, I would not follow ACCC v Skins Compression Garments Pty Ltd for it is, I think, plainly incorrect. 13 Section 191 relevantly provides: (2) In a proceeding: (a) evidence is not required to prove the existence of an agreed fact; and (b) evidence may not be adduced to contradict or qualify an agreed fact; unless the court gives leave. 14 In order to appreciate the true effect of this section, it is necessary to consider the various functions of pleadings. First, pleadings define the issues or questions which are in dispute between the parties: Thorp v Holdsworth (1876) 3 ChD 637, 639. Second, pleadings require each party to give fair and proper notice of the issues intended to be raised. This is to prevent the other party being taken by surprise: Palmer v Guadagni [1906] 2 Ch 494, 497. Third, pleadings inform the court what are the precise matters in issue between the parties which alone the court may determine: Blay v Pollard and Morris [1930] 1 KB 628, 634. Fourth, pleadings provide a brief summary of the case of each party from which the nature of the claim and defence may be apprehended. Finally, pleadings constitute a permanent record of the issues and questions raised in the action: Hoystead v Federal Commissioner of Taxation [1926] AC 155. 15 There are two relevant consequences of these functions. The first is that if facts pleaded in a statement of claim are admitted, there is no issue in dispute between the parties on that part of the case which is concerned with those facts. As a result, no evidence is admissible in reference to those facts: The Hardwick (1883) 9 PD 32; Pioneer Plastic Containers Ltd v Commissioners of Customs and Excise [1967] Ch 597. The second consequence is that, so far as a defendant is concerned, he/she is not permitted to tender evidence which is inconsistent with an admitted fact, save with the leave of the court: Hollis v Burton [1892] 3 Ch.226, Clarke v Yorke (1882) 31 WR 62; see also Practice Direction 14 Civil Procedural Rules UK and O18 r(1)(2) of the Federal Court Rules. 16 Now we can return to s 191. When one understands the rules of pleadings, it will be apparent that s 191 does no more than apply those rules to an agreed statement of facts. That is, the section gives to agreed facts the status of a pleading. There is nothing in s 191 which suggests that it is intended to have a wider operation. In particular, s 191 does not alter the rules laid down for obtaining a declaration in relation to a public right. 17 Putting s 191 to one side, it is possible that in this case, the grant of declaratory relief on the agreed statements of facts might have been justified by an exception to the usual rule, the exception being that it is necessary "to do justice between the parties": Animatrix Ltd v Jeffrey O'Kelly [2008] EWCA Civ 1415, [54] per Lady Arden J. 18 Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427 is another case where it was held to be in the public interest to grant declaratory relief on admissions. There, Kiefel J said (at [59]) that the rule of practice against granting a declaration on admissions was dependent upon the circumstances of the particular case and the purpose and effect of the declaration. Kiefel J said that if a declaration was to be made, it should be made clear that it was made upon facts admitted by the defendant. The Full Court endorsed this approach: Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513, [92]. 19 In the present case, the exception could have been applied for the reason that courts in the United States and the United Kingdom as well as tribunals or regulatory authorities in Korea, Japan, the EU and Brazil found that the cartel was brought into existence and implemented worldwide. It would be strange in that circumstance for an Australian court to insist upon the application of the evidence rule. 20 In the end, however, the parties decided to tender a large volume of documentary evidence, including minutes of meetings of the coordinators, communications between them regarding how the cartel's provisions would be implemented in Australia in relation to particular contracts, and documents showing its implementation in respect of those contracts. The documents prove the facts admitted by each respondent. 21 I turn now to the orders. To understand why they were made, a little needs to be said about each respondent and the nature of its contraventions. 22 Bridgestone was established in Japan in 1931. It is the parent company of a group of companies responsible for the manufacture of tyre and rubber products. For the financial year 2007, the consolidated net sales of Bridgestone and its subsidiaries was AU$34.4 billion. The consolidated net profit for Bridgestone and its subsidiaries over this same period was AU$1.3 billion. In the relevant period, Bridgestone supplied marine hose to Australian customers such as Teekay Shipping. The volume of these sales, however, was relatively small. 23 Bridgestone made no sales of marine hose to any Australian customer in the Australian projects referred to below, despite the company being an active participant in the cartel. During the period between 2001 and 2007, Bridgestone gave effect to the cartel in the jobs described in the following table. The approximate value of the offers of sale by Bridgestone in respect of each job is also set out in the table. Job Provision given effect USD AUD Wandoo 2001 Champion provision Single carcass - $823,830 CIF Fremantle (excluding submarine hose) Single carcass - $1,479,434 (excluding submarine hose) Market share provision Double carcass - $1,046,140 CIF Fremantle (excluding submarine hose) Double carcass-$1,878,593 (excluding submarine hose) Minimum price provision Wandoo 2004 Champion Provision Single carcass - $1,011,350 CIF Fremantle Single carcass - $1,371,694 Market share provision Note: Bridgestone did not quote double carcass Minimum price provision Puffin 2005 Minimum price provision Single carcass - $1,217,200 CIF Dampier Single carcass - $1,608,989 Double carcass - $1,442,150 CIF Double carcass - $1,906,345 Dampier Puffin 2006 Champion provision Option 1 – $1,810,950 CIF Darwin Option 1 – $2,411,642 Market share provision Option 2 - $2,097,950 CIF Darwin Option 2 - $2,793,840 Minimum price provision Option 3 - $1,810,750 CIF Darwin Option 3 - $2,411,375 Total USD $4,863,130 – AUD $6,871,492 – USD $5,597,590 AUD $7,950,472 24 Bridgestone has faced penalties worldwide, most notably in the European Union, where the company was fined €58.5 million. Bridgestone has not paid compensation to any person in Australia relating to any loss or damage that they suffered by reason of conduct in participating in the cartel. 25 Dunlop was incorporated in England and Wales in 1997. That same year, Dunlop acquired the marine hose assets of Dunlop Limited as a subsidiary of BTR plc. In 2000, Dunlop was acquired by Phoenix AG, the majority shares of which were then acquired by Continental Aktiengesellschaft in November 2004. Dunlop sells marine hose world wide and its Australian customers included Mobil Exploration & Producing Australia Pty Ltd, Vermillion Oil & Gas Australia Pty Ltd and HCD Flow Technology Ltd. 26 From January 2001 to December 2006, Dunlop's worldwide turnover for all of its products (including marine hoses) was £165,978,000, of which £16,432,000 was retained as total profit. From May 2001-2007, Dunlop gave effect to the cartel in the jobs described in the table below. The value of the offer or sale by Dunlop in respect of each job is also set out. Job Provision given effect USD AUD Wandoo 2001 Champion provision $963,785 $1,772,315 Market share provision Minimum price provision Wandoo 2003 Champion provision $41,125 $61,454 Market share provision Minimum price provision Wandoo 2004 Champion provision $901,815 $1,191,097 Market share provision Minimum price provision Wandoo 2006 Minimum price provision $51,610 $67,611 Puffin 2005 Minimum price provision $1,342,460 $1,760,303 Puffin 2006 Champion provision $1,066,600 $1,424,850 Market share provision Minimum price provision Bayu-Undan 2006 Champion provision $1,151,185 $1,520,358 Market share provision Minimum price provision Total $5,518,580 $7,797,988 27 Dunlop has not paid compensation to any person in Australia regarding its participation in the cartel. 28 Parker ITR Hannifin Holdings S.R.L. acquired ITR Rubber S.R.L. in January 2002, renaming the company Parker ITR S.R.L. Parker's marine hose operation – including its manufacturing, marketing, pricing and bidding – is undertaken by the company's Oil and Gas Business Unit, which is based in Italy. Parker's annual turnover is approximately US$120 million. The turnover of the Oil and Gas Business Unit, however, is comparatively small; it totalled US$19-21 million over the financial years 2004, 2005 and 2006, representing approximately 11-14% of Parker's overall sales. As of May 2007, Parker's Oil and Gas Business Unit employed 9 white collar workers and 62 employees, which represents 9% of Parker's workforce in it entirety. 29 Parker's main Australian customer during the relevant period was Conoco Phillips. The table below sets out the manner in which Parker gave effect to the cartel in Australia. Job Provision given effect USD AUD Banyu-Undan 2002 Champion provision $2,033,616 $3,655,610 Market share provision Minimum price provision Banyu-Undan 2006 Champion provision $922,474 $1,223,814 Market share provision Minimum price provision Total $2,956,090 $4,879,424 30 Parker's conduct in relation to the Bayu Undan 2002 job in not subject to a penalty, given that it falls outside the limitation period about which, unfortunately, the court can do nothing except suggest that an EU-style limitation period may be more appropriate. 31 Parker has established a compensation scheme in conjunction with independent counsel representing customers or end users of its marine hose products. This regime includes Australian customers and end users for purchases of products invoiced between 31 January 2002 and 2 May 2007, being the period after Parker took over ITR. The compensation scheme provides that an independent expert calculates the amount of compensation payable. Parker estimates the compensation payable to be around 16% of the purchase price. 32 In situations where a customer passed on its loss to its own customer, the scheme provides that compensation is payable to the customer who actually suffered the loss. It is the expert's role to determine under this scenario the amount of compensation recoverable by the direct purchaser and the end customer. The scheme does not allow for compensation to be paid to customers of other cartel participants by reason of Parker's involvement in the cartel. No application for compensation under the scheme has yet been made in Australia. 33 Trelleborg is incorporated in France. It is an indirect subsidiary of Trelleborg AD. In 2006, Trelleborg's total net global sales were approximately €120 million. Its net global sales of marine hose and related accessories and services were less than €18 million. 34 During the period between 2001 and 2007, Trelleborg's Australia customers included Woodside, Upstream, Conoco Phillips and Australia FPSO. In that period, Trelleborg gave effect to the cartel in the jobs described in the following table. The approximate value of the offers of sale by Trelleborg in respect of each job is also set out in the table. Job Provision given effect USD/EUR AUD Enfield 2004 Champion provision EUR 1,272,056 $2,016,819 Market share provision Minimum price provision Puffin 2005 Minimum price provision EUR 876,199 $1,368,616 NO SALE Puffin 2006 Minimum price provision EUR 709,010 $1,190,205 Bayu-Undan 2004 Minimum price provision USD $57, 077 $81,226.40 Bayu-Undan 2006 Champion provision EUR 856,000 $1,359,351.40 Market share provision Minimum price provision Wollybutt 2005 Champion provision EUR 75,400 $121,691 Market share provision Minimum price provision Pyrenees 2006 Minimum price provisions EUR 1,506,506 $2,522,915 NO SALE Total value of sales or offers by Trelleborg n/a $8,660,824 Total value of sales by Trelleborg n/a $4,769,292.80 35 Trelleborg has not paid compensation to any person in Australia for any loss or damage that they may have suffered by reason of the contraventions. In the United States, however, a class action was filed by customers of Trelleborg and settled for US$1.874 million. 36 Turning now to the particular relief. So far as the declarations were concerned, it is now accepted that declarations will serve the public interest, principally as a mark of the court's disapproval of the particular conduct engaged in by a respondent in contravening the Trade Practices Act and to vindicate the ACCC's claim that the respondent did contravene the Act. 37 So far as the particular penalties are concerned, the principles are well known. The principal object of imposing a penalty is deterrence. In the case of a cartel arrangement, because it is notoriously difficult to detect and, when detected, to assess the profits obtained by the contravenor and the losses flowing to the customers, a particularly high penalty is justified. 38 When parties approach the court having agreed on a figure for the penalty, the following principles, largely taken from NW Frozen Foods v Australian Competition and Consumer Commission (1996) 71 FCR 285 apply. First, it remains the responsibility of the court to determine the appropriate penalty. Second, the view of the regulator, as a specialist body, is important in helping the court assess the relevant penalty. Third, the court will give effect to the parties' "agreement" provided the penalty is within a permissible range, even if the court would have imposed a different penalty. 39 In determining what the permissible range is, the following factors are relevant. First, as provided for in s 76(1) of the Trade Practices Act the factors include: the nature and extent of the contravening conduct, the loss or damage suffered as a result of the contravening conduct, the circumstances in which the contravening conduct took place and whether the contravenor has previously engaged in similar conduct. Other important considerations are: (i) the size of the contravening company; (ii) the degree of power it has, as evidenced by its market share and ease of entry into the market; (iii) the deliberateness of the contravention and the period over which it extended; (iv) whether the contravention arose out of the conduct of senior management or at a lower level; (v) whether the company has a corporate culture conducive to compliance with the Act, as evidenced by education programs and disciplinary or other corrective measures in response to an acknowledged contravention; and (vi) whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention; (see Trade Practices Commission v CSR Limited [1991] ATPR 41-076 at 52,152-52,153 per French J and NW Frozen Foods v Australian Competition and Consumer Commission at 292). 40 Another factor which will require future consideration is whether payment of compensation or making restitution to those adversely affected by the illegal conduct should go in mitigation of the penalty. It may be that a company should receive a lower (or discounted) penalty if it has assisted those affected by its actions by implementing a compensation scheme in the same way that a company may receive a discount for assisting the ACCC. 41 I do not intend to go to each factor separately. It will suffice if I indicate those matters upon which I placed most reliance. First, the contraventions are very serious, bearing in mind that they are contraventions of per se provisions. Per se provisions are often the most harmful restrictions on competition. 42 Second, the conduct was covert and deliberate and was undertaken by senior management. Not only that, the relevant employees of each respondent knew the conduct was illegal. 43 Third, the contraventions took place over many years and they were not isolated instances. 44 One of the most important factors is the effect on the markets. While there is no reliable information about the amount of loss caused to cartel customers and profit gained by its participants, the total value of the sales involved in respect of each corporation was significant and there is broad agreement that the cartel activities caused a significant increase in the price for marine hose otherwise above the market price under fair and open competition. As stated, particularly with reference to Trelleborg, prior to 2000 the average level of prices was less than 50% of the price list. By 2005, bid prices were around or exceeded 100% of that same list. This increase in price impacted on the operational costs incurred by customers in the oil and gas industry. 45 The total amount of fines imposed was $8.235 million. This amount represented a discounted total ranging from 20%-33% for each of the four respondents. The total can be considered against a combined total penalty of €126.61 imposed on the respondents in the European Union. This disparity should be explained. 46 In Australia, the maximum penalty at the time of the commission of the contraventions was $10,000,000 for a corporation. In the EU, under Art 23(2)(a) of Reg No 1/2003, the European Commission can impose fines on "undertakings or associations of undertakings" where they either intentionally or negligently infringe the anti-trust Articles (Former Arts 81 and 82 of the Treaty Establishing the European Community, now Arts 101 and 102 of the Treaty on the Functioning of the European Union). The Guidelines on the method of setting fines make clear the Commission's dual approach of specific and general deterrence. The Commission proceeds on the basis that in calculating the amount of the fine, regard should be had to the value of the sales of goods or services subject to the anti-trust infringement along with the duration of the infringement in order that the fine reflect the economic importance of the violation as well as ensuring that each "undertaking's" participation is weighted accordingly. The method used in determining the fine involves a two step process: first, a basic amount for each undertaking or association of undertakings is determined; and, second, this basic amount is either adjusted upwards or downwards. The basic amount is determined by calculating the value of the sales subject to the anti-trust violation in the relevant area. As a general rule, the proportion of the value of sales taken into account will be set at a level of up to 30% of the value of sales. This amount will be multiplied by the number of years of participation in the cartel. This amount will then either be increased due to aggravating circumstances such as a refusal to cooperate with or the obstruction of, the Commission in carrying out its investigations, or decreased on account of mitigating factors such as where the infringement is the result of negligence. 47 In order to ensure specific deterrence, the Commission can increase the fine to be imposed on undertakings which have a particularly large turnover beyond the sales of goods or services related to the infringement. The Commission will also consider the need to increase the fine in order to exceed the extent of any gain made due to the infringing behaviour in cases where it is possible to calculate such an amount. The maximum amount of the fine is not to exceed 10% of the total turnover of the undertaking in the preceding business year. 48 Although, in my view, Australian penalties are very much on the low side (the highest recorded penalty against a single party is $36 million in the cardboard box cartel), penalties imposed by the European Commission cannot be used as a comparison. The applicable principles are far removed from those in place under our legislation and, in any event, the EU has a far more liberal limitation regime. This enabled the European Commission to impose penalties for conduct spanning 19 years. 49 That, however, does not mean that the approach to penalties should not be investigated carefully. Penalties in Australia are still something of a light touch notwithstanding the new penalty regime that was introduced in 2006. If they are to be reviewed, perhaps the place to begin is not to lose sight of the maximum aggregate penalty that can be imposed in a particular case. Although only to be applied in the worst possible case, there must still be some relationship between the maximum penalty and the penalty that is imposed. 50 All in all, the penalties suggested by the parties were reasonable, having regard to the constraints imposed upon a judge in going beyond what the parties have suggested. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 11 June 2010