FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 8) [2011] FCA 153 Citation: Australian Competition and Consumer Commission v April International Marketing Services Australia Pty Ltd (No 8) [2011] FCA 153 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v ASIA PULP & PAPER COMPANY LTD (SINGAPORE), PT INDAH KIAT PULP AND PAPER TBK (INDONESIA), PAUL GEORGE, and SUNIL SOOD File number(s): NSD 2394 of 2006 Judge: BENNETT J Date of judgment: 25 February 2011 Catchwords: TRADE PRACTICES – alleged price fixing arrangements made at overseas meetings – ACCC and certain respondents jointly seek proposed declarations, injunctions and penalties on basis of agreed facts and admissions – whether appropriate Legislation: Evidence Act 1995 (Cth) s 191(3)(a) Federal Court of Australia Act 1976 (Cth) s 21 Federal Court Rules O 18 r 4(1), O 62 r 4(2)(c) Trade Practices Act 1974 (Cth) ss 5, 45(2)(a)(ii), 45(2)(b)(ii), 45A, 76, 80 Cases cited: ACCC v Australian Safeway Stores Pty Limited (1997) 75 FCR 238 cited ACCC v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2004) ATPR 42-002 cited ACCC v British Airways plc [2008]) FCA 1977 cited ACCC v Econovite Pty Ltd (2003) ATPR 41-959 cited ACCC v FILA Sport Oceania Pty Ltd (2007) ATPR 42-135 ACCC v GM Holden Ltd [2008] FCA 1428 cited ACCC v Grove & Edgar Pty Ltd [2008] FCA 1956 cited ACCC v Gulleyside Pty Ltd (2006) ATPR 42-097 cited ACCC v Jurlique International Pty Ltd (2007) ATPR 42–146 cited ACCC v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 cited ACCC v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 cited ACCC v McMahon Services Pty Ltd (2004) ATPR 42-031 cited ACCC v Midland Brick Co Pty Ltd (2004) 207 ALR 329 cited ACCC v Oobi Baby Pty Ltd [2008] FCA 1488 cited ACCC v Qantas Airways Ltd [2008] FCA 1976 cited ACCC v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 cited ACCC v SIP Australia Pty Ltd (1999) ATPR 41-702 cited ACCC v TEAC Australia Pty Ltd (2007) ATPR 42-201 cited Australian Competition and Consumer Commission cited (ACCC) v April International Marketing Services Australia Pty Ltd (No 5) [2010] FCA 17 cited J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532 cited Johnson v R (2004) 205 ALR 346 cited Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993 cited NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 cited Rural Press Ltd v ACCC (2003) 216 CLR 53 cited Thomson Australian Holdings Pty Ltd v Trade Practices Commission (19810) 148 CLR 150 cited TPC v Allied Mills (No. 4) (1981) 37 ALR 256 cited TPC v CSR Ltd (1991) ATPR 41-076 cited TPC v Mobil Oil Australia Ltd (1984) 4 FCR 296 cited TPC v Stihl Chainsaws (Aust) Pty Limited (1978) ATPR 40-091 cited TPC v TNT Australia Pty Ltd (1995) ATPR 41-375 cited Date of hearing: 24 February 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 90 Counsel for the Applicant: Mr A Wigney SC Solicitor for the Applicant: Australian Government Solicitor Counsel for the Eleventh and Twelfth Respondents: Mr P Whitford SC Solicitor for the Eleventh and Twelfth Respondents: Clayton Utz Counsel for the Thirteenth Respondent: Mr P George Solicitor for the Thirteenth Respondent: PricewaterhouseCoopers Legal Counsel for the Fifteenth Respondent: The Fifteenth Respondent did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2394 of 2006 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: ASIA PULP & PAPER COMPANY LTD (SINGAPORE) Eleventh Respondent PT INDAH KIAT PULP AND PAPER TBK (INDONESIA) Twelfth Respondent PAUL GEORGE Thirteenth Respondent SUNIL SOOD Fifteenth Respondent JUDGE: BENNETT J DATE OF ORDER: 25 FEBRUARY 2011 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. Each of the 11th and 12th respondents, Asia Pulp & Paper Company Ltd and PT Indah Kiat Pulp and Paper Tbk, in the period between December 2000 and January 2004, by: 1.1. arriving at arrangements with competitors for the supply to customers in Australia of uncoated woodfree folio and cut-size paper (UWF paper) which arrangements contained provisions which had the purpose and effect or likely effect of fixing, controlling or maintaining the average price per metric tonne at which they would supply UWF paper to customers in Australia; and 1.2. giving effect to those provisions in its pricing for the supply of UWF paper to customers in Australia; thereby contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Competition and Consumer Act 2010 (Cth) (formerly Trade Practices Act 1974 (Cth)) (the Act) and the Competition Codes as defined in s 150A and 150I of the Act (the Codes). THE COURT ORDERS THAT: 2. Each of the 11th and 12th respondents be restrained, whether by themselves or by their servants or agents, for a period of five years from the date of order from: 2.1. making any contract or arrangement or arriving at any understanding with one or more competitors for the supply of UWF paper to customers in Australia, which contains a provision with the purpose, effect or likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price at which any party to the contract, arrangement or understanding, or any related body corporate or agent, will supply UWF paper to customers in Australia (other than a contract made directly with a competitor who is a customer or agent of the respondent, for supply to that customer or by that agent); or 2.2. giving effect to any provision of a contract, arrangement or understanding of the nature set out in subparagraph 2.1 above. 3. The 11th respondent pay to the Commonwealth of Australia, in respect of its conduct in contravention of the Act and the Codes, a pecuniary penalty in the amount of $3,400,000, such penalty to be paid within 28 days of order. 4. The 12th respondent pay to the Commonwealth of Australia, in respect of its conduct in contravention of the Act and the Codes, a pecuniary penalty in the amount of $800,000, such penalty to be paid within 28 days of order. 5. The 11th and 12th respondents pay a contribution to the applicant's costs of and incidental to these proceedings, in the agreed amount of $300,000, within 28 days of the date of order. 6. The proceedings be otherwise dismissed against the 11th and 12th respondents. 7. The notice of motion filed by the 11th and 12th respondents on 11 August 2009 be dismissed. 8. The 11th and 12th respondents discontinue the appeal proceedings with file number NSD 1162/2010 by filing a notice of discontinuance within 14 days of order. 9. The proceedings be dismissed as against the 13th and 15th respondents, with no orders as to costs in relation to the proceedings as against those respondents, and any existing costs orders be vacated. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2394 of 2006 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: ASIA PULP & PAPER COMPANY LTD (SINGAPORE) Eleventh Respondent PT INDAH KIAT PULP AND PAPER TBK (INDONESIA) Twelfth Respondent PAUL GEORGE Thirteenth Respondent SUNIL SOOD Fifteenth Respondent JUDGE: BENNETT J DATE: 25 FEBRUARY 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 These proceedings allege contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth) (the TPA) and the Competition Codes as defined in s 150A and 150I of the TPA (the Codes), and involvement in those contraventions, by (inter alia) the 11th respondent, Asia Pulp & Paper Company Ltd (APP Singapore) and the 12th respondent, PT Indah Kiat Pulp and Paper Tbk (Indah Kiat). I previously made orders in respect of other respondents in the proceedings, collectively the April parties (Australian Competition and Consumer Commission (ACCC) v April International Marketing Services Australia Pty Ltd (No 5) [2010] FCA 17. 2 The Australian Competition and Consumer Commission (ACCC), APP Singapore and Indah Kiat (collectively the Parties) have reached agreement, for the purposes of these proceedings only, as to the relevant facts to be admitted for the purposes of s 191(3)(a) of the Evidence Act 1995 (Cth) (the Evidence Act). Agreement has also been reached as to: 1. the level of pecuniary penalties, pursuant to s 76 of the TPA and the Codes, to be recommended to the Court as appropriate for the contraventions; 2. the granting of injunctions pursuant to s 80 of the TPA and the Codes; 3. the terms of declarations to be made pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth); and 4. other orders. 3 Submissions, facts and admissions pursuant to s 191(3)(a) of the Evidence Act have been made jointly on behalf of the Parties. 4 The proposed form of resolution provides: 1. for the making of orders, including the imposition of pecuniary penalties, in relation to each of APP Singapore and Indah Kiat; 2. that the proceedings be otherwise dismissed, with no order as to costs, as against the 13th and 15th respondents, respectively Mr Paul George and Mr Sunil Sood, each of whom consent to those orders. 5 The facts agreed to, and the admissions made, are agreed to and made pursuant to s 191(3)(a) of the Evidence Act, for the purpose of these proceedings only and are admissions upon which the Court may rely to pronounce judgment and make orders (Federal Court Rules O 18 r 4(1); ACCC v Jurlique International Pty Ltd (2007) ATPR 42–146 at 46,087). 6 It is for the Court to determine whether the contraventions of s 45 of the TPA occurred and the quantum of any pecuniary penalties and other relief that should be ordered. The joint submissions set forth the submissions of the Parties as to the appropriateness of the proposed orders. The Conduct 7 Between December 2000 and January 2004, APP Singapore and Indah Kiat entered into arrangements or understandings with competitors at meetings (which are referred to hereafter as AAA Club meetings). 8 The participants at AAA Club meetings, including APP Singapore and Indah Kiat, were companies involved in the manufacture and supply of uncoated woodfree (UWF) folio and cut size paper to persons including customers in Australia. 9 UWF cut size paper consists of uncoated cut sheets of A3 and A4 copy paper in the range of 70 to 89 grams per square metre (gsm), that typically are supplied wrapped in reams of 500 sheets. UWF folio paper consists of uncut sheets of paper in the range of 60 to 350 gsm, that is measured and supplied by weight, ream or pallet load, in standard sizes larger than A3. 10 APP Singapore was the parent company of various companies responsible for the operations of APP paper mills, relevantly including Tjiwi Kimia, Pindo Deli and Indah Kiat, which produced paper for supply to places including Australia. 11 Indah Kiat was responsible for the operations of and supply of paper from the Indah Kiat mills in Indonesia from which UWF paper was supplied to Australia. 12 Each of APP Singapore and Indah Kiat carried on business in Australia during the relevant period, within the meaning of s 5 of the TPA, by reason of their supply to customers in Australia of UWF folio and cut size paper, and through the operations of APP Singapore's subsidiary, APP Australia Pty Ltd (now deregistered) (APP Australia). APP Singapore and Indah Kiat supplied paper products to customers in Australia assisted by APP Australia, and were otherwise connected with one or more of the States or Territories, within the meaning of s 8(2) of the Competition Policy Reform Acts, by reason of that supply. 13 APP Singapore and Indah Kiat participated in AAA Club meetings, and arrived at arrangements or understandings with other participants at such meetings, as to the average price per metric tonne at which they would supply folio and cut size paper to their customers in Australia, on the 16 occasions between 6 December 2000 and 16 January 2004 pleaded by the ACCC. 14 The meetings took place in overseas locations in south-east Asia. No AAA Club meetings were held in Australia. 15 APP Singapore and Indah Kiat were represented at AAA Club meetings by APP employees , including the following individuals: 1. Mr Chirawood, whose positions in the relevant period included the position of Sales Operation Head and Regional Director within the APP group of companies; and 2. Mr Sood, whose positions in the relevant period included position of Business Development Manager and marketing executive within the APP group of companies. 16 APP Singapore and Indah Kiat gave effect to the arrangements or understandings reached at AAA Club meetings, between December 2000 and January 2004, in their pricing for the supply of UWF folio and cut size paper to customers in Australia. Although APP Australia sold the UWF folio and cut size paper, it frequently exercised little or no discretion in setting the prices for that paper. Prices were frequently set by directives issued by APP Singapore and Indah Kiat. 17 APP Singapore and Indah Kiat ceased involvement in AAA Club meetings after January 2004. 18 The arrangements or understandings arrived at by APP Singapore and Indah Kiat at AAA Club meetings had the purpose and likely effect of fixing, controlling and maintaining the prices at which UWF folio and cut size paper were supplied to customers in Australia, between December 2000 and January 2004. By arriving at the arrangements or understandings, APP Singapore and Indah Kiat thereby contravened s 45(2)(a)(ii) of the TPA and the Codes, by operation of s 45A. 19 By giving effect to those agreements, as outlined above, each of APP Singapore and Indah Kiat contravened s 45(2)(b)(ii) of the TPA and the Codes. Relief sought 20 The orders proposed jointly by the Parties set out the terms of injunctions, declarations and pecuniary penalties jointly recommended to the Court as appropriate in respect of APP Singapore and Indah Kiat. The orders also provide for the proceedings to be dismissed as against the 13th and 15th respondents, with no order as to costs in relation to the proceedings against those respondents, with the consent of those respondents. Injunctions 21 The Court is empowered by s 80 of the TPA to grant injunctive relief. Section 80 relevantly provides as follows: (1) …[W]here, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of any of the following provisions: (i) a provision of Part IV…; … (b) attempting to contravene such a provision; … the Court may grant an injunction in such terms as the Court determines to be appropriate. … (4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind. 22 The Parties jointly submit: 1. the Court has power under section 80 of the TPA to make the orders sought; 2. the injunctive relief is not too vague or imprecise, nor does it require continuing supervision by the Court; 3. there is no multiplicity of overlapping injunctions that may give rise to confusion about the scope of the obligations being imposed (ACCC v Econovite Pty Ltd (2003) ATPR 41-959 at 47,532 per French J); and 4. the injunctions are appropriate to deter a repetition of the conduct (ACCC v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2004) ATPR 42-002 at 48,751). Section 80(4)(a) of the TPA gives the Court power to grant an injunction whether or not it appears to the Court that the person intends to again engage in conduct of that kind. 23 The Parties therefore submit that the injunctions in the attached terms should be made. 24 I am satisfied that the proposed injunctions are within the power of the Court and that they are appropriate. I note that proposed order 2.1, which mirrors the language of s 45(2)(a) of the TPA, is in part in imprecise terms. I have been informed by counsel for the 11th and 12th respondents that those parties have been properly advised as to the effect of that order. In the circumstances and bearing in mind that those respondents have had the benefit of advice from experienced and competent lawyers, I am of the view that the generality and imprecision of terms such as 'with...the effect or likely effect of fixing, controlling or maintaining…the price…' does not prevent the jointly proposed order 2.1 from being too vague or imprecise for the understanding of the Parties or require continuing supervision of the Court. Declarations 25 Section 21 of the Federal Court of Australia Act 1976 (Cth) gives the Court power, in relation to a matter in which it has original jurisdiction, to make binding declarations of right. Courts have recognised that declarations are appropriate in proceedings commenced by the ACCC for contraventions of the TPA. 26 The Court is entitled to treat the consent of APP Singapore and Indah Kiat as involving an admission for the purposes of these proceedings of all facts necessary or appropriate to the granting of the relief sought (ACCC v FILA Sport Oceania Pty Ltd (2007) ATPR 42-135 at [7] per Tracey J; citing Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 164 per Gibbs CJ, Stephen, Mason, and Wilson JJ). Notwithstanding the parties' consent, the Court must be careful to ensure that the proposed orders (including the declarations) are within power and are otherwise appropriate (ACCC v GM Holden Ltd [2008] FCA 1428 at [11]–[12] per Siopis J; ACCC v Grove & Edgar Pty Ltd [2008] FCA 1956 at [18], [21] per Reeves J; ACCC v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [1], [20]–[21] per French J). 27 The declarations sought contain sufficient information as to how and why the conduct complained of is a contravention of the TPA and the Codes. They indicate "the gist" of the contravening conduct (Rural Press Ltd v ACCC (2003) 216 CLR 53 at [89]–[91] per Gummow, Hayne and Heydon JJ (Gleeson CJ and Callinan J agreeing at [2])). 28 I am satisfied that the proposed declarations are appropriate. Pecuniary penalty 29 The Parties jointly submit that, on the basis of the matters set out in the joint submissions, the following pecuniary penalties under s 76 of the TPA and Codes are appropriate in all the circumstances: 1. in relation to APP Singapore, a single penalty in the amount of $3,400,000; 2. in relation to Indah Kiat, a single penalty in the amount of $800,000. Penalty: Relevant Factors and Applicable Legal Principles Assessment of an appropriate penalty 30 Section 76 of the TPA sets out matters to which the Court should have regard in determining an appropriate level of penalty. The principles relevant to the assessment of a pecuniary penalty were addressed by French J in TPC v CSR Ltd (1991) ATPR 41-076 at 52,152–52,153. They are: 1. the nature and extent of the contravening conduct; 2. the amount of loss or damage caused; 3. the circumstances in which the conduct took place; 4. the size of the contravening company; 5. the degree of power it has, as evidenced by its market share and ease of entry into the market; 6. the deliberateness of the contravention and the period over which it extended; 7. whether the contravention arose out of the conduct of senior management or at a lower level; 8. whether the company has a corporate culture conducive to compliance with the TPA as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and 9. whether the company has shown disposition to cooperate with the authorities responsible for the enforcement of the TPA in relation to the contravention. 31 Those considerations were approved and expanded upon by the Full Court of the Federal Court in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 and J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532 as follows: 1. similar conduct in the past; 2. effect on the functioning of the market and other economic effects of the conduct; 3. the financial position of the contravening company; and 4. whether the conduct was systematic, deliberate or covert. Significance of specific and general deterrence 32 It has long been accepted that a principal object of a penalty under s 76 of the TPA is deterrence (TPC v Stihl Chainsaws (Aust) Pty Limited (1978) ATPR 40-091 at 17,896 per Smithers J). In CSR Ltd at 52,152 French J stated: The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the TPA. 33 This approach was approved by the majority of the Full Federal Court in NW Frozen Foods. 34 Deterrence has two aspects: specific deterrence in respect of the actual contravener and general deterrence of others 'who may be disposed to engage in prohibited conduct of a similar kind' (TPC v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 297-298 per Toohey J). The Full Court in NW Frozen Foods made it clear (at 294-295) that: The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay… 35 The cases demonstrate the importance of general deterrence considerations for per se contraventions where competing or conflicting matters arise in determining penalty. In ACCC v McMahon Services Pty Ltd (2004) ATPR 42-031 at 49,228, Selway J observed in relation to price fixing conduct: Once it is understood that deterrence, and particularly general deterrence, is the primary principle in the imposition of penalty for price fixing, then at least two conclusions flow from that. First, it means that penalties for collusive price fixing will need to be substantial and significant. This is, of course, reflected in the size of the maximum penalty upon corporations of $10 million. However, it also follows logically from the principle. Collusive price fixing, particularly between tenderers is difficult to detect. Public enforcement often only occurs with "a tip from an affected party or an insider" (see Marshall & Meurer, "Bidder Collusion and Antitrust Law: Refining the Analysis of Price Fixing to Account for the Special Features of Auction Markets" (2004) 72 AntiTrust Law Journal 83 at 101). Given these difficulties and the potential for large profits from such practices there is a chance that those in the market place might be prepared to factor the risk of a low penalty into its pricing structure as a 'business cost'. That would be inimical to the statutory purpose of ensuring that the practices do not occur. The penalty must be sufficiently high that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost. 36 The above extract from Selway J's judgment was cited with approval by Merkel J in ACCC v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281. 37 In ACCC v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at [22] Lee J said: The object of orders made under s 76, or s 80, of the Act is to protect the integrity of markets and to prevent the subversion and distortion thereof by conduct that has the purpose or effect of adversely affecting competition. The Act sets out the norms to be met by corporations engaged in trade or commerce and in the main seeks to obtain adherence to those standards by providing for penalties to be imposed, and injunctions to be granted, that will be sufficient to deter corporations from risking, whether deliberately or negligently, the consequence of contravening the Act. Totality and parity 38 In TPC v TNT Australia Pty Ltd (1995) ATPR 41-375 at 40,169, Burchett J stated that the total penalty for related offences ought not to exceed what is proper for the entire contravening conduct involved (the "totality principle" as known in criminal law). This approach was adopted by Goldberg J in ACCC v Australian Safeway Stores Pty Limited (1997) 75 FCR 238 at 243 and Mansfield J in Rural Press at [19]. 39 The totality principle in criminal sentencing law was most recently explained by the High Court in Johnson v R (2004) 205 ALR 346. 40 Similar conduct should be deserving of similar penalties, all other things being equal (ACCC v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [43] per Goldberg J), to the extent that equality is ascertainable (NW Frozen Foods at 295). Determining an appropriate level of penalty 41 Determining the quantum of a penalty is not an exact science (NW Frozen Foods at 290 per Burchett and Kiefel JJ). Within a permissible range, the Courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another. The Parties submit that the penalties they propose are in accordance with the penalties imposed in other cases involving price-fixing conduct, considering the relative seriousness and circumstances of the contravening conduct in those other cases. 42 A penalty must not be so high as to be oppressive (Stihl Chainsaws at 17,896 and NW Frozen Foods at 293). In considering what may constitute oppression, Merkel J stated in Leahy Petroleum (No 2) at [9] that: I therefore respectfully agree with the observation of Smithers J, referred to by Burchett and Kiefel JJ in NW Frozen Foods, to the effect that, a penalty that is no greater than is necessary to achieve the object of general deterrence, will not be oppressive. The Court's approach to agreements on penalty 43 I accept that, provided that the Court is satisfied that the terms of the orders are appropriate, it is in the public interest for the Court to make orders in Part IV TPA litigation on the terms that have been agreed between parties, so as to encourage parties to assist the ACCC in its investigations and achieve negotiated settlements. The Court has recognised that, in addition to savings in time and costs, there is a public benefit in imposing agreed pecuniary penalties where appropriate, as parties may not be disposed to reach such agreements were there unpredictable risks involved (NW Frozen Foods at 291). 44 The ACCC's position is contained in the ACCC Cooperation Policy for Enforcement Matters, July 2002. The ACCC expressed the view that making the public aware of the manner in which co-operation and assistance by parties is recognised (such as by making joint submissions to the Court for a reduction of penalty) encourages parties in breach to come forward to assist the ACCC in its enforcement activities. While the Court is not bound by the Policy nor required to take it into account in any given case, it has recognised (in relation to a previous edition of the Policy) that the matters which the Policy takes into consideration are matters relevant to a determination of the appropriate penalties to be imposed for contravention of Part IV of the TPA (ACCC v SIP Australia Pty Ltd (1999) ATPR 41-702 at [32]). 45 The principles governing whether a Court should accept a penalty that has been agreed between the ACCC and a respondent were considered in TPC v Allied Mills (No 4) (1981) 37 ALR 256 by Sheppard J, who stated (at 259): It is, of course, true that the penalty has been suggested to me by the agreement of the parties. Uninformed of their agreement, I may have selected a different figure, but I am satisfied that it would not have been very different from theirs. There is from time to time, amongst members of the profession and amongst the public, discussion concerning plea bargaining. Sometimes it is suggested that it involves disreputable conduct. It is my opinion that that is so if it at all implicates the court in private discussions as to what the court's attitude will or would be likely to be if a particular course is taken. In this case nothing of that kind has occurred. The parties have made their own agreement and put it to the court for approval, not knowing what its attitude was likely to be. ... This, of course, is not a criminal case; the liability is civil only. But, even in the most serious criminal cases, it is not unusual for the prosecution to accept a plea to a lesser charge, subject always to the approval of the court. I have said what I have only to explain that the course which the parties have adopted is both proper and not uncommon, even though perhaps novel in the comparatively new field of trade practices. 46 That approach was considered and approved by the Full Federal Court in NW Frozen Foods. In that case, the Court held (at 298-299): We agree with the statement made in several of the cases cited that it is not actually useful to investigate whether, unaided by the agreement of the parties, we would have arrived at the very figure they propose. The question is not that; it is simply whether, in the performance of the Court's duty under s 76, this particular penalty proposed with the consent of the corporation involved and of the Commission, is one that the Court should determine to be appropriate. 47 The Full Court further stated (at 291): There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to tend to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. 48 The Full Court noted (at 290) that generally the most significant and relevant matters that the Court needed to consider about penalty were effects upon the functioning of markets and other economic effects. Although the Court is responsible for determining the appropriate penalty, the Full Court considered that it would be informed by the views of the ACCC about those effects. 49 In Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993, the Full Court held that the decision in NW Frozen Foods disclosed no error of principle. Relevantly, the Court said at 48,626: ...the views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more 'subjective' matters. 50 Further, in Real Estate Institute French J said at [18]: The question whether an undertaking is to be accepted or a consent order made is not concluded by a finding that it is within the power of the court to do so. The power of the court to make the orders sought is "defined and conferred by public law not by private agreement": Fiss, "Against Settlement" (1984) 93 Yale Law Journal 1073. In the exercise of that power the Court is not merely giving effect to the wishes of the parties, it is exercising a public function and must have regard to the public interest in doing so. This principle applies to the resolution of private litigation by consent orders or undertakings. A fortiori it applies to proceedings brought by the Crown or public or statutory authorities to enforce the law in the public interest. The court has a responsibility to be satisfied that what is proposed is not contrary to the public interest and is at least consistent with it … Consideration of the public interest, however, must also weigh the desirability of non-litigious resolution of enforcement proceedings. 51 In this proceeding, the case as against the April parties was resolved by orders made on 29 January 2010. Penalty: Application of the Principles Nature and extent of the contravening conduct 52 The relevant contravening conduct at the AAA Club meetings was deliberate and coordinated cartel conduct which occurred over a period of approximately 3 years, from December 2000 until January 2004. The details of the conduct have been set out above in the "Conduct" section. 53 Relevant AAA Club meetings were held overseas, including in countries in south-east Asia which had no anti-trust laws in place at the time. It is not alleged that any AAA Club meetings took place in Australia. However, the price fixing agreements made related to supply in individual countries, expressly including Australia. 54 APP Singapore and Indah Kiat, through APP Australia, implemented in Australia the prices that were agreed at the AAA Club meetings. The effect on the market and amount of any loss or damage caused 55 Neither the ACCC, nor APP Singapore and Indah Kiat, can quantify an amount of loss or damage caused by the conduct. As the contraventions admitted for the purposes of these proceedings comprise conduct prohibited per se, the absence of evidence of the loss or damage caused by the conduct is neither a circumstance of mitigation nor of aggravation (ACCC v Gulleyside Pty Ltd (2006) ATPR 42-097 at 44,754 per Kiefel J (in the context of a price fixing case) and more generally Jurlique at 46,826–46,829 per Spender J; ACCC v TEAC Australia Pty Ltd (2007) ATPR 42-201 at 48,345 per Kenny J). 56 The arrangements were longstanding, with the pleaded contravening agreements reached over an approximate period of 3 years, which supports an inference that the arrangements had an effect on a market in Australia. 57 The paper products which were the subject of the agreements were basic and important commodity products. 58 The largest supplier of paper in Australia, a domestic Australian paper manufacturer with an estimated 50-60% share in the relevant period, acted as a constraint on pricing for all paper importers, including APP Singapore and Indah Kiat. The pricing of domestic products, supplied at a premium to imported paper, limited the extent to which the parties to the conduct could increase prices. However, arrangements arising out of AAA Club meetings sought to prevent competitive discounting between the importers. The circumstances in which the conduct took place 59 The conduct at AAA Club meetings involved the making of price fixing arrangements which arose in circumstances where the cartel participants were seeking to achieve stability in pricing by avoiding competition amongst themselves. The conduct of APP Singapore and Indah Kiat arose in the context of volatile pricing for the relevant products, affected also by seasonality, and in an environment where levels of pricing for the importation of paper products to Australia had been the subject of anti-dumping claims by domestic Australian paper producers. Size and financial position of the contravening company 60 APP Singapore and Indah Kiat are part of a multinational group of companies, which manufactured and supplied paper. In addition to the mills operated by Indah Kiat, the APP group owned and operated two mills in Indonesia which also supplied paper to Australia, the Tjiwi Kimia and Pindo Deli mills. 61 Between 2001 and 2003, APP Singapore was responsible for the following volumes of sales of UWF paper (including cut size and folio paper) in Australia: Period Volume (metric tonne) Invoiced amount (USD) 2001 57,075.11 40,102,347.84 2002 65,619.17 51,005,475.98 2003 66,362.31 51,005,475.98 62 The proportion of those sales originating from the Indah Kiat mills was as follows: Period Indah Kiat paper: Indah Kiat paper: Volume (metric tonne) Invoiced amount (USD) 2001 6,709.44 4,703,763.90 2002 1,609.48 1,173,889.99 2003 45.78 44,201.11 Degree of power it has, as evidenced by its market share and ease of entry into the market 63 The paper supplied by the APP group, under the control of APP Singapore, represented approximately 16% by volume (on average for 2001 and 2002) of the sales of UWF paper in Australia. Of this, sales from the Indah Kiat mills represented approximately 1% by volume of the sales of UWF paper in Australia. 64 At the time of the conduct, the largest supplier of paper in Australia was a domestic Australian paper manufacturer with an estimated market share of 50-60%. The remaining share comprised principally the participants at AAA Club meetings. The deliberateness of the contravention and the period over which it extended 65 The conduct involved the competitors at the AAA Club meetings deliberately reaching agreements as to pricing of their products, with the AAA Club meetings being held in secret. The AAA Club meetings involved systematic, sophisticated and long-running cartel arrangements between the participants. 66 The contravening conduct admitted for the purpose of these proceedings by APP Singapore and Indah Kiat continued for a period of approximately 3 years, beginning in December 2000 and ceasing after January 2004. Whether the contravention arose out of the conduct of senior management or at a lower level 67 The representatives of APP Singapore and Indah Kiat at relevant meetings included members of the APP group's management. These representatives had the authority to act on behalf of and bind APP Singapore and Indah Kiat. 68 Those same representatives (members of the APP group's management team) were involved in setting prices of UWF paper for supply in Australia. Specifically, they: 1. gave directions to the management of APP Australia as to the prices it was to charge for UWF paper sold in Australia; and 2. sought information and reports from the management of APP Australia as to prices at which APP Australia's competitors sold UWF paper in Australia, for use at AAA Club meetings. Culture of compliance 69 Anti-trust laws were not introduced in Singapore until late 2004, with a phased implementation. The Singapore Competition Commission was established in 2005 and provisions against anti-competitive agreements were implemented in 2006. 70 Anti-trust laws were introduced in Indonesia in approximately March 1999. The Commission for the Supervision of Business Competition, the government entity responsible for enforcing Indonesian anti-trust laws, was also established to enforce these laws. 71 At the time the contravening conduct occurred, APP Singapore and Indah Kiat had not: 1. provided anti-trust training for staff; or 2. implemented any anti-trust compliance program. 72 No training has been provided subsequently by APP Singapore or Indah Kiat. Whether the company has shown disposition to cooperate with the authorities responsible for the enforcement of the TPA in relation to the contravention 73 APP Singapore and Indah Kiat have resisted service in these proceedings and made no concessions or admissions prior to the settlement negotiations with the ACCC in 2010. 74 APP Singapore and Indah Kiat have since cooperated with the ACCC, by seeking to reach agreement with the ACCC, admitting the conduct alleged for the purposes of these proceedings and submitting to the proposed orders. Similar conduct in the past 75 APP Singapore and Indah Kiat have not been the subject of any previous court proceeding by the ACCC or any other person for a contravention of the TPA or the Codes. The deterrent effect of the proposed penalty 76 As noted above, deterrence involves two elements: both specific deterrence of the particular respondent upon whom a penalty is being imposed, and general deterrence of others who might be minded to engage in similar conduct. 77 The proposed levels of penalty are appropriate to address the need for deterrence. Totality principle 78 As described above, an application of the totality principle requires that the total penalty for related offences ought not exceed what is proper for the entire contravening conduct involved. A single penalty in respect of each respondent, in relation to all contravening conduct, is appropriate in the circumstances. Parity with other respondents 79 Any penalties to be imposed upon APP Singapore and Indah Kiat should retain parity with those imposed upon other corporate respondents in the proceedings to date, taking into account the similarities and differences between their conduct and respective positions. 80 In January 2010 pecuniary penalties were imposed upon other respondents in these proceedings which were part of the April group of companies, following joint submissions by the ACCC and those respondents (April (No 5)). The penalties imposed were as follows: 1. April Fine Trading Pte Limited (Singapore) (AFPT Singapore): $3,250,000; 2. April International Marketing Services Australia Pty Limited (AIMS Australia): $750,000, (together, the April respondents). 81 The penalties proposed as against APP Singapore and Indah Kiat take into account the following differences and similarities between those respondents and the APRIL respondents: 1. the degree of cooperation afforded by the respective respondents; 2. their level and timeframe of involvement in the contravening conduct alleged against them, including the nature and number of the contraventions; 3. the size and turnover of the companies, and their operations; and 4. the other factors relevant to penalty which are set out above. 82 The conduct of the APP and the APRIL respondents was of a similar nature, scale and duration overall. It should be noted that AIMS Australia however was incorporated towards the end of the period of contravening conduct, and the relatively low penalty imposed upon AIMS Australia reflects its ancillary involvement in only 2 meetings of the AAA Club. However, the proposed penalties should be considered in their totality for the APP Singapore and Indah Kiat compared to the totality for the April respondents as, in each case, the evidence indicates that the APP parties on one hand and the April parties on the other function as a group. 83 The chief differences between APP Singapore and AFPT Singapore are: 1. AFPT Singapore cooperated at an earlier stage of the proceedings, including accepting service overseas, and before other corporate respondents, while APP Singapore pressed an application contesting service overseas, from which it appealed; 2. The APP Group, of which APP Singapore was the parent entity, was responsible for supply in Australia of paper with a market share in Australia considerably higher than that of the April respondents. Each of these differences dictates a total penalty as against APP Singapore which is higher than that imposed by the Court upon the April respondents. 84 Indah Kiat differs from the other corporate respondents to the proceedings in that: 1. it was a subsidiary of APP Singapore; 2. it was responsible for a market share in Australia of between 1-2% of the market in which UWF paper was supplied; 3. it was involved throughout the pleaded period of conduct; 4. it was served in the proceedings in June 2009. The above factors in total support a penalty as against Indah Kiat which is significantly below that imposed upon APP Singapore or AFPT Singapore. 85 The other corporate respondent to the proceedings, AIMS Australia, which received a pecuniary penalty of $750,000, differed from the other corporate respondents in that it was incorporated in mid 2003, towards the end of the pleaded period of conduct; and was served at the outset of proceedings, in December 2006 (rather than June 2009). 86 In terms of parity, the effect on the Australian market of the actions of the APP Singapore and Indah Kiat on one hand and the April parties on the other were comparable. Each group was responsible for a relatively minor but significant market share in circumstances where another manufacturer held an estimated market share of 50–60%. 87 Taking account of all of the above considerations, including the penalties imposed on the April parties for the reasons set out in April (No 5), I am of the view that the proposed penalties are appropriate. Costs 88 The Court is empowered to make an order for a gross sum order for costs under O 62 r 4(2)(c) of the Federal Court Rules. Similar orders have been made in other proceedings commenced by the ACCC and resolved by consent (ACCC v Qantas Airways Ltd [2008] FCA 1976; ACCC v British Airways plc [2008] FCA 1977; ACCC v Oobi Baby Pty Ltd [2008] FCA 1488; April (No 5)). The Parties submit that it is appropriate for an order that APP Singapore and Indah Kiat pay the amount of $300,000 in respect of the ACCC's costs of and incidental to this proceeding as against them. I am of the view that this is a very reasonable sum taking account of the history of these proceedings. 89 The 13th and 15th respondents, Messrs George and Sood, have consented to orders that the proceedings be dismissed as against them with no order as to costs (including vacation of any existing costs orders). Conclusion 90 I am satisfied that the penalty and other proposed orders are appropriate and should be made by the Court. I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. Associate: Dated: 25 February 2011