rural press and bridge
34 The ACCC seeks the imposition of a penalty in the sum of $6,500,000 against Rural Press and in the sum of $1,500,000 against Bridge Printing. The discrepancy between the two suggested penalties no doubt reflects the size of those entities. Rural Press is clearly a very large corporate entity. It publishes 30 agricultural magazines and 147 regional newspapers throughout Australia and has interests in New Zealand and the United States of America. Through its subsidiaries, it publishes roughly half the regional newspapers in South Australia. At the end of the 1999/2000 financial year its group had total sales revenue of some $438 million, and its operating profit before tax was some $99 million. It has made similar levels of profit in previous years. Its net assets at 30 June 2000 were valued at $410 million.
35 Bridge Printing in the 1999/2000 financial year earned revenue of $8,611,357 with an operating profit before tax of $3,010,802. It also made similar profits in the previous few years. As at 30 June 2000 Bridge Printing held net assets of $2,261,319.
36 Clearly, having regard to the size of those entities, it is necessary to impose significant financial penalties to deter those entities, and the community generally, from engaging in conduct such as that which I have found them to have undertaken in contravention of the Act.
37 The deliberate nature of the contraventions by Rural Press and Bridge are also factors which weigh in favour of significant financial penalties. In the case of their contraventions of s 46 of the Act, I have found that in the period from the latter part of 1997 to April 1998, they exercised their power in the market for the supply of regional newspapers in the Murray Bridge area for proscribed purposes. In the case of their contraventions of s 45 of the Act they, through Mr Law and Mr McAuliffe, were in my view the drivers of those contraventions. It was at the senior management levels represented by Mr Law and Mr McAuliffe that the strategy was adopted of endeavouring to secure the agreement of Waikerie Printing to withdraw active circulation of the River News from the Mannum area, and then pursued over a period of some months by the communications to which I have referred in the reasons for decision given on 1 March 2001. They pursued that strategy in the face of an apparent lack of response by Waikerie Printing in the early months of 1998 despite those communications.
38 Some account should be taken of the role that Bridge played as principal actor. The conduct arose out of a dispute between two competitors, Bridge and Waikerie Printing. Mr McAuliffe and Mr Law were acting in the immediate interests of Bridge, and only indirectly in the broader interests of Rural Press. The responsibility of Rural Press lies largely with its role as the holding company and its ability to guide and control the actions of Bridge. In my view Bridge's conduct can be seen as that which contributed directly to the anti-competitive conduct. As its parent company, Rural Press is implicated in its conduct. Both Mr McAuliffe and Mr Law were employed by Rural Press. Mr McAuliffe was its regional manager for South Australia, and from January 1998 Mr Law was its general manager for regional publishing.
39 On the other hand, the contraventions themselves are not at the serious end of the spectrum of contraventions of s 45 and s 46 of the Act. They occurred following upon Waikerie Printing extending the prime circulation area of the River News into part only of the prime circulation area of the Murray Valley Standard, namely the Mannum area. The section of the Murray Bridge regional newspaper market in issue was small both in terms of geography and population. The Murray Bridge area has a population of 16,562 of which 3,207 people live in Mannum. The circulation of The River News in the Mannum area resulted only in about 100 - 180 additional copies being sold per week in that area. The River News was only a threat to the Murray Valley Standard to a relatively small degree. The response of Ms Price, in particular, as the manager of Bridge was to combat that competition and to compete with the River News in its own prime circulation area. Whilst there may have been, on the part of Rural Press, a desire to be seen not to tolerate passively any competition in the markets of any of its regional newspapers, at least from the point of view of Bridge I think its response was restricted to protecting its own market.
40 The ACCC correctly submits that :
"Prior to July 1997 Bridge Printing, by virtue of the Standard, held 100% market share in the newspaper market in Murray Bridge. For a period of ten months some of that market share was lost to Waikerie Printing. After the contravening conduct Bridge resumed its 100% market share. The Standard is now the only regional newspaper circulated throughout the Murray Bridge district."
41 The extension of the River News into the Mannum area for the period July 1997 to May 1998 resulted in greater coverage of Mannum news in that area, and over a little time the opportunity for Mannum advertisers to advertise in the River News. Bridge responded in a competitive way by increasing its coverage of Mannum news in the Murray Valley Standard. The evidence indicates that, notwithstanding the retreat of the River News from the Mannum area from May 1998 (so that its coverage of Mannum news was effectively reduced to the levels prior to July 1997), the Murray Valley Standard has continued the level of increased Mannum news. The competitive advertising opportunities available by the expansion of the River News into the Mannum area, in a practical sense, has restricted the advertisers and potential advertisers from the Mannum area. Advertisers in Murray Bridge itself were unlikely to be particularly interested in advertising in the River News, which principally was directed to another market and related only to the Mannum area within the Murray Bridge market.
42 The evidence shows that the River News is still available for sale at the Mannum Newsagency, but it is not actively promoted and it does not make the feature of carrying Mannum news nor does it seek advertising from the Mannum area. Nevertheless, it still sells a significant number of copies in that area each week.
43 In my view, it is appropriate to have regard to the size of the relevant market, the extent of the planned and actual participation in the market by Waikerie Printing which, by the contravening conduct, ceased to be carried on, and the nature and extent of the detriment to the public by reason of the contraventions.
44 On those scores, the particular contraventions must be at the lower end of the scale. The competitive battle, from which Waikerie Printing retired as a result of the contravening conduct, was over the promotion and sale of a few hundred copies of a weekly newspaper into a small section of the market for the Murray Valley Standard by the expansion of the River News into that area. I accept that, for the foreseeable future from July 1997, Waikerie Printing had no intention of further expanding the prime circulations area of the River News beyond that area. The particular comparison was a consequence of the changed local government administrative areas, as explained in my earlier reasons for judgment. Nevertheless, as the ACCC says, the retirement of the River News from that battleground left the Murray Valley Standard as exclusively occupying that market. To a degree, as I also found in my earlier reasons for judgment, there was competition to service the readership and advertising section of that market from local radio, regional television, and Statewide newspaper and television services provided in other markets.
45 In Trade Practices Commission v Allied Mills Pty Ltd (1981) ATPR 40-241 Sheppard J, in explaining why he thought that that case did not involve the most serious contravention of s 45 said at 43,181 - 43,182 :
"In particular, there is no evidence to suggest that the public was affected very much, if at all by what was done, and the evidence tends to establish that the arrangement or understanding had a comparatively short life, certainly no longer than three months and probably less."
46 Even in cases where the contravening conduct was not carried through to its conclusion and therefore no loss resulted, courts have taken into account the potential harm in determining the seriousness of the offence (see Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41-763 ("Weston Foods") and Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR 41-618). In this instance the potential harm to the community by the contravening conduct was always going to be small, even if the appropriate focus is only upon the Mannum community.
47 This is the first contravention of the Act by Rural Press or by Bridge. That is a factor to be taken into account in determining penalty, expressly identified in s 76(1) of the Act. I give Rural Press and Bridge credit on that account. The ACCC contends that neither of those entities has a corporate culture of compliance with the Act. The attitude of a contravener to compliance with the Act is a relevant factor in determining penalty. The absence of an appropriate compliance culture may warrant a higher penalty: see TNT at 40,168 - 40,169. In CSR, French J noted as relevant to penalty (at 52,155) :
"There was little convincing evidence of a corporate culture, seriously committed to the need of complying with the requirements of the Act."
48 It is the case that neither Rural Press nor Bridge presented any evidence of any process of instilling into the organisation a culture of compliance with the Act. The conduct of Mr Law and of Mr McAuliffe in relation to these contraventions suggests that there was no such culture. Accordingly, whilst I give credit for the fact that neither Rural Press nor Bridge has previously contravened the Act, that credit is diluted somewhat by my acceptance of ACCC's submission that those entities, prior to the contraventions, had no positive culture of compliance with the Act and had taken no steps to instil one.
49 It also goes to their credit in determining the level of pecuniary penalties that they are now in the process of implementing a trade practices compliance program. As I noted earlier, that program has been proposed by independent experts. I accept that, even having regard to the relatively late stage at which that program was implemented, it is a genuine effort by Rural Press and Bridge to develop a culture of compliance with the Act and to prevent further contraventions of the Act.
50 Evidence of co-operation with the ACCC and candidness on the part of the respondents in confronting allegations of contraventions and in the course of investigations has been regarded as significant in a number of cases. The respondents in this matter did not acknowledge their contraventions before the judgment. I agree, however, that they should not be penalised for not admitting liability. They were entitled to test the evidence, and their contentions fairly indicated that there were legal issues of some complexity to address.
51 In my view, in this matter, both Rural Press and Bridge should be given credit for their meaningful co-operation in the investigation of the ACCC and in the conduct of the hearing. They co-operated in the investigation through the production of documents and by making their employees available for interviews without compulsion and in other ways. They provided through their solicitors a detailed exposition of the communications, and their explanation for them. Their focus in the course of the hearing was directed to the initial issues, as they saw them, and sensible acquiesced in the tender of much of the evidence and tested witnesses only where that was directly relevant to their case. The majority of cases have dealt with co-operation on behalf of the respondents by way of acknowledgment of liability which has effectively dispensed with litigation (see for example Weston Foods at 40,986; NW Frozen Foods; The CC (No 9) Case, and TNT). In my view the factors which I have mentioned should also be taken into account in favour of Rural Press and Bridge in fixing pecuniary penalties. Their conduct has facilitated the investigation and enabled the trial to be conducted efficiently.
52 Fixing the appropriate level of pecuniary penalties is not an exact science. It results from a careful consideration of the relevant considerations in all the circumstances. I have endeavoured to address those circumstances above. Despite the matters which go to the credit of Rural Press and Bridge, and notwithstanding the nature and size of the relevant market and the effect upon competition which the contraventions procured, in my judgment substantial pecuniary penalties are called for. The contraventions were procured by persons at a senior management level, and the conduct was calculated and persistent. The contraventions of s 45 were procured by Rural Press and Bridge, rather than by Waikerie Printing. The contraventions were directed to restoring a previously existing non-competitive situation within the market for the supply of regional newspapers in the Murray Bridge area, and were successful.
53 Having regard to the matters to which I have referred, in my judgment Rural Press should be ordered to pay to the Commonwealth a pecuniary penalty of $400,000 and Bridge should be ordered to pay to the Commonwealth a pecuniary penalty of $200,000.