6 This brings me to the second preliminary point. It is now quite common in antitrust litigation for the parties to reach agreement on the appropriate level of penalty and to submit jointly that the court should implement their agreement. It is so common that an examination of the reported cases shows that, in the last five years or so, most prosecutions under Part IV of the Trade Practices Act have been resolved by "consent", that is, without a full hearing on the merits of the case. One consequence of this practice is to make it more difficult for a court to determine whether the penalty which has been agreed is within the range that the court would fix. Moreover, decisions which sanction agreed penalties are not a good yardstick against which to measure whether what is agreed in later cases is within the range of appropriate penalties. This is because the agreed penalty need not be the penalty that would have been imposed by the court, although the penalty was not inappropriate.
7 The third matter concerns the purpose of imposing penalties. There is as yet no concluded view on the object of the imposition of penalties for a contravention of Pt IV. It is only when this issue is finally resolved that there can be a degree of certainty in deciding the appropriate level of penalty in a particular case. At the moment there are two competing views, although the application of the principles of each school of thought may overlap. Some favour the view that deterrence, either specific or general, is the sole criterion. Others say that retribution is an important element.
8 The traditional aim of the criminal law is deterrence, rehabilitation and incapacitation: see the note "Developments in the Law - Corporate Crime: Regulating Corporate Behaviour Through Criminal Sanctions" 92 Harvard L R 1227 (1979). Deterrence plays a significant role in corporate crime because "corporate activity is normally undertaken in order to reap some economic benefit" and "corporate decision-makers choose causes of action based on a calculation of potential costs and benefits": 92 Harvard L R at 1235. On this approach, the appropriate penalty is that which would be a sufficient incentive to deter a corporation from engaging in unlawful conduct. However, in antitrust cases, the position may not be so simple. A number of commentators have urged the view that, because the aim of antitrust law is economic efficiency, some contraventions of the law are of economic benefit and should not be deterred: see eg W M Landes, "Optimal Sanctions for Antitrust Violations" 50 University of Chicago L R 652 (1983); G Becker, "Crime and Punishment: An Economic Approach" 76 Journal of Political Economy 169 (1968). So far, this Chicago School of Economics view has not taken hold in Australia.
9 The other approach is to view retribution as a justification for corporate liability. Although a corporation has "no soul to be damned, and no body to be kicked" (Baron Thurlow, quoted in the Oxford Dictionary of Quotations (2nd ed, 1966) at p 527), it may nevertheless be appropriate to punish a corporation for its wrong-doing, that is, for its morally blameworthy conduct.
10 In Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 French J stated his firm preference for deterrence as the sole object of penalties under Pt IV. He said (at 52-152):
"Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV. Nor, if it be necessary to say so, is there are any compensatory element in the penalty fixing process … . 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 Act."
11 French J set out various factors to be taken into account in determining penalty. They are often referred to and need not be set out. As has been pointed out, however, a number of those factors cannot be reconciled with the deterrence theory. For example, French J said that it is necessary to take into account the deliberateness of the contravention and the period over which it extended. Thus, it is quite common for the court to hold that systematic and deliberate defiance of the law warrants a heavier penalty: see, eg, Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR ¶41-375. But, as K Yeung says in her article, "Quantifying Regularity Penalties: Australian Competition Law Penalties and Perspective" (1999) 23 Melbourne University L R 440 at 471, this, and other criteria mentioned by French J, do not amount to an outright rejection of morality and punishment as having relevance to penalty. And then there are the cases which held that retribution is a relevant criterion. For example, in Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (No 5 ) (1998) ATPR ¶41-628, Heerey J said (at 40,891) that while deterrence remains a primary object of the imposition of penalties:
"…[N]vertheless s 76 imports into the penalty fixing process concepts of moral responsibility long known to the criminal law. In other words, the sources of the substantive provisions of Pt IV are doubtless economic policy and theory, but the penalties for contraventions are to be applied in a moral universe."
On appeal ((2000) ATPR ¶41-758) the Full Court did not dissent from this view.
12 The final point concerns the quantum of the penalties that in the past have been imposed. The Trade Practices Act was enacted in 1974. A contravention of the anti-competitive provisions attracted a penalty of $250,000 in the case of a corporation and $50,000 in the case of an individual. In 1993 the penalties were increased to $10,000,000 for a corporation and $500,000 for an individual. The parties have provided me with a detailed schedule of penalties that have been imposed in the last ten years. In a number of the cases there was a systematic and deliberate breach of the law over an extended period, often many years, which resulted in significant harm to consumers and to large gains by the offending corporations. In some cases the maximum possible penalty may have been in the tens of millions of dollars, perhaps more. The two highest penalties that have been imposed are $15,000,000 and $7,500,000 in the case of a corporation (these penalties were imposed in Australian Competition and Consumer Commission v Roche Vitamins Australia Pty Ltd [2001] FCA 150), the next highest penalty being $6,600,000 (in Australian Competition and Consumer Commission v Pioneer Concrete Pty Ltd (1996) ATPR ¶41-457) and the highest in the case of an individual is $150,000 (in Alice Car & Truck Rentals Pty Ltd v NT Outback Adventure Rentals Pty Ltd (1997) ATPR ¶41-582). Most penalties for corporations are below $2,000,000.
13 Of course, it is correct that an appropriate penalty must take into account mitigating circumstances such as remorse, the expression of remorse before discovery of the contravention, cooperation with the Commission, a plea of guilty, the financial capacity to pay the penalty, the parity principle, and the totality principle. This said, I am left with the distinct impression that current penalties are on the low side. It is now more than five years since a similar comment was made: see A-M Allgrove, "The Assessment of Penalties Under the Trade Practices Act for Breaches of the Competitive Conduct Rules" (1996) 4 TPLJ 104. If general deterrence is the principal object of imposing a penalty, the number of cases that still come before the court, and the seriousness of the conduct that is involved in some of them, suggests that past penalties are not achieving that object. For a penalty to have the desired effect, it must be imposed at a meaningful level. Most antitrust violations are profitable. Accordingly, the penalty must be at a level that a potentially-offending corporation will see as eliminating any prospect of gain.
14 I return now to the facts of this case. In virtue of the view I have formed, it is not necessary to do more than provide a brief summary, which is taken from the agreed statement of facts.
15 The group of which Alstom is a member, is one of the leading world-wide suppliers of components, systems and services in various infrastructure markets. In the year to 31 March 1999 Alstom employed approximately 1157 people and had sales of $558,000,000. Its transformer business, located in Rocklea, Queensland, represented approximately 10 per cent of sales.
16 Transformers are equipment used for transforming the voltage of electricity between the voltage at which the electricity is generated or used and the voltage at which the electricity is generated or used and the voltage at which the electricity is transmitted. The total value of sales in the Australian transformer market at relevant times was approximately $60,000,000. Alstom had approximately 20 to 30 per cent of the market, with production capacity to supply approximately 60 per cent. Between them, Alstom, and two other transformer manufacturers, ABB Power Transmission and Wilson Transformer, controlled 90 per cent of the market.
17 Between mid 1989 and late 1995 Alstom was a party to an arrangement or understanding with Wilson Transformer and ABB Power Transmission to allocate tenders to be let by power utility companies for the manufacture and supply of power transformers to one of them, in order to maintain their respective market shares. It was agreed that ABB Power Transmission would retain approximately 44 per cent of total sales and the remaining 46 per cent would be shared equally between Wilson Transformer and Alstom.
18 In the period between 1989 and 1995, the three corporations gave effect to their market sharing arrangement. To implement the arrangement, there were private meetings in relation to forthcoming tenders which were attended by senior executives of each company, including Mr Grabham. Mr Grabham and Mr James both belonged to a trade organisation which allowed them frequent contact with the senior executives of suppliers who competed with Alstom. Once it was agreed which of the three companies would be allocated a tender, that company would submit a tender for a lower capitalised cost than would be submitted by the other companies. The difference between the capitalised cost tendered by the company that would take the tender and the costs submitted by the other parties was usually around 3 per cent.
19 By the end of 1993, senior executives of the three companies met and adopted more organised procedures to give effect to their arrangement. There was an adjustment to the market shares which the agreement would perpetuate. ABB Power Transmission was to secure 44 per cent of the market, Alstom 28 per cent of the market and Wilson Transformers 28 per cent. Senior executives of the three companies continued to meet to implement the agreement. Initially Mr Grabham attended on behalf of Alstom. From about November 1994 the meetings were attended by Mr James.
20 There were occasions between 1989 and late 1995 when the parties did not give effect to their agreement. Sometimes the companies were unable to reach agreement on the allocation of a tender. On other occasions agreement was reached but tenders were not submitted as had been agreed.
21 The agreed statement of facts gives twenty-five examples of tenders which were allocated between the companies from late 1993 to late 1995. The successful tender price ranges from $285,000 to $4,326,000. Most exceed $1,000,000.
22 When the contraventions occurred, Alstom did not have a trade practices corporate compliance program and did not provide its executives, employees and other representatives with trade practices education or training. Still, the executives engaged in the contravening conduct covertly and clandestinely, with full knowledge of its illegality.
23 I should make specific reference to Mr Elliot. Mr Elliot has been the managing director of Alstom since 1989. He was ultimately responsible for the performance of Alstom. At all times Mr Elliot knew that his company had entered into a market sharing agreement with Wilson Transformer and ABB Power Transmission. Mr Elliot was regularly informed by Mr Johnson, the general manager of Alstom's transformer division (1989-1992), Mr Grabham or Mr James of the arrangements to implement the agreement. He was not, however, directly involved in either entering into the arrangement or giving effect to it. Mr Elliot concedes that on behalf of Alstom he acquiesced in the company's participation in the arrangement and was knowingly concerned in contraventions of the Trade Practices Act.
24 The arrangement came to an end in late 1995. That was around the time when multi-million dollar penalties were imposed in respect of cartel arrangements in the Australian express freight industry (Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR ¶41-375) and the pre-mixed concrete industry (Australian Competition and Consumer Commission v Pioneer Concrete Pty Ltd (1996) ATPR ¶41-457). This shows that high penalties will deter unlawful conduct.
25 Whilst Alstom and its three executives did not volunteer to the Commission the fact of their contravening conduct, once the Commission approached them they cooperated with the Commission by assisting it in its investigation, providing it with information, reviewing Alstom's compliance program and agreeing with the Commission on penalties to be submitted to the court.
26 The penalty that has been suggested for Alstom is $5.5 million and for Mr Elliot it is $150,000. The suggested penalties are in respect of all the contraventions. It has become the practice for the court not to impose separate penalties for each contravention which is proven or conceded but instead to impose one aggregate penalty, which is regarded as appropriate for all contraventions. It is not proposed that any monetary penalty be imposed upon Mr Grabham or Mr James. However, the intention is that they, and the other respondents, be restrained from engaging in anti-competitive conduct for a period of four years. Finally, Alstom has agreed to pay the Commission's costs fixed in the sum of $60,000.
27 The parties submit that the proposals fall within the range of penalties that the court would consider appropriate. Subject to the comments that I made earlier, their submissions in that regard are correct. In so far as Alstom is concerned, the suggested penalty is among the larger that have been imposed. So far as Mr Elliot is concerned it seems to be the equal highest imposed on an individual.
28 I consider the suggested penalties are appropriate. I will also grant the injunctions that are sought. Accordingly, there will be orders and declarations in accordance with the minutes filed.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.