Australian Competition and Consumer Commission v Auspine Limited - [2006] FCA 1215 - FCA 2006 case summary — Zoe

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Australian Competition and Consumer Commission v Auspine Limited

[2006] FCA 1215

Federal Court of Australia|2006-09-07|Before: Geo J, Besanko J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2006-09-07

Before

Geo J, Besanko J

Source

Original judgment source is linked above.

Judgment (54 paragraphs)

[1]

For the reasons discussed earlier any order requiring the implementation of a trade practices compliance program should be one which has a sufficient nexus or relationship to the conduct alleged to constitute a breach of a particular provision of the TPA. Given that the orders are sought by consent I am prepared to take a broad view of the conduct which may fairly be described as misleading or deceptive advertising and the making of representations in contravention of ss 52, 53(e) and 53C of the TPA. The compliance program, which the Court may order, should be no wider than one which is designed to prevent repetition of that conduct.

[2]

The orders sought require a compliance program in respect of all parts of the TPA which will include, for example, Pt IV and other parts which have no connection whatsoever with the alleged conduct giving rise to the case or controversy in the Court. In my view it is not appropriate to make orders which require a compliance program which relates to conduct other than the alleged contravening conduct as characterised by the Court.' The comments of Merkel J (at 203) were referred to in Foster. The Full Court did not say anything to suggest that they did not agree with his observations. 31 French J considered the same issue in REIWA. His Honour said (at 88): 'The question whether there is a sufficient nexus between the order sought and the contravention alleged involves an evaluative judgment. At one level the orders sought may be so remote from the contravention alleged that the question is readily resolved as one of power. Thus an injunction directing implementation of a compliance program covering all of the provisions of Pt V in answer to an alleged contravention of Pt IV of the Act might well be thought so remote from the contravention as to be beyond the purpose of s 80 and thus beyond its power. A fortiori such an order might be thought inappropriate even if strictly within power. I respectfully agree with his Honour in relation to that aspect of his approach in the Z-Tek case. A contravention of a basic prohibition of competition law may be indicative of lack of awareness of the requirements of that law generally. To enter into a blatant price fixing arrangement with a competitor might well fall within that category. In such a case an order for a compliance program providing for development of awareness of the provision contravened and related areas of competition law may be seen as appropriately connected to the contravention and designed to prevent the diversion of public resources to further enforcement action whether in relation to the contravention grounding the claim or contraventions in the same general area. What is "a sufficient nexus" between the conduct the subject of the injunction and the conduct alleged or found to constitute a contravention of a provision of the Act is a matter of judgment. In ACCC v Z-TekMerkel J accepted that the making of orders or the acceptance of undertakings to implement a trade practices compliance program are within the power conferred upon the court by s 80 of the Trade Practices Act.

[14]

(c) an order directing the person to revise the internal operations of the person's business which lead to the person engaging in the contravening conduct.' 34 This section is not directly relevant in this case because it is only engaged on a finding that a person has engaged in contravening conduct (s 86C(1)) and that is not the case here. I note that the type of 'probation order' which may be made under the section may only relate to the 'contravening conduct, similar conduct or related conduct' so the section itself requires a nexus between the contravening conduct and the order or undertaking. I did not hear submissions on whether s 86C bears upon the interpretation of s 80 and I will say nothing on that topic. I will proceed by having regard to the principles developed in the context of s 80 of the Act. 35 Fifthly, a question which has arisen in the cases, and which arises in this case, is the Court's power to make an order or accept an undertaking requiring an external audit of a compliance programme or, alternatively, the appropriateness of so doing. It seems that such an order may not be made under s 86C: BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 (Gray, Goldberg and Weinberg JJ) at 468 [51]. It is important to have a clear understanding of what is meant by an external audit of a compliance programme. In my opinion, an order or undertaking which leaves the definition of the major obligations undertaken by a respondent to a third party or which makes the question of whether there has been a breach turn on the assessment or opinion of a third party is beyond power, or at the very least inappropriate. A court should not grant an injunction leaving the scope of the injunction to be determined by a third party and should not accept an undertaking to similar effect. Such an injunction or undertaking would not be in clear and unambiguous terms and it would involve an impermissible delegation of the Court's power to formulate the terms of the order and to determine the question of breach. None of this is to say that an order or undertaking might not include a provision for an external audit providing the major obligations are defined and it is clear that the question of breach is for the court to determine, having regard to the facts and the terms of the order or undertaking. 36 I turn now to consider the particular undertakings proffered in this case. 37 The first undertaking which is proffered by the corporate respondents is in the following terms: 'Each of Auspine Limited, Geo J Bone & Sons Pty Ltd and JAG Timber Products Pty Ltd, for a period of 5 years, whether by its directors, servants or agents or otherwise howsoever, undertakes to the Court to refrain from:

[24]

(iii) any or all of them would charge customers for estimating services at a particular price or particular prices or in accordance with or by reference to a particular mechanism, process or procedure by which the price or prices of estimating servicesto be charged by all or any of them would be fixed or controlled.' 40 As with the first undertaking, I have the power to accept the undertaking and I think it would be appropriate to do so. The individual respondents, other than Mr McDonald, had legal representation, and Mr McDonald told me that he had received legal advice. 41 The third undertaking is proffered by Auspine, the fourth is proffered by Bone Timber and JAG Timber, and the fifth is proffered by the individual respondents. All undertakings require positive measures to be undertaken by those proffering them and the measures involve compliance or education programmes. 42 I will deal first with the fifth undertaking because it is straightforward and can be disposed of briefly. It is in the following terms: 'An undertaking given to the Court by each of Mr Frank McDonald, Mr Andrew Bone and Mr Gary Daniel that he will attend a Trade Practices Compliance seminar in accordance with the terms of Annexure 2 hereto.' 43 Annexure 2 provides as follows: '1. The Respondent will attend a Trade Practices Compliance Seminar conducted by an independent person with appropriate knowledge of trade practices law within 3 months of this Undertaking. 2. The Seminar will address the provisions of Part IV of the Trade Practices Act 1974 ("the TPA") proscribing restrictive trade practices and will, in particular, address the issue of price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings.' 44 In my opinion, the undertaking is within power and it would be appropriate to accept it. It is true that the seminar will go beyond the particular provisions in issue in this case, but I think there is a sufficient nexus between the alleged contravening conduct and the subject matter of the proposed seminar. The seminar is to relate to Part IV of the Act and, in particular, the issue of price fixing and anti-competitive collusion in the context of contracts, arrangements and undertakings. In my opinion, a knowledge of the other provisions of Part IV of the Act will assist in an understanding of the operation of s 45 and s 45A. 45 The third undertaking is proffered by Auspine and is in the following terms: 'An undertaking given to the Court by the first respondent that it will implement the recommendations contained in the March 2006 'Report on the Implementation and Effectiveness of Auspine Limited's Trade Practices Compliance Program' prepared by Watchdog Compliance Pty Ltd which forms exhibit DCJ-1 to the affidavit of David Charles Johnson filed on behalf of the First Respondent in these proceedings.' 46 Mr Johnson is the author of the report. He holds qualifications in economics and law and was employed in the Commission's compliance section for a number of years. He appears to be well-qualified to express the opinions set out in the report. 47 The purpose of the report was to review the implementation and effectiveness of Auspine's trade practice compliance programme over five years. The aim or purpose of the report is stated in paragraph 13 as follows: 'This report aims to provide Auspine with a summary of the trade practices compliance measures that Auspine has taken over the preceding five years and our independent assessment of how effective those measures have been.' 48 The conclusions of Mr Johnson are generally favourable to Auspine in terms of the effectiveness of its trade practices compliance programme. However, in the course of his report Mr Johnson makes a number of recommendations, and those recommendations are the subject of the undertaking. They are as follows: '46. Auspine may wish to consider the development of short, targeted information sheets that could be made available to staff as relevant (eg restrictive trade practices issues, consumer protections issues). These would be more likely to be read and referred to by staff than the longer manuals and policies that are currently available.

[30]

Auspine may wish to strengthen the Program by taking steps to remind staff on a regular basis of the trade practices risks that are relevant to their everyday operations. This could be done by way of targeted brief information sessions for groups of staff or regular presentations by Auspine's Legal Counsel at Business Unit or staff meetings.' It seems to me that there are two difficulties with this undertaking. The first difficulty is that the compliance programme to which the undertaking relates goes beyond the provisions of ss 45 and 45A of the Act and indeed the provisions in Part IV of the Act (Z-Tek, REIWA). This difficulty can be overcome by linking the recommendations to the provisions in Part IV of the Act. 49 The second difficulty relates to the nature of the recommendations. Is it within power or appropriate to impose nothing more than an obligation to consider doing something? Counsel for the Commission said that it was, likening the obligation to that placed on the holder of a power to appoint property of a testator or settlor to third parties. I am prepared to accept that in the circumstances of this case it is within power and appropriate to impose an obligation (or accept an undertaking) requiring Auspine to consider doing something. The undertaking is proffered as part of a commercial settlement. Auspine is a large organisation which has a detailed trade practices compliance programme and an obvious interest in improving the same. The difficulty with some of the recommendations set out above is that they do not even place an obligation on Auspine to consider taking a particular course of action. I would not accept an undertaking in such terms. This particular problem can be overcome by making the obligation to consider mandatory. 50 The fourth undertaking is proffered by Bone Timber and JAG Timber and is in the following terms: 'An undertaking given to the Court by each of the Third and Fifth Respondents that it will implement a Trade Practices Corporate Compliance Program in accordance with the terms of Annexure 1 hereto.' 51 There are difficulties with this undertaking which arise from the terms of the programme referred to in the undertaking. To understand these difficulties, it is necessary to set out in full the terms of the programme: '1. The Respondent shall appoint a Trade Practices Compliance Officer to be responsible for the implementation of the Program. The Program will be implemented within two calendar months of this Undertaking. 2. The Respondent shall ensure that The Trade Practices Compliance Officer receives training in trade practices law. 3. The Respondent will ensure that the Program, including processes which the Respondent intends to implement in order to comply with the Program, are approved by an independent external consultant with appropriate knowledge of trade practices law prior to implementation. 4. The Respondent shall require the Trade Practices Compliance Officer to review: 4.1 The contents of any media and material containing training or operational information for its staff to ensure that it adequately addresses and informs about: 4.1.1 restrictive trade practices proscribed by Part IV of the Trade Practices 1974 [sic] ('the TPA'), including in particular price fixing and anti-competitive collusion in the context of contracts, arrangements and understandings; and

Parties

Applicant/Plaintiff:

Australian Competition and Consumer Commission

Respondent/Defendant:

Auspine Limited

Legislation Cited (4)

Corporations Act 2001(Cth)

Federal Court of Australia Act 1976(Cth)

Federal Court Act 1976(Cth)s 23

Trade Practices Act 1974(Cth)ss 45, 45A, 80, 84

Cases Cited (7)

(c) whether or not there is an imminent danger of substantial damage to any person if the first‑mentioned person refuses or fails to do that act or thing.' 28 Secondly, the Court's power to grant an injunction in the case of a contravention of the Act is contained exclusively in s 80 of the Act and no reliance can be placed on s 23 of the Federal Court of Australia Act 1976 (Cth): Thomson per Gibbs CJ, Stephen, Mason and Wilson JJ at 161-162; Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135 (Ryan, Finn and Allsop JJ) at 145 [22] ('Foster'). 29 Thirdly, in the same way as an injunction must be couched in clear and unambiguous language, so must an undertaking. As the learned authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) at [21-505] say, 'the recipient of it must be placed in a position where he knows exactly what he is obliged to do'. (See also Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 per French J at 88-89 [26] ('REIWA')). An undertaking should not be accepted if it is vague and uncertain or if enforcement is likely to prove impossible. This proposition is subject to a narrow qualification. I agree with the point made by French J, albeit in the context of s 86C, that in the context of compliance programmes it is neither practicable nor useful to prescribe with minute particularity the content of such programmes: Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [24]. An order or undertaking which contains objectives to be fulfilled, or aims to be achieved, might be too uncertain to be enforceable, although the problem might be overcome by making the obligation a best or reasonable endeavours obligation: REIWA per French J at 90 [35]. 30 Fourthly, there must be a relevant nexus between the injunction or undertaking and the alleged or established contravening conduct. It is not the case that an injunction or undertaking can only be framed in terms of restraining a repetition of contravening or alleged contravening conduct: Foster. As far as future conduct is concerned, an injunction or undertaking may be in wider terms. The question of what is a relevant nexus between the alleged or established conduct and the proposed order or undertaking has been discussed in the context of orders or undertakings requiring a compliance or educational programme to be implemented. Of course, there is no denying the desirability of an extensive compliance or educational programme, but that is a different issue from the question of the Court's power to order such a programme or to accept an undertaking to implement such a programme. In Australian Competition and Consumer Commission v Z-Tek Computer Pty Ltd (1997) 78 FCR 197 ('Z-Tek'), Merkel J considered the scope of an appropriate order implementing a trade practices compliance programme. His Honour said (at 203): 'In summary, in determining whether an injunction under s 80 is "appropriate" there are, at least, three limitations on the Court's power.

(1999) 161 ALR 79

(1997) 78 FCR 197

(2004) 207 ALR 452

(2006) 149 FCR 135

(1996) 71 FCR 285

(1981) 148 CLR 150

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