Australian Competition and Consumer Commission v Cement Australia Pty Ltd

Background to amendment 203 On 19 June 2003, Pozzolanic reported to Millmerran that test results for the Millmerran flyash had indicated a relative strength which fell short of the contractual relative strength requirement. Pozzolanic suggested that additional tests would assist in determining whether higher relative strengths would be obtainable. Pozzolanic sought an extension of the cl 2.2(b) period under the Original Millmerran Contract, from 22 June 2003 to 3 October 2003. 204 In August 2003, Pozzolanic provided a further Ash Quality Report to Millmerran. That report noted that "a distinct colour variation" had been observed between two samples collected on 19 and 20 August 2003, and that the extent of the possible colour variation in Millmerran flyash would be investigated. 205 On 24 September 2003, LEK Consulting (LEK) presented a "Strategy Review" to the Cement Australia Board. As to flyash, LEK postulated "several potential scenarios involving increased competition for Pozzolanic". LEK took the view that lower flyash prices in Queensland would almost certainly be reflected in lower concrete prices. The potential scenarios were these: Increased competition for Pozzolanic in Queensland in the medium term could arise from either of two scenarios - An entry by Sunstate (or Boral) could result in a loss of Pozzolanic volumes equal to ~50% of the independent concrete market and 100% of Boral's concrete market (~160Kt) - A collaboration by independent concreters to source flyash directly from power stations could reduce Pozzolanic volumes by about 75% of the independent concrete market (~90Kt) While an entry by Sunstate or Boral (probably through FAA) is not expected to have much effect on flyash prices, an independent entry could bring market prices down toward cost levels (loss of up to ~$30/t). This would almost certainly be leaked to concrete customers. 206 On 26 September 2003, Mr Ridoutt sent an email to Mr Leon (CEO of Cement Australia) in which he said: Please find attached a Board paper from April 02 requesting approval for capital expenditure that supported our strategy to win the new contracts at Tarong and Millmerran and maintain our single supplier status position in the QLD Flyash market. I thought this paper was more detailed but it was condensed for the Board meeting and although [condensed] it provides some interesting info [but it] does not have the depth and detail to cover all the issues you are now facing. It is very pleasing that this strategy has worked extremely well and performance has been much better than forecast, however like any matter it will need to be managed and tweaked a bit where necessary in the south Brisbane and Gold Coast to ensure that things are kept under control. 207 In October 2003, Pozzolanic produced another Ash Quality Report in relation to Millmerran flyash which concluded that: (a) the ash did not fall within the Acceptable Range criteria under the Original Millmerran Contract due to the failure to reach the relative strength limit; (b) the flyash could be used to produce a concrete suitable for some markets; and (c) variations in the colour could have an impact on the ability to "practically and economically convert the flyash into concrete grade flyash". 208 On 9 October 2003, Pozzolanic sought an extension of the time required by cl 2.2(b) for the completion of the necessary investigations into the quality of the Millmerran flyash. 209 On 4 November 2003, Mr Klose (Manager of Pozzolanic) sent an email to Mr Clarke, Ms Collins, Mr Chalmers and Mr Blackburn in relation to Millmerran ash quality, saying: 1. Clause 2.2(b) of the contract states that Pozzo must advise (by 31st of October) whether or not the fly ash from Millmerran is (a) within the Acceptable Range (as defined in the contract,) and (b) can be practically and economically converted into concrete grade fly ash 2. If the ash doesn't fall within the acceptable range then either party has the right to terminate the contract. 3. Results for testing indicate the following (a) The ash fails to meet the relative strength criteria set out in schedule 2 of the contract and therefore the ash fails to be within the Acceptable Range of the contract (b) Colour variations are of some concern in using the ash, as the ash is very dark and the colour variable (note we believe that a Wagner would not worry about this: but our large customers would!) (c) If the colour and usage within the market can be managed/solved then in other respects the ash will make concrete grade fly ash. 4. Since the ash fails to meet the acceptable range we have no choice but [to] inform Millmerran of this. 5. I have spoken to David Hunt at Millmerran and indicated the outcome of these results together with our belief that subject to satisfactory resolution of variability and colour issues that the ash can probably be used. I have also indicated Pozzolanic's desire to meet and discuss these issues so as to move forward with the contract. David Hunt also expressed a desire to meet and further these discussions. (update: David Hunt has contacted me again and is concerned with Pozzo's intention. As such I have suggested that we do not send an official reply until after our meeting. This gives us the maximum flexibility and leaves open options that will not trigger termination). 6. The significance of the above results are obvious. (a) The "Acceptable Range" criteria were placed in the contract to protect Pozzo. (We may now terminate the contract within 14 days of notification if we so desire) (b) The mutual right to terminate the contract means that Millmerran, upon notification, has a period of 14 days to terminate the contract. 210 Mr Klose set out his perception of the three scenarios open under the contract conditions. He described them in these terms: (i) Both Millmerran and Pozzo fail to terminate i.e. the current contract remains in place. This implies Pozzo must install a plant by May 2004 and we must pay our next royalty payment ($1.235m. Note this is placed in the balance sheet and expended monthly to the P & L). (ii) Millmerran terminates. This implies that they have another equally favourable option. We must determine their NBA in order to determine at what point they would do this. (This was [less than] $1.235m when FAA were included in the bidding process). This would include what Wagner's ABL and Peabody [Transpacific] would now offer. (iii) Pozzo terminates: This implies that we get back last year's payment of $1.2m and avoid the $2m capex. This now opens up Millmerran to others. (I can't see why we would do this). 211 In a subsequent email, dated 8 February 2005, Mr Klose explained the thinking underlying this email in the following way: [I]n essence I was trying to delay committing to capital equipment whilst still maintaining the contract since CA did not have any new markets for the ash and there was a question of how to handle the colour variation. 212 On 28 November 2003, Mr Klose sent an email to Mr Clarke (who by that stage had taken over from Mr Ridoutt as General Manager, Sales and Marketing) advising that further to "our desire to keep the contract I have arranged payment of the annual Millmerran royalty payment which is due on the 30th November (>$1.2m)". The payment required the authorisation of Mr Clarke and others. 213 On 8 December 2003, Ms Collins (who had by that time taken over from Mr Klose as Pozzolanic's Manager) prepared a note of the preliminary issues confronting Pozzolanic including the need to retain the Millmerran Contract with a justification for the proposed capital expenditure. Ms Collins also noted that a commitment existed to take Tarong North flyash on request and a request had occurred. 214 On 22 December 2003, Ms Collins prepared a note of the proposed changes to the Original Millmerran Contract reflecting the intention of both parties, arising out of a meeting between Millmerran representatives and Pozzolanic representatives in November 2003. The material proposed changes were these: the revised testing programme would be carried out and a report on the investigations would be provided in May 2004 (cl 2.2(a)); a final report on the investigations would be completed in July 2004 (cl 2.2(b)); the repayment of the first year's lump sum payment would be replaced with repayment of the second year's lump sum payment (cl 2.6(c)); the Buyer's Facilities would be installed before May 2005 (cl 3.3); and cl 4 (which entitled Millmerran to terminate if Pozzolanic did not notify Millmerran as to the outcome of the "Acceptable Range" testing within nine months of "Substantial Completion of Unit 1") would be deleted in view of the termination provisions in cl 2.6, 6.8, 16.5, 17.8, 26 and 28.1. 215 Further investigations into the cause of colour variation at Millmerran continued in the period from January to May 2004. 216 On 2 June 2004, Ms Collins sent an email to Mr Chalmers (Sales Manager for QCL) attaching the first draft of a document called "Queensland Ash Development Plans, Board Briefing Paper 28 June 2004". This document was the first draft of the development of a paper which was to be put to the directors in support of a proposal to continue the Millmerran Contract. Ms Collins asked Mr Chalmers to develop some content in relation to each of the four bullet points under the heading "Market Growth". 217 Ms Collins' "outline paper" noted that: (a) By 31 July 2004, Pozzolanic would be contractually obliged to commit to building ash facilities at Millmerran by 1 May 2005 or to terminate the contract. (b) "[P]rotracted and difficult negotiations" conducted with Millmerran resulted in an agreement to investigate the properties of the ash and make a decision about ash quality by July 2003. The decision point was extended to July 2004 to facilitate further testing. Ms Collins said that a "further extension is unlikely". (c) A decision taken in July 2004 to proceed would require a facility to be installed and operating by 1 May 2005. (d) The contract term continues until 2010. (e) As to Tarong North, in April 2004, notice was given that the quality of the ash was suitable, and ash from Tarong North was being trucked to supplement volumes from Tarong. Ash extraction facilities must be installed at Tarong within 12 months of notice. 218 On 8 June 2004, Mr Chalmers prepared a document entitled "Market Issues - Millmerran Fly Ash", which seems to be a response to the email from Ms Collins requesting development of a contribution to the paper on the topic of "Market Growth". The document contained these observations: Millmerran fly ash adds significant volume to an already over-supplied fly ash market in Southern Qld. While the market for fly ash is growing to a moderate extent in this area, several factors affect the opportunities available for Millmerran fly ash. These factors are: • The addition of Millmerran is not a small increment in the supply side for the region, increasing the availability of fly ash by about 40% • Millmerran is not a significantly better fly ash than the others available • Millmerran fly ash has no significant locational advantage • There are potential colour problems with Millmerran fly ash, and it is not yet clear that the underlying cause of this colour variation has no other detriment to its use in concrete • Bayswater fly ash is being "imported" from NSW - this stems from [next best alternative] pricing rules being ignored in the last round of fly ash price increases. This is a superior fly ash and it is cost competitive with local product • Because of the colour issue, Millmerran fly ash is not readily interchangeable with the other local ashes (Tarong and Swanbank). 219 The document also noted that Millmerran flyash was yet to be used commercially, and that it appeared to have similar reactivity to Tarong flyash but there was uncertainty as to quality, in particular the colour and the nature of the 'loss on ignition' (which is the unburned carbon characteristic). 220 On 14 June 2004, Ms Collins sent an email to Mr Chalmers on the subject of "market impact" and asked him how much of the 500,000 tonnes per annum of the Millmerran flyash production Wagner or others would be likely to take if Pozzolanic "walked away". Ms Collins also asked for Mr Chalmers' view of the likely "price impact" on SEQ sales, and the likely "number of tonnes" to be affected, should Pozzolanic walk away from Millmerran. 221 Ms Collins accepted that if Pozzolanic pulled out of Millmerran there was a likelihood a competitor would enter and sell Millmerran ash, if the ash was of a marketable quality. Ms Collins accepted that she had an expectation at the time that any competitor from Millmerran would be able to undercut Pozzolanic's prices to some extent if Pozzolanic was not at Millmerran. 222 On 16 June 2004, Ms Collins sent an email to Mr Clarke, attaching a further edited version of the Board Briefing Paper. That document included the following discussion under the heading "Financial Considerations": Pozzolanic has traditionally been operated with low capital investment given the impermanence of the contracts with power stations (see the attached Financial Summary). The capital investments proposed are for installation of refurbished silos, structures, pumping vessels, classifiers and buildings. If a competitor lowers the price by $10/t about $3M per annum in SEQ … will be reduced from the Pozzolanic EBIT. 223 The last sentence of those observations under the heading "Financial Considerations" was deleted from the version of the paper that went to the Executive Committee meeting with the papers for that meeting on 21 June 2004. 224 On 17 June 2004, Ms Collins sent an email to Mr Clarke copied to the personal assistants to Mr Clarke and Mr Leon taking up some "urgent amendments" to the paper. The following observations were adopted under the heading "Contractual Arrangements": To relinquish the contract would see Millmerran seek an alternative partner. FAA could be blocked, a likely contender could be Boral, a customer of [Cement Australia] who would establish an owner supply and competitor facility with significant impact on fly ash market dynamics in Queensland. 225 Ms Collins in her email to Mr Clarke observed that she had compiled some figures for the market forecast spreadsheet which Mr Clarke had suggested, although without the increased Victorian demand, the forecast spreadsheet of demand "did not stack up to much". Ms Collins also asked this question: Is a sentence like this warranted somewhere in the document or is this what we are avoiding completely?: "If a competitor lowers the price by $10/t, about $3M per annum in SEQ alone will be reduced from the Pozzolanic EBIT"? 226 In his evidence, Mr Clarke characterised the statement by Ms Collins referred to above as a 'sensitivity analysis'. Mr Clarke denied that any part of the justification for proceeding with the Millmerran Contract was the consideration that if Pozzolanic did not continue in the Millmerran arrangements, a competitor probably would take the ash and prices might fall by $10 a tonne, resulting in about $3 million per annum being reduced from Pozzolanic's EBIT in SEQ. Nevertheless, Mr Clarke accepted that it was relevant to the question of whether Pozzolanic ought to continue with the Millmerran Contract that a competitor might take the Millmerran ash source and compete with Pozzolanic resulting in a reduction in flyash prices. 227 The primary judge made the following findings about that proposition (at [2673]-[2674] of the Reasons): 2673 I do not accept that the remarks of Ms Collins about a $10 price reduction for flyash and the consequences for Cement Australia's EBIT margin in the flyash business in SEQ were simply a constructed "sensitivity" calculation of the effect upon Cement Australia's EBIT margin if one assumed a price reduction of $10 per tonne for one of a hundred possible reasons. Ms Collins was saying in plain and unmistakeable terms to Mr Clarke that should a competitor enter (upon Pozzolanic walking away from Millmerran) the price would likely drop by $10 per tonne and the effect upon the EBIT margin in the flyash business would be significant. Ms Collins had asked Mr Chalmers for his view on the likely volumes lost at Millmerran should a competitor secure access to the ash. 2674 Mr Clarke was also astute to Boral's potential entry at Millmerran… Mr Clarke and Ms Collins expressly deny that competitor entry and the possible consequences for price and margins formed a consideration in the reasoning for deciding to amend and extend the Millmerran Contract. I do not accept their evidence on this issue as it cannot stand in the face of the documents but I do accept that each of them looking back to the events believed that to be so. However, it cannot be so when all of the evidence is considered, and in this sense Mr Clarke and Ms Collins although seeking to assist the Court's analysis of the events, are simply confused. (Emphasis in Reasons.) 228 Shortly after the email of 17 June 2004, the Board Briefing Paper was put into final form by Ms Collins. The briefing paper observed that: By 31 July 2004, Pozzolanic is contractually obliged to commit to building ash facilities at Millmerran ... by 1 May 2005 or to terminate the contract. It is recommended that the Board endorse confirmation of the contract and in-principle commitment of the necessary Capex subject to full engineering and financial analysis. 229 The paper also noted that, whilst Pozzolanic had coped with "local supply" in a "period of very high demand" in Queensland, "some further growth is expected in the next 12-18 months", although a downturn was "expected" and when it occurred, the demand for flyash from concrete producers would generally parallel demand for cement, in which event, it would be necessary to find supplementary uses for flyash so as to consolidate the supply/demand balance. 230 The paper also reflected the statement mentioned above to the effect that should Pozzolanic relinquish the Millmerran Contract, the power station would seek an alternative partner and although FAA could be blocked, a likely contender for an arrangement with Millmerran could be Boral. Boral would likely establish a facility to supply itself and also compete with Pozzolanic "with significant impact on fly ash market dynamics in Queensland". 231 Ms Collins' paper was considered by Cement Australia's Executive Committee on 21 June 2004. 232 On 28 June 2004, Mr Murray Adams, a Cement Australia analyst, sent an email to Ms Collins attaching what he described as a "re-write" of the "Queensland Fly Ash Development Plans" paper. Mr Adams held the position of Strategy and Business Development Manager for Cement Australia. He was new to the company having been appointed on 7 June 2004. The propositions he advanced for comment by the senior managers were these: Pozzolanic Enterprises, highly profitable monopoly of the Qld fly ash market is under threat from new entrants in Global Cement and potentially Boral. PE propose to minimise the damage to their margins and volumes that will result through increased competition by locking out, where possible, their competitors from access to available supplies. This will be achieved by taking up contracts with Millmerran and Callide B and agreeing to invest in these facilities. This move is seen as the most beneficial for all shareholders. 233 Ms Collins responded to Mr Adams with the following observation: I am not sure what guidance Colin has provided [Colin Bailey], but I was under firm instructions from Shaun not to say anything that may have TPC implications wrt competition. Rather the additional facilities needed to be justified on securing enough supply to meet the future demands from our customers and to provide the quality they require. My aim was to provide enough information so that the analysis/discussion can be done on the spot without needing to be spelled out. 234 The primary judge said in relation to this exchange that Mr Clarke was asked whether he had told Ms Collins about the things she should avoid saying in a Board Briefing Paper and whether he told Ms Collins that she should not say anything that may have trade practices implications with respect to competition. He said, "absolutely". Mr Clarke said that he wanted Ms Collins not to make statements that were inappropriate, rather than trying to avoid things being recorded in writing which might reflect reasoning underlying a decision which suggested contraventions of the TPA. 235 On 28 June 2004, the Cement Australia Board met. The following observations were contained in the Board report for directors: Meeting demand for fly ash across the Eastern States has become increasingly problematic in the past year. Demand in Melbourne has far exceeded our capability to supply this year resulting in extraordinary costs for both shipping and trucking. We are currently experiencing tight supplies in NSW and anticipate potential shortages in the fourth quarter as a result of peak demand from projects and reduced availability with power station shoulder demand and maintenance outages. There has been little investment in fly ash capability in all locations in recent years, which finds us close to capacity at present. The investment required to assure us of meeting market demand will need to be made in supply chain and in ash production. Analysis is under way in supply chain … in FAA … and in Pozzolanic. In Queensland our imperatives are two fold: To ensure we can meet short-term demand from existing sources and; To ensue [sic] we secure additional sources of fly ash from power stations not currently being utilised. Meeting short-term demand spikes in Melbourne can be achieved through investment at Callide C. Increasing capability there will allow us to supply North Queensland from Callide and redirect Gladstone (currently fully committed) ash to Melbourne. Investment in incremental improvements at Gladstone will also be required in time. Of more immediate concern is the need to secure Millmerran power station as a source of ash for South Eastern Queensland and Northern NSW. Millmerran has had in place with CAPL a contract (take or pay) for some time. During the initial period CAPL has undertaken extensive testing of the ash to determine its marketability. Initial concerns, principally around colour variability resulted in an extension of the proving-up period, which is due to expire in July. We are confident that, properly treated Millmerran ash will be acceptable to the market. To secure this source we will need to exercise our option in July. Exercise will commit us to install collection equipment by mid-2005. Capex is earmarked in 2005 for this purpose. Board approval of the capex will be sought at the next meeting.

Key terms 236 On 28 July 2004, the parties executed the Amended Millmerran Contract by variation of the Original Millmerran Contract. The agreement to the amendments was signed for Pozzolanic by Ms Collins. Relevantly, pursuant to the Amended Millmerran Contract: (a) the time by which Pozzolanic was to complete investigations and notify Millmerran whether the flyash fell within the Acceptable Range criteria and could be practically and economically converted into concrete grade flyash was extended to 31 July 2004 (cl 2.2(a) and cl 2.2(b)); (b) if the flyash did not meet the Acceptable Range criteria and either party terminated under cl 2.6(a) after Pozzolanic had made the lump sum contract payment for the second operating year (2004), Millmerran was to refund that payment to Pozzolanic within 30 days of the notice of termination being received (cl 2.6(b)); (c) if termination under cl 2.6(a) occurred after Pozzolanic had made the lump sum contract payment for the third operating year (2005), the payment for the second operating year would not be repayable by the seller (cl 2.6(b)(ii)); (d) Pozzolanic would have no right to terminate the agreement under cl 2.6(a) after the date for construction of the Buyer's Facilities under cl 3.3 (cl 2.6(c)); (e) Pozzolanic would be required to construct the Buyer's Facilities for the purposes of cl 3.3 by 1 May 2005 (cl 3.3); and (f) the term of the contract was extended to eight years. 237 Apart from these changes, cl 4 was deleted entirely and replaced with a provision entitled "Termination by buyer" that operated in this way: (a) if at any time after the construction of the Buyer's Facilities and before 1 January 2007 Pozzolanic determined that the Millmerran flyash did not fall within the Acceptable Range criteria for concrete grade flyash, and could not be practically and economically converted into concrete grade flyash, then Pozzolanic would be entitled to give notice to Millmerran of those two circumstances (a cl 4(a) notice); (b) if following a cl 4(a) notice, Millmerran notified Pozzolanic that it accepted Pozzolanic's determination, or independent verification determined that the flyash did not fall within the Acceptable Range criteria or could not be practically economically converted into concrete grade flyash, then either party could terminate the contract by notice given within 14 days, in which event, the termination date would be six months after the notice of termination; (c) if the termination date occurred after Pozzolanic had made the third operating year lump sum payment (2005), the seller had no obligation to refund that payment; and (d) if the termination date occurred after the payment of the lump sum payment for the fourth operating year (2006) or any subsequent operating years, Millmerran was to repay to Pozzolanic an amount calculated under a formula set out in the amended agreement. 238 On 30 July 2004, Ms Collins sent a letter on behalf of Pozzolanic to MPP and Mr Gamble at the power station under cl 2.2 of the agreement as amended, in these terms: We have extensively tested the Millmerran fly ash with the support of Millmerran Power through extensions of time under the [30 September 2002 Agreement], and report that the quality of the Fly Ash does not fall within the Acceptable Range (as defined) for concrete-grade fly ash and it is yet to be determined if it can be practically and economically converted into concrete-grade fly ash. In recognition of the amendments to the Agreement set out in your letter of 28 July, Pozzolanic Enterprises is prepared to proceed with the contract as though an independent verification conducted under Clause 2.3(b) had found that the ash falls within the Acceptable Range for concrete-grade fly ash and can be practically and economically converted into concrete-grade fly ash. 239 Ms Collins signed and sent this letter on the instructions of Mr Clarke. Mr Clarke, in turn, was authorised to approve the amendments to, and continuation of, the Millmerran Contract by Cement Australia's CEO, Mr Leon.

Developments after July 2004 240 On 22 October 2004, the directors of the Cement Australia Group met. Other alternate directors and members of senior management were present. The Managing Director's Board Report for the meeting (September 2004) observed that Global Cement continued to truck ash from Callide C and had begun progressing discussions with station management about a processing installation. Nucon was said to be trucking ash from Tarong North to Sunstate Cement Ltd (Sunstate). The Board report said that management was concerned at the prospect of Transpacific (Peabody) re-entering flyash markets in Central Queensland. 241 The Board Report attached a document "Cement Australia Flyash Strategy", which was presented to and discussed by the directors during the meeting. Slide 3 of that report said that SEQ flyash demand was forecast to grow from 380Kt to 420Kt by 2006. North Queensland demand would grow from 128Kt to 156Kt and the Victorian forecast was from 135Kt to 180Kt. The slide said that Cement Australia would run out of flyash capacity in North and South Queensland in 2005. As to SEQ, options were stated of either investing in Tarong and taking up 27Kt of SEQ growth, or investing in Millmerran to achieve the same result. Slide 10 set out a graph of current capacity and proposed capacity. The slide recited that installing capacity at either Millmerran or Tarong North would resolve the capacity issue in SEQ, otherwise Cement Australia would be unable to supply the 2005 and 2006 Budgets. Slide 11 addressed the SEQ classifier economics repeating, as the earlier version did, that investing in classification capacity in SEQ was an "excellent investment at either location" reflecting a volume uplift in either case of 27Kt per annum, cashflow uplift, positive NPV and an IRR of 51% and 57% in the case of Tarong North and Millmerran respectively. 242 Slide 11 also noted that a "sensitivity analysis" had confirmed that even if the demand growth in SEQ was only 50% of the 2005/6 Budget forecasts, the Millmerran investment was still financially attractive. Under the heading "options", Slide 12 of the presentation said that management recommended an investment at Millmerran which would take advantage of the current $1.3 million take or pay contract in place, and "may deter other flyash investors". 243 On 16 December 2004, Mr Adams sent the flyash strategy presentation to Mr Chalmers and that afternoon Mr Chalmers sent an email to Mr Adams in which he made the following comments in relation to a draft flyash strategy document prepared by Mr Adams: I have had a read of the strategy document. I am not sure where to start on comments. I think we need to get face to face or at least discuss this over the phone. While I understand that this is a hypothesis development exercise, I think that the basic information used in the development work so far has been missing either or both a reasonable understanding of the fly ash situation in Qld or the history of the industry so far. Fly ash has successfully traded on a "smoke and mirrors" situation for decades in which (a) Pozzolanic controlled the fly ash sources in the state, and people thought they had no access (and in some cases didn't), and (b) there was not a lot of knowledge in the concrete industry about how ash worked (in detail). The smokescreen is being eroded by natural attrition and by problematic pricing policies (Qld and NSW) of the last few years, as well as efforts of a couple of people to break the barriers. The concrete market saturation by the product, and the increasing availability of fly ash have both helped to accelerate the erosion of the previous m……….. [monopoly] position. I believe a better description of the basics is necessary to properly look at future options. The "customer segregation" model has little merit in my view. Much of the info you are seeking is known, and I don't believe we should be doing segment analyses and profitability analyses until the scoping has been reviewed. Hate to be a killjoy, but will call you to explain more in detail next week. 244 On 29 December 2004, Mr White who had recently assumed the role from Ms Collins, sent an agenda for a "Fly Ash Action Meeting" on 10 January 2005 to the six Senior Managers reporting to him including Messrs Adams and Chalmers, copied to Mr Clarke. The meeting was to discuss Pozzolanic's strategy and response in the context of Tarong North suggesting that within a few weeks it would allow a competitor to take ash. In the agenda commentary, Mr White set out his views by saying that Pozzolanic (and Cement Australia) had "probably moved past the point of no return in terms of maintaining the historical control of ash in Queensland that has generated such sustained high levels of profitability". 245 The strategic goals set out in the document were said to be: (a) secure revenue/profitability and growth opportunities; (b) strengthen Pozzolanic's hold on the power stations; (c) increase competitor barriers to entry; and (d) ensure that the three big customers (Boral, Hanson and Rinker) were tied to Pozzolanic/Cement Australia in the long-term. 246 As to "customer agreements/competitors", Mr White noted that the key "sales exposure" for the ash business in Queensland was supply to Boral and the key "price exposure" was the most favoured nation (MFN) arrangement. Mr White thought that if Boral could be held to a five year or more supply agreement, then the volumes of ash available in the market would likely limit potential competitors to "run of station type ash sourcing installations". 247 On 6 January 2005, Mr Adams sent an email to Mr White attaching a copy of his slides in relation to the "Cement Australia Flyash Analysis" summarising his analysis. Mr Adams put his conclusion about the analysis in this way: It appears to be telling us that Tarong is really the main game in fly ash and ensuring that we are the only player (or at least have a preferential pricing arrangement) is key. The issue at Callide with Global is far less important and should not distract us too much at present. I am waiting for SEQ power station quality data from David Farah, which will help us to understand the relevance of Millmerran, however it is clear (I think) that the priority should be to keep Tarong happy rather than keeping Millmerran happy. This is due to an immediate threat to our margins at Tarong. The threat from Millmerran is at least one step removed due to the potential for quality issues. 248 Following the meeting of 10 January 2005, competitor access at Tarong was the subject of three postulated scenarios (this document reflected the opinion of Mr Adams, a Cement Australia analyst): (a) Scenario 1 assumed that Nucon would secure 30Kt of Tarong flyash to supply customers otherwise using Bayswater flyash. On that assumption, the two possibilities with Scenario 1 were these: (i) Scenario 1(a) (called "hopeful") was that market pricing would nevertheless stay the same. (ii) Scenario 1(b) (called "realistic") was that Nucon would drop the price by $10 per tonne to increase its market share resulting in a volume loss to Cement Australia of between 10Kt and 20Kt and a triggering of Cement Australia's MFN provisions effecting a $10 per tonne reduction in Cement Australia's prices to its major customers. The pricing loss in this scenario would be $4 million, and because of the high profit margin in the flyash sales, all of that lost revenue would go directly to the EBIT earnings line (reflecting a loss of $4.5 million in EBIT). Not only was this seen as a "realistic" scenario, but its probability was seen, at least for the purposes of the analysis, as "high". (b) Scenario 1(c) also assumed 30Kt of Tarong flyash sales by Nucon to former Bayswater buyers, although in this scenario, Pozzolanic and Cement Australia would take the steps suggested by Mr White in his analysis to "better manage" the "Tarong relationship" and, on that footing, the "medium" probability was seen as the Nucon intervention having "no impact" on Pozzolanic and Cement Australia, with some additional increase in Tarong ash sales. (c) Scenario 1(d) assumed the same elements as Scenario 1(b) except that 50Kt of volume would be moved by Pozzolanic to Millmerran and Pozzolanic would "regain $1-2M in Tarong royalties". (d) Scenario 2 was the "worst case" scenario in which many competitors enter the market; the market price collapses (presumably due to rivalry) to $25-$35 per tonne; the volume of flyash would rise to a market penetration rate of 28%-30% (well above the existing penetration rate analysis); Tarong would lose $2.4 million in royalties due to costs pressures arising out of product contestability downstream; and Cement Australia would lose $10-$15 per tonne in EBIT in the flyash business and 50Kt-100Kt of volume in the cement business as greater flyash was used in and by the market. The EBIT loss would be $15-$20 million. (e) Scenario 3 contemplated Pozzolanic and Cement Australia abandoning Tarong and using an extra 350Kt of Callide and Gladstone ash (assuming no royalty would be payable for that ash) and entering into a price war with Tarong. 249 On 21 January 2005, the Queensland flyash strategy was presented to a meeting of Cement Australia's Executive Committee by Mr Adams. Emphasis was given to the high proportion (80%) of Cement Australia's net margin earned in SEQ through sales to the three major customers. Slide 5 suggested that 21% of the volume of sales (to Independents) was "at risk" which accounted for $2.7 million of Cement Australia's EBIT margin in SEQ. Slide 11 continued the theme of Cement Australia's "high" pricing having allowed Nucon to "economically import flyash from Bayswater". Slide 12 generally observed that Cement Australia's contracts "are expensive but do not offer any guarantees of exclusivity". Slide 14 set out the conclusions and introduced the observation that Cement Australia has high cost royalty agreements that do not guarantee exclusive access to power stations. 250 Slide 15 of the presentation set out "the range of scenarios that could eventuate from the current situation [which] present significant downside risk with no upside". The scenarios were then set out in these terms as "SEQ possible Endgame Scenarios": '05 - '08 Probability Great Tarong agree to supply new buyers but at a Royalty structure that does not allow for price reductions in the market Medium Good Tarong introduce new buyers who price at the current market rate with no impact on Cement Australia's EBIT, or use for own consumption, or buyers sell into non concrete applications Medium/High Bad Tarong introduce new buyers who undercut current market rates by say $10/t thereby winning volume and invoking MFN's - costs Cem Aust $4.5M. Cement Australia could retaliate by moving volumes to Millmerran. Medium Ugly Myriad competitors force prices down to cost plus a minimal margin of say $10/t, essentially relegating [C]ement Australia to being a delivery company. Loss of EBIT for Cement Australia $15-20M. Forces negotiation of zero royalties for all power stations and minimal margins for Cem Aust. No cash available to research new uses for flyash. Low Very Ugly The above scenario, reduction in margins to $10/t, occurs after Cement Australia have invested in Millmerran, Callide and MCF. Low

The Second Swanbank Contract Extension 251 On 11 March 2005, the Manager of Pozzolanic, Mr Chris White, wrote to CS Energy seeking an extension of the "current terms" in place in relation to Swanbank for the period 31 December 2004 to 30 June 2005. Despite the previous Swanbank extension expiring on 31 December 2004, Pozzolanic had continued to access and process Swanbank flyash during the intervening period on the same terms. The extension proposed on 11 March 2005 was said to provide Pozzolanic with some security during the development of a proposed new agreement with CS Energy in relation to Swanbank. CS Energy agreed to the extension on 15 March 2005. 252 The point of this request was to preserve Pozzolanic's exclusive access to the Swanbank ash at least until 30 June 2005. In Mr White's earlier strategic analysis, Mr White saw that one of the solutions to competitor threats at Swanbank was to take all the Swanbank ash. 253 Nevertheless, by January 2005, the provisions of the contract were "pretty much a dead letter" and that is how Mr Christy "behaved on behalf of Swanbank" and so too did Pozzolanic in dealing with Swanbank. The position was that a new agreement was being negotiated and throughout the negotiations for the new agreement, so long as any person who wanted ash could "fit in" and not jeopardise the safety or efficient operation of the power station, Mr Christy felt under no contractual constraint in supplying ash to such a person. In the period from 1 January 2005 to 31 December 2006, Mr Christy (Coal and Water Resources Manager of CS Energy) did not regard himself as constrained in any dealing with any potential off-taker by reason of the contractual arrangements with Pozzolanic. Whilst that view was inconsistent with the terms of the extended contract up to 30 June 2005, Mr White of Pozzolanic also proceeded on the same footing about this question as Mr Christy.

Cement Australia approves the expenditure required to install facilities at Millmerran 254 On 18 March 2005, Mr Leon sent an email to the Cement Australia directors attaching an expenditure request document for capital expenditure for the installation of the classifier at Millmerran and related Buyer's Facilities (the Capex Request). Mr Leon told the directors that Cement Australia was "obliged to make this investment under the terms of our agreement with the power station". Mr Leon also said that Cement Australia had "delayed the investment as long as we dare and we are now obliged to act". 255 The Capex Request included the following description of the rationale for the investment: 1. Executive Summary Cement Australia have a contract with [Millmerran] that requires them to build "buyers facilities" … by 1 May 2005. This request recommends expenditure to build a classifier at Millmerran providing additional capacity to supply flyash into the SEQ market, thereby meeting the terms of the contract that Cement Australia have with the power station. In the event that Cement Australia cannot make the Millmerran ash business economic, and after building "buyers facilities", we may exercise the right to terminate the contract and stop paying the "Take or Pay" of $1.3Mpa. The $1.3M royalty is contracted to continue until 31 December 2010 during which time Cement Australia will have paid out a further $7.8M. This expenditure request recommends the expenditure of $1.87M to install a minimalist classifier, and associated pumps and pipework, storage silos and weighbridge. This project has an NPV of $0.6M and an IRR of 20% vs continuing to pay the ash royalty without taking or selling any ash [the base case]. The expenditure is part of the 2005 capital budget. 256 The paper predicted that by 2006, the SEQ market would have increased by about 40Kt per annum beyond the 2004 volume of 380Kt. In that time, an additional requirement was forecast of 5Kt to 10Kt per annum from SEQ for supply to customers in Northern NSW. 257 The Capex Request noted that although laboratory and field trials indicated that classified Millmerran ash could be used successfully in concrete and met AS 3582.1, variation occurred in the ash colour that was not usually experienced, and although the cause of the colour variation had been studied extensively, the cause had not been "conclusively identified". In comparison with Tarong ash, the Capex Request noted that the colour variability and darkness of the ash was likely to make it unpopular with customers. The paper said Cement Australia "will only be able to sell this ash in the area local to [the] Millmerran site, where [Cement Australia] can discount costs due to lower logistics costs". Moreover, due to the high royalty payment of $1.3 million per annum and the variability of the colour, Cement Australia had formed the belief that there was "a high [likelihood] that Millmerran ash will remain uneconomic after they have constructed the classifier and associated equipment". 258 The Capex Request identified four options. Option 1 was "stay as we are" and continue to pay the royalty until the expiration of the contract term without extracting and selling any flyash. Option 2 involved building the classifier, running it for six to 12 months, ascertaining the marketability of the ash produced from the classifier, and re-negotiating the royalty and continuing to sell small volumes (10Kt to 20Kt per annum) into the market local to Millmerran. Option 3 involved building the classifier, running it for six to 12 months to ascertain the marketability of the classified ash and then terminating the agreement after one year. Option 4 involved terminating the agreement immediately. 259 In the Capex Request, management recommended to the Board that Cement Australia proceed with its contractual obligations at Millmerran and build the Buyer's Facilities. The directors were told that the project had a capital cost of $2.5 million and returned an NPV of $3.0 million and an IRR of 33.3% as compared with the "stay as we are" option, should Cement Australia decide to terminate the agreement 12 months after completion of the installation and operation of the classifier. Finally, management recommended that "the decision as to whether to terminate the agreement or continue at renegotiated royalties be deferred until the market size for Millmerran ash, and possible new negotiated royalty levels, are determined". 260 On 19 March 2005, Mr Clough (Holcim's nominee director) sent a responsive email to Mr Leon copied to the other directors, Mr Maycock (Chairman), Ms de Hayes (Rinker's nominee) and Mr Cadzow (Hanson's nominee) in which he said this: As I understand this you are spending A$2.52m in order to get out of a contract that costs you A$1.3m per year. With due respect that is not terribly attractive! Surely you can negotiate a bit harder on the colour and the fact that any reasonable person is going to see that the business is never going to be economic. You can negotiate for 18 months and still be better off than you are proposing, assuming you negotiate successfully. You can also afford to utilise some of the capital cost to buy yourself out of the contract as well as the colour and economic issues. Even for the power plant this years fee plus a share of the capital cost (if you have to) could be more rewarding than the investment and then termination of the contract. Out of interest if you do invest and then cancel who owns the equipment? On balance, I'd request this was looked at a bit more. 261 Mr Leon prepared a draft reply to Mr Clough's email, in the following terms: I'm afraid you have misunderstood our proposal. We are proposing to spend (A$2.5m) at Millmerran because we are contractually obliged to do so (not to get out of an annual payout). These contractual obligations were entered into by QCL well before the merger. Since the merger and the formation of Cement Australia we have gone to considerable lengths to avoid the adverse financial obligations of the agreement… Whilst these manoeuvres have been helpful, we have now clearly exhausted the patience of Millmerran and frankly we need to meet our contractual obligations or face the consequences. We've [Cement Australia] inherited [from] QCL a large, very profitable Fly Ash business. This business exists in the midst of a market that has a huge Supply: Demand imbalance with Supply vastly outstripping Demand. QCL have managed to maintain their high margins by managing the Supply side very astutely. When Millmerran was built, it posed a major risk to the business and QCL needed to move decisively to protect its existing business. We [Cement Australia] have enjoyed the benefits of that protection and we need to make this investment to continue to do so. The attempted take-over by Boral of ABL last year put the spotlight on the Fly Ash business in Australia. The ACCC (our regulator) has been concerned to ensure that our contracts with power stations don't restrict competition. The concrete companies and competitors have increased their interest in obtaining their Fly Ash directly from the Power Stations and by-passing Cement Australia. Peabody (ex Pozzolanic), Numans (from the Gold Coast), Jerry Wong (Cement Trader) and Sunstate (Boral/ABL) are all trying to obtain Fly Ash from Power Stations. Under these circumstances our defence of the Fly Ash business will need to be decisive and we will need to be careful not to transgress the Trade Practices Act. It is probably worth highlighting that the Fly Ash contracts with Power Stations are not just about money. The Stations need to be seen by their Shareholders (often government) and the Community to be getting rid of Fly Ash in a constructive way. This is why we can't always solve contractual issues with the stations by simply having a commercial settlement. In summary we are proposing that we make this investment because we have exhausted our delaying tactics and we believe that the investment will provide what QCL intended: a valuable defensive tool. So that the likely financial outcomes of this investment are well understood we have sketched these but these are likely consequences not the driver for the investment. 262 The third and fourth paragraphs extracted above reflect the thinking of Mr Leon at about 23 March 2005 and represent a fair reflection of his assessment of the position Cement Australia's flyash business enjoyed in the market; his own assessment of the supply demand imbalance in that market; and a synopsis of some of the threats confronting Cement Australia in the conduct of the flyash business. 263 On 30 March 2005, Mr Leon sent an email to the Cement Australia Executive Management Group by which he forwarded a copy of his email of 18 March 2005 to the directors attaching a copy of the Capex Request of March 2005. In his email to the Executive Management Group, Mr Leon said that the Capex Request "had been approved on the following conditions". First, Mr Cadzow had some concerns about the NPV calculations. Mr Leon suggested that Mr Adams "shares them with Jeremy Smith and convinces him that they're OK". Second, Mr Leon said that management needed to confirm with the Board that Cement Australia retains ownership of the equipment. Mr Leon requested Mr Zeitlyn to confirm that position with him. Third, management would need to make a presentation to the 29 June 2005 Board meeting on Cement Australia's "Fly Ash Strategy". Mr Zeitlyn and Mr Bailey were asked to work with Mr Adams and Mr White to put the presentation together. 264 Mr Zeitlyn gave evidence that to the best of his recollection, the reasoning informing the decision to install a classifier at Millmerran was that by February or March 2005, the view had been formed that if Cement Australia terminated the Millmerran agreement without constructing a classifer, Cement Australia would thereby breach the terms of the Amended Millmerran Contract. Mr Zeitlyn said that he thought that reasoning was held by "everybody". 265 Mr Maycock gave evidence that he was in favour of Cement Australia proceeding with the Capex Request put to the directors by Mr Leon. Mr Maycock described doing so as "being the better of several, somewhat undesirable options, frankly". He said: I think it seemed to me at the time that the reputation or risk for the company of not proceeding with its contractual obligations and having some sort of - who knows - legal dispute with Millmerran would have been rather unfortunate … So I think, on balance, my view was, it was probably better to give management the authority to spend the money, hope the economics and commerciality of the project turned out to be satisfactory, and then if not try and retrieve whatever value we could from the equipment. 266 Plainly enough, by March 2005, the obligation to construct the Buyer's Facilities would not be able to be discharged by 1 May 2005, and in the event that Cement Australia elected to confirm its willingness to invest the capital at Millmerran, the time would need to be extended beyond 1 May 2005. 267 On 26 April 2005, Mr White wrote to Mr Hunt setting out five propositions in relation to Pozzolanic's proposed installation of an ash plant on site at Millmerran, including that the Board had approved the capital expenditure. Mr White said that the plant could not be installed by 1 May 2005 but he was confident of installation by the end of 2005. Mr White said that Pozzolanic was "able to continue monitoring of the ash produced at Millmerran" and would have "potential markets well developed by the time the facility is completed". Mr White requested an extension of the deadline to 31 December 2005. On 3 May, Millmerran agreed to the request. 268 The primary judge's findings in respect of Pozzolanic and Cement Australia's conduct at Millmerran in March and April 2005 regarding approval of capital expenditure for the installation of a classifer at Millmerran are set out in the Reasons at [2977], [2978], [2982], [2990] and [2993]. In respect of this conduct and the period after 30 April 2005, the respondents' conduct was found not to give rise to any contravention of s 45 or 46 of the TPA.

Developments at Swanbank and Tarong 269 On 20 May 2005, Mr Zeitlyn (of Cement Australia) reported internally that "customers were refusing to accept flyash from Swanbank … since it changed its source of coal". 270 As to Cement Australia's price exposure to competition, Mr White's view at this time was that Cement Australia was not exposed, so much, to competition lowering prices and preventing it from competing, but rather a lowering of price in one area would have a "roll-out" effect with much bigger price competition consequences due to the MFN formula. 271 On 8 June 2005, Mr White sent an update of the Pozzolanic flyash strategy to Mr Zeitlyn and Mr Adams for the Executive Committee "for comment". In this update, Mr White reasserted the "SQ sourcing strategy" of removing Swanbank ash from the concrete market and installing plant at Tarong North to supplement Tarong. The advantage of taking this last step was said to be that it "will greatly strengthen our hold on Tarong North and will make it more difficult for competitors to get steady useable ash supplies from this site". 272 Mr White considered that once "we" had a classifier installed, "it would then effectively protect us from any other installation using Tarong North ash". Mr White understood that one of the effects of installing a classifier at Tarong North would be that it would become uneconomic for any other potential off-taker to install a second classification plant to produce concrete grade ash at Tarong North. 273 In July 2005, Cement Australia prepared an Ash Quality Report which observed a worsening of the colour variability at Millmerran. Further reports issued by Cement Australia in October 2005 continued to identify the colour variability issue as impacting on the future ability to sell this ash into the concrete market. 274 Mr White's strategic plan suggests that Swanbank ash had become difficult to sell and the problem was getting worse. The perceived solution was that 35Kt of Swanbank ash would go to Sunstate as mineral filler to be added to ground clinker in making cement; 45Kt would go to Cement Australia's own cement plant at Bulwer Island; and 15Kt would go to either or both of Sunstate or Cement Australia for production of a flyash blend cement. From July or August 2005, Cement Australia ceased selling Swanbank ash as concrete grade flyash. 275 On 14 November 2005, Mr White sent a letter to Tarong North setting out his views of Pozzolanic's future at Tarong and Tarong North Power Stations in the context of concerns about ACCC issues. As to the capacity of the stations, Mr White said that although the current facility at Tarong was operating at its "most optimistic" level of production capacity, it could not provide assured supply to SEQ customers. Mr White said that recent coal changes at Swanbank had rendered that ash unsuitable for concrete use, placing pressure on Tarong as a supply source. Mr White said that the contract with TEC obliged Pozzolanic to construct plant at Tarong North should the ash prove to be suitable for concrete grade use. Mr White said that Pozzolanic had "signalled" its intention to proceed with the installation of plant at Tarong North (in accordance with the terms of the Tarong Contract) for some time and had submitted plans for the project which, although not resulting in any technical objections, had not yet been approved by TEC. 276 On 14 February 2006, Mr White wrote a letter to TEC (copied to the ACCC) about aspects of Pozzolanic's engagement with the Tarong North facility. Mr White said that Pozzolanic had an urgent need to improve the capacity and security of ash supply from the two Tarong power stations. Time had become too short to proceed with the previously proposed installation and Pozzolanic now wished to propose an "interim arrangement" that could be installed more rapidly. Consistent with the earlier observations, Mr White said that the budgeted demand for ash, to be met from Tarong and Tarong North Power Stations in 2006, was around 400,000 tonnes dedicated almost entirely to the SEQ market.

Pozzolanic terminates the Amended Millmerran Contract 277 On 1 March 2006, Mr White wrote to MPP advising that Pozzolanic gave notice under cl 4 of the Amended Millmerran Contract that the Millmerran ash did not fall within the Acceptable Range criteria and could not practically and economically be converted into concrete grade flyash. Accordingly, Pozzolanic sought termination of the agreement and requested that the provisions of cl 2.3 of the agreement apply. 278 MPP initially responded by disputing that Pozzolanic had given a valid termination notice and electing to treat the Amended Millmerran Contract as still on foot. On 20 October 2006, however, Pozzolanic and MPP entered into an agreement to terminate the Amended Millmerran Contract, effective 31 December 2007. 279 During the period from 2002 to 2006, Pozzolanic paid royalties totalling $7,965,000 to MPP, as shown in the table below: Millmerran Royalty Payments Year Millmerran royalty payment 2002 $1,324,000 2003 $1,565,000 2004 $1,572,000 2005 $1,722,000 2006 $1,782,000 Total $7,965,000

Proposal to install a classifier at Tarong North 280 On 27 March 2006, Nucon provided TEC with a final report concerning its flyash trials of Tarong North flyash. The end result of these extensive trials was a conclusion that: Tarong North Fly ash is highly variable in quality and as such the product is unsuitable for use in concrete in its current form. It is concluded that the Raw fly ash will require considerable classification to achieve a finished product that complies with Australian standards [including AS 3582.1-1998]. 281 In March and April 2006, representatives of Pozzolanic continued to discuss with TEC the installation of a classifer at Tarong North. 282 During this same period, TEC had extended 'interim offers' to IFB, Nucon, Sunstate and Transpacific to supply Tarong North flyash to these entities on certain terms. In each of those interim offers, TEC noted that: Pozzolanic was in the process of installing a classifier at Tarong North; the classifier would be installed in May or June 2006; and the classifier would only be available for use by Pozzolanic. TEC observed that, as a result of this arrangement with Pozzolanic, flyash made available under the interim offers may differ in quality from flyash that had previously been made available to these entities under certain trial agreements. 283 On 29 May 2006, Mr Franklin wrote to Mr White giving approval for "the installation and operation of [a] temporary Classifier at the Tarong North plant for the off-take of [concrete] grade fly ash". The approval was subject to 20 conditions, including a requirement that Pozzolanic ensure that the "operation of the classifier will not restrict access by 3rd parties to the existing [run-of-station] fly ash silo".

Size and financial position of the respondents 284 As at the date of entry into the Original Millmerran Contract, Pozzolanic and QCL were conducting a very significant business. The respondents in the post-merger circumstances are also conducting very significant businesses. 285 In 2002, the QCL Group earned a total EBIT of approximately $100 million. 286 The respondents did not produce separate accounts. For the purposes of the penalty hearing, however, the respondents produced notional separate accounts based on the accounts for Cement Australia which recorded that: (a) Cement Australia at the material times derived no revenue or profit, incurred no liabilities, and had total assets of $4.00. (b) QCL earned profit before income tax during the period 2004 to 2013 ranging from $38.645 million to $68.95 million and had net asset values in the range of $94.681 million to $138.174 million in that period. (The net asset value figures are based on Penalty Reasons, [520] rather than the statement of facts and findings, which appears to have a typographical error in the relevant paragraph.) (c) Pozzolanic earned profit in the period 2004 to 2013 before income tax ranging from a figure of negative $3.317 million to $7.546 million and had net asset values in the range at $47.278 million to $71.449 million in that period. (d) Pozzolanic Industries in the period 2004 to 2013 had no revenue other than in the 2005 year when it recorded an impairment of an investment and it had net asset values of $30 million in 2004 and $5.038 million in each year from 2005. 287 The respondents submitted to the primary judge that the accounts for CA Holdings revealed that the CA Holdings Group (which includes entities other than the respondents) earned profit before income tax in the period 2004 to 2013 ranging from $23.7 million in 2004 to $88.8 million in 2013 and had net asset values range from $1.025 billion in 2004 to $499.28 million in 2013. 288 By 2009, the merged group and the CA Partnership had a combined EBIT of $171 million on sales of over $950 million, as shown in the table below: Combined financial information Year 2009 Net sales $957.05m Expenses (cost of goods sold) $687.95m Gross profit $269.10m Earnings before interest and tax (EBIT) $171.42m

289 The respondents' flyash business was also a very significant business in its own right. The respondents earned $110,966,357 in revenue from sales of concrete grade flyash in SEQ during the period from 30 September 2002 to 31 December 2006, as shown in the table below: Revenue figures Year Tarong Reference (average price/tonne x tonnes sold) Swanbank Reference (average price/tonne x tonnes sold) Total 2002 [Oct - Dec only] $4,586,134 [1] $67.46 x 67,983 tonnes $616,931 [2] $55.03 x 11,201 tonnes $5,202,565 2003 $22,682,918 $74.85 x 303,045 tonnes $2,112,167 $57.76 x 36,568 tonnes $24,795,085 2004 $22,856,493 $74.20 x 308,039 tonnes $2,331,806 $56.94 x 40,952 tonnes $25,188,299 2005 $26,797,189 $76.90 x 348,468 tonnes $1,588,773 $59.17 x 26,851 tonnes $28,385,962 2006 $26,612,890 $70.20 x 379,101 tonnes $781,576 $44.03 x 17,751 tonnes $27,394,446 Total $110,966,357 [3]

[1] Tarong revenue for all of 2002 was $18,344,532. [2] Swanbank revenue for all of 2002 was $2,465,729. [3] If the total revenue for the year 2002 is included (rather than just the revenue achieved from October - December of 2002), the total revenue for the full five years from 2002 to 2006 was $126,574,053. 290 The whole of the revenue (for the relevant product in the relevant market) across the period 1 January 2002 to 31 December 2006 was therefore $126,574,053. 291 That revenue figure may then be reduced so that it relates to the narrower field of the contraventions. For example, there was no relevant contravening conduct in relation to any contract in the period from 1 January 2002 to 12 September 2002. Similarly, the revenue derived from the Tarong Contract should not be taken into account until 28 February 2003. The primary judge accepted that the revenue across the narrower period of the contraventions was $101,033,957.

Previous contraventions 292 The respondents have not previously been found to have engaged in similar conduct.

C. THE JUDGMENT AND ORDERS BELOW 293 In this section we summarise the reasoning of the primary judge for the penalties that he imposed. The primary judge's reasons in relation to penalties are contained in the Penalty Reasons, but those reasons draw on the Reasons, in particular in describing the contraventions, as indicated below.

The contraventions 294 At [4] of the Penalty Reasons, the primary judge set out a table summarising the respondents' contraventions of the relevant provisions. At [5], the primary judge set out the declarations of contravention that had been made on 28 February 2014. These relevantly included the following declarations: The Original Millmerran Contract 6. Pozzolanic Enterprises Pty Ltd ("Pozzolanic") by entering into a contract on 30 September 2002, described as the "Ash Purchase Agreement" or alternatively described for the purposes of these proceedings as the "Original Millmerran Contract" (the "OMC") as buyer; Pozzolanic Industries Pty Ltd ("Pozzolanic Industries") as guarantor; and eight companies collectively described as the Millmerran Power Partners ("MPP") as seller, containing provisions which had: 6.1 a substantial purpose of; 6.2 the likely effect of; and 6.3 until 31 December 2003 (see declaration numbered 11), the effect of preventing a rival of Pozzolanic from securing access to unprocessed flyash in the South East Queensland ("SEQ") unprocessed flyash market, and preventing a rival of Cement Australia (Queensland) Pty Ltd formerly known as Queensland Cement Ltd ("QCL") from entering the SEQ concrete grade flyash market (being a product market for fine grade concrete grade flyash), and thereby substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market, contravened Section 45(2)(a)(ii) of the Act. 7. QCL, by funding Pozzolanic's entry into the OMC on 30 September 2002, with knowledge of the purpose, likely effect and effect of the provisions of the OMC contemplated by the above declaration (numbered 6) herein, was knowingly concerned in Pozzolanic's contravention of Section 45(2)(a)(ii) of the Act referred to in the above declaration (numbered 6). 8. Pozzolanic, by giving effect to the provisions of the OMC, having the purpose, likely effect and effect contemplated by the above declaration (numbered 6) herein, in the period 30 September 2002 until 31 December 2003 contravened Section 45(2)(b)(ii) of the Act. 9. QCL, by giving effect to the provisions of the OMC, having the purpose, likely effect and effect contemplated by the above declaration (numbered 6) herein, by funding Pozzolanic's day-to-day performance of the contract in the period 30 September 2002 until 31 December 2003 contravened Section 45(2)(b)(ii) of the Act. 10. Pozzolanic Industries, by electing to act as guarantor of the obligations of Pozzolanic under the terms and conditions of the OMC and by entering into the OMC as guarantor with knowledge of the purpose, likely effect and effect of the provisions of the OMC contemplated by the above declaration (numbered 6), was knowingly concerned in Pozzolanic's contravention of s 45(2)(a)(ii) referred to in the above declaration (numbered 6). 11. To the extent that the identified provisions of the OMC contemplated by the above declaration (numbered 6) had the effect or likely effect of substantially lessening competition in the relevant market upon inclusion of the identified provisions when making the OMC, that effect or likely effect became dissipated by 31 December 2003 with the result that any effect or likely effect upon competition in the relevant market was then attributable to the compromised quality of the Millmerran flyash rather than the continuing effect or likely effect of the identified provisions. The Amended Millmerran Contract 12. Pozzolanic, by entering into a variation of the OMC called, for the purposes of the proceeding, the Amended Millmerran Contract (the "AMC"), on 28 July 2004, containing provisions which had the purpose of preventing a rival of Pozzolanic from securing access to Millmerran Power Station unprocessed flyash in the SEQ unprocessed flyash market, and preventing a rival of Cement Australia Pty Ltd ("Cement Australia") from entering the SEQ concrete grade flyash market, and thereby substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market with processed Millmerran flyash, contravened s 45(2)(a)(ii) of the Act. 13. Cement Australia, by causing Pozzolanic to enter into the AMC with knowledge of the provisions contemplated by the above declaration (numbered 12) was knowingly concerned in Pozzolanic's contravention of Section 45(2)(a)(ii) referred to in the above declaration (numbered 12). 14. Pozzolanic, by giving effect to the provisions of the AMC contemplated by the above declaration (numbered 12) from 28 July 2004 until 30 April 2005 contravened Section 45(2)(b)(ii) of the Act. 15. Cement Australia, by causing Pozzolanic to give effect to the provisions of the AMC contemplated by the above declaration (numbered 12) from 28 July 2004 until 30 April 2005 contravened Section 45(2)(b)(ii) of the Act. The Tarong Contract 16. Pozzolanic, by entering into a Flyash Agreement with Tarong Energy Corporation ("TEC") on 26 February 2003 (the "Tarong Contract") for the acquisition of flyash from Tarong Power Station and Tarong North Power Station (once commissioned and operating), containing provisions which had: 16.1 a substantial purpose of; and 16.2 the likely effect of; and 16.3 the effect of preventing a rival of Pozzolanic from securing access to unprocessed flyash in the SEQ unprocessed flyash market, and preventing a rival of QCL from entering the SEQ concrete grade flyash market, and thereby substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market, contravened Section 45(2)(a)(ii) of the Act. 17. QCL, by funding Pozzolanic's entry into the Tarong Contract with knowledge of the provisions contemplated by the above declaration (numbered 16) was knowingly concerned in Pozzolanic's contravention of Section 45(2)(a)(ii) of the Act, referred to in declaration numbered 16. 18. Pozzolanic, by giving effect to the provisions of the Tarong Contract contemplated by the above declaration (numbered 16) on and from March 2003 contravened Section 45(2)(b)(ii) of the Act. 19. QCL, by funding Pozzolanic's performance of the Tarong Contract until 1 June 2003 contemplated by the above declaration (numbered 16), gave effect to the provisions of the Tarong Contract and thereby contravened Section 45(2)(b)(ii) of the Act, and with knowledge of the relevant provisions, was knowingly concerned in Pozzolanic's contravention of Section 45(2)(b)(ii) contemplated by the above declaration (numbered 18). 20. Cement Australia, by funding Pozzolanic's performance of the Tarong Contract in relation to both the Tarong Power Station and the Tarong North Power Station on and from 1 June 2003 gave effect to the provisions of the Tarong Contract and thereby contravened Section 45(2)(b)(ii) of the Act, and with knowledge of the relevant provisions was knowingly concerned from 1 June 2003 in Pozzolanic's contravention of Section 45(2)(b)(ii). The Swanbank Contract 21. … 22. … 23. Pozzolanic, by giving effect to the identified provisions as contemplated by the above declaration (numbered 21) which conferred exclusive access to Swanbank flyash in the period 1 January 2001 to 30 June 2005, contravened Section 45(2)(b)(ii) of the Act. 24. Pozzolanic, by giving effect to the identified provisions as contemplated by the above declarations (numbered 21 and 22) which conferred exclusive access to Swanbank flyash in the period from 1 January 2005 to 30 June 2005, contravened Section 45(2)(b)(ii) of the Act. 25. QCL, by giving effect to the identified provisions as contemplated by the above declaration (numbered 21) in the period from 1 January 2001 to 31 May 2003, contravened Section 45(2)(b)(ii) of the Act. 26. Cement Australia, by giving effect to the identified provisions as contemplated by the above declarations (numbered 21 and 22), contravened Section 45(2)(b)(ii) of the Act. … 295 Paragraphs 21 and 22 of those orders were varied by paragraphs 3 and 4 of the orders made on 16 May 2016, as follows: 3. The Declaration made at para 21 of the Declarations and Orders made on 28 February 2014 is varied to provide as follows: Pozzolanic, by exercising an option on 11 July 2002, to extend the term of the Swanbank Contract to 31 December 2004 on the terms of the amendment letter of 9 September 1998 and the Agreement of 30 September 1998, and further extend the amended Swanbank Contract to 30 June 2005 incorporating the identified provisions conferring exclusive access to Swanbank flyash in Pozzolanic until 30 June 2005, being provisions that would have the likely effect, and had the effect of preventing a rival of Pozzolanic from securing access to Swanbank unprocessed flyash in the unprocessed flyash market from 1 January 2001 to 30 June 2005, and preventing a rival of QCL from entering the SEQ concrete grade flyash market up to 31 May 2003 and thereafter preventing a rival of Cement Australia from entering the SEQ concrete grade flyash market, thereby substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market, contravened section 45(2)(a)(ii) of the Competition and Consumer Act 2010 (Cth). 4. The Declaration made at para 22 of the Declarations and Orders made on 28 February 2014 is varied to provide as follows: Pozzolanic, by entering into an agreement to extend the term of the Swanbank Contract from 31 December 2004 to 30 June 2005 on the terms of the amendment letter of 9 September 1998 and the Agreement of 30 September 1998 incorporating the identified provisions conferring exclusive access to Swanbank flyash in Pozzolanic until 30 June 2005, being an arrangement incorporating the relevant provisions, having a substantial purpose of preventing a rival of Pozzolanic from securing access to Swanbank unprocessed flyash in the unprocessed flyash market until 30 June 2005, and preventing a rival of Cement Australia from entering the SEQ concrete grade flyash market until 30 June 2005, thereby substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market, contravened section 45(2)(a)(ii) of the Competition and Consumer Act 2010 (Cth). 296 Further, the 16 May 2016 orders included the following order dealing with an additional contravention: 1. The first respondent, Cement Australia Pty Ltd, by causing Pozzolanic Enterprises Pty Ltd (Pozzolanic) to enter into the agreement to extend the term of the Swanbank Contract from 31 December 2004 to 30 June 2005, with requisite knowledge of the provisions contemplated by the Declarations in paras 21 and 22 of the declarations and orders made on 28 February 2014 (as amended by paras 3 and 4 of these Orders), was knowingly concerned in Pozzolanic's contravention of s 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) (described in these orders as the "Act") referred to in those declarations.

The nature and extent of the contravening conduct and the circumstances of the contraventions 297 After setting out the applicable provisions (in particular, ss 45(2) and 76 of the Act) and considering the applicable principles (in particular, by reference to the decision of the High Court in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (FWBII)), the primary judge referred, in Part 3 of the Penalty Reasons, to contextual background matters relating to the contraventions. These matters have been referred to in the preceding section of these reasons, dealing with background facts. 298 Then, in Part 4 of the Penalty Reasons, the primary judge discussed the contraventions in some detail. It will be convenient to summarise this part of the Penalty Reasons in the following order (which reflects the order in which the primary judge ultimately dealt with the penalties to be imposed): (a) Original Millmerran Contract; (b) Tarong Contract; (c) Amended Millmerran Contract; and (d) Swanbank Contract.

The Original Millmerran Contract 299 The primary judge considered the contraventions in relation to this contract at [137]-[168] of the Penalty Reasons. He noted at [139] that, at the hearing on liability before him, the ACCC had contended that the relevant provisions of the Original Millmerran Contract had been included for the substantial purpose of lessening competition in the relevant markets. To summarise his conclusions on this point, the primary judge set out at [142] of the Penalty Reasons the following observations and findings from [3070]-[3078] of the Reasons: 3070 The objective or end QCL sought to achieve in its bid, through Pozzolanic, for the Millmerran Ash Purchase Contract at the outset of the non-conforming tender in September 2001 was to secure an exclusive supply agreement for the "sale of ash into the cementitious market" in SEQ. The commercial strategy of QCL and Pozzolanic's approach to both the Millmerran and Tarong contracts (and Tarong North) was framed and executed by Mr Ridoutt and Mr Wilson, and put to the Directors. The strategy was discussed with Mr Arto as Director and CEO of QCL. Mr Ridoutt presented the strategy to the QCL Board Meetings. Mr Arto spoke of his dependency upon Mr Ridoutt and Mr Wilson. 3071 A substantial purpose of the framing of the final commercial bid to Millmerran was to prevent a rival from securing access to Millmerran unprocessed ash and to prevent threatened entry into the SEQ concrete grade flyash market for the supply of concrete grade flyash. These purposes, serving the end sought to be achieved by QCL and Pozzolanic through Mr Ridoutt, Mr Wilson and Mr Arto, were each a substantial subjective purpose of these individuals. These purposes were not the only purposes for the reasons already mentioned but they were each a substantial purpose. Mr Ridoutt and Mr Wilson persevered in their attempts to try and secure an exclusive arrangement in the lengthy negotiations with Millmerran over the contract terms, ultimately leading to cl 26.4 (not before giving rise to Ms Knox's frustrations set out in her note of 20 June 2002). Pozzolanic and QCL were including entities and their authorised negotiators, Mr Ridoutt and Mr Wilson (with the authority and thus approval of Mr Arto) subjectively held each of the substantial purposes of preventing entry of a person into a supply relationship with MPP and thus entry into the unprocessed flyash market, and preventing entry of a person into the SEQ concrete grade flyash market, using processed Millmerran flyash. 3072 These specific purposes are the expression of a substantial subjective purpose of substantially lessening competition in each market as Mr Ridoutt, Mr Wilson and Mr Arto plainly believed that the face of future competition in each market, and particularly the SEQ concrete grade flyash market in which QCL was the seller supplier, would show contestability and rivalry in volume and price (and other aspects of the service offerings) should a competitor enter at Millmerran and enter the SEQ concrete grade flyash ash market through processed Millmerran ash. This entry would exhibit rivalrous responses and counter-responses that would likely see a volume, revenue and EBIT loss for Pozzolanic and QCL in the flyash business. The future face of competition in each market without entry of a rival at Millmerran would show diminished future (nascent) rivalry and thus impact upon the competitive process. Mr Maycock accepted that whatever shape rivalry might take, Pozzolanic and QCL would be unlikely to maintain their EBIT earnings in the flyash business once a rival entered the market for the sale of concrete grade flyash in the SEQ concrete grade flyash market having secured access to Millmerran ash for processing and supply. 3073 These ends or objectives were achieved through the vehicle of the purposes earlier described in respect of the provisions for which Pozzolanic and QCL were "including" parties. MOC accepted the provisions, no doubt because those provisions met the objectives and ends Millmerran sought to achieve of removing certain thresholds of waste ash from the site and securing an acceptable minimum revenue stream from the sale of ash. Whatever the ends, objectives or purposes of MOC may have been, the ends and objectives of Mr Ridoutt, Mr Wilson and Mr Arto were to secure the contract by adopting the final commercial minimum quantity take or pay term for at least a substantial subjective purpose (among the other purposes and reasons) of substantially lessening the competition QCL would face in the SEQ concrete grade flyash market and, in aid of that purpose, a purpose of preventing a potential rival from securing access to a source of likely contestable ash processed from Millmerran ash. 3074 Section 45 asks whether the identified particular provisions had the substantial purpose of substantially lessening competition and therefore the question is whether those substantial purposes were substantial purposes of the identified particular provisions upon which the Commission relies. 3075 Central to the contract are the commercial provisions concerning the minimum quantity of concrete grade flyash the seller must make available and allow Pozzolanic to take each Operating Year for seven years at 135,000 tonnes extracted, retrieved or processed from the volume of raw ash produced by the power station operations, at a price of $10.10 per tonne, according to the lump sum calculations and escalation provisions, of cls 5.1, 6.1, 6.2, 6.3, 7 and 10. These provisions were incorporated into the contract, at the adoption of Millmerran, by accepting the terms as put by Pozzolanic, but they were provisions initiated by Pozzolanic as the foundation commercial terms of the contract. Pozzolanic and QCL were including parties for these terms as was MOC for reasons entirely different to those actuating Pozzolanic and QCL. By these terms, Pozzolanic would have access to the necessary volume of raw ash at Millmerran to enable it to take either consistently each day, or each week, over each operating year, 135,000 tonnes of concrete grade flyash processed out of whatever volume of raw feedstock ash was required to obtain that volume, or take concrete grade flyash from the raw ash episodically throughout each operating year. In either case, the concrete grade flyash would be extracted from the required volume of raw ash through the buyer's installed facilities. 3076 I am satisfied that a substantial purpose of the inclusion of these commercial terms as framed, in substance, by Pozzolanic and QCL was to substantially lessen competition in the markets as earlier described for the reasons earlier described, by seeking to exercise a substantial degree of control over a sufficient volume of raw unprocessed Millmerran flyash necessary to extract, over time, 135,000 tonnes of concrete grade flyash and foreclose or discourage sustainable new entrant participation at Millmerran. 3077 Plainly enough, however, Mr Ridoutt and Mr Wilson thought that it would also be necessary to secure an exclusive supply arrangement with MPP so as to prevent MOC and MPP from supplying any ash to anyone else for sale into the cementitious market. This conduct brought the integrity of the Pozzolanic negotiators into serious question according to the views expressed by Ms Knox. Pozzolanic's position on this question led to all of the steps earlier described culminating in cl 26.4 in the way explained by Clayton Utz. Having regard to those exchanges, I am satisfied that at least a substantial purpose of the termination provision on 60 days notice to Millmerran after 31 December 2006 with the reduction in the annual minimum payment was to discourage Millmerran from entering into another supply contract for concrete grade flyash extracted or processed out of raw Millmerran ash during the currency of the Ash Purchase Agreement with Pozzolanic so as to constrain rivalry in the sale and supply of concrete grade flyash in the SEQ concrete grade flyash market. Clause 26.4 was included in the contract either by Mr Ridoutt and Mr Wilson, or as a consensual inclusion as a result of a mediation between both parties to the contract of what was then an impasse. Nevertheless, Mr Ridoutt and Mr Wilson were including decision-makers for Pozzolanic and their subjective purposes for the provision was at least a substantial purpose as described and thus a substantial purpose of substantially lessening competition in the way earlier described. 3078 Neither Mr Ridoutt nor Mr Wilson were called by Pozzolanic or QCL to give evidence, and to the extent that there is any ambiguity about their subjective purposes, I am willing a draw a Jones v Dunkel inference, in light of the exchanges I have described, that their evidence on purpose would not have been helpful to Pozzolanic or QCL. 300 After setting out the above passage, the primary judge noted at [143] of the Penalty Reasons that the observations in that passage were important in the exercise of the discretion under s 76 of the Act. The primary judge then referred, at [144]-[155], to some particular aspects of the facts and matters covered in the above passage. 301 As to the effect or likely effect of the identified provisions at the time of making the Original Millmerran Contract on 30 September 2002, the primary judge set out, at [157] of the Penalty Reasons, the following passage from the Reasons: 3079 As to the effect or likely effect of the provisions substantially lessening competition at the date of making the contract containing the provisions, a question arises about the role in such an assessment of the factor that the Millmerran ash had not been produced at that date and was unknown as to its future quality. Would inclusion of the provisions have the effect of substantially lessening competition in a product when the market participants could not know the characteristics, features and qualities of the new ash until it entered the market, contested for supply and acceptance, and its substitutability became apparent? Would, viewed at the date of inclusion, the provisions be likely to substantially lessen competition in either market in a forward looking way by diminishing the future shape of the competitive process by constraining competitor entry of Millmerran ash when the future contestability of the ash could not be known until entry, contestability and substitutability were later determined? 3080 These questions were answered, in substance, for the assistance of the Court by the expert evidence of Professor Hay. 3081 Professor Hay accepted, as a matter of economics, that if a competitor won the contract at Millmerran, and Pozzolanic thought that at some time in the future the competitor would start supplying Millmerran concrete grade flyash into the concrete grade flyash market, that circumstance, "might produce a quite prompt price response on the part of Pozzolanic" (T, p 2559, lns 21-25) and that would particularly be "likely to be the case" if Pozzolanic's prices, at the time the competitor wins the Millmerran contract, were "supra-competitive prices" (prices above prices which would prevail in a workably competitive market) (T, p 2559, lns 27, 28). Professor Hay also unsurprisingly accepted that if the source of a price constraint upon QCL or Pozzolanic was loss of the Millmerran contract to a competitor, that source of constraint would not operate if Pozzolanic won both the Tarong and Millmerran contracts (T, p 2559, lns 39-41). Professor Hay also observed that if a competitor won the contract at Millmerran, that circumstance would reduce the degree of Pozzolanic's market share and therefore tend to reduce its degree of market power and would "likely" lead to the quite prompt price responses on the part of Pozzolanic earlier mentioned in Professor Hay's evidence (T, p 2559, lns 43-47; p 2560, lns 1-7). 3082 This exchange then occurred in cross-examination with Professor Hay at T, p 2561: Q I had understood you to say that if a competitor won the Millmerran contract, that would have an effect on competition as soon as the contract was won. Is that right or not? A It might, yes, and that also depends upon the assumption that there was substantial market power at the time. Q I understand what you say. And it is not only a question of "might", is it? … It is better put that it would be likely that as soon as a competitor won the Millmerran contract, there would have been an effect on competition, correct? A It is possible. It may depend upon the assumption about the quality of the ash, but yes, it is certainly possible. Q Well, if we leave hindsight to one side for a moment, when the Millmerran contract is won, nobody knows that there is going to be a problem with the colour of the ash, correct? A Well, I don't know for sure, but I will assume that to be the case. Q Assume that to be the case. Then what Pozzolanic knows is that there is a competitor who now has a source of supply of fly ash which can be used to sell fly ash into the south-east Queensland concrete-grade fly ash market, correct? A Correct. Q And that knowledge is what is likely to cause Pozzolanic to regard its prices as being constrained, correct? A It could have that effect, yes. Q And it would have that effect if Pozzolanic had been charging supra competitive prices prior to the competitor winning the Millmerran contract? A It could have had that effect, yes. Q You say it could have that effect. It is likely to have had that effect, isn't it? A I will say it could have had that effect. I'm not sure how likely it is, but it may be likely. It is certainly possible. Q Well there was at least a real chance it would have had that effect, correct? A I think there was a chance, yes. Q A real chance? A Well, I take a chance to be a real chance. Q You agree, then, that the effect on competition is not dependent on taking a hindsight view of how long it might have taken a competitor to bring that fly ash to market? A Well, I think that's right. … if someone else had achieved the contract, then there could have been an effect and the question then is how long - would that effect last long, what would happen with the colour and how quickly would it dissipate. That's right. [emphasis added] 3083 Professor Hay's observations on this topic and the related comments in his report are made in the context of the colour variability problem which ultimately emerged throughout 2003 and resulted in the scientific investigations in the latter part of 2003 and 2004, and beyond. Professor Hay in these quoted passages accepted that there was a real chance of a likelihood of an effect upon competition once a competitor won the Millmerran contract but the constraining effect might dissipate over time as a quality, colour problem, emerged. 3084 The relativity in the degree of dissipation of the immediate constraining effect was examined in these passages (T, p 2562, lns 26-45): Q Someone else wins the Millmerran contract. At that stage, no-one knows there is a colour variability problem and we have discussed what the consequences might be. Do you accept the proposition that unless it is found that the Millmerran ash can never be sold as concrete-grade fly ash in the south-east Queensland market, there will remain a degree of constraint on Pozzolanic's prices from the existence of that competitor's alternative source of [concrete-grade fly ash]? A I think that may overstate it. It seems to me the question would be the extent to which it is anticipated that the Millmerran ash would be an alternative source of ash, or people would otherwise buy Pozzolanic ash. Whether it can be sold, the concrete-grade ash may not be the same - saying it can or cannot be sold as concrete-grade fly ash may not be the same assumption. Q So what one is looking at is whether it turns out to be a substitute for those who would otherwise have bought Pozzolanic's ash? A If it's clear that it's not a substitute, then I would expect it to have no significant constraining effect upon Pozzolanic. Q And if it remains a substitute to some extent, then it has a constraining effect. Is that right? A I would expect there to be some degree of proportion between the degree of substitution and the degree of constraint. [emphasis added] 3085 In concluding this discussion, Professor Hay accepted that if there is an assumption that the Millmerran ash is an alternative source of supply, then there is a possibility, looking forward, that a competitor winning the Millmerran contract is going to bring about "some impact" on competition in the SEQ concrete grade flyash market (T, p 2563, lns 1-6). 3086 Professor Hay accepts that the event of entry itself into the Millmerran contract by a competitor would "likely" produce "a quite prompt price response" from Pozzolanic in the SEQ concrete grade flyash market assuming, in a forward looking way, that the ash would be usable in the concrete grade flyash market. Professor Hay also accepts that Pozzolanic's "knowledge" of a competitor at Millmerran with a source of flyash that Pozzolanic would assume could be sold into the SEQ concrete grade flyash market (since no hindsight view of an emergent colour problem would be relevant at that moment in time) would give rise to at least a "real chance" of causing Pozzolanic to regard its prices as being constrained and there would be at least "some impact" on competition in the SEQ concrete grade flyash market. 3087 It follows that, at the date of entry into the contract, with the clauses I have mentioned (cls 5.1, 6.1, 6.2, 6.3, 7, 10 and 26.4), those clauses would have the immediate effect and would be likely to have, in a forward looking way, a real chance of substantially lessening competition in the SEQ concrete grade flyash market because the future field of rivalry or the future state of the competitive process with the provisions is substantially diminished, on all of the evidence as nascent competition in a Pozzolanic/QCL dominated market was hindered and prevented. However, the constraining effect would have begun to dissipate once it became clear to the market that a problem was emerging in the quality of the Millmerran flyash and that problem was unlikely to be resolved either at all, or within a period of time which would make Millmerran ash a real substitute for Pozzolanic ash, assuming a rival in Millmerran. The extent of the constraint and its potential to dissipate is ultimately a question of degree. However, I am satisfied that upon entry into the Millmerran contract by a rival, participants would have proceeded on the assumption that the Millmerran ash was, in all probability, likely usable in the SEQ concrete grade flyash market and that once a competitor had access to a source of ash at Millmerran (notwithstanding that the concrete grade flyash would not be available for some little time), there would likely be quite prompt price responses from Pozzolanic in a market which had been characterised, otherwise, by a virtual monopoly with delivered pricing, and pricing above a competitive level characterising a workably competitive market. 3088 In a market exhibiting the characteristics of the SEQ concrete grade flyash market throughout 2001 and 2002, competitive entry by a rival at Millmerran was very important to the future competitive process, in a forward-looking way, and thus the likely effect upon what would have been emerging competition based on Millmerran ash was large or significant and truly meaningful. Had the frustrations exhibited by Ms Knox in her memorandum of 20 June 2002 resulted in no further negotiations with Pozzolanic, with Millmerran contracting with FAA as the next best option, the likely price responses and counter-responses would likely have been very vigorous. Mr Maycock said that confronted with some of the scenarios postulated by Management arising out of the loss of one or more of the contracts, QCL and Pozzolanic would have found a way to compete and would have responded to the challenges presented to it. Had FAA won the contract at Millmerran, with its tied shareholder concrete producers, Pozzolanic would very likely have vigorously responded in its supply and service offerings to those major shareholders to try and hold some proportion of QCL's sales to those particular buyers, apart from contesting for all marginal sales as Mr Clarke said of FAA. The provisions described at [1347] were the expressions of these substantial purposes. 302 After setting out the above passage, the primary judge made some further observations, including, at [162] of the Penalty Reasons, that including provisions in the Original Millmerran Contract at 30 September 2002 which had a substantial purpose of substantially lessening competition in the concrete grade flyash market, and had as their effect and likely effect a substantial lessening of competition in that market, was very important for the future state of rivalry and the future competitive process in a concrete grade flyash market characterised, at 30 September 2002, as one in which QCL was a virtual monopolist. 303 The primary judge noted, at [166] of the Penalty Reasons, that although the relevant provisions of the Original Millmerran Contract at 30 September 2002 had the effect and would be likely to have the effect, in a forward-looking way, of substantially lessening competition as described, the effect and likely effect would have dissipated as information flows emerged into an informed market that made it plain to market participants that a problem had emerged in the quality of the Millmerran ash (as extensively outlined in the Reasons). The primary judge also noted his conclusion, at [3236] of the Reasons, that the provisions of the Original Millmerran Contract had the effect or likely effect of substantially lessening competition from 30 September 2002 until 31 December 2003.

The Tarong Contract 304 The primary judge described the contraventions concerning the Tarong Contract at [183]-[192] of the Penalty Reasons. The primary judge first referred to certain background facts in relation to this contract. The primary judge next set out an extract from the Reasons that identified the relevant provisions of the contract and the ACCC's submissions in relation to them. At [187] of the Penalty Reasons, the primary judge set out the following extract from the Reasons, which contains findings on the issue of purpose: 3142 I am satisfied that a substantial purpose which actuated Mr Wilson and Mr Ridoutt in framing the terms of the bid for the Tarong Contract was the purpose of having continuity in the product it knew in order to continue to supply that product to QCL's concrete customers, and preferably exclusive access to that ash either expressly or in the terms of exclusivity as Mr Maycock understood that notion. I am satisfied that this was a substantial purpose of Mr Wilson and Mr Ridoutt and ultimately Mr Arto in the way in which he relied upon Mr Wilson and Mr Ridoutt, and also a purpose of Mr Maycock. … 3144 The question, however, is not simply whether there were good business reasons for Pozzolanic wanting to secure a contractual relationship with TEC. I am satisfied that the business objective of Pozzolanic in entering into the contract was to have concrete grade flyash to sell in SEQ. However, the real question is whether the adoption of the identified particular provisions in the contract were included for a substantial purpose of preventing others from entering the SEQ concrete grade flyash market, and in aid of that purpose, a purpose of preventing others from obtaining access to unprocessed Tarong flyash for processing, for entry into the SEQ concrete grade flyash market, and thus a substantial purpose of substantially lessening competition in those markets. 3145 The term of the contract was five years (and on TEC's view probably six years by operation of the notice provision). Pozzolanic and QCL certainly wanted an exclusive agreement that would deny Tarong concrete grade flyash to others. That proposition was pressed with TEC but not accommodated by TEC. There was no provision for express "exclusivity" although the measure of Pozzolanic's rights granted under the contract, was a right to "any and all" solid material extracted from Tarong and Tarong North flue gases, capable of being processed through Pozzolanic's plant for use as supplementary cementitious materials as shown in AS 3582.1, that is, concrete grade flyash recovered through Pozzolanic's plant from the raw flyash. All of the solid material extracted from the flue gases of each power station, collected in the hoppers, could be processed in Pozzolanic's plant. Some of it would then be of use as concrete grade flyash falling within AS 3582.1, and some of it would not and would thus be reject ash. Nevertheless, Pozzolanic enjoyed the right to any and all of the Tarong and Tarong North "Fly Ash" extracted from the hoppers for processing in Pozzolanic's plant for use in conformity with AS 3582.1, from the raw Tarong and Tarong North flyash. Pozzolanic would pay $2.6M (indexed) if it actually took less than 50Kt per annum but that was never going to be the case on any orthodox going concern basis. The likely band would be either 150Kt to less than 350Kt or 350Kt to less than 450Kt attracting payments of $2.5M or $2.4M respectively. 3146 The rights granted under the contract (and related definitions) were framed by TEC and accepted by Pozzolanic during the negotiation process described earlier. TEC formulated the incentive payment schedule to encourage Pozzolanic to extract and sell the highest volume of concrete grade flyash, from Tarong ash, as possible. Although TEC would not grant exclusivity to Pozzolanic, it wanted to see, and agitated for, provisions in the contract that created clear commercial incentives for Pozzolanic to remove as much concrete grade flyash as it possibly could from the Tarong raw ash to meet the perceived demand for concrete grade flyash in South East Queensland, rather than flyash from any other source (and presumably the anticipated entry of Millmerran flyash). These incentives, in turn, encouraged Pozzolanic to assert as much control over the raw unprocessed flyash from each station, as necessary, in order to process out of it "any and all" concrete grade flyash capable of use in conformity with AS 3582.1. Although a substantial volume of unprocessed flyash would continue to be produced each year at Tarong, and a substantial additional volume would begin to be produced from Tarong North, the rights clause, and the incentive schedule, encouraged Pozzolanic to try and extract concrete grade flyash in the aggregate of 450Kt or more to attract the lowest level of payment at $2.1M. Under the rights clause of the contract with Pozzolanic, if any third party was capable of installing plant at Tarong (or later Tarong North), and extracting concrete grade flyash by processing Tarong ROS ash, each tonne of concrete grade flyash so obtained would be a tonne of product that Pozzolanic had the right to extract from the raw ash by processing through its own facilities. 3147 Pozzolanic and QCL perceived at this time that it would require about 330Kt of concrete grade flyash in 2003 for the SEQ market. About 40Kt of that would come from Swanbank. Subject to determining the utility of the Millmerran ash, the balance of flyash supplied by QCL would come from Tarong as would any incremental growth in demand, over time, due to the sorts of factors Mr Arto and Mr Maycock spoke about. Also, Pozzolanic and QCL took into account the extent to which some reserve capacity might be needed although the supplemental 20% buffer did not properly emerge, at least in those terms, until 2004. The Tarong Power Station would produce approximately 1.4 million tonnes of unprocessed flyash each year. Pozzolanic by cl 7.1 had assumed a best endeavours obligation of providing ROS ncgfa from its plant to TEC or TEC nominated third parties including the services of processing and handling that ash through its plant to "the full limit of the capacity" of Pozzolanic's plant. The limits of the "best endeavours" obligation would, no doubt, be determined by the extent to which that ash would be required by Pozzolanic for processing for the production of concrete grade flyash for its own use in supplying its customers. 3148 Pozzolanic's entitlement to first accommodate its own requirements, at any and all times, would no doubt make it difficult for a third party to secure consistent regular access to run-of-station ash for processing into concrete grade flyash in circumstances where an existing contractor had rights of the kind enjoyed by Pozzolanic. "As available" transactional sales would not enable a supplier to confidently enter the SEQ concrete grade flyash market as concrete producers would want regular supplies of flyash to their batching plants to meet the requirements of servicing concrete pours on projects with great regularity if not each day, every other day. 3149 Clause 17.1 created the mechanism under which Pozzolanic could give written notice to TEC terminating the contract at any time after 1 September 2004 with the contract expiring 12 months later. 3150 If the Tarong Power Station was capable of producing about 1.4 million tonnes of raw flyash and Tarong North was expected to produce about 500Kt of raw flyash when commissioned and operational, it is difficult to see why Mr Ridoutt and Mr Wilson found it necessary, as an aspect of securing the objective of having ash to sell at all, from the beginning of March 2003, to include a rights provision framed on the basis that Pozzolanic would have the right to buy "any and all" flyash meeting AS 3582.1 recovered by Pozzolanic through its processing plant, extracted from the 1.9 million tonnes of raw flyash produced at both power stations over the life of the contract. … 3152 Nevertheless, I am satisfied that not only did Mr Ridoutt and Mr Wilson pursue the quite natural and rational objective (and thus have the purpose) of winning the Tarong Contract to secure a continuing source of Tarong concrete grade flyash to enable the flyash business to continue to function and supply the company's customers, but a further substantial subjective purpose in including the terms earlier described was to "creatively" or otherwise (in light of the loss of exclusivity) secure a position where "provisions" would be adopted that gave Pozzolanic (and in effect, QCL) contractual control over access to the total volume of raw flyash produced from both power stations for the life of the contract for priority processing through its own plant for the priority extraction, as it chose, of all concrete grade flyash capable of being extracted from the raw flyash at both stations. That provision was subject only to the "best endeavours" obligation under cl 7.1 concerning non-concrete grade flyash. 3153 Pozzolanic was the incumbent producer and it had its plant and equipment connected to all of the transfer points on all hoppers in Zones 1, 2 and 3 at Tarong and enjoyed the right to connect to all the hoppers at Tarong North. Although the imperative of securing a contract at Tarong, first, to have ash to sell in the immediacy of the post-Tarong tender period (and before Millmerran might come on stream, if useable) and, second, to secure access to the familiar and reliable Tarong ash as the source of proven market ash, was a fundamental objective for entry into the Tarong Contract, I am satisfied that the ubiquity in the scope of the rights provision was included for a substantial purpose of preventing or discouraging a rival from obtaining access to Tarong and Tarong North raw flyash for processing (behind Pozzolanic and QCL), and to prevent a rival entering the SEQ concrete grade flyash market with processed Tarong or Tarong North flyash. Thus, a substantial purpose of the formulation and inclusion of cls 2, 3.1, 12.2, 12.3, 4.4, 8.3 and 17.1, was a substantial purpose of substantially lessening competition in each market. These purposes were the subjective substantial purposes of Mr Ridoutt and Mr Wilson (among other purposes). The material does not reveal the decision-making process about the particular provisions as between Mr Ridoutt and Mr Wilson on the one hand and Mr Arto and Mr Maycock on the other. However, Mr Arto has made plain the degree of inter-dependency between him and Mr Ridoutt and Mr Wilson on these questions, and Mr Maycock fundamentally regarded these questions such as the precise formulation of the particular provisions as very much "matters for management". 3154 Neither Mr Ridoutt nor Mr Wilson was called to give evidence about the business purposes for including the identified provisions or, more generally, the considerations, objectives or purposes in Pozzolanic entering into the contract with TEC. I draw the inference that the failure to call Mr Ridoutt and Mr Wilson on these topics suggests that their evidence would not have been helpful to the respondents. 305 As to the effect and likely effect of the provisions, the primary judge set out, at [188] of the Penalty Reasons, the following passage from the Reasons. Although the passage is lengthy, we set it out in full given the significance of the Tarong Contract for the issues to be determined on the appeal. Conclusions 3162 I am satisfied that cls 2, 3.1, 12.2, 12.3 and 17.1 (together with the cl 1.1 definitions) of the contract as they relate to the Tarong Power Station had the effect when the contract was made, and would be likely to have the effect of discouraging, hindering or preventing a third party from seeking to establish processing facilities (extraction and collection equipment, pumps, a classifier and related plant and equipment) at the Tarong site (or off-site) so as to collect and take raw unprocessed flyash from Zones 1, 2 or 3 into a processing facility for processing and extracting or winning concrete grade flyash for supply into the SEQ concrete grade flyash market. 3163 The essential elements of that conclusion are these. 3164 First, the provisions conferred a right to any and all "Fly Ash" as defined in the way explained earlier both in relation to Tarong (and Tarong North) for the extraction of concrete grade flyash out of raw ROS flyash using Pozzolanic's extractive plant and equipment. Pozzolanic enjoyed, by force of the provisions, the right to take all of the raw flyash into its processing facility to extract whatever volume of concrete grade flyash it wanted. It is no answer to a contention that identified provisions of a contract have an effect at the date of making the contract (or a likely future effect), that a good business reason subsisted in Pozzolanic (in making the contract with those provisions) of wanting or securing access to any or all of the concrete grade flyash that might be able to be extracted from any or all of the raw flyash containing particles meeting the description as concrete grade flyash in its own processing facility, and thus the provisions came to be included in the contract in order to serve that business end. Every contracting party that includes provisions in a contract designed to fully satisfy its own perceived need to be able to supply 95% of the relevant market for a product, produced using a particular input, no doubt fully believes that those business objectives are best served by such an arrangement. 3165 The only question (as to this limb, s 45(2)(a)(ii)) is whether the identified provisions had the effect or would be likely to have the effect, viewed at the date of making the contract, of substantially lessening competition in a relevant market. 3166 Second, the provisions had that effect and would, as to the future, be likely to have that effect because the immediate scope, and the likely future scope, of rivalry characterising the competitive process in the SEQ concrete grade flyash market, was and would continue to be diminished by the operation and effect of the provisions because any third party seeking access to Tarong Power Station raw flyash, as a feedstock for processing, for entry into the SEQ concrete grade flyash market, could have no confidence of real, genuine or effective access to any particular volume of that ash; at any particular time; with any degree of certainty; with any real degree of orthodoxy in planning the conduct of a business of processing raw ash to extract concrete grade flyash for supply each day to batching plants operated by concrete producers undertaking concrete pours each day or every other day. 3167 Concrete grade flyash is material extracted from the relevant power station ash for regular supply to buyers who are engaged in the "ready-mix" daily supply of a concrete mix. The evidence in this case makes plain that suppliers of concrete grade flyash as an input feedstock for the production of concrete must be able to obtain access to a regular and consistent (in terms of quality) source of raw flyash for the production or extraction of concrete grade flyash, rather than on an "as available" or "spot purchases" basis if such a person wants to conduct a business (comprising a sequence of regular transactions) of supplying concrete grade flyash to concrete producers. Mr White was of that view. He recognised that continuity, consistency and regularity were critical matters in the conduct of such a business. 3168 Pozzolanic's contractual command and control position over any and all volumes of raw Tarong ash, by force of the provisions, for first taking any and all Tarong ash into its own processing facilities for the extraction of any or all concrete grade flyash capable of extraction in those facilities from that ash, in priority to any other third party off-taker, either regularly or episodically, meant that the systemic arrangements a third party would need to see in place to "enter" at Tarong could not be put in place because a new third party entrant at Tarong would always be susceptible of being placed second behind Pozzolanic at all times or at any time. Also, the command and control position Pozzolanic enjoyed over any and all of the Tarong "Fly Ash" for first processing in its own facility (to the extent capable of extracting concrete grade flyash from raw Tarong ash through that facility) made it possible for discretionary decision-making by Pozzolanic that would, at all times or at any time, enable Pozzolanic, as it chose, to displace a third party in favour of Pozzolanic's prior rights. 3169 Pozzolanic's enjoyment and exercise of its priority rights during all of the period of the contract would become the daily measure of the commercial uncertainty in any third party's position. 3170 None of the incentives conducive to third party entry were present in the arrangements between Pozzolanic and TEC. The best test of this notion that Pozzolanic's first rights had, and were likely to have, the effect of discouraging third party entry at Tarong is that Mr White would not have wanted to enter, standing behind Pozzolanic's prior rights, as a theoretical third party off-taker at the Tarong Power Station in trying to conduct a new concrete grade flyash supply undertaking. 3171 A proposition was put to Mr White in evidence about the operation of the Tarong Contract to the effect that if a second off-taker had examined the question of what non-concrete grade ash such a person might expect to get for processing, day-to-day, at and from Tarong, standing behind Pozzolanic's rights, the answer would have been "no available ash". Mr White did not accept that proposition because the volume of ash taken from Zone 1 at Tarong by Pozzolanic might, for example, have been 1,000 tonnes which would have left another 2,500 tonnes of ash available for a second off-taker. Mr White took the view that a second off-taker would have been able to connect its own pumping and transfer equipment into Zone 1, connected to its own classifier. Mr White was asked this question: "Are you suggesting that a second off-taker would have regarded that [connecting its own pumping and transfer equipment into Zone 1] as being economically feasible?" Mr White said: "Well, I think … obviously, there would have to be some form of amended arrangement to provide them some guarantee of volume and probably the best arrangement would have been to [allocate] hoppers within each unit to one party or another in the way that's now proposed [in terms of the new tender]" [emphasis added]. Mr White said that other than those sorts of arrangements, there was no reason why it would not have been feasible for a second off-taker to participate at Tarong. That notion of the feasibility of a second off-taker participating at Tarong was further examined with Mr White in this way (T, p 2467, lns 12-19): Q So just let me understand. Do you agree that unless Pozzolanic's existing contract was amended so that a third party could be guaranteed volumes of ash, it was not economically feasible for a third party to be a second off-taker at Tarong Power Station? A I would say that there would have to - if I was a third party off-taker, I would want some arrangement, but I would also, at July 2006, be reflecting that the agreement only had 18 months to run, and I would probably be negotiating around the renewal or retendering of that agreement in terms of any arrangement that I would make. [emphasis added] 3172 Mr White was asked whether he had formed a view during the life of the Pozzolanic Contract about whether a third party would be interested in being a second off-taker at the Tarong Power Station. Mr White said that the Pozzolanic/Cement Australia "internal ash team" had considered that question. Mr White was asked (T, p 2468, lns 40-46): Q Are you saying you [Mr White and the internal ash team] formed the view that it was likely the second off-taker might want to build a classifier and wait behind Pozzolanic at Tarong Power Station? A I don't think we ever viewed or expressed it in those terms because clearly, that wouldn't be attractive. I think our view was that if someone was to obtain a right of access - and it seemed to be feasible at Tarong North, so I'm not sure why not at Tarong - then we would prefer that right of access to be at Tarong and, therefore, obviously, we viewed it as a feasible option. [emphasis added] 3173 Even though Mr White (and the Cement Australia ash team) viewed it as a "feasible option" for a third party to build a classifier and obtain access to Tarong ash for processing, with Pozzolanic's contractual rights derived from the provisions in place as described, it seems to me significant that Mr White, as an experienced operator and manager of an undertaking functioning in the concrete grade flyash market, standing hypothetically in the shoes of a third party, would have wanted "some form of amended arrangement" to the terms of the existing Pozzolanic TEC contract to provide such a third party with either a "guaranteed volume" of ash or, as the "best arrangement", the "allocation" of some hoppers in each unit at Tarong to the incumbent, and others hoppers to a third party. For Mr White, that view of it might not have prevailed by July 2006 because by then the Pozzolanic TEC Agreement would have only had 18 months to run and the focus for Mr White, as a hypothetical third party at that point, would probably have been upon negotiating an access arrangement to Tarong ash as part of TEC's renewal or re-tendering of the principal agreement. Nevertheless, leaving aside the focus that might have emerged in a third party's attempts to secure access towards the end of the term of the Pozzolanic TEC Agreement, the desirability of access to a guaranteed volume of ash or access to particular hoppers for a third party, from the outset of the term, remains a step that Mr White thought desirable, from a third party's perspective. 3174 As to Tarong North, Mr White accepted that once Pozzolanic installed the classifier at Tarong North, it had first right of access to the ash from Tarong North for processing for the extraction of concrete grade flyash, and the result of Pozzolanic installing a classifier at Tarong North, would be that no one else would install a classifier at Tarong North. Mr White put it this way: "I think our view was that if any party, regardless of their rights, installed a classifier first at Tarong North no other party would, including ourselves, and given that we had bought and paid for first rights and an obligation to put a facility in, we felt that was what we should do" [emphasis added]. 3175 Mr White gave evidence that having installed a classifier at Tarong North, it was Pozzolanic's "hope" that no other party would install a classifier. Mr White also accepted that it was more than a hope and that it was "certainly [Pozzolanic's] expectation it [a third party installation] wouldn't happen" (T, p 2469, lns 14-23). 3176 Had the provisions of the Tarong Contract included, for example, a power in TEC (and a clear corresponding obligation in Pozzolanic to act in conformity with the exercise of the power by TEC) to allocate or regulate, for the benefit of one or more third parties seeking access to Tarong ROS ash, either access to a guaranteed volume (a sum certain in the mind of a possible new entrant) of raw unprocessed flyash, or access to particular off-take points or "Ash Transfer Points" on particular hoppers, in particular zones, at particular times, perhaps cycled as between Pozzolanic and a third party (or third parties), or permanently allocated hopper points, at which a third party could readily connect its collection equipment and lines (with a corresponding direction to Pozzolanic to temporarily disconnect its collection plant and equipment) to remove raw Tarong ash into third party processing facilities (and then removal of concrete flyash into a temporary storage silo), the contract might well have facilitated new entrant behaviour productive of rivalry, contestability and a new dimension to the competitive process in the SEQ concrete grade flyash market. Alternatively, such provisions would have at least mitigated the collective disincentives in the grant of the rights by the identified provisions, having the effect of discouraging a new entrant from obtaining ash at Tarong for processing it in its third party facilities so as to supply concrete grade flyash into the SEQ concrete grade flyash market in competition with the incumbent supplier of 95% of all concrete grade flyash sold and supplied into the SEQ concrete grade flyash market. 3177 Confronted with the commercial disincentives contained in the provisions I have mentioned, where might a putative new entrant to the SEQ concrete grade flyash market have turned in 2003 for five years, from the date of the making of the TEC Pozzolanic Contract, for feedstock ash for processing, for entry into the SEQ concrete grade flyash market? There would be little point turning to Millmerran as Pozzolanic had a contract giving it the right to take 135,000 tonnes of concrete grade flyash out of Millmerran ROS ash (coupled with a corresponding supply obligation in MPP) and the quality of the ash had to be determined. Swanbank ash was under contract to Pozzolanic. Any new ash out of Tarong North was under contract to Pozzolanic with the same bundle of rights conferred upon Pozzolanic as those in relation to the Tarong Power Station. Buying ash from NSW power stations required a new entrant to confront the significant disincentives in the transport costs of bringing the product into SEQ. 3178 It follows that the provisions of the Tarong Contract of 26 February 2003 as they applied to access to unprocessed flyash from the Tarong Power Station, had the effect, and the continuing likely future effect, of substantially lessening competition in the market for the supply and acquisition of unprocessed flyash and the effect, and continuing likely future effect, of substantially lessening competition in the SEQ concrete grade flyash market because, first, the provisions operated to discourage and thus hinder and prevent third party entry into a supply arrangement at Tarong Power Station with TEC for raw flyash for processing for entry into the SEQ concrete grade flyash market, and discouraged and hindered and prevented third party entry into the SEQ concrete grade flyash market with processed Tarong concrete grade flyash. In addition, other SEQ raw flyash sources were not available to a third party. 3179 Second, an assessment of the future scope of rivalry and the competitive process in each market with the identified Tarong Power Station provisions in place, reveals an immediately diminished future competitive process in each market upon the making of the contract, by operating to discourage, hinder and prevent third party entry at Tarong thus removing any immediate future potential constraint upon Pozzolanic's discretionary conduct (arising out of effective third party access to Tarong Power Station ash, and the potential entry of third party Tarong concrete grade flyash into the SEQ concrete grade flyash market), as compared with the future scope of the competitive process without the identified provisions and third party entry and contestability. 3180 Third, an assessment of the likely scope of future rivalry and the competitive process in each market over the life of the Agreement with the identified Tarong Power Station provisions in place reveals a real and meaningful likelihood of a diminished future competitive process in each market upon the making of the contract. In the absence of the provisions as framed, the real likelihood was that third parties would have sought access to Tarong ROS flyash (as they attempted to do) and secured an agreement for access to Tarong ROS flyash for processing for the extraction of concrete grade flyash for supply into the SEQ concrete grade flyash market. Had a third party obtained access, processed Tarong ROS flyash and entered the SEQ concrete grade flyash market with Tarong concrete grade flyash, the strong probability is that rivalry and contestability would have operated to constrain the prices of Pozzolanic and QCL (and challenged their market share of volume) and later Pozzolanic and Cement Australia. The likely future effect of the identified provisions was to discourage, hinder and prevent such entry (and the consequential expansion in contestability and rivalry in each market that entry would have brought). The identified provisions operated to make it likely, over the life of the Agreement, that the future scope of rivalry would be meaningfully reduced or diminished as compared with the likely scope of rivalry without the provisions. The measure of the difference is the increased participation in the competitive process by a new entrant and the constraining effect which would likely have arisen, upon Pozzolanic's volume of sales and the prices for concrete grade flyash in the SEQ concrete grade flyash market. 3181 I am satisfied that having regard to the strong interest which was shown by third parties in seeking to strike a relationship with TEC for access to Tarong Power Station ash, during the tender process leading up to the Pozzolanic/TEC Agreement of 26 February 2003, and the interest which was shown by third parties in seeking to obtain Tarong ROS ash after the commencement of the Agreement (and throughout periods of the term of the Agreement and later Tarong North ROS ash), that third party access to Tarong ROS flyash under supply agreements with TEC, and the processing of that flyash into concrete grade flyash would very likely have occurred, had the identified provisions not been included in the Agreement. 3182 Because Pozzolanic and QCL and later Pozzolanic and Cement Australia enjoyed such a substantial market share and exercised such a substantial degree of influence upon pricing in the SEQ concrete grade flyash market for the product, any new entrant activity at the Tarong Power Station of obtaining access to raw flyash for processing so as to enable new entrant competition in the SEQ concrete grade flyash market, would have been significant, real and meaningful new competition. The expansion in the scope and field of rivalry would very likely have operated to constrain Pozzolanic and QCL and later Pozzolanic and Cement Australia in the way described. 3183 Fourth, the evidence demonstrates that approaches made by third parties to TEC both in relation to access to Tarong Power Station ash and, later, Tarong North Power Station ash, resulted in responses which rendered any arrangement for access subject to the prior rights of Pozzolanic. The notion that TEC would have adopted that position is entirely unsurprising because the power station operator was giving voice to its understanding of the operation of the provisions. Any new entrant could only obtain ash for processing in circumstances where its potential right to ash necessarily stood behind the prior rights of Pozzolanic to any and all "Fly Ash" as defined so as to enable Pozzolanic to extract any and all concrete grade flyash capable of being extracted from the power station "Fly Ash" as defined, in Pozzolanic's facilities. The letters generated by TEC make it plain that TEC's view was that any third party would stand, in effect, sublimated to the prior rights of Pozzolanic. Mr White had taken the view that Pozzolanic (as funded by its parent) had paid for and obtained these prior rights. However, that view, and the view reflected in the approach by TEC to its dealings with third parties demonstrates the effect of the provisions upon new entrant behaviour at the power station. As Mr White explained in his evidence, what was actually needed from the perspective of a third party was a change to the Pozzolanic/TEC Agreement to reflect provisions which entitled a third party either to a guaranteed volume of ash (rather than episodic or transactional access to ash as and when not needed by Pozzolanic) or access to dedicated and allocated hoppers. Mr White was entirely correct about this matter. Neither of those mechanisms were incorporated into the contract. Its provisions worked an effect of substantially lessening competition in the upstream and downstream markets as earlier described. 306 As to Tarong North, the primary judge set out, at [190] of the Penalty Reasons, the following conclusions from the Reasons: 3258 A substantial purpose of the pleaded provisions of the Tarong Contract relating to the Tarong North Power Station was also each of the purposes of the pleaded provisions of the contract relating to the Tarong Power Station. The ash produced or to be produced upon commissioning of the Tarong North Power Station was new ash and it was very likely to be of like quality and standard to the Tarong Power Station ash as each station was burning coal from the same coal source. Entry into the Tarong Contract containing those provisions involved a contravention by Pozzolanic of s 45(2)(a)(ii). Pozzolanic contravened s 45(2)(b)(ii) by giving effect to the pleaded provisions in relation to Tarong North by acquiring flyash on the terms of the contract once the power station was commissioned. Cement Australia was knowingly concerned in Pozzolanic's contravention of s 45(2)(b)(ii) by giving effect to the identified provisions by funding Pozzolanic's performance of the contract by the taking of ash by truck to Tarong for processing.

The Amended Millmerran Contract 307 The primary judge outlined the contraventions concerning the Amended Millmerran Contract at [169]-[182] of the Penalty Reasons. At [172], the primary judge noted that, at the hearing on liability, the ACCC had contended that: Pozzolanic contravened s 45(2)(a)(ii) of the Act by entering into the Amended Millmerran Contract as provisions were adopted which had the purpose and effect, or likely effect, of substantially lessening competition in the SEQ unprocessed ash market and the SEQ concrete grade flyash market; Pozzolanic contravened s 45(2)(b)(ii) by giving effect to those provisions; Cement Australia contravened s 45(2)(b)(ii) by giving effect to the provisions by funding Pozzolanic's entry into the Amended Millmerran Contract; and CA Holdings, Cement Australia, Pozzolanic Industries and Mr Leon were knowingly concerned in Pozzolanic's contraventions of s 45(2) of the Act. 308 The primary judge set out, at [176]-[179], the following extracts from the Reasons in relation to these matters: 2671 Notwithstanding Mr Clarke's reasoning based on his largely intuitive view of a need for the Millmerran ash at some point during the contract term (or as it might be extended), it is nevertheless plain that a substantial purpose of Mr Clarke in deciding that Pozzolanic enter into the amended contract (although not the only purpose) was a purpose of preventing a competitor from securing a commercial relationship with Millmerran Power Station and obtaining access to Millmerran ash and then entering the market for the sale of concrete grade flyash in the SEQ concrete grade flyash market in competition with Cement Australia. Ms Collins was sounding the same warning bell for the Directors. Mr Clarke gave evidence about his high regard for Mr Chalmers's views about market developments and supply/demand matters related to sales. Mr Chalmers had warned of the effect upon sales and margins should Callide C fall to a competitor. Global Cement was in mind at the time. Mr Chalmers had also warned about the steps Neilsens were taking. Ms Collins had warned of the effect on price and margins should a competitor enter the market through an arrangement with Millmerran in the event that Pozzolanic/Cement Australia walked away from Millmerran. 2672 I do not propose to repeat all of the chronological and factual examples of these concerns otherwise set out in this Part. I have had regard to all of them. It is enough to say that based on the documents and those matters accepted by Mr Clarke and Ms Collins, that the consequences for Cement Australia of not amending and extending the Millmerran Contract, in terms of competitor entry and the spectre of rivalry based on Millmerran ash was a matter Ms Collins was particularly concerned about and felt ought to be agitated with Mr Clarke and built into the Board paper for the Directors. Ms Collins had the carriage of the development of the Board Briefing paper in the period up to the making of the decision in July 2004, until Mr Adams was retained to assume the role of re-writing the paper and looking at financial data and re-casting the paper on the preferred "justification" basis. 2673 I do not accept that the remarks of Ms Collins about a $10 price reduction for flyash and the consequences for Cement Australia's EBIT margin in the flyash business in SEQ were simply a constructed "sensitivity" calculation of the effect upon Cement Australia's EBIT margin if one assumed a price reduction of $10 per tonne for one of a hundred possible reasons. Ms Collins was saying in plain and unmistakeable terms to Mr Clarke that should a competitor enter (upon Pozzolanic walking away from Millmerran) the price would likely drop by $10 per tonne and the effect upon the EBIT margin in the flyash business would be significant. Ms Collins had asked Mr Chalmers for his view on the likely volumes lost at Millmerran should a competitor secure access to the ash. 2674 Mr Clarke was also astute to Boral's potential entry at Millmerran. Mr Clarke found Global Cement's agitations and its success at Callide "worrying". Mr Clarke and Ms Collins expressly deny that competitor entry and the possible consequences for price and margins formed a consideration in the reasoning for deciding to amend and extend the Millmerran Contract. I do not accept their evidence on this issue as it cannot stand in the face of the documents but I do accept that each of them looking back to the events believed that to be so. However, it cannot be so when all of the evidence is considered, and in this sense Mr Clarke and Ms Collins although seeking to assist the Court's analysis of the events, are simply confused. … 2676 A substantial purpose of Mr Clarke in Pozzolanic's entry into the amended Millmerran Contract was that of preventing competitor entry at Millmerran and especially Boral's entry at Millmerran. Mr Clarke says that Mr Leon was content to adopt Mr Clarke's reasoning and his view of it. I am willing to accept that Mr Leon accepted Mr Clarke's decision-making but I am not satisfied on the evidence up to the end of July 2004 of Mr Leon's purpose in electing to accept Mr Clarke's view of the Millmerran position. … 2694 However, I am satisfied that a substantial purpose of Mr Clarke in amending the Millmerran Contract was a purpose of hindering or preventing a rival from securing a relationship with MPP/MOC (and thus access to Millmerran unprocessed flyash) for processing for sale into the concrete grade flyash market. Mr Leon did not give evidence. I infer his evidence would not have helped Pozzolanic or Cement Australia. I accept that based on Mr Clarke's daily interaction with Mr Leon, Mr Clarke had a proper basis for believing that Mr Leon accepted and respected Mr Clarke's abilities and his assessment of decision-making on questions such as whether the Millmerran Contract ought to be amended or not. I find that Mr Leon gave his authority to Mr Clarke to amend the contract and instructed him to put in place the proposed changes to the particular clauses. The operative purposes on the evidence were those of Mr Clarke. The evidence does not reveal Mr Leon's own thinking on the purpose for amending the Millmerran Contract but he instructed Mr Clarke to put the amendment in place and a substantial purpose of Mr Clarke was to substantially lessen competition in both the upstream and downstream markets.

The Swanbank Contract 309 The primary judge described the contraventions concerning the Swanbank Contract at [193]-[196] of the Penalty Reasons. The primary judge referred to background facts in relation to the extension of the contract to 31 December 2004 and the further extension of the contract from 31 December 2004 to 30 June 2005. The primary judge then set out, at [194]-[195] of the Penalty Reasons, the following passage from the Reasons: Swanbank considerations 3215 The position in relation to Pozzolanic's arrangements with Swanbank can be stated in fairly short terms. As discussed in Part 6, Pozzolanic had enjoyed a longstanding contractual arrangement with Swanbank which conferred, in substance, exclusive access to Swanbank ash subject to certain protocols apparently designed to facilitate third party access but always subject to the prior rights of Pozzolanic. The early contractual arrangements had subsisted since 1993 by force of Contract H0315/93. That contract was amended by the letter of 9 September 1998 (with the amending agreement signed on 30 September 1998) to extend the term for four years commencing 1 January 1999 and ending on 31 December 2002 subject to the option in Pozzolanic to extend the term to 31 December 2004. The event upon which the option was conditioned occurred, and in July 2002 Pozzolanic effected an extension of the amended contract until 31 December 2004. For all practical purposes, the contract was an exclusive supply agreement until 31 December 2004. … 3219 … from about the second quarter of 2005 the Swanbank ash became particularly problematic in terms of its quality. I have identified the evidence about that matter earlier and I will not repeat it here. It is reflected in the observations of Mr White, the strategic planning assessments of Mr White and the evidence of Mr Zeitlyn and others. It is reflected in Mr Blackburn's evidence and his quality assessment reports. I accept Mr Blackburn's evidence on these matters. 3220 … Mr White understood the position to be, from about the middle of 2005 (and perhaps earlier), that CS Energy was operating on the footing that it saw itself as unconstrained in its dealings with third parties. That view was entirely consistent with the evidence of Mr Christy. The content of that evidence is set out at [693] of these reasons and I will not repeat it here except to say that in Mr Christy's view, Pozzolanic did not exhibit any desire to prevent third party access to unprocessed ash at Swanbank and exhibited no obstructive approach to CS Energy giving third party access at Swanbank, if it felt inclined to do so. 3221 Of course, Mr White had put in place by his letter of 11 March 2005 a request for an extension of the terms of the contract from 31 December 2004 to 30 June 2005 and Mr Christy had agreed to that extension on 15 March 2005. There can be little doubt that the point of the request was to preserve Pozzolanic's exclusive access to the Swanbank ash at least until 30 June 2005. In Mr White's earlier strategic analysis reflected in the documents I have extensively described earlier in these reasons, Mr White saw that one of the solutions to competitor threats at Swanbank was to take all the Swanbank ash. Mr White, Mr Leon, Mr Zeitlyn and others, in December 2004, prior to the expiry of the Swanbank Contract, made a visit to Senior Management at Swanbank to talk about the strategy of Pozzolanic taking all of the Swanbank ash. 3222 Nevertheless, in the period from 1 January 2005 to 31 December 2006 Mr Christy did not regard himself as constrained in any dealing with any potential off-taker by reason of the contractual arrangements with Pozzolanic [693]. Whilst that view was inconsistent with the terms of the extended contract up to 30 June 2005, I accept that Mr White proceeded on the same footing about this question as Mr Christy. 3223 To the extent that the contract as varied by the 1998 letter and as extended to 31 December 2004, and then as extended to 30 June 2005, conferred exclusivity of access, in substance and in form, upon Pozzolanic, I accept that that position came to an end by 30 June 2005 but in terms of the dealings, CS Energy was conducting itself as if it was free of that constraint from the early part of 2005, without serious objection from Pozzolanic. … … 3225 I accept, however, that in the period, in particular for the purposes of this case, from the beginning of 2001 and throughout 2002 and up to and including the end of February 2003 when the Tarong Contract was signed, the contractual arrangements between Pozzolanic and CS Energy at Swanbank, conferred exclusivity of access to Swanbank ash upon Pozzolanic and QCL. That position continued until 31 May 2003 and to 31 December 2004 during the period of the Pozzolanic and Cement Australia arrangements. That position also continued, in substance, until 30 June 2005, although Mr Christy saw himself free to conduct negotiations with third parties from about January 2005. 3226 The volume of ash taken by Pozzolanic from Swanbank was, as compared with the Tarong volumes, small but yet very significant. It was flyash substitutable for, or treated by Pozzolanic as substitutable for, Tarong ash. Third party access to Swanbank ash and sales of processed Swanbank ash by a third party into the SEQ concrete grade flyash market would have had significant competition effects as it would very likely have triggered MFN consequences in Pozzolanic's supply price to its major customers. In the Pozzolanic and Cement Australia correspondence I have reviewed and described in these reasons, Pozzolanic put buyers of concrete grade flyash on notice that Tarong ash, if not available for any reason, might well be substituted with Swanbank ash. 3227 I am satisfied that the pleaded provisions of the Swanbank Contract had the effect and the continuing likely effect from the beginning of 2001, relevantly, of substantially lessening competition in the SEQ concrete grade flyash market because any new entrant to that market seeking to use Swanbank flyash, could not secure consistent or regular supply of ash for processing from Swanbank due to the provisions of the Swanbank Contract. The provisions had the effect and the continuing likely effect of substantially lessening competition by preventing access by a rival to a source of ash in the upstream unprocessed flyash market at Swanbank. The future state of competition in the SEQ concrete grade flyash market without the pleaded exclusive terms reflected in the Swanbank Contract would likely have seen third parties securing a source of supply of ash at Swanbank, processing that ash and entering the SEQ market for the supply of concrete grade flyash. Having regard to Pozzolanic and Cement Australia's substantial position in the market, any nascent competition of that kind would have been very significant for the process of competition. Apart from that likely transactional rivalry, rivalrous supply of Swanbank concrete grade flyash would likely have triggered the MFN consequences which would in turn have been productive of price competition on a broader scale. 3228 In that sense, the stand alone provisions of the Swanbank Contract with the provisions had this effect upon future competition. 3229 However, the additional significant matter in relation to the Swanbank arrangements is the combined effect of those arrangements in circumstances where not only could a third party not practically obtain a regular and consistent supply of ash for processing from Swanbank until about 30 June 2005, but such a party could not turn to the other source of supply in SEQ, namely, the Tarong Power Station. 3230 The simple fact is that Pozzolanic was standing at the gate at both places. 3231 By March 2003, Pozzolanic found itself in the position where it had the extension of the Swanbank Contract in place; it had secured the contract for Tarong and Tarong North in the terms already discussed; and it had secured the contract at Millmerran for priority access to a minimum of 135,000 tonnes of concrete grade flyash. From March 2003 to 30 June 2005, the provisions of the Swanbank Contract continued to have the effect or likely effect, in conjunction with the Tarong provisions, of substantially lessening competition in the sense that the future scope of rivalry would be diminished by reason of the provisions as compared with the likely field of rivalry which would have emerged had the provisions not had the effect of hindering and preventing third party access to Swanbank ash either at all or on any regular and consistent basis enabling new entrant competition.

Parts 5 to 16 of the Penalty Reasons 310 In Part 5 of the Penalty Reasons, the primary judge set out the ACCC's contentions in relation to penalty. In Part 6, the primary judge set out the ACCC's contentions in relation to the specific issues of market harm flowing from the contravening conduct and benefit accruing to the respondents by reason of the contravening conduct. This included discussion of four approaches which were said by the ACCC to support the conclusion that the contravening conduct of the respondents led to measurably higher prices in the market. The four approaches (as summarised at [288]-[291] of the Penalty Reasons) were as follows: (a) The first approach involved an examination of the respondents' own analysis of the likely competitive price. The ACCC said that the assessment of Pozzolanic and QCL before and after entry into the Original Millmerran Contract and Amended Millmerran Contract was that prices would have been $14 to $16 per tonne lower if another party had obtained the Tarong or Millmerran Contract. On this footing, the ACCC said that over the period 2002 to 2006 the market harm through higher prices was in the order of $22 million to $42 million. (b) The second approach involved an examination of the prices prevailing in NSW as a comparative geographic region. (c) The third approach involved an examination of the prices that prevailed in the market once Sunstate and IFB entered the SEQ concrete grade flyash market in 2007 and 2008 respectively. (d) The fourth approach involved an examination of the relativities between cement and flyash prices and inferences which might be drawn from those relativities. 311 In Part 7 of the Penalty Reasons, the primary judge discussed the ACCC's contentions concerning benefits derived by Pozzolanic/QCL and Cement Australia from maintaining a high market share. The primary judge summarised the substance of the ACCC's contention at [356] of the Penalty Reasons as follows: notwithstanding that Millmerran ash was exhibiting qualitative technical difficulties for use as concrete grade flyash as a partial substitute for cement in the production of concrete, by the contravening conduct of making the Original Millmerran Contract on 30 September 2002 containing provisions which at least until 31 December 2003 had the effect and likely effect of substantially lessening competition, and making the Tarong Contract in February 2003 containing provisions that had the effect and likely effect of substantially lessening competition (and so too the Swanbank extensions), and by giving effect to those provisions, the respondents derived the benefit of maintaining a level of market share that, but for the contravening conduct, would have fallen and the measure of the difference is quantifiable with some degree of analytical integrity. 312 In Part 8 of the Penalty Reasons, the primary judge set out the ACCC's view as to the "appropriate" penalties in respect of the contravening conduct. The primary judge noted, at [381], that the ACCC contended that the making of and giving effect to each of the contracts containing the relevant provisions gives rise to entirely separate contraventions. Further, as noted at [382] of the Penalty Reasons, the ACCC submitted that: for each contravention, both the "likely level" of profit earned from the conduct and the "level of profit" expected to be earned from the conduct are significant factors to be taken into account in determining the penalty; and the penalty should upset any calculations of profitability arising out of the contraventions. 313 In Part 9 of the Penalty Reasons, the primary judge set out the contentions of the respondents. As noted at [447] of the Penalty Reasons, fundamentally, the respondents challenged the various methodological approaches adopted by the ACCC in seeking to establish the measure or quantification of the but for price which would have prevailed in the SEQ concrete grade flyash market in the period of the contravening conduct. They also challenged the relevance and utility of the data in the period 2011 to 2013 in seeking to establish the shape and character of competition as a measure of what might have occurred in the period 2002 to 2006 but for the contravening conduct. In the course of Part 9 of the Penalty Reasons, the primary judge made the following observations regarding the 'counterfactual world'. We set this passage out, as it is expressly referred to by the primary judge later in the Penalty Reasons in the course of his essential reasoning. The counterfactual world 477 Before further examining the respondents' contentions, the proper approach to the counterfactual should be noted. The factual world, as found, is one in which the respondents became the preferred tenderer at Millmerran and Tarong/Tarong North; they negotiated and won each contract; potential rivals (other bidders) were unsuccessful; and the contracts contained the identified provisions that had the purpose, effect and likely effect of substantially lessening competition as found. 478 A counterfactual world might have been one in which the respondents won the Millmerran Contract as made but failed to win Tarong; lost Millmerran but won Tarong as made; failed to win each contract; or won either or both contracts on terms without the proscribed provisions. The contravention of s 45(2)(a)(ii) of the Act arose because a contract (for example, the first one in time being the OMC, leaving aside the Swanbank Contract for the moment) had been made containing provisions which (leaving aside purpose) had the statutory effect or likely effect judged by looking to a counterfactual world in which the respondents would operate under a Millmerran ash supply contract without the proscribed provisions and the shape of competition in that world was considered as a comparative exercise with the shape of competition in a future world with the Millmerran Contract in place with the proscribed provisions. 479 The factual world as it subsisted from 1 October 2002 to 26 February 2003 was then impacted upon by entry into the Tarong Contract on 26 February 2003. Then, one counterfactual world was one in which the respondents had the Millmerran Contract in place as made with the proscribed provisions and the question of whether the identified provisions of the Tarong Contract had the effect or likely effect of substantially lessening competition would be judged by looking to a counterfactual world in which the respondents would operate, from 26 February 2003, under the Millmerran Contract as made and under a Tarong ash supply contract without the proscribed provisions of that contract. 480 In that Tarong counterfactual world the question becomes: what is the future shape of competition in such a world as compared with future competition in a world with the Tarong provisions in place? 481 Similar questions arise concerning the Swanbank extensions. 482 Also, because there are separate events each informed by their own factual circumstances and chronology, the effect and likely effect of provisions of particular contracts have incremental effects and likely effects. 483 These questions of what would the future state of rivalry and contestability look like in a future world without the proscribed provisions of the particular contract as compared with the future world under that contract with the provisions, is the orthodox method of determining whether, for example, "making" a contract with the "identified" provisions falls foul of the statutory proscription in s 45(2)(a)(ii). Similar questions arise when considering "giving effect" to identified provisions for the purposes of s 45(2)(b)(ii). That was how the case was run by the ACCC because that was the case (leaving aside purpose) it had to make good according to our jurisprudence on these sections of the Act: the "with and without test" which is not a "before and after test". 484 As to the OMC, for example, without the proscribed OMC provisions, rivals would likely have sought access to Millmerran ash so as to enter and contest the SEQ cgf market (although the technical difficulties with the ash gave rise to the dissipation effect earlier described by 31 December 2003). Rivals would likely have also sought access to the tried, proven, well-understood and well-received Tarong ash (at least some of it) had not the proscribed provisions of the Tarong Contract been adopted. 485 All of this goes to whether a contravention of s 45 on either footing arose and to a question of the damage to the future process of competition inflicted by adopting provisions of the relevant contract. The extent of that damage inflicted upon future competition or market harm might be measurable (that is, capable of quantification) or it might not. 486 When the question is one of "benefit", the Court looks to the factual world and asks: what benefit did the respondents derive by adopting the proscribed provisions of the contract (or proscribed provisions of sequential contracts). Having established that contravening conduct has occurred by examining the counterfactual with and without world, the question is, what benefit was obtained by the respondents by reason of the contravening conduct? 487 The benefit obtained by reason of the contravening conduct is that which derives from a causal link between the contravening conduct and the contended benefit. The causal link between contravening conduct and contended benefit is not found in or measured by descending into a counterfactual world and examining how much market harm has been done by adopting the provisions. Rather, the s 45(2)(a)(ii) enquiry, for example, as to benefit is: what benefit did the respondent(s) obtain because a contract was made containing a provision that would have or be likely to have the effect, when made, of substantially lessening competition? 488 That question is itself a "but for" test: did the respondent(s) obtain an identified benefit which but for the fact of the contravening conduct, the respondent would not have obtained? 489 For the purposes of the exercise of the discretion on penalty, the Court proceeds on the footing that the respondents made each contract in the terms as made and asks, as to benefit, did the respondents obtain a benefit that but for the contravening conduct (for example, making a contract with the proscribed provisions) they would not have obtained? The answer to that particular but for question does not involve examining a circumstance in which the respondents would not have won the relevant contract at all and would have been then deprived of any ash to sell at all (under the relevant contract). Otherwise, the fact of having ash to sell (along with sales of it) would itself be regarded as a benefit obtained but for the contravention. Answering the relevant but for question is the mechanism by which the causal link to benefit is tested. If the contended benefit arising out of adopting the proscribed provisions of the Tarong Contract is said to be, say, a price $20/t higher than the price that would have prevailed but for the contravening conduct, the measure of that contended benefit will be tested by asking whether the $20/t is attributable to the contravening conduct and that question will be answered by asking whether the respondents, operating under an ash supply agreement with Tarong, without the provisions, would or would not have derived a price advantage or benefit of $20/t. 314 In Part 10 of the Penalty Reasons, the primary judge set out the parties' respective submissions in relation to the issue of culture of compliance. In Part 11, the primary judge set out the respondents' contentions as to maximum penalty, parity and the totality principle. 315 In Part 12, the primary judge set out the respondents' contentions as to the "appropriate" penalty. As noted in [572] of the Penalty Reasons, the respondents said that the Court should: set the penalty by reference to four courses of conduct identified by the respondents rather than on the basis of 22 separate contraventions; not accept the profit calculations made by the ACCC; conclude that there is no evidence as to the loss or damage caused by the contravening conduct; set a penalty having regard to the circumstance that the respondents have not previously contravened the Act; set the penalty having regard to certain other circumstances outlined by the respondents; and take into account the penalties imposed in other cases where the contravening conduct "bears some similarities". The primary judge noted, at [573] of the Penalty Reasons, that the respondents proposed that, assuming the penalty to be imposed was less than the statutory maximum, the Court impose penalties jointly and severally on the respondents. The respondents further submitted that, provided that the penalty to be imposed is less than $10 million, the Court has jurisdiction to impose liability jointly and severally on all of the respondents and such an approach is consistent, it was said, with the fact that the ACCC did not attempt to distinguish between the different respondents. 316 The primary judge drew attention, in Part 13 of the Penalty Reasons, to the "canyon" between the positions of the parties as to the appropriate penalties. On the one hand, the ACCC contended that, having regard to all of the conduct expressed in the various contraventions (including the additional contentions, advanced at the penalty hearing, regarding CA Holdings and Cement Australia), a penalty of $97 million was the appropriate penalty to be imposed. On the other hand, the respondents contended that the appropriate penalties should be in the order of $4 million. 317 In Parts 14 and 15, the primary judge set out further contentions of the ACCC and the respondents respectively. In Part 16, the primary judge dealt with the expert evidence of Dr Williams. 318 In Part 17 of the Penalty Reasons, the primary judge considered, first, whether a finding should be made that CA Holdings was knowingly concerned in Pozzolanic's contraventions of s 45(2)(a)(ii) of the Act in connection with the Amended Millmerran Contract and the Swanbank extension to 30 June 2005; and, secondly, whether Cement Australia was knowingly concerned in Pozzolanic's contravention of s 45(2)(a)(ii) concerning that Swanbank extension. The primary judge concluded (at [743]-[744], [756]) that he was not satisfied that CA Holdings was knowingly concerned in Pozzolanic's contraventions in connection with the Amended Millmerran Contract and the Swanbank extension to 30 June 2005. In relation to Cement Australia, the primary judge concluded that it was knowingly concerned in Pozzolanic's contravention concerning the Swanbank extension to 30 June 2005 (Penalty Reasons, [756]-[757]).

Part 18 of the Penalty Reasons: the primary judge's core reasoning 319 The primary judge's core reasoning in relation to the penalties to be imposed is contained in Part 18 of the Penalty Reasons, with reference back to earlier parts of those reasons. At [760], the primary judge noted that he had expressed some views about particular matters in the course of considering the parties' submissions, such as the correct approach to the counterfactual as set out at [477]-[489] of the Penalty Reasons (set out above). At [761], the primary judge said that he had examined the true character of the contraventions and contextual matters relevant to those contraventions, including the nature and extent of the contravening conduct and the circumstances in which the conduct took place. These parts of the Penalty Reasons have been described above. 320 The primary judge then made the following additional observations at [763]-[775] of the Penalty Reasons in relation to (what may be described as) "qualitative" matters: 763 There is no doubt that leading up to entry into the OMC (and a relevant starting point might be 2001) and throughout the period 2002 to 2006, QCL and Pozzolanic, in the period up to May 2003, and CA Holdings and the Cement Australia group of companies thereafter, enjoyed a substantial degree of power in the SEQ unprocessed flyash market and the SEQ cgf market. The degree of that market power amounted to, in substance, a monopoly. Those companies relevantly controlled the sources of unprocessed flyash. Both contracts, of course, were subject to tender arrangements. Pozzolanic/QCL won the tender for Millmerran and ultimately entered into a contract, through the vehicle of Pozzolanic, for the acquisition of Millmerran unprocessed ash on the relevantly identified terms which were adopted for the purpose and had the effect and likely effect of substantially lessening competition. 764 Pozzolanic/QCL entered into the OMC contract in order to risk-manage its exposure to the possibility that those companies might not win the Tarong Contract. In simple terms, that is why those companies were not found to have taken advantage of their market power. It is not necessary to re-visit the analysis of that matter. The presently important matter is that even though Pozzolanic/QCL entered into the OMC in circumstances where that conduct did not engage a contravention of s 46 of the Act, the relevant provisions of the contract identified earlier in these reasons were adopted for the purpose and had the effect and likely effect of substantially lessening competition. The rational need for a contract with Millmerran did not carry with it the need to adopt provisions for the purpose and having the effect and likely effect of substantially lessening competition, which brought about contraventions of s 45 of the Act. 765 In all of the documents examined in the course of the principal liability judgment and the documents referred to by the parties in the penalty aspects of the proceedings, one thing is perfectly clear. Nowhere is there any debate which throws up considerations by which Pozzolanic/QCL would seek to serve their own commercial rational interests by securing a contract with Millmerran but, at the same time, adopt provisions which would enable third parties who might wish to secure access to a new source of ash and enter the market, to do so. The objective and the purpose was to secure the Millmerran Contract so as to serve the rational interests of Pozzolanic/QCL but do so in a way which usefully prevented any third party securing access to any of that ash. It is also perfectly obvious that the economic analysis by officers of Pozzolanic/QCL was that those companies controlled a market for cgf in SEQ; it produced significant revenues; it generated high margins; and the entire market ought to be preserved for Pozzolanic/QCL. Pozzolanic/QCL sought exclusive supply arrangements from Millmerran and Tarong at the outset of their tender negotiations and that was undoubtedly their frame of mind. Thus, they sought to adopt provisions which had the purpose of substantially lessening competition and provisions which would have the same effect and likely effect. They did so from a standpoint of market dominance amounting to monopoly. 766 Ultimately, Pozzolanic and QCL were saved from themselves, in fact, to a considerable extent, because the Millmerran ash which they assumed would be substitutable for Tarong ash and would place in jeopardy their prices, revenues and margins should a third party obtain access to it and compete with them, proved to exhibit substantial technical and colour difficulties which made it unable to be used as fine grade concrete grade flyash in the SEQ cgf market. 767 There is also no doubt that the purpose of the identified provisions of substantially lessening competition was a purpose incubated by Mr Ridoutt and Mr Wilson and embraced by Mr Arto and ultimately Mr Maycock. Mr Ridoutt and Mr Wilson were not just subordinate line managers engaged in misadventure of their own. They were significant senior responsible managers steeped in the flyash business. Mr Arto was a Director and CEO. Mr Maycock was the Chairman and a highly experienced and sophisticated Director imbued with all of the knowledge and dynamics of the flyash and concrete markets. He was Holcim's man in Australia. Mr Arto was also from the Holcim school. 768 There is also no doubt that in adopting the particular provisions of the OMC, Mr Ridoutt and Mr Wilson and Mr Arto had a sense of the competitive pressures which would be placed upon flyash pricing and margins should a competitor enter the SEQ cgf market armed with Millmerran ash as a substitutable ash. Their views about all of those matters may have been wrong. Those views might have been formulated upon assumptions about the quality of the Millmerran ash which proved to be wrong. However, they had a view that if a new entrant came into the SEQ cgf market with substitutable ash they would not be able to maintain their margins. Price and volumes would come under pressure. 769 As things turned out, the Millmerran ash proved to be very problematic and as I have already observed, much scientific analysis was deployed in trying to understand the cause of the problems. Once the market became informed about the nature of the problems and more particularly the fact that Millmerran ash would not be readily on the market as a substitutable ash, the effect and likely effect of the provisions began to dissipate. Those effects had dissipated by 31 December 2003. 770 I accept that deterrence requires a significant penalty to be imposed upon Pozzolanic/QCL in respect of the conduct of adopting provisions for the purpose of foreclosing third party competitor entry irrespective of whether ultimately, in one sense, those companies, their senior management and directors, need not have worried about the strategic threat of unprocessed flyash from Millmerran. 771 I also accept that the conduct of crafting and adopting provisions of the OMC for the purpose of foreclosing third party entry and thus substantially lessening competition, was undertaken with the sense of deliberateness contended for by the ACCC. It is, of course, true that there were other purposes which were not unlawful purposes or which did not give rise to contraventions of the Act. However, Pozzolanic/QCL could have served those commercial purposes without engaging in, as a substantial purpose, the purpose of adopting provisions foreclosing third party entry at Millmerran having the purpose of and having the effect and likely effect of substantially lessening competition in the SEQ unprocessed flyash market and the SEQ cgf market. However, Pozzolanic/QCL chose to take a different course. 772 At the moment in time when Pozzolanic/QCL adopted the relevant provisions of the OMC, those companies understood the risks from a competition law perspective and did not have a satisfactory or effective compliance program. I accept that the respondents have now adopted a compliance program with proper integrity. 773 As to the contravening conduct so far as it relates to adopting the provisions of the OMC, I am not satisfied that the respondents have shown a disposition to co-operate with the ACCC in relation to those matters. They took a course entirely open to them to contest the question of whether they had engaged in conduct in contravention of s 45 of the Act and, of course, that stance has to be viewed in the context of their decision to challenge the contentions of contraventions of s 46 which the ACCC failed to make good. 774 In principle, having regard to the qualitative circumstances surrounding the conduct and taking into account the nature and extent of that conduct, the circumstances in which it took place, the degree of market power the relevant respondents enjoyed at that moment in time, the deliberateness of the conduct and the engagement of senior management and directors in it, I am satisfied that a substantial pecuniary penalty ought to be imposed in respect of that conduct. I accept, as the ACCC submits, that Pozzolanic/QCL were respondents conducting a very significant business when the contraventions occurred and I accept that the respondents in the post-merger circumstances are also conducting very significant businesses. I see no good reason to proceed on the basis that the Court ought to only have regard to the scope and nature of the flyash business itself. Of course, the conduct took place within the flyash segment of the overall businesses including the Cement Australia Partnership. The flyash businesses were, in their own right, significant businesses. Nevertheless, the size and scope of the respondents needs to be taken into account more generally as an aspect of deterrence in determining an appropriate penalty. In doing so, the arrangements in relation to the Cement Australia Partnership and the role of Cement Australia in that Partnership needs to be taken into account. 775 In considering the qualitative matters, I have taken into account the impact upon the SEQ unprocessed flyash market and particularly the SEQ cgf market in terms of the harm inflicted upon competition especially in the SEQ cgf market. In the principal liability judgment, I form views about what would likely have occurred had a new entrant entered the SEQ cgf market with contestable ash. Professor Hay had views about that topic as did Mr Arto, as I found. The provisions had the effect of foreclosing competition in the way described in the principal liability judgment. When Pozzolanic/QCL adopted the identified provisions which had the purpose, effect and likely effect of substantially lessening competition they simply did not know that the ash would prove to be problematic and not substitutable for and thus contestable with Tarong ash. Nevertheless, their purpose was clear. 321 After these observations, the primary judge addressed the penalties to be imposed, considering these by reference to the contraventions relating to each contract in issue. In the course of this part of the Penalty Reasons, the primary judge referred both to the qualitative matters discussed in the passage set out above and to the quantitative matters discussed in a later paragraph ([818]) of the Penalty Reasons (set out below). 322 As to the contraventions relating to the Original Millmerran Contract, the primary judge said at [776]-[783] of the Penalty Reasons: 776 Having regard to all of these qualitative matters, in the context of identifying a pecuniary penalty which serves the interests of deterrence, it seems to me that an appropriate pecuniary penalty as a matter of instinctive synthesis of all the factors in respect of the adoption of the provisions of the OMC and taking into account the matters set out at [818] of these reasons, is $3.5 million. 777 Pozzolanic was the entity that conducted the flyash business in the sense that it was the company which entered into the contracts with the power stations and it managed and operated the collection and processing facilities. QCL was the entity that sold cgf into the SEQ cgf market. Pozzolanic was ultimately a wholly owned subsidiary of QCL. Pozzolanic made the contract but it only made it because QCL caused it to be made with Pozzolanic. PIPL was the entity selected as the guarantor. It became the guarantor simply because of its position in the corporate structure and only because QCL caused it to be selected to provide the guarantee. 778 The prime mover in all of the conduct was QCL. 779 In terms of the contraventions, Pozzolanic contravened s 45(2)(a)(ii) of the Act by making the OMC with the relevant provisions having the purpose, effect and likely effect. Pozzolanic gave effect to the provisions until 31 December 2003. QCL was knowingly concerned in Pozzolanic's conduct in making the agreement and it gave effect to the provisions day-to-day by funding Pozzolanic's performance of the contract. Each class of conduct (making, giving effect to, being knowingly concerned in) gives rise to a separate contravention of s 45 of the Act. Even though that is true, I accept that there are two fundamental things informing this particular conduct. 780 The first is the making of the contract with the provisions ultimately brought about by QCL through the vehicle of Pozzolanic. 781 The second is acting upon the agreement as reached and giving effect to it and thus taking the benefit of it at least until the effects became exhausted on 31 December 2003. Although the effects had become dissipated by 31 December 2003, the provisions endured and they, of course, were adopted for the prescribed purpose. 782 In respect of the conduct of giving effect to the provisions of the contract as made in the period from the making of the contract until 31 December 2003, a further penalty ought to be imposed of $500,000. It should be remembered that the Millmerran ash failed to enter the market and was never capable of being used in the multiplicity of applications required of fine grade concrete grade flyash due to the technical and colour difficulties. 783 I also accept that the proper way to view the two classes of conduct is that they are two aspects of one class of conduct. That is not to say that a pecuniary penalty ought not to be determined in relation to the second aspect of that conduct. However, having regard to all of the relevant factors, I am satisfied that a penalty of $4 million in respect of the conduct reflecting both the making and the giving effect to the conduct is an appropriate penalty. 323 As to the contraventions relating to the Tarong Contract, the primary judge said at [784]-[805] of the Penalty Reasons: 784 The Tarong Contract was entered into on 26 February 2003. 785 That contract was also made in circumstances where provisions were adopted for the purpose and having the effect and likely effect of substantially lessening competition in the unprocessed flyash market and the SEQ cgf market. The Tarong Contract was a much more important contract for Pozzolanic/QCL in the sense that it had been the source of Pozzolanic/QCL's cgf for sale into the SEQ cgf market for a long period of time. It was proven, well accepted, well understood and well known. Pozzolanic/QCL had a number of very good reasons for wishing to secure an ongoing ash supply contract with TEC. Pozzolanic/QCL would not lightly give up trying to secure that contract. There was no suggestion in the proceedings that Pozzolanic/QCL engaged in a contravention of s 46 by seeking to acquire that contract. 786 Nevertheless, the same point of principle remains in relation to the TEC contract as that which applies to the OMC. Pozzolanic/QCL could have secured its rational commercial objectives by entering into an ash supply contract with TEC which gave it the necessary continuity of ash supply but nevertheless on terms which enabled third parties to acquire ash from TEC and enter the SEQ cgf market in competition with QCL. 787 That, of course, was heterodoxy to Mr Wilson, Mr Ridoutt and also Mr Arto and Mr Maycock. 788 Those gentlemen were focused upon securing the ash supply contract and doing so in a way which made it, in every practical sense, a virtual impossibility for third parties to secure access to the best ash in SEQ. They could, so easily, have adopted provisions which enabled third parties to obtain quantities of ash from Tarong and Tarong North, process it in some way and enter the market. 789 There would, of course, be other barriers to entry which a new entrant would have needed to overcome such as acquisition and deployment of the appropriate capital equipment, skilling-up in operational expertise, demonstrating a supply reputation in the market and winning the confidence of buyers, and contracts, with buyers. It is highly unlikely that potential participants entirely unfamiliar with the operational and marketing aspects of flyash would have sought to enter into arrangements with TEC and enter the SEQ cgf market. In the main, the entities expressing interest in ash supply arrangements with TEC were entities in the cement, flyash, concrete and aggregates businesses. FAA and Transpacific did not suffer from these other obvious barriers to entry. 790 As to the TEC contract, Pozzolanic/QCL again sought to obtain an exclusive agreement. Once it became clear that TEC would not accept a term conferring exclusivity, Mr Wilson took the view that Pozzolanic/QCL would need to be more creative about the provisions of the contract so as to bring about circumstances of control, through the contract, over all of Tarong's ash taken at the critical ash transfer points through the critical hoppers. 791 I accept the ACCC's submissions on the deliberateness surrounding the contravening conduct so far as it relates to the Tarong Contract. There were, of course, other perfectly proper rational purposes in seeking to secure an ash supply agreement with TEC. However, Pozzolanic/QCL could have secured its own rational commercial interests in a way entirely consistent with enabling third parties to obtain commercially realistic access to Tarong ash. 792 In these reasons, I have already described the nature and extent of the contravening conduct, the circumstances in which it took place and I have expressed views about the size and scope of Pozzolanic/QCL and the later entities concerned with the Cement Australia group of companies and the Cement Australia Partnership. 793 I have described the scope of the market power enjoyed by QCL and the deliberateness of the conduct. The conduct in the case of the TEC contract was engaged in by the same individuals who were involved in the arrangements in relation to Millmerran. At the time of these contraventions, Pozzolanic/QCL did not have in place a compliance system which isolated and protected against the contraventions that occurred. I accept that the respondents have now put in place a compliance system with integrity. As to these contraventions, I am not satisfied that the respondents have demonstrated a culture of co-operation with the ACCC. Nevertheless, it remains true that parties are entitled to test the contentions of the ACCC and advance whatever evidence and arguments they might wish to make in answer to the claims. 794 I am also satisfied that the senior officers of Pozzolanic/QCL were entirely astute to the competition law risks associated with framing and adopting the identified provisions. 795 I also recognise as found in the principal liability judgment that the effect upon competition by reason of the identified provisions was significant and meaningful. It inflicted harm upon the market by depriving market participants of an opportunity to engage with a new entrant supplier who would engage in rivalry and contestability thus forcing Pozzolanic/QCL to engage in competition, compete away inefficient costs and adapt their service offerings to the market. It is likely, as Professor Hay observed, and Mr Arto believed, that there would have been a significant effect upon QCL's margins. 796 Taking account of these factors going to all of these qualitative considerations and having regard to the matters set out at [818], I am satisfied that an appropriate penalty in respect of the conduct of making the Tarong Contract with the relevant provisions is $5.5 million. 797 Having secured the contract, QCL continued to give effect to it. In the principal liability judgment, there is a vast amount of evidence about steps particular entities were seeking to take to secure some degree of access to Tarong ash or (potentially) ash from Tarong North. Apart from entirely episodic collections of ash by a possible third party at moments in time when Pozzolanic may not have required access to all the ash available through its facilities attached to the critical hoppers, no access was available to third parties. 798 Those who tried were unsuccessful. 799 The Tarong ash was particularly significant ash in the context of the SEQ cgf market. It was well known and well received. Third parties securing access to the Tarong ash and entering the SEQ cgf market would have provided meaningful and significant competition. Again, there is nothing in any of the vast amount of material relating to the formulations of strategy by Pozzolanic/QCL and their analysis of the economic impact in the market which suggests any disposition to accommodate the possibility of third party access to Tarong ash. The entire purpose of the identified provisions was to foreclose (and risk-manage) any possibility of such an outcome. Having secured provisions serving that purpose, QCL, until the beginning of June 2003, continued to give effect to the provisions and thereafter Cement Australia continued to give effect to them. 800 It is true that the conduct of giving effect to the provisions is conduct which bears an inevitable relationship with the making of the provisions. If the conduct is examined in a linear sense rather than a disjunctive sense, the conduct consists of a corporation forming a view about striking an agreement with provisions which have the purpose, effect and likely effect of substantially lessening competition and then, having secured a contract with those provisions, performing the contract which necessarily engages giving effect to the provisions so made. However, in my view, the conduct should not be viewed as simply one class of linear conduct in the context of the Tarong Contract. There are two separate classes of conduct in relation to this contract. 801 The first is the body of activity, thinking, engagement and completion of arrangements for a contract containing particular provisions which had the purpose and creatively had the effect and likely effect of substantially lessening competition ("making"). 802 The second class of conduct involved embarking upon activities to give voice to the outcome achieved by making the contract. At any moment in time when it became apparent to Pozzolanic/QCL or Cement Australia that systemically depriving third parties of access to Tarong ash was having and would be likely to have the effect of substantially lessening competition by reason of the provisions, Pozzolanic/QCL and/or Cement Australia could have elected not to take advantage of those provisions and could have put in place protocols enabling third party access to Tarong ash. Officers of those entities could have elected not to give effect to provisions which were adopted expressly for the purpose of foreclosing third party access to the best ash in SEQ from an SEQ power station. 803 They chose not to do that. Again, doing so would have been heterodoxy. 804 I am satisfied that an appropriate penalty in respect of giving effect to the Tarong provisions having regard to all of these considerations and the matters set out at [818], is $5.5 million. 805 In relation to the Tarong Contract, Pozzolanic contravened s 45(2)(a)(ii) by making the contract containing the provisions having the purpose, effect and likely effect; Pozzolanic contravened s 45(2)(b)(ii) by giving effect to the provisions; QCL was knowingly concerned in Pozzolanic's entry into the Tarong Contract containing the relevant provisions having the purpose, effect and likely effect; and QCL was knowingly concerned in Pozzolanic's contravening conduct of giving effect to the provisions. Cement Australia contravened s 45(2)(b)(ii) on and from 1 June 2003 by giving effect to the relevant provisions. 324 As to the contraventions relating to the Amended Millmerran Contract, the primary judge said at [806]-[811] of the Penalty Reasons: 806 The Millmerran Contract was amended on 28 July 2004. 807 In these reasons, I have discussed the circumstances of the amendment. Mr Clarke and Ms Collins were the officers who were most closely engaged in the negotiations for the amendment to the contract. Mr Clarke ultimately received instructions from Mr Leon. The circumstances of that engagement have been discussed extensively in the principal liability judgment and in these reasons. 808 Mr Clarke was a senior member of the management team within Cement Australia. Ms Collins had formulated various postulations of what might occur in the market in terms of price, revenue and the impact upon EBIT earnings should a rival enter the SEQ cgf market. The evidence given by Mr Clarke about those views has been addressed extensively in the principal liability judgment. Mr Clarke thought that ultimately the technical issues with the ash would be resolved and that it would likely be useable. Mr Clarke took the view that the contract ought to be amended and extended and one of the purposes informing his mind, as a substantial purpose, was preventing a rival from securing access to Millmerran unprocessed ash and preventing a rival from entering the SEQ cgf market. 809 When Cement Australia caused Pozzolanic to enter into the amended arrangements with MPP/MOC, Cement Australia continued to enjoy a monopoly position in the SEQ cgf market. I accept the ACCC's statistics in relation to the size of the Cement Australia Group of companies and I accept that it is relevant to have regard to the Partnership arrangements and the assets and scope of undertaking of that Partnership. It was an arrangement crafted expressly for the operation of the merged entities and it was by operation of that merger arrangement that Cement Australia assumed the role of a monopoly supplier of cgf in the SEQ cgf market. 810 I am also satisfied that the conduct of amending the contract in the context of the identified provisions was conduct deliberately undertaken, at least for a substantial purpose, to foreclose the possibility of third party entry should the Millmerran ash prove to be free of the technical difficulties which had bedevilled it until then. Having caused Pozzolanic to make the amended Millmerran Contract, Cement Australia continued to give effect to it. The Millmerran ash never entered the market. The technical questions associated with the ash continued to be examined. Unlike the Tarong Contract, I regard the making of the contract and giving effect to it as one course of conduct. There is, however, an additional consideration concerning the role of Ms Collins and Mr Clarke. There can be no doubt that both Ms Collins and Mr Clarke well understood Cement Australia's monopoly position in the SEQ cgf market and well understood postulations that rival entry would have a significant impact upon prices and the EBIT margin Cement Australia used as the measure of its earnings (apart from EBITDA). I have described aspects of the engagement between Mr Clarke and Ms Collins and also Mr Adams earlier in these reasons. 811 It seems to me that an appropriate penalty in respect of the making of the amended agreement having regard to all of the factors I have discussed and the matters set out at [818], is $850,000. It was made by Pozzolanic at the direction of Cement Australia. In that sense, Cement Australia was knowingly concerned in the contravention. I regard the making of the amended contract and Cement Australia being knowingly concerned in its making as one class of conduct. (Bold emphasis added.) 325 As to the contraventions relating to the Swanbank Contract, the primary judge said at [812]-[817] of the Penalty Reasons: 812 As to the Swanbank Contract, the role of the Swanbank ash was also important. The volumes were relatively small and that became more so by 2005. Nevertheless, the ash produced by Swanbank was ash from the power station located very close to the Brisbane catchment. It was another source of cgf able to be traded in the SEQ cgf market. Pozzolanic/QCL had secured an exclusive supply agreement with the owner of the power station which ultimately became CSE. The contract had been extended on exclusive supply terms to 31 December 2004 under the extensions described in the principal liability judgment and described in these reasons. The contract was the subject of a further extension as a result of the exchanges between Mr Christy and Mr White discussed extensively in the principal liability judgment and in these reasons. 813 The Swanbank Contract was an important part of the market power exercised by Pozzolanic/QCL. No third party could secure access to the ash having regard to the contractual arrangements in place with Pozzolanic/QCL. Pozzolanic/QCL was entirely astute to the exclusive character of the contract. Pozzolanic/QCL understood that CSE was seeking to establish terms which would enable third parties to secure access to its ash. At the time of the extension to 31 December 2004 and the further extension to 30 June 2005, Pozzolanic/QCL and then Cement Australia continued to enjoy a monopoly position in the market. The terms of the Swanbank Contract foreclosed any possibility of supply of Swanbank ash to a third party. 814 Having secured the contract to 31 December 2004 and an extension of it to 30 June 2005, Pozzolanic/QCL up until May 2003, and thereafter Cement Australia, continued to give effect to the contract. Cement Australia was knowingly concerned in Pozzolanic's extension of the contract from 31 December 2004 to 30 June 2005. 815 Mr White was responsible for the extension of the contract on 31 December 2004 to 30 June 2005. Mr White's position and his seniority have been extensively described already. 816 I accept the submissions of the ACCC in relation to the Swanbank Contract set out at [383] to [390] of these reasons except in relation to the quantum of the penalty. I also accept the submissions of the ACCC in relation to the Swanbank extension for the period 1 January 2005 to 30 June 2005 except as to the quantum of the penalty. 817 I have taken into account the nature of the market harm by reason of the provisions of the Swanbank Contract, in a qualitative sense. I have also had regard to the provisions of the principal liability judgment concerning the Swanbank Contract and all matters relevant to the contraventions. I have examined at [818], the quantitative aspects urged by the ACCC in relation to benefit and market harm which engaged questions in relation to Swanbank and the sale of Swanbank cgf. Having regard to all of these factors relevant to the assessment of penalty, it seems to me that in respect of the contravening conduct in the period up to 31 December 2004, an appropriate penalty in relation to the making of that contract with the identified provisions is $1.5 million. As indicated in the principal liability judgment, substitutable ash from Swanbank would have had a significant and meaningful effect upon rivalry, prices, revenue and margins. Prior to deterioration in the quality of the ash towards the end of the contravening period, Swanbank ash was regarded by the respondents as substitutable for Tarong ash. In respect of the making of the six month extension to 30 June 2005 by Mr White, an appropriate penalty is $200,000. The extension was for a short period. In relation to the contract up to the period 31 December 2004, Pozzolanic gave day-to-day effect to that contract as did QCL by selling cgf produced from Swanbank ash. It seems to me, having regard to all of the relevant factors, that an appropriate penalty in respect of that conduct is $1 million. Like the Tarong Contract, there are two classes of separate conduct in relation to the contraventions concerning Swanbank as an analysis of conduct overall. In respect of the giving effect to the provisions in the period 1 January 2005 to 30 June 2005, the appropriate penalty is $50,000. Cement Australia was also knowingly concerned in the extension of the contract to 30 June 2005. The conduct of Mr White for Cement Australia of making the extension and Cement Australia being knowingly concerned in the contravention is a single course of conduct and no additional penalty ought to be imposed in respect of Cement Australia being knowingly concerned in the extension conduct. 326 The primary judge then considered the factors of benefit and market harm quantitatively at [818] of the Penalty Reasons. Given the significance of this paragraph for the appeal issues, we set it out in full: In relation to the various approaches to determining market harm caused by the conduct or benefit derived by the respondents, I have formed these views. (1) An attempt to measure, quantify or estimate the prices that would have prevailed in a market but for the contravening conduct is an extremely difficult and precise task. Although the ACCC in its further submissions disavows the notion that it is seeking to establish a but for price, the substance of the submissions are really directed to that task. The task is undertaken in this case by the ACCC to try and demonstrate or estimate the difference between the prices charged for cgf by QCL and later, Cement Australia, in the period 2002 to 2006 and prices that would likely have prevailed in that period had not the respondents entered into and given effect to provisions of the contracts adopted for the purpose and having the effect or likely effect of substantially lessening competition by foreclosing access to third parties to ash from Tarong, Tarong North and Swanbank (and Millmerran at least for a time, as to effects). (2) That raises the question of the counterfactual. I will not repeat what I said at [477] to [489] of these reasons. (3) The point of undertaking this analysis of the but for price is to try and identify the extent to which the respondents were better off by securing a price, a volume of sales and revenue and a level of EBIT they would not have enjoyed had the provisions not been adopted constraining third party access and new entrant competition in the SEQ cgf market. The ACCC also seeks to identify the market harm brought about by the conduct. The application of the with and without test has already made clear qualitatively that the process of competition in a future world with the provisions was substantially lessened as compared with a future world without the provisions. Now, the ACCC seeks to bolster the serious qualitative assessment already made in the principal liability judgment without an actual measure of the difference between the actual position as to prices, volume, revenue and EBIT as it was from 2002 to 2006 with those things as they would have been but for the contravening conduct. (4) As mentioned, the ACCC says in its further submissions that it is not trying to "quantify" the but for price and consequential but for volumes, revenues and EBIT but rather it seeks to identify an estimate of those things and also the forward-looking estimates of the consequences of new entrant competition identified by the respondents themselves in their own documents. This approach is later described by the respondents as the "hybrid" approach between qualitative assessments and best informed estimates of likely differentials. (5) One of the methods of gaining a sense of how much higher cgf prices were in the period 2002 to 2006, by reason of the contravening conduct, than they would have been is the extent to which the prices of cement and cgf "de-coupled" in the years 2011 and 2012. I accept the submissions of the respondents that the two invoices identified at [353] of these reasons provides no basis for a conclusion that but for the contravening conduct cgf prices in 2002 to 2006 would have been a particular proportion or ratio of the GP cement price [REMOVED TO THE CONFIDENTIAL SCHEDULE] and thus prices would have been a lesser ratio than it was (50% to 60%) in the period 2002 to 2006 with the result that, analytically, one can say that cgf prices would have been lower in the period 2002 to 2006 than they were. (6) At [333] to [349] of these reasons, I describe another measure proposed by the ACCC of the likely price differences that would have prevailed in the period 2002 to 2006 but for the contravening conduct. That measure involves an analysis of pricing differentials between Cement Australia's delivered prices and the delivered prices for cgf of Sunstate and IFB in the years 2011, 2012 and 2013, Sunstate having entered the SEQ cgf market in April 2007 (with ground Tarong North run-of-station ash) and IFB having entered in 2008 (with Millmerran ash). The margin difference for each year is set out at [349] of these reasons as it relates to Nucon. It is not an insignificant margin. Another example is given for purchases by Rocla, Gailes. The "study" years 2011, 2012 and 2013 are 5, 6 and 7 years after the end of the contravening period 2002 to 2006. I have great difficulty with this measure for a number of reasons. First, the study years for the transactions are quite a long time after the period of the contraventions which began on 30 September 2002. The contravening period under examination in the principal liability judgment ends on 31 December 2006. Second, although that which is supplied is flyash, the source of the ash in the case of Cement Australia is Tarong and Gladstone ash each of which has its own particular properties. The source of the Sunstate ash is Tarong North as mentioned, ground in Sunstate's mill, until it reaches the cgf particulate standard. The source of IFB's ash is Millmerran and some of the other comparative ash is Bayswater ash. It is not clear to me, on the present evidence, what role in pricing in 2011, 2012 and 2013 differential sources of ash played, if any, or what the impact of any comparative cement equivalence may have been or its role in pricing. Third, more would need to be known about the transactions to draw the conclusion sought to be established which is that the significant pricing differentials are only attributable to alternative pricing made possible by entry by Sunstate and IFB and had they entered the SEQ cgf market from 2002 to 2006 (which they did not, it is said, by reason of the contravening conduct), the pricing differentials now apparent in these later years of 2011, 2012 and 2013 would have been seen in Sunstate or IFB's pricing (or other third party pricing). The ACCC says that Sunstate's "ex-works" price was [REMOVED TO THE CONFIDENTIAL SCHEDULE] than Cement Australia's "average delivered price" in 2013, and the transport costs of delivering Sunstate ash to the buyers batching plants (on this comparative basis) does not account for the difference, as the tables reveal at [333] to [349] of these reasons. However, I am not satisfied that this measure of pricing differentials for the years 2011, 2012 and 2013 tells me anything ultimately probative of prices which would have prevailed in the period 2002 to 2006 but for the contravening conduct. (7) Another measure said to reveal an analogue of prices that would have prevailed in the period 2002 to 2006 but for the contravening conduct is a comparison of SEQ prices with prevailing prices in NSW. The supply of cgf in NSW was contestable in the relevant years. Prices were a function of that contestability at least in part. The ex-works prices at Mt Piper, Eraring and Bayswater are set out at [322] of these reasons for the period 2001 to 1 December 2006. A delivered pricing comparison between the prevailing prices for delivered cgf into NSW from NSW power stations and prevailing prices for cgf delivered from Tarong and Swanbank to the batching plants of buyers in SEQ is set out for the years 2003, 2005 and 2006 at [323] of these reasons. The differences, plainly enough, are significant: see [329] of these reasons. The difference postulated for the years 2002 to 2006 are set out at [330] of these reasons. (8) The difference per tonne for each year is said to be: 2002 - $26.50/t; 2003 - $33.81/t; 2004 - $26.46/t; 2005 - $29.92/t; 2006 - $15.98/t. The additional revenue for the period 2002 to 2006 based on the volume sold having regard to these price differentials is $42.087 million. The point emphasised by the ACCC is that NSW is a geographic catchment that represents a proper analogue of the SEQ market. The ACCC says that what follows is that had the contravening conduct not occurred, new entrant rivalry in SEQ would have brought about a level of delivered prices on the part of Cement Australia very similar to those prevailing in NSW. Thus, this method demonstrates, it is said, a measure of the margin by which prices were higher in SEQ in 2002 to 2006 than they would have been but for entry and contestability which was foreclosed by the provisions of, particularly, the Tarong and Swanbank Contracts. In NSW, FAA was competing with Hyrock. The ACCC says that FAA had agitated for entry into the SEQ cgf market through access to both Tarong and Millmerran ash and there is no reason to believe that had the contracts at Millmerran and Tarong/Tarong North (but particularly Tarong/Tarong North) not contained the identified provisions, FAA would not have sought to secure access to that ash. The merger of May 2003 resulted in Cement Australia having a 50% interest in FAA (and therefore ultimately Holcim, Rinker and Hanson, the beneficial owners of that interest). (9) Dr Williams accepts that one possible explanation for the marked differences in prices between the two regions is that the effective monopoly of Cement Australia in SEQ meant that it could charge uncompetitive prices. Dr Williams said that another possible explanation is that the ash sources are not homogenous. The product differentiation in the ashes would require extensive empirical work which Dr Williams had not undertaken. Dr Williams thought that another possible explanation was that transfer pricing might be a cause of the differences. The similarity in prices between Eraring, Mt Piper and Bayswater ash suggested to Dr Williams that those ashes were reasonable substitutes for each other. As to aspects of the pricing, Dr Williams seemed to be confused about the 2006 prices. However, he accepted that the SEQ average delivered price for 2006 was $69.09/t and the highest NSW price for 2006 was $54.11/t. Thus, there plainly were differentials. (10) Apart from these possible explanations, Dr Williams criticises the method of simply applying the price difference between the two regions each year across all tonnes sold in SEQ to produce an aggregated price difference of $42.087 million because the price difference, by doing so, is applied to all "tied sales" across each of the five years. The second criticism is that no proper controls were applied to isolate the causal influence of transport costs; whether prices charged were at arms-length; and tied sales were not excluded. (11) Again, I have difficulty with this method as a measure of the price that would have prevailed but for the contravening conduct. Dr Williams accepts that reference to a truly analogical market is one method recognised by economists for testing a but for price. Dr Williams also accepts that the price differentials are significant and that they need to be explained. Apart from the criticisms already mentioned, Dr Williams says that no conclusion can be reached about "average prices" unless all of the invoices for the period under inquiry are examined. The prices could just be point in time prices. It is not clear whether the prices set out in the tables are properly representative or not in the absence of a complete analysis of all of the invoices. (12) It seems to me that these questions of whether the ash is homogenous; the lack of control for other causative factors; and the need for an examination of all the invoices over the period under examination, does not enable a conclusion to be reached that, on this measure, prices in SEQ in the period 2002 to 2006 were higher than they would have been but for the contravening conduct, by the order suggested. (13) This measure is put forward as a measure of market harm of $42.087 million. That number depends upon the integrity of the pricing data to determine the differential per tonne. In principle, however, Dr Williams accepts that direct market harm can be quantified by multiplying the tonnage by the difference in price per tonne between the price actually charged and the price that would have been charged but for the conduct ([679] of these reasons) provided that those tonnes were sold to external parties: that is, not tied sales to shareholder owners. As a method of measuring market harm, therefore, Dr Williams accepts the principle of the method subject, of course, to the elimination of tied sales in the calculation and the integrity of the data. (14) Although I have expressed difficulty with the determination of the differential per tonne each year in the table at [330] of these reasons, as earlier mentioned based in part upon aspects of the evidence of Dr Williams, the differences on the face of the data are significant and they do require an explanation. The ultimate difficulty is that the evidence does not demonstrate a truly probative basis for a causative finding that the contravening conduct is the source of the differential in that measure. (15) The question of tied sales raises a much more general point of principle. Dr Williams says that tied sales should be excluded because an examination of market harm is about identifying harm caused by the contravening conduct to others: see [669] to [673] of these reasons where Dr Williams identifies the principled foundation for that view based upon his expert opinion and his understanding of the economic orthodoxy applied to determining market harm in the context of deterrence. As to the circumstances of Holcim, Rinker and Hanson and their relationship with Cement Australia, Dr Williams accepted that if Hanson, as a shareholder concrete producer buying flyash, was charged $4/t more than a rivalrous price due to contravening conduct and $1/t came back to it (due to its 25% shareholding interest) and the same result occurred for Hanson, then 50% of the higher price would go in a circle and 50% would not. If Hanson and Rinker each pay $4/t more than the "but for" price as a measure of the market harm, Cement Australia then has $8/t (and leaving aside costs for the moment) $2/t would be returned to each of Rinker and Hanson and $4/t would be returned to Holcim, a non-concrete producer. It seems then that if 60% of the sales are tied, only 50% of that 60% should be excluded. If that is so, and the market harm is said to be $42,087,793, 60% of that amount is $25,252,675 and 50% of that number is $12,626,337. The market harm excluding tied sales would then be $29,461,456 assuming the integrity of the pricing differentials which, of course, for the reasons mentioned, cannot be assumed. (16) I have examined the literature and the cases to try and identify judicial authorities for the proposition that tied sales ought to be excluded in measuring market harm consistent with the principle articulated by Dr Williams. I can find no authority on the point. As a matter of foundation principle, it seems to me to be correct to say that if a Court is seeking to identify the market harm caused by contravening conduct, the focus of the inquiry ought to be upon the market harm caused to parties other than entities associated with the companies engaging in the conduct. (17) Accordingly, I accept the proposition that in determining market harm, the proper course is to exclude harm inflicted upon shareholder entities who are engaging in tied acquisitions. (18) Apart from market harm, the ACCC has conducted an analysis of benefit derived by the respondents from maintaining a higher market share than would have been the case but for the contravening conduct. I accept, in substance, the accuracy of the data contained in the tables at [267] and [268] of these reasons as it relates to the full five years in those tables. The Tarong EBIT calculation for those years is at [408] of these reasons ($58,742,565) and the combined Tarong and Swanbank EBIT calculation is at [361] of these reasons ($63,278,191). After excluding the additional Millmerran costs, the five year EBIT calculation is $55,313,191. These financial statistics represent the value of the SEQ flyash business of and to the respondents. The EBIT of $55.313 million as a proportion of total revenues is an EBIT of 43.7% for the full five calendar years set out in those tables. It represents an EBIT of $31.11/t over 1,777,514 tonnes averaged over the five years. (19) The ACCC says that this position reflected in these statistics can be usefully and relevantly contrasted with the position the respondents would have been in across the period at least 2003 to 2006 had they lost the Tarong Contract but won the OMC. They would have earned $0.14/t or $6,429 and this difference between the two positions represents "one straightforward indicator of the potential financial benefit the [respondents] earned by preventing competition": [367] of these reasons. In other words, the ACCC sees the entire flyash undertaking of the respondents, largely derived from the sale of Tarong ash (see [408] of these reasons) as a benefit derived from the contravening conduct which should be stripped away as a function of deterrence. Plainly, that is not correct. (20) The true analytical position is that discussed at [477] to [489] of these reasons. (21) The whole of the revenues and EBIT of the flyash business from the date of the Tarong Contract (in particular) forward cannot be attributed to the adoption of the impugned provisions and thus the contravening conduct in that causal sense. Pozzolanic/QCL might have entered into the Tarong Contract with none of the impugned provisions and yet it might have sustained at least a proportion of its revenues and EBIT in the face of responding to competition notwithstanding that absent the provisions, new entrants would likely have entered with access to Tarong ash (perhaps FAA or Transpacific but also others) and brought about a significant impact on earnings through contestability with Pozzolanic/QCL and later Cement Australia. The competition impact of the provisions is significant but if the benefit brought about by reason of the contravening provisions is to be assessed, quantified or estimated, then it is necessary to approach the matter on the footing of the method identified at [477] to [489] of these reasons. (22) Another measure of the benefit said to have been derived from the contravening conduct is that once contestability occurred (foreclosed by operation of the provisions) through Sunstate and IFB, the contravening grip of the respondents on non-tied sales would have been lost and the ACCC says that the data shows that these sales collapsed from 40% of sales in 2005 to merely 6% in 2010. The ACCC says that had Sunstate or IFB entered the market in 2005 and had that event resulted in a reduction in sales to sales of cgf by Cement Australia to only 6% of the non-tied customers, Cement Australia would have lost $5,418,656 of its 2005 EBIT earnings: see [371] to [372] of these reasons. This is said to give an indication of the measure of the benefit Cement Australia derive from adopting the impugned provisions. (23) Generally, the non-tied sales represented 40% of the SEQ cgf sales of the respondents from 2005 to 2007. Those sales declined throughout 2008 to 2010. In the years 2011, 2012 and 2013, Cement Australia's percentage of sales volume in SEQ declined from [REMOVED TO THE CONFIDENTIAL SCHEDULE] in 2012 and then [REMOVED TO THE CONFIDENTIAL SCHEDULE] in 2013. The volume of sales won by competitors, Sunstate, Hyrock and IFB in that period, correspondingly amounted to [REMOVED TO THE CONFIDENTIAL SCHEDULE]. (24) As described, one significant benefit derived by the respondents from the contravening conduct is said to be the retention for each year from 2002 to 2006 of sales of cgf to non-tied customers represented 40% of the sales revenue. The ACCC then postulates the impact the respondents would have suffered had the impugned provisions not been adopted. The ACCC says that instead of deriving an EBIT across those five years of $53,282,774, the EBIT would have been $21,313,108, a difference (or postulated benefit) of $31,969,666. However, if an assumption is also made that prices were $14/t higher than they would have been but for the contravening conduct, further adjustments for that price difference on the 60% of the remaining sales results in a contended potential EBIT loss of $33,585,604. The respondents are said to have benefited to that quantifiable extent by reason of the contravening conduct: [375] of these reasons. That amount is then adjusted by the ACCC to $32,558,000: [376] of these reasons. (25) A further measure along this line of thinking is that if the respondents had suffered a loss of 40% of sales for each of the five years 2002 to 2006 and prices on the remaining 60% of sales had occurred at the prevailing NSW cgf delivered price, the potential EBIT loss is then said to be $44,158,556. That amount is said to be a measure of the benefit the respondents derived over the five years 2002 to 2006 and as a matter of principle, that benefit ought to be removed from the respondents in the interests of serving the objective of deterrence. (26) This calculation of benefit is, in many respects, quite problematic. It assumes that there would have been a loss of non-tied sales but for the contravening conduct in the way described. The position in relation to tied sales would have been different in the period from 26 February 2003 to the end of May 2003. From 1 June 2003, the sales to the shareholder concrete producers were retained by Cement Australia not because of the contravening conduct but by reason of the shareholder equity interest those buyers held in the supplier of the product. As to the non-tied sales, plainly there would have been a significant impact upon those sales as Professor Hay suggested. What is not clear is whether responsive rivalry from QCL and later Cement Australia would have resulted in a proportion of those sales being held by QCL/Cement Australia. QCL and Cement Australia might well have been reluctant to supply Tarong cgf to non-tied buyers operating batching plants within a relevant catchment of a batching plant of a shareholder concrete producer for fear that the MFN provisions of the contracts would have required QCL/Cement Australia to provide the same price to those buyers as the non-tied buyers notwithstanding that the tied shareholder buyers enjoyed the benefit of the "50% goes around in a circle principle". (27) There is no doubt that QCL/Cement Australia derived a benefit by reason of the contravening conduct in retaining a certain level of non-tied sales during the period 2002 to 2006, a significant proportion of which would have been lost to a third party entrant. The difficulty I have with the formulations as described, in the necessary detail required of the analysis as set out in these reasons, is that as a true measure of the benefit, it is not clear to me what proportion of the non-tied sales would have been lost in the period 2002 to 2006. The other calculations are then dependent upon an assumption that the entire 40% of the sales would have been lost and, on top of that, the price in any event was $14/t higher than it would have been with the result that recalculations must be made on the balance 60% of sales to reflect the deterioration in revenue and EBIT (apart from the further table factoring in the NSW delivered price as a further calculation). (28) I am not satisfied that these calculations provide the Court with a probative analysis of a but for benefit. As I have said, I entirely accept that QCL and Cement Australia garnered to itself a real and meaningful benefit by adopting the provisions. My difficulty is that in attempting to either quantify the measure of that benefit or, as the ACCC later says, estimate that benefit on an informed basis, I cannot attribute a quantification or estimate of the kind sought to be asserted by the ACCC based on these calculations. (29) Apart from these matters, a number of other propositions need to be addressed. (30) I accept that sales to shareholder customers, in the way I have described it, ought to be removed from the calculation if the exercise is one of seeking to calculate market harm. (31) I accept that in calculating the benefit derived from the contravening conduct, the starting point is to isolate the revenue derived during the period of the contravening conduct and, in that regard, I accept that the relevantly adjusted revenue is about $101 million according to the matters described at [490] of these reasons. (32) Although I accept that the calculation of market harm ought to exclude harm, in effect, inflicted upon itself or its related corporations in the form of the shareholder concrete producers, it is not entirely clear to me that in seeking to identify a benefit derived by QCL/Cement Australia in supplying cgf at a price higher than the but for price, the returns to the equity owners who are shareholder concrete producers ought to be taken into account in off-setting the market measure of the benefit derived by the supplier. However, if the analysis involves accepting that any profit extracted from a shareholder buyer due to a higher price, is returned to the concrete producer equity owners as to 50%, the better view is that the measure of the so-called "benefit" derived through the higher but for price ought to be discounted to reflect a 50% return to the concrete producer equity owners. (33) As to the EBIT earnings, there is much controversy about the true measure of the EBIT. For the purposes of seeking to examine the EBIT earnings, it seems to me that a measure of about 37% is an average benchmark EBIT to test the calculations. (34) As to the off-setting of the Millmerran costs, Pozzolanic/QCL incurred an ongoing royalty obligation in entering into the contract. It may have been a price QCL was willing to pay to secure the contract for ash supply from the Millmerran power station without provisions which had the purpose, effect or likely effect of substantially lessening competition. In fact, Pozzolanic/QCL entered into an obligation to pay royalties under a contract which contained provisions adopted for the purpose and having the effect or likely effect of substantially lessening competition. That was a price Pozzolanic/QCL was willing to bear and an obligation Cement Australia assumed as it gave effect to the contract. To the extent that an attempt is made to quantify or estimate the benefit derived from the contravening conduct, it seems to me that costs related to the acquisition of flyash under a contract containing provisions prohibited by the Act ought not to be taken into account in reducing the measure of the contended benefit. Those costs simply lie where they fall. (35) As to the calculation of the costs to be taken into account, the respondents say that there are many other costs allocated to the MIC segment which ought to have been allocated to the flyash business. The respondents historically calculated EBIT and EBITDA on a particular basis and I can see no basis on which costs that have never been regarded by the respondents as part of the flyash business should now be treated as costs of the flyash business for the purpose of seeking to calculate the measure of the profit. (36) As to the tax, I accept that there is some evidence about earnings and the relationship between earnings and the tax liability of the respondents. However, the respondents could have put on focused, succinct material about that question directed expressly to the tax position. They chose not to do so and it is not clear to me what the tax position of the respondents is or has been and whether any non-deductible benefit ought to be reduced by the tax burden that theoretically falls upon the profit margin elevated by reason of the non-deductibility of a pecuniary penalty. (37) I accept that leaving aside the tax question but taking into account the adjustments already indicated (but not the Millmerran costs) the EBIT derived by the respondents in the precise period of the contraventions (rather than the total period 2002 to 31 December 2006) is probably an amount between [$13.5 million] to possibly [$20 million]. (38) I also accept that it does not necessarily follow that all of this EBIT would have been lost in the face of rivalry and that all of it represents a true "benefit". Contestability would have resulted in QCL/Cement Australia retaining some proportion of its EBIT earnings. What the measure of that retention might have been or the measure of the actual lost EBIT is not really clear to me notwithstanding an intensive consideration of all of the data. (39) The last matter on this topic is the emphasis the ACCC attributes to the internal analysis by the respondents of the forward-looking position should a competitor enter the SEQ cgf market. Dr Williams says that it is not inappropriate to examine the thinking within the respondent group but that whatever the thinking of the relevant individuals might have been, it rises no higher than the expression of an opinion and does not reflect hard analysis of a but for price upon which economists would rely. In short, economists would want to test the opinions by reference to hard data to get the answer to the question of what the but for price might have been and that analysis might or might not align with the expressions of opinion. I accept entirely that as a true analytical exercise, the opinions expressed by individuals within the respondent group would need to be tested to determine whether their assessments of the forward-looking price were likely to be correct. It is important to remember that the opinions were forward-looking projections of the price that would, in their view, prevail in the face of competition. They were based on certain assumptions some of which proved to be untrue. Notwithstanding all of those qualifications, I do not accept that the Court ought to simply put to one side the expressions of opinion of experienced managers charged with the conduct of the business and experienced directors charged with the governance of the companies. As already indicated, those individuals are probably in the best position to make a market assessment of likely future events notwithstanding that future events might prove their judgements to be wrong. It is clear that Mr Arto and Mr Maycock thought that the assessments by Mr Wilson and Mr Ridoutt were exaggerated, strong expressions of view and perhaps a postulation of the worst possible case. It is also true that Mr Maycock did not accept those assessments as a likely result once QCL began to engage in the competitive process. (40) Nevertheless, Mr Ridoutt and Mr Wilson thought that there would be a significant price reduction should new entrant competition emerge and it would be likely to be in the order of a $10/t reduction in the price of cgf. Mr Arto seemed willing to act on that view. He certainly had his own views about the benchmark margin QCL should seek to preserve. Later, Ms Collins had very similar views about the likely price reduction should Cement Australia find itself in the very unfortunate and undesirable position of having to compete with a rival for the sale of flyash in SEQ. Revenues and EBIT earnings would be under pressure. She spoke about a $10/t price reduction. She pressed the proposition with Mr Clarke. (41) I accept that these postulations by Mr Ridoutt and Mr Wilson and later by Mr Clarke and the emerging reality which Mr White confronted are, at the end of the day, simply expressions of opinion. They remain, however, informed opinions. They cannot be in any sense determinative or probative of a price which would have emerged in the period 2002 to 2006 but for the contravening conduct and the postulations of a price reduction cannot simply be projected across the entire period of the contraventions. That is simply not a rational approach. However, these expressions of opinion make it very plain that the most informed market participant fully expected there to be a significant impact upon the price should a new entrant emerge with contestable ash and seek to compete away the margin and price enjoyed by the monopoly incumbent. Ultimately, it is not possible to put a number in any credible way on the measure of that benefit because it simply depends upon too many factors and assumptions and is ultimately not supported by hard data establishing a but for price. The entire exercise of trying to postulate, by reference to hard data and sound economic analysis, a but for price, is a very complex exercise. I have undertaken with economists such a detailed exercise in seeking to determine the but for price for electricity transformers which would have prevailed had participants in that industry not engaged in cartel conduct. The opinions of the senior managers cannot operate as a proxy for the but for conduct. However, those opinions ought not to be discounted because they tend to suggest a consistent theme accepted by Mr Maycock that in the face of competition QCL, and later Cement Australia, would not have been able to sustain the margins they enjoyed. The immediate difficulty is trying to quantify or estimate the measure of that difference. (42) In the result, it seems to me, that the trend in the opinions within the respondents' own documents ought to be taken into account in recognising that those individuals believed that QCL and Cement Australia would suffer degradation in the price and earnings should new entrant competition emerge armed with substitutable ash. The pecuniary penalty ought to take into account not the postulated measure of the price reduction projected over five years as a uniform measure but rather recognise that the internal officers believed that new entrant competition would represent a serious threat to price, earnings and margin. It cannot be put any higher than that. Ultimately, the entire matter comes back to a qualitative assessment of the conduct in the sense that the pecuniary penalty should take account and recognise that the respondents derived benefit from the conduct but the true measure of the benefit in the absence of proper economic analysis cannot be quantified in any hard way. We note that it is common ground that of the Penalty Reasons contains a typographical error and should be corrected to refer to the range $13.5 million to $20 million, as we have indicated in square brackets in the above quotation. 327 During the appeal hearing, senior counsel for the respondents handed up a note which set out an analysis of the primary judge's finding as to the relevant profit range at of the Penalty Reasons. Senior counsel for the ACCC indicated agreement with the methodology and calculations in the note (T206). However, the ACCC disputes whether some of the steps set out in the note should be taken, in particular whether sales to shareholders should be subtracted. On the basis of the note, the EBIT range of $13.5 million to $20 million referred to by the primary judge may be calculated as follows: (a) The first step is to identify the whole of the revenue (for the relevant product in the relevant market) across the period from 1 January 2002 to 31 December 2006. The primary judge accepted that this was $126,574,053. (b) The second step is to reduce that revenue figure so that it relates to the narrower period of the contraventions (see [291] above). The primary judge accepted that the revenue across the narrower period of the contraventions was $101,033,957. (c) The third step is to exclude sales to shareholders from the revenue figure, which comprised approximately 60% of sales. Excluding shareholder sales leads to a figure of $40,413,582. (d) The fourth and final step is to apply a figure for EBIT margin in order to derive a figure for earnings rather than simply revenue. The respondents contended for an EBIT margin of 33% and the ACCC referred to a range of figures for EBIT margin, the highest of which was 49%. If these margins are applied to the revenue figure derived from the first three steps, it produces a range of $13,336,482 to $19,802,656.

The 16 May 2016 orders 328 The orders imposing pecuniary penalties were made on 16 May 2016. Those orders were relevantly as follows: 6. As to the Original Millmerran Contract, as described in the Declaration made at para 6 of the Declarations and Orders made on 28 February 2014, a pecuniary penalty be paid to the Commonwealth of Australia (the "Commonwealth") pursuant to s 76(1) of the Act by [Pozzolanic] jointly and severally with [QCL]: in respect of the making of the contract by [Pozzolanic] containing provisions which had a substantial purpose of, the likely effect of, and until 31 December 2003 the effect of, substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market as described in the Declaration made at para 6 of the Declarations and Orders made on 28 February 2014; and in respect of [QCL] having been knowingly concerned in the making of the contract containing those provisions as described in the Declaration made at para 7 of the Declarations and Orders made on 28 February 2014, of $3.5 million. 7. As to the Original Millmerran Contract as described in para 6 of these Orders, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [QCL] in respect of the conduct of giving effect to the provisions of the Original Millmerran Contract contemplated by para 6 of these Orders and the Declarations made at paras 8 and 9 of the Declarations and Orders made on 28 February 2014, of $500,000. 8. No pecuniary penalty be ordered to be paid in respect of the conduct of [Pozzolanic Industries] having given a guarantee of the Original Millmerran Contract. 9. As to the Tarong Contract as described in the Declaration made at para 16 of the Declarations and Orders made on 28 February 2014, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [QCL]: in respect of the making of the Tarong Contract by [Pozzolanic] containing provisions which had a substantial purpose of, the likely effect of, and the effect of, substantially lessening competition in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market as described in the Declaration made at para 16 of the Declarations and Orders made on 28 February 2014; and in respect of [QCL] having been knowingly concerned in the making of the contract containing those provisions as described in the Declaration made at para 16 of the Declarations and Orders made on 28 February 2014, being the conduct the subject of the declarations at paras 16 and 17 of the Declarations and Orders made on 28 February 2014, of $5.5 million. 10. As to the Tarong Contract as described in para 9 of these Orders, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [QCL] in respect of the conduct of giving effect to the provisions of the Tarong Contract contemplated by para 9 of these Orders and the Declarations made at paras 18 and 20 of the Declarations and Orders made on 28 February 2014, of $5.5 million. 11. No pecuniary penalty is ordered to be paid in respect of the conduct of [QCL] having given effect to the provisions of the Tarong Contract contemplated by para 9 of these Orders, in the period March, April and May 2003, the subject of the declaration made at para 19 of the Declarations and Orders made on 28 February 2014. 12. As to the Amended Millmerran Contract as described in the Declaration made at para 12 of the Declarations and Orders made on 28 February 2014, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [Cement Australia]: in respect of the making of the Amended Millmerran Contract by [Pozzolanic] containing provisions which had the purpose of substantially lessening competition as described in the Declaration made at para 12 of the Declarations and Orders made on 28 February 2014; and in respect of [Cement Australia] having been knowingly concerned in the making of the contract containing those provisions as described in the Declaration made at para 12 of the Declarations and Orders made on 28 February 2014, being the conduct the subject of the declarations at paras 12 and 13 of the Declarations and Orders made on 28 February 2014, of $850,000. 13. No pecuniary penalty is ordered to be paid in respect of the matters the subject of the Declarations made at paras 14 and 15 of the Declarations and Orders made on 28 February 2014. … 15. As to the Swanbank Contract extension as described in the Declaration made at para 22 of the Declarations and Orders made on 28 February 2014 (as amended by para 4 of these Orders), in the period from 1 January 2005 to 30 June 2005, a pecuniary penalty be paid to the Commonwealth by [Pozzolanic] jointly and severally with [Cement Australia]: in respect of the making of the extension of the contract from 1 January 2005 to 30 June 2005 by [Pozzolanic] containing provisions having, as a substantial purpose, the purpose of substantially lessening competition as described in the Declaration made at para 22 of the Declarations and Orders made on 28 February 2014 (as amended by para 4 of these Orders) and the Declaration made at para 1 of these Orders; and in respect of the giving effect to the extension until 30 June 2005 by [Cement Australia], as contemplated by the Declarations made at paras 22 (as amended by para 4 of these Orders), 24 and 26 of the Declarations and Orders made on 28 February 2014, of $200,000. 16. As to the Swanbank Contract as described in para 14 of these Orders, in the period up to 31 December 2004, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [QCL] in respect of the conduct by those respondents of having given effect to the identified provisions of the Swanbank Contract up to 31 December 2004, as contemplated by the Declarations made at paras 21, 23 and 25 of the Declarations and Orders made on 28 February 2014, of $1 million. 17. As to the Swanbank Contract extension as described in the Declaration made at para 22 of the Declarations and Orders made on 28 February 2014 (as amended by para 4 of these Orders), in the period 1 January 2005 to 30 June 2005, a pecuniary penalty be paid to the Commonwealth pursuant to section 76(1) of the Act by [Pozzolanic] jointly and severally with [Cement Australia] in respect of their having given effect to the relevant provisions of the contract to 30 June 2005 as contemplated by the Declarations made at paras 22 (as amended by para 4 of these Orders) and 26 of the Declarations and Orders made on 28 February 2014, of $50,000. 329 We note for completeness that paragraph 14 of the 16 May 2016 orders (not set out above) was later set aside. 330 Although paragraph 10 of the 16 May 2016 orders refers to Pozzolanic and QCL, it was common ground on the appeal that the latter reference was a slip and the intended reference was to Pozzolanic and Cement Australia. Further, although paragraph 15 of the 16 May 2016 orders refers both to making and giving effect to the 2005 Swanbank Contract Extension, it was common ground on the hearing of the appeal that this was an error, as the order was only intended to be imposed in respect of the making of the contract. This much is clear because of the findings in [817] of the Penalty Reasons and the fact that paragraph 17 of the 16 May 2016 orders imposes the separate penalty for giving effect to the contract. However, because of this latter reason, the ACCC conceded that nothing turned on this error.

Summary of contraventions and penalties 331 The following table summarises the contraventions found by the primary judge and the penalties imposed with respect to each contravention. The table is arranged by reference to each of the contracts in issue, consistently with the approach taken by the primary judge in Part 18 of the Penalty Reasons. In the second column of the table, a shorthand description of each contravention is provided. In the third column, there is a cross-reference to the relevant declaration of contravention. In most cases, the declarations were made on 28 February 2014, but in two cases the form of the declaration was varied by the 16 May 2016 orders, and in one case the order was made on 16 May 2016. In the fourth column, the penalty imposed by the primary judge is set out. In setting out these penalties, we have (consistently with the preceding paragraph of these reasons) treated paragraph 10 of the 16 May 2016 orders as imposing a joint and several penalty on Pozzolanic and Cement Australia (rather than on Pozzolanic and QCL). In relation to the Swanbank Contract, the table indicates that no penalty was imposed with respect to the contravention that is the subject of declaration 21. Although a penalty of $1.5 million was originally included as paragraph 14 of the 16 May 2016 orders, as noted above that order was later set aside. Contract Contraventions found by primary judge Date of declarations [paragraph] Penalty imposed by primary judge Paragraph in 16 May 2016 orders Original Millmerran Contract Pozzolanic - making 28/2/14 [6] $3.5m (jointly and severally) [6] QCL - knowingly concerned in making 28/2/14 [7] Pozzolanic - giving effect 28/2/14 [8] $500,000 (jointly and severally) [7] QCL - giving effect 28/2/14 [9] Pozzolanic Industries - knowingly concerned in making 28/2/14 [10] No penalty [8] Total: $4m Tarong Contract Pozzolanic - making 28/2/14 [16] $5.5m (jointly and severally) [9] QCL - knowingly concerned in making 28/2/14 [17] Pozzolanic - giving effect 28/2/14 [18] $5.5m (jointly and severally) [10] Cement Australia - giving effect and knowingly concerned in giving effect 28/2/14 [20] QCL - giving effect and knowingly concerned in giving effect 28/2/14 [19] No penalty [11] Total: $11m Amended Millmerran Contract Pozzolanic - making 28/2/14 [12] $850,000 (jointly and severally) [12] Cement Australia - knowingly concerned in making 28/2/14 [13] Pozzolanic - giving effect 28/2/14 [14] No penalty [13] Cement Australia - knowingly concerned in giving effect 28/2/14 [15] No penalty [13] Total: $850,000 Swanbank Contract Pozzolanic - making (extensions to 31/12/04 and to 30/6/05 - with provisions having effect and likely effect etc) 28/2/14 [21] as varied by 16/5/16 [3] No penalty ([14] of 16 May 2016 orders set aside) - Pozzolanic - making (extension from 31/12/04 to 30/6/05 - with provisions having purpose etc) 28/2/14 [22] as varied by 16/5/16 [4] $200,000 [15] (jointly and severally with Cement Australia) Pozzolanic - giving effect to provisions in declaration 21 28/2/14 [23] $1m (jointly and severally with QCL) (for period up to 31/12/04) [16] Pozzolanic - giving effect to provisions in declarations 21 and 22 (from 1/1/05 to 30/6/05) 28/2/14 [24] $50,000 (jointly and severally with Cement Australia) [17] QCL - giving effect to provisions in declaration 21 (to 31/5/03) 28/2/14 [25] (Jointly and severally with Pozzolanic) [16] Cement Australia - giving effect to provisions in declarations 21 and 22 28/2/14 [26] (Jointly and severally with Pozzolanic) [17] Cement Australia - knowingly concerned in making (extension from 31/12/04 to 30/6/05) 16/5/16 [1] (Jointly and severally with Pozzolanic) [15] Total: $1.25m Grant Total: $17.1m

D. THE APPEAL AND CROSS-APPEAL 332 The ACCC appeals from paragraphs 6-13 and 15-17 of the orders made on 16 May 2016. The grounds of appeal set out in the amended notice of appeal are as follows: 2. In respect of each contravention for which a pecuniary penalty was imposed pursuant to section 76(1) of the [TPA], the learned primary judge erred in law in assessing and imposing a single joint and several penalty on two respondents for the separate acts of those respondents, on the basis that all of the acts formed part of a single "class of conduct" or "course of conduct". 3. The learned primary judge erred in failing to impose a pecuniary penalty on [Pozzolanic Industries] in respect of the contravention the subject of paragraph 10 of the orders and declarations made on 28 February 2014. 4. The learned primary judge erred in failing to impose a pecuniary penalty on [QCL] in respect of the contraventions the subject of paragraph 19 of the declarations and orders made on 28 February 2014. 5. The learned primary judge erred in failing to impose a pecuniary penalty on [Cement Australia] with respect to the period between 1 June 2003 and 31 December 2004 for the contraventions the subject of paragraph 26 of the orders and declarations of 28 February 2014. 6. In respect of the contraventions the subject of paragraph 15 of the orders and declarations made on 28 February 2014, the learned primary judge erred in: 6.1. failing to impose a pecuniary penalty on [Cement Australia]; or 6.2. in the alternative, finding that the conduct of making and giving effect to the Amended Millmerran Contract was a single course of conduct and as a consequence imposing a single pecuniary penalty on [Cement Australia] for the contraventions the subject of paragraphs 13 and 15 of the orders and declarations made on 28 February 2014. 7. The learned primary judge erred in imposing a single penalty for the conduct of making and giving effect to the Swanbank Contract extension in order 15 of the orders made on 16 May 2016 where the learned primary judge found that the conduct in making and giving effect to the Swanbank Contract extension did not constitute a single course of conduct in [817] of the [Penalty Reasons]. 8. The learned primary judge erred in law by failing to have adequate regard to the quantum or magnitude of the benefits that the respondents expected they would derive from engaging in the acts in respect of which a pecuniary penalty was, or could be, imposed. 9. The learned primary judge erred in relation to his consideration of the quantum of actual benefit and market harm that resulted from the acts of the respondents in respect of which a pecuniary penalty was, or could be, imposed by: 9.1. finding that such consideration was to be limited to a recognition that the respondents derived benefit from their conduct; and 9.2. finding that harm inflicted upon shareholder entities who are engaging in tied acquisitions should be excluded from any assessment of the market harm caused by or the benefit obtained from the contraventions. 10. The learned primary judge erred in imposing penalties which were manifestly inadequate and not of appropriate deterrent value for the acts the subject of Orders 6, 7, 8, 9, 10, 11, 12, 13, 15, 16 and 17 of the orders made on 16 May 2016: 10.1. where in respect of each act (which was either an act of making, giving effect to, or being knowingly concerned in the making or giving of effect to, a contract or provision thereof): 10.1.1. the respondent engaging in the act was part of a group of companies that operated a very significant business throughout the period of the contraventions with an annual EBIT in excess of $100 million; 10.1.2. at the time of the contravention, the respondent engaging in the act enjoyed or was part of a group of companies that enjoyed a degree of market power that amounted to, in substance, a monopoly of the south east Queensland concrete-grade flyash market (SEQ concrete-grade flyash market); 10.1.3. the relevant provisions of each contract had the purpose, effect and likely effect, with the exception of the Amended Millmerran Contract which had the proscribed purpose and the Swanbank Contract extension to 31 December 2004 which had the effect and likely effect, of preventing competitors from obtaining commercial supplies of flyash from a south east Queensland power station and thereby foreclosing entry into the SEQ concrete-grade flyash market; 10.1.4. the respondent engaging in the act had a deliberate anticompetitive purpose; 10.1.5. the respondent engaging in the act did not show a disposition to cooperate with the ACCC; 10.1.6. senior management was involved in each contravention; and 10.1.7. the respondent engaging in the act was aware that its conduct was at risk of contravening the TPA; 10.2. and having regard to: 10.2.1. the magnitude of the financial benefit that was expected or anticipated by the senior management or decision-makers for the respondent concerned to result from the anticompetitive effect of the relevant provisions of the contract; 10.2.2. the fact that, with the exception of the acts the subject of paragraphs 12 and 13 of the orders made on 16 May 2016, the effect of the provisions of the contract was to substantially lessen competition in the SEQ concrete-grade flyash market; 10.2.3. the significant revenues and high margins derived from the control of the SEQ concrete-grade flyash market by the respondent concerned or the group of companies of which it formed part; and 10.2.4. the magnitude of the financial benefit and market harm that resulted from the anticompetitive effect of the relevant provisions of the Original Millmerran Contract, Tarong Contract and the Swanbank Contract. 333 The respondent cross-appeals from paragraphs 6, 7, 9 and 10 of the 16 May 2016 orders. The grounds set out in the notice of cross-appeal are as follows: 1. The learned primary judge erred, in particular at paragraphs [779] to [783] of the [Penalty Reasons], by imposing separate penalties for the conduct of making the Original Millmerran Contract, and for the conduct of giving effect to the Original Millmerran Contract. 2. The learned primary judge erred, in particular at paragraphs [797] to [804] of the [Penalty Reasons], by imposing separate penalties for the conduct of making the Tarong Contract, and for the conduct of giving effect to the Tarong Contract. 334 During the course of the appeal hearing, senior counsel for the respondents indicated that, if the Court were to reach the conclusion that the penalties should have been imposed on a several, rather than joint and several, basis, the cross-appeal would not be relevant and was not pressed (T162). 335 The issues to be considered on the appeal and cross-appeal are summarised at [10] above.

E. JOINT AND SEVERAL ISSUE 336 In paragraph 2 of its amended notice of appeal (see [332] above), the ACCC raises the issue of joint and several penalties. 337 At the relevant time, the text of s 76 of the TPA provided, in part, as follows: 76. Pecuniary penalties (1) If the Court is satisfied that a person: (a) has contravened any of the following provisions: (i) a provision of Part IV; (ii) …; (b) has attempted to contravene such a provision; (c) has aided, abetted, counselled or procured a person to contravene such a provision; (d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; (e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) has conspired with others to contravene such a provision; the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct. … (1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed: (a) for each act or omission to which this section applies that relates to section 45D, 45DB, 45E or 45EA - $750,000; and (b) for each other act or omission to which this section applies - $10,000,000. (1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed $500,000 for each act or omission to which this section applies. … (3) If conduct constitutes a contravention of two or more provisions of Part IV, a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct. 338 The point of contention between the parties is whether s 76(1) allows the Court to impose joint and several penalties on multiple respondents. The parties each provided competing submissions in this respect. 339 It is important to note that s 76(1), the focus of most of the submissions, is not to be read in isolation. Section 76(3) refers to the position where conduct constitutes a contravention of two or more provisions of Part IV, referring as it does to a proceeding against a person in relation to any one or more of the provisions, but prescribing that the person shall not be liable to more than one pecuniary penalty in respect of the "same conduct".

The submissions of the parties 340 In respect of whether s 76(1) permits the imposition of joint and several penalties, the submissions of the parties focussed first, on the construction of s 76(1), and secondly, on the general principles governing the assessment and imposition of civil penalties. It is useful to consider the arguments of the parties through this framework. As the ACCC's reply submissions are wholly referable to the respondents' submissions, we have interspersed them within our consideration of the respondents' submissions, for ease of comprehension.

The ACCC's submissions 341 The ACCC makes three submissions in support of its contention that a proper construction of s 76(1) precludes the Court from imposing joint and several penalties. 342 First, the ACCC points to the text of s 76, specifically the text (in italics below) that demarcates the extent of the Court's power: the Court can "order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies …". The ACCC submits that orders imposing joint and several penalties would exceed both italicised textual demarcations. 343 This is said to be because such orders do not in fact require either party to pay a penalty (as each respondent's liability is contingent on the question of whether the penalty has been paid by the other respondent). Furthermore, to the extent each respondent is liable for the entire penalty, that penalty is not determined by reference to the acts or omissions of the particular respondent but must also necessarily involve an element referable to the acts of the other respondent. For both of these reasons, an order imposing joint and several penalties is said to exceed the limits of the power conferred on the Court by s 76(1). 344 Secondly, the ACCC submits that orders imposing joint and several penalties create irreconcilable inconsistencies in respect of maximum penalties. The ACCC describes the following difficulty: if a single contravenor had engaged in two acts that attracted the operation of s 76(1), then each act could attract the maximum penalty; however, if two contravenors each engage in one act that attracts the operation of s 76(1), and joint and several liability is imposed for a single penalty, the Act does not permit the imposition of a penalty on either contravenor greater than the maximum penalty for one act. 345 Additionally, the ACCC submits that it is critical that the reasoning process involved in synthesising a penalty be transparent and that the proper sentencing process be followed. The imposition of joint and several penalties is said to obscure this process. For example, the ACCC argues that the primary judge's reasons do not articulate either the figure which was taken as the applicable maximum or the reasoning process leading to the decision to impose a single global penalty on two respondents for their separate acts. 346 Thirdly, the ACCC submits that there are statutes containing provisions which expressly require that liability for a pecuniary penalty be imposed on two or more persons jointly and severally. Such provisions are said to be an exception to the general framing of civil penalty provisions. Their existence is said to support the contention that s 76(1), as a provision that corresponds to the "usual" framing of civil penalty regimes and contains no such express requirements, does not allow for the imposition of joint and several penalties. 347 The ACCC also points to the application of the criminal provisions contained in a predecessor to the TPA (ss 4 and 9 of the Australian Industries Preservation Act 1906 (Cth)), in respect of which Isaacs J in R v Associated Northern Collieries (1911) 14 CLR 387 (Associated Northern Collieries) at 666 held that joint and several fines could not be imposed on multiple respondents; and this was so even in cases where the respondent's offending arose from participation in the same transaction.

The respondents' submissions and the replies of the ACCC 348 The respondents make four submissions in support of their contention that the language of s 76(1) allows for a joint and several approach to the imposition of penalty. 349 First, the respondents submit that the language of s 76(1) is sufficiently expansive to allow for the imposition of joint and several penalties. The respondents point to the fact that the provision uses the adjective "such" - as opposed to an indefinite or definite article - to qualify the pecuniary penalty the Court may impose on that person. According to the Macquarie Dictionary, "such" means the kind, character, degree or extent, of that or those indicated or implied - it has both qualitative and quantitative dimensions. The respondents contend that the use of this word indicates that the penalty may be of various kinds, characters, degrees or extents, and amongst the available kinds are those that operate through imposing joint and several liability, and that there is no text in the section that otherwise prohibits this notion. 350 In reply, the ACCC submits that the word "such" is incapable of supporting the heavy weight that the respondents seek to rest upon it, and that the use of the word, rather than the definite article, is an insignificant matter of drafting choice. 351 The respondents continue by further submitting that s 76(1) expressly directs attention to the penalty the Court considers appropriate having regard to all relevant matters, including the nature and extent of the act or omission and the circumstances in which it took place. The respondents contend that considerations of appropriateness may properly attend to corporate structure; the nature and extent of an act may properly pick up the manner in which it was carried out, and the circumstances will comprehend all matters relevant to the exercise of the discretion. This is said to be another example of the expansive language of s 76(1) that would permit the imposition of joint and several penalties. 352 In reply, the ACCC submits that the need to take into account all relevant factors in imposing a penalty does not logically support the existence of a power to impose a single penalty on multiple respondents. It contends that the respondents do not, and cannot, explain how a section that confers the power to impose a penalty on "the person" for "each act or omission by the person" could allow a Court to impose a penalty on one person for the acts or omissions of another person. 353 Secondly, the respondents submit that this Court should rely upon the reasoning of Isaacs J in Associated Northern Collieries at 666 as support for the proposition that, where the provision of the relevant Act is not explicit, the question of whether that provision allows for the imposition of a joint and several penalty is a question that can be determined by giving consideration as to whether the penalty is intended as "compensation for a private wrong", or as "punishment for an offence against public justice". Because these proceedings are civil in nature, the respondents contend that the imposition of joint and several penalties under s 76(1) is warranted. 354 In reply, the ACCC submits that a civil penalty is "punishment for an offence against public justice", not "compensation for a private wrong" (as those phrases appear in Associated Northern Collieries at 666). The ACCC contends that the distinction in Associated Northern Collieries does not assist the respondents as no arguments were, or could rationally have been, advanced by the respondents that the contraventions here are "private wrongs" or that the penalties represent "compensation" to some unidentified person or persons against whom such a private wrong was committed. 355 Thirdly, the respondents submit that it would be wrong to say that a penalty imposed upon two persons does not require either party to "pay to the Commonwealth such pecuniary penalty". They contend that, correctly understood, it would require both parties to pay such penalty, and that where the Court determines such a penalty, it is a matter of indifference to the Court whether the penalty comes to be borne by one or both of the persons. 356 In reply, the ACCC submits that no authority is cited for that proposition. Rather, it is said to directly contradict the decision of the Victorian Court of Appeal in Director of Public Prosecutions v Nieves [1992] 1 VR 257 at 264, and to be irreconcilable with deterrence, because a contravenor could avoid having to pay any penalty. 357 Fourthly, the respondents submit that the approach of the ACCC involves an impermissible grafting of other language onto s 76. The respondents argue that, according to the ACCC, s 76(1) must be read as saying: "If the Court is satisfied that a person has contravened … a provision of Part IV, the Court may order only that person to pay to the Commonwealth such pecuniary penalty…". The respondents contend that this would involve reading into the legislation a constraint it does not expressly contain, and that it is not to the point that someone else might also be ordered to pay the penalty determined. They reiterate that through the phrase, "the circumstances in which the act or omission took place", s 76(1) accommodates a form of order that takes into account the context within which conduct occurs, including, if relevant, the role of entities related to the person the subject of the order. 358 In reply, the ACCC submits that the respondents' submission assumes that in fact the section empowers a Court to impose a penalty on a person for another person's act or omission - therefore, the respondents reason, it is necessary to read in words of limitation if it is to be said that the section does not permit this to occur. The ACCC contends that there is no basis for that assumption, it being inconsistent with the express words of the section. The ACCC reiterates that its own submission does not require any words to be read into s 76(1) as it is premised on attributing the ordinary meaning to all of the words of the section.

General principles governing the assessment and imposition of civil penalties

The ACCC's submissions 359 The ACCC makes three submissions in support of its contention that general principles governing the assessment and imposition of civil penalties preclude the Court from imposing joint and several penalties in respect of s 76. 360 First, the ACCC submits that a joint and several penalty would not achieve the objective of deterrence, which is a primary consideration for the Court to take into account when assessing and imposing a penalty under s 76(1): FWBII at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. The ACCC contends that the deterrent effect of such a penalty could be defeated by payment of the penalty by only one of the parties subject to the joint and several penalty. 361 Secondly, the ACCC submits that the imposition of joint and several penalties is conceptually incompatible with the course of conduct principle. This principle recognises that "where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality": Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 (Cahill) at [39] per Middleton and Gordon JJ (emphasis in original). 362 The ACCC contends that the application of the course of conduct principle in the context of orders for joint and several penalties creates many unanswerable questions such as: (a) what is the theoretical maximum penalty for that course of conduct in the context of multiple contravenors?; (b) how could it be possible to impose liability on any one respondent for a penalty where the maximum is determined by reference to acts of a different respondent?; (c) what would the (joint) theoretical maximum be where one respondent is a corporate entity and the other is an individual?; and (d) further, how does the Court take into account whether "the person" has previously been found to have contravened the Act (a mandatory consideration under s 76(1))? The ACCC contends that there are no satisfactory answers to these questions. 363 Thirdly, the ACCC submits that there is a more appropriate approach to common ownership, namely that the Court can take this into account in the exercise of its discretion. For example, where there are close economic relationships between two contravenors, it may be proper for the Court to ultimately reduce the separate penalty imposed on each contravenor - or decline to impose any penalty on one of the contravenors - on the basis that any penalty imposed on one contravenor will ultimately be borne by the other: Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 at [294] per Heerey J; Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] ATPR 41-905; [2002] FCA 1349 at [27] per Heerey J. 364 The ACCC contends that the appropriate approach in order to take into account common ownership (such as in this case) is first, to identify the respondent with the greatest responsibility for each contravention (the 'lead' contravenor) and determine the appropriate penalty for that respondent that achieves specific and general deterrence, and secondly, to determine the appropriate penalty for the remaining corporate respondents involved in the contraventions and, in doing so, to take into account the fact that a significant penalty is already to be imposed on the lead contravenor. 365 The ACCC concludes by submitting that, although a close economic relationship between contravenors may justify a reduction in the separate penalties imposed on one or both of them, it does not follow that it justifies a single penalty being imposed on related contravenors jointly and severally. The ACCC submits that the contravenors made deliberate choices to conduct their business through separate legal entities and therefore must take both the benefits and burdens that come with separate legal personality: Australian Competition and Consumer Commission v Origin Energy Limited [2015] FCA 55 (Origin Energy) at [62]-[64] per White J.

The respondents' submissions and the replies of the ACCC 366 The respondents make three submissions in support of their contention that general principles governing the assessment and imposition of civil penalties do not preclude the Court from imposing joint and several penalties in respect of s 76. 367 First, the respondents submit that the imposition of joint and several penalties is not inconsistent with the objective of deterrence. They contend that deterrence operates both personally and generally, and that, at the personal level, if s 76(1) supports the imposition of penalties on a joint and several basis, the question of personal deterrence - "deterrence of whom?" - is answered by reference to the corporate group. Furthermore, general deterrence is said to operate in respect of similarly composed corporate groups. 368 In reply, the ACCC did no more than reiterate its view that joint and several penalties are irreconcilable with deterrence because a contravenor could avoid having to pay any penalty. 369 Secondly, the respondents submit that the imposition of joint and several penalties is not inconsistent with the course of conduct principle. They contend that, in applying this principle, the Court characterises the wrongdoing and determines whether it constitutes one or more courses of conduct. The principle is therefore said to permit a conclusion that a course of conduct can be applied in relation to contraventions by different corporations - this is because the emphasis is on identifying the same criminality, which necessarily involves a detailed factual enquiry. 370 The respondents contend that the "unanswerable" questions posed by the ACCC can be resolved, and that the correct analytical order under s 76(1) is as follows: (a) First, the Court must be satisfied that a person has contravened a relevant provision within the meaning of s 76(1). (b) Secondly, the Court must ascertain the maximum penalty for a contravention of that provision, under s 76(1A). (c) Thirdly, the Court must determine a pecuniary penalty that it considers appropriate within the meaning of s 76(1), and having regard to general principles of sentencing. At this stage the Court will apply the course of conduct principle, consider the parity principle, which directs attention to questions of comparable penalties, and thereafter apply the totality principle as a final check. Within this context, a finding that there is a single course of conduct will not entail that the maximum penalty for the contraventions comprising the single course of conduct is limited to the maximum penalty that could be imposed for one contravention: Australian Competition and Consumer Commission v EDirect Pty Ltd (in liq) (2012) 206 FCR 160 at [74] per Reeves J; Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2015] FCA 274 at [95] per Gordon J. (d) Fourthly, the Court must determine the manner in which that pecuniary penalty is to be imposed. It is at the last stage of the enquiry that the possibility of joint and several imposition arises for consideration. 371 In reply, the ACCC points to a number of logical inconsistencies in the respondents' proposed analytical approach, and states that the following questions remain unanswerable: What maximum penalty has the Court taken into account in its analysis? What if the Court has, at the conclusion of the third stage, assessed the appropriate penalty for one contravenor for that contravenor's act as $7 million and the second contravenor as $9 million for its act? What penalty is the Court to impose jointly and severally and upon whom? The ACCC contends that the respondents' proposed analytical approach is incompatible with the statute and cannot be salvaged by reference to the breadth of sentencing discretion. 372 Thirdly, the respondents submit that the imposition of joint and several penalties is a perfectly acceptable approach in the circumstances of this case (where common ownership between respondents is present). They contend that the authorities support the application of a principle of corporate totality, where supported by the facts, by which the total penalty imposed upon a corporate group, and not merely any particular corporate entity within that group, must attend to the corporate structure of that group, in such a manner as to identify the locus of wrongdoing and without visiting double penalties by reason of accidents or conveniences of corporate structures: see Tiger Nominees Pty Ltd v State Pollution Control Commission (1992) 25 NSWLR 715 (Tiger Nominees) at 722 per Gleeson CJ. 373 In this case, the respondents submit that the application of joint and several penalties was apt. This is said to be because: (a) First, the maximum penalty in the present case is many multiples of $10 million. (b) Secondly, the financial affairs of the respondents appear to be treated and accounted for jointly, no separate accounts being produced: see the Penalty Reasons, [520]; see also [286] above. (c) Thirdly, the size of the respondents for the purposes of assessing penalty has been assumed by the parties to be based on the size of the respondents together. At paragraph [525] of the Penalty Reasons, the primary judge observed that the respondents did not contend they lacked the capacity to pay, despite the fact that the evidence disclosed that in the relevant period Pozzolanic Industries had revenue of $0 and net assets of only $5.038 million. (d) Fourthly, any penalty imposed upon one of the corporations would directly affect the other. As found at paragraph [215] of the Penalty Reasons, QCL, as treasury company, operated a single bank account for the group. (e) Fifthly, the primary judge found that the corporate respondents were effectively operated as one. The alternative approach would apportion the penalty equally as between the relevant corporate respondents. However, that may affect the enforceability of the penalties where certain corporate respondents do not trade and have very limited assets. That is unattractive. 374 Therefore, the respondents submit, having undertaken a detailed factual analysis of the relationship between the corporate respondents, a flexible approach to sentencing permits the Court to apply the principle as between different respondents. 375 In reply, the ACCC submits that there is no such defined principle as that of "corporate totality", and that common ownership is merely one factor to be taken into account by the Court in arriving at appropriate penalties. In any event, the ACCC contends that the purported "principle" does not support the implication of a power to impose joint and several liability - rather, the observation of Gleeson CJ in Tiger Nominees is said to support the position advanced by the ACCC, namely that common ownership can be adequately and properly taken into account in imposing separate penalties on separate contravenors pursuant to s 76(1).

Consideration 376 At the outset we should indicate that we accept the argument put forward by the ACCC as the correct approach to the interpretation of s 76(1). In our view, s 76(1) as it existed at the relevant time, does not allow for the imposition of a single joint and several penalty against multiple respondents. 377 We have reached this conclusion through an orthodox application of the principles of statutory construction. These principles of statutory construction require a consideration of the statutory text, context and purpose: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[71]; Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39]; Thiess v Collector of Customs (2014) 250 CLR 664 at [22]-[23]; Military Rehabilitation and Compensation Commission v May (2016) 257 CLR 468 at [10]; North Australian Aboriginal Justice Agency Ltd v Northern Territory (2015) 256 CLR 569 at [11]. Statutory construction must begin and end with the statutory text: Thiess at [22] (quoting Consolidated Media Holdings at [39]). But as Gageler J observed in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34 (SZTAL) at [37]: But the statutory text from beginning to end is construed in context, and an understanding of context has utility "if, and in so far as, it assists in fixing the meaning of the statutory text". (Footnote omitted.) 378 Similarly, Kiefel CJ and Nettle and Gordon JJ observed in SZTAL at [14]: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. (Footnotes omitted.) 379 The text of s 76(1) focuses specifically and precisely on the contravenor and the appropriate pecuniary penalty to be paid by that contravenor. Specifically, we refer to the repeated use of the phrase "the person" by reference to the relevant "act or omission": the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate … (Emphasis added.) 380 The use of the definite article and the reference to and focus upon "each act or omission" in the text of s 76(1) is deliberate and imports specificity. If a person's acts or omissions are captured by paragraphs (a) to (f), the extent of the Court's power to order payment of a pecuniary penalty is limited by the requirement that it must be that particular person to whom the order to pay is directed, in respect of that particular person's acts or omissions. The nexus is a specific one - a person cannot be ordered to pay a penalty in respect of acts or omissions of another person. This narrow language can be contrasted against that of other statutory provisions which expressly refer to joint and several liability: see, eg, Superannuation Industry (Supervision) Act 1993 (Cth), s 169. 381 The consequence is that the power bestowed on this Court pursuant to s 76(1) is too confined to allow for the imposition of a single joint and several penalty on multiple respondents. This is because joint and several penalties would involve the ordering of each of the persons subject to the order to pay a pecuniary penalty in respect of their conduct and the other person's conduct. Each of those persons subject to the joint and several pecuniary penalty order has invariably been ordered to pay a penalty by reference to acts or omissions beyond their own acts or omissions. 382 Section 76(3) also focusses on the conduct of the person who has contravened, and whether that specific conduct is the same conduct in respect of one or more provisions of the Act. This is another strong indication against construing s 76(1) as empowering or authorising the Court to order a single joint and several penalty on multiple respondents. 383 We reject the respondents' argument that the adjective "such" is sufficiently broad in its qualitative dimensions so as to permit a joint and several penalty. The phrase "such pecuniary penalty" is on any view the penalty ordered to be paid by the person. Further, the words "such pecuniary penalty" are linked to the next part of the phrase "in respect of each act or omission by the person" (our emphasis), indicating that whatever breadth is given to "such", it does not embrace a penalty for the act or omission of another person. More generally, the word "such" in s 76(1) has a demonstrative forward reference encompassing what appears thereafter in the subsection; but what follows are matters directed to "the person". Further and for completeness, we do not consider that s 23(b) of the Acts Interpretation Act 1901 (Cth) assists on the present question; but in any event, s 76(1) manifests a contrary intention. 384 We would make another point. Usually when one is considering the question of subject matter being joint and several, one is referring to and attaching that incident to a liability or a responsibility. But in the present case, before any penalty is ordered there is no liability. And we are dealing with that anterior question of whether an order should be made. On that question, s 76(1) in our view does not empower the making of a joint and several penalty. 385 Further, the general principles governing the assessment and imposition of penalties also support our interpretation. Deterrence is the primary objective for the imposition of civil penalties (see FWBII at [55]), and we consider that the imposition of a joint and several penalty would risk undermining this objective. The deterrent effect of a penalty at a personal level is potentially lessened if one party is able to avoid paying any portion of that penalty at all. This is not necessarily ameliorated by the respondents' suggestion that deterrence would be sufficiently achieved at the level of the corporate group. 386 In terms of case law on the present question, none are compelling authority against our construction. There have been divergent approaches in the existent authorities to the imposition of a single joint and several pecuniary penalty on two or more respondents. However, none of these authorities has had to consider the issue raised in this appeal in circumstances where there has been a true contest as to the power of the Court to impose such a single joint and several penalty. 387 In addition to the primary judge in this case, three other trial judges have imposed a single penalty on two or more respondents jointly and severally or jointly for contraventions of the Act: Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] ATPR 42-364; [2011] FCA 855 (Murphy J); Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 5) [2013] ATPR 42-450; [2013] FCA 1109 (Tracey J) (Turi Foods); and Australian Competition and Consumer Commission v Derodi Pty Ltd [2016] FCA 365 (Edelman J) (Derodi). Edelman J appeared to have doubts in Derodi about the correctness of this approach (see at [57]) but imposed a single penalty in the particular circumstances, which included the fact that the parties had jointly submitted that his Honour ought to do so. The ACCC now submits that the approach it recommended in Turi Foods and Derodi was in error as a matter of law. 388 In other contexts, there are decisions that are not inconsistent with the permissibility of joint and several penalties. In Australian Prudential Regulation Authority v Holloway (2000) 35 ACSR 276; [2000] FCA 1245, Mansfield J, in considering s 194 of the Superannuation Industry (Supervision) Act 1993 (Cth), had regard (at [28]) to the fact that an individual respondent was in reality the alter ego of a corporate respondent, with a consequent coincidence of state of mind. However, Mansfield J did not impose joint penalties on the company and its alter-ego director. Similarly, in Blacktown City Council v The Penatrators Pty Limited (No 5) [2015] NSWLEC 62, Biscoe J imposed a fine jointly and severally on a company and its sole director and shareholder on the basis that the latter was the alter ego of the company (at [27]). However, Biscoe J was considering fines for ongoing contempt of court - there was no discussion of the basis upon which the fine should be imposed jointly and severally. 389 On the other hand, Jagot J in Minister for the Environment v Thermal Dell Pty Ltd [2014] FCA 1442 (Thermal Dell) refused to impose a single penalty on two related corporate respondents under the Environment Protection and Biodiversity Conservation Act 1999 (Cth). A similar approach was also taken by White J in Origin Energy at [59]-[64]. The ACCC and the respondents disagree as to whether these decisions were concerned merely with the proper exercise of discretion, or whether they went to the question of whether the relevant provision does in fact allow for the imposition of joint and several penalties: see Thermal Dell at [46]; Origin Energy at [59]-[64]. 390 For the sake of completeness, we observe that the comments of Isaacs J in Associated Northern Collieries (at 666), relied upon by the parties, give us no real assistance in determining the joint and several issue raised in this appeal. The comments of Isaacs J were made in the context of the relevant legislative regime before him, and were concerned with whether the offences in question were joint offences. Further, the distinction drawn by Isaacs J between compensation for "private wrongs" and an offence against "public justice" is not directly relevant to the circumstances pertaining to this appeal. The contraventions relevant to this appeal are in respect of a breach by the respondents of civil penalty provisions, which have their own features and characteristics. At the very least, the basis upon which a pecuniary penalty may be imposed, and its quantum, ordinarily turn on different considerations to those relevant to criminal proceedings: see FWBII at [16]-[24], [51]-[64]; and Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCAFC 100 (Whitebox) at [13]. 391 In summary, the case law on the approach of the Court on this joint and several issue is divergent, and does not mandate any particular finding. And to the extent other cases are useful in addressing the issue for determination in these proceedings, the one principle to be discerned is that each contravenor must be separately responsible for its own course of conduct. This is not just a discretionary factor. The legislature has indicated that the contravenor should be subject to the "appropriate" pecuniary penalty - the "appropriateness" is to be determined by reference to the contravenor's own conduct and the acts and omissions of that person. 392 For the foregoing reasons, we respectfully disagree with the primary judge's approach. In our opinion, he was not empowered under s 76(1) to fix a joint and several penalty.

F. COURSE OF CONDUCT ISSUE 393 This section concerns the grounds of appeal and cross-appeal that relate to the application of the course of conduct principle. In short, the course of conduct principle seeks to ensure that an offender or contravenor is not punished or penalised twice for what is essentially the same conduct. 394 The ACCC raises the issue of the application of the course of conduct principle in paragraph 6.2 of its amended notice of appeal: see [332] above. 395 This issue is also central to both of the respondents' grounds of cross-appeal. These grounds are set out at [333] above. Although, as noted at [334] above, the respondents indicated that they did not press the cross-appeal if the Court were to reach the conclusion that the penalties should have been imposed on a several, rather than joint and several, basis, we would in any event dismiss the cross-appeal for the reasons that follow.

Relevant conclusions and orders of the primary judge 396 In relation to the Amended Millmerran Contract (raised by ground 6.2 of the appeal), the relevant conclusions of the primary judge were at [810]-[811] of the Penalty Reasons (set out at [324] above). The relevant orders in relation to this ground of appeal are paragraphs 12 and 13 of the 16 May 2016 orders (set out at [328] above). 397 In relation to the Original Millmerran Contract (relevant to the first ground of the cross-appeal), the primary judge's conclusions in relation to penalty are set out at [322] above. Relevantly for this ground of cross-appeal, the primary judge made paragraphs 6, 7 and 8 of the 16 May 2016 orders, set out at [328] above. 398 In relation to the Tarong Contract (relevant to the second ground of the cross-appeal), the primary judge's conclusions as to penalties are set out at [323] above. Relevantly for this ground of cross-appeal, the primary judge made paragraphs 9, 10 and 11 of the 16 May 2016 orders, set out at [328] above. 399 We now turn to a consideration of the submissions of the parties.

Appeal ground 6.2: the Amended Millmerran Contract 400 The ACCC's central contention is that the course of conduct principle was not applied on a consistent basis by the primary judge. Specifically, the ACCC points to an apparent inconsistency between how the primary judge dealt with the Amended Millmerran Contract and the remaining contraventions. 401 In the Penalty Reasons at [810] (see [324] above), the primary judge regarded the making of and giving effect to the Amended Millmerran Contract as one course of conduct. In contrast, the primary judge did not treat the making of and giving effect to the other contracts as single courses of conduct. 402 The ACCC submits that the proper course was to recognise, as the primary judge did in respect of the Tarong Contract, that making a contravening contract is separate and distinct from the conduct of giving effect to the contravening provision of the contract. This is said to be because the respondents could, at any time, have elected to cease giving effect to those contravening provisions. The ACCC contends that there was no reason to depart from that distinction in respect of the Amended Millmerran Contract, and that whilst the Penalty Reasons note the departure, there is no explanation of the reasons for this. 403 The respondents submit that there is no ex ante requirement to treat as a separate course of conduct each making of a contract, and each giving effect to a provision of a contract, offending s 45(2) of the Act. Rather, in ascertaining whether the making of, and the giving effect to, a provision are to be treated separately, the Court exercises an evaluative judgment. The respondents point to various authorities where penalties were imposed for or in respect of a course of conduct in circumstances similar to these proceedings: Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11 (Loy Yang); ACCC v Rural Press Ltd [2001] ATPR 41-833; [2001] FCA 1065 (Rural Press); J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 (J McPhee); Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) (1981) 37 ALR 256 (Allied Mills). 404 The respondents point to the fact that the primary judge found that there were three primary contraventions in respect of the Amended Millmerran Contract - contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii) by Pozzolanic, and a contravention of s 45(2)(b)(ii) by Cement Australia. The contravention of s 45(2)(a)(ii) is said to be predicated on Pozzolanic's entry into the Amended Millmerran Contract and the consequential affirmation of the Original Millmerran Contract: Reasons at [3259]. The contraventions of s 45(2)(b)(ii) are said to be based simply upon giving effect to the amended provisions: Reasons at [3259]. Therefore, the respondents contend, the contraventions of s 45(2)(b)(ii) were not based upon discernibly separate conduct, but on compliance with the contractual obligations imposed by the Amended Millmerran Contract. 405 The respondents also seek to explain why the primary judge treated the Amended Millmerran Contract contraventions as a single course of conduct in distinction to the other contracts. At appeal transcript p 105, counsel for the respondents submitted: So his Honour appears to have distinguished the two circumstances because of the taking of a benefit. And that was his Honour's evaluative judgment. Now, on the [other] hand, the giving effect to the amended Millmerran contract occurred at a time when the effect on the market had ceased. And there's no reason why his Honour cannot regard that as one course of the conduct on the basis that the respondent secured no benefit. 406 The ACCC does not dispute the respondents' submissions that the Court must exercise an evaluative judgment in determining whether to apply the course of conduct principle (although the ACCC notes that, in respect of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act, the Court must give weight to the fact that Parliament intended to create separate contraventions). Instead, the ACCC disputes what it characterises as an erroneous application of that principle in these specific circumstances. 407 The ACCC notes that the authorities cited by the respondents concern two particular factual scenarios: (a) where the Court considered that the regulator conducted its case in such a way that it did not distinguish between making and giving effect to the contravening contractual provisions: J McPhee at [181]-[182]; and Rural Press at [16]-[19]; and (b) where the Court considered that the relevant contraventions all arose out of the same transaction and should therefore be considered a single course of conduct: Allied Mills at 258; and Loy Yang at [40]. 408 As to the first scenario, the ACCC submits that there is no suggestion by the respondents in this case, nor was it found by the primary judge, that the ACCC's case at trial did not distinguish between making and giving effect to the Amended Millmerran Contract. 409 As to the second scenario, the ACCC submits that there is no suggestion in this case that the conduct of making and giving effect to the Amended Millmerran Contract constituted the 'same conduct'. If one was to view the respondents' conduct broadly, it involved multiple discrete contraventions with different contracts and power stations over a period of four years, of which the Amended Millmerran Contract was but one instance. This conduct was directed towards different competitors and had different impacts over time as market circumstances changed: cf Loy Yang at [40]. 410 The ACCC submits that, while the conduct of giving effect to the contravening provisions of the Amended Millmerran Contract was based on compliance with the contractual obligations imposed by that contract, this did not mean that there was no discernibly separate conduct. Rather, the ACCC contends that the act of exercising an option to extend the relevant contract, and the subsequent acts needed to ensure compliance with the terms of the extended contract, were separate in time such that they constituted two separate contraventions for the purposes of penalty. In particular, the ACCC points to the fact that the period in which the Amended Millmerran Contract was given effect to was nine months. For these reasons, the ACCC submits that the primary judge ought to have distinguished between the making of and giving effect to the Amended Millmerran Contract and imposed separate penalties for each, in the same way that the primary judge did in respect of the other impugned contracts in the proceedings.

Cross-appeal grounds 1 and 2 - the Original Millmerran Contract and Tarong Contract 411 By their cross-appeal, the respondents contend that the primary judge erred in imposing a separate penalty for the conduct of making and giving effect to the Tarong Contract and the Original Millmerran Contract. 412 In the liability judgment, the primary judge concluded that four primary contraventions had occurred in relation to the Tarong Contract: a contravention of s 45(2)(a)(ii) and s 45(2)(b)(ii) by Pozzolanic, and a contravention of s 45(2)(b)(ii) by QCL and Cement Australia. 413 The respondents contend that the conduct relied upon in respect of the giving effect to the contravention followed from entry into the Tarong Contract, as there was a contractual obligation to acquire flyash or alternatively make a minimum payment. It is said that the giving effect in breach of s 45(2)(b)(ii) therefore flowed from compliance with the terms of the contract entered into in breach of s 45(2)(a)(ii). Accordingly, the respondents contend that the conduct relied upon for the giving effect to the Tarong Contract was part and parcel of the conduct relied upon for the purpose of entry into the Tarong Contract. 414 Further, the primary liability of each of QCL and Cement Australia for a contravention of s 45(2)(b)(ii) was based upon their funding of the operations of Pozzolanic. Further, in addition to the four primary contraventions, the primary judge found that QCL was an accessory to Pozzolanic's contraventions of s 45(2)(a)(ii) and s 45(2)(b)(ii) (up to the time of the merger on 31 May 2003) and that Cement Australia was an accessory to Pozzolanic's contravention of s 45(2)(b)(ii) (from 1 June 2003 to 31 December 2006). In respect of accessorial liability, this was based upon the funding of Pozzolanic's performance of the Tarong Contract. The respondents contend that insofar as Cement Australia was concerned, there was no relevant separate conduct identified for the purpose of the allegations of accessorial liability. Further, the primary judge found that QCL was a primary contravenor of s 45(2)(b)(ii) and also an accessory to Pozzolanic's contravention by reason of, so the respondents contended, precisely the same conduct. 415 Further, the respondents have made similar contentions in respect of the Original Millmerran Contract; the primary judge found three primary contraventions: of s 45(2)(a)(ii) and s 45(2)(b)(ii) by Pozzolanic, and a contravention of s 45(2)(b)(ii) by QCL. 416 The respondents contend that in respect of Pozzolanic, the making of and giving effect to the Original Millmerran Contract did not justify separate penalties. They say that the conduct relied upon as regards entry was part and parcel of the conduct relied upon as regards giving effect. 417 Further, the primary liability of QCL for a contravention of s 45(2)(b)(ii) was based upon its funding of the operations of Pozzolanic by reason of its accounting practices. As well as the three primary contraventions, the primary judge found that QCL was an accessory to Pozzolanic's contravention of s 45(2)(a)(ii) and that Pozzolanic Industries was an accessory to Pozzolanic's contravention of s 45(2)(a)(ii). Insofar as QCL was concerned, it was sufficient to find accessorial liability that Pozzolanic was controlled by QCL. In relation to Pozzolanic Industries, the finding was said to be available based on the common boards of directors, and the fact that Pozzolanic Industries provided a guarantee in respect of Pozzolanic's obligations under the Original Millmerran Contract. 418 The primary judge found that QCL was knowingly concerned in Pozzolanic's contravention because decisions were made by QCL with full knowledge of relevant matters, and QCL funded Pozzolanic's entry into the Original Millmerran Contract as the group treasury company. But the respondents contend that this discloses that there was no relevant separate conduct. The respondents contend that the funding of the obligation was but a part of the mechanism by which the decision to proceed with the Original Millmerran Contract was implemented. 419 The respondents contend that it appears that the provision of the guarantee by Pozzolanic Industries was the basis upon which it was knowingly concerned in the primary contravention by Pozzolanic (paragraph 10 of the 28 February 2014 declarations). But the respondents contend that the guarantee was provided by the same decision makers during the same meeting - it was signed by Mr Maycock and Mr Schodel, the company secretary (being the other member of the board of directors in addition to Mr Arto), and was notionally allocated to the minutes of both Pozzolanic and Pozzolanic Industries. The respondents contend that the provision of the guarantee was properly to be regarded as part of the same course of conduct.

Consideration 420 We do not consider there to be a dispute in these proceedings about the nature of the course of conduct principle. Rather, there is a dispute about whether the facts of this case support the application (or non-application) of this principle in respect of certain contracts.

The course of conduct principle 421 The course of conduct principle is commonly referred to as the recognition that "where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality": Cahill at [39]. 422 In Royer v Western Australia (2009) 197 A Crim R 319; [2009] WASCA 139 (Royer v WA), Owen JA stated at [22]: At its heart, the one transaction principle recognises that, where there is an interrelationship between the legal and factual elements of two or more offences with which an offender has been charged, care needs to be taken so that the offender is not punished twice (or more often) for what is essentially the same criminality. The interrelationship may be legal, in the sense that it arises from the elements of the crimes. It may also be factual, because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the crimes arise out of substantially the same act, omission or occurrences. (Emphasis added.) 423 We note that a Court must be cautious in the application of this principle in a civil penalty context when it is so frequently expressed using the language of the criminal law, especially since the decisions of FWBII and more recently Whitebox. For example, the notion of "criminality" in relation to "offences" is obviously unsound in the context of civil penalties. There are other, more subtle distinctions, such as the fact that the concept of an offender being "punished" may be different in a civil penalty context as opposed to a criminal context. 424 Putting expressions of caution to one side, the course of conduct principle is commonly employed and is a useful "tool" in the determination of appropriate civil penalties: Cahill at [41]. As we have already indicated, the principal object of the penalties imposed by s 76 of the Act is that of specific and general deterrence. With this in mind, in a civil penalty context, the course of conduct principle can be conceived of as a recognition by the courts that the deterrent effect in respect of a civil penalty (at both a specific and general level) is measured by reference to the nature of the conduct for which it is imposed. It is therefore of paramount importance to identify whether multiple contraventions constitute a single course of conduct or separate instances of conduct, so as to ensure that an appropriate deterrent effect is achieved by the imposition of the penalty or penalties in respect of that particular conduct.

The application of the course of conduct principle 425 This Court is mindful that the application of the course of conduct principle requires an evaluative judgment in respect of the relevant circumstances. In Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet365 (No 2) [2016] FCA 698 at [25], Beach J recognised as much: Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. 426 This exposition was cited with approval in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25 (Reckitt Benckiser) at [141] per Jagot, Yates and Bromwich JJ. 427 This Court is also mindful, in this context, of the principles governing appellate intervention. These principles are well established and need not be reiterated: see House v The King (1936) 55 CLR 499. It suffices to say that this Court will not seek to overturn the application of the course of conduct principle by the primary judge merely because, had we been in the position of the primary judge, we would have taken a different course. Rather, the primary judge must appear to have made some error in the exercise of his or her discretion: see Reckitt Benckiser at [142]. 428 However, we note that the question of error is not merely whether the primary judge erred in his characterisation of the conduct in accordance with the course of conduct principle. Rather, the question of error is ultimately whether the primary judge erred in relying on that characterisation in the imposition of the relevant penalties. This can be seen in Reckitt Benckiser at [142] and [145], where the Full Court stated that the primary judge did not err "merely by characterising the courses of conduct involved as two in number … [even though] we would have reached a different view", but erred in relying on that characterisation as a factor in imposing penalties as it "could not be entitled to the weight which the primary judge gave to that factor". The need for an appellate court to focus on the penalties imposed is especially obvious in circumstances where the primary judge states that the application of the course of conduct principle has no bearing on the penalties imposed.

Analysis 429 It is evident that there is an inconsistency in the application of the course of conduct principle in respect of the Amended Millmerran Contract as compared with both the Original Millmerran Contract and the Tarong Contract. The fact that there is an inconsistency is not necessarily erroneous. Nevertheless, both the ACCC and respondents seek to remove this inconsistency by asking this Court to find that the primary judge erred either in respect of the Amended Millmerran Contract (as the ACCC alleges in appeal ground 6.2) or in respect of the Original Millmerran Contract and the Tarong Contract (as the respondents allege in cross-appeal grounds 1 and 2). 430 For the following reasons, we would uphold the ACCC's ground of appeal and dismiss the respondents' grounds of cross-appeal. 431 We consider that the course of conduct principle must be informed by the particular legislative provisions relevant to these proceedings. In particular, we consider that weight must be given to the fact that the legislature has deliberately and explicitly created separate contraventions for each of the making of, and giving effect to, a contract, arrangement or understanding that restricts dealings or affects competition: ss 45(2)(a) and 45(2)(b). 432 This statutory structure is relevant because it will often be the case that the making of, and giving effect to, a contract, arrangement or understanding will involve overlapping or homogenous conduct. The Court should be wary that it does not undermine this explicit distinction by applying the course of conduct principle too liberally in such circumstances. 433 In the circumstances of these proceedings, we consider that there must be sufficient justification for the primary judge's decision to draw a distinction in respect of the Amended Millmerran Contract by applying the course of conduct principle in respect of that contract (and not, relevantly, the Original Millmerran Contract or the Tarong Contract). We are not convinced there is sufficient justification. 434 The primary judge did not in terms indicate on what basis he arrived at a different conclusion, and so much was accepted by counsel for the respondents. Nevertheless, counsel did attempt to provide what they saw as being the reasoning underpinning this distinction. 435 However, as we read the primary judge's judgment, the basis for the different treatment is that entering into the Amended Millmerran Contract on 28 July 2004 had no effect on competition, and the respondents obtained no benefit by giving effect to it, given that any effect on competition had dissipated by 31 December 2003. That appears to be the basis upon which his Honour analysed it as, in effect, one course of conduct. 436 We do not consider that the ultimate consequence of the giving effect to the contract provides any justification for treating that as a single course of conduct with the making of that contract. It does not point to any significant interrelationship between the legal and factual elements of the two contraventions. It does not relate to any link in the elements of the contraventions, or any temporal or other relevant circumstances: Royer v WA at [22]. 437 Not only is there a lack of justification for the distinction, but we consider there are compelling reasons why the primary judge erred in characterising the making of, and giving effect to, the Amended Millmerran Contract as a single course of conduct. 438 From a temporal perspective, the act of exercising the option to extend the relevant contract, and the subsequent acts needed to ensure compliance with the terms of the extended contract, were markedly separate in time. Specifically, the period in which the Amended Millmerran Contract was given effect was nine months. 439 Furthermore, this is not a case where the conduct of making, and giving effect to, a contract, arrangement or understanding was the same. It may be the case that in some circumstances, the same act may be relied upon as evidencing both the "making of" and "giving effect to" contraventions, especially in proceedings involving informal arrangements: see, eg, J McPhee at [181]. This was not such a case. The pleaded conduct was different for each contravention. 440 In summary, we are not satisfied that the making of, and giving effect to, the Amended Millmerran Contract can be justified as constituting a single course of conduct. We consider that the imposition of penalties by the primary judge was inevitably influenced by this characterisation, and thus the primary judge fell into error. 441 Given our findings in respect of this ground of appeal, we would also dismiss the grounds of cross-appeal. No appellable error can be discerned from the decision of the primary judge to treat the relevant conduct as being separate, and not a single course of conduct. That involved an orthodox application of the principles we have outlined earlier in these reasons. 442 For completeness we would make one other point. The cross-appeal also raises other issues concerning the application of the course of conduct principle which we have summarised earlier. But we do not need to address them in any detail given that we propose to set aside his Honour's decision on the 'joint and several' question and to fix separate penalties for ourselves. But if it is necessary to say so, we do not consider that his Honour made any error on these other aspects.

Introduction 443 The ACCC has raised two appeal grounds (grounds 8 and 9) relevant to the question of market harm and the expected and actual benefits said to be causally connected to the contravening conduct found by the primary judge. They are set out at [332] above. 444 Before proceeding further we would make a number of preliminary observations concerning these grounds that pose difficulties for the ACCC. 445 Ground 8 refers to the consideration of expected benefits. As to that consideration we would observe the following. 446 First, s 76(1) does not mandate consideration of such a factor. Rather it stipulates that "any loss or damage suffered" is to be considered (ie, actual loss or damage). Not only is the s 76(1) reference to the actuality, but it is to the actuality of loss or damage rather than the question of benefits (expected or actual) flowing to the contravenors. It is conceptually confused to equate or elide one with the other as the ACCC tended to do from time to time in its submissions before the primary judge and before us. 447 Secondly, it may be accepted that expected and actual benefits are relevant considerations and are encompassed by the language of s 76(1) "having regard to all relevant matters". But it is not in doubt that the primary judge had regard to the consideration of expected benefits. 448 Thirdly, the ACCC's ground 8 asserts an error of law in failing to have "adequate regard to the quantum or magnitude of the benefits" (our emphasis). But failing to have adequate regard to a relevant matter is not of itself an error of law or an error in the House v The King (1936) 55 CLR 499 sense that can impugn the exercise of a discretionary judgment. 449 Fourthly, ground 8 makes reference to the "quantum or magnitude of the benefits", but this is unclearly expressed at a number of levels. One can look at benefits in a qualitative sense or a quantitative sense, and one sense may shade into the other. There is no doubt that the primary judge took into account expected benefits in both senses (see at [758], [759] and [817] to [818] of the Penalty Reasons). He also explained why he could not quantify benefits (whether expected or actual) with any degree of rigour; see for example 818, 818 and 818 to 818. So he considered the question of quantified benefits (whether expected or actual) and in that sense took that matter into account, albeit explaining why he could not quantify them with precision. 450 Fifthly, ground 8 does not engage with his Honour's reasoning in the sense that there is no direct attack on: (a) any factual finding, let alone any assertion of an error of fact (as we have said, ground 8 only makes reference to an error of law); or (b) any of his Honour's reasoning explaining why he could not quantify with any degree of rigour any expected benefit. 451 The ACCC's submissions before us have broadly roamed over various factual and evaluative findings made by his Honour concerning expected benefit in order to establish error. But ground 8 does not articulate such errors. Nevertheless we are prepared to address some of these principal criticisms for the purposes of demonstrating that they are not made out. 452 Further and generally, we would note that his Honour in setting a pecuniary penalty was engaged in an evaluative or discretionary exercise of power involving intuitive synthesis. In that context he had considerable flexibility in how he addressed the non-mandatory consideration of expected benefits as but one factor to take into account and balance. No error has been established. 453 Ground 9 is not in terms confined to an error of law. It appears to challenge (albeit in a limited way) evaluative aspects of his Honour's factual analysis and conclusions concerning both market harm and actual benefit. 454 Ground 9.1 asserts that the primary judge's consideration of market harm and benefit was limited to a recognition that the respondents derived benefit from their conduct. But the findings of the primary judge travelled well beyond that and included the following (with reference to the Penalty Reasons): (a) the infringing provisions substantially lessened competition (); (b) the competitive impact of the provisions was significant (); (c) the respondents derived a benefit by reason of the contravening conduct (); (d) but for the contravening conduct, a significant proportion of sales to non-tied customers would have been lost to a new third party entrant (), though the proportion that would have been lost was not clear (); (e) the respondents enjoyed a real and meaningful benefit by adopting the provisions (); (f) the most informed market participant fully expected there to be a significant impact upon the price should a new entrant emerge (); and (g) internal officers of the respondents believed that a new competitor would present a serious threat to price, earnings and margin (). 455 Further, there are a number of other preliminary points that we would make at this stage. 456 First, again the ACCC appears to conflate actual benefit and market harm. 457 Secondly, actual benefit is not referred to as a mandatory factor in s 76(1), although it is a relevant factor as his Honour readily accepted. 458 Thirdly, and notwithstanding the way in which ground 9.1 has been expressed, during the course of the ACCC's submissions it became clear that the ACCC was again taking issue with many of his Honour's factual findings and conclusions that have not been challenged in the notice of appeal. Nevertheless, we are prepared to deal with some of the principal criticisms, but we would observe the following. 459 Before the primary judge the ACCC accepted that it was impossible to precisely quantify the loss or damage caused by the contraventions and that any assessment of loss or benefit was necessarily imprecise (Penalty Reasons, [266]). Moreover, it expressly disavowed the proposition that it was seeking to establish a price for flyash but for the contravening conduct: Penalty Reasons, . 460 But we accept that before the primary judge the ACCC contended that the conduct caused "significant harm" (Penalty Reasons, [266]) and that the respondents derived "very significant financial benefits" (Penalty Reasons, [355]). But the high point of the ACCC's quantification before the primary judge appears to have been that the benefits or market harm "may have been in the order of" the figures it proposed (Penalty Reasons, [202]) or that those figures gave a useful yardstick of potential magnitude. The ACCC sought to make its case good before the primary judge by examining, first, the benefits derived as a result of higher flyash prices and, secondly, the benefits derived as a result of an increased market share. The ACCC then treated the market harm as equivalent to those benefits rather than providing any separate assessment of market harm. 461 But the primary judge accepted that the conduct had a significant effect on competition and that the respondents derived a real and meaningful benefit (Penalty Reasons, [795] and [818]). The primary judge took those findings into account when imposing penalties on the respondents (at [775], [776], [795], [796], [817] and [818]). For our part, we generally agree with his Honour's methodology and analysis. 462 Further and generally on this aspect, the ACCC submits that as part of his assessment of an appropriate penalty the primary judge had to undertake a quantification exercise that derived a rough figure or range of figures of market harm and benefit. It submits that a quantified figure is a necessary factor in conducting the required intuitive synthesis and that his Honour erred by not deriving one. We disagree. As noted, there is no bright line between what constitutes a qualitative and a quantitative assessment, and the one may shade into the other. The primary judge considered the question of quantified benefits, albeit explaining why he could not quantify them with precision. 463 The ACCC in its criticisms of his Honour's approach focussed upon his statement that "the true measure of the benefit in the absence of proper economic analysis cannot be quantified in any hard way" (Penalty Reasons, ). It was suggested that his Honour in using the expression "hard way" was setting too high a threshold for the forensic estimation. But we consider that his Honour's observation should not be taken out of context. His Honour accepted that the respondents had "garnered to [themselves] a real and meaningful benefit by adopting the provisions" (), but had difficulty with the ACCC's attempts to quantify the benefit which he did not consider to be sufficiently probative. Relatedly, he considered that it was an "extremely difficult and precise task" to measure, quantify or estimate "but for" prices. So, in context, a reference to "hard way" did not necessarily preclude some element of estimation. All that his Honour was saying was that the ACCC's attempts at estimation were not sufficiently probative in the present circumstances given the limited material before him. 464 In summary, in our view ground 9.1 is not made out. For the reasons elaborated upon below, there was no error in his Honour's methodology or its application. 465 Ground 9.2 raises a related question. It asserts that the primary judge wrongly excluded from his assessment the harm inflicted upon shareholder entities who were engaged in tied acquisitions. We will address this point in detail later. In the meantime we would simply observe that even if the point is good, it would not substantially affect his Honour's overall conclusion that a reliable quantification of the actual benefit or market harm could not be made. 466 It is convenient to now address each of these grounds of appeal in more detail.

Anticipated benefit (ground 8) 467 We would accept that to achieve deterrence, both specific and general, a penalty must be sufficient to render inutile "the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention" (Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 (Singtel Optus) at [63], cited with approval in Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 (TPG) at [66]). Moreover, we would also accept that the intention to profit from contravening conduct must be deterred even if it could be shown by the contravenor that no actual profit was made. Indeed, the higher the intended benefit (even if not actually received), the higher the penalty required to satisfy the objective of deterrence, all else being equal. Generally, we accept that "the sanction for the conduct [must be] substantial relative to the possible gain to be made from it" (our emphasis) (Reckitt Benckiser at [153]). 468 The ACCC contends that the primary judge did not base his consideration of what penalty would be sufficient to deter the respondents from engaging in the contravening conduct on the profit anticipated at the time that they decided to engage in that conduct. Rather, the ACCC contends that the primary judge only addressed a related matter raised by the ACCC as to inferences that could be drawn as to actual benefit and market harm based on the forecasts of the respondents (Penalty Reasons, [307], [308], [662] and [818]). In that context, so it is said, the primary judge found that, while the respondents' opinions should be given "careful attention, due weight and consideration" (at [307]) they "cannot be in any sense determinative" of the price which would have emerged but for the contraventions (at 818). 469 The ACCC contends that the respondents' forecasts are of particular significance for penalty because of the deliberate and calculated nature of the contraventions. It is said that each of the contraventions arose out of the respondents' desire to maintain their EBIT and margins in the face of the threat of new entry. It is said that the forecasts they made in the lead up to the critical decisions represent their best estimates of the profits to be had from the contraventions. Accordingly, it is said that the forecasts were an important part of the decision-making process. It is said that in the case of the Tarong, Swanbank and Original Millmerran Contracts, the anticipated profits were such that the respondents were prepared to proceed with the contracts despite the fact that senior officers of Pozzolanic and QCL were "entirely astute" (Penalty Reasons, [794]) to the competition law risks. 470 In elaboration, the ACCC refers to the following matters. 471 It contended before the primary judge and contends before us that at the time of the first contraventions, Pozzolanic and QCL considered the profitability of their entire SEQ flyash business was potentially at risk. Mr Wilson and Mr Ridoutt anticipated that the SEQ flyash business would be "marginally profitable" if FAA entered, while Mr Arto expected QCL's market share would "collapse" in this circumstance. Mr Maycock accepted QCL could not maintain its revenue and volumes in the face of new entry. Board papers from the briefing team considering the matter advised that if Pozzolanic lost either contract (Tarong or Millmerran) then it would lose sales volumes of 250,000 tonnes and suffer an erosion in the EBIT margin in the order of $6 million. 472 But the ACCC has accepted that there was an element of uncertainty, both in relation to the quality of the Millmerran ash (which at that stage was unknown) and as to the identity of the party who would in fact take up a contract with Tarong or Millmerran if entry could not be prevented (with entry by Transpacific expected to have a less dramatic, but nonetheless significant impact on the respondents' earnings). 473 It has contended that the choice facing the respondents was clear. On the one hand, they could act in a way which would have allowed new entry and face the risk of a significant loss of profits in SEQ. On the other hand, they could block new entry and risk contravening the Act. They chose the second option. 474 It has contended that the respondents faced a further decision point on 28 July 2004. At this stage, they could either terminate the Millmerran Contract (in which case they would receive a refund of royalties already paid under the contract and be relieved of the obligation to install plant) or elect to proceed with it, extending the term of the contract by a year and waiving the right to recover existing royalty payments. The cost of this course would have been approximately $13 million over eight years. 475 It has contended that at this time, the senior managers involved (Ms Collins and Mr Clarke) thought that the quality problems at Millmerran would ultimately be solved. Ms Collins and Mr Clarke expected that, if Cement Australia "walked away" from Millmerran, Boral would be likely to "establish an owner supply and competitor facility with significant impact on fly ash market dynamics in Queensland". It has contended that Ms Collins expected that if a competitor was able to enter at Millmerran upon Pozzolanic relinquishing the contract, the price of flyash would likely drop by $10 per tonne leading to an EBIT loss of "about $3M per annum in SEQ alone". 476 Accordingly, the ACCC contends that against this background, and on the basis of the anticipated benefits of the contravening conduct alone, the penalties determined by the primary judge were manifestly inadequate. It contends that even if QCL knew that it would ultimately face penalties totalling $17.1 million as at September 2002, it might well have been expected to have taken precisely the steps it did to block entry. The ACCC contends that even after factoring in the cost of the penalty, QCL would have expected to profit or possibly profit from its contraventions at the time it decided to engage in the contravening conduct. It asserts that the total figure of $17.1 million merely illustrates how inadequate these penalties were. 477 The ACCC also contends that this consideration comes into particular focus in relation to the Millmerran contraventions where the primary judge found that "Pozzolanic and QCL were saved from themselves, in fact, to a considerable extent, because the Millmerran ash … proved to exhibit substantial technical and colour difficulties" (Penalty Reasons, [766]). 478 It contends that the Millmerran contraventions were calculated by "the most informed market participant" to cause significant market harm and to result in substantial financial benefit for QCL: Penalty Reasons, . It says that the colour issues which ultimately emerged at Millmerran were not foreseen by QCL or any other potential entrant in 2002. In 2004, the respondents expected that they would be resolved. It is said that to the extent that colour issues in the ash diminished the harm which would otherwise have been caused by the Millmerran conduct, that diminution in harm was not brought about by the respondents. Accordingly, it should not reduce an otherwise appropriate penalty. 479 In our view, appeal ground 8 must be rejected. 480 First, the primary judge gave detailed consideration to the benefits said to be anticipated by the respondents. His Honour dealt with the ACCC's submissions and evidence on this aspect at considerable length (Penalty Reasons, [758], [759], [817] to [818]). We can identify no error in his analysis; he appears to have considered and evaluated all relevant matters. 481 Secondly, the ACCC's submissions proceed from a flawed foundation including mischaracterising some of the respondents' forecasts that were in evidence. The identified benefits that it asserts were not "expected" as such by the respondents. Indeed, as the primary judge noted, it was apparent that the respondents' decision-makers thought that the assessments (on which the ACCC has relied) were exaggerated and in some respects a forecast of the worst possible case. The relevant decision-makers did not accept the assessments as a likely result once the respondents began to engage in the proscribed conduct: Penalty Reasons, . In any event, his Honour addressed the relevant expressions of opinion () and was prepared to conclude that there was an expectation of a "significant impact upon the price". But he concluded that it was "not possible to put a number in any credible way on the measure of that benefit". No error has been demonstrated with respect to his Honour's analysis. 482 Thirdly, some of the respondents' assessments were based upon assumptions that the primary judge in any event found were misplaced (Penalty Reasons, [297]), including an assumption that the respondents would obtain no flyash from either Millmerran or Tarong and that the quality of Millmerran flyash would not be problematic ([297], [766], [769] and [782]). Appeal ground 8 has not expressly challenged his Honour's findings in that regard. In any event, we see no error in his Honour's approach. 483 Finally in relation to appeal ground 8, we would repeat some of our earlier observations. 484 First, while it may be accepted that expected and actual benefits are relevant considerations encompassed by the language of s 76(1) "having regard to all relevant matters", the primary judge clearly had regard to the consideration of expected benefits, at least in a qualitative sense and in some respects in a quantitative sense. He also explained why he could not quantify them with any degree of rigour. So he quite correctly considered the question of expected benefits and took that matter into account, albeit he explained why he could not quantify them with precision. 485 Secondly, the ACCC's appeal ground 8 asserts an error of law in failing to have "adequate regard to the quantum or magnitude of the benefits" (our emphasis). But failing to have adequate regard is not per se an error of law or an error in and of itself in either the first or second House v The King sense. A criticism of failing to have adequate regard is in reality a challenge to his Honour's weighting. We adopt what the Full Court said on that aspect in Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 at [25]-[32] per Barker, Katzmann and Beach JJ. 486 Further and generally, there is an air of unreality in the ACCC's criticisms. His Honour was engaged in an evaluative or discretionary exercise of power involving intuitive synthesis of numerous mandatory and non-mandatory considerations to determine a penalty. In that context he had considerable flexibility and scope in how he addressed the non-mandatory consideration of expected benefits both qualitatively and quantitatively. No error has been established. 487 Finally, to the extent that the ACCC has sought to use ground 8 (and indeed ground 9) or parts thereof as stepping stones to establish the more general ground of appeal that the penalties imposed were manifestly inadequate (ground 10), we have explained at [567] below how we have dealt with that ground.

General methodology 488 The primary judge, at [488] of the Penalty Reasons identified the relevant question as: "did the respondent(s) obtain an identified benefit which but for the fact of the contravening conduct, [they] would not have obtained?" (see the primary judge's discussion at [477] to [489]). His Honour accepted that the respondents' documents suggested a "consistent theme … that in the face of competition QCL, and later Cement Australia, would not have been able to sustain the margins they enjoyed." But his Honour found that the difficulty was in "trying to quantify or estimate the measure of that difference" (emphasis in original): 818. 489 The ACCC criticises his Honour's focus on an "identified benefit". It says that the "identified benefit" can only be determined by comparison with a hypothetical event, in respect of which proof is "necessarily unattainable" (Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643, cited with approval in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 350). 490 The ACCC accepts that the precise change in the respondents' margins in a hypothetical alternative world would ultimately have depended upon a range of factors including the identity and number of new entrants, the timeframe in which entry took place, the pricing policies adopted by the new entrant(s) and the steps taken by QCL or Cement Australia in response. It says that competition is a process and that a change in the competitive landscape would be expected to lead to a response and counter-response, ad infinitum. The ACCC says that it is unlikely to ever be practicably possible for the ACCC to establish a "but for" price to whatever is the requisite standard. 491 The ACCC points out that the primary judge concluded that QCL and Cement Australia obtained "a real and meaningful benefit by adopting the provisions", but that he could not "attribute a quantification or estimate of the kind sought to be asserted by the ACCC": Penalty Reasons, 818. As a result, his Honour concluded that "the pecuniary penalty should take account and recognise that the respondents derived benefit from the conduct but the true measure of the benefit in the absence of proper economic analysis cannot be quantified in any hard way" (emphasis in original) (818). The ACCC contends that this approach creates a problem with applying the principles of deterrence. It says that a penalty sufficient to have appropriate deterrent effect if the benefit to the corporate respondents is in the order of $5 million is very different from a penalty sufficient to have appropriate deterrent effect if the benefit is in the order of $25 million. So much may be accepted. It says that the primary judge appeared to accept in his reasons that the anti-competitive impact of the impugned provisions on the corporate respondent's earnings was "significant". But the ACCC complains that whether "significant" means several million dollars or tens of millions of dollars was not explained by his Honour. 492 The ACCC makes reference to s 76(1) of the Act, which requires the Court to have regard to "any loss or damage suffered" as a result of the conduct. It contends that such language is similar to the language of s 82 of the Act which entitles a person who "suffers loss or damage by conduct of another person" to recover damages. Accordingly, so the ACCC contends, the primary judge ought to have been aided in considering "any loss or damage suffered" in the context of fixing a pecuniary penalty by making an analogy with principles relevant to the assessment of damages. In elaboration, the ACCC contends that the Court has recognised difficulties said to be associated with the proof of past hypothetical factual situations and has developed the following principles in assessing damages under s 82 of the Act to address such difficulties. A distinction has been drawn between, on the one hand, proof of causation and loss and, on the other hand, proof of the value of the loss or damage for which recovery is sought. Although the issue of whether a loss has been caused by a respondent's conduct must be established on the balance of probabilities, the determination of the amount or value of the loss suffered may require the evaluation of hypotheses and possibilities (the fulfilment of which cannot be proved). It is said that proof on the balance of probabilities plays no part in the evaluation of such hypotheses or possibilities. Evaluation is a matter of informed estimation. If a loss is established, its value must be estimated. That must be done no matter how difficult the task, even if some guesswork is involved or if it is impossible to be precise. It is said that the award of damages may need to be adjusted to reflect the degree of probability that an event would have occurred or might occur. Further, it is said that it is proper to draw inferences in favour of an applicant, if the respondent's contravention itself made quantification of loss difficult. 493 The ACCC contends that the need to adjust a damages award to reflect future contingencies arises because the 'all or nothing' outcome produced by the civil standard of proof would result in the vast majority of cases in over-compensation or under-compensation. But it says that this consideration is of less significance in a penalty case where the object is not to put the contravenor in the same position as it would have been absent the contravention, but rather to put a sufficiently high price on contravention that a business acting rationally and in its own best interest would not be prepared to treat the risk of such a penalty as a business cost. 494 The ACCC says that support for its analogy with the assessment of damages can be found in R v Smithers; Ex parte McMillan (1982) 152 CLR 477 discussing the imposition of a pecuniary penalty under the Customs Act 1901 (Cth), where the Court stated at 487: The statutory provisions, in requiring the Court to assess the value of the benefits derived, do not impose upon the Court an administrative discretion ... In essence the function reposed in the Court is closely analogous to the task undertaken by a court when, in the exercise of judicial power, it is called upon to assess the damages sustained by a plaintiff in tort or contract. In that case the court assesses detriment. In this case the Court is required to assess benefits. Of course, it has been said that the assessment of damages involves the making of a sound discretionary judgment. No doubt the same comment may be made about the Court's function under s 243B(2). But the making of a sound discretionary judgment is entirely consistent with the exercise of judicial power. The exercise of that power often calls for the exercise of a judicial discretion. 495 The ACCC accepts that it is impossible to quantify the loss or damage caused by the respondents "in a hard way". It accepts that the very nature of the contravening conduct means that a precise quantification of this kind is impossible. But it contends that the standard imposed by the primary judge is a standard which no applicant (whether the ACCC or a private litigant) would ever be able to meet. It contends that it is a standard which is not applied when dealing with damages under s 82 of the Act. It says that there is no reason in principle why an unattainable standard should be applied to form a view about market harm or financial benefit upon which the Court can properly act in considering penalty. Rather, it says that a judgment is required as to the likely quantum of market harm and financial benefits. 496 We would generally reject the ACCC's submissions. 497 The principles developed in connection with the assessment of damages, namely, that where it is clear that substantial loss has been incurred, the fact that an assessment is difficult because of the nature of the damage is no reason for awarding no damages or merely nominal damages, are not directly comparable with the present context. 498 First, the assessment of damages is a different exercise to the imposition of a civil penalty. The Court is principally concerned in the present context with general and specific deterrence. The perspective of putting a party in the position that they would have been in if a contract had been performed, or with putting an injured party in the position that they would have been in but for the statutory contravention or the tortious conduct has little to do with the matter. 499 The imposition of a penalty is affected by many questions which are then balanced as a matter of intuitive synthesis. The amount of loss or damage causally connected to the contravening conduct is only one of the relevant factors. Moreover, the exercise of intuitive synthesis is an evaluative exercise. To suggest that there must be quantitative precision on any one factor feeding into the question of what a penalty should be is misplaced. Contrastingly, in the assessment of damages or the value of a lost opportunity, some monetary quantification resulting from the process of some degree of estimation, albeit imperfect, must be made (see for example Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 350-355 and 368; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 at [38]; and Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 642 and 643). And indeed that quantification is the singular goal of such a compensatory exercise. But in setting a penalty, the goal is to fix a monetary amount for the penalty sufficient to address the principal objective of deterrence, rather than to quantify loss or damage as compensation. 500 Further, the authority on which the ACCC has relied to support the transposition of what it asserts to be the relevant principle was concerned with quite different legislation (s 243B(2) of the Customs Act 1901 (Cth)) that imposed upon the court an obligation to quantify the benefits derived in relation to dealings in narcotics, and to impose a penalty equal to the value of those benefits (R v Smithers; Ex parte McMillan). But such a statutory provision has no analogy with s 76(1), which identifies the "nature and extent … of any loss or damage suffered …" as only one factor to be taken into account by the Court in exercising its discretion on what penalty to impose. Moreover, the very words "nature" and "extent" are more general than monetary quantification and do not dictate that the latter must be achieved if the evidence is not sufficiently probative to warrant it. The words "nature and extent" are to be read distributively in the s 76(1) phrase such as to apply to that part of the phrase "any loss or damage suffered". In any event, the latter phrase in and of itself does not necessitate monetary quantification. It is more general and diffuse in the sense of looking at loss or damage more broadly rather than concerned with identifying loss or damage to any particular individual (a precursor to awarding compensation), let alone quantifying damages (a different concept to the concept of damage). 501 Further, if the ACCC's principle was to be accepted, contrary to our view, it was a matter for the ACCC to have adduced such evidence as was necessary to enable the primary judge, to the requisite standard (s 140(2) of the Evidence Act 1995 (Cth)), to make the appropriate quantification of damage or market harm. It failed to do so. It did not seek to apply and justify quantification based upon any sufficiently probative method. It was not appropriate for the ACCC to say in effect to the primary judge or contend before us that his Honour had to do his best with the ad hoc and less than systematic approach which the ACCC advocated. In elaboration, we would note the following. 502 First, the only expert evidence concerning market harm relied on at the penalty hearing was from Dr Philip Williams, who was called by the respondents. The ACCC chose not to adduce its own expert evidence on the subject. Dr Williams' evidence was to the effect that the matters relied upon by the ACCC did not provide a sound economic basis for quantifying the effect of the conduct. In the absence of contrary and probative evidence, his Honour was entitled to accept and act upon Dr Williams' opinions. 503 Secondly, it may have been possible for the ACCC to probatively measure the benefits derived or the market harm suffered even if the identity of the entities that might have entered the market was unknown. Dr Williams referred to economic literature that suggested there were various methods that could have been employed to quantify market harm: Penalty Reasons, [641]. But the ACCC chose not to rigorously engage with any such methodologies. Moreover, its criticisms of the primary judge's conclusions as to the lack of probative evidence (see for example at ) are unwarranted, particularly in the context where it only chose to put before his Honour its own, if we may say so, piece-meal analysis. 504 We accept that estimating damage from anti-competitive behaviour of the type found by the primary judge in the present case is difficult. The question of making such an assessment usually involves in an economic context a "but for" analysis. But in a legal context where compensatory loss is being assessed, sometimes a "but for" approach may not be suitable or comprehensive. Section 76(1) in using the phrase "any loss or damage suffered" may embrace but is clearly not confined to the lens of compensatory loss. It is to be analysed in part in its economic context. And for economists, a "but for" analysis is usually appropriate. The question normally posed in such a framework is: what would the price of the relevant product have been absent the anti-competitive conduct? This is compared with the actual price to determine loss. Of course, such an approach may not consider other types of loss such as harm done arising from the reduced use of the relevant product because of the higher price that may also have to be considered. But the issue principally posed for economists is how to calculate the "but for" price. Various but problematic methods may suggest themselves (see Brander JA and Ross TW, "Estimating Damages from Price-Fixing" in Pitel S (ed), Litigating Conspiracy: An Analysis of Competition Class Actions (Federation Press, 2006) at 335), including: (a) making before and after comparisons of prices; (b) using marginal cost or average cost as a proxy for price; (c) using prices in similar markets as analogues; and (d) undertaking econometric simulations to determine a competitive price benchmark. 505 But before the primary judge the ACCC did not put forward any probative analysis using any of these methods, although it did suggest rough and ad hoc approximations utilising some aspects of methods (a) and (c). 506 Thirdly, in relation to some aspects of its analysis the ACCC relied upon what the respondents not unfairly described as a "patchwork quilt of figures" from budget assumptions or forecasts prepared by different personnel of the respondents at different times. But these were premised on counterfactuals and other assumptions in part correctly rejected by the primary judge. Moreover, the ACCC inappropriately equated perceived benefit with market harm. The ACCC's approach was correctly rejected by the primary judge. 507 Fourthly, we agree with the respondents that there was no proportionality in the ACCC's approach given that it sought penalties of $97.5 million despite the EBIT earned by the respondents in relation to the relevant products in the relevant period relating to the contraventions being in the adjusted range of $13.5 million to $20 million (discussed at to of the Penalty Reasons albeit with some typographical errors in the figures and analysed further by us at [327] above). Moreover, given that a comparison was required between the actual position of the respondents with the counterfactual position where the relevant contracts did not contain the impugned provisions (rather than the total loss of the contract(s) to a third party), it was incorrect for the ACCC to assert that the whole of the EBIT should be taken to have been causally connected to the contravening conduct. Indeed and more generally, in our opinion the ACCC never properly engaged with his Honour's statement at [489] of the Penalty Reasons (set out at [313] above). 508 Generally, the primary judge concluded that the exercise undertaken by the ACCC was flawed and did not permit any reliable quantification of loss or damage or the economic effects of the conduct (Penalty Reasons, , and ). For our part, we do not see any operative error in such a conclusion or his Honour's foundational findings supporting such a conclusion. 509 Finally and as a general observation, we of course accept that the mandatory consideration of loss does not necessarily require evidence from victims or expert evidence on a "but for" basis (Reckitt Benckiser at [93]); moreover, in some cases an assessment can be made even absent precise evidence on causation or mathematical precision. The primary judge was required to consider and analyse the information before him, and draw any necessary but reasonable inferences open to him in making some assessment. But to say as much is not to say that his Honour was in error in failing to make a quantification of the type contended for by the ACCC. We would also note that the forensic context that his Honour was dealing with was quite different and considerably more complex than that discussed by the Full Court in Reckitt Benckiser at [98]. Depending upon the context and the exercise, more or less precision in the assessment may be justified. At the end of the day the task is principally an evaluative exercise for the trial judge. And in any event it is only one input into a broader evaluative exercise being the setting of the pecuniary penalty itself, with any input only being weighed as part of an intuitive synthesis approach. Precision in the quantification of one of the inputs may be unrealistic given the broader nature and context of the task in setting a penalty. Of course, if probative evidence enabling greater precision is available, then more detailed quantification may be appropriate. But in the present case and context, we see no error in his Honour's evaluation of the material before him. 510 It is convenient to now discuss some of the detailed factual questions that his Honour addressed and the ACCC's criticisms thereof, even though the grounds of appeal do not expressly address the same.

The ACCC's various analyses 511 The ACCC contends that the findings at first instance made clear that the respondents' conduct caused significant market harm and that they obtained financial benefits from it. The ACCC has referred to the following findings made by the primary judge that it says are of particular relevance in this context: (a) The Tarong, Swanbank and Original Millmerran Contracts substantially lessened competition in the upstream and downstream markets. (b) QCL expected that the price of concrete grade flyash would fall by $10 per tonne if a competitor secured a contract at Millmerran. Informed potential entrants such as FAA and Transpacific also expected prices to fall if they secured access to Millmerran ash. (c) The respondents' expert economist, Professor Hay, expressed the opinion that if Pozzolanic lost either the Tarong or Millmerran Contract its market share would "collapse almost immediately" no doubt because FAA would deploy its "pass-through cost plus model". Mr Arto had the same view. (d) Tarong was of particular importance to the SEQ concrete grade flyash market. New entry at Tarong would have led to significant, real and meaningful competition. (e) Third party access to Swanbank ash would have had significant competition effects as it would very likely have triggered MFN consequences in Pozzolanic's supply price to its major customers. (f) Once Pozzolanic had secured the Millmerran Contract, the respondents implemented a $4 per tonne price increase, effective 1 October 2002. (g) On 16 October 2002, QCL revised its budget so as to forecast an increase in average selling prices of $16.11 per tonne compared to the 2002 Budget (which assumed competitor entry at Millmerran) and a $4.25 million increase in EBIT compared to the 2002 Budget, even after accounting for the additional cost of the Millmerran Contract. (h) The respondents earned $110 million in revenue from sales of concrete grade flyash in SEQ from 30 September 2002 to 31 December 2006. The combined EBIT contribution made by the Tarong and Swanbank sites over the period from 2002 to 2006 was $63 million. Over the period from 2003 to 2006, the EBIT figure was approximately $53 million. (i) Prices in NSW during the period of the contraventions were much lower than prices in the SEQ region. (j) After Sunstate and IFB entered, the respondents lost virtually all sales other than 'tied' sales to their shareholders. Non-tied sales made up approximately 40% of the respondents' SEQ sales in 2005 and 2006. (k) Following their entry into the concrete grade flyash market, IFB and Sunstate each supplied flyash at prices which were materially lower than the prices offered by Cement Australia. In some cases, the prices offered by these suppliers in 2013 were lower than the prices offered by Pozzolanic and QCL in 2003. (l) During the period from 2006 (being the last year in which the respondents did not face a SEQ-based competitor) to 2012, Cement Australia's annual SEQ sales fell from 396,852 tonnes to [see Confidential Schedule] (a total loss of over [see Confidential Schedule]). Further, Cement Australia's annual revenue from SEQ flyash sales fell from $27,394,446 to [see Confidential Schedule] (a total loss of approximately [see Confidential Schedule]). Further, if the value of the revenue in 2005 was adjusted to reflect 2012 dollars, the true value of the revenue lost (ie, after adjusting for inflation) was [see Confidential Schedule] in 2012 dollars. 512 The ACCC contends that the primary judge accepted that if the measures it put forward could be treated as a reliable measure of the overcharge, the following conclusions would follow: (a) If the overcharge likely to have been achieved by the respondents was an amount of $14 per tonne (comprising QCL's forecast $10 per tonne price reduction coupled with the $4 per tonne price increase implemented on 1 October 2002) then the "overcharge" calculated according to this measure over the period 30 September 2002 to 31 December 2006 would be approximately $20.8 million. (b) If SEQ prices had fallen to the levels charged in NSW (where FAA competed with Hyrock Pty Ltd (Hyrock)) the overcharge during the same period would have been in excess of $37.8 million, also excluding lost sales. (c) If a competitor had entered in 2003 and taken all, or substantially all, of the 'non-tied' sales (consistent with what in fact occurred after Sunstate and IFB entered) the likely impact from lost market share (excluding any price reductions) would be in the order of $21.2 million ($53 million x 40% = $21.2 million). If entry on this scale had been coupled with a $14 per tonne decrease in prices for the remaining 60% of sales, the total impact would be in the order of $33.2 million ($21.2 million + ($20 million x 0.6), where $20 million is the figure identified in subparagraph (a) above less the "over-charge" incurred in relation to sales during September 2002 - 31 December 2002). If entry on this scale had been coupled with a reduction to NSW prices for the remaining 60% of sales, the total impact would be in the order of $43.9 million ($21.2 million + ($37.8 million x 0.6), where $37.8 million is the figure identified in subparagraph (b) above). 513 In summary, before the primary judge the ACCC identified four types of analyses that it submitted supported the conclusion that the respondents' conduct led to higher prices: (a) First, an analysis based upon internal documents produced by the respondents containing statements or assumptions about the potential impact of the loss of the Millmerran Contract or Tarong Contract. (b) Secondly, an analysis comparing prices charged in Queensland (Tarong, Millmerran and Swanbank flyash) with prices in NSW (Eraring, Mt Piper and Bayswater flyash). (c) Thirdly, an analysis comparing flyash prices charged by the respondents from 2003 to 2006 with the prices charged by their competitors in the period from 2011 to 2013. (d) Fourthly, an analysis comparing the price of flyash relative to the price of cement charged by the respondents from 2004 to 2008 (around 50-60%) with the equivalent ratio charged by Sunstate in 2011 and 2012 [see Confidential Schedule]. 514 We can put to one side the fourth type of analysis as it was not persisted with before us. As to the other types of analyses, with respect they were informal and incomplete. Moreover, the primary judge did not accept that any of these methods were reliable. It is appropriate to discuss the remaining three in more detail.

Respondents' internal documents 515 The primary judge accepted that the opinions expressed in the respondents' documents relating to likely price decreases in the face of new entry were "informed opinions" but that they could not "be in any sense determinative or probative of a price which would have emerged in the period 2002 to 2006 but for the contravening conduct": Penalty Reasons, 818. The ACCC accepted that the respondents' expectations did not represent a "hard economic analysis" of a "but for" price but submitted that they were nevertheless a useful yardstick of the potential magnitude of the effect of new entry because they were informed opinions of market participants. At the penalty hearing the ACCC submitted that the benefit obtained by the respondents could be quantified in the following ways based upon the respondents' internal documents: (a) First, as being within the range of $7 to $42 million over the proposed seven year term of the Millmerran Contract based on an assessment of 9 November 2001 (see [85] above) that loss of single supplier status would cause a loss of $1 to $6 million per annum. (b) Secondly, as being $22.352 million from 1 July 2002 to 31 December 2006. This was based on an assumption that the respondents' flyash prices would have been $14 per tonne lower for the whole of that period. The ACCC relied on a 14 November 2001 budget assumption (see [86] above) that the price of Tarong flyash would drop by $10 per tonne if a competitor won the Millmerran Contract, and further assumed that but for the contravening conduct the respondents would have been unable to increase prices by $4 per tonne on 1 October 2002 or any other date. (c) Thirdly, as being $39.2 million over the proposed seven year term of the Millmerran Contract. This was based on an assumption from the 14 November 2001 budget that loss of the Millmerran Contract would reduce EBIT by $2.8 million in the six months to 31 December 2002. The ACCC submitted that the assumed effect over the six months would be felt uniformly across the whole of the proposed seven year term of the Millmerran Contract. 516 In relation to each of these proffered quantifications, the primary judge made the following findings. 517 First, he considered that the 9 November 2001 assessment was based on the misplaced assumptions that Millmerran flyash would enter the market, and that it was not problematic in terms of quality (due to colour variability) and other factors. That assessment (and the March 2002 Board paper which adopted the upper end of the range of "up to" $6 million), so his Honour considered, did not express any opinion about the effect of the impugned provisions, being the relevant question that the primary judge had to consider ([477] to [489] and ). In our view, there is no reason to query his Honour's analysis. The 9 November 2001 assessment had a very broad range of $1 million to $6 million per annum and was for the loss of "single supplier status". Moreover, this and other of the respondents' documents were forecasts and expectations of what might occur rather than calculations of actual benefit or harm. 518 Secondly, his Honour considered that the opinion about a fall of $10 per tonne in flyash prices was simply an informed forward-looking opinion based on certain assumptions (Penalty Reasons, and ) (some of which were proved to be untrue) (); further, subsequent events proved that prediction wrong ([662]). In his Honour's view, with which we agree, the opinion could not in any sense be determinative or even probative of a price which would have emerged in the period 2002 to 2006 but for the contraventions. As his Honour rightly held, the predictions of a price reduction could not simply be projected across the entire contravention period (). And in those circumstances, his Honour rightly considered that no finding was necessary as to whether the respondents would have been able to increase prices by (part or all of) $4 per tonne on 1 October 2002 or at some time thereafter. 519 Thirdly, his Honour appears to have accepted that it was problematic to conclude that the relevant provisions of the Millmerran Contract produced an EBIT of $39.2 million, even if the November 2001 assumption (as to the effect of losing the Tarong or Millmerran Contract as a whole) was otherwise sound. Neither the November 2001 budget document nor the subsequent March 2002 Board paper expressed any opinion on that question. 520 The ACCC's ground 9.1 does not challenge any of these factual findings or conclusions. The ACCC has not identified any error, let alone an error of the requisite kind, in the primary judge's conclusions in relation to the ACCC's analysis based upon the respondents' internal documents.

NSW pricing 521 As to the ACCC's second type of analysis based upon NSW pricing, the primary judge rejected the same in large part for the reasons given by Dr Williams. He was entitled to do so. The primary judge accepted Dr Williams' evidence that the comparison with NSW prices did not represent "a measure of the margin by which prices were higher in SEQ in 2002 to 2006 than they would have been but for entry", based on the following matters (Penalty Reasons, 818 and 818). First, Dr Williams accepted that one possible explanation for the marked differences in prices between the two regions was that the effective monopoly of Cement Australia in SEQ meant that it could charge uncompetitive prices. Secondly, another possible explanation was that the ash sources were not homogenous, although Dr Williams had not undertaken the empirical work necessary to determine whether this was the case. Thirdly, another possible explanation was that transfer pricing might be a cause of the differences. Dr Williams made further criticisms to the effect that the ACCC's analysis did not control for the impact of transport cost differences and that in order to do a proper analysis of the comparative pricing, it would be necessary to analyse all invoices in the relevant period, rather than simply rely on average prices. 522 In our view, his Honour was quite entitled to accept in large part Dr Williams' opinions, particularly in the absence of contrary expert opinion. Moreover, there is no ground of appeal stating that his Honour was in error in doing so. Ground 9.1 is silent on the matter. Nevertheless we will address some of the criticisms of his Honour's approach raised by the ACCC. 523 First, the ACCC accepted below that its initial analysis did not control for transport costs. The evidence at trial was to the effect that the average transport costs in SEQ were approximately $5 per tonne higher than those in NSW. The ACCC prepared a further analysis dealing with this difference, which was put forward at the penalty hearing (Penalty Reasons, [324]). The effect of taking that differential into account was to reduce the "overcharge" by $7,303,875 (calculated as: 1,460,775 tonnes [total tonnage sold in the period 2003-2006] x $5 per tonne = $7,303,875). The ACCC contends that his Honour did not control for transport costs as set out in a table handed up during the penalty hearing. But this criticism has no substance. The primary judge expressly stated that this table was taken into account in making his findings ([324] and [331]). 524 Secondly, as to quality, the ACCC says that the highest Dr Williams' evidence rose was to the effect that quality differences might be a possible explanation for the differences in prices but that Dr Williams had not undertaken any analysis of that question. The ACCC accepts that differences in quality might provide a theoretical explanation for a price difference between two regions but contends that the findings and evidence were against that being an explanation for the following reasons: (a) The ACCC's analysis included prices for Bayswater flyash. Bayswater flyash was of superior quality to that of Tarong flyash. The ACCC says that [see Confidential Schedule]. Therefore it says that quality differences could not be an explanation for the lower price of Bayswater flyash in NSW. Indeed, it says that the difference between the price at which Bayswater ash was able to be sold in SEQ and the average price in NSW was itself a direct "like for like" comparison of the pricing differentials. (b) Further, the ACCC contends that there is no evidence that FAA differentiated its sale prices based on ash quality. Rather, it sold ex-works to its shareholders using a "pass-through cost plus model". (c) Further, the ACCC contends that the actual ex-works prices charged for Bayswater, Eraring and Mt Piper ashes in NSW were very similar, with a price spread of approximately [see Confidential Schedule] between the three. The ACCC says that in this respect, Dr Williams himself observed that the similarity in prices between Eraring, Mt Piper and Bayswater ash suggested that those ashes were reasonable substitutes for each other. (d) Further, the ACCC says that had FAA, who was the under-bidder at Tarong and who had expressed a willingness to contract on a non-exclusive basis, obtained a contract with Tarong, there is no reason to assume it would not have deployed its existing business model at the Tarong Power Station, with similar price effects to those seen in NSW. 525 As to these contentions, Dr Williams expressed an opinion that Tarong flyash was, at least to some extent, superior to Bayswater ash (Penalty Reasons, [686]). Further, the cement equivalence value, which is a measure of quality, was the same for Tarong and Bayswater. Dr Williams gave evidence that further work would be required in order to understand product differentiation ([686] and ). The primary judge accepted that further analysis was required. Further, it was not clear what conclusions could be drawn from the MFN provisions. Generally, the ACCC's proposition that Bayswater flyash was superior to Tarong flyash was not made good. But even if there was substance to the ACCC's submissions about the ability to disregard flyash quality, its analysis did not control for "other causative factors" including the particular and different features of the NSW market (a separate market) and its market participants. 526 Thirdly, it is said by the ACCC that while FAA's prices to its shareholders were transfer prices, the prices of the other NSW supplier, Hyrock, were not. Hyrock sold Bayswater ash ex-works for prices slightly below those offered by FAA: approximately $12.50 per tonne - $15.00 per tonne. Further, the ACCC says that it is not clear why FAA's sales prices should be disregarded on the basis of transfer pricing. Boral (one of the shareholders in FAA) would likely have preferred to pay FAA an average price of $39.20 per tonne for flyash (even if it was a transfer price) than to pay an average price of $73.01 per tonne to Cement Australia (prices based on 2003 prices). Further, the ACCC submits that FAA adopted a pass-through cost plus model in Northern NSW, and that there is no reason to believe that it would not have adopted that model in SEQ if it won the Tarong Contract. But it is not clear what strategy might have been adopted by FAA. 527 The ACCC submits that the lack of allowance for sales to FAA shareholders can be discounted. This is on the basis that another entity, Hyrock, sold Bayswater flyash. But we agree with the respondents that it is not clear why this means that the issue of tied sales can be put to one side. The ACCC also says that Boral, one FAA shareholder, would have preferred to pay the prevailing price in NSW rather than the price charged by the respondents in SEQ. But the other FAA shareholder (ACH), as a 50% shareholder in Cement Australia from May 2003, may have taken a different view (even if it could simply be assumed that the prevailing price in NSW would otherwise match the price in SEQ). 528 Fourthly, the ACCC submits that the lack of evidence about average price, as opposed to point in time prices, can be discounted. It is said that the prices relied upon were drawn from the respondents' own analysis of their prices, either as recorded in their business records or arising out of an analysis recorded in the affidavit of their flyash accountant, Ms Boman. It is said that there is no reason to assume the prices were unreliable. It is said that the respondents did not contend that the prices were unreliable, nor did they identify alternative prices which ought to have been preferred. Rather Dr Williams indicated in his report that he simply did not know whether the prices were representative. Further, it is said that if the respondents considered that there was a problem with the sales data, they were uniquely well placed to lead evidence on that topic and to identify any inaccuracies in it. The ACCC says that they chose not to do so. But we agree with the respondents that this was a matter for the ACCC to establish. 529 In summary, the ACCC submitted before the primary judge that if Queensland prices dropped to the same level as NSW prices, then over the broader period 1 January 2002 to 31 December 2006 (rather than the narrower contravention period) this would have a resulted in a loss of revenue to the respondents of $42,087,000. Applying the EBIT margin adopted by the primary judge of 37% (Penalty Reasons, ), that equated to a suggested loss of EBIT of $15,570,000 from 2002 to 2006. But in our opinion, in summary, his Honour rightly had difficulty with this proposed indicator (Penalty Reasons, ). The question of whether the ash was homogeneous, the lack of a control for other causative factors, and the lack of analysis of average prices (rather than point in time prices) meant that a conclusion could not be drawn that prices were higher than they would have been by the order suggested ( and (12)). In our view, in summary, his Honour was entitled to accept the expert evidence of Dr Williams (as expressed at [680], [684] and [686] to [688] of the Penalty Reasons). In our opinion, the ACCC has failed to establish any error in the primary judge's conclusions in relation to his consideration of the ACCC's NSW pricing "analysis".

Prices following new entry 530 The ACCC's third type of analysis is even more problematic. 531 The primary judge found that evidence as to pricing by new entrants after the relevant period did not provide a basis upon which he could draw proper conclusions as to the "but for" price which would have prevailed in the absence of the conduct: Penalty Reasons, [818]. 532 The ACCC contends that the evidence before his Honour demonstrated that the prices of the new entrants into the SEQ concrete grade flyash market (Sunstate and IFB) were [see Confidential Schedule]. It submits that the observed differences in pricing between Cement Australia and its competitors following new entry was significant and that this was a matter "which calls out for an explanation". It is asserted by the ACCC that the data supports an inference that prices would have fallen had a new entrant been able to enter the market during the period 2002-2006. 533 The ACCC had to accept that the significant time difference between entry into the original transaction(s) and the prices examined by his Honour, particularly for the period 2011-2013, meant that he could not draw firm conclusions as to the "but for" prices which would have prevailed in the period 2002-2006 by reference to this data. But the ACCC has persisted in saying that this does not mean the measure should be disregarded in assessing the likely magnitude of benefit and market harm. 534 There are a number of responses that we would make. 535 The primary judge rightly said that care had to be taken in relying upon prices in 2011 to 2013 as a measure of the prices in 2002 to 2006 but for the impugned provisions. The factors influencing actual market prices in a much later period may not give any proper indication of the but for price unless all other factors are accounted for. Understandably in our view, the primary judge had difficulty with this measure for the following reasons (Penalty Reasons, 818): (a) First, the comparison was made with prices a long time after the period of the contraventions; prices could change very substantially from one year to the next. (b) Secondly, the comparison was made between flyash with different qualities and properties. (c) Thirdly, more would need to be known about the transactions in order to conclude what prices would have prevailed but for the contravening conduct. 536 The primary judge rightly concluded that this third type of analysis did not tell him anything probative of the prices which would have prevailed but for the contravening conduct: Penalty Reasons, . The ACCC has not challenged any specific findings of his Honour in this regard in its notice of appeal. Indeed it has accepted that the significant time difference entailed that a firm conclusion could not be drawn about the price that would have applied in 2002 to 2006 but for the contravening conduct. 537 The ACCC did not attempt any quantification based on this third type of approach. Moreover, the ACCC failed to analyse the cost base of the respondents' competitors or the qualities of the different flyash they supplied. The ACCC has resorted to the proposition of saying that the pricing differential "calls out for an explanation" and that it can be inferred that prices would have fallen if there had been a new entrant between 2002 to 2006. But it was the ACCC that sought to rely on the differential between competitors' prices in 2011 to 2013 and the respondents' prices in 2002 to 2006. Accordingly, the onus was upon the ACCC to establish the causal reasons for the differential, not the respondents. The ACCC has not established any error in the primary judge's conclusions in relation to this suggested third type of approach.

Market share impacts 538 It is now appropriate to say something on the market share question. 539 The ACCC submitted to the primary judge that the respondents obtained very significant financial benefits from the maintenance of their high market share, and that the market share would have fallen by 40% if there had been a competitor at Tarong or Millmerran. This submission was in essence based on the following propositions. 540 First, the ACCC submitted to the primary judge that the whole of the EBIT earned by the respondents over the period from 2002 to 2006 inclusive in connection with the relevant products was $55,313,000 (Penalty Reasons, [363]), and that a "straightforward indicator" of the potential financial benefits for the respondents was the difference between the profits earned by the respondents, and the profits that would have been earned (based on the assumption that the Millmerran Contract would have been marginally profitable on a standalone basis ([364]) and based on the further assumption that the EBIT on the Swanbank Contract would be unchanged) ([367]). The ACCC did not attempt to quantify that difference. But we agree with the primary judge that the correct starting point was not $55.313 million, but rather an EBIT range of between $13.5 million to $20 million, a derivation for which is set out at [327] above. Moreover, as the primary judge correctly concluded, it was not correct to assert that the difference identified by the ACCC was a "straightforward indicator" of the potential financial benefits (818). The relevant question was what price and market share the respondents would have enjoyed if they had won the Tarong Contract but on terms that permitted third party access ([477] to [489] and 818). That was only some unknown proportion of the $13.5 million to $20 million (818). 541 Secondly, the ACCC submitted that the respondents' sales to non-tied customers "collapsed" following competitive entry by Sunstate and IFB in 2007 and 2008, and that if this had occurred in 2002 then the respondents would have suffered significant reductions in EBIT. The ACCC sought to quantify such reductions. If non-tied sales in 2005 matched those in 2010 then the respondents would have suffered a reduction of $5.3 million in 2005. If the respondents lost 40% market share in 2002 (based on an estimate in 2011 that the respondents lost 35-40% market share as a result of entry by Sunstate and IFB), the reduction would have been $21,313,109, being 40% of a total EBIT of $53,282,774; for completeness, we would note that this figure (for the period of the contravening conduct) is slightly less than the figure used by the primary judge of $55,313,000, with the discrepancy explained by the different modes of calculation used by his Honour in his reasons (cf the table at [362] with the table at [375] of the Penalty Reasons). Further: (a) if it were further assumed that prices would have fallen by $14 per tonne, then the respondents would have suffered a reduction in EBIT of $33,585,604; and (b) if it were further assumed (in addition to (a)) that: (1) FAA secured the Tarong Contract in February 2003; (2) the merger between QCL and ACH did not proceed in May 2003 (despite ACCC approval having been sought on 8 November 2002); (3) sales to FAA shareholders therefore collapsed; (4) prices dropped to the prices charged in NSW for different flyash (contrary to the findings summarised above), then the loss of EBIT to the respondents would have increased to $44,158,556. 542 But the correct starting point is between $13.5 million and $20 million, not $53,282,774. On that basis, even assuming an immediate 40% market share collapse that was uniformly sustained throughout the relevant period, the reduction in EBIT would not have been $21,313,109 but rather $8 million. 543 The ACCC contends before us that the EBIT range of $13.5 million to $20 million was not the correct EBIT figure. We have set out earlier at [327] the apparent basis for his Honour's calculation. Principally, the difference between his Honour's EBIT range and the ACCC's figure relates to the fact that the primary judge adjusted the figure to exclude profits earned of "tied sales" to shareholders (see our analysis above at [289] to [291] and [327]). 544 The ACCC submits that its higher figure of $53,282,774 was the proper figure for consideration and that the "tied sales" ought not to have been excluded. But if the primary judge was correct to exclude "tied sales" from his assessment of actual market harm and damage (see our later reasons), then for the same reasons the profits derived from tied sales ought not to be included in the calculation of the relevant EBIT. In summary, we agree with the primary judge's findings that the relevant EBIT was in the range of $13.5 million to $20 million. 545 Further, the ACCC's analysis assumed that all other things would remain equal. But as the primary judge correctly concluded, this could not be assumed. His Honour rightly rejected the ACCC's methodology and concluded that its proposed calculation of benefit was problematic (Penalty Reasons, to (27)). 546 Further and generally, the primary judge did not accept, and in our view was entitled not to accept, the assertion that there would have been a 40% loss of market share. The tied sales to the shareholder entities were retained not because of the contravening conduct but by reason of the shareholder equity interests. Further, it was not clear whether the respondents would have retained some proportion of the non-tied sales in the face of new entry. In this respect, the primary judge found that (Penalty Reasons, ): plainly there would have been a significant impact upon those sales as Professor Hay suggested. What is not clear is whether responsive rivalry from QCL and later Cement Australia would have resulted in a proportion of those sales being held by QCL/Cement Australia. 547 The ACCC's amended notice of appeal contains no challenge to this finding. 548 Further, the respondents have submitted that another respect in which the ACCC's calculation was "problematic" concerned the potential entry of Sunstate. The primary judge found that until 2007 the threat of entry by Sunstate was not a real threat that operated to constrain the respondents (Reasons, ). But that was not a consequence of the existence of the impugned provisions in the Tarong Contract and the Millmerran Contract, but rather because Sunstate had made a commercial and strategic decision not to supply flyash as a separate product until April 2007 (Reasons, [245], and [2661]). But it would have been open to Sunstate to enter the market well before that time. Accordingly, even if the Tarong and Millmerran Contracts had not contained the impugned provisions, the respondents contended that it could not be assumed that Sunstate would have entered the market before it chose to do so in 2007. This submission has some merit. 549 Further, the respondents have submitted, in relation to entry by IFB, that the primary judge found that the problems experienced by Pozzolanic in relation to the quality of the Millmerran flyash were not confected or manufactured, but were real and enduring problems. The primary judge also found that Millmerran, the respondents and professional third party advisors performed substantial work to rectify those problems. Accordingly, so the respondents have contended, even if IFB had been able to enter in 2003, it cannot be assumed that it immediately would have been able to supply large quantities of flyash. On the contrary, so the respondents contended, the likelihood is that it would have taken IFB substantial work over an extended period before it would have been in a position to sell any Millmerran flyash. Again, these submissions have some merit. 550 Finally, the ACCC has made reference to a fall in the respondents' market share based on a fall in the volume of flyash sold from 400,000 tonnes in 2006 to [see Confidential Schedule] in 2013, [see Confidential Schedule] (Penalty Reasons, [357] and [360]) and lost revenue from [see Confidential Schedule]) (Penalty Reasons, [379]). But the ACCC did not attempt to calculate a benefit to the respondents over the period of the contraventions (or from 2002 to 2006). 551 In summary, the ACCC has not established any error in the primary judge's conclusions in relation to this aspect.

Conclusion regarding actual market harm and financial benefits 552 The ACCC submits that its various measures did provide a basis upon which the Court could form a view about issues of loss or damage and financial benefit for the purposes of fashioning a penalty of appropriate deterrent value. It submits that the Court should have found that the actual market harm and corresponding benefit to the respondents in this case was in the tens of millions of dollars. But as we have stated, we see no error in his Honour's approach. Moreover, the ACCC should have adduced proper and detailed evidence before his Honour utilising a systematic methodology if it wanted a finding of such a quantification. Finally and for completeness, we would note that although our attention has been drawn to Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2010] FCA 929 at [53] and [54], we found it to be of limited assistance in the present context.

Shareholder sales (ground 9.2) 553 The primary judge held that in determining market harm one should exclude harm inflicted upon shareholder entities who were engaged in tied acquisitions (Penalty Reasons, 818). In other words there should be a reduction by the proportion of the respondents' sales that were made to the shareholder customers, Hanson and Rinker. This conclusion appears to have been based on the following reasoning. Each of the shareholder customers of Cement Australia had a 25% economic interest with the remaining 50% owned by Holcim (a non-concrete producer). For every $4 in profit earned by Cement Australia, $1 went to Hanson, $1 went to Rinker and $2 went to Holcim: 818. When Cement Australia sold flyash to Rinker, 25% of the profits on those sales were returned to Rinker by way of profit distributions. Rinker also had the benefit of 25% of the profit made on any sales by Cement Australia to Hanson. The same position applied in relation to Hanson (818). His Honour held that if a court was seeking to identify the market harm caused by contravening conduct, the focus of the inquiry ought to be upon the market harm caused to parties other than entities associated with the companies engaging in the conduct (818). Accordingly, so his Honour held, the proper course was to exclude harm inflicted upon the shareholder customers who were engaging in tied acquisitions (818). And as a corollary, his Honour also held that the better view was that the measure of any benefit derived through higher prices ought to be discounted to reflect a 50% return to the concrete producer equity owners (818). 554 The ACCC contends that the primary judge's approach was flawed. It contends that if a contravenor derives a financial benefit from increased prices caused by the conduct, the fact that part of that benefit is passed onto shareholder customers does not mean that the contravenor has received a lesser benefit. It only means that shareholders, in their capacity as shareholders, have shared in the benefit. We accept such contentions so far as they go in form, but there is an economic air of unreality to them. 555 In elaboration on its criticism, the ACCC contends that the primary judge erred in law for the following reasons: (a) There was no evidence from any lay witness that the shareholder customers or the respondents accepted the "50% goes around in a circle principle" or took it into account in their commercial decision-making. (b) Although it was correct to say that Hanson and Rinker were associated with Cement Australia (as minority shareholders), it was not correct to say that their interests were necessarily aligned with Cement Australia or each other. The ACCC pointed to the fact that as part of the Cement Australia merger, the parties implemented specific ring-fencing arrangements to manage the competition law risks arising out of the fact that Hanson and Rinker were both minority shareholders and competitors. (c) The findings and evidence at trial demonstrated, so the ACCC contends, that Cement Australia was concerned to avoid the possibility of third party entry 'triggering' the MFN provisions as even small-scale entry could have had widespread price effects as a result of the MFN formula. Hanson and Rinker were concerned in their negotiations with the respondents to ensure that they were not disadvantaged by purchasing flyash at higher prices than their competitors. That was the purpose of the MFN provisions. (d) There is nothing in the text of s 76(1) which restricts the analysis of 'loss or damage' to damage suffered by direct purchasers. It is contended that the impact of the contravening conduct was likely to have been felt by a variety of market participants including direct purchasers, end users and competitors. (e) The ACCC contends that concrete producers purchase flyash in order to lower their 'mix cost' of producing concrete and thereby become more competitive in the concrete market. It is contended that to the extent that the shareholder customers' flyash prices were artificially high, it would follow that their 'mix cost' was also inflated. Accordingly, this extra cost is likely to have been passed on to some extent to end users. (f) More generally, it was contended that the vast majority of the concrete poured in the SEQ region during the relevant period incorporated flyash supplied by the respondents. In this context the ACCC referred to the observation by Heerey J in Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 at [312] that "[e]very day every man, woman and child in Australia would use or consume something that at some stage has been transported in a cardboard box". It has contended that the conduct in the present case had the potential for a similarly wide effect. But we would observe that although in ACCC v Visy Industries the product of a cardboard box was used Australia-wide, these proceedings are restricted to the SEQ market. And in any event, the primary judge concluded and readily accepted that the contraventions had a significant competitive impact. To the extent that the ACCC has suggested that the primary judge failed to consider this aspect of market harm, we find no such error. 556 At the end of the day we do not consider that his Honour's treatment of this matter, when one considers the ultimate economic effects of the contravening conduct, substantially affected the result. Whether sales to shareholders were included in the calculation of harm or benefit did not affect overall the economic assessment of whether there had been significant harm caused to true third parties or very significant financial benefits assessed in the sense with which his Honour proceeded. 557 But in any event his Honour was entitled to come to some of the conclusions that he reached. 558 The ACCC's contentions do not necessarily challenge Dr Williams' statement of orthodox economic analysis, but they do challenge the primary judge's conclusion that the shareholders ought to be considered "as one" with the respondents. They point to their separate commercial alignments and the ring-fencing arrangements established as part of the merger. True it is that Hanson and Rinker necessarily had different commercial alignments to the respondents, and that a shareholder may not always be considered part of a respondent group. But in the present context those points do not take the ACCC very far. 559 First, the respondents were closely "held" by three shareholders, whose ownership was governed by a partnership agreement. This is to be contrasted with a case where the contravenors were owned by a large number of shareholders whose holdings were small. Hanson and Rinker each had large shareholdings, and obtained substantial benefits through the "50% goes around in a circle" distribution of profits. 560 Secondly, the "tied sales" by these shareholders were not normal commercial purchases of flyash, but were "equity assured purchases". 561 Thirdly, his Honour's characterisation of the purchases and the relationship between the shareholders and respondents clarifies why he considered them "one with" the respondents such that harm they suffered was not harm suffered by a third party. That conclusion was consistent with Dr Williams' evidence that sales to shareholders should be disregarded in any calculation of benefit or market harm (Penalty Reasons, [673]). To the extent that a shareholder paid too much for flyash as a result of contravening conduct, no part of the harm suffered was imposed on any third party. Further, part of the overpayment would be returned to the shareholder or accumulated for its benefit, thereby reducing the amount of the harm to the shareholder. Further, to the extent that the shareholders suffered harm, this detracted from any benefit gained by the respondents. Accordingly, he held that there was therefore no need for the penalty to reflect this harm from the perspective of achieving sufficient deterrence. Further, his Honour accepted that if it were assumed that the price was $4 higher as a result of the contravening conduct, then for every sale to Hanson it would follow that $1 would be returned to Hanson and $1 would be returned to Rinker. Dr Williams agreed that, taking those together, 50% of the profit went in a circle. The other $2 was returned to Holcim. And whilst it was possible that there might be internal transfers of benefit as between shareholders, this did not bear upon deterrence. We tend to agree. 562 Fourthly, the ACCC submits that sales to shareholders should be included in the assessment of market harm given the existence of MFN provisions which affected the prices paid by shareholder customers. But whilst Dr Williams accepted that there was an apparent contradiction between the MFN provisions and the notion that shareholders were unharmed by higher prices, it did not follow that the shareholders sought to have the lowest possible price or a competitive price. Dr Williams gave evidence that MFN provisions are not necessarily designed to keep prices low and could have manifold possible effects. There was little evidence before the primary judge as to the effect of the MFN provisions. In any event, even if there had been evidence that the MFN provisions had the effect of securing a competitive price, it would not have substantially affected the conclusion that shareholders' sales should be excluded from calculations of market harm or benefit. 563 Finally, and as the respondents point out, the primary judge's findings with respect to the effect of the conduct on shareholders were consistent with the fact that he had regard to the CA Partnership arrangements and the assets and the scope of undertaking of that partnership established as part of the merger between the shareholders (Penalty Reasons, [219] and [809]). It was contended that it would be contradictory if the existence of the shareholding structure were to be taken into account for one purpose (size), but effectively disregarded for another (market harm). We tend to agree. 564 For our part, if we had been expressing the matter for ourselves, perhaps we may not have been as definitive as the primary judge expressed himself at and (32). In form, the shareholder entities' positions had to be considered. But as a matter of economic substance, in our opinion his Honour's approach was well justified and, of course, had the advantage of being backed up by the only economic evidence adduced before his Honour. But we would observe, however, that the potential market harm caused to downstream parties with which the shareholder entities were dealing (to the extent that higher prices were passed on) was, of course, a relevant matter and a separate issue to the treatment of the shareholder entities. 565 In summary, we reject ground 9.2.

H. PENALTIES TO BE IMPOSED 566 In light of the conclusions reached above in relation to the 'joint and several' and 'course of conduct' issues, the penalties imposed by the primary judge must be set aside and the penalty discretion re-exercised. Both parties accepted at the appeal hearing that, if it were necessary for the discretion to be re-exercised, it was appropriate for this to be carried out by this Court. Accordingly, in this section of the reasons, we re-exercise the discretion. 567 Given that the discretion is to be re-exercised, it is unnecessary to deal separately with grounds 3, 4, 5, 6.1, 7 or 10 of the amended notice of appeal. By grounds 3, 4, 5 and 6.1, the ACCC contends that the primary judge failed to impose a penalty with respect to particular contraventions. Each of those contraventions will be addressed below. By ground 7, the ACCC contends that the primary judge erred in imposing a single penalty for making and giving effect to the Swanbank Contract, where his Honour had found this was not a single course of conduct. Each of those contraventions will be addressed separately below. By ground 10, the ACCC contends that the penalties imposed by the primary judge were manifestly inadequate. The ACCC relies in the main on its submissions concerning market harm and benefit, which have been dealt with above. Insofar as the ACCC makes other submissions in relation to this ground, we have taken these into consideration in the course of re-exercising the discretion.

Applicable principles 568 Section 76(1) of the Act is set out at [337] above. As noted by the primary judge at [16] and [17] of the Penalty Reasons, s 76 of the Act was amended in a significant respect effective from 1 January 2007. The amendment has no application to the determination of any penalty in this case. 569 The principles applicable to the discretion to impose pecuniary penalties have been discussed in many cases including the following authorities: Trade Practices Commission v CSR Ltd [1991] ATPR 41-076; [1990] FCA 762; Australian Competition and Consumer Commission v Kokos International Pty Ltd (No 2) [2008] ATPR 42-212; [2008] FCA 5; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; Singtel Optus; TPG; FWBII; and Reckitt Benckiser. In these circumstances, it is unnecessary for us to set out the principles, which are well-established, in any detail. 570 It is convenient, nevertheless, to set out the following list of relevant factors from the judgment of French J (as his Honour then was) in Trade Practices Commission v CSR Ltd at 52,152-52,153: 1. The nature and extent of the contravening conduct. 2. The amount of loss or damage caused [by the contravening conduct]. 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 Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention. 9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention. 571 It is also appropriate to emphasise the purpose of civil penalty provisions, as explained by French CJ, Kiefel, Bell, Nettle and Gordon JJ in FWBII at [55]: …whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance: "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 [of the Trade Practices Act]. … 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 contravenor and by others who might be tempted to contravene the Act." (Footnotes omitted.) 572 Further, in TPG at [64], French CJ, Crennan, Bell and Keane JJ endorsed the observation of the Full Court of this Court in Singtel Optus that the Court, in fixing a penalty, must make it clear to the contravenor and the market that the cost of courting a risk of contravention cannot be regarded as an acceptable cost of doing business. 573 In re-exercising the penalty discretion, this Court must decide for itself the penalties to be imposed. This will require an examination of all relevant factors in relation to each of the contraventions. The Court does not start with the penalties imposed by the primary judge (on a joint and several basis) and work from those figures to penalties on a several basis. Rather, once the Court concludes that the penalties imposed by the primary judge are to be set aside, the Court must determine the appropriate penalties for itself. That said, neither party challenges the primary judge's factual findings (relevantly summarised in section B above) or his conclusions as to the purpose, effect or likely effect of the contravening conduct (set out in section C above) except in the respects discussed in section G above. Thus, as both parties accepted during the course of argument on the appeal, in re-exercising the penalty discretion, the Court proceeds on the basis of the same factual findings and the same conclusions as to purpose, effect or likely effect as were the foundation for the primary judge's exercise of the discretion. 574 The task of assessing the penalties afresh involves an individualised analysis of the conduct of each respondent for each contravention, by reference to the applicable principles. This involves the following steps: (a) identify the contravention; (b) identify the conduct of each respondent in respect of that contravention; (c) identify the maximum penalty for that contravention, as one yardstick in assessing penalty (Australian Competition and Consumer Commission v Reebok Australia Pty Ltd [2015] FCA 83 at [160]); (d) assess the appropriate penalty to be imposed on each respondent for each contravention in which that respondent engaged or was knowingly concerned, having regard to: (i) the application of the statutory factors and the factors referred to by French J in Trade Practices Commission v CSR Ltd; (ii) if appropriate, the analytical device of organising contraventions by a particular respondent into courses of conduct; and (iii) the extent, if any, to which the conduct of one respondent affects the penalty that should be imposed upon any other respondent; and (e) as a final check, look at the totality of the contravening conduct of each respondent and consider whether the total of the penalties proposed to be imposed on that respondent is excessive (cf Mill v The Queen (1988) 166 CLR 59 at 63).

The parties' positions on penalty 575 The parties' positions as to the penalties to be imposed if the Court were to re-exercise the discretion are as follows. The ACCC's primary position is that penalties totalling $91 million should be imposed, but this is predicated on success with respect to all of its appeal grounds. In the course of the appeal hearing, the Court requested the ACCC to prepare a document indicating its position if the 'joint and several' appeal ground succeeded but the other appeal grounds did not. Accordingly, the ACCC provided, shortly after the hearing, a document setting out (what may be described as) the ACCC's alternative position. In the document, the ACCC sets out, in table format, proposed alternative penalties "on the basis that the [ACCC] succeeds on ground 1 of its appeal only; and that all other aspects of the learned primary judge's decision (including in relation to the matters raised in appeal grounds 3 to 10) remain undisturbed". The ACCC's document also states: "The suggested penalties reflect the penalties imposed by his Honour apportioned between the primary contravenor and secondary contravenor(s). On the assumption that no error is demonstrated in his Honour's reasons except with respect to joint and several liability, the total penalties imposed on two or more contravenors for related conduct ought to at least equal the joint and several penalty imposed by his Honour for that conduct." 576 The tables setting out the ACCC's primary position and alternative position are as follows. For ease of reference, we have re-arranged the tables to reflect the order in which we propose to deal with the contracts. ACCC's primary position Company Original Millmerran Contract (30 Sep 2002 to 28 July 2004) Tarong Contract (March 2003 to 31 Dec 2006) Amended Millmerran Contract (28 July 2004 to 30 April 2005) Swanbank Contract (Jul 2002 to 31 Dec 2004) Swanbank Contract Extensions (Jan 2005 - Jun 2005) Total Pozzolanic Make: $4m Make: $4m Make: $4m Make: $0 Make: $1m Adjusted for totality: $15m Give effect: $4m Give effect: $4m Give effect: [no separate penalty sought] Give effect: $2m Give effect: $1m Pozzolanic Industries Make: $1m $1m QCL Make: $10m Make: $10m Make: $0 $45m Give effect: $10m Give effect: $10m Give effect: $5m Cement Australia Give effect: $10m Make: $10m Give effect: $2.5m $30m Give effect: $5m Sub-total $29m $38m $19m $7m $4.5m $91m

ACCC's alternative position Company Original Millmerran Contract (30 Sep 2002 to 28 July 2004) Tarong Contract (March 2003 to 31 Dec 2006) Amended Millmerran Contract (28 July 2004 to 30 April 2005) Swanbank Contract (Jul 2002 to 31 Dec 2004) Swanbank Contract Extensions (Jan 2005 - Jun 2005) Total (adjusted for totality) Pozzolanic $500,000 (make) $100,000 (give effect) $750,000 (make) $100,000 (make) $200,000 (give effect) $50,000 (make) (no additional penalty for giving effect) $2.45m $750,000 (give effect) Pozzolanic Industries QCL $3m (make) $4.75m (make) $800,000 (give effect) $8.95m $400,000 (give effect) Cement Australia $4.75m (give effect) $750,000 (make) $150,000 (make) $5.7m $50,000 (give effect) Sub-total $4m $11m $850,000 $1m $250,000 $17.1m

577 The respondents also prepared a table setting out their position as to the penalties to be imposed should the Court re-exercise the discretion. The respondents' position, as set out in a table attached to an 'aide memoire' filed shortly after the hearing of the appeal, is as follows: Respondents' position Company Original Millmerran Contract (30 Sep 2002 - 28 July 2004*) Tarong Contract (Mar 2003 to 31 Dec 2006) Amended Millmerran Contract (28 Jul 2004 - 30 April 2005*) Swanbank (12 Sep 2002 to 31 Dec 2004) Swanbank (1 July 2005 to 30 Jun 2005) Total Pozzolanic $500,000 (make and give effect) $250,000 (make and give effect) $250,000 (make and give effect) $200,000 (give effect 12 Sep 2002 to 31 Dec 2004) $150,000 (make and give effect) $1.35m Pozzolanic Industries $100,000 (accessory to making) - - - - $100,000 QCL $1m (accessory to making; give effect) $1m (giving effect Mar 2003 to 31 May 2003; accessory to making and giving effect Mar 2003 to 31 May 2003) - $100,000 (give effect 12 Sep 2002 to 31 May 2003) - $2.1m Cement Australia - $2m (giving effect; accessory to giving effect) $500,000 (accessory to making; give effect) $300,000 (give effect 1 Jun 2003 to 31 Dec 2004) $250,000 (accessory to making; give effect) $3.05m Sub-total $1.6m $3.25m $750,000 $600,000 $400,000 $6.6m

• No substantial effect on competition after 31 December 2003.

Original Millmerran Contract 578 In relation to the Original Millmerran Contract, the following contraventions were established: (a) Pozzolanic contravened s 45(2)(a)(ii) by making the contract; (b) QCL was knowingly concerned in the contravention referred to in (a); (c) Pozzolanic contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract; (d) QCL contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract; and (e) Pozzolanic Industries was knowingly concerned in the contravention referred to in (a). 579 Both QCL and Pozzolanic Industries were accessories to primary contravening conduct of Pozzolanic in making the contract. Notwithstanding this accessorial role, the primary judge found (and there is no challenge to this finding on appeal) that QCL was the "prime mover" in all of the conduct relating to the Original Millmerran Contract (Penalty Reasons, [778]). Accordingly, while Pozzolanic was the agent of the group through which the contraventions relating to the making of the contract occurred, QCL was the sine qua non of their occurrence. This is a matter to be taken into account in the exercise of the Court's discretion. 580 The current exercise involves the imposition of separate penalties on each respondent. However, some of the relevant facts and matters pertain to the respondents or the contraventions collectively. In applying 'global' matters to separate actors or contraventions, it is important to avoid qualitative or quantitative double or triple counting. For example, loss or damage caused by an entity's entry into a contract where the contract is funded by another entity and guaranteed by a third entity, flows from combined conduct that could in principle have been undertaken by fewer entities. In such a scenario, the loss must be notionally distributed across the respondents. 581 The nature and extent of the contravening conduct in relation to the Original Millmerran Contract, and the circumstances in which the conduct took place, are addressed at [299]-[303], [320] and [322] above. We refer to that discussion and note, in particular, the following facts and matters: (a) A substantial purpose of the framing of the final commercial bid to Millmerran was to prevent a rival from securing access to Millmerran unprocessed ash and to prevent threatened entry into the SEQ concrete grade flyash market for the supply of concrete grade flyash. (b) Mr Ridoutt, Mr Wilson and Mr Arto plainly believed that the face of future competition in each market, and particularly the SEQ concrete grade flyash market, would show contestability and rivalry in volume and price should a competitor enter at Millmerran. This entry would exhibit rivalrous responses and counter-responses that would likely see a volume, revenue and EBIT loss for Pozzolanic and QCL in the flyash business. (c) A substantial purpose of the inclusion of the relevant commercial terms, framed, in substance, by Pozzolanic and QCL, was to substantially lessen competition in the two relevant markets, by seeking to exercise a substantial degree of control over a sufficient volume of raw unprocessed Millmerran flyash necessary to extract, over time, 135,000 tonnes of concrete grade flyash and foreclose or discourage sustainable new entrant participation at Millmerran. (d) At the time the impugned provisions were included in the contract, Millmerran ash had not yet been produced and its future quality was not known. Nevertheless, viewed at the date of inclusion of the provisions, the relevant clauses had the immediate effect and were likely to have the effect of substantially lessening competition in the SEQ concrete grade flyash market, because the future field of rivalry or the future state of the competitive process was substantially diminished. (e) However, the constraining effect began to dissipate once it became clear to the market that a problem was emerging in the quality of the Millmerran flyash and that the problem was unlikely to be resolved either at all or within a period of time that would make Millmerran ash a real substitute for Pozzolanic ash, assuming a rival in Millmerran. That effect had dissipated by 31 December 2003. (f) In a market exhibiting the characteristics of the SEQ concrete grade flyash market throughout 2001 and 2002 (including the characteristic that QCL was a virtual monopolist), competitive entry by a rival at Millmerran was very important to the future competitive process, in a forward-looking way, and thus the likely effect of the relevant provisions of the contract upon what would have been emerging competition based on Millmerran ash was large or significant and truly meaningful. (g) The period during which the relevant provisions of the Original Millmerran Contract had the effect or likely effect of substantially lessening competition was from 30 September 2002 to 31 December 2003. 582 Identifying the role of each respondent is complicated by the structure of the corporate group. Pozzolanic was fully managed in an integrated way within the QCL Group. Pozzolanic and Pozzolanic Industries were wholly-owned subsidiaries of QCL. There was a single meeting for all of the group companies, and minutes were drawn up by the Company Secretary notionally allocating items to particular companies. Further, the following facts are established: (a) Pozzolanic resolved to approve the capital expenditure associated with entry into the Original Millmerran Contract, managed the flyash business and operated the flyash processing and collection facilities. (b) QCL sold the flyash and was also the treasury company for the group of companies including the respondents. When a payment was made by QCL on behalf of another group company, an entry was recorded in an intercompany loan account (Reasons, [296]). (c) Pozzolanic Industries was the entity selected as the guarantor. It became the guarantor simply because of its position in the corporate structure and only because QCL caused it to be selected to provide the guarantee (Penalty Reasons, [777]). 583 Having regard to these matters, the prime mover in the contravention was QCL. The other entities' conduct - formal entry and provision of a guarantee - was relatively less significant to the wrongdoing. There does not appear to be any dispute between the parties about this, as indicated by the relativities (as between respondents) of the penalties proposed by each party. 584 As to the nature and extent of any loss or damage suffered as a result of the contravening conduct, neither party suggests that it is possible in the present case to adopt a mode of analysis where, first, one identifies a basis for assessing the loss or damage caused by the conduct overall and, secondly, one ascribes to each entity a portion of the loss or damage properly referable to its conduct. Thus the nature and extent of any loss or damage of the contravening conduct in relation to the Original Millmerran Contract must be considered globally. As to the matters of expected and actual benefit, for the reasons given in section G above, we generally agree with, and therefore adopt, the primary judge's analysis, both as regards qualitative and quantitive aspects. 585 As noted above, the primary judge found that the effect on competition of the relevant provisions of the Original Millmerran Contract had dissipated by 31 December 2003. Further, the effect on competition between 30 September 2002 and 31 December 2003 was based on the threat of competition rather than any sales of flyash. 586 The respondents have not previously been found by the Court to have engaged in any similar conduct. 587 As for the size and financial position of the contravening companies, we refer to the background facts set out at [284]-[291] above. As at the date of entry into the Original Millmerran Contract, Pozzolanic and QCL were conducting a very significant business. In 2002, the QCL Group earned a total EBIT of approximately $100 million. The respondents' flyash business was also a very significant business in its own right. The respondents do not contend that any respondent lacks the capacity to pay a penalty. 588 As for the degree of power the respondents had, the primary judge found, and there is no challenge to this on appeal, that leading up to entry into the Original Millmerran Contract and throughout the period 2002 to 2006, QCL and Pozzolanic (in the period up to May 2003) and CA Holdings and the Cement Australia Group (after May 2003) enjoyed a substantial degree of power in the SEQ unprocessed flyash market and the SEQ concrete grade flyash market. The degree of that market power amounted to, in substance, a monopoly. 589 The primary judge found (and there is no challenge to this on appeal) that the respondents' conduct in crafting and adopting the relevant provisions of the Original Millmerran Contract for the purpose of foreclosing third party entry and thus substantially lessening competition, was undertaken deliberately. 590 Another factor is whether the contraventions arose out of the conduct of senior management or at a lower level. In this respect, the primary judge found (and there is no challenge to this on appeal) that the purpose of the relevant provisions of substantially lessening competition was a purpose incubated by Mr Ridoutt and Mr Wilson and embraced by Mr Arto and ultimately Mr Maycock. Mr Ridoutt and Mr Wilson were significant senior managers, steeped in the flyash business. Mr Arto was a Director and CEO. Mr Maycock was the Chairman. 591 The primary judge found (and there is no challenge to this on appeal) that at the time when Pozzolanic/QCL adopted the relevant provisions of the Original Millmerran Contract, those companies understood the risks from a competition law perspective and did not have a satisfactory or effective compliance program; and that the respondents now have a compliance program with proper integrity. 592 The primary judge found (and there is no challenge to this on appeal) that he was not satisfied that the respondents had shown a disposition to co-operate with the ACCC in relation to the contravening conduct. 593 The respondents submit that, in the case of each of QCL and Pozzolanic, it is appropriate to view their contraventions relating to making and giving effect as a single course of conduct. In our view, however, for the reasons given in section F above, it is appropriate in the circumstances to consider each of these contraventions separately for the purposes of the imposition of penalties. 594 Nevertheless, in considering the penalty to be imposed on one respondent, it is relevant to have regard to the penalty to be imposed on another respondent or other respondents. For example, a penalty imposed on Pozzolanic would have regard to the fact that a penalty was also to be imposed on QCL in respect of much the same conduct. One company implemented the will of the other. So too with Pozzolanic Industries: this company was effectively instructed by QCL to act as the guarantor. 595 Having regard to the above matters, in our view appropriate penalties for the contraventions relating to the Original Millmerran Contract are: (a) in respect of the making of the contract by Pozzolanic (namely the contravention described in paragraph 6 of the declarations made 28 February 2014): $500,000; (b) in respect of QCL being knowingly concerned in the making of the contract (namely the contravention described in paragraph 7 of the 28 February 2014 declarations): $3 million; (c) in respect of Pozzolanic giving effect to the provisions of the contract (namely the contravention described in paragraph 8 of the 28 February 2014 declarations): $100,000; (d) in respect of QCL giving effect to the provisions of the contract (namely the contravention described in paragraph 9 of the 28 February 2014 declarations): $600,000; and (e) in respect of Pozzolanic Industries being knowingly concerned in the making of the contract (namely the contravention described in paragraph 10 of the 28 February 2014 declarations): $100,000. 596 In relation to the above penalties, we make the following observations. The penalties to be imposed on QCL under (b) and (d) above are six times the penalties to be imposed on Pozzolanic under (a) and (c) respectively. This reflects the role played by QCL as the prime mover in relation to the contraventions. The relatively modest penalty to be imposed on Pozzolanic Industries under (e) reflects the fact that Pozzolanic Industries became the guarantor simply because of its position in the corporate structure and only because QCL caused it to be selected to provide the guarantee.

Tarong Contract 597 In relation to the Tarong Contract, the following contraventions were established: (a) Pozzolanic contravened s 45(2)(a)(ii) by making the contract; (b) QCL was knowingly concerned in the contravention referred to in (a); (c) Pozzolanic contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract; (d) QCL contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract, and was knowingly concerned in the contravention referred to in (c); and (e) Cement Australia contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract, and was knowingly concerned in the contravention referred to in (c). 598 At the time the Tarong Contract was entered into (26 February 2003), QCL occupied the role described above in the context of the Original Millmerran Contract. 599 However, following the Cement Australia merger of 31 May 2003, Cement Australia was responsible for management of the day-to-day operations of the CA Partnership, including logistics, distribution and sales and marketing of flyash. As the agent of the partnership, Cement Australia was appointed as manager of the corporate group, which was responsible for the manufacture of flyash. Accordingly, it performed much the same role as QCL prior to the merger, save that QCL continued to act as the treasury company. 600 The Tarong Contract was a much more important contract for Pozzolanic/QCL than the Original Millmerran Contract in that it had been the source of Pozzolanic/QCL's concrete grade flyash for sale into the SEQ concrete grade flyash market for a long period of time. As the primary judge said at [785] of the Penalty Reasons, Tarong flyash was "proven, well accepted, well understood and well known". 601 The nature and extent of the contravening conduct in relation to the Tarong Contract, and the circumstances in which the conduct took place, are described in [304]-[306], [320] and [323] above. We note, in particular, the following facts and matters: (a) A substantial subjective purpose of Mr Ridoutt and Mr Wilson in including the relevant terms was to secure for Pozzolanic (and, in effect, QCL) access to the total volume of raw flyash produced by the Tarong and Tarong North Power Stations for the life of the contract for the priority extraction of all concrete grade flyash capable of being extracted from the raw flyash at both stations. (b) The relevant contractual provisions were included for a substantial purpose of preventing or discouraging a rival from obtaining access to Tarong and Tarong North raw flyash for processing (behind Pozzolanic and QCL) and to prevent a rival entering the SEQ concrete grade flyash market with processed Tarong and Tarong North flyash. Thus, a substantial purpose of the formulation and inclusion of the relevant clauses was to substantially lessen competition in each market. (c) The provisions of the Tarong Contract as they applied to unprocessed flyash from the Tarong Power Station had the effect, and the continuing likely future effect, of substantially lessening competition in the market for the supply and acquisition of unprocessed flyash and the effect, and continuing likely future effect, of substantially lessening competition in the SEQ concrete grade flyash market. (d) Had a third party obtained access to Tarong run-of-station flyash, processed that flyash and entered the SEQ concrete grade flyash market, the strong probability is that rivalry and contestability would have operated to constrain the prices (and challenge the market share) of Pozzolanic and QCL and, later, Pozzolanic and Cement Australia. (e) Had the identified provisions not been included in the contract, third party access to Tarong run-of-station flyash, and the processing of that flyash into concrete grade flyash, would very likely have occurred. (f) Because Pozzolanic and QCL and, later, Pozzolanic and Cement Australia enjoyed such a substantial market share, and exercised such a substantial degree of influence upon pricing in the SEQ concrete grade flyash market, any new entrant activity at the Tarong Power Station (of obtaining access to raw flyash for processing) would have led to significant, real and meaningful new competition in the SEQ concrete grade flyash market. (g) The expansion in the scope and field of rivalry would very likely have operated to constrain Pozzolanic and QCL and, later, Pozzolanic and Cement Australia in the way described. 602 Further, as the primary judge observed at [786] of the Penalty Reasons, Pozzolanic and QCL could have secured their rational commercial objectives by entering into an ash supply agreement with TEC which gave them the necessary continuity of ash supply on terms that enabled third parties to acquire ash from TEC and enter the SEQ concrete grade flyash market in competition with QCL. However, as the primary judge put it: "That, of course, was heterodoxy to Mr Wilson, Mr Ridoutt and also Mr Arto and Mr Maycock" (Penalty Reasons, [787]). Those gentlemen were focused upon securing the ash supply contract and doing so in a way that made it, in a practical sense, a virtual impossibility for third parties to secure access to the best ash in SEQ (Penalty Reasons, [788]). 603 As with the Original Millmerran Contract, identifying the role of each respondent is complicated by the structure of the corporate group. The role of QCL at the time the Tarong Contract was entered into (26 February 2003) has been described above in the context of the Original Millmerran Contract. The role of Cement Australia following the merger of 31 May 2003 has been described at [599] above. 604 As to the nature and extent of any loss or damage suffered as a result of the contravening conduct, and the matters of expected and actual benefit, we refer to our reasons at [584] above. Further, in the context of the Tarong Contract, the primary judge found (and there is no challenge to this on appeal) that the effect upon competition by reason of the identified provisions was significant and meaningful (Penalty Reasons, [795]). 605 In relation to the other factors, we refer to our reasons at [586]-[592] above. Insofar as those paragraphs refer to findings made in relation to the Original Millmerran Contract, comparable findings were made in relation to the Tarong Contract (and there is no challenge on appeal to such findings). 606 As with the Original Millmerran Contract, the respondents submit that multiple contraventions by a single respondent should be treated as a single course of conduct. In our view, for the reasons given in section F above, it is appropriate in the circumstances to consider each of the contraventions separately for the purposes of the imposition of penalties, save that, where two contraventions by a single respondent have been grouped together and dealt with in a single declaration, it is convenient to deal with these contraventions together. This is relevant in relation to QCL (paragraph 19 of the 28 February 2014 declarations) and Cement Australia (paragraph 20 of those declarations). 607 Further, we reiterate the point made at [594] above that, in considering the penalty to be imposed on one respondent, it may be relevant to have regard to the penalty to be imposed on another respondent or other respondents. 608 Having regard to the above matters, in our view appropriate penalties for the contraventions relating to the Tarong Contract are: (a) in respect of the making of the contract by Pozzolanic (namely the contravention described in paragraph 16 of the 28 February 2014 declarations): $1 million; (b) in respect of QCL being knowingly concerned in the making of the contract (namely the contravention described in paragraph 17 of the 28 February 2014 declarations): $6 million; (c) in respect of Pozzolanic giving effect to the provisions of the contract (namely the contravention described in paragraph 18 of the 28 February 2014 declarations): $1 million; (d) in respect of QCL giving effect to the provisions of the contract and being knowingly concerned in Pozzolanic giving effect to the provisions of the contract (namely the contraventions described in paragraph 19 of the 28 February 2014 declarations): $500,000; and (e) in respect of Cement Australia giving effect to the provisions of the contract and being knowingly concerned in Pozzolanic giving effect to the provisions of the contract (namely the contraventions described in paragraph 20 of the 28 February 2014 declarations): $5.5 million. 609 We make the following observations in relation to these penalties. The penalty to be imposed upon QCL under (b) above is six times the penalty to be imposed on Pozzolanic under (a). Likewise, the penalties to be imposed upon QCL and Cement Australia under (d) and (e), which relate to sequential periods of 'giving effect', are in total six times the penalty to be imposed on Pozzolanic under (c). This relativity reflects the group structure and the roles of QCL (up to 31 May 2003) and Cement Australia (after 31 May 2003) in that group structure. The penalty to be imposed on QCL under (d) above, for giving effect to the relevant provisions and being knowingly concerned in giving effect to those provisions, reflects the limited period of time between the making of the Tarong Contract (28 February 2003) and the Cement Australia merger (31 May 2003), after which Cement Australia became the principal entity.

Amended Millmerran Contract 610 In relation to the Amended Millmerran Contract, the following contraventions were established: (a) Pozzolanic contravened s 45(2)(a)(ii) by making the contract; (b) Cement Australia was knowingly concerned in the contravention referred to in (a); (c) Pozzolanic contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract; and (d) Cement Australia contravened s 45(2)(b)(ii) by giving effect to the relevant provisions of the contract. 611 The Original Millmerran Contract was amended on 28 July 2004. Mr Clarke and Ms Collins were the officers who were most closely engaged in the negotiations for the amendment to the contract. Mr Clarke received instructions from Mr Leon. Mr Clarke thought that, ultimately, the technical issues with the ash would be resolved and that it would likely be useable. 612 The nature and extent of the contravening conduct in relation to the Amended Millmerran Contract, and the circumstances in which the conduct took place, are addressed at [307]-[308], [320] and [324] above. We note, in particular, the following facts and matters: (a) A substantial purpose of Mr Clarke in deciding that Pozzolanic amend and extend the Original Millmerran Contract (although not the only purpose) was a purpose of preventing a competitor from securing a commercial relationship with Millmerran Power Station, obtaining access to Millmerran ash and then entering the market for the sale of concrete grade flyash in the SEQ concrete grade flyash market in competition with Cement Australia. (b) A substantial purpose of Mr Clarke was to substantially lessen competition in both the upstream and downstream markets. (c) The operative purposes were those of Mr Clarke. The primary judge found that Mr Leon (who did not give evidence) gave his authority to Mr Clarke to amend the contract and instructed him to put in place the proposed changes to the particular clauses. (d) When Cement Australia caused Pozzolanic to enter into the amended arrangements with MPP/MOC, Cement Australia continued to enjoy a monopoly position in the SEQ concrete grade flyash market. 613 The discussion of the role of Cement Australia in the context of the Tarong Contract is equally applicable here. 614 As to the nature and extent of any loss or damage suffered as a result of the contravening conduct, given the primary judge's conclusion (in the context of the Original Millmerran Contract) that the effect on competition had dissipated by 31 December 2003, it follows that the contraventions relating to the Amended Millmerran Contract did not have an effect on competition. 615 As for the other factors, we refer to the reasons we have given in relation to the Original Millmerran Contract and the Tarong Contract, save to the extent that they relate specifically to those contracts. The primary judge made comparable findings (not challenged on appeal) in connection with the Amended Millmerran Contract. In particular, the primary judge found that Mr Clarke was a senior member of the management team within Cement Australia (Penalty Reasons, [808]), and that the conduct of amending the contract in the context of the identified provisions was deliberately undertaken to foreclose the possibility of third party entry should the Millmerran ash prove to be free of the technical difficulties which had bedevilled it until then (Penalty Reasons, [810]). 616 The respondents submit that the conduct of Pozzolanic in making and giving effect to the Amended Millmerran Contract is properly regarded as one course of conduct. Similarly, they submit that the two contraventions by Cement Australia are based on the same conduct, namely causing Pozzolanic to make and give effect to the contract. In our view, for the reasons given in section F above, it is appropriate in the circumstances to consider each of these contraventions separately for the purposes of the imposition of penalties. 617 Having regard to the above matters, in our view appropriate penalties for the contraventions relating to the Amended Millmerran Contract are: (a) in respect of the making of the contract by Pozzolanic (namely the contravention described in paragraph 12 of the 28 February 2014 declarations): $100,000; (b) in respect of Cement Australia being knowingly concerned in the making of the contract (namely the contravention described in paragraph 13 of the 28 February 2014 declarations): $600,000; (c) in respect of Pozzolanic giving effect to the provisions of the contract (namely the contravention described in paragraph 14 of the 28 February 2014 declarations): $30,000; and (d) in respect of Cement Australia being knowingly concerned in Pozzolanic giving effect to the provisions of the contract (namely the contravention described in paragraph 15 of the 28 February 2014 declarations): $170,000. 618 The penalty for Cement Australia under (b) is six times the penalty for Pozzolanic under (a). Again, this reflects the group structure and the role of Cement Australia as the principal entity. The penalties under (c) and (d) take into account that the conduct did not have an effect on competition. As the primary judge found, any effect on competition of the Millmerran provisions had dissipated by 31 December 2003. The Amended Millmerran Contract was entered into later, on 28 July 2004. The relativity between (c) and (d) is broadly commensurate with the respective roles of Pozzolanic and Cement Australia in the group structure.

Swanbank Contract 619 The contraventions relating to the Swanbank Contract are set out in paragraphs 21 to 26 of the 28 February 2014 declarations (as varied by the orders made on 16 May 2016) and paragraph 1 of the 16 May 2016 orders. They relate to two extensions of the Swanbank Contract: first, an extension (on 11 July 2002) to 31 December 2004 (the first relevant extension); and, secondly, an extension (on 15 March 2005) from 31 December 2004 to 30 June 2005 (the second relevant extension). 620 In relation to the first relevant extension, penalties are not sought in relation to the exercise of the option to extend, or the entry into an agreement upon exercise of the option, as this took place more than six years before the proceeding was commenced; accordingly, the ACCC is out of time to claim a penalty in relation to this conduct: see the Penalty Reasons, [383]. Penalties are sought for giving effect to the relevant provisions of the Swanbank Contract in the period from 12 September 2002 to 31 December 2004. The ACCC accepts that the relevant period for this purpose commenced on 12 September 2002, this being six years before the commencement of the proceeding: see the ACCC's written submissions regarding the re-exercise of the penalty discretion (handed up during the appeal hearing), paragraph 137(b). 621 In relation to the second relevant extension, penalties are sought with respect to both entry into an agreement to extend the term of the Swanbank Contract and giving effect to the relevant provisions of the contract as so extended. 622 The nature and extent of the contravening conduct in relation to the Swanbank Contract, and the circumstances in which the conduct took place, are addressed at [309], [320] and [325] above. We refer also to the ACCC's submissions summarised at [383]-[390] and [427]-[435] of the Penalty Reasons, which were adopted (save as to the quantum of penalties) by the primary judge at [816] of the Penalty Reasons. We note, in particular, the following facts and matters: (a) As at July 2002, Pozzolanic had enjoyed a longstanding contractual relationship with Swanbank which conferred, in substance, exclusive access to Swanbank ash. For all practical purposes, the contract (as extended to 31 December 2004) was an exclusive supply agreement until 31 December 2004. (b) From about the second quarter of 2005, the Swanbank ash became problematic in terms of its quality. (c) In the period up to 30 June 2005, the contractual arrangements between Pozzolanic and CS Energy at Swanbank conferred exclusivity of access to Swanbank ash upon Pozzolanic and QCL (until 31 May 2003) and Pozzolanic and Cement Australia (after 31 May 2003). (d) However, from January 2005, CS Energy did not regard itself as constrained in any dealing with any potential off-taker by reason of the contractual relationship with Pozzolanic. (This view was inconsistent with the terms of the contract as extended to 30 June 2005.) (e) The volume of ash taken by Pozzolanic from Swanbank was relatively small (compared with the volumes taken from Tarong) but yet it was very significant. Third party access to Swanbank ash and sales of processed Swanbank ash by a third party into the SEQ concrete grade flyash market would have had significant competition effects as it would very likely have triggered MFN provisions in Pozzolanic's contracts with its major customers. (f) The relevant provisions of the Swanbank Contract had the effect, and continuing likely effect, of substantially lessening competition in the SEQ concrete grade flyash market because any new entrant to that market seeking to use Swanbank flyash could not secure consistent or regular supply of ash for processing from Swanbank. (g) The future state of competition in the SEQ concrete grade flyash market without the relevant terms would likely have seen third parties securing a source of supply of ash at Swanbank, processing that ash and entering the SEQ market for the supply of concrete grade flyash. Having regard to Pozzolanic and Cement Australia's substantial position in the market, any nascent competition of that kind would have been very significant for the process of competition. (h) An additional significant matter is the combined effect of the Swanbank arrangements and the provisions of the Tarong Contract. Not only could a third party not practically obtain a regular and consistent supply of ash for processing from Swanbank until 30 June 2005, but it could not turn to the other source of supply in SEQ, namely the Tarong Power Station. As the primary judge put it: "The simple fact is that Pozzolanic was standing at the gate at both places" (Reasons, [3230]). (i) In the period up to 30 June 2005, the provisions of the Swanbank Contract (in conjunction with those of the Tarong Contract) had the effect or likely effect of substantially lessening competition, in the sense that the future scope of rivalry would be diminished by reason of the provisions as compared with the field of rivalry likely to have emerged without the provisions. 623 In relation to the roles of QCL (in the period up to 31 May 2003) and Cement Australia (in the period after 31 May 2003), we refer to the discussion, above, in the context of the Amended Millmerran Contract and the Tarong Contract. 624 As to the nature and extent of any loss or damage suffered as a result of the contravening conduct, and the matters of expected and actual benefit, we refer to [584] above. 625 In relation to other factors, we refer to the reasons set out above in relation to the Original Millmerran Contract, save for matters that are specific to that contract. Further, we note that the primary judge found (and there was no challenge to this on appeal) that Pozzolanic and QCL were entirely astute as to the exclusive character of the Swanbank Contract (Penalty Reasons, [813]); and that Mr White, who was responsible for the extension of the contract from 31 December 2004 to 30 June 2005, held a senior management position (Penalty Reasons, [815]). 626 The respondents submit that, in relation to the second relevant extension, the conduct of Pozzolanic in making the contract and giving effect to the relevant provisions is properly regarded as one course of conduct; so too in relation to the conduct of Cement Australia. As with the other contracts, discussed above, we consider it appropriate to consider each of the contraventions separately for the purposes of the imposition of penalties. 627 Having regard to the above matters, in our view appropriate penalties for the contraventions relating to the Swanbank Contract are: (a) in respect of the exercise by Pozzolanic of the option to extend the term of the Swanbank Contract to 31 December 2004, and further extend it to 30 June 2005 (namely the contraventions described in paragraph 21 of the 28 February 2014 declarations as varied by paragraph 3 of the 16 May 2016 orders): no penalty; (b) in respect of the making of an agreement to extend the term of the Swanbank Contract from 31 December 2004 to 30 June 2005 by Pozzolanic (namely the contravention described in paragraph 22 of the 28 February 2014 declarations as varied by paragraph 4 of the 16 May 2016 orders): $50,000; (c) in respect of Pozzolanic giving effect to the relevant provisions of the Swanbank Contract (namely the contravention described in paragraph 23 of the 28 February 2014 declarations): $120,000; (d) in respect of Pozzolanic giving effect to the relevant provisions of the Swanbank Contract in the period 1 January 2005 to 30 June 2005 (namely the contravention described in paragraph 24 of the 28 February 2014 declarations): $30,000; (e) in respect of QCL giving effect to the relevant provisions of the Swanbank Contract (namely the contravention described in paragraph 25 of the 28 February 2014 declarations): $180,000; (f) in respect of Cement Australia giving effect to the relevant provisions of the Swanbank Contract (namely the contravention described in paragraph 26 of the 28 February 2014 declarations): $720,000; and (g) in respect of Cement Australia being knowingly concerned in the making of the agreement to extend the term of the Swanbank Contract from 31 December 2004 to 30 June 2005 (namely the contravention described in paragraph 1 of the 16 May 2016 orders): $300,000. 628 We make the following observations in relation to the penalties set out above. In relation to (a), for the reasons given above no penalty is imposed in relation to the making of an agreement in connection with the first relevant extension; insofar as this declaration refers also to the second relevant extension, it is convenient to deal with this under (b) above. In relation to the making of an agreement in connection with the second relevant extension, the penalty to be imposed on Cement Australia under (g) is six times that to be imposed on Pozzolanic under (b); this is reflective of Cement Australia's role in the corporate structure as described above. In relation to the penalties for giving effect to the relevant provisions, the relevant period for the purposes of these penalties commenced on 12 September 2002 (for the reasons given above). We have treated the penalty to be imposed under (c) above as relating to the period 12 September 2002 to 31 December 2004, given that the period 1 January 2005 to 30 June 2005 is covered by (d) above. The relativity as between the penalties in (c) and (d) reflects, in rough terms, the difference in the time periods covered by those paragraphs. The relevant period for the purposes of (e) is 12 September 2002 to 31 May 2003 (the date of the Cement Australia merger). The relevant time period for (f) is 1 June 2003 to 30 June 2005. We have had regard to these relevant time periods in determining the penalties under (e) and (f) above.

Totality 629 As a final check, we have looked at the totality of the contravening conduct of each respondent and considered whether the total of the proposed penalties for that respondent is excessive. The totals of the proposed penalties are as follows: (a) for Pozzolanic - $2.93 million; (b) for QCL - $10.28 million; (c) for Cement Australia - $7.29 million; and (d) for Pozzolanic Industries - $100,000. 630 We consider these totals to be appropriate and do not consider any reduction to be required.

Summary of penalties to be imposed 631 The following is a summary of the penalties to be imposed with respect to the contraventions: Contract Contraventions found by primary judge Date of declarations [paragraph] Penalty to be imposed Original Millmerran Contract Pozzolanic - making 28/2/14 [6] $500,000 QCL - knowingly concerned in making 28/2/14 [7] $3m Pozzolanic - giving effect 28/2/14 [8] $100,000 QCL - giving effect 28/2/14 [9] $600,000 Pozzolanic Industries - knowingly concerning in making 28/2/14 [10] $100,000 Total: $4.3m Tarong Contract Pozzolanic - making 28/2/14 [16] $1m QCL - knowingly concerned in making 28/2/14 [17] $6m Pozzolanic - giving effect 28/2/14 [18] $1m QCL - giving effect and knowingly concerned in giving effect 28/2/14 [19] $500,000 Cement Australia - giving effect and knowingly concerned in giving effect 28/2/14 [20] $5.5m Total: $14m Amended Millmerran Contract Pozzolanic - making 28/2/14 [12] $100,000 Cement Australia - knowingly concerned in making 28/2/14 [13] $600,000 Pozzolanic - giving effect 28/2/14 [14] $30,000 Cement Australia - knowingly concerned in giving effect 28/2/14 [15] $170,000 Total: $900,000 Swanbank Contract Pozzolanic - making (extensions to 31/12/04 and to 30/6/05 - with provisions having effect and likely effect etc) 28/2/14 [21] as varied by 16/5/16 [3] No penalty Pozzolanic - making (extension from 31/12/04 to 30/6/05 - with provisions having purpose etc) 28/2/14 [22] as varied by 16/5/16 [4] $50,000 Pozzolanic - giving effect to provisions in declaration 21 28/2/14 [23] $120,000 (for period 12/9/02 to 31/12/04) Pozzolanic - giving effect to provisions in declarations 21 and 22 (from 1/1/05 to 30/6/05) 28/2/14 [24] $30,000 QCL - giving effect to provisions in declaration 21 (to 31/5/03) 28/2/14 [25] $180,000 Cement Australia - giving effect to provisions in declarations 21 and 22 28/2/14 [26] $720,000 Cement Australia - knowingly concerned in making (extension from 31/12/04 to 30/6/05) 16/5/16 [1] $300,000 Total: $1.4m Grand Total: $20.6m

I. CONCLUSION 632 For the reasons given above, we uphold the grounds of appeal relating to the 'joint and several' and 'course of conduct' issues. We dismiss the cross-appeal. In light of the conclusion on the 'joint and several' and 'course of conduct' issues, it is necessary for the penalty orders made by the primary judge to be set aside and for the penalty discretion to be re-exercised. Having re-exercised the discretion, we consider the penalties set out above to be appropriate and will make orders accordingly. We will provide that these penalties, to the extent not already paid, be payable within 30 days. (This is consistent with the time for payment of the penalties imposed by the primary judge.) We will reserve liberty to apply in case there are procedural matters (including as to confidentiality) that need to be addressed. 633 The notice of appeal does not seek a variation of the costs order below. In relation to the costs of the appeal, we will make orders for the filing and service of short written submissions and propose to deal with the issue of costs on the papers. I certify that the preceding six hundred and thirty-three (633) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Middleton, Beach and Moshinsky.

SCHEDULE OF PARTIES QUD 408 of 2016 Respondents Fourth Respondent: POZZOLANIC INDUSTRIES PTY LTD (ACN 010 608 947)