THE COMMISSION'S PLEADED CASE IN SUMMARY
6 Colgate, Cussons and Unilever competed in the Australian market for the wholesale supply of powdered and liquid laundry detergent products for domestic use.
7 From about early 2008, each of Colgate, Cussons and Unilever was separately considering the possible transition to ultra concentrated laundry detergents in the Australian market. Each of them considered that the transition to ultra concentrates would generate benefits, including significant cost savings and gross margin improvements as a consequence of reduced expenditure on ingredients, packaging, transport and other logistics. It was also considered that retailers, consumers and the environment would benefit from the transition. The transition had already occurred in Europe and in the United States.
8 The Commission alleged, however, that at some stage in 2008 or 2009, Colgate, Cussons and Unilever each came to the view that the transition would be unlikely to achieve the expected benefits unless they made the transition simultaneously. In simple terms, that was said to be because, if one or more of the Suppliers continued to supply some standard concentrates, consumers would be unlikely to see the value or benefit in the ultra concentrates and would continue to buy the standard concentrates. They would think that standard concentrates were better value because they were in bigger boxes but cost about the same. Manufacturers who held back transitioning all their brands to ultra concentrates might capitalise on this consumer confusion and thereby increase sales and market share.
9 That realisation, on the Commission's case, led each of Colgate, Cussons and Unilever to consider that the success, and consequential benefits, of the transition to ultra concentrates would be optimised if six things occurred: first, each of them effected a full category transition simultaneously; second, that "initiative" was led by an industry association or major retailer; third, each of them simultaneously withdrew the supply of standard concentrates; fourth, the withdrawal occurred simultaneously with the introduction of ultra concentrates; fifth, the ultra concentrates manufactured and sold by each of them were as uniform as possible in terms of the degree of concentration, packaging and product claims; and sixth, there was an agreed transition date.
10 In that context, the Commission alleged that in the period between 18 April 2008 and 31 January 2009, Colgate, Cussons and Unilever made or arrived at two arrangements or understandings concerning the transition. The first is referred to in the Commission's Amended Statement of Claim (ASOC) as the Withhold Supply Arrangement. The second is referred to as the Aligned Transition Arrangement. As will be seen, the two arrangements or understandings are really just alternative formulations of the one alleged arrangement or understanding.
11 The Commission's pleaded case (ASOC [57]) was that the Withhold Supply Arrangement contained provisions, the Withhold Supply Provisions, which were to the effect that Colgate, Cussons and Unilever would prevent, restrict or limit the supply of laundry detergent to Woolworths, Coles and Metcash in three respects. First, the supply of ultra concentrates would be restricted until a particular date, originally scheduled to be January 2009 but changed, before that date, to March 2009. Second, the supply of ultra concentrates other than those which met certain parameters (including in relation to concentration level and pack communication), would be restricted, again originally from January 2009, but then March 2009. Third, the supply of standard concentrates would be restricted from a particular date. That date was again originally January 2009, but changed, before that date, to March 2009.
12 The Commission alleged (ASOC [58]) that a substantial purpose of the Withhold Supply Provisions was to prevent, restrict or limit the supply of laundry detergent to Woolworths, Coles and Metcash, by Colgate, Cussons and Unilever. In simple terms, the purpose was to ensure that the new ultra concentrates would not be supplied before March 2009 (originally January 2009), and that the old standard concentrates, as well as ultra concentrates that did not meet certain specified parameters concerning concentration level, pack size and pack communication, would not be supplied after March 2009 (again originally January 2009). In those circumstances, it was contended that the Withhold Supply Provisions were exclusionary provisions within the meaning of s 4D of the Act (ASOC [59]) and satisfied the "purpose condition" in s 44ZZRD(3) of the Act (ASOC [60]). They were therefore "cartel provisions" for the purposes of s 44ZZRK of the Act (ASOC [61]).
13 The Aligned Transition Arrangement was alleged to contain similar, but slightly different provisions; the Aligned Transition Provisions. As already noted, the Aligned Transition Provisions were, in reality, simply a different or alternative formulation of the Withhold Supply Provisions. The Commission did not contend that there were two separate and distinct arrangements or understandings. The Withhold Supply Provisions were pleaded in such a way that they were likely to constitute an exclusionary provision as defined in s 4D of the Act, and therefore the Commission would not need to prove that the provisions had the purpose, or had or was likely to have the effect of, substantially lessening competition. The alternative formulation of the provisions, the Aligned Transition Provisions, would only give rise to a contravention if the Commission was able to prove that the provisions had that purpose or effect.
14 The Aligned Transition Provisions (ASOC [64]) were alleged to be that Colgate, Cussons and Unilever would, from a particular date, which was again originally January 2009, but then changed to March 2009, do three things: first, cease to supply standard concentrates to Woolworths, Coles and Metcash; second, simultaneously move to supply ultra concentrates to Woolworths, Coles and Metcash; and third, supply only ultra concentrates that met certain prescribed parameters in relation to concentration level, pack size and pack communication to Woolworths, Coles and Metcash. It was alleged that the Aligned Transition Provisions had a substantial purpose, or the effect or likely effect, of substantially lessening competition in the laundry detergent market for the purposes of s 45(2) of the Act (ASOC [65]), and the purpose of preventing, restricting or limiting the production or likely production of laundry detergent products for the purposes of s 44ZZRD(3)(a)(i) of the Act (ASOC [66]). They were therefore "cartel provisions" for the purposes of s 44ZZRK of the Act (ASOC [67]).
15 The Commission contended that, by making the arrangement, or arriving at the understanding, that contained the Withhold Supply Provisions, or the Aligned Transition Provisions, Cussons contravened s 45(2)(a)(i) of the Act (in the case of the Withhold Supply Provisions) (ASOC [114]) and s 45(2)(a)(ii) of the Act (in the case of the Aligned Transition Provisions) (ASOC [116]).
16 In the case of the Withhold Supply Provisions, as noted earlier, the Commission contended that such provisions would constitute exclusionary provisions as defined in s 4D of the Act. An arrangement containing such provisions would accordingly give rise to a per se contravention. The Commission did not contend, however, that the Aligned Transition Provisions were exclusionary provisions. Rather, it alleged that those provisions had a substantial purpose, or the effect or likely effect, of substantially lessening competition in the laundry detergent market (ASOC [65]). In short terms, the Commission alleged that, but for the Aligned Transition Provisions, one or more of the Suppliers would have continued to supply standard concentrates, that would have led to price competition between standard concentrates and ultra concentrates, and that in turn would have led to reductions in the price of the ultra concentrates. It also alleged that one or more of the Suppliers would have supplied laundry detergent with a variety of levels of concentration, with a variety of package sizes and with a variety of appearances.
17 The Commission also alleged that, from January 2009 until 31 December 2009, Colgate, Cussons and Unilever gave effect to the Withhold Supply Provisions and the Aligned Transition Provisions (ASOC [62] and [68]). The Commission's case in that regard was that on 2 March 2009, each of Colgate, Cussons and Unilever introduced ultra concentrates across each of their brands, and withdrew all of their previous standard concentrates from supply, save in respect of the "sell-down" of certain products (ASOC [48(a), (c)]). The ultra concentrates supplied by each of the Suppliers had two times (2x) the level of concentration of the previous standard concentrates; were priced in parity with the previous standard concentrates; and were marketed in similar packaging (ASOC [48(b), (d), (e)]). In giving effect to the Withhold Supply Provisions and the Aligned Transition Provisions, Cussons was alleged to have contravened s 45(2)(b)(i) or (ii) of the Act, respectively, and, from 24 July 2009 onwards, s 44ZZRK of the Act (ASOC [115] and [117]).
18 It should be noted that the Commission ultimately did not press the parity pricing allegations.
19 Needless to say, Cussons denied that it made any arrangement, or arrived at any understanding, with Colgate or Unilever that contained either the Withhold Supply Provisions or the Aligned Transition Provisions. Equally, it denied giving effect to any arrangement or understanding containing those provisions.
20 Before embarking on a detailed consideration of the facts and evidence, it may be useful to note some features of the Commission's pleaded case concerning the alleged arrangements or understandings. The particulars that the Commission supplied in relation to the making of the Withhold Supply Arrangement and the Aligned Transition Arrangement were effectively identical. Following are the important points.
21 First, the Commission did not, no doubt because it could not, plead or particularise exactly when the alleged arrangements were made, or the understandings arrived at. The best the Commission could do was to contend that the arrangements were made, or the understandings were arrived at, some time between 18 April 2008 and 31 January 2009.
22 Second, the Commission did not, no doubt again because it could not, plead that certain specific officers or employees were responsible for causing Cussons to enter into the alleged arrangements, or arrive at the alleged understandings. A corporation can only relevantly act, or have a state of mind, through its officers or employees. Yet the Commission was unable to say, at least in its pleaded case, who the relevant officers or employees of Cussons were. Indeed, it did not specify who the relevant officers or employees of Colgate or Unilever were either, save for Mr Ansell in Colgate's case. That was particularly unusual in the case of Unilever, since Unilever was an immunity applicant and its officers and employees gave evidence in the Commission's case.
23 Third, the Commission's case concerning Cussons' entry into the arrangement, or its arrival at the understanding, was essentially circumstantial. It relied on inferences that it contended could and should be drawn from a series or pattern of meetings and other communications which occurred between 18 April 2008 and 31 January 2009. Most of those meetings and communications did not involve each of the Suppliers directly meeting or communicating with each other. They mostly involved meetings or communications between one or other of the Suppliers and Woolworths. Cussons was not directly involved in many of the meetings and communications relied on by the Commission.
24 There was no real dispute that most of the meetings and communications relied on by the Commission occurred. There was also, for the most part, very little dispute about what was said at the meetings or otherwise communicated between the Suppliers, Accord and Woolworths. Almost all of the meetings and communications were documented in some way. The main issue is what can and should be inferred from the pattern of meetings and communications, considered in the context of what in due course occurred in March 2009.
25 It is useful to briefly identify the specific meetings and communications that the Commission contended gave rise to, or resulted in, or somehow evidenced, the alleged arrangements or understandings. The content of the meetings and communications will be considered in detail later. The relevant meetings and communications were:
A meeting on 8 January 2008 between representatives of Colgate and Woolworths (ASOC [13], [14]).
A meeting held on 10 March 2008 between representatives of Colgate and Accord Australasia Limited (ASOC [15], [16]). Accord was the national industry association for the Australasian hygiene, cosmetic and speciality products industry.
An email from Accord to Colgate, Cussons, Unilever and others sent on 18 April 2008 (ASOC [17]).
A meeting held on 30 April 2008 between representatives of Accord, Colgate, Cussons and Unilever (ASOC [22]).
Telephone conversations on 4 July 2008 between a representative of Colgate and a representative of Unilever (ASOC [27]).
An internal Unilever email sent on 7 July 2008 (ASOC [28]).
A communication involving representatives of Colgate and Unilever on 7 August 2008 (ASOC [32]).
An email sent by a representative of Woolworths on 11 August 2008 which was received by representatives of Colgate, Cussons, Unilever and other vendors who supplied laundry detergent to Woolworths (ASOC [36]).
An email sent by a representative of Woolworths on 12 August 2008 to representatives of Colgate, Cussons, Unilever and other vendors who supplied laundry detergent to Woolworths (ASOC [37]).
A telephone conversation on 19 August 2008 between a representative of Unilever and a representative of Cussons (ASOC [38]).
A telephone conversation on 21 August 2008 between a representative of Unilever and a representative of Cussons (ASOC [39]).
Telephone conversations on 21 and 22 August 2008 between representatives of Unilever (ASOC [40]).
A conversation between a representative of Unilever and a representative of Woolworths on or about 21 August 2008 (ASOC [41]).
A meeting between a representative of Woolworths and representatives of Cussons on 25 August 2008 (ASOC [42]).
An email sent by a representative of Unilever to a representative of Woolworths on 26 August 2008 (ASOC [43]).
A meeting between a representative of Woolworths and representatives of Unilever on 27 August 2008 (ASOC [44]).
An email between representatives of Colgate sent on 29 August 2008 (ASOC [45]).
Emails sent by a representative of Woolworths to representatives of Colgate, Cussons and Unilever on 22 December 2008 (ASOC [46]).
An email sent by a representative of Woolworths to representatives of Colgate, Cussons and Unilever on 5 January 2009 (ASOC [47]).
26 As can be seen, less than half of the pleaded meetings or communications directly involved Cussons. Even fewer involved a direct communication between Cussons and one of the other Suppliers.
27 It should be noted that the evidence concerning the specifically pleaded meetings and communications did not comprise the entirety of the evidence relied on by the Commission as supporting the inference or inferences that the alleged arrangements or understandings were made or arrived at. Those were, however, the meetings or communications that the Commission specifically identified as supporting the alleged agreement or understanding (see particular 1 to ASOC [56] and [63], and ASOC [13]-[17], [19]-[22], [27], [28], [32] and [36]-[48]).
28 Fourth, the Commission's case was that the Withhold Supply Arrangement and the Aligned Transition Arrangement were partly written and partly oral (particular 4 to ASOC [56] and [63]). To the extent that they were in writing, the Commission identified the writing as being the pleaded written communications, mostly emails, to which reference has just been made. Likewise, to the extent that they were oral, the Commission identified the discussions that occurred in the pleaded meetings and telephone conversations to which reference has just been made.
29 Fifth, the Commission also alleged that the Withhold Supply Arrangement and the Aligned Transition Arrangement were "wholly or partly implied from the facts, matters and circumstances" relating to the specifically pleaded meetings and communications (particular 5 to ASOC [56] and [63]).
30 In its submissions, the Commission sought, at times, to characterise the alleged arrangement or understanding as a "hub and spoke" arrangement whereby the individual Suppliers, Colgate, Cussons and Unilever, made or arrived at the arrangement or understanding by communicating not directly, but mostly through a common "hub". The "hub" was alleged to be Accord, in the first instance, and then later, Woolworths. That submission was probably made in an effort to explain or account for the limited number of direct communications between Cussons and the other two Suppliers.
31 Cussons complained that the Commission's "hub and spoke" submission went outside the Commission's pleading. It submitted that the Commission should be held to its pleaded case. As will be seen, there was some merit in Cussons' complaints in that regard, though ultimately it is unnecessary to consider the implications of that pleading point.
32 The final general point to note is that the Commission's case at trial turned out to be largely documentary in nature. While the Commission adduced affidavit evidence from a number of officers or employees of Unilever, ultimately their evidence added little, in terms of support for the Commission's case, to the content of the documents. That, in many respects, very much reflected the way that the case had been pleaded.