Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd - [2012] FCA 1124 - FCA 2012 case summary — Zoe

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Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd

[2012] FCA 1124

Federal Court of Australia|2012-10-17|Before: Murphy J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2012-10-17

Before

Murphy J

Source

Original judgment source is linked above.

Judgment (28 paragraphs)

[1]

REASONS FOR JUDGMENT 1 In this proceeding the applicant, the Australian Competition and Consumer Commission ("ACCC"), filed a fast track application and statement of claim alleging contraventions by the respondents of s 48 of the Competition and Consumer Act 2010 (Cth) ("the CCA"), and the predecessor provision in the Trade Practices Act 1974 (Cth) ("TPA"). The first respondent, Eternal Beauty Products Pty Ltd ("Eternal Beauty"), is a wholesaler and retailer of women's beauty products. The second respondent, Ms Penny Rider, is a director of Eternal Beauty and the owner of 60 of its 100 issued shares. ACCC alleged that Eternal Beauty engaged in seven separate acts of resale price maintenance, and that Ms Rider was directly knowingly concerned in and a party to those acts. 2 The parties later filed an agreed statement of facts, a joint outline of submissions, and proposed consent orders. The proposed consent orders provided for declarations regarding the respondents' breaches of the CCA, pecuniary penalties against the first respondent and against the second respondent personally, and for the implementation of a compliance program. I earlier made the orders sought and now set out my reasons for the same.

[2]

the facts 3 The facts are set out in the parties' agreed statement and can be summarised as follows. From early 2010 to mid 2011 Eternal Beauty was the sole Australian distributor of two beauty products, "Eyesential" eye cream and "The Lift Petite" face cream (collectively "the Products"). The Products were supplied to Eternal Beauty by a UK company pursuant to an exclusive distribution licence, and sold by it to online retailers through an intermediary wholesaler. 4 Eternal Beauty admits that during the relevant period it engaged in acts of retail price maintenance in its dealings with two online retailers of women's beauty products, Bepharmacy Pty Ltd ('Bepharmacy") and Slender Body Pty Limited ("Slender Body"). The admitted conduct involved Eternal Beauty and Ms Rider inducing and also attempting to induce Bepharmacy and Slender Body not to sell Eyesential below the price of $99.00 or The Lift Petite below the price of $235.00 (collectively "the Minimum Price") on their online retailing websites.

[3]

Contravening conduct in respect of Bepharmacy 5 The conduct admitted by Eternal Beauty and Ms Rider in relation to Bepharmacy consists of a telephone conversation between Ms Rider and Mr Anfernee Chang, the director of Bepharmacy, on about 4 May 2010, and emails sent on behalf of Eternal Beauty to Mr Chang on 24 December 2010, and 10 January, 9 February and 10 February, 2011. 6 In the telephone conversation on about 4 May 2010 between Ms Rider and Mr Chang, Ms Rider requested that Mr Chang increase to the Minimum Price the prices at which Bepharmacy offered the Products. Mr Chang complied with this request and Ms Rider replied by email to thank him for his prompt compliance. 7 In around December 2010 Bepharmacy again offered the Products below the Minimum Price. On 24 December 2010, Ms O'nions, an employee of Eternal Beauty, was directed by Ms Rider to send an email to Mr Chang stating (without alteration/sic): This is a follow up to Penny Rider's email. Your web team are still using Eyesential as a advert and the pricing for the products is not allowed. The lift must not be sold for lower then $235.00 and the Eyesential $99.00. please amend immediately. 8 On 10 January 2011, at the direction of Ms Rider, Ms O'nions sent another email on behalf of Eternal Beauty to Mr Chang stating (without alteration/sic): Following my email sent 24/12/2010 regarding the pricing of our products on your website, they still have not been changed. Please can you change the prices too the following. • Eyesential $99.00 plus p&h • The Lift Petite $235.00 plus p&h I will check again tomorrow to ensure this has been done. 9 On 9 February 2011 Ms Rider sent an email on behalf of Eternal Beauty to Mr Chang stating (without alteration/sic): Yourself and Skin Essentials are really causing me problems with salon owners that sell the products. I am getting complaints from them every day. I have asked you both to match the price we all sell at which is $99. And you both are saying to me only if the other wones does first. I am wasting so much time on this. Please can you keep your price at $99 for online sales. 10 Mr Chang replied by email on 10 February 2011 stating, in summary, that he did not believe it was reasonable to ask online retailers to match the prices products were offered for by retail salons and that, in any event, Bepharmacy was offering Eyesential at only a marginal discount from the requested price of $99.00. 11 On the same day Ms Rider replied by email to Mr Chang stating: Maybe its best that you just stop selling our products and I will give you a refund for any stock you are holding. I am hoping to do the same with Skin Essentials too. It just isn't worth the hassle.

[5]

Prohibition on resale price maintenance and deemed corporate liability 17 Section 48 of the CCA provides: A corporation or other person shall not engage in the practice of resale price maintenance. 18 Section 96 relevantly provides: (1) Subject to this Part, a corporation (in this section called the supplier) engages in the practice of resale price maintenance if that corporation does an act referred to in any of the paragraphs of subsection (3). (2) Subject to this Part, a person (not being a corporation and also in this section called the supplier) engages in the practice of resale price maintenance if that person does an act referred to in any of the paragraphs of subsection (3) where the second person mentioned in that paragraph is a corporation. (3) The acts referred to in subsections (1) and (2) are the following: … (b) the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier; … (4) For the purposes of subsection (3): (a) where a price is specified by another person on behalf of the supplier, it shall be deemed to have been specified by the supplier; … (6) For the purposes of subsection (3), anything done by a person acting on behalf of, or by arrangement with, the supplier shall be deemed to have been done by the supplier. (7) A reference in any of paragraphs (3)(a) to (e), inclusive, including a reference in negative form, to the selling of goods at a price less than a price specified by the supplier shall be construed as including references to: … (c) the offering of goods for sale at a price less than a price specified by the supplier as the price below which the goods are not to be offered for sale … 19 Section 84(2)(a) provides: (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; … shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.

[6]

Pecuniary penalties for contraventions 20 Section 76 of the CCA gives the Court power to impose pecuniary penalties against a contravening party and relevantly provides: (1) If the Court is satisfied that a person: (a) has contravened any of the following provisions: (i) a provision of Part IV (other than section 44ZZRF or 44ZZRG); (iii) section 95AZN; or (b) has attempted to contravene such a provision; or (c) has aided, abetted, counselled or procured a person to contravene such a provision; or (d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or (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: (aa) for each act or omission to which this section applies that relates to section 44ZZRJ or 44ZZRK - the greatest of the following: (i) $10,000,000; (ii) if the court can determine the total value of the benefits that have been obtained (within the meaning of Division 1 of Part IV) by one or more persons and that are reasonably attributable to the act or omission - 3 times that total value; (iii) if the Court cannot determine the total value of those benefits - 10% of the annual turnover (within the meaning of Division 1 of Part IV) of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and (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 act or omission to which this section applies that relates to any other provision of Part IV - the greatest of the following: (i) $10,000,000; (ii) if the Court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission - 3 times the value of that benefit; (iii) if the Court cannot determine the value of that benefit - 10% of the annual turnover of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and (c) for each act or omission to which this section applies that relates to section 95AZN - $33,000; and (d) 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: (a) for each act or omission to which this section applies that relates to section 95AZN - $6,600; and (b) for each other act or omission to which this section applies - $500,000. I note that s 76(1)(c) provides that an individual may be liable for a pecuniary penalty where he or she has been in any way, directly or indirectly, knowingly concerned in, or party to, a contravention.

[9]

relief 29 I have ordered declaratory relief, pecuniary penalties against both Eternal Beauty and Ms Rider, the institution of a compliance program by Eternal Beauty, and that Ms Rider undergo compliance training, in the form of the consent orders sought. 30 The Court is entitled to treat the respondents' consent to the relief sought as involving an admission of all facts necessary or appropriate to the granting of the relief sought: Thomson Australian Holdings Pty Ltd v TPC (1981) 148 CLR 150 at 164 per Gibbs CJ, Stephen, Mason and Wilson JJ. The agreed facts and the parties' joint submissions provide additional foundation for the relief sought. In my view the content of the declarations, the quantum of the penalty, and the compliance program sought by the parties are appropriate and reflect a sound application of the relevant principles to the circumstances of this case. 31 Accordingly these reasons draw heavily on the parties' joint submissions. 32 There is a public interest in the settlement of cases under the CCA and in this regard, Burchett and Keifel JJ's observations in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 291 ("NW Frozen Foods") are relevant: There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. 33 The Court will ordinarily not refuse to give effect to settlements under the CCA which are within its jurisdiction and are otherwise not inappropriate. As explained by Lee J in ACCC v Target Australia Pty Ltd (2001) ATPR 41-840 at [24]: It is the Court's duty in receiving consent orders in any matter to scrutinise such orders as to their appropriateness. However, after being satisfied as to the appropriateness of the orders, the Court should be slow to impede final settlement of such matters, particularly those involving public interest considerations. Moreover, the public has an interest in the mutual resolution of litigation, and subject to the foregoing the Court should be careful not to refuse to make orders simply because the orders may have been different had it been the Court's task to formulate them. 34 I am satisfied that the proposed consent orders are appropriate and are within the Court's power to make. I do not consider that they raise any of the difficulties that have previously caused the Court to refuse to make consent orders as discussed in ACCC v Econovite Pty Ltd (2003) ATPR 41-959 per French J at [12].

[14]

Factors relevant to the quantum of pecuniary penalties 45 The factors relevant to the exercise of the Court's discretion which are expressly referred to in s 76 of the Act are: (a) the nature and extent of the act or omission constituting the contravening conduct; (b) the nature and extent of any loss or damage suffered as a result of the contravening conduct; (c) the circumstances in which the act or omission took place; and (d) whether the contravener has previously been found by the Court to have engaged in similar conduct. 46 In addition, in TPC v CSR Limited (1991) ATPR 41-076 at 52,152 to 52,153, French J (as he then was) identified further factors which are relevant to the exercise of the discretion: (a) the size of the contravening company; (b) the degree of its power, evidenced by its market share and the ease of entry into the market; (c) the deliberateness of the contravention and the period over which it extended; (d) whether the contravention arose out of the conduct of senior management or at a lower level; (e) whether the company had a corporate culture conducive to compliance with the Act, as evidenced by education programs and disciplinary or other corrective measure in response to an acknowledged contravention; and (f) whether the contravener has shown a disposition to cooperate with the authority responsible for the enforcement of the CCA in relation to the contravention. 47 Further, in addition to those factors Heerey J in ACCC v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 at 42,444 to 42,445 identified as additional relevant factors the financial position of the respondent(s) and the deterrent effect of the penalty. This suit of factors has been approved in subsequent decisions of the Full Court, for example Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529. 48 Deterrence (both specific and general) is the principal object of imposing a pecuniary penalty under s 76 of the CCA: ACCC v High Adventure Pty Limited [2005] FCAFC 247 ("ACCC v High Adventure") at [11]. The penalty for related offences ought not exceed what is proper for the entire contravening conduct: see TPC v TNT Australia at 40,169 per Burchett J; ACCC v Baxter Healthcare Pty Ltd [2010] FCA 929 at [22]. Similar contraventions should incur similar penalties, other things being equal, albeit bearing in mind the Full Court's caution in NW Frozen Foods at 295 that "other things are rarely equal where contraventions of the Trade Practices Act are concerned".

Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd

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Judgment (28 paragraphs)

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