Australian Competition and Consumer Commission v Hobie Cat Australasia Pty Ltd

Australian Competition and Consumer Commission v Hobie Cat Australasia Pty Ltd - [2008] FCA 402 - FCA 2008 case summary — Zoe

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Factual Setting 3 Hobie is a wholly owned subsidiary of a United States company, details about which are not in evidence. Hobie is a manufacturer and importer of Hobie brand recreational watercraft, principally, for present purposes, sail boats and associated sail boat products and kayaks and associated kayak products. Hobie appointed Australian retailers of its watercraft as either, or both, dealers in sail boats and dealers in kayaks. At times of present relevance there were 12 sail boat dealers and 18 kayak dealers throughout Australia. Beginning in May 2003 until about 1 October 2006 Hobie supplied its dealers with an array of documents each of which stated prices for Hobie products. The price lists contained in those documents each referred to the Manufacturer's Recommended Retail Price ("MRRP") and the Manufacturer's Recommended Retail Price inclusive of GST. The documents were updated on an annual basis. 4 The conduct contravening s 48 of the Act commenced in August 2004 when Hobie entered into a written agreement with Glascraft Marine Pty Ltd. The terms on which Glascraft could sell and otherwise deal with kayaks included (inter alia) express terms to the following effect: 1. Glascraft shall endeavour at all times to sell kayaks at the MRRP; 2. Glascraft shall not advertise kayaks below the MRRP by more than 10%; 3. Hobie commits to make alternative arrangements (inter alia): 3.1 for any violation of the Glascraft Kayak Dealership Agreement; 3.2 for violation of any policies as outlined in the dealer handbook; or 3.3 if it feels it is in the best interest of promoting Hobie Products. 5 The decision to stipulate such terms was taken by the Managing Director in Australia of Hobie, Mr Steve Fields. Mr Fields was the sole resident Australian director. He was responsible for the conduct of Hobie's operations in Australia, for its dealer network and for its pricing policies. Hobie did not obtain any legal advice in stipulating terms to the above effect or to their later use. Mr Fields was unaware of the provisions of s 48 of the Act. 6 The parties have agreed, properly in my view, that the contravening conduct was founded upon the decision of Mr Fields referred to above, which decision it continued to implement, as will be seen, until the ACCC's notification to Hobie of its concerns on 1 November 2006. For this reason they have not sought to disaggregate the individual contraventions to which that decision gave rise. Rather, they invite me to deal in aggregate with the decision and its implementation. 7 From about September 2005 to September 2006, Hobie entered into written agreements with both dealers in sail boats and dealers in kayaks which contained, inter alia, express terms to the same effect as those referred to above in relation to the Glascraft dealership. 8 Additionally, on 28 September 2005 Hobie sent to Glascraft a "Hobie Dealer - Account Application" which included express terms to the effect that: (i) no price less than the MRRP may be offered in any form of advertising; and (ii) listing of Hobie products on the world wide web is considered a form of advertising. Glascraft executed that application on 28 September 2005. In October 2005 Hobie sent Glascraft a "Domestic Sail Boat and Kayak Dealer Handbook" which included express terms to like effect as in the above application.

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The Legislative Setting 14 Section 48 of the Act prohibits a corporation or other person from engaging in the practice of resale price maintenance. Resale price maintenance is, insofar as presently relevant, defined in s 96(1) and (3) in the following terms: "(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). … (3) The acts referred to in subsections (1) and (2) are the following: (a) the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier; (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; (c) the supplier entering into an agreement, or offering to enter into an agreement, for the supply of goods to a second person, being an agreement one of the terms of which is, or would be, that the second person will not sell the goods at a price less than a price specified, or that would be specified, by the supplier; … (f) the supplier using, in relation to any goods supplied, or that may be supplied, by the supplier to a second person, a statement of a price that is likely to be understood by that person as the price below which the goods are not to be sold." 15 Section 96(7) deems the references in ss 96(3)(a), (b) and (c) to the selling of goods at a price less than a price specified by the supplier to include reference to the advertising of goods for sale at a price less than a price specified by the supplier, and similarly deems the reference in s 96(3)(f) to a price below which the goods are not to be sold to include reference to the price below which the goods are not to be advertised for sale. 16 Section 76(1) of the Act as it applies to this matter provides that, if the Court is satisfied that a person has contravened s 48, it 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." 17 It is unnecessary that I set out in any detail the provisions of s 80 of the Act which contains the Court's power to grant injunctive relief. The only additional provision to which I should make reference is s 86C which empowers the Court, on application by the ACCC, to make orders in relation to a person who has engaged in contravening conduct which include: "(2)(c) an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to." Section 86C equally empowers the Court in subs (2)(b) to make a "probation order" for a period of no longer than three years. Such an order is defined in s 86C(4) in the following terms: "probation order, in relation to a person who has engaged in contravening conduct, means an order that is made by the Court for the purpose of ensuring that the person does not engage in the contravening conduct, similar conduct or related conduct during the period of the order, and includes: (a) an order directing the person to establish a compliance program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and (b) an order directing the person to establish an education and training program for employees or other persons involved in the person's business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the contravening conduct, similar conduct or related conduct; and (c) an order directing the person to revise the internal operations of the person's business which lead to the person engaging in the contravening conduct."

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The Pecuniary Penalty 25 The order proposed by consent is that Hobie pay the Commonwealth a penalty in the sum of $168,000 payable in two instalments. That sum represents a 30 per cent discount on the penalty that otherwise would have been sought but for Hobie's cooperation during the ACCC's investigations, its early acceptance that its conduct contravened the Act and its willingness to correct its conduct and to resolve the proceedings by consent orders. 26 I have referred already to the requirements of s 76(1) and to the considerations it includes amongst matters relevant for the Court to have regard to in determining an appropriate pecuniary penalty. I need not repeat them. Additionally, a considerable body of authority has enlarged upon the principles governing the imposition of pecuniary penalties. Those principles were helpfully distilled by Kenny J in Australian Competition and Consumer Commission v TEAC Australia Pty Ltd [2007] FCA 1859 at [16]. Her Honour there said: "The relevant principles governing the imposition of pecuniary penalties are discussed in Australian Consumer and Competition Commission v Dataline.Net.Au Pty Ltd [2007] FCAFC 146 at [60]-[75]; Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,151-52, 154; NW Frozen Foods Pty Ltd v Australian Consumer and Competition Commission (1997) 71 FCR 285 at 290-295; J McPhee & Son (Aust) Pty Ltd v Australian Consumer and Competition Commission (2000) 172 ALR 532; and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 at [51]-[58]. These authorities indicate that further relevant matters include: (a) the size of the contravening company; (b) the degree of power the company has, as evidenced by its market share and ease of entry into the market; (c) whether the conduct was systematic, deliberate, or covert; (d) the period over which the conduct occurred; (e) the effect on the functioning of the market and other economic effects of the conduct; (f) whether the contravention arose out of the conduct of senior management or at a lower level; (g) whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and discipline, or other corrective measures in response to an acknowledged contravention; and (h) 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. See also Australian Consumer and Competition Commission v Jurlique International Pty Ltd [2007] FCA 79 at [51]; Australian Consumer and Competition Commission v Knight [2007] FCA 1011 at [70]; and Australian Consumer and Competition Commission v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617 at [303]." 27 Before analysing the circumstances revealed in this matter in light of the considerations and principles referred to in s 76(1) and in the above extract, it is appropriate to note the observations of Burchett and Kiefel JJ in the Full Court in NW Frozen Foods. Having referred to the "unity" in the case law affirming the public interest in the promotion of settlements, especially in this area where litigation is likely to be very lengthy, their Honours observed (at 298-299): "We agree with the statement made in several of the cases cited that it is not actually useful to investigate whether, unaided by the agreement of the parties, we would have arrived at the very figure they propose. The question is not that; it is simply whether, in the performance of the Court's duty under s 76, this particular penalty, proposed with the consent of the corporation involved and of the Commission, is one that the Court should determine to be appropriate." 28 In considering the appropriateness of the proposed quantum of pecuniary penalty it is necessary to have regard to the various considerations to which I have referred above and to which I now turn.

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(xi) Pecuniary penalties in other proceedings 39 While the parties have provided me with a list of the pecuniary penalties imposed in cases dealing solely with s 48 contraventions for the period 1996 to 2007, I would have to say that "the parity principle" has yielded little by way of direct assistance. Such is not uncommon in cases concerned with TP Act contraventions: cf the observations of Burchett and Kiefel JJ in NW Frozen Foods at 295. 40 In determining whether the proposed pecuniary penalty is appropriate, it is of course important to recognise that the sum agreed represents a settlement between the parties: cf Trade Practices Commission v Milreis Pty Ltd (No 2) (1978) 32 FLR 234 at 243. However, it is also important to acknowledge the deterrent function, specific and general, of such a penalty. As Goldberg J observed in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [39]: "The penalty imposed must be substantial enough that the party realises the seriousness of its conduct and is not inclined to repeat such conduct. Obviously the sum required to achieve this object will be larger where the Court is setting a penalty for a company with vast resources. However, as specific deterrence is only one element and general deterrence must also be achieved, consideration of the party's capacity to pay must be weighed against the need to impose a sum which members of the public will recognise as significant and proportionate to the seriousness of the contravention." 41 I am, in the circumstances, satisfied that the various contraventions engaged in by Hobie were related to Mr Fields' August 2004 decision and should be seen as such with the total penalty imposed not being one that exceeds what is appropriate for the entire contravening conduct in question. 42 I equally am satisfied that the penalty proposed is an appropriate one, having regard to the considerations to which I have referred. It is substantial and significant for a company of Hobie's size and is proportionate to the seriousness of the contraventions. 43 I will make orders in the terms of the proposed consent orders. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

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Judgment (58 paragraphs)

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Cases Cited (18)

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