Australian Competition and Consumer Commission v IPM Operation and... [2007] FCA 144 | Case summary

REASONS FOR JUDGMENT 1 The Australian Competition and Consumer Commission ("ACCC") commenced a proceeding in the Court alleging that IPM Operation and Maintenance Loy Yang Pty Ltd (formerly known as Edison Mission Operation and Maintenance Loy Yang Pty Ltd ("Edison") and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia ("the CEPU") had contravened various provisions of the Trade Practices Act 1974 (Cth) ("the Act"). It was alleged that, in 2001, Edison and the CEPU agreed that Edison would not engage the services of any electrical contractor to perform work at the Loy Yang B power station unless that contractor had entered into a certified agreement with the CEPU. After the proceeding was commenced the ACCC and Edison agreed on terms of settlement and filed a jointly agreed statement of facts and joint submissions which supported the making of declarations that Edison had contravened the provisions of ss 45E(3) and 45EA of the Act and orders providing for the payment of a pecuniary penalty and costs. Edison filed a defence in which it admitted the relevant contraventions. 2 The CEPU contested the allegations made against it. The proceeding, in so far as it involved allegations against the CEPU, went to trial before Young J. On 19 December 2006 his Honour made orders declaring that the CEPU had been an accessory to the contraventions, by Edison, of ss 45E(3) and 45EA of the Act. His Honour further ordered that the CEPU be restrained for a period of three years from engaging in any repetition of such conduct directed to Edison: see Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd [2006] FCA 1777. Having heard further submissions relating to the quantum of penalty and costs his Honour, on 16 January 2007, ordered that the CEPU pay a penalty of $125,000 and costs of $200,000: see Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd (No. 2) [2007] FCA 11. The CEPU has lodged an appeal against his Honour's decision. The appeal grounds challenge his Honour's findings in relation to liability and penalty. 3 There remains for consideration the question of whether the Court should make the orders which the ACCC and Edison agreed should be made in respect of Edison's contraventions of the Act. As already noted, the parties have filed an agreed statement of facts and joint submissions in support of proposed orders. On 9 February 2007 I heard argument as to whether the proposed orders should be made. I was provided with a copy of an amended version of the orders sought which had been framed in such a way as to render them harmonious with the orders made by Young J. Counsel advised that there had been no material changes to the statement of facts (including information as to Edison's financial position) which had been earlier filed. Counsel for Edison advised that his client wished the Court to proceed to make orders notwithstanding the pending appeal against Young J's decision and the possible relevance of the outcome of that appeal to his client's legal position. 4 Having considered the parties submissions I determined to make the orders sought. I advised the parties that I would publish my reasons at a later date. These are those reasons. 5 The agreed statement of facts, dated 19 September 2005, which I accept, appears on the Court file. It is not necessary to set it out in full. The substance of the ACCC's complaint was that Edison had agreed with the CEPU that it would not engage the services of electrical subcontractors which did not have certified industrial agreements with the CEPU. It was contended that Edison had given effect to its obligations under this agreement by declining to engage the services of a company - DJN Electrical and Instrumentation Pty Ltd ("DJN") - which it had previously engaged and which was, at the time of the making of the agreement, performing work for Edison at the Loy Yang site. The agreed statement provides the following details of the agreement and its implications for DJN: "27. From at least August 1999 to August 2001, Edison regularly acquired from DJN Electrical and Instrumentation Pty Ltd ('DJN') electrical services which were provided for Edison at the Loy Yang B power station. 28. In the period between 1 May 2001 and 20 August 2001 DJN provided electrical services for Edison at the Loy Yang B power station on 16, 17, 18, 22, 23, 28 and 29 May 2001; 12 July 2001; on various days between 16 July 2001 to 8 August 2001 inclusive and 15 August 2001. 29. Edison did not acquire any electrical services from a third party between 16 and 24 August 2001. 30. DJN has at all material times employed people whose employment was governed by the National Electrical, Electronic and Communications Contracting Industry Award 1998. 31. DJN has not at any time entered into an enterprise agreement with the CEPU. 32. At all material times, Edison knew the facts stated in paragraphs 30 and 31. 33. At a time before 13 August 2001 Mr David Nabulsi of DJN informed Mr Wayne Buckley, who at the time was the maintenance co-ordinator for Edison, that DJN had not entered into any enterprise bargaining agreements. On the basis of that information Mr Buckley assumed that the employment of employees of DJN was governed by the National Electrical, Electronic and Communications Contracting Industry Award 1998. 34. Between 16 August 2001 and about 1 March 2004 DJN did not supply electrical services directly for Edison at the Loy Yang B power station with the exception of some minor works performed by it on 20 September 2001. Those services involved modifying some previous work which DJN had performed at the Loy Yang B power station for another contractor in the period between 1 March 2001 and 1 August 2001. DJN performed works at the site of Ondeo Nalco Australia Pty Ltd, a subcontractor to Edison, on 17 September 2003, 24 September 2003, 22 October 2003, 28 January 2004, 29 January 2004 and 30 January 2004. 35. Between 16 August 2001 and about 26 January 2004 Edison did not request DJN to provide a quotation in relation to providing electrical services or to provide such services at the Loy Yang B power station. This was because Edison had entered into the contracts, arrangements or understandings with the CEPU referred to in paragraphs 36 and 37 below. Edison's breaches of the Act 36. ... [B]etween about 13 and 24 august 2001 Edison entered into an arrangement, or arrived at an understanding with the CEPU containing a provision to the effect that Edison would not engage any electrical contractor who employed people whose employment was governed by the National Electrical, Electronic and Communications Contracting Industry Award 1998 to provide services at the Loy Yang B power station if that electrical contractor did not have a current enterprise agreement with CEPU. 37. Further or in the alternative … on or about 24 August 2001 Edison entered into a contract or arrangement, or arrived at an understanding with the CEPU, containing a provision to the effect that Edison would request of any company which it contracted to work at the Loy Yang B power station and which employed people whose employment was governed by the National Electrical , Electronic and Communications Contracting Industry Award 1998 that the company have a current enterprise agreement with CEPU before the company commenced work. 38. Each of the provisions referred to in paragraphs 36 and 37 above, was included in the arrangement and/or understanding referred to in paragraph 36 and in the contract, arrangement and/or understanding referred to in paragraph 37 for the purpose of preventing Edison from acquiring and/or from continuing to acquire electrical goods and electrical services from DJN or any other electrical services company which employed people whose employment was governed by the National Electrical, Electronic and Communications Contracting Industry Award 1998 and which did not have an enterprise agreement with the CEPU; and preventing Edison from acquiring and continuing to acquire electrical goods and electrical services from DJN or any other such electrical services companies except subject to a condition: (a) that was not a condition to which the acquisition of such goods or services by Edison from DJN or any other such electrical services company had previously been subject because of a provision in a contract between those persons; and (b) that was about the persons to whom, the manner in which or the terms on which DJN or any other such electrical services company may supply any goods or services. 39. Edison admits that it contravened section 45E of the Act by entering into an arrangement or an understanding with the CEPU in August 2001 containing a provision which had the purpose of: (a) preventing Edison from acquiring and continuing to acquire electrical goods or services from DJN or any other electrical services company which employed people whose employment was governed by the National Electrical, Electronic and Communications Contracting Award 1998 and which did not have an enterprise agreement with the CEPU; and (b) preventing Edison from acquiring and continuing to acquire electrical goods or services from DJN or any other electrical services company which employed people whose employment was governed by the National Electrical Electronic and Communications Contracting Award 1998 and which did not have an enterprise agreement with the CEPU except subject to a condition: (i) that was not a condition to which the acquisition of such goods or services by Edison from DJN or any other such electrical services company had previously been subject because of a provision in a contract between those persons; and (ii) that was about the persons to whom, the manner in which or the terms on which DJN or any other such electrical services company may supply any goods or services, where at the time that the arrangement and understanding was made, entered into or arrived at, Edison: (i) had been a regular acquirer of electrical goods and services from DJN; and (ii) during the immediately preceding 3 months had acquired electrical goods and services from DJN. 40. Edison admits that it contravened section 45EA of the Act by giving effect to the arrangement or the understanding referred to in paragraph 39 above and between 21 august 2001 and about 20 November 2003. The parties agreed that, as soon as the ACCC advised Edison that its conduct might have contravened the Act, Edison promptly ceased to require that its potential electrical subcontractors should have industrial agreements with the CEPU. Edison provided information and documents sought by the ACCC. Confidential information was provided as to the financial position of Edison. 6 The declarations, proposed by the parties, and made by the Court, identify the relevant conduct and declare that it involved contraventions of the act. Such declarations are appropriate in circumstances such as the present. They serve the public interest by making it plain that conduct of the kind admitted by Edison contravenes the Act: see Australian Competition and Consumer Commission v Midland Brick Company Pty Ltd (2004) 207 ALR 329 at 333; Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53 at 91. 7 The parties were agreed that a single pecuniary penalty should be imposed in respect of all of the contravening conduct. It was submitted that the appropriate amount was $120,000. The parties acknowledged that it remained a matter for the Court to make an independent judgment as to the amount of the penalty. The exercise of the Court's powers in this regard is guided by the principles outlined in the joint judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291. Their Honours said: "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. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, except in a clear case." See also Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993. 8 The maximum monetary penalty which may be imposed upon a corporation for a contravention of ss 45E and 45EA of the Act is, in each case, $750,000: see s 76(1A) of the Act. Edison's admissions, therefore, render it liable to a maximum aggregate penalty of $1.5m. It was submitted that an appropriate penalty, absent any ameliorative factors, was one tenth of that amount, namely $150,000. A discount of $30,000 was applied to take account of Edison's cooperation with the ACCC in the course of the ACCC's investigation and Edison's early admission of liability: cf Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd (2002) ATPR 41-851. 9 In determining the "proper range" within which a monetary penalty for contravention of the Act falls a wide range of considerations has potential application. The Court is required, by s 76(1) of the Act, to have 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 … Part [VI] to have engaged in any similar conduct." Additional factors have been identified by the Court: see Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152-153; ACCC v NW Frozen Foods (1996) ATPR 41-515 at 42,444-42,445. To the extent that these factors have application in the circumstances in the present case, I have taken them into account. 10 The agreement between the ACCC and Edison had been entered into well before Young J determined that a penalty of $125,000 should be imposed on the CEPU. In these circumstances the principle of parity assumes considerable importance in determining the appropriate penalty to be imposed on Edison. That principle of parity, better known in the context of criminal sentencing, is applicable in cases such as the present: see Northwest Frozen Foods at 295. It requires, inter alia, that disparate penalties should not be imposed on co-offenders such as to engender "a justifiable sense of grievance" on the part of one of them or as to "give the appearance that justice has not been done": see Lowe v The Queen (1984) 154 CLR 606 at 611; Postiglione v The Queen (1997) 189 CLR 295 at 301, 338. The tests are objective and they are to be applied "having regard to the different circumstances of the co-offenders in question and their different degrees of [culpability]": Postiglione at 302. 11 Initially, I was concerned that the imposition of a monetary penalty on Edison which was only slightly less than that imposed on the CEPU might not be in accord with the parity principle having regard to the finding of Young J that the CEPU was the instigator of the offending conduct and that the CEPU could not claim the benefit of any discount by reason of any cooperation with the ACCC's investigation or an early willingness to acknowledge liability. However, having heard argument on the point, I was persuaded that the imposition of a penalty of $120,000 on Edison would not contravene the parity principle. I have come to this view having regard to a number of factors. The first is that the CEPU was penalised as an accessory rather than a party principal. Moreover it was penalised in respect of a single course of conduct which extended over two weeks: see [2007] FCA 11 at [40]-[41], [50]. Edison, on the other hand, committed two separate contraventions of the Act, one under s 45E and the other under s 45EA. The contravention of s 45E occurred when Edison, in August 2001, entered into the agreement with the CEPU. The contravention of s 45EA, which occurred when Edison gave effect to the agreement, involved conduct undertaken over a period of more than two years (21 August 2001 until 20 November 2003). 12 The nature of the contravening conduct to which Edison has admitted and the circumstances in which it occurred appear from the passages in the agreed statement of facts extracted above at [5]. The demand, by the CEPU, which led to the making of the offending agreement, was made at a time when Edison was peculiarly susceptible to industrial pressure by reason of pressing commercial imperatives. The principal victim of the agreement was DJN. It was unable to obtain work from Edison at the Loy Yang site for over two years. Edison was deprived of the option of engaging DJN and any other subcontractors who did not have certified agreements with the CEPU. It is not possible to quantify the losses sustained by DJN and Edison which were caused by the agreement. Those losses do not appear to have been significant in monetary terms. 13 It is necessary, in fixing an appropriate penalty, to have regard to the need to deter other companies from engaging in similar conduct. In my view a penalty of the magnitude proposed serves this purpose. 14 I have examined the confidential attachment relating to Edison's financial position. No issue arises as to Edison's capacity to pay the proposed penalty. 15 I have taken into account, in Edison's favour, the following matters: · Edison ceased to enforce its agreement with the CEPU immediately it was advised, by the ACCC, that its conduct may have contravened the Act. · Edison's cooperation with the ensuing ACCC enquiry. · Edison's readiness to admit the contraventions and the related avoidance of legal costs. · The absence of any previous contraventions of the Act which had come to the attention of the ACCC or its predecessor. · The introduction by Edison of an extensive ongoing compliance programme with a view to ensuring that its managers and other employees are aware of the provisions of the Act insofar as they impinge on the company's business operations. 16 In all the circumstances, I considered that the penalty agreed on by the parties fell within the proper range and should be imposed by the Court I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY J.

Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd

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