Recognition of terms of settlement
23 It is well known, indeed notorious, that litigation to establish anti-competitive conduct can be very complex, time consuming and expensive for all parties as well as for the Court. Settlement of such proceedings relieves the Court and the parties of much of that time and expense. This is, as the parties submitted, a matter of public interest:
"It is in the public interest for litigation under Part IV of the Act (as with other litigation) to be concluded in the shortest time frame that is consistent with justice being done between the parties, freeing the Court and the regulator to deal with other matters.
24 Provided that it can be satisfied that there has been contravention of the Act and that the terms of the orders including the proposed penalty are appropriate, the Court is generally willing to make orders in terms agreed by the parties. It is also accepted that recognition of the terms of settlement agreed between the parties can also be an important element in encouraging other parties to cooperate with the regulator and negotiate settlements. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291 Burchett and Kiefel JJ commented that there was an important issue of public policy involved in the Court recognising settlements agreed by the parties. Their Honours observed:
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 the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.
25 It is worth noting that encouraging parties to come forward and assist the ACCC in its enforcement activities is a formal ACCC policy. The joint submissions state:
The ACCC's position is contained in its Cooperation Policy for Enforcement Matters, July 2002. Whilst the Court is not bound by the Policy nor required to take it into account in any given case, it has recognised (in relation to a previous edition of the policy) that the matters which the Policy takes into consideration are matters relevant to a determination of the appropriate penalties to be imposed for contravention of Part IV of the Act.
26 The judicial statements quoted above do not suggest in any way that the Court is bound to accept as appropriate the amount agreed between the ACCC and the contravening party but they recognise it as a factor to be taken into account. In Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at [18] French J was explicit on the point:
The question whether an undertaking is to be accepted or a consent order made is not concluded by a finding that it is within the power of the court to do so. The power of the court to make the orders sought is "defined and conferred by public law not by private agreement": Fiss, "Against Settlement" (1984) 93 Yale Law Journal 1073. In the exercise of that power the court is not merely giving effect to the wishes of the parties, it is exercising a public function and must have regard to the public interest in doing so. This principle applies to the resolution of private litigation by consent orders or undertakings. A fortiori it applies to proceedings brought by the Crown or public or statutory authorities to enforce the law in the public interest. The court has a responsibility to be satisfied that what is proposed is not contrary to the public interest and is at least consistent with it … Consideration of the public interest, however, must also weigh the desirability of non-litigious resolution of enforcement proceedings.
27 It is more common than not for the Court to approve the amount of an agreed penalty. The joint submissions cited only three cases where the Court had substituted another amount, in one of which the judgment was reversed on appeal. In contrast, an annexure to the joint submissions listed a large number (56) of cases in which the agreed amount had been accepted. This information is only of marginal relevance. Ultimately whether the proposed penalty is acceptable depends on the issues relevant to this matter and not whether agreed penalties have been accepted in other cases.
28 A prime consideration is whether the proposed penalty of $5.5 million is within the permissible range. The proposed amount embraces the entirety of the conduct in relation to the Understandings during the period subject to penalty. At the time of the contraventions the maximum penalty for each act of arriving at or giving effect to collusive understandings was $10 million: s 76(1A)(b) of the TPA.
29 The conduct involved in arriving at and giving effect to the Understandings was deliberate and extended over many years. It is, however difficult to be precise about the extent of loss or damage caused. Relevantly, the per annum revenue generated was: from the fuel surcharge, approximately AU$3 million; from the security surcharge, approximately AU$1.13 million; and from the customs fee, approximately AU$0.15 million. The parties submitted that, at least in relation to the fuel surcharge the revenue derived does not demonstrate actual loss to the shippers or their customers:
Absent the understandings as to fuel surcharges, some price increases would have occurred to cover the increased costs of fuel, which did increase over the relevant period. It may have also been that some airlines would have been forced to exit certain routes, allowing the remainder to impose other increases with less constraint. These competitive outcomes cannot be known.
30 As indicated above the Statement of Agreed Facts establishes that Korean Air was a comparatively small player in the carriage of air cargo to and from Australia. In the relevant period it had about 2% of the business, British Airways had about 3% and Qantas had 24%. Major international carriers were significant competitors. That being so the ACCC does not contend that it was able to act in the Australian segment or elsewhere without being constrained by those competitors. Nevertheless to be successful the contravening conduct required the participation of all major carriers and, it was submitted that for this reason alone Korean Air's participation calls for the penalty proposed by the parties.
31 The fact that the contravening conduct occurred, and that the Understandings were reached and implemented by senior cargo staff, is sufficient indication that Korean Air's trade practices compliance polices were not adequate. The joint submissions state that these policies "are being fully revised, with education and managerial responsibilities being introduced in order to instil a culture of compliance at an institutional level". The revision of its policies and its considerable cooperation with the ACCC in reaching an agreed resolution of the matter is indicative that Korean Air has changed its approach and gives grounds for optimism about its future compliance with the TPA. The joint submissions state:
The ACCC accepts that Korean Air Lines is entitled to real credit for having admitted contravening the Act, and agreeing with the ACCC on the appropriate penalty to put to the Court … Korean Air Lines' co-operation with the ACCC has saved the ACCC and the Court (and ultimately the community) the cost and burden of litigating a complex, lengthy and expensive case.
It is obviously of benefit to the ACCC's investigations that respondents are encouraged to co-operate in appropriate cases. In these circumstances the parties submit Korean Air Lines is entitled to a discount on the penalty that otherwise would have been appropriate, which, given the regularity of the contravening conduct over the relevant period and the maximum applicable penalty per contravention of $10 million, could have been very much higher. This discount reflects the appropriate admissions and the substantial savings from full litigation.
Korean Air Lines has conducted extensive searches of documents throughout the world at considerable burden. It has produced to the ACCC a considerable quantity of documents in response to compulsory notices issued under section 155 of the Act and as discovery in these proceedings. Korean Air Lines does not, because of the searches it has conducted and its production to date, expect that it is likely to have a substantial quantity of additional relevant or probative documents to provide to the ACCC as evidence in these proceedings. Notwithstanding this, Korean Air Lines has agreed to conduct further searches and provide additional discovery of documents of assistance which have been specifically requested by the ACCC in the proceedings in this Court which remain on foot between the ACCC and other airlines.
The discount for Korean Air Lines' co-operation and acknowledgment of liability should be meaningful so that it can be seen that, was it not for its admissions now and co-operation, the Court would impose a significantly increased penalty if liability was established following a contested trial.
32 The proposed penalty of $5.5 million can be compared with the penalties imposed on other airlines who participated with Korean Air in the contravention of s 45. The joint submissions give details of the penalties imposed on Qantas, British Airways, Japan Airlines, Cargolux, Martinair and the merged Air France/KLM. The discounts allowed to each of those participants are, given the individual circumstances, on a par with the proposed penalty and the discount incorporated in it.
33 Having taken into account the relevant matters as outlined above at [21], I am satisfied that the proposed penalty of $5.5 million is appropriate as are the other orders sought by the parties.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.