Australian Competition and Consumer Commission v Koyo Australia Pty Ltd - [2013] FCA 1051 - FCA 2013 case summary — Zoe

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Australian Competition and Consumer Commission v Koyo Australia Pty Ltd

[2013] FCA 1051

Federal Court of Australia|2013-10-18|Before: Edmonds J

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Source facts

Court

Federal Court of Australia

Decision date

2013-10-18

Before

Edmonds J

Source

Original judgment source is linked above.

Judgment (29 paragraphs)

[1]

The respondent pay the Commonwealth of Australia, within 14 days, a pecuniary penalty in the sum of $2 million in respect of contraventions of ss 45(2)(a)(ii) and (2)(b)(ii) of the Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth) ("the Act") and s 44ZZRK of the Act, in that: (a) the respondent: (i) in or around May 2008, made arrangements or arrived at understandings with certain of its competitors for the supply of ball and roller bearings and associated components (bearing products) in Australia to aftermarket customers containing a provision that they would each increase prices of bearing products of specified amounts, in respect of those products; (ii) in or around January 2009, made arrangements or arrived at understandings with certain of its competitors for the supply of bearing products in Australia to aftermarket customers containing a provision that they would each increase prices of bearing products of specified amounts, in respect of those products; (b) the respondent and one or more other parties to the said arrangements or understandings: (i) were, or were likely to be; or (ii) were, or were likely to be, but for the said arrangements or understandings, in competition with each other in relation to the supply of bearing products in Australia; (c) the provisions of the said arrangements or understandings had the purpose, effect or likely effect of fixing, controlling or maintaining (or providing for the fixing, controlling or maintaining of) the price at which any party to the said arrangements or understandings, any related body corporate or agent, would supply bearing products in Australia to aftermarket customers within the meaning of s 45A of the Act and are therefore deemed to substantially lessen competition within the meaning of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act; and (d) by reason of paragraph l(a) to (c) above: (i) in making the said arrangements or arriving at the said understandings, the respondent contravened s 45(2)(a)(ii) of the Act; and (ii) in giving effect to the provisions of the said arrangements or understandings that contravened s 45(2)(a)(ii) of the Act, the respondent contravened s 45(2)(b)(ii) of the Act and s 44ZZRK of the Act.

Review 6.1 In the event the ACCC has sufficient reason to suspect that the Compliance Program is not being implemented effectively, the respondent shall, if requested by the ACCC, at their own expense, cause a review of the Compliance Program elements ("the Review") to be carried out in accordance with each of the following requirements: 6.2 Scope of the Review - The respondent shall ensure that the Review is broad and rigorous enough to: 6.2.1 provide the respondent and the ACCC with a supportable verification that the respondent has in place a Compliance Program that complies with the requirements of this Annexure and is suitable for the size and structure of the respondent; 6.2.2 provide the Review Report and opinions detailed at point 7 below. 6.3 Independence of Reviewer - The respondent shall ensure that the Review is carried out by a suitably qualified, independent compliance professional with expertise in competition and consumer law ("the Reviewer"). The Reviewer will qualify as independent on the basis that he or she: 6.3.1 did not design or implement the Compliance Program; 6.3.2 is not a present or past staff member or director of the respondent ; 6.3.3 has not acted and does not act for the respondent in any competition and consumer law related matters; 6.3.4 has not and does not act for or consult to the respondent or provide other services on competition and consumer law related matters other than Compliance Program reviewing; and 6.3.5. has no significant shareholding or other interests in the respondent. 6.4 Evidence - The respondent shall use their best endeavours to ensure that the Review is able to be conducted on the basis that the Reviewer has access to all relevant sources of information in the respondent's possession or control, including without limitation documents created by the respondent's consultants, legal practitioners and accountants for use in the respondent's Compliance Program. 6.5 The respondent shall ensure that the Review is completed within three months of written request from the ACCC.

[5]

Introduction 1 These proceedings, commenced on 15 July 2013, allege contraventions of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth) ("the Act"), and s 45ZZRK of the Act, by reason of the respondent having made arrangements or arrived at understandings with certain of its competitors for the supply of ball and roller bearings and associated components ("bearing products") in Australia to aftermarket customers containing a provision that they would each increase prices of bearing products in specified amounts, in respect of those products. 2 The allegations are that this contravening conduct extended over two periods, the first entered into on 14 May 2008 and given effect to from 1 July 2008, the second entered into on 21 January 2009 and given effect to in May 2009; that the respondent and one or more other parties to the said arrangements or understandings were, or were likely to be, or were, or were likely to be but for the said arrangements or understandings, in competition with each other in relation to the supply of bearing products in Australia; and that the provisions of the said arrangements or understandings had the purpose, effect or likely effect of fixing, controlling or maintaining (or providing for the fixing, controlling or maintaining of) the price at which any party to the said arrangements or understandings, any related body corporate or agent, would supply bearing products in Australia within the meaning of s 45A of the Act and are therefore deemed to substantially lessen competition within the meaning of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act. 3 At the time of commencement of proceedings, the parties had reached agreement concerning relevant facts including facts not disputed, admissions as to the legal consequences thereof including admissions as to contraventions of relevant provisions of the Act and these were embodied in a Statement of Agreed Facts and Admissions pursuant to s 191(3)(a) of the Evidence Act 1995 (Cth) signed on behalf of both parties by their respective legal representatives and filed as Annexure "AJC-1" to the affidavit of Andrew John Christopher sworn 15 July 2013. 4 The parties had also reached agreement on the orders the applicant sought the Court to make and to which the respondent was prepared to consent, subject to the Court being satisfied that the orders, including the terms of any pecuniary penalty, were appropriate. These were embodied in draft short minutes of orders filed as Annexure "AJC-2" to the affidavit of Andrew John Christopher. 5 In this regard, I cannot improve on the recent observation of Buchanan J in ACCC v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 at [4]: It is well established by authority in this Court that, although the terms of orders made by the Court are within the discretion of the Court, and not the parties, the Court may pay regard to an agreed position about the orders which are appropriate to be made following admission of a civil contravention of a statutory standard. That principle extends to an agreement about the amount of a pecuniary penalty to be imposed (see in particular NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [(1996) 71 FCR 285] and Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [(2004) ATPR 41-993 at [56])]. The principles stated in those cases have recently been criticised by the Victorian Court of Appeal in ASIC v Ingleby [2013] VSCA 49 ("Ingleby") but they are principles which bind me and I propose to apply them. 6 Finally, the Court was provided with an outline of joint submissions of the applicant and the respondent dated 2 August 2013 in support of the appropriateness of the draft orders, including the amount of pecuniary penalty to be imposed.

[7]

Australian Bearings Market 9 Koyo has co-operated fully with the investigation of the respondent ("ACCC") in relation to the above-described conduct since December 2011, when Koyo voluntarily approached the ACCC in relation to its participation in that conduct. 10 Bearing products permit a movable connection between two or more mechanical items. 11 Bearing products are an essential component for a wide range of automotive and industrial uses, where moving parts are present. There are no other products closely substitutable for bearing products. Bearing products are used in a vast range of applications, including in motor vehicles, mining conveyors, household electrical items and farm machinery. Bearing products range in size from small diameter items measured in fractions of millimetres to large bore items over several metres in diameter. 12 At all relevant times, Koyo supplied bearing products to customers in Australia for automotive and industrial use. The market in which there was demand from customers for, and supply of, bearing products in Australia is hereinafter referred to as the "Australian Bearings Market". 13 The customers of Koyo in the Australian Bearings Market included: (1) "Original Equipment Manufacturers" ("OEM customers"); who used or incorporated bearing products in the manufacture of their own new products; (2) "Aftermarket customers" ("AM customers"); who used bearing products for repair and maintenance purposes; and (3) "Contract customers"; who used bearing products for specific industrial purposes. 14 At all relevant times Koyo imported into Australia bearing products with the brand name "Koyo". 15 At all relevant times no bearing products were manufactured in Australia by Koyo. 16 For each year during the period from 2007 to 2011, the ACCC has ascertained and Koyo does not dispute that the. collective value of bearing products imported into the Australian Bearings Market by all manufacturers was approximately AUD$370 to $400 million. 17 There were, and continue to be, a number of suppliers of bearing products in the Australian Bearings Market, including SKF Australia Pty Ltd ("SKF Australia"), Australian Timken Pty Ltd ("Timken Australia"), Schaeffler Australia Pty Ltd ("FAG"), NTN-CBC (Australia) Pty Ltd ("NTN"), NSK Australia Pty Ltd (ACN 004 799 455) ("NSK Australia") and Nachi (Australia) Pty Ltd (ACN 000 774 989) ("Nachi Australia"). NSK Australia is a wholly owned subsidiary of NSK Corporation of Japan ("NSK Japan"). Nachi Australia is a wholly owned subsidiary of Nachi-Fujikoshi Corporation of Japan ("Nachi Japan"). 18 At all relevant times, Koyo, NSK Australia and Nachi Australia were in competition with each other in relation to the supply of bearing products in the Australian Bearings Market. 19 The ACCC has ascertained and Koyo does not dispute that during the period from 2007 to 2011, the percentage of bearing products supplied in the Australian Bearings Market by: (1) SKF Australia was up to approximately 40%; (2) Timken Australia was approximately 12% to 15%; (3) FAG was approximately 7% to 10%; (4) NTN was approximately 10% to 16% (5) NSK Australia was approximately 10% to 20%; (6) Koyo was approximately between 5% and 10%; and (7) Nachi Australia was approximately between 3% and 5%. 20 The actual percentage for each company varied in the specified range from year to year depending on actual sales made. 21 For each year during the period from 2007 to 2011, the sales revenue of Koyo from sales of bearing products in the Australian Bearings Market was between AUD$20 and $30 million. 22 For each year during the period from 2007 to 2011, the percentage of its sales revenue attributable to the sale of bearing products by Koyo Australia to AM customers in the Australian Bearings Market was between 22% and 37%.

[8]

Southern Cross Association Meetings 23 During the period from at least 2000 to May 2011, there existed a group of senior executives from a number of suppliers of bearing products in the Australian Bearings Market who met regularly, being representatives from Koyo, NSK Australia and Nachi Australia. In the case of Koyo, these meetings were attended by the person occupying the position of Managing Director. In the case of NSK Australia and Nachi Australia, these meetings were attended by the most senior executives residing in Australia from time to time. In October 2001 the participants in the group at that time gave this group the name "the Southern Cross Association" ("SCA"). 24 The participants who attended the SCA meetings were: (1) On behalf of NSK Australia: the late Mr Yasake Adachi (from 2000 to December 2004) and Mr Naofumi Tada (from December 2004 to May 2011); (2) on behalf of Koyo: Mr Akira Nishimura (from 2000 to February 2006); Mr Hiroshi Sano (from February 2006 to July 2010) and Mr Hiroyuki Fujioka (from July 2010 to May 2011); and (3) on behalf of Nachi Australia; Mr Tetsu Furusawa (from 2000 to July 2004), Mr Akira Iwai (from July 2004 to June 2007) and Mr Ryo Kodama (from July 2007 to May 2011), ("SCA Participants"). 25 During the period from at least 2000 to May 2011: (1) The SCA operated, in part, as a social group and business network for the most senior executive from each of NSK Australia, Koyo and Nachi Australia who was present in Australia but also as a forum in which each of the SCA Participants shared information about the Australian Bearings Market; (2) the SCA Participants met over dinner at restaurants in Sydney and Melbourne three to four times per year; (3) the meetings of the SCA were convened on the basis and assumption, and through a long-standing practice between Koyo, NSK Australia and Nachi Australia, that the meetings were a confidential forum in which the SCA Participants were able to exchange sales information in relation to AM customers in the Australian Bearings Market; and (4) on occasions at meetings of the SCA, the SCA Participants discussed and shared confidential information about each Koyo, NSK Australia and Nachi Australia's pricing plans for AM customers in the Australian Bearings Market.

[9]

2008 price increase 26 On or about 5 February 2008, Mr Tada from NSK Australia, Mr Sano from Koyo and Mr Kodama from Nachi Australia attended an SCA meeting at the Azuma Restaurant in Sydney. Certain of the SCA Participants at that meeting stated, that as a result of an expected increase in the price of steel and accordingly the CIF price (being cost, insurance and freight) for bearing products imported into Australia paid by each of the participants, they would need to implement an increase in the sales price for bearing products to AM customers in Australia. Other SCA Participants at that meeting stated their agreement to do the same. 27 On or about 14 May 2008, Mr Tada from NSK Australia, Mr Sano from Koyo and Mr Kodama from Nachi Australia attended an SCA meeting at the Kabuki Shoroku Restaurant in Sydney. During this meeting each of the participants outlined their pricing plans for bearing products for AM customers in the Australian Bearings Market arising as a result of increases in CIF prices of bearing products imported into Australia, substantially attributable to the increase in the price of inputs. 28 At the meeting referred to in [27] above, Mr Sano discussed plans to increase Koyo's sales price for bearings to AM customers by 3% from 1 July 2008. Mr Tada discussed plans to increase NSK Australia's sales price for bearings to AM customers by 2% in July and a further 2% in October 2008. Mr Kodama discussed plans to increase Nachi Australia's sales price by 3% from 1 August 2008. 29 In the course of the events described in [27] and [28] above, Koyo made an arrangement or arrived at an understanding with certain of its competitors, namely NSK Australia and Nachi Australia, that each of them would implement an increase in the sales prices for bearing products to AM customers subsequent to the meeting on 14 May 2008 ("2008 Arrangement or Understanding"). 30 The 2008 Arrangement or Understanding recognised that the actual amount and precise timing of the increase in sales prices for bearing products for each company may vary somewhat to take account of internal company implementation processes. 31 Subsequent to Koyo making or arriving at the 2008 Arrangement or Understanding, Koyo, NSK Australia and Nachi Australia each increased the sales prices for bearing products to AM customers by: (1) In the case of Koyo, 3% with effect from 1 July 2008; (2) the ACCC has ascertained and Koyo does not dispute that in the case of Nachi Australia, 4% effective from 1 August 2008; and (3) the ACCC has ascertained and Koyo does not dispute that in the case of NSK Australia, 4% effective from 1 October 2008. 32 In the course of the events described in [31(1)] above, Koyo gave effect to the 2008 Arrangement or Understanding.

[10]

2009 price increase 33 The ACCC has ascertained and Koyo does not dispute that on 23 December 2008, NSK Australia announced a 10% increase in its sales price for bearing products to AM customers in the Australian Bearings Market to take effect from 2 February 2009. This price increase followed a decline in the Australian dollar against the Japanese Yen by over 50% in late 2008. As a consequence of this exchange rate change, the cost of bearing products imported into Australia increased for each of NSK Australia, Koyo and Nachi Australia. 34 On or about 21 January 2009, Mr Tada from NSK Australia, Mr Sano from Koyo and Mr Kodama from Nachi Australia attended an SCA meeting at the Kabuki Shoroku Restaurant in Sydney. During that meeting, Mr Tada discussed with Mr Sano and Mr Kodama that, due to the rise in the CIF price of imported bearing products due to exchange rate fluctuations, NSK Australia planned to increase its sales price for bearing products to AM customers by 10%. Mr Tada asked what each of the other SCA Participants planned to do with their prices of bearing products to AM customers. In response, Mr Sano and Mr Kodama discussed the plans of their respective companies and indicated their intentions to increase the sales price for bearings to AM customers by at least 5%. 35 In the course of the events described in [34] above, Koyo made an arrangement or arrived at an understanding with certain of its competitors, namely NSK Australia and Nachi Australia, that each of them would implement an increase in the sales price for bearings to AM customers subsequent to the meeting on 21 January 2009 ("2009 Arrangement or Understanding"). 36 The 2009 Arrangement or Understanding also recognised that the actual amount and precise timing of the increase in the sales prices for bearing products for each company may vary somewhat to take account of internal company implementation processes. 37 Subsequent to Koyo making or arriving at the 2009 Arrangement or Understanding: (1) The ACCC has ascertained and Koyo does not dispute that NSK Australia increased its prices by 10% to AM customers in February 2009; (2) the ACCC has ascertained and Koyo does not dispute that Nachi Australia increased its price to AM customers by 5% in April 2009; and (3) Koyo increased its sales price to AM customers by 5% in May 2009. 38 In the course of the events described in [37(3)] above, Koyo gave effect to the 2009 Arrangement or Understanding

[14]

Penalty - Relevant Factors and Applicable Legal Principles 45 The outline of joint submissions referred to in [6] above contained the following excursus on the penalty provision and the relevant factors and applicable principles to be taken into account in the fixing of penalty. 46 If satisfied that a person has contravened a provision of Part IV of the Act (other than ss 44ZZRF and 44ZRG), the Court is empowered under s 76 of the Act to order the person to pay to the Commonwealth a pecuniary penalty in respect of each contravention. 47 On the basis of the facts and admissions set out in AJC-1, the parties submitted that the Court can proceed to the fixing of penalty and the making of other orders against Koyo on the basis that Koyo, in making and giving effect to the 2008 Arrangement or Understanding and in making and giving effect to the 2009 Arrangement or Understanding, has contravened the Act. 48 Section 76(1), provides that the applicable penalty is to be determined by the Court: [H]aving 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 took place and whether the person has previously been found by the Court in proceedings under this Part ... to have engaged in any similar conduct. 49 The relevant authorities make it clear that the principal object of a penalty under s 76 of the Act is deterrence, not only the deterrence of the contravener, but of anyone who might be inclined to similarly contravene the Act: ACCC v Prysmian Cavi E Sistemi Energia S.R.L. (No 5) [2013] FCA 294 at [23] per Lander J (see also TPC v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 1140-091 at 17,896 per Smithers J). 50 As deterrence is the primary aspect of the fixing of a pecuniary penalty, it follows that any penalty imposed must be substantial and significant where there has been a complaint of serious conduct: ACCC v Prysmian at [24] per Lander J. The penalty imposed must also be sufficiently high to deter repetition by the contravener and others who might also be inclined to contravene the Act: TPC v CSR Ltd (1991) ATPR 41-076 at 52,152 per French J: approved by the majority of the Full Federal Court in NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 292. 51 In this regard, deterrence has two aspects: specific deterrence in respect of the actual contravener and general deterrence of others "who may be disposed to engage in prohibited conduct of a similar kind'': TPC v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 297-298 per Toohey J. 52 Recent cases demonstrate the importance of general deterrence considerations for per se contraventions where competing or conflicting matters arise in determining penalty. In ACCC v McMahon Services Pty Ltd (2004) ATPR 42-031 (at 49,228 [15]), Selway J observed in relation to price-fixing: Once it is understood that deterrence, and particularly general deterrence, is the primary principle in the imposition of penalty for price fixing, then at least two conclusions flow from that. First, it means that penalties for collusive price fixing will need to be substantial and significant. This is, of course, reflected in the size of the maximum penalty upon corporations of $10 million. However, it also follows logically from the principle. Collusive price fixing, particularly between tenderers is difficult to detect. Public enforcement often only occurs with "a tip from an affected party or an insider" (see Marshall & Meurer, "Bidder Collusion and Antitrust Law: Refining the Analysis of Price Fixing to Account for the Special Features of Auction Markets" (2004) 72 AntiTrust Law Journal 83 at 101). Given these difficulties and the potential for large profits from such practices there is a chance that those in the market place might be prepared to factor the risk of a low penalty into its pricing structure as a "business cost". That would be inimical to the statutory purpose of ensuring that the practices do not occur. The penalty must be sufficiently high that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost. 53 Notwithstanding that the deterrence is the primary aspect affixing a penalty, the penalty must not be so high as to be oppressive: Smithers J in TPC v Stihl at 17,896; see also NW Frozen Foods Pty Ltd v ACCC at 293. A penalty will not be oppressive where it is no greater than necessary to achieve the object of general deterrence: ACCC v Leahy Petroleum (No 2) (2005) 215 ALR 281 per Merkel J at [9]. 54 The ACCC regards, and Koyo accepts, that contraventions of per se provisions of the Act, namely, s 45(2) (read with s 45A), are very serious. 55 Such contraventions must be seen as one of the most serious contraventions of the Act, given that Parliament has deemed such conduct to substantially lessen competition. The prohibitions against price fixing, contained within the Act have been the subject of numerous proceedings by the ACCC and, since July 2009, may attract criminal sanctions. A number of these proceedings have resulted in multi-million dollar penalties, which have been extensively and widely publicised. 56 The ACCC and Koyo recognise that under s 76 of the Act, it is a matter for the Court to determine whether the contraventions of s 45 of the Act occurred and the quantum of any pecuniary penalties and other relief that should be ordered. The ACCC and Koyo respectfully made these submissions to the Court in order to assist the Court in coming to its own assessment of the level of penalties to be imposed and any other orders that the Court sees fit to make.

[15]

Criteria for assessment 57 The criteria set out in s 76 of the Act to which the Court should have regard in making an assessment of the appropriate level of penalty were addressed by French J (as he then was) in TPC v CSR Ltd. His Honour said that those factors included the following (at 52,152-52,153): (1) The nature and extent of the contravening conduct; (2) the amount of loss or damage caused; (3) the circumstances in which the conduct took place; (4) the size of the contravening company; (5) the degree of power it has, as evidenced by its market share and ease of entry into the market; (6) the deliberateness of the contravention and the period over which it extended; (7) whether the contravention arose out of the conduct of senior management or at a lower level; (8) whether the company has a corporate culture conducive to compliance with the Act as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and (9) whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention. 58 Those considerations were approved by the Full Court of the Federal Court in NW Frozen Foods Pty Ltd v ACCC and J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532. In those decisions, further criteria was also identified, being: (1) Similar conduct in the past; (2) effect on the functioning of the market and other economic effects of the conduct; (3) the financial position of the contravening company; and (4) whether the conduct was systematic or covert. 59 In applying these factors to the contravening conduct, the appropriate penalty to be determined in any case will be within a range; the "fixing of a penalty is not an exact science": ACCC v Prysmian at [29] per Lander J. 60 Therefore, the relevant question for the Court exercising power under s 76 is thus whether the amount is "within the permissible range" in all the circumstances. This may be approached by the Court either by considering first the proposed penalty and then whether it falls within the permissible range, or by considering first the appropriate range and then determining whether the proposed penalty falls within that range: Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993 at [54].

[16]

Agreement on Appropriate Penalty 61 The ACCC and Koyo have reached agreement as to the pecuniary penalty to be recommended to the Court for its consideration, being $2.0 million. 62 The quantum of the agreed penalty to be recommended to the Court has been arrived at in applying the above principles, and having regard to the factors and circumstances outlined below as those factors concern Koyo's conduct in entering into and giving effect to the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding. 63 Litigation pursued to establish contraventions of Pt IV of the Act can be very complex, time consuming and costly and it is in the public interest for Pt IV litigation to be concluded in the shortest time frame that is consistent with justice being done between the parties and freeing the Court and the ACCC to deal with other matters. In this regard, the Court has looked with favour upon negotiated settlements, provided that their terms recognise that the ultimate responsibility for the terms and making of the orders that resolve the proceedings lies with the Court (see, for example, the decisions in TPC v TNT Australia Pty Ltd (1995) ATPR 41-375; NW Frozen Foods v ACCC). 64 In considering whether a proposed penalty is appropriate, the Court will also be mindful of the ACCC's position as the regulator and have regard to its view as to whether the proposed penalty would serve the deterrent purpose if imposed: ACCC v Prysmian at [32] per Lander J. In Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd at 48,626, the Full Court of the Federal Court notes that: [T]he views of the regulator on matters within its expertise (such as the ACCC's views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more "subjective" matters. 65 Provided that the Court is satisfied that the terms of the orders are appropriate, the parties submitted that it is in the public interest for the Court to make orders in Pt IV litigation on the terms agreed between parties to encourage parties to assist the ACCC in its investigations and achieve negotiated settlements. The Court has recognised that, in addition to saving the time and costs of the parties involved, there is a public benefit in imposing agreed pecuniary penalties where appropriate as parties would not be disposed to reach such agreements where there are unpredictable risks involved: see NW Frozen Foods v ACCC at 291. 66 The ACCC believes that making the public aware of the manner in which co-operation and assistance by parties is recognised (such as reaching agreement in respect of the appropriate quantum of a penalty, and by making joint submissions to the Court in relation to a penalty) encourages parties in breach of the Act to come forward to assist the ACCC in its enforcement activities. The ACCC's position is contained in its Cooperation Policy for Enforcement Matters, published 31 July 2002. The Court is, of course, not bound by the Policy nor is it required to take it into account in any given case. However, the Court has recognised (in relation to a previous statement 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 Pt IV of the Act (ACCC v SIP Australia Pty Ltd (1999) ATPR 41-702 (43,014 at [32])). 67 Utilising these approaches, the Court has, in the great majority of cases involving agreed penalties, decided that the agreed penalty is the appropriate amount. Only in very isolated cases has the Court decided that a different penalty should be imposed: see, ACCC v NW Frozen Foods Pty Ltd (1996) ATPR 41-515 which was reversed unanimously on appeal in NW Frozen Foods v ACCC; ACCC v FFE Building Services Ltd [2003] FCA 1542; ACCC v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at [39]-[42] reducing an individual's penalty; and ACCC v Australian Safeway Stores Pty Limited (No 4) (2006) ATPR 42-101 at [85]-[91] increasing an individual's s 45 penalty.

[28]

The Parties' Submissions and Conclusion on Appropriate Penalty 99 As noted above (see [59] - [60]), the fixing of a penalty is not an exact science and the appropriate penalty to be determined in any case will be within a range. 100 The parties submitted that the proposed penalty of $2.0 million in respect of Koyo's conduct in entering into and giving effect to the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding was within the range that the Court, unaided by the parties' views, would consider appropriate and achieves parity with penalties imposed upon other companies who have admitted their participation in similar conduct of this type. That penalty level was jointly recommended by the ACCC and Koyo to be appropriate. 101 In summary, the ACCC regarded, and Koyo agreed, that the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding made and given effect to by Koyo involved serious contraventions of the Act. The conduct involved Koyo's senior management and the arrangements or understandings were implemented through a long standing practice between Koyo, NSK Australia and Nachi Australia, of participating in a confidential forum in which those companies were able to exchange sales information and discuss their respective pricing plans to customers. On occasions each of Koyo, NSK Australia and Nachi Australia discussed and shared confidential information about their respective pricing plans for customers, particularly aftermarket customers in the Australian Bearings Market. 102 The ACCC considered it to be important that the penalty imposed in this case serves the two aspects of deterrence, in that it deters Koyo from engaging in further contraventions of the Act and that it generally deters others who may be disposed to engage in prohibited conduct of a similar kind and that major companies must be deterred from making and giving effect to a cartel concerning Australian markets. 103 Koyo's co-operation has assisted the ACCC in resolving this matter by facilitating the institution of proceedings. The savings to the Court and the community are substantial. The parties submitted the proposed penalty was appropriate in all the circumstances.