Benefits from, and loss or damage caused by, the contraventions, including effects on competition
100 The ACCC properly acknowledged that it was unable to identify any specific quantifiable loss or damage caused by the contraventions, nor could it point to any specific quantifiable benefits obtained by Lactalis.
101 Despite the occurrence of the Non-Publication Contravention, the objective of s 12 of the Dairy Code was largely achieved by the publication method adopted by Lactalis. Any farmer who wished to peruse copies of its MSAs was able to receive them at or around the time that publication was required by the Code. There was no indication that farmers were unable to engage in the contracting process competitively and in the manner intended by the Code.
102 In addition, there was no evidence that Lactalis terminated any MSA on account of a breach of the public denigration clause, material or otherwise.
103 The ACCC submitted that, even though there was an absence of quantifiable harm resulting from the contraventions, it did not follow that no harm or loss was suffered. It submitted that, when considering the mandatory requirement in s 76(1) of the CCA, that the Court take into account "any loss or damage suffered as a result of the act or omission", the concept of loss or damage should not be given a narrow meaning. That is quite possibly correct, and s 4K of the CCA provides that a reference to "loss or damage" in the statute includes a reference to "injury". The submission is also supported by the observations of O'Bryan J in ACCC v Uber at paragraph [15], where his Honour, when discussing the cognate provisions in the Australian Consumer Law, observed that "injury" can include personal injury and mental stress and such matters can be taken into account when determining a penalty for contravention. See also Australian Competition and Consumer Commission v Google LLC (No 4) [2022] FCA 942 per Thawley J.
104 However, in ACCC v Uber, whilst accepting that different types of harm may be difficult to quantify but must nevertheless be taken into account, O'Bryan J correctly observed (at paragraph [33]) that this does not negative the conclusion that:
… the nature and extent of actual or potential harm caused by the contravening conduct is a central consideration in the assessment of penalty. It is not appropriate to impose severe penalties under the Australian Consumer Law in respect of contravening conduct that has no potential to cause harm (of some kind) to Australians.
105 His Honour went on to reject the suggestion in the ACCC's submissions in that case to the effect that, simply because the contraventions in question had occurred, there must have been some "non-quantifiable harm" to consumers. His Honour made the following relevant comments at paragraph [34] (the contraventions in that case concerning certain misrepresentations):
[T]he ACCC submitted that "there is a non-quantifiable harm if large corporations make widespread misrepresentations on a large scale for lengthy periods of time in circumstances where they were aware or should have been aware that the messaging was incorrect or inaccurate". It is not entirely clear what the ACCC meant by that submission. The fact that a misrepresentation is made does not, of itself, establish harm to Australians. It can be accepted, though, that widespread misrepresentations in trade or commerce have the potential to distort consumer or business choices, harming competition and efficient markets and potentially harming consumers. In each case, though, the Court is required to assess the nature and extent of harm that will or may be caused by the contravening conduct. That can be done even if the quantification of the harm is difficult and requires broad or rough estimation. In my view, the recurrent theme in the ACCC's submissions, that the Court does not need to be concerned whether harm to Australians was likely to be caused by the contravening conduct, is wrong in principle.
106 That approach should apply in this case as well.
107 Here, the ACCC submitted that the Court should take into account the following alleged types of loss or damage:
69. By neglecting its obligations under the Dairy Code, Lactalis engaged in conduct which favoured the interests of large processors over smaller (and in most cases, family run) dairy farms.
70. The ACCC refers to the material set out at [51] to [53] above in relation to the exclusivity of most MSAs and the range of values of those MSAs. The impact of contraventions that go to the integrity of such important and valuable documents must be considered a harm in and of themselves. These are not trivial matters.
108 It also submitted that, even though there was no quantifiable harm, the fact that a processor has undermined the measures in the Dairy Code that are designed to address market failures must mean that "there is nonetheless harm to the competitive process in an unbalanced market".
109 However, no evidence was adduced to demonstrate either, at the micro level, that the contraventions had harmed individual farmers or, at the macro level, that the contraventions had distorted behaviour in the market and, in that way, impaired competition or market efficiency. It was also not shown with any particular precision that Lactalis' conduct favoured the interests of large processors over farmers of any size, or that it detrimentally impacted the integrity of MSAs.
110 As Lactalis pointed out, in the absence of such evidence, the ACCC's submissions seemed to reduce to the proposition that, because there was contravening conduct, there must have been harm. Treating this vague notion of "harm", which can neither be proved nor disproved to have resulted from the contraventions, as relevant to the determination of an appropriate penalty would seem to be at odds with the reasoning of O'Bryan J in ACCC v Uber set out above. The ACCC's submissions should accordingly be rejected, and the lack of evidence by which to quantify loss or damage in this case should be regarded as a mitigating factor: ACCC v EnergyAustralia at 351 [42].
111 Along somewhat similar lines, the ACCC submitted that O'Bryan J's reasons in ACCC v Uber supported the proposition that the "risk of potential harm" is a relevant aspect of the loss or damage that the Court must consider. It is true that his Honour did refer to the concept of "potential harm" at paragraph [33] of his judgment, as extracted above, and such harm has been accepted to be relevant to the question of pecuniary penalties in other authorities: see, eg, Australian Competition and Consumer Commission v Sony Interactive Entertainment Network Europe Ltd (2020) 381 ALR 531, 550 [84] per Steward J. However, it is not apparent that the concept is to be understood from O'Bryan J's reasons, or from the wider case law, to encompass harm that is merely speculative. As the term itself suggests, some apparent "potential" for "harm" must be demonstrated; it must be established, on the evidence, or at the very least as a matter of clear inference, that there is some identifiable type of loss or damage, of a particular scale and severity, that would ordinarily be expected to result, or has resulted (albeit in a manner that renders it unquantifiable), from the contravention.
112 It may be, for instance, that the contravening conduct was not carried through to completion, such that no real harm resulted, but some potential harm could nevertheless be demonstrated by showing that the conduct in question would ordinarily be expected to produce certain damaging consequences. Potential harm could also be shown in a similar way where the contravening conduct was carried through to completion but, by happenstance only, caused no real harm. See, generally, ACCC v Rural Press Ltd (2001) ATPR ¶41-833, 43,296 [46] per Mansfield J; Australian Competition and Consumer Commission v Cromford Pty Ltd (1998) ATPR ¶41-618, 40,764 - 40,765 per Lockhart J.
113 In the present case, the ACCC did not put on the evidence necessary to prove the existence of potential harm. The fact that such harm must be identified loosely by inference, if it can be discerned at all, weighs strongly against any finding that Lactalis' contraventions have caused loss or damage that has increased the need for deterrence.
114 It is relevant to note again, in connection with the Non-Publication Contravention, that there was no substantial hindrance to the ability of farmers to compare the terms on which Lactalis was prepared to contract with them to other terms in the market. The ACCC's contention that the contravention caused harm to the competitive process is not made out.
115 Specifically in relation to the Termination Clause / Publication Contraventions, the ACCC pointed out that it would be rare for such contraventions to produce significant quantifiable loss or damage, and yet a sizeable maximum penalty of 300 penalty units was prescribed. If this submission was meant to suggest that the legislature must have intended for a substantial penalty to be imposed in the absence of discernible loss or damage, it should be rejected. It is a basic proposition that, all else being equal, the size of the penalty should be at least somewhat proportionate to the harm that it has caused. The quantum of the prescribed maximum penalty has no bearing on that relationship. Indeed, it is not at all difficult to imagine in this instance that the maximum penalty of 300 penalty units might be well suited to the "rare" case of which the ACCC speaks; namely, where a publication contravention does lead to some tangible loss or damage (depending, of course, on the other factors at play), whilst having no application to the vast majority of contraventions. There would be nothing peculiar about that result, and there is no indication that the drafters of the Dairy Code intended anything different.
116 The ACCC also submitted that the Termination Clause / Contract Entry Contraventions had serious consequences, despite the absence of quantifiable loss and damage. Specifically, it was said that farmers' operations might be damaged by the sudden termination of an MSA by Lactalis. That alleged damage would include wasted produce and the possibility of harm to animals. Ultimately, this submission was rendered somewhat sterile by the accepted fact that Lactalis did not attempt to terminate any MSA as a result of a farmer engaging in public denigration of it, its customers, or other stakeholders.
117 However, the ACCC also submitted that the public denigration clause might have a chilling effect on a farmer's willingness to raise a legitimate concern about Lactalis, or the farmer's ability to conduct their business in their best interests. Whilst the risk of that chilling effect no doubt existed, there was nothing to show that it actually materialised, and it is therefore essentially impossible to quantify the actual or potential harm. Moreover, the clause did not impede farmers' liberty to take their concerns directly to Lactalis, or to the regulator for that matter. It must also be kept in mind that the existence of a clause in the MSAs that obliged a farmer not to engage in public denigration of Lactalis, its customers and other stakeholders would not itself offend against the Dairy Code. It was Lactalis' ability to terminate the MSAs as a result of an immaterial breach of the public denigration clause in this case that gave rise to the contravention. The clause could be included in an MSA, with a less severe consequence attaching to any breach of it that was not material, and no issue of non-compliance with the Dairy Code would arise.
118 It follows that it was Lactalis' entitlement to terminate for a non-material breach that was the offending characteristic of the contractual arrangement, such that the counterfactual to be considered for the purpose of assessing loss and damage is that in which an MSA still contained a clause obliging farmers not to engage in public denigration, but afforded no right to terminate for a non-material breach of that clause. Comparing that counterfactual to the reality at present, it is potentially open to suppose that the inclusion of the entitlement to terminate for an immaterial breach gave rise to some adverse sequelae. However, such consequences of the contravention are entirely theoretical. If they had actually crystallised, it would have been possible to identify when and how they did so. No details of this kind were put before the Court.
119 Ultimately, whilst it might be assumed that the manner in which Lactalis drafted its MSAs was directed to its best interests and that, in acting as it did, it contravened s 34 of the Dairy Code, such that some level of deterrence is required, it is very difficult to identify any consequential harm or damage in the circumstances.
120 Overall, the consideration of benefits, loss and damage in this case does not suggest any more pressing need for general or specific deterrence. To the contrary, that consideration leads to the conclusion that it would be appropriate to mitigate any penalties that would otherwise be imposed for the contraventions in this case.