Australian Competition and Consumer Commission v Navman Australia Pty Ltd [2007] FCA 2061 | Case summary

REASONS FOR JUDGMENT Introduction 1 The respondents have admitted to a large number of contraventions of the resale price maintenance prohibition contained in s 48 of the Trade Practices Act 1974 (Cth) ("the Act"). The Australian Competition and Consumer Commission ("the ACCC") and the respondents have jointly put forward to the Court pecuniary penalties in amounts agreed between them in respect of those contraventions. They submit that these amounts are appropriate penalties to be imposed on the respondents under s 76 of the Act. 2 The proposed penalties are:

· Mr Baird $ 80,000 · Mr King $ 30,000 3 It is well established that there is a public interest in promoting the settlement of litigation, particularly where it is likely to be lengthy and expensive. This public interest extends to the settlement of proceedings in which corporations acknowledge contraventions of the restrictive trade practices provisions of Part IV of the Act. 4 Nevertheless, the parties accept, as they must, that the Court is not merely a "rubber stamp" for the agreement reached between them. It is for me to determine the appropriate penalties having regard to all the circumstances: NW Frozen Foods Pty Limited v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290-291 (per Burchett and Kiefel JJ); Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41-993 (per Branson, Sackville and Gyles JJ). 5 The essential question which arises is not whether I would, without the assistance of the parties, have reached the precise figures set out above. Rather, it is whether those amounts are "within the permissible range" in all the circumstances: NW Frozen Foods at 291. 6 In answering that question, it is necessary to consider the following: (i) the parties (ii) the contraventions (iii) the principles which apply as to determination of the appropriate penalty (iv) the principles which apply to cases where the parties agree on the penalty (v) the particular considerations which apply in the present case as a consequence of the principles stated in those authorities. The parties 7 In the period covered by the contraventions, ie. between 2001 and 2004, Navman supplied marine navigational equipment and personal and in-car navigational products ("PCN products") through selected retail dealers in Australia. 8 Mr Baird and Mr King were senior executives of Navman during the relevant period. Mr Baird was the General Manager of Navman's marine division. He was also a director of the company from November 2003. 9 Mr King held the position of National Sales Manager from about August 2003. Later, he became the Australasian Sales Manager for Navman's PCN division. He was the most senior manager in that division and was responsible for its operations in Australia. 10 Navman is a subsidiary of Navman NZ Limited ("Navman NZ"). Navman was established in Australia in 1997. Both Navman and Navman NZ are ultimately owned by Brunswick Corporation ("Brunswick"), a global marine and leisure equipment company based in the USA. Brunswick acquired an initial shareholding in Navman in mid-2003. It acquired the balance of its shareholding in 2004. 11 After the date of commencement of these proceedings, Navman's operations were sold to third parties. It is an agreed fact that the purchasers of the business are not related to Navman NZ or Brunswick. The marine product business and the PCN business were sold in March 2007. The balance of Navman's business operation was sold in July 2007. 12 Following upon the sale of Navman's business operations, the company is now a shell which is not trading. Nevertheless, it retains funds to pay a pecuniary penalty of $1,250,000. I have not been told whether it has sufficient funds to pay a higher penalty if I were to come to the view that such a figure is appropriate. 13 Navman has now changed its name to Aus Holdco Pty Ltd. This of course does not alter its corporate identity or its liability to meet the penalty for its contraventions. 14 Mr Baird held the position of General Manager of the marine division, and his office as a director of Navman until January 2005. At about that time the ACCC notified Navman of its investigation into the resale price maintenance which is the subject of these proceedings. Navman terminated Mr Baird's employment by reason of his involvement in that conduct. 15 Mr King continued to hold his position as National Sales Manager of Navman after the ACCC commenced its investigation. He remained in that position until about June 2006 when he was demoted to Business Development Manager. He was demoted because of his involvement in the conduct which is the subject of the proceedings. 16 Mr King is no longer employed by Navman but he is employed by the company that purchased Navman's PCN product business. An overview of the contraventions 17 Navman engaged in extensive resale price maintenance over a period of more than three years. Its conduct extended to the supply of both marine equipment and PCN products. Its conduct in relation to the supply of marine equipment covered the period from 2001 to 2004. Its resale price maintenance conduct in the supply of PCN products covered the period from 2003 to 2004. 18 Navman's conduct involved more than 35 individual acts. The conduct may be conveniently divided into ten separate episodes. The first of these episodes consisted of communications which Navman sent to all of its dealers during the period from 2001 to 2004, enclosing price lists and containing statements discouraging the dealers from discounting their prices below those set out in the price lists. 19 The other nine episodes consisted of contraventions arising from dealings between Navman and nine of its appointed dealers. The conduct consisted of statements made by representatives of Navman to dealers discouraging them from discounting products below Navman's specified prices. 20 The conduct also included threats to terminate, and subsequent termination of, two dealerships for discounting below Navman's specified prices. In addition, Navman representatives sent emails to another dealer threatening harm to the relationship between Navman and the dealer if it did not take steps to prevent discounting of prices on the internet. 21 By engaging in resale price maintenance conduct for its marine products, Navman sought to ensure that dealers did not sell below the price at which a major marine dealer advertised its products in its catalogue. That major dealer was Whitworth's Nautical World Pty Limited ("Whitworth's"). 22 The "Whitworth's price" or "street price" was an industry benchmark which Navman used as a benchmark for pricing its marine products. 23 Navman's aim in relation to the pricing of its PCN products was to avoid retail prices being driven down by discounting on the internet. 24 The dealers to whom Navman's resale price maintenance conduct was directed were: · Emjay Communications Pty Ltd ("Emjay") · Corsair Pty Limited, trading as Alec's Marine Centre ("Alec's Marine") · Anntam Pty Limited trading as Hirecraft Marine ("Hirecraft Marine") · P D Bulbeck Pty Limited, trading as Bulbeck Marine ("Bulbeck") · Family Boats Pty Limited, trading as John Smale's Family Boat Centre ("Family Boats") · Oakum & Hemp Pty Limited, trading as Glascraft Marine QLD ("Glascraft Marine") · Challenge Marine Pty Limited ("Challenge Marine") · C H Smith Marine Pty Limited ("C H Smith Marine") · Brightpoint. (The full name of this entity was not provided; I will refer to it as "Brightpoint"). 25 Navman's conduct was in breach of s 48 of the Act because it consisted of acts of the kind referred to in s 96(3)(b), (d) and (f). 26 In summary, the breaches were: · inducing or attempting to induce dealers not to sell goods at prices less than the price specified by Navman: s 96(3)(b); · withholding the supply of goods to dealers because the dealers were likely to sell the goods at prices less than those specified by Navman: s 96(3)(d); and · making statements of prices to dealers that were likely to be understood by the dealers as prices below which the goods were not to be sold: s 96(3)(f). 27 Mr Baird was involved in Navman's contraventions, within the meaning of s 75B of the Act, insofar as the breaches related to price list communications sent to dealers in relation to Navman's marine products. 28 Mr Baird was also involved in Navman's contraventions consisting of its conduct toward five of the marine dealers. Those dealers were Emjay, Alec's Marine, Hirecraft Marine, Glascraft Marine and Challenge Marine. 29 Mr King was involved in Navman's contraventions comprised in its conduct toward four dealers who dealt in PCN products. They were Hirecraft Marine, Bulbeck, Family Boats and Brightpoint. 30 The conduct comprised in the ten episodes summarised above was set out in some detail in the Joint Submissions. I will refer to the salient facts. The Price List Conduct 31 During the period from 1 March 2001 to December 2004, Navman issued price lists for Navman marine products to all of its marine dealers. There were approximately 250 such dealers during that period. The price lists were accompanied by communications from Navman, and statements were made by Navman representatives to the dealers, that were likely to be understood as statements of prices below which Navman's marine products were not to be sold. 32 Following the introduction of Navman's PCN products in about August 2003, Navman regularly sent price lists for those products to its PCN dealers. The price lists suggested retail prices which were likely to be understood by the dealers as the approximate prices below which the products were not to be advertised or sold. 33 In some instances, Navman's price lists were accompanied by a letter to its marine dealers from Mr Baird. Those letters urged Navman's marine dealers not to discount below Navman's recommended prices or street prices. In addition, Mr Baird sent a number of communications to dealers about particular Navman marine products which were referred to in the Joint Submissions. I will refer to those communications below. 34 On or about 1 March 2001, Mr Baird sent a letter and a price list to all of Navman's marine dealers. The letter included the following: As you are aware Navman products are very keenly priced. If we have good products that are priced below our competitors, as I have stated before, the discounting of our products makes no commercial sense. It especially makes no sense if the particular products are unique in this market… 35 In or about November 2001 Mr Baird sent a price list and a covering communication to marine dealers which included the following: the new products are going to be so good and priced so well that discounting them will be simply 'bad business'. 36 On or about 13 March 2002 Mr Baird sent to all marine dealers a price list with a covering communication that stated: P.S. As stated many times by myself, please do not discount these new products, as they are excellent and extremely well priced anyway. Turnover is easy but profit is why we open the doors!! (original emphasis) 37 On or about 28 June 2002, Mr Baird sent a communication to all Navman marine dealers about a new Navman product called the "Tracker 5600" unit. The communication said: the trackers 5600's [sic] are now just starting to arrive in numbers and they really are brilliant, recommended retail on these is $2740 and from the boating publics [sic] response you would be mad to discount this product. 38 In or about October 2004, Mr Baird sent to Navman marine dealers a document titled "Navman News Special". The document referred to a combined package of two Navman products. They were the Trackfish 6600 model, which was a marine product, and the "PiN" pocket PC street navigator which was a Navman PCN product. 39 The Navman News Special was sent over the signature block of Mr Baird and included the following statement: there is no need to discount on this special and at $3,449 you will nett [sic] $600 for each pack! 40 On two occasions between September 2002 and January 2004, Mr Baird sent communications to all Navman marine dealers discouraging discounting. The first communication, dated on or about 27 September 2002 included the following: First off and my biggest gripe within our industry has always been discounting. I just cannot understand the mentality where you have an extremely popular product that is priced under the market with good margin and we still have dealers that discount heavily. There is only one issue that will stop NAVMAN and that's discounting!! I will not allow our great products to be prostituted - take the warning now! 41 The second communication, dated in or about January 2004, included the following statement: It is not acceptable to have dealers discounting heavily with a good product that is already well priced. If you can't sell our products without discounting, then I suggest it's time to sell any of our competitors' products - simple as that!! Emjay 42 Emjay was a Navman marine products dealer from about November 2002. It was also a dealer for Navman's PCN products from about September 2003. Emjay sold both lines of products through its retail outlet. It also advertised Navman's marine products for sale on its website. 43 Between 2002 and 2004, Emjay advertised Navman's marine products on the Emjay website at prices that were lower than the retail prices stated in Navman's price lists, and below Whitworth's prices. 44 There were a large number of conversations during the period from November 2002 to October 2003 between Navman's National Sales Manager for marine products and Emjay's manager, in which Navman told Emjay to keep its prices for Navman's marine products up to Whitworth's prices. Those conversations took place between Mr Cummings of Navman and Mr Adamson of Emjay. 45 Mr Cummings reported to Mr Baird. Mr Cummings had received instructions from Mr Baird to ensure that Navman marine dealers kept their prices at least as high as Whitworth's prices. Mr Baird had also instructed Mr Cummings to keep Emjay's prices under control. Mr Baird was aware of Mr Cummings' conduct in relation to Emjay, which was in response to Mr Baird's instructions. 46 There were regular conversations between Mr Cummings and Mr Adamson between November 2002 and 2003 about Emjay's pricing of Navman's marine products. Sometimes Mr Adamson increased the prices of Navman's marine products to Whitworth's prices after he was contacted by Mr Cummings. 47 There were also four conversations between Mr Cummings and Mr Adamson in the period from November 2002 to October 2003 which were referred to in the Joint Submissions. 48 In those conversations Mr Cummings told Mr Adamson to keep prices up to Whitworth's prices and not to sell below them. 49 In one of the conversations Mr Cummings told Mr Adamson he would not be entitled to credit and would have to pay cash up front if he continued to sell below Whitworth's prices. In another, Mr Cummings told Mr Adamson that he had received a complaint from some Navman dealers about Emjay's discount prices. 50 In November 2003 and December 2003 Navman entered into, or offered to enter into, an agreement with Emjay for the supply of Navman marine products. In the course of the negotiations Navman induced Emjay not to sell, or advertise for sale, Navman marine products and Navman's PCN products at prices less than Whitworth's prices. 51 Navman's inducement to Emjay in the period November and December 2003 consisted of Navman terminating and subsequently reinstating Emjay's dealership when Emjay increased its prices in response to the termination notice. Emjay was reinstated in correspondence from Mr Baird dated on or about 10 December 2003. Mr Baird stated that Emjay's dealership was not being closed and: things like loyalty, service and good margins for all our dealers are important to our company. 52 Following Navman's reinstatement of Emjay's dealership, Mr Cummings again attempted to induce Emjay not to sell or advertise Navman marine products at less than Whitworth's prices. Mr Baird was aware of Mr Cummings' conduct which was in accordance with Mr Baird's instructions to him. 53 Mr Cummings had a number of conversationsin the period from January or February 2004 to August 2004 with Mr Watters of Emjay. In those conversations Mr Cummings told Mr Watters to keep Emjay's prices up to Whitworth's prices. In one conversation Mr Cummings told Mr Watters that Navman's business would be better if Emjay increased pries on its website. In another he said that other Navman marine dealers were upset with Emjay's pricing. 54 In about April 2004, Mr Cummings told Mr Adamson that other dealers were complaining about Emjay's prices and that Emjay should take its prices off its website. In response, Emjay removed its prices and inserted "Price on application". On about 18 June 2004, Mr Cummings told Mr Adamson that Emjay should put its advertised prices back up to Whitworth's prices. 55 Mr Cummings continued his efforts in July and August 2004. On about 29 July 2004, Mr Cummings told Mr Watters that Navman would take steps to see that Emjay did not obtain the benefit of a sale of a Tracker 5600 for which Emjay had quoted a discounted price. The quoted discount was $100 below the Whitworth's price for the product. 56 In his conversations with Mr Watters about the discounted Tracker 5600, Mr Cummings told Mr Watters that Navman would not continue to supply Emjay with Navman marine products if Emjay continued to sell them below Whitworth's prices. 57 There was another conversation between Mr Cummings and Mr Watters about Emjay's prices on 16 August 2004. Mr Cummings told Mr Watters that Emjay's prices were "too cheap", ie. below Whitworth's prices. Mr Cummings said that the Perth Show was on at that time and Emjay's prices would not help. Mr Cummings told Mr Watters to remove Emjay's prices from its website and to change Emjay's prices (ie. to Whitworth's prices). 58 Also, on or about 17 August 2004, Mr Cummings had a conversation with Mr Adamson about Emjay's prices. The conversation was in response to Emjay's advertisement on its website at prices below Whitworth's prices. Mr Cummings told Mr Adamson that Emjay should remove its prices for Navman marine products from the website. 59 Navman also engaged in resale price maintenance conduct in relation to Emjay's sales of Navman's PCN products. Navman attempted to induce Emjay not to sell or advertise Navman's PCN products at prices less than those specified by Navman. 60 This conduct consisted of two conversations held by Navman's Regional Sales Manager for PCN products for New South Wales and Queensland, Mr Marriott. The first was in May 2004 between Mr Marriott and Mr Watters. Mr Marriott told Mr Watters that Navman would like Emjay to sell Navman's PCN products at around the prices stated in Navman's price lists, or not more than $50 below that price. 61 The second conversation was between Mr Marriott and Mr Adamson in about July 2004. Mr Marriott said that Emjay must not sell Navman PCN products at below the retail prices specified in Navman's price lists. The following exchange then took place: Adamson: "Is this the same price fixing policy you employ with marine products?" Marriott: "Yes, it has to be at the RRP." 62 On or about 31 August 2004, Navman withheld supply to Emjay of both lines of Navman's products for reasons which included Emjay's selling of Navman's products at prices less than those specified by Navman. The reasons also included the fact that Emjay had not agreed not to sell the products at less than Navman's specified prices. 63 On or about the same day, 31 August 2004, Navman terminated Emjay's dealership arrangement with Navman. The letter was signed by Mr Baird. 64 The Joint Submissions contain the following statement at [38]: Mr Baird was aware that Mr Cummings was engaging in the conduct in relation to Emjay set out above in relation to Navman marine products. He instructed Mr Cummings to encourage Navman marine dealers to keep their prices for Navman marine products at least as high as the Whitworth's prices, by means including conduct constituting resale price maintenance. Mr Baird directed Mr Cummings to keep Emjay's prices under control; and on or about 15 August 2004 sent an email to Mr Cummings to the effect that Mr Cummings should take further steps to control Emjay's prices. Alec's Marine 65 Alec's Marine was a Navman marine products dealer from 1996 to August 2004. 66 There were a number of conversations between Mr Baird and the Manager of Alec's Marine, described in the Joint Submissions only as Cass, in which Navman attempted to induce Alec's Marine not to sell Navman marine products at prices less than those specified by Navman. The conversations took place during the period from 2001 to September 2004. 67 In the conversations between Mr Baird and Cass, Mr Baird said that Alec's Marine should sell particular Navman marine products at prices which he described as "street prices." Those prices were approximately equal to Whitworth's prices. 68 In addition, during the period from August 2003 to September 2004, Navman's Regional Sales Manager, Marine, for Victoria and Perth, Mr Paul Cameron had a number of conversations with Cass in which he attempted to induce Alec's Marine not to sell Navman marine products at less than those prices specified by Navman. 69 In those conversations Mr Cameron told Cass that Alec's Marine's prices for Navman marine products were too low and that Cass should price the products at Whitworth's prices. 70 On some occasions after these conversations took place, Cass took the step of raising the price at which Alec's Marine displayed Navman marine products for sale, to prices that were about the same as Whitworth's prices. 71 In July 2004 and August 2004, Mr Cameron engaged in further resale price maintenance conduct by attempting to induce Alec's Marine not to advertise or sell Navman marine products at the 2004 Perth Boat Show at prices below those specified by Navman. 72 In particular, on or about 27 July 2004, Mr Cameron sent to Cass a list of wholesale prices at which Navman dealers could purchase Navman marine products for supply at the Perth Boat Show. He also sent to Cass a list of retail prices for Navman marine products applicable to sales made at the Perth Boat Show. 73 At some time after 27 July 2004, Cass sent an email to Mr Cameron suggesting that Cass proposed to discount Navman marine products below the prices contained in the retail price list. Mr Cameron responded to this email on or about 11 August 2004 by stating: I would like to think that the prices that I have requested for the show are followed by all. 74 Mr Baird was aware that Mr Cameron was engaging in the conduct described above. He instructed Mr Cameron to advise Alec's Marine of the prices applicable to the 2004 Perth Boat Show. Moreover, he instructed Mr Cameron to encourage Navman marine dealers, including Alec's Marine, to keep their prices for Navman marine products at least as high as Whitworth's prices, by means including conduct that constituted resale price maintenance. 75 In 2004 Navman withheld supply of Navman marine products from Alec's Marine. It did so primarily because Alec's Marine was switching its customers to other competitive products, but also because Alec's Marine had been selling, and had not agreed not to sell, those Navman products at prices less than the prices specified by Navman. The latter reason was a substantial reason for the conduct. 76 On or about 31 August 2004, Navman by correspondence from Mr Baird, terminated Alec's Marine's dealership for Navman marine products. It ceased thereafter to supply Navman marine products to Alec's Marine. Hirecraft Marine 77 Hirecraft Marine was a dealer in Navman Marine products from about early 2002. It was also a dealer in Navman PCN products from about August 2003. The Joint Submissions do not state whether Hirecraft Marine ceased to be a Navman dealer or, if so, when that occurred. 78 The Joint Submissions record two conversations between Mr Cummings, on behalf of Navman, and Mr Damien Hurt, the owner of Hirecraft Marine, which constituted engaging in the practice of resale price maintenance. 79 In or about early 2002, Mr Cummings stated to Mr Hurt that Hirecraft Marine should not sell Navman marine products at prices less than the current Whitworth's prices. Mr Cummings' statement was likely to be understood by Hirecraft Marine as the prices below which the goods were not to be sold. 80 In about March 2004, Navman, by its representative Mr Cummings, stated to Mr Hurt that Hirecraft Marine should not sell Navman PCN products at prices less than the prices at which they were being sold by Whitworth's. 81 Navman thereby made a statement of prices for its PCN products which was likely to be understood by Hirecraft Marine as the prices below which the goods were not to be sold. In making the statement, Navman also attempted to induce Hirecraft Marine not to sell Navman PCN products at prices less than Whitworth's prices. 82 Mr Baird was aware of Mr Cummings' conversation with Mr Hurt about Navman marine products. Mr Baird instructed Mr Cummings to encourage Navman marine dealers, including Hirecraft Marine, at least as high as Whitworth's prices, by means including conduct that constituted the practice of resale price maintenance. 83 Mr King was aware of Mr Cummings' conversations with Mr Hurt about Navman PCN products. By an email dated 9 March 2004, Mr King instructed Mr Cummimgs to ensure that Hirecraft Marine adhered to the retail prices set out in the Navman price list. Mr Cummings' conversation with Mr Hurt was in response to the instruction given by Mr King in the email. Bulbeck 84 Bulbeck was a dealer in Navman marine products from about 2001. It was a dealer in Navman PCN products from about March 2004. The Joint Submissions do not say whether Bulbeck ceased to be a Navman dealer or if so when. 85 Between 2001 and October 2004 Navman had dealings with Bulbeck by which it attempted to induce Bulbeck not to sell Navman marine products at prices less than Whitworth's prices. Navman used statements of prices for its marine products, namely Whitworth's prices, which were likely to be understood by Bulbeck as the prices below which the goods were not to be sold. 86 The only details provided in the Joint Submissions of the dealings or statements in relation to Navman marine products are the price lists and communications referred to under the heading "The Price List Conduct" set out above. 87 Navman also attempted to induce Bulbeck not to sell Navman's PCN products at prices less than Whitworth's prices. In about March 2004, Navman, by its representative Mr Cummings, told the manager of Bulbeck that Bulbeck should not sell Navman PCN products supplied by Navman at prices less than the Whitworth's prices. 88 Mr Cummings' statement to the manager of Bulbeck was in response to the instruction given to him by Mr King in the email of 9 March 2004. This was the same email as I referred to in relation to Hirecraft Marine. It also contained an instruction by Mr King to Mr Cummings to ensure that Bulbeck adhered to the retail prices set out in the Navman PCN price list. Family Boats 89 Family Boats was a dealer in Navman marine products. It was also a dealer in Navman PCN products from about March 2004. 90 In about March 2004, Mr Cummings told the manager of Family Boats, Mr John Smale, that Family Boats should not sell Navman PCN products at prices less than those which the goods were being sold by Whitworth's. 91 Mr Cummings' statement to Mr Smale was in response to Mr King's email of 9 March 2004. This was the same email to which I referred above at [83] and [88]. It also instructed Mr Cummings to ensure that Family Boats adhered to the retail prices set out in the Navman PCN price list. Glascraft Marine 92 Glascraft Marine was a dealer in Navman marine products, at least during the period from July 2002 to October 2004. 93 On 11 July 2002, Navman's commissioned agent for Queensland, Mr Ian O'Rourke, sent an email to Glascraft Marine setting out retail prices for particular Navman marine products, including the Tracker 5600 unit. 94 Mr O'Rourke's email stated that Glascraft Marine's current catalogue price was below the marketplace pricing for the Tracker 5600 by an amount of between $30 to $80. 95 The email also stated that Glascraft Marine should use its catalogue price rather than an even lower price in its special advertising for the Brisbane Boat Show in September 2002. The email stated that Glascraft Marine's catalogue price was already too heavily discounted considering the strength of the product in the market. 96 The email of 11 July 2002 was copied to Mr Baird to whom Mr O'Rourke reported. 97 Mr Baird, on behalf of Navman, also sent to Glascraft Marine all of the price lists and communications referred to under the heading "The Price List Conduct" above, other than the communication referred to in [34]. Challenge Marine 98 Challenge Marine was a dealer in Navman marine products, at least during the period from 2001 to 2004. 99 Mr Baird, on behalf of Navman, sent Challenge Marine each of the price lists and communications referred to under the heading "Price List Conduct" above. 100 Mr Baird also had conversations with the manager of Challenge Marine during the period between 2001 and 2004 in which Mr Baird stated that Challenge Marine should not sell or advertise Navman marine products at less than the Whitworth's prices. Mr Baird sometimes referred to Whitworth's prices as the "street prices." 101 Mr Cameron had conversations with the manager of Challenge Marine on several occasions between 2003 and 2004 in which Mr Cameron made statements to the same effect as those of Mr Baird. C H Smith Marine 102 C H Smith Marine was a dealer in Navman marine products and, at least during 2004, was a dealer in Navman PCN products. 103 In or about November 2004, C H Smith Marine was advertising Navman PCN products at prices below those set out in the Navman PCN price lists. At about that time, a representative of Navman, Mr Daniel Duncan, stated to C H Smith Marine that it should advertise Navman PCN products at around the retail prices set out in the Navman PCN price lists. 104 Mr Duncan's statement to C H Smith Marine was made in response to its advertisement of Navman PCN products at below the retail price lists. C H Smith raised its prices to the levels sought by Navman. Brightpoint 105 On or about 19 April 2004 Navman appointed Brightpoint as a distributor of Navman PCN products to retailers in Australia. 106 In June or July 2004, Navman attempted to induce Brightpoint to engage in acts of resale price maintenance, namely of a kind referred to in s 96(3)(b) of the Act. The conduct consisted of statements and emails from Mr King and an email from another representative of Navman. 107 In June and July 2004, Brightpoint was advertising Navman PCN products at heavily discounted prices by internet retailers supplied by Brightpoint. In response to this, Mr King stated to the Managing Director of Brightpoint, Mr Felix Wong, that Brightpoint should ensure that retailers supplied by Brightpoint, who sold the products on the internet, should move their prices closer to Navman's recommended retail prices. 108 On 15 June 2004, Mr King sent the following email to Mr Wong: The prices I can get all others to work to will be: $1949 ICN630 $1449 IICN620 $586 PCN3450 $749 PCN4410 $830 PCN4460 We are generally happy to see our devices with a $50 off RRP on the net, but the prices quoted by these people [being particular retailers supplied with Navman PCN products by Brightpoint] are crazy". 109 On 6 July 2004, Mr King sent an email to Mr Wong stating that discounting of Navman PCN products by retailers supplied by Brightpoint was extremely damaging to Navman's price points on its premium products. The email also stated that discounting by those retailers was damaging to Navman's relationships with other retailers. The email said that this was making Navman "less than comfortable in dealing with Brightpoint." 110 In about July 2004, a retailer supplied by Brightpoint, Chilli Power Computing, was advertising the ICN 630 Navman PCN product for sale on the internet. In response to this, a representative of Navman, named Marriott, sent an email dated 9 July 2004 to Brightpoint. The email stated: Unfortunately this is not a problem limited to Chilli. It will only work if all internet retailers change their prices together … Ideally we would expect them to be advertising around the $1949 mark (you can tell them that Strathfield and Harvey Norman advertise at full RRP and Dick Smith have the ICN530 in their current catalogue at $1988). 111 On 14 July 2004 Mr King sent an email to Brightpoint stating, inter alia, that discounting of Navman PCN products below listed prices, by retailers supplied by Brightpoint, could impact on Navman's relationship with Brightpoint. Penalty: The Principles 112 The matters to which the Court may have regard under s 76(1) are not confined to the four matters enumerated in the sub-section. The authorities have identified a number of additional factors which the Court may take into account: Trade Practices Commission v CSR Limited (1991) ATPR 41-076 at 52,152-52,153; NW Frozen Foods at 292-293. 113 The principal, and probably the only, object of the penalties that are imposed by s 76(1) is deterrence, both specific and general: CSR at 52,152; NW Frozen Foods at 292-293; Australian Competition and Consumer Commission v High Adventure Pty Limited (2006) ATPR 42-091 at [11]. There are many other authorities to the same effect. 114 The penalty should take into account the deliberateness of the contravention and the period over which it occurred. The involvement of senior management and the corporate culture in which the conduct occurred are also relevant factors: CSR at 52,152-52,153; NW Frozen Foods at 292-293. 115 The penalty should constitute a real punishment which takes into account the size of the company and the overall commercial environment, but it should not be so high as to be oppressive: CSR at 51,152-52,153; NW Frozen Foods at 293. 116 Determination of the amount of a penalty is not an exact science. Each case turns on its own facts and limited assistance is to be obtained from considering the amounts imposed in other proceedings: NW Frozen Foods at 295; Mobil Oil at [51]; Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No 3) [2007] FCA 1617 at [320]. The prohibition against resale price maintenance 117 Resale price maintenance was first made illegal in Australia in 1906, although the legislation did not refer to it in express terms: ACCC v High Adventure at [8]. 118 The policy which underlies s 48 of the Act is that competition is an important feature of the distribution of goods. Resale price maintenance, as a form of vertical price fixing, eliminates the competition which Part IV of the Act seeks to achieve: ACCC v High Adventure at [7]. 119 As the Full Court observed in ACCC v High Adventure, a number of reasons have been put forward to explain the undesirability of the practice. One of them is that resale price maintenance is often a manifestation of price fixing among retailers. Another is that it inevitably eliminates dealer competition, thereby restricting freedom of competition in the price of goods in the marketplace: ACCC v High Adventure at [7]. The principles applicable where the parties agree on penalty 120 The reasons given by Burchett and Kiefel JJ in NW Frozen Foods contain an authoritative statement of the principles to be applied where the parties agree on the appropriate penalty. The Full Court in Mobil Oil set out at [51] the six propositions which emerge from the reasons in NW Frozen Foods. 121 In Mobil Oil, Branson, Sackville and Gyles JJ agreed at [79] with the principles stated in NW Frozen Foods. 122 It is unnecessary for me to repeat the six propositions enumerated in Mobil Oil. I referred at [3] - [5] above to the principal factors to which I must have regard. I would add to this that the view of the regulator, as a specialist body, is a relevant consideration, but it is not determinative of the ultimate question of the appropriateness of the penalty: Mobil Oil at [51(iv)]. 123 It is open to the Court to commence its reasoning by referring to the proposed figure and then limiting itself to considering whether that penalty is within the permissible range. Alternatively, the Court may adopt the reverse process of addressing the appropriate range independently of the agreed figure and then determine whether the proposed penalty falls within the range: Mobil Oil at [54]. 124 Either approach raises broad questions of judgment because s 76 imports concepts of moral responsibility derived from the criminal law: Visy at [304]. 125 In Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liq) (2007) 161 FCR 513 at [67-68], a Full Court pointed to the difficulties in determining an applicable range by reason of the wide variety of considerations arising in each case. 126 It seems to me that these difficulties inform the approach which Spender J took in Australian Competition and Consumer Commission v Jurlique International Pty Ltd [2007] FCA 79. The effect of what his Honour said at [109] - [111] is that the Court should only depart from the penalties agreed by properly informed and legally assisted parties where it is clear that it should do so. Navman's Penalty 127 Navman's contraventions of s 48 were serious. Its conduct was deliberate and was carried out over a lengthy period of time in relation to a range of expensive products. Navman's conduct extended over a period of more than three years in the distribution of marine products, and more than a year in the distribution of PCN products. 128 I am entitled to draw inferences and reach conclusions from the facts that have been agreed in the Joint Submissions: Visy at [1]. 129 The details of the contraventions show that Navman's conduct was not merely deliberate. It was pursued in an aggressive and high-handed way by the company's most senior managers. 130 Navman's corporate culture was not conducive to compliance with the Act. Mr Baird and Mr King did not receive any trade practices training from Navman. I would have thought that senior managers of a multi-national company would have, at very least, a basic understanding of the law even without the need for detailed training. In any event, the failure of the company to provide training and see that its senior managers arranged training for their subordinates reflects badly on Navman's corporate culture. 131 The Joint Submissions contain the following statement at [106]: Navman believed that maintaining higher retail margins would ensure that retailers remained loyal to the Navman brand rather than selling competitors' products. By its actions in policing its resale price maintenance policy, Navman sought to avoid complaints from some of its larger retailers about the prices of other retailers. Navman sought to protect higher margins for dealers, so that dealers could afford to offer the level of customer service that the complexity of its products demanded. 132 I am not bound to accept statements merely because they have been agreed between the parties: Visy at [1]. I accept that Navman sought to avoid complaints from some of its larger retailers. The threats contained in the emails of Mr Baird and Mr King to non-compliant distributors suggest that this was so. But this also suggests that Navman's resale price maintenance conduct was a manifestation of price fixing among retailers: ACCC v High Adventure at [7]. 133 During the period when the contraventions took place, Navman's turnover and profit increased substantially. Its turnover grew from approximately $3.6 million in 2001 to over $29 million in 2004. Navman was not profitable in 2001 but its financial reports for 2004 disclosed a profit of $1.3 million. 134 Moreover, Navman's level of profitability was determined by internal transfer pricing decisions made within the Navman group. If the profit accruing to Navman NZ were included in Navman's accounts, Navman would have recorded a profit of just under $5.6 million for 2004. 135 Navman's changes in ownership and the subsequent sale of its business reduce the significance of specific deterrence. However, general deterrence remains important. A significant penalty is warranted against Navman to deter other suppliers from engaging in this type of conduct. 136 The amount of $1.25 million is a significant sum. But in view of the seriousness of the conduct, it seems to me that it is at the very bottom of the permissible range. 137 Accordingly, I have come to the view that it is an appropriate penalty. Mr Baird's penalty 138 I do not accept Mr Baird's professed ignorance of the details of the Act as mitigating the seriousness of his contraventions. His conduct was deliberate and high-handed and it was carried out over a period of more than three years. 139 At one stage Mr King suggested that Mr Baird seek legal advice before Mr Baird terminated a Navman marine dealership for discounting. It is plain that Mr Baird did not seek such advice. 140 It is true that Mr Baird was encouraged by officers of Navman to ensure that retail prices remained high. But this cannot be accepted in mitigation. He adopted their instructions enthusiastically and actively instructed and encouraged his staff to implement the resale price maintenance policy. 141 Despite some misgivings, I have come to the view that this is not a clear case for the Court to depart from the agreed penalty. In particular, I take into account that Mr Baird has cooperated with the ACCC by admitting the conduct pleaded against him and making himself available to meet with the ACCC as well as submitting to the proposed orders. The penalty has been discounted by a figure in the order of 25% to 30% to reflect Mr Baird's cooperation in this process. Mr King's penalty 142 I also have considerable misgivings about the penalty to be imposed on Mr King. I have real reservations as to whether it is withinthe permissible range. 143 It is true that Mr King has cooperated with the ACCC and that the penalty has been discounted by the same percentage as is applicable to Mr Baird. It is also true that Mr Baird played a more significant role over a longer period of time. The parity principle therefore points toward a lower penalty for Mr King. 144 However, Mr King's conduct involved serious contraventions of s 48. He actively instructed and encouraged his staff to discourage discounting in a way which resulted in resale price maintenance. 145 Mr King was aware of the need for Navman to comply with the Act. He acknowledged this in the Joint Submissions. I give no weight to his statement that he did not have a detailed knowledge of the Act. He was sufficiently concerned about Navman's conduct to suggest that Mr Baird obtain legal advice. Moreover, Mr King failed to seek advice when a distributor raised with Mr King concerns that his conduct may breach the Act. 146 Mr King acknowledged in the Joint Submissions that he did not approach trade practices compliance with the diligence to be expected of a senior manager in his position. 147 In my opinion, as with Mr Baird, he was prepared to persist in conduct which he ought to have known to be unlawful, without regard to the consequences. 148 It seems to me that even allowing for a 25% to 30% discount, the penalty is so close to the bottom of the permissible range as to risk falling below it. Mr King is still employed in the industry. He is employed by the company that purchased Navman's PCN business. Specific deterrence is to be taken into account. 149 Nevertheless, with considerable reservations, I have come to the view that this is not a clear case where the Court should depart from the agreed penalty. Conclusion 150 I will make the declarations and orders agreed by the parties.

Australian Competition and Consumer Commission v Navman Australia Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)

Cited By (2)