The respondent pay the Commonwealth of Australia, within 14 days, a pecuniary penalty in the sum of $3 million in respect of 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"), in that:
(a) the respondent:
(i) on or about 14 May 2008, made an arrangement or arrived at an understanding 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 provide to one another information about price increases that were proposed to be implemented in respect of the sales prices for bearing products to aftermarket customers in 2008 ("2008 Arrangement or Understanding");
(ii) on or about 21 January 2009, made an arrangement or arrived at an understanding with certain of its competitors for the supply of bearing products in Australia to aftermarket customers containing a provision that they would provide to one another information about price increases that had been advised to customers, or were proposed to be implemented, in respect of the sales prices for bearing products to aftermarket customers in 2009 ("2009 Arrangement or Understanding");
(b) the respondent and one or more other parties to the said arrangements or understandings were, or were likely to be, in competition with each other in relation to the supply of bearing products in Australia;
(c) the provision of the 2008 Arrangement or Understanding had the purpose and a likely effect of controlling or maintaining the price at which the parties to the 2008 Arrangement or Understanding, or 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 is therefore deemed to substantially lessen competition within the meaning of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act;
(d) the provision of the 2009 Arrangement or Understanding had the purpose of controlling or maintaining the price at which the parties to the 2009 Arrangement or Understanding, or 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 is therefore deemed to substantially lessen competition within the meaning of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act; and
(e) the respondent:
(i) on or about 14 May 2008, gave effect to the provision of the 2008 Arrangement or Understanding by exchanging the information about price increases that were proposed to be implemented in respect of the sales prices for bearing products to aftermarket customers in 2008; and
(ii) on or about 21 January 2009, gave effect to the provision of the 2009 Arrangement or Understanding by exchanging the information about price increases that had been advised to customers, or were proposed to be implemented in respect of the sales prices for bearing products to aftermarket customers in 2009;
(f) by reason of paragraphs (a) to (e) above:
(i) in making the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding, the respondent contravened s 45(2)(a)(ii) of the Act; and
(ii) in giving effect to the provisions of the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding that contravened s 45(2)(a)(ii) of the Act, the respondent contravened s 45(2)(b)(ii) of the Act.
The respondent be restrained, for a period of three years from the date of this order from:
(a) making any contract or arrangement or arriving at any understanding with one or more competitors for the supply of bearing products in Australia to aftermarket customers, which contains a provision which has 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 contract, arrangement or understanding, or any related body corporate or agent, will supply bearing products in Australia to aftermarket customers; and
(b) giving effect to such a provision; unless
(c) the conduct referred to in order 2(a) and (b) is authorised under s 88 of the Act or any other Australian statute in accordance with s 51 of the Act.
Within 3 months from the date of this order, the respondent establish and implement a competition and consumer law compliance training program in accordance with the requirements set out in Annexure 1 to these orders for its employees, being a program designed to minimise the respondent's risk of future contraventions of ss 44ZZRJ and 44ZZRK and ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act and to ensure an awareness of its responsibilities and obligations in relation to the requirements of ss 44ZZRJ and 44ZZRK and ss 45(2)(a)(ii) and 45(2)(b)(ii).
For a period of three years, the respondent maintain and continue to implement the competition and consumer law compliance training program referred to in order 3 above.
The respondent pay the applicant within 14 days a contribution towards its costs of and incidental to these proceedings in the sum of $50,000.
Annexure 1
COMPETITION AND CONSUMER LAW COMPLIANCE PROGRAM
The respondent will establish a Competition and Consumer Law Compliance Training Program ("Compliance Program") that complies with each of the following requirements:
Appointments
1.1. Within one month of the date of the order coming into effect the respondent will appoint a Director or a Senior Manager of the business to be responsible for the development, implementation and maintenance of the Compliance Program ("Compliance Officer").
Compliance Officer Training
2.1. The respondent will ensure that, within three months of the order coming into effect, the Compliance Officer attends practical competition and consumer law training focusing on Part IV of the Competition and Consumer Act 2010 (Cth) ("the Act"), particularly as it relates to ss 44ZZRJ and 44ZZRK and ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act ("Relevant Provisions").
2.2. The respondent shall ensure that the training is administered by a suitably qualified compliance professional or legal practitioner with expertise in competition and consumer law.
2.3. The respondent, within 14 days of completion of training, will provide the Australian Competition and Consumer Commission ("ACCC") with a written statement from the compliance professional or legal practitioner confirming the completion of the training conducted in accordance with paragraphs 2.1 and 2.2 above.
Staff Training
3.1. The respondent will cause all employees of the respondent whose duties could result in them being concerned with conduct that may contravene the Relevant Provisions to receive regular (at least once a year) practical training administered by the Compliance Officer (once trained) or a qualified, compliance professional or legal practitioner with expertise in competition and consumer law, that focuses on the Relevant Provisions.
The respondent will ensure that the Compliance Officer reports to its director(s) or governing body every 12 months on the continuing effectiveness of the Compliance Program.
If requested by the ACCC, the respondent shall, at its own expense, provide copies of documents and information in respect of matters which are the subject of the Compliance Program.
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 its 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 its 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.
Reporting
7.1. The respondent shall use its best endeavours to ensure that the Reviewer sets out the findings of the Review in a Compliance Program Review Report, which will provide particular and specific information regarding the scope of the Review and the effectiveness of the Compliance Program including:
7.1.1. details of the evidence gathered and examined during the Review;
7.1.2. the name and relevant experience of the person appointed as the respondent's Compliance Officer;
7.1.3. the Reviewer's opinion on whether the respondent has in place effective staff training, that complies with the requirements of this Annexure; and
7.1.4. actions recommended by the Reviewer to ensure the continuing effectiveness of the respondent's Compliance Program.
7.2. The respondent shall ensure that each Compliance Program Review Report is completed and provided to the respondent within one month of completion of the Review.
7.3. The respondent will cause the Compliance Program Review Report to be provided to the ACCC within 14 days of its receipt from the Reviewer.
7.4. The respondent shall implement promptly and with due diligence any recommendations made by the Reviewer or required by the ACCC that are reasonably necessary to ensure that the respondent maintain and continue to develop the Compliance Program elements in accordance with the requirements of this Annexure.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
[2]
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION NSD 2524 of 2013
[3]
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
[4]
JUDGE: EDMONDS J
DATE: 13 MAY 2014
PLACE: SYDNEY
[5]
Introduction
1 The hearing of this application proceeded by way of statement of agreed facts and admissions by the respondent ("A-NSK") pursuant to s 191 of the Evidence Act 1995 (Cth), dated 12 December 2013 (annexure "AJC-1" to the affidavit of Andrew John Christopher sworn 13 December 2013 (Ex 1)) ("Statement"); outline of joint submissions of the applicant ("ACCC") and A-NSK, dated and filed 31 January 2014 ("JS"); and form of consent orders agreed to by the ACCC and A-NSK on 12 December 2013 (annexure "AJC-2" to Ex 1).
2 The anticompetitive conduct the subject of this proceeding concerned the sales price for ball and roller bearings and related components ("bearing products") supplied by ANSK and certain competitors of A-NSK from 2008 to 2009 ("relevant period") to the Australian market. A-NSK made arrangements or arrived at understandings with certain of its competitors in Australia to exchange information with those competitors as to planned or proposed price increases for the purpose of controlling or maintaining prices for bearing products. The terms of the arrangements or understandings, and their implementation, are set out in further detail at [20] to [35] below.
[6]
The respondent - A-NSK
3 At all relevant times, A-NSK:
(a) Was a company incorporated in Australia;
(b) was a corporation within the meaning of s 4 of the Trade Practices Act 1974 (Cth), now the Competition and Consumer Act 2010 (Cth) ("the Act");
(c) carried on business in Australia as a supplier of bearing products; and
(d) was a wholly owned subsidiary of NSK Ltd ("NSK") of Japan.
[7]
Australian Bearings Market
4 Bearing products permit a movable connection between two or more mechanical items.
5 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 the 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.
6 At all relevant times, A-NSK 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".
7 The customers of A-NSK in the Australian Bearings Market included:
(a) "Original Equipment Manufacturers" ("OEM customers"); who used or incorporated bearing products in the manufacture of their own new products;
(b) "Aftermarket customers" ("AM customers"); who used bearing products for repair and maintenance purposes; and
(c) "Contract customers"; who used bearing products for specific industrial purposes.
8 At all relevant times A-NSK imported into Australia bearing products manufactured by NSK or one of its related entities with the brand name "NSK".
9 At all relevant times no bearing products were manufactured in Australia by A-NSK.
10 For each year during the period from 2007 to 2011, the collective value of bearing products imported into the Australian Bearings Market by all manufacturers was approximately AUD370 to AUD400 million.
11 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"), Koyo Australia Pty Ltd (ACN 000 471 867) ("Koyo Australia") and Nachi (Australia) Pty Ltd (ACN 000 774 989) ("Nachi Australia"). Koyo Australia is a wholly owned subsidiary of JTEKT Corporation ("JTEKT") of Japan. Nachi Australia is a wholly owned subsidiary of Nachi-Fujikoshi Corporation of Japan ("Nachi Japan").
12 At all relevant times, A-NSK and the suppliers referred to in the previous paragraph were in competition with each other in relation to the supply of bearing products in the Australian Bearings Market.
13 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) A-NSK was approximately 10% to 13%;
(6) Koyo Australia was between 6% and 10%; and
(7) Nachi Australia was between 3% and 5%.
14 The actual percentage for each company varied in the specified range from year to year depending on actual sales made.
15 For the period from April 2008 to March 2009, the sales revenue of A-NSK from sales of bearing products to AM customers in the Australian Bearings Market was $22.77 million and A-NSK's total profit after tax in relation to all sales of bearing products in the Australian Bearings Market was $1.65 million. For the period from April 2009 to March 2010, the sales revenue of A-NSK from sales of bearing products to AM customers in the Australian Bearings Market was $23.66 million and A-NSK's total profit after tax in relation to all sales of bearing products in the Australian Bearings Market was $1.2 million.
16 For the period from April 2008 to March 2009, the percentage of sales of bearing products by A-NSK to AM customers in the Australian Bearings Market was 68% of all sales of bearing products by A-NSK in the Australian Bearings Market. For the period from April 2009 to March 2010, the percentage of sales of bearing products by A-NSK to AM customers in the Australian Bearings Market was 72% of all sales of bearing products by A-NSK in the Australian Bearings Market.
[8]
Southern Cross Association Meetings
17 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 A-NSK, Koyo Australia and Nachi Australia. In the case of A-NSK, these meetings were attended by the person occupying the position of Chairman and Chief Executive Officer. In the case of Koyo 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" ("Southern Cross Association").
18 The participants who attended the Southern Cross Association meetings were:
(a) On behalf of A-NSK: the late Mr Yusuke Adachi (from 2000 to December 2004) and Mr Naofumi Tada (from December 2004 to May 2011);
(b) on behalf of Koyo Australia: Mr Akira Nishimura (from 2000 to Feb 2006); Mr Hiroshi Sano (from February 2006 to June 2009) and Mr Hiroyuki Fujioka (from June 2009 to May 2011); and
(c) 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),
collectively, the "SCA Participants".
19 During the period from at least 2000 to May 2011:
(a) The Southern Cross Association operated, in part, as a social group and business network for the most senior executive from each of A-NSK, Koyo Australia 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;
(b) the SCA Participants met over dinner at restaurants in Sydney and Melbourne three to four times per year;
(c) the meetings of the Southern Cross Association were convened on the basis and assumption, and through a long-standing practice between A-NSK, Koyo Australia and Nachi Australia, that the meetings were a confidential forum in which the SCA Participants were able to exchange market information (including prices) in relation to AM customers in the Australian Bearings Market; and
(d) on occasions at meetings of the Southern Cross Association, the SCA Participants discussed and shared confidential information about each of A-NSK, Koyo Australia and Nachi Australia's pricing plans for customers, particularly AM customers, in the Australian Bearings Market.
[9]
2008 price increase
20 On or about 5 February 2008, Mr Tada from A-NSK, Mr Sano from Koyo Australia and Mr Kodama from Nachi Australia attended a Southern Cross Association meeting at the Azuma Restaurant in Sydney. The ACCC has ascertained and A-NSK does not dispute for the purposes of these proceedings that certain of the SCA Participants at that meeting stated, that as a result of an expected increase in the price (being cost, insurance and freight ("CIF")) 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.
21 On or about 14 May 2008, Mr Tada from A-NSK, Mr Sano from Koyo Australia and Mr Kodama from Nachi Australia attended a Southern Cross Association meeting at the Kabuki Shoroku Restaurant in Sydney. During this meeting each of the participants agreed to exchange information as to their pricing plans and subsequently 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.
22 At the meeting referred to in [21] above, Mr Sano discussed plans to increase Koyo Australia's sales price for bearings to AM customers by 3% from 1 July 2008. Mr Tada discussed plans to increase A-NSK's sales price for bearings to AM customers by 2% in July 2008 and a further 2% in October 2008. Mr Kodama discussed plans to increase Nachi Australia's sales price for bearings by 3% from 1 August 2008.
23 In the course of the events described in [21] and [22] above, A-NSK made an arrangement or arrived at an understanding with certain of its competitors, namely Koyo Australia and Nachi Australia, that contained a provision that they would provide to one another information about price increases that were proposed to be implemented, in respect of the sales prices for bearing products to AM customers in 2008 ("2008 Arrangement or Understanding") .
24 A-NSK admits, for the purposes of these proceedings, that a substantial purpose and a likely effect of the 2008 Arrangement or Understanding was to maintain or implement the proposed price increases for bearing products to AM customers. In the absence of the 2008 Arrangement or Understanding it is not known whether A-NSK would have maintained the proposed price increases for bearing products to aftermarket customers in any event.
25 A-NSK further admits, for the purposes of these proceedings, that there was an expectation among each of the participants at the meeting that each of the proposed price increases would be implemented.
26 A-NSK further admits, for the purposes of these proceedings, that the awareness of each of the participants at the meeting as to each other's proposed price increases increased their confidence that their proposed price increases would be able to be maintained or implemented, including because it rendered it more likely that the other competitors present at the meeting would also be increasing their prices and therefore more likely that the proposed price increases would be accepted by customers and would not cause customers to move to another source of supply.
27 A-NSK further admits that it gave effect to the 2008 Arrangement or Understanding by exchanging the information referred to in [23] above at the Southern Cross Association meeting, with a substantial purpose and having a likely effect of maintaining or implementing the proposed price increases for bearing products to AM customers.
28 Subsequently, A-NSK, Koyo Australia and Nachi Australia each maintained or implemented the proposed price increases, and increased the sales prices for bearing products to AM customers by:
(a) In the case of Koyo Australia, 3% with effect from 1 July 2008;
(b) in the case of Nachi Australia, 3% effective from 1 August 2008; and
(c) in the case of A-NSK, 4% effective from 1 October 2008.
[10]
2009 price increase
29 On 23 December 2008, A-NSK advised its distributors by letter of 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 ANSK, Koyo Australia and Nachi Australia.
30 On or about 21 January 2009, Mr Tada from A-NSK, Mr Sano from Koyo Australia and Mr Kodama from Nachi Australia attended a Southern Cross Association meeting at the Kabuki Shoroku Restaurant in Sydney. During this meeting each of the participants agreed to exchange information as to their pricing plans and subsequently 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. Mr Tada discussed with Mr Sano and Mr Kodama that, due to the rise in the CIF price of imported bearing products, A-NSK had advised its distributors of an increase in its sales price for bearing products of 10%. Mr Tada asked what each of the other 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 bearing products to AM customers by at least 5%.
31 In the course of the events described in [30] above, A-NSK made an arrangement or arrived at an understanding with certain of its competitors, namely Koyo Australia and Nachi Australia, that contained a provision that they would provide to one another information about price increases that had been advised to customers, or were proposed to be implemented, in respect of the sales prices for bearing products to AM customers in 2009 ("2009 Arrangement or Understanding").
32 A-NSK admits, for the purposes of these proceedings, that a substantial purpose of the 2009 Arrangement or Understanding was to maintain or implement the advised and proposed price increases for bearing products to AM customers.
33 A-NSK further admits, for the purposes of these proceedings, that the awareness of each of the participants at the meeting as to A-NSK's advised price increase, and ANSK's awareness of each of the other participants' proposed price increases, increased the confidence of the participants that their proposed or advised price increases would be able to be maintained or implemented, including because it rendered it more likely that the other competitors present at the meeting would also be increasing their prices and therefore more likely that the advised or proposed price increases would be accepted by customers and would not cause customers to move to another source of supply.
34 A-NSK further admits that it gave effect to the 2009 Arrangement or Understanding by exchanging the information referred to in [31] above at the Southern Cross Association meeting with a substantial purpose of maintaining or implementing the proposed price increases for bearing products to AM customers.
35 Subsequently, A-NSK, Koyo Australia and Nachi Australia each maintained or implemented the proposed price increases, and further:
(a) A-NSK increased its prices by 10% to AM customers in February 2009 as advised to its distributors by letter dated 23 December 2008;
(b) Nachi Australia increased its price to AM customers by 4% in May 2009; and
(c) Koyo Australia increased its sales price to AM customers by 5% in May 2009.
[11]
2008 price increase
36 A-NSK admits that arriving at the 2008 Arrangement or Understanding and giving effect to its provisions constituted the making of an arrangement, or arriving at an understanding, and giving effect to an arrangement or understanding containing provisions which had a substantial purpose and a likely effect of controlling or maintaining the price at which the parties to the 2008 Arrangement or Understanding, or any related body corporate or agent, would supply bearing products to AM customers in the Australian Bearings Market.
37 A-NSK admits that the 2008 Arrangement or Understanding therefore constituted the making of an arrangement, or arriving at an understanding, and giving effect to an arrangement or understanding containing provisions to which s 45A of the Act applies and are therefore deemed to have had the purpose and a likely effect of substantially lessening competition between A-NSK and its competitors, Koyo Australia and Nachi Australia, for the supply of bearing products to AM customers in the Australian Bearings Market.
38 A-NSK admits that by making or arriving at the 2008 Arrangement or Understanding and by giving effect to its provisions by exchanging information about price increases that were proposed to be implemented in respect of the supply of bearing products in the Australian Bearings Market in May 2008, it has contravened ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act, by reason of s 45A.
[12]
2009 price increase
39 A-NSK admits that arriving at the 2009 Arrangement or Understanding and giving effect to its provisions constituted the making of an arrangement, or arriving at an understanding, and giving effect to an arrangement or understanding containing provisions which had a substantial purpose of controlling or maintaining the price at which the parties to the 2009 Arrangement or Understanding, or any related body corporate or agent, would supply bearing products to AM customers in the Australian Bearings Market.
40 A-NSK admits that the 2009 Arrangement or Understanding therefore constituted the making of an arrangement, or arriving at an understanding, and giving effect to an arrangement or understanding containing provisions to which s 45A of the Act applies and are therefore deemed to have had the purpose of substantially lessening competition between A-NSK and its competitors, Koyo Australia and Nachi Australia, for the supply of bearing products to AM customers in the Australian Bearings Market.
41 A-NSK admits that by making or arriving at the 2009 Arrangement or Understanding and by giving effect to its provisions by exchanging information about advised and proposed price increases in respect of the supply of bearing products to AM customers in the Australian Bearings Market in May 2009, it has contravened ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act, by reason of s 45A.
42 The Southern Cross Association ceased meeting in May 2011. At or about the same time, overseas regulators publicised their investigations of alleged meetings between various bearing products manufacturers.
[13]
Relief Sought
43 The ACCC and A-NSK jointly requested the Court to impose a pecuniary penalty on A-NSK pursuant to s 76 of the Act, to grant injunctions pursuant to s 80 of the Act and to make other orders against A-NSK, so as to dispose of this proceeding.
44 The ACCC and A-NSK have reached agreement as to the suggested penalty that the Court should impose against A-NSK in respect of its participation in the relevant conduct, being a total of $3 million, in addition to the terms of the injunctions and other orders.
[14]
Penalty - Relevant Factors and Applicable Legal Principles
45 If satisfied that a person has contravened a provision of Pt IV of the Act (other than ss 44ZZRF and 44ZZRG), 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.
46 Section 76, 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 or omission took place and whether the person has previously been found by the Court in proceedings under [Pt VI of the Act] ... to have engaged in any similar conduct.
47 This Court has previously made orders against Koyo Australia in respect of its participation in the relevant 2008 and 2009 conduct in contravention of the Act: see Australian Competition and Consumer Commission v Koyo Australia Pty Ltd [2013] FCA 1051. On 18 October 2013, the Court made the following orders against Koyo Australia:
(1) Koyo Australia to pay a pecuniary penalty of $2 million in respect of contraventions of ss 45(2)(a)(ii), 45(2)(b)(ii) and 44ZZRK of the Act;
(2) Koyo Australia be restrained for a period of three years from making any contract, arrangement or understanding with one or more of its competitors which contains a provision which has the purpose, effect or likely effect of fixing, controlling or maintaining the price of bearings to be supplied in Australia to aftermarket customers, or giving effect to such a provision; and
(3) Koyo Australia to establish and implement a competition and consumer law compliance training program.
48 The ACCC and A-NSK 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 A-NSK respectfully made the submissions to the Court set out in the JS 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.
49 I agree with the submissions of the ACCC and A-NSK in the JS relating to:
(1) 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: paras 19 to 22 of the JS.
(2) The principles to be applied and the matters to be taken into account by the Court in assessing whether a penalty proposed by agreement of the parties is appropriate: paras 23 to 36 of the JS.
(3) The application of these principles to the conduct of A-NSK including:
(i) the nature and extent of the contravening conduct, including its deliberateness;
(ii) the amount of loss or damage caused;
(iii) the size of the contravenor;
(iv) the period over which the contravening conduct extended;
(v) the degree of power A-NSK has, as evidenced by its market share and ease of entry into the market;
(vi) the circumstances in which the conduct took place;
(vii) the participation of senior management;
(viii) the culture of compliance with the Trade Practices Act;
(ix) co-operation and contrition; and
(x) similar conduct in the past.
[15]
Parity between the Parties
50 As indicated in [47] above, this Court has previously ordered a pecuniary penalty of $2 million against Koyo Australia in respect of its participation in the relevant 2008 and 2009 conduct in contravention of the Act. The conduct Koyo Australia admitted to engaging in is set out in ACCC v Koyo Australia at [26]-[38].
51 The parity principle has been applied in cases when determining penalty for breaches of the Act, see: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295B and Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) 127 FCR 170 per Sackville J at [10]-[14] and per Merkel J at [53]-[58].
52 When assessing parity, the Court has acknowledged that differences between the parties' circumstances, such as market share, should be taken into account so as to ensure that the agreed penalty achieves general and specific deterrence. This was discussed by Finkelstein J at [40] in Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) (2002) 190 ALR 169.
53 The ACCC submitted, and A-NSK agreed, that the proposed pecuniary penalty of $3 million against A-NSK achieves parity with the pecuniary penalty of $2 million that the Court ordered against Koyo Australia which admitted its participation in the relevant 2008 and 2009 conduct in contravention of the Act.
54 The proposed higher pecuniary penalty against A-NSK compared with that ordered by the Court against Koyo Australia takes into account A-NSK's materially larger share of the Australian Bearings Market than Koyo Australia. Specifically, during the period from 2007 to 2011 A-NSK had a share of approximately 10% to 13% of the Australian Bearings Market compared to Koyo Australia which had a market share of approximately 6% to 10%.
55 Further, A-NSK's proportional involvement in supplying bearing products to AM customers in the Australian Bearings Market was materially greater than for Koyo Australia. The sales revenue of A-NSK from the sale of bearing products to AM customers in the Australian Bearings Market was AUD22.77 million for the period from April 2008 to March 2009, and AUD23.66 million for the period from April 2009 to March 2010. For the years 2009 and 2010, the respective sales revenue of Koyo Australia from the sale of bearing products to AM customers in the Australian Bearings Market was AUD7.1 million and AUD8.4 million.
56 In addition, the ACCC submitted, and A-NSK did not dispute, that Koyo Australia rendered materially greater assistance to the ACCC's investigation than A-NSK. Koyo Australia approached the ACCC to assist with its investigation into the Australian Bearings Market at least nine months before A-NSK approached the ACCC to provide assistance. Koyo Australia also agreed to resolve the ACCC's proceedings against it at an earlier time than A-NSK. Koyo Australia was also the first party to produce to the ACCC a number of key documents relevant to the investigation and facilitated the attendance of witnesses that were able to provide information of greater utility to the investigation than A-NSK's witnesses were able to provide.
[16]
Conclusion on Penalty
57 In summary, the ACCC regards, and A-NSK agrees, the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding made and given effect to by A-NSK involved serious contraventions of the Act. The conduct involved a senior executive of A-NSK and the arrangements or understandings were implemented through a long-standing practice between A-NSK, Koyo 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 A-NSK, Koyo Australia, and Nachi Australia discussed and shared confidential information about their respective pricing plans for customers, particularly AM customers in the Australian Bearings Market.
58 The ACCC considers it to be important that the penalty imposed in this case serves the two aspects of deterrence, in that it deters A-NSK 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. I agree with the importance of that consideration.
59 On the other hand, A-NSK'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.
60 Accepting that 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, I accept the parties' submission that the proposed penalty of $3 million in respect of A-NSK's conduct in entering into and giving effect to the 2008 Arrangement or Understanding and the 2009 Arrangement or Understanding is within a range that, unaided by the parties' views, is appropriate and achieves parity with the $2 million penalty imposed against Koyo Australia which has admitted its participation in the relevant 2008 and 2009 conduct in contravention of the Act.
[17]
Other Orders
61 The other orders proposed by the form of consent orders agreed to by the ACCC and A-NSK providing for injunctions against A-NSK for a period of three years and the implementation of a competition and consumer law compliance training program are, in my view, equally appropriate.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.