Australian Competition and Consumer Commission v PRK Corporation Pty Ltd

Federal Court of Australia|2009-07-03|Before: Jacobson J

INTRODUCTION 1 In these proceedings, the Australian Competition and Consumer Commission ("the Commission") claimed that a number of large well-known companies entered into arrangements in 2001 and 2002 which had the purpose or effect, or likely effect, of substantially lessening competition in markets for the supply of automotive terminals at ports in Brisbane, Sydney and Melbourne. 2 The claims of contravention of s 45(2) of the Trade Practices Act 1974 (Cth) ("the Act") were brought against the first to fifth respondents, which comprise five companies in the Toll/Patrick Group (collectively "Patrick"); the sixth to eight respondents, which comprise three members of the P&O Group (collectively "P&O"); as well as the ninth respondent, Australian Amalgamated Terminals Pty Limited ("AAT"), a joint venture between Patrick and P&O which carries on the business of operating the terminals. 3 A director of Patrick, Mr Christopher Corrigan; a director of AAT, Mr Donald Smithwick; and two directors of P&O, Mr Andrew Burgess and Mr Timothy Blood, were said to have aided and abetted, or to have been knowingly involved in, the contraventions. 4 The parties have reached agreement on orders which they wish the Court to make in order to dispose of the proceedings. The proposed orders include pecuniary penalties to be imposed under s 76 of the Act. The amounts which are proposed are $1,900,000 against each of Patrick Stevedores Holdings Pty Limited ("Patrick Stevedores") and D P World Australia Limited ("P&O Ports"). 5 Provision is made in the proposed orders for Patrick Stevedores to pay the penalty by four equal instalments over a period of 18 months. This regime has been proposed as a result of financial pressures affecting that company, or its parent, in the current global financial circumstances. 6 No penalty is to be imposed upon AAT. Consent orders were made on 11 June 2009, the effect of which was that the proceedings against AAT would be dismissed upon the basis that AAT would apply to the Commission for an order under s 88 of the Act for authorisation of the contractual arrangements which are the subject of the present proceeding. 7 Nor is any penalty proposed against Mr Corrigan and the other directors in respect of their alleged involvement in the contraventions. The proposed orders in respect of the individual respondents is that the proceedings against them will be dismissed, so long as I am prepared to make the orders for pecuniary penalties against the relevant corporate respondents in the amounts stated above.

THE AGREED STATEMENT OF FACTS AND JOINT SUBMISSION 8 I have been provided with a document entitled "Agreed Statement of Facts and Joint Submission between the Applicant and the First to Eighth Respondents". The Statement of Facts was provided to me in accordance with s 191 of the Evidence Act 1995 (Cth). The facts which are agreed to in the document, and the admissions made in it, are agreed to have been made for the purpose of these proceedings only. 9 The substance of the Agreed Statement of Facts is that Patrick and P&O admit that from about August 2001, they made various plans to provide access to each other's automotive terminal services at the ports of Brisbane, Sydney and Melbourne and to form a joint venture for the shared conduct of those facilities at the three ports, as well as others in Australia. 10 Patrick and P&O also admit that during the period of about 14 months in which the arrangements between them were in place, they took steps to give effect to their plans. In particular, in October 2001, they jointly lodged a tender on behalf of the proposed joint venture to lease land at Glebe Island, in the port of Sydney, for the purpose of operating an automotive terminal from that land. The joint tender was successful and, in December 2002, AAT entered into a ten year lease of the land at Glebe Island. 11 In [4] of the Agreed Statement of Facts, Patrick and P&O admit, for the purpose of these proceedings, that the conduct they engaged in, as described in more detail in the document, had the likely effect of substantially lessening competition in automotive terminal services markets in Brisbane, Sydney and Melbourne. 12 However, no admissions are made by either Patrick or P&O as to the purpose or actual effect on competition of their conduct. 13 AAT now operates terminals in Melbourne, Brisbane and Port Kembla. The parties have agreed that any effect on competition of the continuing conduct of AAT, and any public benefit arising from that conduct, is to be dealt with through the authorisation process under Part VII of the Act. 14 The Agreed Statement of Facts contains a description of the companies comprising the Patrick Respondents and the P&O Respondents. It includes brief details of the takeover in 2006 of the First Respondent (then known as Patrick Corporation Limited) by Toll Holdings Limited ("Toll") and the subsequent restructure of Toll. 15 The effect of the restructure of Toll has some bearing on this matter because the second to fifth respondents are now a subsidiary of Asciano Limited ("Asciano"). Confidential evidence was tendered before me as to the financial pressures affecting Asciano in order to explain the instalment regime for the pecuniary penalty to be paid by Patrick Stevedores. 16 I will set out below the relevant parts of the Agreed Statement of Facts which appeared under the sub-headings "Markets and Market Structure", "The Development of the AAT Joint Venture", "Likely Effect of the Arrangement" and "Contraventions". MARKETS AND MARKET STRUCTURE 14. During the relevant period: 14.1. retail motor vehicle sales in Australia totalled approximately $25 billion per annum; [reference omitted] 14.2. approximately 70% of motor vehicles sold in Australia were imported; 14.3 the only practical means of importing motor vehicles into Australia was by sea; 14.4 approximately 85% of motor vehicles imported to Australia were delivered through the three ports; 14.5 importers engaged shipping lines to transport motor vehicles from the country of manufacture to specified ports in Australia; 14.6 importers generally required delivery of motor vehicles to, or as near as practicable to, the locations at which the vehicles were intended to be prepared for sale, distributed and sold; 14.7 transportation of motor vehicles over land was significantly more costly than transportation by sea; 14.8 the majority of motor vehicles were shipped on vessels which were purpose designed for their carriage; 14.9 the process of moving motor vehicles from the vessel to land required a terminal facility of sufficient size and strength to handle the vessel (automotive terminal) and automotive stevedoring services to unload the cargo. An automotive terminal is a piece of infrastructure that is suited to the loading, unloading and storage of motor vehicles. In particular, the area adjacent to the wharf must generally be large enough to accommodate large volumes of motor vehicles and generally be free from any obstructions that might restrict the movement of motor vehicles. For big city ports, the temporary storage area typically needs to be able to handle offloading 3 to 4 vessels per week including approximately 800 to 1000 motor vehicles per vessel; 14.10 in Port Jackson and the Port of Brisbane, Patrick and P&O operated automotive terminals at which motor vehicle carriers regularly berthed to discharge their loads. Patrick operated an automotive terminal in the Port of Melbourne from which motor vehicle carriers regularly berthed to discharge their loads but P&O did not; 14.11 apart from the three ports, there were no other ports in Australia which had facilities suitable for berthing motor vehicle carriers and which were sufficiently proximate to markets for the sale of motor vehicles in the eastern States of Australia (except for the Port of Townsville which was sufficiently proximate to markets for the sale of motor vehicles in Northern Queensland only). It was not practical to stevedore motor vehicles at port terminals that were not set up to accommodate motor vehicles, such as bulk and container terminals; 14.12 although there was a limited amount of competition between the three ports in respect of locations between the ports that could be serviced for the same cost, motor vehicle carriers routinely stopped at each of the three ports; 14.13 at each of the three ports the shipping lines engaged a particular stevedore to provide automotive stevedoring services to the shipping line for the purpose of discharging vehicles from vessels to the wharf; 14.14 in order to complete the importation of motor vehicles from ship to shore at the three ports, the following services were also required: 14.14.1clerical delivery of the vehicle to the importer; 14.14.2arranging for customs and quarantine inspection of the vehicles; 14.14.3delivery and storage of the vehicles according to the importer's requirements; and 14.14.4provision of security systems, computer systems to track and record the whereabouts of vehicles, and ferry services to take drivers from the parking area back to the vessel to collect further vehicles; 14.15 typical contracts between shipping line and stevedore for the provision of the automotive stevedoring services had terms of between one and five years; 14.16 in each of the three ports, terminals were situated on port land which was under the control of the relevant port corporation as lessor of that land. Each port corporation made land available for the purpose of operating terminals at which automotive stevedoring services could be provided to shipping lines; and 14.17 each terminal from which automotive stevedoring services were provided, was leased to Patrick or P&O by the port corporation of each of the three ports, except Webb Dock West in Melbourne, which was leased by Toll. 15. The Commission, P&O and Patrick agree, for the purposes of these proceedings only, that the most appropriate markets for analysing the conduct during the relevant period are three separate geographic markets in each of the three ports for the supply of automotive terminal services (described respectively as the Sydney, Melbourne and Brisbane terminal services markets). 16. During the relevant period, Patrick and P&O were the only automotive terminal operators and suppliers of automotive stevedoring services, in each of Sydney and Brisbane. In Melbourne, the only automotive terminal operators and suppliers of automotive stevedoring services were Patrick and Toll. P&O was not able, in a commercial sense, to supply automotive terminal services at Appleton Dock in the Port of Melbourne, as Appleton Dock was an inferior facility in that it was not a specialised automotive terminal. Subject to obtaining access to a suitable terminal, P&O was a potential supplier of automotive stevedoring services in Melbourne during the relevant period. 17. During the relevant period, there were substantial barriers to entry into each of the terminal services markets, particularly: 17.1 the requirements of the local port corporations, each of which makes decisions by reference to multiple objectives including its own financial objectives and other objectives, such as the promotion of trade generally through the port, safety and the accommodation of the interests of the community in which the port is located; and 17.2 scale economies inherent in the physical nature of wharf facilities, and requirements to make payments to port corporations based on a minimum volume of business. THE DEVELOPMENT OF THE AAT JOINT VENTURE 18. In Port Jackson in early 2001, P&O operated an automotive terminal at Glebe Island. An estimated 60-65% of motor vehicles unloaded in Port Jackson were unloaded at Glebe Island by P&O automotive stevedores, while the remaining estimated 35-40% were unloaded at the Patrick automotive terminal at Darling Harbour by Patrick automotive stevedores. 19. P&O's lease over Glebe Island was due to expire in October 2002 and, in about March 2001, the Sydney Ports Corporation informed P&O that it proposed not to renew the lease on its current terms. Around that time, Sydney Ports Corporation sought public expressions of interest for the lease of land at Glebe Island. Patrick and P&O each submitted an expression of interest to Sydney Ports Corporation for the lease of Glebe Island on a sole user basis. 20. In the Port of Brisbane, by early 2001, the Port of Brisbane Corporation had made it known both to Patrick and P&O that it proposed to relocate the automotive terminals in Brisbane to a single automotive terminal in Fisherman Islands (further from the city of Brisbane towards the mouth of the Brisbane river). The Port of Brisbane Corporation also made it known that all berths at Fisherman Islands would be operated on a "common user" basis, that is, that the Port of Brisbane Corporation would control the berths adjacent to the automotive terminal and would grant licences to stevedores that may request access from time to time. 21. In or about June or July 2001, senior executivesof Patrick and P&O met to discuss a proposal to share P&O's Glebe Island Motor Vehicle terminal in Port Jackson and Patrick's Webb Dock East terminal in the Port of Melbourne as a prelude to the establishment of the AAT joint venture. After further negotiations, on about 15 August 2001, P&O and Patrick produced the document annexed to this Agreed Statement of Facts and marked 'A' (the First In Principle Agreement). 22. The First In Principle Agreement contained, relevantly, the following provisions: 22.1 the parties would establish a joint venture company (the JV company) to assume management of certain of the parties' existing automotive terminals and establish shared terminals to be managed by the JV company; 22.2 in respect of those automotive terminals in each of Sydney, Melbourne and Brisbane, until the commencement of operations by the JV company, the lessee of that terminal would grant access to the other party for the conduct of automotive stevedoring operations; 22.3 the JV company would tender on behalf of Patrick and P&O for the Glebe Island lease and, if successful, the JV company would operate the automotive terminal at Glebe Island as a multiple user facility, that is, a facility available to any stevedore licensed by the JV company, including Patrick and P&O; 22.4 once the JV company was established it would take over the management of the terminals at Glebe Island, Maritime Wharf, manage an access regime to East Webb Dock and provide Patrick and P&O with access to each of those automotive terminals. Once the redevelopment of Glebe Island was completed by AAT, it would issue licences to other stevedores that may request access from time to time, in addition to Patrick and P&O. In particular: 22.4.1 existing assets and leasehold improvements could be transferred to AAT by Patrick or P&O for a commensurate rental or fee, but all future capital funding would be provided by the shareholders in equal shares; 22.4.2 AAT would manage the leases held by P&O and Patrick at Glebe Island and Maritime Wharf, and that AAT would manage an access regime to East Webb Dock by establishing a management agreement with P&O and Patrick, although the leases for these terminals would continue to be held by the relevant Lessees; 22.4.3 AAT would reimburse to the Lessees all lease payments made by them to the Lessors, including outgoings, and be responsible for all maintenance and insurance and for all matters relating the administration and management of the facilities; 22.4.4 AAT would provide site security and be responsible for appropriate wharf clerical processing. This would not include clerical processing of export vehicles at East Webb Dock in Melbourne; 22.4.5 nothing would prevent the parties from reaching agreement at some future time so as to bring East Webb Dock within AAT's management; and 22.4.6 AAT would charge stevedoring licensees a Facility Access Charge to cover berth access, site occupation, security, and appropriate clerical services and/or whatever other related charges may be deemed to apply. 23. In August 2001, Sydney Ports Corporation released its request for tender of land at Glebe Island. The request for tender included an option for bidders to submit a tender on the basis that common user access would be permitted. The request for tender stated that, under a common user system, the Sydney Ports Corporation would control the Glebe Island berths; that is, the Sydney Ports Corporation would grant licences to stevedores that may request access to the berths from time to time. 24. Thereafter, Patrick and P&O jointly prepared and, on or about 15 October 2001, submitted, a tender for the lease of Glebe Island on behalf of Australian Automotive Terminals Pty Limited, the then working name of the entity which was registered on 16 October 2001 as AAT. The tender proposed that AAT would operate the Glebe Island Motor Vehicle Terminal as a multiple user facility. 25. From about December 2001, Patrick granted P&O access to Patrick's automotive terminal at Maritime Wharf, Brisbane, as provided for in the First In Principle Agreement, and P&O Ports began automotive stevedoring there. 26. In or about February 2002, Sydney Ports Corporation advised P&O and Patrick that AAT was the preferred tenderer for the lease of Glebe Island and began negotiations with AAT. 27. In early April 2002, senior executives of Patrick and P&O met to discuss the proposed operations of AAT. At the meeting the participants agreed to review the First In Principle Agreement so as to better define the parties' rights. Subsequently, the First In Principle Agreement was revised (Revised In Principle Agreement). 28. Insofar as the Revised In Principle Agreement was in writing, it was recorded in an unsigned document entitled "In Principle Agreement" bearing the date April 2002. A copy of the document is annexed to this Agreed Statement of Facts and marked 'B'. 29. The Revised In Principle Agreement contained, inter alia, the following provisions: 29.1 the parties would establish AAT as a joint venture company to assume management of the parties' existing automotive terminals at Glebe Island, Maritime Wharf in the Port of Brisbane and Webb Dock East in the Port of Melbourne and operate them, and establish shared motor vehicle and general cargo terminals throughout Australia to be managed by AAT; 29.2 in respect of those terminals in each of Sydney, Melbourne and Brisbane, until the commencement of operations by AAT, the lessee of that terminal would grant access to the other party for the conduct of automotive stevedoring operations; 29.3 the parties would cause AAT to negotiate and finalise an exclusive lease from Sydney Ports Corporation over Glebe Island from October 2002 until at least 2018 and thereafter to operate the terminal as a multiple user facility; 29.4 once AAT was established it would take over the management of the terminals at Glebe Island and Maritime Wharf, and manage an access regime to East Webb Dock. AAT would also provide Patrick and P&O with access to each of those three automotive terminals. Once the redevelopment of Glebe Island was completed by AAT, it would issue licences to other stevedores that may request access from time to time, in addition to Patrick and P&O. In particular: 29.4.1 existing assets and leasehold improvements could be transferred to AAT by Patrick or P&O for a commensurate rental or fee, but all future capital funding would be provided by the shareholders in equal shares; 29.4.2 AAT would manage the leases held by P&O and Patrick at Glebe Island and Maritime Wharf, and that AAT would manage an access regime to East Webb Dock by establishing a management agreement with P&O and Patrick, although the leases for these terminals would continue to be held by the relevant Lessees; 29.4.3 in relation to the relevant ports, AAT would endeavour to establish, develop and operate: 29.4.3.1 a motor vehicle and general cargo handling terminal at Berths 1-3 at Fisherman Islands in Brisbane, leased from the Port of Brisbane Corporation; and 29.4.3.2 a dedicated motor vehicle and handling facility at Glebe Island, leased from Sydney Ports Corporation. 29.4.4 AAT would reimburse to the Lessees for all lease payments made by them to the Lessors, including outgoings, and be responsible for all administration, management and operating costs in including maintenance and insurance associated with each facility; 29.4.5 AAT would provide site security and be responsible for appropriate wharf clerical processing, customs clearance and on-site labour transport. This would not include clerical processing of export vehicles at East Webb Dock in Melbourne; 29.4.6 Nothing would prevent the parties from reaching agreement at some future time so as to bring East Webb Dock within AAT's management; 29.4.7 AAT would charge stevedoring licensees: 29.4.7.1 a Facility Access Charge to cover berth maintenance, berth access, site occupation, lighting and other utilities and/or whatever other related charges may be deemed to apply; 29.4.7.2 a Facility Services Fee to cover provision of security, vans and appropriate clerical services, including customs clearance and relevant computer and software systems. 30. In May 2002, representatives of P&O and AAT met with the Port of Brisbane Corporation to introduce AAT. At that meeting, the Port of Brisbane Corporation stated a preference that AAT take over overall management of berths 1-3 at Fisherman Islands instead of the previous common user proposal. 31. Thereafter, AAT lodged an expression of interest with Port of Brisbane Corporation for AAT to acquire premises at Fisherman Islands to be operated on a multiple user basis which would accommodate the operations of both P&O and Patrick, previously conducted at Hamilton Wharf and Maritime Wharf respectively. Patrick and P&O did not lodge expressions of interest. 32. In essence, Patrick and P&O proposed to share automotive terminal facilities but continue to conduct separate stevedoring businesses from those facilities in competition with one another and potentially other stevedores. Initially, they agreed to specific steps to share their existing facilities. The next step was to put the existing facilities into a joint venture. Ultimately, the joint venture would develop new automotive terminals. 33. By reason of the foregoing, the Commission, Patrick and P&O consider that, between September 2001 and April 2002, Patrick and P&O made an arrangement within the meaning of section 45(2)(a) of the Act (the Arrangement). 34. Patrick and P&O admit for the purpose of these proceedings only that the Arrangement described in this document subsisted until about November 2002. LIKELY EFFECT OF THE ARRANGEMENT 35. Pursuant to the Arrangement, automotive terminal services formerly provided to shipping lines as part of the stevedoring services provided by Patrick and P&O as vertically integrated entities in competition with one another, would instead be provided by a single entity, AAT, to each of Patrick and P&O, and potentially other stevedores. 36. By reason of the conduct of Patrick and P&O, AAT would be the only supplier of automotive terminal services at Glebe Island. 37. Therefore as at November 2002 in Port Jackson, having regard to the fact that Patrick and P&O were the only suppliers of automotive terminal services prior to the Arrangement, and the substantial barriers to entry, the Arrangement was likely to have had the effect of substantially lessening competition in the Sydney terminal services market. 38. By reason of the conduct of Patrick and P&O, AAT would be the only supplier of automotive terminal services at Maritime Wharf and subsequently, Fisherman Islands. 39. Therefore as at November 2002 in the Port of Brisbane, having regard to the fact that Patrick and P&O were the only suppliers of automotive services prior to the Arrangement, and the substantial barriers to entry, the Arrangement was likely to have had the effect of substantially lessening competition in the Brisbane terminal services market. 40. In Melbourne, the pre-existing market structure was that the two major automotive terminal operators were Patrick and Toll. P&O's facility at Appleton Dock was inferior. In the short term, the arrangement allowed P&O to stevedore at the Patrick East Webb Dock facility, thereby improving its ability to compete for automotive stevedoring customers. Whilst this was an improvement in competition in the stevedoring markets, it gave rise to the likely effect of substantially lessening competition in the Melbourne terminal services market by removing the incentive of P&O itself to compete to supply automotive terminal services in Melbourne. CONTRAVENTIONS The Second Respondent 41. By reason of the matters set out above, the Second Respondent admits, for the purposes of this proceeding, that between around September 2001 and November 2002, the Second Respondent made and gave effect to an arrangement (namely, the Arrangement) with a competitor, the Seventh Respondent, which contained provisions that: 41.1 they would seek to establish and operate automotive terminals jointly in each of the ports in Sydney, Melbourne and Brisbane; and 41.2 to that end, they would form an incorporated joint venture which subsequently became known as AAT. 42. The making and giving effect to that arrangement, as at November 2002, had the likely effect of substantially lessening competition in each of the following markets: 42.1 Sydney terminal services market; 42.2 Melbourne terminal services market; and 42.3 Brisbane terminal services market within the meaning of sub-sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act. The Seventh Respondent 43. By reason of the matters set out above, the Seventh Respondent admits, for the purposes of this proceeding, that, between around September 2001 and November 2002, the Seventh Respondent made and gave effect to an arrangement (namely, the Arrangement) with a competitor, the Second Respondent, which contained provisions that: 43.1 they would seek to establish and operate automotive terminals jointly in each of the ports in Sydney, Melbourne and Brisbane; and 43.2 to that end, they would form an incorporated joint venture which subsequently became known as AAT. 44. The making and giving effect to that arrangement, as at November 2002, had the likely effect of substantially lessening competition in each of the following markets: 44.1 Sydney terminal services market; 44.2 Melbourne terminal services market; and 44.3 Brisbane terminal services market within the meaning of sub-sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Act.

THE LEGAL PRINCIPLES APPLICABLE TO DETERMINATION OF PENALTY 17 The Act places on the Court the responsibility to determine the "appropriate" penalty in each particular case, having regard to "all relevant matters", including those specified in s 76(1): NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290. 18 Four relevant matters are specified in s 76(1), but the Court is not confined to them. A checklist of six additional matters was identified by French J in Trade Practices Commission v CSR Limited (1991) ATPR ¶41-076 at 52,152-52,153, to which judges have frequently made reference: see NW Frozen Foods at 292. 19 As French J said in Trade Practices Commission v CSR at 52,152, the principal, and probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and others. That is to say, the quantum is informed by considerations of specific and general deterrence: Trade Practices Commission v Mobil Oil Australia Ltd (1984) 4 FCR 296 at 298. 20 Much has been said in the authorities about the need to deter conduct which is antithetical to the promotion of competition and the seriousness of Parliament's intentions in that respect: NW Frozen Foods at 293-294; Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR ¶41-815 at [13]; Australian Competition and Consumer Commission v Midland Brick Co Pty Ltd (2004) 207 ALR 329 at [22]; Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [39]. 21 As Lindgren J observed in Australian Competition and Consumer Commission v Qantas Airways Ltd (2008) 253 ALR 89 at [25], the principles governing the imposition of penalties for contravention of Part IV should be considered in light of the most recent Full Court pronouncement in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR ¶41-993. 22 In that case, at [51], the Full Court listed six propositions that emerge from NW Frozen Foods. They were listed by Lindgren J in Qantas at [26] as follows:- (i) It is the responsibility of the court to determine the appropriate penalty; (ii) Determining the quantum of a penalty is not an exact science and the courts have acknowledged that within a permissible range, a particular figure cannot necessarily be said to be more appropriate than another; (iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy; (iv) The view of the regulator, as a specialist body, is relevant, but not determinative, and its views on matters within its expertise will usually be given greater weight than its views on more "subjective" matters; (v) The court examines all the circumstances of the case, and where the parties have advanced an agreed statement of facts, the court may act on it if it is appropriate to do so; and (vi) Where the parties have jointly proposed a penalty, it is not useful to investigate whether the court would have arrived at that precise figure; the figure will be appropriate if within the permissible range. 23 The Full Court in Mobil Oil (2004) ATPR ¶41-993also listed five further points which were usefully summarised by Lindgren J in Qantas at [27] as follows:- · First, the rationale for giving weight to a joint submission on penalty is the saving in resources for the regulator and the court, which, in the case of the regulator, can be used to increase the likelihood that other contraveners will be detected and brought before the court. · Second, the sixth proposition from NW Frozen Foods (see [26] above) does not mean that the court must commence its reasoning with the level of penalty proposed and limit itself to considering whether that penalty is within the permissible range: the court may, instead, address the question independently at the outset. · Third, there was no suggestion in NW Frozen Foods that the admissions or statement of agreed facts had been "tailored or modified to reflect the difficulties faced by the [commission] in proving its case" (at [55]). · Fourth, the regulator should always explain to the court the process of reasoning said to justify a discounted penalty (the court referred to Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd (2002) ATPR 41-851; [2001] FCA 1716 at [56]). · Fifth, there is nothing in NW Frozen Foods inconsistent with any of the following propositions: (i) The court may request the parties to provide additional evidence or information or to verify the information provided, in default of which the court may well not be satisfied that the proposed penalty is within the permissible range; (ii) If the absence of a contradictor inhibits the court in the performance of its duty under s 76 of the Act, it may seek the assistance of an amicus curiae or of an individual or body prepared to act or intervene under O 6 r 17 of the Federal Court Rules; and (iii) If the court is disposed not to impose the agreed penalty, it may be appropriate for the parties or either of them to be given the opportunity to withdraw consent and for the matter to proceed as a contested hearing.

THE COURT'S APPROACH TO AGREEMENT ON PENALTY 24 The parties accept 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, and taking into account the propositions emerging from NW Frozen Foods,as further explained in Mobil Oil (2004) ATPR ¶41-993. 25 The summary of those propositions and further points set out above make clear the public interest factors which underlie the non-litigious resolution of enforcement proceedings and the regard which the Court will have to the views of the regulators. 26 The essential question is not whether I would have, without the assistance of the parties, reached the precise figures agreed between them. Rather, it is whether those amounts are "within the permissible range" in all the circumstances: NW Frozen Foods at 291. 27 In answering that question, it is open to me to commence with the amount of the proposed penalties and then determine whether they fall within the permissible range. Alternatively, it would be permissible to address the appropriate range independently and then determine whether the proposed penalty falls within that range: Mobil Oil (2004) ATPR ¶41-993at [54].

THE PARTIES' SUBMISSIONS ON MATTERS RELEVANT TO CONSIDERATION OF PENALTY 28 It is convenient to set out in full the content of [55] - [58] and [76] - [106] of the Joint Submissions. 55. As noted at paragraph 5 above, an important component of the proposed resolution of these proceedings is the lodgement by AAT of the authorisation application pursuant to s88 of the Act. This is the first occasion on which a court has been required to decide upon the appropriate penalty in such circumstances. In the unusual circumstances of this case, the Commission, Patrick and P&O jointly submit that the primary reason for imposition of the penalty sought in this case is, by way of general deterrence, to deter corporations from risking contraventions of the Act which may otherwise obtain the benefit of an authorisation from the Commission, whether with or without conditions. 56. Patrick and P&O could have sought authorisation for the Arrangement during the relevant period. Patrick and P&O accept that they ought to have sought an authorisation from the Commission for the Arrangement so as to avoid risking contravention of the Act. On the other hand, the Commission accepts that, whilst the terms of the Arrangement were not provided to it for scrutiny in the context of an application for authorisation, it is relevant on the issue of penalty that the conduct did not result from a secret, collusive agreement. 57. In these circumstances, general deterrence will be served by the penalty proposed to be imposed upon the Second and Seventh Respondents, who were directly involved in the conduct at the relevant time. 58. It is submitted that no punitive element is warranted in the penalty awarded by the Court, as there has been no flagrant or wilful contravention of the Act by Patrick, P&O or any related body corporate. … 76. The conduct which is subject to penalty was engaged in by Patrick and P&O over a period of 14 months, approximately seven to eight years ago. It comprised an agreement between Patrick and P&O to rationalise automotive terminal infrastructure, including by the formation of a joint venture company to provide automotive terminal services in each of the three ports. The three ports constitute the main Australian destinations for importation of motor vehicles. 77. Patrick and P&O intended to make the Arrangement, proceeded to do so and to give effect to it. 78. The volume of commerce, measured by gross sales revenue over the relevant period in the markets affected by the conduct in question, cannot be accurately calculated by Patrick by reference to its audited accounts for the relevant period because Patrick compiled those accounts on an aggregated basis for its whole stevedoring business of which automotive stevedoring was a small proportion. On the basis of the aggregated information contained in its management accounts for the financial year 2001/2002 for its automotive, bulk and general stevedoring division, Patrick estimates that total gross revenue for automotive stevedoring services in the three ports did not exceed approximately $15 million for that financial year. 79. Similarly P&O did not during the relevant period keep accounting records which adequately identified revenues from its automotive stevedoring businesses for each of the three ports. No accounts were kept separately for "automotive terminals" or "automotive stevedoring" businesses. For the years ended 31 December 2001 and 31 December 2002 P&O estimates that total revenues from its automotive terminal and stevedoring businesses for the three ports were $14 million and $15 million respectively. 80. Whilst the conduct had the likely effect of substantially lessening competition in the relevant terminal services markets, the Commission accepts, for the purpose of these proceedings only, that the objectives of Patrick and P&O in entering the Arrangement were likely to have included increasing efficiencies by gaining access to scarce port land and the superior terminal in each port, and improving utilisation of that land. The increased capacity of the joint venture to invest in infrastructure, due to the increased volume of business, was also harnessed. In this respect, regard was had by Patrick and P&O to the desire of the Sydney Ports Corporation and the Port of Brisbane Corporation to have one automotive terminal only, with a view to achieving such efficiencies. 81. The Commission's case was that the conduct of Patrick and P&O, including the creation of AAT, led to a substantial lessening of competition in terminal services markets in each of the three ports. 82. On this issue, the Commission's position was (and remains) that whether the impugned conduct led to the gaining of efficiencies or other public benefits is irrelevant to whether or not there had been a substantial lessening of competition in relevant terminal services markets for the purposes of s45 of the Act. Rather, those matters are only able to be brought to account in the context of an authorisation application made under Part VII of the Act. 83. On the other hand, Patrick and P&O proposed to lead evidence that the relevant markets were no less competitive in future with the impugned conduct than without the impugned conduct, and argue that the operations of AAT resulted in increased efficiencies to customers, being shipping lines and importers, and stevedores (including potentially third party stevedores). Further, they contend that, to the extent such efficiencies could be established, they should be taken into account in the determination of whether or not there had been a substantial lessening of competition in the relevant terminal services markets. 84. The resolution of the proceedings in the manner the Commission, Patrick and P&O propose leaves to the authorisation process currently underway the determination of the question of whether any lessening of competition arising from the operations of AAT (at least in the future) is outweighed by any public benefits able to be established (including any efficiencies). There is no dispute between the Commission, Patrick and P&O that these matters can properly be raised in the authorisation process. 85. Patrick and P&O do not admit that the conduct in fact affected competition in contravention of the Act. Rather it has been admitted that the conduct had the likely effect of affecting competition substantially, as at November 2002. In the proposed resolution of these proceedings, the other allegations in the Second Further Amended Statement of Claim will be dismissed, and accordingly it is not necessary for the Court to consider the purpose or actual effect on competition in any market of the conduct, nor any conduct occurring after November 2002. The Amount of Loss or Damage Caused 86. The Commission, Patrick and P&O jointly submit that it is not possible to determine whether any quantifiable loss or damage was caused by the impugned conduct. 87. P&O and Patrick admit only that the Arrangement was likely to have the effect of substantially lessening competition in the terminal services market and do not admit that it had the effect of causing loss or damage. The Circumstances in which the Conduct took Place 88. The conduct was not clandestine. It was openly conducted between the parties, and was known in the market to have occurred, by customers of Patrick and P&O, the relevant ports corporations, and competitors, such as Toll. Customers were informed of the Arrangement at the time the Arrangement was first contemplated by Patrick and P&O. Degree of power, market share and ease of entry into the terminal services markets 89. Approximately 70% of motor vehicles sold in Australia were imported and 85% of those imported motor vehicles were delivered through the three ports. 90. In the ports of Sydney and Brisbane, Patrick and P&O were the sole providers of automotive terminal services. In the port of Melbourne, Patrick and Toll were the main providers of automotive terminal services. 91. As noted at paragraph 17 above, there were substantial barriers to entry into each of the terminal services markets. The size and financial circumstances of the Contraveners 92. The Second Respondent is a subsidiary of Asciano, a publicly listed company of some size and repute. 93. The Second Respondent has made a separate submission, which includes some confidential material, which relates to the financial circumstances of the corporate group of which the Second Respondent is a member. 94. The Sixth to Eighth Respondents are each ultimate subsidiaries of DP World Ltd which is a substantial listed company in Dubai conducting a container terminal business worldwide. Participation of Senior Management 95. The conduct admitted by Patrick and P&O was carried out by senior management employed at the relevant time. None of the individual executives involved in the conduct remain in the employ of Patrick, or any of the Asciano owned group of companies, or any of the P&O companies owned by DP World. None of the current directors of Asciano were directors of Patrick at the relevant time. 96. Asciano's ownership of Patrick arose from a hostile public company take-over by Toll, and accordingly Toll was not in a position to perform due diligence on the target companies, the First to Fifth Respondents, or to satisfy itself about the compliance with the Act of any of the terms of any arrangements entered into by those companies. 97. It is acknowledged that some shareholders in Asciano may have held shareholdings in the Respondents during the relevant period. For the most part however, the current shareholders in Asciano are public shareholders, whose investment in Asciano would be diminished by reason of the award of any substantial penalty against Patrick. 98. The shareholders of P&O are now completely different to those at the relevant time as set out in paragraphs 11 to 13 above. Culture of Compliance with the Trade Practices Act 99. Asciano retains specialist external legal counsel to conduct trade practices training with its staff on an annual basis and requires all relevant staff, including managers and directors, to attend such training. Training materials are supplied to staff which includes material relevant to compliance with Part IV of the Act generally, as well as in relation to the type of conduct the subject of these proceedings and the availability of authorisation under s88 of anti-competitive conduct on public interest grounds. 100. The DP World group had no involvement in these alleged contraventions or knowledge about them prior to the Commission commencing its investigation of the matter. 101. The DP World corporate respondents, and the DP World Group generally, have taken considerable steps to co-operate with the Commission and have sought to deal with the Commission in an open manner. For example, DP World proactively approached the Commission to bring to a close the long standing Section 155 investigation regarding the container terminal landside interface. DP World has since made considerable efforts to advise the Commission of developments in the container terminal landside interface bearing in mind the various State Government and Port Authority initiatives. 102. The DP World respondents have a corporate culture conducive to compliance with the Act. This is evidenced by DP World providing training to both senior management and compliance training at each of its terminals in 2008 for all personnel likely to be involved in those areas considered appropriate (especially the landside interface). DP World's senior management and its worldwide legal counsel have made it clear to DP World in Australia they wish DP World to engage with the Commission to improve the level of communication. Co-operation and Contrition 103. These admissions have been made well before hearing of the matter, and accordingly will result in a significant saving in court time, and costs and expense to the Commission in continuing to pursue the matter through the courts. 104. Patrick and P&O, as shareholders in AAT, support AAT pursuing its application for authorisation of AAT pursuant to section 88 of the Act, and will incur further costs during that process. 105. The Commission accepts that the decision of Patrick and P&O to agree to resolve these proceedings in this way has saved considerable Court time and Commission resources. Similar Conduct in the Past 106. The Court has not previously found that any of Patrick, Asciano, P&O or DP World have contravened the Act.

CONSIDERATION 29 As the authorities make clear, the determination of the amount of a penalty cannot be an exact science: NW Frozen Foods at 290; Mobil Oil (2004) ATPR ¶41-993 at [51]. 30 The determination of the amount is not done by the application of a formula and the courts have recognised that, within a certain range, one figure "cannot be incontestably said to be preferable to another": Trade Practices Commission v TNT Australia Pty Limited (1994)] ATPR ¶41-375 at 40,165. 31 The principle of parity of penalty for similar offences is an important one, but as Burchett and Kiefel JJ observed in NW Frozen Foods at 295, things are rarely equal where contraventions of the Act are concerned. Their Honours went on to say that the quantum of penalties imposed in other cases can seldom be of much direct assistance. 32 Here, the question of quantification of the penalty falls to be considered in light of the fact that the conduct in question is admitted to be likely to have had the effect of substantially lessening competition, but no admission is made that this was the purpose, or that it actually had that effect. 33 It is also to be borne in mind that the Commission accepts, for the purpose of these proceedings, that the objectives of Patrick and P&O in entering into the arrangement were likely to include increased efficiencies, as stated in [80] of the Joint Submissions. 34 The Commission's position is that the suggested increased efficiencies are irrelevant to the question of whether there was a substantial lessening of competition. Patrick and P&O dispute that proposition. But the fact that they do so is, no doubt, one that would have informed the negotiation process. So too is the fact that the parties were still in dispute as to whether the impugned conduct had the proscribed purpose or actual effect on competition. 35 What seems to me to be of particular importance is that the parties have agreed that the effect on competition of any continuing conduct by AAT at the terminals in Melbourne, Brisbane and Port Kembla, and any public benefit said to arise from such conduct, will be dealt with pursuant to the Commission's power to grant an authorisation under s 88 of the Act. 36 An application for authorisation has now been made, so that the question of public benefit will be considered by the Commission under s 90 of the Act. Section 90(6) provides that the Commission shall not grant authorisation unless it is satisfied in all the circumstances that the proposed conduct would result, or be likely to result, in a benefit to the public that would outweigh the detriment constituted by the lessening of competition; see also s 90(8). 37 Other important factors are the 14-month duration of the contravening arrangement, which was comparatively short, and the estimated revenue from the automotive terminal and stevedoring businesses at the ports in question. 38 Whilst the total annual value of retail motor vehicle sales in Australia is approximately $25 billion, of which a substantial percentage constitutes vehicles imported through the ports of Brisbane, Sydney and Melbourne, the estimates of gross revenue for stevedoring services is quite small. 39 Patrick estimates that its total gross revenue from stevedoring services in the three ports did not exceed about $15m for the financial year 2001 to 2002. P&O estimates total revenues not exceeding $15m in each of the years in question. 40 Another important factor is that the conduct was not clandestine. It was known in the market and customers were informed of the arrangement when it was first contemplated. 41 It is common ground that Patrick and P&O's customers were large shipping lines which have contractual and other commercial relations with large global motor vehicle manufacturers which export vehicles to Australia. None of the customers appears to have made any complaint about the conduct of Patrick and P&O notwithstanding the fact that approximately seven years have passed since it was first made known to them. 42 This is not to understate the seriousness of the conduct which has been admitted but it does distinguish it from the clandestine behaviour which is at the heart of price fixing cartels. It is therefore a factor (though of course not the only one) which informs the imposition of a much lower penalty than was ordered in Australian Competition and Consumer Commission v Visy Industry Holdings Pty Limited (No 3) (2007) ATPR ¶42-185 and ACCC v Qantas. 43 Other relevant factors include those that are referred to at [92]-[106] of the Joint Submissions set out above. 44 In addition, as is stated in the Joint Submissions, the admissions of liability have been made well before the hearing and will result in significant saving of court time, costs and expenses to the Commission. 45 This is an important aspect of public policy to which the majority judges referred in NW Frozen Foods at 291. As their Honours said, the beneficial consequences which flow from the settlement would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. 46 As Burchett and Kiefel JJ observed in NW Frozen Foods at 291:- The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. 47 It is also relevant to the quantum of the penalty that Patrick and P&O have each agreed to pay a contribution of $100,000 towards the Commission's costs of the proceedings. 48 The factors to which I have referred above satisfy me that the penalties to be imposed on Patrick Stevedores and P&O Ports are within the permissible range in all the circumstances. 49 I am satisfied that this is not a clear case for departing from the agreed settlement. 50 I will therefore make orders in terms of the draft short minutes of order handed up by counsel for the Commission. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Associate: Dated: 3 July 2009 Counsel for the Applicant: Ms J.S. Gleeson

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First to Fifth Respondents: Mr N.C. Hutley SC with Mr S.A. Goodman

Solicitor for the First to Fifth Respondents: Clayton Utz

Counsel for the Sixth to Eighth, Twelfth and Thirteenth Respondents: Mr A.J. Payne SC and Ms K.H. Barrett

Solicitor for the Sixth to Eighth, Twelfth and Thirteenth Respondents: HWL Ebsworth Lawyers

Counsel for the Tenth Respondent: Mr J.R.J. Lockhart

Solicitor for the Tenth Respondent: Arnold Bloch Leibler

Solicitor for the Eleventh Respondent: Johnson Winter & Slattery

Trade Practices Act 1974(Cth)

Australian Competition and Consumer Commission v PRK Corporation Pty Ltd [2009] FCA 715

At a glance

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Judgment (15 paragraphs)

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