Australian Competition & Consumer Commission v Dermalogica Pty Ltd - [2005] FCA 152 - FCA 2005 case summary — Zoe

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Australian Competition & Consumer Commission v Dermalogica Pty Ltd

[2005] FCA 152

Federal Court of Australia|2005-07-01|Before: Goldberg J

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Court

Federal Court of Australia

Decision date

2005-07-01

Before

Goldberg J

Source

Original judgment source is linked above.

Judgment (44 paragraphs)

[1]

introduction 1. This proceeding concerns a claim by the Australian Competition and Consumer Commission ('the Commission') that the respondent, Dermalogica Pty Ltd ('Dermalogica'), contravened s 48 of the Trade Practices Act 1974 (Cth) ('the Act'), by engaging in conduct that constitutes resale price maintenance under s 96(3) of the Act. The Commission seeks an appropriate pecuniary penalty pursuant to s 76(1) of the Act, and injunctive relief. 2. Dermalogica admitted to engaging in the practice of resale price maintenance within s 96(3)(b) and (f) of the Act, but denied that any conduct constituting resale price maintenance under s 96(3)(a) had occurred. Three questions fall for decision: first, whether the applicant has contravened s 48 of the Act insofar as s 96(3)(a) is concerned; secondly, what the appropriate pecuniary penalty should be for Dermalogica's conduct in contravention of s 48; and thirdly, whether an injunction should be granted.

[2]

Background 3. Dermalogica is a wholesaler of skin care products. It is a subsidiary of a United States of America corporation and sells the parent company's products to retailers across Australia. At the date of the hearing there were over 700 retailers within Australia to whom Dermalogica supplied its products. Two of these retailers, relevant for present purposes, were Fatal Attraction and Café Beauty Advanced Anti‑Aging ('Café Beauty'). Both are beauty salons providing a range of personal services to customers. The former is located in Melbourne, the latter in Sydney. Each also operated a website, on which it offered Dermalogica products for retail sale at discounted prices. 4. Dermalogica sees its products as a 'premium' brand. Ms Suzette Cassie (General Manager of Dermalogica in Australia, sole resident director of the company, and a secretary of the company) stated that the products are positioned or pitched, in relation to price, towards the higher end of the market. It is a 'professional product' that is sold and used by professional beauty salons, and is unavailable for retail purchase in supermarkets or other retail stores. This image of its products is a principal element of Dermalogica's marketing strategy. Dermalogica also maintains a system of recommended retail prices and communicates those recommended prices to retailers on order forms and price lists provided by Dermalogica from time to time. 5. Dermalogica's United States parent company maintains a website operated in conjunction with the Australian management of Dermalogica. Information about Dermalogica's products is made available on the website to the public and to professional stockists ('the website information'). The website information included guidelines for stockists in relation to retailing Dermalogica products via the Internet - particularly, guidelines for the use of Dermalogica's name, logos and other images, together with statements of Dermalogica's views in relation to the retail pricing of its products when sold via the Internet. 6. Café Beauty and Fatal Attraction both offered Dermalogica products for sale on their websites at prices lower than Dermalogica's recommended retail price. It was Dermalogica's response to the salons' discounting that gave rise to allegations of contravention of the Act.

[6]

The 23 July meeting 13. Andrea Mayne was the sales representative of Dermalogica responsible for liaising with Fatal Attraction. Georgio Caccamo, a director and secretary of Fatal Attraction, gave evidence, which was not contested, that on 23 July 2002 a meeting occurred at which Andrea Mayne, Sylvia Augello, the manager of Fatal Attraction, and Mr Caccamo were present ("the 23 July meeting"). 14. At the 23 July meeting Ms Mayne of Dermalogica told Ms Augello and Mr Caccamo that it was necessary to register Fatal Attraction's website with Dermalogica's parent company in order to sell Dermalogica products on the web. She gave Mr Caccamo a set of web guidelines. A conversation ensued as to the discount that Fatal Attraction was offering on its website in respect of Dermalogica products. Mr Caccamo said Ms Mayne used a "serious" tone of voice and that the conversation involved words to the following effect: "She said: 'We have a problem with you discounting the product.' I said: 'We are competitive'. She said 'Where we position the product we don't like the idea of it being discounted. It is a professional product. It needs to be recommended by professional people and salons.' I said 'How do you know we aren't doing that?' She kept repeating what she had already said. I said 'I can email you other sites that are discounting'. She said 'No that's impossible'. The conversation paused for a short time and then she continued. She said 'That's fine, if you could email me those sites. Look Georgio, I would hate to see this problem cause Dermalogica to cancel your account'. When Andrea made this last comment … I realised the seriousness of the conversation. I said 'If it went that far I think Dermalogica would have a serious problem, I am not just some little therapist who will get scared or back off.' [Emphasis added] 15. Dermalogica contended that Ms Mayne's comments during the 23 July meeting extended only to statements to the effect that Dermalogica "might", in a "worst case scenario", cease the supply of Dermalogica products to Fatal Attraction. It denied that any statements had been made to the effect that Dermalogica would withhold the supply of products if Fatal Attraction did not agree to sell at specified prices.

[25]

findings OF FACT 29. The publication of the web policies alone is not alleged to constitute Dermalogica 'making it known' that it will not supply products to those persons unless those persons retail the products at a price specified by Dermalogica. But the website information is relevant to whether representatives of Dermalogica made it known, particularly through conversations in person and over the telephone and by the letters of 16 September, to Fatal Attraction and Café Beauty that Dermalogica would not supply products to them unless they agreed not to sell the products at a price below a price specified by Dermalogica. 30. Statements such as those made in the website information are not made lightly. They were likely to be seen as serious and true statements of Dermalogica's intentions. Plainly in these statements Dermalogica was evincing a broad intention to keep a tight rein on the marketing and retailing of its products (at least on the Internet), in relation not only to the professional usage of those products but also to its image and, most importantly, its price. 31. It can be seen that the language of the website information varies within the document from "A violation of this policy can result in account termination and legal action" to "Violating any of these provisions will result in retraction of web approval and/or account termination." In my view, the inconsistency in use of 'can' and 'will' does not weaken the inference that the website information shows that Dermalogica intended that suppliers acting in contravention of these policies would be faced with the threat that supply of products would be withheld. That threat is plainly apparent, and it matters not that sometimes it was prefaced by 'can' and sometimes 'will'. 32. The inference I draw from the website information is that where Dermalogica or its employees adopted that information as their own by requesting people to read it, Dermalogica was intending to communicate to those people that they should conform to Dermalogica's consistent pricing strategy or else Dermalogica would take action which included cancelling a retailer's account. I infer also from Ms Cassie's evidence that this was a policy widely held and appreciated throughout Dermalogica. 33. In respect of Fatal Attraction, I am not satisfied that in July 2002 or even before 16 September 2002, Mr Caccamo actually read the website information or appreciated the contents of the website. The meeting of 23 July between himself and Ms Mayne is a sufficient basis for concluding, even absent Mr Caccamo's reading the website information personally, that he was aware of the position which Dermalogica took in relation to the consequences of breach of its policy on discounted sales of Dermalogica products. 34. There is no doubt that Ms Mayne's conduct during the 23 July meeting suggested that Dermalogica wanted Fatal Attraction to stop advertising the discounting of Dermalogica's products. Ms Mayne's conduct during that meeting must be examined and interpreted against the background of Dermalogica's web policies. It matters not whether the persons to whom Ms Mayne was speaking had read or were otherwise aware of those policies. If they were aware, then it was clear that violating the provision against discounting would result in account termination as set out in those policies. If they were not aware of the specific terms of the web policy I am nevertheless satisfied that Ms Mayne was seeking to implement the web policy of retraction of web approval and account termination by her observation "Look Georgio, I would hate to see this problem cause Dermalogica to cancel your account." Mr Caccamo heard that observation in which Ms Mayne used a serious tone of voice. In any event the receipt of the 16 September letter puts it beyond doubt. 35. I do not consider the conversation between Ms Mayne and Mr Caccamo that followed the 23 July meeting adds weight to the allegations of resale price maintenance under s 96(3)(a). It is really only a bare assertion that Dermalogica had received complaints from other stockists. 36. Turning to Café Beauty, I am satisfied that the substance and effect of Ms Mitchell's conversations with Mr Sleiman was that Dermalogica was complaining about the selling of its products cheaply, at a discount and not at its recommended prices and that Dermalogica wished to encourage strongly Café Beauty to sell at the recommended prices, including by asserting that the consequence may be the cessation of supply. 37. Mr Sleiman stated explicitly that he read the relevant website information and I have already stated the inference to be drawn from that information. In any event, the subject‑matter and tenor of the 16 September letter in conjunction with Mr Sleiman's statement that he had read the website information confirms, to my mind, that Dermalogica's attitude to Café Beauty's discounted Internet sales of Dermalogica product was made clear to Mr Sleiman. 38. In both cases the content of the policy or attitude which Dermalogica adopted in relation to the salon proprietors' discounted Internet sales of Dermalogica products was therefore clearly and intentionally communicated to the salon proprietors. That policy or attitude included the assertion that it was likely that account cancellation would result if the salon proprietors did not 'toe the line' and cease engaging in this conduct which was seen as potentially tarnishing Dermalogica's premium‑brand image. 39. However, in response to Mr Sleiman's query whether he could sell online at 10% less than the recommended retail price, Ms Mitchell told him that he could do so. The consequence was that Dermalogica's policy of cancellation still applied but the discounting which it required Mr Sleiman to cease was discounting beyond 10% of the recommended retail price.

[27]

The Certainty of the Threat 43. Counsel for Dermalogica argued that the words 'known' and 'will' in s 96(3)(a) demonstrate that there must be absolute certainty that the supplier would withhold supply of goods unless the second person agrees to sell at the specified price; that the threat must be unequivocal and the outcome absolutely certain; (counsel described the necessary state of affairs as a 'fait accompli, a blunt, no‑qualification, no‑argument position'). But even so, counsel noted that the ordinary or dictionary meaning of the word 'will' (which he contended should be adopted here) meant 'certainty or likelihood'. 44. The words 'known' and 'will' cannot be focused upon without considering the substance of the provision and of the conduct which it proscribes. It is precisely because the proscribed conduct involves indicating one's intention in relation to some future action, that it will almost never be absolutely certain that a particular threat will materialise. The outcome of the threat therefore can never be certain. This also follows as a consequence of the structure of s 96(3), which, in conjunction with subs (1), clearly makes the conduct described in s 96(3)(a) an independent instance of resale price maintenance, alongside any actual withholding of supply. 45. The threat itself, however, should convey an unequivocal intention to cease supply. It is not necessary that the supplier or the second person have supernatural foresight in order for the provision to be satisfied, but the threat must unequivocally indicate that withholding of supply is either certain or at least a likely consequence of the second person failing to maintain the specified resale price. 46. It is necessary to show that the second person appreciated the supplier's statement of their intentions. The second person must have understood the supplier's threat to be serious, that is that the supplier's withholding of goods would be the actual or likely outcome if the second person did not agree to sell those goods at the specified price. This is really where the element of likelihood discussed above becomes relevant, because the 'knowledge' or 'awareness' is in the mind of the person being threatened. The supplier must bring about in the mind of the second person a clear apprehension that the threatened action is at least likely. 47. The breadth of the language 'making it known' indicates that it need not be shown that the supplier communicated its intention in strong language or in any particular mandatory form of words. For example, it is not necessary that words be used such as 'If you entertain the idea of discounting the product, I would find a million and one ways of stopping supply' (see The Heating Centre Pty Ltd v Trade Practices Commission (supra) at 156). Indeed, in many cases in a commercial setting, a sense of politeness or grace may cause a person to use more oblique language and a more mild tone. 48. Further, although it is necessary to show that the supplier intended to use the threat of withholding goods to cause the second person to maintain the specified resale price, it is not necessary to show that the supplier actually intended to carry through on its threat. The supplier might make the threat even though it well knew that it was impossible or highly unlikely that it would act upon the threat. The legislation indicates, by proscribing such conduct, that the "making it known" can be sufficient in itself to ensure that the specified resale price is maintained. 49. It is also necessary to address the notion of 'agreement' in s 96(3)(a). In The Heating Centre Pty Ltd v Trade Practices Commission (supra) (per Lockhart and Wilcox JJ at 155 and per Pincus J at 164, 165‑166), the members of the Court stated that there is a difference between a supplier making it known that goods will not be supplied if the second person sells goods at a price other than the price specified, which does not fall within s 96(3)(a), and what is covered by the paragraph, namely that a supplier makes it known that goods will not be supplied unless the second person agrees that they will not sell goods at a price other than the price specified. 50. I do not consider that the notion of 'agreement' in the context of s 96(3)(a) should be confined to something resembling a negotiated compact or the explicit provision of an assurance. It can extend to acquiescence or submission by the second person to a unilateral demand by the supplier. Indeed, Lockhart and Wilcox JJ in The Heating Centre at 157-158 acknowledged as much. Their Honours held that the evidence before the trial judge had been capable of supporting a finding that s 96(3)(a) was made out in one instance where, although the evidence did not support a finding that there had been explicit efforts to seek an agreement, in the sense of obtaining a promise or an assurance, the second person had apparently accepted the demands of the supplier's agent. 51. There is no need for evidence that a formal agreement is sought. All that must be shown is that the supplier made it known that agreement by the second person not to discount is required to maintain supply; it need not be shown that the supplier was even seeking acknowledgment that it had been made known, let alone any indication of the second person's intended course of conduct in response to the making‑known. The provision requires only communication from the supplier to the second person, and it does not require anything in the nature of a response, nor does it require that the communication from the supplier sought a response. The second person may acquiesce or submit and may do so in complete silence.

[30]

Although the matter was left open in Trade Practices Commission v Simpson Pope Ltd (1980) 30 ALR 544 at 556, I am satisfied that where conduct constitutes a contravention of s 48 by satisfying more than one paragraph of s 96(3), there has been a contravention of only one provision of Pt IV for the purposes of s 76(3). 57. The next question to determine is whether there have been one or more contraventions of s 48, that is whether the contravening conduct should be considered the "same conduct" for the purposes of s 76(3). Contraventions of s 48 are not to be defined by reference to any one, narrow 'act' in the sense of a single verbal or written assertion about maintaining a specified resale price or the withholding of one single item that would otherwise have been supplied. The "same conduct" is to be understood by reference to the second person with whom the supplier deals, and perhaps by reference to the distinct subject‑matter of dealings between the supplier and the second person. Where there has been a course of conduct involving more than one "second person", it is more likely that there has been more than one contravention. 58. Section 48 is contravened twice in these circumstances - once in relation to each of the two salons, Fatal Attraction and Café Beauty. Each of those contraventions is constituted by a course of conduct engaged in by Dermalogica that amounts to resale price maintenance in relation to the particular salon. That is Dermalogica made it known to each salon that it would withhold supply unless the salon agreed to stop discounting (in the case of Café Beauty it was discounting beyond 10%) (s 96(3)(a)), it induced or attempted to induce each salon to maintain a specified resale price (s 96(3)(b)) and it used a statement of a price likely to be understood as a price from which the second person was not to deviate (s 96(3)(f)). For each of the two contraventions of s 48 so understood, a separate pecuniary penalty should be imposed. 59. This is not a case in which the parties have submitted to the Court by agreement a figure jointly proposed as the appropriate penalty. The Commission sought a penalty of no less than $150,000 for each contravention, while Dermalogica submitted that the penalty should be no more than $20,000 for each contravention. In such a case it is for the Court to decide what is an appropriate penalty, not to decide whether the figures proposed by the parties are within a permissible range: see Schneider Electric (Australia) Pty Ltd v Australian Competition & Consumer Commission (2003) 127 FCR 170 at 184.

[31]

Factors relevant to determining the penalty 60. There are a number of factors relevant to the determination of what is an appropriate pecuniary penalty in any given case. These factors are found in s 76(c) of the Act and in a number of cases (see Trade Practices Commission v CSR Ltd (1991) ATPR 41‑076 at 52,152‑153 per French J; and Australian Competition & Consumer Commission v NW Frozen Foods Pty Ltd (1996) ATPR 41‑515 at 42,442‑445 per Heerey J), and can be summed up as follows, although this list is by no means exhaustive (see Trade Practices Commission v CC (New South Wales) Pty Ltd (1994) ATPR 41‑363 at 42,723): · the nature and extent of the contravening conduct; · the amount of loss or damage caused; · any profit gleaned from the contravening conduct; · the circumstances in which the conduct took place; · the deliberateness of the conduct; · the size of the contravening company; · the contravening company's market share or market power; · whether the contravening conduct was brought about by senior management of the company or at a lower level; · whether the company has a corporate culture conducive to compliance with the Act; · any previous contraventions of the Act; and · whether the company cooperates with the Commission in investigating the circumstances, or admits breaches of the Act where proper so to admit. 61. The submissions of the Commission are also a relevant, but not a determinative, factor: Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd (2004) ATPR 41‑993 at 48,626. This is due to the Commission's expertise in such matters and to its role as the investigative and regulatory authority under the Act. 62. The Court must also have regard to the objects of the penalty regime, and to the principle of totality. I note that issues of parity and proportionality are not raised on the facts of this case. 63. The principle of 'totality' requires the Court to consider whether the aggregate of the penalties imposed for the several contraventions results in the total of the penalties exceeding what is considered to be proper having regard to the totality of the contravening conduct involved: McDonald v R (1994) 48 FCR 555 at 563; Australian Competition & Consumer Commission v SIP Australia Pty Limited (2003) ATPR 41‑937 at [60]; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 52‑53.

[32]

The objects of the penalty PROVISIONS 64. It is well established that the primary objective of the Act's penalty regime is deterrence: see Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40‑091 at 17,896; Trade Practices Commission v CSR Ltd (supra) at 52,152; Australian Competition and Consumer Commission v George Weston Foods Ltd (2000) ATPR 41‑763 at 40,986; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 294‑295; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) 44; Schneider Electric (supra) at 172 per Sackville J, 181 per Merkel J; Australian Competition and Consumer Commission v SIP Australia (supra) at 47,072. Deterrence has both a specific and a general element, so that the penalty is fashioned to deter the particular respondent from engaging in further contraventions of the Act and also more generally to deter members of the public from engaging in similar conduct by showing that contraventions of the Act will be dealt with seriously by the courts and will ultimately be more costly than compliance: see Burchett and Kiefel JJ in NW Frozen Foods v Australian Competition & Consumer Commission (supra) at 294‑295. 65. The object of deterrence is qualified by the proposition that the penalty should not be so great as to have an oppressive quality: Stihl Chain Saws (supra) at 17,896; NW Frozen Foods v Australian Competition & Consumer Commission (supra) at 293. 66. Counsel for Dermalogica advanced what was, in his own words, the "novel submission" that the object of 'general deterrence' is satisfied by the existence under the statute of the prescribed maximum penalties, and that the achievement of the objective of general deterrence does not, and should not, depend upon the exercise by the Court of the power to fix penalties in particular cases. Consequently, so counsel said, it is unnecessary, inappropriate and perhaps erroneous to taken into account a general deterrent effect flowing from the size of the particular penalty imposed in the instant case. 67. I reject that submission. It is well‑established in the authorities, and it is entirely sound as a matter of principle, that the Court should determine that a particular penalty is appropriate, bearing in mind the deterrent effect that the specification of a particular penalty will have upon future conduct in the wider community. If a court fixes a particular penalty for one case, the size of the penalty may discourage others from engaging in the same or similar conduct and in future cases of a very similar kind, the parties will be in a position to know the potential size of the penalty they face. People will not be deterred from engaging in any conduct which might fall within a proscription under the Act simply because there are specified maximum penalties. The general deterrent objective is dependent upon enforcement to be effective, which necessarily entails the exercise of the power to fix penalties in particular cases. 68. I would note one further issue. It is a vexed question whether any notions of punishment and morality are relevant to fixing the appropriate penalty for a contravention of the Act. In Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (2001) ATPR 41‑815 at 42,936‑42,937, Finkelstein J suggested that deterrence is not the sole object of the penalty regime, and that considerations of punishment or morality are not wholly excluded. See also Schneider Electric (supra) at [4] per Sackville J; SIP Australia (supra) at [24]‑[25]; but compare the opinion of the majority of the Full Court in NW Frozen Foods v Australian Competition & Consumer Commission (supra) at 296‑297. I have previously stated that where there has been a flagrant and wilful contravention, a court might take the view that a severe penalty was warranted having regard to the deliberateness and wilfulness of the contravention: Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (supra) at 43,810‑43,811. However, since the present case falls closer to the lower end of the scale of blameworthiness than would many other cases, any question of punishment is of marginal (if any) relevance.

[34]

The nature and circumstances of the relevant conduct 70. As Sackville J noted in Schneider Electric (supra) at [6], the character of the contravention will be the central determinant of a penalty decision, taking into account ameliorating circumstances. 71. I have already indicated that the contraventions in this case fall towards the lower end of the scale so far as breaches of Pt IV of the Act are concerned. The circumstances of this case can be contrasted with those of major cases of price‑fixing by companies with considerable market power in industries of wide significance to society: see for example Schneider Electric (supra); Australian Competition & Consumer Commission v ABB Power Transmission Pty Ltd (2004) ATPR 42-011. 72. I would characterise Dermalogica's behaviour in each case as deliberate, bold, and somewhat aggressive. There is no doubt that each of Ms Cassie, Ms Mayne and Ms Mitchell in the relevant circumstances deliberately acted to promote the interests of the company - and, perhaps, those of their stockists in South Australia and Western Australia, but that motive as I have said is not an ameliorating factor - by maintaining resale prices at the recommended retail price. Their object was comprehensive protection of the image of Dermalogica as a 'premium brand'. This was explicitly a factor in the reasoning they presented to Fatal Attraction and Café Beauty when explaining why they sought the maintenance of the specified resale price. I would also describe Dermalogica's conduct as quite naďve. Much of what was said and written by Dermalogica and its representatives was unusually frank. Ms Mitchell's statement to Mr Sleiman that Dermalogica could 'even cut off your account', when Mr Sleiman had questioned the legality of her actions, is an example of what was at least a rash disregard by Dermalogica to there being any legal problem with its conduct and at most a dogmatic belief that all was fair in business. 73. Dermalogica's conduct was anything but systematic. What has been alleged and proved or admitted comprises only two instances of resale price maintenance, both taking place within the same three‑month period. 74. The Commission did not dispute that there was a single contravention of s 48 of the Act in relation to each company for the purpose of fixing a penalty. However it contended that the contravention should be viewed as a more serious contravention because the conduct fell within three subparagraphs of s 96(3). I do not accept this submission. Section 96(3) sets out a number of types of conduct that constitute resale price maintenance. Some are more serious than others in the sense that they constitute a more blatant or deliberate act of contravention. I consider that one should approach the fixing of a penalty where there is a contravention falling into more than one of the subparagraphs of s 96(3) in a qualitative, rather than a quantitative manner. The number of ways in which conduct can be classified is not a relevant consideration, but rather the Court is guided by the well‑established principles in relation to fixing penalties, such as the character of the contravention.

[35]

Responsibility for the offending conduct: senior management and the holding company 75. Where the offending conduct was instigated at the level of senior management within a company the appropriate penalty will be higher than where it is a result of tactics adopted by lower‑level officers: Trade Practices Commission v CSR (supra); Australian Competition & Consumer Commission v J McPhee & Son (Australia) Pty Ltd (1998) ATPR 41‑628 at 40,897. Ms Cassie, the General Manager, sole resident director, and a company secretary, and apparently the most senior managerial officer of Dermalogica Australia, directly engaged in the offending conduct by writing and sending the letters of 16 September 2002. But she was not solely responsible. Ms Mayne and Ms Mitchell may not have been directly instructed by Ms Cassie to behave as they did, but I am satisfied that the sales representatives were not acting on a whim, spurred by the individual complaints made by Dermalogica's stockists in South Australia and Western Australia. I am satisfied, then, that this conduct was for the most part a product of an attitude inculcated at a senior level within Dermalogica's management structure. I do not think it necessary to address whether the company's attitude against discounted retailing had developed entirely at the initiative of Dermalogica's Australian management or by the initiative of the US parent company. 76. Where the role of Dermalogica's US parent corporation becomes relevant is in the content of the website information. Dermalogica sought, to an extent, to exculpate itself from any liability that might have arisen directly from the content of the website information. But I rejected that submission earlier. 77. In Schneider Electric (supra) at [49], Merkel J (with whom Black CJ and Sackville J agreed) noted that where a parent company bears some responsibility for contravening conduct the size of a parent company could be relevant to determining the size of the penalty to be imposed on its subsidiary. But I do not think that any involvement of Dermalogica's US parent corporation in determining the content of the website information should affect the penalty to which Dermalogica is subject. First, representatives of Dermalogica consistently adopted the website information as their own, referring to the representations contained in it and indicating to persons with whom they dealt that those persons should also read and appreciate those representations. Second, it became clear during Ms Cassie's cross‑examination that Dermalogica's Australian management had a significant degree of real control over the content of the website information. When Ms Cassie asked for the offending statements to be deleted on 5 November 2002, they were removed as and when she requested and the change became apparent on the website within a matter of days.

[36]

The position of the contravener: size, resources, market power 78. Dermalogica earns substantial revenue. Its revenue from ordinary activities has grown substantially over the four years prior to the commencement of the proceeding, from $4,486,346 for the year ending 30 September 2002 to $14,862,231 for the year ending 30 September 2002. During the same period its profit from ordinary activities, before income tax, had risen from $563,913 to $1,064,657, the profit for the year ended 30 September 2000 being $1,169,676 and profit for year ended 30 September 2001 being $1,011,062. These are the "financials" of a substantial and well‑established company. 79. Dermalogica has (or had at the relevant time) a 15% market share. This phrase is somewhat imprecise though, since there are different dimensions of the relevant 'market' in which Dermalogica participates to different degrees. Dermalogica also furnished an affidavit from Mr John Woods, the Executive Director of the Cosmetic, Toiletry and Fragrance Association of Australia Inc, who appeared well‑qualified to assess objectively the position of Dermalogica in the market relative to its competitors. His assessment was that, in the market for sales of cosmetics to or through salons, Dermalogica 'sells not more than 10 percent in terms of retail sales'. In the whole skincare market including sales through department stores and pharmacies, Dermalogica's sales 'account for less than 2% market sales.' Mr Woods stated that Dermalogica is one of the smaller of over 100 competitors in the cosmetics industry. 80. Consequently it appears that Dermalogica has no significant market power in the sense of the ability to sustain sales of products at a price significantly above market value or persistently to act in a manner unconstrained by competition: see Universal Music Australia Pty Ltd v Australian Competition & Consumer Commission (2003) 131 FCR 529 at [53]‑[57]. 81. The commercial consequences of Dermalogica's conduct are, as always, difficult to assess. This is especially so since both Fatal Attraction and Café Beauty appear to have continued their discounted Internet sales of Dermalogica products in spite of Dermalogica's blustering threats. Dermalogica's conduct caused no significant economic loss or damage to the salons. I would tend towards the view that, even if the impact of this conduct upon the market was measurable in any precise way, it would appear to have had little impact. This is in part due to Dermalogica's small share in the cosmetics market and in part due to the salons having continued to sell Dermalogica products at a discounted rate. However, in my view this factor should be given relatively little weight. An attempt to distort the market must be nearly as blameworthy and as proper an object of the Act's deterrent penalty regime as is an actual distortion of the market.

[37]

Cooperation with the Commission and willingness to comply with the Act 82. Cooperation with the Commission is relevant to, and may mitigate, the penalty imposed by the Court: Australian Competition and Consumer Commission v Tyco Australia Pty Ltd (2000) ATPR 41‑760 at 40,961; Australian Competition and Consumer Commission v SIP Australia Pty Limited (1999) ATPR 41‑702 at 43,005-43,006; Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (supra) at 40,892; Trade Practices Commission v CC (New South Wales) (supra) at 42,725. Considerable evidence was given in relation to this issue - perhaps more than for any other relevant factor. In short, although there was communication and provision of some information by Dermalogica to the Commission, the level of cooperation and compliance were in dispute. 83. It is useful to set out a short sequence of events in relation to the complaints, the investigation and the cooperation given by Dermalogica. At the time of the contravening conduct, Dermalogica had no compliance program, indeed its policy can be evinced from its letter dated 16 September and web policies. 84. Dermalogica submitted that it sought legal advice as to whether it could restrain stockists from selling below the prices Dermalogica recommended, and in particular whether they could refuse supply to achieve this result. However the date upon which the advice had been sought was in issue. Dermalogica's actual request for advice was withheld on the basis of legal professional privilege, but the tendered documents (including the letter of advice consequently provided by Dermalogica's initial solicitors, Steingold Abel) indicated that Dermalogica had sought advice. I accept the evidence of Ms Cassie that Dermalogica sought that advice on 16 September 2002, the same day that the letters discussed at par [19] above were sent to Fatal Attraction and Café Beauty. 85. Dermalogica received its advice from Steingold Abel on 26 September 2002, which summed up the provisions of the Act and concluded by suggesting that 'You may wish to write to [your stockists] to request that they sell at the recommended retail price, but you should also state that the price is not obligatory and also ensure that the request is not framed in such a way as to be taken [as] an attempt to induce the stockist not selling [sic] below the recommended retail price.' 86. Dermalogica became aware of Fatal Attraction's complaint and of the Commission's investigation the following day. By a letter of 27 September 2002, the Commission first advised Dermalogica of a complaint made by Fatal Attraction in respect of Dermalogica's conduct and requested that Dermalogica provide information to the Commission in relation to that complaint. Ms Cassie stated that Dermalogica immediately contacted Steingold Abel. On 30 September 2002, in a telephone conversation between Ms Cassie and Mr Mark Schramm, an officer of the Commission, Ms Cassie indicated she would provide the Commission with the information requested in its letter of 27 September. 87. On 3 October Steingold Abel wrote to the Commission to indicate that the firm had been consulted by Dermalogica to obtain their 'advice as to what action it could take (if any) to prevent stockists from selling products at less than the recommended retail price.' Upon provision of the requested advice, Steingold Abel said that Dermalogica contacted its agents and servants and instructed them not to take any action in relation to any stockists that were discounting prices. It requested the Commission to indicate that no further action would be taken. 88. The Commission responded on 3 October, noting that Steingold Abel's letter of 3 October appeared to suggest that Dermalogica was not willing to provide the information Ms Cassie had said the company would provide. 89. On 11 October Steingold Abel responded that Dermalogica had not agreed to provide all the information requested by the Commission. However, the 11 October letter provided information on a number of matters including Dermalogica's provision to its stockists of price lists and policies, approximate numbers of its stockists throughout Australia at that time, and Dermalogica's lack of an internal Trade Practices Act compliance program. Steingold Abel said that where Dermalogica had not provided the information the Commission had requested, alternative material could be provided. 90. The Commission wrote to Steingold Abel on 15 October (presumably not in response to the above letter, which was apparently received by the Commission on 17 October) further requesting information on a range of matters including those discussed in the 11 October letter from Steingold Abel. 91. On 5 November 2002 Dermalogica changed its website by deleting both those sections in which it was asserted that Dermalogica 'strongly discouraged' deviation from Dermalogica's suggested retail prices. There is no evidence that the assertion by Dermalogica that violation of any of the web policies could or would lead to cancellation of account, was deleted. I consider that the intention behind making only the former deletion but not the latter appears to have been to comply with the Act, while retaining the threat of account cancellation (among other things) as a sanction for breach of those web guidelines dealing with matters other than resale price maintenance, such as use of Dermalogica trademarks and images. 92. On 6 November KPMG Legal, who in the interim had been engaged to advise Dermalogica, responded on behalf of Dermalogica. KPMG Legal dealt with a wide range of matters. It is not necessary to discuss them in any detail save to say that the letter mentioned the complaints Dermalogica had received from stockists about the discounted internet sales, the sending of the 16 September letter, a change in the Dermalogica website content and that Dermalogica would welcome the opportunity to discuss the matters and the company's policies and procedures more fully with the Commission. 93. On 6 November 2002 Fatal Attraction and Café Beauty received a letter from Ms Cassie retracting the requests made in the letter of 16 September 2002 and acknowledging that in accordance with legal requirements, 'Dermalogica cannot and does not control or attempt to influence in any way or by any means the prices charged by its stockists or their advertised prices.' ("the retraction letter"). The content of the circular letter to all Dermalogica stockists was similar to the content of the retraction letters, although its stated object was merely to 'clarify' Dermalogica's position on both the issues of discounted Internet sales specifically and pricing policy generally. Dermalogica sent a similar email to its sales personnel, but it also instructed that where stockists complained about the prices of other stockists, the sales personnel should inform the complaining stockist that Dermalogica does not control or attempt to influence resale prices. 94. The Commission submitted that the delay of approximately six weeks between the 16 September letters and their retraction evidenced the company's lax attitude to compliance with the Act. Dermalogica submitted that, from the pattern of correspondence between Dermalogica's legal advisors and the Commission, the inference should be drawn that the delay was due to Dermalogica's legal advisors obtaining instructions, giving advice and cooperating with the Commission. 95. I am disposed to accept Dermalogica's explanation for its delay. Dermalogica was engaged in consulting with its legal advisors and, upon consultations being substantially completed, it immediately set about rectifying the situation. Even while those consultations were taking place, Dermalogica and its legal advisors were engaged in the process of cooperating with the Commission. In my view, Dermalogica's explanations for its delay are acceptable. It legitimately reserved its rights. 96. Further, I note that Dermalogica complied with the Commission's request insofar as it volunteered information to the Commission in relation to other potential breaches of the Act. Notwithstanding the delay and some slight confusion at the outset as to whether the requested information was forthcoming, in my view the evidence indicates that Dermalogica cooperated with the Commission adequately. 97. Similarly, I am satisfied that the changes made to the website on 5 November, the retraction letters of 6 November and Dermalogica's communication to its sales staff of the Act's implications for Dermalogica's pricing policy all indicate a reasonable attitude towards compliance with the Act. 98. However, I am not satisfied that Dermalogica has taken sufficient steps towards implementing an adequate program of compliance and control since it became aware that its conduct might have been in contravention of the Act. Since early November 2002, Ms Cassie had been designated as Dermalogica's 'compliance officer'. However, under cross‑examination, it became apparent that Ms Cassie had no significant awareness of the stipulations of the Act other than insofar as they had already been invoked against Dermalogica. This is but one example of a general ignorance of the Act within Dermalogica's corporate culture. Ms Cassie indicated that in early 2003 Dermalogica staff were treated to a trade practices training course over part of a day. But that, in my view, is a far cry from efforts which would encourage the sort of pervasive awareness of and respect for the Act which the courts have treated as a factor mitigating the appropriate penalty. 99. Finally, it is perhaps appropriate to note at this point that Dermalogica has not previously contravened the Act. As has been demonstrated recently in Australian Competition and Consumer Commission v George Weston Foods Ltd (2004) 210 ALR 486, a record of prior contraventions of the Act might become a factor raising the appropriate pecuniary penalty very significantly in a particular case. But this does not apply to Dermalogica.

[40]

injunction 106. The Commission sought an injunction pursuant to s 80 of the Act in relation to future acts of resale price maintenance by Dermalogica. Section 80 of the Act provides: "(1) Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: (a) a contravention of any of the following provisions: (i) a provision of Part IV, IVA, IVB, V or VC; (ii) section 75AU or 75AYA; (b) attempting to contravene such a provision; (c) aiding, abetting, counselling or procuring a person to contravene such a provision; (d) inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or (f) conspiring with others to contravene such a provision; the Court may grant an injunction in such terms as the Court determines to be appropriate. … (2) … (3) … (4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised: (a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; (b) whether or not the person has previously engaged in conduct of that kind; and (c) whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind. (5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised: (a) whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing; (b) whether or not the person has previously refused or failed to do that act or thing; and (c) whether or not there is an imminent danger of substantial damage to any person if the first‑mentioned person refuses or fails to do that act or thing. …" 107. Section 80 confers a broad power upon the Court to grant an injunction "in such terms as the Court determines to be appropriate". By reason of subss (4) and (5), the Court is empowered to grant an injunction even in the absence of factors that would, in the case of equitable injunctions, be considered necessary for the exercise of power. However, the power is limited in that the injunction must be in terms that the Court considers to be appropriate, which has been interpreted as requiring a connection between the contravening conduct and the future conduct that is prohibited by the injunction. The rationale for this is that where an injunction is made in terms that are too broad, the party enjoined by the injunction should not carry the burden of making an application to limit its scope: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248. In that case Gummow J considered the circumstances in which granting an injunction will be appropriate (at 267): "Thus, the terms of the injunction will not be "appropriate" if, on its face, it operates upon a range of conduct some of which does, but some of which does not, have the relationship required by s 80 with contravention of the Act. The injunction should not prohibit conduct falling outside the boundaries drawn by s 80: see Thomson Australian Holdings Pty Ltd v Trade Practices Commission(1981) 148 CLR 150 at 161. The same limitation applies to mandatory injunctive relief. It is, in my view, no support for the grant of an injunction which, from the outset, has an operation outside the boundaries of s 80, to say that it is open for the party enjoined to apply under s 80(3) to vary the injunction so as to bring its operation wholly within proper limits. The party in question should not be placed under any such obligation in the first place." 108. More recently, in Australian Competition and Consumer Commission v Francis [2004] FCA 487, Gray J considered the necessity of clear and specific terms of injunctive orders, particularly because one consequence of granting an injunction under s 80 is the creation of a liability for contempt of court where the injunction is breached. His Honour said (at [122]): "The effect of granting an injunction, if there is a repetition of the conduct enjoined, is to render the person enjoined liable to punishment for contempt of court. By this means, what would otherwise be a contravention of the Trade Practices Act can be converted to conduct rendering the person liable to a financial penalty, or, in extreme cases, to imprisonment. The Court must therefore be satisfied that the possibility of such consequences ought to be visited upon a person, if there should be a repetition of the conduct complained of, before granting such an injunction. The terms of the injunction must be specific, so that the person subject to it can understand clearly what conduct will amount to a breach of the injunction, and what conduct he or she can engage in legitimately."