Australian Competition & Consumer Commission v Kokos International Pty Ltd [2008] FCA 549 | Case summary

A. Kokos International Pty Ltd (ACN 009 404 611)

It is hereby declared that the First Respondent (Kokos) by making an oral agreement with the Third Respondent (IAE), the Fifth Respondent (Nanuri) and Jobbok International Pty Ltd (Jobbok) in early to mid 2004 (Oral Agreement), to the effect that: (a) the parties would, in the supply of Education Consulting Services (as defined in the Amended Statement of Claim) refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee (as defined in the Amended Statement of Claim); made a contract or arrangement, or arrived at an understanding, which contained a provision that: (b) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Trade Practices Act 1974 (Cth) (the Act); and accordingly (c) had the purpose or effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Act.
It is hereby declared that Kokos, by making a written agreement with IAE, Nanuri, the Seventh Respondent (Study Overseas Now) and Jobbok in mid 2004 (Written Agreement), to the effect that: (a) the Education Consultants (as defined in the Amended Statement of Claim) would refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; (b) the Education Consultants would monitor each other's conduct in relation to the practice of offering or agreeing to accept a Discounted Tuition Fee; (c) the Education Consultants would report any Discounted Tuition Fee to the so-called "Council of Korean Agency", which would comprise a representative of each of the Education Consultants; and (d) any Education Consultant that engaged in the practice of offering or agreeing to accept a Discounted Tuition Fee would be banned from enrolling students in the relevant School (as defined in the Amended Statement of Claim) for a period of three months; made a contract or arrangement, or arrived at an understanding, which contained a provision or provisions that: (e) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other, within the meaning of s 45A(1) of the Act; and accordingly (f) had the purpose or the effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Act.
It is hereby declared that Kokos, by engaging in the following conduct: (a) causing a copy of the Written Agreement to be sent to the following Schools on a date or dates unknown to the Applicant but within approximately one week after signing the Written Agreement: (i) St Mark's International College; (ii) Kingston College; (iii) Alexander Education Group; (iv) Edith Cowan University; and (v) Eurocentre Language School; (b) refraining from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee for various periods totalling approximately four weeks on dates unknown to the Applicant but in approximately the last six months of 2004 and/or the first six months of 2005; and (c) on or about 18 February 2005, sending to Jobbok a table containing information in relation to the terms and conditions, including incentives and benefits agreed between Kokos and a number of Schools for the purpose of assisting Jobbok to determine whether Kokos was adhering to the provisions of the Oral Agreement and/or the Written Agreement; gave effect to a provision or provisions of the Oral Agreement and/or Written Agreement in contravention of s 45(2)(b)(ii) of the Act.
It is hereby declared that Kokos, by sending an email to Mr Joseph Woo on or about 24 September 2004 in which Kokos: (a) informed Joseph Woo that the Education Consultants in Perth had formed the so-called "Council of Perth Overseas Study Agencies"; (b) informed Joseph Woo that members of the Education Consultants' "Council" restrict providing discounts to students apart from special offers provided to Education Consultants by Schools; and (c) urged Joseph Woo to join the Education Consultants' "Council" and comply with the rules; within the meaning of ss 76(1)(b) and 80(1)(b) of the Act, attempted to make an arrangement or arrive at an understanding with Joseph Woo that contained a provision or provisions which, by virtue of s 45A(1) of the Act would have constituted a contravention of s 45(2)(a)(ii) of the Act. B. IAE Edu Net Perth Pty Ltd
It is hereby declared that IAE, by making the Oral Agreement with Kokos, Nanuri and Jobbok in early to mid 2004 to the effect that: (a) the parties would, in the supply of Education Consulting Services, refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; made a contract or arrangement, or arrived at an understanding, which contained a provision that: (b) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Act; and accordingly (c) had the purpose or effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Act.
It is hereby declared that IAE, by making the Written Agreement with Kokos, Nanuri, Study Overseas Now and Jobbok in mid 2004 to the effect that: (a) the Education Consultants would refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; (b) the Education Consultants would monitor each other's conduct in relation to the practice of offering or agreeing to accept a Discounted Tuition Fee; (c) the Education Consultants would report any Discounted Tuition Fee to the so-called "Council of Korean Agency", which would comprise a representative of each of the Education Consultants; and (d) any Education Consultant that engaged in the practice of offering or agreeing to accept a Discounted Tuition Fee would be banned from enrolling students in the relevant School for a period of three months, made a contract or arrangement, or arrived at an understanding, which contained a provision or provisions that: (e) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Act and accordingly (f) had the purpose or effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Act.
It is hereby declared that IAE, by engaging in the following conduct: (a) refraining from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee from approximately July 2004 to November 2004; (b) on or about 18 February 2005, sending to Jobbok a table containing information in relation to the terms and conditions, including incentives and benefits agreed between IAE and a number of Schools for the purpose of assisting Jobbok to determine whether IAE was adhering to the provisions of the Oral Agreement, and/or the Written Agreement, gave effect to a provision or provisions of the Oral Agreement and/or Written Agreement in contravention of s 45(2)(b)(ii) of the Act. C. Sang-Hong Jung t/a Nanuri Education Centre
It is hereby declared that Nanuri, by making the Oral Agreement with Kokos, IAE and Jobbok in early to mid 2004 to the effect that: (a) the parties would, in the supply of Education Consulting Services, refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; made a contract or arrangement, or arrived at an understanding, which contained a provision that: (b) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Competition Code of Western Australia (the Code); and accordingly (c) had the purpose or the effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Code.
It is hereby declared that Nanuri, by making the Written Agreement with Kokos, IAE, Study Overseas Now and Jobbok in mid 2004 to the effect that: (a) the Education Consultants would refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; (b) the Education Consultants would monitor each other's conduct in relation to the practice of offering or agreeing to accept a Discounted Tuition Fee; (c) the Education Consultants would report any Discounted Tuition Fee to the so-called "Council of Korean Agency", which would comprise a representative of each of the Education Consultants; and (d) any Education Consultant that engaged in the practice of offering or agreeing to accept a Discounted Tuition Fee would be banned from enrolling students in the relevant School for a period of three months; made a contract or arrangement, or arrived at an understanding, which contained a provision or provisions that: (e) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Code; and accordingly (f) had the purpose or the effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Code.
It is hereby declared that Nanuri, by refraining from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee for various periods totalling approximately four weeks on dates unknown to the Applicant but in approximately the last six months of 2004 and/or the first six months of 2005 gave effect to a provision or provisions of the Oral Agreement and/or Written Agreement in contravention of s 45(2)(b)(ii) of the Code. D. Study Overseas Now Pty Ltd
It is hereby declared that Study Overseas Now, by making the Written Agreement with Kokos, IAE, Nanuri and Jobbok in mid 2004 to the effect that: (a) the Education Consultants would refrain from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee; (b) the Education Consultants would monitor each other's conduct in relation to the practice of offering or agreeing to accept a Discounted Tuition Fee; (c) the Education Consultants would report any Discounted Tuition Fee to the so-called "Council of Korean Agency", which would comprise a representative of each of the Education Consultants; and (d) any Education Consultant that engaged in the practice of offering or agreeing to accept a Discounted Tuition Fee would be banned from enrolling students in the relevant School for a period of three months, made a contract or arrangement, or arrived at an understanding, which contained a provision or provisions that: (e) had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of s 45A(1) of the Act; and accordingly (f) had the purpose or the effect or was likely to have the effect of substantially lessening competition; and thereby engaged in conduct in contravention of s 45(2)(a)(ii) of the Act. E. Chul Woo Kim
It is hereby declared that the Second Respondent (Chad Kim) by engaging, on behalf of Kokos, in the conduct that constituted each of the contraventions of the Act by Kokos referred to in paragraphs 1, 2 and 3 above was directly or indirectly, knowingly concerned in, or party to, the contraventions by Kokos of ss 45(2)(a)(ii), and 45(2)(b)(ii) of the Act within the meaning of ss 76(1)(e) and 80(1)(e) of the Act. F. Young Gil Pae
It is hereby declared that the Fourth Respondent (Ace Pae) by engaging, on behalf of IAE, in the conduct that constituted each of the contraventions of the Act by IAE referred to in paragraphs 5, 6 and 7 above, was directly or indirectly, knowingly concerned in, or party to, the contraventions by IAE of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Act within the meaning of ss 76(1)(e) and 80(1)(e) of the Act. G. Rebekah Cabalt
It is hereby declared that the Sixth Respondent (Rebekah Cabalt) by engaging, on behalf of Nanuri, in the conduct that constituted each of the contraventions of the Code by Nanuri referred to in paragraphs 8, 9 and 10 above, was directly or indirectly, knowingly concerned in, or party to, the contraventions by Nanuri of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the Code within the meaning of ss 76(1)(e) and 80(1)(e) of the Code. H. Seow Bing Yeo
It is hereby declared that the Eighth Respondent (Bernard Yeo) by engaging, on behalf of Study Overseas Now, in the conduct that constituted the contravention of the Act by Study Overseas Now referred to in paragraph 11 above, was directly or indirectly, knowingly concerned in, or party to, the contravention by Study Overseas Now of s 45(2)(a)(ii) of the Act within the meaning of ss 76(1)(e) and 80(1)(e) of the Act. Injunctions Bernard Yeo
Bernard Yeo be restrained for a period of three years from the date of this order, whether by himself, his servants or agents or otherwise howsoever and by any means whatsoever from being in any way directly or indirectly, knowingly concerned in, or party to, any contract, arrangement or understanding with Kokos, IAE, Nanuri, Jobbok or any supplier of Education Consulting Services in Western Australia which contains a provision that: (a) has the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by any of the parties to the contract, arrangement or understanding in competition with each other; or (b) has the purpose or a substantial purpose of preventing, restricting or limiting the supply of Education Consulting Services to Korean students or prospective students by any of the parties to the contract, arrangement or understanding who are competitive with each other. Pecuniary Penalties Bernard Yeo
A pecuniary penalty of $500 is imposed on the Eighth Respondent in relation to his involvement in the contravention of the Act by Study Overseas Now set out in paragraph 11 above.
The Seventh and Eighth Respondents are to pay the applicant's costs, to be taxed, if not agreed.

(a) providing information about available courses of study in Perth, including information regarding fees; (b) providing advice as to which of the available courses may be suitable for a prospective student's requirements; (c) providing informal oral translation of promotional materials and course information published in English by the Schools; (d) facilitating application to, and enrolment in, courses of study at Schools; and (e) facilitating payment of fees by students or prospective students to Schools. 5 The company does not have exact figures for the annual turnover and profit for the 2004/2005 and 2005/2006 financial years. Mr Yeo has stated that no profits were made during those periods. That fact is not agreed but the ACCC did not dispute his statement. I will therefore proceed on the assumption that no profits were made. It is agreed that Study Overseas Now employed four full time staff. 6 Mr Yeo was at all material times a servant or agent of Study Overseas Now authorised by it to conduct business in its name and on its behalf and was responsible for its day to day management. It is agreed that at all material times Study Overseas Now and each of the following businesses: (a) Kokos International Pty Ltd (Kokos); (b) IAE Edu Net Perth Pty Ltd (IAE); (c) Nanuri Education Centre (Nanuri); and (d) Jobbok International Pty Ltd (Jobbok) were competitive with each other in the supply of education consulting services. 7 Schools published details of the fees payable for each course of study offered and where a student enrolled at a course at a School through Study Overseas Now: (a) the student paid the tuition fee to Study Overseas Now and Study Overseas Now remitted part or all of the tuition fee paid by the student to the school; (b) the school paid a commission to Study Overseas Now for enrolling the student in the course. The commission was calculated as a percentage of the tuition fee and was paid in one of the following ways: (a) the School paid a commission to Study Overseas Now upon receipt of the full tuition fee; or (b) the School permitted Study Overseas Now to deduct its commission from the tuition fee and remit the balance to the School. The manner and payment and the amount of commission agreed to be paid by a School varied according to the particular terms and conditions agreed between Study Overseas Now and each school. Study Overseas Now did not directly charge fees to students for supplying education consulting services. 8 Before early to mid-July 2004 the market comprised Kokos, Nanuri, Jobbok, Study Overseas Now, the Schools and an unknown number of small service providers. The practice then, of offering or agreeing to accept a discount tuition fee, was commonly engaged in by competitors in the Perth market for education consulting services. In mid-July 2004 IAE entered the Perth market. There followed a meeting between Chad Kim on behalf of Kokos, Ace Pae on behalf of IAE, Rebekah Cabalt on behalf of Nanuri, Bernard Yeo on behalf of Study Overseas Now and Jacob Kim on behalf of Jobbok. Those present at the meeting made a written agreement on behalf of their respective employers to the effect that in the supply of education consulting services to students or prospective students: (a) the parties would refrain from engaging in the practice of offering or agreeing to accept a discounted tuition fee; (b) the parties would monitor each other's conduct in relation to the practice of offering or agreeing to accept a discounted tuition fee; (c) the parties would report any discounted tuition fee to the "Council of Korean Agency" which would be constituted by a representative of each of the parties; and (d) any party that engaged in the practice of offering or agreeing to accept a discounted tuition fee would be banned from enrolling students in the relevant School for three months. Study Overseas Now had not at any time before entering into the written agreement offered or accepted discounted tuition fees from students. It did not accept discounted tuition fees thereafter. 9 Neither Study Overseas Now nor Mr Yeo have engaged in a contravention of the Trade Practices Act 1974 (Cth) (the Act) in the past. Study Overseas Now cooperated with the ACCC before and following the commencement of the proceedings. Before being joined in the proceedings Mr Yeo did not provide full cooperation, however since being joined he has offered full cooperation. 10 The declaratory and injunctive orders proposed against the seventh and eighth respondents and to which they consent are in accordance with those sought against the other respondents. I will therefore make the declaratory and injunctive orders. They are within power and appropriate. The outstanding question is that of penalty. 11 In penalty submissions filed by the ACCC it was submitted that Study Overseas Now did not at any time before or after entering into the written agreement, offer or accept discounted tuition fees from students. Therefore it was submitted there was no evidence of direct loss or damage caused to particular consumers by the company's conduct or by that of Mr Yeo. To the extent that they participated in creating the written agreement given effect to by the first to sixth respondents, their conduct contributed to loss and damage caused by those respondents. 12 The ACCC accepted that Mr Yeo was ignorant of the fact that the conduct was unlawful. It acknowledged that there was no evidence that he had concealed or attempted to conceal it. It was submitted that he engaged in the conduct deliberately in response to concerns about the commercial viability of the business but not with the intention to contravene the Act. It was, however, clear from the face of the written agreement that he would have been aware that the conduct would have a detrimental effect on competition in the market. It appears also to have been common ground that Study Overseas Now did not take any steps to give effect to the written agreement. 13 Mr Yeo was employed as the manager for the company. The company had no compliance program in place. The parties agreed that a principal object of a penalty under s 76 of the Act is deterrence. It was submitted that Study Overseas Now was arguably in a position of considerable responsibility and power relative to the students it serviced. 14 Study Overseas Now and Mr Yeo filed their own submissions as to penalty. 15 Study Overseas Now was deregistered on 18 March 2006 and was only reinstated for the purposes of these proceedings. During its period of registration it was a small scale company with only four employees. It was submitted that the offending conduct occurred during mid-2004 for a period of approximately five months and was never initiated nor implemented by the company. 16 The company also referred to its cooperation with the ACCC, the fact that its conduct was undertaken in ignorance of the relevant provisions of the Act and that it had an insignificant percentage of the relevant market. At the time of its conduct, Mr Yeo was the only person who represented Study Overseas Now. 17 In addition to those considerations Mr Yeo, for his part, pointed out that he has no assets and is currently not employed although he is actively looking for employment. When he was working for Study Overseas Now he rarely drew a personal wage. During his employment with the company he worked on two other jobs to sustain its debts and to pay associated business expenses. He submitted that given his financial circumstances either no pecuniary penalty or in the alternative, a small pecuniary penalty would achieve the current objectives of the Act. The factual aspects of his submissions were not disputed by the ACCC. 18 In my opinion there is no point in imposing a pecuniary penalty on the company which has been re-registered for the purposes of these proceedings. There is a point of distinction to be drawn between the involvement of Nanuri and Ms Cabalt with which I have already dealt, and the involvement of Study Overseas Now and Mr Yeo. In the case of Nanuri and Ms Cabalt there was evidence that the business did discontinue the practice of offering discounted tuition fees albeit, as it turned out, to its own detriment. Neither Study Overseas Now nor Mr Yeo changed their practice after entering into the agreement. Their practice before entering into the agreement had been not to offer discounted tuition fees. Another point of distinction is the asset position of both the company and Mr Yeo. 19 So far as Mr Yeo is concerned, I will, impose a penalty of $500 which reflects the limited scope of his involvement in the contravention, the absence of any implementing conduct, his ignorance of the law and his personal circumstances. The fact that he has cooperated in reaching a resolution without the need for any litigation is also a factor in his favour. 20 I will make orders for costs against the company and against Mr Yeo to be attached or agreed. Whether recovery against the company is possible is questionable. 21 I will also make the outstanding declarations which were agreed for the other respondents. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Australian Competition & Consumer Commission v Kokos International Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)