Fraser Henleins Pty Ltd v Cody

Federal Court of Australia|1998-07-10|Before: Kiefel J

Conduct of the kind referred to in each of pars (a),(b) and (f) is alleged to have been engaged in by reason of what was said at the May 1992 meeting, which stood as confirmed by other evidence. The allegation that the statements in question were also directed specifically to two companies, with which Mr Jackson and Mr Coffey were associated, is not now pressed. It is not likely that the arrangement reached, and the discussion which took place in connexion with it, at the May 1992 meeting was connected with or contained any threat in relation to the supply of Mayo International products. Paragraph (a) is not made out. And, whilst the price which Mayo International provided as its "recommended retail price" was then understood by Mr Jackson to be that which was to be maintained, this was because of the agreement reached between him and Mr Le Court and not because of the way in which the price was itself stated in the lists which were published from time to time, which seems to me to be the concern of par (f). The first alleged contravention then falls to be considered either as an inducement or an attempt to induce sales at not less than the specified prices within the meaning of par (b). The respondents pointed to the apparent requirement of par (b) that the inducement, or attempt to induce, be directed to a reseller. As a simple matter of construction that appears to be correct. The "second person" there referred to is a reseller. What the submissions however further imply is that conduct will not fall within (b) when it comprises discussions with an intermediary. It is correct to observe that the discussion which took place and the arrangement reached with Mr Jackson, whilst providing the source for and explanation of later conduct said to contravene the Part, brings provisions such as s 45 TPA to mind, rather than those provisions under consideration. Such an issue does not however arise in these proceedings. In any event what that approach overlooks is the effect, or intended effect of what was undertaken and that these are the matters dealt with in par (b). In my view the communications in question are not required to be had with the reseller, so long as that person is in fact induced by the relevant conduct, or it can be shown that the supplier, in any event, attempted to bring that result about. Many means may be employed in such a process. The use of an intermediary is perhaps a more obvious one particularly where the resellers are part of a group such as franchisees. In the case of an inducement, the statutory provision will be satisfied where the necessary causal connexion is shown between the supplier's words or actions and the maintenance of price. When an attempt is in issue, the essential question will be whether the supplier can be shown, by the conduct in question, to have intended the reseller to act in that way. "Inducing" to my mind conveys both the means employed and the result. It refers to actions which are effective, although they may not have comprised actual coercion or pressure, or the offer of an advantage (see The Heating Centre case, 164, Pincus J). In the present case it has not been shown that the franchisees were in fact induced by what was arranged. It has not been shown that Mr Jackson ever made plain what their supposed obligations were and the evidence relating to the individual contraventions suggests that he did not. It is, however, clear that Mr Le Court intended that all those in the Price Attack group, whom he supposed to be subject to the influence, if not the direction, of the franchisor company and Mr Jackson, should sell at Mayo International's price if the fifteen per cent discount were reinstated. Indeed it would appear that he believed that the advantageous offer would be effective to bring this about. The necessary intention to bring about the result with identified resellers is then made out (and see Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168, 183). In these circumstances it is not necessary to consider the position of Price Attack itself as a reseller, through its own corporate stores.

The facsimile message of 24 November 1992 is also relied upon as conduct within each of pars (a), (b) and (f). It refers to discounting undertaken by one franchisee at Pacific Fair, the company Havencool Pty Ltd in which Mr Coffey had an interest. The terms of the letter are clearly a reminder to Mr Jackson of the arrangement that had been made, that no discounting on retail price would occur, and contains a veiled threat that the continuance of the fifteen per cent discount ("our trading terms") depends upon that. The communication was directed, once again, to Mr Jackson as the head of the Price Attack group, which comprised both the franchisor company and all franchisees. It stands as both a reminder and an attempt to have the Pacific Fair salon brought to heel by Mr Jackson and therefore an attempt to induce it to maintain Mayo International's prices. Neither par (a) nor (f) seem to me relevant, for much the same reasons earlier referred to. In the reasons which follow I have taken a similar approach and concluded that they do not have application, but I have not on each occasion so stated.

Only one occasion of conduct affecting Mr Cameron and the company Ferngloss Pty Ltd, has been made out. On that occasion Mr Blencowe, on behalf of Mayo International, encouraged Mr Cameron to use the new recommended retail price by the use of either a request (as to whether he "minded" doing so) or a suggestion or recommendation. This conduct, whilst arguably amounting to an attempt to induce, is not that alleged nor that relied upon in submissions.

Allegations of conduct directed to Mr McCloud, and the franchisee Sailnote Pty Ltd, were established on the evidence. In the first instance the statement by Mr Le Court, that he was visiting to ensure there was no discounting, is alleged to amount to conduct within s 96(3)(a),(b) and (f). The same allegation is made with respect to the second occasion of conduct. It seems to me that both fall to be considered only as inducements or attempts to induce resale price maintenance. The comment as to the purpose of Mr Le Court's visit is absent any threat or inducement. It takes the form of a negative encouragement, absent reference to any consequences which might follow. It is then in the category of a type of mild persuasion. Such persuasion, in my view, will suffice to qualify conduct as an attempt to induce the maintenance of price (see Assoc Professor Clarke, "Vertical Price Fixing in Australia" The Federation Press 1991 p 68 and following). Indeed persuasion of some kind will, at the least, be employed where it is intended to bring about that result. Here one may infer that intention from the words used, even if they were not expressed in strong terms. In each case much may depend upon what is known about the recipient and how that person will view what is said. The second occasion involved Mr Le Court complaining about Mr McCloud's practice of discounting to Mr Jackson. The terms of the complaint were then put to Mr Le Court by him in the following telephone conversation and were not denied by him. Mr Le Court then suggested other means which might address Mr McCloud's need to discount. It had the result that he desisted. This conduct, taken as a whole, amounted to an inducement.

Having regard to the evidence concerning conversations between Mr Kotis and Mr Le Court, the Commission now submits only that conduct under par (b) is made out. The statement made was in the nature of a request. This conduct could not in my view be taken as effective as an inducement. Mr Kotis raised his prices later and only when Mr Le Court's salon changed its prices. I acknowledge there may be difficulties in concluding that a "mere request" to maintain prices could amount to an attempt to induce (as Assoc Prof Clarke suggests, 70). A request however may be framed in such a way as to be persuasive and to be taken to have been so intended. There is no doubt an assumption that in commerce "mere requests" will ordinarily be of no avail. Mr Kotis' evidence is then somewhat unusual, for he imported some emotion into his account of the conversation with Mr Le Court. His evidence was that Mr Le Court appealed to Mr Kotis, as a person known to him over a long period rather than as a competitor, and about his (Mayo International's) product, which he said he thought was being damaged by Mr Kotis' action. It is of course possible that Mr Kotis deduced some kind of offer by Mr Le Court, in the way the matter was discussed, but this was not explored. Accepting the conversation occurred as Mr Kotis recounts, in my view it took the form of persuasion which involved the necessary intentional element. An attempt is therefore established. I should add that the Commission, in submissions, properly drew to my attention the prospect that I may not be satisfied that Mr Le Court spoke on behalf of Mayo International, and that he did so as a salon proprietor. I am however satisfied that he spoke as a person having an interest in the image and standing of Mayo International's products. It would have been otherwise if he had simply offered to change the prices on the Delva products in the salon.

The alleged conduct in connexion with Mr de Candia and Findham Pty Ltd has not been established.

I have accepted that Ms Shaw did say to Mrs Nicholson (Merryworth Pty Ltd) in about March 1994, that there was no need to change the prices of a Mayo International product. As such it may be seen as either advice, or an attempt to persuade Mrs Nicholson not to reduce the price below Mayo International's listed price. Whilst the evidence did not establish the allegations made, submissions addressed the evidence of Mrs Nicholson in the terms I have found. I therefore accept that conduct within par 96(3)(b) is established. The second occasion of conduct, in June 1995, was not made out.

The assertions made by the sales representative to Ms de Vries (Muscatstone Pty Ltd) were not as subtle and bordered on intimidatory. Whilst not having the desired effect, they amount to an attempt to induce price maintenance.

The conduct alleged in connexion with Mr McCahon (Third Gralloch Pty Ltd) was not made out.

Mr Blencowe suggested to Mr Cicchini that he sell at the recommended retail price, as the Jon Le Court salons were doing. He did not however do so for some time. Whilst it may not appear likely to be particularly persuasive it was, I consider, intended to have that effect and ought to be taken as an attempt to have the recommended retail price maintained.

Mr Blencowe did attempt to persuade Ms Criss (Millicroft Pty Ltd and Noosa River Heights Pty Ltd) to maintain Mayo International's price by a combination of references to its wishes and appeals to her, on the basis that Mayo International would take some action against him. Other conduct, which I take to be that amounting to a threat to withhold supply, as referred to in par (d) of s 96(3), was not made out.

Statements alleged to have been directed to Ms Hopp were not established.

The statement made by Mr Weedon to Ms Jackson, that she could not list products at other than the recommended retail price, was not amongst the allegations contained in the statement of claim. They depended largely upon Mr Coffey's evidence, which I have rejected. Whilst the statement of claim should have been amended, her statement of the incident in question was provided to the respondents and the proceedings were conducted on that basis. On this occasion the assertion made was effective, because of the possible implication it conveyed in relation to other franchisees. An inducement to maintain price has been established.

The statements made to Ms Stanojevic about the existence of an agreement between Mayo International and Price Attack, which obliged her and the corporate Price Attack store she managed to sell at Mayo International's listed price, amounted to an attempt to induce her to do so. (Ms Stanojevic ignored them). The additional comment that it was not necessary to do so, because of the quality of the product, did not detract from this. If that had been all that was said it would have been arguable that it was a mere expression of opinion, although, again elements of persuasion can be seen in it.

I have accepted that Ms Purcell (Purcell Holdings Pty Ltd) was at least the subject of some pressure to sell only at Mayo International's price. She was however disabused of the notion of any obligation by Price Attack's own staff. An attempt to induce retail price maintenance is nevertheless made out.

Even if one accepts that the sales representative who spoke to Ms Bretherton (Marlestone Park Pty Limited) was attempting to be helpful rather than dictatorial, the assertion that prices were "wrong" and "that there was therefore a need to change them" constitutes an attempt to maintain the price.

I have accepted that some discussion by the sales representative, conveying the wishes of Mayo International that discounting not be pursued, was made to Ms Moses. Whilst seemingly innocuous it is to be borne in mind that they are made by a representative of a supplier to a reseller who is not likely to be aware of what arrangements have been made between the supplier and the franchisor and who lacks any real power. In this background such statements are capable of conveying the prospect of an unknown, but undesirable, outcome. Whilst this may not be sufficient to convert it to the type of threats referred to in other parts of subsection 96(3), one is able to discern that the representatives would know that it would have impact and might, therefore, be effective to bring about the desired change. An attempt to induce the maintenance of the listed price is established.

The allegations in connexion with Ms Eastley were not made out.

The conduct in connexion with Mr Balmer was not established.

There remains, for consideration, the central allegations concerning the letters of June and July 1995. It is alleged that this course of conduct comes with not only s 96(3)(a),(b) and (f) but also par (d) which provides that the following are also acts with the meaning of s 96(1): "(d) the supplier withholding the supply of goods to a second person for the reason that the second person - (i) has not agreed as mentioned in paragraph (a); or (ii) has sold, or is likely to sell, goods supplied to him by the supplier, or goods supplied to him by a third person who, directly or indirectly, has obtained the goods from the supplier, at a price less than a price specified by the supplier as the price below which the goods are not to be sold;" The Commission then also refers to s 98 ("Withholding the supply of goods") and to that part which provides: "(1) For the purposes of paragraphs 96(3)(d) or (e), the supplier shall be deemed to withhold the supply of goods to another person if - … (b) the supplier refuses to supply those goods except on terms that are disadvantageous to the other person; …" In summary, and as relevant here, these provisions appear to provide that actions will amount to contravening conduct, where they comprise supply on terms disadvantageous to the reseller (the withholding of supply) for the reason that the reseller would not agree to maintain the supplier's specified price or has sold at prices less than it specified. "Disadvantageous" in this context would seem to me to comprehend supply on terms which would put the reseller at a disadvantage with other resellers in the marketplace. The letter of 23 June 1995 contained a veiled threat that the fifteen per cent discount might not continue if Mr Jackson did not abide by the agreement to ensure franchisees did not discount on resale. To take the reference to "trade terms" as referable only to that discount, and not to terms as to payment is, I consider, consistent with its use in other communications. That the letter and the threat were motivated by a franchisee's actions in discounting from Mayo International's prices is clear by the following, brief, reference to the Price Attack store at Kawana, on the north coast. That situation was not rectified. The later letter of 11 July accepts that Price Attack is unable to ensure that such practices will not continue. In the way in which it is expressed it is conceivable that that was the only reason for the withdrawal of the fifteen per cent discount on the wholesale price. The letter went on, however, to alter terms as to payment. The previous terms providing credit were not entirely withdrawn. They remained in place for those franchisees who complied with them. A separate category was created for those who did not. This approach was consistent with what had been threatened for some time and was not, I consider, motivated by the practices of franchisees concerning pricing. On the other hand, consistent with the admissions sought to be used against Mayo International, it would seem that franchisees' habits both as to pricing and non-payment combined to cause the decision to deny them the fifteen per cent discount in the future. The terms of the two letters in question fall outside the scope of pars (a), (b) and (f). Matters had gone beyond any attempt to secure maintenance of Mayo International's price. What was first threatened, and then put in place, was a change in the terms of supply to Price Attack franchisees because Mr Jackson and Price Attack were taken no longer to agree that retail sales would not take place at less than Mayo International's listed prices. This conclusion had been drawn because Price Attack franchisees were doing so and had in the past done so without any obvious intervention from Price Attack. Paragraph (d) is concerned with the supply to resellers and the reason for its being withheld or provided on disadvantageous terms. It does not however require that that reason be made known to the reseller, although in many cases that will be obvious. In my view the conduct in question falls within that provision. The wholesale price to Price Attack franchisees, without the fifteen per cent discount, would not permit them to compete by offering lower prices. Mr Le Court understood this. Mr Le Court's own evidence as to the discussions in May 1992 go some way towards confirming what I consider to be fairly obvious. Mayo International, by this means, was going to secure the maintenance of its listed prices. It was motivated to do so principally because some franchisees had not sold at the recommended retail price and because it apprehended that such practices would continue. Whilst problems with payments of accounts played some part in the decisions contained in the July letter, the substantial reason in question was that just mentioned (see s 4F(1)). The Second, Third and Fourth Respondents I have not had the benefit of submissions as to these respondents' complicity in the conduct I have found to contravene s 48. I shall allow a short period for written submissions as to these matters prior to hearing argument as to penalty. Orders In addition to directions as to the time for the filing of these submissions, the issues of penalties and costs shall be adjourned for further hearing on a date to be fixed. I will also make directions as to the filing of proposed orders by the Commission and as to outlines of argument.

I certify that this and the preceding fifty (50) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel

Associate: Dated: 10 July 1998

Counsel for the Applicant: Mr P O'Shea

Solicitor for the Applicant: Corrs Chambers Westgarth

Counsel for the Respondents: Mr R Hanson QC with him Mr L Bowden

Solicitor for the Respondents: Bowdens Lawyers

Date of Hearing: 10, 11, 12, 13, 16, 17, 18, 20, 23, 24 February 1998

Date of Judgment: 10 July 1998

Evidence Act 1995(Cth)s 87(1)(b)

Trade Practices Act 1974(Cth)

Part IV Trade Practices Act 1974(Cth)

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