ACCC v April International Marketing Services Australia Pty Ltd (No 8)

Facts

Asia Pulp & Paper Company Ltd (Singapore) and PT Indah Kiat Pulp and Paper Tbk (Indonesia), between 2000 and 2004, arrived at 'arrangements with competitors for the supply to customers in Australia of uncoated woodfree folio and cut-size paper (UWF paper)' containing 'provisions which had the purpose and effect or likely effect of fixing, controlling or maintaining the average price per metric tonne at which they would supply UWF paper to customers in Australia' and gave effect to those provisions' in its pricing for the supply of UWF paper to customers in Australia. This contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) of the Competition and Consumer Act 2010 and the Competition Codes defined in s 150A and 150I of the Act. (see para 1)

Orders

The following orders were made:

• The companies be restrained for a period of five years from "making any contract or arrangement or arriving at any understanding with one or more competitors for the supply of UWF paper to customers in Australia, which contains a provision with the purpose, effect or likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price at which any party to the contract, arrangement or understanding, or any related body corporate or agent, will supply UWF paper to customers in Australia (other than a contract made directly with a competitor who is a customer or agent of the respondent, for supply to that customer or by that agent)" or giving effect to a provision of such an agreement.

• That Asia Pulp & Paper Company Ltd (Singapore) pay a pecuniary penalty of $3,400,000

• That PT Indah Kiat Pulp and Paper Tbk (Indonesia) pay a pecuniary penalty of $800,000

• That the companies also pay a contribution to the applicant's costs in the amount of $300,000

Key quotes

[32] It has long been accepted that a principal object of a penalty under s 76 of the TPA is deterrence ...

[34] Deterrence has two aspects: specific deterrence in respect of the actual contravener and general deterrence of others ‘who may be disposed to engage in prohibited conduct of a similar kind’ (TPC v Mobil Oil Australia Ltd [1984] FCA 363; (1984) 4 FCR 296 at 297-298 per Toohey J). The Full Court in NW Frozen Foods made it clear (at 294-295) that:

The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay...

[35] The cases demonstrate the importance of general deterrence considerations for per se contraventions where competing or conflicting matters arise in determining penalty. In ACCC v McMahon Services Pty Ltd [2004] FCA 1425; (2004) ATPR 42-031 at 49,228, Selway J observed in relation to price fixing conduct:

Once it is understood that deterrence, and particularly general deterrence, is the primary principle in the imposition of penalty for price fixing, then at least two conclusions flow from that. First, it means that penalties for collusive price fixing will need to be substantial and significant. This is, of course, reflected in the size of the maximum penalty upon corporations of $10 million. However, it also follows logically from the principle. Collusive price fixing, particularly between tenderers is difficult to detect. Public enforcement often only occurs with "a tip from an affected party or an insider" (see Marshall & Meurer, "Bidder Collusion and Antitrust Law: Refining the Analysis of Price Fixing to Account for the Special Features of Auction Markets" (2004) 72 AntiTrust Law Journal 83 at 101). Given these difficulties and the potential for large profits from such practices there is a chance that those in the market place might be prepared to factor the risk of a low penalty into its pricing structure as a ‘business cost’. That would be inimical to the statutory purpose of ensuring that the practices do not occur. The penalty must be sufficiently high that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost.

[36] The above extract from Selway J’s judgment was cited with approval by Merkel J in ACCC v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; (2005) 215 ALR 281.

[37] In ACCC v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 329 at [22] Lee J said:

The object of orders made under s 76, or s 80, of the Act is to protect the integrity of markets and to prevent the subversion and distortion thereof by conduct that has the purpose or effect of adversely affecting competition. The Act sets out the norms to be met by corporations engaged in trade or commerce and in the main seeks to obtain adherence to those standards by providing for penalties to be imposed, and injunctions to be granted, that will be sufficient to deter corporations from risking, whether deliberately or negligently, the consequence of contravening the Act.

[Discussion of the Court's approach to agreements on penalties follows at para's 43-51. Bennett J concluded that the penalty and other proposed orders were appropriate]