Trade Practices Commission v David Jones
(1985) 7 FCR 109(1986) 64 ALR 647
[1986] ATPR 40-671
(Judgment by: Fisher J)
Re: TRADE PRACTICES COMMISSION
And: DAVID JONES (AUSTRALIA) PTY. LIMITED; RUSSWAT NOMINEES PTY. LIMITED; MYER S.A. STORES LIMITED; ZELLEN PTY. LIMITED; BRUCE HANDEL WATT; JOHN STANLEY WATSON; CHRISTOPHER RUSSELL; ROBERT JOHN WOOD; JAMES ANTHONY CORCORAN, No. G29 of 1985
Subject References:
Trade Practices
Judgment date: 6 February 1986
SOUTH AUSTRALIA DISTRICT REGISTRY, GENERAL DIVISION
Judgment by:
Fisher J
These proceedings were commenced by the Trade Practices Commission ("the Commission") by application filed together with a statement of claim on 28 May 1985 . Nine parties were respondents to the application, namely David Jones (Australia) Pty. Limited ("David Jones"), Russwat Nominees Pty. Limited ("Bedroom Mazurka"), Myer S.A. Stores Limited ("Myer") Zellen Pty. Limited ("Zellen"), Bruce Handel Watt the director of Buying (Home Wares) for the Adelaide Division of David Jones, John Stanley Watson and Christopher Russell both directors of Bedroom Mazurka, Robert John Wood South Australian Regional Merchandise Co-ordinator (Home Furnishings) of Myer and James Anthony Corcoran a director of Zellen which traded under the business name of "Corcoran Agencies".
The endorsements on the application sought a pecuniary penalty against each respondent in respect of alleged contraventions of s.45 of the Trade Practices Act 1974 ("the Act") and injunctions pursuant to s.80 of the Act. The statement of claim may be summarised as alleging that at a meeting held on 19 March 1984 the respondents made an arrangement or arrived at an understanding to the effect that as from 1 April 1984 or thereabouts the corporate respondents (other than Zellen) would sell certain items of Sheridan manchester products in the Adelaide metropolitan area at prices stipulated in a list distributed by Corcoran. This conduct was alleged to contravene sub.para.45(2)(a)(ii) of the Act. The statement of claim also alleged that the corporate respondents gave effect to this arrangement or understanding contrary to the provisions of sub.para.45(2)(b)(ii) of the Act. The five individual respondents were alleged to have been knowingly concerned in or a party to the contraventions.
Certain of the respondents applied to have the statement of claim struck out on the ground that it did not disclose a reasonable cause of action. This application was successful, the reasons for my decision being reported at 1985 ATPR case 40-607 page 46-903, and the whole of the statement of claim was struck out. An amended statement of claim was filed on 19 August 1985 .
Each of the corporate respondents, other than Zellen, which respondents I shall hereafter refer to as "the retailers", carries on extensive retailing activities in the Adelaide metropolitan area, David Jones in Rundle Mall, Myer in Rundle Mall and at Colonnades, Marion and Tea Tree Plaza and Bedroom Mazurka at Glenelg, Colonnades, Tea Tree Plaza, West Lakes and Marion. At all relevant times each sold considerable quantities of Sheridan manchester bedroom products which are hereafter more particularly identified in what will be called the Corcoran list. These products were manufactured by or for Dunlop Olympic Limited. Zellen acted as commission agent and distributor in South Australia for Sheridan manchester products.
In addition to the retailers another two groups were selling Sheridan manchester products in Adelaide in 1983 and thereafter. These groups I will refer to collectively as "the discounters" and they comprise Mr. & Mrs. MacLeod who traded in partnership as "Bedmates" and Duna World Pty. Limited ("Duna World") with which was associated Manchester Markets Pty. Limited. The latter company carried on an extensive business as a discounter of Sheridan products under the name "Pirate Pete" from 1981 to July 1984, whereas Duna World which had a smaller turnover did not engage in discounting to the same extent as Pirate Pete. The Bedmates partnership was, during 1983, carrying on business in Rundle Arcade, adjacent to the Rundle Mall, and in December of that year opened another outlet in John Martins Plaza, just off the Rundle Mall. During that year Duna World operated in Unley Road, Unley and Pirate Pete at 0'Halloran Hill and Pelican Plaza, Ridgehaven. Within the Central City shopping area of Adelaide, Harris Scarfe Limited and John Martin Retailers Limited also carried on substantial retail businesses, stocking inter alia Sheridan products, but these companies were not involved in the proceedings.
It was not disputed by any of the respondents that the individual respondents met together at the invitation of Corcoran on 19 March 1984 and discussed retail prices of Sheridan manchester products. There is however no direct evidence that the corporate respondents or any of them made the arrangement or arrived at the understanding alleged. For ease of reference I will hereafter call the arrangement or understanding allegedly made or arrived at "the understanding".
For the reasons hereafter to appear I am of opinion that an understanding as alleged has been established by the Commission. I make this finding as a matter of inference drawn from circumstantial evidence. This evidence reveals both an incentive and an opportunity to arrive at such an understanding as well as subsequent concurrent acts of and the lack of sworn evidence from the respondents. I will deal with each of these matters in turn.
Circumstances in the market place prior to the meeting indicate that there was an incentive for the retailers to arrive at an understanding. These circumstances were revealed in October 1984 when officers of the Commission interviewed each of the retailers. The interviews were recorded in reports of interview which were signed by the individual respondents and indicated the views of each of them of these circumstances. Corcoran gave his version in answers to a notice served pursuant to s.155 of the Act. These officers, Craig Jackson Henderson and Richard Townsend, gave evidence to the Court and in the reports of interview they are identified as "C.J.H." and "T" respectively.
As most of the evidence on this and other matters is to be found in exhibits tendered during the hearing and not in the transcript of evidence, it is probably more helpful to repeat extracts from the documents even though the consequence will be to lengthen somewhat these reasons.
In response to questions from these officers the respondents Watson and Russell on behalf of Bedroom Mazurka described the circumstances existing prior to the meeting of 19 March 1984 as follows:
"Mr Watson: Well the reason why (we) were happy to see such a meeting take place was because our viability in the market place depended on us not having to discount to the extent of which the market got to in 1983. If the market got to that stage we just could not exist and what was discussed was the fact that everyone agreed there was no future for anybody if that situation occurred again. But there was no real answer to the problem if it was going to happen it was going to happen.
CJH: What was the situation?
Watson: Selling at a level such that the mark up was not enough to meet overheads. Effective 18%.
CMr Russell: And that doesn't pay the rent.
CJH: Was there any resolution, decision or understanding made or arrived at by yourself and Mr Corcoran and any other persons who may have been present? Provide details.
CMr Russell: Yes, the resolution was we all felt that business was heading no where if we all continued they way (we) were going."
In answer to questioning by Henderson the respondent Watt, on behalf of David Jones, gave the following answers:
"CJH: Why did you discuss retail prices with other persons at that time?
Mr Watt: (The) reason we discussed prices on Sheridan merchandise is that there is a lot of discounting of that merchandise in this market place.
CJH: What was your purpose? What did you or Mr Corcoran hope to achieve?
Mr Watt: (There was) a lot of discounting of Sheridan at that time. The market place was very disrupted. Discussion was on that disruption.
CJH: Would people like to have reduced the degree of discounting?
Mr Watt: Our profit margins were being eroded and I would have liked to have seen us selling at a higher price.
CJH: How long was this discounting of concern, 3, 6 months, a year?
Mr Watt: It was a fairly lengthy time at the time we reduced our prices considerably to come down under Myer's prices."
Mr. Trott, a buyer employed by David Jones at the date of the meeting but not at the time of the hearing, gave evidence in which he described the competition in the market place. He said that in mid 1983 David Jones was "having to meet quite substantially the prices from the Pirate Pete Manchester market on first grade merchandise". The margin above cost of the prices he was meeting was 10%.
The respondent Wood, at the interview of Myer, described the state of the market as "very disruptive, prices were flying around everywhere" and that at the meeting there was "general agreement that the general level of pricing in South Australia was stupid." There was also evidence from the discounters of approaches to them by Corcoran and the directors of Bedroom Mazurka on the topic of discounting during the latter part of 1983.
In his answers to the s.155 notice Corcoran said of the circumstances which prompted him, as distributor of Sheridan products, to invite the other individual respondents to a meeting and to prepare the Corcoran list of retail prices:
"There were two principal reasons for producing the list. The first was that I considered that, unless the prices of Sheridan products were stabilized, a number of the retailers would cease selling Sheridan products because it was not possible for them to sell these products profitably. This would result in there being insufficient outlets for Sheridan products in the Adelaide area and therefore lost sales of Sheridan products. In 1982 Sheridan had discontinued its previous practice in South Australia of producing a list of recommended retail prices for its products. (Recommended retail prices had continued to be produced for other states.) Representatives of a number of retailers of Sheridan products had contacted me in March 1984 and discussed the prices being charged for Sheridan products. As Sheridan did not provide its retailers with recommended retail prices each retailer had to calculate its own retail prices. After consultation with Mr. Paul Hawcroft, the General Manager of Sheridan (Hawcroft), it was agreed that the earlier practice of producing a list of recommended retail prices should be resumed and that realistic recommended prices which reflected the market conditions should be used in preparing the list. I believed that a list of recommended retail prices could provide a useful guideline to the retailers in their pricing of Sheridan products and that with such a guideline the prices might stabilize at levels which were both commercially realistic in the competitive nature of the market and sufficient to allow retailers a reasonable level of profitability. The second reason was that a number of the "discount" retailers frequently placed advertisements which included what was purportedly the usual retail price of Sheridan products in addition to the retailer's advertised price. Frequently the "usual" price shown in the advertisements was a price at which the goods had never been sold in the Adelaide area and I considered that the advertisements were false and misleading and damaged the image of Sheridan products. I considered that the production and distribution of a list of recommended retail prices would discourage advertising using comparisons with false retail prices."
This was the atmosphere in the market place when Corcoran invited the other individual respondents to meet with him on 19 March 1984 . Each of the individual respondents, none of whom gave evidence in the proceedings, was interviewed, as previously related, in October 1984 concerning the meeting of 19 March 1984 .
The respondent Wood attended that meeting on behalf of his employer Myer. He agreed that Corcoran invited him to the meeting and initiated the discussion on the subject of retail prices of Sheridan merchandise. After acknowledging that the market "was very disruptive and prices were flying around" he said that Corcoran submitted a suggested retail price list. This list, Corcoran said, was an appropriate level of pricing that should apply to South Australia and that it was a guide. Wood agreed that he responded that he was sure "Myer would prefer to work at prices closer to this level than what we are currently working on." In response to a question whether any commitment was given, Wood ("Mr.W.") replied -
"No there was no committment (sic) given. I explained that prices are set in Melbourne and that I had no authority. In addition to that we have a competitive pricing policy which is administered by our stores and I have no authority over them.
CJH: What did the others say?
Mr W. I can't recall any committments (sic) given by anybody else.
T: There were other comments by other people.
Mr W: The guy from DJ said I'll have to discuss it with my buyer.
T: Bedroom Mazurka. What did they say?
Mr W: I can't recall. I can remember Jim Corcoran talking about the new range of merchandise.
T: Jim Corcoran must have been a disappointed man if that was the sum total of the responses.
Mr W. I had only been there a couple of weeks. I didn't know the ins and outs of merchandise. At the time there were complaints directed at Jim Corcoran on the atrocious level of deliveries at that time. He said we'll fix these things they will be better in the future.
T: Was there reference to other retailers and in particular referring to their pricing policies.
Mr W: The only reference I can recall was Jim Corcoran saying that he felt that the general trade would work at or around the suggested price list.
T: Did he explain how he felt that?
Mr W: He didn't explain it.
T: Any other comment made by any other person
Mr W: No.
CJH: To make that explicit
Was there any resolution, decision or understanding made or arrived at by yourself and Mr Corcoran and any other persons who may have been present? Provide details.
Mr W: There was general agreement that the general level of procing in South Australia was stupid.
Mr G: No other agreement or decision?
Mr W: No.
CJH: That an agreed assessment of the state of the market, does a decision flow from it as to what's going to be done about it.
Mr W: No.
Mr G: Were there any deecisions made at the meeting by anyone present.
Mr W: No.
CJH: I show you a copy of a price list marked MS
l. Have you seen a copy of this before?
Mr W: I'm pretty sure this is what he put forward.
CJH: It is alleged that Mr Corcoran produced a copy of this at the meeting of 19 March 1984. Is this correct?
CJH: It is alleged that an arrangement or reached to sell Sheridan merchandise at the prices on this price list. Is that correct?
Mr W: No.
CJH: It is further alleged that it was agreed that Mr. Jim Corcoran would prepare and distribute copies of this price list to be used by the persons present. Is that correct?
Mr W: Yes. I took one away with me. It's the only copy I think I had.
CJH: It is alleged that the prices were to come into effect on or about 1 April 1984. Is this correct?
Mr W: No.
CJH: Did Myer receive a copy of this price list?
Mr W: Yes.
CJH: What was the source of the price list?
Mr W: Jim Corcoran.
CJH: To what use was the price list put?
Mr W: I simply used it as an indication what the market would be like in terms of pricing and advised Melbourne.
CJH: You took it as an indication as to what the market would be like (what drew you to this conclusion).
Mr W: Because Jim Corcoran said he felt that most retailers would be at or about this price level.
CJH: Did Myer price its Sheridan merchandise in accordance with the price list?
Mr W: Yes I'm not certain that it was all put into effect I sent it to Melbourne.
CJH: Did Myer change its retail prices for Sheridan merchandise on or about 1 April 1984? If so for what reason?
Mr W: I would think it was during April we had our new range in and I presume the retails were changed at that time."
After expressing uncertainty whether the list prepared by Corcoran was presented to them at the meeting, a matter which subsequently was conceded, Russell and Watson gave the following answers to questions put to them -
Mr Watson: As individuals we further discussed what we thought the market would stand. We were concerned that there was no guide and had been no guide for at least a year with regard to suggested retail prices. Prior to the time in question (which) each new price list that came out, had always had printed on it Suggested retail price as with most other suppliers. To help alleviate the matter seeing that Sheridan was not doing it at the time Jim Corcoran was prepared to prepare what he considered a realistic retail price for the Adelaide market. That would give a guide as to what a person wanted to do within his own organisation. The coffee was out and that was about it.
...
"CJH: You've said Mr Corcoran was to prepare a suggested retail price list, on what basis was it to be calculated?
Mr Russell: As we (already) said what the market could bear, we discussed amongst ourselves what would be a fair and reasonable mark up. It was bandied around about the 70% mark up would be acceptable to the consumer and allow a reasonable profit to be made. It was a realistic suggested retail. Quite often suggested retail prices come out that are unrealistic as to what the consumer would be prepared to pay.
CJH: It is alleged that the agreed prices were to come into effect on or about 1 April 1984.
Is this correct?
CJH: Rephrase 21. It is alleged there was to be a movement to this margin of about 70%.
Mr Watson: Alleged by whom?
CJH: By indeed several people one of the persons being in attendance at that meeting.
Mr Watson: I've got no idea.
Mr Russell: There was no date set or agreement to stick to those prices. It was a suggested retail only.
CJH: Did Bedroom Mazurka receive a copy of this price list?
Mr Russell: Yes.
CJH: What was the source of the price list?
You understand the source of it was Corcoran Agencies?
Mr Russell: Yes.
CJH: To what use was the price list put?
Mr Russell: As a guide.
Mr Watson: As a guide to what the industry...
Mr Russell: .....felt was a reasonable mark up.
CJH: Did Bedroom Mazurka price its Sheridan merchandise in accordance with the price list?
Mr Russell: Yes.
CJH: Did Bedroom Mazurka change its retail prices for Sheridan merchandise on or about 1 April 1984. and If so for what reason?
Mr Watson: The new range arrived and there was an introduction of a price increase with the new range.
Miss C: Do you want to explain what you mean by price increase?
Mr Watson: Wholesale price increase.
Mr Russell: It would have been around that time. (Mr Russell looks at a price list).
Mr Russell: I don't know it was too long ago."
As to David Jones, Watt answered, to the extent relevant, questions put to him at the interview as follows:
"CJH: Who invited you (Mr Watt) to the meeting or who initiated the discussion with Mr Corcoran on the subject of retail prices of Sheridan merchandise?
Mr Watt: Mr Corcoran asked me to have a cup of coffee with him.
CJH: Where and when did the meeting occur? State what was said or proposed by Mr Corcoran at the meeting and your responses and comments by any other persons who may have been present?
Mr Watt: A cup of coffee at Kappy's Coffee Lounge in Stephens Place.
CJH: Do you know the date?
Mr Watt: 19th of March 1984.
CJH: Mr Corcoran invited you to have coffee.
What did you discuss?
Mr Watt: A lot of things I cannot remember.
CJH: (We are) particularly interested in prices of Sheridan merchandise (Do you) have any recollection of that?
Mr Watt: Yes, he produced what he called a suggested retail price of Sheridan merchandise and he asked if that would help in anyway to reduce the very heavy discounting of Sheridan merchandise in the market place at that time.
RDT: What was the response of you and others present?
Mr Watt: I said it could possibly help but it was our policy to mark our merchandise at or below the price of other competitors around town.
CJH: Do you recall what Mr Russell and Mr Watson said?
Mr Watt: No I can't.
RDT: What was Mr Corcoran's response?
Mr Watt: He said, I will go ahead and issue a suggested retail price list.
RDT: Referring to what?
Mr Watt: The price list he had.
CJH: (Shows price list DJ l) Is that a copy of the price list he produced at that time?
Mr Watt: To the best of my recollection it was.
CJH: Any suggestion of date when it (list) was to become operative.
Mr Walker: We are not terribly interested in this. We have our own pricing policy. Not interested in what manufacturers retail is. We make sure we are under our competitors in the whole of Adelaide. John Martins, Target. We take them all on.
RDT: (Recap of Mr Walker's statement)
Mr Walker: That's right.
CJH: Mr Watt, did you meet with Mr Corcoran at any other place at any other time?
Mr Watt: We have discussed Sheridan prices over a long period of time.
CJH: Why did you discuss retail prices with other persons at that time?
Mr Watt: (The) reason we discussed prices on Sheridan merchandise is that there is a lot of discounting of that merchandise in this market place.
CJH: What was your purpose? What did you or Mr Corcoran hope to achieve?
Mr Watt: (There was) a lot of discounting of Sheridan at that time. The market place was very disrupted. Discussion was on that disruption.
CJH: Would people like to have reduced the degree of discounting?
Mr Watt: Our profit margins were being eroded and I would have liked to have seen us selling at a higher price.
CJH: How long was this discounting of concern, 3, 6 months a year?
Mr Watt: It was a fairly lengthy time at the time we reduced our prices considerably to come down under Myer's prices.
CJH: Did you (Mr Watt) meet with Mr Corcoran and/or any other person at any other time and discuss the retail price of Sheridan merchandise (this includes telephone conversations).
Provide details of these discussions. (Or discuss this price list.)
Mr Watt: Only that it would be issued?
CJH: If it was issued, what was its purpose?
Mr Watt: (It was the) suggested retail that Mr at.
CJH: What ...was there any reciprocation from others present?
Mr Watt: Not from me.
CJH: The others?
Mr Watt: The general feeling was that if prices went up in the market place they may put their prices up.
CJH: To put it baldly, it is suggested an agreement was reached on that price list?
Mr Watt: No.
Corcoran gave in his answers to the s.155 notice his version of what happened at the meeting. He said:
"12.(c) I produced a list of recommended retail prices for some of the products in the Sheridan range. This list is the list referred to in l4 as 'Attachment l'. At the meeting I produced copies of this list and handed a copy to each of those present. I discussed with all of those present the manner in which the recommended prices had been calculated. As not all retailers were represented at the meeting, I indicated that I would send copies to other retailers in the Adelaide area. At no stage during the meeting did I indicate to those present that they were required to charge the prices set out in the list. The list was intended only as an aid to them in the calculation of retail prices of Sheridan products. I am unable to recollect the individual responses of those present at the meeting but the general tenor of their responses led me to believe that those present regarded the prices set out in the list as realistic and the markups reasonable in the current market situation, and that for the time being, they would be likely to price at about those recommended retail prices.
17. (d) I told the representatives of the retailers to whom I distributed the list that it was a suggested retail price list and intended as a guide in the pricing of Sheridan products. I also said that those retailers represented at the meeting at Kappy's had indicated that they would be likely to price at about the recommended prices set out in the list. At no stage did I indicate to the retailers that they were required to charge the prices set out therein.
(e) I do not recollect the exact response of each retailer but I believe that each indicated that they would be likely to charge the prices set out in the list of approximately those prices.
l8. (a) No arrangement was made or understanding arrived at involving Sheridan or Zellen or myself in relation to the retail prices of Sheridan products. I am unable to say whether an arrangement was made or understanding arrived at by any of the other persons present. I refer to my response to 12(c). Nothing was said that in any way placed an obligation upon the retailers represented to charge the prices set out in the list. I did not interpret anything that was said as placing an obligation upon any of the retailers represented at the meeting to charge the prices listed.
(b) No arrangement was made nor understanding arrived at on the terms or conditions upon or subject to which Sheridan products would be supplied by Zellen or Dunlop. No products were supplied by me."
The following list of prices was handed by Corcoran to each of the other individual respondents during this meeting at Kappy's Coffee Lounge. It is the list which I call the Corcoran list. "SUGGESTED RETAILS
Sheet Sets B 57.95 DB 73.95 QS 98.95 Single Unit Sheets SB 25.95 DB 29.95 QS 38.95 KS 49.95 Pillowcase Standard 12.95 Pillowcase Ruffled 27.25 Standard Quilt Covers SB 47.95 DB 59.95 QS 67.95 KS 86.95 Ruffled Quilt Covers SB 56.95 DB 69.95 QS 81.95 KS 98.95 Comforter Sets Std. SB 163.00 DB 192.00 QS 210.00 Comforter Sets Outline Quilted SB 178.00 DB 212.00 QS 237.00 Sheet Sets SB 48.50 DB 62.50 QS 76.50 Single Unit Sheets SB 21.50 DB 25.50 QS 32.50 Pillowcase Standard 6.50 Pillowcase Ruffled 12.50 Standard Quilt Covers SB 39.50 DS 49.50 QS 57.50 Ruffled Quilt Covers SB 47.50 DB 59.50 QS 69.50"
It is now necessary to relate the evidence of what each of the parties did subsequent to the meeting of 19 March 1984 although it is conceded that all such evidence is not necessarily admissible even conditionally against all respondents. Such happenings however may amount to further circumstantial evidence from which inferences may be drawn.
Shortly after the meeting Corcoran had a further communication with the retailers and made a number of adjustments to his list of retail prices. He amended the figure of "$98.95 per Sheet Sets QS" to "$89.95" and added the following items and prices:
"Ruffled Base Valances SB $ 39.95 DB $ 46.95 QS $ 55.95 KS $ 76.95"
23. On or about 23 March 1984 Corcoran visited the MacLeods. He said to them -
"I have had a meeting with David Jones, Myers and Bedroom Mazurka. I did not worry about Michael Trott. I have gone above his head to Bruce Watt, and they have all agreed they would be happy with about 70 per cent."
Corcoran handed to MacLeod a copy of his list and said he had given a copy to "everyone in town". In reply to a question from MacLeod as to when it would take effect Corcoran replied "From 1 April". MacLeod told the Court that he raised his prices to the prices shown in the list on about 1 April 1984 .
On 29 April 1984 the MacLeods advertised a sale of Sheridan products at prices "dramatically lower" than those on the Corcoran list. On the following day MacLeod was visited by Corcoran. The latter said that he had been contacted by several retailers who he said were very unhappy that Bedmates was not sticking to the agreed prices. MacLeod replied that he understood he could have an occasional sale. Corcoran replied -
"We might have to change this idea of having an occasional sale. If its all right for you to have a seven hour Sunday sale; its all right for Mazurka to have a seven hour Tuesday sale."
On 3 June the MacLeods advertised another sale at reduced prices. On 13 June there was a showing of a new range of Sheridan manchester products at Corcoran's showrooms. When MacLeod arrived Corcoran said to him -
"Bedroom Mazurka and Pirate Pete have complained to Paul Holcroft and Bruce Jesson about your prices, and I just want to let you know that you could be walking into a bit of a flak here tonight."
Prior to the meeting on 19 March 1984 Corcoran had telephoned Mr. T.D.J. McNamara, who was a director of Duna World and Pirate Pete. On this occasion, which McNamara fixed at late February, he said Corcoran said something had to be done about the retail price at which Sheridan was being sold in Adelaide. McNamara said he replied that he thought that things had got to a ridiculous level. Corcoran then asked McNamara if "a price agreement could be reached or could everybody be brought to see a bit of reason and go to a reasonable margin on the products of Sheridan, would I be willing to go along with the pricing structure." McNamara said he replied that "if something was arranged like that I would do it so long as it suited me". Corcoran then told him that he would be talking to the other retailers of Sheridan manchester to see what could be done about the pricing arrangement and that he would get back to him at a later date if and when anything was agreed upon.
McNamara said that Corcoran was in touch with him by telephone in the third week of March and reported that an agreement had been reached with the Rundle Street sellers and Bedroom Mazurka that they would all operate on a retail price some 70 per cent above the wholesale price. Corcoran asked McNamara if he would go along with that and whether he could have his word on it because none of the retailers would agree unless he was a party to setting his prices at the same level as theirs. In reply to McNamara's question concerning the retail prices, Corcoran gave him a list over the telephone, a copy of which was received subsequently by McNamara. In reply to the latter's query concerning when the pricing structure would take effect Corcoran said " 1 April 1984 ". He said that a period of time was required in which to change signs and reprice stock. McNamara said "well that is okay by me. From 1 April we will operate at those prices".
It is apparent that Corcoran organised and attended the meeting of 19 March for the purpose of arranging an understanding with the Rundle Street retailers and Bedroom Mazurka that they would sell at the prices in his list if he could persuade the discounters, the MacLeods and McNamara, to cease discounting and to sell at these prices. It was not a fortuituous meeting on a social occasion such as in Nicholas' case infra but preconceived and arranged. However this evidence, or at least much of it, is not necessarily admissible against the retailers to establish that they reached an understanding to this effect amongst themselves. It is necessary as a first step to relate the action that each took subsequent to the meeting.
Russell acknowledged in the report of his interview that Bedroom Mazurka priced its Sheridan merchandise in accordance with the Corcoran list. When Watson was asked whether Bedroom Mazurka changed its retail price on or about 1 April 1984 he replied, as set out in full above, that a new range of merchandise arrived and there was an introduction of a price increase with the new range. However Russell subsequently said that this was an error as the new range had arrived in late February or early March. He agreed that there had been a change in prices at about 1 April 1984 .
As to Myer Wood said at his interview that he "simply used it as an indication what the market would be like in terms of pricing and advised Melbourne". When asked what drew him to this conclusion he replied "because Jim Corcoran said he felt most retailers would be at or about this price level". In response to a question whether Myer priced its merchandise in accordance with the price list Watt replied "I am not certain that it was all put into effect I sent it to Melbourne". He was also asked whether Myer changed its retail prices for Sheridan merchandise on or about 1 April 1984 and if so for what reason. His answer was "I think it was during April we had our new range in and I presume the retails were changed at that time". It also appears that Wood did more in relation to the price list than merely to send it to Melbourne. Prior to sending it on he had a discussion with a Mr. Smith, to whom he passed the price list with the following note attached, namely
"27.3.84
To: D. Smith
Please find attached the agreed S.A. Sheridan prices, as previously discussed.
R.J. Wood."
This list, together with certain additional handwriting thereon, was forwarded to the Commission by Myer on 5 December 1984 in response to a telephone request by Mr. Townsend. It was accompanied by a letter in the following terms -
"December 5, 1984
The Regional Director,
Trade Practices Commission,
G.P.O. Box 922,
ADELAIDE, 5001
Dear Sir,
Further to Mr. Townsend's telephone request of 3rd inst. please find enclosed a photocopy of the Price List sent by Mr. Wood to Mr. D. Smith in Melbourne, together with a photocopy of the attached memorandum from Mr. Wood.
Mr. Wood says that his reference to the 'agreed S.A. Sheridan prices' was his shorthand way of referring to the indications Mr. Corcoran had given of what he expected the market would be like - see his third last response to Question 14 and his last response to Question 24 in the Interview conducted on October 19, 1984.
Yours faithfully,
Myer Stores Limited,
(Signed) A.H. Gordon,
Company Secretary."
It is apparent that the writer of the letter, who was present at the interview between Myer officers and the Commission, considered it necessary to attempt to explain the words "...agreed S.A. Sheridan prices". Wood however did not give evidence to verify this explanation, and therefore it is equally open to read the words as meaning the prices agreed at the meeting of 19 March 1984 or as subsequently discussed and agreed by Wood with Mr. Smith. Each of the latter two interpretations of the note could amount to circumstantial evidence which can be used to draw the inference that Myer was a party to an alleged understanding concerning prices. The additional handwriting on the list contains the date "2 April", which was the first date for business in April 1984 and the alleged date for implementation of the understanding. No explanation or reason was given for the insertion of this additional handwriting. There is also evidence from the MacLeods and also Trott referred to hereafter that Myer did increase its prices to those in the Corcoran list during April, and possibly as early as the second week thereof.
With respect to the respondents David Jones and Watt, Trott gave evidence of events at David Jones thereafter. He said that he was a buyer involved in the selection and buying of merchandise and the fixing of the retail prices thereof. He was well acquainted with Corcoran and Watt was his immediate superior as the director of buying. Watt had conveyed to him the policy of David Jones on pricing, namely that David Jones would not be beaten in price. He was also instructed that he was not at liberty to depart from the prices at which goods were ticketed unless the customer mentioned that a cheaper product was available elsewhere. He said that he set his prices for the current new range of merchandise in February 1984 at 55 per cent above cost "and actually sneaking through to 70 per cent above cost". Trott had a telephone conversation with Corcoran late in January or early February 1984 when Corcoran said that "the boys", by which Trott said he understood him to mean other retailers, "were concerned at the poor margins that Sheridan products were being sold at".
In the first or second week of March Trott said Watt told him that he had been invited to a meeting to discuss Sheridan prices. Later, on 23 March, Trott was invited by Corcoran to morning tea at Kappy's Coffee Lounge. Corcoran handed him a copy of his price list and said there had been a meeting at which the prices had been agreed upon. Trott said he January or early February 1984 when Corcoran said that "the was that it would beat everybody's prices, he would find it very difficult to adhere to the prices. Corcoran said to him that everybody had agreed the prices would be effective from 1 April 1984 . Trott said that later that day Watt came to him and said "Jim has given me a copy of the trade prices and I want David Jones through you to adhere to those prices". Trott said he responded "Where do I stand with David Jones' pricing policy?" Watt said he was not so concerned with the policy of David Jones but more in the ability of David Jones to make higher profits through Sheridan products. Trott said he reiterated "What about David Jones' pricing policy?" and that Watt replied "I don't give a f... for David Jones' policy. You will operate and sell merchandise at these prices". Mr. Trott said "what about the everybody had agreed the prices would be effective from 1 April 1984 . Trott said that later that day Watt came to him and said be adhered to but that they were not to re-mark the merchandise immediately but merely remove all the existing retail price tickets from the merchandise. He said that by late morning on 2 April there were no retail prices on any Sheridan merchandise for bedspreads. The new prices were not marked on the merchandise until at least 8 or 9 days after 2 April, although throughout that time it was sold in accordance with the Corcoran price list. During that period Trott checked the prices in other stores, visiting Myer in Rundle Mall on the morning of 2 April and again later that week.
His evidence was that on or about 12 April Myer had re-marked its stock to accord with the Corcoran list and thereafter his inspections revealed that in May 1984 Myer was selling at this level, as was Bedroom Mazurka.
That comprises the evidence from which I am asked to infer that the respondents arrived at the alleged understanding and carried it into effect.
I have no hesitation in accepting the evidence of all the witnesses called by the Commission, most of whom were subjected to strenuous and critical cross-examination. Attention was directed to the fact that telephone conversations and one luncheon conversation were taped, in the former instances by officers of the Commission and on the latter occasion with their encouragement. However the contents of the tapes were not relied upon as assisting in proof of the Commissioner's case. I do not accept the contention of counsel for the respondents that there was any element of unfairness in the conduct of the interviews. It cannot fairly be said that the representatives of the retailers were taken by surprise or insufficiently warned by officers of the Commission. Bedroom Mazurka and Myer had their solicitors in attendance at the interviews and Watt was accompanied by two senior directors of David Jones.
There was however much argument as to the extent to which, if at all, the evidence or any part was admissible against parties other than those against whom it was primarily directed. At the end of the Commission's case counsel for the respondents indicated that they did not intend to call any evidence. I therefore have not any sworn evidence from the respondents of any explanation of the aforesaid happenings which explanation could have been tested by cross-examination and perhaps found acceptable.
37. It is now necesary to consider the relevant provisions of the Act.
Section 45 of the Act was substantially amended in 1977 but has been in its present form since that year. The relevant portions of that section are as follows:
"(1) ...
(2) A Corporation shall not -
- (a)
- make a contract or arrangement or arrive at an understanding, if
- (i)
- ...
- (ii)
- a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or
- (b)
- give effect to a provision of a contract, arrangement or understanding, whether the contract, or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision -
- (i)
- ...
- (ii)
- has the purpose, or has or is likely to have the effect, of substantially lessening competition.
(3) For the purposes of this section and section 45A, 'competition', in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.
(4) ...
(5) This section does not apply to or in relation to -
- (a)
- ...
- (b)
- ..
- (c)
- a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding in so far as the provision relates to conduct that contravenes section 48 or would contravene that section if this Act defined the acts constituting the practice of resale price maintenance by reference to the maximum price at which goods are to be sold or are to be advertised, displayed or offered for sale."
The Commission also relied upon the provisions of sub.s.45A(1) as assisting in the proof of its case. This section is as follows:
"(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other."
There was no dispute that each of the corporate respondents was a trading corporation and that the individual respondents each held the position ascribed to him in the pleadings.
The two principal matters for determination are whether the evidence is sufficient to enable me to find that the retailers or any two or more of them arrived at the alleged understanding and if so whether Zellen being a wholesaler or wholesaler's agent can be found to have arrived at an understanding with retailers in contravention of the Act.
The nature of an arrangement or understanding in the context of the Act has been considered by this Court on a number of occasions. In argument before me counsel accepted my view of the essential features in law of an arrangement or understanding in Trade Practices Commission v Nicholas Enterprises Pty. Ltd. (1979) 26 ALR 609 subject to the qualification expressed by the Full Court on the appeal which is reported in Morphett Arms Hotel Pty. Ltd. v Trade Practices Commission (1980) 30 ALR 88 . I was there of opinion that it is a necessary ingredient of an "understanding" for the purposes of s.45 that there be an element of mutual commitment between two or more persons in the sense that each must have accepted an obligation qua the other or others. The Chief Judge, in delivering judgment and his reasons therefor on the appeal, said at page 91;
"As at present advised, it seems to me that one could have an understanding between two or more persons restricted to the conduct which one of them will pursue without any element of mutual obligation, insofar as the other party or parties to the understanding are concerned. It is not, however, necessary that I reach or express any final view on this question since Mr. Justice Fisher's view that such an element of mutual commitment was required plainly imposed a heavier burden on the respondent Commission, and thereby favoured the appellant."
As far as I am aware and the researches of counsel reveal, the point has not been again before a Full Court although courts of first instance have proceeded on the basis of the qualification. Lockhart J. dealt with the point in Trade Practices Commission v Email Ltd. (1980) 31 ALR 53 at page 66 when he said:
"...I incline to the view that there is no necessity for an element of mutual commitment between the parties to an arrangement or understanding such that each accepts an obligation qua the other; although in practice such cases would be rare."
It is possible that this matter may be one of such rare cases, bearing in mind the special circumstances arising out of the involvement of Zellen, not being a retailer, in an understanding alleged in respect of horizontal price fixing by retailers. The obligation which I am asked to infer Zellen assumed was not the mutual obligation arrived at by the retailers but an obligation to act consequent upon the retailers assuming that obligation.
In Trade Practices Commission v T.N.T. Management Pty. Ltd. and Others (1985) 58 ALR 423 at 446 -449 Franki J. referred to the cases arising under s.45 and judicial consideration of the section's requirements. As with Franki J., I also favour the views expressed by Smithers J. which are referred to in the following paragraph of the former's reasons for judgment at page 448:
"I lean with respect to the views expressed by Smithers J. in L. Grollo & Co. Pty. Ltd. v Nu-Statt Decorating Pty. Ltd. (1978) 34 FLR 81 at 89 where he said:
'I have to remember that the concept of an understanding is broad and flexible. It may arise merely where the minds of the parties are at one that a proposed transaction proceeds on the basis of the maintenance of a particular state of affairs or the adoption of a particular course of conduct'."
As Franki J. also said, on that page of his reasons, judicial consideration has tended to equate "arrangement" with "understanding". In indicating that he proposed to proceed on that basis he said in relation to s.45 prior to its amendment in 1977 -
"... I would not necessarily reject a proposition that the requirements for entering into an understanding may be somewhat different and more easily satisfied than the requirements for making an arrangement."
In their joint judgment in Federal Commissioner of Taxation v Lutovi Investments Pty. Ltd. (1978) 140 CLR 434 Gibbs J. (as he then was) and Mason J. said at page 444 of the requirements of an arrangement in the context of sub.s. 80B(5) of the Income Tax Assessment Act 1936:-
"It is, however, necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view it is not essential that the parties are committed to it or are bound to support it. An arrangement may be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it."
In my opinion this statement of the elements of an arrangement, and a fortiori an understanding, is particularly relevant to this matter where the contention of the respondents is that I should not infer that the alleged understanding was arrived at, inter alia, because it would be contrary to company policy or could only be implemented if approved in Melbourne.
My opinion in Trade Practices Commission v Nicholas (supra) was to the effect that a meeting of minds of the parties to the alleged understanding was the essential feature. It was the following statement of the necessary elements of such a meeting of minds, on page 629 of the reasons, which was qualified by the Full Court. After referring to a number of authorities I said:
"A significant feature of each of the above passages is the emphasis placed upon the necessity for each of the parties to have communicated with the other, for each to have raised an expectation in the mind of the other, and for each to have accepted an obligation qua the other."
As qualified, the last-mentioned element will be satisfied if one only of the parties accepts an obligation qua the other or others.
In this present matter the direct evidence establishes both the incentive and the opportunity for a meeting of the minds of the parties. All of the respondents acknowledged that the market for Sheridan manchester had been severely disrupted by discounting and all accepted the invitation and attended a meeting to discuss retail prices. However there is no positive or direct evidence which establishes that an understanding was arrived at by parties attending the meeting on 19 March 1984 . In the circumstances I have to rely upon circumstantial evidence and inferences which can properly be drawn therefrom. I have already to some extent identified circumstantial evidence of happenings subsequent to the meeting. As to whether or not I should draw the necessary inference from this evidence was the principal difference between the Commission and the respondents in this matter. However a very important factor was that no oral evidence was tendered on behalf of the respondents and therefore no explanation was given on oath of their behaviour. In particular there was no sworn evidence tested by cross-examination by which I might be persuaded that their conduct was actuated by considerations other than an understanding reached at the meeting. As I said in Nicholas' case supra in respect of the circumstances in that matter "failure to explain the reasons for and the circumstances of the parallel reduction encourages the tribunal to feel that it is less unsafe to make the requisite finding; see per Zelling J. in Thorogood v Warren (1979) 20 SASR 156 at p.159".
There was much debate before me as to the significance I should attach to the failure of the individual respondents to give evidence. In Nicholas' case I gave consideration to the failure of a director of the Morphett Arms Hotel, who was present at the particular meeting, but not joined as a respondent to the proceedings, to give evidence. I said at page 639 of the reasons for judgment:
"A further significant fact is the failure of Palmer to give evidence, and in this regard I would refer to the statements of Cockburn C.J. in McQueen v Great Western Railway (1875) LR 10 QB 569 at p.574 and Menzies J. in Jones v Dunkel 1959) 101 CLR 298 at p 312. There is no explanation why Palmer failed to give evidence and thus I am entitled to infer that his evidence would not have helped the Morphett Arms case. This inference is particularly appropriately drawn when the facts are peculiarly within the knowledge of the silent party (Tozer Kemsley & Millbourn (A'sia) Pty. Limited v Collier's Interstate Transport Service Ltd. (1956) 94 CLR 384 per Fullagar J. at p 403.)"
The facts of this matter are distinguishable from the facts in Nicholas' case in that there is here no direct evidence of what occurred at the meeting, apart from the answers given some seven months later by the persons present. Moreover they all were respondents to these proceedings and all failed to give evidence.
The respondents contend that it would be an exercise in guesswork or conjecture to infer that the parties had arrived at the alleged understanding. On the question of conjecture and inference Kitto J. said in Jones v Dunkel supra at page 305 -
"One does not pass from the realm of conjecture into the realm of inference until some fact is found which positively suggests, that is to say provides a reason, special to the particular case under consideration, for thinking it likely that in that actual case a specific event happened or a specific state of affairs existed."
Kitto J. again referred to the drawing of inferences when dealing with the appropriate direction by the trial judge when the defendant failed to give evidence. He said, in respect of that direction, at page 308 -
"But what should have been added, and not being added was in the circumstances as good as denied, was that any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation of his absence. The jury should at least have been told that it would be proper for them to conclude that if Hegedus had gone into the witness-box his evidence would not have assisted the defendants by throwing doubt on the correctness of the inference which, as I have explained, I consider was open on the plaintiff's evidence."
Menzies J. at page 312 was of the same opinion and he stated, inter alia, the following propositions-
"...
- (ii)
- that evidence which might have been contradicted by the defendant can be accepted the more readily if the defendant fails to give evidence;
- (iii)
- that where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference."
Windeyer J. said at page 319 -
"But silence may amount to much more than an acquiescence in the primary facts. It may be eloquent in support of an inference to be drawn from those facts."
At page 321 he approved the following statement by Best J. in R. v Burdett (l820) 4 B. & Ald. 95 at page 122 l06 E.R. at page 883 -
"Nor is it necessary that the fact not proved should be established by irrefragable inference. It is enough, if its existence be highly probable, particularly if the opposite party has it in his power to rebut it by evidence, and yet offers none; for then we have something like an admission that the presumption is just."
In 1978 Fullagar J. succinctly stated the position as he saw it in a case under the Designs Act 1906. He said in L.J. Fisher & Company Limited v. Fabtile Industries Pty Limited reported in Official Journal of Patents, Trade Marks and Designs 4 October 1979 p 3611 at p 3612:
"As to the inferences which may be drawn by the tribunal of fact when one party offers no viva voce evidence, see e.g. Boyle v. Wiseman (1855) 10 Ex 647 at 651 per Baron Alderson; Insurance Commissioner v. Joyce (1948) 77 CLR 39 at p 49 per Rich, J.; and O'Donnell v. Reichard (1975) VR 916 at p 929 per Newton and Norris, JJ. In the present case I am prepared to draw, and I do draw, the strongest inferences against the defendant on every applicable feature of the case, from its failure to adduce oral evidence."
Counsel drew my attention to the relevant standard of proof in a matter such as this and to my application in Nicholas' case (p.642) of the test in Briginshaw v Briginshaw and Another (1938) 60 CLR 336 at pp.347, 353 and 362. I have borne in mind this test as well as the fact that, these being civil proceedings I should be more prepared to draw the inference sought by the Commission than if the proceedings were criminal. I refer to what I said in this regard in Nicholas' case (pp.642-643).
It is appropriate to deal with each of the retailers and assess the primary facts which may support the drawing of the inference that the persons present at the meeting or some of them arrived at an understanding that on l April or soon thereafter they would sell Sheridan manchester at the prices in the Corcoran list. I purposely refrain in relying at this stage upon evidence, the admissibility of which, against particular parties, was the subject of disputation and I will not repeat that evidence common to all, namely the circumstances in which they came to attend and did attend the meeting.
A matter which I must however first consider is the weight that I should attach to the explanations of their conduct which the respondents gave in their respective interviews and, in the case of Corcoran, in answers to the s.l55 notice. The respondents themselves are entitled to rely upon what they said, their answers having been tendered by the Commission, but their explanations are self-serving statements made some months later and after they had been alerted to possible contraventions of the Act. There is some conflict of authority, judicial and text book, on this topic which was considered by Menzies J. and Gibbs J. (as he then was) in Lopes v Taylor (1970) 44 A.L.J.R. 412 at pages 417 and 421 respectively. It does seem to be generally accepted that I am not obliged to attach the same weight to all parts of their answers and explanations. Again in assessing the weight to be attached to the various portions of the self-serving answers I can have regard to the fact that they could have been given to the Court on oath and tested by cross-examination.
I turn to the facts upon which I rely as supporting the inference that the corporate respondents were parties to an understanding. In this regard it is appropriate to refer to the manner in which Isaacs J., as he then was, dealt with this matter and also with the question of what evidence of the furtherance by one party of the alleged understanding will be admissible against other parties. This particular passage is frequently cited and was relied upon by Sheppard J. in Trade Practices Commission v Allied Mills (198l) 37 ALR 236 . It appears in R v Associated Northern Colliers (1911) l 4 CLR 387 at page 400 and is very apt to be applied to the circumstances of this matter. Isaacs J. said:
"Community of purpose may be proved by independent facts, but it need not be. If the other defendant is shown to be committing other acts, tending to the same end, then though primarily each set of acts is attributable to the person whose acts they are, and to him alone, there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre-concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose, thus forming as well as evidencing a combination to effect the one object towards which the separate acts are found to converge."
In this matter I attach considerable significance to the similar pricing structures which the retailers adopted on or shortly after the beginning of April. Admittedly they did not all forthwith re-ticket their products to accord with the prices in the Corcoran list, nor did they abandon the practice of "shopping" each others prices. But in the light of their previous practices and policies there was a significant uniformity in their conduct.
In the case of Bedroom Mazurka the staff were instructed, by telephone, to change the prices of Sheridan manchester products and these prices were changed on or about l April 1984. In respect of David Jones, Trott received instructions on 23 March that as from l April the products were to be priced and sold in accordance with the Corcoran list. For him to be so instructed by a superior officer as to prices was exceptional departure from previous practice. The fact that his objections on the score of company policy and the provisions of the Act were either bluntly rejected by Watt or ignored is in my opinion very significant. I accept Trott's sworn evidence in this regard in preference to the unsworn statements of Watt given at his interview. Trott gave instructions to staff that all goods should be sold at the prices in the Corcoran list on 2 April. This was the first business day in April. On that day, having been absent during the preceding week, he arranged for the existing price tickets to be removed and in the following week the goods were price-marked in accordance with the list. Myer proceeded in much the same way. There was the telephone conversation with head office in Melbourne on the matter of prices, and shortly thereafter on 27 March a copy of the Corcoran price list, duly amended, was sent to Melbourne and described as "the agreed S.A. Sheridan prices". There is no doubt that some adjustment at least was made to Sheridan manchester prices in the first week of April. Wood acknowledged that Myer did price the merchandise in accordance with the Corcoran list. Each of the MacLeods noticed some change in the first week of April although Mr. Trott said there had been no change on 2 April. The latter visited Myer in the following week and found that stock was generally re-marked in accordance with the Corcoran price list.
The evidence given by Trott and the MacLeods as to what they saw is understandably somewhat scanty but the fact is that in consequence of their visits they were not deterred from adopting the Corcoran prices.
In my opinion these acts exhibit such a concurrence of "time, character, direction and result" that they, taken in conjunction with the meeting and the circumstances in which it was held, encourage the drawing of the inference that the acts were "the outcome of pre-concert". In addition, the actions of Corcoran in advising the retailers of amendments to the list, approaching the discounters and giving them the list, and subsequently informing Trott of the success of his approach, together all lead to my mind irresistibly to the conclusion that there was a combination to achieve a common objective.
Counsel for Myer strongly and persuasively urged that I should not reach this conclusion. He submitted that I should approach the matter on the basis that Corcoran was unilaterally "attempting to talk up the price of Sheridan manchester". I can agree that this is one inference that could be drawn and which might well be accepted if there was sworn evidence in support. In the absence of such evidence, it appears to me that the obvious way that the discounters might be persuaded to cease discounting was for the large retailers to agree on a common price and for the discounters to know that the retailers would refrain from competing, qua prices, with their pricing. Mere exhortations by Corcoran unilaterally to each of them, the retailers and discounters, would not be effective without some form of understanding between the large retailers in respect of the level of their prices.
Counsel also attached significance to inferences which could be drawn from certain stock sheets (BSR-SKU Master Lists) which were supplied by Myer to the Commission. However in my opinion they are equivocal and not of any real assistance to either side. As was said at the time of their production, the sheets were of Australia wide application and subject to local variations. Moreover they deny Woods' attempted explanation to the effect that prices changed on delivery of a new range and also provide no support for any alternative explanation.
One fact which is not in dispute is that each of the retailers made alterations to their retail prices for Sheridan merchandise and conformed with the Corcoran price list subsequent to 1 April 1984 . Their reasons for doing this have not been satisfactorily explained. One suggestion was that the increase in prices coincided with the late arrival of the autumn range of Sheridan manchester products.
With regard to Bedroom Mazurka, Russell and Watson stated at their interview that the retail prices of Sheridan merchandise were increased on 1 April 1984 which they said was the date when a new range arrived with increased wholesale prices. However Russell gave subsequently to Henderson a different explanation and the latter's evidence was as follows -
"Was there any further conversation with Mr. Russell?...
Yes. He said that on reflection of the previous interview which Mr Townsend and I had had with Mr Russell and Mr Watson, he said that there were two errors which he now perceived upon reflection, those being that the suggestion by Mr Watson that prices had changed in April because the new Sheridan range had arrived was not strictly correct. The range would have arrived in late February or early March and would have been distributed to the branches in mid to late March."
Wood, in his interview, stated that Myer's retail prices for Sheridan merchandise were increased on or about 1 April 1984 in accordance with the Corcoran price list. He also said that the reason for the price increase was the arrival of a new range during April. This explanation is not supported by the evidence and is in fact in conflict with the sworn evidence of Trott that the new range arrived in February.
Watt answered the question in his interview relating to the retail price change of Sheridan merchandise on or about 1 April 1984 by stating that "if the price in town was at that price at that time, yes". Later in the interview Watt stated that the retail price was altered to conform with the Corcoran price list "because the market price had risen to those suggested retails". Watt for his part did not suggest that a new Sheridan range arrived in April and there was the sworn evidence from Trott that the new range had arrived in February.
The explanation put forward, albeit faintly, by Bedroom Mazurka and Myer that Sheridan merchandise was priced in accordance with the Corcoran list on or about 1 April 1984 , because of the receipt at that time of a new range with increased wholesale prices is not acceptable. Corcoran did not make any reference to the arrival of a new range in his answers to the s.155 notice.
Furthermore, none of the individual respondents when interviewed stated that any reference was made by Corcoran, or others, at the meeting on 11 March 1984 that the price list distributed was to apply to a forthcoming new range of Sheridan merchandise or that such would have an increased wholesale price.
In the absence of any acceptable explanation I am of opinion that I should infer that each of the retailers reached an understanding with the others and with Corcoran that on 1 April 1984 or shortly thereafter they would price their Sheridan manchester at the prices set out in the Corcoran list. They were prompted to reach this understanding because of a common desire to curtail the practice of discounting by the discounters. I am however not prepared to infer that the understanding extended beyond adherence to this list and in particular that it extended to a list subsequently produced by Corcoran in August 1984. Corcoran, who took the initiative to arrange the meeting, would have seen this understanding as an essential precondition to an attempt to persuade the discounters to cease this practice. For their part the retailers were prompted to enter into the understanding because it could be used by Corcoran as a means to attain the end of so persuading the discounters. Thus this particular provision of the understanding which the retailers had arrived at inter se was part and parcel of a wider understanding to which Corcoran was a party, including as it did the further provision that he would approach the discounters. This in my view was the common purpose of the respondents and in approaching the discounters Corcoran was acting in furtherance of the common purpose. Evidence of what Corcoran did and said on these occasions was initially admitted only against him and Zellen and its admission against the retailers was conditional upon a finding of common purpose. I have found other admissible evidence, which established in my opinion the common purpose and thus I hold that Corcoran's approaches to the discounters are matters to which I may pay regard.
For obvious reasons I do not rely upon the telephone conversations between McNamara, MacLeod and Corcoran prior to the meeting of 19 March 1984 as being in furtherance of a common purpose. However shortly after that meeting Corcoran again telephoned McNamara and subsequently supplied him with a copy of the Corcoran list. What was said and done by Corcoran at this time is, in my opinion, admissible against the retailers and confirmatory of their common purpose. The conversation was related as follows by McNamara:
"Did Mr. Corcoran subsequently contact you again on the topic of retail prices of Sheridan manchester? ---Yes, again in the third week of March I think Mr Corcoran was in touch with me and said that an agreement had been reached with the Rundle Street sellers and Bedroom Mazurka, that they would all operate on a price at retail some 70 per cent above the wholesale price and would I go along with that. He asked me if he could have my word on it because none of the other retailers would agree unless I was a party to setting our prices at the same as their level.
What, if anything, did you say?---I then asked Mr Corcoran for prices.
Mr Ireland: Could this be given as close as possible - I appreciate the difficulty that the witness may have?
His Honour: Could you put it: I said to Mr Corcoran?---I said to Mr Corcoran, 'What are the retail prices?' Mr Corcoran then gave me a list of prices over the phone. I then asked Mr Corcoran for a price-list which a couple of days later I received in the mail. Mr Von Doussa: Was anything else said?---I then asked Mr Corcoran from what date this pricing structure would take effect. He said to me from 1 April 1984. I said, 'Why from 1 April?' He said, 'Because people need a period of time in which to change signs and re-price stock.' I said, 'Well, that is okay by me. From 1 April we will operate at those prices.'
Did you receive a written price-list from Mr. Corcoran?---Yes, we did."
Corcoran made a like approach to MacLeod, one of the proprietors of the Bedmates business, on or about 23 March 1984 . MacLeod related the conversation as follows:
"Mr Corcoran said, 'I have had a meeting with David Jones, Myers and Bedroom Mazurka. I did not worry about Michael Trott. I have gone above his head to Bruce Watt, and they have all agreed they would be happy with about 70 per cent.' Mr Corcoran then handed to me a list of prices for Sheridan merchandise which suggested - he handed you a list?---Yes.
We will show you the list in a minute?---Mr Corcoran then handed me a list.
Can the witness be shown A9? Can you identify that document?---Yes, I can.
What is that?---This is the list that Mr Corcoran handed to me on 23 March.
There is some biro writing on that document now, and other writing on it. Was that writing there when it was handed to you?---No.
Was there any handwriting on it when it was handed to you?---No.
When you got the list, what did you do or say?---You want my response to receiving the list?
His Honour: Did he say anything to you?
Mr Von Doussa: Tell us how the discussion between the two of you went?---Mr Corcoran handed me the list and said, 'I have given a copy of this to everyone in town.'
Keep your voice up?---'I have given a copy of this to everyone in town' and I took the list and looked at it and said to Mr Corcoran, 'From when is this to take effect?' Mr Corcoran replied, 'From 1 April.' I then asked Mr Corcoran what would be the situation with regards to having a sale, and Mr Corcoran replied that an occasional sale would be all right providing that we did not move too far below the prices on the list or prolong the same."
I accept the evidence given by MacLeod as to what Corcoran said and did on that occasion as evidence admissible against the retailers to confirm the terms of their understanding. McNamara and MacLeod further gave evidence to the effect that they altered their prices on 1 April to the prices in the Corcoran list.
In my opinion the retailers and Corcoran reached an understanding at the meeting on 19 March to the effect that they would on or about 1 April price their Sheridan manchester products in accordance with the Corcoran list and that Corcoran would convey this understanding to the discounters in an effort to persuade them to cease discounting. It is necessary to determine whether this understanding contravenes sub.para. 45 (2)(a)(ii) of the Act. It is such an understanding if a provision thereof "has the purpose, or would have, or be likely to have the effect of substantially lessening competition". Two points can relevantly be made. What is proscribed is a provision of an understanding which has the stated purpose or effect. Furthermore by its definition in sub.s.45(3) of the word "competition" the legislature appears to contemplate that, prima facie at least, the parties to the understanding will be parties who are in competition in the market. The retailers are in competition in the retail market but Zellen does not operate in that market. The question whether Zellen by reaching an understanding with the retailers contravened s.45 requires separate consideration. I consider at this stage only the retailers.
I have already set out the provisions of sub.s.45(3) and sub.s.45A(1) and these need not be repeated. Each is relevant to the question whether the understanding which I have found the retailers reached had the prescribed purpose. The respondents themselves tendered no evidence on this topic and did not challenge that of the Commission. Moreover they limited their defence on this aspect of the case to denying the existence of an understanding. I can therefore be reasonably brief at this time.
The Commission relied upon sub.s.45A(1) as assisting it to discharge its onus. It states that a provision of an understanding is deemed to have the relevant purpose or effect if it complies with the requirements of the section. In my opinion a provision of this understanding had the requisite purpose of controlling or maintaining prices and therefore is deemed to have the purpose or effect of substantially lessening competition provided the parties thereto, or at least some of them, are in competition. The respondents did not contend to the contrary and there can be no doubt that Myer and David Jones are in competition in the Rundle Mall and Myer through its Target stores competes with Bedroom Mazurka at Marion and Colonnades. Again this was not disputed by the respondents and the area of the geographic market is not in issue in these proceedings. It follows that the understanding at which I have found the retailers arrived contravenes the Act.
The question whether Zellen reached an understanding with the retailers which contravened s.45 is more difficult. The understanding reached at the meeting comprised two provisions, namely the provision imposing an obligation on the retailers inter se, and the provision that Zellen would approach the discounters. It is my opinion that these provisions were inter-dependent and thus were part and parcel of the one understanding arrived at by Zellen as well as the retailers. However counsel for Zellen contended that his client was not and could not be party to an understanding which contravened s.45. In support of this submission he said that it was more correct to find that Zellen had engaged in resale price maintenance as proscribed by s.48, and in particular para.96(3)(b) of the Act. Paragraph 45(5)(c) then applied to exclude Zellen from the application of s.45. Whether or not that is so, I will consider later in these reasons. The position certainly is that Corcoran promoted, substantially in his own and Zellens' interest the meeting of 19 March and encouraged the retailers to arrive at a contravening understanding. Corcoran was particularly concerned that if discounting continued, the retailers would reduce their purchases of Sheridan products because of inadequate profit margins. Zellen was clearly a party to the understanding with a significant role to play in giving effect to one provision thereof, namely the approach to the discounters.
In this regard it is significant to note the terminology of sub.s.45(2). It does not proscribe or make illegal only the anti-competitive provision. It provides that a corporation shall not make a contract or arrangement, or reach an understanding if a provision thereof is anti-competitive. The word "provision" is defined in s.4 of the Act as meaning, in relation to an understanding, "any matter forming part of the understanding". The anti-competitive provision, which I call the price-fixing provision, encompassed the retailers only. Zellen as a wholesaler was only indirectly, if at all, a party to this provision and not subject to any obligation in respect thereof. It was not required to implement this provision of the understanding but merely to advise the discounters of its existence. The question is whether in reaching the understanding with the retailers in circumstances where the price-fixing provision imposes obligations only on the retailers, Zellen has contravened s.45 of the Act.
In my opinion Zellen can be found to have contravened sub.para.45(2)(a)(ii) by being a party to an understanding which contains a price fixing provision even if it is not involved in or affected by that provision. There is no doubt that the Act contemplates that an understanding may contain a number of provisions (cf sub.s.45(4)) and I am of opinion that a person may be a party to the understanding provided he is aware of although not necessarily committed to each provision. The qualification of the Full Court to my reasons in Nicholas' Case may well be referable to such a situation.
Furthermore it is apparent that it is not necessary for the parties to the understanding to be limited to those who are in competition in the same market. Sub-section 45A(1) appears to indicate that the parties to the understanding may include persons who are not suppliers of goods or alternatively who are not in competition. This sub-section may be paraphrased to the extent presently relevant as follows:
"... a provision of a ... understanding shall be deemed, for the purposes of (s.45) to have the purpose or... the effect of substantially lessening competition if the provision has the purpose or... the effect... of fixing... the price for... goods... to be supplied... by the parties... to the understanding, or by any of them,... in competition with each other."
The words "or any of them ... in competition with each other" may indicate that it is not necessary for all of the parties to the understanding to be engaged in the supply of goods and thus in competition with each other in that market for the deeming provision to be available. Alternatively it could mean that it is not necessary for them all to be in competition although it would appear essential for at least two to be engaged in the supply of goods to the market otherwise there would be no competition. The crucial words are "or any of them" indicate the necessity for at least two parties to the understanding to be in competition with each other. Either construction of the section supports the view that it is not essential for all parties to the understanding to be in competition with each other.
Subject to consideration of the resale price maintenance point it is my opinion that Zellen was in breach of sub.para.45(2)(a)(ii) of the Act in that it arrived at an understanding with the retailers which understanding contained a price-fixing provision. On one view of the aggregation provisions of sub.s. 45(4), they are consistent with and supportive of this conclusion, (Taperell, Vermeesch & Harland, Trade Practices and Consumer Protection Third Edition para. 596). Counsel for the Commission however did not so contend and I have no firm view of the ambit of this sub-section.
Counsel for Zellen also contended that para.45(5)(c) excluded the application of s.45 to a provision of an understanding in so far as the provision related to conduct that contravenes s.48. I have already set out the provisions of para.45(5)(c). Section 48 is as follows:
"A corporation or other person shall not engage in the practice of resale price maintenance."
The practice of resale price maintenance is defined by s.4 as meaning-
"The practice of resale price maintenance referred to in Part VIII."
Section 96 of Part Vlll prescribes the acts which constitute this practice, and the provisions of that section relied upon by counsel for Zellen are as follows:
"(1) Subject to this Part, a corporation (in this section called 'the supplier') engages in the practice of resale price maintenance if that corporation does an act referred to in any of the paragraphs of sub-section
(3).
(2) ...
(3) The acts referred to in sub-sections (1) and (2) are the following:
- (a)
- ...
- (b)
- the supplier inducing or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier."
It is important to note that para.45(5)(c) does not refer to and exclude from s.45 an understanding which includes a provision relating to conduct contravening s.48. It merely provides that the Act does not apply to or in relation to the provision relating to such conduct. Therefore para 45(5)(c) does not apply to exclude the understanding from s.45 but only a particular provision of the understanding. The fact that the legislature preconceived it as necessary to insert this paragraph, affecting as it does persons who are invariably not in competition, supports the view that a person may be a party to a prohibited understanding even though not in competition with the other parties.
The two provisions here under consideration are the provisions relating to the understanding between the retailers concerning compliance with the Corcoran list and the understanding between the retailers on the one hand and Zellen on the other concerning the approach to the discounters. Neither of these provisions evidence any inducement by Zellen by itself or on behalf of Dunlop Olympic Limited not to sell below the price specified in the Corcoran list. The retailers agreed amongst themselves, maybe at the prompting of Corcoran, but for their own ends. Furthermore if it be appropriate to infer that Corcoran, on behalf of Zellen or Dunlop, did perform any acts by way of inducement, which resulted in some provision on this topic in the understanding, it would be this provision and this alone which would be excluded from the operation of s.45.
Furthermore in the absence of any direct evidence as to what happened at the meeting I would not be prepared to infer that the retailers agreed to sell at the Corcoran prices in consequence of an inducement from Corcoran. Nor would I infer that Corcoran attempted to induce them in the sense in which those words are used in this section. It was the retailers or some of them who took the initiative and prior to the meeting complained to Corcoran concerning the discounting. It would not be appropriate in the circumstances to infer that Corcoran threatened disadvantages or promised benefits in an effort to persuade the retailers to adopt the Corcoran list. The most one could responsibly infer is that Corcoran presented arguments or reasons why it was desirable for the retailers to maintain the price list if he was to have any hope of persuading the discounters to cease that practice. In Thomson v Deakin (1952) Ch.646 Lord Evershed M.R. distinguished conduct which was in the nature of advice from persuasive conduct. He said at page 686 -
"I appreciate that in these matters there is a difficult question of distinguishing between what might be called persuasion and what might be called advice, meaning by the latter a mere statement of, or drawing the attention of the party addressed to, the state of facts as they were."
In Yorke v Lucas (1983) 49 ALR 672 at 681 the Full Court of this Court said in respect of the word "inducing" in another context as follows:
"Inducing a contravention in the context of s.75B(b) connotes, in our view, some act of compulsion by force or threat of force or some act of persuasion or stimulation aimed at ensuring an act is committed which constitutes a contravention. The word 'incite' is akin to 'induce', though 'induce' probably covers a wider field."
In this matter there is little direct evidence of what Corcoran did or said at the meeting in the way of persuasion or stimulation and what there is does not establish inducement or attempted inducement in the sense in which these words are used in this Act. As Barwick C.J. said in Mikason (N.S.W.) Pty. Ltd. v Festival Stores (1972) 127 CLR 617 at 636 the fact that "failure to observe the recommended price could be visited with other consequences" would justify the drawing of an inference. There is no such justification in this matter as there is no evidence of pressure by Zellen or Corcoran on the retailers.
It follows that there is no provision in the understanding which relates to conduct that contravenes s.48 and this ground of defence must fail.
It is my opinion that Zellen as well as the retailers contravened sub.para 45(2)(a)(ii). If I am wrong in making this finding, I would have no hesitation in holding that Zellen aided and abetted the retailers to contravene s.45 but for the fact that it has not been so charged. The retailers have also contravened sub.para.45(2)(b)(ii) of the Act in that they each gave effect to the price-fixing provision. However Zellen did not give effect to this provision and it was not argued that in giving effect to the provision which required it to approach the discounters whether as agent for the retailers or otherwise it was contravening sub.para.45(2)(b)(ii). Sub-section 45(4) may well be relevant in this regard but in the absence of argument I do not, as already indicated, propose to make a positive finding. It must also follow that each of the individual respondents was knowingly concerned in and a party to the contravention of para.45(2)(a)(ii) and thus liable to a pecuniary penalty under para.76(1)(e) of the Act. There was no argument or submission to the contrary.
I propose to stand the matter over to a date to be fixed to enable the parties to make submissions on the question of the orders to be made including orders in respect of penalties, terms of injunctions and costs and evidence on the matter of the penalties to be imposed.
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