Re Trade Practices Commission v CSR Limited
[1990] FCA 762; [1990] FCA 521; (1991) 13 ATPR 41-076 (20 December 1990)
Facts
The case involved an admitted contravention of the misuse of market power provision. In particualr, CSR admitted having a substantial degree of market power in the ceiling materials market (market involved was that for ceiling materials in Western Australia (para 5)), refusing to supply certain customers for the prupose of deterring competitive conduct in the ceiling market and preventing entry of Boral into that market and that it took advantage of its market power in the ceiling materials market in contravention of s 46 (para 32).
CSR further admitted that its conduct was engaged in with purpose of substantially lessening competition or that it was likely to have that effect and that, as a result, its conduct also contravened section 46 (exclusive dealing) (para 32)
CSR was ordered to pay a pecuniary penalty of $220,000.
Pecuniary penalties
The most significant (and most cited) aspect of the case was Justice French's discussion of the principles relating to pecuniary penalties [my emphasis]:
Pecuniary Penalties - General Principles
[para 38] The provisions of Pt. IV of the Trade Practices Act 1974 are directed to procuring and maintaining competition in trade and commerce ... They are of a regulatory rather than penal character. Proceedings for their enforcement by recovery of pecuniary penalties are not classed as criminal prosecutions. ... Unlike many kinds of criminal prosecution, therefore, it is not necessary to measure the contravening conduct against some general communal morality in which the law is embedded. Aspects of some commercial behaviour, such as ruthlessness and expansionary ambition, are not elements of the classes of conduct prohibited by Pt. IV nor even aggravating factors. For those same attributes may be found in vigorous and lawful competition.
[para 39] characterisation of contravening conduct in terms of a morality larger than that which is defined by the legislative purpose is misplaced. ...
[para 40] Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt. IV. Nor, if it be necessary to say so, is there any compensatory element in the penalty fixing process ... The principal, and I think probably the only, object of the penalties imposed by s.76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
[para 41] There has been a significant number of decisions of the Court which have considered the operation of s.76 ... The primacy of the deterrent purpose in the imposition of penalty was identified at an early stage
[para 42] The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:
1. The nature and extent of the contravening conduct.
2. The amount of loss or damage caused.
3. The circumstances in which the conduct took place.
4. The size of the contravening company.
5. The degree of power it has, as evidenced by its market share and ease of entry into the market.
6. The deliberateness of the contravention and the period over which it extended.
7. Whether the contravention arose out of the conduct of senior management or at a lower level.
8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.
9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.
The first three factors are all expressly mentioned in s.76. They can be regarded as measures of the scope and impact of the conduct and it is conducive to deterrence that the greater the significance of these elements, the heavier the penalty should be. ... The need for commercial realism in fixing penalties has been mentioned in more than one decision of the Court. In Trade Practices Commission v. Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091, Smithers J. at 17,896 said:
"The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality, and it should be kept in mind that the Act operates in a commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive."
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Case links
Full case at AustLII
Commentary
Articles and notes
