The ACCC alleged that "in relation to tenders for various Queensland and local government public works projects, the respondents variously engaged in or were a party to conduct which contravened s 45(2)(a)(ii) and s 45(2)(b)(ii) within Pt IV and, further or alternatively, s 52 within Pt V of" the TPA (as it then was) (see para 2, reasons for judgment)

In particular, the conduct alleged consisted of 'cover pricing', described at para's 29 and 30 of the judgment as arising in situations where

"a builder participant wished to be seen to tender for a particular project but either:

(a) did not wish to win the tender; or

(b) did not have the time or resources to prepare a tender for that project.

By admission of these parties, the practice included the following:

(a) a builder (the first builder) wishing to be seen to tender for a particular project asks another builder (the second builder), which it knows or believes also to be tendering for the same project for a price, termed a “cover price” or a “cover” in respect of that project;

(b) the second builder may then give the first builder a cover price in respect of the project shortly prior to the close of tenders for that project."

The ACCC alleged that [at para 41],

"arising out of the knowledge of the relevant respondents of the practice of cover pricing and the admitted communications which occurred between Mr Richardson and “Woollam representative A” ... it should be inferred that Kelly and Woollam arrived at an arrangement or understanding that:

(a) should Kelly decide to tender on the Callemondah Project, its tender price would be no less than the cover price given to it in respect of that project; and

(b) Woollam’s tender price for that project would be less than the cover price."

Justice Logan held that, in respect of the Callemondah Project, Woollam and Kelly:

"(a) made an arrangement or understanding which contained provisions ... which had the purpose or which had or which were likely to have the effect of substantially lessening competition, contrary to s 45(2)(a)(ii) of the TPA; and

(b) gave effect to provisions ... which had the purpose or had or were likely to have the effect of substantially lessening competition, contrary to s 45(2)(b)(ii) of the TPA.

[extracts only deal with some competition law issues, not the allegations and findings regarding misleading and deceptive conduct]

Justice Logan [at 49] rejected "Woollam’s and Kelly’s submissions that the ACCC has failed to prove any arrangement or understanding between them in relation to the Callemondah Project and, for that matter such others of the Projects in respect of which it is alleged there was an arrangement or understanding between them. The seeking by Kelly from it and the communication by Woollam to Kelly of a “cover price” makes it more likely than not, ... that these two corporate respondents, in each case, came to an arrangement or understanding."

"[50] An arrangement or understanding, though not a contract, must be consensual and carry with it an element of obligation rather than mere expectation. Thus, in Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383 at 385, Lockhart J observed:

For there to be an arrangement or understanding there must be a meeting of the minds of those said to be parties to the arrangement or understanding. In some cases this may be inferred from circumstantial evidence. There must be a consensus as to what is to be done and not just a mere hope as to what might be done or happen. Independently held beliefs are not enough.

[51] Later, in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (and Others) [1999] FCA 954; (1999) 92 FCR 375 (CC (NSW) Case) at [141], Lindgren J stated:

The cases require that at least one party "assume an obligation" or give an "assurance" or "undertaking" that it will act in a certain way. A mere expectation that as a matter of fact a party will act in a certain way is not enough, even if it has been engendered by that party.

[Emphasis in original]

[52] More recently, these same sentiments are evident in the following passage from the joint judgment of French CJ and Kiefel J in Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 at [48]:

An arrangement or understanding ordinarily involves an element of reciprocal commitment even though it may not be legally enforceable. It involves more than a mere hope or expectation that each party will act in accordance with its terms.

[Footnote reference omitted]

[53] Woollam puts it that, however soundly based it may have been, it and Kelly had no more than an expectation as to how each other would behave. It emphasises that, in relation to the Callemondah Project and, for that matter, the others, there were but two short telephone conversations between subordinate staff members. This is true but there did not have to be any more. As I have already observed, the term “cover price” as used in these conversations one to the other was one pregnant with meaning for each. The request for such a price and the giving of it engendered more than just mere expectations. Further, and contrary to the submissions of Kelly and Mr Murphy, there was the requisite meeting of minds for there to be an arrangement or understanding between Woollam and Kelly in relation to the Callemondah Project (and each of the others in the Projects involving contraventions alleged against those two corporate respondents). Mr Murphy authorised Mr Richardson to seek a cover price and, after an interval following the initial request, Mr Bogiatzis authorised “Woollam representative A” to communicate the same.

[54] As already noted, the ACCC has alleged that the arrangement or understanding had two “provisions”. So it did. As a matter of necessary inference, each of these provisions was conveyed by the use one to the other of the term “cover price”, particularly in the circumstances then prevailing, which materially included, in the case of the Callemondah Project, that the conversations occurred on the date on which tenders closed.

[55] That conclusion renders it unnecessary to resolve whether, for there to be an understanding or arrangement, there must be mutual obligations. In Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344 at [75] Sackville J opined that, “There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation”. It does not seem to me to follow from the words “arrangement” or “understanding” that either requires, as opposed to admits of, an element of mutual commitment to the exclusion of a consensus that, without any assumption of obligation by one party, the other will act or not act in a particular way. It is always a strong thing to engraft onto the ordinary meaning in context of the words which are used in a statutory provision words which do not appear in it. The question can, though, be left as an open one in this case because here the two provisions in the arrangement or understanding conveyed a mutual commitment as between Woollam and Kelly.

[58] Kelly did not, in terms, focus its submissions on an absence of proof of purpose but its analysis of the evidence as to what was in the minds of various persons is nonetheless relevant to a consideration of whether, as against it, purpose has been proved. It also submitted that the evidence of Mr Bogiatzis as to his purpose was relevant to the ACCC’s case as against Woollam and him, but not as against Kelly. This submission ignores the discussion of purpose by Dowsett and Lander JJ, in relation to s 45 of the TPA, in Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160 (Seven Network Case) at [860] to [869] and, in particular, their conclusion at [865] that:

The object of the TPA is to promote competition. It does so by proscribing the making of a contract containing a provision which has the purpose of lessening competition. If ss 45 and 4F required that all parties to the contract who included the provision shared one substantial purpose, many contracts, arrangements or understandings which include anti-competitive provisions would fall outside the provisions of the TPA.

It is not necessary, in order for Kelly to be found to have contravened s 45, for there to be any shared proscribed purpose on the part of the parties to the arrangement or understanding.

[59] Instead, as the language of each of s 45(2)(a)(ii) and s 45(2)(b)(ii) of the TPA dictates, the focus must be on whether a corporate respondent made an arrangement or understanding which has a provision or, as the case may be, gives effect to a provision in such an arrangement or understanding that, “has the purpose or has or is likely to have the effect, of substantially lessening competition”. Further, s 4F of the TPA makes it plain that the proscribed purpose need not be the only purpose but that it is sufficient if that is a substantial purpose.

[60] It is a given that purpose is not to be confused with motive and must also be distinguished from effect: News Ltd v South Sydney District Rugby Leave Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563 (South Sydney Football Club Case) at [18] per Gleeson CJ. Section 45 of the TPA treats purpose and effect differently. So far as a distinction between purpose and motive is concerned, the Chief Justice (ibid) put these matters in this way:

Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end. ... [In] the context of competition law, it is necessary to identify purpose by describing what is sought to be achieved by reference to what is relevant in market terms.

[61] Further, the inquiry must be as to whether the ACCC has proved that one or more of the parties to the arrangement or understanding had, subjectively, a proscribed purpose for the inclusion of the provisions in question: South Sydney Football Club Case at [18] per Gleeson CJ, at [43] per McHugh J, at [63] per Gummow J and at [212] per Callinan J; see also Seven Network Case at [851] per Dowsett and Lander JJ. In the latter (ibid), and by reference to Hughes v West Australian Cricket Association Inc (1986) 19 FCR 10, Dowsett and Lander JJ allowed that, “In identifying the appropriate purpose, the circumstances in which the contract, arrangement or understanding was made may be relevant”.

[62] Another issue was whether the ACCC was impermissibly conflating purpose and effect or even whether the ACCC was mistakenly trying to “reverse engineer” purpose from effect. Such “reverse engineering” would indeed be an error, for it is clear that the purpose must be subjective. One, but not the only, submission made by the ACCC as to purpose relied on the following passage from the advice of the Judicial Committee in Ashton v Commissioner of Inland Reserve [1975] 1 WLR 1615 at 1621 (Ashton):

If an arrangement has a particular purpose, then that will be its intended effect. If it has a particular effect, then that will be its purpose and oral evidence to show that it has a different purpose or different effect to that which is shown by the arrangement itself is irrelevant to the determination of the question whether the arrangement has or purports to have the purpose or effect of in any way altering the incidence of income tax or relieving any person from his liability to pay income tax.

[Emphasis added]

...

[63] ... These passages from income tax cases [including Ashton] concern differently worded provisions ... The following statement made by Gummow J at [63], offers an apposite explanation of why it is that reliance by the ACCC on the proposition, derived from Ashton, that if an arrangement has a particular effect then that will be its purpose must be rejected:

Before this Court, the Australian Competition and Consumer Commission (the ACCC), as intervener, submits that both the subjective purpose of the parties to the relevant contract, arrangement or understanding and the objective purpose of the impugned provision are relevant when determining whether or not the provision falls within the purview of s 4D. However, a construction which, depending upon the facts of the case, may require examination of either the subjective purpose of the parties or the objective purpose of the provision, or both, is not the product of reasoned statutory interpretation and falls foul of the provisions in s 4F. In addition, there is a danger that an examination of the objective purpose of a provision will give undue significance to the substantive effect of the provision, as opposed to the effect that the parties sought to achieve through its inclusion. The consistent distinction drawn in the Act, particularly in s 45 when read with s 4D, between "purpose" and "effect" demonstrates the impermissibility of such an approach.

[Emphasis in original]

[64] Rejection of this part of the ACCC’s submissions with respect to purpose does not mean that its case fails, for it otherwise submitted that the purpose of the provisions was to be determined by reference to the subjective purpose of a party to the arrangement or understanding. As to subjective purpose, I consider that Woollam and Mr Bogiatzis have not confronted the ramifications of the admission which it and Mr Bogiatzis made as to the authorised communication of a “cover price” to Kelly and of the evidence as to purpose which Mr Bogiatzis did give.

[65] I have already referred to the evidence of Mr Bogiatzis as to his purpose. His purpose was undoubtedly that of Woollam given that, at the time of the Callemondah Project (and the others), as now, he was that company’s managing director. What he terms a “purpose” is truly that, not a motive. There was some debate in the submissions of both the ACCC and Woollam as to whether one or the other was confusing purpose with motive. I do not consider that either the ACCC or Woollam conflated purpose and motive.

[66] I accept that Mr Bogiatzis did indeed have a purpose which was to enable Kelly to be seen to tender for the Projects without winning them. I do not accept that, in the circumstances, which materially include his admitted authorisation of “Woollam representative A” to give a “cover price” to Kelly and his admitted understanding as to what was entailed in a “cover price”, that this was the only end which was sought to be accomplished by him and thus by Woollam.

[67] To me, the inference seems inescapable that, in authorising the communication of a cover price, especially, as in the case of the Callemondah Project, on the closing date for tenders, Mr Bogiatzis and therefore Woollam also had as a purpose that such tender as Kelly came to submit would not be price competitive with that of Woollam. So much is also necessarily implicit in his evidence that he had only ever given a cover price “to enable another builder to be seen to tender for a particular project where it did not wish to win the tender or it did not have the time and resources to tender for the project” (Affidavit, para 17). ..

[69] Did the provisions have the purpose of substantially lessening competition? The meaning of “competition” is supplied by s 45(3) of the TPA (quoted above). That the provisions have a purpose of substantially lessening competition is deemed to be so, the ACCC submits, by the operation in the circumstances of s 45A(1) of the TPA [ed: now repealed]

[70] One requirement which must exist for s 45A to deem the provisions to have the purpose of substantially lessening competition is that the parties to the arrangement or understating must be in competition with one another....

[71] As against the ACCC it was submitted that Woollam and Kelly were not in competition with each other in relation to any of the Projects, including the Callemondah Project. Woollam wanted to win the Projects and Kelly did not, it was submitted. ...

[72] There is a certain, superficial attraction about this submission. On further reflection and even before recourse to authority, it seems, with respect, rather odd that one can, by submitting a tender, present oneself to the party which has called for tenders as being in competition and yet, by virtue of the provisions of the arrangement or understanding, never disclosed to that party, thereby be entitled to a finding that one and one’s fellow party to that arrangement or understanding should not be regarded as competitors. Recourse to authority confirms the absence of merit in the submission. This is apparent from the following passage from the judgment of the Full Court in J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission [2000] FCA 365; (2000) 172 ALR 532 at [111] to [112] (McPhee), especially at [112]:

[111] McPhee and DFE were, however, generally in competition with each other in the express freight market, and the fact that DFE may have had a policy of not quoting for business from McPhee customers (except where the customers were dissatisfied with the level of service they were receiving) does not mean that McPhee and DFE were not relevantly "competitive with each other" for the purposes of s 4D(1)(a) of the Act or "in competition with each other" for the purposes of s 45A(1) of the Act. As Just Jeans on 16 May was proposing to ask DFE to supply a quote and as McPhee was encouraging DFE to submit a quote, McPhee and DFE, in the terms of s 4D(2) of the Act were, or were likely to be, in competition with each other in relation to the supply of services to Just Jeans. It was that supply of services to which the relevant provision of the attempted arrangement or understanding was directed. The attempt involved putting McPhee and DFE into a position where they were in competition with each other for the Just Jeans business. The attempt by McPhee to get DFE to submit a non-competitive quote was an attempt to make a provision of the proposed arrangement or understanding which fell within s 4D(1) of the Act. It was irrelevant in this context that there was a pre-existing policy of DFE not to submit a quote to McPhee customers (except where the customers were dissatisfied with the level of the service they were receiving).

[112] The same observations apply in relation to s 45A(1) of the Act. If the attempt had been successful McPhee and DFE would have been, in the terms of s 45A(1), "in competition with each other" in relation to the services to be supplied to Just Jeans; and there would have been a provision of that arrangement or understanding which had the purpose and the effect of fixing, controlling or maintaining the price for services to be supplied to Just Jeans by McPhee and DFE who were in competition with each other for that business. Again, the pre-existing policy of DFE was irrelevant as the attempt was to achieve an arrangement or understanding which contained a provision which fell within s 45(2)(a)(ii) by virtue of the provisions of s 45A(1).

These statements were made in relation to an attempt. Here, there were more than attempts as between Woollam and Kelly as they in fact made and gave effect to arrangements or understandings. In so doing, they were, in terms of s 45A(1) “in competition with each other”. That Kelly did not wish to win the tender is, like the policy of DFE referred to in the passage quoted, irrelevant. I find that, in respect of each of the Projects in which they each lodged tenders, Woollam and Kelly were in competition with each other. ...

[81] Did the provisions have the purpose of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of the price for goods or services supplied?

[82] Reading the language of s 45A(1) of the TPA as a whole and in context, I respectfully agree with an observation made by Professor Heydon (as his Honour then was) that it may be incorrect to split the components of the expression, “fixing, controlling or maintaining”: Heydon JD, Trade Practices Law, (Lawbook Co, subscription service) at [4.810] (update 85). The expression may be a composite, an element of a description of particular types of provisions the presence of which in contracts, arrangements or understandings Parliament has chosen to deem to have the purpose or effect or likely to have the effect of substantially lessening competition. That, as Professor Heydon states (ibid), price fixing has been the more “traditionally observable” may, by the relative frequency of that encounter, create an impression that the expression is not, as a matter of construction, a composite. If so, it would not, in relation to statutory construction, be the first occasion when examples of the operation of a statute have diverted attention from the language employed by Parliament.

In the CC (NSW) Case at [133] Lindgren J referred to this and other parts of Professor Heydon’s work and to pertinent judicial authority in relation to the meaning of expression “fixing, controlling or maintaining” and its constituent elements:

The notion of "fixing, controlling or maintaining" in s 45A(1) of the Act has been discussed in several cases which are reviewed in Heydon, Trade Practices Law (1989), par [4.750]-[4.920]. As the learned author observes "[t]o fix prices is the most precise case" (par [4.780], p 2223). It has been said that "to maintain a price assumes that it has been fixed beforehand": Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437 at 449 per Lockhart J. The contrary is, however, arguable: it is arguable, for example, that it would "maintain" a price not yet fixed at a minimum level if all tenderers were to reach an understanding that a component sufficiently influential on price was to be included in their tender prices. I need not pursue this issue because it seems to me that the notion of "controlling" a price best fits the case pleaded and because the present case could not be one of "fixing" or "maintaining" the price to be charged to ACS while not one of "controlling" it.... Heydon observes that there may be no distinction between the words "control" and "maintain" and that it is perhaps even incorrect to split the expression "fix, control or maintain" at all, except by reference to the fact that price-fixing has been found to be more "traditionally observable" (par [4.810], p 2224).

Later in that case, at [168], his Honour elaborated upon what constituted “controlling”:

168. The word "control" is not defined in the Act. Its natural or ordinary meaning is "to exercise restraint or direction over" (the Macquarie Dictionary) or "to exercise restraint or direction upon the free action of" (the Oxford English Dictionary) a person or thing. There are degrees of control and there may be control although the "restraint" or "direction" is not total. An arrangement or understanding has the effect of "controlling price" if it restrains a freedom that would otherwise exist as to a price to be charged.
     

His Honour added, at [176]:

I do not think that some specificity as to price is a necessary element of the notion of "controlling" price within s 45A. To insist on such a requirement would be to introduce an unauthorised general limitation on the notion and would allow the statutory prohibition to be easily circumvented — a result that cannot have been intended and should not be lightly accepted.

I approach the meaning to be given to the constituent elements of the expression “fixing, controlling or maintaining” in the same way as did Lindgren J in the CC (NSW) Case. Again as in the CC (NSW) Case, it is, in my opinion, "controlling" which is of greatest present relevance. If the expression “fixing, controlling or maintaining” is a composite then a case will fall within that composite if, for example, the provisions can be said to have a "controlling" of price as their purpose. If each of the words in the expression is a strict alternative, that one of those alternatives is satisfied will be sufficient.

[84] The purpose of the provisions was to put a ceiling on the price at which Woollam tenders, because it was to be less than the communicated cover price and a floor on the price at which Kelly tendered because it was to be more than the cover price. That amounts to a “controlling” of the price at which services are to be supplied. It matters not that there is no greater specificity as to price than the imposition, via the cover price, of a ceiling and floor. The imposition of such limits is nonetheless a control on the price. It does not detract from this conclusion that Woollam costed its tender for the Callemondah Project prior to its receipt of the request for a cover price. In is nonetheless the case that, by becoming a party to the arrangement or understanding, Woollam assumed obligations by virtue of the provisions of that arrangement or understanding, as did Kelly for that matter. [emphasis added]

[85] The ACCC alternatively submitted that the meaning of “fixing” was wide enough to cover an arrangement or understanding such as that struck between Woollam and Kelly. In Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1983] FCA 140; (1983) 68 FLR 70 at 72 the Full Court observed that the word "fixing" took its colour from its general context and the words used with it, "controlling" and "maintaining". Construing the word in this way serves to underscore the ordinary meaning which the word carries, which is "to fasten, make firm or stable in position" (Oxford English Dictionary, Online Edition). Here, ranges which had a price ceiling or, as the case may be, floor were fixed but there was no greater precision. This, I consider, is more aptly described as "controlling". If the price were settled with precision that, in my opinion, would constitute "fixing".

[86] I conclude that the provisions had the purpose, which was a substantial purpose, of controlling the price for which each of Woollam and Kelly was respectively to supply its services pursuant to the tenders respectively submitted by them.

[87] The case of the ACCC was not only put on the basis of "purpose" of the provisions but also that of their "effect" or "likely effect", the other alternatives presented in s 45A(1) of the TPA. In Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 50, Franki J observed of the phrase, “has or is likely to have” that “the word ‘has’ requires the question to be tested against the established facts whereas the words ‘likely to have’, while referring to the period at or about the time when the arrangement was made or the understanding entered into, allows any reasonable inference to be drawn.”

[88] The established facts in this case include the tenders which each of Woollam and Kelly submitted in respect of the Callemondah Project. Given the respective lump sum amounts, it is inherently likely that the provisions of the arrangement or understanding between Woollam and Kelly in respect of a cover price had the effect of controlling their respective prices. Further, having regard to the mutual understanding of these companies as to what was entailed in the giving and receiving of a cover price, it was, objectively, inherently likely that these provisions would have this effect in respect of the price of services to be supplied by them in respect of that project. The alternative basis upon which the ACCC sought to rely upon s 45A is also made out.

[89] Woollam and Mr Bogiatzis also put forward that there was a distinction to be drawn between "bid" and "price”" with s 45A being inapplicable to conduct which entailed nothing more than the submission of a bid to supply services for a specified amount. The deeming effect of that section was not engaged, it was submitted, with respect to fixing, controlling or maintaining tender prices, only prices. Yet further, it was submitted that the section was not directed to the price at which services might be supplied. It was submitted that the TPA contained an example, in s 44ZZRD of a distinction being drawn between price fixing (s 44ZZRD(2)) and bids, as defined by s 44ZZRB (s 44ZZRD(3)(c)).

[90] There is no merit in this submission. Each tender specified a price at which services were "to be supplied". The presence of that expression in s 45A(1) means that, to this extent, the section looks to the future. Reference to s 44ZZRD is but an irrelevant distraction.

[91] For these reasons, I conclude that Woollam and Kelly, in respect of the Callemondah Project:

(a) made an arrangement or understanding which contained provisions (as particularised) which had the purpose or which had or which were likely to have the effect of substantially lessening competition, contrary to s 45(2)(a)(ii) of the TPA; and

(b) gave effect to provisions (as particularised) which had the purpose or had or were likely to have the effect of substantially lessening competition, contrary to s 45(2)(b)(ii) of the TPA.

In each instance, the element of substantially lessening competition is made out by virtue of the operation of s 45A(1) of that Act.

• 'Court speaks against "Cover pricing" in building tenders' (14 October 2011) Issue 636, Australian Competition and Consumer Law News (Eds, Rufina Cheung and Katie Robb)
• Freehills, 'ACCC succeeded in price fixing case against "cover pricing"' (5 September 2011)
• Christopher Hodgekiss SC, 'Case note: Bid-rigging in the Queensland construction and building industry: ACCC v TF Woollam & Sons Pty Ltd' (2012) 20 Australian Journal of Competition and Consumer Law 109

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