ACCC v Colgate-Palmolive Pty Ltd

ACCC v Colgate-Palmolive Pty Ltd [2019] FCAFC 83 (Cussons appeal)

ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590 (Cussons)

ACCC v Colgate-Palmolive Pty Ltd (No 3) [2016] FCA 676 (Woolworths)

ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528 (Colgate)

Note: on 20 February 2018 the ACCC announced that it was appealing the Cussons decision to the Full Federal Court. The matter was heard on 20-22 August. On 24 May 2019 the Court ordered that the appeal be dismissed.

Overview

Laundry The ACCC alleged cartel conduct involving Colgate-Palmolive Pty Ltd (Colgate), PZ Cussons Australia Pty Ltd (Cussons), Unilever Australia Limited (Unilever) and Woolworths.

The relevant conduct predated current cartel laws with the result that it was considered under s 45 of the Act, in combination with s 45A (which then deemed price fixing to substantially lessen competition).

Unilever was an immunity applicant and as a result was not a party to the proceedings.

In 2016 both Colgate and Woolworths admitted involvement and paid penalties of $18m and $9m respectively. In particular:

Colgate contravened s 45(2)(a)(ii) of the Trade Practices Act by entering into an understanding with Unilever 'containing a provision that they would share with each other confidential and commercially sensitive information relating to the price of their laundry detergent products ... which provision had the effect of controlling the price of laundry deterents supplied by Unilever in November 2008, within the meaning of section 45A(1)'. It was therefore deemed by section 45A to have had the puprpose, effect or likely effect of substantially lessening competition in the market for the 'wholesale supply of powdered and liquid laundry detergent products for domestic use ... within the meaning of section 45(2) of the Act'. In addition, Justice Jagot declared that Colgate engaged in conduct in contravention of section 45(2)(b)(ii) by giving effect to the information sharing provision and that the third respondent, Paul Ansell, was 'directly or indirectly, knowingly concerned in or party to, and involved in' to contraventions by Colgate.
Woolworths admitted that it was 'knowingly concerned in the making of, and giving effect to, an understanding between Colgate-Palmolive Pty Ltd (Colgate), PZ Cussons Australia Pty Ltd (Cussons) and Unilever Australia Limited (Unilever) that they would each cease supplying standard concentrate laundry detergents to Woolworths in early 2009 and supply only ultra concentrates to Woolworths from that time.

Cussons contested the claims and the matter was heard before Justice Wigney in June and July 2016. .

Justice Wigney handed down his judgment on 22 December 2017, dismissing the ACCC's claims. In particular, Justice Wigney held that the ACCC had not discharged its burden of proving, on the balance of probabilities, that the respondent had entered into the claimed arrangement or understanding. Justice Wigney preferred the economic evidence suggesting the conduct resulted from oligopoly behaviour rather than agreement.

The ACCC appealed this decision; judgment delivered on 24 May 2019: appeal dismissed.

For case links see:

ACCC v Colgate-Palmolive Pty Ltd [2019] FCAFC 83
(appeal from ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590]
ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590 (Cussons)
ACCC v Colgate-Palmolive Pty Ltd (No 3) [2016] FCA 676 (Woolworths)
ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528 (Colgate)

Judgments

Cussons

Appeal

Dismissed (reasons not yet available)

Trial

Justice Wigney noted that while many of the primary facts were not in dispute the critical question was what inferences 'can and should be drawn from the primary facts' (para 73).

The answer to this 'critical question' turned heavily on expert evidence (discussed from para 381) with the Court preferring the evidence of the expert report of Prof George Hay, tendered by Cussons, over the expert report and evidence of Prof Williams, tendered by the ACCC.

[para 383] Professor Williams expressed the opinion that, had Colgate, Cussons and Unilever acted unilaterally, it is possible, but “seems unlikely”, that each of them would have decided to introduce their new products in March 2009. His opinion, it seems, was that it is likely that Woolworths would have insisted that the change take place in February 2009, and would not have changed the in-store launch to March 2009 in response to requests by some of the Suppliers. Professor Williams also expressed the opinion that if Colgate, Cussons and Unilever had acted unilaterally, it is unlikely that they would have decided to cease supply of standard concentrates. His opinion, in that regard, appeared to be based on his inference, drawn from the evidence, that the Suppliers saw a complete switch to ultra concentrates as risky if taken unilaterally. Professor Williams appeared to reason that in those circumstances, the Suppliers were likely to adopt the less risky strategy of supplying a mixed range of ultra concentrates and standard concentrates.

[para 384] Professor Hay, on the other hand, expressed the opinion that the transition to ultra concentrates by each of the Suppliers would most likely have occurred in March 2009 without any agreement, arrangement or understanding between them. Likewise, in his opinion, the restriction of the supply of standard concentrates would most likely have occurred in the absence of any agreement, arrangement or understanding. In Professor Hay’s opinion, the substantive behaviour of the Suppliers with respect to the transition to ultra concentrates was explicable without reference to any collusive arrangements or understanding. Their conduct was, rather, an individually economically rational response to underlying market forces.

...

Colgate

Justice Jagot declared that Colgate had contravened s 45(2)(a)(ii) of the Trade Practices Act by entering into an understanding with Unilever 'containing a provision that they would share with each other confidential and commercially sensitive information relating to the price of their laundry detergent products ... which provision had the effect of controlling the price of laundry deterents supplied by Unilever in November 2008, within the meaning of section 45A(1)'. It was therefore deemed by section 45A to have had the puprpose,e ffect or likely effect of substantially lessening competition in the market for the 'wholesale supply of powdered and liquid laundry detergent products for domestic use ... within the meaning of section 45(2) of the Act'.

Justice Jagot further declared that Colgate engaged in conduct in contravention of section 45(2)(b)(ii) by giving effect to the information sharing provision and that the third respondent, Paul Ansell, was 'directly or indirectly, knowingly concerned in or party to, and involved in' to contraventions by Colgate.

Colgate was ordered to pay the Cth pecuniary penalties totaling $18million, was ordered to update it complaince and education/training program and to maintain and administer the updated program for a period of three years. Mr Ansell was disqualified from managing corporations for a period of seven years.

Both Colgate and Ansell were also ordered to pay a contribution to the Applicant's costs ($450,000 and $75,000 respectively)

[para 6] In or around early 2008, Colgate and its competitors decided to replace what were previously marketed as “standard-concentrate” laundry detergent products with “ultra-concentrate” laundry products. Ultra Concentrates allow less detergent to be used to achieve a comparable level of product performance. They also yield significant cost savings and gross margin improvements for Colgate as a consequence of reduced expenditure on ingredients, packaging, transport and other logistics.

[para 7] Colgate considered that the proposed transition meant that there was a risk that:

(1) but for a simultaneous industry wide transition of those laundry detergents that had not yet been replaced with Ultra Concentrates, consumers might be uncertain as to the value proposition of Ultra Concentrates relative to Standard Concentrates;

(2) confronted by laundry products and packaging of different sizes, at parity or closely equivalent retail prices, consumers may prefer Standard Concentrates in larger packages on the mistaken basis that they represented greater value for money than Ultra Concentrates in smaller packages; and

(3) Colgate would lose sales or market share if Colgate transitioned to Ultra Concentrates while other manufacturers continued to supply Standard Concentrates.

[para 8] Through a series of meetings, telephone calls and correspondence between Colgate and its competitors throughout 2008, the Withhold Supply Understanding was reached to the effect that each manufacturer would participate in a coordinated transition from Standard Concentrates to Ultra Concentrates in February 2009 and that there would be a uniform in-store supermarket launch of Ultra Concentrates on the same date in March 2009.

...

[para 10] Colgate admits that Withhold Supply Understanding contained provisions with the substantial purpose of limiting the supply of Ultra Concentrates until in or around February 2009, and of Standard Concentrates from that date, and that supply of these goods was limited as a result.

[para 11] Further, in 2008, Colgate wished to increase the wholesale price of its laundry products. Mr Ansell, with the apparent but not actual authority of Colgate, communicated to representatives of Unilever confidential and commercially sensitive information about the price of Colgate’s laundry detergents including Colgate’s proposed price increases. Unilever increased the wholesale list prices of specific laundry detergent products supplied by it with effect from 10 November 2008. Unilever decided to implement these price increases after receiving information from Mr Ansell to the effect that Colgate was going to introduce its own price increases. Colgate increased the wholesale list prices of specific laundry detergent products supplied by it with effect from 17 November 2008.

[para 12] Colgate admits that by reason of these circumstances, and in contravention of ss 45(2)(a)(ii) and 45(2)(b)(ii) of the TPA, it entered into the Laundry Information Sharing Understanding and the Laundry Information Sharing Provision which had the effect of controlling the price of laundry detergents supplied by Unilever in November 2008 and is thereby deemed by s 45A of the TPA to have had the purpose or effect, or been likely to have the effect, of substantially lessening competition in the laundry detergent market.

Woolworths

Order was made following statement of agreed facts and admissions and joint submissions on liability.

Woolworths was ordered to pay penalties totalling $9m following admissions that it was 'knowingly concerned in the making of, and giving effect to, an understanding between Colgate-Palmolive Pty Ltd (Colgate), PZ Cussons Australia Pty Ltd (Cussons) and Unilever Australia Limited (Unilever) that they would each cease supplying standard concentrate laundry detergents to Woolworths in early 2009 and supply only ultra concentrates to Woolworths from that time.'

[para 5] The relevant conduct took place in 2008 and 2009, in relation to the transition by Colgate, Cussons Australia Pty Ltd (Cussons), and Unilever Australia Limited (Unilever) from standard-concentrated laundry detergents (Standard Concentrates) to ultra-concentrated laundry detergents (Ultra Concentrates).

[para 6] Woolworths admits, for the purpose of this proceeding, that it was, within the meaning of s 76(1)(e) of the TPA, directly or indirectly knowingly concerned in contraventions of s 45(2)(a)(i)and 45(2)(b)(i) of the TPA by Colgate, Cussons and Unilever who:

(a) arrived at an understanding (the Withhold Supply Understanding) containing a provision (the Withhold Supply Provision):

(i) with the substantial purpose of limiting the supply to Woolworths by Colgate, Unilever and Cussons of:

(A) Ultra Concentrates until in or around February 2009; and

(B) Standard Concentrates from in or around February 2009;

(ii) which was an exclusionary provision within the meaning of section 4D of the TPA,

and thereby contravened s 45(2)(a)(i) of the TPA; and

(b) gave effect to the Withhold Supply Provision in the period from early February 2009 to early March 2009 and thereby contravened s 45(2)(b)(i) of the TPA.

...

[para 13] In 2008 and 2009, approximately two thirds of the annual volume of laundry detergents sold in Australia comprised powdered laundry detergents. Colgate, Cussons and Unilever were the largest wholesale suppliers of laundry detergents in Australia, with a combined market share measured both by value and by volume, of approximately 80%. Colgate, Cussons and Unilever, along with other wholesale suppliers of laundry detergents in Australia, made laundry detergent products available for sale to retailers within Australia, including to Woolworths and Coles. In 2008 Woolworths held a share by value of the laundry detergent market in Australia of approximately 42%. Woolworths had knowledge at all times in 2008 and 2009 that Colgate, Unilever and Cussons were competitors in the laundry detergent market.

[para 14] Before February 2009, the majority of powdered and liquid laundry detergent products sold within Australia for domestic use comprised Standard Concentrates. In 2008 and 2009 representatives of Woolworths, including Mr Fuchs [Business Manager, Groceries, Woolworths], attended various meetings and engaged in communications with representatives of Colgate, Unilever and Cussons. By the end of August 2008, Woolworths had decided it would accept shipments of Ultra Concentrates from 26 January 2009 and the in-store launch dates of Ultra Concentrates would be 2 March 2009 and Woolworths understood that each of Colgate, Cussons and Unilever would all be changing over their remaining Standard Concentrates to Ultra Concentrates at around the same date with an in-store launch at Woolworths of 2 March 2009.

[para 15] From in or around early February 2009, in relation to the supply of laundry detergent products to Woolworths:

(a) Colgate introduced powder and liquid Ultra Concentrate products, and ceased the supply of its previous powder and liquid Standard Concentrate products, save in respect of the sell-down of certain products;

(b) Unilever introduced powder Ultra Concentrate products, and ceased the supply of its previous powder Standard Concentrate products, save in respect of the sell-down of certain products; and

(c) Cussons introduced powder Ultra Concentrate products and some additional liquid Ultra Concentrate products, and ceased the supply of most of its previous powder and liquid Standard Concentrate products, save in respect of the sell-down of certain products and the supply of a particular Standard Concentrate product, Radiant Black Wash 750ml, to Woolworths.

It is admitted by Woolworths that Mr Fuchs:

(1) Through his communications with Colgate, Cussons and Unilever relevant to the Withhold Supply Understanding knew the essential facts and matters constituting the contraventions by Colgate and Cussons in arriving at an understanding (with Unilever) containing the Withhold Supply Provision, and giving effect to that provision.

(2) Had the apparent, but not actual, authority of Woolworths to engage in the communications which resulted in his knowledge of the Withhold Supply Understanding, albeit that he was not a member of Woolworths’ senior management,

and that, by reason of this, Woolworths was knowingly concerned in the contraventions as identified above.

[para 17] I accept the joint submission that the contraventions in the present case are serious, while not at the most egregious end of the scale of seriousness. The seriousness of the contraventions is demonstrated by the fact that the conduct occurred in a national market for a staple product, (i.e. laundry detergents), the contraventions delivered benefits to Woolworths which cannot be characterised as trivial or insignificant, the conduct of Woolworths through its employee was a necessary component to give effect to the contraventions and, as agreed, “Woolworths wanted to ensure that there was a simultaneous transition to Ultra Concentrates by Colgate, Cussons and Unilever…, and to this extent had a shared objective with these manufacturers”.