Once more the dire consequences of breach of Part IV of the Trade Practices Act 1974 (Cth) (“Act”) have been made clear. This time with record penalties, injunctive orders and compliance orders imposed by the Federal Court of Australia.
Today Australian billionaire, Richard Pratt, his company and two of his senior executives were all found responsible to various degrees for breaches of the Act in the corrugated fibreboard packaging products market in Australia. The penalties require Visy to pay A$36 million, and two executives to respectively pay A$1.5 million and A$500,000.
The decided case is Australian Competition and Consumer Commission v Visy Industries Holdings Pty Limited (No 3)  FCA 1617. The ACCC alleged that between January 2000 and October 2004 companies in the Visy Group and certain officers of those companies engaged in price fixing and market sharing with companies in the Amcor Group.
The court agreed that the cartel activities, which included secret meetings between executives in a park and a tavern, were contrary to section 45 of the Trade Practices Act. The court also agreed with the A$36 million penalty against Visy suggested by the ACCC. This is more than double the previously highest penalty.
In making orders, Justice Heerey noted that the respondents only admitted liability after years of denial with arguments which were without merit and so convoluted that they amounted in one case to a “John Le Carré defence”.
At paragraph 319 of his 333 paragraph decision, Justice Heerey referred to the corporate culture at Visy. He concluded Visy’s approach to trade practices compliance in effect treated it as “Sanskrit”. There was no compliance in substance.
“… The corporate culture of Visy in relation to its obligations under the Trade Practices Act was non-existent. None of the most senior people hesitated for a moment before embarking on obviously unlawful conduct. There was in evidence a Visy document entitled “Trade Practices Compliance Manual” dated February 1998. It was signed by Mr Pratt. It bears a distribution list, signed by Mr Debney, with the names of 50 or so personnel covering every State and Head Office. On the front cover it is said:
This is an important document. It is essential that it be read and understood by you. Visy Industries requires strict compliance with its policy on the Trade Practices Act.
The document includes the stern warning that price fixing and market sharing are “strictly prohibited” and that readers of the document “must never make (such) arrangements with a competitor”. Further, it is said Visy personnel should avoid all contact with competitors or their employees other than contact approved by senior management or Visy Industries’ Legal Counsel. All necessary contact with competitors should be conducted in formal settings.
I doubt that Westerfolds Park and the Cherry Hill Tavern could be regarded as formal settings. The Visy Trade Practices Compliance Manual might have been written in Sanskrit for all the notice anybody took of it. …” (Emphasis ours)
Justice Heerey ordered that the company implement a trade practices compliance program which:
- accords with the Australian Standard for Compliance Programs AS-3806-1998;
- is in a form agreed with the ACCC or approved by the Court given section 45 of the Act; and
- is audited by an independent auditor.
Following changes to the Act on 1 January 2007, it is unlawful and void under sections 77A and 77B of the Act for a company to indemnify or pay a person for penalties or legal costs arising from breaches of the Act by that person acting as the company’s officer. Justice Heerey noted discussion in Australia about the need to also impose jail sentences on executives who breach the Act.
Related court actions against Visy or Amcor are likely to be heard in 2008. In the class action case, Jarra Creek Central Packing Shed Pty Ltd (ACN 085 691 425) v Amcor Ltd (ACN 004 275 165), thousands of businesses are claiming they were overcharged for fix corrugated fibreboard packaging. Cadbury Schweppes is suing Visy separately to pursue its own A$120 million claim against Amcor.
Graphics: The opening graphic is of “faux Sanskrit, look closer, you’ll see it’s all Latin script. English and Sanskrit are related languages within the family of Indo-European languages. The map from Wikipedia illustrates the territories in the world where Indo-European languages are spoken. In lighter green are places with an Indo-European minority language with official status.