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Trade Practices Commission v Nicholas Enterprises

TRADE PRACTICES COMMISSION V. NICHOLAS ENTERPRISES PTY LTD (NO 2) (1979) 40 FLR 83

Federal Court of Australia

FACTS

The defendants ran five hotels in the metropolitan area of Adelaide. The defendants all sold packaged beer to the public.

The Trade Practices Commission commenced proceedings against the defendants claiming pecuniary penalties and injunctions. The claim alleged breaches of section 45 of the Trade Practices Act as the defendants had made an arrangement or arrived at an understanding which had the purpose or effect of substantially lessening competition and that they gave effect to that understanding. The essence of the arrangement as alleged was that the defendants would only allow two bonus bottles to customers who purchase twelve bottles instead of the then customary three bonus bottles.

ISSUES

Had the defendants made an arrangement or reached an understanding that they would reduce their bonus supply of beer?

Did the alleged arrangement lead to , or substantially reduce competition?

FINDING

An arrangement or understanding within the meaning of section 45 of the Act requires each party to have communicated with the other, for each party to have raised an expectation in the mind of the other and for each party to have accepted an obligation from the other.

There must be a meeting of minds. The raising of the expectation in one party must be communicated to the other party.

QUOTE

Fisher J said:

“A significant feature 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. These are, in my opinion the essential elements of the requisite meeting of minds.

“It seems to me also that an understanding must involve the meeting of two or more minds. Where the minds of the parties are at one that a proposed transaction between them proceeds on the basis of the maintenance of a particular state of affairs or the adaptation of a particular course of conduct, it would seem that there would be an understanding within the meaning of the Act”.

IMPACT

An arrangement to reduce competition in a market does not need to be a legally binding agreement or contract to make the parties liable under the Act.

Arrangements between competitors for the same market or customer may be in breach of the Act.

Trade Practices Commission v Commodore Business Machines

TRADE PRACTICES COMMISSION V. COMMODORE BUSINESS MACHINES PTY LTD (1989) ATPR 40-976

Federal Court of Australia – 3 August 1989

FACTS

Respondent supplied personal computers to 150 dealers around the country, requiring a commitment in writing that the computers would not be advertised at less than the recommended retail price. They obtained legal advice that this clause would be lawful so long as dealers recognised that they could sell the computers at whatever price they wished. Commodore threatened a number of dealers that supply would be withheld or dealerships cancelled unless the product was advertised at the recommended price. TPC contacted Commodore and advised that the conduct was a breach of the resale price maintenance provisions of the Act. A month later, Commodore wrote to the relevant dealers advising that the dealers could sell the computers at whatever price they wished.

Commodore argued that it merely wanted the computers to be advertised at a certain price and did nothing to prevent discounts. In relation to penalty, Commodore argued that it had acted on legal advice in the first place and had changed its practices as soon as the Commission notified it of alleged breaches.

ISSUE

Imposition of penalties and injunctions and the effect of legal advice in mitigating these penalties.

FINDINGS

Commodore’s conduct was in breach of the resale price maintenance provisions; substantial monetary penalties and injunctions were granted.

QUOTE

Justice Einfeld:

“It is one thing to argue that clause 4 was thought to be legal; this may entitle the respondent to some mitigating effect in the penalty for the distribution of the documents alone. It is quite another matter to use this to justify multiple efforts by employees to impose a quite crude regime of enforcement clearly outlawed by the Act and exposed by the considerable publicity given to this practice over many years.”

“It thus seems to me that the respondent’s activities represent a significant and deliberate interference with the rights of both dealers and the ordinary public which are protected and defined by the Act.

The fact that the large chains were not asked to sign the document and did not do so leads to two further conclusions. One is that the retailers with whom this case is concerned, in the main, are presumably small business proprietors. The second is that they were disadvantaged in relation to large stores by having their capacity to compete on price reduced or removed.”

IMPACT

Obtaining and following legal advice of a low standard may only be given limited regard when penalties are being considered.

Generally the whole circumstances of the breach will be considered.