Sweet deal for the ACCC

Published On 16/10/2018 | By Paula Mucha | Enforcement, Litigation

In the Australian Competition and Consumer Commission v Oakmoore Pty Ltd cases,[1] the Federal Court declared, by consent, that Ampelite Australia Pty Ltd (Ampelite), Palram Australia Pty Ltd (Palram) and Oakmoore Pty Ltd (trading as EGR) had engaged in exclusive dealing conduct which had the purpose of substantially lessening competition.  The Court ordered the parties to pay penalties totalling $11.95 million. The $350,000 penalty imposed on Mr Horwill, a director of EGR, is the highest penalty ever imposed on an individual for a breach of the exclusive dealing provisions of the Competition and Consumer Act 2010 (Cth) (CCA).

These cases are also the first time that the Court has imposed a penalty for being “knowingly concerned” in a contravention of the exclusive dealing provision. Australian Competition and Consumer Commission (ACCC) Chair Rod Sims said that “the penalties ordered by the court show that exclusive dealing conduct is serious illegal behaviour”.[2]

Background

Ampelite and Palram were distributors of polycarbonate roof sheeting (polycarb), and competed in the $45 million national market to supply to commercial purchasers: being retail stores, large commercial users and on-sellers. EGR was a manufacturer and supplier of plastic products. At the relevant time, EGR only competed in the polycarb distribution market to a limited extent.

In late 2008, Mr Horwill communicated to Mr Vergahen and Ms Horesh, directors of Ampelite and Palram respectively, that unless Ampelite and Palram agreed to purchase polycarb from EGR, EGR would enter the retail market: meaning that EGR would supply polycarb to commercial purchasers, in competition with Ampelite and Palram. Both Ampelite and Palram were concerned about the entry of EGR into the market, as they believed the addition of a new supplier would require them to lower their prices for polycarb.

EGR, Palram and Ampelite admitted that, as a result of these discussions:

  • Ampelite and Palram verbally agreed that each of them would enter into a supply agreement to purchase polycarb from EGR, on the basis that EGR would agree to refrain from supplying polycarb to commercial purchasers; and
  • Palram and Ampelite both entered into written supply agreements with EGR on this basis.

Decision

All parties admitted, and the Court held, that this conduct contravened the exclusive dealing prohibition in s 47(1) of the CCA. The Court held that Palram and Ampelite engaged in exclusive dealing, as defined in s 47(4), because the parties acquired and offered to acquire polycarb from EGR, on the basis that EGR would not supply, or seek to supply, polycarb to commercial purchasers. The Court held that EGR was knowingly concerned in and party to the contravention. Further, the Court found that the agreement between Palram and Ampelite, and their supply agreements with EGR, had the purpose of substantially lessening competition in the distribution market.

The relevant parties admitted, and the Court also held, that Mr Horwill, Ms Verhagen and Ms Horesh were knowingly concerned and party to the contraventions, within the meanings of s 76(1)(e) and s 75B(1)(c) of the CCA.

Ampelite also admitted that it breached the prohibition on anti-competitive agreements in s 45(2) of the CCA. It admitted that it entered into and gave effect to the agreement with Palram, and that the agreement had the purpose and likely effect of substantially lessening competition in the distribution market.

Orders

The Court imposed the relief which was agreed upon by the parties and the ACCC. EGR, Palram and Ampelite were ordered to pay $6 million, $3.5 million and $2 million respectively. Mr Horwill was ordered to pay a record-breaking $350,000, whilst Mr Vergahen and Ms Horesh were ordered to pay $100,000 and $250,000 respectively.

The Court was influenced by the fact that Palram and Ampelite provided significant and early assistance to the ACCC. As EGR and Mr Horwill only conceded just before their trial was scheduled to start, the Court reasoned that their delay justified a higher penalty.

In addition, all parties were ordered to contribute to the ACCC’s costs, and to cause all directors and employees to receive training regarding their responsibilities and obligations under Part IV of the CCA. Furthermore, Ms Horesh was disqualified from managing corporations for 3 years under s 86E(1) of the CCA. The Court refused Palram’s application for a non-publication order. His Honour was not satisfied that the prices paid by Palram to EGR were of commercial significance.

[1] [2018] FCA 1169; [2018] FCA 1170; [2018] FCA 1472.

[2] ACCC, EGR to pay $6m penalty for exclusive dealing (Media Release, 28 September 2016).

Image credit: Image by m-louis /CreativeCommons 2.0 / remixed to B&W and resized

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About The Author

is a Law Graduate in the Melbourne office of King & Wood Mallesons.

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