VISY penalised $500,000 for attempted boycott

Penalties of $500,000 were today imposed on Visy Paper Pty Ltd and penalties of $25,000 on two senior executives for trying to stop a competitor, Northern Pacific Paper, from taking Visy's customers.

The Federal Court also ordered declarations and injunctions restraining Visy and the executives from engaging in similar conduct in future and ordered a trade practices compliance program.

The penalties follow the High Court's finding in October 2003 that Visy attempted to contravene section 45 of the Trade Practices Act 1974 which deals with anti-competitive conduct. The proceedings were instituted by the Australian Competition and Consumer Commission in December 1998.

In handing down his judgment, Justice Ronald Sackville, said:

 "In my view, Visy's conduct warrants the imposition of a substantial pecuniary penalty … The penalty must be sufficient to act as a deterrent to Visy and as a general deterrent to those corporations or individuals contemplating engaging in anti-competitive conduct in contravention of the TP Act".

"The non-competition clause plainly would have had an anti-competitive effect on the market".

"While Visy had a compliance regime in place when the contraventions took place, it appears not to have been particularly intensive or effective".

ACCC Chairman, Mr Graeme Samuel, said the penalties demonstrated the Federal Court's low tolerance for any attempts at boycott activity.

"Whenever boycotts appear on the ACCC radar, we are committed to stamping them out", he said. "Such conduct is often difficult to detect, so when companies are caught a heavy penalty is fitting.

"Today's penalty should tell companies to resist the temptation to collude with competitors or risk a significant price. That price is not only monetary but also to the reputation of the company and the individuals concerned.

"The decision reinforces the need for business to have an effective trade practices education program to remove the risk of transgressions of the law".

Background

In December 1998, the ACCC began proceedings against Visy alleging that Visy had attempted to contravene and attempted to induce Northern Pacific Paper Pty Ltd to contravene section 45(2) of the Trade Practices Act 1974.

Section 45(2) prohibits the making of a contract containing an exclusionary provision. An exclusionary provision in a contract boycotts particular persons or classes of persons.

The ACCC alleged that Visy attempted to make a contract and attempted to induce NPP, a waste collection company, to make a contract containing an exclusionary provision by which NPP would boycott customers or potential customers of Visy. The ACCC alleged that in 1996 Visy provided NPP with a number of draft agreements. Each draft contained a ‘non competition’ clause specifying that NPP would not collect or offer to collect recyclable waste paper from persons who were customers of Visy or had negotiated with Visy to become customers.

In November 2000, the Federal Court found that the ACCC had not established its case essentially because Visy was able to invoke a defence in section 45(6) of the Act. The Court was satisfied that the ACCC had proven the elements constituting an attempt and an exclusionary provision. The ACCC's case was dismissed on an interpretation of section 45(6).

The ACCC appealed to the Full Court of the Federal Court. On 10 August 2001 the Full Federal Court, by majority, found in the ACCC's favour and upheld the ACCC's appeal that Visy had attempted to contravene section 45(2) of the Act.

Visy then sought special leave to the High Court to appeal this finding and leave was granted. On 8 October 2003, the High Court, by a 5:1 majority, confirmed the Full Court's finding that Visy's conduct was illegal. The matter was remitted to the Federal Court to consider the issue of penalty. The penalty hearing took place on 6 October 2004.