Penalties and costs of $1.15 million have been imposed on the Queensland subsidiary of foam manufacturer Joyce Corporation Ltd and two managers for their role in a price fixing and market sharing arrangement.
Joyce has admitted that its subsidiary entered into the arrangement with its Queensland competitors, chiefly through a friendship between company executives who met regularly over lunch.
Previously, in December 1997, the Federal Court, Melbourne had imposed $2 million in penalties and costs on Foamlite (Australia) Pty Ltd and Vita Pacific Limited, subsidiaries Pacific Dunlop Limited, for their part in the arrangement.
The Federal Court accepted a joint submission from the ACCC and the parties on injunction and penalty on the price fix and market sharing arrangements by Joyce and its then state manager, Ronald Windebank, and its commercial manager, John Pike, and an estimator, Neil Cashion.
The Court was told the arrangement followed a friendship which had developed in the mid-80s between Windebank, acting in his role as Queensland state manager of Cablemakers (Cablemakers was acquired by Joyce in 1988), and the state managers of competitors Foamlite and Vita. They agreed to compete on non-price matters such as style, delivery et cetera, but not poach each others customers through price.
Justice Finkelstein accepted the submissions and ordered the penalties totalling $1 million as follows: Joyce Corporation Limited $850,000 Ronald Windebank $100,000 John Pike $50,000
The Court issued injunctions restraining all for three years from repeating the conduct and the company agreed to pay $150,000 towards the ACCC's costs.
'This was the final chapter in a blatant case of price fixing which went as high as the Queensland state manager,' ACCC Chairman, Professor Allan Fels, said today. 'Price fixing and market sharing have been deemed by Parliament as being inherently anti-competitive under the Trade Practices Act 1974.
'Cases such as the 'concrete case' involving price fixing and market sharing in south east Queensland by Boral, Pioneer and CSR where penalties of more than $20 million were ordered in late 1995, demonstrate the seriousness with which this type of conduct is viewed. Whilst the facts of this case are quite different, there has again been a clear breach of the Act.
'It is disappointing to see this further case of price fixing and market sharing emerge in Queensland particularly as the conduct affected small businesses, such as furniture makers, who use the foam product.
'Businesses must be aware of the severe consequences of engaging in anti-competitive behaviour. The ACCC will protect small business from being disadvantaged by illegal conduct of larger corporations.
'Normally, the ACCC would seek higher penalties than ordered today but Joyce was cooperative and has affirmed its commitment to upgrading its existing trade practices compliance program.
'It is also a warning to company executives that entertaining with rival executives can easily lead to illegal behaviour. Such contact must be strictly social and matters of business should be left at the office.
Joyce has removed Windebank from the position of Queensland state manager and transferred him to other duties. Windebank, Pike and Cashion have been severely reprimanded by Joyce and warned that such conduct will not be tolerated in future and will lead to instant dismissal.
Joyce assisted the ACCC in the provision of affidavits by individuals involved and other information relevant to the investigation, and in bringing the matter to Court in agreed pleadings, remedies and joint submissions for the Court to consider.
For further information about this media release: Professor Allan Fels, Chairman, ACCC (03) 9290 1812 Ms Lin Enright, Director, Public Relations, (02) 6243 1108 MR 214/98
BACKGROUND The action follows a three year investigation into alleged price fixing and market sharing in the flexible polyurethane foam market in Queensland between the mid to late 1980s and early 1996. In December 1997, the Federal Court in Melbourne accepted joint submissions regarding injunction and penalty for price fixing and certain market sharing by the other parties in the arrangement. It awarded penalties totalling $1.9 million, as follows: Foamlite (Australia) Pty Ltd $1.2million, Vita Pacific Limited $600,000 and Peter Dell $100,000. It was agreed that $100,000 would be contributed towards the ACCC's costs.
The conduct In or about the mid 1980s Windebank, acting in his role as Queensland state manager of Cablemakers (Cablemakers was acquired by Joyce in 1988) and with the state managers of competitors Foamlite and Vita, made an arrangement or understanding about dealing with people who sought quotations for the supply of industrial flexible polyurethane foam who were not existing customers and who were known or ascertained to be rival companies' customers. The arrangement evolved over time and continued until early 1996 when the ACCC's investigation became known.
It grew from a friendship between Windebank and Peter Dell, then Foamlite's Queensland state manager. They met when they were involved in an industry working party. A friendship resulted, and the two began lunching together.
The result was that the companies could compete on non-price matters such as service, quality, delivery, style, capacity and product range. Where price was concerned, and where the companies found out that they were approaching or had been approached by a prospective customer who was known to be a competitor's customer, it was understood that the companies would not seek to undercut their competitors.
By this it was intended that: (a) each company should not approach a prospective customer in an endeavour to secure new business in circumstances where they knew that the customer was an established customer of one or other of the other companies; and (b) if one company inadvertently approached a competitor's customer or a customer approached one of the companies that was not its current supplier, the relevant company would, in circumstances where it knew or ascertained that the prospective customer was a customer of one of the other companies, endeavour to quote prices that were above the competitor's prices. In some instances this meant that a company had to requote although it had already provided a quote in circumstances where it had been unaware that the prospective customer was an existing customer of one of the other two competitors.
The lunches with Dell were social in their intent and content, and Windebank states that they were not intended to form part of the understanding. The lunches served the purpose of maintaining personal relationships between them and established and maintained relationships between other employees. They introduced their respective Queensland sales managers (Pike for Joyce and Lait for Foamlite) to each other at one of these lunches. Of these lunches, it is recalled that on several occasions discussion touched on customer sharing and pricing. In short, these lunches facilitated the arrangement.
Joyce has admitted that its subsidiary entered into the arrangement with its Queensland competitors, chiefly through a friendship between company executives who met regularly over lunch.
Previously, in December 1997, the Federal Court, Melbourne had imposed $2 million in penalties and costs on Foamlite (Australia) Pty Ltd and Vita Pacific Limited, subsidiaries Pacific Dunlop Limited, for their part in the arrangement.
The Federal Court accepted a joint submission from the ACCC and the parties on injunction and penalty on the price fix and market sharing arrangements by Joyce and its then state manager, Ronald Windebank, and its commercial manager, John Pike, and an estimator, Neil Cashion.
The Court was told the arrangement followed a friendship which had developed in the mid-80s between Windebank, acting in his role as Queensland state manager of Cablemakers (Cablemakers was acquired by Joyce in 1988), and the state managers of competitors Foamlite and Vita. They agreed to compete on non-price matters such as style, delivery et cetera, but not poach each others customers through price.
Justice Finkelstein accepted the submissions and ordered the penalties totalling $1 million as follows: Joyce Corporation Limited $850,000 Ronald Windebank $100,000 John Pike $50,000
The Court issued injunctions restraining all for three years from repeating the conduct and the company agreed to pay $150,000 towards the ACCC's costs.
'This was the final chapter in a blatant case of price fixing which went as high as the Queensland state manager,' ACCC Chairman, Professor Allan Fels, said today. 'Price fixing and market sharing have been deemed by Parliament as being inherently anti-competitive under the Trade Practices Act 1974.
'Cases such as the 'concrete case' involving price fixing and market sharing in south east Queensland by Boral, Pioneer and CSR where penalties of more than $20 million were ordered in late 1995, demonstrate the seriousness with which this type of conduct is viewed. Whilst the facts of this case are quite different, there has again been a clear breach of the Act.
'It is disappointing to see this further case of price fixing and market sharing emerge in Queensland particularly as the conduct affected small businesses, such as furniture makers, who use the foam product.
'Businesses must be aware of the severe consequences of engaging in anti-competitive behaviour. The ACCC will protect small business from being disadvantaged by illegal conduct of larger corporations.
'Normally, the ACCC would seek higher penalties than ordered today but Joyce was cooperative and has affirmed its commitment to upgrading its existing trade practices compliance program.
'It is also a warning to company executives that entertaining with rival executives can easily lead to illegal behaviour. Such contact must be strictly social and matters of business should be left at the office.
Joyce has removed Windebank from the position of Queensland state manager and transferred him to other duties. Windebank, Pike and Cashion have been severely reprimanded by Joyce and warned that such conduct will not be tolerated in future and will lead to instant dismissal.
Joyce assisted the ACCC in the provision of affidavits by individuals involved and other information relevant to the investigation, and in bringing the matter to Court in agreed pleadings, remedies and joint submissions for the Court to consider.
For further information about this media release: Professor Allan Fels, Chairman, ACCC (03) 9290 1812 Ms Lin Enright, Director, Public Relations, (02) 6243 1108 MR 214/98
BACKGROUND The action follows a three year investigation into alleged price fixing and market sharing in the flexible polyurethane foam market in Queensland between the mid to late 1980s and early 1996. In December 1997, the Federal Court in Melbourne accepted joint submissions regarding injunction and penalty for price fixing and certain market sharing by the other parties in the arrangement. It awarded penalties totalling $1.9 million, as follows: Foamlite (Australia) Pty Ltd $1.2million, Vita Pacific Limited $600,000 and Peter Dell $100,000. It was agreed that $100,000 would be contributed towards the ACCC's costs.
The conduct In or about the mid 1980s Windebank, acting in his role as Queensland state manager of Cablemakers (Cablemakers was acquired by Joyce in 1988) and with the state managers of competitors Foamlite and Vita, made an arrangement or understanding about dealing with people who sought quotations for the supply of industrial flexible polyurethane foam who were not existing customers and who were known or ascertained to be rival companies' customers. The arrangement evolved over time and continued until early 1996 when the ACCC's investigation became known.
It grew from a friendship between Windebank and Peter Dell, then Foamlite's Queensland state manager. They met when they were involved in an industry working party. A friendship resulted, and the two began lunching together.
The result was that the companies could compete on non-price matters such as service, quality, delivery, style, capacity and product range. Where price was concerned, and where the companies found out that they were approaching or had been approached by a prospective customer who was known to be a competitor's customer, it was understood that the companies would not seek to undercut their competitors.
By this it was intended that: (a) each company should not approach a prospective customer in an endeavour to secure new business in circumstances where they knew that the customer was an established customer of one or other of the other companies; and (b) if one company inadvertently approached a competitor's customer or a customer approached one of the companies that was not its current supplier, the relevant company would, in circumstances where it knew or ascertained that the prospective customer was a customer of one of the other companies, endeavour to quote prices that were above the competitor's prices. In some instances this meant that a company had to requote although it had already provided a quote in circumstances where it had been unaware that the prospective customer was an existing customer of one of the other two competitors.
The lunches with Dell were social in their intent and content, and Windebank states that they were not intended to form part of the understanding. The lunches served the purpose of maintaining personal relationships between them and established and maintained relationships between other employees. They introduced their respective Queensland sales managers (Pike for Joyce and Lait for Foamlite) to each other at one of these lunches. Of these lunches, it is recalled that on several occasions discussion touched on customer sharing and pricing. In short, these lunches facilitated the arrangement.