Justice Heerey of the Federal Court today imposed penalties totalling $4 million against J McPhee & Son (Australia) Pty Ltd and four of the company's executives for breaches of Part IV of the Trade Practices Act.
The Court found that McPhee and three of its executives had attempted to reach a collusive tendering arrangement with a competitor, Discount Freight Express (DFE), in 1995. After McPhee had sought to increase the price of its freight services to one of its customers, Just Jeans, the customer sought tenders from other freight companies, including DFE.
McPhee approached DFE and attempted to induce them into submitting a tender at prices which would not succeed. DFE did not agree to the approach and ultimately Just Jeans awarded the contract to a rival of both companies, Ipec. A penalty of $3 million was ordered against McPhee for this incident. Mr Richard Forde, a Director of the company, was penalised $100,000; Mr Craig Holland, General Manager, was penalised $60,000 and Mr Doug Morton, Business Development Manager, was penalised $80,000.
In his decision Justice Heerey said "The market place is, and is meant to be, a tough place. But the norms imposed by Part IV, and in particular the prohibition of price-fixing, by now are to be seen as part of fair, honest and ethical business behaviour. Price-fixing, and in particular the kind of collusive bidding which was attempted in the present case, is a form of cheating."
In another incident the Court found that in 1994 Mr Guy Webb, McPhee's Gippsland Manager, had heard that a DFE manager had approached one of McPhee's customers during a visit to the region. Mr Webb arranged a meeting with the DFE manager and verified that he was intending to submit a quote to the McPhee client (ACI Florapak). Mr Webb asked him to 'cover' the rates which McPhee was charging ACI.
The DFE manager was provided with McPhee's quoted rates by Mr Webb and then submitted prices which were calculated to exceed McPhee's rates and be unacceptable to ACI. ACI rejected the offer by DFE and continued to obtain freight services from McPhee. The Court found McPhee had engaged in price fixing and ordered a penalty of $750,000. Mr Webb was penalised $15,000 for his involvement in the arrangement.
Professor Allan Fels, ACCC Chairperson said, 'The business community does generally understand that price fixing is not acceptable behaviour; but there are still a few who do not accept that and flout the law. McPhee's conduct took place within months of massive fines being imposed in the largest collusion case ever undertaken by the Commission. That case was also in the express freight industry, involved collusion on price and involved a company related to McPhee (TNT Australia Pty Ltd).
'McPhee had obviously learnt nothing from their sister company's experience in the first freight case but I am hopeful that other businesses, in every industry and profession, who are tempted to price fix will better appreciate that collusion is detectable, that it is provable and that penalties will be heavy.' It is understood that the respondents will be appealing the Court's decision.