George Weston Foods Limited has been penalised $1.5 million by the Federal Court after the company conceded that a former divisional chief executive had attempted to fix the price of flour with a competitor.
Following an investigation into an allegation that, in late 1999, Mr Paul Benedict Loneragan, a then director of George Weston Foods and chief executive of its flour milling division, had telephoned a competitor seeking to fix the wholesale price of flour, the Australian Competition and Consumer Commission began legal action against George Weston Foods and Mr Loneragan.
The ACCC alleged Mr Loneragan had tried to reach an agreement with a competitor about George Weston Foods' decision at that time to raise its wholesale price of flour. The ACCC further alleged that, had agreement been reached, it would have amounted to a price fixing arrangement under the Trade Practices Act 1974 and, accordingly, both George Weston Foods and Mr Loneragan had attempted to breach the Act.
George Weston Foods' competitor did not respond to Mr Lonergan's approach.
At the beginning of the hearing, George Weston Foods admitted to the court that, arising from the actions of its former divisional chief executive, it had attempted to breach the Act.
Before the hearing, after legal advice and careful consideration, the ACCC agreed to discontinue its action against Mr Loneragan.
When imposing the penalty of $1.5 million against George Weston Foods, Justice Gyles noted the following:
- George Weston Foods had previously engaged in price fixing or attempted price fixing conduct in 1976, 1995 and 1997
- the circumstances of this case show a deliberate attempt to breach the most fundamental prohibition in Part IV [restrictive trade practices section] of the Act at the highest level of a very substantial corporation with a very poor record of prior contraventions
- this type of cartel behaviour is very difficult to detect and, in those cases where it is detected, deterrence demands a heavy penalty
- the potential loss and damage to the public was very great as the flour industry is large and strategic as it affects staple foods.
Justice Gyles commented that: "The objective circumstances show a deliberate attempt to breach the most fundamental prohibition in Part IV of the Act at the highest level of a very substantial corporation with a very poor record of prior contraventions. What is more, the conduct is typical cartel behaviour, very similar in substance to that in which the company was involved in the glucose price fixing case. Such behaviour is notoriously difficult to detect. In those cases where it is detected, deterrence demands a heavy penalty".
Justice Gyles also made the following orders against George Weston Foods:
- George Weston Foods be restrained for four years from making or attempting to make any price fixing arrangement with competitors regarding the retail or wholesale price of wheaten flour
- George Weston Foods pay the ACCC's costs.
"The penalty imposed upon George Weston Foods clearly demonstrates the seriousness with which the court views attempts by companies to stifle competition by trying to enter into price fixing arrangements with competitors", ACCC Chairman, Mr Graeme Samuel, said today . "Agreements on price between competitors can be very damaging to both consumers and business, and this would have been the case in this matter had the attempted price fix been successful.
"Flour is a major ingredient in bread and other staple food products and, therefore, a price fixing deal between wholesalers would have had widespread detriment flowing through to consumers.
"The ACCC considers price fixing agreements, and attempts to reach these agreements, to be very serious breaches of the Trade Practices Act. It will not hesitate to take action against parties involved in this type of conduct. Anyone contemplating participating in a price fixing arrangement with a competitor should be aware they place themselves at grave risk of ACCC action should they attempt do so.
"George Weston Foods submitted to the court that it had put much effort into improving its trade practices compliance program both before and since the offending conduct in this matter took place. As this is the third occasion since 1995 that the company has engaged in price fixing-related conduct, I hope that its compliance program will now prevent a reoccurrence and change the culture within George Weston Foods that has fostered these past contraventions.
"This case is a timely reminder to all Australian business of the need to implement comprehensive trade practices compliance programs and the importance of constantly monitoring their effectiveness, including at the highest levels of an organisation".