Justice Allsop of the Federal Court today imposed pecuniary penalties totalling $7million on Woolworths Limited for entering into and giving effect to illegal anticompetitive agreements with small business liquor licence applicants.
On 27 June 2003, the ACCC instituted legal proceedings in the Federal Court against Woolworths and Liquorland, a wholly owned subsidiary of Coles Group Limited, for entering into and giving effect to allegedly anticompetitive agreements.
The ACCC alleged that the conduct arose in circumstances where Woolworths and Liquorland objected to certain liquor licence applications and then proposed restrictive agreements in return for withdrawing their objections. The restrictive agreements contained conditions such as the following:
- preventing liquor licence applicants from selling packaged takeaway liquor from their premises
- restricting and preventing liquor licence applicants from opening a dedicated bottleshop or establishing a separate drive-through bottleshop
- restricting and preventing liquor licence applicants from advertising or conducting promotions for the sale of packaged takeaway liquor over the counter to consumers
- preventing liquor licence applicants from expanding the size of their licensed premises, and
- limiting the amount of liquor which liquor licence applicants could keep on their premises to meet consumer demand.
On 31 May 2005, Liquorland admitted that it had entered into illegal agreements with five applicants for liquor licences. Liquorland was subsequently penalised $4.75 million by Justice Gyles of the Federal Court for these contraventions. The case against Woolworths continued before Justice Allsop.
On 30 June 2006, after a lengthy trial, Justice Allsop found that the four agreements entered into by Woolworths with liquor licence applicants contravened section 45 of the Act.
In his judgment, Justice Allsop found that Woolworths had entered each of the agreements with the substantial purpose of substantially lessening competition in local packaged takeaway liquor markets in Campbelltown, Tweed Heads and Arncliffe. These agreements related to the following small businesses:
- Ettamogah Bar & Restaurant, Campbelltown
- Dry Dock Bottleshop, Tweed Heads
- Global Beer Importers, Tweed Heads, and
- Jin Ro Australia, Arncliffe.
Justice Allsop also found that the Ettamogah and Global Beer agreements contravened the Act on the additional basis that each contained an exclusionary provision which had the purpose of preventing the small business applicants from supplying packaged takeaway liquor to Woolworths' actual and potential customers.
In his judgment Justice Allsop described Woolworths' purpose in entering into the agreements as aimed at preventing the entry of new competitors into local retail packaged takeaway liquor markets so as to protect Woolworths' liquor businesses.
He said: "A substantial purpose of the [Woolworths] objections and of the provisions was to prevent the licence being or becoming the platform or vehicle for a market entrant without restriction on its licence… It was a purpose to ensure, as far as was possible by the provisions, that the licence to be granted could not in the future be available as a scarce and potent item to be used by an entrant to the business of selling takeaway liquor in the local area where Woolworths had, or would shortly have, a liquor outlet".
On 15 December 2006, Justice Allsop heard argument from the ACCC and Woolworths as to the appropriate penalty Woolworths should pay in respect of the contraventions and also whether injunctions should be ordered to prevent future contraventions of the Act.
In imposing penalties totalling $7 million, Justice Allsop said: "Lying at the heart of the Act is the competitive process. A subjective purpose of a substantial commercial entity of substantially affecting competition is of the utmost seriousness. This is especially so when experienced senior officers undertook such conduct deliberately to ensure that licences did not become any form of competitive platform or threat. Whilst no particular effect was proved, I should approach the matter on the basis that the conduct was seen as relevantly important to protect Woolworths' interest by ensuring the absence of a competitive platform. It was of relevant commercial significance to Woolworths and should be viewed in that light".
In its submissions, the ACCC relied upon prior contraventions of the Act by Woolworths' subsidiaries. However, Justice Allsop considered that Woolworths' conduct in these four episodes should be looked at independently, and a penalty imposed, without reference to other cases.
Justice Allsop also made orders restraining Woolworths from relying on or enforcing in any way any of the four agreements.
ACCC Chairman, Mr Graeme Samuel, said the ACCC welcomed the substantial penalties imposed on Woolworths by Justice Allsop.
"Penalties of this magnitude are important to achieve both specific and general deterrence", he said. "Not only do such penalties reinforce the seriousness of contraventions of the anti-competitive provisions of the Act in the mind of the company which engaged in the illegal conduct, but they also serve as a warning to other companies which may be contemplating engaging in similar illegal conduct.
"Whilst it is normal business practice for companies to seek to defend their sales from their competitors, companies must ensure that they seek to protect their sales by legal means. Entering into agreements with competitors to prevent the loss of sales or market share is an entirely inappropriate and illegal means of protecting your business".