Woolworths has admitted to being ‘knowingly concerned’ in a laundry detergent price-fixing scheme that provided Woolworths with a total benefit of $4.36 million. The Federal Court accepted the joint submissions of Woolworths and the ACCC and ordered Woolworths to update its trade practices compliance programme and pay $9 million in fines.

Background

This is the latest in a series of penalties imposed as a result of proceedings brought by the ACCC against Colgate, Cussons, Woolworths and a former Colgate sales director. The proceedings concern an allegedly anti-competitive arrangement between Colgate, Cussons and Unilever to sell ultra-concentrated laundry detergent at the same price per wash as standard concentrate detergent, without passing on cost savings associated with lower storage and shipping costs to customers. In April this year, having admitted to entering into the price-fixing arrangements, Colgate was ordered to pay $18 million, the third largest penalty the Federal Court has ever ordered for a contravention of competition laws.

Just months later, the ACCC settled on yet another record-breaking fine, this time against Woolworths. The $9 million fine is the highest penalty ever obtained by the ACCC against a party not directly involved, but rather merely ‘knowingly concerned’ in anticompetitive conduct.

Woolworths’ knowing concern

Section 76 of the Competition and Consumer Act 2010 (the Act) allows the court to penalise any party that has contravened, or been in any way, directly or indirectly, knowingly concerned in the contravention. Woolworths admitted it was knowingly concerned in the contravention because a former Woolworths Business Manager knew the essential facts and matters constituting the contraventions, and knew of the Withhold Supply Understanding between Colgate, Unilever, and Cussons.

In considering the appropriate penalty, the court may have regard to the nature, extent, circumstances, and any loss or damage caused by, the act or omission, and whether the party has previously been found to have engaged in any similar conduct. Further factors, like the size and financial position of the company, whether the contravention was deliberate, systematic, or carried out by senior management, and whether the contravening company had in place programmes for compliance may also be considered.

It is well established that the primary purpose of imposing penalties is deterrence of future similar conduct. Therefore, penalties should be commensurate with genuine punishment, relative to the characteristics of the contravening company. The Act allows the imposition of penalties equivalent to 3 times the amount of benefit the company receives from its involvement in a contravention. Accordingly, in this case, a maximum penalty of $26 million could have been imposed for the two contraventions. According to Justice Jagot, the final penalty of $9 million reflected the seriousness of Woolworths’ conduct. Her Honour also took into account the fact that this was a one off contravention, Woolworths’ involvement was limited, the conduct was engaged in by an employee who was not a member of senior management and Woolworths had cooperated with the ACCC during the investigation, admission and settlement stages of the proceedings.

Implications

This decision may broaden the situations in which parties may be found to be knowingly concerned. It is well established that to be knowingly concerned, a party must have more than mere knowledge of information in connection with the contravention. Rather, the party must have knowledge of the essential elements of the contravention, and the involvement must have some practical connection to the contravention. Here, the practical link between the Business Manager’s knowledge of the understanding and the actual commission of the contravention was not addressed or considered by the court.

The outcome therefore highlights that even those playing a relatively small role in cartel and price-fixing schemes may be found to be knowingly concerned. The penalty against Woolworths sends a strong message to individuals and corporations that the ACCC will not hold back on prosecuting, and the courts will not hesitate punishing, even those that are minimally involved in anticompetitive conduct.