A whopping $8.3m in penalties were recently imposed by the Federal Court on two companies and three individuals who engaged in cartel conduct.

Background and contravening conduct

The two companies, Renegade Gas, trading as Supagas NSW, and Speed-E- Gas NSW are competitors in the supply of gas used in forklifts in NSW. In the period 2006 to 2011, the companies, via their senior officers and sales staff, came to an understanding that they would not poach each other ‘s customers and if they did, they would allow some “poaching back” to replace the volume or value lost by the first company’s  poaching.

The companies also agreed certain exceptions to the understanding, such as where a customer cited poor service for the reason in changing suppliers.

The first of the individuals involved in the conduct was Paul Berman, a long- term director and Managing Director of Renegade Gas. He was assisted in the conduct by Corey Smith, who had supervisory responsibility for Renegade Gas’ sales in Sydney. Jay Wilson was Speed-E-Gas’ Sales Manager. He reported to Geoffrey Hobby, who died before the proceedings.

Mr Berman instructed Mr Smith to implement the understanding by instructing Renegade Gas sales staff not to approach Speed-E-Gas’ forklift gas customers or if they did, they were not to offer a price for the supply of forklift gas, or else to offer prices higher than those the customers were paying to Speed-E-Gas in an effort not to win the business.

Mr Hobby authorised Mr Wilson to implement similar strategies.

In June 2011, the ACCC executed search warrants at the premises of both Renegade Gas and Speed-E-Gas. From that time, the implementation of the understanding ceased. The Court found, based on agreed statements of facts presented by the parties, that Renegade Gas and Speed-E-Gas had contravened section 45(2)(b)(i)of the Competition and Consumer Act (Act) which provides that a corporation shall not give effect of a provision or a contract, arrangement or understanding if that provision is an exclusory one, that is, a provision between competitors which has the purpose of preventing, restricting or limiting the supply of goods or services from, particular persons or classes of person. 

The Court also found that each company contravened section 44ZZRK of the Act in giving effect to a cartel provision. 

Each of the individuals was found to have been directly or indirectly knowingly concerned in or party to the contravening conduct of the companies.

Penalties

Justice Gordon ultimately imposed a pecuniary penalty of $4.8 million on Renegade Gas and $3.1 million on Speed- E-Gas.

In ordering these penalties, Her Honour took into account the following matters, amongst others:

  • the nature and extent of the conduct, noting the conduct had continued for a long time and would likely have continued but for the ACCC warrants
  • the number of customers being denied a competitive offer
  • the size of the companies and their financial position
  • the degree of market power of the companies
  • the deliberateness of the conduct
  • the corporate culture of the companies
  • cooperation with the ACCC.

The latter consideration turned out to be an important one for Speed-E-Gas. It began cooperating with the ACCC shortly following the execution of the warrant whereas Renegade Gas ultimately agreed to settle the proceedings in July 2014, avoiding the need for a hearing.

The ACCC submitted and the Court agreed that each company’s penalty should be $5 million but that each should receive a different discount on that sum for the degree of cooperation.

Mr Berman received the largest penalty of the individuals - $250,000. He was also disqualified from managing a corporation for three years. Mr Smith and Mr Wilson received penalties of $100,000 and $50,000 respectively.