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ACCC v Australian Abalone Pty Ltd

[2007] FCA 1834


Facts & background

Proceedings were brought against a total of 19 corporate and individual respondents, with the relevant conduct facilitated through the first respondent – the corporation Australian Abalone.  All respondents were involved in the harvest and supply of unshucked abalone in Victoria.  Abalone was in high demand as a luxury item but both the harvesting and supply/sale of Abalone was regulated by legislation.  Victoria was divided into three zones for purposes of licencing – this case related to the central zone.  The relevant licences available in relation to abalone harvesting and distribution were the ‘Fish Receivers’ (Abalone) Licence’ which permitted receipt and sale of abalone (there were 18 such licences) and the ‘Abalone Fishery Access Licence’ which permitted the taking of abalone of sale, use, possession etc.  These licences were also limited.  The respondents were holders of the latter licences (‘quota holders’) and were concerned that the power held by those with the former (to whom they were required to supply), combined with prevalent poaching, meant that their returns were low.

The quota holders held meetings to discuss marketing strategies and, after considering various options, proposed to establish a new company, Australian Abalone, which would market and sell the abalone caught by the quota holders.  Various agreements were then entered into between Australian Abalone and the quota holders which included provisions which:

  • * Envisaged the provision of consultation services for ‘the purpose of generally utilising the combined volume of catch from the quota holders to efficiently control the supply to processors and buyers of abalone’
  • * Provided that the quota holders would make their quota of abalone available to Australian Abalone to sell to processors nominated by AA.
  • * Provided that Australian Abalone would receive all sale proceeds in excess of the ‘Beach Price’ (which was defined by a formula) (some of this excess would be used for expenses incurred in running AA and the remainder would be evenly distributed between quota holders).
  • * Provided that if quota holders sold to a processor other than one nominated by AA a proportion of the amount received would go to AA.
  • * Provided that the primary objective of the agreements was to increase price and profits.

The matter originally went to mediation, which failed.  The ACCC then presented its case over five days and the matter was then sent to mediation again which was successful.  Consequently, Weinberg J’s decision was based on agreed facts and agreed penalties.


Allegations and admissions

The ACCC alleged various breaches of s 45 involving price fixing and boycotts – this conduct was admitted.


Held: Justice Weinberg

The breaches

The conduct constituted the making and giving effect to (and (for individuals) being knowingly concerned in same) exclusionary provisions having the purpose of preventing, restricting or limiting the supply of goods or services to particular persons in particular circumstances on particular conditions (the nominated processors/buyers).

Price fixing was established in relation to the ‘Beach Price’ – ‘In ordinary competitive circumstances, each quota holder would negotiate with each processor seeking to get the best possible price for its abalone. However, under the impugned arrangement a quota holder would not supply a processor unless that processor was prepared to pay a premium on top of the Beach Price, and was nominated by Australian Abalone.  The Beach Price would go to the quota holder, and the premium would go to Australian Abalone.’

The Penalty

In relation to penalties the ACCC and Weinberg J accepted that the respondents did not set out to contravene the TPA or the competition code and that they did not act dishonestly in this respect:

‘It is an unusual feature of this case that the respondents acted, at all times, in an open manner.  They documented all of their actions.  Unlike almost all cases brought under s 45, there was no secrecy in what they did.  That speaks volumes as to their state of mind.’ (para 79) … ‘… they had no idea that by making or giving effect to the arrangement, they might be contravening the provisions of the TPA.’ (para 81)

Justice Weinberg also noted that the arrangement was in place for a relatively short period of time.  He set out the matter relevant to fixing pecuniary penalties (from para 114), noting that (at para 117):

‘… any penalty that is imposed should not be so high as to be oppressive.  Among the factors that may be taken into account by way of mitigation are a blameless prior history, genuine contrition, and a willingness to settle any proceedings so as to avoid unnecessary expense.’

Weinberg concluded that all but two of the submitted/agreed penalties were within the ‘permissible range’ – in relation to those two he reduced the penalties.  Total penalties amounted to $927,500.

Discussion of criminal penalties

When discussing the seriousness of cartel conduct Weinberg J talked briefly about the criminal penalties proposed for the TPA.   He expressed the view that criminal penalties should by available but using a ‘dishonesty’ element to distinguish criminal from civil cartel behaviour should be avoided [para’s 127-130]:

"I note that in April 2003 the Dawson Committee recommended the introduction of criminal sanctions for serious cartel behaviour.  I also note that on 2 February 2005 the Treasurer announced proposals for the criminalisation of serious cartel conduct.  He stated that the maximum penalties for the new cartel offence would be a term of imprisonment of five years and a fine …"

"Although not all cartel conduct should be viewed as warranting the imposition of criminal sanctions, including imprisonment, plainly that option should be available in relation to serious cases of such conduct.  … I interpolate that in the event such conduct is criminalised in Australia, problems may arise in formulating a cartel offence in terms that would be comprehensible to ordinary jurors.  Section 45 is complex enough.  The idea, which has been mooted, of simply adding the notion of “dishonesty” to what is already a daunting provision may be counterproductive.  … no country other than the United Kingdom (the Enterprise Act 2002 (UK)) has made dishonesty an element of a cartel offence, and perhaps for good reason." 

"It ought to be possible to define serious cartel conduct in relatively simply terms.  … Whatever else might be said, in appropriate cases imprisonment should be available as a sentencing option.  Pecuniary penalties may be seen as simply part of the price of doing business." 

"Nonetheless, there are cases, of which the present is a prime example, where the cartel conduct should be viewed in quite a different light.  …"


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