Trade Practices - Record price-fixing penalties for supermarket giant
A long-running case against Australian Safeway Stores Pty Ltd (Safeway) concluded recently with the Federal Court handing down an $8.9 million fine to the supermarket giant for fixing bread prices and misusing market power. This is the biggest penalty of its kind recorded in Australian legal history.
The judgement of Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (no. 4) [2006] FCA 21, handed down on 31 January 2006, followed a series of court challenges between Safeway owner, Woolworths, and the Australian Competition and Consumer Commission (ACCC) over the last decade. The allegations of misuse of market power concerned several incidents where Safeway was accused of cutting off supplies from Tip Top, Buttercup and Sunicrust because they were allegedly supplying bread to cheaper, rival retailers.
The court heard that shelf space in Safeway stores, which was normally allocated to those suppliers, was allegedly filled with product from alternative suppliers until the discounts from rival retailers stopped. This affected a number of independent retailers in metropolitan Melbourne and Albury.
The price-fixing allegation concerned an arrangement between Safeway and Tip Top, whereby it was alleged that bread prices at the Tip Top bakery at Preston market were being controlled by Safeway to insulate their nearby store from the threat of competition.
It was argued that, in both these instances, Safeway’s actions contravened the Trade Practices Act 1974 (Cth) (‘TPA’), which prohibits big businesses from abusing their market power. The provisions of the TPA are intended to champion a healthy Australian economy; one that thrives on competition and protects the small business sector, ultimately giving consumers better choice in price, quality and service.
The sizeable fine imposed on Safeway clearly demonstrates that TPA offences are considered serious and intolerable. In handing down the penalties, Justice Alan Goldberg stated: “the penalties imposed on Safeway ought to be substantial and reflective of the need, in particular, for general deterrence” (paragraph 84 of judgement). The result of the case sends a very strong message to the business and commercial community, compelling them to foster a culture of compliance when it comes to trade practices legislation.
The ACCC is pursuing Woolworths on another case of alleged anti-competitive conduct in the packaged liquor industry, following similar charges against Coles Myer’s Liquorland, which was fined $4.75 million last year.
More information
From the LIV Bookshop
Competition Law in Australia, Corones $120;
Annotated Trade Practices Act, Steinwall $95
Useful web links
www.accc.gov.au
Disclaimer:The information in this newsletter is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from Brendan Kelly of our office.
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