Case: Australian Competition &amp; Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5
Outcome: cited
The detailed background to the proceedings has already been set out in the judgment, which I delivered on 10 January 2008: Australian Competition &amp; Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5. At that time injunctive orders were made by consent against the first to fourth respondents. Pecuniary penalties were imposed on them after consideration of agreed statements of fact and submissions by the parties. Declaratory relief, which was sought by the ACCC, was stood over pending the finalisation of proceedings against the seventh respondent, Study Overseas Now Pty Ltd (Study Overseas Now) and the resolution of issues concerning the joinder of its principal, Mr Seow Bing Yeo, who is as yet not a party to these proceedings, but against whom a motion for joinder is pending. 3 The position of the fifth and sixth respondents was not resolved by that judgment. They are Sang-Hong Jung, trading as the Nanuri Education Centre (Nanuri) and Rebekah Cabalt, her former office manager. Although they were represented earlier in these proceedings, and while represented filed defences effectively admitting various of the contraventions alleged against them, they have for some time been unrepresented and have been given time by the Court to consider their position and to make submissions. The position today is that the ACCC has identified three contraventions of the Code on the part of Sang-Hong Jung, trading as Nanuri, and one count of involvement in Ms Jung's contraventions by Ms Cabalt, as her employee. The contraventions and involvement alleged by the ACCC and admitted by Ms Jung and Ms Cabalt were as follows: 1 The Fifth Respondent ( Nanuri ), by making an oral agreement with the First Respondent ( Kokos ), the Third Respondent ( IAE ) and Jobbok International Pty Ltd ( Jobbok ) in early to mid 2004 as defined in the Statement of Claim ( Oral Agreement ) made a contract or arrangement, or arrived at an understanding, which contained a provision that had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of section 45A(1) of the Competition Code of Western Australia ( Code ) and accordingly had the purpose or the effect or was likely to have the effect of substantially lessening competition and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of the Code. 2 Nanuri, by making a written agreement with Kokos, IAE, Study Overseas Now Pty Ltd ( Study Overseas Now ) and Jobbok in mid 2004 as defined in the Statement of Claim ( Written Agreement ) made a contract or arrangement, or arrived at an understanding, which contained a provision or provisions that had the purpose or the effect or was likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to Education Consulting Services supplied by the parties in competition with each other within the meaning of section 45A(1) of the Code and accordingly had the purpose or the effect or was likely to have the effect of substantially lessening competition and thereby engaged in conduct in contravention of section 45(2)(a)(ii) of the Code. 3. Nanuri, by refraining from engaging in the practice of offering or agreeing to accept a Discounted Tuition Fee (as defined in the Statement of Claim) for various periods totalling approximately four weeks on dates unknown to the Applicant but in approximately the last six months of 2004 and/or the first six months of 2005 gave effect to a provision or provisions of the Oral Agreement and/or Written Agreement in contravention of section 45(2)(b)(ii) of the Code. 4 The Sixth Respondent ( Rebekah Cabalt ), by engaging, on behalf of Nanuri, in the conduct that constituted each of the contraventions of the Code by Nanuri referred to in paragraphs 1, 2 and 3 above, was directly or indirectly, knowingly concerned in, or party to, the contraventions by Nanuri of sections 45(2)(a)(ii) and 45(2)(b)(ii) of the Code within the meaning of sections 76(1)(e) and 80(1)(e) of the Code. 4 The contraventions now alleged are admitted by Ms Jung and the involvement alleged is admitted by Ms Cabalt. They do not dispute the orders sought so far as they relate to declaratory relief and so far as they relate to the proposed injunctions and, in the case of Ms Jung, the proposed requirement to attend at a trade practices compliance seminar. The only issue that remains is the determination of pecuniary penalties. 5 The general principles governing the imposition of pecuniary penalties under the Act and the Code, were canvassed in Australian Competition &amp; Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5 and I will not repeat them here, save to emphasise the significance of their deterrent purpose. I also observe the necessity to take account of relevant distinctions between different contraveners in the context of the deterrence principle, which informs the penalties that are imposed. 6 As with each of the other parties who have been dealt with, it is not disputed that Ms Jung and Ms Cabalt were unaware that they were breaking the law by entering into, and being involved in, the implementation of the agreements not to offer discounted tuition fees. There was no question of any concealment. They have admitted the contraventions and as the ACCC acknowledges, have cooperated with it in its investigations into the agreements that had been made. Neither has been involved previously in any contravention of the Act or Code. In an affidavit sworn by Mr Hilton for the ACCC, documents which are exhibited, including material from the former solicitors for Ms Jung and Ms Cabalt, indicate that the Nanuri business had a net income of approximately $19,000 for each of the financial years ended 30 June 2006 and 30 June 2005. Ms Cabalt's annual income during the relevant period as its office manager, was $30,000. The gross commission income of the business, according to a profit and loss statement with which I have been provided by Ms Jung, was $340,247 in 2004 and $266,378 in 2005. In 2004 there was additional income derived from consulting fees and other fees. It is apparent that Ms Jung's business was by far the smallest of the operations with which the Court has been concerned in this case. The turnover of the first and third respondents was three to four times greater than the turnover of this firm. The net operating profit for 2005 was $19,925. A loss of $51,474 was shown for 2004. 7 It appears from the submission by Ms Jung, which is not contested by the ACCC, that after the agreements were struck and implemented, her business actually lost clientele because she was not in a position, adhering as she did to the agreements, to offer discounted tuition fees. Absent discounting, the size and facilities of her competitors made them more attractive to students. 8 Both Ms Jung and Ms Cabalt are of limited means which is well evidenced by the fact that they have been unable to afford ongoing legal representation. The anticompetitive conduct which was entered into in this case, as I remarked in the judgment given on 10 January, was blatant price fixing. It was blatant, I suppose, because nobody who participated in it seems to have been in the least aware that they were breaking the law. Indeed, they even set up a council of competitors to enforce the agreements. I have no doubt that their exposure to these proceedings and the expense and time that has already been involved have themselves had a significant deterrent effect on Ms Jung and Ms Cabalt in respect of any repetition of this conduct. I see very little, if any, risk of further contraventions on the part of Ms Jung, who continues operating the business. Ms Cabalt is no longer involved in the business. 9 In the circumstances, having regard to the deterrence requirement and the relevant distinctions between Nanuri and the other respondents and the factors I have mentioned, I will impose a penalty on Ms Jung of $3,000 in respect of each admitted contravention, making a total of $9,000. As to Ms Cabalt, in respect of her participation, I impose a penalty of $1,500. 10 The orders that I will make are as follows: 1. The declaratory orders sought against the fifth and sixth respondents be stood over to the completion of these proceedings or to such earlier date as may be sought by the ACCC. 2. The fifth respondent be and is hereby restrained for a period of three years from the date of this order, whether by herself, her servants or agents or otherwise howsoever from: (a) making or arriving at; (b) giving effect to; (c) attempting to make or arrive at or give effect to, any contract, arrangement or understanding with Kokos International Pty Ltd (Kokos), IAE Edu Net Perth Pty Ltd (IAE), Study Overseas Now Pty Ltd (Study Overseas Now), Jobbok International Pty Ltd (Jobbok) or any supplier of education consulting services in Western Australia which contains a provision that: (d) has the purpose or the effect or is likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to education consulting services supplied by any of the parties to the contract, arrangement or understanding in competition with each other; or (e) has the purpose or a substantial purpose of preventing, restricting or limiting the supply of education consulting services to Korean students or prospective students by any of the parties to the contract, arrangement or understanding who are competitive with each other. 3. The fifth respondent is, within three months from the date of this order, to attend a trade practices compliance program seminar relating to the provisions of Part IV of the Code (including s 45 of Part IV) conducted by an independent external professional with trade practices law experience who is acceptable to the applicant or otherwise approved by the Court. 4. Within one week of attending the seminar, the fifth respondent must notify the applicant of her attendance. 5. A pecuniary penalty of $3,000 is imposed on the fifth respondent for each of the three contraventions of the Trade Practices Act 1974 (Cth) referred to in the statement of contraventions filed by the ACCC on 11 January 2008, a total penalty of $9,000. 6. The sixth respondent is hereby restrained, for a period of three years from the date of this order, whether by herself, her servants or agents or otherwise howsoever, and by any means whatsoever, from being in any way directly or indirectly knowingly concerned in, or party to, any contract, arrangement or understanding with Kokos, IAE, Study Overseas Now, Jobbok or any supplier of education consulting services in Western Australia which contains a provision that: (a) has the purpose or the effect or is likely to have the effect of fixing, controlling or maintaining or providing for the fixing, controlling or maintaining of a discount, allowance, rebate or credit in relation to education consulting services, supplied by any of the parties to the contract, arrangement or understanding in competition with each other; or (b) has the purpose or a substantial purpose of preventing, restricting or limiting the supply of education consulting services to Korean students or prospective students by any of the parties to the contract, arrangement or understanding who are competitive with each other. 7. A pecuniary penalty of $1,500 is imposed on the sixth respondent in relation to her involvement in the contraventions set out in the statement of contraventions by the applicant filed 11 January 2008. 8. The fifth and sixth respondents are to pay the applicant's costs, to be taxed if not agreed. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. Associate: Dated: 18 January 2008 Counsel for the Applicant: Mr W Keane Solicitor for the Applicant: Corrs Chambers Westgarth Ms S Jung appeared in person Ms R Cabalt appeared in person Date of Hearing: 17 January 2008 Date of Judgment: 17 January 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/20.html