ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590: Cartel Case Dismissed

Friday 19 January 2018 @ 12.06 p.m. | Legal Research | Trade & Commerce

On 22 December 2017, in the case of ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590, the Federal Court of Australia dismissed a cartel behaviour case originally brought in 2013 by the Australian Competition and Consumer Commission ("the ACCC") against PZ Cussons Australia ("Cussons"), regarding a suspected cartel relating to the price and supply of laundry detergent concentrates. Justice Wigney, sitting alone, dismissed the case, saying that the ACCC had not proven on the balance of probabilities that there was cartel conduct by Cussons. The case concerned, in particular, sections 44ZZRD and 44ZZRK of the Trade Practices Act 1974 (Cth)

Procedural History

The ACCC initiated civil proceedings against Colgate, Cussons and Woolworths in 2013, alleging that in 2009 Colgate, Cussons and Unilever entered into arrangements to only supply ultra concentrated laundry detergents to consumers for the same price per wash as the standard concentrated products, despite the fact that concentrates are cheaper to produce and store than standard concentrate detergents. For more information, read TimeBase’s earlier article. Following this action in 2016, Colgate-Palmolive Pty Ltd was fined a total of $18 million for their contraventions, which is outlined in TimeBase's previous article.

Based on admissions made by Woolworths that it was knowingly concerned in the making of and giving effect to the understanding between Colgate, Cussons and Unilever, Woolworths was found guilty of cartel conduct, and was ordered to pay penalties totalling $9 million. For more information, read Timebase’s earlier article on this. Following this, further pecuniary penalties were imposed upon Woolworths.

Federal Court’s Decision against Cussons

Justice Wigney, sitting alone in the Federal Court, dismissed the claim of the ACCC argued that the case concerned what inferences could be drawn from the primary facts rather than facts in dispute. Regarding the involvement of Cussons, Justice Wigney referred to expert evidence to find that the behaviour of the suppliers in question was an economically rational response to underlying market forces rather than any collusive explicit agreement or contract:

“Professor Hay, on the other hand, expressed the opinion that the transition to ultra concentrates by each of the Suppliers would most likely have occurred in March 2009 without any agreement, arrangement or understanding between them. Likewise, in his opinion, the restriction of the supply of standard concentrates would most likely have occurred in the absence of any agreement, arrangement or understanding. In Professor Hay’s opinion, the substantive behaviour of the Suppliers with respect to the transition to ultra concentrates was explicable without reference to any collusive arrangements or understanding. Their conduct was, rather, an individually economically rational response to underlying market forces.” [384]

Justice Wigney found that the ACCC had failed to prove on the balance of probabilities that the suppliers had explicitly entered into a collusive arrangement, rather finding that it was more likely that the actions were in response to economic forces. He stated:

“The Commission failed to discharge its burden of proving, on the balance of probabilities, that Cussons contravened s 45(2)(a)(i) and (ii), s 45(b)(i) and (ii) and s 44ZZRK as alleged. The evidence, considered as a whole, does not prove to the requisite standard that Cussons made an arrangement, or arrived at an understanding, with Unilever and Colgate that included the alleged Withhold Supply Provisions, or the alleged Aligned Transition Provisions. Nor does the evidence prove that Cussons gave effect to any such arrangements or understandings. Even if the Commission had been able to prove that Cussons made an arrangement or arrived at an understanding that included the Aligned Transition Provisions, it nonetheless failed to prove that the Aligned Transition Provisions had the purpose, or had or were likely to have, the effect of substantially lessening competition in the relevant market.” [677]

Response to Decision

Chairman of ACCC, Rod Sims stated in a media release:

“The ACCC took this action because we were concerned that the conduct reduced choice of an essential household product, which could have affected many Australian consumers. Proving the existence of an understanding can be a complex task, which is why the Parliament recently added a new concerted practices prohibition to our competition law. The ACCC will carefully consider the judgment.”

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Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590

[media release] ACCC, ‘Court Dismisses Case against Cussons,’ 22 December 2017.

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