Express law No. 50

24 January 2007

Penalty judgment under secondary boycott provisions of
the Trade Practices Act

This the first penalty judgment obtained by the ACCC under
sections 45E and 45EA (secondary boycott provisions relating
to agreements with a union) of the Trade Practices Act
1974 (Cth). Young J of the Federal Court imposed a
pecuniary penalty of $125,000 against the CEPU and also
made orders for declarations and injunctions. The CEPU
has also been ordered to pay the ACCC's costs, agreed
in the sum of $200,000.

This is not only the first penalty judgment obtained against
a union in respect of such conduct, but is also the highest
penalty imposed upon a union for a single course of conduct
constituting a contravention of the Trade Practices Act.

Australian Competition and Consumer Commission v IPM
Operation and Maintenance Loy Yang Pty Ltd (No 2)

[2007] FCA 11, 16 January 2007

The proceeding concerns claims made under sections 45E
and 45EA of the Trade Practices Act, which prohibit the
making and giving effect to a contract, arrangement or
understanding, with a union, which prevents or hinders
the supply or acquisition of goods or services. Relevantly
for this proceeding, the ACCC alleged that Edison Mission
Operation and Maintenance Pty Ltd, the operator of the
Loy Yang B power plant in Victoria, made and gave effect
to an agreement with the CEPU containing a provision that
was included for the purpose of preventing Edison from
acquiring goods or services from a third person. In this
case Edison had been accustomed to acquire goods or services
from the third person.

The ACCC alleged that the CEPU had induced the making
of and giving effect to the agreement by Edison.

By this decision, Young J delivered judgment in relation
to penalty and made final orders relating to the CEPU.

Background

Edison (now known as IPM Operation and Maintenance Loy
Yang Pty Ltd) operates the Loy Yang B power station in
Victoria. Valley Power, a company related to Edison, contracted
with the State of Victoria to construct a new gas-fired
power station on land adjoining the Loy Yang B power station.
This was known as the peaker project, established to provide
electricity at times of high demand. Valley Power contracted
to complete the project within an extremely short period
of time.

The ACCC alleged that in August 2001 the CEPU informed
Edison that it would sign a construction site agreement
for the peaker project only if Edison agreed to engage
electrical contractors at Loy Yang B who had an enterprise
agreement with the CEPU.

Because of the urgent need to progress the peaker project,
Edison agreed to the union's demand. This had the
consequence that DJN Electrical and Instrumentation, whom
Edison had previously regularly contracted with to perform
electrical work, was no longer engaged by Edison. The arrangement
continued in effect until late 2003, when the ACCC wrote
to Edison about the arrangement.

CEPU

On 19 December 2006 Young J handed down judgment in respect
of the CEPU (see [2006]
FCA 1777
). The court found that
the CEPU was an accessory to Edison's making and giving
effect to the proscribed arrangement.

Submissions on penalty and costs in respect of the CEPU
were heard on 22 December. The ACCC had sought a penalty
in the range of $210,000 to $250,000. This was based on
the contention that there had been two separate contraventions – both
the making and giving effect to the arrangement. The union
submitted that both contraventions were based on the same
conduct and therefore it was liable to only one penalty.
Young J agreed with the CEPU.

The union submitted that the appropriate penalty was in
the order of $20,000.

His Honour found that the penalty proposed by the CEPU
did not properly reflect the nature and seriousness of
the union's conduct and was inadequate to deter both
the CEPU and other potential offenders from similar conduct.
His Honour noted that the CEPU had been the instigator
of the conduct and determined that 'the appropriate
level of penalty which reflects the deliberate and serious
nature of the contravention, the requirement of deterrence,
and the other factors which I have mentioned is $125,000.'

Edison

Edison admitted the contraventions early in the proceedings.
The hearing of the application against Edison was deferred
until after the trial of the application against the union
(see [2006]
FCA 853
). The penalty hearing has been fixed
for 9 February 2007 before Tracey J. Young J considered
it appropriate that another judge deal with the company
given his findings against the CEPU. (His Honour is stepping
down from the bench this month.)

Text of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2007/11.html

AGS Senior Executive Lawyer, Graham Thorley with Alice
Crowe, Senior Lawyer and Matthew Crowley, Lawyer acted
on behalf of the ACCC in the conduct of the proceedings.

For further information please contact:

Graham Thorley
Senior Executive Lawyer
T 03 9242 1244 F 03 9242 1278
graham.thorley@ags.gov.au

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