Carton king and Visy facing $36 mln fine for price fixing

In a show of contrition, Australia's third-richest businessman on Tuesday fronted a Federal Court penalty hearing in person after settling with the Australian Competition and Consumer Commission (ACCC) over the allegations.

Under the agreement Pratt, Visy and his senior executives admit to their role in the deal to fix prices and market share in Australia's $2 billion cardboard market between 2000 and 2004.

Both sides settled on the size of the fine, with smaller amounts of $1.5 million and $500,000 to be paid by Pratt's lieutenants, chief executive Harry Debney and former general manager Rod Carroll, respectively.

If confirmed by the court, the penalty would be the largest ever levied in Australia for price fixing, following a $15 million fine in 2002 involving similar charges in the power transformer market.

Pratt, supported by his friend of 50 years and Pratt Foundation boss Sam Lipski, on Tuesday listened to the ACCC outline the arrangement that lasted almost five years.

"The collusion involved both price fixing and market sharing measures, was deliberate, was brought about and sanctioned at the highest levels of the companies concerned, and was very carefully and deliberately concealed," Peter Jopling QC, for the ACCC, told the court.

It was Debney who set up an "overarching understanding" with Amcor in 2000 after a price war between the packaging giants, which controlled 90 per cent of the market.

Under the arrangement Visy and Amcor sought to maintain market share and collaborate on raising prices.

Debney, who "somewhat surprisingly still remains in his position", then deputised Carroll to look after the day-to-day running of the deal that resulted in a 20 per cent rise in price over those years, Jopling said.

The court heard Carroll met with senior Amcor executives up to 40 times between July 2000 and November 2004, making arrangements with specially purchased pre-paid mobile phones.

Meetings were held at motels, hotels and parks throughout central Melbourne and its leafy eastern suburbs.

"The conduct overall shows a blatant disregard for the law and a cynical culture of evasion of the proper obligations of senior corporate citizens and their high-level executives," Jopling said.

The arrangement affected thousands of Visy and Amcor's non-contract customers along with some of Australia's biggest food and beverage companies, including Ingham's, Goodman Fielder, Foster's Group, Nestle and Cadbury Schweppes.

Jopling urged Justice Peter Heerey to reject a public apology issued last week by Pratt, in which he said Visy senior executives involved did not properly understand the complexities of the Trade Practices Act.

"The contraventions were clearly deliberate and were committed in the consciousness of illegality," the barrister said.

Nor did Jopling spare Pratt, who met with Amcor's chief executive Russell Jones at an inner-suburban hotel when it appeared the deal was in danger of falling over.

"The significance of (Mr Pratt) giving his imprimatur to the over-arching understanding is very great," he said.

Outside the court, Pratt issued another apology.

"I know a lot more now than I knew then, but I sincerely regret what happened and I accept ultimate responsibility," he told journalists.

That was all Pratt would say, despite a flurry of questions over Debney's continuing role at Visy.

Earlier, his legal team said Pratt and Visy acknowledged liability and repented the contraventions of the Trade Practices Act.

But with an eye to pending civil claims by customers, Jonathan Beach QC, for Visy, said the arrangement had not caused any losses to Visy and Amcor's clients.

Beach said prices had been expected to rise after the price war between the two companies.

"It's not an excuse but it explains the genesis of the arrangement so far as Visy is concerned," he told the court.

"Our position is that increases would have taken place in any event."

Justice Heerey will have the final say in whether the agreed penalties are adequate and has reserved his decision until a date to be fixed.

Amcor won immunity after blowing the whistle on the price fixing arrangement to the competition watchdog in 2004.

It had dismissed senior executives who were involved in the secret deal.

Both Visy and Amcor are now joined in defending a class action against thousands of non-contract customers who claim their the cartel cost the market up to $700 million.

Agreed statement of facts in Visy case
 
Highlights from the Agreed Statement of Facts between the Australian Competition and Consumer Commission (ACCC) and Visy:
* A "price war" between Visy and Amcor resulted in both companies suffering significant trading losses in 1998-99.

* In 2000 Visy CEO Harry Debney and Amcor Australasia managing director Peter Brown arrived at an understanding that included:

- The companies would permit each other to maintain approximately their current share of the corrugated fibreboard packaging (CFP) market.

- They would not enter contracts to supply CFP products with each other's principle customers.

- The companies would collaborate with each other to increase CFP prices.

* On May 21, 2001, Visy director Richard Pratt met former Amcor managing director and CEO Russell Jones at the All Nations Hotel in Richmond, agreeing to adhere to the understanding.

* Former Visy general manager Rod Carroll appointed contact person with Amcor in implementing the understanding.

* Amcor appointed former general manager Edward Laidlaw as its contact person with Visy.

* Between July 2000 and November 2004 Carroll and Laidlaw met up to 40 times to discuss the understanding and spoke to each other by telephone on numerous occasions.

* The companies reached understandings in relation to customers that included Fosters Group, Gillette, Cadbury Schweppes and Hardy Wine Company.

* The ACCC does not claim that conduct admitted to by Visy had any negative financial impact on or caused loss to any of the named customers.

* Visy's share in the CFP market in 2000/01 was 49 per cent, while Amcor's was 44 per cent.

In 2005 Visy's share was 55 per cent and Amcor's 36 per cent.