Proportionate competition law penalties may be reduced where a small market player faces an unduly destructive sanction

A competition law discussion on penalties for participation in an anti-competitive supply arrangement states that liability may remain established even where the party is a very small market player with limited bargaining power and financial losses. The penalty assessment should still be proportionate, taking account of deterrence, the nature of the conduct, the party's market position, and mitigating circumstances, so that the sanction does not become unduly punitive or destructive of the business. On that basis, the company's monetary penalty was reduced, while the penalties on directors, officers, and employees were maintained as commensurate with their role.

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Issues: Whether the penalty imposed on the appellant for participation in an anti-competitive agreement required reduction on account of its small market share, limited bargaining power, and financial condition.

Analysis: The penalty was imposed after finding that the product supply agreement operated as an anti-competitive arrangement because the appellant agreed not to act against the supplier's market interests, particularly in relation to prices. While the appellant was held to have contravened the competition law, the record showed that it was a very small player in the relevant market, had no meaningful bargaining strength vis-a -vis the supplier, and had suffered losses in some of the relevant years. The quantum of penalty had to be assessed with regard to proportionality, deterrence, and the actual economic position of the appellant, and a punishment that could effectively destroy the business was considered excessive. The penalties imposed on the individual directors and officers were found to be commensurate with their role and were not disturbed.

Conclusion: The penalty imposed on the appellant company was reduced from 4% to 1% of turnover for each year of continuance of the cartel, while the penalties on the directors, officers, and employees were maintained.

Final Conclusion: The appeal succeeded only to the extent of reduction of the company's monetary penalty, and the remaining parts of the impugned order were left intact.

Ratio Decidendi: Even where contravention of competition law is established, the penalty must be proportionate to the nature of the conduct, the party's market position, and relevant mitigating circumstances, so that deterrence is achieved without imposing a punishment that is unduly punitive or destructive.

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