Miller's Australian Competition Law & Policy. [3 ed.] 9780455238265, 045523826X
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MILLER’S AUSTRALIAN COMPETITION LAW AND POLICY
Thomson Reuters (Professional) Australia Limited 19 Harris Street Pyrmont NSW 2009 Tel: (02) 8587 7000 Fax: (02) 8587 7100 [email protected] legal.thomsonreuters.com.au For all customer inquiries please ring 1300 304 195 (for calls within Australia only) INTERNATIONAL AGENTS & DISTRIBUTORS NORTH AMERICA Thomson Reuters Eagan United States of America
ASIA PACIFIC Thomson Reuters Sydney Australia
LATIN AMERICA Thomson Reuters São Paulo Brazil
EUROPE Thomson Reuters London United Kingdom
Miller’s Australian Competition Law and Policy THIRD EDITION
RUSSELL V MILLER AM LLB (Hons) Senior Advisor in Competition Policy and Regulation, Centre for Strategy and Governance Member, Minter Ellison Australasian Competition Group
LAWBOOK CO. 2018
Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW First edition 2008 Second edition 2012 Third edition 2018 ISBN 9780455238265
A catalogue record for this book is available from the National Library of Australia
© 2018 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be submited online at www.ag.gov.au/cca, faxed to (02) 6250 5989 or mailed to Commonwealth Copyright Administration, Attorney-General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600. This book is the successor to “Annotated Competition Policy Law and Practice” by Russell V Miller, (LBC Information Services, 2000). This edition is up to date as of 30 November 2017. Product Developer: Catherine Fitzgerald Publisher: Nigel Royfee Printed by Ligare Pty Ltd, Riverwood, NSW This book has been printed on paper certified by the Programme for the Endorsement of Forest Certification (PEFC). PEFC is committed to sustainable forest management through third party forest certification of responsibly managed forests. For more info see www.pefc.org
PREFACE Australian competition policy mirrors the political, cultural, economic and social pressures that have come to bear, in differing ways and at different times, on the development of Australia as a nation. This book charts the course of that policy and the Australian competition laws that reflect it. It is a companion to Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters 40th ed 2018), providing the policy and historical context for the competition law covered by that book. Our competition laws have a long, if somewhat chequered, history. Australia’s first competition law, introduced in 1906, was modelled on the United States Sherman Act 1890. Although that Act, the Australian Industries Preservation Act 1906 (Cth), was directed against “combinations” in restraint of interstate or overseas trade and commerce, its focus was really on protecting Australian industries from takeover by large US corporations, rather than any altruistic notion of promoting competition. That Act was quickly emasculated by the High Court but languished on the statute books until a new wave of interest in competition policy emerged in the 1960s. By the late 1950s market concentration in Australia, then unusually high compared with Canada, the United Kingdom and the United States, began to draw adverse public comment. Academic economists turned their minds to the need to open up the economy. Concern about the inherent unfairness of anti-competitive practices led to the Trade Practices Act 1965, but constitutional challenges that were to fundamentally reshape our view of Commonwealth power kept that legislation in abeyance until 1971. By the early 1970s recognition of the contribution competition policy could make to economic sustainability, and therefore social welfare, led to a complete renovation of our competition laws, culminating in the Trade Practices Act 1974. The current competition legislation, the Competition and Consumer Act 2010, although significantly expanded from the 1974 legislation on which it is based, still bears all of the hallmarks of that Act and the US jurisprudence that framed it. In the 100 years since the first competition law was enacted Australia has progressed from a post-colonial era to that of a modern developed society. Our attitude to the role of competition policy in modern society has developed as Australia has matured and grown. But that is not to say we now have a universally accepted or coherent view on what our competition laws should be or how they should apply, nor is the law static. This book charts the rich history of competition law in Australia and the policy considerations that underpin it. It also explains the law as it stands today. It includes, in particular, consideration of the significant changes in Australian competition law introduced in November 2017 as a result of the Harper Review. Those changes, and other developments in the 6 years since the last edition was published, has resulted in refreshing and updating of almost every chapter. International comparisons have been expanded.
© 2018 THOMSON REUTERS
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Preface
Research on comparative international law and policy for this and the 2nd edition was undertaken at New York University and the College of William and Mary respectively. I am indebted to Professor Eleanor Richardson (NYU) and Professor James Moliterno (William and Mary) for making that possible. I have also drawn on the excellent work of the International Competition Network. RVM Sydney January 2018
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Miller’s Australian Competition Law and Policy
TABLE OF CONTENTS Preface���������������������������������������������������������������������������������������������������������������������� v Table of Statutes����������������������������������������������������������������������������������������������������� xxi Table of Cases������������������������������������������������������������������������������������������������������ xxix
1 Objectives of Competition Policy [1.20]
Developing an Australian Objective ..................................................... 1
[1.60]
Why Are Objectives Important? ........................................................... 3
[1.80]
Welfare of Australians — A View ........................................................ 4
[1.90]
Objectives — Other Countries ............................................................. 4
[1.130]
Objectives — Other Views ................................................................... 6
Further reading ........................................................................................................ 7
2 Origins of Australian Competition Law [2.30]
Australia — First Steps ....................................................................... 11
[2.70]
Australia — Reviving Interest ............................................................. 13
[2.120]
The 1965 Act ....................................................................................... 16
[2.160]
Resale Price Maintenance ................................................................... 18
[2.190]
The Constitutional Conundrum .......................................................... 20
[2.250]
The 1971 Remedial Act and Work on a New Approach ...................... 23
[2.270]
A New Policy Direction ...................................................................... 24
Further reading....................................................................................................... 25
3 Development of Australian Competition Policy 1972–1992 [3.30]
A New Approach to Competition Policy ............................................ 28
[3.120]
Swanson Committee ............................................................................ 31
[3.170]
Price Discrimination ........................................................................33
[3.180]
Commonwealth Businesses..............................................................33
[3.190] Unions.............................................................................................. 34 [3.200] Mergers............................................................................................ 34 [3.210] Monopolisation................................................................................ 35 [3.220]
The Result........................................................................................ 35
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[3.240]
Blunt Committee .................................................................................. 36
[3.250]
Small Business Report..................................................................... 37
[3.260]
Price Discrimination ....................................................................... 37
[3.270] Monopolisation................................................................................ 37 [3.280]
The Result........................................................................................ 38
[3.290]
Green Paper — Proposals for Change ................................................. 38
[3.300]
Price Discrimination ....................................................................... 38
[3.310] Monopolisation ............................................................................... 39 [3.330] Mergers............................................................................................ 39 [3.340] Unions ............................................................................................. 39 [3.350]
The Result........................................................................................ 40
[3.360]
Griffiths Committee ........................................................................... 40
[3.370]
Misuse of Market Power.................................................................. 41
[3.380] Mergers............................................................................................ 42 [3.390]
The Result ....................................................................................... 42
[3.400]
Cooney Committee .............................................................................. 43
[3.410]
Misuse of Market Power ................................................................. 43
[3.420] Mergers ............................................................................................43 [3.430]
The Result ....................................................................................... 44
4 Development of Australian Competition Policy 1992–2017 [4.40]
Hilmer Committee ............................................................................... 47
[4.50]
Policy Objectives ................................................................................ 48
[4.70]
Misuse of Market Power ................................................................. 49
[4.80]
Price Discrimination ....................................................................... 49
[4.90] Mergers ........................................................................................... 50 [4.100]
Tying and Vertical Restrictions ...................................................... 50
[4.110]
Resale Price Maintenance .............................................................. 50
[4.120]
Scope of Coverage .......................................................................... 51
[4.130]
Essential Facilities .......................................................................... 51
[4.140]
Public Monopolies .......................................................................... 52
[4.160]
National Competition Policy Becomes a Reality ................................ 53
[4.170]
Conduct Code Agreement................................................................ 53
[4.180]
Competition Principles Agreement................................................. 55
[4.210]
Implementation Agreement............................................................. 58
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[4.220]
Competition Policy Reform Legislation .............................................. 59
[4.250]
Riding the Wave of Change ................................................................ 60
[4.260]
Productivity Commission ............................................................... 61
[4.270]
Senate Review ................................................................................. 61
[4.280]
Additional Parliamentary Committees ........................................... 61
[4.290]
Baird Report ................................................................................... 62
[4.320]
National Competition Council ............................................................. 63
[4.330]
Dawson Committee ............................................................................ 64
[4.340]
Misuse of Market Power ................................................................ 64
[4.350]
Price Discrimination ....................................................................... 65
[4.360] Mergers ........................................................................................... 65 [4.380] Tying ............................................................................................... 65 [4.390]
Criminalisation of Cartel Conduct ................................................ 66
[4.400] Penalties ......................................................................................... 66 [4.410]
The Aftermath of Boral ...................................................................... 66
[4.430]
Senate Takes up the Challenge ............................................................ 67
[4.440]
Misuse of Market Power ................................................................. 68
[4.460]
Collective Bargaining ..................................................................... 69
[4.470]
Creeping Acquisitions ..................................................................... 69
[4.480] Remedies ......................................................................................... 70 [4.490]
Some Recommendations Enacted ....................................................... 70
[4.510]
A New Government Brings a New Approach ..................................... 71
[4.520]
Misuse of Market Power ................................................................. 71
[4.530] Cartels ............................................................................................. 71 [4.540]
Grocery Markets — Another Inquiry ................................................. 72
[4.560]
Creeping Acquisitions — a Legislative Response ............................... 74
[4.570]
Refocus on Predatory Pricing .............................................................. 74
[4.580]
Reconsidering Arrangements and Understandings ............................. 75
[4.590]
Price Signalling Concerns Prompt Legislation ................................... 77
[4.610]
Harper Committee ............................................................................... 78
[4.620]
Price Discrimination ....................................................................... 79
[4.630]
Misuse of Market Power ................................................................. 79
[4.650]
Creeping Acquisitions .................................................................... 80
[4.660] Cartels ............................................................................................ 80 [4.670]
Price Signalling ............................................................................. 80
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[4.680] Tying ............................................................................................... 81 [4.690]
Resale Price Maintenance .............................................................. 81
[4.700] Boycotts .......................................................................................... 81 [4.710]
Essential Facilities .......................................................................... 82
5 Australian Competition Agencies and Institutions [5.20]
Australian Competition and Consumer Commission .......................... 83
[5.40]
Origins of the ACCC ..................................................................... 84
[5.80]
Changes to the ACCC ..................................................................... 86
[5.100]
The ACCC today ............................................................................ 87
[5.140]
National Competition Council ............................................................. 88
[5.150]
Origins of the NCC ......................................................................... 89
[5.170]
The NCC today .............................................................................. 90
[5.180]
Australian Competition Tribunal ........................................................ 90
[5.190]
Origins of the Tribunal .................................................................. 90
[5.200]
The Tribunal Today ........................................................................ 91
[5.210]
State and Territory Regulators ............................................................. 91
6 Economics and Competition Policy [6.30]
Economic Efficiencies ........................................................................ 94
[6.40]
Allocative Efficiency ...................................................................... 95
[6.50]
Dynamic Efficiency ........................................................................ 95
[6.60]
Productive Efficiency ...................................................................... 95
[6.80]
Barriers to Entry ................................................................................. 96
[6.90] Collusion ............................................................................................. 97 [6.110]
Illustrating the Point ........................................................................... 97
[6.130]
Hypothetical Monopolist Test ............................................................. 99
[6.150]
Herfindahl-Hirschman Index ............................................................. 100
[6.160]
Welfare Standards .............................................................................. 101
Further reading .................................................................................................... 102
7 Concepts: Markets and Competition [7.20]
The Concept of a “Market” ............................................................... 104
[7.40]
Role of Substitution ...................................................................... 105
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[7.50]
What the Act Says ......................................................................... 105
[7.60]
The Tribunal’s Interpretation ........................................................ 105
[7.70]
The Court’s View .......................................................................... 106
[7.80]
Substitution Revisited ................................................................... 107
[7.90]
Practical Approach Required ....................................................... 107
[7.100]
The Focusing Process ................................................................... 108
[7.110]
Long Run Substitution .................................................................. 109
[7.120]
Lack of Homogeny ........................................................................ 109
[7.130]
Product Dimension ....................................................................... 109
[7.150]
Functional Dimension ................................................................... 111
[7.180]
Geographic Dimension ................................................................. 111
[7.200]
Time Dimension ........................................................................... 112
[7.210]
Identifying Markets ...................................................................... 113
[7.230]
The Concept of “Competition” .......................................................... 113
Further reading — Markets................................................................................... 116 Further reading — Competition............................................................................ 116
8 Concepts: Substantial Effect on Competition [8.20]
A Choice of Benchmarks ................................................................... 118
[8.40]
Australian Development .................................................................... 119
[8.100]
SLC — Horizontal and Vertical Conduct .......................................... 122
[8.130]
SLC — Mergers ................................................................................. 124
[8.160]
SLC — Misuse of Market Power ....................................................... 127
9 Coverage of Australian Competition Laws [9.20]
Corporations to Which the Competition Law Applies ...................... 130
[9.30]
Trading Corporations as a Foundation ......................................... 131
[9.80]
Financial Corporations — A Second Challenge .......................... 135
[9.100]
Foreign Corporations — The Original Objective ......................... 136
[9.120]
Holding Companies ...................................................................... 138
[9.130]
Bodies Corporate ............................................................................... 138
[9.140] Individuals ......................................................................................... 139 [9.170]
The Commonwealth and its Authorities ............................................ 140
[9.180]
Crown in the Right of the Commonwealth ........................................ 141
[9.200]
Carrying on a Business ................................................................. 142
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[9.330]
States and Territories and Their Statutory Authorities ...................... 149
[9.370]
Local Government ............................................................................. 151
[9.390]
Activities in Trade or Commerce ...................................................... 152
[9.420]
Corporations Dealing with Government — Derivative Immunity ... 153
10 Anticompetitive Arrangements and Concerted Practices [10.70]
Contracts, Arrangements and Understandings .................................. 159
[10.110] Arrangements .................................................................................... 161 [10.120] Understandings ............................................................................. 162 [10.130]
The Policy Conundrum ................................................................. 162
[10.140]
The Courts’ Approach .................................................................. 163
[10.250]
Concerted Practices ........................................................................... 169
[10.260] European Law ............................................................................... 170 [10.290] US Law ......................................................................................... 172 [10.340] Other Countries ............................................................................ 173 [10.350]
Australian Guidance ..................................................................... 173
[10.370]
Some Observations ....................................................................... 176
[10.380]
Independent Parallel Conduct ............................................................ 176
[10.490]
Anticompetitive Purpose ................................................................... 179
[10.490]
The Task ....................................................................................... 179
[10.510] Provisions ...................................................................................... 180 [10.530] Purpose ......................................................................................... 181 [10.640]
Concerted Practices Purpose ........................................................ 185
[10.650]
Substantial Purpose ...................................................................... 185
[10.660]
Determining Purpose ................................................................... 185
[10.690]
Purpose — Point in Time ............................................................. 187
[10.700]
Likely Anticompetitive Effect ........................................................... 187
[10.710] Likely ............................................................................................ 188 [10.760]
Substantially Lessening Competition ................................................ 190
[10.800]
Exchanging Information .................................................................... 191
[10.820] Criteria .......................................................................................... 192 [10.830]
International Approaches .............................................................. 193
[10.890]
Australian Approach ..................................................................... 196
[10.940]
Price Signalling ................................................................................. 198
[10.980] Attempts ............................................................................................. 199 xii
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Table of Contents
[10.1000] Most Favoured Customer Arrangements ........................................... 201 [10.1030] Applicability Otherwise Than to Corporations ................................ 202 [10.1040] Exclusions ......................................................................................... 203 [10.1050] Digest of Cases ................................................................................. 203 Further reading ................................................................................................... 203
11 Cartels [11.20]
What Is a Cartel? .............................................................................. 206
[11.30]
Development of Anti-Cartel Laws .................................................... 207
[11.30] USA ............................................................................................. 207 [11.40]
United Kingdom .......................................................................... 208
[11.50] Australia ....................................................................................... 208 [11.90]
International Focus on Cartels ........................................................... 211
[11.100] Vitamins ....................................................................................... 212 [11.110]
Marine Hose ................................................................................. 213
[11.120] Construction .................................................................................. 213 [11.130]
Air Cargo ...................................................................................... 213
[11.140]
Criminalising Cartel Conduct ........................................................... 214
[11.150] Australia ........................................................................................ 215 [11.170]
United States ................................................................................. 216
[11.180]
United Kingdom ........................................................................... 216
[11.190] Canada .......................................................................................... 217 [11.200]
What Constitutes a Cartel Under Australian Law? ........................... 217
[11.220]
What is Price-Fixing? ........................................................................ 218
[11.300]
Fixing, Controlling or Maintaining Prices ........................................ 221
[11.380]
What are Prohibited Output Restrictions? ......................................... 223
[11.410]
What are Market Allocation Cartels? ............................................... 224
[11.440]
What are Collective Boycotts? ........................................................... 225
[11.460]
What is Bid Rigging? ......................................................................... 226
[11.520]
Cartel Contract, Arrangement or Understanding .............................. 228
[11.530]
Purpose of a Cartel ............................................................................ 228
[11.550]
Parties Must Be in Competition with Each Other ............................. 229
[11.590]
Exchanging Information and Price Signalling .................................. 230
[11.610]
Where Must They Compete? ............................................................. 231
[11.620]
Circumstances Not Regarded as Cartel Conduct .............................. 231
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[11.630]
Recommended Prices ................................................................... 231
[11.650]
Cooperative Buying and Selling ................................................... 232
[11.690]
Joint Ventures ............................................................................... 233
[11.750]
Other Carve-Outs ......................................................................... 235
[11.760]
Accessing a Carve-Out ................................................................. 235
[11.770]
Criminal liability ............................................................................... 235
[11.790]
Immunity Policy ................................................................................ 237
[11.820]
Digest of Cases .................................................................................. 238
Further reading .................................................................................................... 238
12 Unilateral Conduct Laws: Monopolisation and Misuse of Market Power [12.30]
Differences in Policy Objective ........................................................ 240
[12.70]
Australian Policy Objective ............................................................... 241
[12.90] United States, United Kingdom, EU and Australia — Early Developments.............................................................................242 [12.90]
United States ................................................................................. 242
[12.120]
United Kingdom .......................................................................... 244
[12.130]
European Union ........................................................................... 244
[12.150] Australia ....................................................................................... 246 [12.190]
Development of Australian Unilateral Conduct Law ....................... 248
[12.250]
Controlling a Market .................................................................... 251
[12.310]
Other Changes ............................................................................. 254
[12.320]
Fundamental Problems ................................................................ 254
[12.330]
The Australian Misuse Law .............................................................. 255
[12.340]
Market Power ................................................................................ 255
[12.380]
How Much Market Power? ........................................................... 257
[12.420]
Market Power Requirements — Other Jurisdictions ................... 260
[12.440]
Buyer Power .................................................................................. 262
[12.450]
Conduct or Purpose? ..................................................................... 262
[12.510]
Identifying the Market .................................................................. 265
[12.530] Purpose ........................................................................................ 266 [12.600]
Using Market Power ..................................................................... 269
[12.610]
Competition or Competitors? ........................................................ 270
[12.660]
What Markets? .............................................................................. 272
[12.670]
Australia Old and New ...................................................................... 274
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[12.680]
Predatory Pricing ............................................................................... 274
[12.690]
A Predatory Pricing Prohibition ................................................... 275
[12.710] Recoupment .................................................................................. 275 [12.720]
Relevant Cost ................................................................................ 276
[12.730]
Sustained Period ........................................................................... 277
[12.740]
Business Reason ........................................................................... 278
[12.760]
Refusals to Supply ............................................................................. 279
[12.770]
Unanswered Questions ...................................................................... 279
[12.830]
A Quest for a Standard ...................................................................... 282
[12.830]
Effects-Balancing Test .................................................................. 282
[12.840]
Disproportionality Test ................................................................. 283
[12.850]
No-Economic-Sense Test .............................................................. 283
[12.870]
Profit Sacrificing Test .................................................................. 284
[12.880]
Equally Efficient Competitor Test ............................................... 284
[12.890]
Consumer Harm Test ................................................................... 284
[12.900]
Digest of Australian Cases ................................................................ 285
Further reading .................................................................................................... 285
13 Vertical Constraints — Tying and Other Vertical Restrictions [13.20]
Development of a Vertical Restrictions Prohibition .......................... 287
[13.50]
An International Perspective ............................................................. 289
[13.60]
Australian Policy Position ................................................................ 290
[13.70]
Exclusive Dealing — What it Involves .............................................. 291
[13.80]
Supply Restrictions ....................................................................... 291
[13.160]
Acquisition Restrictions ................................................................ 294
[13.170]
Full Line Forcing .......................................................................... 294
[13.190]
Third Line Forcing ....................................................................... 296
[13.210]
What is Third Line Forcing? ........................................................ 297
[13.250]
Bundled Products or Services ............................................................ 298
[13.290]
The Other Elements — Acquire Directly or Indirectly ..................... 301
[13.300]
Other Elements — Supplying Products or Services ......................... 302
[13.310] Supply .......................................................................................... 302 [13.320]
Goods and Services ..................................................................... 302
[13.330]
Other Elements — Is Compulsion Required? ................................... 303
[13.410]
Anticompetitive Purpose .................................................................. 306
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[13.440]
Likely Effect on Competition in a Market ........................................ 307
[13.480]
Exclusive Dealing — Land Transactions ......................................... 309
[13.490]
Exclusive Dealing — Exempt Conduct ............................................ 309
[13.500]
Exclusive Dealing — Aiding a Contravention ................................. 309
[13.510]
Digest of Cases .................................................................................. 310
Further reading .................................................................................................... 310
14 Resale Price Maintenance [14.20]
Development of Australian Resale Price Maintenance Law ............. 312
[14.40]
What is Resale Price Maintenance? .................................................. 313
[14.50]
The Policy Conundrum ...................................................................... 314
[14.100]
An International Perspective ............................................................. 316
[14.100]
United States ................................................................................. 316
[14.130]
European Union ............................................................................ 318
[14.140] Canada .......................................................................................... 318 [14.150]
Other Countries ............................................................................ 318
[14.160]
The Australian Prohibition ................................................................ 319
[14.170]
Who is a Supplier? ........................................................................ 319
[14.180]
To Whom? ..................................................................................... 319
[14.190]
What Does Specifying a Price Involve? ....................................... 320
[14.280]
Agreeing Not to Sell ..................................................................... 323
[14.300] Inducing ........................................................................................ 323 [14.350]
Making it Known .......................................................................... 325
[14.360]
Removing Sales Support .................................................................... 325
[14.390]
Withholding Supply ........................................................................... 326
[14.450]
The Role of Intent .............................................................................. 328
[14.460]
Recommended Prices ........................................................................ 328
[14.470] Immunity ........................................................................................... 328 [14.480]
Digest of Cases .................................................................................. 329
Further reading .................................................................................................... 329
15 Mergers and Acquisitions [15.20]
Development of Australian Merger Law ........................................... 332
[15.80]
An International Perspective ............................................................. 335
[15.90]
What is the Standard? ................................................................... 335
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[15.130]
International Competition Network Guidance ............................. 336
[15.150]
Current Merger Test ........................................................................... 338
[15.180]
Acquisition of Shares or Assets ......................................................... 339
[15.220]
Likely Effect on Competition ...................................................... 340
[15.250]
Markets and Market Power ................................................................ 341
[15.270]
Assessing the Impact of a Merger ..................................................... 342
[15.290]
Market Identification .................................................................... 343
[15.320]
The State Competition in the Market ........................................... 343
[15.330]
Availability of Substitutes ............................................................ 344
[15.380]
Level of Concentration in the Market ........................................... 345
[15.410]
Degree of Countervailing Power in the Market .......................... 346
[15.440]
Barriers to Entry ........................................................................... 347
[15.480]
Import Competition ...................................................................... 349
[15.510]
Removal of a Vigorous and Effective Competitor ........................ 350
[15.540]
Failing Firm .................................................................................. 350
[15.570]
Vertical Integration ....................................................................... 352
[15.600]
Dynamic Characteristics of the Market ........................................ 352
[15.640]
Significant and Sustainable Increase in Prices or Profit Margins .... 353
[15.660] Efficiencies .................................................................................... 354 [15.690]
Scope of Merger Provisions ............................................................... 355
[15.700]
Merger Safe Harbours ....................................................................... 356
[15.720]
United States and European Union ............................................... 356
[15.740]
Other Countries ............................................................................ 357
[15.780]
Creeping Acquisitions ........................................................................ 357
[15.800]
The Assessment Process .................................................................... 358
[15.810]
Overseas Mergers Affecting a Market in Australia ........................... 358
Further reading .................................................................................................... 359
16 Competitor Boycotts, Secondary Boycotts and Collective Bargaining [16.20]
Development of a Competitor Boycott Law ...................................... 362
[16.80]
Cartels and Competitor Boycotts ...................................................... 364
[16.90]
What Conduct? ............................................................................. 365
[16.110]
Parties Must Be Competitors ....................................................... 366
[16.170] Purpose ......................................................................................... 368 © 2018 THOMSON REUTERS
xvii
Table of Contents
[16.240]
Preventing, Restricting or Limiting .............................................. 371
[16.250]
Identifying the Subject of the Exclusionary Provision ................. 372
[16.300]
Joint Ventures .................................................................................... 373
[16.320]
Employee Boycotts — “Secondary Boycotts” .................................. 374
[16.330]
Development of a Secondary Boycott Law ....................................... 375
[16.390]
What is a Secondary Boycott? ........................................................... 377
[16.420]
Legitimate Purpose ....................................................................... 378
[16.450]
Engaging in Conduct .................................................................... 379
[16.460]
Hindering or Preventing ............................................................... 380
[16.470]
Purpose of Substantially Causing Loss or Damage ..................... 380
[16.490]
Likely Effect of Substantially Causing Loss or Damage ............. 381
[16.500]
Secondary Boycotts — Actions Against Unions ............................... 382
[16.510]
Secondary Boycotts — Firms ............................................................ 382
[16.520]
Collective Bargaining ........................................................................ 383
[16.550]
Initial Requirements ..................................................................... 384
[16.560]
Effect of Notification .................................................................... 384
[16.600] Boycotts ........................................................................................ 385 [16.630] Duration ........................................................................................ 386
17 Access to Essential Facilities [17.20]
Development of US Essential Facilities Doctrine ............................. 387
[17.90]
Development of a European Approach .............................................. 391
[17.140]
Development of the Australian Approach ......................................... 392
[17.170]
Hilmer Recommendations ................................................................. 393
[17.200]
Competition Principles Agreement ................................................... 395
[17.220]
Australia’s Policy Objectives ............................................................. 396
[17.290]
Australia’s National Access Regime .................................................. 398
[17.300]
The Scheme Overview .................................................................. 398
[17.310]
What is an “Essential Facility”? ................................................... 398
[17.360]
Declaring a Service ..................................................................... 400
[17.470]
When a Declaration Cannot Be Made ......................................... 405
[17.490]
State and Territory Regimes ............................................................. 406
[17.520]
National Energy Access Regimes ..................................................... 407
[17.580]
Telecommunications, Broadband and Broadcast Towers ................. 409
[17.590]
Airport Access .................................................................................. 409
Further reading......................................................................................................410 xviii
Miller’s Australian Competition Law and Policy
Table of Contents
18 Exclusions and Immunities [18.30]
General Exemptions .......................................................................... 412
[18.60]
Crown Immunity ............................................................................... 413
[18.90]
Matters Authorised by Federal, State or Territory Legislation ......... 414
[18.140]
Consumer Action Groups .................................................................. 416
[18.150]
Covenants on Sale .............................................................................. 416
[18.180]
Employment Conditions .................................................................... 417
[18.220]
Unincorporated Partnerships ............................................................. 418
[18.250]
Patents, Trademarks, Registered Designs, Copyright and Rights in Circuit Layouts ................................................................... 418
[18.270]
Quality Standards .............................................................................. 419
[18.280]
Export Contracts ................................................................................ 420
[18.290]
Overseas Cargo Shipping .................................................................. 420
[18.320]
Case Specific Immunity Applications ............................................... 421
[18.330] Authorisation ................................................................................ 421 [18.450] Notifications .................................................................................. 425 [18.490]
Class Exemptions .......................................................................... 426
[18.550]
Merger Clearance ......................................................................... 427
19 Consequences [19.20]
Who Is Liable? ................................................................................... 430
[19.30] Principals ...................................................................................... 430 [19.50]
Aiding and Abetting ..................................................................... 431
[19.60] Inducing ........................................................................................ 431 [19.70]
Party to a Contravention ............................................................... 432
[19.80]
Knowingly Concerned .................................................................. 432
[19.90]
Criminal Penalties ............................................................................. 433
[19.140]
Pecuniary Penalties ............................................................................ 435
[19.160]
Standard of Proof .......................................................................... 436
[19.170]
Assessing Penalty ......................................................................... 436
[19.280] Deterrence .................................................................................... 440 [19.290]
Reputational Damage ................................................................... 441
[19.300]
Legal Advice ................................................................................. 441
[19.310]
Multiple Penalties ......................................................................... 441
[19.320]
Total Penalties ............................................................................... 442
© 2018 THOMSON REUTERS
xix
Table of Contents
[19.330]
Optimal Penalties ......................................................................... 442
[19.340]
Immunity and Leniency .................................................................... 443
[19.390]
Private Rights of Action .................................................................... 445
[19.410]
Seeking Compensation ..................................................................... 446
[19.420] Causation ..................................................................................... 446 [19.430]
Types of Compensable Loss ......................................................... 447
[19.440]
Assessing Compensation ............................................................. 448
[19.460]
Limitation Period ......................................................................... 449
[19.480]
Standard of Proof .......................................................................... 450
[19.500]
Remedial Orders ................................................................................ 451
[19.520] Injunctions ......................................................................................... 452 [19.570]
Disqualification Orders ...................................................................... 455
[19.600]
Punitive Publication Orders ............................................................... 456
[19.610]
Non-Punitive Orders .......................................................................... 456
[19.620]
Corrective Advertising .................................................................. 456
[19.630]
Compliance Programs .................................................................. 457
[19.640]
Probation Orders ........................................................................... 458
[19.650]
Community Service Orders .......................................................... 459
[19.660]
Enforceable Undertakings ................................................................. 459
[19.680] Divestiture ......................................................................................... 460 Further reading..................................................................................................... 461
20 Competitive Neutrality [20.20]
Origins of Competitive Neutrality ..................................................... 463
[20.80]
Taxation Neutrality ........................................................................... 466
[20.90]
Debt Neutrality .................................................................................. 467
[20.100]
Rates of Return .................................................................................. 467
[20.110]
Cost Allocation and Pricing .............................................................. 467
[20.120]
Competitive Tendering and Contracting ........................................... 468
[20.130]
Competitive Neutrality Complaints .................................................. 468
[20.160]
Making a Complaint ..................................................................... 470
[20.180]
Types of Cases............................................................................... 471
Appendices ����������������������������������������������������������������������������������������������������������� 475 Index��������������������������������������������������������������������������������������������������������������������� 549 xx
Miller’s Australian Competition Law and Policy
TABLE OF STATUTES Commonwealth Acts Interpretation Act 1901:������������������� 9.320 s 22(1)(a):������������������������������������������������ 15.690 Administrative Decisions (Judicial Review) Act 1977:�����������������������������������19.660, 19.670 Airports Act 1996:������������������������������������17.590 s 201:�������������������������������������������������������17.590 Australian Act 1986 s 2:�������������������������������������������������������������� 1.80 Australian Energy Market Agreement cl 5.1(b):���������������������������������������������������17.560 Australian Energy Market Commission Establishment Act 2004:����������������������17.570 Australian Industries Preservation Act 1906: 1.20, 2.20, 2.30, 2.40, 2.50, 2.170, 2.210, 3.20, 9.100, 10.20, 10.30, 11.50, 12.150, 12.160 s 4:�������������������������������������������������������������11.50 s7:������������������������������������������������������������12.150 Commonwealth Banks Act 1959:��������������9.190 Commonwealth of Australia Constitution Act 1901 s 51(xiii):���������������������������������������������������� 9.80 s 51(xiv):����������������������������������������������������� 9.80 s 51(xx):������2.210, 2.240, 9.20, 9.30, 9.80, 9.90 s 122:���������������������������������������������������������� 9.90 Commonwealth Services Delivery Agency Act 1997 s 12:�����������������������������������������������������������9.210 Competition and Consumer Act 2010:������������� 6.10, 7.10, 7.50, 9.10, 9.100, 9.120, 9.130, 9.380, 10.10, 10.30, 10.250, 10.1030, 11.200, 11.620, 11.770, 13.40, 13.90, 13.200, 13.470, 14.20, 15.220, 16.320, 17.260, 17.490, 19.20, 19.400 s 2:������������������������������������������� 1.50, 7.10, 18.10 s 2A:��������������������������������9.200, 9.320, 10.1030 s 2B:�������������������������������������������9.330, 10.1030 s 2BA:������������������������������������������������������ 9.380 s 2C:�������������������������������������������9.200, 10.1030 s 2C(4):������������������������������������������������������9.210 s 2D:����������������������������������������������������������9.370 s 4:��������������������������������������9.210, 11.610, 14.40 s 4(1):��7.230, 9.20, 9.90, 9.120, 10.510, 13.290, 13.310, 13.320 s 4(2):����������������������������������������� 14.170, 16.450 s 4A:��������������������������������������������� 9.130, 15.810 s 4AA:����������������������������������������������������� 19.110 s 4C:������������������13.290, 13.310, 14.170, 16.460 s 4D:���������������������������������� 4.660, 16.10, 16.180 s 4D(1):����������������������������������������������������� 16.60 s 4D(1)(a):������������������������������������������������ 16.110 s 4D(1)(b):������������������������������������������������ 16.90
© 2018 THOMSON REUTERS
s 4D(2):���������������������������������������������������� 16.110 s 4E:����������������������������������������������������������� 7.50 s 4F:�������������������������������������������������������� 16.220 s 4F(1)(a):���������������������������������� 10.600, 16.230 s 4F(1)(b):����������������������12.320, 14.400, 16.470 s 4G:����������������������������������������������������������� 8.30 s 4J:���������������������������������������������������������11.720 s 4K:��������������������������������������������������������19.430 s 4M:�������������������������������������������������������18.160 s 5(1):�������������������������������������������� 9.140, 15.170 s 7(3)(c):������������������������������������������������������ 5.30 s 8:�������������������������������������������������������������� 5.30 s 10.01:��������������������������������������������������� 18.300 s 29B:��������������������������������������������������������5.150 s 29C(3)(b):�����������������������������������������������5.140 s 30:�����������������������������������������������������������5.180 s 31:�����������������������������������������������������������5.180 s 42:�����������������������������������������������������������5.180 s 44AA:���������������������������������������������������17.230 s 44B:����������������������������������������� 17.310, 17.340 s 44CA:�������������������������������������� 17.320, 17.360 s 44CA(1)(b):������������������������������������������ 17.410 s 44CA(1)(c):�������������������������������������������17.420 s 44CA(1)(d):�������������������������������������������17.430 s 44CA(2):����������������������������������������������� 17.410 s 44CA(3)(a):�������������������������������������������17.440 s 44CA(3)(b):������������������������������������������17.440 s 44F:������������������������������������������������������� 17.310 s 44F(1):��������������������������������������������������17.480 s 44F(1)(a):��������������������������������� 17.470, 17.490 s 44F(1)(b):���������������������������������������������� 17.470 s 44G:����������������������������������������� 17.320, 17.360 s 44G(2)(a):�������������������������������� 17.360, 17.430 s 44G(2)(d):���������������������������������������������17.450 s 44H(4)(a):��������������������������������� 17.360, 17.430 s 44H(4)(d):���������������������������������������������17.450 s 44K:������������������������������������������������������� 5.200 s 44M:�����������������������������������������������������17.490 s 44M(4):�������������������������������������������������17.490 s 44O:������������������������������������������������������� 5.200 s 44PG:����������������������������������������������������� 5.200 s 44PH:����������������������������������������������������� 5.200 s 44ZP:����������������������������������������������������� 5.200 s 44ZZRO:��������������������������������� 11.730, 16.310 s 44ZZRP:���������������������������������� 11.730, 16.310 s 45:������������ 7.10, 10.60, 11.660, 11.700, 11.760 s 45(2)(a)(i):���������������������������������������������� 4.660 s 45(2)(b)(i):��������������������������������������������� 4.660 s 45(8):���������������������������������������� 9.130, 10.1040 s 45(8AA):����������������������������������18.60, 10.1040 s 45(9):�����������������������������������������������������18.420 s 45AB:��������������������������11.200, 16.140, 16.240 s 45AB:����������������������������������������������������11.550 s 45AC:���������������������������������������11.460, 11.550
xxi
Commonwealth
Table of Statutes
Competition and Consumer Act 2010: — cont s 45AD:�����������������������������������������������������2.170 s 45AD(3):������������������������16.10, 16.100, 16.170 s 45AD(3)(a)(iii):������������������������������������ 16.240 s 45AD(3)(a)(iv):������������������������������������ 16.240 s 45AD(3)(c):�������������������������������������������11.470 s 45AD(4):��������� 11.520, 11.550, 11.610, 16.150 s 45AD(6):�����������������������������������������������11.630 s 45AD(8):����������������������������������11.540, 16.220 s 45AD(11):��������������������������������11.630, 16.220 s 45AE(3):�����������������������������������������������11.150 s 45AF:�����������������������������������������11.220, 19.90 s 45AF(2):������������������������������������ 11.770, 19.90 s 45AF(3):�����������������������������������������������19.100 s 45AG:�����������������������������������������������������19.90 s 45AG(2):�������������������������������������������������19.90 s 45AG(3):�����������������������������������������������19.100 s 45AI:�����������������������������������������������������19.130 s 45AJ:�����������������������������������������������������11.220 s 45AL:���������������������������������������������������� 11.750 s 45AM:�������������������������������������������������� 11.750 s 45AN:��������������������������������������������������� 11.750 s 45AO:�������������������������������������� 11.700, 16.310 s 45AO(1):�����������������������������������11.730, 11.740 s 45AP:��������������������������������������� 11.700, 16.310 s 45AP(1):������������������������������������11.730, 11.740 s 45AR:��������������������������������������������������� 11.750 s 45AR(2)(b)(iii):������������������������������������18.450 s 45AS:���������������������������������������������������� 11.750 s 45AT:���������������������������������������������������� 11.750 s 45AU:����������������������������������������������������11.650 s 45D:��������������������������������������������� 7.10, 16.390 s 45D(2):��������������������������������������������������16.470 s 45D(3):������������������������������������������������� 16.400 s 45D(4):������������������������������������������������� 16.400 s 45DA:���������������������������������������������������16.410 s 45DA(2):���������������������������������������������� 11.200 s 45DA(3):�����������������������������������������������11.210 s 45DB:���������������������������������������������������16.410 s 45DC:�������������������������������������������������� 16.500 s 45DC(5):���������������������������������������������� 16.500 s 45DD(1):���������������������������������������������� 16.420 s 45DD(3):�����������������������������������������������16.430 s 45DD(4):�����������������������������������������������16.430 s 45E(2):��������������������������������������������������16.510 s 45E(3):��������������������������������������������������16.510 s 45EA:���������������������������������������������������16.510 s 46:�������������������������������������������������� 6.120, 7.10 s 46(1):�������������������������� 12.530, 12.600, 12.660 s 46(1AA):���������������������������������������������� 12.690 s 46(1AAA):�������������������������������12.310, 12.690 s 46(2):������������������������������������������������������9.130 s 46(3):��������������������������������������������������� 12.300 s 46(3A):������������������������������������������������� 12.400 s 46(3)(b):����������������������������������������������� 12.340 s 46(3C):������������������������������������������������� 12.300 s 46(4):�������������������������������������� 12.300, 12.380 s 46(5):��������������������������������������������������� 12.380 s 46(6):��������������������������������������������������� 12.380 s 46(6A):��������������������������������������������������12.310 s 46B:������������������������������������������������������� 18.60 s 47:�������������������������������������������������� 7.10, 13.40
xxii
s 47 (6):�������������������������������������������������� 13.340 s 47(2):���������������������������������������������������� 13.340 s 47(2)(a):�������������������������������������������������13.170 s 47(2)(b):������������������������������������� 13.90, 13.170 s 47(2)(c):������������������������������������ 13.100, 13.170 s 47(2)(d):������������������������������������������������� 13.80 s 47(2)(e):�������������������������������������������������13.130 s 47(2)(f):�������������������������������������������������13.140 s 47(3):����������������������������13.150, 13.160, 13.170 s 47(3)(c):�������������������������������������������������13.100 s 47(4):�����������������������������������������������������13.160 s 47(6):�����������������������������������������������������13.210 s 47(6)(a):������������������������������������������������13.210 s 47(6)(b):������������������������������������������������13.210 s 47(6)(c):�������������������������������������������������13.210 s 47(7):����������������������������������������������������13.210 s 47(7)(a):������������������������������������������������13.210 s 47(7)(b):������������������������������������������������13.210 s 47(7)(c):������������������������������������������������13.210 s 47(8):���������������������������������������������������� 13.480 s 47(9):���������������������������������������������������� 13.480 s 47(10):���������������������������������������������������� 13.80 s 47(10A):������������������������������������������������18.450 s 47(11):�������������������������������������������������� 13.480 s 47(12):�������������������������������������������������� 13.490 s 47(13):�������������������������13.330, 13.340, 13.470 s 48(2):����������������������������������������������������18.450 s 49:�������������������������������������������������������10.1040 s 50:������������� 6.120, 7.10, 9.130, 15.190, 15.210, 15.780 s 50(1):����������������������������15.150, 15.160, 15.170 s 50(3):�����������������������������������������8.130, 15.260 s 50(3)(e):����������������������������������������������� 15.640 s 50(3)(f):����������������������������������������������� 15.330 s 50(3)(g):����������������������������������������������� 15.600 s 50(3)(h):������������������������������������������������15.510 s 50(3)(i):�������������������������������������������������15.570 s 50(6):���������������������������������������15.160, 15.250 s 50A:�������������������������������������������3.350, 15.810 s 50A(4):��������������������������������������������������15.810 s 50A(8):��������������������������������������������������15.810 s 51:�����������������������������������������������������������2.110 s 51(1A):��������������������������������������������������� 18.90 s 51(1)(a):�������������������������������������������������� 18.30 s 51(1)(b)-(e):�������������������������������������������� 18.30 s 51(1C)(a):����������������������������������������������18.100 s 51(1C)(b):����������������������������������������������� 18.90 s 51(1C)(c):����������������������������������������������18.100 s 51(1C)(d):����������������������������������������������18.100 s 51(2):������������������������������������������������������ 18.40 s 51(2A):���������������������������������������18.40, 18.140 s 51(2)(a):�������������������������������������������������18.180 s 51(2AA):���������������������������������������������� 18.280 s 51(2)(c):�������������������������������������������������18.270 s 51(2)(d):����������������������������������������������� 18.220 s 51(2)(e):�������������������������������������������������18.150 s 51(3):������������������������������������������18.50, 18.250 s 75B:��������������������������������������������� 9.140, 19.20 s 76:������������������������������������9.140, 19.20, 19.180 s 76(1A)(a):��������������������������������� 16.380, 19.150 s 76(1A)(b):���������������������������������� 5.110, 19.150 s 76(1B):��������������������������������������������������19.150
Miller’s Australian Competition Law and Policy
Table of Statutes Competition and Consumer Act 2010: — cont s 76(1)(b):�������������������������������������10.980, 19.40 s 76(1)(d):�������������������������������������10.980, 19.60 s 76(3):�����������������������������������������������������19.310 s 76(5):����������������������������������������������������19.150 s 76C:����������������������������������������������������� 16.300 s 77:���������������������������������������������������������19.150 s 77A:������������������������������������������������������19.150 s 79(1):���������������������������� 11.150, 19.100, 19.110 s 80(1A):�������������������������������������19.520, 19.560 s 80(4):��������������������������������������������������� 19.540 s 80(5):��������������������������������������������������� 19.540 s 81:���������������������������������������������������������19.680 s 82:���������������������������������������������19.180, 19.410 s 82(1):�����������������������������������������������������19.420 s 82(2):��������������������������������������������������� 19.460 s 84:�������������������������������������������������������� 13.340 s 84(1):�������������������������������������������������������19.90 s 86C:�����������������������������19.610, 19.620, 19.630 s 86D:����������������������������������������������������� 19.600 s 86E:�����������������������������19.120, 19.150, 19.570 s 87:��������������������������������������������19.500, 19.680 s 87(1C):������������������������������������������������� 19.500 s 87(2):���������������������������������������������������� 19.500 s 87AA:���������������������������������������������������19.430 s 87B:���������������������������� 18.430, 19.630, 19.660 s 87B(2):��������������������������������������������������19.670 s 87B(4):��������������������������������������������������19.670 s 88:���������������������������������������������������������18.330 s 88(2):����������������������������������������������������18.350 s 88(3):����������������������������������������������������18.430 s 88(4):�����������������������������������������������������18.430 s 88(6):����������������������������������������������������18.420 s 90(7):��������������������������������������������������� 18.340 s 90(7)(a):����������������������������������������������� 18.360 s 91(1):���������������������������������������������������� 18.440 s 91B:�������������������������������������������������������18.350 s 91B(3):������������������������������������������������� 18.440 s 93(1)(b):����������������������������������������������� 14.480 s 93(3):���������������������������������������������������� 18.460 s 93(3A):������������������������������������������������� 18.480 s 93(4):�����������������������������������������������������18.470 s 93(5):��������������������������������������������������� 16.630 s 93(7):���������������������������������������18.460, 18.470 s 93(7A):������������������������������������������������� 18.480 s 93A:������������������������������������������������������18.470 s 93AB:�������������������������������������������������� 16.540 s 93AC:��������������������������������������������������� 16.560 s 93AC(1):���������������������������������������������� 18.480 s 93ACA(1):�������������������������������������������� 16.620 s 93AD(1):���������������������������������������������� 18.480 s 93AD(1)(a)(i):�������������������������������������� 16.630 s 93AD(3)(c):������������������������������������������ 16.630 s 93AG:�������������������������������������������������� 16.620 s 95AA(1):���������������������������������������������� 18.540 s 95E:��������������������������������������������������������5.130 s 95F:���������������������������������������������������������5.130 s 95G:��������������������������������������������������������5.130 s 95P:���������������������������������������������������������5.130 s 95X:��������������������������������������������������������5.130 s 95ZE:������������������������������������������������������5.130 s 96:���������������������������������������������������������� 14.40
© 2018 THOMSON REUTERS
Commonwealth
s 96(4):��������������������������������������������������� 14.230 s 96(8):����������������������������������������������������14.180 s 96A:������������������������������������������������������� 14.40 s 97:����������������������������������������������14.10, 14.460 s 98(1):�����������������������������������������������������14.420 s 98(1)(d):������������������������������������������������14.420 s 98(2):��������������������������������������������������� 14.440 s 98(3):���������������������������������������������������� 14.440 s 100:�������������������������������������������������������14.430 s 100(2):��������������������������������������������������14.430 s 150K:������������������������������������������������������4.170 s 152ASA:���������������������������������������������� 18.540 s 155:����������������������������� 10.190, 10.200, 18.180 s 163A:��������������������������������������������������� 15.270 s 166:������������������������������������������������������ 18.280 Pt IIA:�������������������������������������������������������5.140 Pt III Div 2AA:���������������������������������������17.480 Pt IIIA Div 2B:��������������17.270, 17.480, 17.580 Pt IIIAA:�������������������������������������������������17.570 Pt VIIA:�������������������������������������� 4.540, 10.900 Pt X:�������������������������������������������18.290, 18.310 Pt XIA:�������������������������10.1030, 18.110, 19.400 Pt XIC:����������������������������������������������������17.580 Sch 1:����������������������������� 9.120, 10.1030, 19.400 Competition and Consumer Amendment (Competition Policy Review) Act 2017:��������������������������������������������������4.720 Sch 7:�������������������������������������������������������� 13.60 Competition and Consumer Amendment (Misuse of Market Power) Act 2017:����4.720 Competition and Consumer Legislation Amendment Bill 2010:��������������������������� 4.560 Competition Code Agreement 1995 cl 4:������������������������������������������������������������� 5.30 Competition Policy Reform Act 1995:���� 4.220, 4.240 s 2B:����������������������������������������������������������4.170 s 7(3):���������������������������������������������������������4.170 s 13:�����������������������������������������������������������4.170 s 14:�����������������������������������������������������������4.170 s 51(1C)(e):������������������������������������������������4.170 s 51(1C)(f):������������������������������������������������4.170 Competition Policy Reform Acts 1995:������9.10 Competition Principles Agreement 2010 cl 1(5):������������������������������������������������������ 20.30 cl 3:��������������������������������������������������������� 20.130 cl 3(2):������������������������������������������������������ 20.30 cl 3(4)(a):�������������������������������������������������� 20.60 cl 3(4)(b):���������������������������������������������������20.70 cl 3(4)(b)(i):���������������������������������������������� 20.80 cl 3(4)(b)(ii):��������������������������������������������� 20.90 cl 3(5):�������������������������������������������������������20.70 cl 3(5)(b):�������������������������������������������������20.110 cl 3(8):�����������������������������������������������������20.140 cl 4:����������������������������������������������������������� 20.40 cl 4(1):������������������������������������������������������ 20.30 cl 6:����������������������������������������������������������17.200 cl 6(4):����������������������������������������������������� 17.210 cl 9:������������������������������������������������������������5.140 Conduct Code Agreement 1995 cl 1(5):�������������������������������������������������������4.180 cl 2:������������������������������������������������������������4.180
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Commonwealth
Table of Statutes
Conduct Code Agreement 1995: — cont cl 3(1):�������������������������������������������������������4.180 cl 3(4):�������������������������������������������������������4.190 cl 3(5):�������������������������������������������������������4.190 cl 3(8):�������������������������������������������������������4.190 cl 4:������������������������������������������������� 4.170, 4.180 cl 4(1):�������������������������������������������� 4.170, 4.180 cl 5:������������������������������������������������������������4.190 cl 5(2):�������������������������������������������������������4.170 cl 6:������������������������������������������������������������4.170 cl 7:������������������������������������������������������������4.170 cl 13:��������������������������������������������������������� 4.200 Copyright Act 1968:�������������������������������� 15.500 Corporations Act 2001:����������������������������� 20.60 s 206C:����������������������������������������������������19.580 Criminal Code cl 9.3:���������������������������������������������������������19.90 Health Insurance Commission Act 1973 s 4:�������������������������������������������������������������9.210 Industrial Relations Act 1988:��������������� 16.330 Migration Act 1958:���������������������������������� 9.240 National Electricity Law s 15:���������������������������������������������������������17.570 National Gas Pipelines Access Agreement cl 5:����������������������������������������������������������17.540 Productivity Commission Act 1998 s 21:���������������������������������������������������������20.160 Restrictive Trade Practices Act 1965:�������������� 2.110–2.150, 9.20, 10.20, 10.50, 13.20 s 6:������������������������������������������������������������ 2.130 s 8:������������������������������������������������������������ 2.220 ss 35-37:����������������������������������������������������2.110 s 36(1)(a):�������������������������������������������������� 13.30 s 36(1)(b):�������������������������������������13.30, 13.190 s 36(1)(c):�������������������������������������������������� 13.30 s 38:�����������������������������������������������������������2.110 s 39:�����������������������������������������������������������2.110 s 46:���������������������������������������������������������� 2.120 ss 51-52:���������������������������������������������������� 2.130 s 85:�����������������������������������������������������������2.110 s 86:�����������������������������������������������������������2.110 s 88:���������������������������������������������������������� 2.130 s 91(2):������������������������������������������������������ 10.20 Restrictive Trade Practices Act 1971:���� 2.120, 3.20, 11.60, 12.170, 14.20, 14.30 s 35:�����������������������������������������������������������11.60 s 85:�����������������������������������������������������������11.60 s 86:�����������������������������������������������������������11.60 Small Business and the Trade Practices Act 1979:�������������������������������������������������������� 3.250 Trade Marks Act 1995 Pt XI:������������������������������������������������������ 18.250 Trade Practices Act 1965:������1.20, 3.20, 12.170 s 37:���������������������������������������������������������12.170 ss 51-52:�����������������������������������������������������5.190 s 88:�����������������������������������������������������������5.190 Trade Practices Act 1971:�����������������2.120, 9.30 Trade Practices Act 1974:���2.120, 3.120, 3.360, 4.30, 4.40, 4.60, 4.170, 4.200, 4.220, 4.330, 4.410, 4.510, 6.10, 8.10, 9.10, 9.20, 9.30, 9.40, 9.80, 9.100, 9.140, 9.150, 9.160, 9.170, 9.220,
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9.230, 9.270, 9.300, 9.320, 9.330, 9.340, 9.350, 9.370, 9.420, 9.430, 10.30, 10.50, 10.120, 10.890, 10.1030, 11.60, 11.200, 11.210, 12.180, 12.190, 13.40, 14.20, 15.30, 16.40, 16.320, 16.330, 17.140, 19.140, 19.170, 19.340, 20.20, 20.60 s 2A:���������������3.180, 9.170, 9.240, 9.300, 9.310 s 4(1):���������������������������������������������������������� 9.90 s 4(3):������������������������������������������������������10.740 s 4D:����������������������������������3.160, 3.190, 12.200 s 4F:��������������������������������������������10.550, 10.620 s 4F(1)(b):�����������������������������������10.650, 13.430 s 4F(1)(b)(ii):������������������������������������������ 10.650 s 44ZZRO:����������������������������������������������11.690 s 44ZZRP:�����������������������������������������������11.690 s 45:������������������������������������ 2.170, 3.160, 3.210, 4.30, 10.350, 10.360, 10.540, 10.720, 10.940, 10.1030, 11.80, 12.200 s 45(2)(a)(i):�����������������������������������������������11.60 s 45(2)(b):����������������������������������������������� 10.690 s 45(2)(b)(i):����������������������������������������������11.60 s 45(4):�����������������������������������������������������10.700 s 45(10(a):��������������������������������������������������11.60 s 45A:����������� 2.170, 3.160, 3.210, 11.60, 11.210 s 45B:��������������������������������������������������������3.210 s 45D:��������������������������������3.190, 9.220, 16.350 s 45D(1)(b):���������������������������������������������� 9.220 s 45E:������������������������������������������ 3.340, 16.370 s 46:�����3.210, 3.220, 4.30, 4.290, 4.430, 9.220, 9.310, 10.720, 12.70, 17.140 s 46(1):���������������������������� 3.210, 12.200, 12.340 s 46(7):������������������������������������������������������3.410 s 47:��������������3.160, 10.720, 11.80, 13.40, 13.70 s 47(3):���������������������������������������������������� 13.340 s 47(4):���������������������������������������������������� 13.200 s 47(7):��������������������������������������������������� 13.340 s 49:����������������������������������������������3.170, 12.200 s 50:�������������������������������������� 4.90, 4.560, 15.30 s 51:�����������������������������������������������������������4.170 s 51(1)(a):������������������������������������������������ 16.330 s 51(2)(a):���������������������������������������������������3.130 s 75B:������������������������������������������������������� 9.320 s 76D:������������������������������������������������������11.690 s 81:���������������������������������������������������������� 4.430 s 90(9):����������������������������������������������������� 3.200 s 92:�������������������������������������������������������� 13.200 s 150D:����������������������������������������������������� 4.230 Pt IIA:������������������������������������������������������ 4.220 Pt IIIA:����������������������������������������������������� 4.220 Pt IV, Div 1A:������������������������������������������ 4.600 Pt XIA, s 150C:����������������������������������������4.170 Pt XVI:����������������������������������������������������� 4.220 Trade Practices Act 1995 Pt IIIA:����������������������������������������������������17.200 Trade Practices Amendment (Fair Trading) Bill 1997:����������������������������3.160, 4.280, 15.40 Trade Practices Legislation Amendment Bill 2007:�������������������������������������������������������� 4.500 Trade Practices Legislation Amendment Bill 2008:�������������������������������������������������������� 4.520 Wheat Marketing Act 1989:��������������������� 18.90
Miller’s Australian Competition Law and Policy
Hong Kong
Table of Statutes
Australian Capital Territory
Tasmania
Competition Policy Reform Act 1996:����� 4.230 Electricity (National Scheme) Act 1997:���17.530 Independent Competition and Regulatory Commission Act 1997 s 19B:������������������������������������������������������20.160
Competition Policy Reform Act 1996:����� 4.230 Economic Regulator Act 2009 ss 48-62:����������������������������������������������������2.170 Electricity – National Scheme (Tasmania) Act 1999:�������������������������������������������������������17.530
New South Wales
Victoria
Competition Policy Reform Act 1995:����� 4.230 Co-operation Act 1923:�������������� 9.70, 9.80, 9.90 Fair Trading Act 1987:������������������������������ 9.290 Independent Pricing and Regulatory Tribunal Act 1992 s 24GB-24GE:������������������������������������������2.170 Interpretation Act 1987 s 21:�����������������������������������������������������������9.120 Local Government Act 1919:���������������������� 9.30 National Electricity Act 1997:�����������������17.530 Transport Administration Act 1988:�����17.500
Competition Policy Reform Act 1995:����� 4.230 National Electricity (Victoria) Act 1997:��17.530 Rail Corporations Act 1996 Pt 2A:������������������������������������������������������ 17.510
Northern Territory Australasia Railway (Third Party Access) Act:��������������������������������������������������������� 17.510 Competition Policy Reform Act 1996:����� 4.230
Queensland Competition Policy Reform Act 1996:�������������� 4.230 Electricity – National Scheme Act 1997:��17.530 Queensland Productivity Commission Act 2015 ss 31-42:��������������������������������������������������20.160 s 34(1):�����������������������������������������������������20.170 s 34(2)(a):������������������������������������������������20.170 s 34(2)(b):������������������������������������������������20.170 s 34(2)(d):������������������������������������������������20.170 s 37:���������������������������������������������������������20.170 s 38:���������������������������������������������������������20.170 s 39:���������������������������������������������������������20.170 s 41:���������������������������������������������������������20.170 s 42:���������������������������������������������������������20.170
South Australia Australasia Railway (Third Party Access) Act 1999:������������������������������������������������������� 17.510 Competition Policy Reform Act 1996:����� 4.230 Government Business Enterprises (Competition) Act 1996 ss 16-19:��������������������������������������������������20.160 National Electricity (South Australia) Act 1996:�������������������������������������������������������17.530 National Electricity Act 1996 s 7:�����������������������������������������������������������17.530 s 44ZZAA:����������������������������������������������17.530 National Gas Act 2008:����������������������������17.480
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Western Australia Competition Policy Reform Act 1996:����� 4.230
Brazil Competition Law 2011 Art 36:�������������������������������������������������������� 8.20
Canada Competition Act 1985:������������������������������ 13.50 s 1.1:����������������������������������������������������������1.100 s 45(1):������������������������������������������������������ 4.530 s 61(1):�����������������������������������������������������14.140 s 75(1):�������������������������������������������������������� 8.20 s 76(1):�������������������������������������������������������� 8.20 s 77(2):��������������������������������������������� 8.20, 13.50 s 77(3):������������������������������������������������������ 13.50 s 78(1):�����������������������������������������������������12.780 s 79(1):�����������������������������������������������������14.140 s 92:��������������������������������������������������������� 15.110 Competition Act 2002 s 79(1):���������������������������������������������������� 12.420 s78(1):����������������������������������������������������� 12.460
Germany Act Against Restraints of Competition 2013 § 1:�������������������������������������������������������������� 8.20
Hong Kong Competition Ordinance s 6(1):������������������������������������������������������ 10.340 s 15, Sch 1(1):����������������������������������������� 18.520 Competition Ordinance 2012 Sch 7:������������������������������������������������������� 15.110 Competition Ordinance 2013 s 6:�������������������������������������������������������������� 8.20
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India
Table of Statutes
India
Singapore
Competition Act 2002 s 3(1):���������������������������������������������������������� 8.20 s 6:����������������������������������������������������������� 15.110
Competition Act 2004:������������������������������ 13.50 s 34:���������������������������������������������������������14.150 s 34(1):�������������������������������������������������������� 8.20 s 35, Sch 3:����������������������������������������������� 13.50 s 36:�������������������������������������������������������� 18.520 s 47:�������������������������������������������������������� 12.490 s 47(1):���������������������������������������������������� 12.640 s 47(2):���������������������������������������������������� 12.640 Competition Act 2007 s 54:��������������������������������������������������������� 15.110
Japan Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (1947) Art 2(5):������������������������������������������������� 12.640 s 2(9)(5):������������������������������������������������� 12.640 Antimonopoly Act 1947 Art 2:������������������������������������������������������ 12.480 Art 2(9)(iv)(a):�����������������������������������������14.150 Art 3:���������������������������������������������������������� 8.20 Art 20(1):������������������������������������������������14.150 Art 20-2:�������������������������������������������������14.150 Art 23:���������������������������������������������������� 18.520
The Netherlands Dutch Competition Act 1997 Art 6:���������������������������������������������������������� 8.20
New Zealand Commerce Act 1986 s 2(1):�������������������������������������������������������� 9.390 s 5(1):�������������������������������������������������������� 9.390 s 37:���������������������������������������������������������14.150 s 39:���������������������������������������������������������14.150 s 47:��������������������������������������������������������� 15.110
People’s Republic of China Anti-Monopoly Law 2007 Art 3(3):����������������������������������������������������� 8.20 Art 17:���������������������������������������������������� 12.490
Philippines Competition Act 2014 s 20:��������������������������������������������������������� 15.110
Republic of Korea Monopoly Regulation and Fair Trade Act 1980 Art 7:������������������������������������������������������� 15.110 Monopoly Regulation and Fair Trade Act 1990 Art 19(1):���������������������������������������������������� 8.20 Art 29:�����������������������������������������������������14.150 Art 30:�����������������������������������������������������14.150 Art 31:�����������������������������������������������������14.150 Art 31-2:��������������������������������������������������14.150
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South Africa Competition Act 1998 s 1(1)(vi):������������������������������������������������ 10.340 s 2:�������������������������������������������������������������� 1.90 s 4(1)(a):������������������������������������������������������ 8.20 s 7:���������������������������������������������������������� 12.430 s 8:���������������������������������������������������������� 12.490 s 11(1):�����������������������������������������������������15.770 s 13:���������������������������������������������������������15.770
United Kingdom Combination Act 1799:������������������������������ 10.30 Competition Act 1998:���������������������������� 10.340 s 2(1):������������������������������������������������������ 10.340 s 6:�����������������������������������������������������������18.510 s 10:���������������������������������������������������������18.510 s2:��������������������������������������������������������������� 8.20 Resale Price Act 1964:���������������������2.160, 14.20 Restrictive Trade Practices Act 1956:���� 10.20, 10.80, 11.40 s 24:���������������������������������������������������������� 2.160 Trading with the Enemy Act 1916:���������� 10.80
United States Clayton Act 1914:���������������� 8.20, 13.20, 13.460, 15.150 s 4:���������������������������������������������������������� 19.400 s 7:���������������������������������������������� 15.100, 15.150 s 16:�������������������������������������������������������� 19.400 Federal Trade Commission Act 1914 s 5:�����������������������������������������������������������15.100 Hart-Scott-Rodino Act 1976:������������������� 3.330 Robinson-Patman Act 1936:�����������3.170, 3.260 Sherman Act 1890:�����2.10, 2.20, 10.30, 10.290, 10.860, 13.460 s 1:������������������������������������������������� 4.530, 10.30 s 2:���������������������������12.90, 12.110, 17.40, 17.90
Miller’s Australian Competition Law and Policy
Table of Statutes
Treaties and Conventions EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings (2009) Art 82:����������������������������������������12.450, 12.810 Treaty of Rome (1957) Art 82:��������������������������������������� 12.130, 12.380 Art 86:����������������������������� 12.130, 12.140, 17.90 Art 87:������������������������������������������������������ 20.50
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Treaties And Conventions
Treaty on the Functioning of the European Union (Lisbon Treaty) (2007) Art 4(a):���������������������������������������������������14.130 Art 101:������������������������������������������8.20, 14.130 Art 101(1):��������������������������������������4.150, 4.580 Art 101(3):����������������������������������14.130, 18.500 Art 102:��������������������������� 12.130, 12.380, 17.90 Art 102(a):���������������������������������������������� 12.820
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TABLE OF CASES A A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union [2007] FCA 1047; (2007) 165 IR 94.............................................................. 16.400 Aalborg Portland A/S v Commission (2004) I-00123 at [272]- [297].............................10.280 AB Volvo v Erik Veng [1988] ECR 6211........................................................................ 12.630 ACCC v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491; (2003) ATPR (Digest) 46-239....................................................................... 19.630, 19.640 ACCC v ABB Power Transmission Pty Ltd (2004) ATPR 42-011; [2004] FCA 819......................................................................................................... 19.190, 19.220 ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169; (2002) ATPR 41-872; [2002] FCA 559......................19.130, 19.170, 19.190, 19.310, 19.330 ACCC v Admiral Mechanical Services Pty Ltd [2007] FCA 1085 (2007) ATPR 42-174.....................................................................11.480, Appendix 3, Appendix 4 ACCC v Air France [2009] FCA 341 (2009) ATPR 42-283............................................ 11.130 ACCC v Air New Zealand Ltd [2014] FCA 1157.......................................7.170, 18.110, 18.120 ACCC v AirAsiaBerhad Company [2012] FCA 1413......................................................19.290 ACCC v Albert [2005] FCA 1311....................................................................................19.550 ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344; [2000] ATPR 41-749.................................................10.160, 10.140, Appendix 3 ACCC v ANZ Banking Group Ltd [2015] FCAFC 103..................................................... 7.160 ACCC v Apco Service Stations Pty Ltd [2006] HCATrans 272...................................... 10.170 ACCC v April International Marketing Services Australia Pty Ltd [2010] FCA 16; (2010) ATPR 42-312................................................................11.290, Appendix 4 ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC 103................................................................................... 7.90, 11.260, Appendix 4 ACCC v Australia and New Zealand Banking Group Ltd [2016] FCA 1516.................................................................................. 10.190, 11.230, Appendix 4 ACCC v Australian Abalone Pty Ltd [2007] FCA 1834; (2007) ATPR 41-199..........................................................................................11.290, Appendix 4 ACCC v Australian Egg Corp Ltd [2016] FCA 69; ATPR 42-519.............. 10.110, 10.210, 11.500, Appendix 4 ACCC v Australian Medical Assn Western Australia Branch Inc [2003] FCA 686; (2003) 199 ALR 423; [2003] ATPR 41-945................................ 10.120, 11.320, Appendix 3 ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562....................... 19.190, 19.250, 19.270, 19.320 ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; (2001) 119 FCR 1......................................................................10.640, 12.530, Appendix 6 ACCC v Australian Safeway Stores Pty Ltd [2003] FCAFC 149; (2003) 129 FCR 339; 198 ALR 657; [2003] ATPR 41-935.............................. 12.440, Appendix 3 ACCC v Baxter Healthcare Pty Ltd [2005] FCA 581; (2005) ATPR 42-066......... 8.110, 9.280 ACCC v Baxter Healthcare Pty Ltd [2006] FCAFC 128 (2006) 153 FCR 574; 232 ALR 627; (2006) ATPR 42-128................................................18.70, 9.350, 18.70
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ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 81 ALJR 1622........................................................... 9.170, 9.280, 9.420, 9.430, 15.690, 18.80, 18.140 ACCC v Baxter Healthcare Pty Ltd (No 2) [2008] FCAFC 141; (2008) 170 FCR 16; 249 ALR 674........................................................... 8.100, 8.110, Appendix 5 ACCC v Bill Express Ltd [2009] FCA 1022; (2009) 180 FCR 105; 259 ALR 483............................................................................................................ Appendix 5 ACCC v Black & White Cabs Pty Ltd [2010] FCA 1399....................................... Appendix 5 ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 41-715............................................................. 6.80, 12.350, 12.720, 12.730, 12.290, 15.440 ACCC v Boral Ltd (2001) 106 FCR 328; (2001) ATPR 41-803; [2001] FCA 30............... 7.190 ACCC v Bridgestone Corp [2010] FCA 584; (2010) ATPR 42-320.................... 11.100, 11.290 ACCC v British Airways [2008] FCA 1977; (2008) ATPR 42-265................................. 11.130 ACCC v Cabcharge Australia Ltd [2010] FCA 1261; (2013) ATPR 42-331................... 12.680 ACCC v Cadbury Schweppes Pty Ltd [2004] FCA 516 (2004) ATPR 42-001; [2004] FCA 516................................................................................. 19.540 ACCC v Cargolux [2009] FCA 342 (2009) ATPR 42-282............................................... 11.130 ACCC v Cathay Pacific [2012] FCA 1392; (2012) ATPR 42-425.................................... 11.130 ACCC v CC (NSW) Pty Ltd [1999] FCA 954 (1999) 92 FCR 375; 165 ALR 468; (1999) ATPR 41-732..................................................10.160, 11.300, 11.320 ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165; [2014] FCA 148.................................................. 8.110, 10.540, 10.750, 10.790, Appendix 3 ACCC v Cement Australia Pty Ltd [2016] FCA 453.......................................................19.260 ACCC v CG Berbatis Holdings Pty Ltd [2000] FCA 1893 (2001) ATPR41-802............19.620 ACCC v Coles Group Ltd [2014] FCA 363; (2014) ATPR 42-467...................................19.670 ACCC v Colgate-Palmolive Pty Ltd [2016] FCA 528................................. 10.190, 10.770, 10.960, 11.390, Appendix 3 ACCC v Construction, Forestry, Mining and Energy Union [2006] FCA 1730; (2007) ATPR 42-140.........................................................................................19.630 ACCC v Construction, Forestry, Mining and Energy Union [2008] FCA 678................10.140 ACCC v Dally M Publishing and Research Pty Ltd [2007] FCA 1220 (2007) ATPR 42-176...................................................................................................11.230 ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665; (2007) ATPR 42-138..........................................................................................19.630 ACCC v Dataline.Net.Au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513.................................................................................................. 19.530, 19.550 ACCC v Dateline Imports Pty Ltd [2014] FCA 791......................................................... 19.160 ACCC v Dell Computers Pty Ltd [2002] FCA 847 (2002) ATPR 41-878.......................19.620 ACCC v Dermalogica Pty Ltd [2005] FCA 152. [2005] ATPR 42-046............... 14.40, 19.550 ACCC v DM Faulkner Pty Ltd [2004] FCA 1666...................................... 11.470, Appendix 3 ACCC v Econovite Pty Ltd [2003] FCA 964; (2003) ATPR 41-959...............................19.630 ACCC v Emirates [2012] FCA 1108 (2012) ATPR 42-422.............................................. 11.130 ACCC v Eternal Beauty Products Pty Ltd [2012] FCA 1124; (2012) ATPR 42-021............................................................................ 14.290, 14.320, Appendix 6 ACCC v FFE Building Services Ltd [2003] FCA 1542; [2003] ATPR 41-969...........................................................................................16.90, Appendix 3 ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; (2004) ATPR 41-983.........................................7.130, 19.190, 19.220, 19.260, 19.280, Appendix 5 ACCC v Flight Centre Travel Group Ltd [2016] HCA 49................................... 11.260, 11.640 ACCC v Francis [2004] FCA 487; (2004) 142 FCR 1.....................................................19.550 ACCC v Garuda [2016] FCAFC 42.................................................................................. 11.130 ACCC v George Weston Foods Ltd [2000] FCA 690; (2000) ATPR41-763.......................................................................................19.190, 19.250, 19.310
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ACCC v George Weston Foods Ltd [2004] FCA 1093; (2004) 210 ALR 486.................19.630 ACCC v GIA Pty Ltd (2002) ATPR 41-902; [2003] ASAL 55-093; [2002] FCA 1298....................................................................................................................19.280 ACCC v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161 (1999) 95 FCR 302; 166 ALR 74; (1999) ATPR 41-718............................................... 19.50, 19.70 ACCC v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42-097................. 10.410, 11.290 ACCC v Halkalia Pty Ltd (No 2) [2012] FCA 535..........................................................19.580 ACCC v High Adventure Pty Ltd [2005] FCAFC 247; (2006) ATPR 42-091................................................................................................. 19.220, 19.280 ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007...........19.30 ACCC v Hobie Cat Australasia Pty Ltd [2008] FCA 402; (2008) ATPR 42-225................................................................................................. 14.190, 19.630 ACCC v Hugo Boss Australia Pty Ltd (1996) ATPR 41-536...........................................14.190 ACCC v IMB Group Pty Ltd (In liq) [2004] ACompT 4; (2004) 180 FLR 44; 206 ALR 271; (2004) ATPR 41-985............................................................13.280 ACCC v IMB Group Pty Ltd (In liq) [2002] FCA 402; (2002) ATPR (Digest) 46-221.................................................................... 13.190, 13.250, 13.280, 13.290 ACCC v IPM Operation & Maintenance Loy Yang Pty Ltd [2006] FCA 1777; (2006) 157 FCR 162; (2006) ATPR (Digest) 46-271............................10.140, 16.510 ACCC v Ithica Ice Works Pty Ltd [2000] FCA 997; (2000) ATPR 41-777..................... 11.430 ACCC v J McPhee & Son (Aust) Pty Ltd [1997] FCA 469 (1997) ATPR 41-570.................................................................................................................19.60 ACCC v JAL [2011] FCA 365 (2011) ATPR 42-352........................................................ 11.130 ACCC v Jurilique International Pty Ltd [2007] FCA 79; (2007) ATPR 42-146.............14.120 ACCC v Kaye [2004] FCA 1363......................................................................................19.620 ACCC v KLM [2009] FCA 341; (2009) ATPR 42-283.................................................... 11.130 ACCC v Kokos International Pty Ltd (No 2) [2008] FCA 5; (2008) ATPR 42-212.........................................................................................11.250, Appendix 4 ACCC v Koyo Australia Pty Ltd [2013] FCA 1051..........................................................11.220 ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183; (2004) ATPR (Digest) 46-260................................................ 4.580, 10.120, 10.160, 10.170 ACCC v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; (2005) 215 ALR 281; ATPR 42-051.............................................................................................19.280 ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321; (2007) ATPR 42-162......................................................................... 10.120, 10.200, 10.520 ACCC v Link Solutions Pty Ltd (No 2) [2010] FCA 919, (2010) ATPR 42-339............. 13.240 ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123................................................................................................ 7.20, 8.40, 8.50, 8.110 ACCC v Malaysia Airlines [2012] FCA 767 (2012) ATPR 42-409................................. 11.130 ACCC v Maritime Union of Australia [2001] FCA 1549; (2001) 114 FCR 472; 187 ALR 487; 50 AILR 4-521............................................................................ 16.410 ACCC v Maritime Union of Australia [2001] FCA 1807; (2002) ATPR 41-857............. 16.410 ACCC v Martinair [2009] FCA 340; (2009) ATPR 42-281............................................. 11.130 ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; [1998] ATPR 41-653..................... 14.250, 14.300, 14.310, 14.340, 14.350, 19.60 ACCC v McMahon Services Pty Ltd [2004] FCA 1425; (2004) ATPR 42-031............................................................................19.220, 19.280, Appendix 3 ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 24-378....................6.140, 7.210, 8.150 ACCC v Metcash Trading Ltd [2011] FCAFC 151; (2011) 198 FCR 297............................................................6.140, 7.170, 8.150, 15.240, 15.270, 15.800 ACCC v Michigan Group Pty Ltd [2002] FCA 1439......................................................... 19.70
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ACCC v Midland Brick Co Pty Ltd (2004) 207 ALR 329; (2004) ATPR 42-008; [2004] FCA 693............................................................................................19.270 ACCC v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413...............................................................................14.190, 19.230, 19.330, Appendix 6 ACCC v Mobil Oil Australia Ltd [1997] FCA 480; (1997) ATPR 41-568...................... 10.400 ACCC v Multimedia International Services Pty Ltd [2016] FCA 439............................19.290 ACCC v Navman Australia Pty Ltd [2007] FCA 2061; [2007] ATPR 42-208................................................................................................................ Appendix 6 ACCC v Netti Atom Pty Ltd [2007] FCA 1945; [2007] ATPR 42-204.................. Appendix 6 ACCC v NSK Australia Pty Ltd [2014] FCA 453.......................... 10.190, 11.220, Appendix 3 ACCC v NW Frozen Foods Pty Ltd [1996] FCA 1680 (1996) ATPR41-515................... 19.190 ACCC v Olex Australia Pty Ltd [2017] FCA 222.......................... 10.220, 10.410, Appendix 4 ACCC v Olex Australia Pty Ltd [2014] FCA 1157...........................................................10.220 ACCC v On Clinic Australia Pty Ltd [1996] FCA 1705 (1996) ATPR 41-517................19.620 ACCC v Oobi Baby Pty Ltd [2008] FCA 1488...........................................14.190, Appendix 6 ACCC v Pauls Ltd [2002] FCA 1586; [2003] ATPR 41-911.............................. 10.630, 10.700, 10.710, 11.320, 11.540, 11.580 ACCC v Pepe’s Ducks Ltd [2013] FCA 570.....................................................................19.640 ACCC v Pfizer Australia Pty Ltd [2015] FCA 113................................. 7.130, 10.640, 12.320, 12.530, 12.580, Appendix 5 ACCC v PRK Corp Pty Ltd [2009] FCA 715; [2009] ATPR 42-295..........10.780, Appendix 3 ACCC v Prysmian Cavi E Sistemi SRL (No 12) [2016] FCA 822......................... Appendix 4 ACCC v PT Garuda Indonesia Ltd [2016] FCAFC 42............................................ Appendix 4 ACCC v Qantas Airways Ltd [2008] FCA 1976; (2008) 253 ALR 89; ATPR 42-266................................................................................................. 11.130, 19.280 ACCC v Ranu Pty Ltd [2007] FCA 1777; (2007) ATPR 42-202.....................................11.240 ACCC v Real Estate Institute of WA Inc [1999] FCA 18 (1999) 161 ALR 79; FCA 1387 (1999) 95 FCR 114;; (1999) ATPR 41-719...........................................19.620 ACCC v Renegade Gas Pty Ltd [2014] FCA 1135.................................11.430, 19.590, 19.630, 19.640, Appendix 3, Appendix 4 ACCC v Roche Vitamins Australia Pty Ltd (2001) ATPR 41-809; [2001] FCA 150........................................................................................................ 11.100, 11.290, 19.190, 19.230 ACCC v Rural Press Ltd [2001] ATPR 41-804; [2001] FCA 116............................7.140, 7.180 ACCC v Rural Press Ltd (2001) ATPR 41-833; [2001] FCA 1065..................... 19.190, 19.250 ACCC v Safeway Stores Pty Ltd (1997) 75 FCR 238; (1997) ATPR41-562.................... 19.310 ACCC v Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1; (2002) ATPR (Digest) 46-215.....................................................................13.110, 13.160 ACCC v Signature Security Group Pty Ltd [2003] FCA 3; (2003) 52 ATR 1; (2003) ATPR 41-908...............................................................................................19.660 ACCC v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395............................11.130, 11.290, Appendix 3 ACCC v SIP Australia Pty Ltd [1999] FCA 858 (1999) ATPR 41-702...............11.420, 19.190, 19.210, 19.260, Appendix 3, Appendix 4 ACCC v SIP Australia Pty Ltd [2002] FCA 824 (2002) ATPR 41-877................14.300, 19.60 ACCC v SIP Australia Pty Ltd [2003] FCA 336 (2003) ATPR 41-937.......................... 19.180, 19.280, 19.310 ACCC v Skins Compression Garments Pty Ltd [2009] FCA 710...................................14.320 ACCC v SMS Global Pty Ltd [2011] FCA 855................................................................19.540 ACCC v Sundaze Australia Pty Ltd [1999] FCA 1642; [2000] ATPR 41-736........ Appendix 6 ACCC v Target Australia Pty Ltd (2001) ATPR 41-840; [2001] FCA 1326....... 19.190, 19.250 ACCC v TEAC Australia Pty Ltd [2007] FCA 1859; [2007] ATPR 42-201.......... Appendix 6 ACCC v Telwater Pty Ltd [2009] FCA 263; (2009) ATPR 42-276.............14.270, Appendix 6
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ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973; (2011) 196 FCR 212; [2011] ATPR 42-367..................10.160, 10.670, , 11.320, 11.370, 11.480, Appendix 4 ACCC v Thai Airways International Public Co Ltd [2012] FCA 1434.............. 11.130, 11.290 ACCC v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640; 88 ALJR 176; 304 ALR 186............................................................................... 19.190, 19.230 ACCC v Trevor Davis Investments Pty Ltd [2001] FCA 952; (2001) ATPR 41-828..............................................................................................................11.290 ACCC v Tubemakers of Australia Ltd [1999] FCA 1787................................................. 11.430 ACCC v Tyco Australia Pty Ltd (2000) ATPR 41-760; [1999] FCA 1799.......................................................................................................19.190, 19.260 ACCC v Universal Music Australia Pty Ltd [2001] FCA 1800 at [458-9]; (2001) 115 FCR 442; 201 ALR 502; [2002] ATPR 41-855........................................13.120 ACCC v Universal Music Australia Pty Ltd (No 2) (2002) ATPR 41-862; [2002] FCA 192............................................................................................. 19.190, 19.200 ACCC v Vales Wine Co Pty Ltd (1996) ATPR 41-528....................................................19.280 ACCC v Vanderfield Pty Ltd [2009] FCA 1535..................................... 10.770, 11.420, 11.430, Appendix 3 ACCC v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548.................. 19.630, 19.640 ACCC v Visa Inc [2015] FCA 1020........................................................................ Appendix 5 ACCC v Visy Industries Holdings Pty Ltd [2007] FCA 1617; (2007) 244 ALR 673; [2007] ATPR 42-185............................. 4.530, 11.430, Appendix 3, Appendix 4 ACCC v Visy Paper Pty Ltd [2000] FCA 1640.................................................... 10.980, 19.40 ACCC v Visy Paper Pty Ltd [2001] FCA 1075; (2001) 112 FCR 37..................................16.90 ACCC v Westminster Retail Pty Ltd [2005] ATPR 42-084; [2005] FCA 1299.......................................................................................... 14.190, 14.200, 19.260 ACCC v White Top Taxis Ltd [2009] FCA 88; (2009) ATPR 42-273................. 11.420, 16.90, Appendix 3 ACCC v Wizard Mortgage Corp Ltd [2002] FCA 1317; [2008] FCA 1792.....................19.640 ACCC v Woolworths (SA) Pty Ltd [2003] FCA 530; (2003) 198 ALR 417; (2003) ATPR 41-941..................................................................................................19.660, Appendix 3 ACCC v Yazaki Corp (No 2) [2015] FCA 1304.........................10.120, 11.490, 11.810, 19.160, Appendix 4 ACCC v Z-Tek Computer Pty Ltd [1997] FCA 871 (1997) 78 FCR 197; 148 ALR 339; (1997) ATPR 41-580.............................................................. 19.630, 19.640 ACI Operations Pty Ltd (1991) ATPR (Com) 50-108, Re................................................18.380 Ackers v Austcorp International Ltd [2009] FCA 432.......................................................19.30 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169; 56 ALJR 366; 40 ALR 609; (1982) ATPR 40-285............................................................. 9.10, 9.100, 9.120, 9.130, 9.210, 9.210, 15.690 Adamson v New South Wales Rugby League Ltd [1991] FCA 9; 100 ALR 479; 27 FCR 535; (1991) ATPR 41-084...................................................................... 18.180 Adamsonv New South Wales Rugby League Ltd [1991] FCA 425; (1991) 27 FCR 535; 100 ALR 479; (1991) ATPR 41-141.......................................... 18.190, 18.200 Addyston Pipe & Steel Co v United States 175 US 211 (1899)........................................12.100 Adelaide Steamship Co v R [1912] HCA 58; (1912) 15 CLR 65........................... 11.50, 12.160 Agsafe Ltd [2002] ATPR (Com) 50-290, Re........................................................... Appendix 7 Ah Toy J Pty Ltd v Thiess Toyota Pty Ltd (1980) 30 ALR 271......................................... 7.130 Ahlström Osakeyhtiö v Commission [1993] ECR I-1307................................................10.270 Air New Zealand Ltd v ACCC [2017] HCA 21; (2017) 91 ALJR 648................ 11.290, 18.120 Alaska Airlines Inc v United Airlines Inc [1991] 2 Trade Cases 69, 624..........................17.50 Albrecht v Herald Co 390 US 145 (1968)......................................................14.10, 14.20, 14.40
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Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129....................................................................................... 2.240 American Channel v Time-Warner Cable Inc [2007-1] Trade Cases 75, 559....................17.80 American Tobacco Co v United States 328 US 781 (1946).............................................10.290 Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; 1 ALR 385; (1973) ATPR 40-001............................................ 18.160 Apartment Source of Pennsylvania LP v Philadelphia Newspapers Inc [1999-1] Trade Cases P 72, 502....................................................................................17.60 Apco a Full Court described this at (2005) 159 FCR 452................................................10.160 Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2005) ATPR 42-078............................................. 4.580, 10.140, 10.160, 10.170, 11.310, 11.360 Arcadi v Colonial Mutual Life Assurance Society Ltd [1984] FCA 184; (1984) ATPR 40-473..................................................................................................19.460 Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; 94 ALR 719; (1990) ATPR41-015...................................................................................19.430 Arnotts Ltd v Trade Practices Commission [1990] FCA 473; (1990) 24 FCR 313; 97 ALR 555; ( [1990) ATPR 41-061......................................3.360, 7.80, 15.260 Ascot Cartage Contractors Pty Ltd v Transport Workers Union [1978] FCA 12; (1978) 32 FLR 148.......................................................................................16.360 ASIC v Adler [2002] NSWSC 483...................................................................................19.580 Association of Fluorocarbon Consumers & Manufacturers Inc, Re [1998] ATPR (Com) 50-266.......................................................................................... Appendix 7 Association of Magazine Publishers of Australia Inc, Re (A91472 25 June 2015)..................................................................................................... Appendix 7 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460; 97 ALR 513; (1991) ATPR 41-069....................... 10.610, 10.640, 10.660, 12.530, 13.320, 13.420, 13.440, 16.210, 16.260 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1991] FCA 158; (1991) 27 FCR 460; 97 ALR 513; (1991) ATPR 41-069.............8.100, 12.320, 12.580 Atlantic Refining Co v Federal Trade Commission 381 US 357 (1965)..........................13.380 Attorney-General (Cth) v Adelaide Steamship Company Ltd (Re Coal Vend) [1913] UKPCHCA 2; (1913) 18 CLR 30........................................ 2.60, 9.10, 12.160 Ausfield Pty Ltd v Leyland Motor Corporation of Australia Ltd (No 2) (1977) 30 FLR 477........................................................................................ 12.260, 16.340 Australasian Meat Industry Employees’ Union v Meat & Allied Trades Federation of Australia [1991] FCA 524; (1991) 32 FCR 318; 104 ALR 199; (1991) ATPR 41-151............................................................................................16.450 Australasian Memory Pty Ltd v Brien [2000] HCA 30 (2000) 200 CLR 270; 74 ALJR 991.......................................................................................................19.530 Australia Meat Holdings Pty Ltd v Trade Practices Commission [1989] FCA 43; (1989) ATPR 40-932...................................................... 3.360, 7.70, 7.180, 15.190 Australian Associated Stock Exchanges [1982] ATPR (Com) 50-049, Re............. Appendix 7 Australian Association of Pathology Practices Inc, Re (1990) 22 FCR 495....................13.270 Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568..................................... 13.340 Australian Beauty Trade Suppliers Ltd v Conference and Exhibition Organisers Pty Ltd [1991] FCA 154; (1991) 29 FCR 68; 99 ALR 474; (1991) ATPR 41-107........................................................................................................9.70 Australian Cargo Terminal Operations Pty Ltd, Re (1997) ATPR (NCC) 70-000...................................................................................17.420, 17.440, 17.450, 17.590 Australian Dental Assn, Re (A91340; 29 October 2013)........................................ Appendix 7 Australian Directors Guild Ltd, Re (A91499 13 August 2015)............................... Appendix 7
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Australian Gas Light Co v ACCC (No 3); [2003] FCA 1525; 137 FCR 317; (2003) ATPR 41-966................................7.20, 8.10, 8.140, 12.770, 15.210, 15.240, 15.260, 15.270, 15.800 Australian Hotels Association, Re (A91513, 19 February 2016)............................ Appendix 7 Australian Medical Association, Re (A91392; 19 March 2014).............................. Appendix 7 Australian National University, Re (A91433; 19 November 2014).......................... Appendix 7 Australian Petroleum Pty Ltd v ACCC [1997] FCA 175; (1997) 73 FCR 75; 143 ALR 381; (1997) ATPR 41-555......................................................................19.670 Australian Rugby Union Ltd v Hospitality Group Pty Ltd [2000] FCA 823; (2000) 173 ALR 702; (2000) ATPR 41-768......................................................... 7.130 Australian Union of Students, Re (1997) 140 FLR 167; 147 ALR 458; (1997) ATPR 43, 953 (41-573)........................................................................17.420, 17.460 Australian Wagering Council Ltd, Collective Bargaining Notification No CB00284, Re (13 February 2014).................................................................. 16.570, 16.610 Australian Wool Innovation Ltd v Newkirk [2005] FCA290; (2005) ATPR 42-053.....................................................................................................8.80, 16.460
B Bailey v Allgas Inc 284 F. 3d 1237 (2002); [2002-1] Trade Cases 73, 607.....................12.430 Ball Memorial Hospital Inc v Mutual Hospital Insurance Inc 784 F 2d 1325 (1986)...... 12.80 Bank of New South Wales v The Commonwealth (Banking Case) [1948] HCA 7; (1948) 76 CLR 1..............................................................................................9.190 Barneys Blu-Crete Pty Ltd v Australian Workers Union [1979] FCA 89; (1979) 43 FLR 463; (1979) ATPR 40-139..................................................................16.360 Barry Wright Corp v ITT Grinnell Corp 724 F 2d 227 (1983)....................................... 12.840 Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334; 73 ALJR 522; (1999) ATPR 42, 714 (41-682)...........................................9.320, 9.330 Baxter Healthcare [2005] FCA 581; (2005) ATPR 42-066................................................13.90 Beech-Nut Nutrition Corp v Gerber Products Co [2003-2] Trade Cases 74, 146............ 12.710 Begbie v State Bank of New South Wales Ltd [1994] ATPR 41, 881 (41-288)................13.320 Bell Atlantic Corporation v Twombly 550 US 1 (2007)..................................... 10.470, 10.810 Berry v Federal Commissioner of Taxation [1953] HCA 70; (1953) 89 CLR 653...........19.660 Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 7 FCR 325; 59 ALR 334; (1985) ATPR 40-565.....................................................................................9.70 BHP Billiton Iron Ore Pty Ltd v NCC [2007] FCAFC 157; (2007) ATPR 42-190 at [163]............................................................................................................17.340 BHP Billiton Iron Ore Pty Ltd v NCC [2008] HCA 45; (2008) 236 CLR 145............... 17.310, 17.330, 17.340, 17.350 B&I Line plc v Sealink Harbours Ltd [1992] 5 CMLR 255................................ 17.100, 17.130 Blue Ribbon Properties Inc v Hardin County [2002-2] Trade Cases P 73, 773................17.60 BMW Australia Ltd v ACCC [2004] FCAFC 167; (2004) 207 ALR 452; (2004) ATPR 42-012..................................................................................................19.550 Bogosian v Gulf Oil Corp 561 F 2d 434 (1977) pp 445-6................................................10.330 Books, Re (1972) 20 FLR 256............................................................................................16.30 Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915............... 4.410, 4.450, 12.290, 12.340, 12.390, 12.410, 12.600, 12.710, 12.740 Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276; 64 ALJR 406; 93 ALR 460; (1990) ATPR 41-033........ 9.90, 9.110, 9.130, 9.340 Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd [1979] HCA 15; (1979) 145 CLR 107; 53 ALJR 452; ; 24 ALR 9; (1979) ATPR 40-106................9.190, 9.340, 9.420, 18.70 © 2018 THOMSON REUTERS
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Bradken Ltd v Norcast SárL [2013] FCAFC 123............................11.500, 11.610, Appendix 4 Bray v F Hoffman-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1; 190 ALR 1; (2002) ATPR 41-865........................................................................................ 9.110 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336; 12 ALJR 100............... 19.160 Brisbane City Council, Re (A91500 8 October 2015)............................................. Appendix 7 British Basic Slag Ltd’s Agreements, Re [1963] 1 WLR 727; [1963] 2 All ER 807....................................................................................................10.80, 11.540 Broadway Delivery Corp v United Parcel Service of America Inc 651 F 2d 122 (1981); [1981-1] Trade Cases 64, 068...........................................................12.430 Brooke Group Ltd v Brown & Williamson Tobacco Corp 509 US 209 (1993); [1993-1] Trade Cases 70, 277............................................................ 12.710, 12.740 Bropho v Western Australia (1990) 171 CLR 1; 64 ALJR 374; [1990] HCA 24....................................................................................................9.170, 9.420, 18.60 Brown Shoe Co v US 370 US 294 (1962).........................................................................12.620 Buckley v Tutty (1971) 125 CLR 353; 46 ALJR 23; (1972) ALR 370............................. 18.160 Bullock v Federated Furnishing Trades Society of Australasia [1984] FCA 364; (1985) 5 FCR 476; 58 ALR 373; (1985) ATPR 40-505................16.260, 16.280 Bullock v Federated Furnishing Trades Society of Australasia (No 1) [1985] FCA 19; (1985) 5 FCR 464; 60 ALR 235; (1985) ATPR 40-577....................16.260 Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation [1987] FCA 454; (1987) 18 FCR 212; 76 ALR 173; (1988) ATPR 40-835..................9.330 Butt v Tingey [1993] FCA 369 (1993) ATPR (Digest) 46-110...........................................19.50
C Calmao Pty Ltd v Stradbroke Waters Co-owners Co-operative Society Ltd [1989] FCA 407; (1989) 21 FCR 28; 89 ALR 507; (1989) ATPR 40-984...........19.460 Canada Commissioner of Competition v Canada Pipe Co, [2007] 2 FCR 3.... 12.560, 12.640 Canada (Director of Investigation and Research) v Tele-Direct (Publications) Inc (1997) CanLII 11 (CT), 73 CPR (3d) 1........................................ 12.560 Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380..........................19.520 Caribbean Broadcasting System Ltd v Cable & Wireless PLC 148 F 3rd 1080 (1998)...................................................................................................................17.30 Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd [1987] FCA 412; (1987) 16 FCR 351.........................................................19.520 Carter Holt Harvey Building Products Group Ltd v Commerce Commission [2004] UKPC 37........................................................................ 12.80, 12.710 Cason-Merenda v Detriot Medical Center [2012-1] Trade Cases 77, 893.......................11.280 Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395; 61 ALJR 10; 68 ALR 376; (1986) ATPR 40-751...................................................................................... 13.260, 13.310 Catalano Inc v Target Sales Inc [1980-2] Trade Cases 63, 352........................................11.270 Cel-Tech Communications Inc v Los Angeles Cellular Telephone Co [1999-1] Trade Cases 72, 495.................................................................................... 12.590 Chandler v DPP [1964] AC 763; [1962] 3 All ER 142; [1962] 3 WLR 694 (AC)...............................................................................................11.530, 16.170 Charlick Trading Pty Ltd v National Rail Corporation Ltd [1999] FCA 452..................12.740 Chime Communications Pty Ltd (No 2), Re [2009] ACompT 2; (2009) 234 FLR 210..................................................................................................... 6.80, 15.440 Chisholm v Auckland City Council [2001] NZHC 1299; [2002] NZRMA 362................ 9.410
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Cimenteries CBR v Commission (2000) II-00491...........................................................10.280 City of Chanute, Kansas v Williams Natural Gas Co [1990-1] 1 Trade Cases P 68, 967.............................................................................................................17.60 Clarke Memorials of Alabama Inc v SCI Alabama Funeral Services [2014-1] Trade Cases 78, 662.......................................................................................17.80 Clift Food Stores Inc v Kroger Inc [1969] Trade Cases 72, 923......................................12.430 Coe Clerici Logistics SpA v Commission of the European Communities [2003] EUECJ T-52/00............................................................................................... 17.130 Coleman v Gordon M Jenkins & Associates Pty Ltd [1988] FCA 393; (1989) ATPR 40-960..................................................................................................19.460 Commerce Commission v Carter Holt Harvey Building Products Group Ltd [2004] All ER (D) 235 (Jul).................................................................................12.410 Commercial Solvents v European Commission [1974] ECR 223................................... 12.630 Commission of the European Communities v Alrosa Company Ltd [2009] EUECJ C-441/07_O........................................................................................ 17.130 Commission of the European Communities v Anic Partecipazioni SpA Case 49/92 [1999] ECR I-04125 at para 115............................................................. 10.260 Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519................19.590 Commissioners of Inland Revenue v Maple & Co (Paris) Ltd [1908] AC 22.................. 18.180 Commodore Business Machines Pty Ltd v Trade Practices Commission [1990] FCA 77; (1990) 92 ALR 563...........................................................................19.550 Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876................................................... 11.130, 19.100, 19.380 Commonwealth of Australia v Mewett [1997] HCA 29; (1997) 191 CLR 471; 71 ALJR 1102.......................................................................................................9.330 Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; 66 ALJR 123; 104 ALR 1...........................................................................19.440 Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46............................................................................................................19.380 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v ACCC [2007] FCAFC 132; (2007) 162 FCR 466; 242 ALR 643; (2007) ATPR 42-177..................................................................................................10.140, 19.160 Como Investments Pty Ltd (In liq) v Yenald Nominees Pty Ltd [1997] FCA 12 (1997) ATPR41-550.......................................................................................19.420 Compañía española para la fabricación de aceros inoxidables SA (Acerinox) v Commission, Case C-57/02 [2005] ECR I-06689................................10.450 Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968 (1998) 157 ALR 1......................................................................................................... 19.50, 19.70 Conley Publishing Group Ltd v Journal Communications Inc [2003-2] Trade Cases 74, 088....................................................................................................12.720 Connell Construction Co v Plumbers Union 421 US (1975).......................................... 10.1010 Construction Material Producers Assn Inc, Re (A91047; 29 August 2007)........... Appendix 7 Continental Baking Company v United States 281 F 2d 137, 145 (1960)........................10.480 Continental TV Inc v GTE Sylvania Inc 433 US 36 (1977)....................... 13.40, 13.460, 14.70 Cook v Pasminco Ltd [2000] FCA 677; (2000) 99 FCR 548; (2000) ATPR 41, 030 (41-767)........................................................................................................... 13.310 Cool & Sons Pty Ltd v O’Brien Glass Industries Ltd [1981] FCA 95 (1981) 35 ALR 445; (1981) ATPR 40-220..................................................................13.100 Cool & Sons Pty Ltd v O’Brien Glass Industries Ltd (No 2) (1981) 40 ALR 88.............19.540 Coöperatieve Vereniging “Suiker Unie” UA v Commission [1976] 1 CMLR 295......... 10.440
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Cornwall Quality Tools Co v CTS Co 446 F 2d 825 (1971); [1971] Trade Cases 73, 620..............................................................................................................12.430 Corrections Corp of Australia Pty Ltd v Commonwealth [2000] FCA 1280 (2000) 104 FCR 448; (2000) ATPR 41-787....................................................... 9.240 Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539; 91 ALR 273; (1990) ATPR41-000............................................................. 19.50, 19.70
D Dalrymple Bay Coal Terminal, National Competition Council Recommendation, Re (10 May 2011)......................................................................... 17.470 Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) 64 FLR 238; 44 ALR 173; (1982) 4 ATPR 40-315........................8.60, 13.150, Appendix 5 Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388; (2006) 236 ALR 322; (2007) ATPR 42-134............................................19.490 Davids Holdings Pty Ltd v Attorney-General (Cth) [1994] FCA 1039; (1994) 49 FCR 211; 121 ALR 241; (1994) ATPR 41-304...................................7.180, 7.190 Deutche Telecom v European Commission (European Commission, C-280/08, 14 October 2010)...................................................................................... 12.630 Devenish v Jewel Food Stores Pty Ltd [1991] HCA 7 (1991) 172 CLR 32; 65 ALJR 262; 99 ALR 275; (1991) ATPR 41-098............................................8.80, 16.460 Director of Consumer Affairs Victoria v Dimmeys Stores Pty Ltd [2013] FCA 1371; (2013) 308 ALR 296; (2013) ATPR 42-457.............................................19.590 Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; [1992] ATPR 41-165.............................................10.410, 10.640, 10.690, 10.700, 12.340, 12.400, 12.520, 12.530, 13.420, 15.260, 16.210, 16.230, Appendix 3 Dowling v Dalgety Australia Ltd [2004] FCA 1678; (2004) 141 FCR 183...................... 10.410 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199. Note comment in ACCC v Kaye [2004] FCA 1363.............................................................. 19.70 Dr Miles Medical Company v John D Park & Sons Company 220 US 373 (1911)..............................................................................2.160, 13.40, 14.20, 14.100 Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169 (2004) ATPR 42-013; [2004] FCAFC 169.............................................................................19.670 Ducret v Colourshot Pty Ltd (1981) 35 ALR 503; (1981) ATPR 40-196......................... 19.310 Duke Eastern Gas Pipeline Pty Ltd, Re [2001] ACompT 2 (2001) 162 FLR 1; (2000) ATPR 41-821......................................................................................17.380 Dunn v Australian Society of CPAs [1996] FCA 1213; (1996) ATPR 41-461...................16.90
E E v Australian Red Cross Society (1991) 31 FCR 299; 105 ALR 53; [1992] ATPR 40, 115 (41-156)...............................................................................................13.320 E v Australian Red Cross Society [1991] FCA 20; (1991) 27 FCR 310; 99 ALR 601; (1991) ATPR 41-085......................................................................................9.70 Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991) 30 FCR 385; 103 ALR 41; (1991) ATPR 41-128............................ 8.80, 10.40, 12.590, 16.120 Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; (1992) ATPR 41-167................. 10.640, 12.280, 12.400, 12.520, 12.530, 12.720
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Eastern States Retail Lumber Dealers’ Association v United States 234 US 600 (1914).............................................................................................................10.320 Eastman Kodak Co v Image Technical Services Inc 504 US 451 (1992); [1992-1] Trade Cases 69, 839.......................................................................... 10.530, 11.30, 12.540, 13.40 Eisai Inc v Sanofi Aventis US LLC (US Court of Appeals, 4 May 2016).......................12.620 Energex Ltd v Alstrom Australia Ltd [2005] FCAFC 215; (2005) ATPR 42-086.......... 19.470 Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 4 FCR 450 (1984) 57 ALR 167; (1985) ATPR 40-507.............................................. 19.440, 19.480 Eurofix-Bauco v Hilti Case COMP/30.787 & 31.488 (1987)........................................... 12.630 European Night Services Ltd (ENS) v Commission of the European Communities, European Commission, Case Nos T-374/94, T-375/94, T-384/94 and T-388/94 (15 September 1998)............................................................. 17.130 Europemballage Corp and Continental Can Co Inc v Commission of the European Communities [1978] ECR 215...................................................... 12.140, 12.450
F F Sharkey and Co Pty Ltd v Fisher [1980] FCA 146; (1980) 50 FLR 130; 33 ALR 184; (1980) ATPR 40-185.............................................................................. 9.340 FAI General Insurance Co Ltd v Workcover Corporation (SA) [1998] FCA 1438; (1998) ATPR 41-639.................................................................................. 9.340 Fasold v Roberts [1997] FCA 439; (1997) 70 FCR 489; 145 ALR 548; (1997) ATPR 41-561.......................................................................................................9.70 Federal Commissioner of Taxation v Lutovi Investments Pty Ltd [1978] HCA 55; (1978) 140 CLR 434.................................................................................... 10.110 Federal Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 150 CLR 355........................................................................................9.210 Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570; 57 ALJR 317; 46 ALR 41; (1983) ATPR 40-350............................................................................. 9.60, 9.150 Fenech v Sterling [1983] FCA 256; (1983) 79 FLR 244; 51 ALR 205; (1983) ATPR 40-413...................................................................................................19.460 Festival Industries Pty Ltd v Mikasa (NSW) Pty Ltd (1971) 18 FLR 260.................... 14.200, 14.460 Firth v Mineral Springs Pty Ltd (1983) 65 FLR 213, (1983) ATPR 40-339....................19.430 Flat Glass Antitrust Litigation, In Re, 385 F.3d 350 (2004) ..............................................10.90 Fleischman v Albany Medical Center 728 F Supp 2d 191 (2010); [2010-2] Trade Cases 77, 177.......................................................................... 10.860, 10.880, 11.280 Flight Centre Ltd v ACCC [2015] FCAFC 104......................................................... 7.90, 7.160 Ford Motor Company of Australia Ltd, Re (1977) 32 FLR 65; (1977) ATPR 40-043........................................................................................... 8.50, 8.60, 13.170 Fortescue Metals Group Ltd, Re [2010] ACompT 2............................................17.370, 17.430 Foster v ACCC [2006] FCAFC 21 (2006) 149 FCR 135; (2006) 28 ATPR 42-105; [2006] FCAFC 21..........................................................................................19.530
G Gallagher v Pioneer Concrete (NSW) Pty Ltd [1993] FCA 59; (1993) 113 ALR 159;; (1993) ATPR 41-216..................................................................................11.450 Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1; 60 ALJR 239; 63 ALR 600; (1986) ATPR 40-666................... 19.430, 19.450
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General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164; 117 ALR 629; (1993) ATPR 41-274.......................................................................................... 12.520 Georges River Council, Re (A91530, 14 September 2016)..................................... Appendix 7 Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749............................. 11.720 Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; 59 ALJR 461; 58 ALR 641................................................................................................ 19.50, 19.70 Gladstone Ports Corp Ltd, Re (A91209; 21 April 2010)......................................... Appendix 7 Glaxo New Zealand Ltd v Attorney-General [1990] NZHC 155...................................... 9.400 Glencore Coal Pty Ltd, Re [2016] ACompT 6.................................................................. 17.370 Gordon v Microsoft Corporation [2002-2] Trade Cases P 73, 730....................................17.60 Gottrup-Klim v Dansk, Case C-250/92 [1994] ECR I-5641...............................12.420, 12.430 Government Insurance Office (NSW) v Cox (1976) 50 ALJR 559; 9 ALR 194..................................................................................................................19.440 Graphic Products Distributors Inc v ITEK Corp 717 F 2d 1560 (1983) [1983-2] Trade Cases 65, 670........................................................................12.430, 13.450
H Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; 63 ALJR 80; 82 ALR 626; (1988) ATPR 40-923.............................................................................. 19.70 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357 (1999) ATPR 41-687.........................19.420 Hart Productions Inc v Greater Cincinnati Convention and Visitors Bureau [1990-2] Trade Cases P 69, 233...........................................................17.60, 17.420 Hawthorn Pty Ltd v State Bank of South Australia [1993] FCA 9; (1993) 40 FCR 137; (1993)ATPR 41-219................................................................................ 9.340 Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR40-674.................... 14.210, 14.280, 14.300, 14.330, 19.40, 19.60, 19.160 Hecht v Pro-Football, Inc [1977-2] Trade Cases P 61, 773....................................17.60, 17.420 Helix Milling Co v Terminal Flour Mills Co [1975-2] Trade Cases P 60, 554.................17.60 Henderson v Pioneer Homes Pty Ltd (No 2) (1980) 43 FLR 276; 29 ALR 597; [1980] ATPR 42, 240. (40-159)...........................................................................13.320 Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; 75 ALJR 1410; 182 ALR 37; (2001) ATPR 40-841.................................................................19.420, 19.510 Herald & Weekly Times Ltd, Re (1976) TPRS 108.98....................................................... 5.50 Hoffmann-La Roche v European Commission [1979] ECR 461.......................12.140, 12.630, 12.800 Holcim (Australia) Pty Ltd, Re (A91377, 18 December 2013)................................ Appendix 7 Homemakers South Ltd, Re (A91284; 12 April 2012)............................................ Appendix 7 Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1....................................9.210 Hospital Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (t/a Health Australia) (1988) ATPR40-834..............................19.620 Howard Smith Industries Pty Ltd, Re (1977) 28 FLR 385; (1977) ATPR 40-023......... 18.400 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54 (2004) 217 CLR 640; 79 ALJR 190; 211 ALR 79; (2004) ATPR 42-030................................................................................................. 19.430, 19.450 Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330....................................................... 2.50, 2.130, 2.210, 2.230, 2.240, 9.30, 9.100 Hughes v Western Australian Cricket Association Inc [1986] FCA 357; (1986) 19 FCR 10; 69 ALR 660; (1986) ATPR 40-736 at [104]...................10.620, 12.580 Hungier v Grace [1972] HCA 42; (1972) 127 CLR 210......................................................9.210
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I I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; 76 ALJR 1461; 192 ALR 1; (2002) ATPR 41-894.....................................................................................19.410, 19.420, 19.500 ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248; 110 ALR 47; (1992) ATPR 41-185.................................................................................................19.530, 19.540, 19.550 Imperial Chemical Industries Ltd v EU European Court of Justice Case 48/69 [1972] ECR 619.................................................................................... 10.270, 10.420 Imperial Chemical Industries Ltd v European Commission (European Commission, T-66/01, 25 June 2010)........................................................................ 12.550 IMS Health GmbH & Co v NDC Health GmbH & Co [2004] All ER (EC) 813, [2004] ECDR 23, [2004] EUECJ C-418/01, Case C-418/01, [2004] 4 CMLR 28, [2004] ECR I-5039.................................................................... 17.100 Industrial Enterprises Pty Ltd v Federated Storemen and Packers Union of Australia (1979) ATPR 40-100...............................................................................16.460 Inglis v Commonwealth Trading Bank of Australia [1969] HCA 44; (1969) 119 CLR 334; 43 ALJR 330; (1970) ALR 241..................................................9.190 Integrated Education Software Ltd v Attorney-General [2012] NZHC 837...................... 9.410 Inter-County Title Co v First American Title Co of Nevada [2003-1] Trade Cases P 74, 032...................................................................................................17.60 Interstate Circuit, Inc v United States 306 US 208 (1939).................................. 10.310, 10.320 IRAF Pty Ltd v Graham [1982] 1 NSWLR 419; (1982) 59 FLR 115; 41 ALR 209; (1982) ATPR 40-281................................................................................. 18.170
J J McPhee & Son (Aust) Pty Ltd v ACCC (2000) 172 ALR 532; [2000] ATPR 40, 881 (41-758); [2000] FCA 365............................10.600, 10.680, 11.570, 13.420, 16.140, 19.190, 19.230 Jacob Blinder & Sons Inc v Gerber Products Company (In Re Baby Food Antitrust Litigation) 166 F 3d 112 (1999)...................................................................10.870 James v ANZ Banking Group Ltd (1986) 64 ALR 347; (1986) ATPR (Digest) 46-005..........................................................................................................19.460 Jamestown Glass Service v Pilkington Plc (In Re Flat Glass Antitrust Litigation) 385 F 3d 350 (2004)..................................................................................10.870 J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) [1992] FCA 436.....................................................................16.450 Jellyn Pty Ltd v State Bank of South Australia [1996] 1 Qd R 271; (1995) 119 FLR 59.................................................................................................................. 9.340 Jet Fuel Supply at Sydney Airport, Re (10 May 2012).....................................................17.590 Jewel Food Stores Pty Ltd v Amalgamated Milk Vendors Assn Inc [1989] FCA 479; (1989) 24 FCR 127; 91 ALR 397; (1990) ATPR 40-997...........................16.470 Jim Walter Corporation v Federal Trade Commission 625 F 2d 676 (1980).................. 15.200 JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237; (1993) ATPR 41-257........................... 19.410 John Dee (Export) Pty Ltd, Re (1989) 11 ATPR 40-938......................................................7.20 John Deere Ltd v European Commission [1994] EUECJ T-35/92 (27 October 1994).......................................................................................................10.850 John S Hayes & Assocs Pty Ltd v Kimberley-Clark Australia Pty Ltd [1994] ATPR 41-318........................................................................................... Appendix 5 Jones v Schiffmann [1971] HCA 52 (1971) 124 CLR 303; 45 ALJR 653........................19.440
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Jools, Re [2006] ACompT 5; (2006) 233 ALR 115; (2006) ATPR 42-122..................... 18.400 JS McMillan Pty Ltd v Commonwealth [1997] FCA 593; (1997) 77 FCR 337; 147 ALR 419; [1997] ATPR (Digest) 46-175.....................9.210, 9.240, 9.310
K Kadkhudayan v WD & HO Wills (Aust) Ltd [2002] FCAFC 110 (2002) ATPR 41-874................................................................................................. 14.360, 14.370 Kam Nominees Pty Ltd v Australian Guarantee Corp Ltd (1994) 51 FCR 338; 123 ALR 711; [1994] ATPR 42, 288 (41-325)....................................................13.370 Karedis Enterprises Pty Ltd v Antoniou [1995] FCA 1356; (1995) 59 FCR 35; 137 ALR 544; (1995) ATPR 41-427..................................................................... 19.470 Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1988] FCA 60; (1988) ATPR 40-853....................................................................................19.460 Keith Russell Simplicity Funerals Pty Ltd v Cremation Society of Australia (ACT) Ltd [1982] FCA 27; (1982) 57 FLR 472; 40 ALR 125; (1982) ATPR 40-273...................................................................................................16.480 King v GIO Australia Holdings Ltd ; [2001] FCA 308 (2001)184 ALR 98............ 19.50, 19.70 Kolon Industries Inc v DuPont De Nemours & Co [2014-1] Trade Cases 78, 727...........................................................................................................10.530, 12.540 Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134; 22 ALR 621; [1978] ATPR 17, 294 (40-094)........................ 9.70, 9.80, 9.90, 13.200, 13.230, 13.400, 18.110
L L Grollo& Co Pty Ltd v Nu-Statt Decorating Pty Ltd [1978] FCA 33; (1978) 34 FLR 81; (1978) 2 ATPR 40-086................................................................. 10.110 Launceston Corporation v Hydro-Electric Commission [1959] HCA 12; (1959) 100 CLR 654.....................................................................................................9.190 Laurel Sand & Gravel Inc v CSX Transportation Inc [1991-1] Trade Cases P 69, 312......17.60 Leegin Creative Leather Products Inc v PSKS Inc 551 US 877 (2007); [2007-1] Trade Cases 75, 753......................................................................................14.100 Leegin Creative Leather Products Inc v SKSInc 551 US 877 (2007)............................... 4.690 Leon Laidley Pty Ltd v Transport Workers Union (1980) ATPR 40-147........................16.370 Lindner v Murdock’s Garage [1950] HCA 48; (1950) 83 CLR 628................................. 18.210 Livestock Transporters’ Assn of Queensland Inc, Re [1986] ATPR (Com) 50-117................................................................................................................. Appendix 7 Locked Coil Ropemakers’ Association’s Agreement, Re [1965] 1 All ER 382; [1965] 1 WLR 121; (1964) LP 5 RP 146..............................................................16.30 Lorain Journal Co v United States 343 US 143 (1951).......................................................17.40 Loren Enterprises Pty Ltd v The Shell Company of Australia Ltd [2001] FCA 754 at [32]..........................................................................................................11.270 Lowe v The Queen [1984] HCA 46; (1984) 154 CLR 606............................................... 19.310 Luckins v Highway Motel (Carnarvon) Pty Ltd [1975] HCA 50; (1975) 133 CLR 164.................................................................................................................9.210
M MacLean v Shell Chemical (Australia) Pty Ltd [1984] FCA 157; (1984) 2 FCR 593; (1984) ATPR 40-462.....................................................................12.260, 19.550
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Macquarie Generation and AGL Energy Ltd, Re [2014] ACompT 1............................... 18.410 March E v MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506; 65 ALJR 335; 99 ALR 423..............................................................................................19.420 Marina Holdings Ltd (in rec) v Thames-Coromandel District Council [2010] NZHC 1561....................................................................................................... 9.410 Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd [1987] FCA 282; (1987) 75 ALR 581; (1987) ATPR 440-809............................................................... 7.130, 12.520 Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665....................................................................... 19.410, 19.430, 19.450, 19.500, 19.510 McCarthy v Australian Rough Riders Association Inc [1987] FCA 391; (1988) ATPR 40-836......................................................................................................9.70 McCarthy v Australian Rough Riders Association Inc [1988] ATPR 40-836........ Appendix 3 McDonald v The Queen [1994] FCA 956; (1994) 48 FCR 555........................................19.320 MCI Communications Corp v American Telephone and Telegraph Co [1982-3] Trade Cases P 65, 137....................................................................................17.60 Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1; 205 ALR 402; (2003) ATPR 41-971.............................................. 19.70 Medicines Australia Inc, Re [2007] ACompT 4............................................................... 18.410 Medicines Australia Ltd, Re (A91436 24 April 2015)............................................ Appendix 7 Melbourne City Council, Re (A91532, 21 July 2016).............................................. Appendix 7 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [1989] HCA 6; (1989) 167 CLR 177................................................................................................... 12.600 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805; [2001] HCA 13...........10.640, 12.350, 12.370, 12.390, 12.530, 12.760, 13.450, 19.520, 19.550 Merci Convenzionali Porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR 5889......................................................................................................... 17.130 Michael Edgley International Pty Ltd v Ashton’s Nominees Pty Ltd (1979) 38 FLR 135; 26 ALR 419................................................................................13.320 Mid Density Development Pty Ltd v Rockdale Municipal Council [1992] FCA 634; (1992) 39 FCR 579.......................................................................................9.230 Midwest Gas Services Inc v Indiana Gas Co Inc [2003-1] Trade Cases P 73, 935...........17.60 Mikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617; 47 ALJR 14; [1972-73] ALR 921.............................................................14.30, 14.400 Mill v The Queen (1988) 166 CLR 59.............................................................................. 19.310 Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879; AGL v ACCC (No 3) [2003] FCA 1525................................7.140, 10.720, 13.390, 16.140, 19.520, Appendix 5 Morphett Arms Hotel Pty Ltd v TPC (1980) 30 ALR 88; (1980) ATPR 40-157.............10.150 Morris Communications Corp v PGA Tour Inc [2003-1] Trade Cases P 73, 972.............17.60 Mortgage & Finance Assn of Australia, Re (A91396; 21 May 2014)..................... Appendix 7 Motion Picture Patents Co v Universal Film Manufacturing Co 243 US 502 (1917); United Shoe Machinery Corp v United States 258 US 451 (1922); Times-Picayune Publishing Co v United States 345 US 594 (1953)...............13.20 Munchies Management Pty Ltd v Belperio [1988] FCA 413 (1989) 58 FCR 274; 84 ALR 700; (1989) ATPR40-926............................................................. 19.410 Murphy v Overton Investments Pty Ltd [2001] FCA 500 (2001) 112 FCR 182; (2001) ATPR 41-189............................................................................................ 19.470
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Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388; 78 ALJR 324; 204 ALR 26; (2004) ATPR 41-973................19.410, 19.430, 19.450, 19.510 Musca v Astle Corp Pty Ltd [1988] FCA 4 (1988) 80 ALR 251; (1988) ATPR40-855............................................................................................................... 19.410 Mutual Acceptance Co Ltd v Federal Commissioner of Taxation [1944] HCA 34; (1994) 69 CLR 389......................................................................................11.270
N NARTA International Pty Ltd, Re (A91335; 11 April 2013)................................... Appendix 7 Nashua Australia Pty Ltd Application Nos C13827-C13834, A3956-A3961, Re (1975) TPRS 105.76......................................................................13.170 National Library of Australia, Re (A91012; 17 January 2007)............................... Appendix 7 National Management Services (Australia) Pty Ltd v Commonwealth (1990) 9 BCL 190........................................................................................................ 9.260 National Sulphuric Acid Association Ltd’s Agreement (No 1), Re (1963) LR 2 RP 169; [1963] 1 WLR 848; [1963] 3 All ER 73................................................16.30 Nauru Local Government Council (t/as Nauru Pacific Line) v Australian Shipping Officers Association [1978] FCA 37; (1978) 34 FLR 281; 27 ALR 535; (1978) ATPR 40-087................................................................................... 9.110 NBN Co Ltd, Re (A91479 28 August 2015)............................................................ Appendix 7 Neat Domestic Trading Pty Ltd v AWB Ltd [2001] FCA 1178; (2001) 114 FCR 1; (2001) ATPR 41-836........................................................................................18.90 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170; 110 ALR 449....................................................................................... 19.160 Net Book Agreement (No 1), Re [1962] 1 WLR 1347; [1962] 3 All ER 751.....................14.30 Net Book Agreement, Re 1957 [1962] LR 3 RP 246.........................................................16.30 New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54; (2003) 57 NSWLR 1...............................................................................................9.290 New Zealand Medical Association, Re (1988) 7 NZAR 407............................................ 9.400 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; (1996) ATPR 41-521................................................................................................... 16.140 News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563; 77 ALJR 151; 200 ALR 157; [2003] ATPR 41-943; [2003] HCA 45............................................ 10.530, 10.540, 10.560, 10.570, 10.580, 10.600, 10.630, 10.670, 11.530, 13.410, 13.420, 16.90, 16.170, 16.180, 16.190, 16.260 Nixon v Philip Morris (Australia) Ltd [1999] FCA 1107 (1999) 95 FCR 453; 165 ALR 515; (1999) ATPR41-707..................................................................... 19.410 Norcast SárL v Bradken Ltd (No 2) [2013] FCA 235; (2013) 219 FCR 14...................................................... 11.500, 11.560, 11.610, 16.160, Appendix 4 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535............ 18.160 Northern Pacific Railroad Co v United States 356 US 1 (1958)........................................13.40 Northern Securities Co v United States 193 US 197 (1904)............................................12.100 Novell Inc v Microsoft Corporation [2013–2] Trade Cases 78, 523...................12.430, 12.620 NSW Minerals Council Ltd, Re (1997) ATPR (NCC) 70-005................17.420, 17.450, 17.470 NT Power Generation Pty Ltd v Power & Water Authority [2001] FCA 334; (2001) 184 ALR 481; [2001] ATPR 41-814.................................................. 9.310 NT Power Generation Pty Ltd v Power and Water Authority [2002] FCAFC 302; (2002) 122 FCR 399...............................................................................9.220
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NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at140-141; 79 ALJR 1, 210 ALR 312; [2004] ATPR 42-021; [2004] HCA 48.......................................................................... 9.220, 9.310, 12.70, 12.410, 12.540, 12.590, 19.520 NW Frozen Foods Pty Ltd v ACCC [1996] FCA 1134; (1996) 71 FCR 285; 141 ALR 640; (1997) ATPR 41-546.................................................. 19.170, 19.270, 19.310
O O’Brien Glass Industries Ltd v Cool & Sons Pty Ltd (1983) 77 FLR 441; 48 ALR 625; [1983] ATPR 44, 449 (40-376).............................................................13.420 OD Transport Pty Ltd v WA Government Railways Commission [1987] FCA 76 (1986) 13 FCR 270; 71 ALR 190; (1987) ATPR40-761................................19.530 Olympia Equipment Leasing Co v Western Union Telegraph Co [1986]; Trade Cases 67, 189....................................................................................................12.610 O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188 (2002) 122 FCR 455; (2002) ATPR 41-882................................................................19.480 Orion Pet Products Pty Ltd v RSPCA (Vic) Inc [2002] FCA 860; (2002) 120 FCR 191; (2002) ATPR 46-223...............................................................................9.70 Oscar Bronner GmbH & Co v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co [1998] ECR I-7791, [1998] EUECJ C-7/97.............................. 12.630, 17.100 Otter Tail Power Co v US 410 US 366 (1973)..........................................................17.40, 17.70 Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) 4 ATPR 40-298. On appeal (1982) 66 FLR 120; 44 ALR 667; (1982) 4 ATPR 40-327.......................................................................................8.60, 13.130
P P Commission v Anic, Case C-49/92, [1999] ECR I-4125.................................10.280, 10.370 P Hüls v Commission, Case 199/92 [1985] 2 CMLR 108................................................10.450 P Hüls v Commission, Case C-199/92 [1999] ECR I-4287................................. 10.370, 10.450 P Sarrió v Commission, Case C-291/98 [2000] ECR I-9991...........................................10.280 Paladin Associates Inc v Montana Power Co [2003-1] Trade Cases P 74, 029.................17.60 Paramedical Services Pty Ltd v Ambulance Service of New South Wales [1999] FCA 548............................................................................................................9.250 Parramatta Tourist Services Pty Ltd v SWB Family Credit Union Ltd (1979) 24 ALR 273; (1979) ATPR 40-102.........................................................9.90, 13.320 Pascoe v Commissioner of Taxation (Cth) (1956) 30 ALJR 402; 11 ATD 108; 30 ALJ 402............................................................................................ 13.420, 16.210 Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 (ALJR)....................12.530 Paul Dainty Corp Pty Ltd v National Tennis Centre Trust ( [1989] FCA 173; 1989) ATPR 40-951 . On appeal [1989] FCA 173........................ 13.180, 13.260 Paul Dainty Corp Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495; 94 ALR 225; (1990) ATPR 51, 442 (41-029)......................................... 13.270, 18.130 Pereira v DPP [1988] HCA 57; (1989) 63 ALJR 1; 82 ALR 217............................. 19.50, 19.70 Peter Williamson Pty Ltd v Capitol Motors Ltd [1982] FCA 79 (1982) 61 FLR 257; 41 ALR 613; (1982) ATPR40-291............14.210, 14.400, 14.410, 14.460, 19.160 Peters American Delicacy Co Ltd v Patricia’s Chocolates and Candies Pty Ltd (1947) 77 CLR 574; 21 ALJ 281.................................................................... 18.160
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Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126; 75 ALJR 1385; (2001) ATPR 41-830......................................................................... 18.160 Petersville Ltd v Peters (WA) Ltd [1999] FCA 5 (1999) 160 ALR 359; (1999) ATPR 41-674................................................................................................... 18.160 Pevely Dairy Co v United States St Louis Dairy Co [1949] USCA8 6; 178 F 2d 363...............................................................................................................10.480 Pittsburg County Rural Water District No 7 v City of McAlester [2003-2] Trade Cases P 74, 183...................................................................................................17.60 Polyurethane Foam Antitrust Litigation [2015-1], In Re; Trade Cases 79, 070...........................................................................................................................10.90 Pont Data Australia Pty Ltd v ASX Operations Pty Ltd [1990] FCA 30; (1990) 21 FCR 385; 93 ALR 523; (1990) ATPR 41-007...........................................19.520, Appendix 3 Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124..................................................................................................... 17.370 Post Danmark A/S v Konkurrenceradet (European Commission, C-23/14, 6 October 2015)......................................................................................................... 12.550 Postiglione v The Queen [1997] HCA 26 (1997) 189 CLR 295; (1997) 145 ALR 408; (1997) 71 ALJR 875.................................................................................. 19.310 Powercor Australia Ltd, Re (A91393, 9 April 2014)............................................... Appendix 7 Province of Bombay v Municipal Corporation of the City of Bombay [1947] AC 58............................................................................................9.170, 9.420, 18.60 Pye Industries Sales Pty Ltd v Trade Practices Commission (1979) ATPR 40-124..............................................................................................................14.220
Q Qantas Airways Ltd, Re [2004] ACompT 9; (2004) ATPR 42-027; (2005) ATPR 42-065.....................................................................6.30, 6.60, 6.160, 18.400, 18.410 Quadramain Pty Ltd v Sevastapol Investments Pty Ltd [1976] HCA 10; (1976) 133 CLR 390.....................................................................................................10.50 Queensland Co-op Milling Assn Ltd, Re (1976) 25 FLR 169; 8 ALR 481; (1976) ATPR 40-012.............................................. 7.60, 7.220, 7.240, 7.250, 7.260, 18.370 Queensland Independent Wholesalers Ltd, Re (1995) 132 ALR 225; (1995) ATPR 41-438.........................................................................................7.100, 18.410 Queensland Rail Network, Re (19 January 2011)............................................................. 17.510 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) ATPR 40-801............................................................................................................. 12.600 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1987] FCA 496; (1987) 17 FCR 211; (1988) ATPR 40-841 (Federal Court) [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 (High Court)............................................................................ 17.140, 17.150 Queensland Wire Industries Pty Ltd v BHP Co Ltd (1988) ATPR 40-841.......................17.30 Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925................................................................3.360, 7.30, 7.60, 7.70, 7.100, 7.130, 7.260, 10.640, 12.70, 12.80, 12.340, 12.350, 12.360, 12.390, 12.400, 12.510, 12.520, 12.530, 12.600, 12.660, 12.740, 15.250, 15.260, 15.570 Quinlivan v ACCC [2004] FCAFC 175 (2004) ATPR 42-010............................. 19.50, 19.310
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R R v Associated Northern Collieries [1911] HCA 73; 14 CLR 387 ..........................2.50, 10.30, 10.180, 11.50 R v Australian Industrial Court; Ex parte CLM Holdings Pty Ltd [1977] HCA 6; (1977) 136 CLR 235; 51 ALJR 362; 13 ALR 273; [1977] ATPR 17, 292 (40-017).................................................................................... 9.130, 15.690 R v Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd [1978] HCA 60; (1978) 142 CLR 113; 53 ALJR 238; 23 ALR 69.......................19.520 R v Federal Court of Australia; Ex parte WA National Football League (Adamson) [1979] HCA 6; (1979) 143 CLR 190; 53 ALJR 273.....................................9.40 R v Industrial Court; Ex Parte CLM Holdings Pty Ltd [1977] HCA 6; (1977) 136 CLR 235..................................................................................................... 9.110 R v Tiddy [1969] SASR 575.............................................................................................. 19.310 R v Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533; 48 ALJR 26; 2 ALR 371.....................9.40, 9.30, 9.70, 9.190 R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) HCA 8; (1970) 123 CLR 361............................................................................ 2.200 Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission of the European CommunitiesEuropean Commission, Case Nos 241/91 P and C-242/91 P (6 April 1995).............................. 17.130 Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206 (1982) 62 FLR 437; 44 ALR 557; (1982) ATPR 40-318.................................. 8.60, 11.330, 12.380 Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1983] FCA 140; (1983) 68 FLR 70; 48 ALR 361; (1983) ATPR 40-367..............................................11.310, 11.350 Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1; 287ALR 437...................19.500 Rail Access Corp v NSW Minerals Council Ltd [1998] FCA 1266; (1998) 87 FCR 517; 158 ALR 323; (1998) ATPR 41-663...................................................... 17.310 Redfern v Dunlop Rubber Australia Ltd [1964] HCA 9; (1964) 110 CLR 194; 37 ALJR 413; [1964] ALR 618.............................................................................2.170 Rentokil Pty Ltd v Lee (1995) 66 SASR 301; (1996) ATPR 41-451................................ 18.210 Re Queensland Cooperative Milling Association Ltd (1976) 25 FLR 169; 8 ALR 481, ATPR 41-438............................................................................................8.140 RG Tanna Coal Export Terminal Producers, Re (A91405; 16 April 2014)............. Appendix 7 Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129........................................................19.580 Ron Hodgson (Holdings) Pty Ltd v Westco Motors (Distributors) Pty Ltd (1980) 29 ALR 307; [1980] ATPR 40-143......................................................... Appendix 6 Rural Export & Trading (WA) Pty Ltd v Hahnheuser [2008] FCAFC 156; (2008) 169 FCR 583; 249 ALR 445.......................................................................... 16.440 Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883.......................................................10.160, 10.600, 16.180, 16.230, 19.50, 19.70, 19.260 Rural Press Ltd v ACCC [2003] HCA 75; 216 CLR 53; 78 ALJR 274; (2003) ATPR 41-965; 203 ALR 217; 78 ALJR 274.......................4.450, 8.70, 8.100, 8.110, 10.160, 11.450, 12.600, 12.610, 16.250, 16.280, 19.70, 19.550
S Salvation Army (New South Wales) Property Trust v Commonwealth [2015] FCA 674....................................................................................................................... 9.240 Scandlines Sverige AB v Port of Helsingborg, Case COMP/A.36.568/D3 (2004)........ 12.820
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Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170; 196 ALR 611; (2003) ATPR 41-957; [2003] FCAFC 2................19.180, 19.190, 19.220, 19.310 Sea Containers v Stena Sealink EU Commission, Decision No 94/19/EC (21 December 1993).................................................................................................... 17.100 Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332; (1994) 120 ALR 16; (1994) 68 ALJR 313; (1994) ATPR 41-301.................. 19.430, 19.480 Sent v Jet Corp Australia Pty Ltd [1986] HCA 35; (1986) 160 CLR 540; 60 ALJR 503; 66 ALR 73; (1986) ATPR 40-704.......................................................19.500 Services Sydney Pty Ltd, Re [2005] ACompT 7..............................................................17.380 7-Eleven Stores Pty Ltd (1994) ATPR 41-357, Re............................................................18.370 Seven Network Ltd v ACCC [2004] FCAFC 267; (2004) 140 FCR 170; (2004) ATPR 42-035.................................................................................................. 18.180 Seven Network Ltd v News Ltd [2007] FCA 1062; (2007) ATPR 46-274...................................................................................... 6.140, 10.630, 10.680 Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160; 262 ALR 160..............................................................................................................10.720 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46; 248 ALR 267.................................................................................9.70 Shell Company of Australia Ltd, Re (1975) TPRS 108.1.................................................... 5.50 Simpson Ltd v Hubbards Pty Ltd [1982] FCA 210; (1982) 69 FLR 392 (1982) ATPR 40-319...................................................................................................19.480 Singapore Airlines Ltd v ACCC [2009] FCAFC 136; (2009) 260 ALR 244; (2009) ATPR 42-297.......................................................................................... 18.180 Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 621; (1991) 33 FCR 158; 104 ALR 633; (1992) ATPR 41-159...............7.20, 7.80, 7.190, 12.520 Singapore Airlines Ltd, Re (A91542, 18 November 2016)...................................... Appendix 7 Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20; (2012) ATPR 42-387; (2012) 287 ALR 249...................................................................................................19.230 Sirway Asia Pacific Pty Ltd v Commonwealth of Australia [2002] FCA 1152........................................................................................................... 9.270, 9.310 South Australian Water Infrastructure, Re (22 May 2017).............................................. 17.510 South Sydney District Rugby League Football Club Ltd v News Ltd [1999] FCA 1710; 169 ALR 120 at [61]..................................................................... 16.240 South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824....................................................................... 1.500, 10.490, 10.520, 16.170, 16.180, 16.200, 16.230, 16.240, Appendix 3 Southern Metropolitan Regional Council, Re (A91518, 23 March 2016)............... Appendix 7 SPAR Licensing Pty Ltd v MIS QLD Pty Ltd (No 2) [2012] FCA 1116...............7.160, 16.130 Specialised Container Transport, Re (1997) ATPR (NCC) 70-004........17.310, 17.420, 17.450 Specialised Container Transport, Re, No 2 (1997) ATPR (NCC) 70-006....................... 17.420 SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; 80 ALJR 1190; 228 ALR 417; [2006] ATPR 42-118; [2006] HCA 31..................13.320, Appendix 5 St Lukes Health Insurance v MBF of AustraliaLtd [1995] FCA 1314; (1995) ATPR 41-428...................................................................................................19.620 Standard Oil Co of New Jersey v United States 221 US 1 (1911)....................... 12.110, 12.210 State Electricity Commission (Vic) v City of South Melbourne [1968] HCA 49; (1968) 118 CLR 504......................................................................................9.190 State Government Insurance Corporation v GIO (NSW) [1991] FCA 121; (1991) 28 FCR 511; 101 ALR 259; (1991) ATPR 41-110..................9.70, 9.90, 9.130, 9.340 State of Illinois; Ex rel Burris v Panhandle Eastern Pipe Line Co [1991–1] Trade Cases P 69, 455...................................................................................................17.60 State Oil Co v Khan 522 US 3 (1997)...........................................................14.10, 14.20, 14.40
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State Superannuation Board v Trade Practices Commission [1982] FCA 53; (1982) 60 FLR 165; 41 ALR 279; (1982) ATPR 40-282........................................ 9.340 State Superannuation Board v Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282; 57 ALJR 89.........................................................9.10, 9.50, 9.190 Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35; [1993] ATPR 41, 419 (41-255)..........................13.360, Appendix 3 Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40-490..........................................19.430 Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38; (2000) ATPR 41-752...................................................................8.10, 8.90, Appendix 3 Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607; (1998) ATPR 41-657.................................................. 10.690, 16.140, 16.230 Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40; (1971) 124 CLR 468; 37 ALJR 413; [1964] ALR 618................................. 2.240, 2.250, 9.20, 9.170, 12.180 Suatu Holdings Pty Ltd v Australian Postal Commission [1989] FCA 60; (1989) 86 ALR 532...................................................................................................... 9.300 Suiker Unie v Commission [1975] ECR 1663..................................................................10.270 Suncorp-Metway Ltd, Re (A91508; 1 October 2015)............................................. Appendix 7 Superannuation Fund Investment Trust v Commissioner of Stamps (SA) [1979] HCA 34; (1979) 145 CLR 330; 53 ALJR 614; 10 ATR 97................................9.190 SWB Family Credit Union v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445; 32 ALR 365; [1980] ATPR 40-180.......................................................13.350 Sydney Airport Corp Ltd v Australian Competition Tribunal [2006] FCAFC 146; (2006) 155 FCR 124................................................................ 17.440, 17.590 Sydney International Airport, Re [2000] ACompT 1 (2000) 156 FLR 10; (2000) ATPR 41-754.................................................. 17.310, 17.330, 17.370, 17.420, 17.450 Sykes v Reserve Bank of Australia (1997) 151 ALR 579; [1998] ATPR 40, 609 (41-608)................................................................................................................13.320 Synavant Australia Pty Ltd v Harris [2001] FCA 1517.................................................... 18.210
T Tasmanian Farmers and Graziers Assn, Re (A91467 4 March 2015)..................... Appendix 7 Tate & Lyle plc v Commission [2001] 5 CMLR 859 at paras 55-6.................................10.430 Tate v Pacific Gas & Electric Co [2002-2] Trade Cases P 73, 873....................................17.60 Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709.................. 13.200, Appendix 5 The Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73 (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674................................ 19.40, 19.60 The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; (2012) ATPR 41-418.........................................................................17.390 The State of Queensland Office of Liquor and Gaming, Re (A91224; 7 October 2010).................................................................................................... Appendix 7 Theatre Enterprises v Paramount Distributing 346 US 537 (1953)................................ 10.300 Theo Holdings Pty Ltd v Hockey [2000] FCA 665; (2000) 99 FCR 232; 175 ALR 89; [2000] ATPR 41-766.............................................................................13.320 Thomson Publications (Aust) Pty Ltd v Trade Practices Commission [1979] FCA 78; (1979) 40 FLR 257; 27 ALR 551; (1979) ATPR 40-133.....................9.230 Thurley v Hayes [1920] HCA 28; (1920) 27 CLR 548.....................................................10.730 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138........................ 8.70, 10.710, 10.720, 10.730, 16.140, 16.360, 16.450, 16.470, 16.490 Times-Picayune Publishing Co v United States 345 US 594 (1953).......................13.40, 13.50 TLS Association Pty Ltd, Re (A91250; 24 February 2011).................................... Appendix 7
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T-Mobile Netherlands BV v Raad van bestuur van de Nederlandse Mededingingsautoriteit [2009] EUECJ C-8/08.........................................................10.670 Toll Holdings Ltd v ACCC [2009] FCA 462; (2009) 256 ALR 631; (2009) ATPR 42-303..............................................................................................................19.670 Tooltechnic Systems (Aust) Pty Ltd, Re (A91433; 5 December 2014)........14.470, Appendix 7 Tooth & Company Ltd, Re (1976) TPRS 108.272............................................................... 5.50 Tooth & Company Ltd, Re (1979) 39 FLR 1; (1978-1979) ATPR 40-113................7.100, 7.140 Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286; 5 ALR 465; (1975) ATPR 40-004...............................................7.130, 10.140, 12.220 Town Investments Ltd v Department of the Environment [1978] AC 359........................9.210 Townsville Hospitals Board v Townsville City Council [1982] HCA 48; (1982) 149 CLR 282; 56 ALJR 789; 42 ALR 319........................................................9.190 Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) [1981] FCA 133; (1981) 60 FLR 1 (1981) 3 ATPR 40-237......................................... 10.110 Trade Practices Commission v Annand & Thompson (1987) ATPR40-772...................19.270 Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd [1978] FCA 21; (1978) 32 FLR 305; (1978) ATPR 40-071................12.250, 15.60 Trade Practices Commission v Arnotts Ltd [1990] FCA 473; (1990) 97 ALR 555; (1990) ATPR 41-062...................................................................... 3.360, 15.200 Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) FCA 244; (1988) 83 ALR 299; (1988) ATPR 40-876............................ 3.360, 7.70, 19.680 Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299; [1988] ATPR 40-876.....................................................................................7.30 Trade Practices Commission v Australian Iron & Steel Pty Ltd [1990] FCA 23 (1990) 22 FCR 305; 92 ALR 395; (1990) ATPR 41-001.....................................................................................15.170, 15.180, 15.690 Trade Practices Commission v Bata Shoe Co of Australia Pty Ltd (No 1) [1979] FCA 60; (1979) 44 FLR 145; (1980) ATPR 40-161............... 14.200, 14.210, 14.250 Trade Practices Commission v BP Australia Ltd [ [1985] FCA 391; (1985) 7 FCR 499...................................................................................................................14.250 Trade Practices Commission v Caravella (1994) ATPR 41-293.......................................19.270 Trade Practices Commission v Carlton & United Breweries Ltd [1990] FCA 248; (1990) 24 FCR 532; (1990) ATPR41-037..................................................19.260 Trade Practices Commission v CC (NSW) Pty Ltd (No 3) (1995) ATPR41415..........................................................................................................19.260, Appendix 3 Trade Practices Commission v Commodore Business Machines Pty Ltd (1989) ATPR 40-976. On appeal [1990] FCA 77.......................................................14.270 Trade Practices Commission v Cook-On Gas Products Pty Ltd (1985) ATPR 46, 506 (40-560)..................................................................................19.190, 19.210 Trade Practices Commission v CSBP and CSBP & Farmers Ltd [1980] FCA 27; (1980) 53 FLR 135; (1980) ATPR 40-151................................................... 12.260 Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076................................................................................................ 13.100, 19.180, 19.190 Trade Practices Commission v Culley (1983) ATPR40-399................................19.190, 19.210 Trade Practices Commission v David Jones (Aust) Pty Ltd [1986] FCA 19; (1986) 13 FCR 446; 64 ALR 67; (1986) ATPR 40-671.......................................10.160 Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172....................10.110, 10.160, 10.190, 10.270, 10.400, 10.890, 11.340, 11.360, Appendix 3 Trade Practices Commission v General Corp Japan (Aust) Pty Ltd [1988] FCA 390 (1989) ATPR40-922....................................................................................19.260 Trade Practices Commission v ICI Australia Operations Pty Ltd (1992) 38 FCR 248; 110 ALR 47; (1992) ATPR41-185.........................................................19.250
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Trade Practices Commission v ICI Australia Operations Pty Ltd [1991] FCA 527; (1991) 105 ALR 115; (1991) ATPR 41-153.................................... 19.190; 19.200 Trade Practices Commission v JJ & YK Russell Pty Ltd (1991) ATPR 41-132...............10.160 Trade Practices Commission v Legion Cabs (Trading) Cooperative Society Ltd [1978] FCA 47; (1978) 35 FLR 372; (1978) ATPR 40-092...........................................................................9.70, 13.230, 13.290, 18.130 Trade Practices Commission v Malleys Ltd (1979) 25 ALR 250; (1979) ATPR 40-118..............................................................................................................14.380 Trade Practices Commission v Massey Ferguson (Aust) Ltd (1983) 67 FLR 364; [1983] ATPR 40-369......................................................................... Appendix 5 Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 238; (1984) 3 FCR 168; 55 ALR 527; (1984) ATPR 40-482 (FCR)............. 14.450, 19.40, 19.60 Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 363; (1985) 4 FCR 296; (1985) ATPR 40-503.................................................................... 19.180 Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) [1979] FCA 51; (1979) 40 FLR 83; 26 ALR 609; [1979] 2 ATPR 40-126....................................................................................10.110, 10.150, 11.280, 19.160 Trade Practices Commission v Orlane Australia Pty Ltd (1984) 1 FCR 157; 51 ALR 767; [1984] ATPR 45, 014 (40-437)......................................................14.440 Trade Practices Commission v Palmer Corp Ltd (1990) ATPR40-995...........................19.260 Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 27; (1985) 5 FCR 140; 59 ALR 589; (1985) ATPR 40-526................. 10.160, 11.310, 19.40 Trade Practices Commission v Penfolds Wines Pty Ltd [1991] FCA 631; 104 ALR 601 (1992) ATPR 41-163............................................................................14.230 Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164; 124 ALR 685; (1994) ATPR 41-345..............................................12.340, 12.410 Trade Practices Commission v Prestige Motors Pty Ltd [1994] FCA 1495; (1994) ATPR41-359...................................................................19.170, 19.270, Appendix 3 Trade Practices Commission v Pye Industries Sales Pty Ltd (1978) ATPR 40-088.............................................................................................................14.220 Trade Practices Commission v Queensland Aggregates Pty Ltd (1981) 36 ALR 236; [1981] ATPR 40-228..................................................................................13.320 Trade Practices Commission v Rank Commercial Ltd (1994) 53 FCR 303; 123 ALR 551; (1994) ATPR 41-331; (1994) ATPR 41-343.........................................19.560 Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206; 116 ALR 643; (1993) ATPR 41-260...........................................................10.160 Trade Practices Commission v Sharp Corporation of Australia Pty Ltd (1975) 8 ALR 255; (1975) ATPR 40-010................................................................... 14.310 Trade Practices Commission v Simpson Pope Ltd (1980) 47 FLR 334; 30 ALR 544; (1980) ATPR 40-169......................................................................14.310, 19.310 Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] TPRS 305.14; (1978) ATPR40-091.....................................................14.10, 14.390, 19.270 Trade Practices Commission v Tepeda Pty Ltd (t/as Metro Motor Market) [1994] FCA 1125; (1994) ATPR 41-319......................................................... 13.100, 13.380 Trade Practices Commission v The Gillette Company (No 1) [1993] FCA 495; (1983) ATPR 41-267.......................................................................................... 15.200 Trade Practices Commission v TNT Australia Pty Ltd [1995] FCA 1046; (1995) ATPR41-375........................................................................... 19.190, 19.260, 19.310 Trade Practices Commission v TNT Management Pty Ltd & Others [1985] FCA 23; ATPR 40-512...........................................................10.120, 16.180, 16.270 Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1; 58 ALR 423; [1985] ATPR 46, 078......................10.160, 10.280, 10.690, 10.710, 10.740 Trade Practices Commission v Total Australia Ltd (1975) 24 FLR 413..........................10.730
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Trade Practices Commission v Tubemakers of Australia Ltd (No 2) [1983] FCA 93; (1983) 76 FLR 455; 47 ALR 719; (1983) ATPR 40-358................ 10.110, 10.490, 10.980, 19.40, 11.640 Trade Practices Commission v Walplan Pty Ltd [1985] FCA 389; (1985) 7 FCR 495; (1985) ATPR 40-637...............................................................................19.550 Tradestock Pty Ltd v TNT (Management) Pty Ltd (No 1) [1977] FCA 1; (1977) 30 FLR 343 (2 May 1977)...............................................................................16.270 Transport Workers Union of Australia SA/NT Branch, Re (A91514, 4 February 2016).................................................................................................. Appendix 7 Travel Industries Automated Systems Pty Ltd, Re (1993) ATPR (Com) 50-131.............18.370 Tukinya Securities Ltd, Re [1975] ATPR 8, 659............................................................. 13.200 Tyree Telecom Pty Ltd v Australian Telecommunications Commission [1986] FCA 215; 67 ALR 433; (1986) ATPR 40-711.................................................. 9.300
U United Brands Company and United Brands Continental BV v Commission of the European Communities [1978] ECR 207.....................12.140, 12.420, 12.430, 12.630, 12.820 United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; 157 CLR 1; 60 ALR 741................................................................................................................ 11.710 United Permanent Building Society Ltd, Re (1976) 26 FLR 129....................................... 5.50 United Permanent Building Society Ltd, Re (1976) TPRS 108.138............................... 13.200 United States v American Airlines Inc 743 F 2d 1114 (1984); [1984-2] Trade Cases 66, 232 at [37]........................................................................................10.980 United States v American Tobacco Co 221 US 106 (1911)...................................10.80, 10.230 United States v Arnold, Schwinn & Co 388 US 365 (1967).................................13.40, 13.460 United States v E.C. Knight Co., 156 US. 1 (1895).................................................... 2.20, 2.50 United States v Grinnell Corp 384 US 563 (1966).......................................................... 12.540 United States v Masonite Corp 316 US 265 (1942)..........................................................10.290 United States v Socony-Vacuum Oil Co 310 US 150 (1940)..............................................11.30 United States v Trans-Missouri Freight Association 166 U.S. 290 (1897)......................... 2.50 United States v Ward Baking Company 243 F Supp 713 (1965).....................................10.480 Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; 57 IPR 353; [2003] ATPR 41-947......................... 4.450, 7.130, 7.190, 8.100, 10.550, 10.650, 10.680, 10.720, 10.730, 10.740, 12.280, 12.380, 12.400, 12.530, 13.40, 13.50, 13.80, 13.340, 13.410, 13.420, 16.140, 19.300, Appendix 5 Urban Renewal Authority, Re (A91416; 28 February 2014).................................... Appendix 7 US Anchor Manufacturing Inc v Rule Industries Inc 7 F 3d 986 (1993); [1993-2] Trade Cases 70, 426.....................................................................................12.430 US v Aluminium Co of America 148 F 2d 416 (1945)...........................10.530, 12.540, 12.820 US v AMR Corp (2003) 335 F 3d 1109; [2003-2] Trade Cases 74, 078............................................................................................... 12.720, 12.730, 12.860 US v Blue Cross and Blue Shield of Ohio 8 November 1996........................................10.1020 US v Colgate & Co 250 US 300 (1919)............................................................................14.100 US v E C Knight Company 156 US 1 (1895)...................................................................12.100 US v General Electric Co 272 US 476 (1926)..................................................................14.100 US v General Motors Corp 121 F 2d 376 (1941)..............................................................13.380 US v Grinnell Corporation 348 US 563 (1966)...................................................10.530, 12.620
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US v Terminal Railway Association of St Louis 224 US 383 (1912)................................17.20 US v Trans-Missouri Freight Association 166 US 290 (1897).........................................12.100 US v Trenton Potteries Co 273 US 392 (1927)...................................................................11.50 US v United States Gypsum Co 438 U S 422 (1978)............................................. 2.20, 10.860 Utah Development Co v Seaman’s Union (1977) 17 ALR 9; (1977) ATPR 40-049 (22 December 1977)...........................................................................16.360
V Valley Liquors Inc v Renfield Importers Ltd [1982-2] Trade Cases 64, 744......12.390, 12.430 Verizon Communications Inc v Law Offices of Curtis V Trinko LLP 540 U.S. 682 (2004)...............................................10.530, 12.540, 17.40, 17.80, 12.620, 12.830 VFF Chicken Meat Growers’ Boycott Authorisation, Re [2006] ACompT 2 (2006) ATPR 42-120.................................................................................. 18.400, 18.410 Victorian Association of Newsagents Ltd, Re (A91399; 21 May 2014).................. Appendix 7 Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd [1978] FCA 27; (1978) 33 FLR 294; (1978) ATPR 40-081................................................................. 12.220 Village Building Co Ltd v Canberra International Airport Pty Ltd [2004] FCA 133; (2004) 134 FCR 422; 208 ALR 98; (2004) ATPR 41-979.......................... 9.260 Virgin Blue Airlines Pty Ltd, Re (2005) 195 FLR 242; [2005] ACompT 5; (2006) ATPR 42-092......................................................................... 17.310, 17.460, 17.590 VISA Worldwide Pte Ltd, Re (A91379; 18 December 2013).................................. Appendix 7 Vision Group Holdings Ltd, Re (A91217; 8 September 2010)................................ Appendix 7 Visy Paper Pty Ltd v ACCC [2003] HCA 59; (2003) 216 CLR 1; 77 ALJR 1893; 201 ALR 414............................................................................................ 1.60, 10.510 Visy Paper Pty Ltd v ACCC [2005] FCAFC 236............................................................19.300
W WA Broiler Grower Assn Inc, Re (A91527, 31 May 2016)...................................... Appendix 7 Wakim, Re; Ex parte McNally (1999) 198 CLR 511; 73 ALJR 839; 163 ALR 270; [1999] HCA 27........................................................................................... 4.230 Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR41-189.................................................. 19.410, 19.420, 19.430, 19.450, 19.470, 19.510 Warman International Ltd v Envirotech Australia Pty Ltd [1986] FCA 205; (1986) 11 FCR 478; 67 ALR 253; (1986) ATPR 47, 808 (40-714)........................3.370 Waterside Workers’ Federation of Australia v JW Alexander Ltd (1918) HCA 56; (1918) 25 CLR 434........................................................................................2.190 Watson v Foxman (2000) 49 NSWLR 315....................................................................... 19.160 WestbaySeafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 1535 (1996) ATPR (Digest) 46-162...................................................19.50 WheelerGrace &Pierucci Pty Ltd v Wright [1989] FCA 127 (1989) ATPR 40-940......... 19.70 Williams v Papersave Pty Ltd [1987] FCA 351; (1987) 16 FCR 80; 76 ALR 152; (1987) ATPR 40-818....................................................................................3.370 World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181; (1977) ATPR 40-040.........19.520 Wribass Pty Ltd v Swallow [1979] FCA 3; (1979) 38 FLR 92.........................................16.360 WSGAL Pty Ltd v Trade Practices Commission (1994) 51 FCR 115; 122 ALR 673; (1994) ATPR 41-314...................................................................................19.680 Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) [1955] HCA 72; (1955) 93 CLR 376.............................................................................9.190
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Y Yorke v Lucas [1983] FCA 230; (1983) 80 FLR 143; 49 ALR 672; (1983) ATPR 40-401................................................................................................................19.60 Yorke v Lucas [1985] HCA 65 (1985) 158 CLR 661; (1985) 59 ALJR 776; 61 ALR 307; (1985) ATPR 40-622.......................................................... 19.50, 19.70,19.70
Z Zoneff v Elcom Credit Union Ltd (1990) ATPR 41-009; (1990) 94 ALR 445................19.430 Zuchner v Bayerische Vereinbank AG [1981] ECR 2021................................................10.430
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[1.20] [1.60] [1.80] [1.90] [1.130]
1
Developing an Australian Objective ........................................................ Why Are Objectives Important? .............................................................. Welfare of Australians — A View ............................................................ Objectives — Other Countries ................................................................ Objectives — Other Views ......................................................................
1 3 4 4 6
[1.10] Competition is not an end in itself. That is a proposition on which there is universal agreement. But there is less agreement on what the objectives of competition policy should be and even less on how those objectives should be achieved. That is not necessarily a bad thing. As one commentator has observed:1 In market based economies, governments typically defer to the competitive process in which rivalry among firms is counted on to ensure efficient outcomes for society. … [C]ompetition policy “referees” this rivalry. In deciding whether certain behaviour is ‘out of bounds’, it relies on various rules. The rules themselves tend to evolve over time … .
For instance, European competition law is peculiarly European, based on competition as an autonomous fundamental principle and on the adoption of Community-level industrial policy aimed at restructuring the economy of the Community on competitive lines.2 In the United States, the policy was originally directed in the 1890s at breaking up giant conglomerates, but by the 1970s, a time of oil crises and high inflation, the concern was about competitiveness against aggressive Japanese and German manufacturers who supplied the US market. As Professor Amato has noted:3 Concerns at lost competitiveness and jobs and the consequent promotion of policies to strengthen the national industry became crucial, just as had happened in different circumstances and ways during the New Deal. It was in those years that the Supreme Court’s shift in the antitrust area came to fruition; and it came with the explicit entry into its case law of the interpretative principles of the Chicago School …
Developing an Australian Objective [1.20] Australia’s competition law states that the objective is “to enhance the welfare of Australians through the promotion of competition”. Earlier versions of the law contained no statement of objectives, although the debates at the time provide us with a picture of what those objectives might have been. As we will see in Chapter 2, the original competition statute, the Australian Industries Preservation Act 1906 (Cth), was essentially directed at protection of Australian industry, even though it borrowed heavily from the US Sherman Act. When it came to be used against 1. G Evans QC “Why Different Jurisdictions Do Not (and Should Not) Adopt the Same Antitrust Rules” (2009) 10 Chi J International L 161, 163–164. 2. G Amato, Antitrust and the Bounds of Power (Hart Publishing, 1997), p 45. 3.
G Amato, Antitrust and the Bounds of Power (Hart Publishing, 1997), p 25.
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Objectives of Competition Policy
[1.40]
Australian, rather that foreign, corporations, it ran into constitutional difficulties from which it never recovered. The Trade Practices Act 1965, and its immediate successors, were tentative steps to address the Barwick view of practices “that may be” contrary public interest — seeking a fairer society by protecting free enterprise.4 The Trade Practices Act 1974, which heralded a new approach to competition policy and drew significantly on economics, did not include a stated objective. However, in debates on the legislation, the Attorney-General, Lionel Murphy QC, was clear about his objective. He said:5 It is accepted an (sic) all hands that restrictive practices are one of the major influences in inflation, that they are injurious to the community and that in effect they are rackets perpetrated against the consumers and the rest of the community.
In introducing the 1977 Bill, the Minister, John Howard, offered no overarching policy rationale for the changes made, nor did the Swanson report suggest one, referring only briefly to the ”short-term economic objectives of the government, as we understand them”.6 [1.40] It was not until 1995 that a statement of objectives appeared in the Act. Hilmer had concentrated on developing a coherent rationale for competition policy and a framework for the law that resulted. Hilmer recognised that competition laws could have two possible high level objectives — either to protect the competitive process (and therefore economic efficiency) and the welfare of the community as a whole, or to confer special benefits on particular sectors of the community, such that the benefits to the community as a whole are subordinated to the interests of those sectors. Hilmer ”unhesitatingly embraced” the first.7 Hilmer saw competition policy as a key element of national economic policy, concluding that:8 Competition policy is not about the pursuit of competition for its own sake. Rather, it seeks to facilitate effective competition in the interests of economic efficiency while accommodating situations where competition does not achieve economic efficiency or conflicts with other social objectives.
[1.50] In the result, the government agreed and the following objective was inserted:9 The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.
That objective remains in the Act. In 2015, the Harper Panel, establishing principles against which to test current competition laws, endorsed the view that the focus of competition policy should be on the competitive process, rather than on competitors. The Panel observed that there 4. Introducing the Barwick list, the Acting Attorney-General, Gordon Freeth, said the objective was “devising a scheme of legislation which would protect free enterprise against … practices … harmful to it.”: House of Representatives, Hansard, 6 December 1962. The list is reproduced in Appendix 1. 5. Senate, Hansard, 3 April 1974, p 645. 6. Swanson Committee, Trade Practices Act Review Committee Report (the Swanson Report) (AGPS, August 1976), para 2.13. 7. Report by the Independent Committee of Inquiry, National Competition Policy (the Hilmer Report) (AGPS, August 1993), p 26. 8. Hilmer Report, p 6. 9. Now Competition and Consumer Act 2010 (Cth), s 2.
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[1.70]
Why Are Objectives Important?
are broader objectives than economic efficiency. Harper identified six attributes that were seen as determinants of whether or not Australian competition policy is fit for purpose. They were:10 • focuses on making markets work in the long-term interests of consumers; • fosters diversity, choice and responsiveness in government services; • encourages innovation, entrepreneurship and the entry of new players; • promotes efficient investment in and use of infrastructure and natural resources; • includes competition laws and regulations that are clear, predictable and reliable; and • secures necessary standards of access and equity. Of course, those objectives are consistent with the objective: “to enhance the welfare of Australians”. They identify attributes that may be used for determining whether competition policy is enhancing welfare. No change to the objects was suggested by Harper.
Why Are Objectives Important? [1.60] Objectives are important because, first, without a coherent policy philosophy there is no benchmark for testing whether enacted competition laws reflect good or bad public policy. Secondly, for those charged with interpreting the “maze created by statutory language” a clear focus on the policy objective provides essential guidance. As High Court Justice, Michael Kirby AC has pointed out:11 … it is essential … to adopt a construction of the TPA that achieves the apparent purposes of that Act by furthering the objectives of Australian competition law. Keeping such purposes in mind helps to shine the light essential to finding one’s way through the maze created by the statutory language. Even then, there is a substantial danger of losing one’s way in the encircling gloom.
That comment is especially apt in relation to both the cartel provisions and the misuse of market power provisions. Significantly understating the position, Harper said: Some of the complexity in the law has arisen from amendments and additions made in response to calls for more ‘effective’ regulation … or where there has been a perceived shortfall or over-reach resulting from a court judgment. The certainty provided by specific drafting must be balanced against the complexity that arises from attempts to address all possible contingencies.
[1.70] Unlike the position in some other countries, the Australian competition law has one stated objective. While it is not unusual for the one legislative initiative to have multiple objectives, where that is the case two problems arise. First, objectives can be in conflict.12 Second, even when not in direct conflict, questions of priority arise. We will see examples of this below. 10. Report of the Competition Policy Review (the Harper Review) (AGPS, March 2015), p 23. The Panel also said: “The CCA (and competition policy more generally) is not designed to support a particular number of participants in a market or to protect individual competitors; instead, it is designed to prevent competitors’ behaviour from damaging the competitive process to the detriment of consumers.”: Harper Review, p 307. 11. Visy Paper Pty Ltd v ACCC [2003] HCA 59; (2003) 216 CLR 1; 77 ALJR 1893; 201 ALR 414. 12. See OECD Global Forum on Competition, Note by the Secretariat, The Objectives of Competition Law and Policy (2003), para 3, (viewed 24 November 2017). © 2018 THOMSON REUTERS
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[1.80]
Even where only one objective is stated, that can be at such a level of abstraction that it fails to ‘shine the light’ as Justice Kirby put it. To take the Australian objective, while it seems sensible and appropriate, reconciling the specific provisions of the Act to that policy objective has proven to sometimes be a challenge.
Welfare of Australians — A View [1.80] The Australian Competition Tribunal had cause to consider what the term “public benefit” – the term used in parts of the Act expressing the “welfare of Australians” concept – meant in the context of an authorisation application concerning an airline joint venture. The Tribunal concluded that the objective was to promote efficient resource allocation and maximise community welfare, but that did not meant that promotion of efficient resource allocation was the sole objective.13 It said: In our view, the objective and statutory language of the Act, as well as precedent, support the use of a form of the total welfare standard as the most appropriate standard for identifying and assessing public benefit. We say a “form of” the total welfare standard because … , whilst the Tribunal does not require that efficiencies generated by a … set of arrangements necessarily be passed on to consumers, it may be that, in some circumstances, gains that flow through only to a limited number of members in the community will carry less weight.
What is a “total welfare standard”? As the Tribunal explained, it involves taking into account efficiencies that accrue to either consumers or producers, or to both. It is to be compared with a consumer welfare standard, which only takes into account efficiencies that will be passed on to consumers, usually in the form of lower prices or better products.14 There is a very live debate internationally on which of those two standards should be the objective of competition policy.
Objectives — Other Countries [1.90] Like the Australian Act, legislation in a number of jurisdictions sets out the policy objectives of the country’s competition law. They are quite diverse. The South African legislation is the most expansive and diverse, listing as its objective15 the promotion and maintenance of competition in South Africa in order to: • promote the efficiency, adaptability and development of the economy; • provide consumers with competitive prices and product choices; • promote employment and advance the social and economic welfare of South Africans; • expand opportunities for South African participation in world markets and recognise the role of foreign competition in the Republic;
13. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 41-972 at [179], [180]. Of course, the Tribunal was primarily addressing the net public benefit test for authorisation, but its views were expressed in the context of the objective in s 2. 14. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 41-972 at [171]. See also Chapter 6. 15. Competition Act 1998 (South Africa), s 2.
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[1.110]
Objectives — Other Countries
• ensure that small and medium-sized enterprises have an equitable opportunity to participate in the economy; and • promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons. [1.100] The Canadian Competition law is somewhat more confined in scope, but nevertheless contains a number of objectives. They are:16 to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.
Neither the Singapore nor the Hong Kong competition legislation contains a statement of objectives, although the long title of the Hong Kong Ordinance is quite focused. It states: An Ordinance to prohibit conduct that prevents, restricts or distorts competition in Hong Kong; to prohibit mergers that substantially lessen competition in Hong Kong; …
Similarly, the UK competition legislation does not contain a statement of objectives, as such, but the long title contains a simple statement of potentially conflicting aims. It is:17 An Act to make provision relating to the promotion of enterprise and economic growth
[1.110] A 2006 International Competition Network survey sought views from competition agencies around the world on the objectives of one important element of competition law — unilateral conduct.18 The report provides insight into what agencies thought the objectives of competition policy should be.19. Thirty-five agencies and 14 non-government advisors responded to the survey. Although virtually all respondents cited an effective competition process as an objective, there was a wide range of views on the objectives an effective competition process should be directed to achieving. The Australian response cited promoting consumer welfare, maximising efficiency and ensuring a level playing field for SMEs as among the objectives. In all, respondents from 30 countries nominated promoting consumer welfare as an objective and 20 nominated maximising efficiency. Ensuring economic freedom was nominated by 13, ensuring a level playing field by seven, and promoting fairness and equality and promoting consumer choice by six and five respectively.20
16. Competition Act 1985 (Canada), s 1.1. 17. Enterprise Act 2016 (UK). 18. In Australia, misuse of market power; in the EU, abuse of dominance; and, in the USA, monopolization. 19. Unilateral Conduct Working Group, “Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/Substantial Market Power, and State-Created Monopolies” (Paper Presented at the 6th Annual ICN Conference, Moscow, May 2007), . 20. Unilateral Conduct Working Group, “Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/Substantial Market Power, and State-Created Monopolies” © 2018 THOMSON REUTERS
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Objectives of Competition Policy
[1.120]
[1.120] A study by the OECD in 1992 and rerun in 2003,21 found that the view of respondents was that the basic objective of competition policy should be to promote efficient use of resources while protecting the freedom of economic action of various market participants. But the study also found that competition policy had been directed at achieving or preserving a range of supplementary objectives, including “pluralism, de-centralisation of economic decision-making, preventing abuses of economic power, promoting small business, fairness and equity and other sociopolitical values”. The report noted that these “supplementary” objectives tended to vary across jurisdictions and over time. The latter reflects the changing nature and adaptability of competition policy so as to address current concerns of society, while remaining steadfast to the basic objectives.
Objectives — Other Views [1.130] Leading academics have put forward alterative views on the objectives of competition policy, or on what they should be.22 While they do not demonstrate the breadth of objectives reflected in the legislation referred to above, they do illustrate that there is no consensus on what the objectives should be. The majority of competition academics argue that the primary objective should be to enhance economic welfare, although that is not a unanimously held view. Furthermore, opinions differ over whether that objective is met by enhancing consumer welfare, or whether the objective should be to enhance total welfare.23 The Harvard Business School has advocated efficient resource allocation, a total welfare objective, with particular emphasis on the structure of markets. The Chicago School also focused on total welfare as the aim of competition policy, but the view in the 1950s of Professor Aaron Director, the originator of the Chicago School, was that:24 the focus of antitrust laws should not be on unilateral action; it should instead be on: (1) cartels and (2) horizontal mergers large enough either to create monopoly directly, as in the classic trust cases, or to facilitate cartelization by drastically reducing the number of significant sellers in the market.
For the Post-Chicago School, led by Professor Robert Bork,25 the objective should not be to enhance general economic welfare, but consumer welfare. This view is said to have had a significant influence on the thinking of the US Supreme Court. Promoting consumer welfare is seen by some as too narrow an objective. A more recent view, expressed by Professor Michael Porter, is that productivity growth should be the policy’s driving motivation. According to Porter, relying too heavily on narrowly conceived consumer welfare theory can result in antitrust analysis
(Paper Presented at the 6th Annual ICN Conference, Moscow, May 2007), Annex A, p 89. 21. OECD Global Forum on Competition, Note by the Secretariat, The Objectives of Competition Law and Policy (2003), para 3, . 22. The various views are well summarised in Anne C Witt, The More Economic Approach to EU Antitrust Law (Bloomsbury, 2016). 23. For the difference in welfare standards see Chapter 6 at [6.130]. 24. Richard A Posner, “The Chicago School of Antitrust Analysis” (1978) 127 University of Pennsylvania Law Review 925 at 928. 25. Robert Bork, The Antitrust Paradox (Free Press, 1978).
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Objectives — Other Views
overlooking some of the most important benefits of competition for society. He said new thinking was called for and that:26 This new thinking sets forth productivity growth as the basic goal of antitrust policy … By linking competition to a nation’s standard of living through productivity growth, it becomes apparent that far more is at stake in protecting competition than short-term consumer welfare defined by price-cost margins. … ‘The fundamental benefit of competition is to drive productivity growth through innovation, where innovation is defined broadly to include not only products, but also processes and methods of management.
[1.140] The original objectives of European competition law is said to be mainly to address the growing strength of corporate entities in Germany in the 1950s. It is no coincidence, Professor Amato says, that Germany was the first country on in Europe to adopt an antitrust law, in 1957.27 He added:28 The European antitrust history is, then, a necessarily and peculiarly European one, even if it did in the end reach, with the Maastricht Treaty, an assertion of competition as an autonomous fundamental principle, and the adoption of industrial policy at Community level which is understood no longer as a haven from competition but as a restructuring of the economy on competitive lines …
[1.150] None of this is surprising, given that competition law and policy is not an end in itself. It is a means of achieving economic and social policy outcomes that will differ, impacted by the historical and political environment and the nature of and level of development of the economies in which they are intended to operate.
FURTHER READING Author
Title
Citation
Amato Bork Evans
Antitrust & the Boundaries of Power The Antitrust Paradox “Why Different Jurisdictions Do Not (and Should Not) Adopt the Same Antitrust Rules” Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/ Substantial Market Power, and State-Created Monopolies The Objectives of Competition Law and Policy
Hart Publishing, 1997 Free Press, 1978 (2009) 10 Chicago Journal of International Law 161 6th Annual ICN Conference papers, Moscow, May 2007
International
Competition Network
OECD Global Forum on Competition
OECD website, (2003)
26. Michael E Porter, “Competition and Antitrust: Toward a Productivity-based Approach to Evaluating Mergers and Joint Ventures” (2001) 46 Antitrust Bulletin 919, 920–922. 27. G Amato, Antitrust and the Bounds of Power (Hart Publishing, 1997), p 41. 28. G Amato, Antitrust and the Bounds of Power (Hart Publishing, 1997), p 45. © 2018 THOMSON REUTERS
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Porter
Posner
Witt
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“Competition and Antitrust: (2001) 46 Antitrust Towards a Productivity-Based Bulletin 919 Approach to Evaluating Mergers and Joint Ventures.” “The Chicago School of Antitrust” (1979) 127 University of Pennsylvania Law Review 925 The More Economic Approach to Bloomsbury, 2016 EU Antitrust Law?
Miller’s Australian Competition Law and Policy
ORIGINS OF AUSTRALIAN COMPETITION LAW [2.30] [2.70] [2.120] [2.160] [2.190] [2.250] [2.270]
2
Australia — First Steps .......................................................................... Australia — Reviving Interest ................................................................ The 1965 Act ......................................................................................... Resale Price Maintenance .................................................................... The Constitutional Conundrum ............................................................. The 1971 Remedial Act and Work on a New Approach ........................ A New Policy Direction ..........................................................................
11 13 16 18 20 23 24
[2.10] Although monopolies had been regulated by courts applying general law principles for centuries, statutory competition law has its origins, at a national level,1 in the Sherman Act. That Act is said to have been motivated by public concern in the United States about abuse of power by large and powerful conglomerates, especially in the oil, railway and tobacco industries, although views on the motivation vary.2 Certainly, there were activities engaged in by trusts at the time that would have prompted calls for government intervention. John D Rockefeller is said to have originated the use of trusts for anti-competitive ends. The trusts he created were based on a traditional concept, recognised in equity, which he and his co-investors developed in a new and powerful way. The essence was that a trustee was delegated, inter alia, rights to vote on the election of company boards. Through criss-crossing voting proxies, Rockefeller and his coinvestors created trust structures through which prices and market policies of several competing companies could be co-ordinated even though each company remained under the control of others.3 The first use of a trust in this way is said to have been Standard Oil, which was set up as a combination of oil companies under the control of nine trustees, allowing the conglomerate to operate as one entity, functioning as a monopoly. 4 The Sherman Act contained (and still contains today) two brief prohibitions: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is hereby declared to be illegal …
1.
Prior to the introduction of the Sherman Act, a number of US States had passed antitrust statutes: see H Hovenkamp, “State Antitrust and the Federal Scheme” (1983) 58 Indiana Law Journal 375 and G Stigler, “The Origin of the Sherman Act” (1985) 14 Journal of Legal Studies 1 at 6.
2. For a controversial view on the motivations for the Sherman Act see G Stigler, “The Origin of the Sherman Act” (1985) 14 Journal of Legal Studies 1. See also R Bradley, “On the Origins of the Sherman Antitrust Act” (1990) 9 Cato Journal 737. 3.
See G Amato, Antitrust & the Boundaries of Power (Hart, 1997), p 8.
4.
See .
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[2.20]
Every person who shall monopolise, or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade or commerce among the several States, or with foreign nations, shall be deemed to be guilty of a misdemeanour … .
[2.20] The body of law the Sherman Act spawned is known in the USA as “antitrust”. Unlike most traditional criminal statutes, the Sherman Act did not precisely identify the conduct which it proscribes in clear and categorical terms. As the US Supreme Court observed:5 Both civil remedies and criminal sanctions are authorized with regard to the same generalized definitions of the conduct proscribed … Nor has judicial elaboration of the Act always yielded the clear and definitive rules of conduct which the statute omits; instead open-ended and fact-specific standards like the “rule of reason” have been applied to broad classes of conduct falling within the purview of the Act’s general provisions.
Named for the Chairman of the US Senate’s Finance Committee, John Sherman of Ohio, the Act became law on 2 July 1890. The Sherman Act itself was motivated more by concepts of fairness and equity than by economic thinking, although it is now regarded as a pathfinding piece of economic legislation.6 The Act had a shaky start; a position, as we will see, repeated in Australia when attempts were made to introduce similar laws here. The first case brought under the Sherman Act involved a challenge to the Nashville Coal Exchange, an agreement between Kentucky coal mining companies and Nashville wholesale coal dealers to set the price of coal in Nashville to coal.7 But that case was resolved before the matter reached the United States Supreme Court. The first case to reach the Supreme Court, E C Knight,8 challenged a sugar refining monopoly through the acquisition by a New Jersey refiner of refineries in Pennsylvania. The challenge was unsuccessful, the Supreme Court holding that “the business of sugar refining in Pennsylvania, bear (sic) no direct relation to commerce between the states or with foreign nations”. Support for US antitrust laws was mixed, even at the highest levels of government. For instance, President Teddy Roosevelt, a Republican President,9 is said to have doubted the value of antitrust as early as 1899. Although known as a “trust buster” President, he is said to have associated size, however obtained, with efficiency. In 1912, for instance, he spoke favourably of German cartels and decried the structural remedy in Standard Oil. He advocated an agency to enforce “fair” competition, even to the point of setting prices.10
5. United States v United States Gypsum Co 438 US 422 (1978). 6. Hovenkamp, Federal Antitrust Policy, The Law of Competition and Its Practice (Thomson, 3rd ed, 2005), p 49. Hovenkamp observed that: “Clearly the framers of the Sherman Act did not have Pareto-efficiency in mind when they drafted the statute, for Pareto had not yet developed it at the time the Sherman Act was passed. The concepts of allocative efficiency and deadweight loss from monopoly were almost certainly not known to the framers of the Sherman Act.” 7. See J Siegfreid and M Mahony, “The First Sherman Act Case: Jellico Mountain Coal, 1891” (1990) 35 Antitrust Bulletin 801. 8. United States v E C Knight Co 156 US 1 (1895). 9. Roosevelt was President 14 September 1901 – 4 March 1909. 10. M Winerman and W Kovacic, “Outpost Years for a Start Up Agency: The FTC from 1921–1925” (2010) 77 Antitrust Law Journal 145.
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[2.30]
Australia — First Steps
Australia — First Steps [2.30] Australia’s first competition law, modelled on the United States Sherman Act 1890, was introduced in 1906. The Australian Act, the Australian Industries Preservation Act 1906 (Cth), was not, however, directed at breaking up monopolies in Australia. Its focus was on preventing Australian industries being taken over by large foreign corporations, particularly from the United States, rather than any notion of promoting competition. According to Professor Jack Richardson: “In the early years of federation a common complaint in and out of Parliament was that infant Australian industries were in danger of falling into the hands of foreign corporations, particularly those of United States origin, as indeed had happened in the petroleum, tobacco and beef industries.”11 This is borne out by the Minister for Trade and Customs, Sir William Lyle, who said, when introducing the Bill on 13 December 1905: I feel that no excuse is necessary for the introduction of the Bill, but if it were, it could be found in the statements published in the newspapers of the United States of America, showing the dimensions to which the enormous octopus trusts of that country have grown, and the harm which they have done, not only by their cheap exportations of manufactures to other countries, but by buying up and destroying the smaller internal business concerns of the United States.12
In a particularly telling example, later in the debate Sir William informed Parliament that:13 The avowed intention of one of the great American Trusts, viz, the International Harvester Trust, ... to wipe out the Australian agricultural implement manufacturer in Australia, is clearly shown in the sworn declaration … which was put in evidence before the Tariff Commission by Mr H V McKay. Mr Coxon declared as follows: That about three months ago, in my office ..., I was interviewed by Mr. Beale, one of the travelling representatives of the International Harvester Company of America, and that the following conversation took place: Mr. Beale said, “The International Harvester Company is determined to get hold of the trade in harvesting machinery, and it’s only a matter of a little time till we knock out all the local men.” I said, “You can’t beat McKay.” ”Yes,” he replied, “We’ll beat McKay. We have unlimited money behind us, and even if we worked at a loss for three years, we are bound to beat him. Say that McKay’s agent … 11. J Richardson, Introduction to the Australian Trade Practices Act (Hicks Smith, 1967). 12. House of Representatives, Hansard, 13 December 1905. 13. Statement by Sir William Lyne, Minister for Trade and Customs, in the course of debate on the Australian Industries Preservation Bill. House of Representatives, Hansard, 14 June 1906. The Protectionist Party MP JH McColl (Mandurang Victoria) countered that: It is an undoubted fact that the competition of imported harvesters with the locally manufactured article has brought about the introduction of this measure. Although we have heard of other cases of alleged unfair competition, that is the only one that has been specially mentioned. Had the harvester industry possessed less influence, this measure would not have been introduced.: Kerang New Times, 6 July 1906, p 1. A further example provided by Sir William in a meeting with a delegation of 40 Australian producers, manufacturers and traders in June 1906 was: … he (the Minister) had before him a letter demanding the return of certain American machinery because an English machine had been erected by its side. It was an outrage that free Australian people should have to sign conditions which permitted of that sort of thing being done. If a man invented, the best boot machine in the world, Australians could not use it, because the America Trust would immediately take its machines away, and thus disorganise the trade. © 2018 THOMSON REUTERS
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[2.40]
is getting the trade, we shall put on two men to beat him. If they don’t succeed we shall put on three, or a dozen if need be. We don’t care what money it costs, we shall secure the trade. McKay had an offer from us to buy him out, and he will live to regret the day that he refused that offer. We are going to close him up.”
There was nevertheless stringent debate over the Bill. Representatives of Australian industry: all agreed that Australian industries should be preserved, but the title of the Bill was only the sugar of a very bitter pill.14 The member for Parramatta, subsequently Australia’s sixth Prime Minister, Sir Joseph Cook, was reported as saying:15 the bill should be called the Anti-Trade Bill. It was the hottest dose the Australian trader had yet had administered to him, either by legislative or any other means. If carried into law as at present drafted, it would most assuredly cripple and destroy our commerce. … This is not a proposal for regulating competition, but for preventing it.
Attempts to split the Bill into two — one dealing with preservation of Australian industries supported by representatives of producers, manufacturers and traders, and the other dealing with trusts, which they opposed — failed. [2.40] The genesis of the Australian Industries Preservation Act 1906 (Cth) may have been quite different to that of the Sherman Act, but the prohibitions were nevertheless quite similar. The Australian Act provided prohibited contracts in restraint of interstate or overseas trade and commerce and against “combinations” in restraint of interstate or overseas trade and commerce. A person found to have entered into such a contract or to have been party to such a “combination” was liable for a fine and treble damages, unless the person could establish that the conduct was neither a detriment to the public nor unreasonable in all of the circumstances. When the High Court was called on to interpret the Act in a challenge to collieries and shippers who had formed associations that, it was alleged, monopolised trade in coal, the similarities with the Sherman Act was noted and a number of US Supreme Court decisions considered.16 [2.50] The Sherman Act ultimately flourished in the United States after an unsteady start. As we have already noted, in the first Sherman Act case to reach the US Supreme Court, E C Knight,17 the government was unsuccessful. But in 1897 the government succeeded for the first time. In Trans-Missouri Freight,18 the government successfully challenged an agreement between three railway companies to establish and maintain “reasonable rates, rules, and regulations on all freight traffic” for the purposes of “mutual protection”. Nevertheless, as Professor Hovenkamp points out, twelve of the first successful Sherman Act cases were against unions. 19 The Australian legislation suffered a worse fate. The first attempt to apply its provisions to monopolistic business practices ended in a constitutional challenge. 14. 15. 16. 17. 18. 19.
Report from the Ballarat Star, 28 June 1906, p 3. Sydney Morning Herald, 13 December 1905, 9. R v Associated Northern Collieries [1911] HCA 73; (1911) 14 CLR 387. United States v E C Knight 156 US 1 (1895). United States v Trans-Missouri Freight Association 166 US 290 (1897). see H Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice (Thomson West, 3rd ed, 2005), pp 56–59; CJ Primm, “Labor Unions and the Anti-Trust Law: A Review of Decisions” (1910) 18 Journal of Political Economy 129.
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[2.70]
Australia — Reviving Interest
In Huddard Parker,20 the High Court declared key provisions of the statute unconstitutional because they purported to regulate corporate behaviour; a power then thought to be reserved by the Constitution to the States. Huddard Parker involved an appeal against conviction for failing to answer questions put to the appellant under a provision of the Australian Industries Preservation Act 1906 (Cth). The Act provided that, if the Comptroller-General of Customs believed that an offence has been committed against the Act, he may require, in writing, any person whom he believes to be capable of giving any information in relation to the alleged offence to answer questions and produce documents in relation to the alleged offence. The appellant successfully argued that the relevant provisions of the Act were unconstitutional, at least to the extent that they applied to the intra-State activities of corporations. Although decided on the application of strict legal principle and precedent, the context in which the case had been brought cannot have helped. It was against an Australian, not a foreign, company and was a prosecution. [2.60] After a further unsuccessful challenge in the context of combinations to control prices, output and distribution of coal in interstate trade,21 the Australian Industries Preservation Act 1906 (Cth) was no longer thought workable. As the Attorney-General of that time observed:22 if the Parliament of the Commonwealth possessed power to legislate in respect of combinations or monopolies in restraint of trade, State as well as interstate and external, the law and administration would be uniform throughout the Commonwealth. One proceeding, instead of several, would suffice; and the judgment of the Court would apply to all, not, as at present, only to the interstate, operations of the defendants. The scope of the operations of the most powerful interests is so wide, and touches at so many points those parts and relations of the industrial power which are admittedly Federal, that it seems a clear case for one comprehensive and effective power.
Attempts to confer relevant power on the Commonwealth through constitutional amendment failed. Referenda to give the Commonwealth Parliament power to legislate in relation to monopolies were defeated on five occasions between 1911 and 1944.23 Thereafter, although the Act was not repealed until 1965, no further attempt to enforce its provisions was made and it lay dormant.
Australia — Reviving Interest [2.70] By the late 1950s the level of market concentration in Australia, then unusually high compared with Canada, the United Kingdom and the United States, began to draw adverse public comment as academic economists turned their minds to the need to open up the economy and the opportunity competition policy presented to do so.24 20. Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330. 21. Attorney-General (Cth) v Adelaide Steamship Company Ltd (Re Coal Vend) [1913] UKPCHCA 2; (1913) 18 CLR 30. This case was an appeal to the Privy Council from a judgment by Justice Isaacs (who had dissented in Huddart Parker). 22. Sir Patrick Glynn KC, Opinion, 1 August 1909, . 23. Report of the Joint Committee on Constitutional Review (1959). 24. M Brunt, “Legislation in Search of an Objective”, Economic Record (September 1965). © 2018 THOMSON REUTERS
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[2.80]
Barwick’s biographer, David Marr describes the position in the early 1960s in the following terms:25 Australia had one steelworks and one glassmaker. Cartels fixed the price of petrol, cement, bricks, television sets, car parts, alcohol, tyres, timber, paper, books, insurance and all pharmaceutical goods. The nation’s wool clip was sold by a system of collusive bidding at auction and a great proportion of supply to governments was carried out by a system of collusive tendering. Four hundred cartels or trade associations were devoted to restricting competition in one form or another.
While there were strongly divergent views over whether there was a problem at all, there were also different views on approaches to dealing with the problem. As Professor Maureen Brunt put it at the time:26 Broadly speaking there are two alternative types of policy available; (1) the “cops and robbers” approach, and (2) the “workable competition” approach. The first aims to proscribe obvious abuses such as destructive price cutting, collusive tendering or exorbitant pricing. The second aims to foster effective competition over a wide area of the economy.
[2.80] Sir Garfield Barwick is credited with reviving interest in anti-monopoly laws in Australia, at least at a national level. State monopolies legislation existed, but that was of little practical utility.27 Barwick convinced the then Prime Minister, Sir Robert Menzies, to include in the Governor-General’s speech at the opening of Parliament in 1960 a statement that: “[t]he development of tendencies to monopoly and restrictive practices in commerce and industry has engaged the attention of the government which will give consideration to legislation to protect and strengthen free enterprise against such a development”.28 Marr described Barwick’s success in getting anti-monopoly laws on to the Coalition agenda as “a considerable political achievement for Barwick, perhaps the most extraordinary of his time in Canberra”.29 The United Kingdom had introduced a restrictive trade practices law in 1956.30 It was that law which provided a model for Barwick’s proposal. A white paper presented to Parliament by Barwick in December 1962 provided a long list of practices that Barwick argued were harmful and contrary to public interest.31 [2.90] Barwick’s list included classic restrictive agreements such as agreements between trade associations and manufacturers that manufacturers would only supply association members, or would give them a preferential discount, agreements between principal suppliers of products that they would only supply those who carried the supplier’s products exclusively, and agreements between manufacturers of competing products on prices and customers. 25. D Marr, Barwick (Allen & Unwin), pp 184–185. 26. M Brunt, “Legislation in Search of an Objective”, Economic Record (September 1965), quoted in J P Nieuenhuysen, Australian Trade Practices Readings (Cheshire, 1970), p 231. 27. The Monopolies Act 1923 (NSW); the Profiteering Prevention Act 1948 (Qld); the Monopolies and Restrictive Trade Practices Control Act 1956 (WA); the Prices Act 1948 (SA). See also G Whitlam, The Whitlam Government (Penguin Books, 1985), p 624. 28. House of Representatives, Hansard, 8 March 1960. 29. D Marr, Barwick (Allen & Unwin, 1980), p 184. 30. Trade Practices Act 1956 (UK). 31. The list is reproduced in Appendix 1.
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[2.100]
Australia — Reviving Interest
According to Marr, the Barwick proposal was driven by moral rather than economic considerations.32 That would seem to explain his persistence in the face of strong opposition from the then Prime Minister, Sir Robert Menzies,33 whose government had been returned with the barest majority at the 1961 general election. Menzies faced a potential business backlash on the issue. As one business correspondent put it: “It must be assumed at the outset that some undesirable and untenable business practices do exist in Australia, but to judge from known evidence they are the exception … The gain to the economy from eliminating small pockets of exploitation is likely to be small”.34 As Marr graphically describes it:35 These arrangements were seen as honourable by those who engaged in them. the magnates of ‘orderly marketing’ were honoured with knighthoods; the associations of cartels like the Chamber of Manufacturing Industry were among the principal backers of the Coalition parties. In the rhetoric of conservative Australian politics, monopolies were efficient units. In a small economy, collusive arrangements were a useful boost to business confidence and for government to supervise takeovers was seen as a threat to the free flow of foreign capital …’
[2.100] The government moved forward cautiously. It was not only Menzies who had severe reservations about the course Barwick was proposing. Cabinet support was slipping, led by the Deputy Prime Minister, John McEwen.36 Barwick responded to all this by publishing a list of unfair and unacceptable practices, to which reference has already been made.37 Barwick, who was the Foreign Minister as well as Attorney-General, was overseas when his list was tabled in Parliament. The Acting Attorney-General, Gordon Freeth, read Barwick’s statement, introducing it with reserved endorsement: the Government and the Parliament are greatly indebted to the Attorney-General for the painstaking research and investigation which he undertook as a necessary preliminary to the preparation of this document. He operated virtually as a commission of one to inquire into some of the most difficult and complex aspects of the commercial life of Australia to-day and their effect on the community. The paper which I have before me represents his own and the Government’s conclusions, arising out of the really monumental amount of work that he did.38
Barwick was not alone in advocating anti-monopoly legislation. Work by economists on the high level of concentration of ownership of manufacturing industry added to the debate,39 and some States introduced legislation to outlaw a number of the 32. D Marr, Barwick (Allen & Unwin, 1980), p 185. 33. D Marr, Barwick (Allen & Unwin, 1980), pp 184, 205. 34. Institute of Public Affairs Review (October 1963), reprinted in JP Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970). 35. D Marr, Barwick (Allen & Unwin, 1980), p 185. 36. D Marr, Barwick (Allen & Unwin, 1980), p 187. 37. Australian Proposals for Legislation for the Control of Restrictive Trade Practices and Monopolies’ (Australian Government Printer, 1963) reprinted in JP Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970). See also Richardson, “The Law Relating to the Australian Trade Practices Plan” (1963) 37 ALJ 203. 38. House of Representatives, Hansard, 6 December 1962. 39. See, for example, A Hunter, “Restrictive Practices and Monopolies in Australia”, Economic Record (March 1961); P H Karmel and M Brunt, The Structure of the Australian Economy (Cheshire, 1962). © 2018 THOMSON REUTERS
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practices on the Barwick list.40 Although monopolies received very little recognition in the wide-ranging Vernon economic inquiry, commissioned in February 1963, and which reported in May 1965,41 a Royal Commission into restrictive trade practices in Tasmania in 1965 added impetus to interest in structural reform to the economy through a restrictive trade practices law.42 [2.110] As Ron Bannerman, the first Commissioner of Trade Practices explained:43 It is remarkable … that the 1965 Act actually happened. The initiative came personally from Sir Garfield Barwick as Attorney-General, who launched the project in a long detailed statement to the Parliament in December 1962. The subject matter seemed esoteric and difficult to understand because of the technicalities that entered immediately into the discussion and confused it.
It was not until 1965, after Barwick had left the Attorney-General’s portfolio and Billy Snedden QC had taken over as Attorney-General, that a watered down version of the Barwick proposal was actually passed. According to Bannerman,44 the Bill passed “with little support from the government and with much criticism from the Opposition that the Bill was not stronger and more comprehensive”. The Act received Royal Assent on 18 December 1965.
The 1965 Act [2.120] The Trade Practices Act 1965 (Cth), introduced the concept of examinable agreements and practices, examinable by a new tribunal, the Trade Practices Tribunal, to determine whether they were contrary to the public interest. Although they were subject to a number of exemptions, thos examinable agreements and practices, were:45 • agreements between competitors restricting the terms or conditions (including price) on which the parties might deal or the discounts, concessions or benefits that may be provided by any of them; • agreements between competitors restricting the quantity, quality, kinds or extent of goods or services that may be produced, acquired, stocked or supplied by any of them; • agreements between competitors restricting the places at or from which goods or services may be supplied by any of them; • agreements between competitors restricting those with whom any of them any deal; • buyers of goods or services inducing suppliers to discriminate in the price or terms of dealing in a manner likely to substantially lessen the ability of a competitor to compete with the buyer; 40. See, for example, A Castles, “State Control of Unfair Trading Practices in Australia” (1964) ALJ 164. 41. Report of the Committee of Economic Enquiry (Vernon Committee, May 1965), p 213. 42. Report of the Royal Commission on Prices and Restrictive Trade Practices and Monopolies (Chaired by Professor John Grant, AGPS, Canberra, 1965). 43. RM Bannerman, “Development of Trade Practice Law and Administration”, presented to ANU conference, Continuity and Change in Australian Economic Policy, 25–27 June 1985. 44. See Marr, n 33. 45. 1965 Act, ss 35–37.
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[2.140]
The 1965 Act
• third line forcing — requiring as condition of supply that the buyer acquire other goods or services from a third person; • trade association members attempting to induce a person to refuse to deal (or deal on disadvantageous terms) with a third person; • monopolisation — taking advantage of a dominant position to induce a person to not deal with a third person, price-cutting to substantially damage a competitor or preventing competitive entry, or imposing prices or trading terms that could only be imposed because of the dominant position. The exemptions need not be listed. It is sufficient to note that they were quite similar to the exemptions that appeared in the current Act when enacted in 1974, many of which remain there today.46 The 1965 Act also contained a specific prohibition against collusive tendering and collusive bidding. It was an offence to make or join in a collusive tender or to bid at an auction in accordance with a collusive bidding agreement, although in both cases liability could be avoided by registering the agreement with the Commissioner.47 [2.130] Although there are significant differences between the 1965 Act and the Trade Practices Act 1974, the earlier Act was, in many respects, advanced in its substantive provisions. It contained most of the basic pillars of competition law and policy now recognised in Australia and internationally. What it lacked was any effective enforcement mechanism or broadly based rights of direct private action. It also lacked a prohibition against anticompetitive mergers, now regarded as an essential part of any competition law. Importantly, it lacked both community support and constitutional certainty. From a procedural perspective the 1965 Act was extremely conservative, following as it did the United Kingdom lead. The Act certainly prohibited collusive tendering and collusive bidding but otherwise did no more than require parties to examinable agreements to register them with the Commissioner of Trade Practices.48 It also empowered the Commissioner to have examinable agreements and examinable practices reviewed by the Trade Practices Tribunal if the Commissioner thought them to be contrary to the public interest.49 [2.140] The Act established the Trade Practices Tribunal as an independent statutory body, a controversial matter having regard to the division of powers entrenched under the Australian Constitution. If the Tribunal found an agreement to be contrary to the public interest, it declared the agreement unenforceable and could make restraining orders.50 This inevitably provided an opportunity to challenge the constitutional legality of the Act on the grounds that the Tribunal was empowered to exercise judicial power; power reserved to courts under the Australian Constitution. It was not entirely toothless, however. The Act conferred power on the Tribunal to make declarations and issue restraining orders. Where the Tribunal made an order
46. 1965 Act, ss 38, 39. Competition and Consumer Act 2010, s 51. 47. 1965 Act, ss 85, 86. 48. A requirement that led immediately to constitutional challenge in Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468, seeking to have the court emasculate the Act as it had done in Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330. 49. 1965 Act, s 46. 50. 1965 Act, ss 51–52. © 2018 THOMSON REUTERS
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[2.150]
declaring a practice or agreement contrary to the public interest, any person who suffered loss or damage could recover damages through the courts.51 Finally, the 1965 Act did not bind the Crown, either in the right of the Commonwealth or the State. This meant that Commonwealth and State trading activities, quite prevalent in the economy at that time,52 were not subject to the Act.53 This position was to continue, in relation to the Crown in the right of the Commonwealth, until 1977, and in relation to the Crown in the right of the States, until 1996. [2.150] Before turning to the constitutional uncertainties that placed the 1965 Act in limbo between 1967 when it came into force, and 1971 when the High Court decided the last of the challenges, it is convenient to deal with the emergence of the prohibition against resale price maintenance.
Resale Price Maintenance [2.160] One of the original pillars of competition law not included in the 1965 Act was a prohibition against vertical resale price maintenance — the requirement by a manufacturer or wholesaler that retailers not resell its products at less than the price specified by the manufacturer or wholesaler. Although part of the original Barwick proposal, it had been dropped by the time the legislation reached the Parliament. In the United States, vertical resale price maintenance had come before the Supreme Court in 1911 and was declared, by majority, to be in breach of the Sherman Act.54 The case involved the manufacturer of proprietary medicines requiring retail pharmacies to only sell the products at the manufacturer’s specified price. However, in Australia in the early 1960s, there was little recognition at a political level of the significant inhibitors to retail price competition that the practice produced. In the then rigid Australian economy, manufacturers each dictated the retail price at which their products were to be resold and refused to deal with retailers who engaged in discounting. It was thought in Australia at that time that it was a manufacturer’s right to control the price at which its products would be resold, as long as that did not involve one of the examinable agreements or practices the Act contained. In the United Kingdom, the Resale Price Act 1964 had rendered void any provision in a contract for the sale of goods that purported to establish a minimum resale price.55 This had followed the introduction of a prohibition on collective resale price maintenance in 1956.56 [2.170] Although the Australian Industries Preservation Act 1906 (Cth) was generally regarded as dead, collective resale price maintenance brought it back before the High Court shortly before the 1965 Act was introduced. This occurred in circumstances that gave some hope that the trade and commerce power could provide at least a level of constitutional cover for the 1965 Act. In Redfern v Dunlop
51. 1965 Act, s 88. 52. This included, for instance, railways, airlines, the Commonwealth Bank, State banks, water and electricity suppliers. 53. 1965 Act, s 6. 54. Dr Miles Medical Co v John D Park & Sons Co 220 US 373 (1911). 55. See Richardson, Introduction to the Australian Trade Practices Act (Hicks Smith, 1967), p 38. 56. Trade Practices Act 1956 (UK), s 24.
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[2.180]
Resale Price Maintenance
Rubber Australia Ltd,57 the High Court had to decide whether a private action under the Australian Industries Preservation Act attacking a collective resale price maintenance agreement between tyre manufacturers was maintainable. The court held that it was, including the treble damages provision of the Act. As Chief Justice Dixon said and other members of the court agreed: “the main subject, suppression of restraint of trade and of monopolies, is, in my opinion, clearly within the subject of trade and commerce with other countries and among the States provided, of course, that intra-State trade is not included as a direct subject”. However, that case involved collective resale price maintenance, a practice now covered by the prohibition on cartel conduct.58 It did not deal with vertical resale price maintenance. That issue was to emerge as a political challenge in 1971, in an unusual turn of events. 59 [2.180] In January 1970, Bob Hawke was elected Australian Council of Trade Unions (ACTU) President. As an ACTU advocate he had railed for years against what he saw as manufacturers setting resale prices, thereby rigidly controlling profit margins at all levels of the supply chain. However, until he became president of the ACTU he lacked both the practical and financial means to deal with the problem. That changed when the owner of a Melbourne discount department store, Bourke’s, approached Hawke proposing a joint enterprise to provide cheaper products for unionists. Bourke’s had been refused supply of television sets because it had undercut the resale price set by the manufacturers. A commercial joint venture between Bourke’s and the ACTU was negotiated. Its explicit aim was to break retail price maintenance in Melbourne. As Hawke’s biographer stated:60 The ACTU executive quickly grasped the unspoken technicalities of [the] proposal. Hawke, using the power of his position in the trade unions and the press, would out-bully the big retailers should they refuse to supply Bourkes. Manufacturers and suppliers would be more frightened of him than, for example, of Myers – and the entire structure of retail price maintenance in Melbourne would come tumbling down.
Hawke forced the case publicly against manufacturers who refused to supply the store because it discounted their products. The ACTU advised unions to place a ban on Dunlop, one of the manufacturers that had refused to supply Bourke’s, and Dunlop capitulated, thereby effectively setting in train steps to end the practice.61 The media reported that:62 A union black ban has been placed on all goods going to and from Dunlop Australia Ltd and its subsidiary companies. Rail, road, sea and air workers will be instructed not to handle any of their goods. Leaders of 12 unions made the decision unanimously at a meeting called by the Trades Hall Council at the request of the ACTU. The president of the ACTU, Mr R. J. Hawkc, said the black ban would stay on until Dunlop and its subsidiaries decided to review their resale price maintenance policies towards Bourke’s;
57. [1964] HCA 9; (1964) 110 CLR 194; 37 ALJR 413; [1964] ALR 618. 58. Competition and Consumer Act 2010, s 45AD; formerly Trade Practices Act 1974, ss 45, 45A. 59. See J G Collinge, “Resale Price Maintenance in Australia” in J G Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970). 60. D’Alpuget, Hawke (MUP, 2010), p 279. 61. D’Alpuget, Robert Hawke (Reed, 1994), pp 184–187. 62. Canberra Times, 18 March 1971, p 1. © 2018 THOMSON REUTERS
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[2.190]
the ACTU Store. The ACTU will be asked to convene . its national disputes committee on Friday to take the dispute over on an Australia wide basis.
Although the bans were lifted the next day when Dunlop capitulated,63 the political impact was immediate. Prime Minister McMahon, who had assumed the Prime Ministership from John Gorton on only a week earlier was facing an imminent election with an uncertain outcome,64 and decided that an immediate policy change was required. Within days the Cabinet had approved work on an amendment to the 1965 Act to include resale price maintenance provisions65 based on the United Kingdom legislation. The amendment was brought to Parliament quickly and came into force on 5 May 1971.66
The Constitutional Conundrum [2.190] The 1965 Act had to survive a number of constitutional challenges before it could operate fully effectively, even within its limited scope. The first constitutional challenge related to the status of the Trade Practices Tribunal. This was a logical way to challenge the Act because its whole operation depended on adverse findings by the Tribunal. As noted earlier, the Act conferred power on the Tribunal to make declarations and issue restraining orders. Where the Tribunal made an order declaring a practice or agreement contrary to the public interest, any person who suffered loss or damage could recover damages through the courts. Clause 71 of the Constitution vests the judicial power of the Commonwealth in the High Court of Australia (and such other federal courts as the Parliament creates) and sets out the terms on which judges of such courts are to be appointed. In 1918, the High Court had decided that the Constitution did not permit Parliament to confer judicial power on administrative tribunals.67 It was quite clear that the Trade Practices Tribunal was not a federal court within the meaning of the Constitution. The 1965 Act had set the scene for a constitutional challenge by conferring on the Tribunal power to issue restraining orders where the Tribunal declared examinable agreements and practices contrary to the public interest. [2.200] The issue came before the High Court in 1969 on an application by brewers in Tasmania.68 When the Commissioner sought to bring proceedings before the Tribunal in relation to Tasmanian Breweries Pty Ltd the company applied to the High Court for a declaration that the provisions of the Act constituting the Tribunal were invalid. By a conclusive majority, five of the six sitting members of the court 63. Canberra Times, 19 March 1971, p 1. As the paper subsequently reported, “HAWKE is the most spoken name in Melbourne at present. Capitulation of the mighty fascinates human beings. … People who normally take no interest in such matters asked each other the meaning of the ACTUDunlop showdown. The speed of Dunlop’s surrender heightened the drama. Melbourne is not used to commercial giants who bow the knee to revolutionary demands from labour leaders before the second day of conflict is fairly under way.” Canberra Times, 24 March 1971, p 31. 64. At the election in December 1972 the McMahon Government was defeated. 65. Canberra Times, 22 March 1971, p 1. 66. Trade Practices Act 1971 (No 57, 1971), amending the Trade Practices Act 1965–1969. In December 1971 that Act was repealed and replaced by the Trade Practices Act 1971 (No 138, 1971). 67. Waterside Workers’ Federation of Australia v JW Alexander Ltd (1918) HCA 56; (1918) 25 CLR 434. 68. R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) HCA 8; (1970) 123 CLR 361.
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[2.210]
The Constitutional Conundrum
decided that, in performing the functions conferred on it, the Tribunal was not exercising federal judicial power.69 The court’s analysis of each of the duties and powers conferred on the Tribunal explained why. Taking first the Tribunal’s duty to ascertain the public interest, and make declarations accordingly, this was held not to be a determination of right or obligations as between parties. It was an exercise of “administrative or quasi-legislative”70 power rather than judicial power. But what of the power to issue restraining orders in relation to examinable practices found to be contrary to the public interest? That power was also held not to be judicial power because it was not granted “as a means of enforcing obligations that have been established”. Rather, it was “an order in conformity with ascertained obligations … not in order to ensure observance of them but to prevent observance of them, because it is considered that their observance would be against the public interest”.71 The view taken by the court is perhaps best summed up in the closing comment in Justice Windeyer’s reasons. His Honour said: This Court has the duty of keeping the Parliament within its constitutional bounds. But it is equally its duty itself to keep within the province marked out for it as the judicial power of the Commonwealth. The Court, no less than the Parliament, must observe the separation of powers. I see no compelling reason in this case for setting at naught the declared will of the duly elected Parliament of the Commonwealth.72
[2.210] The second constitutional challenge was far more fundamental. It challenged the power of the Commonwealth to legislate in relation to trade practices at all. The Australian Industries Preservation Act 1906 (Cth) had, as earlier noted, foundered on the High Court’s interpretation of s 51(xx) of the Constitution, which provides: The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.
A central issue in the 1909 challenge, in Huddart Parker,73 had been the authority of the Commonwealth to legislate in relation to corporations formed and carrying on business solely within a State. The majority of the High Court had decided that the Commonwealth did not have power to legislate to control the operations of trading corporations lawfully engaged in intrastate trade or commerce. Although the Commonwealth had power over trade and commerce, that power only extended to trade and commerce between the States or internationally. The Commonwealth’s broader power to legislate for the peace, order and good government of Territories was also of little utility because Australia’s trading, commercial and financial centres were not based in any Territory. As the majority of commercial activity was State based the decision in Huddart Parker meant that the Commonwealth had no effective means of legislating comprehensively in relation to corporations that controlled Australian commercial and financial activity.
69. See Richardson, “Legal Aspects of the Control of Monopolies, Mergers and Restrictive Trade Practices” (1962) 35 ALJ 423. 70. Per Justice Windeyer at (1970) 123 CLR 361 at 400. 71. Per Justice Kitto at (1970) 123 CLR 361 at 378. 72. (1970) 123 CLR 361 at 403. 73. Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330. © 2018 THOMSON REUTERS
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[2.220]
[2.220] The Federal Government’s response was to seek, in 1911, amendments to the Constitution to expand Commonwealth powers over trade and commerce and over corporations and to give the Commonwealth power to legislate in relation to monopolies. The referendum was defeated. Only in Western Australia was there a majority in favour of the amendment and that was by a slim 54.86%. Successive subsequent attempts in 1913,74 1919 (as a temporary measure only),75 192676 and 194477 were also defeated. As the century progressed, transport and communications links developed and more and more industries operated on a national basis. But it remained possible to avoid the legislative reach of Commonwealth by incorporating separate subsidiaries in each State to carry on the business in that State. This made it impossible to introduce a comprehensive competition law without either a constitutional amendment or a referral of power from the States, neither of which was forthcoming. Enacted at a time of changing social and political attitudes to monopolistic practices, the 1965 Act anticipated a referral of powers from the States78 but that was not forthcoming and the 1965 Act came into force in 1967 without it. [2.230] The lack of comprehensive Commonwealth coverage over corporations and the lack of explicit constitutional power to deal with monopolies or anticompetitive practices left the 1965 Act vulnerable to constitutional challenge based on Huddart Parker. Barwick, in a speech to an Australian Legal Convention in 1962 had said, not without justification, that “After all, the very artificiality of the dichotomy of trade into interstate and intra-State trade … may well operate to enable federal legislation to go a great distance in protecting Interstate trade from the harm of [restrictive practices]”.79 Nevertheless, the uncertainties remained as clear as those expressed in an AttorneyGeneral’s Department opinion, 20 years earlier, relating to a possible Federal company law:80 It is true that the personnel of the Court has changed completely since the decision [in Huddard Parker], and it is also true that since the Engineers’ case (Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd. 28 C.L.R. 129), there has been an important change in the principles of interpreting the Constitution, but the fact remains that there is so much uncertainty as to what the view of the Court to-day would be on the subject that the Parliament could not take the risk of providing for the creation of companies which might at any time be found not to have been lawfully incorporated.
[2.240] Queensland produced the first such challenge. Strickland,81 provided the opportunity for the High Court to consider the matter. The case reached the High Court in 1971, four years after the Act came into force and after Barwick’s appointment as Chief Justice. The case resulted from a prosecution of concrete 74. 75. 76. 77. 78. 79. 80.
Majorities in favour in Queensland, South Australia and Western Australia only. Majorities in favour in Queensland, Victoria and Western Australia only. Majorities in favour in New South Wales and Queensland only. Majorities in favour in South Australia and Western Australia only. 1965 Act, s 8. (1963) 36 ALJ 363. Opinion of Solicitor-General, Sir George Knowles CBE, 14 November 1945, . 81. [1971] HCA 40; (1971) 124 CLR 468; 37 ALJR 413; [1964] ALR 618.
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[2.250]
The 1971 Remedial Act and Work on a New Approach
manufacturers for failing to register their agreements under the 1965 Act. The manufacturers were all incorporated in Queensland and carried on business only in Queensland. They therefore argued, based on Huddart Parker, that the 1965 Act was unconstitutional to the extent that it purported to apply to them. The High Court decided that the 1965 Act was unconstitutional, but not on the basis of Huddart Parker. In fact the court took the opportunity to declare that, as Huddart Parker was based on the doctrine of reserved State powers, a doctrine rejected by the court in the Engineers case82 in 1920, Huddart Parker had been wrongly decided. In rejecting Huddart Parker, the High Court decided that the Commonwealth Parliament had power under s 51(xx) to enact a law governing the conduct, by a trading corporation formed with the limits of the Commonwealth, of the corporation’s business,83 thereby paving the way for the Commonwealth to legislate a new Trade Practices Act that was within its constitutional power.
The 1971 Remedial Act and Work on a New Approach [2.250] Although the constitutional challenge in Strickland had succeeded, the High Court’s decision to explicitly reject Huddart Parker gave the Commonwealth the authority it needed to remedy the defects in the 1965 Act without undue effect on the substantive provisions of the Act. The government therefore re-introduced the 1965 Act and it passed without delay. Its introduction provided an opportunity, especially in the Senate, for the Opposition to propose strengthening the legislation by, for instance, making predatory pricing an offence, but that was not taken up. The remedial Act came into effect on 9 August 1971, without inclusion of the Opposition’s proposal. By this time public attitudes to monopolistic practices and anticompetitive arrangements were changing, although organised business opposition to the legislation was not. In early 1971 the then Attorney-General, Tom Hughes QC, sought Cabinet approval, pointing out that: ‘The express purpose of the Act is to preserve competition. However the Act permits anti-competitive agreements and practices to continue unless and until they have been determined … on a case by case approach, to be contrary to the public interest. … The Act is proving ineffective to ensure the desirable degree of competition.84
Cabinet approval was obtained in March 1971 just before Hughes was replaced as Attorney-General in the reshuffle that followed the resignation of John Gorton as Prime Minister. Nevertheless, work that Hughes had initiated continued. In his submission to Cabinet, Hughes had observed:85 My own assessment, which, I think, is shared by some commentators, is that the Act is proving ineffective to ensure the desired degree of competition. The number of anticompetitive agreements on the register is so great that the laborious case-by-case consideration of the compatibility of each of them with the public interest is a quite
82. 83. 84. 85.
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129. (1971) 124 CLR 468 per Justice Menzies, 511. Cabinet Submission No 693/1971, Trade Practices Act 1965 – 1969: Need for Amendment. Cabinet Submission No 693/1971, Trade Practices Act 1965 – 1969: Need for Amendment.
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Origins of Australian Competition Law
[2.260]
inadequate method of dealing with them. Parties to objectionable arrangements are deliberately taking advantage of the time-consuming procedures of the Act to postpone changes that are desirable in the public interest.
[2.260] Senator Ivor Greenwood, who succeeded Hughes as Attorney-General,86 made a lengthy submission to Cabinet on 7 December 1971 that contained a blueprint for a much more aggressive trade practices law.87 The changes proposed were designed to substantially strengthen the Act. Attorney-General Greenwood’s recommendations to Cabinet included that it should be an offence to enter into agreements of most of the types that then required registration. Penalties of up to $50,000 should be imposed on corporations engaged in such agreements and up to $10,000 or two years’ imprisonment for individuals. Directors of corporations that contravened the Act should be guilty of an offence unless they establish that the offence was committed without their knowledge and that they took all reasonable steps to avoid the corporation contravening the Act. Work on proposals to deal with “monopolization, predatory pricing, mergers and take-overs, exclusive dealing, full-line forcing and refusals to supply” was also recommended. Cabinet referred the matter to an interdepartmental committee. The committee’s view, expressed in its second report to Cabinet, reflected the views expressed by Hughes that the 1965 Act was neutral in its policy on anticompetitive agreements, “involving little or no prima facie stand that anticompetitive agreements are contrary to the public interest” and that this should change. The committee was also of the opinion that the registration and examination process required by the 1965 Act was working too slowly. Further consideration of the matter was delegated to an ad hoc Cabinet committee consisting of the Attorney-General, the Treasurer and the Ministers for National Development, Health and Foreign Affairs.88 A significant amount of work was done, with the Cabinet committee giving detailed consideration to five interdepartmental committee reports on the subject, but the work was never finished.89 In December 1972 the government changed.
A New Policy Direction [2.270] A change was occurring in public sentiment as Australia grappled with rising unemployment, a decline in consumer spending, rising inflation and a trend to industry consolidation through mergers.90 The McMahon Government had made some attempts at economic reform but they were clearly insufficient. The laissezfaire economic policies that had characterised the previous 23 years were about 86. Hughes served as Attorney-General until 22 March 1971 when he was succeeded by Sir Nigel Bowen who, in turn, was succeeded by Senator Greenwood on 2 August 1971. 87. Cabinet Submission No 465/1971, Restrictive Trade Practices: Proposed Strengthening Legislation. 88. Cabinet Decision No 650 (16 December 1971). 89. Cabinet Ad-Hoc Committee Decisions 714 (4 February 1972), 817 (14 and 15 March 1972) and 943 (8 May 1972). Cabinet Decision No 936 (3 May 1972). 90. The McMahon Coalition Government had moved to deal with monopolies by introducing a Monopolies Commission Bill just prior to the December 1972 general election. The then AttorneyGeneral, Senator Ivor Greenwood, told the Senate that: “the trend towards monopoly conditions in Australia could not be allowed to take place without surveillance in the public interest”.
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[2.270]
A New Policy Direction
to be replaced with a confronting array of new legislative measures challenging accepted business practices. Foremost among them was a new approach to competition policy. 91 The Whitlam Labor government, elected in December 1972 with a reform agenda that included greater emphasis on tougher measures to deal with restrictive trade practices, took up the task and added initiatives on consumer protection to the reform package.92 Senator Lionel Murphy QC, the new Attorney-General, took up the challenge of creating a modern competition law for Australia. The result was the forerunner of the Act as we have it today.
FURTHER READING Author D’Alpuget D’Alpuget Donald and Heydon Hovenkamp
Title Hawke Robert Hawke Trade Practices Law Federal Antitrust Policy
Hunter
Restrictive Practices and Monopolies in Australia The Structure of the Australian Economy Barwick Australian Trade Practices Law Australian Trade Practices Readings Introduction to the Australian Trade Practices Act “Legal Aspects of the Control of Monopolies, Mergers and Restrictive Trade Practices” “The Law Relating to the Australian Trade Practices Plan”
Karmel and Brunt Marr Masterman and Solomon Nieuwenhuysen Richardson
Richardson
Richardson
Publisher/Citation MUP, 2010 Reed Books, 1995 Law Book Co, 1978 Thomson West, 3rd ed, 2005 Economic Record, March 1961 Cheshire, 1962 Allen & Unwin, 1980 Butterworths, 1967 Cheshire, 1970 Hicks Smith, 1967
(1962) 35 Australian Law Journal 423
(1963) 37 Australian Law Journal 203
91. As Economics writer Warwick Bracken noted at the time: “After 23 years of laissez-faire economic policies, Australian businessmen are confronted, suddenly they must feel, with an array of legislative controls. No less than three Bills regulating business behaviour … were presented to the Parliament … ”. Canberra Times, 15 November 1972, p 29. 92. E G Whitlam, ALP Policy speech, 13 November 1972. © 2018 THOMSON REUTERS
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Origins of Australian Competition Law
Siegfreid and Mahony Stigler Walker Whitlam
26
“The First Sherman Act Case: Jellico Mountain Coal 1891” “The Origin of the Sherman Act” Australian Monopoly Law The Whitlam Government
[2.270]
(1990) 35 Antitrust Bulletin 801 (1985) 14 Journal of Legal Studies Cheshire, 1967 Penguin, 1985
Miller’s Australian Competition Law and Policy
DEVELOPMENT OF AUSTRALIAN COMPETITION POLICY 1972–1992 [3.30] [3.120]
[3.240]
[3.290]
[3.360]
[3.400]
3
A New Approach to Competition Policy ................................................ Swanson Committee ............................................................................. [3.170] Price Discrimination .............................................................. [3.170] Commonwealth Businesses ................................................. [3.190] Unions ................................................................................... [3.200] Mergers ................................................................................. [3.210] Monopolisation ..................................................................... [3.220] The Result ............................................................................ Blunt Committee .................................................................................... [3.250] Small Business Report ......................................................... [3.260] Price Discrimination .............................................................. [3.270] Monopolisation ..................................................................... [3.280] The Result ............................................................................ Green Paper — Proposals for Change ................................................. [3.300] Price Discrimination .............................................................. [3.310] Monopolisation ..................................................................... [3.330] Mergers ................................................................................. [3.340] Unions ................................................................................... [3.350] The Result ............................................................................ Griffiths Committee ............................................................................... [3.370] Misuse of Market Power ....................................................... [3.380] Mergers ................................................................................. [3.390] The Result ............................................................................ Cooney Committee ................................................................................ [3.410] Misuse of Market Power ....................................................... [3.420] Mergers ................................................................................. [3.430] The Result ............................................................................
28 31 33 33 34 34 35 35 36 37 37 37 38 38 38 39 39 39 40 40 41 42 42 43 43 43 44
[3.10] It would be a mistake to attribute the development of Australian competition policy to one of coherent, chronologically consistent policy progression. A shifting array of political, cultural, economic and social pressures all came to bear, in differing ways and at different times, on the thinking that ultimately led to our current view of competition policy and the laws that it represents. This chapter provides context for the current Competition and Consumer Act by describing some of the major social and political influences that have helped to shape modern Australian competition law. It also provides an historical overview of the various Parliamentary and other inquiries that have considered our competition law and policy over the years and the recommendations they have made. Some have been taken up; many have not.
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Development of Australian Competition Policy 1972–1992
[3.20]
[3.20] Historically, the logical starting point is the Australian Industries Preservation Act 1906 (Cth). The genesis and plight of that Act are described briefly in Chapter 2. As we noted in Chapter 2, although it was not repealed until 1965, the Australian Industries Preservation Act 1906 (Cth) fell into disuse. The Trade Practices Act 1965, and the remedial Trade Practices Act 1971, had helped resolve constitutional uncertainties, but from a competition policy perspective that legislation was merely a start. The election of the Whitlam Labor Government in December 1972 heralded an entirely new approach to competition policy.
A New Approach to Competition Policy [3.30] Gough Whitlam QC had started to explore the need for more effective trade practices laws much earlier1 and Labor had pressed the government on this while in opposition, so it was no surprise that one of the first legislative steps taken by the Whitlam Government, when elected in December 1972, was in relation to competition policy. Armed with the constitutional authority Strickland had provided, the Whitlam Government set about designing a new competition and consumer protection statute for Australia based on the United States model. It utilised much of the work that had gone into and followed Senator Greenwood’s 1971 Cabinet submission. AttorneyGeneral, Lionel Murphy QC, took the policy to Cabinet in March 1973 and obtained authority to prepare a Bill covering the full policy package — restrictive trade practices, monopolies and consumer protection.2 [3.40] Attorney-General Murphy, obtained Cabinet approval to prepare a Bill in February 1973,3 which he instructed his department to prepare guided by the following principles: • a proscriptive approach by which specified anticompetitive conduct would be outlawed …; • coverage of mergers and misuse of market power as well as horizontal and vertical restrictive practices; • serious penalties to give weight to the law; • private rights of action to give affected businesses and individuals a self-interest in the law to avoid exclusive dependence on the whims and fortunes of a regulatory body; … and • a preference in drafting for use of broad concepts and principles rather than detailed prescription.
The team moved quickly to translate Cabinet’s decision into legislation. The new Bill was introduced in the Senate on 27 September 1973. The Bill marked a clear move away from the tendency to follow UK law in this area and to introduce an Australian version of competition law squarely based on the US model.
1.
In his 1957 Chifley Lecture, Whitlam had made reference to the need for antitrust laws in Australia, based on a combination of UK and US legislative experience: E G Whitlam, The Whitlam Government (Penguin Books, 1985). 2. Cabinet Decision No 248 (6 March 1973). 3. Cabinet Submission No 137 (16 February 1973), approved by Cabinet on 6 March 1973 by Decision No 248.
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[3.70]
A New Approach to Competition Policy
Although, in relation to restrictive practices, the 1974 Bill reflected the areas covered by the 1965 Act, it was a radical departure from the earlier legislation. Determined to introduce a law of broad general application, Attorney-General Murphy QC brought in a new team of young advisers who had studied competition law in the US and, building on the work that had been done by the interdepartmental committee in 1971, fashioned a fundamentally different trade practices law for Australia. [3.50] Introducing the Bill, Murphy QC described the existing legislation as ”one of the most ineffectual pieces of legislation ever passed by the Parliament” and went on to observe: Restrictive trade practices have long been rife in Australia. Most of them are undesirable and have served the interests of the parties engaged in them, irrespective of whether those interests coincide with the interests of Australians generally. These practices cause prices to be maintained at artificially high levels. They enable particular enterprises or groups of enterprises to attain positions of economic dominance which are then susceptible to abuse; they interfere with the interplay of competitive forces which are the foundation of any market economy; they allow discriminatory action against small businesses, exploitation of consumers and feather-bedding of industries.4
[3.60] Murphy’s Bill did away with the concept of examinable agreements and practices, leaving it to parties to either apply in advance to a new independent authority, the Trade Practices Commission, for clearance or authorisation, or to take the risk that their agreements and practices might be found to be anticompetitive. It gave private parties direct access to the courts to mount challenges. The Bill stopped short of the United States treble damages approach, but it entitled anyone who suffered loss or damage to recover compensation by taking private court action not dependent on any decision of the Commission. It also entitled the Attorney-General and the Commission to institute proceedings for injunctions and significant civil damages against anyone found by the court to have breached the Act. [3.70] Although Strickland had provided a way forward constitutionally, constitutional uncertainties remained about the extent to which the Commonwealth could legislate without a referral of power from the States; a step the States were unlikely to take.5 The Bill called on every conceivable available constitutional power to extend its operation to corporations formed within Australia, whether limited in their operation to one State or not, foreign corporations, natural persons who aided or abetted a contravention and anyone in a Federal Territory. However, the Bill stopped short of applying to Commonwealth or State trading activities. Amendments in 1977 dealt with the former, but changes in the latter had to wait a further 30 years. Significantly, the Bill went beyond competition matters. In a decision that was to prove extremely important in developing the public support the new Trade Practices Commission would need when challenging long-standing anticompetitive practices by big business, Murphy included in the Bill wide-ranging authority for the Commission to protect consumers. This proved to be significant in engendering public support for the new law, especially as, for the first time, it empowering consumers themselves to take private action to enforce their rights. 4. Senate, Hansard, 27 September 1973. 5. Ultimately achieved in 1996, some 30 years after it was first provided for in the Trade Practices Act 1965 (Cth). © 2018 THOMSON REUTERS
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[3.80]
[3.80] Passage of the Bill was not easy. The Trade Practices Bill 1973 was introduced in September 1973 but the Senate voted to defer consideration of it. The government then introduced the Bill into the House of Representatives, using its numbers to secure passage, but when the Bill moved to the Senate it was again deferred. The Bill remained there until it lapsed on 11 April 1974 when Parliament was dissolved for a double dissolution election. The Whitlam Government was returned, but without a Senate majority. Following the election the government tried again, with some amendments reflecting comments made on the first Bill. Lionel Murphy QC re-introduced the Bill in the Senate on 30 July 1974, with a detailed Second Reading speech that included the following prescient observation: The present Bill recognises the futility of such drafting. Many matters have, of course, had to be stated in detail. But other provisions, particularly those describing the prohibited restrictive trade practices, have been drafted along general lines using, wherever possible, well understood expressions. I am confident that this will be more satisfactory. The Courts will be afforded an opportunity to apply the law in a realistic manner in the exercise of their traditional judicial role.6
[3.90] Passage of the Bill through the Senate was no easy matter. As Richard St John has reported:7 “In a dramatic development on 15 August 1974, the Government lost a vote on an amendment which resulted in the striking out of the Bill of the penalty provisions. Later the same evening, following behind the scenes activity, the relevant clause was resubmitted and adopted with a minimum of fuss.”8 The Bill passed and came into force on 1 October 1974, with the prohibition on contracts, arrangements and understandings in restraint of trade and exclusive dealing coming into effect on 2 February 1975. [3.100] In a few short, broadly expressed clauses, the Act prohibited contracts, arrangements or understandings in restraint of trade, monopolisation, vertical resale price maintenance, price discrimination and mergers likely to have an adverse effect on competition. It established a new, independent commission, the Trade Practices Commission, with power to grant immunities9 and also to go direct to the court to seek pecuniary penalties where a contravention had occurred. The Act established a direct right of private action for the first time. In retrospect, that Act appears modest, but Australian business at the time feared that its effect would be enormous and opposition was trenchant. The Australian Chamber of Commerce described the legislation as “the most punitive legislation
6. Senate, Hansard, 30 July 1974, p 542. 7. R St John, “Reflections on 20 Years of the Trade Practices Act”, ACCC Bulletin No 79, p 25. Richard St John was then a senior officer in the Attorney-General’s Department responsible for developing the new Bill. 8. R St John, “Reflections on 20 Years of the Trade Practices Act”, ACCC Bulletin No 79, p 24. The question in issue was whether the standard of proof for contravention of the competition provisions of the Bill should be the civil standard or the criminal standard. The Opposition had proposed a criminal standard, which would have made proof of a contravention significantly harder to establish: Senate, Hansard, 15 August 1974, p 983. 9. The Commission could either grant a clearance if the contract, arrangement or understanding was assessed as unlikely to be in restraint of trade, or authorisation if there were public benefits outweighing any anticompetitive detriment.
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ever to be introduced into the Australian Parliament to govern business conduct”.10 The Chamber’s principal complaint was that: The Bill represents a complete change of philosophy on this highly complex aspect of business. The underlying principle of the existing legislation, that most agreements or practices are lawful and may be continued until proved contrary to the public interest, has been swept aside. Instead, the Government has decided to prohibit a wide range of business practices and in the case of price agreements, no provision has been made for exemptions.
[3.110] Business reacted by flooding the new Commission with immunity applications. By the time the Swanson Committee reported in August 1976 the Commission had a backlog of applications dating back to early 1975, which it estimated would take a further 12 months to clear. The new Act got off to a brisk, but unexpected, start. The first successful cases brought in the United States under the Sherman Act were against labour unions11 rather than big business, and Australia’s first case was similar. Private medical practitioners in Canberra took action against the Canberra Hospital Board, claiming that the Board had engaged in monopolisation when it engaged salaried specialists and gave them a right of private practice.12 An interlocutory injunction was granted, but the matter settled without a substantive hearing.
Swanson Committee [3.120] Within nine months of the new Trade Practices Act 1974 coming into force, the government changed again. The Fraser Coalition Government was elected following the dismissal of the Whitlam Government on 11 November 1975. A new department, the Department of Business and Consumer Affairs,13 was established under Minister John Howard, to coordinate business regulation in response to a concern that the various agencies that regulated business had differing and sometimes conflicting aims. A change in policy on trade practices was one of the results of the change in government. The Liberal and National Parties had gone to the election with an ambivalent policy on trade practices. They had said that they would “keep government interference in business to a minimum level, under which adequate competition/and fair trading would continue”.14 The Minister’s brief was to unify and simplify the approach to business regulation and this included giving greater clarity to the “broad concepts and principles” that the Act then contained.15 [3.130] In April 1976, Minister Howard announced that there would be a wideranging inquiry into the operation and effect of the Act. Many regarded this as a
10. 11. 12. 13.
Canberra Times, 10 October 1973, p 24. H Hovenkamp, Enterprise and American Law 1836–1937 (Harvard University Press, 1991), p 229. Canberra Times, 13 February 1975, p 3. The change in portfolio responsibility resulted in most of the Business Affairs Division of the Attorney-General’s Department being transferred to the new department. This was reversed when the Department of Business and Consumer Affairs was subsequently disbanded. 14. Canberra Times, 20 November 1975, p 8. 15. See D Barnett and P Goward, John Howard: Prime Minister (Viking, 1997), pp 30–33. © 2018 THOMSON REUTERS
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means of emasculating the new legislation,16 but the result was the opposite. There were two reasons for this. First, an active small business lobby, recognising the protection afforded by the Act to small business, argued for greater certainty and a reduction in the administrative burden imposed by the Act, but wanted the Act to stay. Second, the Transport Workers Union had imposed a black ban on the transportation of petrol from Melbourne to Sydney to prevent service stations in Sydney engaging in price-cutting. The Trade Practices Commission was unable to take action because the Act did not apply to trade unions. In its original 1974 form, the Act did not refer to unions, except by including an obscure reference in one of the exemption provisions. That reference, in a provision excepting certain conduct from the competition provisions, stated that the prohibitions on resale price maintenance and arrangements in restraint of trade were not to apply to anything done by an organisation of employees other than in the course of carrying on a business.17 [3.140] In its first annual report, the Commission had planted the seed for union activities to be covered by the Act, observing simply that the then exemption for union activity “can cause disquiet because it moves against competition.”18 Minister Howard obtained Cabinet approval to add a term of reference requiring the inquiry to “give particular attention to the application of the Act to anticompetitive conduct by employees, and employee or employer organisations”.19 [3.150] In August 1976, the Swanson Committee delivered its report to the government.20 A crucial term of reference was to advise on whether the Act was achieving its intended purpose of developing and maintaining a free and fair market and whether Australian consumers were benefiting from the Act. To this the committee gave an equivocal response, stating that: The Committee is aware that the Act has been in operation only since October 1974 and has since then affected a great many practices previously held, by the businesses concerned, to be legitimate and appropriate to the Australian market. The relevant confusion, upset and in some cases resentment, has tended to direct attention to particular problems of the Act rather than its broad effect.21
The report then proceeded to work through the particular problems raised with it in relation to the Act and developed practical recommendations for dealing with each. In doing so, the report provided a blueprint for changes to the Act that would improve its effectiveness rather than result in its watering down.
16. John Howard is reported as stating that one objective of the government was to “ensure that restrictions on business activity were the minimum necessary to promote adequate competition and conditions of fair trading.” Canberra Times, 2 April 1976, p 11. 17. Original Trade Practices Act 1974, s 51(2)(a). The reference to carrying on business was presumably a reference to the fact that unions were engaged in some commercial activities, such as through the ACTU’s investment in the Bourke’s department store. Section 51(2)(a) also exempted anything done by anyone in relation to the remuneration, conditions of employment, hours of work or working conditions of employees. 18. Trade Practices Commission First Annual Report (1975), para 1.50. 19. Swanson Committee, Term of Reference No 5, Trade Practices Act Review Committee Report, p 1 (Swanson Report). 20. Trade Practices Act Review Committee Report (AGPS, 1976). 21. Trade Practices Act Review Committee Report (AGPS, 1976), p 4.
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[3.160] Rejection of the report by the government, or at least a watering down of the Act as big business had hoped, was a real possibility. But instead, the government decided to accept Swanson’s recommendations. The consequence was the Trade Practices Amendment Bill 1977, a comprehensive overhaul of the Act that introduced many of the Act’s current provisions. For instance, the core provision dealing with restraints of trade was replaced with a broader prohibition on anticompetitive provisions in contracts, arrangements and understandings.22 Per se prohibitions against pricefixing23 and primary boycotts24 were introduced, as were complex, detailed exclusive dealing provisions25 and a simplified Notification procedure that accompanied them.
Price Discrimination [3.170] The Act then contained a prohibition against discriminating,26 on price between buyers of goods of like grade and quality where the discrimination was of such magnitude or of such a recurring or systematic character that it had the likely effect of substantially lessening competition. The prohibition was based on the US Robinson-Patman Act 1936, legislation that had been roundly criticised in the United States. It had not been enforced by competition authorities in the United States for some time. Nevertheless, in Australia, small businesses saw protection against price discrimination as an important protection against large businesses that achieved discounts and rebates not available to them, especially in the retail sector. Swanson recommended its repeal because the committee concluded that the provision had produced such price inflexibility that the detriment to the economy outweighed the benefits small business operators derived from it.27 However, a strong lobbying effort by small business saw the provision retained.
Commonwealth Businesses [3.180] The government made two other important policy decisions. First, it extended the Act to cover the Commonwealth and its authorities insofar as they carry on a business.28 Second. It extended to Act to secondary boycotts. In its first annual report the Commission had observed that: “Companies in the private sector resent it if government corporations operating in their field are not subject to the same rules.”29 The issue was taken up in submissions to Swanson and the committee dealt with them by stating: We take the view that the Commonwealth Government should be prepared to accept for itself, in relation to its commercial activities, restrictions which it places on others. The same standards of commercial conduct are clearly as appropriate for officers of the Government as for persons in a less protected position.30 22. In March 1976, the High Court had handed down a decision on s 45, Quadramain Pty Ltd v Sevastapol Investments Pty Ltd [1976] HCA 10; (1976) 133 CLR 390, exposing the limitations inherent in the term “contract restraint of trade” as it originally appeared in the section. 23. Trade Practices Act 1974, s 45A (repealed in 2009). 24. Trade Practices Act 1974, ss 4D, 45. 25. Trade Practices Act 1974, s 47. 26. Trade Practices Act 1974, s 49. The current s 49 now deals with entirely different subject matter. 27. Swanson Report, p 46. 28. Trade Practices Act 1974, s 2A. 29. Trade Practices Commission First Annual Report (1975), para 1.48. 30. Swanson Report, para 10.25. © 2018 THOMSON REUTERS
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Minister Howard obtained Cabinet agreement in principle to extending the Act to government businesses and the amending Act did so.
Unions [3.190] The government’s second important policy decision was to extend the Act to deal with unions that involved themselves in activities that affected competition other than in relation to wages and conditions for the workers they represented. Responding to the additional term of reference the government had provided, Swanson was quite clear that: the Act should leave no doubt that it applies to restrictive conduct of organisations of employees which is carried out by agreement, arrangement or understanding with another person engaged in trade or commerce.31
Although it was not part of the original 1977 Bill, when the Bill was before the House, Minister Howard introduced an amendment32 designed to make secondary boycotts a breach of the Act unless primarily motivated by conditions of work. Introducing the new provision, the Minister said: the Government believes that the Trade Practices Act should take an even handed approach to secondary boycotts and apply, as far as possible, to both business and employees alike.33
The Act was to take a “firm line” on boycotts that substantially lessened competition, whether by business or the unions. It included a convoluted and poorly titled absolute prohibition on primary boycotts by competitors,34 in addition to the secondary boycott provisions directed at unions.
Mergers [3.200] The Whitlam Government had included a provision on mergers in the 1974 Act. The relevant provision prohibited acquisitions likely to substantially lessen competition, unless authorised on public benefit grounds. While this today seems an unremarkable provision, it was a highly contentious issue both politically and within the business community. Some business lobbies sought outright repeal of the merger provision. Those that did not sought to have it significantly watered down. The absence of a threshold test for the application of the provision was seen as a significant shortcoming. The potential for political intervention in the Commission’s consideration of mergers was another issue raised with Swanson. At that time, the Act entitled the AttorneyGeneral to inform the Commission where there were special national economic policy considerations in relation to a merger then under review, in which case the Commission was bound to authorise the merger.35 The Attorney-General had been roundly criticised when, in 1975, he exercised that power, immediately after the Act came into effect, to allow the merger of two biscuit companies. As one commentator said:36
31. 32. 33. 34. 35. 36.
34
Swanson Report, para 10.11. Trade Practices Act 1974, s 45D. House of Representatives, Hansard, 3 May 1977, p 1477. Trade Practices Act 1974, s 4D. Trade Practices Act, s 90(9). W Bracken, Canberra Times, 18 February 1975, p 1. Miller’s Australian Competition Law and Policy
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the application almost certainly would have been rejected by the Trade Practices Commission. An examination of the relevant documents … leads unavoidably to the conclusion that the decision was contrary to all the principles underlying the Trade Practices Act, which was conceived to protect consumer interests, and was prompted instead by motives of political dogma or self-interest.
Swanson proceeded cautiously, stating that, while a merger law was necessary, it should not be as sweeping as the current law. Furthermore, it should not apply to smaller acquisitions.37 As to thresholds, Swanson favoured a threshold based on turnover because that was seen as a well-known measure, was easily understood, and could be easily applied.38 As to the Attorney-General’s power to “direct” the Commission, Swanson stated that it was “bad in principle and should be abolished”.39
Monopolisation [3.210] While merger control was a highly contentious issue, there was general acceptance of the need for a prohibition on abuses of power by monopolies in their dealings with competitors. The relevant provision stated that a corporation in a position to substantially control or dominate a market was prohibited from taking advantage of its power to eliminate or damage competitors, or deter or prevent market entry or competitive behaviour.40 Swanson recommended against amendment but noted, prophetically, that the phrase “take advantage” was problematic.41 Swanson could not have foreseen the controversy that has attended this provision ever since.42
The Result [3.220] The result was a comprehensive make-over of the Act that came into effect on 1 July 1977. This gave the Act many of its present provisions, including a significantly expanded series of provisions dealing with anticompetitive arrangements.43 The new provisions included an expanded prohibition on anticompetitive contracts, covenants, arrangements and understandings, a per se prohibition on price fixing and competitor boycotts and a prohibition on secondary boycotts by employees, unless related to wages or conditions. As we have seen, the prohibition on price discrimination remained. When it came to mergers, the result was a reduction in coverage, although without the statutory turnover threshold Swanson had suggested. It no longer prohibited mergers that were likely to substantially lessen competition. Instead, the provision applied only to mergers that were likely to enable the corporation to control or dominate a market – in effect a change to a less stringent market structure test. Another change was the removal of the Attorney-General’s entitlement to direct
37. 38. 39. 40. 41. 42. 43.
Swanson Report, para 8.7. Swanson Report, para 8.29. Swanson Report, para 8.52. Trade Practices Act 1974, s 46(1). Swanson Report, paras 6.9 and 6.16. The development of the relevant provision, s 46, is discussed in Chapter 12. A new s 45 (contracts, arrangements and understandings), s 45A (price fixing), s 45B (covenants affecting competition), s 45C (covenants affecting price) and s 45D (secondary boycotts).
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the Commission in merger authorisation matters, thereby establishing the policy of completely independent decision-making in merger cases.44 The monopolisation provision, s 46, was amended to add to the confusion by including a “purpose” element such that, in order to infringe the section, a corporation had to have taken advantage of its market power for one of the three enumerated foreclosure purposes.45 While the Act’s coverage was by no means universal, the extension to Commonwealth business activities was significant and laid the foundation for later extensions of the Act to State, Territory and local government business activities. Summing up the position with administration of the Act between November 1975 and June 1977 when the amendments came into force, the Commission observed that:46 there was uncertainty in industry as to what the law would be requiring in a long-term sense. … Companies were often as much concerned to consider their trade practices position in relation to what they hoped the law might become as in relation to what the law then was.
Administration of the Act through the period was undoubtedly difficult, but the Act and the Commission had survived their first major challenge.
Blunt Committee [3.240] In July 1977, John Howard was appointed Minister for Special Trade Negotiations. The new Minister for Business and Consumer Affairs, Wal Fife, decided to establish a Trade Practices Consultative Committee. The committee’s role was to advise the Minister, on an on-going basis, on the practical operation of the Act and whether the Act was having any unintended effect in the marketplace. The committee was established on 28 June 1978. Leading competition lawyer, Gaire Blunt, originally a member of the committee, was appointed its chair shortly after the committee was established. The committee prepared two reports in areas of the economy of particular interest to the Coalition Government. The first was a brief report on the impact of the Act in the primary production industries, and the second, a major report on the impact of the Act on small business. The concerns of small business and the need to ensure that government encouraged the development of small business by cutting unnecessary impediments continued to be a major policy focus for the government. This remained an issue notwithstanding the “wins” small business had achieved in the outcomes of the Swanson Report.
44. The Minister still has an involvement in relation to foreign acquisitions under the Foreign Acquisitions and Takeovers Act 1975 (Cth): see JA Rowley and DI Baker, International Mergers The Antitrust Process (Sweet & Maxwell, looseleaf), Ch 3. 45. Eliminating or substantially damaging a competitor, preventing entry into a market and deterring or preventing competitive conduct. 46. Trade Practices Commission Third Annual Report (1977), para 1.6.
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Small Business Report [3.250] The committee’s report, Small Business and the Trade Practices Act, was delivered in December 1979.47 It presented a thorough analysis of all of the issues small business lobbies had with the Act, but did little to appease them. Although it recommended that the ambit of the monopolisation provision be extended, it offended small business by recommending, on logical policy grounds, that the price discrimination provision be repealed. The committee also recommended that no change be made to other competition provisions of the Act.48
Price Discrimination [3.260] The price discrimination provision49 was a subject of particular attention because its retention continued to be a rallying point for the small business lobbies. As noted earlier, the Swanson Committee had recommended that the prohibition be repealed,50 but that recommendation had not been adopted. The Blunt Committee also recommended repealing the prohibition. In doing so, it noted that, while eliminating the discounts that had resulted from the provision’s introduction in 1975 had placed some on the same purchasing footing as medium and large business, some small businesses had been deprived of growth incentives.51 The committee also found that the prohibition insulated small business from competitive forces at the expense of other potentially more competitive firms.52 The committee was influenced by views expressed by Professor Stephen Breyer,53 who argued that the US statute on which the provision was based, the Robinson-Patman Act, had inhibited rather than promoted competition.54 As Professor Breyer had observed55: The American statute has been criticised with virtual unanimity by economists and academic anti-trust experts as impeding, rather than promoting, competition. The Federal Trade Commission in recent years has curtailed its enforcement of this statute, and, there is now a strong move afoot to repeal it.
Monopolisation [3.270] As far as the monopolisation provision was concerned, the committee confirmed that small firms should be protected from the predatory conduct of other firms that had a substantial degree of market power. The committee said: “Whilst small business preservation is not necessarily a desirable economic end in itself it 47. Trade Practices Consultative Committee, Small Business and the Trade Practices Act (AGPS, 1979) (Blunt Report). 48. Blunt Report, p 9. 49. As noted earlier, the original prohibition, based on the US Robinson-Patman Act, prohibited discrimination between buyers of goods of like grade and quality where the discrimination was of such magnitude or of such a recurring or systematic character that it had the likely effect of substantially lessening competition in a market in which the supplier supplies goods. 50. Swanson Report, pp 45–46. 51. Blunt Report, para 10.98. 52. Blunt Report, para 10.99. 53. Then a Harvard professor but now a member of the US Supreme Court. 54. Blunt Report, para 10.7. The Robinson-Patman Act 1936 was enacted in 1936 to protect small business from larger businesses using their buying power to obtain more favourable prices than were available to small business. Although it has been consistently criticised as protecting inefficient competitors rather than consumers it remains on the statute books in the USA today. 55. S Breyer, “Five Questions About Australian Antitrust Law” (1977) 51 Australian Law Journal 28, 36. © 2018 THOMSON REUTERS
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may well be desirable for social, economic or political reasons.”56 The committee recommended that, instead of applying when a corporation in a position substantially to control a market took advantage of its power, the prohibition should apply where a corporation with a substantial degree of power in a market used that power for a proscribed purpose.57 The “use v purpose” debate remains today.
The Result [3.280] In the end other priorities intervened. Australia was grappling with rising inflation and unemployment, flat economic growth and the consequences of a global oil supply crisis. The Australian economy remained in stagflation with low output growth, inflation running at around 10 per cent and rising unemployment.58 No amendments were presented to Parliament by the then government. The Committee was disbanded in November 1981. In March 1983, the Hawke Labor government was elected. The Department of Business and Consumer Affairs was disbanded and its trade practices function returned to the Attorney-General’s Department. The new Attorney-General, Gareth Evans QC, took up competition policy reform. Although portfolio responsibility for competition policy was to pass ultimately to the Treasury, at this point in its development, and for some time to come, competition policy was to be led by the Attorney-General’s Department.
Green Paper — Proposals for Change [3.290] The new government outlined its policy proposals for changes to the Act in a statement by the Attorney-General on 23 November 1983, followed by the publication of a discussion paper in February 1984.59 The discussion paper raised policy considerations relating to each of the competition provisions of the Act.
Price Discrimination [3.300] The price discrimination provision again received particular attention. The paper noted that the effectiveness of the provision in assisting small business to compete on reasonably equal terms with big business whilst not adversely affecting competition had been widely debated. The Council of Small Business Organisations had submitted to the Blunt Committee that the prohibition should be recast. It argued that it should apply, subject to relevant defences, to price discrimination of such magnitude or recurring systematic nature that it was likely to have the effect of substantially lessening the competitiveness of the business being discriminated against. The committee had rejected the proposal. The paper also noted submissions to the Trade Practices Consultative Committee that the provision could have deleterious effects on competition. The paper proposed that the provision should be retained and possibly strengthened.60 The Commission chair, Ron Bannerman, expressed the view that “it was probably 56. 57. 58. 59.
Blunt Report, para 9.7. Blunt Report, para 9.36. R Snape, “Productivity, Costs and Employment” (1979) 12 Australian Economic Review 85. The Trade Practices Act Proposals for Change, issued February 1984 by the Attorney-General, Gareth Evans QC; the Minister for Home Affairs and Environment, Barry Cohen and the Minister for Employment and Industrial Relations, Ralph Willis (Green Paper). 60. Green Paper, para 35.
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small business dissatisfaction with studies the TPC did in 1979 and 1980 into petrol and bread retailing, and dissatisfaction with the TPC not bringing court proceedings against suppliers that led to, or increased, the demand for stronger legislation”.61 But in the end no change was made.
Monopolisation [3.310] The paper noted that, in its then form, the monopolisation provision did not prevent predatory or anticompetitive conduct unless the corporation was in a position to control or dominate a market. The Trade Practices Commission Chair, Ron Bannerman, expressed the view that the three elements of the then s 46 — substantial control, taking advantage and purpose of eliminating or blocking others — were “erecting nearly impossible barriers against action under the section”.62 The policy view was that the threshold test should be lowered because the test was too rigorous; that monopolisation was fundamentally anticompetitive. The proposal was to change the test to cover predatory conduct by corporations with a substantial degree of market power, effectively adopting the Blunt Committee’s recommendation.63
Mergers [3.330] Finally, the paper addressed the “control or dominate” test for mergers. The policy proposal was that the merger test should be based on the likely competitive effect of a merger rather than on market structure, but the prohibition should continue to apply only in “substantial” markets, thereby limiting the prohibition to the more significant mergers.64 The paper also proposed extension of the provision to cover acquisitions by individuals.65 At that stage the Act only covered acquisitions by corporations. Noting that pre-merger notification requirements had applied in the United States since the enactment of the Hart-Scott-Rodino Act in 1976, the paper canvassed the possibility of introducing a similar requirement.66
Unions [3.340] The policy view of the Labor Government was that “general secondary boycott provisions, which are aimed primarily at the conduct of trade unions, should not be contained in the Trade Practices Act”.67 When it came to secondary boycotts the proposal was that they should be repealed. However, the circumstances in which this policy change was proposed were not conducive. Three years earlier a black ban on Amoco supplying petrol to an independent haulage contractor, Leon Laidely Pty Ltd, had resulted in the contractor obtaining an interlocutory injunction under the then secondary boycott provisions.68 The Fraser 61. R Bannerman, Debate on Exposure Draft Bill to Amend Trade Practices Act, presented to Monash University Trade Practices Law Reform Seminar, 29 March 1984, p 17 (ACCC library collection). 62. Bannerman, Debate on Exposure Draft Bill to Amend Trade Practices Act, presented to Monash University Trade Practices Law Reform Seminar, 29 March 1984, p 14 (ACCC library collection). 63. Green Paper, paras 25–26. 64. Green Paper, paras 40, 45. 65. Green Paper, para 46. 66. Green Paper, para 49. 67. Green Paper, paras 22–23. 68. See Leon Laidely Pty Ltd v Transport Workers Union of Australia (1980) 42 FLR 352; 28 ALR 129. © 2018 THOMSON REUTERS
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Coalition Government responded by strengthening the Act and a new provision, s 45E, had been inserted to deal specifically with the conduct Laidley had experienced. The government introduced a Bill to repeal the provisions in September 1984 and transfer some of the boycott-settling powers to the Arbitration Commission, but it was defeated in the Senate. Opposition to the repeal came from many quarters including the National Farmers Federation,69 the Australian Chamber of Commerce,70 the Business Council of Australia,71 and the then Commission chairman, Ron Bannerman, who pointed out that: “A cynical view of section 45D is that it has not been very successful because no-one has really been prepared to enforce it when the chips were down”.72
The Result [3.350] The resulting amendments73 were nevertheless significant. The threshold test for applying the monopolisation provision was reduced from substantial control of a market to a substantial degree of power in a market. The provision was renamed “misuse of market power”. An addition to the provision arguably made proof of purpose easier, by explicitly providing that purpose could be ascertained by inference. This was the start of a long line of tinkering with the provision until significant changes were made in 2017. The merger test remained unchanged other than to remove the tautology of “control or dominate”, but a new provision74 was added, dealing specifically with acquisitions that occur outside Australia. No pre-merger notification requirement was introduced. The price discrimination prohibition remained, ultimately to be repealed in 1995. As noted above, when it came to the repeal of the secondary boycott provisions, although the Bill presented to Parliament in September 1984 contained a repeal provision, it was defeated in the Senate. The secondary boycott provisions remained in the Act, but were rarely used by the Commission, until they were substantially amended by the Hawke Labor government in 1993. They returned to the Act, however, in 1996 in an expanded form with the election of the Howard Coalition government, and remain in the Act.
Griffiths Committee [3.360] On 25 February 1988, at the request of the Acting Attorney-General, Senator Michael Tate, the House of Representatives referred the merger control and monopoly provisions of the Trade Practices Act 1974 (Cth) to its Standing Committee on Legal and Constitutional Affairs. The catalyst for that referral was increasing concern that the merger law was not adequately protecting the public interest. Corporate merger activity was at an all69. Canberra Times, 4 September 1984, p 13. 70. Canberra Times, 18 May 1984, p 7. The Chamber’s spokesperson, Alexander Downer, unhelpfully suggested that, if the provisions were repealed they should be maintained unaltered in a separate Act. 71. Canberra Times, 14 August 1984, p 10. 72. R Bannerman, Debate on Exposure Draft Bill to Amend Trade Practices Act, presented to Monash University Trade Practices Law Reform Seminar, 29 March 1984, p 10 (ACCC library collection). 73. Trade Practices Revision Act 1986 (Cth) (No 17, 1986). 74. Essentially the current Competition and Consumer Act 2010 (Cth), s 50A.
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time high in the mid-1980s,75 but the stock market had crashed in October 1987. There were proposals to merge Qantas, Australian Airlines and Air New Zealand. Controversial mergers included the Myer takeover of Grace Bros in 1983 and the Coles-Myer merger in 1985 which raised concern of a duopoly in the food industry resulting in an ability to control prices and create barriers to entry. Outgoing Chair of the Commission, Bob McComas, was reported as saying that, although the law had been appropriate in an era of restructuring the Australian economy, its continued application in the then current form could eventually result in monopolies in the domestic market that did not yield efficiency benefits.76 Signalling a tougher stand on mergers, the Commission had instituted proceedings to block the takeover of Thomas Borthwick and Sons by Australian Meat Holdings Pty Ltd on the grounds that the merger would give the combined group dominance in the fat cattle market in North Queensland.77 Australia Meat Holdings78 was the first case that had been litigated by the Commission in 10 years.79 The committee reported in May 1989,80 shortly after the High Court handed down its decision in Queensland Wire81 and the Commission had succeeded in Australia Meat Holdings.
Misuse of Market Power [3.370] Concern about the scope of the misuse of market power provision centred primarily around what “taking advantage of market power” meant. The Commission Chair, Professor Bob Baxt, had stated that, with the current test, the pendulum may have swung too far in the direction of industry concentration and proposed a test based on the results of anticompetitive behaviour.82 While the committee was deliberating the High Court handed down its decision in Queensland Wire, deciding that in the relevant context “take advantage” meant no more than “use”. While that only led to debate over how “use” was to be determined, the committee decided that a redrafting of the prohibition was not warranted, as it would be a retrograde step.83 75. For example the Holmes à Court and Elliot bids for BHP in 1985, the Ansett takeover of East West Airlines in 1987 and the ill-fated attempt by Warwick Fairfax to take over media publisher Fairfax in the same year. There were government proposals in 1988 to merge Qantas, Australian Airlines and Air New Zealand, but they were abandoned. 76. Canberra Times, 29 February 1988, p 3. 77. Trade Practices Commission v Australia Meat Holdings Pty Ltd [1988] FCA 244; 83 ALR 299. The judgment in favour of the Commission, handed down on 15 July 1988, was subsequently appealed and the appeal dismissed [1989] FCA 43; ATPR 40-932. 78. Australia Meat Holdings Pty Ltd v Trade Practices Commission [1989] FCA 43; (1989) ATPR 40932 handed down on 3 March 1989. 79. In the same year, 1988, the Commission also challenged a proposed acquisition by Arnott’s of rival biscuit-make, Nabisco. The court’s decision in favour of the Commission was handed down in January 1990: Trade Practices Commission v Arnott’s Limited [1990] FCA 15; 93 ALR 657. An appeal was dismissed: Re Arnott’s Limited v Trade Practices Commission [1990] FCA 473; 97 ALR 555. 80. House of Representatives Standing Committee on Legal and Constitutional Affairs, Mergers, Takeovers and Monopolies: Profiting from Competition? (AGPS, 1989) (Griffiths Report). 81. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 82. Canberra Times, 11 August 1988, p 14. 83. Griffiths Report, para 4.6.29. © 2018 THOMSON REUTERS
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A second concern, that there had been court decisions84 that might tend to limit the operation of the prohibition, was not seen as of sufficient concern to warrant any change.
Mergers [3.380] Turning to the merger test, the committee accepted that the dominance test provided a high threshold that permitted relatively high levels of concentration. This was said to be an advantage because it facilitated industry rationalisation, improved efficiency and increased international competitiveness.85 A common view, before the publication of Professor Michael Porter’s work in 1990,86 was that size and efficiency were necessary for international competitiveness. That was a theory seriously challenged by Professor Porter. The consumer lobby argued for a return to the “substantial lessening competition” test for mergers, but the Commission thought this would put strains on its resources, increasing by up to four times the number of mergers potentially covered by the dominance test.87 The committee was not convinced there was sufficient justification for moving from the dominance test.88
The Result [3.390] The result was that no changes to the substantive competition provisions of the Act were recommended. Nevertheless, by the end of the 1980s Australia had a workable competition law that addressed most of the practices that inhibited competition, even if not optimally in some respects. It also had an independent Commission enforcing the law effectively. Debate about the price discrimination prohibition remained, as did small business frustration about the effectiveness of the misuse of market power provision. Otherwise substantive competition policy and law were aligned. However, there remained significant areas of the economy to which the Act did not apply. Although it had applied to the Commonwealth since 1977, to the extent that the Commonwealth carried on a business, for constitutional reasons it did not apply to State or local government businesses.89 State business enterprises, in electricity generation, transmission and distribution, in banking, in water management and distribution and in rail transport, constituted a significant percentage of gross domestic product.90 Furthermore, the Act did not apply to businesses operated by individuals rather than corporations, including the professions. Concerns about whether the legislation dealt optimally with mergers and monopolisation also remained. 84. Warman International Ltd v Envirotech Australia Pty Ltd [1986] FCA 205; (1986) 11 FCR 478; 67 ALR 253; (1986) ATPR 47,808 (40-714); Williams v Papersave Pty Ltd [1987] FCA 351; (1987) 16 FCR 80; 76 ALR 152; (1987) ATPR 40-818. 85. Griffiths Report, para 5.4.1. 86. M Porter, Competitiveness of Nations (Macmillan, 1990). 87. Griffiths Report, paras 5.4.16–5.4.17. 88. Griffiths Report, para 5.4.22. 89. As noted in Chapter 1, attempts to amend the Constitution to include a power over monopolies failed on successive occasions commencing in 1911 and attempts to encourage the States to refer power to the Commonwealth in 1965 also failed. 90. Government businesses were reported to account for 10% of Australia’s GDP in the later 1980s. Rail, electricity, gas and water utilities were said to account for nearly 5%: Industry Commission reports on Rail Transport (1991), Energy Generation and Distribution (1991) and Water Resources and Waste Water Disposal (1992).
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Cooney Committee [3.400] Continued debate about the nature and extent of the law with respect to mergers and monopolisation prompted the Senate to hold an inquiry into them. On 16 May 1991, the Senate referred the matter to its Standing Committee on Legal and Constitutional Affairs and the committee reported in December 1991.91
Misuse of Market Power [3.410] The committee focused, in relation to the misuse of market power provision, on whether or not it should include an “effects” test because purpose was so difficult to establish. If the Act were changed in this way, the misuse of market power provision would have prohibited corporations with market power using that power if either the purpose was to substantially lessen competition or that was the effect.92 Although the provision had been amended in 1986 to make proof of purpose easier,93 concern remained that the degree of difficulty in dealing with conduct that adversely affected competition was too high. As the Commission Chair, Professor Bob Baxt, said at the time, echoing views expressed to the Griffiths Committee:94 the difficulty of showing purpose (as distinct from the lesser test of showing effect on competition) means that unless there is very clear evidence of a predatory purpose, or unless someone is prepared to act as a ‘deep throat’, it will be very difficult to prove the case.
The committee accepted that establishing purpose would continue to present difficulties for litigants and concluded that amending the provision by adopting an effects test would “encourage greater use of the section by litigants”95 - a positive outcome. Nevertheless, the committee concluded that, as a matter of competition policy, it remained important to retain a distinction between purpose and consequence.96 In other words, the prohibition should only apply when a corporation used its market power for a reprehensible purpose. The committee was concerned, as a matter of competition policy, to ensure that mere use of market power was not prohibited. The committee also considered, but rejected by majority, a proposal to extend the divestiture power in section 81 to allow it to apply to serious and persistent misuse of market power.
Mergers [3.420] As far as merger policy was concerned, the question for the committee was whether or not the test for intervention in mergers on competition grounds was appropriate. The test, as we have seen, was the “dominance” test. By this time the view that Australian firms needed to be larger in order to compete internationally 91. Standing Committee on Legal and Constitutional Affairs, Mergers, Monopolies and Acquisitions: Adequacy of Existing Legislative Controls (AGPS, 1991) (Cooney Report). 92. Cooney Report, para 5.22. 93. Trade Practices Act, s 46(7) provides that purpose may be inferred from the conduct of the corporations and others involved in the relevant conduct. 94. Cooney Report, para 5.14. 95. Cooney Report, paras 5.62–5.63. 96. Cooney Report, para 5.65. © 2018 THOMSON REUTERS
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was giving way to a new theory, based on the work of Professor Michael Porter. His thesis was that innovation, not size, was the most important driver for international competitiveness. Consequently, Porter’s view was that:97 Part of what makes a nation successful in an industry is vigorous domestic rivalry. Rarely do firms gain and sustain competitive advantage internationally without tough competition at home. … While tough domestic rivalry is a national asset, there is a tendency to view it as a liability … Merging with domestic rivals is viewed as beneficial to international success … This perspective, while understandable, reflects an incomplete view of competitive advantage. What is most important is not static efficiency but a firm’s dynamism. Firms will not be served by eliminating domestic rivalry.
The committee concluded that empirical evidence on the actual effects of mergers was conflicting and inconclusive, but noted “the growing body of economic theory which suggests that international competitiveness is achieved not through mergers but through the encouragement of competition”.98 There was a strong division of opinion among the experts who testified before the committee on whether the “dominance” test had caused demonstrable damage to competition in Australia. The small business and rural lobbies argued for a lowering of the standard for statutory intervention to a substantial lessening of competition test. Others argued that a change to the test was not warranted and that it would increase uncertainty and administrative cost. Ultimately, quoting Professor Porter’s work in support, the committee recommended that the “substantial lessening of competition test” should be adopted.99
The Result [3.430] The government responded to these recommendations by introducing a Bill to change the merger test to a “substantial lessening of competition” test. No substantive change was made to the misuse of market power provision, although it was expanded to cover circumstances where prohibited conduct was directed at classes of competitors rather than one particular competitor.100
97. M Porter, Competitiveness of Nations (Macmillan, 1990), pp 597–598. 98. Cooney Report, paras 3.25–3.26. 99. Cooney Report, paras 3.122–3.131. 100. Trade Practices Legislation Amendment Act 1992 (Cth), Act No 106 of 1992.
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Hilmer Committee .................................................................................. 47 Policy Objectives ................................................................................... 48 [4.70] Misuse of Market Power ........................................................ 49 [4.80] Price Discrimination ............................................................... 49 [4.90] Mergers .................................................................................. 50 [4.100] Tying and Vertical Restrictions............................................... 50 [4.110] Resale Price Maintenance .................................................... 50 [4.120] Scope of Coverage ................................................................ 51 [4.130] Essential Facilities ................................................................. 51 [4.140] Public Monopolies ................................................................. 52 National Competition Policy Becomes a Reality ................................... 53 [4.170] Conduct Code Agreement .................................................... 53 [4.180] Competition Principles Agreement ....................................... 55 [4.210] Implementation Agreement .................................................. 58 Competition Policy Reform Legislation ................................................. 59 Riding the Wave of Change .................................................................. 60 [4.260] Productivity Commission ...................................................... 61 [4.270] Senate Review ...................................................................... 61 [4.280] Additional Parliamentary Committees: .................................. 61 [4.290] Baird Report ......................................................................... 62 National Competition Council ................................................................ 63 Dawson Committee ............................................................................... 64 [4.340] Misuse of Market Power ........................................................ 64 [4.350] Price Discrimination ............................................................... 65 [4.360] Mergers ................................................................................. 65 [4.380] Tying ..................................................................................... 65 [4.390] Criminalisation of Cartel Conduct ......................................... 66 [4.400] Penalties ............................................................................... 66 The Aftermath of Boral .......................................................................... 66 Senate Takes up the Challenge ............................................................ 67 [4.440] Misuse of Market Power ....................................................... 68 [4.460] Collective Bargaining ............................................................ 69 [4.470] Creeping Acquisitions ........................................................... 69 [4.480] Remedies .............................................................................. 70 Some Recommendations Enacted ....................................................... 70 A New Government Brings a New Approach ........................................ 71 [4.520] Misuse of Market Power ....................................................... 71 [4.530] Cartels .................................................................................. 71 Grocery Markets — Another Inquiry ..................................................... 72 Creeping Acquisitions — a Legislative Response .............................................................................................. 74 Refocus On Predatory Pricing ............................................................... 74
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Reconsidering Arrangements and Understandings .............................. 75 Price Signalling Concerns Prompt Legislation .............................................. 77 Harper Committee ................................................................................. 78 [4.620] Price Discrimination .............................................................. 79 [4.630] Misuse of Market Power ....................................................... 79 [4.650] Creeping Acquisitions ............................................................ 80 [4.660] Cartels .................................................................................. 80 [4.670] Price Signalling ...................................................................... 80 [4.680] Tying ...................................................................................... 81 [4.690] Resale Price Maintenance ................................................... 81 [4.700] Boycotts ................................................................................ 81 [4.710] Essential Facilities ................................................................ 82
[4.10] At the same time as the Cooney Committee was deliberating, the government was grappling with faltering economic performance and a bleak economic future. At that time Australia had fallen behind other developed countries, in part because our economy was, as the then Chair of the Productivity Commission, Professor Gary Banks, explained:1 highly regulated, anti-competitive and redistributive: captured nicely by the expression “protection all round” — a policy that for much of the last century had bi-partisan support and wide community acceptance.
The then Treasurer, Paul Keating, later explained:2 in the non-traded good economy — ports, electricity, hospitals, etc — where there was no import competitor, inflation was running at 4.5% or thereabouts. … The question then was, how do we introduce competition to those industries that cannot be competed against, like gas, water and electricity? Clearly Australia had to shake up its closed and monopolised sectors …
[4.20] As Professor Banks pointed out, Australia had had the highest per capita income in the world at the start of the 20th century, but it had steadily declined. There were many causes for that decline, but for the purposes of this book, I will concentrate on one — the reach of competition law. Although competition laws had applied to Australian businesses for almost 20 years, the competition law did not apply to federal and State statutory authorities that provided public utility and other services, sometimes on a monopoly basis and sometimes in competition to others. They did so, Professor Banks said, by and large on the basis that their “fair” prices incorporated the cost of poor management and labour practices. The Industry Commission (now the Productivity Commission) undertook major studies of rail transport (1991), energy generation and distribution (1991) and water resources (1992), concluding that, in those industries alone, efficiencies could increase gross domestic product by $8 billion per annum.3
1.
G Banks, “Structural Reform Australian-Style: Lessons for Others?” (Paper presented to the IMF and World Bank, Washington DC, 26–27 May 2005 and OECD, Paris, 31 May 2005). 2. K O’Brien, Keating (Allen & Unwin, 2015), p 646. 3. Report by the Independent Committee of Inquiry, National Competition Policy (AGPS, 1993) (Hilmer Report), p 129.
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Hilmer Committee
[4.30] In a major statement on 12 March 1991, Building a Competitive Australia, the government laid out a blueprint for significant economic reform, including competition policy reform. The Prime Minister, Bob Hawke, said:4 The Trade Practices Act is our principal legislative weapon to ensure consumers get the best deal from competition. But there are many areas of the Australian economy today that are immune from the Act: some Commonwealth enterprises, State public sector businesses, and significant areas of the private sector, including the professions … The benefits for the consumer of expanding the scope of the Trade Practices Act could be immense – potentially lower professional fees, cheaper road and rail fares, cheaper electricity. This has to be done.
The Prime Minister stated that he had written to the Premiers urging a positive examination of opportunities to widen the ambit of the Act and placing the matter on the agenda for a Special Premiers’ Conference in May 1991. The statement added:5 The Commonwealth Government is therefore seeking the agreement of the State and Territory Governments to a joint examination … of the ways in which excluded areas might be brought within the scope of a national framework of competition policy and law.
As Paul Keating, then Treasurer but soon to be Prime Minister explained, this was no easy task.6 Nevertheless, agreement to address the issue was reached at the Premiers and Chief Ministers Meeting in November 1991. The communiqué issued after that meeting stated that “the Premiers and Chief Ministers endorse the need for a national competition policy to create and safeguard market structures and behaviour which prevent anticompetitive practices, ensure that markets operate efficiently and to protect the interests of consumers”. It took until October 1992 for the government to take the next step by commissioning the Independent Committee of Inquiry into National Competition Policy chaired by Fred Hilmer. The Hilmer Committee was established under terms of reference issued by Prime Minister Paul Keating.7
Hilmer Committee [4.40] The Hilmer Committee’s terms of reference were wide-ranging. They required the committee to inquire into and report on appropriate changes to legislation and other measures to give effect to the objective that national competition policy and law should meet the following principles:8 (a) No participant in the market should be able to engage in anticompetitive conduct against the public interest; (b) as far as possible, universal and uniformly applied rules of market conduct should apply to all market participants regardless of the form of business ownership; 4. Statement by the Prime Minister, Building a Competitive Australia (12 March 1991), pp 1.12–3. 5. Statement by the Prime Minister, Building a Competitive Australia (12 March 1991), p 5.30. 6. According to Keating, “Dealing with the premiers on reform at any time was worse than herding cats, but introducing competition to public monopolies that tended to be revenue gravy trains for governments … [was] not conducive to easy overnight policy solutions …”: K O’Brien, Keating (Allen & Unwin, 2015), p 635. 7. Paul Keating had replaced Bob Hawke as Prime Minister in December 1991. In his One Nation statement on 26 February 1992, Prime Minister Keating had reinforced the need for competition policy reform, stating that “the engine which drives efficiency is free and open competition”. 8. Hilmer Committee, Terms of Reference, Report, Executive Summary, p 27. © 2018 THOMSON REUTERS
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(c) conduct with anticompetitive potential said to be in the public interest should be assessed by an appropriate, transparent assessment process, with provision for review, to demonstrate the nature and incidence of the public costs and benefits claimed; (d) any changes in the coverage or nature of competition policy should be consistent with, and support, the general thrust of reforms: (i) to develop an open, integrated domestic market for goods and services by removing unnecessary barriers to trade and competition; (ii) in recognition of the increasingly national operation of markets, to reduce complexity and administrative duplication.
The Hilmer Committee reported in August 1993.9 The report provided the most comprehensive analysis of the challenges facing Australia in implementing a successful, national, competition policy since the Trade Practices Act 1974 had been introduced 20 years earlier. From a policy perspective the scope of the Hilmer Report went well beyond matters covered by the Trade Practices Act 1974. It addressed the fundamental structural and legislative changes necessary to remove entrenched impediments to competition at all levels in the community.
Policy Objectives [4.50] The Hilmer Committee observed that the need for a national competition policy rested on three main factors:10 ‘First, there is increasing acknowledgment that Australia is for all practical purposes a single integrated market … Second, while trade policy reforms have markedly increased the competitiveness of the internationally traded sector, many goods and services provided by public utilities, professions and some areas of agriculture are sheltered from international and indeed domestic competition … Third, the domestic pro-competitive reforms implemented to date have all been progressed on a sector-by-sector basis, without the benefit of a broader policy framework or process.’
Competition policy, according to Hilmer, was not about competition per se. It was about facilitating effective competition to achieve other aims – “to promote efficiency and economic growth while accommodating situations where competition does not achieve efficiency or conflicts with other social objectives”.11 National competition policy should address six issues: anticompetitive conduct by firms, unjustified regulatory restrictions on competition, inappropriate structure of public monopolies, denial of access to facilities essential to competition, monopoly pricing and competitive neutrality when government businesses compete with private firms.12 [4.60] The committee made a comprehensive set of recommendations addressing each of those issues. First, in relation to the Trade Practices Act 1974’s competition rules, Hilmer concluded that the rules were, for the most part, operating satisfactorily, broadly consistent with international practice and appropriate to apply to all sectors of the economy without substantial revision.13 Among the specific recommendations for changes to the competition provisions of the Act, Hilmer recommended that: 9. 10. 11. 12. 13.
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National Competition Policy Review Report (Hilmer Report) (AGPS, 25 August 1993). Hilmer Report, p xvii. Hilmer Report, p 6. Hilmer Report, p 7. Hilmer Report, Executive Summary, p 8. Miller’s Australian Competition Law and Policy
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Policy Objectives
• third line forcing be made subject to the substantial lessening of competition test rather than remain a per se prohibition;14 • resale price maintenance should be extended to services and authorisation should be available;15 • no change was required to the misuse of market power or the merger provision;16 • the prohibition against price discrimination should be repealed.17
Misuse of Market Power [4.70] In relation to misuse of market power, the committee stated that it “sees a need to strike a balance between deterring undesirable unilateral conduct, encouraging business certainty and minimising the regulatory interference in daily business decisions”.18 However, the committee was not convinced that perceived difficulties with the prohibition warranted amendment. Noting the wide range of views expressed in submissions, the committee expressed the view that:19 The central conundrum in addressing the problem of misuse of market power is that the problem is not well defined nor apparently amenable to clear definition. There is considerable debate about what sorts of conduct should be prohibited.
The committee concluded that a balance needed to be struck between deterring undesirable unilateral conduct, encouraging business certainty and minimising regulatory interference. It observed that:20 ... distinguish[ing] between vigorous competitive activity, which is desirable, and economically inefficient, monopolistic practices, which are undesirable. The difficult task facing legislatures attempting to address misuse of market power is to develop a process which will make the appropriate distinctions while providing businesses with the necessary certainty as to the limits of legal conduct.
It was not satisfied that there was sufficient a case to warrant amendment to se 46 as it them stood.21 A change to prohibit unilateral conduct that had the effect of substantially lessening competition would not improve on the test, the committee said.22
Price Discrimination [4.80] Notwithstanding repeal recommendations from the Swanson Report in 1976 and the Blunt Report in 1979, the small business lobby had succeeded in retaining the contentious provision relating to price discrimination. The Business Coalition argued that the provision should be strengthened so that it applied if a discrimination in price disadvantaged individuals without the need to show any damage to competition. The committee disagreed, observing that price discrimination generally enhances economic efficiency, except in cases of anticompetitive arrangements covered 14. 15. 16. 17. 18. 19. 20. 21. 22.
Hilmer Report, p 59. Hilmer Report, p 59. Hilmer Report, p 84 (p 69). Hilmer Report, p 84. Hilmer Report, p 74. Hilmer Report, p 69. Hilmer Report, p 62. Hilmer Report, p 74. Hilmer Report, p 70.
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by s 45, or misuse of market power, covered by s 46. It stated that “competition policy should not be distorted to provide special protection to any interest group, particularly where this is potentially to the detriment of the welfare of the community as a whole” and recommended repeal of the provision.23 The government accepted this recommendation and the provision was repealed in 1995.
Mergers [4.90] The committee correctly observed that the role of the mergers provision, s 50, was to distinguish between those mergers that are welfare enhancing and those that are welfare reducing.24 The change from a “dominance:” test to a “substantial lessening of competition” test for mergers had only occurred in January 1993, following the Cooney Report and it remained controversial. In recommending no change at that time, the committee said that evidence of the benefits and detriments of mergers was equivocal and a more detailed review of the merger provision would best be undertaken with the benefit of additional experience.25
Tying and Vertical Restrictions [4.100] The committee accepted that a specific prohibition on non-price vertical tying arrangements26 was appropriate where those arrangements had an anticompetitive purpose or likely effect. It did not question, as the Harper Committee did 20 years later, whether a simpler approach to the whole issue might be available. The committee focused instead on the different treatment afforded to third line forcing. Third line forcing — tying supply or acquisition of a third party’s product to the supply of a firm’s own product — had been a per se contravention since 1974. Swanson had noted the difference, but concluded that “the practice will, in virtually all cases, have an anti-competitive effect” and therefore recommended that the per se prohibition remain.27 The Hilmer Report took a different view. It did not think that third line forcing was “so significantly anti-competitive as to warrant treatment which differs from other forms of tying” and recommended that third line forcing be subject to the same competition test as other tying prohibitions.28 The recommendation was not taken up. The prohibition was extended to services, but a Notification process for third line forcing was also introduced.
Resale Price Maintenance [4.110] The committee acknowledged that, at least in economic theory, there were circumstances in which resale price maintenance could enhance economic efficiency, but noted the uncertainty about how frequently it did so.29 The committee decided to recommend that the practice remain a per se contravention, but that Authorisation should be available. The recommendation was accepted.
23. 24. 25. 26. 27. 28. 29.
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Policy Objectives
Scope of Coverage [4.120] Turning to the question of universal application, Hilmer considered that the scope of coverage of the Act was not adequate in a number of respects. First, it noted that professions had historically not been regarded as engaging in trade or commerce and that those professional partnerships not in corporate form were outside the constitutional reach of the Act.30 Hilmer recommended that competitive conduct rules should be extended to include all unincorporated businesses and that State and Territory laws should not authorise or approve anticompetitive conduct by unincorporated businesses.31 Turning to government business enterprises, Hilmer concluded that the shield of the Crown doctrine should have no place in national competition policy. All government commercial activities — federal, State, Territory and local — in actual or potential competition with private sector firms should be covered by the competition law,32 subject to specific exemptions established as being necessary in the public interest. Hilmer recognised that it would not be sufficient to make government business activities subject to the competition laws. Structural reform was also needed if the government’s objective of facilitating competition to promote efficiency and economic growth were to be realised. What was also required was removal of regulatory restrictions on competition, structural reform of public monopolies and independent oversight of monopoly pricing by those monopolies. A mechanism to facilitate reform of government regulation that unjustifiably restricts competition was seen by Hilmer as “a central plank of competition policy”,33 prompting Hilmer to recommend a wholesale review of regulation by each State and Territory and the Commonwealth. The proposal was for this review to be based on the principle that there should be no regulatory restrictions on competition unless clearly demonstrated to be in the public interest.34 Hilmer recommended establishment of a National Competition Council to “play a role in coordinating reforms and facilitating the cooperative process generally”.35
Essential Facilities [4.130] One area where Hilmer found current substantive competition law to be less than optimal was in the area of access to facilities essential to competition in an upstream or downstream market. The challenge, as the Hilmer Committee saw it, was this:36 Where ... structural reforms have not occurred, the challenge from a competition policy perspective is to provide a mechanism that will support competitive market outcomes by protecting the interests of potential new entrants while ensuring the owner of the natural monopoly element is not unduly disadvantaged. A mechanism of this kind seems likely to play a pivotal role in a national competition policy as competition is introduced to areas previously reserved to public monopolies. 30. 31. 32. 33. 34. 35. 36.
Hilmer Report, p 133. Hilmer Report, p 136. Hilmer Report, p 120. Hilmer Report, p 205. Hilmer Report, p 206. Hilmer Report, p 208. Hilmer Report, p 242.
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Hilmer proposed a new access regime, applicable to all sectors in the economy, under which access to a facility could be required if the Minister were satisfied that access was essential to competition in an upstream or downstream market, the granting of access was in the public interest and the legitimate interests of the facility owner were protected.37 Where access was declared but the parties could not agree on the access price, Hilmer recommended that the ACCC be responsible for binding arbitration.38
Public Monopolies [4.140] When it came to the sensitive subject of public monopolies, Hilmer proceeded cautiously, expressing a preference for “respecting the prerogatives of sovereign governments unless there is a clear national interest at stake that cannot be resolved cooperatively”.39 Hilmer noted the trend to corporatise government utilities, an approach which the committee supported, but it did not think there should be a general presumption in favour of structural separation of potentially competitive elements of public monopolies.40 However, Hilmer made a series of recommendations, including that, before competition is introduced to any sector traditionally supplied by a public monopoly, responsibility for industry regulation should be separated out.41 The committee was equally cautious when it came to monopoly pricing by government utilities. It preferred to rely on regulatory and structural reform to enhance competition and reduce concern about monopoly pricing, but recommended, as a second-best option, a targeted prices oversight mechanism (but not price controls) to deal with situations where reforms were not adequate or practicable.42 [4.150] Finally, Hilmer thought that, although privatisation and corporatisation were likely to be the most effective means of ensuring that government businesses faced the same regulatory requirements (including taxes and charges) as private sector competitors, this would not cover all circumstances. There was a need for a mechanism to deal with the problem where privatisation did not occur or a government utility was corporatised without the necessary safeguards. The basic principle adopted by the committee was that: “Government businesses should not enjoy any net competitive advantage by virtue of their ownership when competing with other businesses.”43 This was backed up by a series of recommendations designed to ensure that competitive neutrality measures were put in place before government businesses were permitted to expand their operations to compete with the private sector. They were:
37. 38. 39. 40. 41.
Hilmer Report, p 266. Hilmer Report, p 267. Hilmer Report, p 232. Hilmer Report, p 225. Hilmer Report, p 229. Many public monopolies at that time also had policy and regulatory functions. For instance, the Federal Civil Aviation Authority was both a regulator and a provider of air traffic control and other aeronautical services to the aviation industry. Hilmer also recommended a rigorous, independent study of all related structural issues where a substantial public monopoly was to be privatised or competition introduced into a sector traditionally supplied by a substantial public monopoly: Hilmer Report, pp 230–231. 42. Hilmer Report, p 289. 43. Hilmer Report, p 305.
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Government businesses competing against other firms within their traditional markets should be subject to measures that effectively neutralise any net competitive advantage flowing from ownership … Government businesses should not compete against other businesses outside their traditional markets without being subject to measures that effectively neutralise any net competitive advantage flowing from their ownership.
National Competition Policy Becomes a Reality [4.160] Hilmer delivered the report in August 1993. Given its breadth and the significant challenges it presented, especially to State and Territory governments, it would not have been surprising if the report had been shelved or only a few of its recommendations accepted and slowly implemented. Surprisingly that was not what occurred. At the meeting of the Council of Australian Governments in Hobart on 24 February 1994 the recommendations were largely accepted by all governments and work on inter-government agreements was undertaken to formalise matters. One reason for general acceptance of Hilmer recommendations by State and Territory governments was that Prime Minister Keating offered a significant financial incentive if the reforms proposed were implemented. Almost $27 billion in payments to the States and Territories over the period 1997 to 2006 was offered by the Commonwealth. As he put it:44 The States had monopoly rents from their enterprises which they fed into their budgets … Business was paying too much for these services and also passing that cost on to consumers. Ordinary workers were paying too much for their gas and electricity. … So I sought to bring competition policy with the single constructive national framework built around the Hilmer recommendations, with the cooperation of the states through the Council of Australian Governments.
In the result, all State and Territory governments entered three agreements with the Commonwealth on 11 April 1995: the Competition Principles Agreement, the Conduct Code Agreement and the Agreement to Implement the National Competition Policy and Related Reforms. These three short agreements heralded the most significant development of competition policy in Australia since the Act was introduced in 1974.
Conduct Code Agreement [4.170] The Conduct Code Agreement, signed on 11 April 1995, obliged the signatories to apply the competition provisions of the then Trade Practices Act 1974 (now Competition and Consumer Act 2010) universally.45 The scheme adopted was for the Commonwealth to amend the Trade Practices Act 1974 to insert a new Part46 which introduced into the Act a Schedule duplicating the Act’s competition provisions. The agreement47 then required the States and Territories to bring forward legislation adopting those provisions and applying them to all
44. 45. 46. 47.
K O’Brien, Keating (Allen & Unwin, 2015), p 647. Conduct Code Agreement, app 2 contains a copy of the agreement. Trade Practices Act 1974, Pt XIA, s 150C. Conduct Code Agreement 1995, cl 5(2).
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persons within the legislative competence of the State or Territory. Each State and Territory did so. The agreement also provided for the Federal Treasurer to publish a notice if any State or Territory law makes significant modifications to the Competition Code text. No such notice has been published. If one were published it would have the effect of removing from the relevant jurisdiction status as a fully participating jurisdiction.48 The commitment to adopt the Competition Code included application of the Code to the Crown in the right of each State or Territory and, so far as legislative competence permits, of every other State, insofar as the Crown carries on a business either directly or through an authority.49 It is also reflected in the Act, which provided that the competition provisions bind the Crown in the right of the States, of the Northern Territory and of the Australian Capital Territory, in so far as the Crown carries on a business, either directly or by an authority of the State or Territory.50 The agreement contained provisions designed to ensure that the text of the Competition Code remains uniform throughout Australia. It requires the Commonwealth to consult with all fully-participating jurisdictions before amending the Competition Code or the competition provisions of the Act. After consultations on any proposed change, a vote is to be conducted in relation to any proposed amendments to the Competition Code text (but not the competition provisions of the Act). The Commonwealth agreed not to put forward any amendments to the Competition Code text unless they are supported by a majority of fully-participating jurisdictions.51 The agreement did not restrict the right of the States and Territories to enact exemption legislation, but the previous exemptions in the Trade Practices Act 1974 relating to things authorised by State or Territory law were tightened. The Act52 now only exempts things done in any State or Territory specified in and specifically authorised by State or Territory legislation, if the State or Territory is a party to the Competition Principles Agreement. Additional conditions apply. The exempting legislation or regulation must refer specifically to the Act and if the exemption is by regulation, the exemption expires after two years. The Federal Treasurer has power to make a regulation overriding any State or Territory exemption.53 If the State or Territory ceases to be a fully-participating jurisdiction, any existing exemption to Act or regulation expires after 12 months, does not apply to contracts made or action under contracts made after the State or Territory ceased to be fully-participating,
48. Competition and Consumer Act 2010, s 150K and Conduct Code Agreement 1995, cl 4(1). The result of a State or Territory ceasing to be a fully-participating jurisdiction is that the State or Territory concerned has no right to be consulted or to vote on proposed changes to the Competition Code, or appointments to the ACCC (although it has a continuing right to be consulted and to vote on appointments to the NCC). It would also no longer be entitled to payments under the Implementation Agreement, would lose its rights to exempt conduct under s 51 and, ultimately, would have all existing exemptions revoked. However, it would remain, as far as its own business activities are concerned, subject to the competition and other applicable provisions of the Act. 49. Competition Policy Reform Act 1995, ss 13, 14. 50. Competition and Consumer Act 1995, s 2B. 51. Conduct Code Agreement 1995, cll 6, 7. 52. Competition and Consumer Act 2010, s 51(1)(b)-(e). There are to be no State or Territory exemptions from the merger provisions: s 51(1C)(b). There were examples in South Australia and Victoria of legislation being passed to protect corporations of significance to the State from takeover. 53. Competition and Consumer Act 2010, s 51(1C)(f).
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and does not apply if the exempting law was not in effect immediately before the State or Territory ceased to be fully-participating.54 Finally, the agreement contained a commitment on the way in which vacancies on the ACCC are to be filled,55 which initially proved to be something of a difficulty because of delays in getting agreement on potential appointees. The process is that the Federal Treasurer must notify the States and Territories of any vacancy on the ACCC and the States and Territories have 35 days to make suggestions to fill the vacancy. The Federal Treasurer then gives notice to the States and Territories of the names it proposes to put forward for appointment and they have 35 days to indicate whether or not they support the nomination. The Commonwealth may only put forward to the Governor-General for appointment nominees supported by a majority of fully-participating jurisdictions.56
Competition Principles Agreement [4.180] The Competition Principles Agreement reflected the agreement reached by the Commonwealth, the States and Territories to cooperate on public sector reform to improve efficiency through the introduction of consistent competition law and policy to all businesses in Australia, including government business. The agreement set out a framework for oversight of pricing by government business enterprises, competitive neutrality to eliminate resource allocation distortions arising from public ownership of significant businesses, structural reform of public monopolies, access to essential infrastructure; and a wholesale review of all Commonwealth, State and Territory legislation to reduce or eliminate restrictions on competition.57 In dealing with oversight of pricing by public utilities, the agreement contained a broad commitment by the governments to work together to examine issues associated with oversight of prices charged by government business enterprises (GBEs). It also set out the following principles for independent pricing oversight: • independence from the GBE whose prices are being assessed; • a body whose prime objective should be efficient resource allocation (but having due regard to explicitly identified and defined community service obligations imposed by the State or Territory); • jurisdiction to cover all significant GBEs that are monopolies or near monopolies; and • a body that permits interested parties to make submissions and that publishes its recommendations, with reasons.58
54. Competition and Consumer Act 2010, s 51(1C)(e). 55. Conduct Code Agreement, cl 4. The appointment of Graeme Samuel, who had been the president of the National Competition Council responsible for recommending payment, or withholding of, national competition payments, to the States was held up because the requisite State and Territory support proved difficult to secure. He was initially appointed as acting chairman, which did not require State and Territory approval. 56. This obligation is now in Competition and Consumer Act 2010, s 7(3). 57. The agreement is set out in Appendix 2. 58. Competition Principles Agreement 1995, cl 2. © 2018 THOMSON REUTERS
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Hilmer had reported that:59 Firms with the greatest potential to engage in monopoly pricing are those protected by legislated monopolies. In Australia, the overwhelming majority of these are owned by Commonwealth, State and Territory Governments.
Hilmer had therefore recommended60 that there should be a “targeted prices oversight mechanism to deal with those situations where pro-competitive reforms are not adequate or practical. That oversight would provide for prices monitoring or surveillance but not price control.” This recommendation is reflected in the agreement, which provides for the governments to work cooperatively to identify relevant issues, with the assistance of the National Competition Council (NCC,) and to consider establishing independent sources of price oversight advice. It did not actually require the States and Territories to establish such bodies but that, in fact, is what has occurred. As far as structural reform of public monopolies was concerned, the agreement was neutral on the question of public ownership of business enterprises and explicitly recognised that each government was free to establish its own agenda for reform of public monopolies.61 It did, however, set out the framework to apply before a government introduced competition into a market traditionally supplied by a public monopoly or privatised public monopolies. This included separating out regulatory functions and undertaking the independent review Hilmer had recommended.62 [4.190] In dealing with the recommendations relating to competitive neutrality, governments accepted the key principle that government businesses should not enjoy any net competitive advantage simply because they are government-owned.63 Where the benefits outweighed the cost, governments committed to adopting a corporatisation model for significant GBEs. They also committed, “where appropriate”, for those GBEs to pay State and federal taxes or tax equivalents, pay debt guarantee fees where they have government guarantees and be subjected to all the regulations private sector corporations are normally subjected to.64 In this context, it was left to each State and Territory to determine what was a significant GBE or business activity.65 Adoption of this aspect of the competitive neutrality 59. Hilmer Report, p 280. 60. Hilmer Report, p 289. 61. Competition Principles Agreement 1995, cll 1(5), 4(1). 62. Competition Principles Agreement 1995, cl 4. 63. Competition Principles Agreement 1995, cl 3(1). 64. Competition Principles Agreement 1995, cl 3(4). This applied to all significant GBEs that came within the Australian Bureau of Statistics classification as a Public Trading Enterprise or Public Financial Enterprise. Public Trading Enterprises and Public Financial Enterprises are government undertakings that aim to recover most of their expenses by deriving revenue from sales of goods and services (Australian Bureau of Statistics, 1994). Examples of public trading authorities are commodity marketing authorities, electricity and railway authorities and port authorities. Examples of public financial enterprises are banks and insurance offices. Similar requirements applied to the business activities of agencies which were not GBEs but which undertook significant business activities: cl 3(5). 65. As an example, the Commonwealth’s Competitive Neutrality Policy Statement, issued in June 1996, identified all Commonwealth GBEs as significant, along with all non-GBE share limited companies and all Commonwealth business units. It also identified non-GBE activities and other business activities as significant if the commercial receipts from the activities exceeded $10 million. However, the NCC took a different approach, expressing the view that “[i]dentifying significant government businesses according to size alone carries a danger that businesses which
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principle has had a profound effect on the way in which governments do business. Corporatisation of electricity, gas, water and rail utilities has been universal, where those utilities have not been privatised. A further aspect of the competitive neutrality principle governments adopted was that each government was required to publish a policy statement on competitive neutrality by June 1996, including an implementation timetable and a mechanism for dealing with competitive neutrality complaints.66 Each did so. A Hilmer recommendation had been that the ACCC should be the body to receive complaints. No government adopted that recommendation. Each established its own competitive neutrality complaints body.67 The agreement provided, as Hilmer recommended, that, as a guiding principle, legislation should not restrict competition unless it can be demonstrated either that the benefits of the restriction to the community outweigh the costs, or that the objectives of the legislation could only be achieved by restricting competition. This principle was supported by a commitment to develop and publish, by June 1996, a timetable for reviewing and reforming all legislation that restricts competition by 2000, and each 10 years thereafter.68 This commitment resulted in the most comprehensive review of State and Territory legislation ever undertaken in Australia. [4.200] Turning to the Hilmer access recommendation, the agreement provided for the Commonwealth to prepare legislation to establish a regime for third party access to infrastructure. Where, in relation to infrastructure of national significance, it would not be feasible to duplicate the infrastructure, access was necessary to permit effective competition in an upstream or downstream market, and safe use of the infrastructure by the third party could be provided at an economically feasible cost. The agreement did not require State and Territory access regimes to be brought under the new provisions, but required them to comply with principles set out in the agreement. The consequence, if they did not, was that the Commonwealth provisions were to apply if the NCC determined that a State or Territory regime was ineffective.69 The result was Pt IIIA of the Trade Practices Act 1974, introduced in 1995.70 The agreement did not provide explicitly for the establishment of the National Competition Council but the council was established by the Commonwealth under the Trade Practices Act 1974.71 The agreement provided for consultations on all appointments to the council, with the Treasurer not putting forward a person for appointment unless a majority of States and Territories supported the appointment. Although the agreement makes it clear that the governments were free to determine their own agenda for implementation of each of the principles, the Implementation are significant in their particular markets, but nevertheless below some arbitrary threshold size, will be excluded from consideration of pro-competitive reform. Accordingly the Council sees value in a broader test of significance, involving consideration of the impact of an activity on its relevant market”: Competitive Neutrality Reform—Issues in Implementing Clause 3 of the Competition Principles Agreement (AGPS, 1997). 66. Competition Principles Agreement 1995, cl 3(8). 67. See Chapter 20. 68. Competition Principles Agreement 1995, cl 5. 69. Competition Principles Agreement 1995, cl 13. 70. See Chapter 17. 71. See Competition and Consumer Act 2010, Pt IIA and [4.30]. © 2018 THOMSON REUTERS
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Agreement provided a significant incentive for this principle being applied in practice, through the performance-based compensation payments to the States and Territories it provided for.
Implementation Agreement [4.210] The Implementation Agreement, also entered into on 11 April 1995,72 is from a practical viewpoint the most important agreement because it provided the incentive for the States and Territories to commit to and deliver on the competition reforms Hilmer had recommended. Under the agreement, the Commonwealth agreed to make payments of up to $24,972 million (in 1994/1995 dollars) to assist participating States and Territories to implement the Competition Principles Agreement and the Conduct Code Agreement, payable over the period 1998 to 2006. The agreement set out very specific conditions for the payments. For instance, the first payments depended on the relevant State giving effect to the Competition Principles and Conduct Code Agreements and, in particular, meeting the deadlines they prescribed in relation to the review of regulations and competitive neutrality, implementation of commitments made on electricity reform, a national framework for free and fair trade in gas and road transport reforms. Payments under the second tranche depended on the State continuing to give effect to the Competition Principles and Conduct Code Agreements, including meeting all deadlines, establishing a competitive national electricity market, implementing the agreed national framework for free and fair trade in gas, implementing the agreed strategic framework for the efficient and sustainable reform of the Australian water industry and effective observance of agreed road transport reforms. The National Competition Council had the important and sensitive function of advising the Federal Treasurer on progress made by State and Territory governments, forming the basis for decisions on payments under the agreement. If sufficient progress was not made payments were to be withheld. The first NCC review, in 1997, was primarily concerned with assessing whether the governments had established the necessary policy agendas and administrative arrangements to achieve the agreed competition objectives. The second assessment, in 1999, reviewed progress in achieving those agendas. The NCC concluded that there had been a strong reform performance by all governments. The second and subsequent reviews proved more difficult. For instance, in relation to the second tranche, the Treasurer announced73 that all States and Territories, except Queensland, would receive their full allocation of 1999–2000 payments for implementing that tranche of National Competition Policy reform commitments. Payments would amount to more than $600 million. In relation to Queensland, the NCC had recommended that payments of approximately $15 million be suspended, pending a supplementary assessment. The recommendation was based on Queensland’s inability to adequately demonstrate its commitment to a specific water reform measure, part of an agreed package of water reforms agreed to by all States and Territories. The suspended payment was subsequently approved. The NCC also conducted reviews and reported on the Commonwealth’s program of implementing the agreed reforms.
72. The agreement is set out in Appendix 2. 73. Treasurer’s Press Release No 043 (27 July 1999).
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Competition Policy Reform Legislation
Competition Policy Reform Legislation [4.220] The three agreements resulted in a sustained competition reform effort by the Commonwealth and each State and Territory. Significant changes to the framework of competition legislation also occurred. The Commonwealth moved quickly to amend the Trade Practices Act 197474 to give effect to the agreement to introduce the Competition Code, implement a new essential facilities access regime, establish the National Competition Council and to facilitate the ACCC and the Australian Competition Tribunal exercising jurisdiction in matters under the Code.75 [4.230] The States and Territories introduced complementary legislation to give effect to the Competition Code as part of their own law, thereby extending the competition provisions of the Act effectively to all businesses, whether incorporated or not and whether corporations within the meaning of the Constitution or not. The following table lists the relevant State and Territory legislation: State/Territory
Legislation
New South Wales
Competition Policy Reform (NSW) Act 1995
Victoria
Competition Policy Reform (Victoria) Act 1995
Tasmania
Competition Policy Reform (Tasmania) Act 1996
Australian Capital Territory
Competition Policy Reform (ACT) Act 1996
Northern Territory
Competition Policy Reform (Northern Territory) Act 1996
Queensland
Competition Policy Reform (Qld) Act 1996
South Australia
Competition Policy Reform (SA) Act 1996
Western Australia
Competition Policy Reform (WA) Act 1996
In order to ensure development of coherent, nationally applicable jurisprudence, the State and Territory uniform Competition Policy Reform Acts provided that the Federal Court of Australia had exclusive jurisdiction to hear and determine matters under the Competition Code. This complemented the Trade Practices Act 1974, which conferred power on the Federal Court in matters under the Code.76 [4.240] Turning to substantive amendments, the Competition Policy Reform Act 1995 inserted an object, for the first time, as follows: The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection. 74. Competition Policy Reform Act 1995 (No 88, 1995). 75. On 20 July 1995 the Commonwealth Competition Policy Reform Act 1995 came into effect, adding Pt XVI to the Trade Practices Act 1974, a schedule to the Act containing the Competition Code text, Pt IIIA dealing with access to essential services, Pt IIA establishing the National Competition Council and making consequential amendments such as to the appointment processes for ACCC members. 76. Now Competition and Consumer Act 2010, s 150D. © 2018 THOMSON REUTERS
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The Act also repealed the price discrimination provision and extended the exclusive dealing provision to cover services as well as goods. No changes were made to either the merger provisions or the misuse of market power provision. More broadly, State-by-State and Commonwealth legislation reviews were undertaken to remove unnecessary impediments to competition and structural reform accelerated, especially in the electricity, gas and rail freight industries. Competitive neutrality was applied to State-owned enterprises, and regulatory functions removed. Corporatisation was accelerated and, in some States, notably Victoria, privatisation of State-owned enterprises occurred. The Commonwealth and each State and Territory established a competitive neutrality complaints procedure and, in most cases, an independent agency to investigate complaints.77
Riding the Wave of Change [4.250] After the reform package was adopted, the government changed. A Howard-led Coalition government, elected in March 1996, took over responsibility for national competition policy and continued with the reforms the previous Labor government had initiated. Although the Act remained free of constitutional challenge, the significant structural changes introduced by the Hilmer reforms generated widespread controversy as they began to be implemented. When the NCC found itself in the position of having to recommend against tranche payments to States, it bore the brunt of the criticism that followed. The Treasurer’s decisions to withhold payments drew public criticism, especially of the NCC, from the Premiers of the States concerned. As reforms began to be implemented, the community grew more concerned at the social consequences of the changes. Although many of the changes producing this tension were not related to the Hilmer reforms, national competition policy was blamed for many of the perceived ill effects.78 As community concern grew, so did the level of parliamentary interest. The Senate had referred the 1995 Bill to its Economics Legislation Committee when the Bill was before it. There was strong support for the Bill, but the committee had noted that general concern had been expressed that “The legislation has the potential to be very far reaching and may have an impact far broader than originally intended”.79 Support was not universal. For instance, a committee of the Western Australian Parliament warned in 1996, when that State’s complementary legislation was before it, that: “It would be ironic … and indeed unacceptable — if Australia was to achieve major competition reform only to find that Parliaments and Governments had indirectly diminished the customer focus of previous government enterprises which had seen this as their principal objective.”80 77. See Chapter 20. 78. In its interim report, Competition Policy: Friend or Foe, the Senate Select Committee on the SocioEconomic Consequences of the National Competition Policy noted that National Competition Policy had become a “lightning rod” for the many negative social and structural changes occurring at that time in Australia, particularly in rural and regional areas. 79. Senate Economics Legislation Committee, Report on the Consideration of the Competition Policy Reform Bill 1995 (1995), p 3. 80. Legislative Assembly, Western Australia. Standing Committee on Uniform Legislation and Intergovernment Agreements: 12th report, 1996. Quoted in the Senate report, Riding the Waves of Change, p 9.
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A House of Representatives Committee conducted an inquiry into national competition policy, reporting in June 1997 that the policy was widely supported but needed more resources applied to community understanding and debate about the contents of the policy and its outcomes.81
Productivity Commission [4.260] The Treasurer gave a reference to the Productivity Commission in August 1998 to report on the impact of competition policy reforms on rural and regional Australia. The Commission reported in September 1999, reinforcing the fact that there was a widespread lack of understanding of what national competition policy involved and how it was being implemented. The Productivity Commission made a series of recommendations designed to give greater clarity to competition policy reforms and to maintain the dates set in the agreements for completion of reform requirements.82
Senate Review [4.270] The Senate also decided to set up an inquiry into the matter. It established the Senate Select Committee on the Socio-Economic Consequences of the National Competition Policy in July 1998.83 The committee commenced public hearings in March 1999 and tabled its report, Riding the Waves of Change, in February 2000. The report, like each of the reports that had preceded it, noted that many, but not all, supported national competition policy as being beneficial to the community, at least in theory, then raised a range of specific concerns with the implementation of national competition reforms.84 None of the reports indicated that the Act or Competition Code required adjustment. They were concerned with the nature and pace of change and the impact this was having on sectors in the Australian community. The regularity of inquiries into national competition policy reflected the level of concern in the community. It would inevitably lead to renewed concerns about the impact of the Act, especially on small business and in rural and regional communities, and that is what occurred.
Additional Parliamentary Committees [4.280] National Competition Policy was not the only area under review at that time. Three reports by Parliamentary committees considered other issues that impacted on competition policy.
Reid Report In June 1996, the House of Representatives Standing Committee on Industry, Science and Technology was asked to enquire into business conduct and in particular the economic and social impact of commercial practices by major businesses.
81. House of Representatives Standing Committee on Financial Institutions and Administration, Cultivating Competition (1997), para 5.39. 82. Productivity Commission, Impact of Competition Policy Reforms on Rural and Regional Australia (1999). The Commission quantified the overall benefit of national competition policy as producing an increase in GDP of 2.5% over what it would otherwise have been. 83. The committee lapsed when Parliament was prorogued for the 1998 election, but re-established on 9 March 1999. A number of parliamentary committees were considering aspects of the impact of the Hilmer reforms at the time, including the Joint Select Committee into the Retail Sector. 84. Riding the Winds of Change, p xiii. © 2018 THOMSON REUTERS
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The committee delivered its report, Finding a balance: Towards Fair Trading in Australia, to the Minister for Small Business and Consumer Affairs in May 1997. The report dealt extensively with franchising, banking and retail lease fair trading issues, but it also made recommendations in relation to misuse of market power. No changes to the misuse of market power provision in the Act were recommended, but the committee did recommend an amendment to permit the ACCC to take representative actions for contraventions of the competition provisions of the Act.85 The committee also recommended that the ACCC “make investigation of complaints, and enforcement of the law, in relation to the misuse of market power in the retail sector a top priority in light of the high degree of concentration in that sector”.86 The government’s response, New Deal: Fair Deal — Giving Small Business A Fair Go, resulted in the introduction of the Trade Practices Amendment (Fair Trading) Bill 1997 but that Bill dealt with fair trading and unconscionable conduct reforms only.
Baird Report [4.290] Concerns by the independent grocery sector about growing concentration in their industry had prompted a commitment, in the 1998 election, to set up an inquiry into the matter. In December 1998, the Parliament resolved to establish a Joint Select Committee on the Retailing Sector to inquire into, and report on, the degree of concentration in the retailing sector in Australia, “with particular reference to the impact of that industry concentration on the ability of small independent retailers to compete fairly in the retail sector”.87 The inquiry had bipartisan support. The committee tabled its report, Fair Market or Market Failure? A Review of Australia’s Retailing Sector,88 in August 1999. The law on misuse of market power was, of course, of central interest to the inquiry. The committee considered supplementing the “purpose” test with an “effects” test but decided not to recommend it. The committee said:89 One view is that an ‘effects’ test would not address the central issue of how to distinguish between socially detrimental and socially beneficial conduct. In order to avoid frivolous and capricious actions, any such change to section 46 might require only the ACCC or the Minister to bring actions in highly concentrated markets. Once proved, in order to protect private rights, damages claims would be open to affected parties. … However, the Committee is of the view that such far reaching changes to the law may create much uncertainty in issues dealing with misuse of market power.
[4.300] Another approach the committee considered was to maintain the “purpose” element, but reverse the onus of proof. The result would have been that, once the ACCC or private litigant had established that a firm that has substantial market power had used that power, the firm would have carried the onus of proving 85. Reid Committee recommendation 4.1. 86. Reid Committee recommendation 4.2. 87. Proposed by the House of Representatives on 8 December 1998, amended by the Senate on 9 December 1998, and the amended version agreed to by the House of Representatives on 10 December 1998: see . 88. . 89. Parliamentary Joint Select Committee on the Railing Sectors, Fair Market or Market Failure? A Review of Australia’s Retailing Sector (1999) (Baird Report), para 6.32.
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that it did not have one of the prescribed purposes. Another alternative the committee considered was to remove the “purpose” element altogether, but make the absence of purpose a defence.90 The committee decided, instead, to recommend implementing a mandatory code of conduct to regulate conduct associated with vertical relationships throughout the grocery supply chain. It also recommended that the then $1 million transactional limit for unconscionable conduct claims be increased to $3 million to allow more small businesses to access that remedy.91 Although it did not pursue the “effects” test issue, it did recommend that the committee should be reconstituted in three years to review progress and determine whether further legislative changes were required, suggesting that changes might include a reversal of onus of proof in misuse of market power cases and extension of the divestiture remedy to all competition provisions: an approach rejected by the Cooney Committee in 1991.92 [4.310] Turning to mergers and acquisitions, the committee recommended93 that acquisitions of wholesalers by retailers, and vice versa, should be subject to mandatory notification to, and approval by, the ACCC. This recommendation stated that the code of conduct should include a mandatory requirement to notify, and obtain approval of, the ACCC where publicly-listed corporations propose to acquire retail grocery stores or develop a new grocery store. In determining whether or not to give approval, the ACCC should “consult with local authorities and other relevant parties in order to make an informed assessment of the likely impact on local businesses of such acquisitions”. Although the report led to a retail grocery voluntary code of conduct, it did not result in any substantive change to competition law or policy.
National Competition Council [4.320] In June 1998, the Treasurer, Peter Costello, referred the exemption provisions of s 51(2) and (3) of the Act to the NCC for review. The NCC reported in March 1999. The fundamental policy question was whether the benefits to the community as a whole from the exemptions outweigh the costs, and whether those benefits could be achieved more efficiently through other means, including non-legislative approaches.94 The exemptions related (and still relate) to the negotiation of employment conditions, restrictive covenants in employment contracts, covenants on the sale of businesses, use of standards approved by Standards Australia and other prescribed bodies, export contracts and certain conduct in relation to patents, trademarks and registered designs. The NCC recommended that the exemptions be maintained with the exception of those relating to approved standards. It recommended that the intellectual property exemptions be retained in a modified form, removing protection for price and
90. Baird Report, para 6.33. 91. Baird Report, recommendations 5, 6. 92. Baird Report, recommendation 10. 93. Baird Report, recommendation 4. 94. National Competition Council, Review of Sections 51(2) and 51(3) of the Trade Practices Act 1974, Final Report (1999), p v. © 2018 THOMSON REUTERS
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quantity restrictions and horizontal agreements and extending exemptions to plant breeders’ rights. No changes resulted from this report.
Dawson Committee [4.330] Concerned about the growing power of the ACCC, and what it saw as unwarranted interference in business, the Business Council of Australia reportedly met with the Prime Minister, John Howard, and obtained a commitment to undertake a review of the ACCC. At the same time, small business lobbies were again pressing for a further review of the misuse of market power provision. In October 2001, in the lead up to the federal election, the Coalition announced that there would be an independent review of the competition provisions of the Trade Practices Act 1974, “in view of the significant structural and regulatory changes that are occurring in Australia that impact on the competitiveness of Australian businesses, economic development and affect consumer interests”.95 On 9 May, 2002 the Treasurer, Peter Costello, appointed Sir Darryl Dawson AC KBE CB to chair the review. The committee was given broad-ranging terms of reference that included noting that:96 In establishing a review, the Government is aware of concerns, among other things: (a) that Australian businesses increasingly face global competition and need to compete locally and internationally; (b) that excessive market concentration and power can be used by businesses to damage competitors; and (c) the need for businesses to have reasonable certainty about the requirements for compliance with, or authorisation under, the Act.
The Dawson Committee reported in January 2003,97 providing a thorough report that canvassed each of the competition provisions of the Act as well as its penalty provisions.
Misuse of Market Power [4.340] The misuse of market power provision was again under a spotlight with small business lobbies arguing that the section should be strengthened in a variety of ways and the ACCC submitting that an “effects” test should be added. Pointing to a difficulty in establishing purpose, the ACCC proposed that the prohibition apply where a corporation with substantial market power uses that power for the purpose, or with the likely effect, of damaging or eliminating a competitor, etc. As an alternative, the ACCC suggested prohibiting corporations that have market power taking advantage of that power “with the effect or likely effect of substantially lessening competition in a market”.98 The committee rejected the view that purpose was unnecessarily burdensome to establish and did not think the introduction of 95. F Brenchley, Review of Allan Fels: A Portrait of Power (Wylie, 2003), p 227. This was reflected in Terms of Reference, 9 May 2002: . 96. Treasurer’s Media Release, “Review of the Competition Provisions of the Trade Practices Act 1974” (Media Release 2002/023, 9 May 2002). 97. Review of the Competition Provisions of the Trade Practices Act (2003) (Dawson Report). 98. Dawson Report, p 84.
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an effects test appropriate. A further suggestion that the burden of proof in relation to purpose be reversed was also rejected as discouraging rather than encouraging competitive behaviour.99 The committee recommended that no change be made to the misuse of market power provision.100
Price Discrimination [4.350] Reintroduction of a prohibition on price discrimination, a provision that had been deleted in 1995, was the subject of submissions by a number of parties, particularly in the wholesale and retail grocery industry. They pointed out that independent grocery wholesalers were not able to buy groceries at prices that made them competitive with the two major national supermarket chains and saw reintroduction of a price discrimination provision as one answer to the problem.101 The committee concluded that the misuse of market power provision provided an appropriate means to deal with anti-competitive price discrimination, noting that price discrimination may be either pro-competitive or anti-competitive depending on the context.102
Mergers [4.360] As far as mergers were concerned, the committee noted widespread support for the “lessening of competition” test and made no recommendations for change to that test, although there were recommendations designed to improve the process of merger review and the procedures for obtaining an authorisation in merger cases.103
Collective Bargaining [4.370] In relation to bargaining by small business with big business, Dawson noted that small businesses, lacking bargaining power, may seek to bargain collectively. The problem was that collective bargaining may amount to per se price-fixing (now cartel conduct) and, if not, then could amount to an anticompetitive arrangement. Although collective bargaining could be authorised, that was a cumbersome and expensive process. Dawson therefore recommended that a new Notification process be introduced for collective bargaining by small businesses where the transaction value involved was less than $3 million, but the recommendation did not go so far as to recommend sanctioning collective boycotts if the results of the collective bargaining was not what the businesses concerned had hoped for.104
Tying [4.380] Third line forcing — the requirement, as a condition of supply, that a third party’s product be acquired — had not been the subject of consideration in any of the earlier enquiries since its inclusion as a per se contravention in 1977. The committee, noting that the practice may be beneficial and pro-competitive where efficiencies in production make it cheaper to produce and sell two products in combination, 99. Dawson Report, p 86. 100. Dawson Report, p 88. 101. Dawson Report, pp 89–90. 102. Dawson Report, pp 92, 96. 103. Dawson Report, pp 70–71. Recommendations were made about the way in which the ACCC administered the merger provisions and for a right for merging parties to go direct to the Tribunal, but otherwise no changes were proposed. 104. Dawson Report, pp 116–121. © 2018 THOMSON REUTERS
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recommended that the prohibition should only apply where an anticompetitive purpose or likely effect could be established.105
Criminalisation of Cartel Conduct [4.390] The Dawson Committee concluded that serious cartel behaviour should, as a matter of policy, be a criminal offence because it can have a crippling effect on competition and therefore significantly harm the economy. It recommended that there should be criminal sanctions for serious cartel behaviour, but noted the difficulty in arriving at a satisfactory definition to differentiate serious, or hard-core, cartels from other cartels.106
Penalties [4.400] A further significant recommendation by the Dawson Committee related to penalties for contravention of the competition provisions of the Act. Dawson recommended that the maximum pecuniary penalty for corporations should be raised to the greater of $10 million or three times the gain from the contravention. Alternatively, where gain could not be readily ascertained, the penalty should be 10 per cent of the turnover of the body corporate and all of its interconnected bodies corporate. The recommendation included that the court should be given the option to exclude an individual implicated in a contravention from being a director of a corporation or being involved in its management, and that corporations should be prohibited from indemnifying officers, employees or agents against the imposition on them personally of any pecuniary penalty for breach of the Act.107
The Aftermath of Boral [4.410] The decision in Boral108 was handed down by the High Court in February 2003, one month after the Dawson Committee had reported, but before its recommendations had been released. Boral involved a claim by the ACCC that the company had engaged in misuse of market power by selling building products at below avoidable cost. The High Court’s rejection of the ACCC’s case against Boral, on the ground that Boral did not have market power, provided further fuel for the debate over whether the Act’s misuse of market power provisions were adequate. In a press release issued on the day the decision was handed down, the ACCC Chairman, Allan Fels, expressing disappointment at the outcome, stated that:109 This judgment raises concerns as to the ability of the misuse of market power provision of the Trade Practices Act 1974 to protect viable small businesses and efficient new entrants from anti-competitive targeting by larger and better resourced competitors, thereby undermining the benefits of competition.
The ACCC’s 2002–3 Annual Report took the matter further, stating that: With the Boral judgment the ACCC has concerns about the application and effectiveness of the misuse of market power provision. The ACCC has reviewed a number of its 105. Dawson Report, pp 128, 130. 106. Dawson Report, p 163. 107. Dawson Report, pp 164–165. 108. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 606; (2003) ATPR 41-915. 109. ACCC, Media Release (MR 024/03, 7 February 2003).
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investigations following the judgment and discontinued some of these. Further reviews will occur as a number of other misuse of market power judgments are handed down by the courts, including appeal courts, in the coming year.
[4.420] Meanwhile, in April 2003 the government announced that it had accepted the Dawson recommendations110 and as a consequence proposed to make no changes to the substantive law on mergers, third line forcing or misuse of market power, and not to reintroduce a price discrimination provision. Rather than put an end to the matter, this provided a focal point for continued agitation for changes to the Act. Small business representatives’ view was that Dawson’s failure to recommend changes to deal effectively with misuses of market power added to the perception by small business groups that they were losing out to the big end of town.111 The Labor Party, in opposition, declared the misuse of market power provision seriously flawed and asserted that the Dawson Committee had failed to address the inadequacies of the law to prevent abuse of market power by big business. Labor announced that, if elected, it would ban predatory pricing.112 Turning to hard-core cartels, the government’s response was as cautious as Dawson’s. It accepted, in principle, that criminal penalties “may be more effective than civil penalties” in deterring people from engaging in serious cartel behaviour. It decided to move cautiously by doing no more than giving “further consideration” to introducing criminal penalties for serious cartel behaviour.113 After considering the matter for two years, the government decided to proceed with the introduction of criminal penalties for serious cartel conduct114 but no legislation was introduced before the change of government in November 2007.
Senate Takes up the Challenge [4.430] In June 2003, Labor Senator, Stephen Conroy, successfully moved in the Senate to have the Senate Economics References Committee conduct a further inquiry into the effectiveness of the Act in protecting small business. The terms of reference included: “whether section 46 of the Act deals effectively with abuses of market power by big businesses, and, if not, the implications of the inadequacy of section 46 for small businesses, consumers and the competitive process”. The committee reported in March 2004.115 It addressed the difficult policy question of whether the Act should protect competitors, as opposed to competition, by stating that:116 The Committee considers that the Act can best protect competition by maintaining a range of competitors, who should rise and fall in accordance with the results of competitive rather than anticompetitive conduct. This means that the Act should protect businesses 110. Treasurer’s Media Release (MRl021/03, 16 April 2003). 111. John Dagge, “Little to No Benefit from Trade Practices Review”, Sydney Morning Herald, 21 April 2003. 112. Cosima Marriner and John Garnaut, “Labor to Tackle Trade Practices”, Sydney Morning Herald, 5 May 2003. 113. Treasurer’s Media Release (MR 021/03, 16 April 2003). 114. Treasurer’s Media Release (MR 004/2005, 2 February 2005). 115. Senate Economics References Committee, The Effectiveness of the Trade Practices Act 1974 in Protecting Small Business (2004). 116. Committee Report, para E.3. © 2018 THOMSON REUTERS
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(large or small) against anticompetitive conduct, and it should not be amended to protect competitors against competitive conduct.
In other words, the committee supported a measure of protection for small business from anticompetitive conduct by big business, which raised the immediate question whether Boral had set the bar too high. This reflects a policy approach that suggests that, beside economic goals of allocative and productive efficiency, competition policy may encompasses political rules aimed at decentralising power, protecting freedom of decisions, and maintain equal opportunities to compete for small businesses.117
Misuse of Market Power [4.440] A number of submissions had argued that Boral has raised the threshold for the operation of the misuse of market power provision above that intended by Parliament in 1986. Many, including the ACCC, argued that the misuse of market power prohibition “required amendment to ensure that the lower threshold intended by Parliament is given effect in the legislation”.118 The committee recommended that:119 the Act be amended to state that the threshold of ‘a substantial degree of power in a market’ is lower than the former threshold of substantial control; and to include a declaratory provision outlining matters to be considered by the courts for the purposes of determining whether a company has a substantial degree of power in a market.
The committee made a number of other recommendations in relation to the misuse of market power provision. They included that the Act be amended to provide that, in determining whether a corporation has misused its market power, the courts may have regard to the corporation’s financial, technical and business resources120 and to the capacity of the corporation to sell a good or service below its variable cost,121 that a company may obtain a substantial degree of market power through its ability to act in concert (whether as a result of a formal agreement or understanding, or otherwise) with another company,122 and that a corporation with a substantial degree of power in a market is not to take advantage of that power for a proscribed purpose, in that or any other market.123 The committee also considered that the Act should be strengthened by making predatory pricing a clear target of the misuse of market power provision. It therefore recommended that the Act be amended to state that, where predatory pricing is 117. See, for example: Van den Bergh: The Difficult Reception of Economic Analysis in European Competition Law in Post-Chicago Developments in Antitrust (Elgar, 2002), p 34. In Europe, competition policy is “oriented to the special responsibility of firms in dominant positions to protect existing small competitors”: G Amato, Antitrust & the Boundaries of Power (Hart, 1997), p 71. 118. Committee Report, paras E.5, E.6. 119. Committee Report, para E.7. 120. Committee Report, recommendation 4. However, as the International Competition Network’s Unilateral Conduct Working Group has noted “‘high prices or profits alone are not sufficient proof that an undertaking has market power because they may represent a return on previous innovation, or result from changing demand conditions and thus may be consistent with a competitive market”. International Competition Network, ICN Report on the Objectives of Unilateral Conduct Laws (2007), p 56. 121. Committee Report, recommendation 3. 122. Committee Report, recommendation 6. 123. Committee Report, recommendation 5.
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involved, it is not necessary to demonstrate a capacity to subsequently recoup the losses resulting from the predatory pricing.124 [4.450] Although some submissions urged the committee to recommend an effects test rather than the purpose test, the committee rejected that proposal. The committee noted that, while the ACCC had made submission to previous enquiries that an effects test should be included, that was not the position it took with the committee. The ACCC, under new Chair, Graeme Samuel, had moved away from that proposal because “an effects test could potentially have some unintended consequences and therefore would need to be very carefully framed”.125 The committee said that the ACCC’s recent losses in misuse cases126 had not resulted from difficulty in proving purpose. While the committee expressed sympathy with some of the arguments for an effects test, it saw difficulties in introducing it.127 Some of these recommendations were taken up in relatively minor amendments to the provision in 2007 and 2008. Change to an “effects” test was not one of them.
Collective Bargaining [4.460] Turning to collective bargaining, the committee supported the Dawson recommendation that a notification process should be introduced for collective bargaining by small businesses dealing with large business. (including co-operatives meeting the definition of small business), but added that the $3 million transaction threshold should be excluded and collective boycotts included.128
Creeping Acquisitions [4.470] Creeping acquisitions was starting to become a matter of public interest because of growing consolidation in the supermarket sector, concerns about large supermarkets developments in regional towns and progressive acquisition of independent liquor outlets by the public companies that owned large supermarkets129 – all developments that would accelerate in future years.130 The committee recommended that provisions be introduced to ensure that the ACCC has powers to prevent creeping acquisitions that substantially lessen competition in a market. In making this recommendation, the committee noted that as a matter of logic if they continue indefinitely, creeping acquisitions must, at some point in time, result in very concentrated markets.131
124. Committee Report, recommendation 3. 125. Evidence by ACCC Chair, Graeme Samuel, extracted from the Committee Report, para 2.84. 126. The Commission did not have a good year with se 46 cases in 2003. It was unsuccessful in the High Court in Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; (2003) ATPR 41-915 and Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; (2003) ATPR 41-965 and in the Federal Court in Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947. 127. Committee Report, para 2.85. 128. Committee Report, recommendation 11. 129. See, for example, The Age, “Coles, Woolies in ALP’s sights”, 3 June 2003, 2. 130. Sydney Morning Herald, “Woolies: Let Us Grow”, 28 November 2008; Australian Financial Review, “ACCC Gets Tough on Creeping Giants”, 22 January 2010. 131. Committee Report, paras E.40–E.42. © 2018 THOMSON REUTERS
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Remedies [4.480] When it came to remedies, both for creeping acquisitions and for misuse of market power, the committee picked up an issue that had been considered and rejected, by majority, by the Cooney Committee in 1991 but left open by the Baird Committee in 1999.132 It recommended that, in addition to the other remedies already contained in the Act, the divestiture power in s 81 should apply in both cases. However, in the case of creeping acquisitions, with a “warning mechanism” to ensure that firms to which the remedy may potentially apply were aware of the risk of continuing with their acquisitions.133
Some Recommendations Enacted [4.490] The government’s response was to introduce a Bill in June 2004, primarily to give effect to its decisions on the Dawson recommendations. Significantly, the Bill made no change in relation to the areas of greatest concern to small business — misuse of market power, predatory pricing and price discrimination — nor was criminal cartel conduct part of it. The Bill introduced an entitlement for small business to engage in collective boycotts if notified to the ACCC, inserted a joint venture defence to the per se application of the prohibitions against price fixing and boycotts (exclusionary conduct), extended the competition provisions to local government to the extent that a council carries on a business, reformed the process in relation to merger clearance and authorisations, and strengthened the ACCC’s search and seizure powers. The Bill had a difficult time. It was introduced in June 2004, passed the House of Representatives, but lapsed in the Senate when Parliament was prorogued for the October 2004 election. The Coalition government was returned and Bill was reintroduced in February 2005 but rejected by the Senate. It finally passing with some changes in October 2006 after the Treasurer and the Minister for Small Business agreed to work with small business to strengthen the misuse of market power provisions and other provisions of the Act.134 [4.500] The result of that work was the introduction, in June 2007, of a further Bill,135 introduced by the Treasurer, Peter Costello, to amend the misuse of market power provision, responding to recommendations of the 2004 Senate Economic References Committee and the Dawson Report. However, that Bill also ran into difficulties in the Senate. It was passed in September 2007 only after the government accepted a last minute amendment to add a predatory pricing prohibition to the Act. The result was an unsatisfactory compromise on predatory pricing: a new provision prohibiting corporations with a substantial market share from supplying goods or services for a sustained period at a price that is less than the corporation’s relevant cost if it did so for the purpose of eliminating or substantially damaging a competitor, preventing market entry or deterring or preventing competitive conduct.136
132. See [4.290]. 133. Committee Report, paras E.44–E.45. 134. Treasurer’s Media Release (MR 113/06, 19 October 2006). 135. Trade Practices Legislation Amendment Bill (No 1) 2007 (Cth). 136. See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 457.
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A New Government Brings a New Approach
Other changes to the prohibition on misuse of market power focussed on giving guidance to the courts, the effect of which was intended to lower the barrier for determining whether or not a corporation has market power. They included providing that a firm may have a substantial degree of market power even though it doesn’t substantially control the market or have absolute freedom from constraint by competitors, suppliers or customers, and that more than one firm may have a substantial degree of power in a market. The Bill also provided that courts may have regard to any market power a firm has resulting from contracts, arrangements or understandings with others, but stopped short of specifically referring to financial strength.
A New Government Brings a New Approach [4.510] The Rudd Labor Government, elected in November 2007, announced as one of its election commitments a new policy approach to some areas of competition law, including changes to the Trade Practices Act 1974. The new policy initiatives included ensuring that the second Deputy Commissioner, provided for in the 2007 amendments, had a small business background, appointing a Commissioner with special responsibility for petroleum pricing and having the ACCC undertake an enquiry into grocery prices. The government also proposed to strengthen the merger provisions to deal with “creeping” acquisitions, to allow the ACCC to consider acquisitions of local, regional or small businesses that increase the market strength of the acquirer.
Misuse of Market Power [4.520] Dissatisfied with the former government’s response to the Senate Economic References Committee’s 2004 report, the government also proposed further amendments to the misuse of market power provision in relation to predatory pricing, and in order to clarify that recoupment is not an element in determining whether or not a party with market power is using that power for an improper purpose.137 It did not take up any of the suggestions made about more radical amendment to the provision to include an “effects” test.
Cartels [4.530] Finally, the government proposed to move ahead to criminalise serious cartel behaviour, introducing jail sentences as an additional penalty. In effect, it took up the policy decision announced by the previous government but not proceeded with. Although changes to criminalise cartel conduct took some time to introduce, the then Minister for Competition Policy and Consumer Affairs, Chris Bowen, issued an exposure draft and discussion paper on the subject in January 2008. The public controversy surrounding the Visy138 cartel case, decided in November 2007, had meant that moving forward to criminalise cartel conduct was inevitable. In Visy, a penalty of $36 million, the largest by far in Australia, had been imposed when the company admitted engaging in a price fixing and market sharing cartel that had operated for four years between it and another major fibreboard packaging company.
137. Trade Practices Legislation Amendment Bill 2008, Explanatory Memorandum. 138. ACCC v Visy Industries Holdings Pty Ltd [2007] FCA 1617; (2007) 244 ALR 673; (2007) ATPR 42-185. © 2018 THOMSON REUTERS
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In the course of his judgment, Justice Hearey observed: Many countries with free market economies have recognised this reality by enacting laws which make cartel conduct by individuals subject to criminal sanctions, including imprisonment. In the United States this happened as long ago as 1890. … More recently … the following countries have laws providing for terms of imprisonment for cartel conduct: Canada, France, Germany, Ireland, Israel, Japan, South Korea, Mexico, Norway, Slovak Republic and the United Kingdom. … On 2 February 2005 the Treasurer, the Honourable Peter Costello MP, announced acceptance of the recommendations of the Dawson Committee and stated that the Government would amend the Trade Practices Act to provide for a term of five years imprisonment, as well as increases in other penalties. Although, as already mentioned, the Act was amended last year to raise corporate penalties, the Government hasn’t yet got around to introducing criminalisation.
While debate continued over the drafting of the cartel provisions, the government moved to bring in further changes in relation to misuse of market power. A Bill introduced in June 2008 provided further guidance to the courts intended to lower the threshold for a finding of that a corporation had market power. It provided that the court may have regard to matters such as whether the conduct was materially facilitated by the corporation’s substantial degree of power in the market and whether it is likely that the corporation would have engaged in the conduct if it did not have a substantial degree of power in the market. Controversially, the Bill also amended the predatory pricing provision to provide that the provision may be contravened even if the corporation might not ever be able to recoup losses incurred in selling below cost.139 The legislation came into effect on 21 November 2008. Next, in December 2008, the government introduced a Bill to criminalise cartel conduct. Drafted in convoluted terms, the Bill drew criticism140 even from those who supported criminalising cartel conduct, much of which revolved around whether “dishonesty” should be an element of the offence. The Bill was referred to the Senate Economic Reference Committee, which recommended that the Bill be passed and it was, coming into force on 26 June 2009.
Grocery Markets — Another Inquiry [4.540] Changes to the cartel laws and further legislative tinkering with the position with misuse of market power provision were not the only initiatives the government took to address community, and small business, concerns about the level of concentration and alleged abuses in the grocery industry.
139. I describe this amendment as controversial because competition encourages, and consumers benefit from, efficient prices. It is only if there is a real possibility that the corporation pricing predatorily will, as a result, be in a position to recoup its losses by driving out competitors and defending its market gain from new entry that competition laws should address the matter. 140. For instance, the Law Council of Australia’s submission to the Senate committee echoed views expressed in earlier enquiries, that: “The Committee supports the introduction of criminal sanctions for cartel conduct. The Committee, however, remains concerned by a number of aspects of the current Bill, including with respect to is structure, the drafting techniques it employs, and its substantive content.” . See also C Beaton-Wells and B Fisse, Australian Cartel Regulation (Cambridge University Press, 2011).
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Grocery Markets — Another Inquiry
On 22 January 2008, the Minister tasked the ACCC to hold a public inquiry into the competitiveness of retail prices for standard groceries.141 The inquiry was to be wide ranging, considering matters including the current structure of the industry at the supply, wholesale and retail levels including mergers and acquisitions by the national retailers, the nature of competition at the supply, wholesale, and retail levels of the grocery industry, the competitive position of small and independent retailers, and the pricing practices of the national grocery retailers and the representation of grocery prices to consumers. [4.550] The ACCC delivered its report142 in July 2008. It was a disappointment to those who had advocated a better deal for small business. The ACCC said that grocery retailing was “workably competitive”, but that there were a number of factors limiting the level of price competition, including: • high barriers to entry and expansion, particularly in relation to difficulties in finding new sites for development; • limited incentives for the two major grocery retailers to compete aggressively on price; and • limited price competition from the independent grocery sector. The ACCC concluded that any possible weakening in the level of competition in retailing was unlikely to have been a substantial contributor to food price inflation in Australia. While the gross margins of the two major grocery retailers and the major independent grocery wholesaler had increased over the previous five years, the increases could have only made a small contribution to overall food price inflation, the ACCC concluded. It said that the vast majority of grocery price increases in Australia were attributable to other factors, such as supply and demand changes in international and domestic markets, increases in the costs of production and domestic weather conditions. Nevertheless, the retail grocery sector was clearly quite concentrated. The two majors — Coles and Woolworths — accounted for approximately 70 per cent of packaged grocery sales in Australia and approximately 50 per cent of fresh product sales, such as meat, fruit and vegetables.143 A number of submissions to the inquiry asserted that the two major grocery retailers were increasing their dominance of the sector through creeping acquisitions, repeating the type of evidence that had been given to the Baird Committee in 1999. On that issue, the ACCC concluded:144 The ACCC does not consider that acquisitions by Coles and Woolworths of smaller competitors over time are a significant current concern in the grocery retail sector. Most of the new growth by Coles and Woolworths in recent years has not come from acquisitions of independent supermarkets. Although such acquisitions do not appear to be a significant current concern in the supermarket retail sector, the ACCC maintains its support for the introduction of a general creeping acquisition law.
The only legislative result was in relation to creeping acquisitions. 141. Part VIIA of the Competition and Consumer Act 2010 (then the Trade Practices Act 1974) entitles the Minister to require the ACCC to hold an enquiry into such matters as the Minister may specify. 142. ACCC, Report of the ACCC Inquiry into the Competitiveness of Retail Prices for Standard Groceries (2008), . 143. Committee Report, p xvii. 144. Committee Report, p xxii. © 2018 THOMSON REUTERS
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Creeping Acquisitions — a Legislative Response [4.560] In September 2008, in response to the ACCC’s grocery inquiry, the government released a discussion paper on creeping acquisitions.145 This was an issue that continued to fester in the community, especially the small business community. As we have seen, the issue had been the subject of a number of enquiries.146 The Baird Committee had reported that the merger provision was unlikely to be breached by small but repeated acquisitions of independent grocery retailers, but there was a “degree of equivocation” on whether legislative amendments were required in relation to creeping acquisitions. The Dawson Report had discussed a range of measures to deal with creeping acquisitions, but concluded that the merger provision was adequate to deal with them. The Senate Economics Reference Committee, noting that “as a matter of logic”, creeping acquisitions in concentrated markets must substantially lessen competition over time, had recommended that the merger provision be revised to empower the ACCC to prevent creeping acquisitions that would lead to a substantial lessening of competition in an Australian market. However, the government had not brought forward legislation to deal with it. The discussion paper sought to give substance to the term “creeping acquisition”, defining it unremarkably as conduct that: comprises the accumulated effect of a number of small individual transactions which, when considered in isolation at the time that each transaction occurred, would not breach section 50. That is, while each transaction considered at the time it occurred may have a limited impact on competition, and would therefore not fall within the scope of section 50, over a longer period a series of such transactions may have the cumulative effect of substantially lessening competition in a market.147
On 27 May 2010, the government introduced a Bill148 to amend the Act to improve the ACCC’s power to consider creeping acquisitions. It did so by applying the merger provision to any market, whether substantial or not, thereby potentially significantly increasing the level of ACCC scrutiny of small acquisitions, whether creeping or not. The Bill lapsed when Parliament was prorogued for the 2010 elections, but was reintroduced on 15 June 2011 and became law in December that year.
Refocus on Predatory Pricing [4.570] Meanwhile, political pressure had been mounting to respond to the price disadvantages small business experienced when trying to compete with larger firms, with particular focus on the retail grocery and petrol retailing. In June 2009, the
145. Chris Bowen, Minister for Competition Policy and Consumer Affairs, “Government Takes First Step Towards Creeping Acquisitions Law to Promote Competition” (Media Release, 1 September 2008). 146. As we have seen, the issue had been raised by the Parliamentary Joint Select Committee on the Retailing Sector (Baird Committee) in its 1999 Fair Market or Market Failure report, the Review of the Competition Provisions of the Trade Practices Act in 2003 (the Dawson Review) and the Senate Economics References Committee in its 2004 report on The Effectiveness of the Trade Practices Act 1974 in Protecting Small Business. 147. Treasury, Creeping Acquisitions, Discussion Paper (2008). 148. Competition and Consumer Legislation Amendment Bill 2010.
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National Party co-sponsored a minority Bill,149 introduced in the Senate, directed at addressing predatory pricing by large firms. The Bill proposed to add a further new provision to the Act to prohibit differential pricing within a 35 kilometre radius. If passed, it would have required firms to which it applied to adopt uniform retail prices at all retain outlets operated under the same name by the firm or a related corporation, with that radius. The Bill was referred to the Senate Economic Legislation Committee150 and that committee recommended, by majority, that it not be passed. A minority report by the Bill’s sponsors151 echoed a recurrent theme that has consistently called into question what the policy of competition law should be in relation to large firms in the supermarket and petrol sectors pricing small independent retailers out of the market.152 Two policy questions arise that have defied definitive answers. First, should competition policy be “oriented to the special responsibility of firms in dominant positions to protect existing small competitors” or should it be solely concerned with protecting the competitive process?153 Second, if the latter, what political responses should there be to the concerns of small business?
Reconsidering Arrangements and Understandings [4.580] The trigger for the prohibition on anticompetitive conduct has, since the Act was introduced, been a provision in a contract, arrangement or understanding. Other competition laws have adopted other triggers expressed in broader terms. In the EU it is agreements, decisions or concerted practices.154 In the United States, it is contracts, combinations or conspiracies.155 In Canada, the trigger is conspiring, combining, agreeing or arranging.156 In Australia courts have, as we will see in Chapter 10, struggled with whether or not there is a difference between an arrangement and an understanding. In 2005, the ACCC was unsuccessful in the Apco.157 That started the ACCC questioning whether or not there might be an alternative trigger for the prohibition on anticompetitive conduct, including price fixing. In Apco the issue was whether or not Apco was a party to a petrol price fixing understanding that other fuel distributors 149. Trade Practices Amendment (Guaranteed Lowest Prices - Blacktown Amendment) Bill 2009. 150. Senate Economic Legislation Committee Report, 24 November 2009, . 151. Senators Barnaby Joyce and Nick Xenophon. 152. Senate Economic Legislation Committee Report, 24 November 2009, minority report, para 1.58. 153. See G Amato, Antitrust & the Boundaries of Power (Hart, 1997), p 71; G Van den Bergh, “The Difficult Reception of Economic Analysis in European Competition Law”, Post-Chicago Developments in Antitrust (Elgar, 2002), p 34. 154. Art 101(1) on Treaty on the Functioning of the European Union (Lisbon Treaty). 155. Sherman Act 1890 (United States), s 1. 156. Competition Act 1985 (Canada), s 45(1). 157. Apco Service Stations Pty Ltd v ACCC [2005] FCAC 161; (2005) 159 FCR 452; (2005) ATPR 42078. This followed by a loss by the ACCC in the Geelong petrol price fixing case, ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183; (2004) ATPR (Digest) 46-260. © 2018 THOMSON REUTERS
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in the Ballarat area had admitted. The court decided, on the facts, that Apco had not been a party to the understanding even though it had received communications about the prices other stations in the city were posting. It had, on occasions, followed those prices, but did not commit to doing so. The opportunity to explore the issue in a non-litigious setting arose when, in June 2007, the Treasurer, Peter Costello, gave the ACCC a direction to inquire into the price of unleaded petrol. The ACCC conducted a wide ranging investigation, delivering its report to the new Minister for Competition Policy and Consumer Affairs, Chris Bowen, in December 2007; a federal election having intervened.158 One of the practices the ACCC looked into was a monitoring service, Informed Sources, used by the majors in the retail market to access, to information about prices being charged by every other retail outlet, on a virtual real time basis. The ACCC concluded that:159 This information-sharing arrangement gives them enormous advantage over consumers. If one of the big retailers wants to raise prices, they have sufficient virtual real time information to understand what their competitors’ response will be—they can deal with it very quickly and adjust their pricing accordingly. This would seem to reduce incentives to take the initiative to decrease prices. Instead it is better to wait for a competitor to move.
An obvious question was whether or not this exchange of information in real time could amount to a contravention of the Act. That, in turn, depended on whether the exchange of information involved an anticompetitive arrangement or understanding. The ACCC took senior counsel’s advice and surprisingly, instead of testing the position, stated that the practice did not infringe the Act. Equally surprising, the ACCC included counsel’s advice in an appendix to the report. The advice was that “the courts has (sic) excluded from the reach of the statute various forms of behaviour which Parliament intended to prohibit”.160 Referring to Apco the ACCC’s report stated:161 The ACCC is concerned that these recent decisions provide a basis for defendants to argue that it must now be found that a party has assumed an obligation or given an assurance to act in a particular way before an understanding can arise. If this argument was accepted, the ACCC’s ability to prosecute alleged price fixing and market sharing would be impaired.
In January 2009, the Minister released a discussion paper on the meaning of the term “understanding”,162 seeking views in particular on whether or not the judicial approach to the interpretation of “understanding” limits the ability to properly address anticompetitive practices, and if so, whether there was a need to clarify or
158. ACCC, Petrol Prices and Australian Consumers (2007), . 159. Committee Report, p vii. 160. Committee Report, app R. Subsequently, the ACCC under Chair Rod Sims, instituted proceedings against Informed Sources and several petrol retailers alleging an anticompetitive arrangement or understanding: ACCC, Media Release (20 August 2014). There had been no relevant change to the legislation in the intervening period. 161. Committee Report, p 228. 162. Treasury, “Meaning of ‘Understanding’ in the Trade Practices Act 1974” (8 January 2009), .
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define the meaning of “understanding” in the Act.163 Only a handful of submissions were received and views were quite divergent. No amendment to the Act was forthcoming.
Price Signalling Concerns Prompt Legislation [4.590] The opportunity to use pricing announcements and private communication of prices between competitors has long been a matter of concern because it is, in some circumstances, a subtle but effective way to fix prices. However, nothing was done about it until an issue with Australian banks enlivened the government to address the issue legislatively. Before going into those events and their aftermath, it is appropriate to note that, from a policy perspective, price disclosure is not presumptively anticompetitive. Public disclosure of prices assists in ensuring that markets and consumers are informed. It is a common business practice and part of the competitive process. Only when there is something else going on does price disclosure become a competition issue. The problem is that price disclosures, even if public, can be a means by which tacit price collusion occurs. A 1992 case brought by the US Department of Justice against six US airlines illustrates the point. The allegation, resolved by a consent decree, was that airlines used an industry computer reservation system to signal prices in advance. The allegation was that the airlines posted future fares, waited to see what their competitors did, and if the competitors didn’t follow, withdrew the fare.164 Although it might be thought that price signalling could, depending on the circumstances, give rise to a contravention in Australia, or at least an attempt to do so, the requirement to establish some level of commitment in order to engage the arrangement or understanding trigger makes that unlikely. Rather than amend the Act to clarify whether or not such conduct is capable of coming within the prohibition on cartel conduct, or anticompetitive arrangements, the government decided to insert specific provisions dealing with price signalling. [4.600] The ACCC Chair, Graeme Samuel, raised concerns about banks signalling prices in a television interview in October 2010.165 The ACCC informed the Treasurer that there was strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition.166 The government moved quickly, introducing, less than two months later, a controversial Bill to insert a new set of provisions in the Act to deal with the problem. The rationale for this, set out in the Explanatory Memorandum to the Bill, was:167 Anti-competitive price signalling and information disclosures are communications between competitors which facilitate prices above the competitive level and can lead to inefficient outcomes for the economy and reduce wellbeing for consumers. They fall short of cartel behaviour but can have similar effect. Anti-competitive price signalling and information disclosures can occur as part of a wider cooperation agreement, or as a standalone practice absent of an explicit cartel arrangement.
163. Treasury, “Meaning of ‘Understanding’ in the Trade Practices Act 1974” (8 January 2009), para 17. 164. US Department of Justice, Media Statement (21 December 1992). 165. ABC Radio National, Breakfast, 25 October 2010 (Graeme Samuel). 166. House of Representatives, Hansard, p 3133. 167. Explanatory Memorandum, Competition and Consumer Amendment Bill (No 1) 2011. © 2018 THOMSON REUTERS
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The policy intent168 was to prohibit corporations: • making a private disclosure of pricing information to a competitor where doing so is not in the ordinary course of business; and • making a disclosure (on a wide range of matters) if the purpose of the disclosure is to substantially lessen competition in a market; in relation to classes of goods and services prescribed by regulation. The only industry to which the regulations applied was the banking services industry. The Bill was passed in 2011 but its provisions only came into effect on 6 June 2012. The provisions were roundly criticized as unfit for purpose, potentially capturing pro-competitive and benign conduct. Indeed, they were described as such by the Harper Committee, commissioned following another change of government one year later. The provisions only remained in the Act until 2017, when they were repealed on the advice of the Harper Committee and the problem with the arrangement or understanding trigger addressed instead. In the period the provisions were in the Act no proceedings based on them were instituted.
Harper Committee [4.610] Continued agitation by small business representatives for what they saw as a need to change the Act, especially in relation to misuse of market power, ultimately resulted in a decision by the government to commission another independent review. In December 2013, following the election of a Coalition government three months earlier, the then Prime Minister, Tony Abbott MP, and the Minister for Small Business, Bruce Billson MP, fulfilling an election promise, announced a “root and branch” review of competition law and policy.169 The Panel, chaired by Professor Ian Harper, delivered a broad ranging report on 6 March 2015.170 The scope of the report was much wider than competition law and the institutions that administer it. It ranged over delivery of human services, infrastructure, agricultural, planning and zoning regulatory restrictions, and retail shopping hours. When it came to competition laws, the committee set out the following guiding principles:171 An important principle is that competition policy should foster choice and increased responsiveness to consumers. … Another guiding principle is that the law should be simple, predictable and reliable. … Furthermore, the law must balance two principles: • that its scope not over reach (by prohibiting procompetitive conduct) or under reach (by failing to prohibit anticompetitive conduct); and • that the language of the law be clear to market participants and enforceable by regulators and the courts.
168. Trade Practices Act 1974, Pt IV Div 1A. 169. Treasurer, Review of Competition Policy (Media Release, 4 December 2013). 170. Competition Policy Review: Final Report (2015) (Harper Report). 171. Harper Report, p 307.
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The committee concluded that Australia’s competition laws were sound, although some of the provisions were unnecessarily complex, contributing to uncertainty and imposing unnecessary costs.172
Price Discrimination [4.620] Inevitably, the question of reintroduction of a specific prohibition on price discrimination was raised with the Panel. As we have seen, a prohibition on price discrimination had been part of the competition law between 1974 and 1995. The provision had prohibited discrimination on price between purchasers of like goods where the discrimination was of such magnitude or recurring or systematic character that it was likely to adversely affect competition in any relevant market. The argument that such a provision would improve the ability of small businesses to compete, allowing them to be more responsive to consumer needs, was again raised, as was the counter argument that the price rigidity it would involve can be harmful to competition and therefore to consumers.173 The Panel concluded, as had inquiries that proceeded it, that a specific prohibition on price discrimination should not be introduced, adding that it could be dealt with by the existing law and the Panel’s proposed changes to the prohibition on misuse of market power.174 Of course, one clearly recognised circumstance in which price discrimination was an issue that competition law should address was where it was engaged in as an exclusionary tactic by firms with market power.
Misuse of Market Power [4.630] In considering whether or not the misuse of market power provision was fit for purpose, the committee thoroughly reviewed the jurisprudence and considered legislative responses to unilateral conduct in other countries that, like Australia, had well-developed competition laws. Harper focused on each specific aspect of the then current law, noting that it only applied to firms that had market power, applied only where the firm uses that market power, and only when it does so for a prohibited purpose. The Panel also considered whether the prohibited purposes, focusing as it did on competitors, rather than the competitive process, was appropriate. The first element — the requirement to establish that the firm has market power — was accepted as uncontroversial, as was the proposition that firms should not contravene the law merely because they have market power. When it came to the “take advantage” element, Harper came to the conclusion that it was not a useful test for distinguishing between pro-competitive and anticompetitive conduct.175 The requirement that a firm with market power must have used its market power gave rise, in the committee’s view, to substantial interpretative difficulties, undermining confidence in the law’s effectiveness.176 It concluded that this element should be removed.
172. Harper Report, p 310. 173. Harper Report, p 350. 174. Harper Report, p 355. 175. Harper Report, p 338. 176. Harper Report, p 347.
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[4.640] Turning to the “purpose” element, Harper concluded that it was misdirected and inconsistent with equivalent prohibitions in other countries.177 The committee did not think purpose irrelevant, but though the provision should be directed to purposes of harming the competitive process, rather than harming competitors. In considering ways in which the prohibition might be reframed, Harper reviewed how prior enquiries had dealt with the issue, noting that only one had recommended a form of effects test.178 The Panel nevertheless concluded that the prohibition ought to be directed at conduct that had either the purpose or likely effect of harming the competitive process.179 Finally, Harper recommended that the re-framed provision should include legislative guidance “directing the courts to weigh the pro-competitive and anticompetitive impact of conduct”.180
Creeping Acquisitions [4.650] Creeping acquisitions had, as we have seen, been a contentious issue for many years, because individual acquisitions, viewed in isolation, could not necessarily be caught by the merger provision. As the Baird Committee had noted, creeping acquisitions were unlikely, in most circumstances, to breach the Act because of the limited impact on the market caused by each individual acquisition, but its recommendations to deal with the issue had not been taken up. The attempt made to deal with the concern legislatively in 2011 by removing the requirement that a market had to be “substantial”, had done little to reduce concerns. Nevertheless, Harper concluded, on balance, that there was not a strong enough case for change in this respect, especially in the absence of evidence of acquisitions harmful to competition proceeding because of a gap in the law.
Cartels [4.660] There had been no criminal prosecutions for cartel conduct since the cartel provisions were introduced in 2009 and many were of the view that the complexity of the legislation was a contributing factor. There was no dissent from the view that criminal prosecution was an appropriate policy response to hard-core cartels. Harper agreed that the drafting was complex and concluded that it should be simplified,181 including by confining the provisions to conduct involving firms that were in actual or likely competition, and making a broader exemption for joint ventures and removing overlap by repealing the exclusionary provisions sections.182
Price Signalling [4.670] As discussed earlier, Harper acknowledged that price signaling can harm the competitive process because competitors may use the disclosure of price information to co-ordinate pricing. Harper also recognised that the current state of the law on what is meant by “arrangement or understanding” was an impediment 177. Harper Report, p 340. 178. This had been suggested by the Griffiths Committee in 1984 (see 3.370). The other had recommended against such a change for a variety of reasons: see Harper Report, pp 335–336. 179. Harper Report, p 340. 180. Harper Report, p 347. 181. Harper Report, recommendation 27, p 367. 182. Competition and Consumer Act 2010, ss 4D, 45(2)(a)(i), 45(2)(b)(i).
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to dealing effectively with anticompetitive price signaling. However, the provisions prohibiting private disclosure of price information between competitors (confined to the banking sector) were regarded as not fit for purpose.183 Harper recommended instead that the term “concerted practices” should be added to the triggers for the prohibition on anticompetitive provisions,184 so that anticompetitive concerted practices would be covered along with anticompetitive contracts, arrangements and understandings.
Tying [4.680] Since 1977, Australian competition law had differentiated between horizontal anticompetitive conduct and vertical anticompetitive conduct, an approach not take in other jurisdictions. This had added to the complexity of the Australian law, which Harper thought unnecessary. Harper therefore recommended that the distinction be removed.185 Third line forcing — a firm tying a third party’s product or service with supply of its product — had constituted a per se contravention also since 1977, although, as we have seen, the Hilmer Committee had questioned why this form of tying was not subject to a competition test, as the other types of tying covered by the Act were.186 Harper recommended that third line forcing should only be prohibited if it substantially lessens competition.187
Resale Price Maintenance [4.690] Both economic thinking and the US Supreme Court had moved on in the 20 years since Hilmer had looked at the issue of resale price maintenance and decided that the evidence was insufficient to recommend that it should no longer be a per se contravention.188 Nevertheless, Harper remained equivocal. It “did not see a sufficient case” for moving from the per se prohibition to a lessening of competition requirement.189
Boycotts [4.700] Harper concluded that a strong a case remained for the prohibition on secondary boycotts, as was the case when the provisions were first recommended by the Swanson Committee in 1976. Furthermore, the Panel thought the ACCC was not doing enough in this area. It recommended that the ACCC “pursue secondary boycott cases with increased vigour”.190 Surprisingly, Harper made no recommendation about simplifying the complex drafting of the secondary boycott provisions.
183. Harper Report, p 371. 184. Harper Report, recommendation 29. 185. Harper Report, recommendation 33. 186. Hilmer Report, p 52. See Chapter 13. 187. Harper Report, recommendation 32, p 63. 188. Leegin Creative Leather Products Inc v SKS Inc 551 US 877 (2007). 189. Harper Report, p 379. 190. Harper Report, recommendation 36. © 2018 THOMSON REUTERS
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Essential Facilities [4.710] Harper confirmed that the essential facilities provisions, Part IIIA, should continue to provide “a back stop to current industry-specific access regimes”.191 Noting a recent report on the National Access Regime by the Productivity Commission,192 Harper made a number of recommendations on the criteria for declaration.193
The Result [4.720] In November 2015, the government published its response to the Harper Report,194 accepting most, but not all, of the recommendations, at least in principle. Significant controversy continued to surround the recommendation on misuse of market power sufficient for the government to defer its decision on that recommendation, opting instead for further consultations. Following an options paper and round-table discussions convened by Assistant Treasurer, Kelly O’Dwyer, the government decided to implement the Harper recommendation “in full”.195 In December 2016, the government introduced legislation to amend the misuse of market power provision and, in March 2017, to give effect to the other aspects of Harper that the government had accepted. The Competition and Consumer Amendment (Misuse of Market Power) Act 2017 and the Competition and Consumer Amendment (Competition Policy Review) Act 2017 both came into effect on 6 November 2017.
191. Harper Report, p 431. 192. Productivity Commission, National Access Regime, Report No 66 (2013). 193. Harper Report, recommendation 42. 194. Australian government response to the Competition Policy Review . 195. Prime Minister, Treasurer and Assistant Treasurer, Joint Media Statement: Fixing Competition Policy to Drive Economic Growth and Jobs, 16 March 2016.
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Australian Competition and Consumer Commission ............................ [5.40] Origins of the ACCC ............................................................. [5.80] Changes to the ACCC .......................................................... [5.100] The ACCC Today .................................................................. National Competition Council ................................................................ [5.150] Origins of the NCC ............................................................... [5.170] The NCC Today .................................................................... Australian Competition Tribunal ............................................................ [5.190] Origins of the Tribunal .......................................................... [5.200] The Tribunal Today ............................................................... State and Territory Regulators ..............................................................
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[5.10] Three statutory authorities, each originally established under the Trade Practices Act 1974 and recognised in the package of legislation and agreements that makes up the competition policy reform package, have an essential role under Australian competition law. Those authorities are: • Australian Competition and Consumer Commission; • National Competition Council; and • Australian Competition Tribunal. In addition, each State and Territory has established an independent regulator with power to approve access undertakings and arrangements, and arbitrate on access disputes within that jurisdiction and determine competitive neutrality complaints.
Australian Competition and Consumer Commission [5.20] The ACCC is the independent statutory authority responsible for administering the Competition and Consumer Act 2010. It is constituted by a chair, two deputy chairs and currently four commissioners. In addition, the chairs of the Australian Communications and Media Authority, the New Zealand Commerce Commission, and the Australian Energy Regulator and one member of the Australian Energy Regulator are associate commissioners. The government decided to designate one of those commissioners as a “small business” commissioner and another as an “agriculture commissioner”. The ACCC’s powers and functions are drawn from a wide range of provisions in the Act, including, in particular, investigating possible breaches of the competition and consumer protection provisions of the Act and, where appropriate, bringing proceedings against those suspected of contravening the Act.
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[5.30] All members of the ACCC are appointed by the Governor-General for a fixed term, on the recommendation of the Treasurer. The Conduct Code Agreement1 provides that, before making a recommendation to the Governor-General the Treasurer must have the support of a majority of the participating States and Territories for the nomination2 and the Governor-General cannot appoint a member unless a majority of the States and Territories support the appointment.3 Members of the ACCC hold office for up to five years, but may be reappointed.4
Origins of the ACCC [5.40] The Trade Practices Act 1965 created the office of Commissioner of Trade Practices, an independent statutory office responsible for maintaining the register or registrable agreements, investigating examinable agreements and practices and bringing them before the Trade Practices Tribunal if they were thought to be contrary to the public interest. The Trade Practices Act 1974 created the Trade Practices Commission, with a chairman and such other full time or part time members as may be appointed from time to time. The former Commissioner, Ron Bannerman, was appointed the first chairman. The Commission had a wide-ranging role to administer the new Act. This included, for the first time, bringing court proceedings to enforce the competition provisions of the Act. Although the old compulsory registers had been discarded, the Commission’s role also included providing clearances and authorisations to applicants who voluntarily submitted their agreements and practices to the Commission for assessment. The first controversy faced by the new Commission was over authorisation and clearance applications. The government had allowed the period from 1 October 1974 to 1 February 1975 for business to adjust to the new Act and make applications if they wished to do so. The Commission was overwhelmed by the number of applications it received. The Commission exercised its power to grant interim authorisations to all applications to give it time to process them properly, a controversial move. [5.50] Clearance was a procedure under which applicants could, through a public process, obtain a decision from the Commission on whether or not their agreement or practice was likely to have an adverse effect on competition. If the Commission issued a clearance, the relevant agreement or practice was taken not to infringe the Act. The clearance process was abolished in 1977, but reintroduced in 2006 in relation to mergers and combined with the authorisation process in 2017. Authorisation was, and still is, a process by which applicants can obtain immunity for their agreements or practices, or for mergers. That immunity now applies if the parties can establish to the satisfaction of the Commission one of two situations. The first is that the conduct would not be likely to have the effect of substantially lessening competition, which was originally the clearance test. The second is that the conduct has public benefits that would not otherwise be available and that outweigh any detriment caused by any adverse effect on competition likely to result from the agreement, conduct or merger. Until 2017 authorisations only involved the latter.
1. 2. 3. 4.
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Between 1974 and 1977, the Commission was entitled to conduct public hearings, which it did on five occasions.5 That was thought to be too resource intensive, especially as decisions of the Commission could be reviewed by the Tribunal, so the power to conduct public hearings was removed in 1977. Today, applications for authorisation are made to the Commission, although between 2006 and 2017 merger clearance and authorisation applications were made direct to the Tribunal. When clearances were abolished in 1977, a notification procedure for exclusive dealing conduct, explained in Chapter 18 was introduced. That process remains part of the Act today. [5.60] Taking court proceedings, initially in the Commonwealth Industrial Court and, after its establishment in 1977, the Federal Court of Australia, was an important priority for the new Commission, as it is today. The Commission made a serious start. It challenged petroleum giant, Total’s, exclusive dealing conduct in relation to petrol supply. It followed up with penalty proceedings against 109 liquor retailers, who, it claimed had been parties to recommended price agreement established by the Australian Hotels Association’s NSW Branch. It then challenged major domestic airline, Ansett’s, acquisition of the Avis Rent-A-Car business in Australia. When it came to authorisations, the Commission made it clear that it would not wave through applications. After a gruelling 30 days of public hearings it rejected, in December 1975, authorisation applications in relation to petrol station ties — a test case for the industry. It followed up by refusing, after a 10-day hearing, to authorise building societies authorisation to require borrowers to insure mortgaged properties with insurers nominated by the building society. [5.70] In 1995, the Trade Practices Commission was reconstituted as the Australian Competition and Consumer Commission, following acceptance of the Hilmer Report. However, its structure did not change and all members of the old Commission became members of the new ACCC. Its role has not changed, although since then its functions and influence have grown. In 1995, the Commission’s functions were enlarged with the inclusion of Part IIIA, dealing with access to essential facilities. In 1997, as part of a new regulatory scheme governing telecommunications, the Commission’s functions were expanded significantly in relation to conduct rules and access to telecommunications infrastructure, with the addition of two new Parts to the Act. Between 1999 and 2002, the ACCC had a role in ensuring that no price exploitation occurred with the introduction of Australia’s goods and services tax. It acquired a price monitoring function in 2004 following a Productivity Commission report recommending termination of the Prices Surveillance Authority and the addition of a limited new inquiry and monitoring to the Trade Practices Act 1974. In 2014, another new Part was added to the Act conferring on the ACCC a function in monitoring prices and dealing with price exploitation following the repeal of Australia’s carbon tax.
5.
Re Shell Company of Australia Ltd (1975) TPRS 108.1 (oil company ties with petrol stations); Re Herald & Weekly Times Ltd (1976) TPRS 108.98 (Media Council accreditation rules); Re United Permanent Building Society Ltd (1976) 26 FLR 129 (building society tied insurance arrangements); Re Tooth & Company Ltd (1976) TPRS 108.272 (brewery ties with hotels).
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Of course all of these additional functions added to the already heavy load of the ACCC. That included investigating and prosecuting contraventions of the competition and consumer protection provisions and assessing the growing number of informal merger clearance and general authorisation applications. As the Dawson Committee noted in 2003:6 The powers of the ACCC as a regulator are considerable and, in the exercise of those powers, the ACCC has made a significant impact on the conduct of business in this country and on the economy.
Changes to the ACCC [5.80] When the Trade Practices Commission was established in 1974 there was power to appoint part-time members, but that had not occurred. In November 1976 the then Minister for Business and Consumer Affairs, John Howard, took to Cabinet a proposal to appoint part-time members to “bring to Commission deliberations more industry involvement”. The proposal, which was adopted, was to allow the Minister to appoint a panel of part-time commissioners from which the chairman could select members to serve on the Commission for the purpose of particular inquiries. The Act was amended accordingly. However, the panel approach was not regarded as successful. No part-time Associate Commissioners have been appointed, except for the purposes of coordination with other authorities such as the New Zealand Commerce Commission, Australian Energy Regulator and the Australian Communications and Media Authority. [5.90] Proposals to establish a supervisory board, put to the Dawson Committee in 2002, were not supported because it would, in the committee’s view, introduce an additional and uncertain layer of control over management and would be unlikely to increase the ACCC’s efficiency.7 The governance question was revisited by the Harper Panel in 2014. The Panel recommended that, in order to incorporate a wide range of viewpoints, half of the commissioners should be appointed on a part-time basis, and the position of deputy chair should be abolished. The government had, some years earlier, designated one of the commissioners as a “small business” commissioner and another as a “consumer” commissioner, although none of these designations were recognised legislatively.8 The Panel recommended that the designation of commissioners as sectoral commissioners should not continue because the requirements for appointment were sufficient to ensure that commissioners had the full range of expertise and experience.9 The government’s response to those recommendations was to reject them. The government view was that full-time commissioners were best placed to consider and take action on the varied and frequent decisions of the ACCC, a view that reflected the importance of consistency in ACCC decision-making and the inefficiencies in managing timely decision-making presented by part-time commissioners. The government also thought that a specific small business and a specific consumer commissioner were important aspects of the government’s commitment to ensuring key regulatory bodies were enhanced by appointments with small business and 6. 7. 8. 9.
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consumer insights and experience.10 It went further by also deciding to appoint a specialist agriculture commissioner. The appointment of sector-specific commissioners, designated as such, does seem inappropriate. The ACCC has a wideranging brief. Its decisions should engage all commissioners, with none having a special role in any of them. The Harper Panel was right to point out that appointment criteria were sufficiently broad to permit appointment of commissioners who have had deep experience in sectors of importance to the ACCC’s functions but also who meet the overall qualifications for appointment. Finally, the Harper Panel recommended that a new Access and Pricing Regulator be established and take over some of the ACCC’s responsibilities.11 Specifically, the recommendation was that the new regulator should take over the ACCC’s powers under the National Access Regime and its telecommunications access and pricing functions. The government was non-committal about this recommendation, stating that:12 The Government will continue discussions with states and territories on how a new national framework could be developed between the Commonwealth, states and territories to promote economic growth including the most appropriate institutional architecture to support reform.
The 2017 legislation implementing the Harper reforms did not include provision for an Access and Pricing Regulator.
The ACCC Today [5.100] Today the ACCC is regarded as one of the most effective competition agencies in the world. According to Global Competition Review’s 2010 annual survey of competition agencies globally:13 [The ACCC] continued to live up to its well-earned reputation as one of the world’s leading competition enforcers, with a generally well-chosen, balanced caseload of behavioural and merger cases.
The Review’s 2017 scorecard continued to rate the ACCC highly, stating:14 The Australian Competition and Consumer Commission, led by longtime chairman Rod Sims, remains a model for developing antitrust regimes in the region, and an example to agencies in the UK and elsewhere of how to balance criminal enforcement with a voluntary merger system and an active and effective advocacy record.
The primary role of the ACCC remains enforcing the competition and consumer provisions of the Act, including through court proceedings for injunctions and pecuniary penalties. It also has an important role in administering an immunity policy in relation to cartels and in supporting the Director of Public Prosecutions in cartel prosecutions. Its role also includes: • granting authorisations, informal merger clearances and assessing Notifications; • price monitoring; 10. 11. 12. 13. 14.
Australian Government Response to the Competition Policy Review (2015), p 39. Harper Report, p 81. Australian Government Response to the Competition Policy Review (2015), p 38. Global Competition Review, Rating Enforcement (2010). Global Competition Review, Rating Enforcement (2017), p 26.
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• competition oversight of the telecommunications industry; • arbitrating access disputes and approving access undertakings in relation to essential services (including telecommunications); and • publishing guidelines and information to assist the community to understand and comply with obligations under the Act and the Competition Code. [5.110] The ACCC has a significant role in clearing mergers. The consequences of completing a merger later found to have contravened the Act are significant.15 Consequently, where a merger that might have an adverse effect on competition in any market in Australia is contemplated, the practice is to apply to the ACCC for informal clearance of the merger, even though merger clearance is not compulsory. This is explained in Chapter 18. [5.120] The ACCC also has an integral role in relation to access to essential services. Once a service has been declared as essential to competition in an upstream or downstream market, it is the ACCC that arbitrates all access disputes. As importantly, the ACCC is the authority to which access undertakings are offered. Infrastructure owners can offer access undertakings which, if accepted by the ACCC, avoid the necessity for anyone to seek to have the service declared an essential service. The ACCC administers the access regimes for telecommunications,16 electricity transmission and gas transmission. In its telecommunications role the ACCC conducts inquiries into whether to declare telecommunications services, to vary or revoke existing declarations, and grant exemptions from standard access obligations for declared services. It also develops pricing principles and indicative prices for declared services and arbitrates telecommunications access disputes. [5.130] The ACCC has had responsibility for price surveillance in those markets where, in the view of the Treasurer, competitive pressures are not sufficient to achieve efficient prices and protect consumers.17 In its price surveillance role, the ACCC receives notification of price increases in relation to declared goods and services; monitors prices in industries as directed by the Treasurer; and undertakes price inquiries, through a public process, as requested by the Treasurer.18
National Competition Council [5.140] The National Competition Council is an independent statutory authority.19 It was originally established primarily to assess the progress of State and Territory governments in opening up to competition their agencies undertaking business activities. It was also asked to make recommendations to the federal government on compensation payments to be made under the Implementation Agreement. It is constituted by a part-time President and two part-time Councillors.
15. Remedies include divestiture and penalties of up to the greater of $10 million, 10% of annual turnover of three times the benefit: Competition and Consumer Act 2010, s 76(1A)(b). 16. The telecommunications industry is regulated by the ACCC under the provisions of Parts XIB and XIC of the Competition and Consumer Act 2010. 17. Competition and Consumer Act 2010, s 95E. 18. Competition and Consumer Act 2010, ss 95F, 95G, 95P, 95X, 95ZE. 19. Competition and Consumer Act 2010, Pt IIA.
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The President and Councillors are appointed by the Governor-General but the Competition Principles Agreement provides that, before making a recommendation to the Governor-General, the Treasurer is required to consult with the States and Territories and consider their suggestions of suitable candidates. The Treasurer cannot propose a candidate unless that person has the support of a majority of States and Territories20 and the Governor-General cannot appoint a member unless a majority of the States and Territories support the appointment.21 The NCC’s main function now is to make recommendations to relevant Ministers on the regulation of third party access to services provided by monopoly infrastructure. Access to essential facilities is explained in Chapter 17. Since 1 July 2014, while the NCC remains an independent statutory authority, the ACCC provides secretariat services to it, including advice and support in relation to NCC recommendations, decisions and reports, and administrative services. The Harper Panel considered the NCC’s role in 2014, and observed that it had been significantly diminished. As noted earlier, the Panel recommended that the NCC be dissolved and its functions transferred to a new Access and Pricing Regulator.22 The government did not take up that recommendation.
Origins of the NCC [5.150] The Hilmer Committee recommended that a National Competition Council be established jointly by the Commonwealth, State and Territory governments, to play a key role in extending the scope of competition laws. The committee recommended that the NCC could undertake nationwide reviews in specified areas of regulatory restrictions on competition and assist governments to develop detailed principles covering individual sectors,23 advise governments on structural reform of public monopolies,24 advise on whether access rights to essential facilities should be created and if so on what terms,25 and assist governments to develop and refine principles of competitive neutrality.26 Governments accepted the recommendation and the Competition Principles Agreement, signed on 11 April 1995, provided for establishment of the Council under the Trade Practices Act 1974. That occurred as a consequence of the Competition Policy Reform Act 1995. The Act provides27 that the functions of the NCC are to include carrying out research into, and providing advice on, matters referred to it by the Federal Treasurer. [5.160] Initially the NCC’s primary role was to monitor implementation of the national competition policy reforms agreed on by governments through the Competition Principles Agreement, the Conduct Code Agreement and related agreements.28 The NCC undertook the sensitive task of making assessments of 20. 21. 22. 23. 24. 25. 26. 27. 28.
Competition Principles Agreement 2010, cl 9. Competition and Consumer Act 2010, s 29C(3)(b). Harper Report, p 81. Hilmer Report, Executive Overview, p xxx. Hilmer Report, Executive Overview, p xxxi. Hilmer Report, Executive Overview, p xxxii. Hilmer Report, Executive Overview, p xxxiv. Competition and Consumer Act 2010, s 29B. The agreements are reproduced in Appendix 2.
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whether or not the States and Territories had met the requirements under the terms of the Implementation Agreement for the competition reform payments by the Commonwealth. As expected this proved to be a very sensitive exercise because it required the NCC to report that States were not making sufficient progress with their reform programs to warrant the Treasurer approving payments. As a consequence, on occasions, payments were deferred. That role has come to an end because all competition reform payments have been disbursed.
The NCC Today [5.170] The NCC’s primary role today is to undertake assessments of whether or not a service is an essential service for the purposes of providing a statutory right to access. The NCC advises the Treasurer on whether or not to declare services for access purposes. The Treasurer cannot make a declaration before receiving a report from the NCC. In addition, where a State or Territory introduces an access regime, the NCC is the body that assesses and advises the Treasurer on whether that regime is an effective regime for the purposes of recognition under the Act.
Australian Competition Tribunal [5.180] The Australian Competition Tribunal is an independent arbitral tribunal, established to hear and determine applications by interested parties dissatisfied by decisions of the ACCC on Authorisations applications and on Notifications. It is constituted by a President, Deputy Presidents and other members appointed by the Governor-General.29 All members serve part-time. The President and Deputy Presidents are drawn from the ranks of sitting judges of the Federal Court of Australia. Members are appointed from a cross-section of the community, including economists, business people, lawyers and former senior public servants.30 There is no formal requirement for the Treasurer to consult the States and Territories before recommending a person for appointment. The Tribunal proceeds essentially as a court, with each party presenting its case in the normal adversarial manner, although the rules of evidence do not apply and proceedings are generally less formal than in a court. Questions of law must be determined by the sitting presidential member,31 but otherwise the matter is decided by all of the sitting members.
Origins of the Tribunal [5.190] The Trade Practices Tribunal, the predecessor of the Australian Competition Tribunal, was originally established in 1965. In its original role the Tribunal determined whether or not registrable agreements or examinable practices were contrary to the public interest. Where the Tribunal found an agreement to be contrary to the public interest it declared the agreement unenforceable and could issue restraining orders.32 Where the Tribunal made an order, any person who
29. 30. 31. 32.
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suffered loss or damage could recover damages.33 Its history is explained further in Chapters 2 and 3.
The Tribunal Today [5.200] The role of the Tribunal changed significantly with the introduction of the Trade Practices Act 1974. Its primary role, a role that it has today, is to review, by re-hearing, applications by those dissatisfied with a decision of the ACCC on an authorisation application or a Notification. Today, the other roles of the Tribunal include determining applications for review of decisions of the Treasurer or a State Minister on the declaration of services as essential services,34 and on whether or not a State or Territory access regime is an effective regime;35 whether a tender process is a competitive tender for exemption purposes;36 and re-considering arbitration decisions made by the ACCC.37 The Tribunal was renamed the Australian Competition Tribunal in 1995 following the Hilmer Report and its powers expanded in relation to access matters. Following the Dawson Report the Tribunal’s powers in relation to mergers were expanded in 2006. However, the 2017 amendments following the Harper Review returned the Tribunal to its original role as a re-hearer of ACCC decisions. Otherwise, the Tribunal has not changed significantly since it was re-established in 1974.
State and Territory Regulators [5.210] Each State and Territory, has established by statute an independent regulatory authority to oversee pricing decisions by government monopolies and, in some cases, to arbitrate access disputes under access regimes in the jurisdiction. Although the objectives of these authorities vary, in essence they are to: • promote effective competition in the interests of consumers; • facilitate an appropriate balance between efficiency and environmental and social considerations; and • ensure non-discriminatory access to monopoly and near-monopoly infrastructure in relation to regulated industries and access regimes. Details of each State and Territory regulator and the legislation under which they are established are set out in the following table. Although some of the regulators listed also have jurisdiction over competitive neutrality complaints, that is not the case with them all. Details of each State and Territory body responsible for competitive neutrality complaints are set out in Chapter 20. It is not within the scope of this book to deal with regulation of State and Territory government monopoly pricing or access regimes but the following summarises the position with each State and Territory regulator.
33. Trade Practices Act 1965, s 88. 34. Competition and Consumer Act 2010, s 44K. 35. Competition and Consumer Act 2010, s 44O. 36. Competition and Consumer Act 2010, ss 44PG, 44PH. 37. Competition and Consumer Act 2010, s 44ZP. © 2018 THOMSON REUTERS
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State / Territory Australian Capital Territory
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Authority Independent Competition and Regulatory Commission
Internet Site http://www.icrc.act.gov. au/
New South Wales
Independent Pricing and Regulatory Tribunal
https://www.ipart.nsw. gov.au/
Northern Territory
Utilities Commission
http://www.utilicom. nt.gov.au/
Queensland
Queensland Competition Authority
http://www.qca.org.au/
South Australia
Essential Services Commission
http://www.escosa. sa.gov.au/
Tasmania
Office of the Tasmanian Economic Regulator Commissioner for Better Regulation
http://www. economicregulator.tas. gov.au/
Essential Services Commission
Essential Services Commission Act 2001 https://www.erawa.com. Economic au/ Regulation Authority Act 2003
Victoria
Western Australia
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Legislation Independent Competition and Regulatory Commission Act 1997 Independent Pricing and Regulatory Tribunal Act 1992 Utilities Commission Act 2016 Queensland Competition Authority Act 1997 Essential Services Commission Act 2002 Economic Regulator Act 2009
http://www. betterregulation.vic. gov.au http://www.esc.vic.gov. au/
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6
Economic Efficiencies ........................................................................... 94
[6.40] [6.50] [6.60]
Allocative Efficiency .................................................... 95 Dynamic Efficiency ...................................................... 95 Productive Efficiency ................................................... 95
[6.80] Barriers to Entry .................................................................................... 96 [6.90] Collusion ................................................................................................ 97 [6.110] Illustrating the Point ............................................................................... 97 [6.130] Hypothetical Monopolist Test ................................................................ 99 [6.150] Herfindahl-Hirschman Index ............................................................... 100 [6.160] Welfare Standards ............................................................................... 101
[6.10] Law draws support and direction from a wide spectrum of sources - social, moral, cultural and financial — to name a few. While Australian competition law is no different and Barwick’s original motivation for introducing a trade practices law may have been predominantly to redress unfairness,1 the influence of economic theory on the development and operation of the Trade Practices Act 1974, and now the Competition and Consumer Act 2010, is significant. As Professor Maureen Brunt, the leading economist (and member of the Trade Practices Tribunal) responsible for developing our understanding of competition policy and law said: 2 We begin with a statute; it is to be interpreted and enforced by courts of law; necessarily we are in the hands of lawyers. Yet fundamentally the Trade Practices Act … is an instrument of economic policy; its subject-matter, anti-competitive conduct of business enterprises within markets, is economic; the very terms used in drafting the statute (eg “conduct likely to have the effect of substantially lessening competition in a market for goods or services”) employ economic concepts; the statutory criterion for determining whether anti-competitive conduct is in the public interest calls for analysis of economic processes.
Competition policy aims, as the Competition and Consumer Act 2010 states, to enhance the welfare of all Australians through competition. In other words, competition is the means by which we provide an opportunity to optimise economic welfare. It does that by contributing to innovation, efficient production, distribution efficiencies and lower prices. It also goes some way to dealing with inappropriate barriers to business.
1.
See Chapter 2.
2. M Brunt, Monash Trade Practices Lectures (Melbourne, 1975), reproduced in the Report of the Senate Standing Committee on Legal and Constitutional Affairs, “Mergers, Monopolies and Acquisitions – Adequacy of Existing Legislative Controls” (1991) (Cooney Committee). © 2018 THOMSON REUTERS
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Although it is not within the scope of this book to deal in any detail with the subject, a short excursus into the field of economics will prove useful. [6.20] Economics explains why firms act in the way they do and predicts, through the use of models, how firms will behave given different market conditions. It is in the study of and application to industrial organisations that economics makes its greatest contribution competition policy. In so doing, economics helps us understand why some market conditions are not conducive to efficient competitive outcomes. It also explains the way firms behave given those market conditions so we can observe what amounts to normal competitive behaviour and what amounts to anticompetitive conduct. While a few short paragraphs in this book cannot do justice to the contribution economics has made to competition policy, it is useful to introduce some aspects of that learning. Starting with the self-evident proposition that all resources are finite, economics considers how resources might be utilised efficiently in the interests of maximising the benefit to society – in the language of the Act, how the welfare of Australians may be promoted. Economics uses the concept of economic welfare to measure how well industry performs by aggregating consumer welfare and producer welfare, referred to in the language of economics as consumer surplus and producer surplus.3 As Professor Motta points out: It follows that, other things being equal, an increase in the price at which goods are sold reduces consumer surplus and increases producer surplus.4
Economic welfare is lowest when the market price is at monopoly levels and highest when the market price is at competitive levels.
Economic Efficiencies [6.30] Economists speak in terms of allocative, dynamic and productive efficiency.5 What does this all mean? For the purposes of our competition law they are seen as important public benefits to be weighed up in assessing whether or not a merger or conduct for which authorisation is sought delivers public benefits. If the result of a proposal is likely to be that efficiencies are generated that lead to increased welfare (in the sense meant by economists), that constitutes a public benefit. However, if a proposal enhances a firm’s market power and leads to an increase in prices, it reduces allocative efficiency and creates the loss of producer and consumer surplus. That results in a public detriment. Economists consider three types of economic efficiencies — allocative efficiency, dynamic efficiency and productive efficiency.
3. These concepts are explained well in M Motta, Competition Policy, Theory and Practice (Cambridge University Press, 2004), pp 17–30. 4. M Motta, Competition Policy, Theory and Practice (Cambridge University Press, 2004), p 18. 5. The commentary here draws heavily on the views expressed by the Australian Competition Tribunal in Re Qantas Airways Ltd [2005] ACompT 9; (2005) ATPR 42-065.
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Allocative Efficiency [6.40] Allocative efficiency is the result when the optimal level of resources is employed in a market at a given point in time as a result of the efficient operation of independent market forces of supply and demand. When allocative efficiency is achieved, the socially optimal level of production is achieved at the minimum achievable long-run cost. Consequently, no alternative allocation of resources could improve the outcome. Conversely, allocative inefficiency is prices or output decisions that are not optimal for society. Turning to the graph at [6.110], allocative efficiency is achieved at Box 1 and allocative inefficiency at Box 2.
Dynamic Efficiency [6.50] Dynamic efficiency involves adaptation by firms to the evolving supply and demand forces in the market. It is economists’ way of referring to benefits to society resulting from innovation and change — the search for new ideas, new products and new production methods that expands consumer choice, raises output levels and leads to production cost savings.
Productive Efficiency [6.60] Productive efficiency relates to the most efficient use of the resources and technology currently available to a firm, in any given time period. When there is production efficiency a firm will produce the maximum output possible from its available inputs, given the various technological constraints under which it may be operating. The result is expected to be the minimum possible costs of production for time period under consideration.6 Conversely, “x-inefficiency” refers to those forms of productive inefficiency resulting from a lack of competitive pressures on and lack of incentives for a firm that has market power. The theory, borne out by experience, is that, the greater the competitive pressure the greater the allocative, dynamic and productive efficiencies and therefore, the greater the benefit to society. As the Australian Competition Tribunal put it7: The greater the competitive pressures to which a firm is exposed, the greater the pressure on it, for example, to keep costs low, innovate in its production technology and processes, and innovate and induce people to work harder.
Conversely, the lower the competitive pressures the lower the allocative, dynamic and productive efficiencies, leading to higher prices, higher production costs, less innovation and less investment in new technologies and processes. This is referred to by economists as “deadweight loss”, which simply meant the loss to both consumers and producers. [6.70] Applying this to a simple example, take an ordinary household product such as a steam iron. A range of local and overseas firms supply steam irons. There are no patents preventing other firms manufacturing steam irons, no import restrictions
6. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 42-027 at [160]. 7. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 42-027 at [161]. © 2018 THOMSON REUTERS
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or tariffs, nor is there likely to be any lack of retailers ready to stock a new line of steam irons, or supply orders placed over the internet.8 We know from everyday experience that, in those circumstances, there will be a readily available range of steam irons, reasonably priced, with price differences reflecting only matters such as brand preference, design, quality and special addon features. We also know that the firms producing the product are covering their cost, including a reasonable return for shareholders, because otherwise they would stop manufacturing steam irons. We can also observe the part innovation plays. The original 19th century shaped metal slab heated over a stove (giving an iron its name) gave way to electricity to heat the ironing plate, plastics, thin stainless steel and Teflon coatings reducing the weight, as technological advances were made, and manufacturers innovated and competed to produce the most attractive product at the most attractive price. Economic studies confirm our experience. The firms producing steam irons are innovative and efficient. If they were not, they would not sell sufficient irons to make it profitable to continue to do so. Competition from other innovative and efficient firms means that each firm’s product is available at, or close to, economic cost. Like all consumer goods in a competitive market, prices have reduced as volumes increased, reflecting pressure from competition and manufacturing efficiencies. The result is that consumers benefit from access to the product at the lowest efficient cost.
Barriers to Entry [6.80] Now assume that the Australian manufactures of steam irons merge so that there is only one producer. Would anything change? We know from everyday experience, and economics confirms, that the single manufacturer will seek to extract a higher price for its product, producing less in order to maintain or increase the level of demand for the product, thereby making more profit.9 Just how much the price will increase will depend on the extent to which imported products, or other entry or expansion barriers impose a constraint on the capacity of other local firms to switch to manufacture or import the product. In the language of economics, it depends on how high the barriers to entry and expansion are. What are barriers to entry? Over the years economists have developed a range of definitions, but it is sufficient for our purposes to treat barriers to entry as a cost of producing products or services that must be borne by a firm seeking to enter an industry but is not borne by firms already in the industry.10 Import taxes that add 8. Of course steam irons were not always as ubiquitous as they now are. Although first patented and manufactured in the USA by the Eldec Company in 1926, it was not until the 1950s that they started to become a household item. As has been the pattern with most household goods, with design improvements, more efficient manufacturing and distribution, more firms manufactured steam irons, and the price reduced. 9. In the language of economics, producer surplus increases, consumer surplus decreases and total welfare reduces. 10. This definition was proposed by Nobel Laureate, Professor George Stigler in 1968. See GJ Stigler, The Organization of Industry (University of Chicago Press, 1983). For this and other definitions see H Demsetz, “Barriers to Entry” (1982), Vol 72, No 1, The American Economic Review, p 47. In considering barriers to entry for merger purposes, the ACCC takes into account a broader range of potential constraints: legal or regulatory barriers, structural or technological barriers and strategic barriers (such as the risk of retaliation): see ACCC, Merger Guidelines, paras 7.29–7.32 reproduced in Miller’s Australian Competition and Consumer Law Annotated (40th ed, 2018), p 2109.
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Illustrating the Point
a cost to imported products not borne by locally manufactured products is but one example. Barriers may be structural, either based on market characteristics or the result of the incumbent firm’s strategic behaviour to deter market entry.11 They may arise in a variety of ways, including, for instance, through intellectual property rights, customer loyalty, availability of skilled labour, raw materials, plant and equipment, availability of suitable sites or the level of capital investment required.12 They may also exist due to import quotas, restrictions or tariffs, technological factors or from legislation which gives a statutory monopoly.
Collusion [6.90] Consider the outcome if, instead of merging to create one manufacturer, the firms producing steam irons collude. Collusion for this purpose may be in terms of price, output volumes or through dividing the market and allocating a geographic segment the firms agree each will serve. Whatever form the collusion takes, the effect is that each firm will seek to extract a higher price for its product and produce less to maintain or increase the level of demand, thereby making more profit. Again, just how successful that collusion will be depends how many firms producing the same products collude, the barriers to entry and, of course, the extent to which participants in the cartel cheat on one another. [6.100] Economic theory also shows us that prices may rise to a supra-competitive level without collusion in markets in which there is a limited number of competitors and high barriers to entry, a consideration for merger policy. Starting with the safe assumption that in market economies firms will seek to maximise price, Cournot13 modelled the effect in a market with few competitors and high entry barriers. Assuming that each firm knows the production capacity of the others, each will, according to the Cournot theory, if acting rationally and without collusion, reduce capacity below that which would exist in a competitive market. This would produce the result that consumer demand exceeds supply, with the consequence that prices rise above a competitive level. The consequence is that prices will be higher than in a perfectly competitive market, but not as high as if there were a monopoly or cartel.
Illustrating the Point [6.110] Lawyers tend to work in words, but economists use diagrams to explain concepts, which we lawyers often find difficult to comprehend. However, there is one basic diagram used by economists to illustrate why competition laws directed at curbing cartels and other anticompetitive conduct, anticompetitive mergers and misuse of market power contribute to improved economic welfare – to enhancing the welfare of all Australians. It is this: 11. Re Chime Communications Pty Ltd (No 2) [2009] ACompT 2; (2009) 234 FLR 210. 12. Drawn from ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 41-715. 13. Named for Antoine Augustin Cournot (1801–1877), a French philosopher and mathematician. See S Bishop and M Walker, The Economics of EC Competition Law: Concepts, Application and Measurement (Sweet & Maxwell, 1999), p 24. Cournot theory has provided the basis for significantly more sophisticated and complex economic models and theories, not the least of which is game theory and the Nash equilibrium, named for John Nash, the mathematician featured in the film “A Beautiful Mind”. © 2018 THOMSON REUTERS
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Price a
g
f box 2
loss
d
c box 1
b h
e
Quantity
The first point to note about the diagram is the demand line (a to b). This represents the fact that, the lower the price of a product the higher the likely demand and vice versa. It also represents the fact that, as the quantity of products available to the market increases, the cost per unit reduces, with participating firms achieving an efficient return and buyers obtaining the products at an economically efficient price. Box 1 (in the diagram (c,d,e) represents an efficient outcome in a competitive market. Price is at a level that meets optimal demand. Consumers benefit from sufficient quantity at an optimal price. Efficient producers benefit from optimal output sufficient to cover costs, including the cost of capital. In the language of economics, producer surplus and consumer surplus are in equilibrium, and therefore economic welfare is at its highest. Box 2 in the diagram (f,g,h) represents a position in which the impact of competition is less. In that example, the price is higher and firms produce less (h rather than e), but their return is higher. The consequence is that participating firms capture a greater return than they would in a more competitive market, and they do so at the expense of consumers for whom there is less of the product available and the price is higher. The result is that producer surplus – the return to the producing firms — has increased while consumer surplus – the level of benefit to buyers — has decreased. The space between Boxes 1 & 2 and the demand curve (g, d) represents the loss to society resulting from firms producing less than is optimal and charging more. In an efficient and competitive market more consumers would have had access to the product and prices would have been lower. In the language of economics, the total surplus is less and economic welfare reduced. What factors would allow a firm to produce less and charge more, as Box 2 in the diagram illustrates? First, in those markets where there is only one producer, that firm will be able to produce less and charge more if the market conditions are such that competitive entry is unlikely — if there are high entry barriers. As we have 98
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noted, a variety of reasons explain why high entry barriers might exist. Second, they may do so where firms in the market can produce less and charge more by colluding to fix prices, divide up the market, restrict production or engage in other types of cartel conduct. Third, the work done by Cournot and those who followed him shows that prices may rise to above a competitive level (producer surplus increases while consumer surplus decreases) without collusion in markets in which there is a limited number of competitors and high barriers to entry, again a consideration for merger policy. [6.120] Applying this to the objectives of competition policy, we can see how competition law is intended to function. First, the Act prohibits, with heavy penalties, cartels or other anticompetitive conduct that reduce competition allowing producers to produce less and change more. Second, through the merger and the monopolisation (misuse of market power) provisions,14 the Act deals with the opportunity for firms to acquire a monopoly or create a market condition sufficiently concentrated for coordinated conduct allowing the firms to produce less and charge more without collusion. It does so by providing for competition agencies to intervene in mergers likely to have an adverse effect on competition, and by penalising firms with market power whose actions adversely affect the competitive process.
Hypothetical Monopolist Test [6.130] The hypothetical monopolist test is a test used in economics to identify the extent to which product substitution occurs, or is likely to occur. The test is also called the SSNIP test, shorthand for a “small but significant non-transitory increase in price”. The test assists in determining what products, within what geographic area, are likely to be substituted for the products in question, in order to identify the boundaries of relevant markets and assess the consequences, particularly of mergers. The test is designed to identify whether, with a non-transitory price increase of 5% to 10%, substitution for the product under consideration, or within a given geographic area, would occur and to what extent. The test originated in the United States as a test used to identify markets for the purposes of merger analysis. It is used for that purpose by the ACCC. The Merger Guidelines describe how the test is used: The process of applying the hypothetical monopolist test starts with one of the products and geographic areas supplied by one or both of the merger parties. If a hypothetical monopolist supplier of this product cannot profitably institute a SSNIP because of customers switching to alternative products, the next closest demand substitute is added. If a hypothetical monopolist supplier of this extended group of products cannot profitably institute such a price increase because of customers switching to alternative products, the next best substitute is added. The collection of products is expanded until a hypothetical monopoly supplier of all those products could profitably institute a SSNIP.
[6.140] As the ACCC has explained, the test involves determining whether a hypothetical monopolist supplier could profitably impose a small but significant non-transitory increase in price for the supply of relevant products, or whether substitution by buyers or suppliers, over a reasonable time period, would make such an increase unprofitable. If the hypothetical monopolist could profitably impose 14. Competition and Consumer Act 2010, ss 50, 46. © 2018 THOMSON REUTERS
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such an increase the market is correctly identified. However, if the hypothetical monopolist could not impose such an increase, the scope of the enquiry must be narrowed until a positive answer can be given to the question as to whether the increase could be imposed profitably. The test is applied by expanding the boundaries of the possible market to include all close substitutes that would likely impact on the ability of the firm or firms under consideration to impose a small but significant non-transitory increase in price. The relevant market is identified as the area, in terms of either product or geography, in which a hypothetical monopolist could profitably impose that increase in price. If there are several products that compete within the same market, it is the cumulative switching to all those alternative products by consumers that determines whether close demand-side substitutes exist. If the cumulative effect is sufficient to make the relevant increase in price unprofitable, all close substitutes would be included in the market, even if the consumer switching to each individual product in isolation might be insufficient to make the relevant increase in price unprofitable.15 Of course, the test can only be used if sufficient quantitative data is available on which to calculate prices of the products in question.16
Herfindahl-Hirschman Index [6.150] The Herfindahl-Hirschman Index, or HHI, is a model for measuring the degree of concentration in a market on the basis of market shares. It is based on the separate work in the 1940s and 1950s by economists Oris Herfindal and Albert Hirschman.17 It came to prominence in the assessment of mergers for antitrust purposes when the US Department of Justice adopted in on its 1982 Merger Guidelines.18 The ACCC uses the index in merger analysis as part of a preliminary indicator of the likelihood that a proposed merger may raise competition concerns.19 How does the index work? The HHI produces a number by squaring the market share of each firm in the relevant market, including the merging firms, before and after the proposed merger, and adding the results to produce a final number. The higher the resulting number (10,000 being the highest possible), the more concentrated the market. The HHI then subtracts the pre-merger number from the post-merger number to determine the likely increase in concentration, expressed numerically. The increase is called the “delta”. To take an example, assume a market with five firms, with market shares as follows: Firm 1 — 45%, Firm 2 — 35%, Firm 3 — 10%, Firms 4 & 5 — 5% each. Applying the HHI index, the result of adding each market share squared is 3,400. Assume a merger between Firm 2 and Firm 3. The result of adding each market share squared would be 4,100, producing a delta — the difference between the pre-merger and 15. The description of the process is drawn from the explanation in ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 24-378 and on appeal [2011] FCAFC 151; ATPR 42-380. 16. A point made by Justice Sackville in Seven Network Ltd v News Ltd [2007] FCA 1062. 17. A Hirschman, “The Paternity of an Index” (1964) American Economic Review 761. 18. See Cohen and Sullivan, “The Herfindahl-Hirschman Index and the New Antitrust Merger Guidelines: Concentrating on Concentration” (1983) 62 Texas Law Review 453. 19. ACCC, Merger Guidelines, para 7.14: see Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 2109.
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post-merger result — ofs 700. The higher the post-merger number (in our case 4,100) or the delta (in our case 700) the more concentrated the market. Having calculated the HHI, what next? The ACCC’s Merger Guidelines state that it is unlikely to refuse merger clearance, at least in horizontal mergers, unless the post-merger HHI is less than 2,000 or greater 2,000 with a delta of less than 100. In our example the merger would be closely examined. What if Firm 3 and Firm 4 were to merge? The result would be a post-merger HHI of 3,500 and a delta of 100 (3,500–3,400). In this example, while the market is concentrated, the delta is borderline. The merger would be examined, but would more likely be cleared. Calculating an HHI accurately is often a challenge for two reasons. First, it relies on an accurate assessment of the relevant market or markets. Second, in Australia it is often difficult to obtain reliable market share data.
Welfare Standards [6.160] As we saw in Chapter 1, competition policy is driven by different considerations in different countries. In Australia it is the “total welfare standard” or a variant of it. Other countries adopt different standards, with Europe focusing in particular on the “consumer welfare standard”. What do these standards mean? The total welfare standard involves, as the Tribunal noted in Qantas,20 taking into account efficiencies that accrue to consumers as well as those that accrue to the producers. The consumer welfare standard only takes into account efficiencies that will be passed on to consumers through, for instance, lower prices or better products. Competition agencies usually argue that, except in exceptional circumstances, it is the consumer welfare standard that is important because, unless benefits flow though to consumers, benefits cannot be regarded as public benefits. On the other hand, as Professor Gal argues:21 Total welfare predictions also involve a number of difficult analytical and qualitative issues that place a heavy burden on the regulator. Nevertheless, while it is true that total welfare is hard to predict, when such predictions can be made, there is a strong case in favour of adopting such a standard, especially in small economies, as it is the standard for reviewing mergers most consistent with promoting economic efficiency.
Welfare standards are used for different purposes. In Australia their relevance is in assessing public benefit in authorisation applications. In other jurisdictions these standards are used more broadly in courts determining whether or not conduct contravenes competition laws. As the Tribunal explained, in a merger context in Australia, the difference between the outcomes each standard produces is that under the total welfare standard, if the benefits associated with the proposed merger exceed the amount of the deadweight loss, then total welfare increases and the merger is allowed to proceed even if it might enhance market power.
20. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 42-027 at [171]. 21. M Gal, Competition Policy for Small Market Economies (Harvard University Press, 2003), pp 203–204. Quoted in Re Qantas Airways Ltd [2004] ACompT 9. © 2018 THOMSON REUTERS
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This is because, under that standard, equal weight is given to any loss in consumer welfare and any corresponding increase in producer surplus. Under a consumer welfare standard, on the other hand, mergers involving an increase in market power cannot be authorised unless there is a net benefit to consumers. In other words, consumers must receive sufficient benefits. As the Tribunal added:22 Put simply, the difference in the underlying rationale of the two standards is that under the total welfare standard, no weight is accorded to the transfer from consumers to producers, instead such redistribution is regarded as neutral. Under the consumer welfare standard, redistribution towards consumers is valued to the exclusion of redistribution towards producers.
FURTHER READING Author ACCC Bishop and Walker:
Demsetz
Title Merger Guidelines Economics of EC Competition Law: Concepts, Application and Measurement A Practical Guide to the Hypothetical Monopolist Test for Market Definition “The Herfindahl-Hirschman Index and the New Antitrust Merger Guidelines: Concentrating on Concentration” “Barriers to Entry”
Hirschman
“The Paternity of an Index”
Motta
Competition Policy, Theory and Practice The Organization of Industry
Coate and Fischer
Cohen and Sullivan
Stigler Werden
“The 1982 Merger Guidelines and the Ascent of the Hypothetical Monopolist Paradigm”
Publisher/Citation ACCC website Sweet & Maxwell, 1999
Potomac Papers in Law and Economics 06-01. Also SSRN website (1983) 62 Texas Law Review 453
(1982) 72 The American Economic Review 47 (1964) The American Economic Review 761 Cambridge University Press, 2004 University of Chicago Press, 1983 (2003) 71 Antitrust Law Journal 253
22. Re Qantas Airways Ltd [2004] ACompT 9 at [173].
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7
The Concept of a “Market” .................................................................. 104 [7.40] Role of Substitution ............................................................ 105 [7.50] What the Act Says .............................................................. 105 [7.60] The Tribunal’s Interpretation ............................................... 105 [7.70] The Court’s View ................................................................ 106 [7.80] Substitution Revisited ......................................................... 107 [7.90] Practical Approach Required ............................................. 107 [7.100] The Focusing Process ........................................................ 108 [7.110] Long Run Substitution ........................................................ 109 [7.120] Lack of Homogeny .............................................................. 109 [7.130] Product Dimension ............................................................. 109 [7.150] Functional Dimension .......................................................... 111 [7.180] Geographic Dimension ........................................................ 111 [7.200] Time Dimension ................................................................... 112 [7.210] Identifying Markets .............................................................. 113 The Concept of “Competition” .............................................................. 113
[7.10] The starting point for an understanding of modern competition law and policy is an appreciation of economics. This chapter expands on Chapter 6 by focusing on two key concepts that derive from economics, as interpreted and applied by the courts — “market” and “competition”. A third, “substantially lessen competition”, which combines those concepts, is considered in Chapter 8. These three concepts are the foundation of Australia’s competition law. How do these concepts underpin the Competition and Consumer Act 2010? First, the object of the Act is to enhance the welfare of Australians through the promotion of competition.1 The Act contains a series of legal rules designed to achieve that objective. Arrangements will contravene the Act if they have the purpose or likely effect of substantially lessening competition in a market in Australia.2 Tying3 will contravene the Act if it has that purpose or likely effect. Mergers likely to adversely affect competition in any substantial market in Australia, or in a State, Territory or region of Australia will also contravene the Act.4 Firms with market power whose conduct adversely affects the competitive process will contravene the Act.5 Finally, secondary boycotts that have the purpose of causing a substantial lessening of competition also contravene the Act.6 Each of those prohibitions are assessed in the context of markets. 1.
Competition and Consumer Act 2010, s 2.
2. Competition and Consumer Act 2010, s 45. See also Chapter 9. 3. Referred to in the Act as “exclusive dealing”: see Competition and Consumer Act 2010, s 47. See also Chapter 13. 4.
Competition and Consumer Act 2010, s 50. See also Chapter 15.
5.
Competition and Consumer Act 2010, s 46. See also Chapter 12.
6. Competition and Consumer Act 2010, s 45D. See also Chapter 16. © 2018 THOMSON REUTERS
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The Concept of a “Market” [7.20] The context in which competition takes place is a market so the concept of a market is instrumental in analysis of the processes of competition and sources of market power.7 A market is “the basal economic concept around which” the Act works.8 In economics, and therefore in competition law, a market is a tool used by economists to analyse the competitive effect of conduct. It describes, in a metaphorical way, an area of economic activity the dimensions of which are function, product and geography, taking into account substitution possibilities on both the supply side and the demand side. A market may be defined functionally by reference to wholesale or retail activities or a combination of both. The concept includes the range of products or services that are substitutable for, or otherwise competitive with, each other having regard to the nature and characteristics of the products, their function and geography.9 The nature of the activity undertaken is also relevant. Activities are differentiated by reference to their particular economic functions (eg manufacturing, wholesale or retail sales), and by the class or classes of products relevant to those functions (eg soft drinks, milk, fruit juices, bottled water).10 [7.30] Whether or not there are different markets depends on what happens (or would happen) on either the demand or the supply side in response to a change in relative price.11 Put simply, what would buyers do if there was s sufficiently significant change in the price of the products or services they acquire? It follows that the term “market” is not susceptible of precise comprehensive definition. Australia is not divided into an identifiable number of discrete markets with all trading activities neatly fitted into one or the other. The boundaries are blurred. For instance, are soft drinks, flavoured milk and fruit juices sold at service stations and convenience stores in the same market, or are they in separate markets? Are those products when sold by a wholesaler to a retailer in the same market as when sold by retailers to consumers? As was said in QWI:12 The identification of relevant markets and the definition of market structures and boundaries … involve value judgments, about which there is some room for legitimate differences of opinion. The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap … with one or more others. The outer limits … of a particular market are likely to be blurred …”
7. Re John Dee (Export) Pty Ltd (1989) 11 ATPR 40-938 at 50,219. 8. ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123 at [84]. 9. Australian Gas Light Company v ACCC (No 3) [2003] FCA 1525; (2003) 137 FCR 317; (2003) ATPR 41-966. 10. Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158; 104 ALR 633; (1992) ATPR 41-966. 11. Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299; (1988) ATPR 40-876. 12. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 195–196; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,012.
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Role of Substitution [7.40] Substitution, whether of products or due to geography, is a relevant factor. How close does one service station have to be to another to be a viable substitute for another for customers needing petrol? Do customers substitute flavoured milk for fruit juice or bottled water if their convenience store has run out, or are they more likely to move on to the next store? Will they choose from the range in the convenience store they enter, or go to another store if the product they want is not available there? How far will they travel to do so? Is one football code substitutable for another? Across the range, at what point do different makes of motor vehicles cease to be substitutable? All these are relevant questions in identifying a market.
What the Act Says [7.50] It is therefore understandable that the Competition and Consumer Act 2010 does not provide a definition of the term, “market”. Instead it provides guidance on how the term is to be interpreted. The Act states that a market is a market in Australia and: when used in relation to goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services.13
It has been left to the courts, applying economic theory to particular facts, to expand on what a market is.
The Tribunal’s Interpretation [7.60] It is useful to start consideration of what the term “market” means by setting out what the Trade Practices Tribunal has said about it, and then explore the ramifications of what the Tribunal said. The classic exposition is to be found in a statement by the Tribunal in QCMA.14 The QCMA case was the first contested merger case to come before the Trade Practices Tribunal. QCMA was a flour milling cooperative that operated five mills throughout Queensland. It made a takeover offer for Barnes Milling Ltd, which owned one mill in Queensland. Defiance, another major flour miller in Queensland with three mills, made a competing offer for Barnes. QCMA and Defiance both sought authorisations on the basis that the public benefits of the merger outweighed any anticompetitive effects. The Commission refused the application. The parties then applied to the Tribunal for review. In deciding to refuse both applications, the Tribunal had to consider the nature of the markets in which the merging parties competed. In doing so, it provided guidance on what the concept of a market involves. The Tribunal said that the concept of a market is basically a very simple idea. Although few lawyers would have readily agreed with that observation, economists would have done so. The Tribunal said that a market is the area of close competition between firms, and went on to explain: Within the bounds of a market there is substitution – substitution between one product and another, and between one source of supply and another, in response to changing prices. So a market is the field of actual and potential transactions between buyers and 13. Competition and Consumer Act 2010, s 4E. 14. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190; 8 ALR 481; (1976) ATPR 40-012 at 17,247. Referred to with approval by the High Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. © 2018 THOMSON REUTERS
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sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive.
The Tribunal used the following example. Let us suppose, the Tribunal said, that the price of one supplier goes up. “Then on the demand side buyers may switch their patronage from this firm’s product to another, or from this geographic source of supply to another. As well, on the supply side, sellers can adjust their production plans, substituting one product for another in their output mix, or substituting one geographic source of supply for another. Whether such substitution is feasible or likely depends ultimately on customer attitudes, technology, distance, and cost and price incentives.” The Tribunal concluded that it is the possibilities of such substitution that sets the limits of a firm’s ability to “give less and charge more”. Accordingly, the Tribunal said:15 in determining the outer boundaries of the market we ask a quite simple but fundamental question: If the firm were “to give less and charge more” would there be, to put the matter colloquially, much of a reaction? And if so, from whom? In the language of economics the question is this: From which products and which activities could we expect a relatively high demand or supply response to price change, ie, a relatively high cross-elasticity of demand or cross-elasticity of supply?
The Court’s View [7.70] That view has been adopted and applied universally by the court. Although it has been paraphrased in a variety of ways, the best judicial description is that drawn from QWI and expressed in Australia Meat Holdings:16 A market is the field of activity in which buyers and sellers interact and the identification of market boundaries requires consideration of both the demand and supply side. The ideal definition of a market must take into account substitution possibilities in both consumption and production. The existence of price differentials between different products, reflecting differences in quality or other characteristics of the products, does not by itself place the products in different markets. The test of whether or not there are different markets is based on what happens (or would happen) on either the demand or the supply side in response to a change in relative price.
In Australia Meat Holdings, AMH acquired Borthwick, a United Kingdom-based company that had a longstanding involvement in the Australian meat industry. The acquisition included an abattoir in North Queensland. AMH also owned several abattoirs in Queensland. The issue for the court was whether, as a consequence of the acquisition (which occurred in the United Kingdom), AMH would be in a position to dominate the fat cattle market in northern Queensland. The court decided that it was. AMH took the matter on appeal but the Full Court17 upheld the original decision.
15. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190; 8 ALR 481; (1976) ATPR 40-012. 16. Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) FCA 244; (1988) 83 ALR 299; (1988) ATPR 40-876 at [47]. 17. Australia Meat Holdings Pty Ltd v Trade Practices Commission (1989) FCA 43; (1989) ATPR 40-932.
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Substitution Revisited [7.80] It will be apparent that substitutability of products or services, whether by buyers or by sellers, is the key to identifying a market. Substitutability is, of course, a matter of degree. Returning to the drink cabinet in a service station or convenience store, taken at its broadest, any drink is substitutable for any other drink. However, considered more narrowly, for many who drink flavoured milk, soft drinks may not be substitutable at all. Is bottled water substitutable for carbonated soft drinks? If so, to what degree? The degree of substitutability is an important consideration in identifying a market. How, then, should the question of degree of substitutability be approached? The Federal Court dealt with that question in Arnotts.18 Arnotts involved the withdrawal from Australia of a major United States corporation, Nabisco. Nabisco, a manufacturer of cereals and biscuits, agreed to sell all the shares in its Australian subsidiary to a third party, Dickens, who was only interested in Nabisco’s cereals business. Dickens signed an option agreement with Arnotts, the leading biscuit manufacturer in Australia, to on-sell the Nabisco biscuit business. The issue for the court was whether, as a consequence, Arnotts had made an acquisition that placed it in a position of dominance in the biscuit market in Australia. At first instance the court found that it did. Arnott’s appealed. On appeal, the Full Court confirmed the original decision. In dealing with the question of substitution, the court said:19 the fact that, upon some occasions, some consumers select one product rather than another does not establish that the two products are ‘substitutable’, so as to be within a single market … [I]f for example, a particular company dominated the sale of tea within Australia, it would thwart the objectives of … [the relevant provisions of the Act] … to deny their application, because the company did not dominate the “hot beverage market”.
As Areeda and Kaplow have stated:20 A vast number of firms might have some actual or potential effect on a defendant’s behaviour. Many of them, however, will not have a significant effect and we attempt to exclude them from the relevant market in which we appraise a defendant’s power. We try to include in the relevant market only those suppliers — of the same or related product in the same or related geographic area — whose existence significantly restrains the defendant’s power. This process of inclusion and exclusion is spoken of as market definition.
Practical Approach Required [7.90] Identification of relevant markets involves value judgments about which there may be legitimately differing opinions. Seeking to identify a market in abstract is of little utility in competition law. The relevant question is: what is the relevant market for the inquiry the Act requires? Identification of the relevant market involves application of the principles discussed above to specific factual circumstances.
18. Arnotts Ltd v Trade Practices Commission [1990] FCA 473; (1990) 24 FCR 313; 97 ALR 555; (1990) ATPR 41-061. 19. Arnotts Ltd v Trade Practices Commission [1990] FCA 473; (1990) 24 FCR 313; 97 ALR 555; (1990) ATPR 41-061 at [64]. 20. P Areeda and L Kaplow, Antitrust Analysis (Little, Brown & Co, 4th ed, 1988), p 572. Quoted by Justice French in Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 621; (1991) 33 FCR 158 at 178; 104 ALR 633; (1992) ATPR 41-159. © 2018 THOMSON REUTERS
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Although the term “market” is an analytical or economic tool — not a feature of the real world — a market must be based on findings of fact. A market is not artificial or contrived. It has economic and commercial reality. Courts will not accept a market definition that is an artificial construct; one that does not accurately or realistically describe and reflect the interactions between, and perceptions and actions of, the commercial community involved.21 Flight Centre22 is an example. In order to construct a case of attempted price-fixing by a leading travel agency, the ACCC needed to establish that the agency was in competition with the airlines in relation to whom the attempt was made. But it seemed clear that airlines and travel agents supplied different services and operated at different functional levels. The economist for the ACCC put forward a theory that those in an airline responsible for selling tickets direct were providing a service to the airline that could be separated and taken to be in competition with the travel agent. The court rejected the proposition as unrealistic.
The Focusing Process [7.100] A market is nothing more than the context — the parameters within which the effect of conduct on competition is to be assessed, or the degree of market power determined. In other words, the concept of a market is an evaluative tool in a broader factual analysis necessary to determine whether or not the relevant provision of the Act has been contravened.23 As the High Court has observed, “too narrow a description of the market will create the appearance of more market power than in fact exists; too broad a description will create the appearance of less market power than there is”.24 Identification of the relevant market is therefore a focusing process. The court must select what emerges as the clearest picture of the relevant competitive process in the light of commercial reality and the purposes of the law. As the Tribunal has said:25 The choice of market definition, ie the specification of relevant markets in the particular case, must depend upon the issues for determination. For the Tribunal’s purposes it is the identification of a market or markets that best enables it to evaluate the likely effects of authorised conduct …
The Trade Practices Tribunal26 suggested a generally accepted approach to that focusing process, one that starts by identifying the areas of close competition relevant to the matter under consideration. The Tribunal acknowledged that a market should comprehend the maximum range of business activities and the widest geographical area within which, given a sufficient economic incentive, buyers can switch from one product or supplier to another and sellers from one production flow to another.
21. ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC 103; (2015) 236 FCR 78; (2015) ATPR 42-508; (2015) 324 ALR 392. 22. Flight Centre Ltd v ACCC [2015] FCAFC 104; (2015) 234 FCR 367; 324 ALR 202. The decision was reversed on appeal but not on this point. 23. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 187; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,008. 24. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 187; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,008. 25. Re Queensland Independent Wholesalers Ltd (1995) ATPR 41-438. See also Re Media Council of Australia (1996) ATPR 441-497 at 42,227. 26. Re Tooth & Co Ltd (1979) 39 FLR 1; (1978–1979) ATPR 40-113.
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In undertaking that factual inquiry, the Tribunal said that regard should be had to the following considerations: • long-run substitution possibilities rather than the short-term transitory ones are what is important; • at the extremities of the market, there will be such a break in substitution possibilities that firms within its boundaries would collectively possess substantial market power; • within the bounds of the market, substitution possibilities may be more or less intense and more or less immediate; the field of substitution is not necessarily homogeneous but may contain within it submarkets such that their competitive relationship has a wider effect upon the functioning of the market as a whole; and • a market is a multi-dimensional concept — with dimensions of product, functional level, geography and time. We will consider each of those points in turn.
Long Run Substitution [7.110] The long run substitution point may be illustrated returning to our soft drink example. In service stations and convenience stores those products are known as impulse drinks. If we go back a few years, service stations and convenience stores sold carbonated soft drinks but no bottled water, energy drinks or fruit juices. Short term, the only substitutes were different brands of carbonated soft drinks, but over time changing consumer preference provided an opportunity for other impulse drinks to be added to the array of choices. When they were first introduced there may have been insufficient substitution to warrant those products all being considered as being in the same market. However, as consumer tastes, prompted by advertising and health considerations, changed over time, those products gained a significant share of impulse consumer spending. They became substitutable products. On the other hand, alcoholic drinks, are priced, regulated and marketed so differently that there is, in the Tribunal’s language, such a break in substitution possibilities, that alcoholic drinks could not be regarded as being in the same market as carbonated soft drinks, bottled water and fruit juice drinks, even if sold side-by-side in the same retail outlet and even over the longer term.
Lack of Homogeny [7.120] The Tribunal also made the point that substitutability within a market is not necessarily homogeneous. Within the boundaries of the soft drink market many consumers may have a strong preference for one type of drink, or even one brand. If their preferred type or brand is not available they may decide to look elsewhere rather than substitute one of the alternatives available. For other consumers, while there may be a preference for one type of drink or brand, if that drink or brand is not immediately available they will substitute an alternative. The degree to which consumers switch from one brand to another, or one type of drink to another, will be a relevant consideration in determining which products form part of the market.
Product Dimension [7.130] The proposition that market is a multi-dimensional concept is best explained by separately considering each of the dimensions referred to by the Tribunal.
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Taking first the product dimension, the soft drink product example above is an illustration of this. In QWI27 the point was made that a market includes not just the product under consideration, but also those products that are substitutable for, or otherwise competitive with that product. The process of defining a market by reference to substitution possibilities involves both including products that compete with the products under consideration and excluding those which, because of differentiating characteristics, do not compete. Although early cases recognised single product markets,28 the courts would not do so today except in very special cases. As the court pointed out in Bursill Sportsgear,29 a case involving refusal by the manufacturer to supply skiwear to a retailer that had engaged in discounting: There may be cases where a particular product, or brand of products, is so distinctive that no other product or brand is seen by consumers as a possible substitute. In such a case the “market” is constituted by the trade in that product or brand of products. Perhaps more frequently other products or brands present realistic alternatives; in which case they also will be within the relevant market.
For instance, the apparel for one football team was found not to be substitutable for that of another, so there were separate markets for apparel for separate teams.30 In another, the court concluded that each football code was in a separate market because each had a distinct identity with its own special characteristics appealing to its own players and fans.31 However, those decisions turn on their particular facts. Markets are rarely found to be that confined to a single product. For instance, in a case involving the distribution of compact disks, the court accepted that compact disks did not constitute a separate product market. The relevant market was a market for recorded music.32 In another, involving a dominant brand of pharmaceutical the relevant market was the particular type of drug; not the brand.33 [7.140] What are other examples of the court dealing with the question of what constitutes the relevant product market? In Rural Press,34 a case involving rival newspapers, the relevant market was the market for the provision of news and advertising in regional newspapers, rather than a broader market for news and advertising that would have included, for instance, television and radio. In Monroe Topple,35 the court rejected a submission that the supply of educational services by the Institute to accountancy students who wished to be certified by the Institute 27. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 187; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 28. Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) FLR 286; Ah Toy J Pty Ltd v Thiess Toyota Pty Ltd (1980) 30 ALR 271. 29. Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd [1987] FCA 282; (1987) 75 ALR 581 at 589; (1987) ATPR 40-809. 30. ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; (2004) ATPR 41-983. 31. Australian Rugby Union Ltd v Hospitality Group Pty Ltd [2000] FCA 823; (2000) 173 ALR 702; (2000) ATPR 41-768. 32. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947. 33. ACCC v Pfizer Australia Pty Ltd [2015] FCA 113. 34. ACCC v Rural Press Ltd [2001] FCA 116; (2001) ATPR 41-804. 35. Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879.
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amounted to a market. The market was found to be the provision of such services for certification as an accountant generally, rather than just certification for membership of the Institute. In Tooth & Co,36 the Tribunal had to consider whether the relevant market, in relation to brewery hotel ties, should be described broadly by reference to all alcoholic beverages, more narrowly by reference to beer, or even more narrowly still by reference to bulk beer. The Tribunal concluded that the relevant product was beer.
Functional Dimension [7.150] Turning to the functional dimension, products and services may not be substitutable even when they are identical. It is necessary to consider the function the relevant product and its suppliers or buyers perform. For instance, manufacturers of carbonated soft drinks or fruit juices and retailers of those products all deal in the one type of product, soft drinks, as does the carrier that delivers the product to the retailer. However, each performs a different function. Although they may all deal in the same product, the manufacturer, retailer and carrier each participate in separate markets. In the Tribunal’s language, there is a sufficient break in substitution possibilities between the various functions to constitute separate markets for the production of soft drinks, the delivery of soft drinks and the retailing of soft drinks. On the other hand, service stations, corner stores and supermarkets all sell impulse drinks. They compete with each other at the same functional level. [7.160] What are some examples of the court dealing with the question of what constitutes the relevant functional market? In ANZ,37 a case involving an allegation by the ACCC of price-fixing between the bank and its mortgage brokers, the court decided that the bank and the brokers operated in separate functional markets. In Flight Centre,38 another alleged price-fixing case between airlines and a travel agency, the airlines and the travel agency were found by the Federal Court to be in separate functional markets, although on appeal the High Court decided that the airlines were in competition with their agents. In SPAR,39 the court decided that a grocery retailer and a grocery wholesaler were not in the same functional market. [7.170] Behaviour of participants at one functional level may have a substantial constraining effect on the behaviour of participants at another functional level. That may be sufficient to warrant the inclusion of all those activities in the market the subject of attention.40 For instance, in Air New Zealand,41 a price-fixing case in the airline industry, the court considered whether shippers operated in the relevant market in competition with forwarders without reaching any conclusion because there was insufficient evidence. The high Court’s decision in Flight Centre is another example.
Geographic Dimension [7.180] The geographic dimension recognises that a market corresponds to the commercial realities of the industry under consideration. The geographic dimension 36. 37. 38. 39. 40. 41.
Re Tooth & Co Ltd (1979) 39 FLR 1 at 39; (1979) ATPR 40-113 at 18,197. ACCC v ANZ Banking Group Ltd [2015] FCAFC 103. Flight Centre Ltd v ACCC [2015] FCAFC 104. SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (No 2) [2012] FCA 1116. ACCC v Metcash Trading Ltd [2011] FCAFC 151; (2011) 198 FCR 297. ACCC v Air New Zealand Ltd [2014] FCA 1157.
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represents an economically significant area of trade, taking into account realistic trade patterns. As von Kalinowski has observed:42 Any geographic market … must be one that both corresponds to the commercial realities of the industry and represents an economically significant trade area. Because a geographic market determination looks to actual trade patterns, it is not required that geographical boundaries be drawn with exactitude …
Identifying the geographic boundaries on a market will necessarily be an arbitrary exercise, dictated by common sense and involving value judgments. There will always be fuzziness about it.43 In the retail market for impulse drinks, from the buyer’s perspective the geographic area within which substitutes may be sought is relatively narrow. While the buyer might, for instance, go to alternative retailers in the close vicinity seeking their product of choice, it is unlikely that buyers would go far to do so. The practical realities are that retailers of impulse drinks compete with other retailers in the immediate vicinity, but not those some distance away. On the other hand, if the question relates to the market for the production of impulse drinks, substitution possibilities expand geographic reach. The relevant market may encompass the whole of Australia. Depending on distribution costs, a producer in any part of Australia may be able to effectively supply retailers throughout the country. [7.190] What are some examples of the court and tribunal dealing with the geographic market question? In Universal Music,44 a case involving the supply of compact disks, the relevant geographic market was the whole of Australia. In Boral,45 a case involving the manufacture of masonry products, the relevant geographic market was limited to Melbourne. In Davids Holdings,46 a challenge to a takeover offer by one grocery wholesaler for another, the market was for the supply of grocery products by independent wholesalers to independent retailers in Queensland and northern New South Wales. In Singapore Airlines,47 a case involving package tours to the Maldives, the court decided that the relevant market was for island holiday destinations, not just the Maldives.
Time Dimension [7.200] Turning finally to the time dimension, it is long-run substitution rather than short-run substitution that is important. If a product may be substituted in the short term, it is clear that the market includes the substitute, but for longer term substitution, the question is: how long is it likely to take for substitution to occur and in what circumstances? Is the threat of substitution sufficient to constrain a small but significant non-transitory increase in price? 42. JO von Kalinowski, Antitrust Laws and Trade Regulation (Mathew Bender, New York, 1981), Vol 3 at [18]-[96], quoted with approval by the Federal Court in Australia Meat Holdings Pty Ltd v Trade Practices Commission (1989) ATPR 40-932 at 50,011. 43. Australia Meat Holdings Pty Ltd v Trade Practices Commission (1989) ATPR 40-932. See also Davids Holdings Pty Ltd v Attorney-General (Cth) (1994) 49 FCR 211; 121 ALR 241; (1994) ATPR 42,066 (41–304) at 42,091; ACCC v Rural Press Ltd (2001) ATPR 41-804 at 42,736; [2001] FCA 116 at [103]. 44. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947. 45. ACCC v Boral Ltd [2001] FCA 30; (2001) 106 FCR 328; (2001) ATPR 41-803. 46. Davids Holdings Pty Ltd v Attorney-General (Cth) [1994] FCA 1039; (1994) 49 FCR 211; 121 ALR 241; (1994) ATPR 41-304. 47. Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd [1991] FCA 621; (1991) 33 FCR 158; 104 ALR 633; (1992) ATPR 41-159.
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At one point in time the possibility that fruit juices or bottled water would be a substitute for carbonated soft drinks was so remote that those products could not be regarded as part of the impulse drink market. With changes in consumer preferences fruit juices, energy drinks and bottled water became part of the relevant market.
Identifying Markets [7.210] Identifying the relevant market in any given case is a complex issue of fact and expert opinion. In Metcash,48 a case in which the ACCC challenged a proposed merger in the grocery industry, the court observed that: A critical market definition test is the hypothetical monopolist test. That test involves determining whether a hypothetical monopolist supplier in a market could profitably impose a small but significant non-transitory increase in price, most commonly between five and ten per cent, for the supply of relevant products, or whether substitution by buyers or suppliers would make such an increase unprofitable. If the hypothetical monopolist supplier could profitably impose such an increase, … the market is correctly defined.
[7.220] The hypothetical monopolist test is described in more detail in Chapter 6. It was developed for merger analysis. The hypothetical monopolist test is rarely used in non-merger cases, essentially because the proper application of the test requires analysis of significant amounts of data. There are, however, some practical indicia that the Tribunal has suggested as useful in identifying relevant markets:49 • the number, size and distribution of independent sellers, especially the degree of market concentration; • the height of barriers to entry, that is, the ease with which new firms may enter and secure a viable market; • the extent to which the products of the industry are characterised by extreme product differentiation and sales promotion; • the character of “vertical relationships” with customers and with suppliers and the extent of vertical integration; and • the nature of any formal, stable and fundamental arrangements between firms which restrict their ability to function as independent entities.
The Concept of “Competition” [7.230] The meaning of the term “competition” is of fundamental importance in relation to many of the provisions of the Competition and Consumer Act 2010. Yet, for all of its importance, the Act does not contain a definition of that term. All the Act says is that:50 Competition includes: (a) competition from goods that are, or are capable of being, imported into Australia; and (b) competition from services that are rendered, or are capable of being rendered, in Australia by persons not resident or not carrying on business in Australia.
48. ACCC v Metcash Trading Ltd [2011] FCA 967; (2011) ATPR 42-368 at [153]. 49. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190; 8 ALR 481; (1976) ATPR 40-012. 50. Competition and Consumer Act 2010, s 4(1). © 2018 THOMSON REUTERS
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That provision was inserted in 2017. Previously the provision stated: “competition” includes competition from goods imported or capable of being imported into Australia, or from services — rendered or capable of being rendered in Australia, by persons not resident or carrying on business in Australia.
It has been left to the courts, applying well-established principles of economics, to describe the concept. Professor Maureen Brunt, writing on the subject in 1965, explained that:51 Effective or workable competition may be defined as a situation in which there is sufficient market rivalry to compel firms to produce with internal efficiency, to price in accordance with costs, and to strive for product and process improvement. Thus, a workable competitive industry has two characteristics: first, the industry is reasonably efficient and progressive and, second, the efficiency and progressiveness have been achieved through impersonal market pressures.
[7.240] In the first merger authorisation case to reach the Trade Practices Tribunal, QCMA,52 the concepts enunciated by Professor Brunt, who was then sitting as a member of the Tribunal, were taken up. The Tribunal declined to define the term “competition”, referring to it as a “process rather than a situation” and as a “very rich concept”. Instead of attempting a definition the Tribunal embarked on an exploration of some of the connotations of the term. In so doing it laid the foundations for understanding what competition involves. Explaining what it meant by competition being a process, the Tribunal said:53 Competition expresses itself as rivalrous market behaviour … In our view effective competition requires both that prices should be flexible, reflecting the forces of demand and supply, and that there should be independent rivalry in all dimensions of the priceproduct-service packages offered to consumers and customers.
The Tribunal adopted the following statement by the United States AttorneyGeneral’s National Committee to Study the Antitrust Laws (1955): The basic characteristic of effective competition in the economic sense is that no one seller, and no group of sellers acting in concert, has the power to choose its level of profits by giving less and charging more. Where there is workable competition, rival sellers, whether existing competitors or new potential entrants into the field, would keep this power in check by offering or threatening to offer effective inducements.
In short, competition involves rival firms actively competing with each other, rather than colluding on price, dividing territories or adopting other practices that avoid the need to compete with each other. The Tribunal added: we think of competition as a mechanism … first, for firms discovering the kinds of goods and services the community wants and the manner in which these may be supplied in the cheapest possible way. Prices and profits are the signals which register the play of these forces of demand and supply. At the same time, competition is a mechanism of enforcement: firms disregard these signals at their peril, being fully aware that there are
51. M Brunt, “Legislation in Search of an Objective”, Economic Record (1965). Reproduced in J P Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970). 52. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 187–188; (1976) ATPR 40-012. 53. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169; (1976) ATPR 40-012 at 17,245.
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other firms, whether currently in existence or as yet unborn, which would be only too willing to encroach upon their market share and ultimately supplant them.
[7.250] However, the Tribunal also said that this did not mean that it viewed competition as a series of passive, mechanical responses to “impersonal market forces”. There is, the Tribunal said “a creative role for firms in devising the new product, the new technology, the more effective service or improved cost efficiency. And there are opportunities and rewards as well as punishments. Competition is a dynamic process; but that process is generated by the market pressure from alternative sources of supply and the desire to keep ahead”.54 In other words, where competition exists the market is dynamic, with firms not only competing on price and service, but also through product innovation and innovation in methods of production. The introduction of aluminium cans, plasticised cardboard containers and plastic bottles in the soft drink industry are examples of this. Innovation brought opportunities to introduce new products, contain or lower production costs, and therefore contain prices, for existing soft drink products. To adopt Professor Michael Porter’s view:55 ‘The fundamental benefit of competition is to drive productivity growth through innovation, where innovation is defined broadly to include not only products, but also processes and methods of management.’
[7.260] Having expressed a view on what competition involves, what are the indicia of a lack of competition? It is market power — the power to raise prices and/ or reduce quality without rivals taking away business over time. As the Tribunal has said: 56 where there is significant market power the firm (or group of firms acting in concert) is sufficiently free from market pressures to “administer” its own production and selling policies at its discretion. Firms may be public spirited in their motivation; but if their business conduct is not subject to severe market constraints this is not competition. In such a case there is substituted the values, incentive and penalties of management for the values, incentives and penalties of the market place.
Competition is, by its very nature, deliberate and ruthless. Competing in the marketplace is tough. Competitors try to injure one another by taking away business. This is normal behaviour, to be expected in a competitive market.57 New entrants enter the market. Some survive and some do not. Efficient enterprises expand, while others contract. Buying patterns change as innovative enterprises bring new products and services into the market. It is, of course, the competitive process, not the position of competitors, that competition law seeks to protect and enhance.
54. Re Queensland Co-operative Milling Association Ltd (1976) ATPR 40-012; (1976) 25 FLR 169 at 187–188. 55. M Porter, “Competition and Antitrust: Towards a Productivity-Based Approach to Evaluating Mergers and Joint Ventures” (2001) 46 Antitrust Bulletin 919 at 922. 56. Re Queensland Co-operative Milling Association Ltd (1976) ATPR 40-012; (1976) 25 FLR 169 at 188. 57. The High Court has pointed out that this is what is expected in a competitive market. Such behaviour will only be in breach of the Act if it does not meet the norms of behaviour expected – if it is not fair, honest, and ethical business behaviour but instead involves a form of cheating prohibited by the Act: Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 191; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. © 2018 THOMSON REUTERS
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FURTHER READING — MARKETS Author Title Areeda and Antitrust Analysis Kaplow Baxt “The Australian Concept of Market — How it Began”
BeatonWells Brunt
Norman and Williams Porter
Proof of Antitrust Markets in Australia “Market Definition Issues in Australian and New Zealand Trade Practices Litigation” “The Analysis of Market and Competition Under the Trade Practices Act: Towards the Resolution of some Hitherto Unresolved Issues” “Competition and Antitrust: Towards a Productivity-Based Approach to Evaluating Mergers and Joint Ventures”
Publisher/Citation Little, Brown & Co, 4th ed, 1988 Richardson & Williams, The Law and The Market, Federation Press, 1995 Federation Press, 2003 (1990) 18 Australian Business Law Review 86 (1983) 11 Australian Business Law Review 369 (2001) 46 Antitrust Bulletin 919
FURTHER READING — COMPETITION Author Armitage
Brunt
Porter
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Title “The Evolution of the substantial Lessening of Competition Test — A Review of the Case Law” Legislation in Search of an Objective
“Competition and Antitrust: Towards a Productivity-Based Approach to Evaluating Mergers and Joint Ventures”
Publisher/Citation (2016) 44 Australian Business Law Review 74 Economic Record (September 1965). Reproduced in Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970) (2001) 46 Antitrust Bulletin 919
Miller’s Australian Competition Law and Policy
CONCEPTS: SUBSTANTIAL EFFECT ON COMPETITION [8.20] [8.40] [8.100] [8.130] [8.160]
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A Choice of Benchmarks ...................................................................... 118 Australian Development ....................................................................... 119 SLC — Horizontal and Vertical Conduct ............................................. 122 SLC — Mergers ................................................................................... 124 SLC — Misuse of Market Power ......................................................... 127
[8.10] Competition policy focuses on two categories of conduct. First, it focuses on conduct regarded as so egregious that those who participate in it, or attempt to do so, should to be taken to have contravened the law without proof of the likely effect of the conduct.1 The second is conduct that has a sufficiently adverse impact on the competitive process expected in a free-enterprise society, that it should also be prohibited. This chapter discusses the benchmark test – the standard to judicial intervention2 — for the latter. Various phrases are used around the world to describe this benchmark test. In Australia the phrase is “substantially lessen competition” (otherwise referred to as SLC). That phrase made its first appearance in the Trade Practices Act 1974 in three provisions. The merger provision prohibited mergers that were “likely to have the effect of substantially lessening competition in a market for goods or services”, but that test was replaced by a “control or dominate” test in 1977, only to return to the SLC test permanently in 1992. The second was the price discrimination prohibition. That prohibition only applied if the discrimination was of such magnitude or systematic character that it was likely to substantially lessen competition. But that prohibition was rarely used and was ultimately repealed in 1995. The third, and enduring use, was in the exclusive dealing prohibition. That conduct, with the exception until recently of third line forcing, only contravened the Act if the conduct was likely to have the effect of “substantially lessening competition in a market for goods and services”. Use of the phrase in Australian competition law expanded in 1977 when restraint of trade was found to be an unsatisfactory benchmark for dealing with horizontal conduct.3 “Substantial lessening of competition” became the new and permanent benchmark test for assessing contracts, arrangements and understandings and now also for concerted practices. A second use was found for the phrase in 1977, in the new prohibition on secondary boycotts. Originally, the prohibition applied to boycotts where the conduct had the purpose or likely effect of causing “a substantial lessening of competition”. The secondary boycott prohibition has had a number of iterations over the years. Causing substantial loss or damage to a business is now the benchmark. Finally, and somewhat controversially, “substantial lessening competition” has become the benchmark for liability in the recently reformulated prohibition on misuse of market power. 1.
These types of exclusionary behaviour are broadly described as cartel conduct: see Chapter 11. But they also include, more controversially, resale price maintenance: see Chapter 14.
2. Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38; (2000) ATPR 41-752. 3.
See R Miller, Miller’s Annotated Trade Practices Act 1974 (Law Book Co, 1st ed, 1979), at [45/2].
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The end result is that, for the all of the competition provisions that do not involve a per se prohibition, the “substantial lessening competition” test is the benchmark for liability. The only exception is the secondary boycott prohibition, which uses ‘causing substantial loss or damage’ as the relevant test. On the assumption that the term has the same meaning in each of the provisions that include it,4 we need to consider how it applies in three different contexts — horizontal conduct, vertical conduct (including misuse of market power) and merger analysis.
A Choice of Benchmarks [8.20] “Substantial lessening competition” is not the only phrase used in competition laws around the world to describe, legislatively, conduct that competition law seeks to prohibit. But it, or slight variants of it, is the phrase predominantly used. In the United States, the test for contracts, combinations and conspiracies is “restraint of trade”.5 In the US Clayton Act 1914, the test for mergers and acquisitions was (and remains) a “substantially to lessen competition” test. Restraint of trade is the test that applies in Japan.6 In Europe, the Treaty of Rome, and now the Treaty on the Functioning of the European Union7 used “the prevention, restriction or distortion of competition” as the relevant test. Domestic competition laws in the United Kingdom,8 Germany,9 the Netherlands,10 and elsewhere throughout Europe, adopted the same test, as does Singapore11 and Hong Kong.12 The test in Canada for most purposes is “adverse effect on competition in a market”13 but for exclusive dealing the test is “exclusionary effect in a market with the result that competition is or is likely to be lessened substantially”.14 In the People’s Republic of China, it is “elimination or restriction of competition”.15 In India, it is “cause an appreciable adverse effect on competition”.16 In South Korea, it is “unfairly restricts competition”.17 In South Africa, it is “substantially preventing,
4. In Australian Gas Light v ACCC (No 3) [2003] FCA 1525; ATPR 41-966, the court observed at [347] that the phrase appeared in similar or identical versions in a number of provisions and stated that: “In my opinion that formulation is intended to have the same construction throughout Part IV. Neither language nor policy mandates a variation in its construction from section to section”. 5. Sherman Act 1890, 15 USC § 1. 6. Antimonopoly Act 1947 (Japan), Art 3. 7. Treaty on the Functioning of the European Union (Lisbon Treaty), Art 101. 8. Competition Act 1998 (UK), s 2. 9. Act Against Restraints of Competition 2013 (Germany), § 1. 10. Dutch Competition Act 1997 (The Netherlands), Art 6. 11. Competition Act 2004 (Singapore), s 34(1). 12. Competition Ordinance 2013 (Hong Kong), s 6. 13. Competition Act 1985 (Canada), ss 75(1), 76(1). 14. Competition Act 1985 (Canada), s 77(2). 15. Anti-Monopoly Law of China 2007 (People’s Republic of China), Art 3(3). 16. Competition Act 2002 (India), s 3(1). 17. Monopoly Regulation and Fair Trade Act 1990 (Republic of Korea), Art 19(1).
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or lessening, competition”.18 In Brazil, it is “limit, restrain or in any way injure free competition”.19 [8.30] Of course, some of these are translations from the official language of the country and behind many of these tests there is a body of domestic law, developing, or to be developed, by courts or tribunals. The point is that each of these tests, however articulated, has the same policy aim. They aim to address conduct accepted as detrimental to society because it interferes unreasonably with the competitive process — because it is exclusionary or substitutes cooperation for the harsh realities of competition. The policy aim is not to protect competitors from each other or from the fortunes of trading, nor to advance other social, political or industrial policies. The central objective of competition policy, as discussed in Chapter 2, is to enhance either total or consumer welfare by promoting efficient use of resources and protecting the freedom of economic activity, by constraining conduct that harms the competitive process. The phrase “substantially lessening competition” and the other phrases used to express the same policy intent, while seemingly simple phrases, import complex economic principles involving much more than a literal interpretation of each of their terms. In essence, they address conduct that, in relevant markets, has a meaningfully adverse impact on the competitive process, taking more than a short-term view and having regard in particular to barriers to entry.
Australian Development [8.40] It not unfair to say that, when first confronted with the term “substantial lessening competition”, neither counsel in early cases, nor the judges who determined them, understood quite what to do with the phrase. Although it is evident from the start that the courts, and particularly the Tribunal, took account of economic evidence, we did not then have the level of convergence between legal reasoning and economic theory that is evident today. So courts did what they had always done. They deconstructed the phrase, interpreted each word according to precedent or dictionary, and then applied the result to the facts of the case. But an approach that employs “a literal analysis with an eye to the discernment of textual ambiguity through finely spun distinctions”20 is not what competition law is all about. [8.50] Nonetheless, it was recognised early that competition does not occur in a vacuum. It occurs in markets. So courts recognised that, in order to apply the “substantial lessening competition” test, the relevant market or markets in which it said to have been substantially lessened needed to be identified.21 As has been noted already, a market is “the basal economic concept around which” the Act works.22 The starting point in consideration of what the phrase “substantially lessening competition” was taken to mean is the 1977 Tribunal decision in Ford.23 This was 18. 19. 20. 21. 22. 23.
Competition Act 1998 (South Africa), s 4(1)(a). Competition Law 2011 (Brazil), Art 36. ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123 at [46]. This is discussed in Chapter 4 at [4.20]. ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123 at [84]. Re Ford Motor Company of Australia (1977) 1 ATPR 40-043.
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an authorisation application by Ford to maintain its single dealer network — a vertical restraint case. One question for the Tribunal was whether or not the practice substantially lessened competition. The Tribunal received evidence on relevant markets. The “segment of the market on which the Tribunal concentrated was what ït described as “inter-related sub-markets in which motor dealers competed. Although there was what the Tribunal described as a “vehicle builder/importer level” of the market with a high degree of concentration, substantial barriers to entry and significant product differentiation, the Tribunal was not persuaded by Ford’s submissions that single dealer networks enhanced inter-brand competition, sufficiently to displace the anticompetitive effect in the “inter-related sub-markets in which motor dealers competed. The Tribunal concluded that the conduct adversely affected competition because it reduced the dealers’ power vis-à-vis Ford and increased Ford’s competitive position in the market. When it came to whether the effect on competition was substantial, the Tribunal “placed considerable weight on the significance of Ford in the market and decided that the effect was substantial. At that time”, Ford and General Motors Holden held just under 50% of the market, with Toyota and Nissan growing market shares, but from a low base. For its time, the decision was probably correct because Ford’s agreements were likely to have been exclusionary, but not for the reasons that persuaded the Tribunal. It was because they affected the ability of other vehicle manufacturers to access retail sites. [8.60] The Federal Court first came to consider the test in three cases, each decided in 1982. The first and third, Outboard Marine24 and Dandy Power,25 each concerned the cancellation of retail franchises to sell marine outboard motors — again, vertical cases. The allegation in each case was that the manufacturer had engaged in exclusive dealing, so the fundamental question was whether the conduct was likely to substantially lessened competition. The court approached that task in Outboard Marine by considering the meaning of each word — competition, lessening and substantially — separately. Evidence of the competitive situation was limited. But nevertheless, the lack of opportunity for a buyer to view two competing outboard motors side-by-side was said to have an effect on competition and the effect was found to be real, or of substance and therefore substantial. On appeal, the decision was overturned, but that was because the court took the view that, as it involved only one retailer, any effect on competition was not substantial. Substantiality was also the main issue in Dandy Power. The court thought that, as there were large penalties, contravening conduct would need to involve serious trade consequences. The seminal question for the court was: has competitive trading been substantially interfered with, because if it has the public will suffer? The conduct did not affect a sufficiently significant proportion of the market to be substantial. If it had, presumably the court would have come to a different conclusion. Again, evidence of the competitive situation in the market for outboard motors was limited. Both cases turned on the interpretation of the term “substantial” according to legal precedent and the application of that interpretation to the facts.
24. Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) Pty Ltd (1982) 4 ATPR 40-298. On appeal (1982) 66 FLR 120; 44 ALR 667; (1982) 4 ATPR 40-327. 25. Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) 64 FLR 238; 44 ALR 173; (1982) 4 ATPR 40-315.
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The third case in 1982, Radio 2UE”,26 concerned two radio stations issuing a combined advertising rate card. The meaning of the words “substantial” and “likely” occupied the court’s attention and the case turned on a finding that, whatever the effect of the joint rate card on competition might have been, it was not be likely to have the effect substantially lessening competition.27 The first two cases give the impression that, had sufficient dealers been affected by the conduct — had there been sufficient quantum — the court may well have found, as was the case in Ford, that the conduct substantially lessened competition. That would have been regardless of whether or not the conduct foreclosed the market to other outboard motor manufacturers or increased competition between them. The Radio 2UE decision is an example of the process of deconstructing the phrase and interpreting each term. The challenge to the joint rate card was unsuccessful because the court decided that any effect on competition was trivial. [8.70] Courts have correctly observed that the term “substantial” is an imprecise standard. It is capable of a variety of meanings, depending on the context in which it is used. It is, as was said in the first case on secondary boycotts, imprecise and ambiguous. Its meaning can range from “considerable” or “big” to “not merely nominal” depending on the context. Sometimes it is used in a relative sense.28 In Rural Press,29 a case to which we will return shortly, the High Court has said that the word “substantial” meant that the loss or damage must be more than trivial or minimal. It must be meaningful or relevant to the competitive process. This is consistent with the policy intent. [8.80] The Act states that “lessening” includes “preventing” or “hindering”30 so the test is really whether the conduct “substantially lessens, hinders or prevents competition”. To state the obvious, to “prevent” involves total cessation and to “hinder” involves making something more difficult31 — to affect usual dealings to an appreciable extent.32 Of course, whether or not competition in a market is prevented may be a relatively simple question, but whether it has been lessened or hindered or is a question of fact and a matter of degree. A qualitative as well as a quantitative assessment is required. In Eastern Express,33 the court observed that the introduction of “substantially” enabled the court to make judgments about the degree of anti-competitive effect having regard to its scope and purpose. It “enables, and requires, the courts to determine what degree of restriction is compatible with a competitive environment”. As the court pointed out:
26. Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437 at 444; 44 ALR 557; (1982) ATPR 40-318. 27. The term likely is equally ambiguous. It is considered in Chapter 10 at [10.710]. 28. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138. 29. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965. 30. Competition and Consumer Act 2010, s 4G. 31. Australian Wool Innovation Ltd v Newkirk [2005] FCA290; (2005) ATPR 42-053 at [34]. 32. Devenish v Jewel Food Stores Pty Ltd [1991] HCA 7; (1991) 172 CLR 32; (1991) ATPR 41-098. 33. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1991] FCA 321; (1991) 30 FCR 385; 103 ALR 41; (1991) ATPR 41-128 at 420–421. © 2018 THOMSON REUTERS
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… every commercial contract lessens competition to some degree. Each party is taken out of the market to the extent of its commitment. The parties, being bound to each other, are unable to buy from, or sell to, others the goods or services the subject of the contract. To that extent, they are inhibited in their ability to compete with others for purchases or sales. But those restrictions are fundamental to contract law; law which the Trade Practices Act was designed to supplement, not to supplant.
It might also be said that every success in business, whether through innovative products or services, lower input prices, better service or keener prices, impacts on other competitors. It reduces their ability to compete and sometimes drives them out of the market, but it neither hinders nor prevents them from competing in the sense meant by the Act, nor is that what is meant by the “substantial lessening competition” test. Some conduct that reduces choice may nevertheless be conducive to increased competition by enabling participants to better compete. Other conduct will restrict, prevent or hinder competition. A qualitative assessment is required. For example, an electricity standard agreed between electricity utilities may aid competition and improve safety whereas an agreement between them not to sell to each other’s customers would lessen competition. A standard form airline ticket used by the whole industry or a standard contract for the sale of land used by all lawyers facilitates the provision of competitive airline services or conveyancing services. Standard forms of contracts aid competition rather than retard it, unless they contain provisions that are exclusionary. [8.90] Putting the words “substantial” and “lessening” together, in Stirling Harbour Services,34 an unsuccessful challenge to a tender for the provision of towage services at the port of Bunbury, the court pointed out that the concept “substantially lessening” is evaluative and reminded us of the often repeated point that there is little assistance to be derived in replacing words with other phrases. Nevertheless, while that is undoubtedly correct, deciding what the “substantially lessening competition test means, and how that evaluative concept should be applied in specific cases, requires more than the literal interpretation of each of the words used.
SLC — Horizontal and Vertical Conduct [8.100] Professor Kaplow, commenting on the development if US antitrust law, observed that:35 “In recent decades, courts and commentators have increasingly embraced the view that competition law should be grounded in economic substance rather than formalistic distinctions. The US Supreme Court’s decision is Sylvania, Matsushita and Legrin come to mind” A similar trend is evident in Australia. As convergence of legal reasoning and economic theory grew, courts began to emphasise that it is the state of competition in relevant markets, not with particular competitors, that is the relevant consideration. In 1990, in ASX,36 a horizontal case concerning access by a competing data provider to data from the Australian Stock Exchange, the court said: 34. Stirling Harbour Services Pty Ltd v Bunbury Port Authority [2000] FCA 38; (2000) ATPR 41-752. 35. Kaplow, “An Economic Approach to Price Fixing” (2011) 77 Antitrust LJ 343, 345. 36. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1991] FCA 158; (1991) 27 FCR 460; 97 ALR 513; (1991) ATPR 41-069 at 478 (FCR).
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In asking whether provisions of the agreements have or would be likely to have the effect … of substantially lessening “competition” … one looks not so much at the position of particular competitors as to the state or condition constituting the market or markets in question, actually or potentially … It is also to be borne in mind that, whilst actual competition must exist and be assessed in the context of a market, a market can exist if there be a potential for close competition even though none in fact exists or dealings in it are temporarily dormant or suspended.
This was reinforced by the court 2003 in Universal Music,37 a case involving unsuccessful threats by major distributors or CDs to cease supplying, or cease providing “certain trading benefits” to, retailers who stocked imported CDs. The court said: Competition is a process and the effect upon competition is not to be equated with the effect upon competitors, although the latter may be relevant to the former. Competition is a means to the end of protecting the interests of consumers rather than competitors in the market … The Court has to make a qualitative judgment about the impact of the impugned conduct on the competitive process.
In the same year as the Federal Court decided Universal Music, the High Court decided Rural Press.38 In that case, the ACCC took proceedings against a large newspaper group that threatened retaliation against a small-town newspaper publisher, if it started taking advertisements and circulating its newspaper in the town served by a local paper owned by the group. The small-town publisher had acquiesced. The ACCC based its case on a number of grounds, including that the companies had entered an arrangement that had the purpose of substantially lessening competition in the relevant town markets. In response to arguments that a small scale of trade was involved and that there was no real prospect of the other newspaper offering competition, the relevant questions, the court said, were: whether the effect of the arrangement was substantial in the sense of being meaningful or relevant to the competitive process and whether the purpose of the arrangement was to achieve an effect of that kind.
[8.110] Since Rural Press was decided, there has been only a few contested cases in which the court has been required to apply the “substantially lessen competition” test. Three illustrate how the court has done so. In Liquorland,39 decided in 2006, the ACCC challenged a practice adopted by Liquorland and its parent, Woolworths, of objecting to liquor licence applications for smaller takeaway liquor stores and then withdrawing the objection if the store owner entered a deed restricting the license to be sought. The ACCC challenged those arrangements because the purpose was to substantially lessen competition. The court readily accepted that, to succeed, the ACCC had to establish that Woolworths had “the purpose of harming the competitive process or state of competition in the relevant markets”.40 After an impressively exhaustive examination of the factual and economic evidence, the court found that the conduct did have a purpose of 37. Universal Music Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947. See also ACCC v Baxter Healthcare Pty Ltd [2008] FCAFC 141. 38. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965. 39. ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123. 40. ACCC v Liquorland (Aust) Pty Ltd [2006] FCA 826; (2006) ATPR 42-123 at [826]-[827]. © 2018 THOMSON REUTERS
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substantially lessened competition in the relevant markets. Looked at in retrospect, the conduct certainly did not seem to be competition on the merits. It looked decidedly exclusionary. The second case is Cement,41 an even more complicated and lengthy case than Liquorland. Cement involved contracts to exclusively acquire from electricity generators in South East Queensland a by-product from burning coal, fly ash. While the case was long and involved, with over 60 hearing days and a judgment of 3,200 paragraphs running to almost 1,000 pages, the issue in the case for my purpose can be simply stated. To buy any product, including fly ash, would be regarded as a normal course of market behaviour. To substantially lessen competition there needs to be something more. In this case there was. The court found that the purchases were to prevent a rival gaining access to unprocessed fly ash and to prevent a rival from entering the South-East Queensland concrete grade fly ash market. Again, the conduct did not seem to be competition on the merits. It looked decidedly exclusionary. The third case is Baxter Healthcare.42 This was a long and complicated case concerning tenders for the supply of sterile fluids to public hospitals. It was complicated by an issue over Crown Immunity that had to be resolved by the High Court. The main issue in the case was whether the way Baxter bundled its tender responses meant it was misusing its market power. That aspect of the case is discussed in Chapter 12. However, the ACCC also asserted, and it was acknowledged, that Baxter’s conduct amounted to exclusive dealing, so the question was whether the conduct substantially lessened competition. In considering that question the trial judge acknowledged that “preventing” or “hindering of competition must be of the competitive process43 was what was relevant, echoing what had been said in Rural Press.44 [8.120] So far we have considered the “substantially lessen competition” test in the context of contracts, arrangements and understandings between competitors and exclusive dealing conduct. But the phrase is also used in the merger provision and, since November 2017, in the misuse of market power prohibition.
SLC — Mergers [8.130] In the merger context, as explained in Chapter 15, the court, Tribunal or ACCC is required to form a view of what competition will look like in a postmerger environment and compare that with the situation in relevant market before the merger — a “with and without” comparison. The Act sets out a non-exhaustive list of factors, predominantly structural, that are to be taken into account in making that assessment.45 They are: • the actual and potential level of import competition in the market; • barriers to entry; 41. ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165; ACCC v Cement Australia Pty Ltd [2014] FCA 148. 42. ACCC v Baxter Healthcare Pty Ltd [2005] FCA 581; ATPR 42-066. On Appeal at [2008] FCAFC 141. 43. ACCC v Baxter Healthcare Pty Ltd [2005] FCA 581; ATPR 42-066 at [620]. 44. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965 at [41]. 45. Competition and Consumer Act 2010, s 50(3).
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• the level of concentration in the market; the degree of countervailing power in the market; • the likelihood that significant and sustainable higher prices or profit margins would result; • the extent to which substitutes are, or are likely to be, available; • the “dynamic characteristics” of the market, including growth, innovation and product differentiation; • the likelihood that a “vigorous and effective” competitor would be removed from the market; and • the nature and extent of vertical integration in the market. The “substantially lessen competition” question is addressed by considering, not the purpose or likely effect of conduct, but whether or not the post-merger structure of relevant markets is likely to result in an increase in market power for the merging firms. Whether or not that power may be exercised is not the question, at least in the ACCC’s merger clearance analysis. So, as the ACCC’s Merger Guidelines show, the focus is on indicia of market power such as heights of barriers to entry, the nature and extent of vertical integration, the extent and nature of countervailing power held by suppliers or customers, and whether the merger will remove a vigorous and effective competitor. The likely behaviour of the merging parties receives little, if any, consideration. If the result of the merger is an appreciable increase in market power, that is regarded as sufficient to oppose the merger. The ACCC will generally not accept behavioural undertakings. Of course, it must be remembered that, in assessing mergers under the informal clearance process, the ACCC is not deciding whether or not the merger would contravene the Act — whether or not it would result in a substantial lessening of competition. The ACCC is forming a view on whether there is an appreciable likelihood that the merger may substantially lessen competition. Only the court can decide whether or not the statutory test for blocking a merger in met. [8.140] How has the court dealt with the “substantially lessen competition” question in the context of mergers? We should first observe that the court has dealt with very few merger cases and none have been considered by the High Court. Two court decisions illustrate the approach the court takes. In AGL,46 a major electricity retailer sought to participate in a consortium to acquire an electricity generator. AGL was to acquire a 35% interest. When the ACCC declined to accept undertakings to prevent AGL having any substantial influence over the way in which the generator would supply electricity, and clear the acquisition, AGL sought a declaration that the acquisition would not substantially lessen competition. The trial judge, after carefully reviewing the nature, state and regulatory influences on the electricity market and the terms of the acquisition arrangements, concluded, on the balance of probabilities, that the acquisition was not likely to substantially lessen competition in any relevant market. Adopting the views of the Tribunal in the first merger case, QCMA,47 the trial judge observed that competition is a process rather than a situation to be assessed by a snapshot view of the participants’ behaviour. As the Tribunal had said, the requirements for a competitive market are that:48 46. Australian Gas Light v ACCC (No 3) [2003] FCA 1525; ATPR 41-966. 47. Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169; 8 ALR 481; ATPR 41438. 48. Australian Gas Light v ACCC (No 3) [2003] FCA 1525; ATPR 41-966 at [349]. © 2018 THOMSON REUTERS
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Prices should be flexible, reflecting the forces of demand and supply, and … there should be independent rivalry in all dimensions of the price-product-service packages offered to consumers and customers.
The court accepted that the approach to be taken is to consider the likely future with the merger and the likely future without the merger. If the result of that exercise is that market power is likely to be increased, or the competitive situation in relevant markets likely to deteriorate, then the statutory test will be satisfied. In opposing the application, the ACCC sought to convince the court that the acquisition would lessen competition because AGL would exercise control or influence over the generator, but even if it did not, that the acquisition would lead to act in various ways to exercise market power and would otherwise be likely to engage in conduct that raised spot prices and barriers to entry. In other words, the ACCC contended that, acting rationally, the parties to the merger, an objective conclusion was that the parties would exercise market power. The court was not convinced that, if the undertakings AGL had proffered to the ACCC were accepted, the merger would result in the outcomes contended by the ACCC. It granted the declaration, conditioned on AGL giving the undertaking to the court. [8.150] The only other case to consider is Metcash.49 When an overseas owner of a grocery supermarket chain in Australia decided to exit the market, Metcash, a listed grocery wholesaler, agreed to buy the business. However, the ACCC opposed the acquisition on the basis that the acquisition would substantially lessen competition because Metcash owned IGA, a competing supermarket banner group. The trial judge applied the accepted test — comparing the state of competition in relevant markets both without and with the proposed merger,50 as did the appeal court. The case the ACCC brought opposing the acquisition was that, if the acquisition were to proceed, it would “expand the measure of discretion that Metcash has to give less and charge more in its wholesale supply of packaged groceries to independent supermarket retailers”.51 The relevant question, the ACCC said, was whether Metcash would be able to engage in sustained and significant differential pricing, not sufficiently constrained by the major supermarket chains.52 The trial judge concluded that the acquisition would strengthen the capacity of independent grocery retailers to compete more vigorously with the major supermarket chains53 and that, consequently the acquisition would be unlikely to substantially lessen competition. The appeal court upheld that decision. These decisions were, of course, framed by the way in which the parties framed and presented their cases, but it would seem that, in the context of merger analysis, the phrase “substantially lessen competition” has been taken to require a “with/ without” view of the likely state of competition in relevant markets, based primarily on whether the merger enhances sustainable market power.
49. 50. 51. 52. 53.
ACCC v Metcash Trading Ltd [2011] FCAFC 151; ATPR 42-380. ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 42-368 at [343]. ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 42-368 at [427]. ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 42-368 at [456]. ACCC v Metcash Trading Ltd [2011] FCA 967; ATPR 42-368 at [460].
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SLC — Misuse of Market Power [8.160] When it comes to the question of interpreting the phrase “substantially lessen competition” in the misuse of market power prohibition, we will have to wait for cases to emerge to see how the court deals with it. However, it is safe to conclude that the court will regard the meaning to be given to each of the terms used in the phrase to be the same as in other prohibitions. To borrow from AGL: “Neither language nor policy mandates a variation in its construction from section to section”. It is also safe to assume that the court will regard the phrase as requiring a focus on the competitive process rather than on the effect of conduct on competitors, suppliers or customers. It is less clear whether, in focusing on the effect of conduct on the competitive process, whether or not the firm’s conduct is exclusionary will be a relevant consideration. An alternative view, drawn from the merger context, is that, regardless of the characterisation of the firm’s conduct, if the result is a market situation in which the firm is likely to have an expanded discretion “to give less and charge more”, or increase the firm’s market power, competition will be substantially lessened. [8.170] The ACCC would seem the acknowledge that characterisation of the conduct is a relevant consideration. It has said:54 When assessing whether the conduct has the purpose, effect or likely effect of substantially lessening competition, the ACCC will consider the commercial rationale for the conduct. For instance, if a firm is engaging in conduct to make its products more attractive to customers, the conduct is unlikely to substantially lessen competition.
The ACCC has added: 3.1 It is not possible to identify with precision particular types of conduct that necessarily involve a misuse of market power. Whether or not conduct is a misuse of market power will always depend on the circumstances. 3.2. Despite this, competition agencies and courts have regarded some types of conduct as having greater potential to involve a misuse of market power, either in isolation or combined. These include: a) refusal to deal b) restricting access to an essential input c) predatory pricing d) loyalty rebates e) margin/ price squeezing f) tying and bundling.
[8.180] From a policy perspective, the standard for judicial intervention should be whether or not the conduct is exclusionary in the sense that it involves more than competition on the merits, even if market power is enhanced as a consequence. Having market power has never been a contravention of Australian competition law, or that of other jurisdictions. Nor should it be.
54. Interim Guidelines on Misuse of Market Power (2017), at [2.27], . © 2018 THOMSON REUTERS
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Corporations to Which the Competition Law Applies ......................... 130 [9.30] Trading Corporations as a Foundation................................. 131 [9.80] Financial Corporations — A Second Challenge ................. 135 [9.100] Foreign Corporations — The Original Objective ................ 136 [9.120] Holding Companies ............................................................ 138 [9.130] Bodies Corporate ................................................................................ 138 [9.140] Individuals ........................................................................................... 139 [9.170] The Commonwealth and its Authorities .............................................. 140 [9.180] Crown in the Right of the Commonwealth ........................................... 141 [9.200] Carrying on a Business ...................................................... 142 [9.330] States and Territories and Their Statutory Authorities ........................ 149 [9.370] Local Government ............................................................................... 151 [9.390] Activities in Trade or Commerce ......................................................... 152 [9.420] Corporations Dealing with Government — Derivative Immunity ........ 153
[9.10] Australia is a federation and consequently there are limits on the Commonwealth’s constitutional authority. Constitutional validity of Commonwealth legislation depends on whether or not the legislation can be supported by one or more of the heads of authority conferred on the Commonwealth by the Constitution. Relevantly, the Commonwealth has no specific authority to legislate on competition matters, nor does it have universal authority over business enterprises. From a policy perspective, universal application of competition laws is an important objective, but progress towards achieving that objective was long and difficult. This has been due to Australia’s constitutional makeup and an initial reluctance to apply the legislation to Commonwealth, State and local government business activities. Even universal application to all forms of business activity required either constitutional amendment or a State referral of power, neither of which proved possible to secure for quite some time after the competition law was introduced. Attempts to amend the Constitution to expand the Commonwealth’s powers were rejected on five occasions since Coal Vend.1 Furthermore, attempts to obtain a referral of powers from the States, explicitly provided for in the 1965 Act, proved impossible to secure at the time. As a consequence, the effectiveness of competition legislation in Australia, in terms of universal coverage, depended heavily on the High Court developing its views on the meaning of the corporations power in the Constitution. That remained the position until States and Territories were prepared to pass complementary legislation in the mid-1990s. As we saw in Chapter 2, when the Commonwealth introduced trade practices legislation in 1965 it had to rely on the indirect application of Commonwealth powers over interstate and overseas trade and commerce, the post and telegraphs power and the then uncertain corporations power. Although the 1965 Act had provided for a 1.
Attorney-General (Cth) v Adelaide Steamship Company Ltd (Re Coal Vend) [1913] UKPCHCA 2; (1913) 18 CLR 30.
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referral of State powers, that was not forthcoming. As a consequence, when the Trade Practices Act 1974 was introduced in 1974 it did not apply to unincorporated businesses, or to the trading activities of the Commonwealth, States or Territories. The Commonwealth amended the Act in 1977 to extend its operation to include coverage of Commonwealth businesses.2 Shortly thereafter, the High Court concluded that the Act applied to State trading enterprises not covered by the shield of the Crown,3 but that still left State businesses and unincorporated businesses outside the coverage of competition laws. As we saw in Chapter 4, reforms following the Hilmer Report in 1993 led to complementary State, Territory and Commonwealth legislation finally providing comprehensive coverage of competition law in Australia. This chapter considers the coverage afforded by the Competition and Consumer Act 2010, formerly the Trade Practices Act 1974, as it has developed, and then the extensions effected by the various State and Territory Competition Policy Reform Acts.
Corporations to Which the Competition Law Applies [9.20] In order to ensure that the Trade Practices Act 1974 had as comprehensive as possible coverage, particularly in relation to business activities within a State, it was necessary to resort to the corporations power as a foundation, even though, at the time the Act was introduced, the precise scope of that power had not been determined. The competition provisions of the Act were therefore directed at corporations and the term “corporation” defined to precisely mirror the terms of s 51(xx) of the Constitution. Consequently, the term was (and still is) defined to mean a trading corporation formed in Australia, a financial corporation formed in Australia, a foreign corporation, and a body corporate incorporated in a Territory.4 Each of the terms “trading corporation”, “financial corporation” and “foreign corporation” were defined by adopting the meaning given to that term in the Constitution.5 Although by the time the Trade Practices Act 1974 was being drafted there were signs that the High Court’s view may be changing, the traditional view was as described by Dr Wynes6 in 1962 as follows: Thus it is not possible to use the corporations power any more than any other in order to justify a law which has no relation to the power except as an incident to provisions affecting rights and liabilities in themselves unrelated to the subject of the power.
2. Strictly speaking, to the extent that the Commonwealth carries on a business, either directly or through a Commonwealth authority. 3. State Superannuation Board v Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282; 57 ALJR 89. 4. The definition also includes holding companies of any of the other types of corporations or Territory bodies, but to the extent that the Act purports to apply to such corporations it is ultra vires, because the holding companies referred to are outside ss 51(xx) and 122 of the Constitution: Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169; 56 ALJR 366; 40 ALR 609; (1982) ATPR 40-285. 5. Now Competition and Consumer Act 2010, s 4(1). 6. WA Wynes, Legislative, Executive and Judicial Powers in Australia (Law Book Co, 1962), p 214.
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As we saw in Chapter 2, the High Court in Concrete Pipes7 had gone some way towards giving the Commonwealth comfort that it could introduce a more comprehensive Trade Practices Act relying on the corporations power. In that case, a challenge to the Trade Practices Act 1965, the High Court decided, rejecting Huddart Parker, that the Commonwealth Parliament had power under s 51(xx) of the Constitution to enact a law governing the conduct, by a trading corporation formed with the limits of the Commonwealth, of the corporation’s business.8 Nevertheless, even by the mid-1980s, after the High Court had considered the extent of Commonwealth constitutional power over corporations on at least five occasions, doubts about the reach of the corporations power remained. As Professor Michael Coper9 pointed out: The reserved powers heresy having been swept aside … the field was open for the Commonwealth to control intrastate corporate activities and so it was held in Concrete Pipes. But this was not inevitable. Many commentators took the view … that … a law with respect to corporations could only be one which dealt with some essential ingredient of being a corporation. … But how far does the Concrete Pipes abstraction go? Is a law which says that no trading corporation shall build a dam … a law about trading corporations or a law about conservation? In the Franklin Dam case in 1983, the High Court split down the middle on this issue.
Trading Corporations as a Foundation [9.30] Relying for constitutional validity of the Trade Practices Act on the meaning of the term “trading corporation” in s 51(xx) of the Constitution was a calculated gamble. What is and is not a “trading corporation” took a number of High Court cases, over almost 15 years, to determine. The High Court first considered the issue in the context of the Trade Practices Act 1971 in St George County Council.10 That case involved a challenge to the authority of the Trade Practices Tribunal to hear an application by the Commissioner for Trade Practices in relation to examinable practices of the council. The challenge did not involve questions of constitutional validity of the 1971 Act. Rather, it involved the question whether the council, a municipal body created by the Local Government Act 1919 (NSW) was a trading corporation within the constitutional reach of that Act. The council was the sole supplier of electricity within the St George County District. It also supplied, installed, serviced and repaired electrical fittings and appliances. By a three to two majority, the High Court decided that the council was not a trading corporation and therefore not subject to the 1971 Act. In forming that opinion the majority, each of whom delivered separate judgments, accepted that the council derived significant revenue from trading activities, but thought that not to be a reason for concluding that the council was a trading corporation. As Justice Menzies pointed out, a university may trade, for instance, through its bookshop, but if incorporated it would not be regarded as a trading corporation.11 7. 8. 9. 10.
Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40; (1971) 124 CLR 468. (1971) 124 CLR 468 (Menzies J) at 511. M Coper, Encounters with the Australian Constitution (CCH Australia, 1987), p 185. R v Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533 at 543, 562. 11. (1974) 130 CLR 533 at 553. © 2018 THOMSON REUTERS
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As Justice Isaacs had pointed out in 1909 in Huddart Parker:12 … it is always a preliminary question whether a given company is a trading or financial corporation or a foreign corporation. This leaves entirely outside the range of federal power, as being in themselves objects of the power, all those domestic corporations, for instance, which are constituted for municipal, mining, manufacturing, religious, scholastic, charitable, scientific, and literary purposes, and possibly others more nearly approximating a character of trading …
The majority in St George County Council were influenced by the fact that, at the time the Constitution was written, the law recognised a clear distinction between, for instance, municipal corporations and trading corporations and had assigned different powers to each. Although they did not accept that Justice Isaacs was correct in his characterisation of manufacturing and mining corporations as being outside the scope of the term “trading corporation”, the court in St George County Council did accept that the purpose of incorporation was of primary relevance. The council had been established under statute for municipal purposes and was therefore not a trading corporation, even though it earned revenue through trading. [9.40] When the issue next came before the court five years later it was under the Trade Practices Act 1974, but the issue was the same: was the applicant a trading corporation and therefore subject to the Act or not? The case, Adamson,13 arose in unlikely circumstances. Adamson, a professional football player, wanted to move from a Perth football club to a club in South Australia. The club to which he proposed to move wanted to employ him as long as it did not breach the rules of the South Australian National Football League. The South Australian League and the Western Australian League were both affiliated with the National Football League of Australia Ltd. The consequence was that, under applicable rules, the South Australian League could not employ Adamson without the consent of the club he wanted to leave and a majority of other affiliated clubs in Western Australia. Adamson argued that the enforcement of this rule would breach the Trade Practices Act 1974. The High Court had to decide whether or not the Western Australian National Football League was a trading corporation within the meaning of the Constitution. If it were not, then the Trade Practices Act 1974 would not apply. It was quite clear that the League had not been formed for a trading purpose so, if the St George County Council test were strictly applied, the answer would have been that the League was not a trading corporation. In considering this issue, the High Court commenced by observing that the mere fact that a corporation trades does not mean that it is a trading corporation, adopting similar views expressed in St George County Council. However, instead of adopting the purpose of incorporation test propounded in that case the court adopted a current activities test. If the current activities of the corporation involved a sufficient degree of trading for the corporation to be characterised as a trading corporation then it will be a trading corporation for constitutional purposes. Views differed among the judges who made up the majority in Adamson on the question of the extent of trading activity necessary. Chief Justice Barwick said
12. Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330 at 393. 13. R v Federal Court of Australia; Ex parte WA National Football League (Adamson) [1979] HCA 6; (1979) 143 CLR 190; 53 ALJR 273.
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that trading must be a substantial corporate activity;14 Justices Mason and Jacobs thought that the trading activities must form “a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation”;15 Justice Murphy’s view was that the trading activities should not be insubstantial.16 The High Court’s conclusion was that the League was a trading corporation, thereby deciding two other matters important to the potential reach of the Trade Practices Act 1974. First, the decision meant that an incorporated sporting body can be a trading corporation if its activities meet the required test. Second, incorporation under a statute other than one of the State or Territory Companies Acts (such as an Associations Incorporation Act) did not prevent a corporate body from being a trading corporation, if its activities warrant that description. [9.50] A further opportunity to consider the matter came before the High Court in 1982 in State Superannuation Board.17 The question was whether the State Superannuation Board of New South Wales was a financial corporation within the meaning of the Constitution, but the court’s analysis was equally applicable to trading corporations. The issue arose because the board, a Victorian statutory authority, challenged the validity of a notice from the Trade Practices Commission requiring it to provide information concerning a possible breach of the exclusive dealing provisions of the Act. The inquiry related to a then common practice by mortgage lenders requiring borrowers to insure the mortgaged property with an insurer nominated by the lender. The High Court affirmed the activities test it had enunciated in Adamson and clarified aspects of that test. The majority, Justices Mason, Murphy and Deane, decided that, in order to meet the test, corporations must carry on trading activities on a significant scale. On the facts, the board’s activities were found to be sufficient for it to be characterised as a corporation to which the Act was capable of applying. [9.60] The following year, the High Court again considered the question of what constituted a corporation within the meaning of the Constitution. Fencott18 involved a claim that a newly appointed trustee of a unit trust that ran a restaurant was liable to damages for misrepresentations made in the course of the sale. The company had been incorporated to become the replacement trustee of the unit trust, which required it to do no more than receive the proceeds of sale of the business, pay off creditors and distribute the balance to unit holders. The High Court had to decide whether a company that had not traded could be a trading corporation, given the current activities test the court had enunciated in Adamson. The court decided that the current activities test is not the sole criterion for determining whether a corporation is a trading corporation. Where a corporation has not begun to trade, its character may be found in its constitution. Fencott was decided at a time when corporations legislation required a registered memorandum of association which had to include a statement of the purposes for which the company was established. Changes in legislation have since removed that requirement. It is nevertheless logical to assume that, with newly formed 14. 15. 16. 17.
(1979) 143 CLR 190 at 208. (1979) 143 CLR 190 at 233. (1979) 143 CLR 190 at 239. State Superannuation Board v Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282; 57 ALJR 89. 18. Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570; 57 ALJR 317; 46 ALR 41; (1983) ATPR 40-350. © 2018 THOMSON REUTERS
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corporations, a determination of whether or not it is a trading corporation would be made by reference to the intentions of the promoters. [9.70] What types of activities will be regarded as trading activities? Stated simply, trading is nothing more than the activity of providing goods or services for reward.19 How have the courts applied the High Court’s tests in competition and consumer law cases? In Australasian College of Dermatologists20 the College, established primarily to provide training and accreditation for medical practitioners, but not for any payment. The college selected trainee registrars and trained them for hospitals, ran an annual scientific meeting and trade exhibition and earned some income from training functions. That was sufficient to constitute the college a trading corporation. In RSPCA (Vic)21 the court held that although the RSPCA’s trading activities were acknowledged to be ancillary to its main purpose, they were nevertheless sufficiently significant for the association to be a trading corporation. In Australian Red Cross,22 the Red Cross was held to be a trading corporation because it earned substantial income from its shop, stalls and from running courses. In the same case, the Royal Prince Alfred Hospital, a State statutory corporation, was also held to be a trading corporation. In GIO (NSW),23 the Government Insurance Office of New South Wales, a statutory corporation, was held to be both a trading and a financial corporation. In Conference and Exhibition Organisers,24 the activities of a small trade association, which operated on the basis of voluntary members’ labour to organise annual trade fairs as its major activity, were sufficient to categorise the association as a trading corporation. In Legion Cabs25 a taxi cooperative society formed to run the radio base for member taxi owners, which was incorporated under the Co-operation Act 1923 (NSW), was held to be a trading corporation. On the other hand, in Fasold26 the Noah’s Ark Research Foundation, an unincorporated association formed to promote the belief that a boat shaped geological formation in Turkey could contain the remnants of Noah’s Ark, was held not to be a trading corporation. In Australian Rough Riders27 an association of rodeo riders was held not to be a trading corporation because its trading activities were not sufficiently significant. 19. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 138–139; 22 ALR 621; (1978) ATPR 40–094; R v Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533 at 569–570; Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 7 FCR 325 at 330–331; 59 ALR 334; (1985) ATPR 40-565. 20. Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46; 248 ALR 267. 21. Orion Pet Products Pty Ltd v RSPCA (Vic) Inc [2002] FCA 860; (2002) 120 FCR 191; (2002) ATPR 46-223. 22. E v Australian Red Cross Society [1991] FCA 20; (1991) 27 FCR 310; 99 ALR 601; (1991) ATPR 41-085. 23. State Government Insurance Corporation v GIO (NSW) [1991] FCA 121; (1991) 28 FCR 511; 101 ALR 259; (1991) ATPR 41-110. 24. Australian Beauty Trade Suppliers Ltd v Conference and Exhibition Organisers Pty Ltd [1991] FCA 154; (1991) 29 FCR 68; 99 ALR 474; (1991) ATPR 41-107. 25. Trade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd [1978] FCA 47; (1978) 35 FLR 372; (1978) ATPR 49-092. 26. Fasold v Roberts [1997] FCA 439; (1997) 70 FCR 489; 145 ALR 548; (1997) ATPR 41-561. 27. McCarthy v Australian Rough Riders Association Inc [1987] FCA 391; (1988) ATPR 40-836.
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Financial Corporations — A Second Challenge [9.80] Relying for constitutional validity of the. Trade Practices Act on the meaning of the term “financial corporation” was also a calculated gamble, but without it there would be a significant area of commerce the Act could not reach. The term “financial corporation” was, and continues to be defined to combine s51(xx) of the Constitution with s 51(xiii) and (xiv). The latter two paragraphs include bodies corporate carrying on banking or insurance business, other than State banking or insurance business not extending beyond the limits of the State. Development of the meaning of the term “financial corporation” in the Trade Practices Act 1974 paralleled development of the meaning of the term “trading corporation”. In fact, it was a financial corporation case in which Justice Deane had presided while on the Federal Court in 1978, that provided a key to what the High Court would ultimately decide in Adamson and State Superannuation Board. That case, Ku-ring-gai Building Society,28 involved an application by two building societies for declarations that the Trade Practices Act 1974 did not apply to them in relation to imposing a requirement that property mortgaged to the societies by members be insured with an insurer nominated by the society. The societies were formed under the Co-operation Act 1923 (NSW), and so the essential question was whether or not they were financial corporations and operated solely within NSW. In deciding that they were financial corporations, on the question of categorising corporations as financial corporations Justice Deane said: The phrases … “financial corporation” in the context of both s 51(xx) of the Constitution and the definition of ‘corporation’ in the Act … refers to a corporation which can appropriately be categorized by reference to activity whether actual or intended. The fact that a corporation was formed for the purposes or with objectives … that might legitimately be advanced by involvement in financial transactions or that it occasionally has dealings in finance necessarily mean that it can appropriately be categorised as a financial corporation. … [D]ealing in finance (whether actual or intended) will be decisive of characterisation only where the overall circumstances are such that the corporation can appropriately be categorised by reference to such activity …
Thereafter the High Court decided Adamson and State Superannuation Board, establishing tests for determining what the term “corporation” meant in the context of the Trade Practices Act 1974. In Ku-ring-gai Building Society, Justice Deane considered what the indicia of a financial corporation might be. After pointing out that the term did not refer to a corporation’s state of solvency, he added:29 An obvious reference point is to the activity of commercial dealing in finance. Another possible reference point is the provision of management or advisory services in relation to financial matters. I used the words “dealing in finance”, for want of a better expression, to refer to transactions in which the subject of the transaction is finance (such as borrowing or lending money) as distinct from transactions (such as the purchase or sale of particular goods for a monetary consideration) in which finance, although involved in the payment of a price, cannot properly be seen as constituting the subject of the transaction. A common 28. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 158–159; 22 ALR 621; (1978) ATPR 40-094. 29. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 at 159; 22 ALR 621; (1978) ATPR 40-094. © 2018 THOMSON REUTERS
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but not invariable characteristic of the relevant type of transaction is that the obligation on each side is to pay money.
[9.90] How have the courts applied the High Court’s tests to potential financial corporations in competition and consumer law cases? In GIO (NSW)30 the Government Insurance Office of New South Wales, a statutory corporation, was held to be both a financial and a trading corporation. In Ku-ring-gai Building Society31 the court held that the applicants, cooperative terminating building societies registered under the Co-operation Act 1923 (NSW), were financial corporations. In SWB Family Credit Union32 the court held that a credit union incorporated under the Co-operation Act 1923 (NSW) was a financial corporation. In State Superannuation Board33 the High Court held that the State Superannuation Board, a Victorian statutory corporation, was a financial corporation. In Bank of NSW,34 the High Court held that the bank, then a New South Wales statutory corporation whose banking business did not extend beyond New South Wales, was not a “financial corporation” within the meaning of the Act, but only because the definition of the term in the Act specifically excludes bodies corporate whose banking business is State banking not extending beyond the State. Originally the Trade Practices Act had defined the term “financial corporation” to mean “a financial corporation within the meaning of paragraph 51(xx) of the Constitution and includes a body corporate that carries on the business of banking or insurance as its sole or principal business”.35 However, the definition was amended in 1977 to its current form, which states:36 “financial corporation” means a financial corporation within the meaning of paragraph 51(xx) of the Constitution and includes a body corporate that carries on as its sole or principal business the business of banking (other than State banking not extending beyond the limits of the State concerned) or insurance (other than State insurance not extending beyond the limits of the State concerned).
Foreign Corporations — The Original Objective [9.100] As we saw in Chapter 2, Australia’s first competition law, the Australian Industries Preservation Act 1906 (Cth), was directed primarily at foreign corporations.37 It was therefore no surprise that the policy was that the Trade Practices Act 1974 should apply to foreign corporations. Nevertheless, initially the same significant doubt about what the Constitution permitted the Commonwealth to do in relation to “trading or financial corporations formed within the limits of
30. State Government Insurance Corporation v GIO (NSW) [1991] FCA 121; (1991) 28 FCR 511; 101 ALR 259; (1991) ATPR 41-110. 31. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134; 22 ALR 621; (1978) ATPR 40-094. 32. Parramatta Tourist Services Pty Ltd v SWB Family Credit Union Ltd (1979) 24 ALR 273; (1979) ATPR 40-102. 33. (1982) 150 CLR 282; 57 ALJR 89; 44 ALR 1; (1982) ATPR 40-326. 34. Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276; 64 ALJR 406; 93 ALR 460; (1990) ATPR 41-033. 35. Trade Practices Act 1974, s 4(1). 36. Competition and Consumer Act 2010, s 4(1). 37. See [2.30].
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the Commonwealth” applied to foreign corporations.38 But, once the scope of the corporations power had been resolved, the coverage of foreign corporations became clear. Relying on paragraphs 51(xx) and 122 of the Constitution, the Trade Practices Act 1974 defined a foreign corporation for the purposes of the Act as a body corporate that is either formed in a country other than Australia or incorporated in an external Territory. That definition remains in the Competition and Consumer Act 2010.39 Today, application of the Competition and Consumer Act 2010 to foreign corporations in relation to their activities in Australia presents no particular issues, although the scope of the power to make laws in relation to foreign corporations is not settled.40 In the context of the Act, it is its application to the activities of foreign corporations outside Australia that raises questions of the extraterritorial application of the Act. [9.110] The meaning of the term “foreign corporation” arose in Nauru Pacific Line,41 a case involving a statutory authority from Nauru, the Nauru Local Government Council, that ran a shipping linetaking action in Australia against a union as a result of a black ban. The union had placed the ban on one of the Council’s chartered ships as a consequence of a dispute over award coverage for union members employed as clerks in the applicant’s Australian office. An initial question for the court was whether the Council was a foreign corporation within the meaning of the Act. The court held that it was, but that was only on an interlocutory application. Interestingly, the Council was a statutory body corporate and that raises a question about the extent to which the constitutional definition of a “foreign corporation” applies to such bodies,42 although it is clear that statutory bodies corporate that carry on trading activities can be classified as trading corporations.43 A foreign corporation may also be liable as an accessory — a party involved in a contravention by someone else to whom the Act applies directly. In Hoffman-La Roche,44 a private action against vitamin companies involved in an international price-fixing and market-sharing cartel, the respondent was a foreign corporation that did not carry on business in Australia, but it had a subsidiary that did. That subsidiary acted in accordance with instructions received from the respondent and consequently the respondent was a party to a contravention of the Act by its Australian subsidiary.
38. Australian Constitution, s 51(xx). See Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1908) 8 CLR 330. 39. Competition and Consumer Act 2010, s 4(1). 40. Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169. 41. Nauru Local Government Council (t/as Nauru Pacific Line) v Australian Shipping Officers Association [1978] FCA 37; (1978) 34 FLR 281; 27 ALR 535; (1978) ATPR 40-087. 42. See R v Industrial Court; Ex Parte CLM Holdings Pty Ltd [1977] HCA 6; (1977) 136 CLR 235. 43. See Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276. 44. Bray v F Hoffman-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1; 190 ALR 1; (2002) ATPR 41-865. © 2018 THOMSON REUTERS
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Holding Companies [9.120] The Competition and Consumer Act 2010 extends to also cover holding companies of trading corporations, financial corporations, corporations formed in a Territory and foreign corporations.45 However, the Act will only apply to a holding company if that company is itself a trading corporation, financial corporation, corporation formed in a Territory or a foreign corporation within the meaning of the Constitution.46 Although the Act may not itself apply to holding companies that are not “corporations” within the meaning of the Constitution, they are covered by the Competition Code, as a consequence of the uniform State and Territory Competition Policy Reform Acts.47 This is because the Competition Code,48 in force as a result of the State and Territory Competition Policy Reform Acts, contains prohibitions in the form as the Act, but applying to a “person” rather than a “corporation”. State interpretation acts define “person” to include a corporation, a body corporate and a body politic.49
Bodies Corporate [9.130] Whether or not the Competition and Consumer Act 2010 applies to bodies corporate will depend on whether the body corporate can be classified as a corporation. The term “body corporate” appears in the Act in a number of places. First, it appears in the interpretation provisions for the purpose of identifying when a body is deemed to be a subsidiary or related corporate body for the purposes, for instance, of the exclusion from the application of the prohibition on anticompetitive arrangements where they are between related bodies corporate.50 It also has application in the merger provision and the misuse of market power provision. In relation to mergers, acquisitions of the capital of a body corporate by a corporation contravene the Act if the acquisition has the purpose or likely effect of substantially lessening competition.51 In relation to misuse of market power, the market power of related bodies corporate is to be aggregated for the purpose of determining whether a corporation has a substantial degree of power in a market.52 The term “body corporate” is not defined in the Act. It includes, but has a wider meaning that the term “corporation”.53 It includes any office or group of people recognised at law as having separate legal personality. Corporations, whether incorporated under the Corporations Law or by special statute, are examples, as
45. Competition and Consumer Act, 2010, s 4(1), definition of “corporation”. 46. Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169 at 210. 47. See Chapter 4. 48. Competition and Consumer Act 2010, Sch 1. 49. See, for example, Interpretation Act 1987 (NSW), s 21. 50. Competition and Consumer Act 2010, ss 4A and 45(8). 51. Competition and Consumer Act 2010, s 50. 52. Competition and Consumer Act 2010, s 46(2). 53. R v Australian Industrial Court; Ex parte CLM Holdings Pty Ltd [1977] HCA 6; (1977) 136 CLR 235 at 241; 51 ALJR 362; 13 ALR 273; (1977) ATPR 17,292 (40-017); Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169; 56 ALJR 366; 40 ALR 609; (1982) ATPR 43,559 (40-285).
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Individuals
the discussion of Bourke54 and State Government Insurance Corporation55 at [9.170] shows. Government business enterprises established by statute as separate legal entities are also examples. The term does not, however, include bodies politic and therefore neither the Commonwealth nor any State or Territory is a body corporate. As the competition provisions of the Competition and Consumer Act 2010 are limited in their primary operation to corporations, bodies corporate that are not corporations are not within the scope of its provisions. However, even though the Competition and Consumer Act 2010 may not itself apply, some bodies corporate are covered by the Competition Code, as a consequence of the uniform State and Territory Competition Policy Reform Acts.56 This is because, the version of the competition provisions adopted by the States and Territories apply to “persons” the same prohibitions as apply, to corporations.57
Individuals [9.140] The application of the competition provisions of the Act to individuals was a somewhat more complicated matter, at least when the Trade Practices Act 1974 first came into force. Limits on the Commonwealth’s constitutional power meant that the Act could not be applied to individuals, or at least not directly or comprehensively. Although the distinction between corporations and individuals has all but disappeared since the States and Territories enacted their uniform Competition Policy Reform Acts, even when first enacted the Trade Practices Act 1974 applied to individuals in a variety of circumstances and the position has not changed. First and foremost it applies to individuals who: • aided, abetted, counselled or procured a contravention by a corporation (or in limited circumstances another person) of any of the competition provisions of the Act; • induced, or attempted to induce, a contravention by a corporation (or in limited circumstances another person) of any of the competition provisions of the Act, whether by threats or promises or otherwise; • have in any way, directly or indirectly, been knowingly concerned in, or party to, the contravention by a corporation (or in limited circumstances another person) of such a provision; or • conspired with others to contravene such a provision.58 Second, relying on the trade and commerce power, the Act applies to conduct engaged in outside Australia by Australian citizens or persons ordinarily resident in Australia,59 if that conduct would otherwise contravene the Act. 54. Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276. 55. State Government Insurance Corporation v Government Insurance Office (NSW) [1991] FCA 121; (1991) 28 FCR 511. 56. See Chapter 3. 57. Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 1393. 58. Competition and Consumer Act 2010, ss 76, 75B. 59. Competition and Consumer Act 2010, s 5(1). © 2018 THOMSON REUTERS
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[9.150] The Commonwealth’s constitutional entitlement to extend the Act to individuals was tested not long after the Trade Practices Act 1974 came into force. The vehicle for the challenge was a private action, Fencott,60 which reached the High Court in 1983. Fencott arose because of a dispute over representations made in the course of sale of a wine bar. The purchaser had sued the corporate owner of the wine bar and its directors for damages for misleading conduct. The matter reached the High Court because the directors argued that the Act could not apply to them personally. The High Court held that it is within the constitutional power of the Commonwealth to impose civil liability on persons whose actions might reasonably be expected to facilitate compliance with a prohibition, in order to secure compliance by a person directly the subject of a constitutional grant of power. Accordingly, the imposition of civil liability on natural persons involved in a contravention by a corporation was held to be a valid exercise of Commonwealth constitutional power. [9.160] Since the enactment of the Competition Policy Reform Acts in each Australian State and Territory in 1995 and 1996, individuals have been directly subject to the competition provisions of the Trade Practices Act 1974, and now the Competition and Consumer Act 2010. This outcome was achieved by each State and Territory applying, by separate legislation, the provisions of the Competition Code61 to all natural persons as well as bodies corporate. The Competition Code is identical in terms to the competition provisions of the Trade Practices Act 1974, except that the provisions apply to persons rather than corporations.
The Commonwealth and its Authorities [9.170] When the Trade Practices Act 1974 first came into force it did not extend to the Commonwealth or its statutory authorities, except to the extent that those statutory authorities were corporations within the meaning of that term then recently adopted by the High Court in Strickland.62 The well-established rule is, of course, that no statute binds the Crown unless the Crown is expressly stated to be bound or by necessary implication has agreed to be bound by it.63 However, following the 1976 Swanson Report into its operation and effectiveness, the Act was amended to state explicitly that its provisions applied to the Crown in the right of the Commonwealth in so far as the Crown carries on business either directly or by an authority of the Commonwealth. The effect of s 2A is to confirm, by implication, the application of the general Crown immunity, but to provide for its partial abrogation insofar as the Crown carries on business, either directly or by an “authority of the Commonwealth”. The Harper Panel in 2015 recommended that the Act should apply to the Crown in right of the Commonwealth, in so far as it undertakes activity in trade or commerce. 60. Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570; 57 ALJR 317; 46 ALR 41; (1983) ATPR 40-350. 61. Set out in the Schedule to the Competition and Consumer Act 2010. See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 1393. 62. Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40; (1971) 124 CLR 468; 37 ALJR 413; [1964] ALR 618. 63. Province of Bombay v Bombay Municipal Council [1947] AC 58; Bropho v Western Australia [1990] HCA 24; (1990) 171 CLR 1; 64 ALJR 374; ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; 81 ALJR 1622.
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Crown in the Right of the Commonwealth
The government response was that it accepted the recommendation in principle and would consult with the States and Territories.64 The Act has not been amended to effect this change.
Crown in the Right of the Commonwealth [9.180] What is, and what is not, encompassed by the term “the Crown in the right of the Commonwealth” has not always been clear. The Commonwealth is, of course, the body politic established under the Constitution. Therefore, activities undertaken by and in the name of the Commonwealth of Australia are activities of the Crown. Everyday examples of this are government procurement, policing and tax collection. There is no difficulty in recognising when the Commonwealth is undertaking an activity in its own right. However, when it comes to statutory authorities, identifying what is, and what is not, an activity of the Crown is not as easy. Nevertheless it has been important to make the distinction, originally because activities of the Crown were excluded entirely from the operation of the Act and now because there are limits on the extent to which the Act applies to them. Court decisions revolve around characterisation of the activities in question and the status of the particular statutory authority undertaking them. Although some of those cases arose in the Commonwealth context, most have arisen in relation to the Crown in the right of a State, a topic dealt with below.65 [9.190] How is the distinction to be drawn? The starting point is the High Court’s decision in Townsville Hospitals Board.66 That case involved whether or not the board, a Queensland statutory authority, was required to comply with council building approval by-laws when constructing an extension to its hospital. The essential question was whether or not it enjoyed Crown immunity. The High Court decided that the legislation establishing the board did not disclose an intention that it should have Crown immunity when undertaking building works. As Chief Justice Gibbs observed:67 All persons should prima facie be regarded as equal before the law, and no statutory body should be accorded special privileges and immunities unless it clearly appears that it was the intention of the legislature to confer them.
In an earlier case, Inglis,68 the question was whether or not the Commonwealth Trading Bank, then a statutory authority constituted by the Commonwealth Banks Act 1959, was part of the Crown in the right of the Commonwealth. The court regarded the relevant question as being whether or not the legislation disclosed an intention by Parliament to give the Commonwealth “the outward form of a corporation as a convenient means of carrying on a Commonwealth activity”.69 The High Court decided that the bank had been established as an instrument by 64. Australian Government Response to the Competition Policy Review (2015), p 20. 65. See [9.330]. 66. Townsville Hospitals Board v Townsville City Council [1982] HCA 48; (1982) 149 CLR 282; 56 ALJR 789; 42 ALR 319. 67. (1982) 149 CLR 282 at 291; 56 ALJR 789; 42 ALR 319. See also Launceston Corporation v HydroElectric Commission [1959] HCA 12; (1959) 100 CLR 654 at 662; State Electricity Commission (Vic) v City of South Melbourne [1968] HCA 49; (1968) 118 CLR 504 at 510. 68. Inglis v Commonwealth Trading Bank of Australia [1969] HCA 44; (1969) 119 CLR 334; 43 ALJR 330; (1970) ALR 241. 69. Applying Bank of New South Wales v The Commonwealth (Banking Case) [1948] HCA 7; (1948) 76 CLR 1 at 274. © 2018 THOMSON REUTERS
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which the Commonwealth participates in the business of banking and that it was therefore part of the Crown in the right of the Commonwealth. Subsequently, in St George County Council,70 the High Court had held that the council, established under New South Wales local government legislation, was not an agent of the Crown and therefore not entitled to Crown immunity. When it came to the Trade Practices Act 1974 the question was whether statutory authorities were covered by Crown Immunity, and if not, whether they came within the constitutional scope of the Act as financial or trading corporations. As we have seen that question reached the High Court in 1982 in State Superannuation Board.71 The question was whether or not the board, a statutory body, was part of the Crown in the right of Victoria, and if not, whether it was a financial corporation within the meaning of the Act. The High Court held that the statute establishing the board gave it a degree of autonomy, including in the management of its property and funds, sufficient to conclude that it was not part of the Crown.72 In an earlier trade practices case, Bradken,73 the High Court had concluded that the Queensland Commissioner for Railways was an agent of the Crown, entitled to Crown immunity, even though, unlike the position in New South Wales, the relevant legislation did not explicitly say so.74
Carrying on a Business [9.200] The Act applies to the Crown in the right of the Commonwealth in so far as the Commonwealth or the relevant Commonwealth authority, is carrying on a business.75 The Act lists a series of activities that were deemed not to amount to carrying on a business.76 They are: • imposing or collecting taxes, levies, fees or licences; • granting, revoking or taking other action in relation to licences; • transactions involving only persons all acting for the Commonwealth (not being a Commonwealth authority) or, where they are acting for a Commonwealth authority, are all acting for the same authority; • transactions involving only the Commonwealth and non-commercial Commonwealth authorities or only non-commercial Commonwealth authorities; and • compulsory acquisition of primary products under legislation, unless the government body has a discretion about whether or not to make the acquisition. 70. R v Trade Practices Tribunal; Ex Parte St George County Council [1974] HCA 7; (1974) 130 CLR 533; 48 ALJR 26; 2 ALR 371. 71. State Superannuation Board v Trade Practices Commission [1982] HCA 72; (1982) 150 CLR 282; 57 ALJR 89; 44 ALR 1; (1982) ATPR 40-326. 72. Compare Superannuation Fund Investment Trust v Commissioner of Stamps (SA) [1979] HCA 34; (1979) 145 CLR 330; 53 ALJR 614; 10 ATR 97. 73. Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd [1979] HCA 15; (1979) 145 CLR 107; 53 ALJR 452; 24 ALR 9. 74. See Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) [1955] HCA 72; (1955) 93 CLR 376. 75. Competition and Consumer Act 2010, s 2A. 76. Competition and Consumer Act 2010, s 2C.
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Crown in the Right of the Commonwealth
[9.210] The term “non-commercial Commonwealth authorities” requires explanation. It was defined to mean an authority constituted only by one person that is neither a trading corporation nor a financial corporation.77 There have been changes in Commonwealth governance arrangements following the Uhrig Report,78 before those changes the Commissioner of Taxation and the Comptroller of Customs were two examples whereas Centrelink79 and the Health Insurance Commission80 were not because they were each constituted with a board. Having identified what is not a business, it remained necessary to determine what is. In this respect the Act provided little assistance. The term “business” is defined, but only in an inclusive sense to make it clear that to constitute a business the relevant activities do not have to be carried on for profit.81 While the word “business” in any particular context takes its meaning from that context, normally it is a “wide and general” word,82 not a term of legal art. It has been described as “an etymological chameleon; it suits its meaning to the context in which it is found”.83 As a starting point, Justice Mason stated, in Bathurst City Council84 that the term “business” denotes “activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis” or as Chief Justice Gibbs put it in Smith v Capewell,85 “‘carry on business’, in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts, and not simply the effecting of one solitary transaction”. However, repetitiveness alone is not sufficient to constitute carrying on of a business. As Justice Emmett pointed out in McMillan,86 “it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. The example of regular deposits to a bank account is sufficient to explain that proposition. Absence of a system and regularity might deny that a business is being carried on but the presence does not necessarily establish that it is.”
77. Competition and Consumer Act 2010, s 2C(4). 78. Review of the Corporate Governance of Statutory Authorities and Office Holders Report, released 12 August 2004, . 79. See Commonwealth Services Delivery Agency Act 1997, s 12. 80. See Health Insurance Commission Act 1973 (Cth), s 4. 81. Competition and Consumer Act 2010, s 4. 82. Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169 at 184. 83. Town Investments Ltd v Department of the Environment [1978] AC 359 at 383. See also Luckins v Highway Motel (Carnarvon) Pty Ltd [1975] HCA 50; (1975) 133 CLR 164 at 178. Federal Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 150 CLR 355 at 378–379. 84. Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 9. 85. (1979) 142 CLR 509. 86. JS McMillan Pty Ltd v Commonwealth [1997] FCA 593; (1997) 77 FCR 337 at 354; 147 ALR 419; (1997) ATPR (Digest) 46-175. See also Hungier v Grace [1972] HCA 42; (1972) 127 CLR 210 at 217. © 2018 THOMSON REUTERS
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[9.220] The High Court has been called on to consider the term “business” in the context of the Act on a number of occasions. In Fontana Films,87 a dispute arose between Fontana and the actors’ union over a black ban on Fontana because Fontana did not agree to only employ actors who were members of the union. The matter reached the High Court on a challenge by the union to the validity of s 45D of the Trade Practices Act 1974. The statutory context in which the High Court had to consider the meaning of the term “business” was that s 45D(1)(b) dealt with conduct that had the purpose or likely effect of causing substantial loss or damage to Fontana’s “business”. The question was whether s 45D(1)(b) was invalid, given that the term “business” has, depending on the context, a very wide meaning. Referring to prior decisions, the court accepted that the term “business” in s 45D is not restricted to trading activities.88 In NT Power,89 the question for the High Court was whether or not the NT Power and Water Authority, a Northern Territory statutory body corporation that sold electricity it generated and transported, had breached s 46 by declining to make transmission facilities available to a competing generator. The court had little difficulty in finding that the Authority was carrying on a business within the meaning of the Trade Practices Act 1974, pointing out that nothing in the Act limits the definition of the term “business” by reference to the criteria for market definition. The comment about market definition was in response to the view Justice Branson had expressed when the matter was before the Full Federal Court.90 Justice Branson had pointed to the words “in so far as the Territory carries on a business” and said that she was not persuaded that the Authority’s use of its own infrastructure to transmit electricity which it sells meant that the Authority carries on a business in respect of that infrastructure. This point is discussed further below. [9.230] The Federal Court has had to consider the matter on a number of occasions. In Thomson Publications,91 the applicant asked the court to set aside terms of settlement reached between various hoteliers and the Trade Practices Commission relating to the circulation of liquor prices. The applicant argued, rather inventively and quite unsuccessfully, that the implementation of the terms of settlement would result in the Trade Practices Commission being involved in a contravention of the Act. The court quite understandably decided that, in performing its normal functions the Commission was not carrying on a business and therefore the terms of settlement it had agreed on were not susceptible to challenge. In Rockdale Municipal Council,92 the court had to decide whether or not the council was a corporation for the purposes of the Trade Practices Act 1974. Although the court did not consider directly what may or may not be included in 87. Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169. 88. Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd [1982] HCA 23; (1982) 150 CLR 169 per Justice Brennan (1982) 150 CLR 169 at 221 and per Chief Justice Gibbs and Justice Aitkin (1982) 150 CLR 169 at 184. 89. NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 219 CLR 90; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021. 90. NT Power Generation v Power & Water Authority [2002] FCAFC 302 at [90]; (2002) 122 FCR 399. 91. Thomson Publications (Aust) Pty Ltd v Trade Practices Commission [1979] FCA 78; (1979) 40 FLR 257; 27 ALR 551; (1979) ATPR 40-133. 92. Mid Density Development Pty Ltd v Rockdale Municipal Council [1992] FCA 634; (1992) 39 FCR 579.
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Crown in the Right of the Commonwealth
the term “a business” the characterisation by the court of various council activities is informative. The court concluded that in charging fees for zoning certificates the council was performing a statutory duty for which the relevant legislation permitted it to charge a fee, and providing or contracting out garbage collection services was nothing more than carrying out a function of government in the interests of the community. [9.240] In McMillan,93 an unsuccessful tenderer challenged the tender for the outsourcing of the Australian Government Printing Service because the tenderer thought the Commonwealth had engaged in misleading conduct. The court rejected the claim because Commonwealth was only to be bound by the Act where the conduct complained of took place in the course of carrying on a business. It did not apply where the Commonwealth was selling a business. As the court said:94 The conduct of the Commonwealth in issuing the request for tender and in dealing with prospective tenderers was not actively engaged in in carrying on the business which has hitherto been carried on by the Commonwealth, … The conduct complained of is that of officers of the Commonwealth who have had nothing to do with the day-to-day operations of the AGPS. It is conduct quite divorced from the carrying on of that business.
As far as the activities of the Australian Government Printing Service itself were concerned, the court concluded that they amounted in part to carrying on a business. Justice Emmett said:95 However, in its guise as AGPS, the Commonwealth is doing what any citizen or private trader might do, namely, providing those services for remuneration. That remuneration may or may not be a commercially adequate remuneration. Further, those services are being provided to the Commonwealth in its governmental guises. Nevertheless, I consider that the Commonwealth, in providing those services, is carrying on a business within the meaning of s 2A.
The court did not draw a distinction between services provided by AGPS to other Commonwealth departments and agencies and services provided to third parties, an important distinction, as the decision in the next case, Corrections Corp, shows. In Corrections Corp,96 the question was whether, in running detention centres for illegal immigrants the Commonwealth Department of Immigration and Multicultural Affairs was carrying on a business and therefore, whether the Commonwealth was carrying on business when it called for tenders to run detention centres in Australia under the Migration Act 1958. The court decided that it was not. The court observed that:97 It seems to me to be clear beyond argument that operating a detention centre is not a trading or commercial activity of the executive branch. It is no different from a government maintaining and operating a prison for convicted felons. Maintaining and operating a prison may be described by some as “government business”, but it does not amount to 93. JS McMillan Pty Ltd v Commonwealth [1997] FCA 593; (1997) 77 FCR 337; 147 ALR 419; (1997) ATPR (Digest) 46-175. 94. JS McMillan Pty Ltd v Commonwealth (1997) FCA 593; (1979) ATPR (Digest) 46-175 at 54,404. 95. (1997) ATPR (Digest) 46-175 at 54,403. 96. Corrections Corp of Australia Pty Ltd v Commonwealth [2000] FCA 1280; (2000) 104 FCR 448; (2000) ATPR 41-787. 97. (2000) 104 FCR 448 at 452. © 2018 THOMSON REUTERS
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carrying on of a trading or commercial activity … Even if what is being done could be characterised as the provision of a service, by no use of the English language could it be described as the carrying on of a business.
However, that view may overstate the position. In Salvation Army,98 the Commonwealth sought unsuccessfully to strike out a statement of claim alleging that the Commonwealth had engaged in misleading and deceptive conduct in relation to the operation of refugee facilities in Papua New Guinea and Nauru. The basis was that, in operating the facilities, it was not carrying on a business. The court affirmed the approach taken in McMillan but distinguished Corrections Corp because it was not apparent that the Commonwealth was doing anything different to that which a private company might potentially do in a role as a head contractor for the operation of the regional processing centres. Furthermore, the material before the court at that stage in the case did not show that the Commonwealth was required by the Migration Act to operate the regional processing centres. [9.250] In NSW Ambulance Service.99 the court had to determine whether, in relation to the provision of ambulance services at sporting events, the New South Wales Ambulance Service was carrying on a business. The court decided that it was, stating:100 When providing ambulance services at sporting events the respondent was engaged by the relevant organising sporting body. This was not an isolated practice. Whilst it formed a comparatively small part of the respondent’s activities, the provision of ambulance services at sporting events by the respondent occurred frequently. In order to secure this work the respondent competed with, amongst others, the applicant. Fees were charged for the provision of services, even if primarily to recoup costs. In my opinion it follows that, in these circumstances, the respondent was carrying on a business. The provision of ambulance services at sporting events for a fee not only took place in a competitive and commercial context, it bore a business character.
[9.260] In Canberra International Airport,101 the airport owner and the applicant were in dispute over a proposed residential development near the airport. One argument in the case was that, in endorsing a noise exposure forecast in relation to the airport, Airservices Australia, a statutory authority responsible for regulating airports, was carrying on a business. The court rejected the argument, stating:102 The activity so performed by AsA was distinctively governmental and was partially regulatory in character. It is unsurprising that AsA characterised the activity as being in the nature of a community service activity engaged in to meet a specific requirement of the Government.
In National Management Services,103 a dispute arose in relation to the construction of a building in Sydney to provide offices for the Cabinet and Ministers. The development was carried out by the relevant federal department. The court rejected the proposition that the Commonwealth was engaged in a business in developing the building. 98. Salvation Army (New South Wales) Property Trust v Commonwealth [2015] FCA 674. 99. Paramedical Services Pty Ltd v Ambulance Service of New South Wales [1999] FCA 548. 100. [1999] FCA 548 at [87]. 101. Village Building Co Ltd v Canberra International Airport Pty Ltd [2004] FCA 133; (2004) 134 FCR 422; 208 ALR 98; (2004) ATPR 41-979. 102. [2004] FCA 133; (2004) 134 FCR 422 at 447; 208 ALR 98; (2004) ATPR 41-979; at [93]. 103. National Management Services (Australia) Pty Ltd v Commonwealth (1990) 9 BCL 190.
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Crown in the Right of the Commonwealth
[9.270] In Sirway,104 Sirway brought proceedings for alleged breach of the Trade Practices Act 1974 when the Department of Defence cancelled a tender contract for the supply of crockery, claiming that the Department had engaged in misleading conduct in cancelling the contract. In response to the proposition that the Act did not apply, Sirway asserted that the Commonwealth was carrying on a business of trading or acquiring chinaware in industrial quantities. The court concluded that:105 Because the Department’s trade in or acquisition of chinaware so obviously relates to the execution of a government function which is in the interests of the community, it does not have the characteristic of carrying on a business … [T]he Department’s acquisition of chinaware was done for the purpose of sustaining men and women of the Services so that the primary task of defending Australia and its national interests can be pursued. This activity does not constitute the carrying on of a business because it does not have the flavour of a commercial enterprise. Rather is inextricably linked with a function of government.
[9.280] In Baxter Healthcare,106 it was conceded that procurement of medical supplies for public hospitals did not take place in the course of carrying on a business. The case concerned a practice adopted by the respondent of bundling its products when tendering for hospital contracts and offering a more competitive price for the bundle than it was prepared to tender for each product separately. The primary question was whether, because the tenders were to government bodies not carrying on a business, the respondent’s conduct was entitled to derivative immunity. The High Court held that it was not.107 [9.290] In Falls Investments108 the New South Wales Court of Appeal was called on to decide whether the Department of Agriculture had engaged in misleading conduct when it changed its policy in relation to the payment of compensation for diseased cattle. Falls’ entitlement to bring proceedings under the Fair Trading Act 1987 (NSW) depended on whether, in administering the relevant compensation scheme, the Department was carrying on a business. The court held that it was not. The court stated:109 I accept that a government or government agency may be carrying on a business by activities which are themselves only a part, perhaps even a small part, of activities which are, when considered as a whole, plainly the provision of government services and not a business ... However, in this case the goods (cattle) that were acquired were acquired on nothing like a commercial basis, but as part of the means of carrying out a governmental compensation scheme; and in my opinion the fact that such goods were then disposed of on commercial terms would not make either the whole activity or even the disposal of the goods the carrying on of a business. Just as the acquisition of cutlery, no doubt at the best commercial terms that could be obtained, for use by the armed forces, was an activity that private persons might engage in the course of commercial activities but did not amount to the carrying on of a business (Sirway), so 104. Sirway Asia Pacific Pty Ltd v Commonwealth [2002] FCA 1152. 105. Sirway Asia Pacific Pty Ltd v Commonwealth [2002] FCA 1152 at [62]. 106. ACCC v Baxter Healthcare Pty Ltd [2005] FCA 581; (2005) ATPR 42-066. 107. ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; 81 ALJR 1622. 108. New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54; (2003) 57 NSWLR 1. 109. New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54; (2003) 57 NSWLR 1 at [130]-[132]. © 2018 THOMSON REUTERS
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also the disposal of unwanted goods, even on the best terms that could be obtained, would not in my opinion amount to the carrying on of a business, where those goods were acquired, on nothing like commercial terms, for the purposes of a compensation scheme.
[9.300] Tytel,110 involved an interlocutory injunction application in relation to a claim that ATC had misused its market power in relation to Tytel’s attempts to compete with ATC in the sale of premium telephone handsets. The court found that ATC in fact carried on a number of businesses, including the business of selling telephones to the public to connect to its telephone service and that s 2A therefore applied to treat ATC as if it were a corporation under the Act. In Suatu,111 the Australian Postal Commission applied to strike out a statement of claim alleging that it had engaged in misleading conduct in failing to deliver brochures for Suatu’s product to every household in Australia. The court decided that the claim arose out of the carrying on by the Commission of a business in the performance of its statutory functions to operate postal services and that the Trade Practices Act 1974 therefore applied to the Commission. [9.310] There is a subtlety in the way in which the court expressed its decision that points to the proper interpretation of s 2A. The proposition is that, as the Act only binds the Commonwealth in so far as it carries on a business, this means that, in order to determine whether or not a particular act or omission by the Commonwealth is susceptible to challenge under the Act, it is necessary to identify two matters: first, a specific business carried on by the Commonwealth; and, second, an act or omission that occurred in the course of the carrying on of that business.112 Put another way, s 2A should not be interpreted as meaning that, once it is found that the Commonwealth is carrying on a business, the Act applies to all conduct connected in some way to that business, no matter how remote.113 The relevant conduct must be engaged in by the Commonwealth in the course of that business. McMillan is an example of the application of this approach. In that case, although the AGPS carried on a business, the conduct complained of arose from a tender for the outsourcing of that business and not from the conduct of the business itself. The applicant therefore failed. In expressing its opinion on this point in NT Power the High Court warned against “anatomising, filleting and dissecting” the Act,114 and rejected the view, accepted by the Full Federal Court, that in order for the Act to apply, the conduct in question had to be the actual business engaged in. The relevance was that, as Justice Branson had observed, the Authority used its infrastructure to transmit electricity which it sold, but did not carry on a business in respect of that infrastructure. The High Court concluded that the Authority was carrying on a business and that s 46 applied to it in relation to that business. While in that case the decision not to grant access to 110. Tyree TelecomPty Ltd v Australian Telecommunications Commission [1986] FCA 215; 67 ALR 433; (1986) ATPR 40-711. 111. Suatu Holdings Pty Ltd v Australian Postal Commission [1989] FCA 60; (1989) 86 ALR 532. 112. NT Power Generation Pty Ltd v Power & Water Authority [2004] HCA 48; (2004) 219 CLR 90 at 116; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021 at [66]. 113. JS McMillan Pty Ltd v Commonwealth [1997] FCA 593; (1997) 77 FCR 337; 147 ALR 419; (1997) ATPR (Digest) 46-175; NT Power Generation Pty Ltd v Power & Water Authority [2001] FCA 334; (2001) 184 ALR 481; (2001) ATPR 41-814 at [294]; Sirway Asia Pacific Pty Ltd v Commonwealth of Australia [2002] FCA 1152. 114. [2004] HCA 48; (2004) 219 CLR 90 at 116; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021 at [68].
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States and Territories and Their Statutory Authorities
transmission lines was a decision connected sufficiently with the relevant government business, that will not always be the case. As the court said in McMillan, the policy is that: 115 persons dealing with the Commonwealth in relation to the actual conduct of a business will have the same protection as when dealing with a private trader who is carrying on such a business but will not have protection when entering into other dealings with the Commonwealth.”
[9.320] Although the competition provisions of the Act apply only to corporations, as defined, s 75B extends liability to any person knowingly concerned in a contravention. The Acts Interpretation Act 1901 defines the term “person” to include a body politic unless the contrary intention appears, thereby providing the possibility that the Commonwealth might be liable, in appropriate circumstances, as a person. Since 1977 the Trade Practices Act 1974 has evidenced a contrary intention.116
States and Territories and Their Statutory Authorities [9.330] It was assumed that the Trade Practices Act 1974 could not apply to the Crown in the right of a State unless that Act specifically so provided, although that remains an open question.117 Whatever may have been the situation, that changed in 1995 when the Act was amended to specifically apply to States and Territories and their authorities, in so far as they carry on a business.118 The effect was to put States and Territories and their authorities on the same footing as far as the competition provisions of the Act are concerned. Tracing the history, as far as the Territories were concerned, when the Act was amended to explicitly apply to the Crown in the right of the Commonwealth in 1977, it was also extended to apply to the Australian Capital Territory which at that time was not self-governing. As far as the Northern Territory was concerned, the Act was not amended to explicitly apply to it until 1995.119 [9.340] Turning to the States, a series of cases proceeded on the basis that the Act did not apply to the Crown in the right of the States, even if the party involved was a corporation as defined in the Act. In Sharkey,120 the question for the Federal Court was whether the New South Wales Metropolitan Water Sewerage and Drainage Board were entitled to Crown immunity. After a careful analysis of the statute under which it had been established, the court decided that the board was an agent of the Crown and therefore entitled to Crown immunity. As we have already noted, in State Superannuation Board,121 the question for the High Court was whether or not 115. (1997) 77 FCR 337 at 356. 116. See Competition and Consumer Act 2010, s 2A. Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334; (1999) ATPR 42,714 (41-682). 117. Commonwealth of Australia v Mewett [1997] HCA 29; (1997) 191 CLR 471; 71 ALJR 1102. See also Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334; 73 ALJR 522; (1999) ATPR 42,714 (41-682). 118. Competition and Consumer Act 2010, s 2B. 119. Until explicitly brought under the Act, the immunity that extended to the Crown in the right of the States also applied to the Northern Territory: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation [1987] FCA 454; (1987) 18 FCR 212; 76 ALR 173; (1988) ATPR 40-835. 120. F Sharkey and Co Pty Ltd v Fisher [1980] FCA 146; (1980) 50 FLR 130; 33 ALR 184; (1980) ATPR 40-185. 121. [1982] FCA 53; (1982) 60 FLR 165; 41 ALR 279; (1982) ATPR 40-282. © 2018 THOMSON REUTERS
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a Victorian statutory authority was a financial corporation. The court decided that its statute conferred sufficient autonomy on the board that it evidenced an intention that the board was not an agent of the Crown in the right of the State and therefore not entitled to Crown immunity. It was found to be a financial corporation within the meaning of the Trade Practices Act 1974. This led to consideration of the extent to which State Crown immunity applied to exempt anticompetitive agreements entered into by the States. As we have also seen, in Bradken,122 the High Court had to decide whether or not the Act applied to a contract between BHP and the Queensland Commissioner for Railways. The court concluded that the Commissioner was the agent of the State and therefore covered by Crown Immunity. In GIO (NSW),123 the Government Insurance Office of New South Wales, a statutory corporation, and two subsidiaries incorporated under corporate law, were held to be outside the operation of the Trade Practices Act 1974 as they were each an emanation of the Crown in the right of New South Wales. In Bourke.124 the High Court unanimously held that to the extent that the Trade Practices Act 1974 purported to apply to a State bank in the conduct of its banking business not extending beyond the limits of the State concerned it was invalid, but its operation is capable of being read down. However, they are not the only decisions touching on this subject. In State Bank of SA,125 the bank, a South Australian statutory corporation, was held not to be subject to the Trade Practices Act 1974. In Workcover (SA),126 the respondent sought to strike out a statement of claim on the basis that it was not susceptible to the Act because its function was to collect taxes. The court refused the application. [9.350] The effect of this immunity was, for many years, far reaching. In Bradken the result was that the Trade Practices Act 1974 could not apply to the contract between a corporation and the Crown, However, this line of authority has been overturned. In Baxter Healthcare,127 the High Court made it clear that arrangements between bodies entitled to Crown Immunity and corporations otherwise subject to the Act were not immune for application of the Act From a policy perspective, the following views by the Full Federal Court in Baxter Healthcare,128 when dismissing the ACCC’s intermediate appeal because it was bound by Bradken, are apt:129
122. [1979] HCA 15; (1979) 145 CLR 107; 53 ALJR 452; 24 ALR 9; (1979) ATPR 40-106. 123. State Government Insurance Corporation v GIO (NSW) [1991] FCA 121; (1991) 28 FCR 511; (1991) ATPR 41-110. 124. Bourke v State Bank of New South Wales [1990] HCA 29; (1990) 170 CLR 276; (1990) ATPR 41-033. 125. Hawthorn Pty Ltd v State Bank of South Australia [1993] FCA 9; (1993) 40 FCR 137; (1993) ATPR 41-219. See also Jellyn Pty Ltd v State Bank of South Australia [1996] 1 Qd R 271; (1995) 119 FLR 59. 126. FAI General Insurance Co Ltd v Workcover Corporation (SA) [1998] FCA 1438; (1998) ATPR 41-639. 127. [2006] FCAFC 128; (2006) 153 FCR 574; 232 ALR 627; (2006) ATPR 42-128; see also [2007] HCA 38; (2007) 81 ALJR 1622. 128. ACCC v Baxter Healthcare Pty Ltd [2006] FCAFC 128; (2006) 153 FCR 574; 232 ALR 627; (2006) ATPR 42-128. 129. [2006] FCAFC 128; 232 ALR 627; (2006) ATPR 42-128; (2006) 153 FCR 574 at [102].
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Local Government
The amount involved in the combined purchases of goods and services by the executive governments of the States and State instrumentalities is massive and, as this case illustrates, in many fields would dominate demand. It is one thing to exempt the executive government from legislative prohibition as to conduct, particularly where the dominant position of the executive government in many markets would complicate procurement. It is another to have a substantial area of commerce in which restrictive practices can be carried on by all those dealing with a government, perhaps to the disadvantage of the public purchasing authority, but also to the detriment of other suppliers and consumers.
The Federal Court was reflecting on the fact that universal coverage of the Act had not been achieved, notwithstanding efforts by legislatures to do so. Concerned about the extent to which State government business activities were excluded from the Act, the Federal Government had established an Independent Committee of Inquiry into National Competition Policy (the Hilmer Inquiry). In 1993 Hilmer reported, recommending the extension of the competition provisions of the Act to cover business activities of the States and the Northern Territory. The committee noted that government business at that time accounted for about 10% of gross domestic production. Improving efficiency in rail, electricity, gas and water utilities was seen as a national priority. [9.360] As we saw in Chapter 4, accepting the Hilmer recommendations, the Commonwealth, States and Territories signed the Competition Principles Agreement and the Conduct Code Agreement,130 resulting in the adoption of a wide-ranging reform agenda for State and Territory government business enterprises. An important part of that reform agenda was the extension of the restrictive trade practices provisions of the Act to States and Territories and their authorities in so far as they carried on business. As a consequence, since 1995, the Act has expressly stated that it applies to the Crown in the right of the States and Territories, including to their statutory authorities, in the same way as it applies to the Crown in the right of the Commonwealth. It took the High Court in Baxter Healthcare in 2006 to complete the picture.
Local Government [9.370] As we have seen, in St George County Council,131 the High Court held that the council, established under New South Wales local government legislation, was not an agent of the Crown and therefore not entitled to Crown immunity. The consequence was that, in appropriate circumstances local government could be subject to the Trade Practices Act, although this would always depend on the extent to which the governing statute provided for ministerial control over the functions of the body concerned. The Competition Principles Agreement,132 explicitly committed the States to extending competitive neutrality principles to local government, but according to each State’s own agenda. The consequence was an amendment133 to the Trade Practices Act to exclude from the operation of the competition provisions activities by local government bodies in granting, suspending, refusing or varying licences, a curious provision given the intent to apply the Act to business activities universally. 130. See Appendix 2. 131. (1974) 130 CLR 533. 132. Clause 7. See Appendix 2. 133. Competition and Consumer Act 2010, s 2D. © 2018 THOMSON REUTERS
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[9.380] The Productivity Commission recommended in 2002 that Act be amended to state explicitly that the competition provisions only apply to the business activities of local government, an amendment consistent with the treatment of Commonwealth and State authorities.134 That recommendation was accepted. The Competition and Consumer Act 2010 states that the competition provisions of the Act apply to local government bodies only to the extent that they carry on a business, either directly or by an incorporated company in which the local government body has a controlling interest.135
Activities in Trade or Commerce [9.390] Although the 2017 amendments, introducing the Harper reforms, did not include the change recommended by Harper to have the Act apply to the Crown insofar as it undertakes activity in trade or commerce, the recommendation was accepted in principle. So it is useful to consider how this might apply and New Zealand provides a potential example. The New Zealand Commerce Act applies to Crown activities if the Crown is “engaged in trade”,136 a concept close to our “in trade or commerce”. Although our Act does not define the term “in trade or commerce” the New Zealand Commerce Act defines the term “trade” to mean:137 any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land.
[9.400] In Glaxo,138 the New Zealand High Court considered the actions of the Minister for Health in relation to that country’s pharmaceutical benefits scheme. The allegation was that the Minister had contravened the Commerce Act when she decided not to admit the applicant’s antibiotic to the list of scheme approved drugs. It was alleged that she had a substantial degree of power and had taken advantage of that power for the purpose of restricting entry of the applicant’s drug. In striking out the claim Justice Barker observed that: The Minister is not “engaging in trade”; her activities about subsidies must obviously affect trade but I do not consider that her activities … can come within the definition of “trade” under the Commerce Act.
His Honour adopted a view earlier expressed by the New Zealand Commerce Commission in an authorisation case involving pricing of paediatric benefits in which the Commission had concluded that the phrase “engaged in trade” meant carrying on a trade rather than acting in the course of trade.139
134. Productivity Commission, Review of Section 2D of the Trade Practices Act 1974: Local Government Exemptions (2002). 135. Competition and Consumer Act 2010, s 2BA. 136. Commerce Act 1986 (NZ), s 5(1) provides: “Subject to this section, this Act shall bind the Crown in so far as the Crown engages in trade”. 137. Commerce Act 1986 (NZ), s 2(1). 138. Glaxo New Zealand Ltd v Attorney-General [1990] NZHC 155; [1991] 3 NZLR 129. Upheld on appeal. On appeal, Justice Casey stated that the term is meant to cover activity of a commercial nature only and is not apt to describe a Minister’s regulatory action for welfare purposes. 139. Re New Zealand Medical Association (1988) 7 NZAR 407.
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Corporations Dealing with Government — Derivative Immunity
[9.410] In another New Zealand case, IES,140 the plaintiff sought damages from the government when it lost contracts for the supply of software because the Ministry of Education introduced a system to encourage schools to use accredited providers of school management systems software. The plaintiff claimed that the Ministry had unlawfully designed and unfairly implemented its accreditation policy and that this amounted to a misuse of market power because the Ministry had purchased systems on behalf of schools and was therefore intervening directly in the market “in trade”. The court rejected the claim. In Marina,141 the plaintiff sought to recover damages from the Thames-Coromandel District Council because, it alleged, the council had engaged in misleading and deceptive conduct “in trade” in issuing a certificate in relation to a unit building the plaintiff constructed. Contracted buyers withdrew, claiming that the plaintiff had failed to comply with its obligation to build the units properly and in accordance with regulatory requirements. The plaintiff sought to recover from the council losses it made on resale of the units. The plaintiff’s counsel argued that, in issuing building consents, undertaking inspections and issuing code compliance certificates the council was providing a service “in trade”. The court rejected the argument. Although the court accepted that private building certifiers were engaged in a commercial activity, that did not mean that the council was doing so when it certified buildings. Private certifiers were simply removing one aspect of the council regulatory functions. In Chisolm,142 the plaintiff, a property developer, sued the council when he lost an opportunity to build an integrated golf resort on land he owned and adjoining land he had sought to acquire from Auckland City Council. The case arose in unusual circumstances. Faced with an emergency need to find an alternative site to dump effluent from sewerage tanks, the council proposed to use the land the plaintiff sought. Its power under relevant legislation to do so was successfully challenged and while an appeal was pending another site became available. But by then the plaintiff’s backers had withdrawn and the project abandoned. One basis for his claim was that the council had engaged in misleading and deceptive conduct “in trade”. The claim was rejected on the basis that the council was doing nothing more that fulfilling its statutory function.
Corporations Dealing with Government — Derivative Immunity [9.420] For 30 years, it had been thought that, as a principle derived from Crown immunity, corporations dealing with the Crown were also immune from the Trade Practices Act 1974. As a matter of Crown prerogative, legislation does not bind the Crown unless the Crown is expressly named in it or there is a necessary implication that the Crown is to be bound.143 Although the principle remains correct it is now regarded as a
140. Integrated Education Software Ltd v Attorney-General [2012] NZHC 837. 141. Marina Holdings Ltd (in rec) v Thames-Coromandel District Council [2010] NZHC 1561; (2010) 12 NZCPR 277. 142. Chisholm v Auckland City Council [2001] NZHC 1299; [2002] NZRMA 362. 143. Province of Bombay v Municipal Corporation of the City of Bombay [1947] AC 58. © 2018 THOMSON REUTERS
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matter of statutory interpretation rather than Crown prerogative.144 As we have seen, since 1977 Crown immunity has been partially abrogated in relation to the Commonwealth because the Act expressly provides that it applies to the Crown in the right of the Commonwealth, in so far as the Crown is carrying on a business. The same has applied in relation to States and Territories since 1996. It therefore follows that, to the extent mentioned, but not otherwise, the Act applies to the Crown. Originally it was thought that, as the Trade Practices Act 1974 did not apply to the Crown, it could not apply to any contract, arrangement or understanding to which the Crown was a party.145 In Bradken, the High Court had held that the Trade Practices Act 1974 did not apply to the contract between a corporation and the Crown. This led to decisions such as NSW Bar Association,146 in which the court decided, consistent with Bradken, that advertising agents engaged by the NSW Government were entitled to immunity because if they were not, there would be an impermissible restriction on the rights and interests of the Crown. Bradken remained good authority for almost 30 years. [9.430] However the High Court reconsidered the matter in 2007 in Baxter Healthcare.147 Baxter Healthcare involved proceedings by the ACCC alleging breaches of the competition provisions of the Trade Practices Act in relation to contracts for which Baxter had successfully tendered to State and Territory governments. The ACCC argued that Baxter’s conduct amounted to a misuse of market power and exclusive dealing. Baxter successfully argued before the Federal Court that, as the tenders were to the Crown, Bradken meant that Crown immunity applied to remove the relevant agreement from the operation of the Trade Practices Ac 1974t. However, when the matter reached the High Court the court decided that Bradken no longer represented the legal position. Baxter was therefore not entitled to immunity. Consequently the position now is that, if, in the course of conduct in relation to dealings with government a corporation engages in conduct that would be a contravention of the Competition and Consumer Act 2010, the Act will apply.
144. Bropho v Western Australia [1990] HCA 24; (1990) 171 CLR 1; 64 ALJR 374; ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; 81 ALJR 1622. 145. Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd [1979] HCA 15; (1979) 145 CLR 107; 53 ALJR 452. 146. (1988) 18 FCR 378; 82 ALR 431; (1988) ATPR 49,456 (40-875). 147. ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; (2007) 81 ALJR 1622.
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10
[10.70] Contracts, Arrangements and Understandings .................................. [10.110] Arrangements ...................................................................................... [10.120] Understandings .................................................................. [10.130] The Policy Conundrum ....................................................... [10.140] The Courts’ Approach ........................................................ [10.250] Concerted Practices ............................................................................ [10.260] European Law ..................................................................... [10.290] US Law ............................................................................... [10.340] Other Countries .................................................................. [10.350] Australian Guidance ........................................................... [10.370] Some Observations ............................................................ [10.380] Independent Parallel Conduct ............................................................. [10.490] Anticompetitive Purpose .................................................................... [10.490] The Task ............................................................................. [10.510] Provisions. .......................................................................... [10.530] Purpose .............................................................................. [10.640] Concerted Practices Purpose ............................................ [10.650] Substantial Purpose ........................................................... [10.660] Determining Purpose .......................................................... [10.690] Purpose — Point in Time .................................................... [10.700] Likely Anticompetitive Effect ............................................................... [10.710] Likely ................................................................................... [10.760] Substantially Lessening Competition .................................................. [10.800] Exchanging Information ...................................................................... [10.820] Criteria ................................................................................ [10.830] International Approaches ................................................... [10.890] Australian Approach ........................................................... [10.940] Price Signalling .................................................................................... [10.980] Attempts .............................................................................................. [10.1000] Most Favoured Customer Arrangements ............................................ [10.1030] Applicability Otherwise Than to Corporations .................................... [10.1040] Exclusions ........................................................................................... [10.1050] Digest of Cases ...................................................................................
159 161 162 162 163 169 170 172 173 173 176 176 179 179 180 181 185 185 185 187 187 188 190 191 192 193 196 198 199 201 202 203 203
[10.10] It is well recognised that if, instead of competing with one another, firms “regularise” the way in which they interact with their competitors to remove competitive pressures they will be well placed to charge more and give less, to the detriment of consumers and the community more generally. When that occurs
1. I use the term “arrangement” here in a general sense to encompass contracts, arrangements, understandings and concerted practices. © 2018 THOMSON REUTERS
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society as a whole suffers. It does so through higher prices, reduced incentive for firms to innovate, lower quality products and lower levels of service. Economists use the diagram at [6.110] to illustrate the point. If, instead of competing, firms collude on price, production or division of the market, either explicitly or tacitly, the result is a reduction in consumer welfare and in total welfare. However, the economic consequences are not the only consequences. Opportunities to enter markets and compete openly and fairly on the basis of quality and price are also a matter of basic fairness. Fairness, rather than economics, was the key driver for the re-introduction of competition law in Australia in the 1960s, consistent with the view that, a free-enterprise society:2 provides for its citizens to be at liberty to participate in the production and distribution of the nation’s wealth, thus ensuring competitive conditions which tend to initiative, resourcefulness, productive efficiency, high output and fair and reasonable prices to the consumer.
So the policy is to prohibit arrangements that adversely affect the competitive process, leaving the market to function competitively in the public interest. This chapter considers the prohibition on the anticompetitive arrangements provisions of the Competition and Consumer Act 2010. That prohibition supplements the prohibition on cartels. [10.20] It is not surprising that anticompetitive agreements were the first subject addressed in the Trade Practices Act 1965. That Act deemed the term “agreement” to include arrangements and understandings, whether formal or informal and whether express or implied.3 In that and many other respects the drafters of our legislation had been influenced by the framers of the United Kingdom’s Trade Practices Act 1956. The trigger for that Act was “an agreement between two or more persons carrying on business”. The UK Act provided that: “agreement” includes any agreement or arrangement, whether or not it is or is intended to be enforceable (apart from any provision of this Act) by legal proceedings …
Clearly, while “contract” is appropriate, it is too limiting. Although there are examples of parties entering contracts that have been found to be anticompetitive, if the net were not cast more widely a significant number of anticompetitive arrangements would fall outside the legislation. [10.30] The 1965 Act was not the first attempt made in Australia to capture anticompetitive arrangements. The Australian Industries Preservation Act 1906 (Cth) adopted two phrases:– “entering into a contract” and “continues to be a member of or engages in any combination, in relation to trade or commerce”. The relevant provision stated: Any person who … makes or enters into any contract or is or continues to be a member of or engages in any combination, in relation to trade or commerce … with intent to restrain trade or commerce to the detriment of the public …is guilty of an offence.
The term “combination” is not a term readily recognised in Australian law, other than as a generic reference to mergers and the formation of business structures 2.
3.
Statement by the Attorney-General, Billy Snedden QC, introducing into Parliament the Bill for the 1965 Act. Reproduced in JE Richardson, Introduction to the Australian Trade Practices Act (Hicks Smith, 1967), p 13. Trade Practices Act 1965, s 91(2).
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Anticompetitive Arrangements and Concerted Practices
such as joint ventures. The term probably has its origins in the UK Combination Act 1799 and was imported into the US Sherman Act 1890. Originally the term did not relate to business structures. It applied to collectives of “journeymen manufacturers” — people conducting themselves collectively for with a common objective. Nevertheless, it has proven to be an appropriate trigger for the application of US prohibitions on anticompetitive conduct. In framing the Australian Industries Preservation Act 1906 (Cth), the Australian Parliament drew heavily on the Sherman Act 1890. The Sherman Act provided (and still provides): Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce … is declared to be illegal.
In that context, the term “combination” could have been regarded as relating to the formation of business structures, but that has not been the case. Under the Australian Industries Preservation Act 1906 (Cth), the term has been said to mean merely that the relevant parties are “associated for that purpose”. As Justice Issacs said:4 The combination may be the pure result of the contract—it may exist without any contract at all, it may originate in a contract, and yet seriously depart from its terms and take on a new or modified purpose or method of action sanctioned by the conduct or acquiescence of the parties.
Whatever the virtues of the term “combination” may have been as a trigger for liability, it was not to feature in either the 1965 Act or the 1974 Act. When it came to the Trade Practices Act 1974, the trigger used was “contract, arrangement or understanding” and anticompetitive arrangements to which those triggers applied featured prominently among the matters with which the Act was concerned. That remains the position under the Competition and Consumer Act 2010.5 [10.40] As far back as 1962 the Barwick list6 had included the following examples of anticompetitive agreements to which restrictive trade practices law might be directed: • agreements between manufacturers to refrain from supplying customers of each other; • agreements between manufacturers to limit the life or quality of their products; and • concerted refusal by resellers of a product to buy from a manufacturer who deals with other resellers. Cases taken by the Commissioner and subsequently the Commission are replete with examples.7 Cartels, considered separately in Chapter 11, are the most prominent example of anticompetitive agreements. The difference between the general prohibition on anticompetitive arrangements and the cartel prohibition is that the former requires a factual assessment to be made of the purpose or likely effect of conduct, whereas there is no such requirement in relation to cartel conduct. Cartel conduct is prohibited regardless of whether or not there is an anticompetitive purpose or effect. 4. 5. 6. 7.
R v Associated Northern Collieries [1911] HCA 73; 14 CLR 387. Until 2017, the term used was “contracts, arrangements, or understandings” but in 2017 “concerted practices” was added. The list of anticompetitive practices prepared by the then Attorney-General, Sir Garfield Barwick, and tabled in Parliament on 6 December 1962: see Appendix 1. See Appendix 3.
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[10.50] Although contracts, arrangements and understandings may be the trigger for the prohibition with which we are concerned here, there is nothing wrong per se with firms, including competitors, entering contracts, arrangements or understandings. They are important in a healthy, dynamic free-market economy. The economy depends on efficient interaction between firms. From a policy perspective the question is how to identify and address interaction that should be prohibited because of its anticompetitive purpose or effect, without undue interference in the efficient flow of commerce. Not all arrangements between firms will be anticompetitive, or even sufficiently anticompetitive to warrant statutory intervention. Qualitative and quantitative assessments are required to determine whether or not the purpose or effect is anticompetitive. As the court pointed out in Eastern Express:8 every commercial contract lessens competition to some degree. Each party is taken out of the market to the extent of its commitment. The parties, being bound to each other, are unable to buy from, or sell to, others the goods or services the subject of the contract. To that extent, they are inhibited in their ability to compete with others for purchases or sales. But those restrictions are fundamental to contract law; law which the [competition law] was designed to supplement, not to supplant.
There is no bright line test for deciding which arrangements ought to be permissible and which ought not. Attorney General Lionel Murphy recognised that when introducing the Trade Practices Bill 1974. He said:9 [Some] provisions, particularly those describing the prohibited restrictive trade practices, have been drafted along general lines using, wherever possible, well understood expressions. … The Courts will be afforded an opportunity to apply the law in a realistic manner in the exercise of their traditional judicial role.
The approach initially taken in the 1965 Act was, as we saw in Chapter 2, to not prohibit any agreements. Rather, following the UK example, the Trade Practices Act 1965 required agreements between competitors to be registered with the Commissioner for Trade Practices, who then had the task of assessing them for their anticompetitive effect and weighing up any counterbalancing public benefit. When the government decided to update trade practices law in 1974 a new approach was required. The new Act contained a general prohibition of contracts, arrangements and understandings in restraint of trade or commerce, leaving it to the courts, as Senator Murphy had said, “to apply the law in a realistic manner” on a case-by-case basis. Shortly after the Trade Practices Act 1974 came into force it became clear that “restraint of trade or commerce” was too limiting10 and the phrase “substantially lessening competition” was substituted. In 2017, “concerted practice” was added. [10.60] This chapter examines the types of arrangements regarded as anticompetitive and the precise terms of the prohibition against those arrangements.11 Three elements make up the prohibition. First, there must be a contract, arrangement or understanding between two or more parties, or a “concerted practice”. Second, the 8. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1991] FCA 321; (1991) 30 FCR 385 at 420–421; 103 ALR 41; (1991) ATPR 41-128. 9. Senate, Hansard, 30 July 1974, p 542. 10. See High Court decision in Quadramain Pty Ltd v Sevastapol Investments Pty Ltd [1976] HCA 10; (1976) 133 CLR 390. 11. The prohibition against anticompetitive contracts, arrangements, understandings and concerted practices is now in Competition and Consumer Act 2010, s 45.
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purpose or likely effect of a provision of the contract, arrangement, understanding or concerted practice must be to reduce competition in a market. Third, the relevant market must be a market for goods or services in Australia.
Contracts, Arrangements and Understandings [10.70] The term “contract” is a well-defined legal term and therefore understanding what is meant by that term in the context of the Act presents no special difficulty. The Act does not seek to give the term any special meaning, so it has its normal common law meaning.12 But as we have seen, from a policy perspective, framing a rule that only deals with contracts would not be very effective because it could be easily by-passed, so the terms “arrangement” and “understanding” were added. Neither is defined in the current Act and neither has proven to be entirely satisfactory. [10.80] The starting point in interpreting the term “arrangement” is a UK Court of Appeal decision, British Basic Slag.13 That case involved the sale of slag, a fertilizer by-product of the manufacture of steel. British Basic Slag was a company formed by UK steel manufacturers when a German company that had bought and processed their slag was wound up during World War I under the Trading with the Enemy Act 1916. Instead of selling their slag separately, the steel manufacturers all entered separate, long-term, supply agreements with the company. One of the questions for the court was whether the fact that the member companies had each entered into their individual supply agreements with British Basic Slag Ltd was sufficient to establish that there was an “arrangement” between each of the participating manufacturers. The court decided that they had, with the consequence that the agreements in question were required to be registered under the UK’s Trade Practices Act 1956. Lord Justice Wilmer’s view was that: [T]he Act … clearly contemplates that there may be arrangements which are not enforceable by legal proceedings, but which create only moral obligations or obligations binding in honour … [W]hen each of two or more parties intentionally arouses in the others an expectation that he will act in a certain way, it seems to me that he incurs at least a moral obligation to do so. An arrangement as so defined is therefore something “whereby the parties to it accept mutual rights and obligations.
Lord Justice Diplock, who had observed that the term “arrangement” is not a term of art, stated that the term bears the meaning that “an ordinary educated man would ascribe to it”. In his opinion an arrangement involved mutuality “in that each party, assuming he is a reasonable and conscientious man, would regard himself as being in some degree under a duty, whether moral or legal, to conduct himself in a particular way”.14 One of the results was the conclusion that “arrangements” require acceptance of “mutual obligations”. However, Lord Justice Dankwerts expressed the following concern with terms like “arrangement”: 12. A contract is a promise or set of promises to which the law ascribes a remedy if not performed or the performance of which is recognised by the law as an enforceable duty. 13. Re British Basic Slag Ltd’s Agreements [1963] 2 All ER 807; [1963] 1 WLR 727. 14. [1963] 1 WLR 727 at 742; [1963] 2 All ER 807. © 2018 THOMSON REUTERS
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[T]he … [term ‘arrangement’] … seem to me to be calculated to drive any accuratelyminded lawyer to despair. Once the ascertainable ambit of arrangements, rights or obligations, which are legally enforceable is left behind, one flounders in a morass of inexactitudes. There is no path or guide which can be followed … What is the limit of looseness of association which may be tolerated in the application of the Act? It may be that it is impossible to lay down any principle for application and that each case must be decided on the particular circumstances of the case …
In the United States, as we have noted already, the characterisation problem that use of terms such as “arrangement” causes did not arise because the court was prepared to take a broader view. In interpreting the phrase used in the United States, “contract, combination or conspiracy”,15 the US Supreme Court concluded that:16 in view of the general language of the Statute and the public policy which it manifested, there was no possibility of frustrating that policy by resorting to any disguise or subterfuge of form, since resort to reason rendered it impossible to escape, by any indirection, the prohibitions of the statute.
[10.90] Before exploring how our courts have interpreted these terms, it is appropriate to consider why it is necessary to carefully define them. Having accepted that there would be little utility in limiting the provisions of the Act to agreements recognised in law, the logical conclusion is that the Act should apply to conduct involving something less than a formal contract. On the other hand, given the substantial penalties anticompetitive conduct rightly attracts, it is equally important to differentiate between legitimate competitive conduct and anticompetitive arrangements. To illustrate the point, assume two nearby service stations post identical prices for petrol. By what mechanism should we determine whether their conduct is permissible? As a matter of policy we should not conclude that their conduct is anticompetitive merely because their prices are identical, nor should we conclude that there is no anticompetitive conduct unless we can establish that they entered a formal agreement to fix the prices. As a policy matter, something between the two is required and that is the role played by the terms “arrangement” and “understanding”. That something is often referred to as a “plus factor”17 — something else must be going on — but whether or not the plus factor is present is inevitably a difficult question, especially as direct evidence of collusion is rare and courts are required to draw inferences having regard to all of the circumstances. [10.100] It is quite obvious that the terms “arrangement” and “understanding” describe something less binding than a contract, but that does not take the matter very far. Although each of those terms should be thought to mean different things — otherwise one of them would be redundant — the tendency has been to describe the terms as having nuanced differences, but to treat them as interchangeable in practical terms when applying the Act to particular circumstances. This led to a 15. Sherman Act 1890 (US), s 1. 16. United States v American Tobacco Co 221 US 106 (1911) at 178. 17. See, for example, In Re Flat Glass Antitrust Litigation 385 F 3d 350 (2004); In Re Polyurethane Foam Antitrust Litigation [2015–1] Trade Cases 79,070. Areeda describes the term ‘plus factors’ as “the additional facts or factors required to be proved as a prerequisite to finding that parallel action amounts to a conspiracy”: P E Areeda and H Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application (2002, 2nd ed), para 1433(e).
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concern that the policy objective may not be fully realised because there will not be an arrangement, nor will there be an understanding, unless the conduct of the parties concerned included acceptance of “mutual obligations”.
Arrangements [10.110] Dealing first with the term “arrangement”, the obvious conclusion is that, if the conduct is to be regarded as impermissible, communication, directly or indirectly, might be the relevant plus factor. The problem with that as the only plus factor is that communication is always going on between competitors in one way or another. In our example, posting petrol prices on a prominent sign for the public to see indirectly communicates those prices to competing service stations. Commercial dealings are replete with examples of this. From a policy perspective, it is a positive because it informs consumers. An informed market is a competitive market in which suppliers decide their selling prices, and vary them, according to the actions of their competitors. Informed buyers choose between suppliers and products based on price, quality and service. What about other forms of communication? If one firm tells another in advance the prices it is going to post should that be sufficient? If so, does that constitute an arrangement for which both parties are responsible, or only the party providing the information? As we have seen, the first attempt to define an arrangement in a competition context was in British Basic Slag.18 That decision is consistent with the approach taken to the meaning of the term “arrangement” by the High Court in other contexts. In Lutovi Investments,19 Justices Gibbs and Mason stated: It is, however, necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view it is not essential that the parties committed to it or are bound to support it. An arrangement may be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it.20
The key concepts, then, are that an arrangement must “usually” be “consensual” and there must be “some adoption of it”. The courts, applying British Basic Slag and Lutovi Investments, have required evidence of a consensus or meeting of the minds of parties under which one party or both assumes an obligation or gives an assurance or undertaking that it will act in a certain way.21 Of course, a hope or mere expectation that a person will act in a certain way has not been regarded as sufficient, even if it has been engendered by that person.
18. See fn 14. First adopted in a case under the Act in Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) [1979] FCA 51; (1979) 40 FLR 83 at 88; 26 ALR 609; (1979) 2 ATPR 40-126. 19. Federal Commissioner of Taxation v Lutovi Investments Pty Ltd [1978] HCA 55; (1978) 140 CLR 434. See also Trade Practices Commission v Tubemakers Ltd [1983] FCA 93; 47 ALR 7198; Trade Practices Commission v Allied Mills Industries Pty Ltd (No 4) [1981] FCA 133; (1981) 60 FLR 1 at 12; (1981) 3 ATPR 40-237 at 43,151–2; Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383 at 397; (1980) ATPR 40-172 at 42,377; L Grollo & Co Pty Ltd v Nu-Statt Decorating Pty Ltd [1978] FCA 33; (1978) 34 FLR 81 at 89; (1978) 2 ATPR 40-086 at 17,842. 20. [1978] HCA 55; (1978) 140 CLR 434 at 444. 21. ACCC v Australian Egg Corporation Ltd [2016] FCA 69. © 2018 THOMSON REUTERS
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Understandings [10.120] Turning to the term “understanding”. As noted earlier, the courts have tended to treat this term as interchangeable with the term “arrangement”, although they have consistently said that an understanding as something “less precise” than an arrangement22 — “a less formal, looser concept”.23 Given the views expressed in British Basic Slag, when it came to the Trade Practices Act 1974, the Australian draftsman presumably used the term “understanding” in an attempt to ensure that, if acceptance of mutual rights and obligations (whether legally binding or not) were an attribute of an arrangement, that was not intended to be an attribute of an ‘understanding’. What then are the attributes of an “understanding”? In Leahy Petroleum,24 a case concerning petrol station price-fixing allegations, the court approached the issue in the following way, reinforcing the view that an understanding involves, at the least, a consensus (“consensual dealings between parties”)25 and will usually involve “some reciprocity”: [T]he term “understanding” is apt to describe something less than [an] … arrangement. An understanding will usually, but may not necessarily, involve some reciprocity of obligation. … At least there must be a meeting of minds of those said to be parties to the understanding and a consensus as to what is to be done; not merely a hope as to what might be done or might happen.
An earlier view was that “did not necessarily reject” the proposition that an understanding may be somewhat different and more easily satisfied than the requirements for making an arrangement.26 We will consider the outcomes of Leahy Petroleum and associated cases later.
The Policy Conundrum [10.130] How, from a policy perspective, should we apply the view expressed in Leahy Petroleum in practice? As a matter of policy we may accept that there will be an arrangement if there has been communication between competitors and they have agreed, informally, to charge the same price. Conversely, if each made an independent decision based on an observation of the other’s conduct, no arrangement would arise. But if an understanding is something less formal or looser than an arrangement, how are we to determine the difference between pro-competitive behaviour and anticompetitive behaviour? Should the law regard an “understanding” as in place if one firm, observing the other’s prices, matched those prices? The answer is no. Without something more — a ‘plus factor’ — the correct policy response is to regard firms as having freedom to set and vary prices, having regard to the conduct of one’s competitors, as central to the concept of open competition. 22. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321; (2007) ATPR 42-162; ACCC v Yazaki Corp (No 2) [2015] FCA 1304. 23. ACCC v Australian Medical Assn Western Australia Branch Inc [2003] FCA 686; (2003) 199 ALR 423; (2003) ATPR 41-945; ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590 at [49]. 24. ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183. 25. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794 at para 28. 26. Trade Practices Commission v TNT Management Pty Ltd [1985] FCA 23; (1985) 58 ALR 423; (1985) 6 FCR 1 at 25.
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Does it make a difference if firms do so on repeated occasions? That is a more difficult question, because, while conscious parallel conduct is not prohibited, the circumstances may indicate that something more than parallel conduct is going on. In those circumstances a requirement to uncover a “meeting of minds”, “consensus” or “mutual obligation” does not provide an acceptable policy outcome. Faced with this dilemma, courts have had to attempt to ascribe meaning to the terms “arrangement” and “understanding” and then apply it in practice.
The Courts’ Approach [10.140] As has been noted, while there may be differences between arrangements and understandings, in practice courts have regards them as interchangeable in practical terms. That there is a distinction may be easy to articulate, but it has proven hard to identify in practice what that difference is. Critics accurately claim that the result has been under-capture of conduct to which, as a matter of policy, the law should apply. The meaning of the two terms, as described by Australian courts to date, may be summarised in the following propositions.27 First, there must be a “meeting of the minds” of the parties or consensus under which one or both of them committed to a particular course of action.28 Second, a mere expectation, or a hope that something might be done or happen or that a party will act in a particular way, is not, of itself, sufficient.29 Third, the “meeting of minds” or consensus need not involve reciprocity of obligation, although it often will do so.30 In Amcor Printing,31 the court explained the position as follows: … in order for there to be an arrangement or understanding … there must be a meeting of the minds of those said to be parties to the arrangement or understanding. There must be a consensus as to what is to be done and not merely a hope as to what might be done or happen … Ordinarily, an arrangement or understanding involves communication between the parties arousing expectations in each that the other will act in a particular way … There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation …
[10.150] First cases. Early cases, called on to determine where to draw the line between permissible and impermissible conduct, thought reciprocity of obligation — commitment to a particular course of action — to be one of the elements, based on 27. This is drawn from the summary in ACCC v Construction, Forestry, Mining and Energy Union [2008] FCA 678. 28. ACCC v Australian Egg Corporation Ltd [2017] FCAFC 152 at [95]. See also Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v ACCC [2007] FCAFC 132; (2007) 162 FCR 466; 242 ALR 643; (2007) ATPR 42-177 at [15] and [175]; ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344; (2000) ATPR 41-749 at [75]; Top Performance Motors Pty Ltd v Ira Berk (Qld) Pty Ltd (1975) 24 FLR 286; 5 ALR 465; (1975) ATPR 40-004 at 291. 29. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2005) ATPR 42078 at [45]; ACCC v IPM Operation & Maintenance Loy Yang Pty Ltd [2006] FCA 1777; (2006) 157 FCR 162; (2006) ATPR (Digest) 46-271 at [104]-[112]. 30. ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344; (2000) ATPR 41-749 at [75]. 31. ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344 at 359–360; (2000) ATPR 40,663 (41-749) at 40, 677; at [75]. © 2018 THOMSON REUTERS
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UK precedent. Development of the court’s thinking can be traced back to one of the earliest cases, Nicholas Enterprises.32 That case involved beer retailing in Adelaide at a time when the price of bottled beer was regulated. Competition at the retail level manifested itself through the number of “free” bottles a retailer would provide for each dozen purchased. After attending a lunch hosted by the local brewery, a group of leading Adelaide liquor retailers reduced the number of “free” bottles. There had been discussion at the lunch about the effect discounting was having on their businesses. The question for the court was whether the retailers had made an arrangement to reduce the level of discounting. The trial judge decided that, for there to be an arrangement or understanding, there had to be a meeting of minds, which required proof that each of the parties had communicated with each other, that each had raised an expectation in the mind of the other, and that they had accepted an obligation to the other. The case went to appeal. In a short statement dismissing the appeal, the court expressly reserved on whether or not mutual obligation was a necessary ingredient of an arrangement or understanding. The Chief Justice said:33 Fisher J reached the conclusion that it is a necessary ingredient of such an ‘understanding’ that there be an element of mutual commitment between two or more parties in the sense that each must have accepted an obligation qua the other or others. As at present advised, it seems to me that one could have an understanding between two or more persons restricted to the conduct which one of them will pursue without any element of mutual obligation … It is not, however, necessary that I reach or express any final view on this question …
[10.160] Following Nicholas Enterprises the court proceeded cautiously on the question of mutual obligations. In a case decided in the same year as, Email,34 exchanges of price lists between the only two manufacturers of electricity meters in Australia were the issue. The court took the same tentative approach on the question of mutual commitment as the court had taken in Nicholas Enterprises. His Honour’s view was that it would be ‘difficult to envisage’ circumstances in which an understanding would not involve some reciprocity of commitment. Five years later, in Parkfield Operations,35 the judge’s view was that the existence of mutual obligations “would be the common situation”. Eight years later, in 1993, a Full Court had an opportunity to clarify the position, but had declined to do so.36 All the court would say was that “it is difficult to envisage circumstances where there would be an understanding … involving a commitment by one party … without some reciprocal obligation by the other party”, a view subsequently echoed in Email.
32. Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) (1979) 40 FLR 83 at 88; 26 ALR 609; (1979) ATPR 40-126. 33. Morphett Arms Hotel Pty Ltd v Trade Practices Commission (1980) 30 ALR 88; (1980) ATPR 40-157. 34. Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172. 35. Trade Practices Commission v Parkfield Operations Pty Ltd (1985) 5 FCR 140; 59 ALR 589; (1985) ATPR 40-526. 36. Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206 at 206; 116 ALR 643; (1993) ATPR 41-260.
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A long line of cases followed in which the court declined to express a definitive view on whether there could be an understanding without mutual obligation,37 although some judges echoed the view that mutual commitment was not necessary.38 By the time the High Court came to consider, in Rural Press,39 whether interchanges between two rural newspaper companies amounted to a contravention, there seems to have been general acceptance that, as a practical matter, establishing the existence of an arrangement or understanding without a finding of mutual commitment would be unlikely.40 In Service Station Association,41 the court refused to accept that evidence of statements printed in the asociation’s magazine concerning the low margins on petrol and speeches made at meetings of service station proprietors by the association’s president were sufficient to establish that an understanding to raise petrol prices had existed between the association and service station proprietors. Returning to Email,42 that case involved two manufacturers of electricity meters who issued identical price lists, submitted identical tenders, adopted the same price variation clause, sent each other their respective price lists showing prices as identical, forwarded to each other new price lists immediately they changed prices or introduced any new meter or component, and tendered in accordance with their respective price lists. The court nevertheless concluded, on the facts, that their conduct was not the result of any arrangement or understanding.43 In Russell,44 a service station proprietor convened a meeting with other service station proprietors at a local hotel. Petrol prices were discussed, a particular price stated, and subsequently prices rose to the stated price. The court took the view that the presence of the respondent at the meeting, at which some identified and some unidentified persons came to an understanding that the price of petrol would be increased to a specified price, did not prove that the respondent was a party to any understanding, even though he had convened the meeting. This conclusion was reached notwithstanding the fact that the respondent’s company increased its price
37. See, for example, Trade Practices Commission v TNT Management Pty Ltd [1985] FCA 23 at [125]; 6 FCR 1; 58 ALR 423; ACCC v CC (NSW) Pty Ltd (1999) 92 FCR 375 at 408; 165 ALR 468; (1999) ATPR 41-732; [1999] FCA 954 at [141]; Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883 at [76]; Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2005) ATPR 42-078 at [45]; ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183; (2004) ATPR (Digest) 46-260. 38. For example, ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973; (2011) 196 FCR 212; (2011) ATPR 42-367; ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344; (2000) ATPR 41-749. 39. Rural Press Ltd v ACCC [2003] HCA 75; 216 CLR 53; 203 ALR 217; 78 ALJR 274 at para 29. The question in that case was whether, given direct evidence of a meeting of the minds of the parties, evidence established that there had been commitment, but that seems to have been because the ACCC had pleaded its case on that basis. 40. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 169 FCR 452. Only those respondents who had entered a mutual commitment were found to have contravened the Act. 41. Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206; 16 ALR 643; (1993) ATPR 41-260. 42. Trade Practices Commission v Email Ltd (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172. 43. In Apco a Full Court described this at (2005) 159 FCR 452 at 464 as “very much a decision on its own facts”. 44. Trade Practices Commission v JJ & YK Russell Pty Ltd (1991) ATPR 41-132. © 2018 THOMSON REUTERS
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to the proposed figure on the proposed date, because Commission witnesses, who gave evidence about what happened at the meeting, were found to be unreliable. On the other hand, in David Jones,45 at a meeting of retailers in Adelaide there had been discussion about selling manchester products at prices stipulated on a particular price list. There was no direct evidence that the retailers had arrived at an understanding, but the court was nevertheless prepared to draw the inference that an understanding had been reached from circumstantial evidence, including subsequent concurrent acts and the lack of sworn evidence to the contrary from the retailers. But, as the law has developed, that may not be the result today. [10.170] Petrol cases. Returning to a case mentioned earlier, in Leahy Petroleum,46 the question was whether or not the evidence established that service station proprietors had reached an arrangement or understanding to fix prices for unleaded petrol in Ballarat, Victoria. The ACCC presented evidence that a number of petrol retailers, including Apco (who ultimately appealed the decision) had made elaborate arrangements to bring cyclical periods of petrol discounting in the town to an end. A practice had developed in the early 1990s under which an operator who wanted to increase prices telephoned other participants to propose the amount of the increase and its timing. If one of the participants did not follow the price increase a call would be made to encourage it to do so. The court found that there was sufficient evidence to establish that there had been “the requisite meeting of minds and consensus”47 between the proprietors to establish that they had engaged in an anticompetitive understanding. Compare that decision with Apco.48 Apco was one of the Ballarat service station proprietors involved in Leahy Petroleum. Apco appealed, claiming that the evidence did not disclose that it was a party to the understanding. The trial judge had found that Apco was aware of the practice, was aware that it was a long running collusive practice, had received the telephone calls, had closely monitored price increases and had decided whether to substantially match them. However, Apco did not initiate any of the calls, nor did it initiate any of the price increases. The pattern of behaviour showed that on occasions Apco followed the price increases and on occasions it did not. The evidence was that other participants hoped that Apco would increase prices but nothing more. The Full Court decided that, as there was no commitment by Apco, it was not a party to the understanding to fix prices. Simply put, the evidence did not establish that the Apco “became committed to any price increase agreed on by the initiating respondents”.49 [10.180] Circumstantial evidence. More often than not, the existence or absence of an arrangement or understanding has to be inferred from circumstantial evidence. As the High Court stated in Associated Northern Collieries,50 one of Australia’s earliest competition cases: 45. Trade Practices Commission v David Jones (Aust) Pty Ltd [1986] FCA 19; (1986) 13 FCR 446; 64 ALR 67; (1986) ATPR 40-671. 46. ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183. 47. ACCC v Leahy Petroleum Pty Ltd [2004] FCA 1678; (2004) 141 FCR 183 at [359]. 48. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 169 FCR 452. The High Court refused leave to appeal on the grounds that the Federal Court’s decision turned on the facts: ACCC v Apco Service Stations Pty Ltd [2006] HCATrans 272. 49. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 169 FCR 452 at [43]. 50. R v Associated Northern Collieries [1911] HCA 73; 14 CLR 387.
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Community of purpose may be proved by independent facts … If the other defendant is shown to be committing other acts, tending to the same end, then … there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts were the outcome of pre-concert, or some mutual contemporaneous engagement, or that they were themselves the manifestations of mutual consent to carry out a common purpose …
[10.190] Circumstantial evidence may consist of evidence of parallel conduct, of joint action by the parties in relation to relevant matters, collusion between the parties, of similar pricing structures and/or of opportunities (such as industry meetings) for the parties to reach an understanding.51 The ACCC also has resort to compulsory evidence gathering powers.52 Regardless of the type of evidence, in the absence of an admission by the party concerned,53 a finding that a contravention has occurred will depend on the view the court takes of the evidence as a whole. As a practical matter, establishing the existence of an arrangement or understanding by circumstantial evidence, although possible, is never easy. The requirement to establish commitment (or ‘mutual consent’) adds to that burden and that raises policy questions about under-capture of anticompetitive conduct. [10.200] Leahy Petroleum No 254 illustrates how difficult this can be. It is probably the low water-mark case. The ACCC alleged eight separate arrangements involving communication between petrol station proprietors. The allegation was that they communicated about the amount and timing of proposed increases in retail petrol prices, and endeavoured to agree on them. The ACCC presented circumstantial evidence, and admissions made in compulsory examinations55 to prove its case. It also presented direct evidence, but that was found to be unhelpful because it was evidence of general patterns and practices rather than events on any specific date.56 After an exhaustive review of the evidence, the court concluded that, although there could be no doubt that the proprietors passed information between each other about the levels of retail petrol prices on a number of occasions,57 that did not necessarily indicate that they had come to an arrangement or understanding. No commitment had been established. In reaching that conclusion the court added the following:58 Of course, private communication of intended price increases, without communication of the intention to potential purchasers, lends itself readily to price-fixing. It does not constitute price-fixing … without more. Advance notice of the proposed implementation of a decision already made to increase prices would provide a competitor with the advantage of more time, but cannot itself be indicative of the existence of an arrangement
51. Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172. 52. Competition and Consumer Act 2010, s 155. 53. For examples of cases in which the respondent admitted entering an understanding see ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528; ACCC v Australia and New Zealand Banking Group Ltd [2016] FCA 1516; ACCC v NSK Australia Pty Ltd [2014] FCA 453. 54. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321. 55. Competition and Consumer Act 2010, s 155 entitles the ACCC to compulsorily obtain information, documents and evidence in the course of investigation of possible contraventions of the Act. 56. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321 at [131]-[132]. 57. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321 at [922]. 58. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321 at [925]. © 2018 THOMSON REUTERS
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or understanding containing a provision to fix prices. There are additional elements that need to be established before a finding can be made that an arrangement or understanding exists, or that effect is being given to it.
[10.210] Two recent cases provide additional illustrations. Australian Egg Corp59 involved an allegation that the corporation, an association of egg producers, its managing director and a number of egg producers had arrived at an arrangement or understanding when dealing with the oversupply of eggs and its effect on price. The ACCC’s case was based on minutes of the association’s board at which actions to deal with an oversupply problem were discussed, presentations at an industry summit and emails sent to egg producers. However, the court was not convinced that the parties had come to an arrangement or understanding because there was “insufficient evidence to warrant the conclusion that these options were propounded as a form of collective action involving reciprocal obligations or understandings by the egg producers”.60 [10.220] Olex61 concerned action taken by two Australian manufacturers of electrical cables faced with increasing import competition. The ACCC’s circumstantial case based primarily on meeting minutes and other documents. All witnesses called at trial gave evidence largely adverse to the ACCC’s case. The court concluded that Olex met with its major wholesale customers and explained its intended course of action to them. Those customers expressed general acceptance of Olex’s decision and understood and accepted the reasons for it, or at least did not object. But those facts were not sufficient to establish that an arrangement or understanding had been arrived at because the evidence did not disclose that the parties had made a commitment. The last decision to consider on this topic is Air New Zealand Ltd.62 This was yet another circumstantial case in which the ACCC alleged that airlines had entered a number or arrangements or understandings relating to fuel surcharges for cargo freight from Singapore. There was evidence of exchanges of pricing information, reasonably parallel pricing in two out of three regions, the airlines openly discussing fuel surcharges at meeting of industry associations and publication by an airline that had obtained immunity of its fuel index providing occasions for the airlines to discuss fuel surcharges. Furthermore, on a few occasions some airlines appeared explicitly to have agreed fuel surcharges, and there were fuel surcharge surveys. Nevertheless, the court concluded that the alleged overarching understanding had not been proven. In reaching that decision, the court concluded that parallel pricing was to be expected given the relative economic position of Air New Zealand, contemporaneous material showing that the airline’s policy was not to follow the national carrier, and that there were instances of competitive pricing. In addition, there was evidence that parallel pricing did not occur in one region and pricing was not uniform in the other two regions. There was also an absence of any evidence of 59. ACCC v Australian Egg Corp Ltd [2016] FCA 69; ATPR 42-519. 60. ACCC v Australian Egg Corp Ltd [2016] FCA 69; ATPR 42-519 at [383]; Appeal dismissed [2017] FCAFC 152. See also [78]. 61. ACCC v Olex Australia Pty Ltd [2017] FCA 222. 62. [2014] FCA 1157 at [463]. Some, but not all, of the arrangements or understandings alleged by the ACCC were proven to have the requisite degree of reciprocity or mutuality. Minutes of meetings of the association of which the companies were members were evidence of an understanding between those whose representatives were recorded as participating in the meeting. The case when on appeal to the High Court, but on different issues: Air New Zealand Ltd v ACCC [2017] HCA 21.
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complaints or adverse consequences for airlines that did not comply with the alleged understanding.63 As the trial judge said in summing up the position: Arrangements and understandings … are different concepts but at the heart of both is the need for there to be a meeting of the minds or, if you will, a consensus … It seems that an arrangement will generally require some form of express negotiation or at the very least communication between the parties … On the other hand, an understanding can be tacit and may arise without communication so long as there is a meeting of the minds … Whatever else is involved it seems this means that at least one party assumes an obligation to another or gives an assurance or undertaking that it will act in a certain way …
[10.230] As the court pointed out, in no case had an understanding been established in which there was not reciprocity or mutuality between the alleged parties to it. The application of precedent, and specifically British Slag, has led us to this position. The opportunity to move on from “mutual obligation” in relation to understandings has probably passed. But in the absence of precedent our courts might have decided that the term “understanding” can encompass coordination between competitors by which, without the need to establish “mutual obligation” the evidence discloses consensus (but not mutual obligation) to substitute practical cooperation for the risks of competition. It is interesting to contemplate what the position in Australia might have been had the courts taken the same view as the US Supreme Court64 that: in view of the general language of the Statute and the public policy which it manifested, there was no possibility of frustrating that policy by resorting to any disguise or subterfuge of form, since resort to reason rendered it impossible to escape, by any indirection, the prohibitions of the statute.
[10.240] To date the issue has not been tested in the High Court.65 The position therefore, is that, unless and until the High Court decides otherwise, although there may be subtle differences between the meaning of the terms ‘arrangement’ and ‘understanding’, both are to be regarded as requiring the relevant parties to assume an obligation, give an assurance or undertake to act in a certain way.
Concerted Practices [10.250] The Competition and Consumer Act 2010 was amended66 in 2017 to add “concerted practices” to “contracts, arrangements and understandings” as a trigger for application of the prohibition on anticompetitive conduct. The term “concerted practice” is not defined in the Act. The ACCC had raised with the Harper Panel a concern that competitors exchanging price information may not amount to an “understanding”; that the requirement to establish mutual commitment for there to be an understanding set the barrier too high. The Panel’s view was that this could be resolved by adding “concerted 63. [2014] FCA 1157 at [1098]-[1102]. 64. United States v American Tobacco Co 221 US 106 at 178 (1911). 65. The issue did not arise in the High Court’s consideration of Air New Zealand Ltd v ACCC [2017] HCA 21. 66. Inserted by Competition and Consumer Amendment (Competition Policy Review) Act 2017, Act No 114 of 2017. © 2018 THOMSON REUTERS
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practices” to the triggers for the prohibition on anticompetitive conduct “where a concerted practice is a regular and deliberate activity undertaken by two or more firms.”67 The government accepted that recommendation.
European Law [10.260] The term “concerted practice” derives from EU jurisprudence. The term refers to any “form of coordination between undertakings which, without having been taken to a stage where an agreement properly so called has been concluded, knowingly substitutes for the risks of competition practical cooperation between them”.68 It has been described as a very broad notion covering all forms of cooperation between actual and potential competitors that fall short of an agreement, arrangement or understanding.69 Two elements are required for there to be a “concerted practice” in EU law. First, the firms must act together collusively and second, that conduct must be found to have an exclusionary effect. It is said to be directed to catching various forms of collusion between undertakings that, from a subjective point of view, have the same nature as an agreement and are distinguishable from each other only by their intensity and the forms in which they manifest themselves. [10.270] The leading case is Dyestuffs.70 That case involved allegations that ICI, a major chemical manufacturer, had participated, in concert with others, in a concerted practice to increase the price of a product they each produced — dyestuffs.71 ICI argued that, for there to be a concerted practice, the conduct must be the result of “a common plan of action and of a mutual will to act in accordance with that plan”.72 ICI pointed out that each price increase was introduced by one producer then adopted separately by others and that, given the oligopolistic state of the market, this could be explained by the commercial strategy of each participant.73 The court rejected ICI’s propositions, concluding that what occurred was not the product of conscious parallel conduct. In doing so, the court said:74 a concerted practice … exists every time that the conduct of several undertakings on the market proceeds from a common will on the part of the interested parties, whether that common will is the offspring of reciprocal action or of the action of a third party.
The court went on to explain what it meant by “a common will” as follows: There is a common will not only when the undertakings come to an understanding as to their conduct on the market but also when they deliberately ensure that there can be no lack of knowledge about their future conduct by keeping each other informed, and, in so doing,
67. Harper Report, p 370. 68. Commission of the European Communities v Anic Partecipazioni SpA Case 49/92 [1999] ECR I-04125 at para 115. 69. G Amato and C-D Ehlermann, EC Competition Law – A Critical Assessment (Hart Publishing, 2007), p 41. 70. Imperial Chemical Industries Ltd v EU European Court of Justice Case 48/69 [1972] ECR 619. 71. Dyestuff is a soluble substance used for colouring fabrics or hair. 72. [1972] ECR 619 at 638. 73. The similarities with Trade Practices Commission v Email Ltd (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172 will be readily apparent. 74. [1972] ECR 619 at 643. See also Suiker Unie v Commission [1975] ECR 1663; Ahlström Osakeyhtiö v Commission [1993] ECR I-1307.
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they coordinate their conduct. The element of cooperation consists in the fact that, by reason of the common will, each of the participants can rest assured that the others will adopt either a uniform or a different course of conduct according to an allocation of roles worked out in advance. Therefore it is not necessary to show that the participants have collaborated or drawn up a common plan in order to argue that there exists a concerted practice …
More recently, in T-Mobile Netherlands BV,75 the European Court of Justice confirmed earlier decisions to the effect that: With regard to the definition of a concerted practice, the Court has held that such a practice is a form of coordination between undertakings by which, without it having been taken to the stage where an agreement properly so-called has been concluded, practical cooperation between them is knowingly substituted for the risks of competition …
In other words, in EU law a concerted practice may arise as a result of an understanding or from knowingly coordinated conduct. There must be consensus (but not necessarily mutual commitment) knowingly substituting practical cooperation for competition, but that consensus does not have to be established by evidence of direct contact between the parties.76 [10.280] Two examples serve to illustrate the position. The first example involved information exchanges. In Cimenteries,77 a case apparently defended with the same vigour as TNT78 in Australia, the court had to determine whether exchanges of information between competitors amounted to a concerted practice. The court decided that conduct would constitute evidence of concerted practice “where one competitor discloses its future intentions or conduct on the market to another when the latter requests it or, at the very least, accepts it.”79 No mutual obligations were required. The second example is Hüls.80 The question was whether or not mere attendance at a meeting was sufficient to make the attendee a party to the arrangement. The position is that, where participation in the meeting is established, the defendant will be held to be party to the arrangement unless that party puts forward evidence to establish that it had indicated to its competitors that, while it was participating in the meeting, its intentions were different from theirs — that it publicly distanced itself from what was discussed. Not acting on the arrangement is not regarded as sufficient.81 75. [2009] 5 CMLR 11; [2009] EUECJ C-8/08. See also Suiker Unie v Commission [1975] ECR 1663; Ahlström Osakeyhtiö v Commission [1993] ECR I-1307. 76. R Wish and D Bailey, Competition Law (OUP, 2012), p 113. 77. Cimenteries CBR v Commission (2000) II-00491. On appeal, Aalborg Portland A/S v Commission (2004) I-00123 at [272]-[297]. Exchanges of price information were in the context of other activities that tended to establish an anticompetitive agreement between the cement manufacturers. 78. Trade Practices Commission v TNT Management Pty Ltd [1985] FCA 23; 6 FCR 1; 58 ALR 423 was a case involving allegations that the defendants, nine freight companies, had come to arrangements or understandings to not deal with a new entrant transport consultant. The case was “fought with extreme determination”. The judge observed that “[e]very point which could possibly be raised concerning the admissibility of evidence appears to me to have been taken”. The court found that minutes of meetings of the association of which the companies were members, were evidence of an understanding between those whose representatives were recorded as participating in the meeting. 79. Cimenteries CBR v Commission (2000) II-00491 at para 1849. 80. P Hüls v Commission, Case 199/92 [1999] ECR I-4287 at [155]. See also P Commission v Anic, Case C-49/92 [1999] ECR I-4125 at [96]. 81. P Sarrió v Commission, Case C-291/98 [2000] ECR I-9991 at [50]. © 2018 THOMSON REUTERS
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US Law [10.290] Although the term “concerted practice” is not used in the United States the Sherman Act 1890 requirement of “concerted action” is said to be a similar concept. The requirement is that the parties must agree on the course of conduct, but will be taken to have agreed where the evidence discloses that they have made a conscious commitment to a common scheme. As the US Supreme Court said in American Tobacco:82 The essential combination or conspiracy in violation of the Sherman Act may be found in a course of dealings or other circumstances as well as in any exchange of words. Where the circumstances are such as to warrant a jury in finding that the conspirators had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement, the conclusion that a conspiracy is established is justified.
[10.300] Two US Supreme Court decisions are illustrative. In Theatre Enterprises,83 the US Supreme Court considered whether motion picture producers and distributors had conspired to restrict first-run movies to downtown theatres, confining the petitioner’s suburban theatre to subsequent runs. No direct evidence of an agreement between the producers and distributors was presented. In dismissing the case, the court said that the crucial question was whether the respondents’ conduct stemmed from independent decisions or from a tacit or express agreement. The evidence was simply not sufficient to establish the latter. [10.310] The second case was also a movie case. In Interstate Circuit,84 the appellant owned the first-run movie houses in six cities in Texas. It reached individual agreements with eight motion picture producers and distributors, who distributed about 75% of first run movies in the United States, to require other theatres to set a specified minimum price for first-run movies and to not run double features.85 [10.320] The question before the Supreme Court was whether or not there was a combination or conspiracy between the eight motion picture producers and distributors. The trial judge had decided that there was, drawing the inference from the nature of the proposals by the appellant and the manner in which they were made, the substantial unanimity of conduct in accordance with the agreements and from the fact that the distributors did not call evidence from executives who had either negotiated the contracts with Interstate or had knowledge of the existence or nonexistence of an agreement among the distributors.86 The Supreme Court agreed, saying:87 It was enough that, knowing that concerted action was contemplated and invited, the distributors gave their adherence to the scheme and participated in it. Each distributor was advised that the others were asked to participate; each knew that cooperation was essential to successful operation of the plan. They knew that the plan, if carried out, would result 82. American Tobacco Co v United States 328 US 781 (1946). See also United States v Masonite Corp 316 US 265 (1942), where the question was whether or not the defendants had “combined to restrain trade or commerce”. 83. Theatre Enterprises v Paramount Distributing 346 US 537 (1953). 84. Interstate Circuit, Inc v United States 306 US 208 (1939). This decision is regarded as the first “hub and spoke” combination or conspiracy case, although that term was only coined later. 85. Originally theatres ran two feature firms per session rather than one. 86. 306 US 208 (1939) at 221. 87. 306 US 208 (1939) at 226. See also Eastern States Retail Lumber Dealers’ Association v United States 234 US 600 (1914).
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in a restraint of commerce, which, we will presently point out, was unreasonable within the meaning of the Sherman Act.
[10.330] But it that does not mean that, in the United States, “concerted action” is a separate foundation for liability.88 It means that, as an evidentiary matter, the court will, in appropriate instances, regard the common purpose element of the combination or conspiracy trigger to have been satisfied where the evidence establishes “knowing concerted action”.
Other Countries [10.340] In South Africa, the relevant phrase is “agreement or concerted practice or decision by an association of firms”. The term “concerted practice” is defined to mean “co-operative, or coordinated conduct between firms, achieved through direct or indirect contact, that replaces their independent action, but which does not amount to an agreement.”89 Unsurprisingly, the UK Competition Act 199890 follows the EU model, with “agreements between undertakings, decisions by associations of undertakings or concerted practice” as the triggers. In Hong Kong the legislation applies to “concerted practice” and “decision of an association”, as well as to “an agreement” (broadly defined).91 In China the trigger is a “monopoly agreement” but the legislation states that the term includes “agreements, decisions or other concerted actions”.92 Singapore’s competition law includes “concerted practices” as a liability trigger.93 There are no superior court decisions interpreting the term, but the Singapore Competition Commission has stated that:94 A concerted practice would be found to exist if parties, even if they did not enter into an agreement, knowingly substituted the risks of competition with co-operation between them.
Australian Guidance [10.350] The Explanatory Memorandum95 introducing the amendment adding “concerted practice” provided guidance on what the Parliament meant by this “clear and practical” term. The characteristics of a concerted practice were explained in the following terms, making clear reference to the EU definition: 3.19 A concerted practice is any form of cooperation between two or more firms (or people) or conduct that would be likely to establish such cooperation, where this conduct substitutes, or would be likely to substitute, cooperation in place of the uncertainty of competition. 88. See Bogosian v Gulf Oil Corp 561 F 2d 434 (1977), pp 445–446. 89. Competition Act 1998 (South Africa), s 1(1)(vi). 90. Competition Act 1998 (UK), s 2(1). 91. Competition Ordinance (HK) cap 619, s 6(1). 92. Anti-Monopoly Law of the People’s Republic of China (People’s Republic of China) National People’s Congress, 30 August 2007, art 13. See EM Fox and DA Crane, Global Issues in Antitrust and Competition Law (West, 2010), p 166. 93. Competition Act 2004 (Singapore). 94. CCS Guidelines on the Section 34 Prohibition, para 2.16. 95. Explanatory Memorandum to the Competition and Consumer Amendment (Competition Policy Review) Bill 2017. © 2018 THOMSON REUTERS
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3.20 It is not necessary that any (or all) of the parties to a concerted practice should act: • in the same manner; • in the same market; or • at the same time. 3.21 It is intended that the concept of a “concerted practice” should capture conduct that falls short of a contract, arrangement or understanding as the courts have interpreted each of those terms in s 45. 3.22 A concerted practice does not require, but may involve: • the formality or legally enforceable obligations characteristic of a contract; • the express communication characteristic of an arrangement. A concerted practice may be established in the absence of any direct contact between the firms, for example where firms communicate indirectly through an intermediary such as a peak industry body; or • the commitment characteristic of an understanding. A concerted practice may exist even if none of the parties is obliged, either legally or morally, to act in any particular way. 3.23 A concerted practice may exist in addition to, or ancillary to, a contract, arrangement or understanding. 3.24 It is not necessary that a concerted practice have an anti-competitive “provision”, as it is the practice itself which has the anti-competitive purpose, effect or likely effect. 3.25 The concept of a concerted practice is not intended to capture mere innocent parallel conduct, for example where two firms who are determining their prices independently happen to charge similar prices for the same product (see Example 3.4). 3.26 Similarly, it is not intended to capture conduct such as the public disclosure of pricing information which facilitates price comparison by consumers, as this conduct will increase rather than substantially lessen competition. 3.27 The following examples illustrate that a concerted practice: • does not necessarily involve regular or repeated conduct - a single instance of conduct may constitute a concerted practice (Example 3.2); • will typically, but not necessarily, involve the communication of commercial information either by one party to another, or between the parties, generally to reduce or eliminate uncertainty as to the future conduct of the firm making the communication; and • does not require that any (or all) of the parties to the practice reciprocate the actions of the first party or in any way change their conduct as a result of the first party’s actions – the actions of the first party will be sufficient to establish the concerted practice, and the culpability of each other party to the concerted practice will depend on the nature of their involvement and their subsequent action. 3.28 Once conduct has been found to be a concerted practice, the central issue, and the determinant of whether the relevant conduct is prohibited under section 45, is whether the concerted practice has the purpose, effect or likely effect of substantially lessening competition.
[10.360] The Explanatory Memorandum includes a number of examples: Example 3.1 In a small country town, there are three petrol stations: X, Y and Z. Immediately before adjusting its prices, X sends an email to Y and Z with a price. After several emails, it becomes clear to Y and Z that immediately after sending the email with the price, X 174
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changes its price to match the email. Y and Z join in, and each emails their own proposed price adjustments to the other two. A practice develops so that, with a few exceptions, where one petrol station emails their prices, the three stations all change their prices to match the price in the email. At no point do any of them expressly or implicitly agree to reciprocate the communication or to change their prices accordingly. On some occasions after one of the stations announces a price rise, one of the other stations chooses not to match the price, and thereby gains extra customers on that occasion by increasing their price by less than the other two stations and having the lowest price. There are no consequences of this occasional divergence from the usual practice. X, Y and Z are each likely to have contravened section 45 by engaging in a concerted practice with the purpose, effect or likely effect of substantially lessening competition. Even though none of the parties committed to communicate or change their prices, and even though there were some occasions where a petrol station did not change its prices in accordance with the email, the effect of the overall practice was that the petrol stations could increase their prices safe in the knowledge that this would be unlikely to result in a loss of customers as the others would most likely reciprocate. This practice has substantially reduced price competition for petrol in the town.
Example 3.2 Salmon fishers in a small geographic region form an industry association that meets regularly, usually to discuss general industry issues. At one meeting, one fisher (X) states that they will restrict their output to a certain quantity for the next three months, in order to increase the price of salmon in the region. X shares this information in the hope that the other fishers will similarly restrict their output, so that X can adopt the strategy without fearing it will lose customers to the other fishers. X has shared commercially sensitive information which reduces uncertainty as to X’s likely output over the next three months. X is likely to have contravened section 45, by engaging in a concerted practice with the purpose or likely effect of substantially lessening competition, even if X was unable to convince all of the other salmon fishers to adopt a similar strategy and even some or all of the others did not adopt such a strategy (that is, even if the ultimate effect was not a substantial lessening of competition).
Example 3.3 Bank X and Bank Y are two competing banks. A week before banks are expected to announce their respective interest rates for the next quarter, X sends Y a document setting out the interest rate it will announce the following week. Y did not ask for this information, and does not act on this information by either reciprocating with information about its own intended interest rate or changing its strategy to match X’s interest rate. The different actions of X and Y will have different implications under section 45. X is likely to have contravened section 45, by engaging in a concerted practice with the purpose or likely effect of substantially lessening competition, even if this was not the actual effect because Y did not act on the information. X’s communication to Y has made Y a party to a concerted practice. However, Y is not likely to have contravened section 45, as Y did not use the information to inform a decision or change strategy, and this conduct did not have the purpose, effect or likely effect of substantially lessening competition. Y could further ensure it did not breach section 45 by expressly rejecting X’s approaches and requesting that X not communicate any further information of this nature. © 2018 THOMSON REUTERS
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Two of these examples are not all particularly helpful. Example 3.3 is problematic. By sending its rate card, X may or may not have attempted to engage in a concerted practice, but that would depend on why it did so, objectively determined. Y could not be regarded as engaging in a concerted practice by merely receiving X’s rate card. The same applies in relation to Example 3.2. While X may be attempting to engage in a concerted practice, and would certainly have done so if, in addition to sharing the information, X exhorted others to follow suit, the example would seem to fall short of the requirement. That said, the point they presumably try to illustrate is that mutual commitment, a requirement for arrangements and understandings, is not required for concerted practices.
Some Observations [10.370] The inclusion of “concerted practice” as a foundation for liability for anticompetitive conduct should address under-capture that has resulted from the need to establish that the relevant party assumed an obligation, gave an assurance or undertook to act in a certain way. Substituting practical cooperation for competition, demonstrated by a course of conduct inconsistent with competitive activity, will likely be sufficient. Whether Australian courts go as far as the EU did in Hüls96 remains to be seen, but it is clear that proving hub-and-spoke and price signalling cases by circumstantial evidence will be easier.
Independent Parallel Conduct [10.380] Inclusion of “concerted practice” as a foundation for liability for anticompetitive conduct does not mean that the position with conscious parallel conduct will change. As the Explanatory Memorandum states, the concept of a concerted practice is not intended to capture “mere innocent” parallel conduct. Drawing the line between a concerted practice and parallel conduct may be difficult, but from a policy perspective, freedom to set and vary prices, having regard to the behaviour of one’s competitors, is central to the concept of open competition. [10.390] Courts have recognised that parallel conduct may result from independent decisions or other economic factors and, if it does, there will be no arrangement or understanding to trigger application of the prohibition. Nor should such conduct, of itself, constitute a “concerted practice”. It is convenient, first, to consider how the courts have dealt with parallel conduct in the context of arrangements or understandings, and then consider the impact, if any, of the extension to concerted practices. [10.400] Email97 is the first example, although an unusual one that could have gone either way. All of the circumstantial evidence necessary to conclude that the parties had entered an arrangement or understanding was present, yet the court held that they had not done so. As noted earlier, the case involved the only two manufacturers of electricity meters in Australia. They had issued identical price lists, submitted identical tenders, sent each other their respective price lists which showed the prices as identical, forwarded to each other new price lists immediately they changed prices 96. P Hüls v Commission, Case C-199/92 [1999] ECR I-4287 at [155]. See also P Commission v Anic, Case C-49/92 [1999] ECR I-4125 at [96]. 97. Trade Practices Commission v Email Ltd (1980) 43 FLR 383 at 385; 31 ALR 53; (1980) ATPR 40-172.
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or introduced any new meter or component, and tendered in accordance with their respective price lists. The court nevertheless accepted evidence from executives of the two companies, supported by evidence of the state of the market for electricity meters, that there was no arrangement or understanding. In Mobil,98 the allegation was that Mobil had entered a price-fixing arrangement with other oil companies to raise, or maintain, retail petrol prices at company sites and directed franchisees to raise their prices to, or maintain their prices at, the same levels. An application to strike out the claim succeeded. The court observed that parallel conduct may provide circumstantial evidence of an arrangement or understanding but it depends on the facts of each case. Nevertheless: The retail petroleum products market, with its highly visible price boards and mobile customers, is one where a trader’s prices and the fluctuations thereof are as readily apparent to competitors as they are to customers. Therefore parallel pricing in itself, in this particular market, is as likely to follow from the observation and independent decision of rival traders as from prior arrangement. As has been already noted, much of what the Commission would seek to rely on as a putting into effect an unlawful arrangement amounts to no more than that.
[10.410] In Dalgety,99 the applicant was an experienced stock and station agent. He applied to the Goondiwindi Live Auction Sales Association, an unincorporated association of which the respondents were members, to be admitted as a member. Acting ostensibly independently, the members decided not to admit the applicant. The question for the court was whether they had reached an arrangement or understanding. The court held that the conduct, even if independent, gave effect to a prior restrictive agreement the members had made concerning admission of new members to the association. There was therefore an arrangement which they were giving effect to by denying membership to the applicant. Returning to three cases discussed earlier, Leahy Petroleum100 provides an example in which the ACCC established the additional requirements for an arrangement or understanding,101 and Apco102 and Olex103 examples where it did not.
EU Experience [10.420] The position under EU law is that parallel conduct does not, of itself, constitute a concerted practice, although it may provide circumstantial evidence of a concerted practice, depending on the circumstances, if the parallel conduct leads to conditions in the market that do not correspond with normal competition.104 [10.430] European cases specifically on parallel conduct are rare, with decisions focusing on whether or not the conduct was independent. In Zuchner,105 the 98. ACCC v Mobil Oil Australia Ltd [1997] FCA 480; (1997) ATPR 41-568. 99. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 40,247 at 41–165. 100. [2004] FCA 1678; (2004) 141 FCR 183. 101. See also ACCC v Gullyside Pty Ltd [2005] FCA 1727; (2006) ATPR 42-097. 102. [2005] FCAFC 161; (2005) 159 FCR 452. 103. ACCC v Olex Australia Pty Ltd [2017] FCA 222. 104. Imperial Chemical Industries Ltd v EU, Case 48/69 [1972] ECR 619. 105. Zuchner v Bayerische Vereinbank AG [1981] ECR 2021. See also Tate & Lyle plc v Commission [2001] 5 CMLR 859 at paras 55–56. © 2018 THOMSON REUTERS
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European Court of Justice acknowledged that a concerted practice required more that each trader determining “independently the policy which he intends to adopt on the common market and the conditions which he intends to offer to his customers … [and that] requirement of independence does not deprive traders of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors.”106 [10.440] Nevertheless, although it is correct to say that this requirement of independence does not deprive firms of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does preclude any direct or indirect contact between competitors the object or effect of which is either: • to influence the conduct on the market of an actual or potential competitor; or • to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting.107 [10.450] How has this been applied in practice? In Acerinox,108 the applicant, a stainless steel producer, appealed a finding that it had been part of a cartel to increase prices. Following a sharp decline in prices producers agreed, at a meeting, to apply a surcharge. Acerinox argued that its actions in places other than Spain were merely a manifestation of parallel conduct and not the implementation of a concerted practice. It had applied an alloy surcharge at different times in various member States. The court, applying Hüls,109 decided that Acerinox had not sufficiently distanced itself from the outcomes of the meeting to avoid the conclusion that it participated in a concerted practice. Whether or not the court would have decided that there had been more than independent conduct had it not attended the meeting is an open question. [10.460] In Billiton Nederland,110 the question was whether or not zinc producers had engaged in a concerted practice, or whether the conduct under consideration was the consequence of price leadership in an oligopolistic market for a homogeneous product. The Commission said: Under such circumstances, parallel pricing behaviour in an oligopoly producing homogeneous goods will not be in itself sufficient evidence of a concerted practice. However, sufficient evidence may result from parallel pricing in combination with other indications, such as contacts between undertakings on desirable price changes prior to price changes, or the exchange of information which reinforces contacts to this kind.
Billiton and others were found to have engaged in a concerted practice in contravention of EU competition law.
US Experience [10.470] US courts have long recognised that parallel conduct, of itself, does not amount to a contravention of competition law. This was confirmed recently in Twomby,111 in which the US Supreme Court said:
106. Zuchner v Bayerische Vereinbank AG [1981] ECR 2021 at paras 13–14. 107. Coöperatieve Vereniging “Suiker Unie” UA v Commission [1976] 1 CMLR 295. 108. Compañía española para la fabricación de aceros inoxidables SA (Acerinox) v Commission, Case C-57/02 [2005] ECR I-06689. 109. P Hüls v Commission, Case 199/92 [1999] ECR I-4287. 110. [1985] 2 CMLR 108. 111. Bell Atlantic Corporation v Twombly, 550 US 1 (2007).
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It makes sense to say, therefore, that an allegation of parallel conduct and a bare assertion of conspiracy will not suffice. Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality. Hence, when allegations of parallel conduct are set out in order to make a §1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.
Twomby was a case involving a class of telephone and internet subscribers who claimed that Bell Atlantic, a US telecommunications company with whom they had contracted, had engaged in parallel conduct with its competitors to inhibit new entry and that their “common failure” to pursue “attractive business opportunities in contiguous markets” evidenced an agreement not to compete against one another. The claim was unsuccessful. [10.480] Two other decisions serve to illustrate the application of those principles. First, in Peverly Dairy,112 there was evidence that employees of two dairy companies had exchanged information on prices that each firm was about to apply. But neither of the employees had authority to fix prices and the information was not given to fix prices in the future. The court decided that no legitimate inference of the making, or participating in any sort of price-fixing arrangement could be drawn. The second example is Ward Baking.113 In that casem there was an allegation of price-fixing in relation to bread, where the prices charged by the defendants had risen and fallen at about the same time and there was evidence of conversations between the bread manufacturers. The court concluded that the price rises and reductions were due to economic factors affecting its sale of bread. No contravention was found.
Anticompetitive Purpose The Task [10.490] Once the threshold question has been answered by establishing that there is a contract, arrangement, understanding or concerted practice, the next question is whether any of the provisions of that contract, arrangement or understanding has the purpose or likely effect of substantially lessening competition. The same question is to be asked of those engaging in a concerted practice. The Act refers to the purpose of a provision of the relevant contract, arrangement or understanding; not the purpose of the parties to it.114 This might be thought to be in contradistinction to the subjective purpose of those who are parties to the contract, arrangement or understanding. On a plain reading of the Act their purpose would appear to be irrelevant.115 However, as we will see, the courts have taken a different view.
112. Pevely Dairy Co v United States St Louis Dairy Co [1949] USCA8 6; 178 F 2d 363. See also Continental Baking Company v United States 281 F 2d 137, 145 (1960). 113. United States v Ward Baking Company 243 F Supp 713 (1965). 114. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824 at [144], [245]. 115. The prohibition against anticompetitive arrangements is not dependent on establishing mens rea on the part of the parties to the relevant contract, arrangement or understanding: Trade Practices Commission v Tubemakers of Australia Ltd (No 2) [1983] FCA 93; (1983) 76 FLR 455 at 473; 47 ALR 719; (1983) ATPR 40-358. © 2018 THOMSON REUTERS
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[10.500] Before turning to that question, note that, as the relevant question is directed to identifying the purpose of a provision of the relevant contract, arrangement or understanding, rather than of those who entered it, the first inquiry must be to identify the provision or provisions on which to focus. When it comes to concerted practices the inquiry is different. The question is: what was the purpose of those who engaged in the practice? Dealing first with cases other than concerted practices, the focus of any inquiry must be on the provision in question, rather than on the whole of the contract, arrangement or understanding containing the provision.116
Provisions [10.510] The Act contains some limited guidance on what is meant by the term “provision”, but only in the context of understandings. In that context it means “any matter forming part of the understanding”.117 Quite why the draftsman limited this proposition to understandings is not clear, given that provisions of arrangements are presumably as difficult to discern as those of an understanding and as we have seen, in practice, the courts rarely differentiate between the two terms. In any event, whether in relation to contracts, arrangements or to understandings, the term “provision” is not to be narrowly constructed. A narrow construction would unduly restrict the operation of the prohibition. The term is used in a comprehensive, rather than any technical, sense.118 [10.520] The relevant provision must provide for something to occur, or to not occur, because the type of provision contemplated by the section is one that is capable of having a “purpose” or an “effect”. That does not mean that a recommendation cannot be a provision. Whether a provision of the required kind exists depends on substance, not on form, or on any express description. However, there must be sufficient substance to whatever is the result of the formation of an understanding for it to contain a provision of the required kind. To illustrate, in Leahy Petroleum No 2,119 in alleging a price-fixing understanding, the evidence was of courses of dealing rather than of express communications from which relevant provisions of arrangements or understandings could be discerned. The need to establish a provision potentially adds to the burden of proof in circumstantial cases and raises the policy question whether the focus should be on the relevant arrangement or understanding rather than a particular provision of it. On the other hand, a focus on the purpose of a provision does have the utility that if a provision was included for an impermissible purpose, then the fact that there may be a legitimate commercial purpose for the entire contract, arrangement or understanding, will be irrelevant.120
116. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824 at [144], [245]. 117. Competition and Consumer Act 2010, s 4(1). 118. Visy Paper Pty Ltd v ACCC [2003] HCA 59; (2003) 216 CLR 1; 77 ALJR 1893; 201 ALR 414. 119. ACCC v Leahy Petroleum Pty Ltd [2007] FCA 794; (2007) 160 FCR 321; (2007) ATPR 42-162. 120. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824 at [158].
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Purpose [10.530] Returning to the court’s approach to the meaning of the term “purpose”, the term means nothing more than the practical effect sought to be achieved — the end in view. Logic would indicate that, as the enquiry to be made concerns the purpose of a provision121 — not the parties — determining, objectively, what the relevant provision was to do is required. Taking an analogy, in the US, the relevant question is whether or not there has been “the wilful acquisition or maintenance of ... [market power]”.122 However, that does not mean that a subjective purpose is required. In the US context “wilful” does not mean specific intent. It means engaging in conduct that forecloses competition, or destroys a competitor.123 As the US courts have said,124 to require “any specific intent makes a mockery of [the law], for no monopolist monopolizes unconscious of what he is doing.”125 [10.540] From a policy perspective, objective interpretation of the term “purpose’ in Australia is to be preferred. Subjective purpose involves assessing what the parties intended, rather than what, objectively, can be concluded to have been the purpose from all of the circumstances. If the parties have different subjective purposes, or have never turned their minds to the purpose of the provision, the prohibition may have no application. Furthermore, an objective interpretation accords with the objective of promoting competition; an objective weakened if what is objectively anticompetitive conduct escapes proscription only because the parties did not in fact intend to achieve such a proscribed purpose.126 We return to some of these issues below. However, Australian courts have taken a different approach to the United States, focusing instead on the purpose of the parties. It is the subjective purpose of those involved in the contract, arrangement or understanding that is relevant.127 In Cement,128 Justice Greenwood explained the court’s approach in the following way: When s 45 talks about a provision of the contract or arrangement having a purpose, it contemplates a proscribed purpose … subjectively held by someone or perhaps a number of people within the corporation, and the operative connection between those individuals and the corporation, so as to attribute the views of those persons on the topic of the provision(s) to the corporation.
121. As Justice Gummow noted in News, the Act speaks not of human or corporate actors but of the provision itself having the purpose: see News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 122. US v Grinnell Corp 384 US 563 (1966) at 570. 123. Eastman Kodak Co v Image Technical Services Inc 504 US 451 (1992); [1992–1] Trade Cases 69,839, applied more recently in Kolon Industries Inc v DuPont De Nemours & Co [2014–1] Trade Cases 78,727. 124. US v Aluminium Co of America 148 F 2d 416 (1945) at 432. 125. Verizon Communications Inc v Trinko [2004–1] Trade Cases 74,241 at 98,008. 126. This paraphrases views expressed by Justice McHugh in News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [38]. 127. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 128. ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165. © 2018 THOMSON REUTERS
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[10.550] The reason for this would seem to derive from the Act itself. Section 4F states: a provision of a contract, arrangement or understanding … shall be deemed to have had, or to have, a particular purpose if the provision was included …, for that purpose …
That section requires an inquiry into why the provision was included, which leads to an enquiry into the subjective purpose of the parties to the relevant contract, arrangement or understanding. If it were not for s 4F, Australian courts may have taken a different approach. But a decision of the House of Lords, Chandler,129 in an entirely different context, may nevertheless have led to the subjective approach. In that case Lord Devlin had observed that: A purpose must exist in the mind. It cannot exist anywhere else. The word can be used to designate either the main object which a man wants or hopes to achieve by the contemplated act, or it can be used to designate those objects which he knows will probably be achieved by the act, whether he wants them or not.
[10.560] When the High Court came to consider, in News, what the purpose of provisions in agreements to form a new football league were, Chandler was clearly in mind. The ACCC submitted that both the subjective purpose of the parties and the objective purpose of the particular provision were relevant, but the court was not persuaded to take that view. The subject purpose approach was what the majority opted for. Nevertheless, the decision was not unanimous. Justice McHugh clearly thought an objective test preferable, but concluded:130 If the interpretation … was being considered for the first time, I would prefer the view that … the purpose of an alleged exclusionary provision is to be determined objectively without regard to the mental state of the parties who made the provision. But the subjective interpretation has stood for 17 years, been approved by the Full Court of the Federal Court and been followed on numerous occasions. Given the terms of s 4F … it is impossible to hold that the subjective interpretation is plainly wrong.
[10.570] This might be thought to be a surprising view given that the High Court is the final court of appeal in Australia. If, even after 17 years, the High Court concludes that the approach taken by lower courts is incorrect then it should not hesitate to come to a different view. Another judge, Justice Kirby, took that view, saying:131 Left to myself, I would conclude, for textual and policy reasons, that the better view is that the court decides its own characterisation of the “provision” in question (that is, an objective classification). In my view the line of authority to the contrary is wrong.
[10.580] But the majority of the court thought otherwise. The majority was clearly, although unnecessarily, concerned about where an objective characterisation of “purpose” would lead. Their concern was to identify a clear line of distinction to 129. Chandler v Director of Public Prosecutions [1964] AC 763 at 804–805. See also Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; 57 IPR 353; (2003) ATPR 41947 at [251]. 130. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563 at 580; 77 ALJR 151; (2003) ATPR 41-943 at [41]. 131. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 151; (2003) ATPR 41-943 at [130].
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determine the purpose to be ascribed to a provision where two or more competitors enter an arrangement containing a provision that, as a direct consequence, excludes others. Gleeson CJ posed the following question:132 If the owners of competing restaurants decide to combine, with the consequence that they no longer compete, will the purpose of their agreement to combine be anticompetitive or is the removal of competition merely a natural consequence of their business decision?
[10.590] Chief Justice Gleeson raised that question as a prelude to deciding whether a decision by News and the Australian Rugby League to start a new football competition and exclude the appellant had an exclusionary purpose. The appellant had been excluded because it was not feasible to have 22 clubs participate in the competition. Consequently, the appellant club had missed out. The decision to exclude it was made in a non-discriminatory way. The conclusion reached by the majority of that High Court was that, while the relevant provision would have the effect of excluding some clubs, that was not its purpose. The end in view was to establish a new competition. How far, by analogy, Chief Justice Gleeson’s example can be taken is unclear. In that example, and in the agreements upheld in News, there was no specific exclusionary provision. In each instance the exclusionary result was a consequence of the decision to merge restaurants or establish a new competition. As the focus of the law is on the purpose of a “provision” rather than the overall purpose of the arrangement, the result in News would likely have been different if the parties had specifically agreed to exclude clubs in order to create the new league competition. [10.600] The actual effect of the provision is irrelevant, so if it is unlikely that the provision would achieve the result the parties sought, that is also irrelevant.133 Motive is also irrelevant. Motive is the reason for seeking an end rather than the effect sought to be achieved.134 As Chief Justice Gleeson pointed out in News, the parties to a provision “may have had different, and multiple, reasons for their conduct”,135 but a provision will be taken to have a particular purpose if it was included in the contract, arrangement or understanding for purposes that included that purpose.136 Returning to Chief Justice Gleeson’s example above, the effect of the combination of the two restaurants may have resulted in the two proprietors no longer competing, but that was not the purpose. The purpose was to merge the two businesses. That was the end in view of the parties. This comes close to a view that, if the conduct can be characterised as exclusionary, then it can be said to have an anticompetitive purpose and not if it is not. [10.610] If the relevant consideration is the purpose of the parties, does that mean that all the parties to the relevant contract, arrangement or understanding must be
132. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [20]. 133. Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883; although the likelihood that an anticompetitive effect may be achieved can contribute to an understanding of what the real purpose was. 134. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 151; 200 ALR 157; (2003) ATPR 41-943; J McPhee & Sons (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41-758. 135. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943; 45 at [18]. 136. Competition and Consumer Act 2010, s 4F(1)(a). © 2018 THOMSON REUTERS
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proven to have had the same purpose? What if the parties have different subjective purposes? In Pont Data,137 Pont’s business, which competed with the ASX, was to provide electronically disseminated financial information that depended on the ASX’s stock exchange data as its primary source. When contractual negotiations over supply of the data broke down, the ASX threatened to terminate data supply to Pont. Pont then signed the agreement the ASX required and commenced proceedings alleging that the agreement had an anticompetitive purpose. In order to succeed on this point Pont had to convince the court that “purpose” did not refer to the shared purpose of all of the parties to the agreement, because it was clear that only the ASX had an anticompetitive purpose. [10.620] In an earlier case, Hughes,138 a single judge had to consider the same question in the context of a challenge to a ban on cricketers who had played in South Africa playing in. The question was whether or not this amounted to an ‘exclusionary provision’ and that, in turn, depended on the purpose of participating clubs. The court accepted that it was the subjective purpose of those engaging in the relevant conduct that was relevant. However, the case posed no particular problem in that regard because the participating clubs quite clearly had a common purpose. When it came to Pont Data the circumstances were quite different. The Full Court in Pont Data considered whether, to meet the requirements of the section, the purpose had to be a purpose of all of the participants. Drawing “considerable assistance” from an interpretative provision in the Act, that provides in part, “if … the provision was included in the contract …”,139 the court concluded that this required one to look to the purposes of the individuals by whom the provision was included, a position subsequently endorsed by the High Court in News. The court accepted that, at least in the circumstances of that case, shared purpose was not needed. [10.630] Pont Data and Hughes were cases in which it was relatively simple to deal with the question of purpose because in Hughes it was clear that all parties had the same purpose and in Pont Data the party with the strongest bargaining position had required the offending provision. Not all cases are as easy, as Seven Network140 illustrates. In Seven Network the court considered whether, if two of the participants had a purpose of driving the applicant out of business, but the third did not, the purpose element could be established. Justice Sackville concluded that the relevant provision could not have the requisite purpose unless it was the common purpose of all the participants. If that were correct, from a policy perspective, this seems an unfortunate conclusion. As Justice Kirby said in News:141 The “arrangements” mentioned in the Act might involve multiple parties (and, in the case of corporations, multiple officers). They might have been made at different times, having slightly different subjective purposes that it would take many months of court hearings to unravel and then without any certainty of accurate ascertainment. 137. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; 97 ALR 513; (1990) 27 FCR 460 at 482–483. 138. Hughes v Western Australian Cricket Association Inc [1986] FCA 357; (1986) 19 FCR 10; 69 ALR 660; (1986) ATPR 40-736 at [104]. 139. Trade Practices Act 1974, s 4F. Now Competition and Consumer Act 2010, s 4F. 140. Seven Network Ltd v News Ltd [2007] FCA 1062; (2007) ATPR 46-274. See also ACCC v Pauls Ltd [2002] FCA 1586; (2003) ATPR 41-911. 141. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45 at [127]; (2003) 215 CLR 563; 77 ALJR 151; 200 ALR 157; (2003) ATPR 41-943.
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Concerted Practices Purpose [10.640] Whether any of the above will apply to the purpose of a concerted practice remains to be determined. The difference between the assessment to be made in relation to concerted practices and that required for an arrangement or understandings is that, with concerted practices, it is the purpose of the practice that is to be assessed, not the purpose of a provision. However, unless and until the High Court decides otherwise, that difference is unlikely to result in the term “purpose” being interpreted differently in relation to concerted practices. Drawing on analogies with other parts of the Act, “purpose” is likely to be regarded as a subjective, rather than objective, concept,142 in the sense that what is to be ascertained is the object sought to be achieved by participants.143 Whether or not one unified purpose by all participants in a concerted practice will need to be established remains an open question. Even if that were to be the case in relation to provisions, with a “concerted practice” it would be appropriate for the court to decide its own characterisation of the practice in question, at least for policy reasons.
Substantial Purpose [10.650] The purpose does not have to be the participant’s only purpose. The Act provides that a person is deemed to have engaged in conduct for a particular purpose if the person engaged in that conduct for purposes that included that purpose.144 Where there is more than one purpose the anticompetitive purpose must, be a “substantial” purpose.145 The term “substantial” is ambiguous. The meaning can range from “considerable” or “big” to “not merely nominal”, depending on the context. Sometimes it is used in a relative sense. The meaning of the term “substantial” in each context in which it appears in the Act has not been conclusively determined. In Rural Press, the court referred to the proper construction of the term as being the subject of “inconclusive debate”. Given the objects of the Act, in this context it should be taken to mean substantial in a relative sense – one of the main reasons.
Determining Purpose [10.660] How is purpose to be determined? Purpose can be an inference drawn concerning the particular respondent (not some hypothetical bystander) from all of the circumstances, on a balance of probabilities.146 While the best evidence of
142. ACCC v Pfizer Australia Pty Ltd [2015] FCA 113 (currently on appeal); ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460; 97 ALR 513; Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; (1992) ATPR 41-167; Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; (2001) 119 FCR 1. 143. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 (Justice Toohey); Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805; [2001] HCA 13 at [31]. 144. Competition and Consumer Act 2010, s 4F(1)(b). 145. Competition and Consumer Act 2010, s 4F(1)(b)(ii). 146. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947 at [256]. © 2018 THOMSON REUTERS
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purpose might be the statements made by that person in the witness box, such statements must be tested closely and received with the greatest caution.147 We may therefore regard the question of purpose in this context as providing an opportunity for the courts to ask: what is really going on here? What, based on all of the evidence, was the end the parties are to be taken to have had in view? [10.670] It has been said that it is not permissible to conflate purpose and effect to reverse engineer purpose from effect.148 In News,149 Justice Gummow had concluded that: there is a danger that an examination of the objective purpose of a provision will give undue significance to the substantive effect of the provision, as opposed to the effect that the parties sought to achieve through its inclusion.
Even if the effect sought to be achieved is unattainable, that does not meant that the relevant purpose may not be an anticompetitive purpose. The Australian position is consistent with the approaches taken in Europe. As the Advocate General Kokott stated in T-Mobile:150 it must be recalled that an anti-competitive object and anti-competitive effects constitute not cumulative but alternative conditions under which the prohibition established in Article 81(1) is triggered. Putting it another way, regardless of their effects, concerted practices are prohibited if they pursue an anti-competitive purpose. No account need be taken of the actual effects of a concerted practice, if the object of that practice is to prevent, restrict or distort competition within the common market. Such a practice is prohibited even in the absence of anti-competitive effects on the market.
[10.680] It is not the role of the court to “compartmentalise the words used by each individual at [a meeting at which an anticompetitive arrangement is discussed] and then analyse the effect of those words in a vacuum”151 to determine the relevant purpose. As Justice Isaacs said in one of the first Australian competition cases, Associated Northern Collieries:152 Community of purpose may be proved by independent facts, but it need not be. If the other defendant is shown to be committing other acts, tending to the same end … there may be such a concurrence of time, character, direction and result as naturally to lead to the inference that these separate acts … were themselves the manifestations of mutual consent to carry out a common purpose …
How is an intention to eliminate a competitor to be viewed? Will a firm have a purpose of substantially lessening competition in the market where the relevant contract,
147. Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 at 403; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460 at 482–483; 97 ALR 513; (1991) ATPR 41-069. 148. ACCC v TF Woollam & Sons Pty Ltd [2011] FCA 973 at [63]. 149. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [63]. 150. T-Mobile Netherlands BV v Raad van bestuur van de Nederlandse Mededingingsautoriteit [2009] EUECJ C-8/08. 151. J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41-758 at [113]. 152. R v Associated Northern Collieries [1911] HCA 73; (1912) 14 CLR 387 at 400. See also J McPhee & Sons (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41-758.
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arrangement or understanding was concluded in order to damage a competitor? It does not follow that a purpose of eliminating a competitor necessarily amounts to a purpose of substantially lessening competition in the market. It will all depend on the facts. For instance, elimination of a minor market participant might have no more than a trivial effect on competition in the market, whereas a reduction of competition with a major participant might dramatically lessen competition.153 This is consistent with the view that the policy of the Act is to protect the competitive process, not specific competitors.
Purpose — Point in Time [10.690] A final issue to be considered about purpose concerns the point in time at which it is to be determined. The courts have concluded that purpose is to be determined at the time the contract, arrangement or understanding is made, not at the time proceedings are instituted.154 That would appear correct where the claim is based on the making of an offending contract, arrangement or understanding. However, when the claim is based on giving effect to a provision of a contract, arrangement or understanding155 or engaging in a concerted practice there are persuasive reasons for taking a different view. The question in such cases is whether or not giving effect to the relevant provision, or engaging in the concerted practice, is likely to be anticompetitive. That question should logically be answered at the point in time when the parties are giving effect to the provision, not when the contract, arrangement or understanding was entered. Logically, the same would apply in relation to the purpose of a concerted practice.
Likely Anticompetitive Effect [10.700] A provision or concerted practice will not only contravene the Act if it has an anticompetitive purpose. It will also do so if it has, or is likely to have, an anticompetitive effect. The words “has or is likely to have” permit the court to look objectively, not only at what has been established on the facts, but also to infer, from those facts, what is likely to be the consequences of the conduct without regard to the subjective state of mind of the parties.156 In determining the effect of a provision, both the cumulative effect of provisions and their individual effect must be taken into account.157 The law is not directed against every interaction between competitors or potential competitors. If, because of their relative positions, parties to they cannot have any impact on competition in the market relevant to their activities, their interaction will
153. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; Seven Network Ltd v News Ltd [2007] FCA 1062. 154. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607; (1998) ATPR 41-657; Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 50; 58 ALR 423; (1985) ATPR 40-512. 155. This is a separate head of liability under Competition and Consumer Act 2010, s 45(2)(b). 156. ACCC v Pauls Ltd [2002] FCA 1586; (2003) ATPR 41-911. 157. Competition and Consumer Act 2010, s 45(4). © 2018 THOMSON REUTERS
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not be likely to have an anticompetitive effect. Dowling158 is an example. Dowling was a licensed auctioneer, stock and station agent and real estate agent in a small outback town. Three other agents in the town were members of the Goondiwindi Livestock Auction Sales Association and owners of the local cattle sales yards. When Dowling applied for membership of the association his application was refused. The reason for the refusal was that the three owners did not want to allow any other agent to conduct auction sales at the sale yards. The court decided that the refusal was unlikely to substantially lessen competition because the market for selling cattle in the area was highly competitive and preventing Dowling using the sale yards would not alter that position.159
Likely [10.710] The term “likely” is an inappropriate basis for determining liability. Quite a deal in terms of liability turns on the meaning of this term. The term features in most of the prohibitions in the Act, including the one under current consideration. The justification is that it permits the court to consider not only at what has been established on the facts, but also to infer, from those facts, what the likely consequences of the conduct is without regard to the subjective state of mind of the parties.160 In other words, “likely” allows reasonable inferences to be drawn.161 Whether or not a provision or concerted practice has an anticompetitive effect is an objective conclusion to be reached on the facts. However, when it comes to deciding what the likely effect will be, matters become more difficult. That requires judgments about probability to be made. In considering whether or not a provision or concerted practice is likely to have an anticompetitive effect the court is called on to form a view on what is to be inferred, from the facts, as the likely consequences of conduct. As Peter Heerey QC, a former Federal Court judge, has pointed out:162 The meaning of “likely” has provoked controversy … Does it mean the ordinary standard of proof in civil litigation — ie the balance of probabilities, more likely than not? Or is it sufficient if there is a “real chance”? There is a conflict in the authorities.
When will an effect be ‘likely’? As with the term “substantial”, this term has various shades of meaning depending on the context in which it is used. There is a wide range of potential meanings, including “probably” (more likely than not or more than a 50% chance), “material risk”, “a real or not remote chance or possibility” (which could be less or more than 50%), “some possibility”, “prone”, “with a propensity” or “liable”.163 [10.720] Having regard to the circumstances in which the term is used and the substantial penalties that attach to a decision on the meaning of the term, it would be 158. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165. 159. When it came to purpose the court decided that the only real purpose of the owners, in refusing membership to Dowling, was to ensure that their asset, the sale yards, was not shared with others. 160. This explanation was provided in ACCC v Pauls Ltd [2002] FCA 1586; (2003) ATPR 41-911. 161. Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1; 58 ALR 423; (1985) ATPR 40-512. 162. The Hon Peter Heerey AM, QC’s submission on the Harper Committee’s draft report, . 163. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138.
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reasonable to expect, as a matter of policy, a meaning that falls at the “material risk” end of that spectrum, rather than the “more likely than not” end of the spectrum.164 As a policy matter the bar should not be so high that little or no conduct will be regarded as anticompetitive, or so low that all conduct is thought to have a substantial adverse effect on the competitive process. What have the courts made of the term? Does it mean the same thing in each provision in which it appears? Taking the second question first, that has not been settled, but the indications are that it does.165 The first question is difficult to answer. Initially the courts took the view that it meant “real chance”166 However, some doubt about the correctness of that view seems evident from a later case in which the court was only prepared to accept the correctness of the “real chance” interpretation for the purposes of argument.167 Peter Heerey QC makes a strong argument that “real chance” is not an appropriate standard.168 [10.730] An early view, expressed in Total Australia,169 was that the phrase “is likely to have the effect” is equivalent to “calculated”. This was based on the High Court’s decision in Thurley.170 That view was criticised in Tillmanns Butcheries171 because in Thurley the term “calculated” had been interpreted to mean “likely” in order to avoid overtones of intention, not relevant in a competition law context. Although critical of that view, the court declined to decide which of the various meanings applied. Subsequently, in Universal Music,172 the court said it was prepared to assume this to be the test but only “for the purpose of argument”. [10.740] How is a court to determine whether or not there is a real chance or possibility that a concerted practice or a provision of an arrangement may have an anticompetitive effect? Whether or not something is likely is a question of fact to be determined having regard to all the evidence. In doing so a court must put aside hindsight knowledge, other than to note that it illustrates one potential outcome. It is 164. Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879; Seven Network Ltd v News Ltd [2009] FCAFC 166; (2009) 182 FCR 160; 262 ALR 160. See also Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947 (where the court was prepared to assume this to be the test “for the purpose of argument”). 165. Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879; AGL v ACCC (No 3) [2003] FCA 1525. 166. First considered by a full court in Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138, a secondary boycott case, then accepted and applied in Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41879, s case involving Trade Practices Act 1974, ss 45, 46, 47. 167. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947, para 242. The case involved allegations of contraventions of sections 46 and 47 of the Trade Practices Act 1974. 168. P Heerey, “Shootout at the Real Chance Cafe: Aiming s 50” (2011) 39 Australian Business Law Review 451. 169. Trade Practices Commission v Total Australia Ltd (1975) 24 FLR 413 at 416. 170. Thurley v Hayes [1920] HCA 28; (1920) 27 CLR 548 at 551. 171. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331 at 339. 172. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; 57 IPR 353; (2003) ATPR 41-947. © 2018 THOMSON REUTERS
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not, for instance, legitimate to decide that something was not likely simply because it did not occur.173 The point in time that likelihood is to be determined is the date on which the arrangement is made,174 other than when the question relates to whether the relevant provision of an arrangement is unenforceable.175 [10.750] It is not legitimate to decide cases on the basis conduct observed after the relevant time for the purposes of the case, even if that future conduct is no more than a continuation of existing policy. Once one takes away the effect of any such conduct, it is necessary to decide on the remaining facts, whether the conduct in question was likely to have the effect of substantially lessening competition in the market. In Cement,176 Justice Greenwood put the relevant questions as follows: First, what would the future field of actual and potential rivalry with its substitution possibilities look like with the provision in place (the factual hypothesis), and what would it look like without the provision in place (the counterfactual hypothesis)? Second, to what extent is the future field of rivalry diminished or lessened or the competitive process compromised or impacted upon by the provision? Third, is the measure of that effect substantial, actually or potentially, in the sense of being “meaningful” or “relevant” to the competitive process?
Substantially Lessening Competition [10.760] Whether or not an arrangement or concerted practice adversely affects the competitive process — substantially lessens competition — is the ultimate question for a number of the prohibitions in Australia’s competition law. As we saw in Chapter 8, the original term used in relation to horizontal conduct — arrangements between competitors or potential competitors — was “restraint of trade”, but that proved to be too limiting a term. The term “substantially lessening competition” was substituted in 1977. Judicial development of the “substantially lessening competition” test and the extent to which it reflects the policy requirement of addressing conduct that adversely affects the competitive process is considered in Chapter 8. [10.770] What are some recent examples of the application of that phrase in anticompetitive arrangement cases? There are surprisingly few decided cases and many of them involved admissions that the parties had engaged in anticompetitive conduct. For instance, in Colgate-Palmolive,177 Colgate admitted entering into and giving effect to an understanding with competing manufacturers of laundry detergent and some retailers to limit the supply of ultra-concentrated laundry detergents until an agreed date and standard-concentrated laundry detergents from that date. This 173. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947. 174. Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1 at 50; 58 ALR 423; (1985) ATPR 46,078. 175. Where the question is whether or not the provision is enforceable, s 4(3) provides that, where a provision of a contract is unenforceable if the provision is likely to have a particular effect, that applies at any time when the provision of the contract has or is likely to have that effect notwithstanding that at an earlier time the provision did not have that effect or was not regarded as likely to have that effect. 176. ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165. 177. ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528.
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conduct presumably had the effect of allowing the manufacturers to “produce less and charge more” rather than allowing consumers to choose. In Vanderfield,178 two truck dealers admitted that their employees had entered into an arrangement not to compete for sales to customers in each other’s primary area. Dividing the market and agreeing not to compete with each other is clearly has an anticompetitive purpose, even if, in a metropolitan area with many alternative dealers, it is unlikely to have that effect. [10.780] In what might be thought to be a more benign example, in PRK,179 two large automotive terminal services companies at the ports of Brisbane, Sydney and Melbourne agreed to provide access to each other’s terminals and form a joint venture for the shared conduct of those facilities. For about 14 months they took steps to give effect to their plans, including jointly lodging a successful tender to lease land on behalf of the proposed joint venture for the purpose of operating an automotive terminal in Sydney. They admitted, for the purpose of the proceedings, that the conduct they engaged in had the likely effect of substantially lessening competition in the automotive terminal services markets in Brisbane, Sydney and Melbourne. This was because the result was that there would only be one terminal at each port and there were significant barriers to another terminal being constructed. [10.790] Cement180 is, however, an example of a decision in a contested case. The firms involved were found to have entered contracts to exclusively acquire fly ash from electricity generators in south-east Queensland, in order to prevent a rival gaining access to unprocessed fly ash and to prevent a rival from entering the south-east Queensland concrete grade fly ash market. Their contracts were found to substantially lessen competition, or in other words, they were exclusionary.
Exchanging Information [10.800] Markets cannot function efficiently without transparency. An appropriate level of transparency by publishing information on the range of products, their attributes, functions, limitations and prices, is something we take as a given to allow markets to function, provide opportunities for informed consumer choice and to stimulate innovation. As Posner points out,181 the more information firms have about the products and prices of their competitors, the more efficient the market, with consequent benefits in terms of produce, consumer and total welfare. Although the provision of information can provide significant social benefits, this can also facilitate collusion. The OECD summarised the dilemma neatly in its 2010 paper reporting on a round table discussion on information exchanges as follows:182 Information exchanges among competitors increase transparency in the market, which can lead to efficiency enhancing benefits but may also present competition risks. The challenge for competition enforcers is how to approach this conduct within the context of traditional competition laws. … 178. ACCC v Vanderfield Pty Ltd [2009] FCA 1535. 179. ACCC v PRK Corp Pty Ltd [2009] FCA 715; (2009) ATPR 42-295. 180. ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165. 181. RA Posner, Antitrust Law (University of Chicago Press, 2nd ed, 2001), p 160. 182. OECD Policy Roundtable, Information Exchanges Between Competitors under Competition Law 2010 DAF/COMP(2010)37 (11 July 2011). © 2018 THOMSON REUTERS
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[10.810] As Fox and Crane183 point out, the more that the information exchange relates to present or future prices, provide customer-specific information or is only made available to competitors the more likely it is that the exchange will be anticompetitive. The OECD paper observed that: enhanced transparency can also facilitate the attainment of collusive equilibria among competitors or result in non-coordinated anticompetitive effects. The potential for anticompetitive effects depends on a number of key factors, such as the type of information exchanged and the structural characteristics of the market involved.
It is quite clear that, in some circumstances, the publication or exchange of information is a manifestation of an explicit or tacit anticompetitive purpose or produces an anticompetitive effect. As the ACCC pointed out in the Petrol Report:184 Tacit or outright collusion is also made potentially easier by increased price transparency. This is because it makes it easier for cooperating firms to detect and eventually punish firms that deviate. In turn this makes it easier for anti-competitive coordination to survive for longer.
Consequently, while the publication or exchange of information is not presumed to be anticompetitive, there hare circumstances where that can be the purpose or likely effect. The challenge, as in other respects in relation to the prohibition on anticompetitive arrangements and understandings, is to determine what is, and what is not, permissible conduct, or, in the language of the US Supreme Court, to identify the “plus factor”.185
Criteria [10.820] In a working paper on the US position with unilateral information disclosure through media announcements, the OECD set out the following criteria for determining whether a unilateral disclosure of information is likely to harm competition:186 • The nature and quantity of the information disclosed: Disclosing extensive information regarding pricing, output, major costs, marketing strategies and new product development is more likely to have anticompetitive implications. In particular, disclosure of information about future pricing generally has the greatest potential for anticompetitive harm because … even in the absence of an agreement, disclosure of information about future pricing has a greater likelihood of promoting tacit collusion than disclosure of other information.
• The specificity and context of the information disclosed: A disclosure expressing a willingness to raise prices by a specific amount (or similar information, such as a specific output reduction) creates a greater likelihood of 183. EM Fox and DA Crane, Global Issues in Antitrust and Competition Law (West, 2010), p 176. 184. Australian Competition and Consumer Commission, Petrol Prices and Australian Consumers: Report of the ACCC inquiry into the Price of Unleaded Petrol (2007), p 240. 185. Bell Atlantic Corporation v Twombly, 550 US 1 (2007). 186. OECD Working Party No 3 on Co-operation and Enforcement, Unilateral Disclosure of Information with Anticompetitive Effects (14 February 2012) . See also OECD Policy Roundtable, Information Exchanges Between Competitors under Competition Law 2010 DAF/COMP(2010)37 (11 July 2011), .
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anticompetitive harm than disclosure of less specific information. … More generally, a disclosure containing terms of coordination has a greater likelihood of creating anticompetitive harm than one without such terms.
• Whether the disclosure is public or private: Disclosure of information in a public setting may inform the market in ways that promote competition. In comparison, disclosure of information in private does not provide these potential benefits or does so to a lesser degree. Private communications may also, in certain circumstances, more readily allow for non-verbal implicit confirmation that the disclosed information has been accepted by the competitor as a proposal for common action.
• The nature of industry and market: In concentrated industries, a unilateral disclosure of information is more likely to create the possibility of anticompetitive effects because tacit or express collusion is more likely. This is particularly true if the disclosure is made by a company with a dominant position in the market in an attempt to influence a competitor with a significant position. Similarly, other structural market characteristics, such as homogeneous products or barriers to entry, may make successful collusion more likely, thus raising the risk that a disclosure of information could be anticompetitive. By comparison, a disclosure of information in an un-concentrated industry with robust competition is less likely to lead to industry-wide coordination that will have anticompetitive effects.
• Procompetitive business justifications for the disclosure of information: … information disclosures, particularly when made publicly, can benefit the operation of the market by providing participants with better information on which to make decisions. For example, public statements likely to be of general interest to customers and others in the market, such as planned price increases or factory downtime during which the company may not be able to supply customers, may be more likely to have a procompetitive purpose.
International Approaches [10.830] Before looking at the Australian position, how are information exchanges dealt with in other jurisdictions? Guidelines issued by the Singapore Competition Commission provide a useful summary, stating that:187 As a general principle, it is more likely that there would be an appreciable adverse effect on competition the smaller the number of undertakings operating in the market, the more frequent the exchange, the more sensitive and confidential the nature of the information which is exchanged, and where information exchanged is limited to certain participating undertakings to the exclusion of their competitors and buyers.
[10.840] Guidelines issues by the Canadian Competition Bureau188 reflect a similar view: Collaborations can involve a considerable degree of information exchange between competitors. Similarly, trade associations may gather information from industry 187. CSG Guidelines on the Section 34 Prohibition, . 188. Canadian Competition Bureau, Competitor Collaboration Guidelines (2009), p 27. © 2018 THOMSON REUTERS
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participants to further the objectives of the association, perform benchmarking exercises or otherwise benefit members. For the most part, such exchanges do not raise concerns under the Act because competitors generally avoid sharing information that is competitively sensitive in order to preserve their competitive advantage.
However, the guidelines go on to say: In certain cases, an agreement that involves a unilateral disclosure or exchange of information between competitors can impair competition by reducing uncertainties regarding competitors’ strategies and diminishing each firm’s commercial independence. Cartel agreements often involve the exchange of competitively sensitive information between competitors. Indeed, activities that assist competitors in monitoring one another’s prices or conduct otherwise consistent with the existence of an agreement may be sufficient to prove that an agreement was concluded between the parties …
[10.850] A similar view prevails in Europe. In Deere,189 the question was whether a trade association open to all manufacturers and importers of tractors, should receive a clearance from the European Commission for an agreement to collect and disseminate information relating to the registration of tractors in the UK, including information on the sales by each member. Dismissing an appeal from the Commission’s decision not to clear the agreement, the Court of First Instance concluded, after considering the details of the information that was to be exchanged, that: • An information exchange system that does not concern prices and does not underpin any other anti-competitive arrangement is likely, on a truly competitive market, to lead to the intensification of competition between suppliers;190 • On the other hand, where major suppliers use exchanges of precise information at short intervals in a highly concentrated oligopolistic market in which competition is already greatly reduced and exchange of information facilitated, that is likely to considerably impair the competition which exists between them; and • In the latter circumstances, sharing information concerning the operation of the market on a regular and frequent basis has the effect of periodically revealing to all competitors the market positions and strategies of the various individual competitors. The practice in the EU is to not challenge information exchanges where three conditions are met - the information is historical, it is anonymous in the sense that it cannot be attributed to any one competitor and compiled independently. [10.860] In the United States, as in Europe, there is no presumption that information sharing is anticompetitive. The courts have consistently stated that, whether or not information exchanges contravene the Sherman Act 1890 depends on the circumstances, which must be assessed on a case-by-case basis. In Gypsum,191 the Supreme Court considered an indictment of gypsum board suppliers who, “telephoned or otherwise contacted one another to exchange and discuss current and 189. John Deere Ltd v European Commission [1994] EUECJ T-35/92 (27 October 1994). 190. John Deere Ltd v European Commission [1994] EUECJ T-35/92 (27 October 1994) at [51]. 191. US v United States Gypsum Co 438 US 422 (1978).
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future published or market prices and published or standard terms and conditions of sale and to ascertain alleged deviations therefrom.”192 The gypsum board industry was highly concentrated, with the eight largest producers accounting for 94% of sales nationally. The defendants argued that the price information exchanges were to enable them to take advantage of a “meeting competition” defence. The court summarised the position in relation to exchanges of information between competitors:193 The exchange of price data and other information among competitors does not invariably have anticompetitive effects; indeed such practices can in certain circumstances increase economic efficiency and render markets more, rather than less, competitive. For this reason, we have held that such exchanges of information do not constitute a per se violation of the Sherman Act. … A number of factors, including most prominently the structure of the industry involved and the nature of the information exchanged, are generally considered in divining the procompetitive or anticompetitive effects of this type of inter-seller communication. … Exchanges of current price information, of course, have the greatest potential for generating anticompetitive effects and, although not per se unlawful, have consistently been held to violate the Sherman Act.
In other words, whether or not exchanges of pricing information are evidence of collusive behaviour depends on whether there are other “plus factors” present. Those plus factors have been found to include:194 • a motive to conspire, which can be evidence that the industry is susceptible to price-fixing; • noncompetitive behaviour — evidence that the defendants acted contrary to their economic self-interest; and • a high level of inter-firm communications that would suggest that the defendants consciously agreed not to compete. [10.870] Although information exchange cases in the United States are not common, there are a few relatively recent examples. In Flat Glass,195 the allegation was that glass manufacturers had exchanged price information as part of a conspiracy to set prices. The exchanges occurred at a high enough executive level, were “tightly linked” with concerted behaviour and appeared more purposive. The court held that it was reasonable to infer, looking at the evidence as a whole, that the firms used the information to implement collusive price increases. The second example is Gerber.196 The court dismissed a claim that the three baby food manufacturers in the United States had engaged in a price conspiracy, part of the evidence of which was that there had been reciprocal exchanges of information about price movements. The evidence was that relatively low level sales representatives had exchanged information on future prices. The exchange of pricing information by lower level employees was not sufficient to defeat a motion for summary judgment. 192. US v United States Gypsum Co 438 US 422 (1978) at 428. 193. US v United States Gypsum Co 438 US 422 (1978), footnote 16. 194. Fleischman v Albany Medical Center 728 F Supp 2d 191 (2010); [2010–2] Trade Cases 77, 177. 195. Jamestown Glass Service v Pilkington Plc (In Re Flat Glass Antitrust Litigation) 385 F 3d 350 (2004). 196. Jacob Blinder & Sons Inc v Gerber Products Company (In Re Baby Food Antitrust Litigation) 166 F 3d 112 (1999). © 2018 THOMSON REUTERS
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[10.880] Computerisation has added to the challenge in relation to exchanges of price information and price signalling. But this is not a new phenomenon. In 1994, in the United States, six airlines settled a Department of Justice claim, without admission or denial, that they had engaged in price signalling.197 The allegation was that the airlines had a practice of communicating proposed airfare increases to each other through the computerized system maintained by the Airline Tariff Publishing Company. The Justice Department alleged that the airlines had “an electronic smoke-filled room” which they used to float price increases, make and receive counterproposals and reach a consensus on the amount and timing of price increases or the removal of discounts. Illustrating how broadly the net may be cast in the United States, more recently, in Fleischman,198 the allegation was that hospitals had exchanged information about salaries paid to registered nurses which facilitated a wage suppression conspiracy and unreasonably restrained competition for wages by registered nurses.
Australian Approach [10.890] In Australia, exchanges of information between members of trade associations, and between competitors or potential competitors, has long been an area of concern to competition agencies. The Trade Practices Commission was prompted to issue a guideline on the subject not long after the Trade Practices Act 1974 came into force in 1975.199 That guideline noted that, in order to not be at risk, information exchanges needed to be “directed towards information generally and not with the intent or effect of controlling or recommending prices”. The information needed to be collected independently and with anonymity, based on past historical facts and not involve pre-notification of prices or trading terms. The first information case to come before the court in Australia ended badly for the Trade Practices Commission. That case was Email.200 It involved the only two manufacturers of electricity meters in Australia. The market was therefore highly concentrated market. Each firm exchanged price lists and informed each other when they made a change to the components in their meters. Surprisingly, the Commission lost the case, but not because the conduct was not anticompetitive. It lost because the Commission was unable to establish, to the satisfaction of the court, that there had been an arrangement or understanding. Looked at today, this decision seems out of step, even allowing for the particular facts, including the relative positions of each of the firms in the market. [10.900] The interesting question is whether, and if so when, information exchanges will today be regarded as amounting to an arrangement, understanding or concerted practice un Australia. That question, at least in relation to arrangements and understandings, came into sharp focus for the ACCC when conducting the inquiry into unleaded petrol. Public concern over the rising price of petrol prompted the government to direct the ACCC
197. The New York Times, “Six Airlines Settle Suit By Government on Fares” 18 March 1994. 198. Fleischman v Albany Medical Center 728 F Supp 2d 191 (2010); [2010–2] Trade Cases 77,177. 199. Information Circular No 14: Market Information Agreements (28 April 1976). 200. Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172.
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to conduct a price inquiry.201 In the course of that inquiry, the ACCC found that there was a sophisticated information exchange of prices between petrol retailers. It described the position as follows:202 The electronic subscription service, Informed Sources, is used by the major players in the retail market to give them access on a virtual real time basis, to information about prices being charged by every retail outlet that competes with their own. This information sharing arrangement gives them enormous advantage over consumers.
[10.910] Notwithstanding that the report detailed serious concerns about the competitive effect of these information sharing arrangements,203 the ACCC concluded that this information exchange was not contrary to the Act, accepting counsel’s advice that commitment could not be established rather than deciding to challenge the conduct. In an unusual move, the ACCC appended counsel’s advice to its report.204 The ACCC made its concerns plain again when assessing, and rejecting, an informal merger clearance application by Caltex three years later, but still did not take proceedings to test the position. Referring back to the Petrol Report,205 the ACCC repeated that: The ACCC found that the price information [obtained through Informed Sources]: • enables the first mover to effectively signal its intentions to increase prices to other refiner-marketers and major petrol retailers • provides the first mover with comprehensive and timely information on the response of other refiner-marketers and major petrol retailers to its price increase. In the meantime, the ACCC had sought an amendment to the Act to address the issue, but no change was forthcoming. [10.920] In 2014, the ACCC brought proceedings against Informed Sources and several petrol retailers, alleging that the information sharing arrangement facilitated price communications between petrol retailers and that this had a likely anticompetitive effect.206 The outcome is discussed at [10.970]. [10.930] As an OECD round table accurately concluded,207 general and theoretical rules to distinguish a restrictive exchange of information from one that is at least neutral, if not pro-competitive and efficiency enhancing, is an impossible task. Consequently, a case-by-case approach is called for. Such an approach cannot 201. Since the Prices Surveillance Authority was folded into the ACCC in 2003, the ACCC has had the additional function of conducting price inquiries when required to do so by the Minister: Competition and Consumer Act 2010, Pt VIIA. 202. Australian Competition and Consumer Commission, Petrol Prices and Australian Consumers (2007), p vi. 203. Australian Competition and Consumer Commission, Petrol Prices and Australian Consumers (2007), pp vi and 241–243. 204. See opinion by Julian Burnside QC in Appendix R to the report. 205. Australian Competition and Consumer Commission, Public Competition Assessment – Caltex proposed acquisition of Mobil’s retail assets (9 February 2010). 206. ACCC, Media Release (20 August 2014), . 207. OECD Policy Roundtable, Information Exchanges Between Competitors under Competition Law 2010 DAF/COMP(2010)37 (11 July 2011), p 53. © 2018 THOMSON REUTERS
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ignore the economic context in which the firms exchanging information, or the types of information exchanged. There are instances in which artificially increased transparency is a factor leading to collusion and other instances in which increased transparency is pro-competitive. So how should we now see information exchanges between competitors and potential competitors? The position is that exchanges of price data and other information will not necessarily contravene the Act, but it could amount to an anticompetitive concerted practice, especially if on a regular and frequent basis, if the facts disclose that, in context in which the exchange of information takes place, the participants are substituting collusion for competitive action. Of particular concern will be statements of future market behaviour, especially in relation to prices, because it facilitates coordinated rather than competitive behaviour.
Price Signalling [10.940] Price signalling is the term used to describe what is occurring when information about prices is provided, either publicly or privately, for a collusive purpose – when the “plus factor” is present. Prices may be exchanged, or they may simply be ‘signalled’ by one competitor to another. The government took no steps to amend the Act based on concerns reported by the ACCC is the Petrol Report. However, concern over the activities of certain banks in relation to interest rate increases spurred the government to action. The government introduced legislation to add a new Division to the Act to deal specifically with price signalling instead of taking up the ACCC’s recommendation to add “concerted practices” to s 45. The Division was directed at prohibiting both private disclosure of pricing information to competitors and public price disclosures that are made for the purpose of substantially lessening competition. The new Division was only applied to banking services. [10.950] When announcing the government’s intention to introduce the price signalling prohibition, the Treasurer said that “the ACCC has told us there is strong evidence of banks signalling their pricing intentions to each other in a bid to undermine competition”.208 The probability is that, had the Act at that time applied to concerted practices, the ACCC would have had an opportunity to test that evidence in court and no new prohibition would have been required. In introducing the Bill the Treasurer said: The OECD’s roundtables on facilitating practices and information exchanges, in 2007 and 2010, have clearly highlighted the harm to consumers that can arise from anticompetitive price signalling. … What we are doing here is cracking down on the insidious practice of signalling between banks which is designed to undermine competition and which inevitably hurts consumers.
An extract from the relevant OECD report is quoted at [10.800] above. As we saw, the conclusion of the roundtable was that in concentrated markets frequent exchanges of information on future pricing intentions can facilitate price collusion or coordinated conduct. The report noted the particular challenge in those jurisdictions, like Australia, that uses the “agreement” standard rather than the “concerted practices” 208. Treasurer’s Second Reading Speech in the House of Representatives, Hansard, 24 March 2011, p 3133.
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standard for determining liability, stating that: “In jurisdictions requiring proof of an agreement among competitors, it is markedly more difficult to sanction harmful information exchanges that are not part of a broader cartel agreement”. [10.960] No proceedings were ever instituted by the ACCC under the new Division. The Harper Panel, reporting in March 2015, concluded that the provisions were not fit for purpose and the government accepted a recommendation that the Division be repealed. That was the result. The inclusion of “concerted practices” is expected to deal with the matter. But, even without a prohibition on concerted practices, there are circumstances where price signalling could give rise to a contravention. ColgatePalmolive209 is an example. The facts were that, Colgate and two other companies were the leading suppliers of laundry detergents in Australia. As part of a case involving multiple alleged competition contraventions, Colgate admitted that, when it wanted to increase the wholesale price of its laundry products, one of its executives provided one of the other companies with confidential and commercially sensitive information about its prices, including proposed price increases. The competitor implemented price increases after receiving the Colgate information. Colgate also increased its prices in line with the information provided. Colgate admitted engaging in price-fixing.210 [10.970] Returning to Informed Sources, in August 2014, the ACCC decided to take the approach it arguably should have taken in 2007 — to test whether or not the then current law was adequate to deal with what it saw as an anticompetitive sharing of information between competing major petrol retailers. In August 2014, the ACCC took action claiming that the information sharing arrangements between Informed Sources and the petrol retailers allowed the retailers to communicate with each other about prices and that had the effect or likely effect of substantially lessening competition in markets for the sale of petrol.211 However, the matter never reached court. Instead the ACCC accepted enforceable undertakings from Informed Sources, without admission, not to supply a petrol price information exchange service unless it made the information publicly available to consumers at the same time. The participants also gave enforceable undertakings, without admission, that they would cease participation in any price information exchange service except where the petrol price information they receive is made available to consumers and third party organisations at the same time.212
Attempts [10.980] If the signalling is by one firm only, that may amount to either an attempted contravention or an attempt to induce a person to contravene the Act.213 A person will be taken to have attempted to do something if the evidence establishes 209. ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528. 210. Subsequently another manufacturer, Cussons Australia Pty Ltd, was found not to have been party to the contravention: ACCC v Colgate-Palmolive Pty Ltd (No 4) [2017] FCA 1590. 211. ACCC, Media Release (20 August 2014), . 212. ACCC Public Register . 213. Competition and Consumer Act 2010, s 76(1)(b) and (d). See Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 93; (1983) 76 FLR 455; 47 ALR 719; (1983) ATPR 40-358. © 2018 THOMSON REUTERS
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that the person acted with the purpose of bringing about an anticompetitive arrangement, understanding or concerted practice.214 The conduct can amount to an attempt even where there is little or no likelihood that those to whom the attempt is directed will agree. One example is Tubemakers.215 Tubemakers was a market-leading steel merchant. At the relevant time competition for steel products was strong, the market depressed and profitability low. Imports had risen. At a meeting of steel merchants to discuss the depressed state of the market, the Tubemakers representative told the meeting that it was his intention to limit discounts offered to its customers to a specified level and that he would take very strong action against any other merchant who “moved in” on Tubemakers’ customers. It was a unilateral statement. The evidence was that there was no prospect that the merchants would act together to increase prices. Tubemakers were found, in all the circumstances, to have attempted to contravene, or to induce others to contravene, the Act. However, it is clear that something more than a unilateral declaration of what a firm proposes to do is required. The court also said: A statement made quite unilaterally of intention to do something or to refrain from doing something, with no suggestion express or implied that others might act in the same way, is hard to visualise as an attempt to make an arrangement or arrive at an understanding for the control of discounts on the sale of steel products.
There would seem to be a difference between the treatment of unilateral statements in Australia and the USA. In the United States, if a person has the requisite intent and capacity, and the person’s plan, if executed, would have had the prohibited market result, that is sufficient to constitute an attempt to contravene the US competition law: American Airlines.216 There is, however, consistency in the view that it is no defence that the plan proved to be impossible to execute. [10.990] What were the facts in American Airlines? American and Braniff were the principal competing airlines of routes to and from Dallas Fort Worth. They competed strongly, offering low fares and better service. The two CEOs had a conversation in which the American CEO said that Braniff’s should “raise your goddam fares”. The Braniff CEO said “we cannot talk about fares” and Braniff did not raise its fares. Proceedings were brought against American for attempted monopolisation. The conduct amounted to an attempt. In Stone Container,217 the Federal Trade Commission successfully claimed that the world’s leading manufacturer of linerboard, from which corrugated cardboard boxes are manufactured, had attempted to orchestrate an industry-wide price increase through a number of strategies. This was in violation of federal antitrust laws. One of the strategies employed was to announce a price increase but then not implement it when competitors failed to follow suit.
214. ACCC v Visy Paper Pty Ltd [2000] FCA 1640 at [151] applying Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 93; (1983) 76 FLR 455; ACCC v Australian Egg Corporation Ltd [2017] FCAFC 152 at [92]. 215. Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 93; (1983) 76 FLR 455; (1983) ATPR 40-358; ACCC v Australian Egg Corporation Ltd [2017] FCAFC 152. 216. United States v American Airlines Inc 743 F 2d 1114 (1984); [1984–2] Trade Cases 66,232 at [37]. 217. Federal Trade Commission, Media Release, “Stone Container Settles FTC Charges” (25 February 1998), .
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Most Favoured Customer Arrangements
Most Favoured Customer Arrangements [10.1000] Most favoured customer clauses — often referred to as “most-favourednation” or “MFN” clauses — are not uncommon in commercial agreements. Such clauses vary, but the concept is that parties agree that one contracting party will not treat competitors of other contracting party on more favoured terms. No one will get a better deal. To take a simple example, a retailer may agree to take a firm’s product line only on the basis that the firm agrees not to supply the products to another retailer on more favourable terms. That may include price, credit terms or any other aspect of the supply arrangement. Another form of MFN clause is one where the firm agrees with the retailer that if better terms are given to another retailer, those terms will also be extended to the MFN retailer. There have been no MFN cases in Australia, but as the US Department of Justice has observed:218 The most commonly used MFN provisions guarantee a customer that it will receive prices that are at least as favorable as those provided to other buyers of the same seller, for the same products or services. Although at times employed for benign purposes, MFNs can under certain circumstances present competitive concerns.
[10.1010] MFN clauses may give rise to competition concerns in a number of circumstances. They may facilitate collusion or stabilise prices. Trade associations securing an MFN provision in supply agreements with their members is one example. In a different context, the US Supreme Court219 considered the effect of a “most favoured nation” clause in an agreement negotiated by a union and concluded that: The ‘most favored nation’ clause in the multi-employer agreement promised to eliminate competition between members of the Association and any other subcontractors that Local 100 might organize. By giving members of the Association a contractual right to insist on terms as favorable as those given any competitor, it guaranteed that the union would make no agreement that would give an unaffiliated contractor a competitive advantage over members of the Association.
In Europe, “most favoured nation” clauses used by major movie studios in their contracts with pay television companies were investigated. According to the European Commission’s preliminary assessment, the cumulative effect of the clauses was to align the prices paid to the studios, because any increase agreed with one studio triggered a right to parallel increases in the prices of the other studios. The studios agreed to remove the clauses and the Commission closed its investigation.220 [10.1020] Of course, absent collusion between buyers this is only likely to be a successful strategy if the party seeking the MFN provision is in a powerful bargaining position. For example, in Arizona USA the dominant dental plan provider in that state, a firm that had an 85% market share, enforced a “most favoured nation” clause against dentist participating in its dental plan. The result was found to have 218. US Department of Justice, Media Release, “Department of Justice, Federal Trade Commission to Hold Workshop on ‘Most-Favored-Nation’ Clauses” (17 August 2012), . 219. Connell Construction Co v Plumbers Union 421 US (1975). 220. DG Competition, “Commission Closes Investigation into Contracts of Six Hollywood Studios with European pay-TVs” (Media Release IP/04/1314, 26 October 2004). © 2018 THOMSON REUTERS
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eliminated discounts that dentists offered to patients who were not members of the plan.221 As the US Department of Justice pointed out in a court brief in a challenge to MFN clauses in health insurance contracts with hospitals:222 Absent the MFN clause, a seller might provide certain purchasers with greater discounts than the seller provides to other purchasers. However, the MFN clause requires granting the purchaser imposing it as large a discount as it bestows on any other purchaser. If the purchaser benefitting from the MFN clause accounts for a significant portion of the seller’s revenues, the MFN clause may inhibit the seller from giving any other purchaser a greater discount.
Applicability Otherwise Than to Corporations [10.1030] The relevant section of the Competition and Consumer Act 2010, s 45, is directed to prohibitions on corporations. When the Trade Practices Act 1974 was introduced, for constitutional reasons explained in Chapter 2, the Act could only apply to corporations in relation to which the Commonwealth had constitutional power. Although corporations remain the primary focus of the prohibition against anticompetitive arrangements, the law now applies equally to Commonwealth, State and Territory statutory authorities (to the extent they carry on a business) and to the conduct of individuals. The first development was to apply the prohibition, along with all other prohibitions in the Act, to the Commonwealth and its authorities, to the extent that they carry on a business.223 The second was to apply the provisions to States, Territories (and their authorities) and local government bodies to the extent they carry on a business.224 The Harper Panel had recommended that the Act should apply to those governments and their authorities insofar as they undertake activities in trade or commerce, a proposal the government supported in principle but the Act has not been amended to that effect.225 As explained in Chapter 9, following the Hilmer Report, the Commonwealth, States and Territories decided to extend the prohibitions in the Act, including s 45, to apply to individuals, including unincorporated firms. They did so in 1995 by the Commonwealth adding the Competition Code to the Act and by States and Territories passing complementary legislation to apply that Code.226
221. US Department of Justice, Media Release, 30 August 1994, (viewed 24 November 2017). 222. US Department of Justice Brief in US v Blue Cross and Blue Shield of Ohio (8 November 1996) (viewed 24 November 2017). 223. Competition and Consumer Act 2010, s 2A. The effect of this provision is described in Chapter 9 [9.150]. 224. Competition and Consumer Act 2010, ss 2B, 2C. The effect of these provisions is described in Chapter 7. 225. Competition Policy Review Final Report (2015), pp 278–282. Australian Government Response to the Competition Policy Review (2015), p 20. 226. Competition and Consumer Act 2010, Pt XIA Sch 1.
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Exclusions [10.1040] The Act contains a number of exclusions from the prohibitions on anticompetitive provisions and concerted practices. First, they will not apply where the relevant conduct is covered by another part of the Act. They are the prohibitions on resale price maintenance,227 exclusive dealing arrangements,228 purchases of shares in, or assets of, a company or any person’s assets,229 and dual listed company arrangements.230 Second, the prohibition does not apply to contracts, covenants, arrangements or understandings, or proposed contracts, covenants, arrangements or understandings or to concerted practices between related companies.231 Third, the prohibition does not apply where immunity has been granted for the contract, covenant, arrangement, understanding or concerted practice through the authorisation process described in Chapter 18. Fourth, the prohibition will not apply where one of the specific exemptions also explained in that chapter applies. Finally, the prohibition does not apply to or in relation to a concerted practice if the only persons engaging in it are or would be the Crown in right of the Commonwealth and one or more authorities of the Commonwealth, or the Crown in right of a State or Territory and one or more authorities of that State or Territory.232
Digest of Cases [10.1050] Appendix 3 contains a digest of cases decided in relation to the prohibition against provisions in contracts, arrangements and understandings that have the purpose or likely effect of substantially lessening competition, illustrating how the courts have dealt with claims relating to anticompetitive arrangements in practice.
FURTHER READING Author Baker
Beaton-Wells and Fisse
Title “Vertical Restraints with Horizontal Consequences: Competitive Effects of ‘MostFavored-Customer’ Clauses” Australian Cartel Regulation
Citation (1996) 64 Antitrust Law Journal 517
Cambridge University Press, 2011
227. See Chapter 14. 228. See Chapter 13 229. See Chapter 15. 230. Competition and Consumer Act 2010, s 49. 231. See Competition and Consumer Act 2010, s 45(8). 232. Competition and Consumer Act 2010, s 45(8AA). © 2018 THOMSON REUTERS
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Author
Title
Citation
Armitage
“The Evolution of the ‘Substantial Lessening of Competition’ Test — a Review of Case Law” “Facilitating Practices, Vertical Restraints and Most Favoured Customers: Australian Competition Law is Ill-equipped to Meet the Challenge” “Shootout at the Real Chance Cafe: Aiming s 50” “Most Favoured Nation Clauses: Bane or Boon?” “The Identification and Proof of Horizontal Agreements Under the Antitrust Laws” “What If? - The Trigger for Australian Competition Liability — A Perspective” “Long-term Supply Contracts: Here Today Gone Tomorrow?” Antitrust Law
(2016) 44 Australian Business Law Review 74
Fisse
Heerey Henrick and Penhallurick Kovacic
Miller
Pengilley Posner Yao and DeSanti
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“Game Theory & Legal Analysis of Tacit Collusion”
(2016) 44 Australian Business Law Review 325
(2011) 39 A Australian Business Law Review 451 (2004) 12 Trade Practices Law Journal 78 (1993) 38 Antitrust Bulletin 5 (2017) Australian Journal of Competition and Consumer Law (1998) 6 Trade Practices Law Journal 203 Chicago University Press, 2001 (1993) 38 Antitrust Bulletin 113
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CARTELS [11.20] [11.30]
[11.90]
[11.140]
[11.200] [11.220] [11.300] [11.380] [11.410] [11.440] [11.460] [11.520] [11.530] [11.550] [11.590] [11.610] [11.620]
[11.770] [11.790] [11.820]
11
What Is a Cartel? ................................................................................. Development of Anti-Cartel Laws ....................................................... [11.30] USA ..................................................................................... [11.40] United Kingdom .................................................................. [11.50] Australia .............................................................................. International Focus on Cartels ............................................................ [11.100] Vitamins .............................................................................. [11.110] Marine Hose ....................................................................... [11.120] Construction ....................................................................... [11.130] Air Cargo ............................................................................. Criminalising Cartel Conduct .............................................................. [11.150] Australia .............................................................................. [11.170] United States ...................................................................... [11.180] United Kingdom .................................................................. [11.190] Canada ............................................................................... What Constitutes a Cartel Under Australian Law? ............................. What is Price-Fixing? .......................................................................... Fixing, Controlling or Maintaining Prices ............................................. What are Prohibited Output Restrictions? ........................................... What are Market Allocation Cartels? ................................................... What are Collective Boycotts? ............................................................ What is Bid Rigging? ........................................................................... Cartel Contract, Arrangement or Understanding ................................ Purpose of a Cartel ............................................................................. Parties Must Be in Competition with Each Other ................................ Exchanging Information and Price Signalling ..................................... Where Must They Compete? .............................................................. Circumstances Not Regarded as Cartel Conduct ............................... [11.630] Recommended Prices ........................................................ [11.650] Cooperative Buying and Selling ......................................... [11.690] Joint Ventures ..................................................................... [11.750] Other Carve-Outs ............................................................... [11.760] Accessing a Carve-Out ...................................................... Criminal Liability .................................................................................. Immunity Policy ................................................................................... Digest of Cases ...................................................................................
206 207 207 208 208 211 212 213 213 213 214 215 216 216 217 217 218 221 223 224 225 226 228 228 229 230 231 231 231 232 233 235 235 235 237 238
[11.10] Cartels are universally regarded as the most egregious violations of competition law, often described as “cancers to the open market economy”.1 In the result, from a policy perspective, they are now seen as the number one priority in competition law enforcement. Consequently, cartels have been the focus of an unprecedented increase
1. K Mehta and E Sakkers, “The International Competition Network at Ten”, in The International Competition Network at Ten (ICN, 2011), p 267. © 2018 THOMSON REUTERS
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in coordinated action by competition agencies internationally, prompted by the OECD and the International Competition Network (ICN). The ICN has noted that:2 Secret cartel agreements are a direct assault on the principles of competition and are universally recognised as the most harmful of all types of anticompetitive conduct.
A former ACCC Chairman, Graeme Samuel AO, described cartels in the following terms at the ICN 2004 meeting:3 Cartels are a cancer on the economy, a silent extortion and that is why, as far as the Australian Competition and Consumer Commission is concerned, protecting the Australian public from the harmful effects of domestic and international cartels is amongst our highest priorities.
That is reflected in the ACCC’s current priorities, which list cartels as one of its “enduring priorities” because of their detrimental effect on consumer welfare and on the competitive process.4
What Is a Cartel? [11.20] A cartel is an arrangement between two or more competitors to collude rather than compete by fixing prices or sharing markets. Early cartel cases were concerned with price-fixing, but as the law developed, the absolute prohibition on cartel conduct was expanded to apply to other forms of collusion. Australian competition law contains a detailed definition of the term “cartel”, but in essence a cartel is a form of fraud and like fraud is increasingly being treated as a criminal offence. The OECD described cartels in the following way:5 a “cartel” is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.”
Cartels raise prices making products unavailable to some purchasers and unnecessarily expensive for others.6 They result in the participants profiting at the expense of customers. As Dr Veljanovski points out, the theory of harm from cartels is simple to state:7 As long as the firms adhere to the [cartel] agreement or understanding they can profitably raise their prices above current levels and earn greater profits. This harms their consumers who now pay more and consume less, because in order for the cartel to raise prices its members must restrict output.
2. ICN Working Group, “Defining Hard Core Cartel Conduct — Effective Institutions. Effective Penalties” (Report prepared for ICN 4th Annual Conference, Bonn, Germany, 6-8 June 2005) . 3. . 4. ACCC, 2017 ACCC Compliance and Enforcement Policy (2017), p 3. 5. OECD, Recommendation of the Council Concerning Effective Action Against Hard Core Cartels adopted by the Council at its 921st session on 25 March 1998. 6. See OECD, Ministerial Report on Hard Core Cartel (1 January 2000). 7. C Veljanovski, The Economics of Cartels (Case Associates, 2007), .
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As the diagram at [6.110] illustrates, if, instead of competing, firms collude, explicitly or tacitly, on price, production or division of the market, the result is a reduction in consumer welfare and in total welfare.
Development of Anti-Cartel Laws USA [11.30] In the United States, although the Sherman Act did not differentiate between cartels and other forms of anticompetitive combinations, the courts have done so. They did so by developing, in the later 1930s, evidentiary rules that classify price-fixing as so inherently likely to be anticompetitive that mere proof of the existence of that conduct is sufficient to establish a contravention — the “”per se” rule. As Justice Douglas explained in Socony-Vacuum:8 Price-fixing agreements may or may not be aimed at complete elimination of price competition. The group making those agreements may or may not have power to control the market. But the fact that the group cannot control the market prices does not necessarily mean that the agreement as to prices has no utility to the members of the combination … Whatever economic justification particular price-fixing agreements may be thought to have, the law does not permit an inquiry into their reasonableness. They are all banned because of their actual or potential threat to the central nervous system of the economy.
Socony-Vacuum arose in interesting circumstances. During the Great Depression in the United States, the Roosevelt administration introduced legislation to manage and rationalise over-production and price volatility in the oil industry. However, the legislation was declared invalid by the US Supreme Court. Nevertheless the oil industry voluntarily continued with the stabilisation program and a large number of oil companies and their employees were indicted for doing so. As Professor Crane noted:9 “After all, the misconduct alleged was participating in a petroleum stabilization program that had originated in the highest echelons of the very federal government that was now bringing the indictment”. Nevertheless, the conviction of the defendants for contravention of the Sherman Act was upheld. Under United States antitrust jurisprudence the per se rule was applied in situations where logic and experience showed that the risk of injury to competition from the defendant’s behaviour was so pronounced that it was needless and wasteful to conduct a judicial inquiry into the balance between the behaviour’s pro-competitive benefits and its anticompetitive costs.10 Posner suggests that the law developed in the US to a point where it was “emptied of economic content” because judges and lawyers were more comfortable with conspiracy theory that economic theory.11 The public policy approach in Australia in the 1960s owed more to concepts of fairness that conspiracy or economic theory, although it included elements of the former. But that is not now the position. 8. United States v Socony-Vacuum Oil Co 310 US 150 (1940) at 225–226, n 59. 9. DA Crane: The Story of United States v Socony-Vacuum: Hot Oil and Antitrust in the Two New Deals (Benjamin N Cardozo School of Law, Jacob Burns Institute for Advanced Legal Studies, 2006 Working Paper No 173, Social Science Research Network at ). 10. See, for example, Eastman Kodak v Image Technical Services Inc 504 US 451 (1992) per Scalia and O’Connor JJ. 11. RA Posner, Antitrust Law (Chicago Press, 2nd ed, 2001), p 53. © 2018 THOMSON REUTERS
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United Kingdom [11.40] The theory in the United Kingdom was that price-fixing arrangements between competitors could be beneficial and it was only those that were not that the law should address. Consequently, the Trade Practices Act 1956 proceeded more cautiously by including price-fixing agreements between competitors among the types of agreements that were examinable. This allowed for a case-by-case review to see if the agreements were contrary to the public interest. Of the over 2,700 examinable agreements filed, most related to price fixing. By the end of 1970 only nine had been found compatible with the public interest and nineteen had been found, after contested hearings, to be contrary to the public interest.12
Australia [11.50] As we have seen, the original Australian competition statute, the Australian Industries Preservation Act 1906 (Cth), followed the US model. That Act provided that any person who made or entered a contract or engaged in any combination in relation to trade or commerce with intent to restrain trade or commerce to the detriment of the public was guilty of an offence.13 However, our jurisprudence did not develop to the point of embracing per se rules in dealing with cartels. Instead, in Adelaide Steamship,14 the High Court interpreted the provision as requiring the court to decide whether the price agreed on was fair. This was based on the logical view that, if the price was fair, it could not be a detriment to the public to charge that price, even if it had been agreed between competitors. That approach was explicitly rejected in the United States, although not until seven years later.15 Adelaide Steamship was concerned with an explicit agreement between colliery owners and shipping companies to set a price for the coal and allocate supply between them. In what would today be regarded as heresy Chief Justice Griffith stated that:16 In our opinion the fair inference to be drawn from the tenor of the Vend agreement itself is that the intention of the parties was to put the Newcastle coal trade on a satisfactory basis, which would enable them to pay adequate wages to their men and to sell their coal at a price remunerative to themselves, having regard to the capital and risk involved in the enterprise. It may also, we think, be fairly inferred that they intended to ask as high a price as they could get in the market without running the risk of being underbid by other competitors in Australia or abroad and so losing the trade. This is not, in our opinion, an intention to cause detriment to the public. So far as we can see, all the terms of the agreement were reasonably necessary for securing this perfectly lawful object.
Nevertheless, that decision was consistent with contemporary judicial approaches to the social and economic circumstances of that time. As Griffiths CJ said, no
12. Australian Cabinet Submission No 693 by then Attorney-General Tom Hughes QC, dated 22 February 1971, para 11. 13. Australian Industries Preservation Act 1906 (Cth), s 4. 14. Adelaide Steamship Co v R [1912] HCA 58; (1912) 15 CLR 65. 15. US v Trenton Potteries Co 273 US 392 (1927). 16. Adelaide Steamship Co v R [1912] HCA 58; (1912) 15 CLR 65 at 91.
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doubt accurately at that time: “Cut-throat competition is not now regarded by a large portion of mankind as necessarily beneficial to the public”. 17 Adelaide Steamship followed a decision of the Privy Council, then Australia’s final court of appeal, in Associated Northern Collieries,18 another case concerning an explicit agreement to monopolise the trade in coal. The Privy Council had concluded that the public interest was served by coal continuing to be produced and this justified the otherwise anticompetitive price-fixing agreement between coal producers. [11.60] That remained the legal position in Australia until 1962 when Sir Garfield Barwick decided to attempt to introduce a new trade practices law for Australia. As we have seen he started by having tabled in the House of Representatives a list of practices possibly detrimental to the public interest. The Barwick list19 focused heavily on agreements between competitors that fixed prices. However, the legislation introduced to deal with those practices was tentative by current standards. Although collusive tendering was specifically prohibited under the Trade Practices Act 1971, with criminal penalties if engaged in, other types of cartel, price fixing or otherwise, were only treated as examinable agreements.20 Australia followed the UK approach. When the Trade Practices Act 1974 was introduced in 1974 it contained a general prohibition against contracts, arrangements and understandings in restraint of trade or commerce, but nothing specific in relation to price fixing or other cartel conduct. The view was that any arrangement between competitors fixing, controlling or maintaining prices would be in restraint of trade unless there was only very slight competition between the parties.21 Another change was that courts were no longer entitled to balance competitive effect against public benefit.22 Nevertheless, in its 1974 form the provision was thought to be unsatisfactorily vague in its dealing with price fixing cartels and cartels that divided up markets. In 1976, the Swanson Committee took the view that those practices should be dealt with more explicitly. Proof of actual effect on competition should not be required. The Swanson Committee therefore recommended that there should be an absolute prohibition on arrangements between competitors that had the purpose or likely
17. Adelaide Steamship Co v R [1912] HCA 58; (1912) 15 CLR 65 at 76. See also comment in J E Richardson, Introduction to the Australian Trade Practices Act (Hicks Smith & Sons, 1967), pp 102–103. 18. R v Associated Northern Collieries [1911] HCA 73; (1911) 14 CLR 387. 19. The list of anticompetitive practices prepared by the then Attorney-General, Sir Garfield Barwick and tabled in Parliament on 6 December 1962. See Appendix 1. 20. Trade Practices Act 1971, ss 85, 86, 35. For a review of a price fixing case under that Act see PR Davey, “Frozen Vegetables: Before and After Restrictive Practices”, in J P Nieuwenhuysen, Australian Trade Practices Readings (Croom Helm, 2nd ed, 1976). The frozen vegetables case involved consideration by the Trade Practices Tribunal of an “orderly marketing” agreement between ten producers of frozen vegetables, unsuccessfully challenged by the Trade Practices Commission. 21. Swanson Committee Report, para 4.56. 22. The 1974 Act disaggregated consideration of the two issues by conferring on the Trade Practices Commission and Trade Practices Tribunal authority to determine whether arrangements had overriding public benefits. The jurisdiction of the courts ran to determining only whether or not arrangements were anticompetitive or otherwise contravened the statutory prohibitions. That remains the position today. © 2018 THOMSON REUTERS
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effect of fixing or controlling prices, except in the context of joint ventures or joint acquisition pricing.23 When the Act was overhauled in 1977, those recommendations were given effect.24 The result was that, between 1977 and 2009 civil penalties applied to arrangements to fix prices, or engage in certain types of exclusionary conduct, without regard to the effect on competition. [11.70] The next development came in May 2002, when the Treasurer announced a further review of the Trade Practices Act, with the Dawson Review.25 Armed with the OECD’s work on hard core cartels and the experience with international cartels in the United States and Europe,26 the ACCC made a submission to the Dawson Committee that criminal penalties should be introduced for hard core cartels. The committee agreed, stating that it was persuaded that:27 in the light of submissions made to it and growing overseas experience, that criminal sanctions deter serious cartel behaviour and should be introduced. However a number of problems remain to be solved before the introduction of criminal sanctions, not the least being the need to find a satisfactory definition of serious, or hard-core, cartel behaviour and a workable way of combining criminal sanctions with a clear and certain leniency policy.
The cautious attitude of the Dawson Committee was borne out. Although the government accepted the recommendation “in principle”, actual legislation was a long time coming. No legislation was introduced until 2008 and it was not until July 2009 that the amendments came into force. However, it was not until 2016 that a prosecution resulted.28 One reason for this was a view that, while the policy intent was clear, the cartel provisions, as drafted, were unnecessarily complex, both for firms who had to comply with them and for prosecutors. [11.80] Simplification was required. When the Harper Panel came to consider the position in its 2015 review the Panel said:29 Since serious cartel conduct can cause significant damage to the competitive process, the Panel supports using criminal sanctions to punish and deter cartel behaviour. While drafting criminal conduct provisions must necessarily involve a degree of specificity, the Panel considers that the cartel provisions in their current form are overly complex and do not provide businesses with sufficient clarity and certainty.
The Panel recommended that:30 23. 24. 25. 26.
27. 28.
29. 30.
Swanson Committee Report, para 4.59. Act No 206 of 1978. Trade Practices Act 1974, ss 45(10(a), 45(2)(a)(i), 45(2)(b)(i), 45A. Review of the Competition Provisions of the Trade Practices Act 1974, January 2003. See for example, SJ Evenett, MC Levenstein and VY Suslow, International Cartel Enforcement: Lessons from the 1990s, World Bank Policy Research Working Paper No 2680, . Review of the Competition Provisions of the Trade Practices Act 1974, January 2003, p 163. On 16 July 2016, the ACCC announced it had instituted the first criminal cartel case. Nippon Yusen Kabushiki Kaisha, a global shipping company based in Japan, pleaded guilty to criminal cartel conduct in relation to the transportation of vehicles to Australia between July 2009 and September 2012: . Competition Policy Review Final Report (2015) (Harper Report), p 360. Harper Report, p 367.
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• the cartel provisions: ° should only apply to conduct involving persons who compete to supply goods or services to, or acquire goods or services from, persons resident in or carrying on business within Australia; should be confined to conduct involving firms that are actual or likely ° competitors, where “likely” means on the balance of probabilities; and • as to exemptions: ° there should be a broad exemption for joint ventures, whether for the production, supply, acquisition or marketing of goods or services, and an ° exemption should be included for trading restrictions that are imposed by one firm on another in connection with the supply or acquisition of goods or services (including intellectual property licensing) recognising that such conduct would be prohibited by s 45 or s 47 if it has the purpose, effect or likely effect of substantially lessening competition. The government accepted that the prohibitions on cartel conduct were complex and decided to develop legislation to improve clarity and certainty, while retaining the specificity and meaning of the cartel provisions.31 The result was legislation that came into effect on 6 November 2017.32 The resulting legal position in Australia is discussed below.
International Focus on Cartels [11.90] UNCTAD had included price fixing, collusive tendering and market allocation agreements in its 1980 set of principles in relation to matters that harm competition and trade,33 but it was the OECD, as has already been noted, that focussed international attention on cartels with its 1998 recommendation to member States that:34 Member countries should ensure that their competition laws effectively halt and deter hard core cartels. In particular, their laws should provide for: a) Effective sanctions, of a kind and at a level adequate to deter firms and individuals from participating in such cartels; and b) Enforcement procedures and institutions with powers adequate to detect and remedy hard core cartels, including powers to obtain documents and information and to impose penalties for non-compliance.
Although enforcement of the prohibition on cartels had long been a priority in the United States, it was not until Westinghouse35 in 1960, a bid rigging case, that executives went to jail for price fixing. The introduction of a leniency program in the United States in 1993, progressively followed by other countries over the 31. Australian Government Response to the Competition Policy Review (2015), p 23. 32. Competition and Consumer Amendment (Competition Policy Review) Act 2017 Act No 114 of 2017. 33. Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, UNCTAD General Assembly, 35th session resolution 35/63, 5 December 1980. 34. OECD, Recommendation of the Council concerning Effective Action Against Hard Core Cartels C(98)35/FINAL (25 March 1998), . 35. Westinghouse Electric Co v US (1960) discussed in FM Scherer, Industrial Market Structure and Economic Performance (Rand McNally, 1970), p 433. © 2018 THOMSON REUTERS
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next 10-to-15 years, heightened the likelihood of detection of both domestic and international cartels. The EU introduced its first leniency program in 1996 and updated it in 2002. Australia introduced a leniency program in 2003 and replaced it in 2005 with an immunity policy for cartel conduct. Now over 80 jurisdictions have leniency programs designed to detect cartel activity.36 According to the OECD, in the period 1998 to 2000 more than 270 cartel cases were prosecuted by member States and other countries, 16 of which affected commerce to the extent of over US$55 billion.37 The OECD is not alone in its work on cartels. At its third annual meeting in 2004 the ICN decided to establish a Cartel Working Group and that group has been active ever since, providing practical guidance to competition agencies in both developed and developing countries. The ICN has noted that:38 the fight against cartels is a legally and practically demanding task. First of all, cartelists are by definition secretive about their illicit behaviour, and therefore agencies have to undertake great efforts to detect concealed cartels. Secondly, agencies need extraordinary powers and skills to collect sufficient evidence to mount a viable case against sometimes uncooperative defendants. Thirdly, only in the cartel area do agencies operate sophisticated leniency programmes to destabilise such conspiracies. Fourthly, the investigation of international cartels tests the limits of agencies’ jurisdictional reach. Last but not least, the growing trend to criminalise cartel behaviour obliges many agencies to work to a particularly high standard of procedure and proof.
Notwithstanding the difficulties, there has been a significant effort by competition agencies and prosecutors around the world to combat cartels. Examples include the international vitamins cartel, the international marine hose cartel, the Dutch construction cartel and the international air cargo surcharge cases.
Vitamins [11.100] Described at the time as the most serious cartel the European Commission had ever investigated, the vitamins case involved a cartel to fix the prices of vitamins used as nutritional supplements.39 The Commission secured a €855 million fine against eight major companies who had been part of the cartel that operated for nine years. In the United States, two of the participants paid fines totalling US$775 million. As Assistant Attorney General Klein said when announcing the outcome:40 Indeed, during the past several years the Division has uncovered international cartels operating in a broad spectrum of commerce, including food and feed additives, chemicals, graphite electrodes (used in steel making), and marine construction and transportation services. In many of the prosecutions, the conspirator corporations were fined tens of millions of dollars — ADM was fined $100 million for its role in the lysine and citric acid conspiracy; UCAR paid a $110 million fine for its participation in the graphite electrodes
36. See summary of 32 regimes in J Buhart, Leniency Regimes (Sweet & Maxwell, 5th ed, 2015). 37. OECD, Hard Core Cartels: Recent Progress and Challenges Ahead (2003), doi: 10.1787/9789264101258-en, . 38. Defining Hard Core Cartel Conduct: Effective Institutions. Effective Penalties Report prepared by the ICN Working Group on Cartels, ICN 4th Annual Conference Bonn, Germany, 6-8 June 2005, . 39. The Guardian, 21 November 2001, . 40. Statement of Assistant Attorney General Joel I Kline, May 20, 1999.
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conspiracy; and SGL recently agreed to pay a $135 million for its role in the graphite electrodes conspiracy — prior to today, the largest antitrust fine in history. This fiscal year alone, which is less than 2/3 over, we have already secured more than $900 million in criminal fines: more than three times our previous annual record; in fact, more than the total amount of fines in the entire history of U.S. antitrust enforcement.
The United States and EU have not been the only jurisdictions to take a strong stand on cartels. The ACCC brought successful proceedings against three suppliers of animal vitamins, securing penalties of A$26 million.41 The Korean Fair Trade Commission imposed fines of US$3.5 million for participation in the cartel in that country.42
Marine Hose [11.110] The marine hose cartel involved fixing the prices of specialist hoses used to transport oil. In 2008, three former oil industry executives involved in the cartel became the first British executives to be jailed for price-fixing.43 In the United States. a Japanese executive pleaded guilty to participating in the cartel and was jailed for two years.44 On 20 February 2008 the Japan Fair Trade Commission issued an order against Bridgestone Corporation and four non-Japan-based companies for their roles in the cartel. Bridgestone was ordered to pay a ¥2,380,000 fine. In June 2010, the Federal Court in Australia imposed penalties totalling $A8.23 million on four cartel participants.45
Construction [11.120] The third example involved wide spread bid rigging and price fixing in the construction industry in the Netherlands. In November 2001, a Dutch investigative television program reported on secret financial accounts at a major construction company, starting investigations by the Netherlands Competition Authority and parliamentary hearings that uncovered widespread bid rigging and price fixing throughout the construction sector in the Netherlands. The cartel activity was so widespread that the government offered immunity to companies that came forward, resulting in 480 immunity applicants. Over 1,400 companies were involved in the conduct.46
Air Cargo [11.130] The final example is the air cargo surcharges series of cases, cases that demonstrate the high level of international cooperation in cartel investigation that now exists. In February 2006, investigators launched dawn raids simultaneously in a number of countries seeking evidence of a wide spread, if not global, price fixing in relation to air freight, following information provided to authorities by 41. ACCC v Roche Vitamins Australia Pty Ltd [2001] FCA 150; ATPR 41-809. 42. The Korean Fair Trade Commission had previously fined six foreign companies $US8 million for their involvement in a cartel relating to graphic electrodes. 43. The Times, 14 November 2008. 44. US Department of Justice, Media Release, 10 December 2008. 45. ACCC v Bridgestone Corporation [2010] FCA 584; ATPR 42-320. 46. “Bid Rigging Investigations in the Netherlands” (presentation to the ICN 2006 Cartel Workshop, The Hague, Netherlands, 14-16 November 2006), . See also and . © 2018 THOMSON REUTERS
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Lufthansa. The airline made multiple immunity application across the globe.47 What followed was the most extensive series of cases ever brought by competition agencies against airlines. The ACCC was one of the many competition agencies that took action.48 The claim, levelled at more than 18 airlines, was that they had been involved in making and giving effect to arrangements with each other to fix the level of air freight fuel surcharges and security fees. Prosecutions or civil actions were launched by competition agencies from Canada to New Zealand. Competition agencies brought cases against the same airlines in a number of countries. Interestingly, although prosecutions were successfully launched in the USA, none of the airlines involved were US flag carriers. That reinforces the view that antitrust compliance in the United States is more rigorous, due to the threat of jail, than in most other countries. In the United States some airline executives were jailed — the first was a Qantas executive.49 As to fines, the amount imposed in the United States exceeded US$1.8 billion, in Europe US$1 billion, in Australia US$100 million, Canada US$20 million and in South Korea US$17 million, to list only a few. But that is not the end to the matter. Some cases are yet to be finally determined.
Criminalising Cartel Conduct [11.140] As we have seen, the first country to criminalise cartel conduct was the United States. Although the Westinghouse cartel case defendants only spent a short time in jail, 63 defendants in the period 1990 to 2014 spent on average between eight months and 25 months in jail.50 In the period 2007 to 2016, 199 individuals and 575 corporations were charged with criminal cartel offences.51 According to an ICN report in 2017,52 imprisonment of individuals involved in cartels, or hard-core cartels, is now provided for in at least 19 countries.
47. In most countries it is only the first in that will get immunity so where a cartel is discovered internally there is usually a race to get in first and seek a “marker” while the internal investigation is being conducted. 48. See, for example, ACCC v Air France [2009] FCA 341; (2009) ATPR 42-283; ACCC v British Airways [2008] FCA 1977; (2008) ATPR 42-265; ACCC v Cargolux [2009] FCA 342; (2009) ATPR 42-282; ACCC v Garuda [2016] FCAFC 42; ACCC v Thai Airways International Public Co Ltd [2012] FCA 1434; ACCC v Cathay Pacific [2012] FCA 1392; (2012) ATPR 42-425; ACCC v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395; ACCC v Emirates [2012] FCA 1108; (2012) ATPR 42-422; ACCC v Malaysia Airlines [2012] FCA 767; (2012) ATPR 42-409; ACCC v JAL [2011] FCA 365; (2011) ATPR 42-352; ACCC v KLM [2009] FCA 341; (2009) ATPR 42-283; ACCC v Martinair [2009] FCA 340; (2009) ATPR 42-281; ACCC v Qantas [2008] FCA 1976; (2008) ATPR 42-266. 49. Matt O’Sullivan, “Ex-Qantas Freight Chief Pays Heavy Price for Cartel”, Sydney Morning Herald, 4 May 2009. 50. US Department of Justice, Criminal Program Update, 2015, . 51. US Department of Justice, Criminal Program Update, 2016, . 52. International Competition Network Cartels Working Group, “Setting of Fines for Cartels in ICN Jurisdictions” (Report to the 16th ICN Annual Conference, Porto, Portugal, May 2017).
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Australia [11.150] In Australia, after a long delay between the government’s policy decision and introduction of legislation amendments to the Act were made to impose criminal sanctions on cartels. In 2009, the Act was amended53 making cartels an indictable offence. The position now is that, a corporation that commits a cartel offence is liable for a fine of the greater of $10 million or three times the benefit reasonably attributed to the cartel or, where gain cannot be readily ascertained, 10% of its annual turnover in the first 12 months of the cartel.54 Executives (or any other person) involved in a cartel offence, if convicted, can be imprisoned for up to 10 years, or fined up to $360,000 or both.55 Although the Act does not differentiate between different levels of cartel behaviour, the focus of attention in relation to criminalisation has been on “hard core” or “serious” cartel conduct. In order to reflect this, the ACCC and the Director of Public Prosecutions, who has the independent carriage of all prosecutions, have negotiated a protocol that includes an understanding about the types of cartels that will be considered for criminal prosecution.56 The MOU provides that the ACCC will not ordinarily refer relatively minor cartel conduct to the DPP for consideration for prosecution. Referrals will concentrate on conduct that can cause large scale or serious economic harm. In deciding whether to refer a matter, the MOU states that the ACCC will have regard to whether: • the conduct was longstanding or had, or could have, a significant impact on the market in which the conduct occurred; • the conduct caused, or could cause, significant detriment to the public, or a class thereof, or caused, or could cause, significant loss or damage to one or more customers of the alleged participants; • one or more of the alleged participants has previously been found by a court to have participated in, or has admitted to participating in, either criminal or civil cartel conduct; • the value of the affected commerce exceeded or would exceed $1 million within a 12 month period (that is, where the combined value for all cartel participants of the specific line of commerce affected by the cartel would exceed $1 million within a 12 month period); and • in the case of bid-rigging, the value of the bid or series of bids exceeded $1 million within a 12 month period. [11.160] Since criminal sanctions for cartel conduct were introduced in Australia there has only been two prosecutions up until the close off date for this book. Both were instituted in 2016. Both related to an international shipping cartel. The first was against Nippon Yusen Kabushiki Kaisha (NYK), one of the world’s largest shipping lines. It related to cartel conduct in connection with the transporting of vehicles to
53. 54. 55. 56.
Act No 59 of 2009. Competition and Consumer Act 2010, s 45AE(3). Competition and Consumer Act 2010, s 79(1). The protocol, reflected in a formal Memorandum of Understanding, is at .
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Australia between July 2009 and September 2012.57 The company pleaded guilty.58 The second was against Kawasaki Kisen Kaisha (K-Line) for alleged involvement in the same cartel conduct.59 At the time of writing K-Line was defending the allegations and the matter had not been concluded.
United States [11.170] In the most recent case in the United States, three former traders at major banks, all United Kingdom nationals, voluntarily surrendered to the FBI and were arraigned on charges resulting from their alleged roles in a conspiracy to manipulate the price of US dollars and Euros exchanged in the foreign currency exchange spot market.60 But that action was by no means an isolated example. In 2017, to take a few examples, seven companies agreed to plead guilty for fixing prices of equipment that stores and regulates electrical current in computers, home appliances, office equipment and car engines, a real estate investor was convicted for his role in a conspiracy to rig bids at public foreclosure auctions, a former senior vice president of sales for a packaged seafood company pleaded guilty for his role in a conspiracy to fix the price of packaged seafood, and three shipping executives were indicted for participating in an alleged conspiracy to allocate customers and routes, rig bids, and fix prices for the sale of international ocean shipments of roll-on, roll-off cargo.61
United Kingdom [11.180] In the United Kingdom, since 2003 criminal sanctions have applied to individuals who dishonestly agree with others to engage in bid-rigging or other cartel behaviour.62 In 2014, the provision was strengthened by removal of the requirement to prove dishonesty. In the past 10 years, criminal proceedings for cartel conduct in the UK have been instituted in relation to galvanized steel tanks, air cargo and marine hose. Criminal investigations with no action have been initiated in relation to pre-cast concrete drainage products, commercial vehicles, automotive components and products used in the agricultural sector.63 In the marine hose case, a cartel in the market for hose used to transfer petroleum and oil in and out of tankers, two executives of companies concerned and the “cartel coordinator” were arrested and charged. Each was convicted and sentenced to imprisonment.64 57. ACCC, Media Release, 18 July 2016, . 58. Commonwealth DPP v Nippon Yusen Kabushiki Kaisha [2017] FCA 876. 59. ACCC, Media Release, 15 November 2016, . 60. US Department of Justice, Media Release, 17 July 2017, . 61. See US Department of Justice Media Releases 2017, . 62. Enterprise Act 2002 (UK), s 188. 63. See . 64. UK Competition and Markets Authority summary at .
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Canada [11.190] In Canada, cartel conduct had been a criminal offence since 1985, but the law was updated with effect from March 2010. Many of the cases brought in Canada relate to bid-rigging. For example, in 2017 Mitsubishi Electric Corporation pleaded guilty of bid-rigging by participating in an international conspiracy to determine who would win bids to Honda and Ford for the supply of alternators and to General Motors for the supply of ignition coils between 2003 and 2006.65 That year a Quebec supplier of water and sewerage infrastructure pleaded guilty to eight counts of bid‑rigging for municipal water services contracts in Quebec.66 Other Canadian bid-rigging and conspiracy examples have involved infrastructure repair services, information technology supply to government, residential construction, water supply and gasoline retailing.67
What Constitutes a Cartel Under Australian Law? [11.200] Although bid-rigging was the first type of conduct to which ant-cartel policy was directed, followed by price-fixing when the Trade Practces Act 1974 was introduced, the prohibition now has a much wider scope. As a general description, the following types of conduct are prohibited: • price-fixing; • restricting outputs in the production and supply chain; • allocating customers, suppliers or territories; • collective boycotts; and • bid-rigging. The Competition and Consumer Act 2010 contains a complicated description of what is involved in each of those activities for the purposes of civil and criminal liability. In summary, three elements must be present to constitute a cartel: • there must be a contract, arrangement or understanding; • two or more parties to it must be likely to be in competition with each other in relation to the supply, production or acquisition of the relevant goods or services, or likely to be in competition with each other but for the contract, arrangement or understanding; and • a provision of the relevant contract, arrangement or understanding must either have a prohibited purpose or effect. The policy intent is to express the prohibition extremely broadly, utilising terms such as “directly or indirectly” and “likely” to achieve that policy outcome. Emphasising the breadth of the prohibition, the term “likely” is defined to include a possibility that is not remote.68
65. Canadian Competition Bureau, Media Release, 25 April 2017, . 66. Canadian Competition Bureau, Media Release, 17 February 2017, . 67. See Competition Bureau of Canada website at . 68. Competition and Consumer Act 2010, s 45AB. © 2018 THOMSON REUTERS
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[11.210] When it comes to the types of conduct that will be regarded as cartel conduct, instead of leaving it to the courts to decide what cartel conduct is, the Act contains a complex set of definitions to explain what is prohibited. The policy reason for this is to provide certainty, but the result is a complex set of provisions. The first deals with price-fixing conduct. The relevant arrangement must have either the purpose or the effect of directly or indirectly fixing, controlling or maintaining: • the price of goods or services, or • any discount, allowance, rebate or credit in relation to goods or services • furthermore, the goods or services must be: ° supplied or likely to be supplied by any of the participants (whether or not supply occurs); or acquired or likely to be acquired by any of the participants (whether or ° not acquisition occurs) or; ° re-supplied or likely to be re-supplied by third parties to whom they69 were supplied by any of the participants (whether or not supply occurs). The second deals with other forms of cartel conduct. In the following cases the provision must have the purpose (effect is irrelevant) of: • preventing, restricting or limiting production, capacity, supply or acquisition of goods or services by any of the participants (whether or not production happens or capacity exists); • allocating customers or suppliers or geographic areas between any of the participants (whether or not supply occurs); or • colluding, in trade or commerce, on bids for the supply or acquisition by any of the participants of goods or services.70 As already noted, with price-fixing conduct it is sufficient if the conduct has either the purpose or effect described. This, in effect, mirrors the earlier Trade Practices Act 1974 price-fixing provision.71 For output restrictions, customers, suppliers or territory allocation, collective boycotts and bid-rigging, the conduct will only contravene the Act if that is the purpose.
What is Price-Fixing? [11.220] The most common form of price-fixing is when two or more competitors, or potential competitors, agree on the price at which they will sell their products. To be more precise, it is when two or more firms that are, or are likely to be, in competition with each other, come to an arrangement that has either the purpose or likely effect of fixing the price for goods or services likely to be supplied by them.72 Four examples illustrate this. In Kyo,73 an Australian subsidiary of a Japanese company supplied bearings, an essential component for a wide range of automotive 69. 70. 71. 72. 73.
Competition and Consumer Act 2010, s 45DA(2). Competition and Consumer Act 2010, s 45DA(3). Trade Practices Act 1974, s 45A. Competition and Consumer Act 2010, ss 45AF, 45AJ. ACCC v Koyo Australia Pty Ltd [2013] FCA 1051. See also ACCC v NSK Australia Pty Ltd [2014] FCA 453.
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and industrial uses. It had a small share of the bearings market in Australia. Koyo’s managing director met with senior executives of two other bearings suppliers three or four times a year over dinner at restaurants in Sydney and Melbourne. The meetings were a confidential forum to discuss and share confidential information about their respective pricing plans. The result was an arrangement to implement increases in prices. Koyo admitted engaging in cartel conduct. [11.230] A second example is Dally,74 a small business example. As a part of their services, funeral homes provide civil funeral ceremonies arranged and conducted by celebrants. This case involved the price celebrants charged for those services. Dally provided education and training services for celebrants through a college it ran. It held a “Best Practice Funerals Conference” attended by about 60 celebrants. At the conference there was discussion about the fee funeral homes paid celebrants and a motion was passed authorising the College to write to funeral homes informing them of an increase in fees. Dally did so. The firm and its director admitted engaging in price-fixing. The third example is ANZ.75 The ANZ Bank and Macquarie Bank admitted that, on a number of occasions during 2011, traders employed by them in their Singapore offices engaged in discussions with traders at other banks in attempts to manipulate the setting of the Malaysian ringgit benchmark rate, thereby attempting to indirectly fix the price for Malaysian ringgit forward contracts. [11.240] Practices that might be common in the industry or profession can nevertheless amount to price-fixing. In Ranu,76 for example, two orthodontists who shared premises and common administrative and operational costs for their respective practices, but were not in partnership, made the mistake of agreeing that the fees each charged would be fixed by mutual agreement or, failing agreement, would be the fees recommended by the relevant dental association. As to the practice of sharing premises and administrative support, the court commented: Such arrangements are frequently adopted by members of professions in Australia, a notable example being barristers at independent Bars who share chambers and the cost of secretarial and other administrative expenses but do not practice in partnership. There is nothing illegal or dubious in such arrangements and in some respects they have important advantages, which enure to the interest of the public as much as for the practitioners themselves. Practitioners have the benefit of mutual support and the ability to exchange professional learning and experience on a daily basis without the liability and other risks of partnership.
However, in agreeing on fees the orthodontists went too far. They admitted that, by doing so, they had engaged in price-fixing. [11.250] Price-fixing is not limited to fixing the price for products or services. It can also arise where the parties decide to fix, control or maintain a discount, allowance, rebate or credit for either. To illustrate, in Kokos.77 four firms that provided educational consultancy services to Korean students admitted engaging in pricefixing. Their businesses advised prospective students about educational institutions in which they could enrol, arranged enrolments and payment of tuition fees. The 74. 75. 76. 77.
ACCC v Dally M Publishing and Research Pty Ltd [2007] FCA 1220; (2007) ATPR 42-176. ACCC v Australia and New Zealand Banking Group Ltd [2016] FCA 1516. ACCC v Ranu Pty Ltd [2007] FCA 1777; (2007) ATPR 42-202. ACCC v Kokos International Pty Ltd (No 2) [2008] FCA 5; (2008) ATPR 42-212.
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firms were remunerated by commissions from the schools. They competed by rebating part of their commission to the students in the form of reduced tuition fees. The firms decided to end discounting and, unusually, entered a written agreement to give effect to that agreement. The firms admitted engaging in price-fixing. [11.260] In Flight Centre,78 the ACCC ultimately succeeded in establishing that the agency had engaged in price-fixing when it attempted to get a number of airlines for which it was an agent to stop advertising and selling airline tickets directly to customers through the airlines’ websites at prices lower than the fares available to travel agents. Flight Centre had a “price beat guarantee” which meant that it had a number of problems in matching the airlines’ online prices, including the loss of a commissions and the consequent disincentive for its consultants, who were rewarded by a share of commissions earned. In ANZ,79 the issue was rebating commissions. The ACCC claimed that the bank had engaged in price-fixing because its agreements with independent brokers appointed, on a non-exclusive basis, to market the bank’s home loans, included a prohibition on the brokers offering commission rebates. The ACCC was unsuccessful, but only because the bank was not in competition with its brokers. [11.270] An example, from the USA, is Catalano.80 An agreement between competing beer wholesalers to eliminate short-term trade credit for retailers was regarded as an agreement to eliminate discounting and therefore per se illegal. Whether or not Australian courts would regard such an agreement as involving a discount, as meant by the phrase “discount, allowance, rebate or credit” is questionable. This because the term “allowance”, like the other terms, takes its meaning from the context.81 In another legislative context the term has been taken to involve a direct reduction from a sum of money to be paid.82 [11.280] Price fixing may result from indirectly agreeing on a course of conduct that fixes a price. Nicholas Enterprises83 is an example. The case involved beer retailing in Adelaide at a time when the price of bottled beer was regulated. Competition at the retail level manifested itself through the number of “free” bottles a retailer would provide for each dozen purchased. The Commission alleged a contravention of the then price-fixing prohibition. The prohibition on price-fixing is not limited to selling (or supply) prices. It also applies to goods or services acquired by the parties. Although there are no examples in Australia, in the United States, for example, agreements between competing hospitals to fix wages of registered nurses has been regarded as a per se contravention. 84 [11.290] There are many other examples of price fixing cartels, both local and international, a cross-section of which are digested in Appendix 3. The ACCC has 78. 79. 80. 81.
ACCC v Flight Centre Travel Group Ltd [2016] HCA 49. ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC 103. Catalano Inc v Target Sales Inc [1980–2] Trade Cases 63,352. Mutual Acceptance Co Ltd v Federal Commissioner of Taxation [1944] HCA 34; (1994) 69 CLR 389 at 402. 82. Loren Enterprises Pty Ltd v The Shell Company of Australia Ltd [2001] FCA 754 at [32]. 83. Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) [1979] FCA 51; 40 FLR 83; 26 ALR 609. 84. Fleischman v Albany Medical Center 728 F Supp 2d 191 (2010); [2010–2] Trade Cases 77,177. See also Cason-Merenda v Detriot Medical Center [2012–1] Trade Cases 77,893.
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taken action in relation to international cartels involved in the supply of fine paper,85 marine hose,86 power transformers87 and air cargo services.88.= Many of the domestic cartel cases have involved quite small businesses in limited locations. They have included petrol retailing,89,= internet cafes90 and abalone fishers.91
Fixing, Controlling or Maintaining Prices [11.300] The essence of price-fixing is that the relevant arrangement fixes, controls or maintains, or provides for the fixing, controlling or maintaining prices. That is the conduct the Act seeks to prohibit. In determining whether or not a provision does so, it is the substance and not the form that is the relevant consideration. The likelihood that an arrangement or understanding will have the relevant effect is to be assessed as at the time when the arrangement is made or the understanding is arrived at.92 [11.310] The term “fix” is not used in a technical sense. The primary meaning is, as set out in the Macquarie Dictionary, “to make fast, firm or stable”.93 Not every determination of a price, following discussion between competitors, will amount to a price “fixing”. The word “fixing” takes colour from its general context and from the words used with it — “controlling or maintaining”. There must be an element of intention or likelihood to affect price competition before price “fixing” can be established. This will often be a matter of inference, to be drawn from all of the evidence.94A price may be “fixed” even if all that is proposed is an increase to a certain figure, without any agreement between the parties as to when, by what machinery or by what amount, a further change may take place.95 [11.320] The term “control” has its natural or ordinary meaning which is “to exercise restraint or direction over”96 or, expressed slightly differently, “to exercise restraint or direction upon the free action of”97 a person or thing. There are degrees of control. There may be control in circumstances in which the exercise of restraint or direction is not total. An arrangement has the effect of “controlling price” if it 85. ACCC v April International Marketing Services Australia Pty Ltd [2010] FCA 16; (2010) ATPR 42-312. 86. ACCC v Bridgestone Corp [2010] FCA 584; (2010) ATPR 42-320. 87. ACCC v Roche Vitamins Australia Pty Ltd [2001] FCA 150; (2001) ATPR 41-809. 88. The ACCC took action against a significant number of airlines. See, for example, Air New Zealand Ltd v ACCC [2017] HCA 21; ACCC v Thai Airways International Public Co Ltd [2012] FCA 1434; ACCC v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395. 89. ACCC v Gullyside Pty Ltd [2005] FCA 1727. 90. ACCC v Trevor Davis Investments Pty Ltd [2001] FCA 952; (2001) ATPR 41-828. 91. ACCC v Australian Abalone Pty Ltd [2007] FCA 1834; (2007) ATPR 41-199. 92. ACCC v CC (NSW) Pty Ltd (No 8) [1999] FCA 954; (1999) 92 FCR 375; 165 ALR 468; (1999) ATPR 41-732. 93. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2005) ATPR 42-078. 94. Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1983] FCA 140; (1983) 68 FLR 70; 48 ALR 361; (1983) ATPR 40-367 at 72. 95. Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 27; (1985) 5 FCR 140 at 143; 59 ALR 589; (1985) ATPR 40-526; Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2005) ATPR 42-078. 96. The Macquarie Dictionary. 97. The Oxford English Dictionary. © 2018 THOMSON REUTERS
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restrains a freedom that would otherwise exist as to the price to be charged.98 It is therefore an apt description where ranges of pricing with a ceiling or floor are discussed, but with no greater precision.99 The term “control” serves an additional purpose. It means that a price fixed by someone who is not a participant in the relevant arrangement but then controlled by the participants, is caught by the prohibition. [11.330] As to the term “maintain”, it has a similar connotation to “fix” because it involves some element of continuity — not merely conduct that is momentary or transitory.100 To maintain a price assumes that it has been fixed beforehand. However, it has been suggested that there are factual instances in which it is arguable that a price could be maintained, even if not fixed beforehand. For instance, if tenderers were to reach an understanding that a component sufficiently influential on the price were to be agreed on.101 [11.340] The first case to explore what might be involved in fixing, controlling or maintaining prices, Email,102 appeared on first consideration to be a case of classic price-fixing. Email and Warburton Franki were the only manufacturers of electricity meters in Australia. They had identical price lists, sent each other new price lists immediately they changed prices or introduced a new meter or component and submitted identical tenders to electricity authorities in accordance with their respective price lists. Their course of conduct might have been thought to provide sufficient circumstantial evidence of the necessary meeting of the minds to constitute an arrangement or understanding, even though there was no direct evidence of communications between them other than through each supplying price lists to the other. Nevertheless, the Commission failed to establish its case. The court accepted evidence from the parties that it was not the exchange of price information that led to parallel prices, but rather market forces, competition and the necessity for Warburton Franki to follow Email, which was the market leader. [11.350] The first case to reach a Full Court, Radio 2UE,103 also resulted in a rejection of the claim that price-fixing was involved. In order to compete with AM radio stations, two FM radio stations formed a jointly owned company to publish a rate card for advertising on their two stations, thereby giving potential advertisers broader audience reach. The rate card consisted of a combination of their respective independently established rates. The arrangement was held not to be prohibited price-fixing. The court said: When two or more competitors agree to sell a joint package of goods or services, at a price agreed between them, in addition to goods or services which they ordinarily sell in competition with each other and with others, the necessary provision for arriving at a price for those goods or services is not, in our opinion, a provision for fixing, controlling or maintaining prices … . This is certainly true in those cases where the individual 98. ACCC v Australian Medical Association (WA) Inc [2003] FCA 686; (2003) 199 ALR 423; (2003) ATPR 41-945; at [195]; ACCC v CC (NSW) Pty Ltd [1999] FCA 954; (1999) 92 FCR 375; 165 ALR 468; (1999) ATPR 41-732 per Justice Lindgren; ACCC v Pauls Ltd (2002) [2002] FCA 1586; ATPR 41-911. 99. ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973; (2011) 196 FCR 212. 100. Justice Lockhart said in Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437 at 449; 44 ALR 557; (1982) ATPR 40-318. 101. ACCC v CC (NSW) Pty Ltd [1999] FCA 954; (1999) 92 FCR 375. 102. Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; (1980) ATPR 40-172. 103. Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1983] FCA 140; (1983) 68 FLR 70 at 72–73; 48 ALR 361; (1983) ATPR 40-367.
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competitors are entirely free to fix the price of their ingredients of the package, and to change it at any time. We believe that the proposition would still be correct without the proviso, but we do not need to reach a concluded opinion on that point in this case.
[11.360] An arrangement may constitute price-fixing if, instead of fixing, controlling or maintaining prices it provides for fixing, controlling or maintaining prices. The term “provide for” in this context requires more that an exchange of pricing information. It requires the parties to the arrangement to stipulate or arrange a price in the sense of agreeing on the price that is to be charged. It must be a means to an end.104 In Apco,105 the court observed: We were not referred to any authority on the term “providing for” …. In this context the term, coming from the Latin providere, to see before, suggests arranging for or stipulating beforehand (Macquarie Dictionary) or to make preparation for, get ready (Shorter Oxford Dictionary). What is it that is to happen in the future as a result of these arrangements or preparations? It must be price fixing, that is to say competitors agreeing on prices they will charge consumers for good or services. Examples of “providing for” price fixing … would be an arrangement that prices would increase by a particular formula, or an agreement that if one competitor increases prices the others will follow.106
Apco107 involved an allegation of retail petrol price-fixing. Petrol prices are quite cyclical, with prices rising and falling constantly. Retail petrol prices are also quite transparent because service stations display their prices prominently. A small change in price can have a significant impact on the volume of petrol sold. In cases that preceded Apco, a number of service station proprietors in Ballarat admitted participating in arrangements over a number of years to bring petrol discount cycles to an end. This was done by one of the participants increasing prices suddenly and significantly after alerting other proprietors that prices would increase. Others followed suit. However, Apco defended the case, asserting successfully that it did not make any arrangement or understanding with the other service station proprietors. The court did not accept an argument by the ACCC that “provide for” means that the relevant understanding was something that set up a process to enable notice of price rises to get around quickly. [11.370] Woollam108 is a more recent example. The case involved a practice called cover pricing in the building and construction industry. A cover price is a price given by one builder to another, in the context of a building tender, being a price below which the builder giving the price intends to tender and at or above which the other builder will tender if it intends to lodge a tender.
What are Prohibited Output Restrictions? [11.380] When two or more competitors, or potential competitors, agree to limit production, or likely production, of their products or services, or agree to limit capacity or agree to limit supply of their products or services, that amounts to an output restriction. 104. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2006) ATPR 42-078; Trade Practices Commission v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; (1980) ATPR 40-172. 105. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2006) ATPR 42-078. 106. [2005] FCAFC 161; (2005) 159 FCR 452 at 465 at [49]-[50]. 107. Apco Service Stations Pty Ltd v ACCC [2005] FCAFC 161; (2005) 159 FCR 452; (2006) ATPR 42-078. The High Court refused leave to the ACCC to appeal. 108. ACCC v TF Woollam & Sons Pty Ltd [2011] FCA 973; 196 FCR 212; (2011) ATPR 42-367. © 2018 THOMSON REUTERS
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[11.390] Two examples illustrate this. The first is Colgate-Palmolive.109 Colgate and two other companies were the leading suppliers of laundry detergents in Australia. Colgate and its competitors decided to replace standard-concentrate laundry detergent with ultra-concentrate products. This was because less detergent was used in ultra concentrates to achieve comparable washing results. There were significant cost savings and gross margin improvements as a result. However, there was a risk that, if all the major suppliers did not make the switch simultaneously, consumers may not prefer the new product over the old and, if Colgate moved alone, it would lose sales or market share. A series of meetings, telephone calls and correspondence took place between Colgate and the other firms, resulting in an understanding to the effect that each manufacturer would coordinate transition to the new product. In effect, from an agreed date supply of the old product was limited. Colgate admitted that the substantial purpose was to limit supply. [11.400] A second example is White Top Taxis.110 White Top ran a taxi network for independent taxi owners in a regional centre. It put in place a roster system to ensure that taxis were available at times of low demand and to distribute between taxi operators the burden of covering those times. The purpose was also to restrict the number of taxis available during off times. That contravened the Act. This decision illustrates one of the policy problems with per se contraventions. Although, on the facts, the court found that the purpose of the taxi company was to limit the supply of taxi services, the court does not explain how that conclusion was reached. An alternative conclusion may have been that the taxi company’s purpose was to provide sufficient incentive for taxi owners to keep their taxi on the road at quiet times, and that this was an efficient allocation of resources. This particular type of cartel is considered further in Chapter 16.
What are Market Allocation Cartels? [11.410] A market allocation cartel arises where two or more competitors, or potential competitors, enter or give effect to an arrangement to allocate between any or all of them: • those who acquire their products or services; • those who supply them with products or services; • the geographic areas in which they will supply products or services; or • The geographic areas in which they will acquire products or services. [11.420] Two examples illustrate this. The first is SIP Australia.111 SIP and its parent company distributed, in Australia and other countries, compressors and compressor parts imported from Italy. Another firm also distributed those products in Australia, sourced from the same Italian manufacturer. Initially, the firms met and discussed sharing shipping containers and joint importation of products so that they could import larger quantities of the products. But subsequently, the firms decided that it would be more effective for them if they divided up the market by allocating between them the sales channels and customers they would each market and sell to. 109. ACCC v Colgate-Palmolive Pty Ltd (No 2) [2016] FCA 528; Subsequently another manufacturer, Cussons Australia Pty Ltd, was found not to have been party to the contravention: ACCC v ColgatePalmolive Pty Ltd (No 4) [2017] FCA 1590. 110. ACCC v White Top Taxis Ltd [2009] FCA 88; (2009) ATPR 42-273. 111. ACCC v SIP Australia Pty Ltd [1999] FCA 858; (1999) ATPR 41-702.
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The second example is Vanderfield.112 The case involved dealers who had franchises for trucks from the same manufacturer and whose dealership locations were contiguous but did not overlap. Each held a franchise that specified their nonexclusive prime marketing area; a not-uncommon feature of dealership agreements. However, the dealers took the matter further, coming to an arrangement not to sell trucks to customers who were located in the other dealer’s prime marketing area. [11.430] The most significant recent domestic market sharing case, Renegade Gas,113 involved the supply of delivered LPG cylinders for use in forklifts. The cartel conduct took the form of an understanding between Renegade and a competitor, Speed-E-Gas, that neither would try to take over the other business and, if one did, the other business would retaliate for the customers it lost. The cartel operated for almost five years. An earlier case, Visy,114 involved admissions by a major manufacturer of corrugated fibreboard that, for almost five years, it had an arrangement with its major competitor to maintain their respective market shares and not deal with each other’s customers. Other cases involved ice works,115 irrigation equipment116 and truck sales.117
What are Collective Boycotts? [11.440] A collective boycott arises when two or more competitors, or potential competitors, enter or give effect to an arrangement between any or all of them for the purpose of preventing, restricting or limiting, in trade or commerce: • the supply of products or services by some parties to particular persons or classes of persons; or • the acquisition or products or services from particular persons or classes of persons. Direct boycotts — “we agree not to deal with x” — need no explanation. The cases have been mostly focused on what constitutes a class of persons for the purposes of this prohibition. [11.450] Two examples illustrate this. In Rural Press,118 the question was whether two rural newspapers that each agreed not to distribute its newspaper in the other’s area was sufficiently particular concerning who was precluded to constitute an arrangement to restrict supply to “classes of persons”. The High Court decided that it did. The second example is Gallagher.119 One hundred and forty five lorry owner/drivers in the concrete cartage industry were found to be parties to a collective boycott when
112. ACCC v Vanderfield Pty Ltd [2009] FCA 1535. 113. ACCC v Renegade Gas Pty Ltd [2014] FCA 1135. 114. ACCC v Visy Industries Holdings Pty Ltd [2007] FCA 1617. A penalty of $36 million was imposed on the company and $2 million on each of two executives. 115. ACCC v Ithica Ice Works Pty Ltd [2000] FCA 997; (2000) ATPR 41-777. 116. ACCC v Tubemakers of Australia Ltd [1999] FCA 1787. 117. ACCC v Vanderfield Pty Ltd [2009] FCA 1535. 118. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965. 119. Gallagher v Pioneer Concrete (NSW) Pty Ltd [1993] FCA 59; (1993) 113 ALR 159; (1993) ATPR 41-216. © 2018 THOMSON REUTERS
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they agreed among themselves to restrict the number of trucks that could enter the business and rostered trucks to give effect to an equalisation scheme. This particular type of cartel is considered further in Chapter 16. The treatment of worker boycotts has also had an interesting history and remains the subject of separate provisions in the Act. These are also dealt with in Chapter 16.
What is Bid Rigging? [11.460] Joint bids are neither uncommon nor undesirable from a policy perspective, especially where a range of skills is required for a project. It is only when they go beyond rational commercial arrangements that the question of cartel conduct arises. Although the term “bid” is defined to include tenders and steps that precede a tender,120 the Act does not use the term “bid rigging”. Bid rigging a collusive form of market allocation. The Act contains an elaborate description of offending conduct, reflecting a drafting style that attempts to achieve certainty, but adds to complexity. To take one example, although the term is not referred to in the US Sherman Act, courts have had no difficulty in developing a cohesive approach to dealing with the problem. The Antitrust Division of the US Department of Justice has summarised the law as developed by the courts in that country as follows:121 Bid rigging is the way that conspiring competitors effectively raise prices where purchasers — often federal, state, or local governments — acquire goods or services by soliciting competing bids. Essentially, competitors agree in advance who will submit the winning bid on a contract being let through the competitive bidding process. As with price fixing, it is not necessary that all bidders participate in the conspiracy.
[11.470] When will conduct that would be described in other jurisdictions as bid rigging contravene the Australian cartel provisions? The Act describes that conduct in the following terms:122 • one or more parties bidding but others not doing so; • some parties lodging less competitive bids; • some parties withdrawing from a bidding process; • some parties participating in a bidding process proceeding with their bids but in a manner that favours other bidders; or • parties agreeing on a material component of a bid in advance. A number of examples illustrate this. The first involves one party bidding and others agreeing not doing so. In Faulkner,123 small scrap metal merchants agreed that only one of them would bid at scrap metal auctions. To take one of the auctions involved, the Department of Defence held an auction in Bathurst to dispose of items no longer required. Twenty scrap metal dealers met before the auction agreed amongst themselves who would bid at the auction. After the auction, the merchants met at the local RSL Club to conduct a limited auction between them. 120. Competition and Consumer Act 2010, s 45AC. 121. US Department of Justice, “Price Fixing, Bid Rigging and Market Allocation Schemes: What Are They and What to Look For”, . 122. Competition and Consumer Act 2010, s 45AD(3)(c). 123. ACCC v DM Faulkner Pty Ltd [2004] FCA 1666.
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[11.480] The second example is of one party lodging a less competitive bid. In Admiral,124 air conditioning and mechanical services contractors in Western Australia made arrangements to ensure that the contractor who they agreed should get the job put in the lowest tender. The contractors would meet before a forthcoming tender and decide who was to win it. That contractor would then provide each of the other tenderers with a “cover price” — the minimum price for the other contractors to submit their tenders. That meant that the selected contractor was able to submit its tender knowing that its price would be the lowest. Admiral is also an example of parties participating in a bidding process proceeding with their bids but in a manner that favours another bidder. The contractors who were not to win the tender agreed not to reduce their tender prices below the cover price during post-tender negotiations with the builders and owners. [11.490] The third, Yazaki,125 involved automotive electrical distribution systems that distribute power and send electrical signals to other components in the vehicle. It related to a long-standing arrangement between Yazaki and a competitor that, when manufacturers issued requests for quotations for the systems they would meet and seek to agree on allocation of supply between them, giving effect to that allocation by exchanging and agreeing on the prices they would submit. They also agreed that, once an award had been made, neither would compete against the other for supply of the systems to that manufacturer for that model vehicle. Finally, they agreed that neither would disclose the existence of the arrangement to the manufacturers or to any regulatory authority. The cartel was discovered and proceedings instituted as a result of an immunity application. [11.500] The final example is a controversial case, with an unsatisfactory outcome. Norcast126 was, unusually, a private action between the seller of a business and the ultimate buyer. Norcast was the owner of a large Canadian mining consumables company that its Swiss private equity owners decided to sell. Bradken, a competitor in various countries around the world, was interested in buying Norcast but was not invited to bid and had reason to believe that if it did its approach would not have been welcomed. Consequently, it came to a commercial arrangement with a private equity firm that, if the firm bid and was successful it would buy the business from the private equity firm for a marked-up price. That is what happened. When Norcast’s owner discovered what had occurred, it successfully brought private proceedings claiming that Bradken had engaged in bid rigging. An appeal was lodged but never resolved because the parties agreed to settle the dispute and the primary judge’s orders were set aside by consent (but her findings not overturned).127 The case was controversial for two reasons. First, it involved a commercial arrangement to which the cartel provisions, being precisely drafted, may have strictly applied, but that was not finally determined. Second, Norcast was a Canadian company with no business in Australia, its private equity owner was based in Switzerland and the tender was conducted outside Australia. The case could only be brought because
124. ACCC v Admiral Mechanical Services Pty Ltd [2007] FCA 1085; (2007) ATPR 42-174. See also ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973. 125. ACCC v Yazaki Corp (No 2) [2015] FCA 1304. 126. Norcast S ár L v Bradken Ltd (No 2) [2013] FCA 235; (2013) 219 FCR 14. 127. Bradken Ltd v Norcast Sár L [2013] FCAFC 123. © 2018 THOMSON REUTERS
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Bradken was an Australian company and the cartel provisions were then not, but now are, limited to conduct affecting competition in a market in Australia.128 [11.510] The Harper Panel was critical of the application of the cartel provisions to instances like Norcast. The Panel recommended two amendments to the cartel provisions. The first was that they should only apply to those who compete to supply products or services to, or acquire them from, residents of Australia or those carrying on business here. Second, the prohibition should be confined to conduct involving firms that are actual competitors, rather than those in relation to whom competition is a mere possibility.129 The 2017 amendments adopted the first recommendation, but not the second.
Cartel Contract, Arrangement or Understanding [11.520] Conduct can only amount to a cartel if there is an offending provision in a contract, arrangement or understanding. That provision must form part of an arrangement between two or more persons, at least some of whom are either competitive with each other, or who, but for the arrangement, would be likely to be in competition with each other.130 There can be no cartel contravention unless the parties to it entered or gave effect to a contract, arrangement or understanding.131 Although concerted practices are caught by other provisions that apply where conduct is anticompetitive, for the per se cartel provisions a concerted practice is not sufficient. For example, in Eggs,132 the ACCC failed to establish that the Australian Egg Corporation, its managing director and a number of egg producers had engaged in cartel conduct when dealing with the oversupply of eggs and its effect on price because the ACCC failed to establish that the parties had come to an arrangement or understanding.
Purpose of a Cartel [11.530] When it comes to purpose, it is not the purpose of the participants that is relevant. It is the purpose of a provision of the offending arrangement under consideration. This has led to the same difficulty in determining the meaning of purpose in the cartel prohibition as it has with the prohibition against anticompetitive contracts, arrangements and understandings. As was explained in Chapter 10, the concept that a provision of a contract, arrangement or understanding might have a purpose is as artificial as the concept that a corporation may have a purpose. This is because a purpose must exist in the mind. It cannot exist anywhere else.133 Where purpose is to be determined the court must “attribute a purpose to an artificial or notional mind that is deemed responsible
128. Competition and Consumer Amendment (Competition Policy Review) Act 2017 Act No 114 of 2017, sch 2. 129. Harper Report, p 365. 130. Competition and Consumer Act 2010, s 45AD(4). 131. See Chapter 10. 132. ACCC v Australian Egg Corp Ltd [2016] FCA 69. 133. Chandler v DPP [1964] AC 763; [1962] 3 All ER 142; [1962] 3 WLR 694 at 804–805 (AC).
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Parties Must Be in Competition with Each Other
for [the relevant] act or omission”.134 This is explored further at [10.490], but the term refers to the “end in view” — the effect sought to be achieved.135 [11.540] The effect of a provision is, of course, the likely direct consequence of that provision — what has happened or is likely to happen, objectively assessed and ignoring the subjective state of mind of the relevant parties.136 In determining the effect of a provision, regard is to be had to the effect when considered together with other provisions of that or any other contract, arrangement or understanding between relevant parties.137
Parties Must Be in Competition with Each Other [11.550] Conduct described as constituting cartel conduct will only give rise to a per se contravention if two or more participants are either competitors, or likely to be competitors.138 Whether or not parties, or some of them, are or would likely be in competition with each other is a question of fact. In most cases this is a relatively straight forward factual question, but occasionally a case arises in which the proposition is tested. [11.560] The likelihood of participants being competitive with each other has given rise to controversy. The term “likely” has various shades of meaning. The only guidance given in the Act is that the term “includes a possibility that is not remote”.139 In Norcast,140 already discussed at [11.500], the controversy included whether Bradken and the private equity firm were ever really in competition with each other. There was conflicting evidence on whether a bid by Bradken would have been accepted because of animosity between the two businesses involved. Nevertheless, Bradken and the private equity firm with which it made the arrangement to bid were found to be likely competitors, were it not for the bidding arrangement. The Harper Panel thought that, if followed in other cases, Norcast set a very low threshold for determining when parties are likely to be competitors. The Panel recommended that likelihood should assessed on the balance of probabilities (that is, more likely that not).141 However, no change was made in that regard.
134. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; ATPR 41-943 at [40]. 135. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; ATPR 41-943. 136. ACCC v Pauls Ltd [2002] FCA 1586; (2003) ATPR 41-911 at [104] (FCA). 137. Competition and Consumer Act 2010, s 45AD(8). This is directed at conduct of the type considered in Re British Basic Slag Ltd Agreements [1963] 1 WLR 727; [1963] 2 All ER 807 at 746 (WLR). 138. Competition and Consumer Act 2010, s 45AD(4). Although the Act extends in addition to bodies corporate related to the parties to the contract, arrangement or understanding. Competition and Consumer Act 2010, s 45AC. 139. Competition and Consumer Act 2010, s 45AB. 140. Norcast S ár L v Bradken Ltd (No 2) [2013] FCA 235; (2013) 219 FCR 14. 141. Harper Report, p 591. © 2018 THOMSON REUTERS
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[11.570] In McPhee,142 an express freight carrier made an arrangement with another express freight carrier to the effect that, in relation to two of McPhee’s customers, the other carrier would provide quotes that were not less than McPhee’s quote, known generally as “cover quotes”. McPhee argued, unsuccessfully, that the other freight carrier was not in competition with McPhee because the other carrier had a practice of not tendering against McPhee. [11.580] In another example, Pauls,143 the ACCC alleged that Pauls and others had arranged to fix the price for the supply of milk in the Northern Territory. Pauls was a milk processor. It had entered an agreement with a milk producer in the Northern Territory to the effect that Pauls would buy unprocessed milk from the producer at a specified price and the producer, who also distributed processed packaged milk, would buy the processed product from Pauls at an agreed price. In considering whether the arrangement for Pauls to buy unprocessed milk from the producer at a specified price amounted to price-fixing, the court had to consider whether Pauls and the producer were in competition in the supply of unprocessed milk. It was clear that the producer was in competition with other producers of raw milk, but, as Pauls did not produce raw milk, the obvious conclusion was that Pauls and the producer were not in competition with each other in relation to the supply of raw milk. They were, however, in competition in relation to the supply of processed packaged milk.
Exchanging Information and Price Signalling [11.590] Information sharing, especially in relation to prices, is a particularly problematic area when it comes to cartel investigation. It is generally accepted that publication of information, including prices, is important for an informed market, and for that reason information exchanges are rarely regarded as per se illegal. However, it is also recognised that, in concentrated markets, frequent exchanges of information on future pricing intentions can facilitate price collusion or coordinated conduct and may provide evidence of an arrangement or understanding, or, in the case of price signalling, an attempt to make an arrangement or come to an understanding with competing firms. [11.600] This subject is explored in more detail at [10.800]. It is sufficient, for current purposes, to note a few brief points. First, an unsuccessful attempt to strengthen the Act by adding a special Division144 to address information exchanges has been repealed. The Act now applies to concerted practices instead, but involvement in a concerted practice will not contravene the cartel prohibition. It will only amount to a contravention if the information exchange has the purpose or likely effect of substantially lessening competition. Second, as Email and Radio 2UE illustrate,145 not all information exchanges, even between close competitors, can be regarded as fixing prices.
142. J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; 172 ALR 532; (2000) ATPR 41-758. 143. ACCC v Pauls Ltd [2002] FCA 1586; (2003) ATPR 41-911. 144. Former Part IV Division 1A. See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 398. 145. See [11.260].
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Circumstances Not Regarded as Cartel Conduct
Where Must They Compete? [11.610] The Harper Panel had noted that, although the Act is directed at conduct harming competition in markets in Australia, the cartel provisions were not expressly limited to conduct that between competitors in Australian markets.146 Norcast147 was the defining example. In that case the cartel prohibition was found to apply to an arrangement between a private equity firm and a potential bidder in a tender for the sale of a Canadian corporation, where the seller was based in Switzerland and the tender was conducted outside Australia. The private equity firm had been the successful buyer and it subsequently on-sold the company to the respondent, who did not bid. Now, in order for the prohibition to apply, at least two of the participants must be in competition with each other in trade or commerce in Australia.148
Circumstances Not Regarded as Cartel Conduct [11.620] The range of conduct that can constitute cartel conduct is, as we have seen, very broad. With criminal as well as civil penalties applying where cartel conduct is engaged in by competitors or likely competitors, the consequences of a contravention are very significant. It is therefore understandable that the Act contains some carve outs. None of the arrangements carved out from per se contravention is, however, exempted from the Competition and Consumer Act 2010 altogether. They remain subject to the competition test that applies to anticompetitive arrangements and concerted practices.149
Recommended Prices [11.630] The first carve-out is for recommended prices. The cartel prohibition does not apply to arrangements that do no more than recommend, or provide for recommending, a price, discount, allowance, rebate or credit.150 If the purpose of the recommendation is just that — to make a recommendation rather than fix the price — then it should not be caught by the price-fixing prohibition. On the other hand, if the recommendation is a ruse for actually fixing prices, then the carve-out will not apply. It is the substance of the arrangement, not the form or the description the parties give to it, that is relevant.151 [11.640] As intent is irrelevant,152 one of the issues with this carve-out is that there is a risk that, if a large enough group of those who are party to the price recommendation 146. The term “trade or commerce” is defined in s 4 of the Competition and Consumer Act 2010 to mean trade or commerce in Australia or between Australia and places outside Australia. 147. Norcast S árL v Bradken Ltd (No 2) [2013] FCA 235; (2013) 219 FCR 14. The case was regarded as unsatisfactory in a number of respects. An appeal was lodged but resolved with the orders being set aside by consent under the Federal Court Rules: see Bradken Ltd v Norcast S ár L [2013] FCAFC 123. 148. Competition and Consumer Act 2010, s 45AD(4). 149. See Chapter 10. 150. Competition and Consumer Act 2010, s 45AD(6). 151. Competition and Consumer Act 2010, s 45AD(11). 152. Trade Practices Commission v Tubemakers of Australia Ltd (No 2) [1983] FCA 93; (1983) 76 FLR 455 at 473; 47 ALR 719; (1983) ATPR 40-358. However, when it comes to criminal liability the fault element referred to above must be established. © 2018 THOMSON REUTERS
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follow the recommendation, it may be regarded as more than a recommendation. However, there would need to be evidence of more than just the recommendation, such as that those charging the recommended price regard themselves as obliged to do so. No case challenging a recommended price has yet come before Australian courts, either under the cartel provisions or under other provisions of the Act. Manufacturers commonly recommend prices for the sale of their products. Where the manufacturer or supplier does not engage in retail sale of its products (either directly or through associated firms) in competition with retailers who sell its products, that cannot amount to price-fixing as far as the manufacturer or supplier is concerned, regardless of this carve-out, because the manufacturer or supplier is not in competition with the retailers. However, where the manufacturer or supplier also sells direct-to-market, such as through a website, they are at risk unless the recommended price comes within this carve-out.153
Cooperative Buying and Selling [11.650] The second carve-out is in relation to cooperative buying and selling arrangements. The cartel prohibition does not apply in so far as the arrangement provides for the fixing of prices, discounts, rebates or allowances for goods or services collectively acquired, directly or indirectly, by the parties, or to joint price advertising of those goods or services.154 Buying groups are a quite common means by which smaller retailers combine to buy jointly to achieve prices that keep them competitive with larger retailers, especially in relation to groceries, liquor, whitegoods and electrical goods. To come within this carve-out purchasing does not need to be undertaken jointly. All that is required is that the goods or services be collectively acquired. The reason for this is that it is common for buying cooperatives to negotiate volume discounts and specials with manufacturers and wholesalers, but not provide a central buying function. Members of the cooperative are advised of the products and prices and place orders direct with the manufacturer or wholesaler, buying the products individually. [11.660] The meaning of the term “collectively acquired” has not been the subject of judicial consideration. The term has its genesis in the recommendations of the Swanson Committee’s recommendations relating to the ability of small business to compete with big business. The term “collective” means nothing more than “a group of individuals taken together”.155 It would appear that firms, large and small, can join together to agree on the price at which they will collectively acquire goods or services and that will not constitute a contravention of the cartel provisions of the Act. Of course, any such arrangement would still be subject to the substantial lessening of competition test under other provisions of the Act.156 [11.670] The position with advertising is different. There are two requirements for the carve-out to apply. First, the advertisement can only be of products or services collectively acquire. Second, the advertising must be joint advertising. Joint advertising, particularly of “specials” by smaller grocery, liquor, whitegoods and electrical goods retailers, and some larger retailers, is also quite common. Again, the exemption does not draw a distinction between small business and big business, 153. See, for example, ACCC v Flight Centre Travel Group Ltd [2016] HCA 49. 154. Competition and Consumer Act 2010, s 45AU. 155. The Macquarie Dictionary (3rd ed, 1997). 156. Competition and Consumer Act 2010, s 45.
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although joint advertising of the price of goods or services by major competitors is likely to fail the substantial lessening of competition test. [11.680] There is a practice of manufacturers advertising their product at a particular price and listing in the advertisement participating retailers from whom the product can be purchased for at that price. This practice has not been uncommon in, for instance, the motor vehicle industry. Whether or not this type of advertising comes within the carve-out has not been tested, but, at least as a policy matter, it should not, of itself, be a practice that amounts to cartel conduct between participating retailers.
Joint Ventures [11.690] The third carve-out is for joint ventures. This carve-out has an interesting history. It first appeared in the Act in 2006 as a defence to alleged price-fixing. The defence was available if the participants in what would otherwise be a per se pricefixing contravention established that the arrangement was for the purposes of a joint venture and that it did not have an anticompetitive purpose or likely effect.157 That defence did not prove to be sufficient so, in 2009, with the broadening of the prohibition on cartel conduct and the introduction of criminal penalties, an earlier version of this carve-out was introduced.158 The 2009 version was controversial from the start because the drafting of it was complex and thought to be unreasonably limiting. In order to meet the second of those criticisms, the Minister issued a supplementary Explanatory Memorandum when the Bill was before the Parliament, setting out examples of circumstances in which the carve-out would apply.159 [11.700] The Harper Panel received submissions, which it accepted, that the narrow application of the 2009 carve-out was limiting legitimate commercial transactions. The Panel concluded that:160 A broad exemption should be included for joint ventures, whether for the production, supply, acquisition or marketing of goods or services, recognising that such conduct will be prohibited by section 45 of the CCA if it has the purpose, effect or likely effect of substantially lessening competition.
In the result the carve-out was amended and now applies where the relevant provision is for the purposes of a joint venture, reasonably necessary for undertaking the joint venture and the joint venture is not carried on for the purpose of substantially lessening competition.161 [11.710] What is a joint venture? It is simply an association formed for the purposes of a particular trading, commercial, mining or other undertaking, with a view to mutual profit, with each participant usually contributing funds, property or skill. The term also refers to a joint undertaking or activity carried out through
157. Trade Practices Act 1974, s 76D: see Miller’s Annotated Trade Practices Act (Thomson Reuters, 30th ed, 2009), p 768. 158. Trade Practices Act 1974, ss 44ZZRO and 44ZZRP: see Miller’s Annotated Trade Practices Act (Thomson Reuters, 32nd ed, 2010), pp 360–366. 159. See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 38th ed, 2016), pp 498–499. 160. Harper Report, p 367. 161. Competition and Consumer Act 2010, ss 45AO, 45AP. © 2018 THOMSON REUTERS
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a medium other than a partnership, such as a company, a trust, an agency or joint ownership. In United Dominions162 the High Court had said: The term “joint venture” is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, “adventure”) will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership. The borderline between what can properly be described as a “joint venture” and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred.
The Dawson Committee thought that common law meaning to be wide enough to extend to practically any joint activity in trade or commerce;163 a well-founded view. [11.720] The term “joint venture” has conventionally and commonly been used to refer to an association for the purposes of a single undertaking rather than for the continuous carrying on of a business and the term has been used in a general sense to describe undertakings that do not have legal attributes differing from partnerships. Common characteristics of joint ventures include participants: • holding proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common; • exercising joint control of the undertaking; • contributing to the joint undertaking, but not necessarily equally; • enjoying rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made; • having a joint (or community of) interest in the performance of the undertaking’s purpose; and • associating in the undertaking for mutual commercial gain.164 The Act recognised two forms of joint venture:165 • unincorporated ventures between two or more persons, whether corporations or not, carrying on activities in trade or commerce jointly whether or not the relationship is one of partnership; and • incorporated ventures carried on by two or more participants in trade or commerce for a joint purpose, with joint control or through their ownership of the shares. The Act also makes it clear that, in relation to an incorporated venture, the constitution of the venture is taken to be a contract or arrangement between the shareholders. [11.730] Does the carve-out apply to all joint ventures? The short answer is no, although the joint venture carve-out is now broader in its application than it was. Up until the 2017 amendments, in order to come within the carve-out, a joint venture had to have been carried on in trade or commerce and the joint venture had to have been
162. United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; 157 CLR 1; 60 ALR 741. 163. Harper Report, p 141. 164. Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749. 165. Competition and Consumer Act 2010, s 4J.
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for the production of goods and/or the acquisition or supply of goods or services.166 Whether or not this is sufficient to carve out research and development joint ventures was never determined. [11.740] The 2017 amendments changed this. Now the carve-out applies to the cartel provisions entered or given effect for the purposes of a joint venture, where the provision is reasonably necessary167 for undertaking the joint venture, the joint venture is not carried on for the purpose of substantially lessening competition, and the joint venture is for any one or more of the following: • production of goods; • supply of goods or services; and • acquisition of goods or services.168
Other Carve-Outs [11.750] There are a number of other carve-outs, included to remove the potential for overlap with other provisions of the Act. They are, carve-outs for exclusive dealing conduct,169 mergers170 and dual listed company arrangements.171 The cartel provisions also do not apply where the only parties to the cartel contract, arrangement or understanding are related bodies corporate.172 Finally, the cartel provisions do not apply where an authorisation or a collective bargaining notice is in force.173
Accessing a Carve-Out [11.760] Any participant in a contract, arrangement or understanding that would constitute cartel conduct unless a carve-out applies bears the evidential burden of establishing that it does. This means that, in order to rely on a carve-out, the participant’s defence must plead facts that give rise to the carve-out applying.174
Criminal Liability [11.770] Cartel conduct to which the Act applies can result in either civil penalty or criminal liability. The Act differentiates between the two by requiring a “fault element” in relation to the latter. Although the Act simply states that it is an offence to make or give effect to an arrangement containing a cartel provision, more needs to be established because the Australian Criminal Code requires that there be both a fault element and a physical 166. Former Competition and Consumer Act 2010, ss 44ZZRO, 44ZZRP: see Miller’s Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 387–394; Competition and Consumer Act 2010, ss 45AO(1), 45AP(1). 167. As to this term, see Thomas v Mowbray [2007] HCA 33. In Brown v Tasmania [2017] HCA 43 at [139] the High Court, in a different context, applied the following test: whether there are alternative, reasonably practicable, means of achieving the same object but which have a less restrictive effect. 168. Competition and Consumer Act 2010, ss 45AO(1), 45AP(1). 169. Competition and Consumer Act 2010, s 45AR. 170. Competition and Consumer Act 2010, s 45AT. 171. Competition and Consumer Act 2010, s 45AS. 172. Competition and Consumer Act 2010, s 45AN. 173. Competition and Consumer Act 2010, ss 45AM, 45AL. 174. Competition and Consumer Act 2010, s 45. © 2018 THOMSON REUTERS
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element to an offence. In this case, the fault element is either knowledge or belief.175 This means that: • the cartel offence of entering an arrangement can only be established if the person alleged to have committed the offence either knew or believed that they were entering into an arrangement and that the arrangement contained a cartel provision; and • the cartel offence of giving effect to an arrangement can only be established if the person alleged to have committed the offence either knew or believed that they were had entered into an arrangement that contained a cartel provision and knowingly gave effect to it. Knowledge in this context means that the person must be proven to be aware that the relevant circumstance exists or will exist in the ordinary course of events. However, a person can be criminally responsible for an offence even if, at the time of the conduct constituting the offence, the person is mistaken about, or ignorant of, the existence or content of the Competition and Consumer Act 2010. [11.780] Although the Act does not differentiate between different levels of cartel behaviour, the focus for the purposes of criminal penalties has been on “hard-core” or “serious” cartel conduct. The policy position is that it is only hard core cartels that will attract criminal sanctions. In order to reflect this, the ACCC and the Commonwealth DPP have negotiated a protocol that includes the types of cartels that will be considered for criminal prosecution.176 It provides that the ACCC will not ordinarily refer relatively minor cartel conduct to the Commonwealth DPP for consideration for prosecution. Referral of possible serious cartel conduct will concentrate upon conduct of the type that can cause large scale or serious economic harm. The ACCC is “more likely to consider” conduct as a serious cartel if one or more of the following factors is present:177 • the conduct was covert; • the conduct caused, or could have caused, large scale or serious economic harm; • the conduct was longstanding or had, or could have had, a significant impact on the market in which the conduct occurred; • the conduct caused, or could have caused, significant detriment to the public, or a class of the public, or caused, or could have caused, significant loss or damage to one or more customers of the alleged participants; • one or more of the alleged participants has previously been found by a court to have participated in, or has admitted to participating in, cartel conduct either criminal or civil; • senior representatives within the relevant corporation(s) were involved in authorising or participating in the conduct; • the government and thus, taxpayers, were victims of the conduct — even where the value of affected commerce is relatively low; and • the conduct involved the obstruction of justice or other collateral crimes committed in connection with the cartel activity. 175. Competition and Consumer Act 2010, s 45AF(2). 176. The protocol, reflected in a formal Memorandum of Understanding is at . 177. Memorandum of Understanding, para 4.2, .
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Immunity Policy178 [11.790] The ACCC has an immunity policy aimed at detecting, stopping and deterring systematic, deliberate and covert cartel conduct. The ACCC’s immunity policy applies in relation to cartel conduct considered for either civil or criminal action. Civil immunity is granted by the ACCC and criminal immunity by the Commonwealth DPP, but all applications for immunity are handled by the ACCC. Immunity may be granted to corporations (including cooperating executives) or to individuals. Corporate immunity is only available to the first corporation to seek it, but only if: • the corporation meets the following requirements; and • at the time the application is made, the ACCC has not received written legal advice that it has reasonable grounds to institute proceedings in relation to at least one contravention of the Act arising from the cartel conduct. [11.800] The requirements are: • although the corporation was a party to the cartel, it did not coerce others to participate in the cartel; • the corporation admits that its conduct may constitute a contravention or contraventions of the cartel provisions; • the corporation makes full and frank disclosure, providing the ACCC with all evidence and information available to it relating to the suspected cartel and cooperates fully, on a continuous and expeditious basis, throughout the ACCC’s investigation and any ensuing court proceedings; • the admissions and cooperation are a truly corporate act (as opposed to isolated confessions of individual representatives); and • the corporation ceases its involvement in the suspected cartel or indicates to the ACCC that it will cease its involvement in the cartel. [11.810] In addition, individuals are entitled to seek personal immunity, even if the corporation does not do so. That immunity is available to the first person who meets the following requirements, but only if, at the time the application is made, the ACCC has not received written legal advice that it has reasonable grounds to institute proceedings in relation to at least one contravention of the Act arising from the cartel conduct: • the person was a party to the cartel, in whatever capacity, but did not coerce others to participate; • the person makes full and frank disclosure, providing the ACCC with all evidence and information available to the person relating to the suspected cartel and cooperates fully, on a continuous and expeditious basis, throughout the ACCC’s investigation and any ensuing court proceedings; and • the person either ceases their involvement in the cartel, or indicates to the ACCC that they will cease their involvement. Yazaki179 is a practical example of the immunity policy in operation. A long-standing bid-rigging cartel was discovered and successfully broken as a result of an immunity application by one of the parties to the cartel. 178. For further information on the immunity policy see Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 627–630, 2243–2255. 179. ACCC v Yazaki Corp (No 2) [2015] FCA 1304. © 2018 THOMSON REUTERS
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Digest of Cases [11.820] Appendix 4 contains a digest of cases decided in relation to the prohibition against price-fixing, illustrating how the courts have dealt with the prohibition on price-fixing in practice.
FURTHER READING Author
Title
Citation
Beaton-Wells “Criminalising Cartels: Australia’s Slow Conversion” Beaton-Wells Australian Cartel Regulation and Fisse Buhart Leniency Regimes Crane “The Story of United States v Socony-Vacuum: Hot Oil and Antitrust in the Two New Deals”
Doherty
Evenett, Levenstein and Suslow Mehta and Sakkers
OECD
Reid and Henderson Stewart
“Enforcement and Remedies: Cartel Conduct: A Survey of the ACCC’s Enforcement Activity” “International Cartel Enforcement: Lessons from the 1990s”
(2008) 31 World Competition 205 Cambridge University Press, 2011 Sweet & Maxwell, 5th ed, 2015 Benjamin N. Cardozo School of Law Jacob Burns Institute for Advanced Legal Studies 2006 Working Paper No. 173 Social Science Research Network http:// ssrn.comb /abstract= 945455) (2014) 22 Australian Journal of Competition and Consumer Law 46 World Bank Policy Research Working Paper No. 2680. http:// papers.ssrn.com/sol3/papers. cfm?abstract_id=265741 The International Competition Network at Ten (ICN 2011)
“The Cartel Working Group of the ICN: Firm International Collusion That Would Make Cartelists Jealous” “Recommendation of the 921st session on 25 March 1998 Council Concerning Effective Action Against Hard Core Cartels” “Cartels: Criminal Sanctions (2006) 14 Trade Practices Law and Immunity Policy” Journmal 199
“Cartels, Extraterritoriality and (2015) 43 Australian Business the Harper Review” Law Review 474 Veljanovski The Economics of Cartels Case Associates 2007 http:// ssrn.com/abstract=97561 Werden and “Why Price Fixers Should Go (1987) 32 Antitrust Bulletin 917 Simon to Prison”
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UNILATERAL CONDUCT LAWS: MONOPOLISATION AND MISUSE OF MARKET POWER [12.30] [12.70] [12.90]
[12.190]
[12.330]
[12.670] [12.680]
[12.760] [12.770] [12.830]
[12.900]
12
Differences in Policy Objective ........................................................... Australian Policy Objective .................................................................. United States, United Kingdom, EU and Australia — Early Developments ................................................. [12.90] United States ...................................................................... [12.120] United Kingdom .................................................................. [12.130] European Union .................................................................. [12.150] Australia .............................................................................. Development of Australian Unilateral Conduct Law ........................... [12.250] Controlling a Market: .......................................................... [12.310] Other Changes ................................................................... [12.320] Fundamental Problems ...................................................... The Australian Misuse Law ................................................................. [12.340] Market Power ...................................................................... [12.380] How Much Market Power? ................................................. [12.420] Market Power Tequirements — Other Jurisdictions ........... [12.440] Buyer Power ....................................................................... [12.450] Conduct or Purpose? .......................................................... [12.510] Identifying the Market ......................................................... [12.530] Purpose .............................................................................. [12.600] Using Market Power ........................................................... [12.610] Competition or Competitors? .............................................. [12.660] What Markets? .................................................................... Australia Old and New ......................................................................... Predatory Pricing ................................................................................. [12.690] A Predatory Pricing Prohibition .......................................... [12.710] Recoupment ....................................................................... [12.720] Relevant Cost ..................................................................... [12.730] Sustained Period ................................................................ [12.740] Business Reason ................................................................ Refusals to Supply .............................................................................. Unanswered Questions ....................................................................... A Quest for a Standard ........................................................................ [12.840] Effects-Balancing Test ........................................................ [12.850] Disproportionality Test ........................................................ [12.860] No-Economic-Sense Test .................................................. [12.870] Profit Sacrificing Test .......................................................... [12.880] Equally Efficient Competitor Test ....................................... [12.890] Consumer Harm Test ......................................................... Digest of Australian Cases ..................................................................
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[12.10] Competition law has its origins in attempts to constrain excesses by powerful corporations, whether alone or through arrangements with others of like mind, in seeking to control markets for their own benefit. From the viewpoint of economic analysis, as the diagram at [6.110] illustrates, if a firm has the ability to foreclose a market, the result is a reduction in both consumer welfare and in total welfare. Perfectly competitive markets — markets in which each participant having an equal opportunity to price efficiently — only exist in theory. In the real world, competitors will be of different sizes, have differing resources and product ranges and have access to inputs at different prices. As a consequence their capacities to compete will differ. Each will have different competitive advantages and disadvantages. Some will acquire market power through legitimate, tough competition. For others, to do so will remain an unattainable aim. Some will use their position to compete more effectively, to the benefit of consumers and the economy. Others will do so reprehensively, seeking illegitimate gain. Consequently, good public policy dictates that competition laws should include prohibitions on predatory unilateral conduct by firms that have market power. The prohibitions should address conduct that adversely affects the competitive process, while not constraining healthy competitive activity. This is no easy task. [12.20] The US Sherman Act was introduced to curb the growing power of trusts, particularly in the railways and in oil production. But the drafters of that legislation recognised that market power is not only held by combinations of like-minded firms that would be competitors had they not formed a cartel to control or dominate a market, or even by a single firm if sufficiently powerful. History has shown that individual firms can grow so large and become so dominant that they can, without involving anyone else, control markets for their own benefit, leading to higher prices and reduced quality or service. This is particularly the case in small economies. For this reason, a focus on monopolisation of markets has been part of competition jurisprudence since industrialised economies first started to develop competition policy. The consequence has been a variety of unilateral conduct laws.
Differences in Policy Objective [12.30] While there is general agreement that monopolising unilateral conduct should be one of the focuses of competition policy, there is significant disagreement on what the policy objectives should be, and also on how to articulate a law to reflect those objectives. There remains significant divergence among jurisdictions about the notion and measurement of dominance, the range of practices that should be condemned as abusive and the possible remedies to abusive conduct. [12.40] According to a report of the International Competition Network, summarising responses from 33 competition agencies, while the most often cited policy objectives for unilateral conduct laws are ensuring an effective competitive process and promoting consumer welfare, others include ensuring economic freedom, promoting fairness and equity, and ensuring a level playing field for small and medium enterprises.1 The report noted that seven agencies identified ensuring a level playing field for SMEs as an explicit or implicit goal, with the goal being specific in three.2 1. ICN Unilateral Conduct Working Group Report on Objectives of Unilateral Conduct Rules presented at the ICN’s 6th annual conference, Moscow, 30 May 2007, . 2. Canada, South Africa and Switzerland. Report, p 17.
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Australian Policy Objective
[12.50] The Australian unilateral conduct law focuses only on unilateral conduct likely to distort competition, but that has only recently been the case. Australian law has never had the wider aims evident in some other jurisdictions. That, especially in relation to SMEs, has been a cause of ongoing controversy in this country.3 [12.60] Even for those jurisdictions that have similar policy objectives, distinguishing between conduct that should be prohibited on competition grounds and conduct that should not is no easy task. As the ICN has noted:4 Conduct that may constitute an abuse when performed by a dominant firm can be procompetitive, or competitively neutral, when performed by firms that are not dominant. Alternatively, firms that are not dominant are not likely to succeed in harming the competitive process using that conduct. The requirement for dominance thus serves as a “filter” that allows the laws, and the agencies enforcing them, to focus on conduct that may possibly harm competition.
Australian Policy Objective [12.70] The policy objective in Australia is to protect the competitive process, rather than any particular group of competitors. Recognising that competition is, by its very nature, ruthless, the policy challenge is to strike a balance, in the interests of the community, between conduct that is legitimate competition — competition on the merits — and conduct that is not. As the High Court5 has pointed out, it is the legitimate role of competitors to jockey for sales, with the more effective competitors injuring the less effective by taking sales away from them. It said the object: is to protect the interests of consumers, the operation of the section being predicated on the assumption that competition is a means to that end. Competition by its very nature is deliberate and ruthless. Competitors jockey for sales, the more effective competitors injuring the less effective by taking sales away. Competitors almost always try to “injure” each other in this way. This competition has never been a tort … and these injuries are an inevitable consequence of the competition s 46 is designed to foster.
In NT Power,6 the High Court described the position under the earlier version of the prohibition, but nevertheless still relevant, in the following terms: The legislation does not contemplate that immunity … can be found in a desire to bring about … “sensible competition”. In truth, that expression is a reference to the process by which an inefficient monopolist sought to give itself time to reorganise its affairs by obstructing emerging competition … Competition … tends to create conditions of constant turbulence. It generates instability. These circumstances trigger the emulation and striving which produce competitive benefits. Paternalistic control from a monopolist is antithetical to competition, and a construction of s 46 which permitted it, even if only in the short term, is inconsistent with the structure of the section and the legislation as a whole.
3. See, for example, R Miller, “Competition Debate Must Move Beyond EffectsTest Battle”n The Conversation, 1 May 2016, . 4. ICN Unilateral Conduct Workbook, Chapter 3 para 3, . 5. Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 191. 6. NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48 at [138]-[139]; (2004) 219 CLR 90 at 140–141; 79 ALJR 1, 210 ALR 312; (2004) ATPR 42-021. © 2018 THOMSON REUTERS
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[12.80] The US Court of Appeals has expressed similar policy considerations to those suggested by the High court. In Ball Memorial Hospital 7 the court said: Competition is a ruthless process. A firm that reduces cost and expands sales injures rivals — sometimes fatally. The firm that slashes costs the most captures the greatest sales and inflicts the greatest injury. The deeper the injury to rivals, the greater the potential benefit. These injuries to rivals are byproducts of vigorous competition, and the antitrust laws are not balms for rivals’ wounds. The antitrust laws are for the benefit of competition, not competitors.”
Finally, in a New Zealand monopolisation case the Privy Council put the matter as follows:8 The law … does not disable a trader who is in a dominant position in a market from competing with other traders in that or any other market. It is open to the trader to compete on price as well as quality, so long as he does not use his dominant position for the purpose of producing an effect which is anti-competitive… Moreover, the trader is entitled, before he enters upon a line of conduct which is designed to affect his competitors, to know with some certainty whether or not what he proposes to do is lawful … The question … is how, in this difficult area, lawful conduct can be distinguished from unlawful conduct.
More effective competitors injure the less effective by taking customers and sales away. Competitors almost always try to injure each other in this way. This is the inevitable consequence of the competitive process working effectively.9 As Ron Bannerman, the first chairman of the Trade Practices Commission perceptively observed:10 Any monopolisation section is and must be a compromise. The question is where the balance is to be set between the conflicting interests of small business and big business. The objective of competition will give different answers to different people. If anyone is completely satisfied with the section that probably indicates that others are just as dissatisfied.
United States, United Kingdom, EU and Australia — Early Developments United States [12.90] In the United States, the Sherman Act,11 enacted in 1890, contained provisions directed specifically at monopolisation. Like the position in Australia, that law had a difficult beginning.
7.
Ball Memorial Hospital Inc v Mutual Hospital Insurance Inc 784 F 2d 1325 (1986) at 1338.
8. Carter Holt Harvey Building Products Group Ltd v Commerce Commission [2004] UKPC 37 at [8], a case under the NZ equivalent of s 46. 9.
Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925.
10. RM Bannerman, Debate on Exposure Draft Bill to Amend Trade Practices Act, presented to Monash University Trade Practices Law Reform Seminar, 29 March 1984, p 17 (ACCC library collection). 11. Sherman Act 1890, s 2 provides: “Every person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.…”
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[12.110] United States, United Kingdom, EU and Australia — Early Developments
Although the Sherman Act is now held up internationally as a beacon for modern antitrust policy, and seen in the United States as a fundamental protection against anticompetitive conduct, that was not always the case. The Sherman Act was introduced at a time when the laissez-faire was the order of the day when it came to business activities, but that philosophy was coming under increasing challenge from reform movements. As one commentator has pointed out:12 Neither vision could be satisfied with antitrust as a social policy, because it did not reflect either perspective’s understanding of the nature of markets or the proper role of government. Consequently, purists of both visions rejected antitrust as either useless, fraudulent, or actively harmful.
[12.100] The first monopolisation case to reach the United States Supreme Court, E C Knight,13 concerned a challenge to the acquisition of a “practical monopoly” by the American Sugar Refining Company through the acquisition and control of a large number of sugar refineries. The acquisitions were challenged on the basis that the purchases constituted combinations in restraint of trade. Orders cancelling the purchase contracts were sought. The Supreme Court dismissed the case because the “contracts and acts of the defendants related exclusively to the acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania, and bore no direct relation to commerce between the States or with foreign nations.”14 In other words, it was an intra-State matter. However, unlike the position in Australia, successive US administrations persevered. As Hovenkamp states,15 the government succeeded in a series of Sherman Act cases,16 although the primary focus was on cartel conduct rather than combinations through merger. For instance, in Addyston Pipe,17 the Supreme Court distinguished E C Knight, holding that a combination to raise prices for cast-iron pipe by manufacturers and vendors constituted unlawful monopolisation. The court rejected a claim that: the contract or combination was only a reasonable restraint upon a ruinous competition among themselves, and was formed only for the purpose of protecting the parties thereto in securing prices for their product that were fair and reasonable to themselves and the public.18
[12.110] In 1911, the Supreme Court handed down its decision in Standard Oil.19 The result was a break up of a major oil monopoly. The Rockefeller family and others had, over the period from 1870, acquired a large number of the oil refineries in Ohio and elsewhere in the eastern United States and nearly all the oil pipelines from eastern oilfields to the refineries. Smaller competitors were forced, by a variety
12. WH Page, “Ideological Conflict and the Origins of Antitrust Policy” (1991) 66 Tulane Law Review 1, 23. See also GJ Stigler, “The Origins of the Sherman Act” (1985) 14 Journal of Legal Studies 1. 13. US v E C Knight Co 156 US 1 (1895). 14. US v E C Knight Co 156 US 1 (1895) at 17. 15. H Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice (Thomson West, 2005), pp 56–59. 16. US v Trans-Missouri Freight Association 166 US 290 (1897); Addyston Pipe & Steel Co v United States 175 US 211 (1899); Northern Securities Co v United States 193 US 197 (1904). 17. Addyston Pipe & Steel Co v United States 175 US 211 (1899). 18. Addyston Pipe & Steel Co v United States 175 US 211 (1899) at 235. 19. Standard Oil Co of New Jersey v United States 221 US 1 (1911). © 2018 THOMSON REUTERS
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of oppressive tactics, to either merge with Standard Oil or go out of business. All of the interests were combined into one corporation, the Standard Oil Co of New Jersey, which was dominant in domestic oil production and distribution.20 In a landmark decision, the US Supreme Court declared Standard Oil to have engaged in monopolisation in breach of s 2 of the Sherman Act and ordered that company broken up. The tactics Standard Oil used are described by one commentator as including business espionage, price warfare waged both overtly and secretly through bogus independent distributors, and (although never proven), the occasional stick of dynamite!21 When the Supreme Court handed down its decision in Standard Oil the Chicago Daily Tribune carried the front-page banner headline “Supreme Court kills Standard Oil Octopus”.22 The scene was set for a rigorous challenge to improper use of monopoly power; one that continues today.
United Kingdom [12.120] The United Kingdom first introduced a monopolies law in 1948,23 establishing the Monopolies Commission to conduct investigations into large-scale monopolies referred to it by the government and to report on whether monopolistic practices were contrary to the public interest. The Commission had no power other than to investigate and report. After a wide-ranging report in 1953 into collective discrimination, which the government did not accept, the Commission was given no references for many years. However, in 1965 the Commission was, in effect, revived and given a new responsibility to review and report on mergers, applying the same “public interest” test as was to be applied to monopolies, but the Commission’s powers in relation to monopolies remained largely unaltered.24
European Union [12.130] The EU’s unilateral conduct prohibition originated in the 1957 Treaty of Rome. It remains today essentially in its original form, stating:25 Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in:
20. See AD Neale, The Antitrust Laws of the USA (Cambridge University Press, 1974), pp 97–100; P Areeda, Antitrust Analysis (3rd ed, Little, Brown & Co, 1981), pp 148–149. 21. FM Scherer, Industrial Market Structure and Economic Performance (Rand McNally, 1970), p 274. 22. The Chicago Daily Tribune’s front page story in its 16 May 1911 edition headlined “Standard Oil illegal Trust; must dissolve”. 23. Monopolies and Restrictive Practices (Inquiry and Control) Act 1948 (UK). 24. OECD, Regulatory Reform in the United Kingdom: The Role of Competition Policy in Regulatory Reform (2002). 25. Originally Art 86 of the Treaty of Rome (25 March 1957), subsequently re-numbered as Art 82. Now Treaty on the Functioning of the European Union, Art 102.
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(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Although different political and economic circumstances and traditions influenced the provision, and in particular its interpretation, the Article followed the US example of a broadly expressed prohibition, leaving it to the courts to determine what was meant by the terms “dominant position” and “abuse”. [12.140] Two early decisions, decided in 1978 and 1973, set the course for the EU approach to abuses of dominance. The first, United Brands,26 provided the following explanation of the term “dominance”: The dominant position referred to in this Article relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of competitors and ultimately of its consumers.
The second, Continental Can,27 considered what “abuse” meant, stating: Article 86 is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure … Abuse may therefore occur if an undertaking in a dominant position strengthens such position in such a way that the degree of dominance reached substantially fetters competition … The question of the link of causality between the dominant position and its abuse is of no consequence …
This was elaborated further in Hoffman-La Roche28 as follows: The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.
Although it did not emerge until much later, the EU unilateral conduct law proved to be broader in its application that US monopolisation law. The latter addressed only anticompetitive abuses, whereas the EU law was to come to address both anticompetitive and exploitative abuses.
26. United Brands Company and United Brands Continentaal BV v Commission of the European Communities [1978] ECR 207. 27. Europemballage Corp and Continental Can Co Inc v Commission of the European Communities [1978] ECR 215. 28. Hoffmann-La Roche v European Commission [1979] ECR 461. © 2018 THOMSON REUTERS
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Australia [12.150] As we saw in Chapter 2, Australia’s first attempt, the Australian Industries Preservation Act 1906 (Cth),29 included a monopolisation provision that stated:30 Any person who monopolizes or attempts to monopolize, or combines or conspires with any other person to monopolize, any part of the trade or commerce with other countries or among the States, with intent to control, to the detriment of the public, the supply or price of any service, merchandise or commodity, is guilty of an offence.
The Act did not attempt to define the term “monopolize”, but the law was so obviously based on the Sherman Act that it was thought that our courts would take the same view as the US Supreme Court on interpretation of its provisions,31 although there were acknowledged differences. The Australian provision included the additional words “to the detriment of the public”. As the Attorney-General, Sir Issac Issacs, explained: [In the USA] the Courts there have held that it does not matter whether the restraints are beneficial to the’ public — or are not prejudicial to the public — so long as they are restraints, they are hit by the Act. … I personally, and the members of the Government, agree that there may be combinations whose work is useful and beneficial to the public. … We do not believe that that sort of work should be penalized. Therefore, as the American law … pushes the matter so far as to make no discrimination whatever between what is injurious and what is beneficial, we have inserted these words, “to the detriment of the public”
[12.160] In Coal Vend, the High Court had its first opportunity to consider the new law.32 It said that, while US decisions on the Sherman Act were “interesting and instructive”:33 We are unable to derive any assistance from the American decisions on the Sherman Act, which is framed on very different lines from that now under consideration, and contains no reference to an express intent to cause detriment to the public.
The reason was the addition, in the Australian provision, of the qualifying words “to the detriment of the public”. Although the Australian Industries Preservation Act 1906 (Cth) proved to be ineffective, essentially because our constitutional jurisprudence was not sufficiently developed at that time, that was not the issue in Coal Vend.34 This first High Court challenge to a monopolistic combination failed on the grounds that detriment to the public had not been established. Coal Vend involved a challenge to an agreement between colliery owners and ship owners to control the supply and price of coal. The trial judge decided that the defendants had monopolised interstate trade and commerce in Newcastle coal 29. The full title of the Act was An Act for the Preservation of Australian Industries, and for the Repression of Destructive Monopolies. The inclusion of the word “destructive” gave the key to it being quite ineffectual. 30. Australian Industries Preservation Act 1906 (Cth), s 7. 31. Australian House of Representatives, Hansard, 19 June 2006. 32. Earlier cases in which the High Court had declared aspects of the Act invalid had not involved challenges to the monopolisation provision in the context of interstate trade: see Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330; Adelaide Steamship Co Ltd v R [1912] HCA 58; (1912) 15 CLR 65. 33. Adelaide Steamship Co Ltd v R [1912] HCA 58; (1912) 15 CLR 65. 34. R v Associated Northern Collieries [1911] HCA 73; (1911) 14 CLR 387.
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with intent to restrain, to the detriment of the public, the supply and price of that coal. However, on appeal,35 the High Court reversed the decision, deciding that the agreement was not made with intent to monopolise inter-State trade to the detriment of the public, nor was there evidence of that effect. The Privy Council agreed.36 The reason was that prices had been “disastrously low” and there had been “cutthroat competition” which the agreement was intended to bring to an end, but the view was that “it can never be of benefit to the consumers of coal that colliery proprietors should carry on their businesses at a loss”. In addressing submissions that the court should be guided by the US Supreme Court decision in Standard Oil, the Privy Council said37 that the decision was of no real assistance because: The Sherman Act, construed strictly, makes every contract or combination in restraint of trade, and every monopoly or attempt to monopolize, a statutory misdemeanour irrespective of any sinister intention on the part of the accused and irrespective of any detriment to the public. There is, however, no justification for applying a similar test in the case of an Act which, like the Act of 1906, only deals with contracts or combinations or monopolies or attempts to monopolize which involve detriment to the public and in which a sinister intention is of the essence of the offence.
Even if enthusiasm to enforce that law had not waned and attempts to remedy the constitutional issues through referenda failed, the “detriment to the public” rider would have continued to be an impediment to successful enforcement. [12.170] Australia’s next attempts at a unilateral conduct law, the Trade Practices Act 1965 and the Trade Practices Act 1971, followed the United Kingdom model by making monopolisation an examinable practice. No influence from either US experience is evident. As we saw in earlier chapters that law was ineffective. As to what constituted monopolisation, that Act stated that a person engaged in monopolisation if they were in a dominant position in trade in goods of a particular description or in the supply of particular services in Australia, or a part of Australia, and took advantage of that position to induce another person to refuse to deal with a third party, to engage in price-cutting aimed at substantially damaging a competitor, or to impose prices or conditions that could not be imposed if it were not for the dominant position.38 This is the origin of the requirement, until recently part of our law, that monopolisation would only be examinable if firms in a dominant position “take advantage” of that position. As Masterman and Solomon prophetically pointed out at the time,39 this gave rise to “difficult questions where it is argued that the monopolist has taken advantage, not of his monopoly position, but of some other power”. [12.180] In 1972, a Bill was presented to Parliament to establish a separate Monopolies Commission that would investigate monopoly practices, applying the same public interest test as the Tribunal, but the Bill was not proceeded with. That Bill resulted from the government’s response to an attempt by the Opposition to
35. 36. 37. 38. 39.
Adelaide Steamship Co Ltd v R [1912] HCA 58; (1912) 15 CLR 65. Attorney General v Adelaide Steamship Co Ltd [1913] UKPCHCA 2; (1913) 18 CLR 30. Attorney General v Adelaide Steamship Co Ltd [1913] UKPCHCA 2; (1913) 18 CLR 30 at 39. 1965 Act, s 37. GG Masterman and E Solomon, Australian Trade Practices Law (Butterworths, 1967), para [326].
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expand the monopolisation provisions of the 1971 Act when the matter was before Parliament in 1971 to remedy the constitutional deficiencies identified in Strickland.40 The position remained unchanged until work commenced on what became the Trade Practices Act 1974.
Development of Australian Unilateral Conduct Law [12.190] The development of our monopolisation provision, which ultimately became a prohibition on misuse of market power, has been discussed in Chapters 3 and 4. However, it is useful to repeat and expand on some of that treatment here because the prohibition has been the subject of such significant policy debate and controversy. It is also useful to compare the Australian position with that of other jurisdictions. In its original form, the Trade Practices Act 1974 prohibited corporations in a position to substantially control a market from taking advantage of that power to eliminate or substantially damage a competitor, prevent a person entering any market, or prevent or deter a person from engaging in competitive behaviour in any market. As the Attorney-General had stated when introducing the Bill:41 the provision is not directed at size as such. It is confined to the conduct by which a monopolist uses the market power he derives from his size against the competitive position of competitors or would-be competitors … A monopolist is not prevented from competing as well as he is able, eg by taking advantage of economies of scale, developing new products or otherwise making full use of such skills as he has …
[12.200] The decision not to direct the prohibition at size as such was, and remains, good public policy. Unilateral conduct laws should be directed at the way in which firms with the requisite degree of market power maintain or extend their power, where doing so adversely affects the competitive process. Regrettably, however, it was in other respects that the provision was subsequently found to have failed the test of good public policy. Instead of adopting broader language (as was the case with other provisions), or reverting to the language closer to that of the Australian Industries Preservation Act 1906 (Cth) (but removing the reference to detriment to the public), the policy approach adopted in 1974 was to use the 1965 and 1971 Acts as a starting point. As a result the provision stated:42 A corporation that is in a position substantially to control a market for goods or services shall not take advantage of the power in relation to that market that it has by virtue of being in that position— (a) to eliminate or substantially to damage a competitor in that market or in another market; (b) to prevent the entry of a person into that market or into another market; or (c) to deter or prevent a person from engaging in competitive behaviour in that market or in another market.
40. Strickland v Rocla Concrete Pipes Ltd [1971] HCA 40; (1971) 124 CLR 468; 37 ALJR 413. 41. Senate, Hansard, 14 August 1974, p 923. 42. Trade Practices Act 1974, s 46(1).
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Gone, at least in the context of monopolisation, were the references to price-cutting, price gouging or refusals to deal, presumably because those types of conduct had attracted their own specific provisions.43 In introducing the Bill, the AttorneyGeneral, Senator Murphy, expressed confidence that the drafting of the Bill “along general lines using wherever possible, well understood expressions” would afford the courts “an opportunity to apply the law in a realistic manner in the exercise of their traditional judicial role”. As the Attorney-General said:44 Legislation of this kind is concerned with economic considerations. There is a limit to the extent to which such considerations can be treated in legislation as legal concepts capable of being expressed with absolute precision. Such an approach leads to provisions which are complex in the extreme and give rise to more problems than they remove. The present Bill recognises the futility of such drafting.
[12.210] Unfortunately, with the misuse of market power prohibition, complexity was apparent from the start. The US Supreme Court had pointed out in Standard Oil,45 the policy approach had been to express the prohibition in general language “to make sure that by no possible guise could the public policy embodied in the section be frustrated or avoided.” But Australia took a more prescriptive approach. The first Chair of the Commission, Ron Bannerman, asked about the new provision when the Bill was before Parliament. He is reported to have expressed the view that no monopoly provision would be easy, but it would be difficult under the new legislation to move against companies because the Commission would need to prove that advantage was being taken of market power.46 But that did not prove to be the only problem with the provision. The requirement to establish substantial control of a market before the provision could operate and the focus of the provision on competitors rather than competition were to prove to be added difficulties in reconciling the provision with good public policy outcomes. [12.220] The first case, Top Performance Motors,47 proved Ron Bannerman to be right. It came to court in the first year the new Act came into force. It was a private action involving the cancellation of a motor dealer franchise. The court decided that, although the respondent, the distributor for Datsun motor vehicles, was in a position substantially to control the relevant market (the market for Datsun motor vehicles), it had not taken advantage of its power because it had cancelled the dealership for legitimate business reasons. The second case, Parkwood,48 also a private action, reached the courts in 1978. It arose as a result of a glut in fresh eggs in Victoria. Rather than dispose of excess eggs, the Victorian Egg Marketing Board decided to supply eggs to retailers in the Australian Capital Territory undercutting the local supplier, Parkwood. Parkwood applied for 43. Section 49 dealt with price discrimination, but was repealed by Act No 88 of 1995. Sections 45 and 4D, introduced by Act No 81 of 1977 dealt with aspects of collective refusals to deal, although not specifically with inducing others to refuse to deal with a third person or to refuse to deal except on disadvantageous terms. 44. Senate, Hansard No 39, 1973, 27 September 1973, p 1015. 45. Standard Oil Co of New Jersey v US, 221 US 1 (1911). 46. Canberra Times, 16 March 1974, p 14. 47. Top Performance Motors Pty Ltd v Ira Berk (Queensland) Pty Ltd (1975) 24 FLR 286; (1975) ATPR 40-004. 48. Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd [1978] FCA 27; (1978) 33 FLR 294; (1978) ATPR 40-081. © 2018 THOMSON REUTERS
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and was granted an interlocutory injunction to restrain the Board from doing so and the Board appealed. The Board conceded that it was in a position substantially to control the wholesale egg market in Victoria. The court accepted, for interlocutory purposes, that there was sufficient evidence to establish that the Board had entered the Australian Capital Territory market by offering retailers eggs at substantially reduced prices as a temporary expedient to damage Parkwood in retaliation against Parkwood’s parent selling eggs in Victoria. The requisite purpose was established. [12.230] After Top Performance Motors, but before Parkwood, the Swanson Committee had undertaken its review of the Act. The possibility of establishing a separate Monopolies Commission was considered and rejected by the committee as unnecessary. As far as substantive amendments were concerned, the committee made a number of recommendations. First, it recommended an amendment to make it clear that an element of intent was required to establish the prohibition, harking back to one of the elements of the Australian Industries Preservation Act 1906 (Cth),49 although the committee did not express a view on how intent should be established. Proof of intent had been raised in debates on the Australian Industries Preservation Bill and the Attorney General had commented:50 The intention must be found from the necessary result of the acts at the time. The American Courts have not hesitated to infer intention from necessary results, and every man is presumed to intend the necessary results of his acts.
Second, the committee recommended that it should be made clear that the prohibition applied without the need to demonstrate that the corporation’s actions actually succeeded in eliminating or substantially damaging a competitor, etc.51 Finally, the committee considered it desirable to ensure that the prohibition was not used as an excuse for failure to invest by making it clear that monopolisation does not occur by reason only of investment in new capital plant and equipment.52 [12.240] As a result, amendments in 197753 included a change to the effect that corporations in a position to substantially control a market were prohibited from taking advantage of that power for the purpose of eliminating or substantially damaging a competitor, preventing a person entering any market, or preventing or deterring a person from engaging in competitive behaviour in any market. The new provision also included a paragraph stating that a corporation was not to be taken to contravene the provision by reason only that it acquired plant or equipment.54 The result was that the focus shifted from conduct to the purpose for which a firm used its market power. Thereafter, a firm would only contravene the provision if it: • had the power to substantially control a relevant market; • used (“took advantage of”) that power, rather than any other power it might have; and • the firm’s subjective purpose was to harm competitors or prospective competitors. 49. Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976), para 6.4. 50. Australian House of Representatives, Hansard, 19 June 1906. 51. Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976), para 6.10. 52. Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976), para 6.11. 53. Trade Practices Amendment Act 1977, No 81 of 1977. 54. See Miller’s Annotated Trade Practices Act 1974 (5th ed, LBC, 1984), p 181.
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As we will see, this resulted in a prohibition that was ill-suited to protecting markets from monopoly conduct and gave rise to a number of impediments to effective enforcement.
Controlling a Market [12.250] By 1977, the trigger for the application of the provision was that the firm had to be in a position substantially to control a market.55 The first opportunity for the court to consider what might be involved in controlling a market arose in a merger case, Ansett/Avis.56 The case involved a proposed acquisition of the largest Australian rent-a-car business by one of Australia’s two major domestic airlines. The relevant question was whether, as a result of the acquisition, Ansett would be in a position to control or dominate the rent-a-car market. The court logically concluded that “control” meant something more than “dominate” — the other test at that time for merger purposes. Dominate’ meant having a commanding influence. By analogy, in the monopolisation prohibition, the requirement was that a corporation had to have something more than a commanding influence on the relevant market before the prohibition could apply. It had to be in a position substantially to control the relevant market. This set the bar for application of the monopolisation prohibition at a high level, consistent with the views of the Swanson Committee, which had commented: A “position substantially to control a market” appears to require that the corporation enjoy a real degree of independence of behaviour … as to pricing, production and distribution … [T]he presence in the market of a corporation in a position substantially to control a market, assumes the absence of that degree of competitiveness in the market which could ordinarily be relied upon to have a material influence upon its activities. 57
[12.260] In 1979, the Trade Practices Consultative Committee58 recommended that the term “substantial degree of power” replace “substantially to control” in order to extend the reach of the prohibition. However, no change resulted. The committee noted: we have a clear impression that many people, including some who seek to enforce the Act, tend to interpret the words and their definition as only proscribing purposive conduct by the market leader. If this interpretation were correct the section would not be effective to curtail the predatory actions of other powerful firms …59
As may be expected, the number of cases brought under the monopolisation prohibition, as it was then framed, was quite limited. Only one case brought by the Commission reached the courts between 1974 and 1984. In that case the Commission failed because it could not establish conscious predatory behaviour. The case, CSBP,60 involved a claim that the respondent was in a position substantially to control the market in Western Australia for the supply of nitrogen-based fertilisers and that it used that power to eliminate or substantially damage a rival supplier. When the rival 55. The concept of a market is described in Chapter 7 at paragraph [7.20]. 56. Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd [1978] FCA 21; (1978) 32 FLR 305; (1978) ATPR 40-071. 57. Swanson Report, para 6.15. 58. Small Business and the Trade Practices Act 1979. 59. Small Business and the Trade Practices Act 1979, para 9.23. 60. Trade Practices Commission v CSBP and CSBP & Farmers Ltd [1980] FCA 27; (1980) 53 FLR 135; (1980) ATPR 40-151. © 2018 THOMSON REUTERS
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supplier made arrangements to import product, CSBP reduced its prices to below the price at which the rival could profitably compete, causing the rival to cancel its importation contract. CSBP did not dispute that it had market power. It defended the matter on the basis that it had not taken advantage of that power for the purpose of damaging its rival. The court interpreted the section as requiring the Commission to establish conscious predatory behaviour — that the firm charged an unreasonably low price with the intent of keeping the rival out of the market. Two private actions reached the courts in that period. In the first,61 monopolisation was only a subsidiary issue and the second was resolved after an interlocutory injunction was obtained.62 [12.270] As we saw in Chapters 3 and 4, in February 1984 the Attorney-General, Gareth Evans QC, released a major discussion paper63 on proposed changes to the Act which included changes in relation to the monopolisation prohibition. Observing that the “control” requirement, if strictly applied, was very rigorous, with the result that the monopolisation provision would only apply to a few powerful corporations, the paper proposed lowering the standard from “control” to “a substantial degree of market power”.64 [12.280] The result was that the monopolisation prohibition was replaced in 1986 with a new “misuse of market power” prohibition, which provided that a corporation that has a substantial degree of power in a market shall not take advantage of that power for any of the purposes prohibited by the Act. The relevant test was reduced from “control or dominate” to the “substantial degree of market power” test. Consequently, the relevant question became whether or not the firm’s market power was sufficiently considerable or large, in a relative sense.65 [12.290] Boral,66 decided by the High Court in 2003, provided the impetus for the debate over whether the bar was still too high. The case involved a question whether the appellant, a major manufacturer of concrete masonry products, had substantial market power and, if so, whether it misused that power by selling its products below avoidable cost. The case arose because a competitor brought a new, highly efficient plant into production at a time of recession in the building industry and a price war broke out. The High Court decided that Boral did not have substantial power in the relevant market. Three members of the court, Justices Gaudron, Gummow and Hayne, accepted that, as Boral “did not have power to behave independently of competition and of competitive forces”,67 it did not have the requisite market power. Another member, Justice McHugh, decided that Boral did not have the requisite market power because it was neither “able to raise prices to 61. Ausfield Pty Ltd v Leyland Motor Corporation of Australia Ltd (No 2) (1977) 30 FLR 477. 62. MacLean v Shell Chemical (Australia) Pty Ltd [1984] FCA 157; (1984) 2 FCR 593; (19840 ATPR 40-462). 63. “Trade Practices Act: Proposals for Change” (February 1984). 64. “Trade Practices Act: Proposals for Change” (February 1984), p 7. The Trade Practices Consultative Committee had recommended this in 1979. 65. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43 at 63; 106 ALR 297; (1992) ATPR 41-167; Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193. (2003) 131 FCR 529. 66. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915. 67. ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 43,205 (41-715) at [155].
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supra-competitive levels without its rivals taking away customers”, nor to “recover the losses it made by pricing below relevant cost when and if the price-cutting finished”.68 The final member, Justice Kirby, dissenting, expressed the view that the majority was continuing to take too narrow a view of the Act. He noted that originally the provision had applied only to monopolists or near monopolists, but that Parliament had retreated from that position. His Honour concluded that a firm would have a substantial degree of power in a market “if it has the capacity through its decisions, substantially to affect market outcomes”.69 [12.300] The Senate Economics References Committee conducted an inquiry into the effectiveness of the Act in protecting small business in 2003.70 It noted that a number of submissions had argued that, as a result of Boral, the threshold was higher than that intended by Parliament in 1986. Many, including the ACCC, argued that the misuse of market power prohibition “required amendment to ensure that the lower threshold intended by Parliament is given effect in the legislation”.71 The committee recommended72 that: the Act be amended to state that the threshold of ‘a substantial degree of power in a market’ is lower than the former threshold of substantial control; and to include a declaratory provision outlining matters to be considered by the courts for the purposes of determining whether a company has a substantial degree of power in a market.
The result was amendments in 2008, the effect of which was that a firm73 may have a substantial degree of power in a market even though it does not substantially control the market and that absolute freedom from constraint by competitors, suppliers or customers is also not required.74 A further amendment provided that, in determining the degree of power a firm has, the court must have regard to the extent to which the conduct of the firm is constrained by the conduct of competitors, or potential competitors; or its suppliers or customers. Furthermore, the amendments provided that the court could have regard to the power the firm has resulting from any contracts, arrangements or understandings, or proposed contracts, arrangements or understandings, that it has or may have with others and any covenants, or proposed covenants, that it is or would be bound by or entitled to the benefit of. 75 Arguably, none of these clarifying legislative provisions were required, but nevertheless they continued to be a part of the reformulated prohibition.76
68. ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 43,205 (41-715) at [199]. 69. ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 43,205 (41-715) at [342]. 70. Senate Economics References Committee, The Effectiveness of the Trade Practices Act 1974 in Protecting Small Business (March 2004). 71. Senate Economics References Committee, The Effectiveness of the Trade Practices Act 1974 in Protecting Small Business (March 2004), paras E5, E6. 72. Senate Economics References Committee, The Effectiveness of the Trade Practices Act 1974 in Protecting Small Business (March 2004), para E7. 73. In referring to a firm I am also referring, as the provision does, to the firm’s related bodies corporates. 74. Former Competition and Consumer Act 2010, s 46(3C). See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 459. 75. Former Competition and Consumer Act 2010, s 46(3), 46(4). See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 458. 76. Competition and Consumer Act 2010, s 46(4). © 2018 THOMSON REUTERS
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Other Changes [12.310] The substantive misuse of the market power provision remained essentially in this form from 1986 until 2007, when a further prohibition was added to the effect that a corporation that has a substantial share of a market must not supply goods or services for a sustained period at a price that is less than the relevant cost to the corporation of supplying those goods or services, for any of the purposes prohibited by the Act.77 Following the 2007 Federal election, the government introduced further amendments to the effect that supply at less than cost for a sustained period may amount to a misuse of market power even if the firm might not ever be able to recoup the losses.78 Predatory pricing is considered separately below at [12.680]. The Act was also amended in other respects. They were to clarify that, in determining whether a corporation has taken advantage of its market power, the court may have regard to whether the corporation’s conduct was: • materially facilitated by its substantial degree of market power; • engaged in relying on its substantial degree of market power; • likely to have been engaged in if the corporation lacked a substantial degree of market power; or • otherwise related to its substantial degree of market power.79 None of these fine-tuning changes satisfied those who argued that the provision was deficient, nor did it result in better outcomes as far as the ACCC was concerned.
Fundamental Problems [12.320] Between 1974 and 2018, in order to establish liability, the following had to be established: • that the firm had power in a relevant market; • that it used (“take advantage of”) that power, rather than any other power it might have had; and • that the subjective purpose80 of the firm (but not its motive) was to harm competitors or prospective competitors, rather than harming the competitive process as such. These problems continued to fire debate, often characterised as small business v big business, over whether the provision was achieving its policy objective.81 77. Trade Practices Legislation Amendment Act (No 1) 2007 (Cth). 78. Previously Competition and Consumer Act 2010, s 46(1AAA). See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 3th ed, 2017), p 457. 79. Previously Competition and Consumer Act 2010, s 46(6A). See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), p 459. 80. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1991] FCA 158; (1991) ATPR 41069; (1990) 27 FCR 460 at 474; applied recently in ACCC v Pfizer Australia Pty Ltd [2015] FCA 113, a case in which the conduct was exclusionary but the court, at least at first instance, found that the respondent did not have a prescribed purpose. The case is currently on appeal. The relevant purpose does not have to be the sole purpose: Competition and Consumer Act 2010, s 4F(1)(b). 81. See R Miller, “The competition test attracts odd political bedfellows, but isn’t going away”, The Conversation, 18 September 2015, and R Miller, “Competition debate must move beyond effects test battle”, The Conversation, 1 May 2015, .
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The Australian Misuse Law [12.330] In this section we explore the elements of the Australian misuse of market power law, both in its old and new forms, comparing those elements with the position in other jurisdictions. As we have seen,82 the law in this area has been influenced by differing policy objectives in different jurisdictions, making international comparisons difficult. This is reflected in the names given to these unilateral conduct laws. In the United States it is monopolization, in the EU and a number of other countries it is abuse of dominance and in Australia it is misuse of market power. But there are nevertheless some common themes.
Market Power [12.340] The starting point is to consider what is meant by market power. The prohibition does not apply unless the firm concerned has the requisite degree of market power. The same applied under the pre-2017 provision. Market power is, in essence, the power to behave in a market in a manner not constrained by competitors for a sustained period. This is often expressed as the ability to raise prices above the supply cost by restricting output, without rivals taking away customers over time; supply cost being the minimum cost an efficient firm would incur in producing the product.83 However, the ability to raise prices is not the sole indicia of market power. Market power may be manifested by other types of behaviour such as engaging in predatory pricing. The essence of power is absence of constraint84 — to what degree is the firm’s conduct constrained by the conduct of competitors, potential competitors, suppliers and customers.85 When we think of market power we normally think of the power a major manufacturer or supplier may have, but buyers may also have market power. In economics, buyer market power is called “monopsony power”. In an earlier case, Pioneer Concrete,86 the position was described as follows: [I]f competition rules the market, the corporation will not have market power otherwise than because of its competitive strength. But if the body corporate for whatever reason is free to act in the market unrestrained by the competition therein, then it may be said to have a high degree of power in the market which does not have its origins in the competitive forces at play in the market. It is that power which s 46(1) seeks to affect if it is used for any of the proscribed purposes.
In Dowling,87 an unsuccessful case in which a licensed stock and station auctioneer was refused membership of an association the other members of which were his
82. See [12.30]. 83. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 84. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915. 85. Competition and Consumer Act 2010, s 46(3)(b). 86. Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164; 124 ALR 685; (1994) ATPR 41-345. 87. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165. © 2018 THOMSON REUTERS
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competitors and that controlled the local saleyards, the following were the key factors taken into account in identifying market power: • the ability of a firm to raise prices above the supply cost (the minimum cost an efficient firm would incur in producing the produce) without rivals taking away customers in due time; • the extent to which the firm’s conduct in the market was constrained by that of competitors or potential competitors; • the market share of the firm, although this alone was not generally thought to be determinative of market power; • the existence of vertical integration, although this alone was not generally determinative of market power; and • the extent to which it is rational or possible for new entrants to enter the market — the extent of barriers to entry. However, the criteria for determining whether a corporation has market power are not fixed. There will be a wide variety of circumstances that may bear on the question of whether a corporation has a substantial degree of power in a market – some arising from within the market and some extraneous to it. [12.350] Barriers to entry are the most important consideration in assessing whether a firm has market power. This has been said to be the ultimate determinant of the existence or absence of market power.88 As the High Court said in Melway:89 Barriers to entry into a market by competitors are a common reason for the existence of market power. They could exist, as in the present case, because of technological factors, or they might result, for example, from legislation which gives a statutory monopoly.
In Chapter 15 we consider what barriers to entry involve, but for current purposes it can be taken to mean a cost of producing products or services that must be borne by a firm seeking to enter an industry but is not borne by firms already in the industry.90 Barriers may be structural — based on market characteristics — or the result of the incumbent firm’s strategic behaviour to deter market entry.91 They may arise in a variety of ways, including, for instance, through intellectual property rights, customer loyalty, availability of skilled labour, raw materials, plant and equipment, availability of suitable sites, the level of capital investment required.92 They may also exist due to import quotas, restrictions or tariffs, technological factors or from legislation which gives a statutory monopoly. For
88. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 89. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805 at [67]. 90. This definition was proposed by Nobel Laureate, Professor George Stigler in 1968: see G Stigler, The Organization of Industry (University of Chicago Press, 1983). For this and other definitions see H Demsetz, “Barriers to Entry” (1982) 72 The American Economic Review 47. In considering barriers to entry for merger purposes the ACCC takes into account a broader range of potential constraints: legal or regulatory barriers, structural or technological barriers and strategic barriers (such as the risk of retaliation): see ACCC, Merger Guidelines, paras 7.29-7.32 reproduced in Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 2109). 91. Re Chime Communications Pty Ltd (No 2) [2009] ACompT 2; (2009) 234 FLR 210. 92. Drawn from ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 41-715.
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example, in QWI,93 a refusal to deal case, BHP’s market power resulted from it being the only manufacturer with facilities to produce a steel product strongly preferred in rural fencing. In Boral,94 the court took into account the following in determining whether there were barriers to entry in the relevant market: patents, trademarks or copyright which a new entrant may infringe, levels of customer loyalty to particular established brands, availability of skilled labour, raw materials, plant and equipment, availability of suitable land on which to establish operations, level of capital investment required and availability of commercial information. However, not every impediment will amount to a barrier to entry. To qualify it must be a cost of producing products or services borne by a firm seeking to enter an industry but is not borne by firms already in the industry. [12.360] Market share data is considered important in some other jurisdictions. In Australia, although a small market share may be evidence of a lack of market power, having a high market share does not conclusively establish the existence of market power. It is the ease with which competitors may enter the market is the more important factor because a firm’s market share may be a short run phenomenon.95 [12.370] The prohibition on misuse of market power in its pre-2017 amendment form required more than the co-existence of market power, conduct and a proscribed purpose. It required a connection between the three such that the firm whose conduct is in question can be said to be taking advantage of its power.96 That is no longer the case.
How Much Market Power? [12.380] The first policy question is: what degree of market power should a firm have in order to trigger the application of unilateral conduct laws?97 In the United States, the prohibition only applies if the firm is a dominant firm — essentially the 1906 and 1965 Australian position. In the EU, the threshold question is also whether or not the firm is in a dominant position98. The Canadian prohibition applies to firms that “substantially or completely control a class or specie of business” — a threshold close to the Australian 1974 position. Today, the Australian threshold is differently expressed. A firm does not need to be dominant to trigger the prohibition. All that is required is a substantial degree of power in a relevant market.99
93. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 94. [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 43,205 (41-715). 95. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 189 (CLR). 96. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 at 21; 75 ALJR 600; 178 ALR 253 at [44]. 97. I use this term to describe the various laws dealing with monopolisation, abuse of dominance and misuse of market power. 98. Art 102 of the Treaty on the Functioning of the European Union. Formerly Art 82 of the Treaty of Rome. 99. Competition and Consumer Act 2010, ss 46(4), 46(5), 46(6). © 2018 THOMSON REUTERS
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In Australia, therefore, since 1986 the prohibition has cast a wider potential net than in the United States or EU. More firms will be regarded as having sufficient market power for the provision to apply to them than would have been the case under the 1906 or 1965 Acts, or under the 1974 Act in its original form. As we have already seen elsewhere, the term “substantial” is capable of a variety of meanings, depending on the context in which it is used. It is imprecise and ambiguous;100 an unfortunate choice. But the court has decided that in this context the term means “considerable, solid or big”.101 The proposition that, in order to enliven the prohibition, a firm must have a “considerable, solid or big” degree of market power provides little guidance for those firms that may be at risk. [12.390] How is the task of determining whether or not a firm has sufficient market power for the prohibition to apply approached? In Australia that is seen as essentially an economic question. Market power is regarded as the power to behave in a market for a sustained period unconstrained by competitors or potential competitors.102 As Professors Kaysen and Turner103 put it: A firm possesses market power when it can behave persistently in a manner different from the behaviour that a competitive market would enforce on a firm facing otherwise similar cost and demand conditions.
The High Court104 has taken the same view, stating that: market power means capacity to behave in a certain way (which might include setting prices, granting or refusing supply, arranging systems of distribution), persistently, free from the constraints of competition.
Market power is often expressed as the ability to raise prices, whether by restricting output or otherwise, without competitors taking away customers over time.105 However, the ability to raise prices is not the sole indicia of market power. Market power may be manifested by other types of behaviour. As the High Court said in Boral:106 The essence of power is absence of constraint. Market power in a supplier is absence of constraint from the conduct of competitors or customers … Matters of degree are involved, but when a question of the degree of market power enjoyed by a supplier arises, the statute directs attention to the extent to which the conduct of the firm is constrained by the conduct of its competitors or its customers.
100. Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd [1982] FCA 206; (1982) 62 FLR 437 at 444; 44 ALR 557; (1982) ATPR 40-318. 101. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529. 102. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2000] HCA 13; 205 CLR 1; Boral Besser Masonry Ltd v ACCC [2003] HCA 5; 215 CLR 374. 103. Kaysen and Turner, Antitrust Policy (1959), quoted with approval by Justice Dawson in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 200; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,015. 104. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 at 27; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805 at [67]. 105. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 189; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. See also Posner Cir J in Valley Liquors Inc v Renfield Importers Ltd [1982–2] Trade Cases 64,744 at 71,609. 106. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374 at 419; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915 at [121].
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The ability to lower prices may also indicate market power. As members of the High Court have pointed out:107 power in a supplier ordinarily means the ability to put prices up, not down. But if a market is not competitive, and a firm puts prices down, seeking to eliminate a potential rival, in the expectation that it will thereafter be in a position to raise prices without competitive constraint, its ability to act in that manner may reflect the existence of market power.
[12.400] The fact that a firm has conducted itself towards competitors or customers in a manner that might be considered arbitrary or high-handed, does not itself establish that it has a substantial degree of market power,108 although that is an indicator that market power may exist. It is not legitimate for a court to base a finding of substantial market power simply on incidents of apparent abuse. Almost all participants in a market have a degree of power, which may on occasions be abused. The power of the abuser may or may not be substantial.109 A firm may have market power as a result of practices directed at excluding competition such as exclusive dealing, tying arrangements, predatory pricing or refusing to deal.110 Power acquired through contracts, arrangements or understandings with others is also relevant. Such contracts, arrangements or understandings may provide one of the sources of a firm’s individual market power.111 Other factors impact on whether or not a firm has market power, including the ease with which competitors can enter the market and the degree of control exercised by buyers. If barriers to entry are low and there is a likelihood of competitive entry over time if the firm thought to have market power abuses its position, then the firm will not have market power. If a firm is effectively constrained by its customers, or is likely to be constrained over time, then the firm will not have market power. [12.410] The considerations for determining whether a firm has market power are not fixed. There will be a wide variety of circumstances which may bear on the question of whether a corporation has a substantial degree of power in a market — some arising from within the market and some extraneous to it. For example, the ability of a firm to act without constraint because of its access to capital or the extent of its own financial resources, will be relevant.112 However, financial strength is not, of itself, market power. If a firm has market power, its financial resources might be part of the explanation of that power, but it is not market power. The financial ability to survive a price war is neither market power, nor is it a manifestation of characteristics that give market power, if, when the price war is over, the market is still highly competitive.113 107. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374 at 424; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915 at [138]. 108. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529. 109. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529. 110. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 200; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,015 per Justice Dawson. 111. Competition and Consumer Act 2010, s 46(3A). Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 40,247 (41-165); Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; (1992) ATPR 41-167. 112. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915; Trade Practices Commission v Pioneer Concrete (Qld) Pty Ltd (1994) 52 FCR 164; 124 ALR 685; (1994) ATPR 41-345. 113. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; ATPR 41-915. See also NT Power Generation Pty Ltd v Power & Water Authority [2004] © 2018 THOMSON REUTERS
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Market Power Requirements — Other Jurisdictions [12.420] What is the required level of market power to trigger the relevant prohibition in other jurisdictions? In the EU, a firm will be regarded as having sufficient market power to be regarded as dominant if it enjoys such economic strength that it can prevent effective competition in a relevant market because it has the power to behave, to an appreciable extent, independently of its competitors and consumers.114 But market shares are nevertheless used as a indicator of market power. A market share greater than 50% produces a rebuttable presumption of sufficient market power (dominance).115 A market share of less than 40% is unlikely to result in dominance without other factors.116 Other factors to which the Commission has regard include whether the firm has traditionally been the price leader, market perceptions of the firm’s strength, the firm’s upstream or downstream integration, the presence or absence of competition from firms of comparable market strength, the firm’s market coverage as supplier to major customers, the probability of another firm entering the market, and any the protection afforded to the firm by the antidumping duties.117 The Canadian approach118 is expressed in different terms, but the result is the same, as is the Singaporean approach. However, Singapore considers a market share of greater than 60% as likely to indicate dominance. It also takes into account whether the economic strength of the firm is such that it can prevent effective competition by affording the firm the power to behave independently to an appreciable extent.119 [12.430] Market share is generally recognised as an imperfect proxy for determining whether or not a firm has market power, but use of market shares as a proxy is not without precedent. In the United States, courts have been prepared to infer that a firm with a substantial percentage of sales in a market has market power, because market power is generally regarded as difficult to establish in the context of litigation.120 In Graphic Products121 the approach taken by United States courts was explained as follows: Market share is frequently used in litigation as a surrogate for market power for two reasons. First, market power is conceptually difficult to define in any given case. Second, its measurement requires sophisticated econometric analysis. Therefore, market power is not well suited to presentation in an adversary proceeding.
HCA 48; (2004) 219 CLR 90; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021 at [115]; Commerce Commission v Carter Holt Harvey Building Products Group Ltd [2004] All ER (D) 235 (Jul). 114. United Brands Company and United Brands Continentaal BV v Commission of the European Communities [1978] ECR 207. 115. United Brands Company and United Brands Continentaal BV v Commission of the European Communities [1978] ECR 207. 116. Gottrup-Klim v Dansk, Case C-250/92 [1994] ECR I-5641. 117. Drawn from Re Solvay (European Commission, 2003/6/EC, 13 December 2000). 118. Competition Act 2002 (Canada), s 79(1). 119. See K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), p 605. 120. See views expressed by Justice Posner Crc (as he then was) in Valley Liquors Inc v Renfield Importers Ltd [1982–2] Trade Cases 64,744 at 71,609. 121. Graphic Products Distributors Inc v ITEK Corp 717 F 2d 1560 (1983); [1983–2] Trade Cases 65,670 at 69,422.
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As a consequence, a large market share is taken, in United States antitrust cases, to be sufficient to “create a genuine dispute over whether the defendant possessed a dangerous probability of successfully monopolizing a market”.122 As the US Court of Appeals observed in Novell:123 Plaintiffs usually seek to prove market power indirectly or circumstantially — by defining a relevant product and geographic market, pointing to the defendant’s share of that market and perhaps barriers to entry ... and then asking us to infer from this evidence the power to raise prices.
The United States Court of Appeals has consistently found that a market share of more than 50% is required.124 In Broadway Delivery,125 the court went so far as to suggest that, as a matter of law when a defendant held less than a 50% market share it could not have monopoly power. Commentators have suggested that a market share of 70–75% for the five years preceding the complaint is required to establish that a corporation has market power.126 In South Africa, dominance is determined on the basis of a combination of market shares and economic power. A firm is regarded as dominant if it has a market share greater than 45%, or if it actually has market power. Firms within the 35%–45% market share range are presumed to have market power, but the presumption is rebuttable.127 In the EU, a market share greater than 50% produces a rebuttable presumption of dominance.128 A firm with a market share of less than 40% is unlikely to be found to have dominance without other factors.129 But the Commission also looks at other factors, including whether the firm has traditionally been the price leader, market perceptions of the firm’s strength, the firm’s upstream or downstream integration, the presence or absence of competition from firms of comparable market strength, the firm’s market coverage as supplier to major customers, the probability of another firm entering the market and any the protection afforded to the firm by the antidumping duties.130 If market shares are to be the indicia of market power it is, of course, crucial to correctly identify the relevant market before trying to determine the firm’s market share. In United States, where a monopolisation case relies on market shares to establish market power, the courts require the plaintiff to establish “a well-defined
122. US Anchor Manufacturing Inc v Rule Industries Inc 7 F 3d 986 (1993); [1993–2] Trade Cases 70,426 at 71,254. 123. Novell Inc v Microsoft Corporation [2013–2] Trade Cases 78,523. 124. Bailey v Allgas Inc 284 F 3d 1237 (2002); [2002–1] Trade Cases 73,607; US Anchor Manufacturing Inc v Rule Industries Inc 7 F 3d 986 (1993); [1993–2] Trade Cases 70,426; Clift Food Stores Inc v Kroger Inc [1969] Trade Cases 72,923. 125. Broadway Delivery Corp v United Parcel Service of America Inc 651 F 2d 122 (1981); [1981–1] Trade Cases 64,068. 126. P Areeda and H Hovenkamp, Antitrust Law (Wolters Kluwer, 2nd ed, 2002), para 801a. Cited in Bailey v Allgas Inc 284 F 3d 1237 (2002); [2002–1] Trade Cases 73,607. 127. Competition Act 1998 (South Africa), s 7. 128. United Brands v Commission (1978) ECR 207. 129. Gottrup-Klim v Dansk, C-250/92 [1994] ECR I-5641. 130. Re Solway (European Commission, 2003/6/EC, 13 December 2000). © 2018 THOMSON REUTERS
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relevant market”.131 The courts have been sensitive to the fact that too narrow a market definition will result in the conclusion that a firm has a greater market share than it really has, and greater market power than really exists.
Buyer Power [12.440] Buyer power (referred to in economics as monopsony power) is the ability of a buyer that has market to significantly influence the terms of a purchase where the purpose or likely effect is to substantially lessen competition. Before the 2017 amendments the prohibition it was using market power for the purpose of damaging a competitor or preventing or restricting market entry. Buyers could fall foul of that prohibition. As one commentator noted:132 Seller power can reduce the number of buyers of a desired good or service (an output reduction) and force the remaining buyers to pay more (a wealth transfer injury). Similarly, buyer power can reduce the volume purchased (an input reduction) and force atomistic sellers to sell for less (a wealth transfer injury). ... Moreover, the injury to aggregate welfare may not be reduced input, but other distortions to competition, such as … loss of consumer choice …
Monopsony cases are not common in Australia but Safeway133 is an example. This case involved the sale of bread. Safeway was a major supermarket chain. When an independent grocery store located near a Safeway supermarket started discounting bread prices Safeway deleted from its stock that brand of bread. The ACCC alleged, and the court found, that that Safeway had taken advantage of its market power to deter or prevent the relevant bakers and independent grocers from competing in the sale of bread.
Conduct or Purpose? [12.450] The second policy question is: what should the trigger for the prohibition be? Should it be on the firm’s purpose (“fault-base”) or on the effect of its conduct (“effect-based”)? In other countries the trigger is the relevant firm’s conduct, although the distinction is not clear cut. The effect of conduct on either the competitive process or on competitors is the relevant consideration. In Australia, until the 2017 amendments, the focus was solely on the purpose for which market power has been used. Absent a proscribed purpose, there could be no contravention in Australia regardless of the effect the conduct may have on the competitive process. Now, it is engaging in conduct that is the relevant trigger. In the United States, the prohibition applies if a firm engaged in anticompetitive or impermissible exclusionary conduct. A workable description of the requirement is that the conduct must be reasonably capable of creating, enlarging or prolonging monopoly power by impairing the opportunities for rivals and one of the following three results established: that it does not benefit consumers, is unnecessary to produce the consumer benefits it produces, or harms consumers disproportionately
131. Cornwall Quality Tools Co v CTS Co 446 F 2d 825 (1971); [1971] Trade Cases 73,620. For an example of a case where the plaintiff failed to establish the correct market see Bailey v Allgas Inc 284 F 3d 1237 (2002); [2002–1] Trade Cases 73,607. 132. WS Grimes, “Buyer Power and Retail Gatekeeper Power: Protecting Competition and the Atomistic Seller” (2005) 72 Antitrust Law Journal 563 at 566. 133. ACCC v Australian Safeway Stores Pty Ltd [2003] FCAFC 149; (2003) ATPR 41-935.
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to the benefits it produces.134 Another way of putting it is that what is required is something more than competition on the merits. The conduct must be exclusionary. In the EU, the focus is on conduct that is harmful to consumers or the competitive process.135 As the European Commission has explained:136 A dominant company is entitled to compete on the merits as any other company. However, a dominant company has a special responsibility to ensure that its conduct does not distort competition. Examples of behaviour that may amount to an abuse include: requiring that buyers purchase all units of a particular product only from the dominant company (exclusive purchasing); setting prices at a loss-making level (predation); refusing to supply input indispensable for competition in an ancillary market; charging excessive prices.
The European Commission’s enforcement emphasis is on safeguarding the competitive process and ensuring that dominant firms do not exclude competitors by means other than competing on the merits.137 [12.460] The Canadian law provides for prohibition orders to be issued when dominant firms engage in “anti-competitive acts”.138 That term is not defined but the Act contains a list of types of conduct that the term includes a long list of mainly exclusionary conduct: • squeezing, by a vertically integrated supplier, of the margin available to an unintegrated customer who competes with the supplier, for the purpose of impeding or preventing the customer’s entry into, or expansion in, a market; • acquisition by a supplier of a customer who would otherwise be available to a competitor of the supplier, or acquisition by a customer of a supplier who would otherwise be available to a competitor of the customer, for the purpose of impeding or preventing the competitor’s entry into, or eliminating the competitor from, a market; • freight equalization on the plant of a competitor for the purpose of impeding or preventing the competitor’s entry into, or eliminating the competitor from, a market; • use of fighting brands introduced selectively on a temporary basis to discipline or eliminate a competitor; • pre-emption of scarce facilities or resources required by a competitor for the operation of a business, with the object of withholding the facilities or resources from a market; • buying up of products to prevent the erosion of existing price levels; • adoption of product specifications that are incompatible with products produced by any other person and are designed to prevent his entry into, or to eliminate him from, a market;
134. H Hovenkamp, Federal Antitrust Policy (Thomson West, 3rd ed, 2005), §6.4a. 135. Europemballage Corp and Continental Can Co Inc v Commission of the European Communities [1978] ECR 215. 136. . 137. European Commission, Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings (2009/C 45/02) 138. Competition Act 2002 (Canada), s 78(1). © 2018 THOMSON REUTERS
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• requiring or inducing a supplier to sell only or primarily to certain customers, or to refrain from selling to a competitor, with the object of preventing a competitor’s entry into, or expansion in, a market; and • selling articles at a price lower than the acquisition cost for the purpose of disciplining or eliminating a competitor. The United States, EU and Canada focus on what dominant firms do, rather than what their purpose may be. Furthermore, unlike the Australian position between 1974 and 2018, they do not require a claimant to establish that the conduct derives from a use of the firm’s market power. [12.470] Many jurisdictions closer to Australia have modern competition laws and robust enforcement cultures that also focus on exclusionary conduct rather than needing to find a connection between purpose and the use of market power. For example, in South Korea the relevant prohibition is on dominant firms engaging in any of five types of conduct enumerated in the Act. They are:139 • acts of unreasonably determining, maintaining, or changing the price of goods or services; • acts of unreasonably controlling the sale of goods or provision of services; • acts of unreasonably interfering with the business activities of other enterprisers; • acts of unreasonably impeding the participation of new competitors; and • acts to unfairly exclude competing enterprisers or acts that may significantly harm the interest of consumers. [12.480] In Japan, where the prohibition is on abuse of a superior bargaining position, the law also focuses on specific types of exclusionary conduct. They are:140 • selling commodities at unfairly high prices or buying commodities at unfairly low prices; • selling products at prices below cost without any justifiable cause; • refusing to trade with a trading party without any justifiable cause; • requiring a trading party to trade exclusively with itself or trade exclusively with a designated business operator(s) without any justifiable cause; • tying products or imposing unreasonable trading conditions at the time of trading without any justifiable cause; • applying dissimilar prices or other transaction terms to counterparties with equal standing; and • other conducts determined as abuse of a dominant position by the Antimonopoly Authority under the State Council. [12.490] The People’s Republic of China takes a similar approach to South Korea and Japan, enumerating conduct that amounts to abuses of dominance,141 as does South Africa.142 Singapore prohibits conduct that amounts to an abuse of dominance,
139. Monopoly Regulation and Fair Trading Act 2010 (Republic of Korea), Art 3-2. See K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), pp 666–672. 140. Antimonopoly Act 1947 (Japan), Art 2. 141. Anti-Monopoly Law 2007 (People’s Republic of China), Art 17. See K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), pp 132–147. 142. Competition Act 1998 (South Africa), s 8.
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following the EU approach closely.143 Like the United States and the EU, the focus is on what dominant firms do, rather than what their purpose may be. Of course, purpose is not irrelevant in other jurisdictions, any more than it is in Australia. Its role is considered below. [12.500] Since the 2017 amendments,144 the Australian prohibition has focused on conduct, although purpose still has a role to play in Australia in some contexts.145 Most of the conduct listed in those jurisdictions that have adopted the “shopping list” approach would likely amount to misuse of market power in Australia, but the Australian policy position is that our prohibition does not attempt to describe the types of conduct that may constitute a misuse of market power. Instead, the courts will determine whether or not a firm’s unilateral conduct, in all the circumstances, infringes the Act. How the term “conduct” in our Act might be interpreted is a question addressed at [12.780].
Identifying the Market [12.510] Correct identification of the relevant market or markets is essential to any determination of whether or not a firm has a substantial degree of power. As the High Court has observed,146 too narrow a description of the market will create the appearance of more market power than in fact exists, while too broad a description will create the appearance of less market power than there actually is. The objective in identifying the relevant market or markets is to discover the degree of market power, or the market share, held by the firm the subject of the inquiry. When it comes to the question of market power, defining the market and evaluating the degree of power in that market are part of the same process. The two are separated only for the sake of simplicity of analysis. [12.520] In Chapter 7 we discuss what a market is and how it is to be identified for the purposes of the Act. What has been the result in misuse of market power cases? In QWI,147 the court had to decide whether the relevant market was a market for steel and steel products or a market for the product in dispute, Y-bar, which only BHP produced. The High Court held that the relevant market was the market for steel and steel products. In Bursill Sportsgear,148 a case involving the wholesaling of a major brand of ski boots, the court had to decide whether the relevant market was the Australian ski boot market or the retail market either for sports gear or for ski gear. It was found to be the former.
143. Competition Act 2004 (Singapore), s 47. 144. Competition and Consumer (Misuse of Market Power) Act 2017, No 87 of 2017. 145. See [12.530]. 146. Chief Justice Mason and Justice Wilson in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 187; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 at 50,008. 147. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 148. Mark Lyons Pty Ltd v Bursill Sportsgear Pty Ltd [1987] FCA 282; (1987) 75 ALR 581; (1987) ATPR 440-809. © 2018 THOMSON REUTERS
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In Eastern Express,149 a case involving rival suburban newspapers, the court had to decide whether the relevant market was a market in which real estate agents, predominantly in the eastern suburbs of Sydney, acquired advertising services or a broader Sydney market for advertising real estate located in the eastern suburbs, so as to include metropolitan daily newspapers in the market. The narrower market definition was preferred by the court. In Dalgety,150 a case involving refusal by pastoral companies to allow an auctioneer to use their sale yards, the market was found to be one for livestock sales rather than livestock auctions. In General Newspapers,151 a case involving the printing contracts for the Yellow Pages, the court found the relevant market to be an Australian directory market rather than the advertising market. In Taprobane,152 a case involving the termination of a package tour agent by an airline, the question was whether the relevant market was the market for package tours to the Maldives from Australia or island holiday services from Australia to a range of destinations. The court held it to be the latter.
Purpose [12.530] The focus of the Australian prohibition has moved from purpose to conduct, but that does not mean that purpose is irrelevant. In order to establish a contravention in Australia the infringing conduct must have either the purpose or likely effect of substantially lessening competition. That leads to the question: how is purpose to be determined? The Australian prohibition refers to the purpose for which conduct has been engaged in.153 “Purpose”, in this context, refers simply to an intention to achieve a particular result.154 The requirement is to deduce the intent of the firm, although purpose can be deduced by inference from conduct.155 Purpose can be an inference drawn from all of the circumstances relating to the firm under examination, on a balance of probabilities.156 While the best evidence of purpose might be the statements made by that person in the witness box, the court will treat with caution evidence that is
149. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; (1992) ATPR 41-167. 150. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165. 151. General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164; 117 ALR 629; (1993) ATPR 41274. 152. Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 181; 104 ALR 633; (1992) ATPR 41-159. 153. Competition and Consumer Act 2010, s 46(1). 154. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 per Justice Toohey; Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ. 155. ACCC v Pfizer Australia Pty Ltd [2015] FCA 113 (currently on appeal); ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460; 97 ALR 513; Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; (2001) 119 FCR 1. 156. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) ATPR 41-947 at [256].
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ex post facto and self-serving. Such statements must be tested closely and received with the greatest caution.157 [12.540] The Australian position is quite different in this respect from that of the United States.158 There, the prosecutor is required to prove “the wilful acquisition or maintenance of ... [market power] as distinguished from growth or development as a consequence of a superior product, business acumen or historical accident”.159 However, that does not mean that proof of a subjective purpose is required. In the US context, “wilful” does not mean specific intent. As Professor Hovenkamp160 explains: In the case of the complete offence, courts either dispense with an intent requirement, or else infer intent from evidence of monopoly power plus exclusionary practices.
All that is needed is evidence that the conduct forecloses competition, or destroys a competitor.161 As the US courts have said,162 to require “any specific intent makes a mockery of [the law], for no monopolist monopolizes unconscious of what he is doing.”163 [12.550] In the EU, it is the exclusionary effect of a firm’s conduct that is relevant. For instance, in Post Danmark,164 the firm, a government authority, had a monopoly on postal delivery up to 50 grams. It offered a rebate for bulk mailing of direct advertising. When a subsidiary of the Norwegian postal service, Poste Norge AS, began delivering bulk direct advertising in Denmark and subsequently withdrew, the question was whether or not Post Danmark had abused its monopoly position with its rebate system. The Court of Justice ruled that the relevant consideration was whether the conduct was such as to influence the structure of the market.165 In other words, in determining whether or not there has been abuse of a dominant position European courts looks objectively at the conduct. They do so to determine whether, through recourse to methods different from those governing normal competition, the conduct has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.166 [12.560] In Canada, as noted earlier, a dominant firm must be shown to have engaged in an “anticompetitive act”. This is determined by focusing on the firm’s conduct and deciding whether or not the purpose was predatory, exclusionary or
157. Pascoe v Federal Commissioner of Taxation (1956) 30 ALJR 402 at 403 (ALJR); ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460; 97 ALR 513. 158. Referred to by the High Court of Australia in NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48, para 121; (2004) ATPR 42-021. 159. United States v Grinnell Corp 384 US 563 (1966) at 570. 160. H Hovenkamp, Federal Antitrust Policy (Thomson West, 3rd ed, 2005), p 280. 161. Eastman Kodak Co v Image Technical Services Inc 504 US 451 (1992); [1992–1] Trade Cases 69,839. Applied recently in Kolon Industries Inc v DuPont De Nemours & Co [2014–1] Trade Cases 78,727. 162. US v Aluminium Co of America 148 F 2d 416 (1945) at 432. 163. Verizon Communications Inc v Trinko 540 US 398 (2004); [2004–1] Trade Cases 74,241 at 98,008. 164. Post Danmark A/S v Konkurrenceradet (European Commission, C-23/14, 6 October 2015). 165. See also Imperial Chemical Industries Ltd v European Commission (European Commission, T-66/01, 25 June 2010). 166. TeliaSonera, C-52/09 [2011] ECR I‑527, para 27. © 2018 THOMSON REUTERS
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disciplinary.167 Purpose has been taken to involve assessment of the overall character of the conduct, rather than subjective intent. As the court said:168 [P]urpose’ is used in this context in a broader sense than merely subjective intent on the part of the respondent … it might be more apt to speak of the overall character of the act in question.
Relevant factors to be considered and weighed include the reasonably foreseeable or expected objective effects of the act (from which intention may be derived), any business justification, and any available evidence of subjective intent.169 [12.570] What is the position in jurisdictions closer to Australia have modern competition laws? In Singapore, purpose is not primarily relevant – the focus is on conduct, but an allegation of abuse may be successfully rebutted if the firm is able to objectively justify its conduct.170 In South Korea, although the legislation does not import an element of intent, it seems that recent court decisions have done so.171 [12.580] Specific subjective intent may be regarded in the United States as making a mockery of the prohibition, and not used as a basis for liability in other countries, but in Australia subjective purpose has been a key requirement. Although the prohibition was completely re-cast in 2017, purpose remains relevant, but not centrally so. This is because, the primary focus of the prohibition is now on the effect of conduct, rather than the purpose of the dominant firm. Given the approach taken by courts in Australia is seems likely that the enforcement focus in future will be on conduct, not purpose. We will only see purpose cases brought where the firm intended anticompetitive results, even if that is not what happened. Pfizer172 provides an example. That case involved strategies that Pfizer put in place as it approached the expiration of its patent on the cholesterol drug Lipitor and other drugs, including rebates and bundling. The alleged purpose was to prevent or deter the entry of generic manufacturers for as long a period of time as possible. The trial judge decided that the evidence did not support that purpose. To contend that the purpose was to prevent that consequence was “commercial naivety”.173 Where purpose is an issue, subjective purpose of those in authority in the firm, ascertained by appropriately tested evidence and having regard to all of the circumstances, is what will be required in Australia, unless there is a change in approach by the courts.174 [12.590] In purpose cases it is not necessary to establish that the firm actually achieved the proscribed purpose, or even that it was able to achieve it. All that will be needed is that the firm’s purpose, in engaging in the relevant conduct, is to 167. Canada Commissioner of Competition v Canada Pipe Co [2007] 2 FCR 3. 168. Canada Commissioner of Competition v Canada Pipe Co [2007] 2 FCR 3 at [66] applying Canada (Director of Investigation and Research) v Tele‑Direct (Publications) Inc (1997) CanLII 11 (CT), 73 CPR (3d) 1. 169. Canada Commissioner of Competition v Canada Pipe Co [2007] 2 FCR 3 at [67]. 170. Singapore CCS Guidelines on the Section 47 Prohibition, para 4. 171. K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), p 661. 172. ACCC v Pfizer Australia Pty Ltd [2015] FCA 113 (currently on appeal). 173. ACCC v Pfizer Australia Pty Ltd [2015] FCA 113 at [342]. 174. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd [1991] FCA 158; (1991) ATPR 41-069, applying Hughes v West Australian Cricket Association [1986] FCA 56; (1986) ATPR 40-736 per Justice Toohey, applied recently in ACCC v Pfizer Australia Pty Ltd [2015] FCA 113.
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substantially lessen competition. Of course, inability to succeed may be relevant from another perspective. If the corporation does not have the requisite ability to succeed that may indicate that it does not have the requisite market power. That aside, as the court said in Eastern Express,175 it is significant that Parliament did not make it an element of conduct contravening s 46(1) that the firm succeed, or be able to succeed. Identifying whether or not a competitive response in any given circumstances is healthy competition at work or conduct for an impermissible purpose is not an easy task. The fact that a strong competitor takes sales away from other competitors does not, of itself, demonstrate a misuse of its market power. Something more is required. Determining where to draw the line has proven the most difficult.176 The need to determine the relevant purpose both adds to the complexity of the task courts have to deal with and provides a moderator against the tendency to find that a competitive response by a firm that has market power runs a risk of contravention. In undertaking this exercise, the Act does not permit short-term anticompetitive purposes to be nullified or excused by long-term pro-competitive objectives.177
Using Market Power [12.600] Although it is no longer the case, in Australia until the 2017 amendments the requirement was that the firm “take advantage” of its market power; a concept first used in the 1965 Act. This was initially thought to require a finding that the firm had abused its position unusually, predatorily or deceitfully.178 However, that view was quickly dismissed, with the High Court deciding that the term merely meant “whether a firm has used that power”.179 Until the 2017 amendments, a contravention would only occur if it could be proven that the firm had used its market power. If it did not do so there would be no contravention even if the result of its conduct was exclusionary. In other words, if, without market power, the firm could (or would) have engaged in the impugned conduct it would not have been contravening the provision; often referred to as a “but for” analysis.180 The same position applied if the firm used financial or other power, rather than market power.181 The consequence was that, in order to establish a contravention of the Australian provision a clear connection between the market power, the use of that power and a proscribed purpose was required.182 This set the 175. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1991] FCA 321; (1991) 30 FCR 385 at 404-405; 103 ALR 41; (1991) ATPR 41-128. 176. For instance, in Cel-Tech Communications Inc v Los Angeles Cellular Telephone Co [1999-1] Trade Cases 72,495, a cellular telephone provider that provided cellular phone services below cost did not contravene California’s Unfair Practices Act because its primary motivation was to compete with other cellular services, not to injure competition. 177. NT Power Generation Pty Ltd v Power and Water Authority [2004] HCA 48; (2004) 219 CLR 90 at 139–140; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021 at [137]. 178. See B G Donald and J D Heydon, Trade Practices Law (Law Book Co, 1978), p 224, quoted in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) ATPR 40-801. 179. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177. 180. I do not go into the “would or could” debate but it is summarised in Miller’sAustralian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), para [1.46.90]. 181. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374 per Chief Justice Gleeson and Justice Callinan at 138; Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53. 182. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [1989] HCA 6; (1989) 167 CLR 177 per Gleeson CJ, Gummow, Hayne and Callinan JJ at para 44. © 2018 THOMSON REUTERS
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Australian unilateral conduct law apart from all other jurisdiction.183 And it resulted, many argued, in a misdirected legislative response as well as under-capture of conduct that should, as a policy matter, have contravened the Act. The 2017 amendments changed the position completely. Now what is required to be established is only that a firm with market power’s conduct is anticompetitive, or that it has that purpose.184
Competition or Competitors? [12.610] Although it is said that the policy objective of unilateral conduct laws is to protect the competitive process,185 until the 2017 amendments the Australian provision only did so indirectly. That is because the focus of the section was on competitors — on eliminating or substantially damaging a competitor, preventing a competitor entering a market, or deterring or preventing a competitor from engaging in competitive conduct. That approach was predicated on the assumption that, if a firm with market power uses that power to harm a competitor or potential competitor, the result is harm to the competitive process and therefore to consumers. One consequence of this focus on competitors, rather than the competitive process, was that it suggested that actions by a firm with market power that damage a less efficient competitor might contravene the section — that the firm had to “pull its punches”.186 [12.620] Other jurisdictions took a more direct approach. In the United States, for instance, the focus is directly on protecting the competitive process, with the interests of consumers, not competitors, in mind.187 Although earlier US court decisions suggested that a firm with market power had an obligation to permit less efficient rivals enter or remain in the market, that approach has been emphatically rejected.188 Furthermore, US courts eschew defining the types of conduct that contravene the monopolisation prohibition. They explicitly decline to state what conduct qualifies as anticompetitive conduct because, it is said, anticompetitive conduct comes in too many forms and shapes to permit a comprehensive classification.189 [12.630] In the EU, as has already been noted, the focus is also on conduct that adversely affects the competitive process.190 The primary focus of EU unilateral conduct law is on consumer harm. The relevant Article states:
183. For a more detailed discussion of what “take advantage” meant see the 2nd edition of this book, pp 216–219. 184. Competition and Consumer Act 2010, s 46(1). 185. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965 at [41]. 186. See Olympia Equipment Leasing Co v Western Union Telegraph Co [1986–1] Trade Cases 67,189 at p 63,128. 187. See, for example, Novell Inc v Microsoft Corporation [2013–2] Trade Cases 78,523 at p 128,271. See also Brown Shoe Co v US 370 US 294 (1962) at 320, recently applied in Eisai Inc v Sanofi Aventis US LLC (US Court of Appeals, 4 May 2016) at . 188. Verizon Communications Inc v Law Offices of Curtis V Trinko 540 US 398 (2004) quoting US v Grinnell Corporation 348 US 563 (1966). 189. Verizon Communications Inc v Law Offices of Curtis V Trinko 540 US 398 (2004). 190. See [12.130].
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Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
In the EU, abuse is an objective concept. It considers the behaviour of dominant firms in influencing the structure of the market where the result is a weakening of competition. It also considers whether, through recourse to conduct different to that expected in a competitive market the effect is to hinder the competition situation in that market.191 In the EU, the following types of conduct have been determined to be abusive: • exclusive dealing; • conditional discounts; • tying and bundling; • predatory pricing; • refusals to deal — but only if it risks eliminating all competition, existing customers that are competitors,192 new customer where product indispensable or essential facility,193 intellectual property licencing refusals where indispensable, refusals that prevent new products emerging for which there is consumer demand, unjustified refusals that exclude competition in a secondary market;194 • margin squeezes;195 • exploitative conduct — discrimination by applying dissimilar conditions with other trading parties in a way that would place them at a competitive disadvantage;196 and • excessive pricing.197 [12.640] In Canada, the prohibition is on conduct that has the likely effect of substantially lessening competition in a market, as demonstrated by exclusionary practices, of which eleven non-exhaustive examples are listed.198 To take two other examples, in Singapore the law simply states that “any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in any market in Singapore is prohibited”.199 That general prohibition is 191. Hoffmann La Roche v European Commission [1979] ECR 461. 192. Commercial Solvents v European Commission [1974] ECR 223. 193. Oscar Bronner v Mediaprint [1998] ECR I-7791. 194. AB Volvo v Erik Veng [1988] ECR 6211. 195. Deutche Telecom v European Commission (European Commission, C-280/08, 14 October 2010). 196. See, for example, Eurofix-Bauco v Hilti Case COMP/30.787 & 31.488 (1987). 197. United Brands v European Commission [1978] ECR 207. 198. See Canada Commissioner of Competition v Canada Pipe Co [2007] 2 FCR 3 at para [63]. 199. Competition Act 2004 (Singapore), s 47(1). © 2018 THOMSON REUTERS
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supplemented by a list of types of conduct200 that may, in particular, constitute an abuse, but otherwise the matter is left to the courts. In Japan the law prohibits “private monopolization”, which is defined as “activities that exclude or control the business activities of other enterprises, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade”. That prohibition is directed at firms whose conduct can be effective in excluding business activities of other firms or foreclosing a market.201 Japan also prohibits abuses of superior bargaining position, defined by reference to specified types of conduct.202 [12.650] The Australian position is now in line with many other jurisdictions in focusing directly on whether or not the conduct has an anticompetitive purpose or effect. The benchmark test for liability is now whether the conduct substantially lessens competition. The meaning of that term, now a common thread throughout the Act’s competition prohibitions, is discussed in Chapter 8.
What Markets? [12.660] The new misuse of market power provision applies if the purpose or effect of conduct is to substantially lessen competition in any market in which the firm supplies or acquires products or services.203 The pre-2017 amendments “misuse of market power” provision provided that a firm with power in a market may not use that power for a proscribed purpose in that market or any other market.204 In what circumstances might this apply? It is intended to apply when a firm with power in one market leverages its market power in another market and that has a substantial adverse effect in that other market. There is only one reported example. In Parkwood,205 the Board had a virtual monopoly in the supply of eggs in Victoria. When a glut occurred in that market the Board negotiated to supply eggs to retailers who held around 25% of the retail market for eggs in the ACT at prices below those of the applicant. The applicant obtained an interlocutory injunction on the basis that the Board was using its power in the Victorian market to harm a competitor in the ACT market. The correctness of that decision was questioned in Rural Press.206 The High Court referred to Parkwood as “an unusual case”, but did observe that market power in one
200. Competition Act 2004 (Singapore), s 47(2) lists the following conduct: (1) predatory behaviour towards competitors; (2) limiting production, markets or technical development to the prejudice of consumers; (3) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or (4) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of the contracts. For a summary of the law see K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), pp 604–612. 201. Japan Fair Trade Commission, The Guidelines for Exclusionary Private Monopolization under the Antimonopoly Act 2009. 202. Japan Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No 54 of April 14, 1947) Art 2(5) and 2(9)(5). 203. Competition and Consumer Act 2010, s s 46(1). 204. Former Competition and Consumer Act 2010, s 46(1); see Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 457. 205. Victorian Egg Marketing Board v Parkwood Eggs Pty Ltd [1978] FCA 27; (1978) 33 FLR 294; 20 ALR 129; (1978) ATPR 40-081. 206. [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883 at [142].
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market may be used to deter competition in another market and gave the following example: For example, the sole supplier of goods in a market might threaten to cut off supplies of goods in that market to a customer in order to deter that customer from competing with the supplier in another market.
That example is interesting. The new prohibition will apply if the purpose or effect of conduct is to substantially lessen competition in a market in which the firm supplies or acquires products or services, even if the firm does not have market power in that market. All that is required is that the firm have power in a market and that its conduct has the purpose or effect of substantially lessening competition in another market in which it supplies, or is likely to supply, products or services. But is that a sensible policy outcome? Of course, if cutting off supply in the market in which the firm is the sole supplier substantially lessens competition in that market, that would contravene the prohibition without the need to consider the position in the other market. But in what circumstances would such a threat substantially lessen competition in the other market? The probability is that in most instances there will be no adverse effect on competition in that other market unless, like in QWI,207 the lack of availability of product in question adversely affects the competitive situation in a downstream (or upstream) market. Remember that, in QWI, BHP had a monopoly on the production of a fencing product that QWI needed in order to compete effectively with BHP in the rural fencing product market. But in that case, BHP had power in both relevant markets and refusal to supply the product had an adverse effect on QWI’s ability to compete in the downstream market. If the firm, with power in its “home” market, decides to enter a new market, or compete more aggressively in a market in which it does not have the requisite market power, how can it ever do other than enhance competition in the other market? As one commentator noted, commenting on US monopolisation decisions:208 If we turn to the case law, there is a test sometimes referred to as ‘maintenance of an effective competitive structure’ which sounds quite opaque to an economist. ... Does it mean that a firm that is dominant in one market cannot try to compete and gain market share in another market? There is unfortunately no discussion of the reasons why competitors, because of the practice, were not on an equal footing or could not compete in an effective way; instead, the mere fact that a firm is trying to expand its market share seems to be interpreted here as a negative sign – that I find surprising.
If there are instances in which it is appropriate to consider applying the Australian prohibition to behaviour in markets in which the firm does not have market power, by what indicia should we distinguish between health competitive behaviour — competition on the merits — and prohibited conduct? The answer should be, as in Canada, by taking an objective view of whether or not the firm’s conduct is, in all the circumstances, exclusionary.
207. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 208. P Rey, “Abuses of Dominant Position and Monopolization: an Economic Perspective” in AM Mateus and T Moreira, Competition Law and Economics: Advances in Competition Policy Enforcement in the EU and North America (Elgar, 2010), at p 189. © 2018 THOMSON REUTERS
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Australia Old and New [12.670] In summary, the following table contains a snapshot of the differences between the old and new versions209 of Australia’s prohibition on misuse of market power: Old Law New Law Substantial degree of power in a market Substantial degree of power in a market Trigger Use of that market power Conduct or purpose Contravention Purpose of: Effect of substantially • eliminating or substantially lessening competition damaging a competitor; or in that or any other • preventing the entry of a person into market in which that or any other market; the firm supplies or • deterring or preventing a person acquires products or from engaging in competitive services. conduct in that or any other market. Prerequisite
Predatory Pricing [12.680] One type of conduct universally regarded as exclusionary is predatory pricing. Predatory pricing is not a term used in the Australian Act. Although views differ on when prices are predatory, as opposed to good for consumers, it is generally regarded as meaning selling below cost with intent to destroy either competition or a specific competitor.210 The rationale for a firm pricing predatorily is said to be to maximise profits after competition has been driven from the market. This has led to consideration of whether pricing can be said to be predatory, as opposed to keenly competitive, if there is no prospect of the firm recouping the “investment” it has made through low pricing. From a policy viewpoint predatory pricing is viewed in a very bad light by the court. In Cabcharge,211 the dominant provider of credit card processing services for taxis engaged in predatory pricing by selling in-cab meters below cost, with the result that 50% of all meters installed were Cabcharge meters. The court said:212 I regard predatory pricing as one of the more insidious breaches of the Act. Firms engage in predatory pricing “to drive rivals out of business and scare off potential entrants” … Then, they raise prices, capturing monopoly/oligopoly rents. Once firms gain monopoly/ oligopoly power, it is often extremely difficult to take that power away; firms are likely to be deterred from entering the market because they know the incumbent has the ability to undercut them and if new firms try to enter the market, the incumbent is likely to engage in predatory pricing to force them out.
209. New section Competition and Consumer (Misuse of Market Power) Act 2017, Act No 87, 2017. 210. P Areeda, Antitrust Analysis (3rd ed), para 214; H Hovenkamp, Federal Antitrust Policy (3rd ed, Thomson, 2005), para 8.1. 211. ACCC v Cabcharge Australia Ltd [2010] FCA 1261; (2013) ATPR 42-331 per Justice Finkelstein. 212. ACCC v Cabcharge Australia Ltd [2010] FCA 1261; (2013) ATPR 42-331 at [57].
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A Predatory Pricing Prohibition [12.690] Two provisions were inserted in the Competition and Consumer Act 2010 in 2007 and 2008 to deal with predatory pricing. They were removed in 2017. The first213 was not directed at misuse of market power as such. It provided that firms with a substantial market share may not supply, or offer to supply, products or services for a sustained period at a price less than their relevant cost for any of the purposes then prohibited by the Act. The prohibited purposes were: eliminating or substantially damaging competitors generally, a class of competitors or a particular competitor, preventing a person, persons generally or a particular class of persons, entering a market, or preventing or deterring anyone from engaging in competitive conduct in a market. No question of the prospect of recoupment arose. The assumption was that, if a corporation with a substantial market share engages in predatory pricing, as defined, that will not serve the objective of the Act to enhance the welfare of Australians. The second provision214 was a more logical fit with the then scheme of the misuse of market power prohibition. It provided that supply of products or services for a sustained period at less than the firm’s relevant cost may be a misuse of market power regardless of whether recoupment is possible. This was to counter the proposition that there could be no misuse of market power unless recoupment could be established. In the United States, recoupment had become an essential element of a predatory pricing claim.215 [12.700] The Harper Panel concluded that specific provisions addressing predatory pricing did not advance the policy of the prohibition.216 In the result, the new 2017 misuse of market power prohibition makes no mention of predatory pricing. But that does not mean that predatory pricing is irrelevant. As in the United States, predatory pricing by a firm with the requisite degree of market power may well be conduct that substantially lessens competition. Sensibly, the prescriptive approach evident in the earlier Australian specific predatory pricing prohibitions has given way to a policy of leaving it to the courts to decide in any given case.
Recoupment [12.710] Whether or not it is necessary to establish that the firm is likely to recoup losses it incurs in order to prove a contravention has not been established. There is nothing in the misuse of market power provision that requires it, but the issue nevertheless remains open. As the High Court said in Boral:217 While the possibility of recoupment is not legally essential to a finding of pricing behaviour in contravention of s 46, it may be of factual importance. The fact, … that BBM had no expectation of being in a position to charge supra-competitive prices even if Rocla and Budget left the market … was material to an evaluation of its 213. Former Competition and Consumer Act 2010, s 46(1AA). See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 457. 214. Former Competition and Consumer Act 2010, s 46(1AAA). See Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 457. 215. See CR Leslie, “Predatory Pricing and Recoupment” (2013) 113 Columbia Law Review 1695. 216. Harper Report, p 61. 217. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915. © 2018 THOMSON REUTERS
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conduct. The inability to raise prices above competitive levels reflected a lack of market strength. A finding that BBM expected to be in a position, at the end of the price war, to recoup its losses by charging prices above a competitive level may have assisted a conclusion that it had a substantial degree of market power, depending on the other evidence.
If recoupment is not foreseeable, the likelihood is that the firm does not have market power. Treating a reasonable prospect of recoupment as a fundamental element in determining a claim of predatory pricing provides a simple means of applying the misuse of market power provision without affecting the object of protecting consumer interests.218 If a firm with the requisite degree of market power reduces its prices below average variable cost, then it may be easy to attribute to the firm an anticompetitive objective, and to characterise its behaviour likely to substantially lessen competition if recoupment is in prospect. In United States it is only if there is a “dangerous probability” that the firm engaging in predatory pricing could recoup its investment in below-cost prices that a finding of monopolization will be made.219 That would seem to be a sensible policy outcome in Australia as well.
Relevant Cost [12.720] When will a price be sufficiently low to be regarded as predatory? A firm’s total costs can be divided into fixed costs and variable costs, although the distinction between the two can become blurred.220 Fixed costs, such as invested capital, real estate, plant, equipment and management overheads, do not vary with the level of production. Variable costs are those costs that vary with production, such as power, materials and salaries for those directly involved in producing the item. Marginal cost, the additional cost a firm incurs in the production of one additional unit of output, is related to but less than variable cost. For the purposes of predatory pricing, marginal cost is the logical cost measure because a principal objective of competition policy is to achieve efficient prices for consumers. As long as a firm’s prices exceed its marginal cost, each individual sale increases profits or decreases losses. However, in the United States, courts have tended to adopt a price measure based on a test proposed in 1975 by Professors Areeda and Turner.221 That measure is average variable cost. Although marginal cost is the logical cost measure because a principal objective of competition policy is to achieve efficient prices for consumers, the marginal cost of a particular product is not easy to determine. In United States v AMR Corp,222 a case concerning pricing of airline tickets, the US Court of Appeals observed that:
218. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-195; Carter Holt Harvey Building Products Group Ltd v Commerce Commission [2004] UKPC 37. 219. Brooke Group Ltd v Brown & Williamson Tobacco Corp 509 US 209 (1993); [1993–1] Trade Cases 70,277. For application of the rule see, for example, Beech-Nut Nutrition Corp v Gerber Products Co [2003–2] Trade Cases 74,146. 220. As Professor Hovenkamp explains, over time fixed costs are variable because eventually plant and durable equipment needs to be replaced: H Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice (3rd ed, Thomson, 1999), para 1.1. 221. PE Areeda and DF Turner, “Predatory Pricing and Related Practices Under Section 2 of the Sherman Act”, 88 Harvard Law Review 697. 222. US v AMR Corp 335 F 3d 1109 (2003); [2003–2] Trade Cases 74,078 at 96,746.
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In this circuit, we have spoken of both AVC and other marginal cost measures as relevant. … Because there may be times when courts need the flexibility to examine both AVC as well as other proxies for marginal cost in order to evaluate an alleged predatory pricing scheme, we again decline to dictate a definitive cost measure for all cases. Sole reliance on AVC as the appropriate measure of cost may obscure the nature of a particular predatory scheme …
AVC, or average variable cost, is the total of the variable costs of producing a product divided by the units produced.223 There is at least one indication that courts will consider average variable cost as the relevant measure. In Boral224 the allegation was that Boral had misused its market power by selling masonry products at less than “avoidable cost”. The court described the term ‘avoidable cost’ by use of the following example: Assume that to make an article a firm has to pay $6 for raw materials and incurs fixed costs of $4. Thus a sale for any price above $10 will return a profit. If the firm sells for $8, it will sell below cost and accordingly make a loss. But it will recover its raw materials costs and make a contribution to its fixed costs. So the firm is better off making the article than not making it. But if the price received is less than $6, the firm is worse off. It would be better not to make the article. In this example $6 is the avoidable cost, the cost that will be avoided by not making the article. The term variable cost is often used as a synonym for avoidable cost, and was in the present case. In strict economic theory there are differences, but they are not material for present purposes.
Given the difficulty in establishing the marginal cost of a unit of production, average variable or avoidable costs would appear to be an appropriate measure to be used in Australia, but even where measures such as average avoidable cost are utilised whether or not a firm is selling below cost is not an easy question to resolve.225 It is likely that Australian courts will use average variable cost in most cases but not adopt it as a single measure. Australian courts are likely to prefer to maintain a degree of flexibility,226 given that the legislature has not given firms a bright line by selecting any particular cost measure to distinguish between when the prohibition applies and when it does not.
Sustained Period [12.730] The 2007 predatory pricing prohibition provided that transitory below relevant cost sales would not be sufficient to sustain a contravention. This was consistent with the policy that the prohibition should not operate against the interests of consumers by placing firms that offered “specials”, such as airlines and
223. PE Areeda and DF Turner, “Predatory Pricing and Related Practices Under Section 2 of the Sherman Act” (1975) 88 Harvard Law Review 697. 224. ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 41-715 at [104]. 225. For example, in Conley Publishing Group Ltd v Journal Communications Inc [2003–2] Trade Cases 74,088, the Wisconsin Supreme Court had to decide whether the defendant was selling newspapers below cost when it offered certain subscribers 50% off its published rates for its Sunday newspaper on a temporary basis to stimulate sales. The question was whether advertising revenue directly derived from the increased circulation was to be included for the purpose of determining whether the defendant sold below cost. The court held that it was. 226. In Eastern Express Pty Ltd v General Newspapers Pty Ltd [1992] FCA 138; (1992) 35 FCR 43; 106 ALR 297; (1992) ATPR 40,284 (41-167), the court expressed the view that no pre-ordained or fixed categories of level of pricing necessarily control the drawing of an inference that there has been a misuse of market power. © 2018 THOMSON REUTERS
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supermarkets, at risk of contravention for doing so. That should be the position under the reformulated provision. What the period might be is difficult to predict. Areeda and Hovenkamp suggested five years,227 but that is unlikely to be a sustainable proposition in Australia. In AMR,228 allegations that American Airlines had engaged in monopolisation when it responded to the entry of low-cost carriers on some of its routes by multiple episodes of lowering fares and increasing capacity. Although it did so over a two year period, each episode was of short duration. The government failed to establish its case. In Australia, Boral229 involved a period of two-and-a-half years, although nothing in the judgment turned on the period.
Business Reason [12.740] Selling below avoidable cost, even for a prolonged period, does not necessarily mean that the firm has engaged in conduct that substantially lessens competition. There may be a rational business reason for the conduct.230 As the United States Supreme Court has observed:231 That below-cost pricing may impose painful losses on its target is of no moment to the antitrust laws if competition is not injured. It is axiomatic the antitrust laws were passed for “the protection of competition, not competitors”.
A statement to a similar effect was made by the High Court in Australia.232 If a firm is operating in an intensely competitive environment and a close examination of its pricing behaviour shows that the firm is responding to competitive pressures, then its conduct is unlikely to be predatory.233 Charlick234 provides an example. The firm, a government business enterprise, had been formed to amalgamate State operated rail freight services on a commercial basis. Charlick, a rail terminal owner, complained that the firm had reduced its prices to harm Charlick but the court accepted that the firm reduced its prices for legitimate business reasons that had nothing to do with deterring Charlick from engaging in competitive conduct in any market. However, pricing below variable cost for more than a short term prompts a question about what is going on. Is the firm selling its products at less than it costs to produce them due to rational competitive conduct or is something else going on? All that can be said is that, in the absence of some other business justification, one conclusion may be that the firm has an ulterior, predatory objective.
227. PE Areeda and H Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application (Wolters Kluwer, 2nd ed, 2002), para 801a. 228. US v AMR [2003–2] Trade Cases 74,078. 229. ACCC v Boral Ltd [1999] FCA 1318; (1999) ATPR 41-715. 230. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-195. 231. Brooke Group Ltd v Brown & Williamson Tobacco Corp 509 US 209 (1993); [1993–1] Trade Cases 70,277 at 70,383. 232. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [2003] HCA 5; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 233. Boral Besser Masonry Ltd v ACCC [2003] HCA 5; (2003) 215 CLR 374; 77 ALJR 623; 195 ALR 609; (2003) ATPR 41-915. 234. Charlick Trading Pty Ltd v National Rail Corporation Ltd [1999] FCA 452.
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Refusals to Supply [12.760] The general rule is that suppliers are not obliged to supply everyone who seeks to order their products. As Dr Stephen Corones points out, if suppliers have freedom to decide by whom and under what conditions their product will be sold, economic efficiency is enhanced.235 The Act, including the misuse of market power prohibition, is directed to promoting competition — not private interests. If a firm is otherwise entitled to decline to supply someone, it is not the function of the Act to dictate how that firm should conduct its business.236 Even where market conditions are such that a supplier is relatively free from market constraint and the supplier refuses supply, this does not mean that a contravention has occurred. However, if it can be established that the supplier has power in a market and that the refusal is likely to substantially lessen competition then an action would be sustainable. The court would need to consider whether there is more to the refusal that what one might expect in a competitive market, and even if there is more to the refusal than that, whether the effect in the market is likely to be substantial. The question should be: was the conduct exclusionary and did it affect a sufficiently significant proportion of the market to be substantial?
Unanswered Questions [12.770] It will be some time before the exact scope of the new Australian misuse of market power provision is decided by the courts. In the meantime, a number of unanswered questions are worth considering. The first is whether Australian courts will decide that the phrase “substantially lessening competition”, when used in the new misuse of market power prohibition, has the same meaning as it does in other competition provisions. It is, of course, highly likely that they will, as discussed in Chapter 8.237 [12.780] The second question is whether a firm can contravene the Australian prohibition without engaging in conduct objectively determined to be exclusionary. In its Interim Guidelines on Misuse of Market Power238 the ACCC places significant emphasis on the types of conduct it suggests illustrate misuse of market power. But as we have seen, in Canada the equivalent prohibition has two elements. The first is that the firm must have engaged in “anticompetitive acts”, and the second is that the effect of its conduct must substantially lessen competition.239 Although not expressed in that way legislatively in other jurisdictions, the position is that monopolisation or abuse of dominance requires a finding that the firm’s conduct was in some way exclusionary — something other than robust competitive behaviour.
235. S Corones, Competition Law in Australia (3rd ed, Lawbook Co, 2004), p 414. 236. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; 50 IPR 257; (2001) ATPR 41-805. 237. See Australian Gas Light v ACCC (No 3) [2003] FCA 1525; ATPR 41-966 at [347]. 238. Interim Guidelines on Misuse of Market Power October 2017 at [2.27] (viewed 10 November 2017). 239. See [12.560], Competition Act 1985 (Canada), s 78(1). © 2018 THOMSON REUTERS
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This establishes objectively the intent necessary in the United States and the abuse necessary in the EU. [12.790] Distinguishing between conduct that is “competition on the merits” and conduct that has an anticompetitive effect has been, and will remain, a difficult challenge. Most conduct in misuse of market power cases is conduct that can have both anticompetitive and pro-competitive effects. To take one example, a firm’s conduct can be pro-competitive because it provides increased consumer choice through a wider range of products and lower prices. At the same time, the firm’s conduct can be potentially anticompetitive in the sense that other suppliers of the same products may not be able to match the range or price and may ultimately vacate the field by closing down. Is the effect to be regarded as substantially lessening competition because some firms are driven from the market, or is that just the natural consequence of effective competition? It is the latter. But whether or not courts will interpret the “substantially lessening competition” test to mean conduct other than competition on the merits is an open question. As we saw in Chapter 8, earlier decisions on the phrase in other provisions of the Act suggest that it is the qualitative and quantitative outcome of conduct in relevant markets that determines the result. While more recent cases have involved conduct that, objectively considered, has had an exclusionary flavour, our courts have not yet settled the position. [12.800] From a policy perspective, the standard for judicial intervention should be whether or not the conduct is exclusionary in the sense that it is not competition on the merits. How might that outcome be rationalised given the plain words of the prohibition? It will not be by unduly focusing on the meaning of each of the words used — “conduct”, “purpose”, “likely”, “substantial”, “lessening” and “competition” — and deriving an interpretation based on a sequential amalgamation of the meaning of each word. It will be achieved by recognising that it is the whole phrase “conduct that has the purpose or likely effect of substantially lessening competition” that is to be interpreted. In approaching that task, the context in which the word ‘conduct’ appears is critical. It requires us to ask: what conduct has the likely effect of substantially lessening competition? Or, put another way, is the conduct in question the type of conduct that substantially lessens competition? That approach would take us to a consideration of the types of conduct that is exclusionary — conduct not, in its context, competition on the merits. Taking that approach, the prohibition would mean, borrowing from an earlier quoted decision in the EU,240 that it applies to conduct that involves recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators that has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition. [12.810] Although the classes of conduct that this might include is never closed, some types of exclusionary or abusive conduct are generally regarded as fitting that description. In Canada the legislation contains a suggested list,241 and the
240. Hoffmann-La Roche v European Commission [1979] ECR 461. 241. See [12.460]. For South Korea and Japan see [12.470]–[12.480].
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European Commission details them in a guidance note.242 In Australia the ACCC has issued Interim Guidelines on Misuse of Market Power243 that lists refusal to deal, restricting access to an essential input, predatory pricing, loyalty rebates, margin/ price squeezing and tying and bundling. The suggested approach would also be consistent with the well-established view that the law should not penalise firms for having market power, or for seeking to obtain market power by competing on the merits. It would be inconsistent with that view to penalise a firm that has market power when it engages in conduct that is not exclusionary but which nevertheless meets a test of substantially lessening competition derived from an assessment of the state of relevant markets with and without the conduct. [12.820] The third question derives from a difference between EU and United States law. The United States monopolisation prohibition is directed only at exclusionary conduct — conduct that establishes or maintains monopoly power by denying potential competitors a fair opportunity in the market.244 As Fox and Crane observe:245 In recent years the US courts have taken a narrow view — essentially holding that monopolization law is solely concerned with achieving short-run consumer welfare. The courts have strenuously resisted allowing monopolization law to become about business fairness or ethics or achieving a level playing field.
In the EU the different label used — abuse of a dominant position — reflects a difference in substance. The EU law addressed both exclusionary abuses and exploitative abuses. Article 102 specifically provides that an abuse may consist of “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions”.246 Consequently, excessive pricing is a type of abuse recognised under EU law,247 while in the United States it is not. In the Australian context, assume that a firm that only supplies resellers decides to price discriminate. It does so by charging a particular customer, or group of customers, one price for its products and all other customers a significantly higher price. If the firm has market power in the supply market, would this infringe the new prohibition? Arguably it would, if it substantially lessens competition in the downstream retail market, but only if the firm supplies products in that downstream market. Whether or not the Australian prohibition will encompass both exclusionary abuses and exploitative abuses remains to be seen. 242. See [21.630] and Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings OJ C 45, 24.2.2009 (viewed 11 November 2017). 243. Interim Guidelines on Misuse of Market Power October 2017 at [2.27] (viewed 10 November 2017). 244. US v Aluminium Co of America 148 F 2d 416 (1945). 245. EM Fox and DA Crane, Global Issues in Antitrust and Competition Law (West, 2010), p 94. 246. Treaty on the Functioning of the European Union, Art 102(a) (Lisbon Treaty). 247. See, for example, United Brands v European Commission, Case 27/76 (1978) ECR 1978–00207; Scandlines Sverige AB v Port of Helsingborg, Case COMP/A.36.568/D3 (2004), . © 2018 THOMSON REUTERS
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A Quest for a Standard [12.830] Before leaving this topic it is appropriate to briefly consider the quest for an appropriate standard against which to assess whether or not conduct amounts to a misuse of market power. This is not a challenge Australia faces alone. It has been a subject of long debate in the United States and in Europe as economists and lawyers attempt to find a defining policy approach. A short description of the debate in the United States illustrates the position and illustrates the difficulty. As the Supreme Court observed in Trinko:248 Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern; the means of illicit exclusion, like the means of legitimate competition, are myriad.
In 2008, the US Department of Justice issued a report that canvassed a number of economic standards that might be applied in determining whether or not a firm had engaged in monopolisation.249 This was prompted by a view that court decisions that failed to deal with a competitor for valid business reasons did not provide sufficient guidance. The paper canvassed a number of tests, as have academics, but as the following brief description shows, none of the possible tests provides a definitive answer. None provides certainty and each involves either potential over-capture or potential under-capture.
Effects-Balancing Test [12.840] An effects-balancing test would prohibit conduct by a firm with market power that causes net harm to consumers. It would require the court to balance the anticompetitive effects of the conduct with pro-competitive efficiencies. The Harper Panel had recommended something like this test. It recommended that “concerns about inadvertently capturing pro-competitive conduct’ should be mitigated by legislatively requiring courts to have regard to the extent to which the conduct has the purpose or likely effect of ‘increasing competition in the market, including by enhancing efficiency, innovation, product quality or price competitiveness”.250 However, that suggestion was not included in the Bill in its final form. An effects-balancing test has the advantage of focusing the exclusionary-conduct analysis on the impact on consumers, but the disadvantage of not being easy to administer. The Department of Justice concluded that: The effects-balancing test confronts a court with the administrative challenge of conducting an open-ended measuring of effects that includes comparing the existing world with a hypothetical world that is subject to debate. These administrability problems include limitations on both the ability of economists accurately to measure the net consumer-welfare effects of particular conduct and the ability of judges and juries to evaluate this evidence.
248. Verizon Communications Inc v Law Offices of Curtis V Trinko 540 US 398 (2004) at 414; [2004–1] Trade Cases 74,241. 249. US Department of Justice, “Single Firm Conduct Under Section 2 of the Sherman Act” (2008), . 250. Harper Report, p 348.
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The consequence of adoption of this test would likely be under-capture. As the Department of Justice paper notes, quoting Judge Stephen Breyer:251 Rules that seek to embody every economic complexity and qualification may well, through the vagaries of administration, prove counter-productive, undercutting the very economic ends they seek to serve.
Disproportionality Test [12.850] This test is a variant of the effects balancing test. It would apply where conduct has both pro-competitive and anticompetitive effects and it is likely that the anticompetitive effects substantially outweigh the likely pro-competitive benefits. This test is said to it reduces the risk of chilling pro-competitive conduct while prohibiting conduct that significantly harms competition and consumer welfare because it reduces the need to precisely balance pro-competitive and anticompetitive effects. But critics of this test thought it would lead to under-capture. They thought that this test imposes a higher burden on a plaintiff than the effects-balancing test because a plaintiff would need to demonstrate that the harm to competition substantially outweighs the benefits.
No-Economic-Sense Test [12.860] A no-economic-sense test would prohibit exclusionary conduct when the conduct would make no economic sense but for its tendency to eliminate or lessen competition.252 This test was used by the US Department of Justice in a number of cases, but ultimately abandoned. As Gregory Werden,253 a senior economic counsel at the Department of Justice has noted, in Microsoft, the Department of Justice argued that the company’s conduct “would not make economic sense unless it eliminated or softened competition:”. In American Airlines,254 the Department of Justice’s case was that American Airlines had driven out rivals by adding “money-losing capacity” and that this “distinguishing legitimate competition from unlawful predation”. In Dentsply,255 a case involving false teeth, the Department of Justice argued that a policy of terminating dealers that carried rival products and accepting dealers only if they dropped rival’s products “made no economic sense but for their tendency to harm rivals”. However, as Werden acknowledged, this test has its difficulties. It requires consideration of:256 both the gains from the challenged conduct apart from any that stem from the eliminating competition, and the costs of undertaking the conduct. That conduct produces some 251. Barry Wright Corp v ITT Grinnell Corp 724 F 2d 227 (1983). 252. G Werden, “Identifying Exclusionary Conduct Under Section 2: The ‘No Economic Sense’ Test” (2006) 73 Antitrust Law Journal 413. 253. G Werden, “Identifying Exclusionary Conduct Under Section 2: The ‘No Economic Sense’ Test” (2006) 73 Antitrust Law Journal 413, at 414. 254. US v AMR Corp 355 F 3d 1109 (2003). 255. US Department of Justice Brief, 14 May 2004, . 256. G Werden, “Identifying Exclusionary Conduct Under Section 2: The ‘No Economic Sense’ Test” (2006) 73 Antitrust Law Journal 413, at 416. © 2018 THOMSON REUTERS
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gross benefit for the defendant is not a sufficient basis for concluding that it makes economic sense. Conduct fails the ... test if it is expected to yield a negative payoff, net of the costs of undertaking the conduct, and not including any payoff from eliminating competition.
Ultimately, the Department of Justice decided that it would not recommend the no-economic-sense test as a necessary condition for liability, although it expressed the view that the test may sometimes be useful in identifying certain exclusionary conduct. As von Kalinowski noted,257 no court has expressly adopted the test.
Profit Sacrificing Test [12.870] A variant of the no-economic-sense test is a profit sacrificing test. This test involves considering whether anticompetitive conduct would be profitable for the firm and would make good business sense even if it did not exclude rivals and thereby create or preserve market power.258 However, the contrary view is that this is an ineffective test because sacrificing profit is neither necessary nor sufficient for conduct to have an anticompetitive effect.259
Equally Efficient Competitor Test [12.880] An equally efficient competitor test involves a finding that the challenged conduct is likely in the circumstances to exclude an equally or more efficient competitor from the market in which a firm with market power competes. The Department of Justice paper noted the view that this test would permit firms to take full advantage of their efficiency while protecting competition from efficient rivals. It is said to be useful because it allows firms to assess their conduct at the outset based on their own costs. Critics thought that this test would be administratively difficult to apply, because what constitutes an efficient competitor is not self-evident. The Department of Justice concluded that: Whether conduct has the potential to exclude, eliminate, or weaken the competitiveness of equally efficient competitors can be a useful inquiry and may be best suited to particular pricing practices.
Consumer Harm Test [12.890] Some commentators have proposed a consumer harm test. As John Fingleton, the former chief executive of both the UK Office of Fair Trading and the Irish Competition Authority, has said, “consumer welfare should be at the centre of any policy test: competition policy that focusses on consumer welfare drives both productivity growth and competitiveness.”260 This test would condemn conduct by a firm with market power as exclusionary whenever the net effect on consumers was harmful. But it is hardly likely to provide a standard that assists firms to determine their actions. Furthermore, it is likely 257. JO von Kalinowski, P Sullivan and M McGuirl, Antitrust Laws and Trade Regulation (Matthew Bender Elite Products, 2nd ed), para 25.04. 258. D Melamed, “Exclusionary Conduct Under the Antitrust Laws: Balancing, Sacrifice and Refusals to Deal” (2005) 20 Berkeley Tech Law Journal 1247. 259. E Elhauge, “Defining Better Monopolization Standards” (2003) 56 Stanford Law Review 253. 260. J Fingleton, “Competition Policy and Competitiveness in Europe” in AM Mateus and T Moreira, Competition Law and Economics: Advances om Competition Policy and Antitrust Enforcement (Elgar, 2010), p 300.
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Digest of Australian Cases
to result in over-capture because it is biased in the direction of committing false convictions, because it condemns conduct even when that conduct enhances social welfare by contributing to productive efficiency.
Digest of Australian Cases [12.900] As the prohibition on misuse of market power changed significantly in 2017 there are no cases on the interpretation of the new prohibition. Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018) contains a digest of cases decided in relation to the previous misuse of market power prohibition.
FURTHER READING Author Areeda and Turner Demsetz Edwards Elhauge Fingleton Groshinski and Davies Hay Kate and Niels
Leslie McCall McLachlan
Title “Predatory Pricing and Related Practices Under Section 2 of the Sherman Act” “Barriers to Entry” “The Perennial Problem of Predatory Pricing” “Defining Better Monopolisation Standards” “Competition Policy and Competitiveness in Europe” Competition Law in the Asia Pacific “Trinko: Going All the Way” “On the Rationality of Predatory Pricing: The Debate Between Chicago and PostChicago” “Predatory Pricing and Recoupment” “Predatory Pricing: An Economic and Legal Analysis” “Margi Squeezes as a Misuse of Market Power”
Matthiesson “How Will Enforcement of Section 46 Change under the Full Harper?”
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Citation (1975) 88 Harvard Law Review 697 (1982) 72 The American Economic Review 47 (2002) 30 Australian Business Law Review 170 (2003) 56 Stanford Law Review 253 Mateus & Moreira, Competition Law and Economics (Elgar, 2010) Wolters Kluwer, 2015 (2005) 50 Antitrust Bulletin 527 (2002) Antitrust Bulletin 1
(2013) 113 Columbia Law Review 1695 (1987) 32 Antitrust Bulletin 1 (2016) 24 Australian Journal of Competition and Consumer Law 279 (2016) 24 Australian Journal of Competition and Consumer Law 307
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[12.900]
Author
Title
Citation
Melamed
“Exclusionary Conduct Under the Antitrust Laws: Balancing, Sacrifice and Refusals to Deal” “The Ongoing Struggle with Misuse of Market Power”
(2005) 20 Berkeley Tech Law Journal 1247
Miller
Miller
Miller
O’Bryan Page Pleatsikas
Rey
Salop
Stigler Werden
286
“Competition Debate Must Move Beyond Effects Test Battle “ “The Competition Test Attracts Odd Political Bedfellows, But Isn’t Going Away” “Section 46: Law or Economics?” “Ideological Conflict and the Origins of Antitrust Policy” “An Economic Interpretation of Recent American and Australian Judicial Decisions on Predatory Pricing” Abuses of Dominant Position and Monopolization: an Economic Perspective “The First Principles Approach to Anti-trust, Kodak and Anti-Trust at the Millennium” “The Origins of the Sherman Act” “Identifying Exclusionary Conduct Under Section 2: the No Economic Sense Test”
(2016) 24 Australian Journal of Competition and Consumer Law 242 The Conversation, 1 May 2016
The Conversation, 18 September 2015
(1993) 1 Competition & Consumer Law Journal 64 (1991) 66 Tulane Law Review 1 (2003) 11 Trade Practices Law Journal 12
Elgar, 2010
(2002) 68 Antitrust Law Journal 187
(1985) 14 Journal of Legal Studies 1 (2006) 73 Antitrust Law Journal 413
Miller’s Australian Competition Law and Policy
VERTICAL CONSTRAINTS — TYING AND OTHER VERTICAL RESTRICTIONS [13.20] [13.50] [13.60] [13.70]
[13.250] [13.290] [13.300]
[13.330] [13.410] [13.440] [13.480] [13.490] [13.500] [13.510]
13
Development of a Vertical Restrictions Prohibition ............................. An International Perspective ............................................................... Australian Policy Position .................................................................... Exclusive Dealing — What it Involves ................................................. [13.80] Supply Restrictions ............................................................. [13.160] Acquisition Restrictions ...................................................... [13.170] Full Line Forcing ................................................................. [13.190] Third Line Forcing ............................................................... [13.210] What is Third Line Forcing? ................................................ Bundled Products or Services ............................................................. The Other Elements — Acquire Directly or Indirectly ......................... Other Elements — Supplying Products or Services ........................... [13.310] Supply ................................................................................. [13.320] Goods and Services ........................................................... Other Elements — Is Compulsion Required? ..................................... Anticompetitive Purpose ..................................................................... Likely Effect on Competition in a Market ............................................. Exclusive Dealing — Land Transactions ............................................. Exclusive Dealing — Exempt Conduct ............................................... Exclusive Dealing — Aiding a Contravention ...................................... Digest Of Cases ..................................................................................
287 289 290 291 291 294 294 296 297 298 301 302 302 302 303 306 307 309 309 309 310
[13.10] A prohibition against arrangements between competitors or potential competitors only goes part of the way to providing an open and competitive market. Other practices, vertical in nature, can also potentially adversely affect competition. This is especially so where the arrangements are imposed as a condition of supply by a firm that has market power or a group of firms that have market power.
Development of a Vertical Restrictions Prohibition [13.20] In the United States tying arrangements and other forms of vertical restriction that substantially lessened competition or tended to create a monopoly had been banned since the Sherman Act was enacted in 1890 and actively enforced since the Clayton Act was passed in 1914.1
1.
See, for example, Motion Picture Patents Co v Universal Film Manufacturing Co 243 US 502 (1917); United Shoe Machinery Corp v United States 258 US 451 (1922); Times-Picayune Publishing Co v United States 345 US 594 (1953). However as Professors Fox and Crane point out, in the United States, it was ultimately recognised that tying arrangements can have procompetitive effects: see EM Fox and DA Crane, Global Issues In Antitrust and Competition Law (West, 2010), p 223.
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In Australia, tying arrangements started to be the subject of adverse academic comment in the early 1960s. As one Australian commentator, who reported on the adverse effects of trade associations on the economy, stated in 1961:2 The character of [tying] is plain. Retailers and wholesalers who are parties benefit by channelling a large part of the available trade away from non-members of the association. Similarly, manufacturers in the arrangement prevent outsiders from obtaining access to the main trade outlets. Thus at any stage of production and distribution the intensity of competition may be reduced effectively by excluding non-members from the normal trade channels – most frequently new firms — and hence inhibiting free entry.
The Barwick list3 of practices possibly detrimental to the public interest included tying arrangements such as manufacturers only supplying resellers who did not handle another manufacturer’s brand, or only dealing with a reseller who agreed to acquire all of its requirements of agreed products from the manufacturer. However, as we saw in Chapter 2, the Trade Practices Act 1965 took a light-handed approach to dealing with these matters. [13.30] The 1965 Act included three tying practices open to investigation. The first related to requirements contracts — the practice of requiring, as a condition of supply of goods or services, that the person supplied acquire all or part of its requirements of some other types of goods or services from another person.4 This practice, then referred to as “forcing another person’s product”,5 is now an element of “third line forcing”. The second examinable practice involved trade associations extracting prices, terms or conditions from manufacturers that the manufacturers were bound not to make available to non-members.6 The third examinable practice applied to trade associations attempting to induce manufacturers not to deal with third parties, except on disadvantageous terms.7 [13.40] The prevailing view in the late 1960s and early 1970s is reflected in a submission to Cabinet in December 1971 by the then Attorney-General, Senator Greenwood, who expressed the view that: “Exclusive dealing [between individual suppliers and individual distributors] is generally regarded as a legitimate form of distribution but in a monopoly context it may sometimes have an unduly restrictive effect.”8 By 1974, there was growing influence of United States antitrust thinking on Australian policymakers, and increased focus by economists on the impact of restrictive agreements on the economy. Although thinking in the United States was to change over time, at that time United States antitrust law proscribed a number of vertical trading restrictions about which Australian policymakers had previously been ambivalent. The first was tying arrangements — any arrangement by a party to sell its products on the condition that the buyer also purchases a different (or tied) product, or that the buyer agrees not to purchase that product from any other 2. A Hunter, “Restrictive Practices and Monopolies in Australia”, Economic Record (1961). 3. The list of anticompetitive practices prepared by the then Attorney-General, Sir Garfield Barwick, and tabled in Parliament on 6 December 1962. See Appendix 1. 4. Trade Practices Act 1965, s 36(1)(b). 5. See Richardson, Australian Trade Practices Act (Hicks Smith, 1967), p 75. 6. Trade Practices Act 1965, s 36(1)(a). 7. Trade Practices Act 1971, s 36(1)(c). 8. Cabinet Submission No 465 (7 December 1971) Appendix 3, para 13.
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An International Perspective
supplier.9 Territorial restrictions imposed by a manufacturer on a distributor or retailer formed the second category.10 A third category was unilateral resale price maintenance.11 In the United States, the presence or absence of market power was a relevant consideration,12 but that was not to be the case in Australia.13 The Trade Practices Act 1974 addressed these issues simply and directly. It provided that “a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing”.14 The Act then described the prohibited conduct in a few short paragraphs, each picking up a practice illustrated by United States jurisprudence considered applicable to Australia’s circumstances. Following the Swanson Committee review of the Act shortly after it came into force the exclusive dealing provision was extensively overhauled and redrafted.15 The Competition and Consumer Act 2010 continues to contain that simply expressed prohibition, coupled with the detailed description of what exclusive dealing involves, with few changes since 1978.
An International Perspective [13.50] Although the Australian legislation has singled out vertical restraints — “exclusive dealing” — as conduct to be separately dealt with, and prohibits that conduct where the conduct has an anticompetitive purpose or likely effect, vertical trading restrictions are not universally treated in that manner. In accordance with the United Nations Set of Principles and Rules on Competition,16 UNCTAD has published a Model Law on Competition.17 It includes exclusive dealing conduct but as an element of abuse of a dominant position. In other words, under the UNCTAD formulation, vertical restraints are only contestable where the firm imposing the restraint has market power. In the United States, exclusive dealing conduct is now “recognized as normally efficient, and is usually lawful; but it can be illegal if it is a device to keep rivals from needed access to scarce inputs or maintain market power”.18 As Posner has commented,19 although tying arrangements were long thought to epitomise exclusionary practices they are now recognised as rarely exclusionary. He points out that the traditional concern with tying is that they enable firms with market power
9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.
Northern Pacific Railroad Co v United States 356 US 1 at 5-6 (1958); Justice Blackmun in Eastman Kodak Co v Image Technical Services Inc 504 US 451 (1992). United States v Arnold, Schwinn & Co 388 US 365 (1967); Continental TV Inc v GTE Sylvania Inc 433 US 36 (1977). Dr Miles Medical Co v John D Park & Sons Co 220 US 373 (1911). This is covered in Chapter 14. Times-Picayune Publishing Co v United States 345 US 594 (1953). Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; at [268]. Trade Practices Act 1974, s 47 (now Competition and Consumer Act 2010, s 47). See Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976). United Nations Conference on Trade and Development (UNCTAD) 2000 Doc TD/RBP/CONF/10/ REV 2. UNCTAD Doc TD/RBP/CONF/.5/7/REV.3 (2007). EM Fox and Crane, Global Issues In Antitrust and Competition Law (West, 2010), p 223; TimesPicayune Publishing Co v United States 345 US 594 (1953). RA Posner, Antitrust Law (University of Chicago Press, 2nd ed, 2001), p 197.
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in one market to leverage their position in another market in order to gain market power in the second market. In Europe the position seems to be broadly the same as in the United States,20 with vertical arrangements considered pro-competitive in the absence of market power or horizontal collective arrangements.21 As the European Commission said when issuing its Guidelines on Vertical Restraints in 2000:22 “Vertical agreements” may contain certain restrictions to competition which, in the absence of significant market power by the companies involved, nevertheless generally improve production and distribution of the goods and services concerned.
In Canada the Competition Act 1985 contains two prohibitions in relation to exclusive dealing, but only where the conduct is engaged in by a major supplier of a product or because the conduct is widespread in a market.23 Singapore’s Competition Act 2004 does not apply to vertical conduct except where the Minister specifically determines that it is to apply.24
Australian Policy Position [13.60] The policy position in Australia has been to treat tying and other forms of vertical restraints as a separate matter, unconnected with market power — originally to either declare them per se contraventions, or test their legality against the “substantial lessening competition” standard. As the court said in Universal Music:25 It was submitted by reference to some texts that, absent collusion or parallelism, exclusive dealing can only be effective if the “excluder” has substantial market power. That is not the premise on which s 47 if framed. It does not refer to market power …
Submissions to the Swanson Committee suggested that the Act should deal only with vertical arrangements imposed by a firm that has market power, but that was explicitly rejected.26 The Harper Panel recognised that vertical restrictions are usually unlikely to cause competitive harm. It recommended that the exclusive dealing provision be removed, but on the basis that relevant anticompetitive conduct could be addressed by a combination of a newly formulated prohibition on misuse of market power and the existing prohibition on anticompetitive contracts, arrangements and understandings, extended to include concerted practices.27
20. Although Fox and Crane describe it as “less permissive”: Global Issues In Antitrust and Competition Law (West, 2010), p 197. 21. See European Commission, Guidelines on Vertical Restraints (2000) OJ C291/1, ; G Amato and CD Ehlermann, EC Competition Law (Hart, 2007), pp 65, 319. 22. Media Release, 24 May 2000, ip/00/520. 23. Competition Act 1985 (Canada), ss 77(2), 77(3). 24. Competition Act 2004 (Singapore), s 35, Sch 3. 25. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529 at [268]. 26. See Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976), p 29. 27. Competition Policy Review: Final Report (Harper Report), pp 372–376.
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[13.80]
Exclusive Dealing — What it Involves
Turning to third line forcing — requiring, as a condition of supply that customers take other products or services from an unrelated third party — the Harper Panel noted that Australia is the only jurisdiction that prohibits the practice per se. The Panel recommended that the practice should only be prohibited where it has a purpose, or likely effect, of substantially lessening competition.28 That recommendation was accepted and the Act amended accordingly.29
Exclusive Dealing — What it Involves [13.70] What are the vertical trading practices the Act prohibits?30 There is a shopping list of practices that come within the term “exclusive dealing”. The various practices may be categorised as vertical supply limitations, vertical refusal to supply, vertical acquisition limitations, vertical refusals to acquire and tying. Although vertical trading restrictions will usually be imposed through a contract, arrangement or understanding, the prohibitions do not rely on that as a trigger for their operation. The trigger is nothing more than supply or acquisition of products or services, or offers to supply or acquire them. Until the 2017 amendments to the Act, third line forcing was prohibited per se — although most types of exclusive dealing conduct only contravened the Act if they had a purpose, or likely effect, of substantially lessening competition. It is now only a contravention if it has a purpose, or likely effect, of substantially lessening competition.
Supply Restrictions [13.80] The first type of vertical restraint to consider is vertical supply restrictions. When firms that supply products or services impose anticompetitive restrictions on supply, that can amount to prohibited exclusive dealing. The types of restrictions covered by the Act in this respect are quite diverse. The first is restricting customers from acquiring products or services from the supplier’s competitors. If a supplier supplies products or services, or offers to supply them, on that condition, it will amount to prohibited exclusive dealing if the purpose or likely effect of the conduct is to substantially lessen competition.31 An example of this type of conduct is where a manufacturer of television sets supplies retailers with its products on condition that the retailers not stock competing brands. In Universal Music,32 Universal and another music publisher instituted policies of reviewing the terms on which they traded with stores that stocked parallel import compact discs, in order to discourage those stores from parallel importing in competition with the respondents. Universal was found to have engaged in exclusive dealing. 28. Harper Report, p 374. 29. Competition and Consumer Amendment (Competition Policy Review) Act 2017, No 114, 2017 Sch 7. 30. Following the Swanson Committee review of the Act shortly after it came into force the exclusive dealing provision, s 47, was extensively overhauled and redrafted essentially in its current form. See Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976). 31. Competition and Consumer Act 2010, s 47(2)(d), (10). 32. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529. © 2018 THOMSON REUTERS
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[13.90]
[13.90] It will also amount to prohibited exclusive dealing if the supplier conditions the price of the products or services on whether or not the customer deals with a competitor, where the purpose or likely effect of the conduct is to substantially lessen competition.33 A common example of this practice is if a manufacturer supplies product to a retailer at one price if the retailer does not stock a competitor’s product and at another price if the retailer does. Baxter Healthcare34 is an example. In that case, which related to supply of pharmaceutical products for public hospitals in response to tenders, Baxter’s tender to health departments gave a lower price for products for which there was no substitute supplier if the health departments also took products for which there were competing tenderers. [13.100] The third type of restriction that amounts to prohibited exclusive dealing also relates to price. If the supplier offers a discount, allowance, rebate or credit to those customers who do not deal with a competitor, that will also amount to prohibited exclusive dealing where the purpose or likely effect of the conduct is to substantially lessen competition.35 For example, in O’Brien Glass, discussed36 O’Brien was a major supplier of replacement windscreens. It offered substantial discounts to resellers and fitters of windscreens on condition that they purchased all, or almost all, of their windscreens from O’Brien. O’Brien was found to have engaged in exclusive dealing. In CSR,37 the respondent admitted engaging in exclusive dealing when it refused to supply plasterboard to a distributor in Western Australia because the distributor also dealt in imported plasterboard. A different example is provided by Metro Motor Market.38 A car dealer was found to have engaged in exclusive dealing when it offered a larger trade-in to a customer if the customer financed the purchase of a new car through the dealer’s preferred credit provider. A corollary to this prohibition is if a supplier refuses to provide a discount, allowance, rebate or credit, because the person seeking supply has not accepted the relevant restriction, and the conduct has the purpose or likely effect of substantially lessening competition.39 [13.110] The condition does not have to be absolute. The Act does not require, for the exclusive dealing provisions to apply to supplying or products or services, or giving a rebate or allowance, that the customer not acquire other products or services from a competitor. A restriction to a limited extent is all that is necessary. For example, in O’Brien, discussed above, the firm gave discounts on its windscreens on condition that all or a substantial majority of the windscreens would be bought from it. But compare Safeway Stores.40 A large supermarket chain did not engage in exclusive dealing when it offered to stock bread from a supplier, but only if
33. Competition and Consumer Act 2010, s 47(2)(b), (10). 34. [2005] FCA 581; (2005) ATPR 42-066. 35. Competition and Consumer Act 2010, s 47(2)(c), (10). 36. Cool & Sons Pty Ltd v O’Brien Glass Industries Ltd [1981] FCA 95; (1981) 35 ALR 445; (1981) ATPR 40-220. 37. Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076. 38. Trade Practices Commission v Tepeda Pty Ltd (t/as Metro Motor Market) [1994] FCA 1125; (1994) ATPR 41-319. 39. Competition and Consumer Act 2010, s 47(3)(c), (10). 40. ACCC v Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1; (2002) ATPR (Digest) 46-215.
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[13.150]
Exclusive Dealing — What it Involves
the supplier ensured that another supermarket to which it supplied bread did not undercut Safeway. The reason was that the provision applies where the limitation is on the quantity to be supplied, not the price.41 [13.120] These exclusive dealing practices require the condition to involve the customer not acquiring products or services of a particular kind or description from a competitor, whether completely or to a limited extent. Whether or not the conduct involves a competitor is a matter of fact. However, there is no need to identify a specific competitor in order to establish a contravention.42 [13.130] The fourth type of restriction involves resupply. If a firm offers to supply products, or offers to supply at a particular price, or offers a discount, allowance, rebate or credit, on condition that the customer does not resupply the products or services to particular persons, that will also amount to prohibited exclusive dealing, if the purpose or likely effect of the conduct is to substantially lessen competition.43 An example of this type of conduct is where a manufacturer of motor vehicles supplies dealers on condition that the dealers do not sell vehicles to fleet customers whom the manufacturer wants to retain as its direct customers. A further example is if, instead of only supplying dealers who do not sell to its reserved customers, the manufacturer gives a special price, or a discount or allowance to those dealers who do not do so. [13.140] The fifth type of restriction is a resupply restriction that divides up a market. It involves supply subject to the customer accepting a restriction on the places it can re-supply the goods or services, if that conduct has the purpose or likely effect of substantially lessening competition.44 A common example of this practice is if motor dealer franchises prohibit the dealer from selling vehicles to persons other than those who reside in the territory allocated to the dealer by the manufacturer. Another is where a franchisor allocates exclusive territories to franchisees and specifies that a franchisee cannot provide products or services to those outside the franchisee’s designated area. A further example is if the franchisor gives a special price, or a discount or allowance to franchisees who do not supply to those outside the franchisee’s designated area. [13.150] It would be relatively easy to circumvent these prohibitions by simply refusing supply instead of making supply conditional on one of the restrictions referred to above. Consequently, it is also a prohibited exclusive dealing practice to refuse to supply for any of those reasons, if that conduct has the purpose or likely effect of substantially lessening competition.45 For instance, in Outboard Marine,46 41. Safeway was, however, found to have engaged in exclusive dealing in another respect: see [13.160]. 42. ACCC v Universal Music Australia Pty Ltd [2001] FCA 1800 at [458]-[9]; (2001) 115 FCR 442; 201 ALR 502; (2002) ATPR 41-855. This view was not challenged on appeal [2003] FCAFC 193 at [176]. 43. Competition and Consumer Act 2010, s 47(2)(e), (10). 44. Competition and Consumer Act 2010, s 47(2)(f), (10). 45. Competition and Consumer Act 2010, s 47(3), (10). 46. Outboard Marine Australia Pty Ltd v Hecar Investments (No 6) Pty Ltd [1982] FCA 265; (1982) 66 FLR 120; 44 ALR 667; (1982) ATPR 40-327. In another refusal to supply case decided in the same year, Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd [1982] FCA 178; (1982) ATPR 40-315, the franchise was cancelled and supply refused because the franchisee had not to agree not to supply a competitor’s outboard motors, but the franchisee was unsuccessful because the cancellation was unlikely to have an adverse effect on competition. © 2018 THOMSON REUTERS
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the manufacturer of a leading brand of outboard marine motors refused to renew a retailer’s franchise, thereby terminating supply of the manufacturer’s brand of engines and spare parts for them. Outboard Marine had a policy of not supplying the particular brand of outboard motors to retailers who stocked competing brands. Outboard Marine was found to have engaged in exclusive dealing.
Acquisition Restrictions [13.160] Firms that acquire products or services may also have sufficient market power to impose restrictions on suppliers. Consequently, there are reciprocal provisions relating to refusals by firms that acquire products or services to acquire them on condition that the supplier not supply others, or refuse to acquire products or services because the supplier does not accept some restriction on its right to supply third parties. Although combatting market power may be the policy reason for prohibiting this practice, the prohibition does not require any finding that the firm involved has market power. The Act prohibits firms acquiring, or offering to acquire, products or services on condition that the supplier either not supply or limits supplies to someone else, if the purpose or likely effect of the conduct is to substantially lessen competition.47 A common example of this type of conduct is if a retailer only stocks a product if the manufacturer or distributor agrees not to supply a competitor. In Safeway Stores,48 the firm, a major supermarket chain, was found to have engaged in prohibited exclusive dealing when it recommenced stocking a suppliers line of bread on condition that the supplier would not supply bread carrying the same brand at a stall the supplier had at a nearby market. It will also amount to prohibited exclusive dealing if a firm acquires, or offers to acquire, products or services on condition that the supplier limits the persons to whom it otherwise supplies products or services, or the places in which it does so, if the purpose or likely effect of the conduct is to substantially lessen competition.49 A common example is if a retailer stipulates that it will only carry a particular manufacturer’s brand in its stores if the manufacturer either does not supply other stores in the vicinity of the retailer’s stores, or limits the range of products it supplies other retailers.
Full Line Forcing [13.170] Full line forcing, a form of bundling, occurs where a single package of products or services is supplied by the one supplier and in order to obtain one of the products or services in the package the customer must take the whole package. Baxter Healthcare, discussed at [13.90] above, is a good example. This practice is distinguishable from third line forcing, which involves two distinct goods or services with the supply of the first by one party being conditioned on acquisition of the second from a different party. Bundling of that type is considered at [13.190].
47. Competition and Consumer Act 2010, s 47(4), (10). 48. ACCC v Safeway Stores Pty Ltd (No 3) [2001] FCA 1861; (2001) 119 FCR 1; (2002) ATPR (Digest) 46-215. 49. Competition and Consumer Act 2010, s 47(3), (10).
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Exclusive Dealing — What it Involves
The Act prohibits firms supplying products or services on condition that the person to whom they are supplied acquires other goods or services from the firm, if the purpose or likely effect of the conduct is to substantially lessen competition.50 It will also amount to prohibited exclusive dealing if, instead of supplying goods or services on condition that the customer takes the bundle, the firm conditions the price of the goods or services, or a discount, allowance, rebate or credit on whether or not the customer takes the bundle, where the purpose or likely effect of the conduct is to substantially lessen competition.51 Refusals to supply on any such condition are also caught by the prohibition if the purpose or likely effect of the conduct is to substantially lessen competition.52 It was common, when the Act was introduced, for vehicle manufacturers to require their franchised dealers to only use “genuine” spare parts when repairing the manufacturer’s brand of vehicle. The consequence was that, if the vehicle was under warranty or the owner wanted it serviced by an authorised dealer, they had to buy “genuine” spare parts. Spare parts were often sourced by the manufacturer from subcontractors, badged with the manufacturer’s brand and re-supplied by the manufacturer to dealers. Invariably the price was higher than if the dealer bought the parts direct from an alternative supplier. In Ford Motor Co,53 Ford sought authorisation for such a practice, but authorisation was denied. The same bundling practice was common in relation to copiers and copy paper. In Nashua,54 the applicant, then one of fifteen companies actively engaged in supplying plain paper photocopying machines in Australia, sold its machines under contracts that required buyers to only use paper supplied by Nashua (bundling) or an approved third party (third line forcing) and to have the machines serviced only by Nashua (bundling). The Commission rejected the applications for an authorisation and clearance. [13.180] One of the consequences of a policy decision to carefully define contravening conduct, rather than leave it to the courts to develop the law, is that not all bundling will contravene the Act. For example, in Dainty,55 considered further at [13.270] the question was whether bundling booking and ticketing services at a concert venue as part of a package of services amounted to prohibited exclusive dealing. The dispute was over the applicant having to use the respondent’s booking and ticketing services if it wanted to hire the venue. The court decided that no bundling was involved. As long as the choice to supply only the bundle is made other than for an anticompetitive purpose and the decision to bundle is not likely to adversely affect competition, a decision to bundle is open to the supplier. Otherwise it is not.
50. 51. 52. 53. 54.
Competition and Consumer Act 2010, s 47(2)(a) and (d). Competition and Consumer Act 2010, s 47(2)(b) and (c). Competition and Consumer Act 2010, s 47(3). Re Ford Motor Company of Australia Ltd (1977) 32 FLR 65; (1977) ATPR 40-043. Re Nashua Australia Pty Ltd Application Nos C13827-C13834, A3956-A3961, (1975) TPRS 105.76. 55. Paul Dainty Corp Pty Ltd v National Tennis Centre Trust [1989] FCA 173; (1989) ATPR 40-951. On appeal [1989] FCA 173. © 2018 THOMSON REUTERS
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[13.190]
Third Line Forcing [13.190] Third line forcing is a term not found in the Competition and Consumer Act 2010. It is a shorthand way of referring to a range of practices, involving a firm requiring a customer, as a condition of supply, to acquire other products or services, whether required or not, from a third party it specifies.56 The difference between third line forcing and other vertical supply restrictions is that the purpose or likely effect on competition was, until the 2017 amendments, irrelevant. It was prohibited per se. However, that is not now the position. The Barwick list57 of practices possibly detrimental to the public interest included manufacturers supplying a product on condition that the reseller takes other products from other designated manufacturers, whether the reseller wants the other products or not. This resulted, as we have seen, in the 1965 Act including in its list of examinable practices forcing another person’s product as a condition of supply.58 [13.200] When it came to the 1974 Act, third line forcing had moved from an examinable practice with possible detriment to the public, to a practice prohibited without inquiry into either its effect on competition or its effect in terms of public benefits, although authorisation was available if the party engaging in it could establish positive public benefits. That remained the position under the Competition and Consumer Act 2010 until the 2017 amendments. When introduced in 1974, the prohibition attacked directly some well entrenched practices. Tied insurance was one of them. In order to smooth the introduction of the new Act, the Commission was empowered to grant clearances where it formed the view that an agreement was unlikely to be anticompetitive.59 The first clearance application for third line forcing conduct considered by the Commission, Tukinya,60 involved the then common practice of lenders requiring borrowers to insure mortgaged properties with an insurer nominated by the lender. Although the Commission cleared the agreement, Commissioner Pengilley pointed out that the conduct may have infringed the then third line forcing provision,61 in which case the clearance would be ineffective because such conduct was per se and could not be cleared. Shortly after the Tukinya decision was published, the Commission commenced public hearings on applications for authorisation by five permanent building societies of the same practice of nominating insurers with whom borrowers were required to insure mortgaged properties. The Commission refused authorisation.62 A subsequent court challenge in Ku-ring-gai Building Society63 by another building society that engaged in the same practice also failed. The conduct amounted to third line forcing.
56. ACCC v IMB Group Pty Ltd (In liq) [2002] FCA 402; (2002) ATPR (Digest) 46-221. 57. The list of anticompetitive practices prepared by the then Attorney-General, Sir Garfield Barwick, and tabled in Parliament on 6 December 1962. See Appendix 1. 58. Trade Practices Act 1965, s 36(1)(b). 59. Trade Practices Act 1974, s 92. Clearances were abolished in 1978. 60. Re Tukinya Securities Ltd (1975) ATPR 8,659. 61. Trade Practices Act 1974, s 47(4). 62. Re United Permanent Building Society Ltd (1976) TPRS 108.138. 63. Re Ku-ring-gai Cooperative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134; (1978) ATPR 40-094, discussed at [13.230].
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Building societies and other lenders lobbied the Swanson Committee to recommend that their tied insurance arrangements be exempted, but the committee declined to do so.64 Instead of limiting the provision, the result was that the third line forcing provision was expanded in the 1978 Act to its current form.
What is Third Line Forcing? [13.210] It will now amount to third line forcing if a firm: • supplies or offers to supply goods or services on condition that the customer acquires other goods or services from a third party specified by the supplier;65 • refuses supply of goods or services because the customer has not acquired or agreed to acquire other goods or services from a third party specified by the supplier;66 • supplies goods or services at a particular price or gives a discount, allowance, rebate or credit in relation to the goods or services on condition that the customer acquires other goods or services from a third party specified by the supplier;67 or • refuses to supply goods or services at a particular price or gives a discount, allowance, rebate or credit in relation to the goods or services because the customer has not acquired or agreed to acquire other goods or services from a third party specified by the supplier.68 However, it will not be third line forcing if the person from whom the supplier requires the customer to acquire other goods is a related body corporate of the supplier.69 That conduct would be regarded as “full line forcing”; a practice that is also prohibited exclusive dealing if the purpose or likely effect of the conduct is to substantially lessen competition. [13.220] Many of the cases discussed in this chapter provide examples of thirdline forcing. To take one example, Technology Leasing,70 the question was whether there had been third line forcing in the supply of a bundled telecommunications service. The facts were that a telecommunications service provider, Freshtel, carried on a business of providing telephone equipment and services at the same charges as customers were currently incurring because it rented telephone capacity from large communications companies such as Telstra. Customers who signed up signed a service agreement with Freshtel and an equipment leasing agreement with Technology Leasing, the equipment supplier, although they were not made aware of the separate contracts — they simply signed up for the bundle. When Freshtel ceased trading and therefore stopped providing telecommunications services, questions arose concerning the lease payments to Technology Leasing. The court decided that there had been no third line forcing directly engaged in by Technology Leasing. That was because the facts did not establish that the equipment financing 64. Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs (1976), para 4.101. 65. Competition and Consumer Act 2010, s 47(6)(a). 66. Competition and Consumer Act 2010, s 47(7)(a). 67. Competition and Consumer Act 2010, s 47(6)(b) and (c). 68. Competition and Consumer Act 2010, s 47(7)(b) and (c). 69. Competition and Consumer Act 2010, s 47(6) and (7). 70. Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709. © 2018 THOMSON REUTERS
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service would only be provided if the customer agreed to acquire the equipment from a particular equipment vendor or one of a group of equipment vendors. But Freshtel had engaged in third line forcing because it offered its services on condition that the customer acquired equipment financing provided by the panel of financiers, including Technology Leasing, on whom its business model relied in order to receive commissions and rebates. Technology Leasing knew this and that resulted in to being found to be knowingly concerned in Freshtel’s contravention. [13.230] Third line forcing cases first came before the courts shortly after the Act came into force. Legion Cabs71 involved taxi owners who were members of the cooperative and thereby had access to the cooperative’s radio service. A condition of membership was that, under the rules of the cooperative, members were required to buy petrol from nominated service stations that provided a rebate to the cooperative. The conduct was found to be third line forcing. No question of compulsion arose because there was a clear contractual obligation. The second case, Ku-ring-gai Building Society,72 involved a building society that required borrowers to insure mortgaged properties with an insurer nominated by the building society. The conduct was found to amount to third line forcing, but again there was no question of compulsion because the obligation was clear. [13.240] As noted earlier, it will also be third line forcing if: • the price at which products or services are supplied; or • a discount, allowance, rebate or credit is allowed by the supplier; is conditioned on the customer acquiring all or part of its requirements of other goods or services from a third party specified by the supplier. Although the conduct is now only prohibited if it has an anticompetitive purpose or likely effect, there is one difference between the third line forcing and other exclusive dealing conduct. The difference is that, with third line forcing, the tying has to be to a particular person (“another person”), whereas with other exclusive dealing conduct involving re-supply conditions, that condition has to only be to particular persons or classes of persons. The consequence is that, with third line forcing, the tying conduct cannot be any other unspecified persons but it may include persons who are part of a panel of specified persons.73
Bundled Products or Services [13.250] There will be no full line forcing or third line forcing if a single package of products or services is supplied. That is so even if different unrelated corporations produce the component products or services in the package and even, were it not for the supplier’s decision to supply only a bundled package, if the purchaser could have acquired each component separately.74 As the court explained in Technology Leasing: Package arrangements, where one or multiple companies contribute different elements of a package of goods and/or services, which is then offered to the customer, do not constitute 71. Trade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd [1978] FCA 47; (1978) 35 FLR 372; (1978) ATPR 40-092. 72. [1978] FCA 50; (1978) 36 FLR 134; 22 ALR 621; (1978) ATPR 40-094. 73. ACCC v Link Solutions Pty Ltd (No 2) [2010] FCA 919, (2010) ATPR 42-339; see also Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709. 74. ACCC v IMB Group Pty Ltd (In liq) [2002] FCA 402 (2002) ATPR (Digest) 46-221 at [72].
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third line forcing, even if the customer could have arranged for all of the elements of the package to be obtained separately and even if there is no reason for insistence on a package except for the supplier’s requirement. … However, a court must be careful to distinguish between a legitimate package arrangement … and a sham or artificially contrived package that is structured to circumvent the prohibition on third line forcing.
Bundling presents conceptual difficulties. When will a product be simply a product and when will it be a bundle? The difference can be quite unclear. Take a desktop computer. It consists of a processing unit, monitor, keyboard and mouse, none of which functions without operating software. Furthermore, the computer is of little use without applications software such as a word processing program or an internet search engine. A telecommunications system and an internet service are also required if we are to use the internet. At what point does the “package” cease to be a single product and become a bundle of separate products? Computer processing units, monitors and keyboards are all sold separately, yet we would normally not regard a computer as complete unless they all came in the one package, along with applications software. We would therefore regard the complete package as one product — a computer — even though it consists of a bundle of separate products. When the internet was in its infancy, if search engine software were included in the package we would probably have regarded that as a separate, bundled, product, but now we may regard it as part of the product. On the other hand, we would regard the telecommunications system and internet service as quite separate products. [13.260] In Castlemaine Tooheys,75 the High Court decided that a brewery that sold beer on a delivered basis did not engage in third line forcing, even though the product (beer) and the service (delivery) could have been purchased separately. The same result occurred in Dainty.76 The facts in Castlemaine Tooheys were that customers of a Brisbane brewery could choose to either collect beer from the brewery or have it delivered, but if the brewery provided delivery it arranged delivery only by a carrier it appointed. The brewery arranged and paid for the carrier and included a charge for delivery in its invoice to the retailer. For reasons related to liquor licensing laws in Queensland, the practical option for publicans and bottle shops was to have beer delivered by the brewery. The applicant, a carrier that wanted to carry beer to North Queensland, challenged the arrangement, claiming it amounted to third line forcing. The High Court rejected the claim because the brewery did not require retailers to acquire delivery services from the carrier it arranged; it simply provided the beer on a delivered basis. The position would presumably have been different if, instead of arranging and paying for the delivery itself, the brewery had required the publicans to pay the carrier direct. [13.270] Dainty77 involved a challenge to booking arrangements for the National Tennis Centre. The trust responsible for the tennis centre, the National Tennis Centre Trust, entered an agreement with another government body, the Victorian Arts Centre Trust, to grant an exclusive ticketing agency at the tennis centre to that trust. Dainty, a theatrical entrepreneur that had its own booking and ticketing facilities, 75. Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395; 61 ALJR 10; 68 ALR 376; (1986) ATPR 40-751. 76. Paul Dainty v National Tennis Centre Trust (1989) FCA 173; (1989) ATPR 40-951. 77. Paul Dainty v National Tennis Centre Trust (1989) FCA 173; (1989) ATPR 40-951. © 2018 THOMSON REUTERS
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booked the tennis centre for concerts by Pink Floyd and Mick Jagger. Dainty wanted to use its own booking and ticketing facilities rather than those provided with the centre. Dainty sought a declaration that the requirement to use the centre’s booking and ticketing facilities amounted to third line forcing. The application was refused on the basis that there was no requirement for Dainty to acquire booking and ticketing services from a third party. The judge pointed out that: The owner of a venue suitable for concert performances may choose to offer to a promoter a licence of the venue upon terms which would entitle the promoter to provide all ancillary services, such as ticketing and financial services and the provision of staff to be responsible for front of house, the booking office, stage door security, and for the operation of technical facilities. It may, on the other hand, offer a licence of the venue upon terms that it will retain the right to provide to the public some or all of those ancillary services by itself or by its chosen agent.
The services were provided by the National Tennis Centre Trust as part of a package. The position would have been different if Dainty had been required to acquire booking and ticketing services direct from the Victorian Arts Centre Trust. On appeal,78 Dainty argued that, if the decision were allowed to stand, a third party’s services could always be forced on a contracting party by an arrangement which makes the supplier nominally responsible for the service, but which in reality is provided by a third party under a subcontract. Rejecting the appeal the court observed:79 All that can usefully be said in the face of these arguments is that these are the types of problems which naturally arise when, for understandable reasons, the legislature chooses to forbid commercial conduct which is not criminal or immoral, but may be economically undesirable. The courts, while being alert to detect sham or artificially contrived arrangements, must do their best to apply the provisions of the enactment to the particular facts before them.
[13.280] These cases did not turn merely on whether there was one contract rather than two. The question is whether, having regard to all of the circumstances, there is a single supply of goods or services.80 This point is illustrated by the facts in Pathology Practices,81 In that case the association of private pathology providers challenged a practice by the NSW Health Department of requiring private patients in New South Wales public hospitals to use the government’s pathology service rather than the pathology service of their treating doctor’s choice. A private patient in a public hospital is one who pays for the services provided, as opposed to a public patient who does not. Private patients are entitled to choose their own doctor, but not for pathology. The Health Department sought authorisation for the practice because it involved the hospitals, each of which were statutory corporations, providing hospital services on condition that the patient acquired pathology services from pathologists who had a contract at the hospital. The pathologists billed the private patient separately for the service and were entitled, under their hospital contracts, to retain a proportion of the income. The practice amounted to third line forcing, although in that case it was authorised by the Tribunal, subject to conditions that allowed a degree of choice. 78. 79. 80. 81.
(1990) 22 FCR 495. Re Australian Association of Pathology Practices Inc (1990) 22 FCR 495 at 498. ACCC v IMB Group Pty Ltd (In liq) [2002] FCA 402; (2002) ATPR (Digest) 46-221. [2004] ACompT 4; (2004) 180 FLR 44; 206 ALR 271; (2004) ATPR 41-985.
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The Other Elements — Acquire Directly or Indirectly
Compare the facts in Pathology Practices with nursing services. Private patients in public hospitals do not pay separately for nursing services. They are provided by the hospital. The hospital recruits, trains, supervises and pays its nurses. Private patients are charged for their services, but only as a component of the bundle of services provided by the hospital. The provision of nursing services in those circumstances does not involve third line forcing.
The Other Elements — Acquire Directly or Indirectly [13.290] A number of the exclusive dealing practices include reference to restricting the customer acquiring goods or services “directly or indirectly” from a competitor of the supplier. The third line forcing prohibition requires, as a condition of supply, that the customer acquires goods or services “directly or indirectly” from a third party. What constitutes an indirect acquisition? First, the term “acquire” is not limited to buying products or services. It includes, in relation to goods, to acquire by way of purchase, exchange or taking on lease, on hire or on hire-purchase. In relation to services it includes accepting the services.82 Second, references to the acquisition of goods include agreeing to acquire goods, acquisition of property or rights in goods, and acquisition of goods together with other property or services.83 Turning to services, references to the acquisition of services include references to agreeing to acquire services and acquisition of services together with property or other services, or both.84 What does an indirect acquisition of goods or services involve? An early decision, Legion Cabs,85 suggested that “indirectly” means merely an acquisition of products from an agent of that person, but limiting the scope of the prohibition in that way does not seem to accord with the policy intent. In IMB Group,86 the court adopted a broader meaning, applying the Macquarie Dictionary definition: “coming or resulting otherwise than directly or immediately, as effects, consequences, etc”. The judge stated: 87 when a question arises whether, … a person has been offered goods or services by corporation X on condition that the person acquire other goods or services of a particular kind or description ‘indirectly’ from Y, the question for the decision-maker is not whether the legal relationship of agency exists between the entity who delivers the goods or services of that kind or description and Y. Instead, the decision-maker must consider the facts of the case to determine whether the acquisition of those goods or services from the intermediate entity can be said to be an acquisition indirectly from Y within the ordinary meaning of that expression.
IMB Group concerned whether or not promoting a proposed sporting and entertainment complex involved third line forcing. The project involved investors in 82. 83. 84. 85.
Competition and Consumer Act 2010, s 4(1). Competition and Consumer Act 2010, s 4C. Competition and Consumer Act 2010, s 4C. Trade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd [1978] FCA 47; (1978) 35 FLR 372 at 381; (1978) ATPR 40-092. 86. ACCC v IMB Group Pty Ltd (In liq) [2002] FCA 402; (2002) ATPR (Digest) 46-221. 87. [2002] FCA 402 at [100]; (2002) ATPR (Digest) 46-221. © 2018 THOMSON REUTERS
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the scheme that gave them life membership of a rugby league club to be established as part of the scheme, but only if they purchased an investment policy from IMB with one of the insurers with whom IMB had a commission arrangement. The question was whether there was a direct supply by IMB or an indirect acquisition from the insurers though IMB as their agent. The court concluded, on the facts, that there was a direct supply of the insurance policies by IMB, rather than an indirect supply by the insurers. The significance of this is that, as there was found to be direct supply by IMB, there was no third line forcing.
Other Elements — Supplying Products or Services [13.300] Exclusive dealing conduct involves conditioning supply of products or services on the customer accepting one of the restrictions referred to above. The term actually used in the Act is “supply on condition”. When will a supplier be regarded as supplying products or services ‘on condition’ that the customer accepts one of the restrictions that amount to exclusive dealing?
Supply [13.310] ‘Supply’ is a word of wide import. It is defined, when used as a verb, as including, in relation to goods, to supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and in relation to services, to provide, grant or confer.88 In addition, the Act provides that a reference to the supply of goods or services includes a reference to agreeing to supply or acquire goods or services, to the supply of goods together with other property or services, or both, and to the supply of services together with property or other services, or both.89 This supplements the normal meaning of the term,90 which according to the Macquarie Dictionary is to furnish (a person, establishment, place, etc) with what is lacking or requisite; to furnish or provide (something wanting or requisite); to make up (a deficiency); make up for (a loss, lack, absence, etc); satisfy (a need, demand, etc); and to fill (a place, vacancy, etc). The notion of “supply” is the counterpart of “acquire”. A supply of goods or services occurs as part of a bilateral transaction or dealing under which the other party acquires those goods or services.91
Goods and Services [13.320] The terms “goods” and “services” are both defined in the Act in an inclusive sense. The definition of the term “good” includes ships, aircraft and other vehicles; animals, including fish; minerals, trees and crops, whether on, under or attached to land or not; and gas and electricity.92 This definition supplements the ordinary meaning of the term.93 88. Competition and Consumer Act 2010, s 4(1). 89. Competition and Consumer Act 2010, s 4C. 90. Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd (1985) 7 FCR 509 at 532; 64 ALR 536; (1986) ATPR 40-653 per Justice Lockhart. 91. Cook v Pasminco Ltd [2000] FCA 677; (2000) 99 FCR 548; (2000) ATPR 41,030 (41-767). 92. Competition and Consumer Act 2010, s 4(1). 93. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460; 97 ALR 513; (1991) ATPR 41-069 at 52,503.
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Goods which are affixed to land (or to other goods which are themselves fixed to land) become fixtures, thus losing their character as goods and becoming part of the land itself. Goods which have become fixtures are not included in this definition, save in relation to minerals, trees and crops which are specifically included in the definition of “goods” whether affixed to land or not.94 The term “services” is defined in sweepingly general terms which, to some extent, overlap with the definition of “goods”. It includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce. The courts have decided that the term “services” includes the provision of bank and other loans,95 issuing bank notes by the Reserve Bank,96 the provision of hospital services, including an operation and blood transfusion, by hospitals,97 offers to provide work with a third party,98 advertising house and land packages together with finance99 and arrangements by a credit union credited commissions paid to it by travel agents to the accounts of members booking travel through the travel agent.100 It has also been assumed, in the author’s view quite correctly, that the presentation of a circus is a service.101
Other Elements — Is Compulsion Required? [13.330] Whether or not some element of compulsion is required in order to amount to exclusive dealing has been an issue. In other words, what is meant by supply “on condition”? That question is relevant because conduct can only amount to exclusive dealing if the relevant supply or acquisition is on one of the conditions referred to above. The term “condition” in this context has a wide meaning. It includes any direct or indirect condition, any condition whether or not it has legal or equitable force and any condition the existence or nature of which is ascertainable by inference only.102 But that leaves open the question of whether or not the term “on condition” necessarily involves some level of compulsion. The prevailing view is that, all that should be required to trigger the potential application of the prohibition is the inclusion of a condition in the supply arrangement to the effect that: “I will supply you on the basis that you will not do x”, or conversely, “unless you do that I will not supply you”.
94. Theo Holdings Pty Ltd v Hockey [2000] FCA 665; (2000) 99 FCR 232; 175 ALR 89; (2000) ATPR 41-766. 95. SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516; 80 ALJR 1190; 228 ALR 417; (2006) ATPR 42-118; Begbie v State Bank of New South Wales Ltd (1994) ATPR 41,881 (41-288). 96. Sykes v Reserve Bank of Australia (1997) 151 ALR 579; (1998) ATPR 40,609 (41-608). 97. E v Australian Red Cross Society (1991) 31 FCR 299; 105 ALR 53; (1992) ATPR 40,115 (41-156). 98. Trade Practices Commission v Queensland Aggregates Pty Ltd (1981) 36 ALR 236; (1981) ATPR 40-228. 99. Henderson v Pioneer Homes Pty Ltd (No 2) (1980) 43 FLR 276; 29 ALR 597; (1980) ATPR 42,240 (40-159). 100. Parramatta Tourist Services Pty Ltd v SWB Family Credit Union Ltd (1979) 24 ALR 273. 101. Michael Edgley International Pty Ltd v Ashton’s Nominees Pty Ltd (1979) 38 FLR 135; 26 ALR 419. 102. Competition and Consumer Act 2010, s 47(13). © 2018 THOMSON REUTERS
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[13.340]
[13.340] There is, however, a difference in the language in which the prohibition is expressed in the Act depending on whether the potentially offending conduct is a supply ‘on condition’ or a refusal to supply. In a supply situation the relevant question is whether supply is “on the condition” that the customer “will” acquire someone else’s product or services.103 The word “will” implies compulsion, but that remains an open question. But when it comes to refusals to supply, the language of the section is quite different. In that case the refusal must be “for the reason” that the customer has done one of the things mentioned in the section.104 If the reason is that the customer has, as a factual matter, acquired (or not agreed not to acquire) other products or services, to use one example, then those necessary elements of the contravention would be established. In other words, if, in response to a request to do so, the potential customer simply declined or refused to commit to doing so or not doing so that would seem to be enough. Universal Music105 provides a useful example of the application of this element of the prohibition. In that case, the court was called on to consider whether Universal had engaged in exclusive dealing in two circumstances, each of which required the court to consider the scope of the term “on condition”. Universal was a major global supplier of music CDs. In order to combat imported CDs it wrote to retailers stating that, due to the threat of piracy, if the retailer altered its source of supply that would result in the supplier “being unable to provide any of the aforementioned benefits”. The benefits consisted of advertising support. The letter did not, in terms, contain any offer to supply products or services. It was a threat to withdraw advertising support. Nevertheless, having regard to the extended concept of the term “condition”,106 the court accepted that the letter “clearly conveyed an intimation that supporting services would be available only to those who purchased relevant products exclusively” from Universal.107 That was held to be sufficient to constitute an offer to supply services on condition that the customer did not thereafter acquire products from a competitor of the supplier. The second circumstance in Universal Music involved the firm stating to a CD retailer that, if the customer were to go offshore to source CDs, it might lose its trading terms from the Universal — that the Universal would consider taking counter action, rather than that it would necessarily do so. The court decided that it would not overturn a finding by the primary judge that this also amounted to an offer to supply services on condition that the customer did not thereafter acquire products from a competitor of the supplier. [13.350] The first case to consider what was involved in supply “on condition” was, SWB Credit Union,108 decided in 1980. The court decided that rebate travel arrangements did not amount to third line forcing because the service provided by the credit union to its members was not “on condition”. The credit union had acquired an interest in a travel agency and the travel agency paid a rebate to the credit union 103. Competition and Consumer Act 2010, s 47(2) and (6). 104. TPA, s 47(3) and (7). See Australian Automotive Repairers’ Association (Political Action Committee) Inc v NRMA Insurance Ltd [2002] FCA 1568. 105. Universal Music Australia Pty Ltd v ACCC (2003) 131 FCR 529; (2003) ATPR 41-947; [2003] FCAFC 193. 106. Competition and Consumer Act 2010, s 47(13). 107. [2003] FCAFC 193 at [234]; (2003) 131 FCR 529 at 584; (2003) ATPR 41-947. 108. SWB Family Credit Union v Parramatta Tourist Services Pty Ltd (1980) 48 FLR 445; 32 ALR 365; (1980) ATPR 40-180.
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on travel booked with it by credit union members. The credit union then credited the rebate back to the accounts of its members. Another travel agency challenged the — arrangement, claiming that it amounted to third line forcing. It argued, initially successfully, that the practice amounted to third line forcing because the travel agency was offering a discount to people who bought travel products on condition that they acquired services (through membership) from the credit union. On appeal, the court decided that the conduct did not involve third line forcing. One judge took the pragmatic view that there was no issue of conditional supply — all that occurred was that members were promised a benefit if they elected to use the travel agent. Another supported the view expressed above, stating:109 It does not matter whether the condition is legally binding or not … but in my opinion the condition must have some attributes of compulsion and futurity. This can be expressed in the form ‘If we do this, you will (must) do that’. A condition in the nature of an obligation must be imposed upon the person dealing with the corporation. The condition to be complied with must result from something done or to be done by the corporation imposing the condition.
[13.360] As the court said in Stationers Supply,110 mere persuasion is not enough. When a newsagents’ trade association embarked on a strategy of introducing a new member-only line of specially branded stationery, appointing a preferred supplier, a competing stationery supplier claimed that the arrangements amounted to third line forcing. The claim was that, by signing newsagents up as members to participate in promotions of the new line of stationery, there was a sense of obligation created for member newsagents to stock the new line. This was rejected on the basis that what was happening here involved no compulsion to stock the specially branded stationery. Mere persuasion was all that was evident in this case. [13.370] In Kam Nominees,111 the question was whether a firm had engaged in third line forcing when it approved finance for the purchase of a motor vehicle as long as the borrower purchased the vehicle from a dealer it had approved. The borrower had proposed to buy a vehicle from another dealer who was not an approved dealer. The dealer who lost the sale sought damages, claiming that the financier had engaged in third line forcing. The judge accepted that, in order for the conduct to amount to third line forcing, compulsion was required. His Honour characterised the circumstances as being that, once the borrower accepted the respondent’s finance offer, “her freedom of choice was then compulsorily limited to acquiring a car from an AGC approved dealer”.112 The necessary compulsion was therefore found to be present. [13.380] Finally, in Metro Motors,113 another motor vehicle sale case, the dealer was found to have engaged in third line forcing when it offered a higher trade-in if the customer financed the vehicle with the finance company with which the dealer 109. (1980) 48 FLR 445 at 464; 32 ALR 365; (1980) ATPR 40-180 at 42,473. 110. Stationers Supply Pty Ltd v Victorian Authorised Newsagents Association Ltd (1993) 44 FCR 35; (1993) ATPR 41,419 (41-255). 111. Kam Nominees Pty Ltd v Australian Guarantee Corp Ltd (1994) 51 FCR 338; 123 ALR 711; (1994) ATPR 42,288 (41-325). 112. (1994) 51 FCR 338 at 343; (1994) ATPR 42,288 (41-325) at 42,293. 113. Trade Practices Commission v Tepeda Pty Ltd (t/as Metro Motor Market) (1994) ATPR 42,240 (41319). In deciding that case His Honour made reference to two US cases: US v General Motors Corp 121 F 2d 376 (1941) and Atlantic Refining Co v Federal Trade Commission 381 US 357 (1965). © 2018 THOMSON REUTERS
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had an arrangement. All that was required to amount to the necessary compulsion — supply “on condition” — was that the trade-in allowance was offered on condition that finance was taken with the nominated finance company. [13.390] Notwithstanding the breadth the term “condition”, the mere fact that exclusion of a competitor’s products or services is a consequence of what is done does not automatically mean that what was done was on condition that the competitor’s good or services be excluded.114 In Institute of Chartered Accountants115 the court had to consider the effect of re-organisation of the way in which the Institute provided training to determine whether it involved exclusive dealing. The change involved the Institute providing course materials for certain modules as part of the inclusive course fee. The consequence was to reduce demand for the applicant’s course materials. Although the consequence of the Institute’s changes may have been that students did not acquire services from the applicant, there was no relevant condition to that effect in what the Institute did. [13.400] A condition does not need to be “imposed”. All that is required is that supply takes place on a relevant condition. The condition may have been suggested by the customer. It may have originated with a third party, such as a motor dealer’s financier. It may arise by implication from the circumstances in which the products or services were supplied. The prohibition on exclusive dealing does not look at the origin of the condition.116 It merely requires that supply (or acquisition) be tied to a proscribed condition.
Anticompetitive Purpose [13.410] As I have already noted, with the exception of cases involving third line forcing, prior to the 2017 amendments exclusive dealing conduct did not contravene the Act unless it has the purpose or likely effect of substantially lessening competition in a market for goods or services. Now even third line forcing is only prohibited if it has the purpose or likely effect of substantially lessening competition in a market for goods or services. Unlike the position with contracts, arrangements or understandings, the relevant purpose in exclusive dealing cases is the purpose of the firm seeking to impose the restrictions or conditions. The court does not have to attempt to identify the purpose of a provision or condition of a contract, arrangement, understanding or concerted practice. It only has to determine the actual purpose of the relevant party.117 [13.420] “Purpose” in this context, has been taken to refer to the subjective purpose of the party seeking to impose the condition.118 This is not to be confused 114. Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879. 115. Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879. 116. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978) 36 FLR 134 at 167; 22 ALR 621 at 649; (1978) ATPR 17,294 (40-094) at 17,944. 117. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947; News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 118. O’Brien Glass Industries Ltd v Cool & Sons Pty Ltd (1983) 77 FLR 441; 48 ALR 625; (1983) ATPR 44,449 (40-376); Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193 at [256]; (2003) 131 FCR 529 at 588–589; (2003) ATPR 41-947.
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with the motive, which is the reason for seeking an end rather than the effect sought to be achieved.119 While the best evidence of purpose might be the statements made by that person in the witness box, such statements must be tested closely and received with the greatest caution.120 It is not the role of the court to “compartmentalise the words each individual used and then analyse the effect of those words in a vacuum”121 to determine the relevant purpose. Purpose will usually be inferred from the nature of the conduct, the circumstances in which it occurs and its likely effect.122 Of course, an incorporated firm cannot have a purpose in the usual sense of that term. A finding concerning the purpose of a corporation must therefore be “a legal conclusion expressed as an attributed state of mind”.123 A corporation’s purpose will be taken to be the purpose of any director, servant or agent of the corporation who engaged in the relevant conduct within the scope of that person’s actual or apparent authority.124 [13.430] It is not necessary for the anticompetitive purpose to be the only purpose. A firm will be deemed to have the purpose of substantially lessening competition, if its purpose includes a purpose of substantially lessening competition, and that purpose was a substantial purpose.125 A purpose may be impossible to achieve, but that is irrelevant. In Universal Music the evidence was that the actions of the relevant executives did not, in fact, have any effect. Many retailers purchased non-infringing copies of CDs from importers or overseas suppliers. The executives were nevertheless found to have had a purpose that meant that their conduct amounted to exclusive dealing.
Likely Effect on Competition in a Market [13.440] Turning to the question of when exclusive dealing conduct will be taken to have the likely effect of substantially lessening competition in a market for goods or services, the terms “competition” and “market” are described in Chapter 4. Chapter 8 discusses the phrase “substantially lessening competition”. As the Federal Court put it in Pont Data:126 In asking whether provisions of the agreements have or would be likely to have the effect … of substantially lessening ‘competition’ … one looks not so much at the position of particular competitors as to the state or condition constituting the market or 119. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943; J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 40,881 (41-758). 120. Pascoe v Commissioner of Taxation (Cth) (1956) 30 ALJR 402; 11 ATD 108; 30 ALJ 402 at 403; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460 at 482–483; 97 ALR 513; (1991) ATPR 41-069. 121. J McPhee & Sons (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 40,881 (41-758). 122. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165. 123. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193 at [250]; (2003) 131 FCR 529 at 587. 124. Competition and Consumer Act 2010, s 84. 125. Section 4F(1)(b). The meaning of the term “substantial” in this context is explained at [8.30]. 126. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460 at 478; 97 ALR 513; (1991) ATPR 41-069 at 52,061. © 2018 THOMSON REUTERS
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markets in question, actually or potentially … It is also to be borne in mind that, whilst actual competition must exist and be assessed in the context of a market, a market can exist if there be a potential for close competition even though none in fact exists or dealings in it are temporarily dormant or suspended.
[13.450] In the specific context of exclusive dealing, not all exclusive dealing conduct will be anticompetitive. This is particularly so when the conduct involves seeking to restrict intra-brand competition in the interests of promoting inter-brand competition. The classic statement of the law in this respect derives from a United States case, Graphic Products,127 in which the court observed: When a manufacturer restricts a dealer to selling only within a certain territory, or only to certain customers, or only from certain locations, it is necessarily constraining intrabrand competition … [However a] restriction of intra-brand competition may – depending on the inter-brand market structure – either enhance or diminish overall competition.
Our High Court had to consider the intra-brand issue in Melway.128 That case concerned a decision by Melway, the publisher of the leading street directory in Melbourne, not to continue to supply its directories to Hicks, a former distributor. In deciding that Melway had not misused its market power, the court observed that the consequence of not supplying Hicks was only that Hicks would be precluded from taking sales of Melway’s directory from existing distributors including Melway’s new wholesale distributor appointed to service Hicks’ former customers.129 Melway was not preventing Hicks becoming a wholesaler of street directories. Adoption by a manufacturer of a system of distribution involving vertical restraints is not necessarily anticompetitive. It may be pro-competitive, depending on the state of competition in the relevant market.130 [13.460] Graphic Products illustrates the point made by the High Court. The facts in that case were that Itek, a manufacturer of equipment and supplies for the national graphic arts market, appointed distributors for its products and assigned each of them a non-exclusive geographic territory. When one of its distributors, Graphic, made sales outside its assigned territory Itek exercised a right under its agreement to cancel the Graphic’s distributorship. Graphic sued claiming that the effect of Itek’s conduct was to require distributors to only sell in their assigned territories and that this contravened the Sherman Act and Clayton Act.131 The question for the court was whether Itek’s conduct had an anticompetitive effect, recognising that all vertical restraints have some effect in the relevant intra-brand market, but can be pro-competitive in inter-brand markets. The court was convinced that there was sufficient evidence for the jury to find that the restriction foreclosed intra-brand 127. Graphic Products Distributors Inc v Itek Corp 717 F 2d 1560 at 1571 (1983); [1983–2] Trade Cases 65,670. Quoted with approval by the High Court in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1 at 14; 75 ALJR 600; 178 ALR 253; 50 IPR 257; (2001) ATPR 41-805. 128. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd. [2001] HCA 13; (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805. 129. [2001] HCA 13; (2001) 205 CLR 1 at 16; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805 at [23]. 130. [2001] HCA 13; (2001) 205 CLR 1 at 20; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805 at [38]. 131. In United States v Arnold, Schwinn & Co 388 US 365 (1967) the US Supreme Court held that, where a manufacturer sells products to a distributor subject to a territorial restriction, its conduct is per se illegal. However, in Continental TV Inc v GTE Sylvania Inc 433 US 36 (1977), the Supreme Court overturned Schwinn on the basis that vertical restrictions should be tested for their competitive impact.
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competition and could not be justified by established possible positive effects on inter-brand competition. [13.470] The Competition and Consumer Act 2010 provides132 that, in considering whether or not exclusive dealing conduct has an adverse effect on competition, the effect of the conduct in two specific markets is to be considered. They are, any market in which the offending firm, or any body corporate related to it, deals or would otherwise deal, and any market in which any person (including corporations) restricted by the practice or any related body corporate deals or would otherwise deal.
Exclusive Dealing — Land Transactions [13.480] As the prohibition is on conduct — supply or acquisition or refusals — prohibited conduct may arise in the leasing or licensing of land or buildings133 other than where the conduct is engaged in by a religious, charitable or public benevolent institution.134
Exclusive Dealing — Exempt Conduct [13.490] The Act contains, in addition to provisions designed to avoid overlap with other of the Act’s prohibitions, a number of exemptions. First, it exempts conduct engaged in by related companies pursuant to which one of the related companies restricts the dealings of another related company.135 Second, a firm proposing to engage in exclusive dealing conduct may obtain an immunity by lodging a Notification with the ACCC, or obtaining an Authorisation. These processes are explained in Chapter 18. Third, in addition to the immunity can be obtained by either lodging a Notification or obtaining an Authorisation, there are a number of general exemptions provided for by the Act. Of particular relevance are the exemptions for arrangements between partners in a partnership business as long as no partner is a corporation, exemptions related to the sale of a business for the protection of goodwill, provisions in export contracts notified to the ACCC, and conditions in patent and trade mark licenses and assignments, all of which are also considered in Chapter 18. Finally, the Act exempts certain conduct by registered charities. That exemption, which is limited to exclusive dealing arrangements in leases and licenses of land or buildings, where the conduct is for or in accordance with the objects of the institution, or is engaged in pursuant to a legally enforceable requirement of the institution made for, or in accordance with, the objects of the institution.136
Exclusive Dealing — Aiding a Contravention [13.500] The prohibitions on exclusive dealing extend beyond the actions of the supplier. Anyone who aids, abets, procures, counsels or induces a supplier to engage in any of the conduct referred to above will also be liable. 132. Competition and Consumer Act 2010, s 47(13). 133. Competition and Consumer Act 2010, s 47(8) and (9). 134. Competition and Consumer Act 2010, s 47(11). 135. Competition and Consumer Act 2010, s 47(12). 136. Competition and Consumer Act 2010, s 47(12). © 2018 THOMSON REUTERS
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Digest of Cases [13.510] Appendix 5 contains a digest of cases decided in relation to the prohibition against exclusive dealing, illustrating how the courts have dealt with exclusive dealing cases in practice.
FURTHER READING Author Title Blycha and Duns “Tying, Bundling, Loyalty Rebates and Exclusive Dealing in US Antitrust — What Can Australia Learn?” Coorey and “Exclusive Dealing: How Panikabutara Exclusive are Minimum Quantity Condition Dealings?” Fox and Crane Global Issues in Antitrust and Competition Law Griggs “Tying Arrangements Within Franchise Contracts — How Should They be Evaluated?” Hanks and “The Treatment of Vertical Williams Restraints under the Trade Practices Act” Hurley “The Castlemaine Tooheys Case and the Interpretation of the ‘Third Line Forcing’ Provisions” Landrigan “Vertical Price and Non-Price Restraints in Australia and the US” Pleatsikas and “The Competitive Assessment of Teece Vertical Long-term Contracts”
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(2006) 14 Trade Practices Law Journal 145 West, 2010, Chapter 4 (1998) 6 Trade Practices Law Journal 220 (1987) 15 Australian Business Law Review 147 (1987) 61 Australian Law Journal 415 (1997) 25 Australian Business Law Review 312 (2001) 29 Australian Business Law Review 454
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Development of Australian Resale Price Maintenance Law ............... What is Resale Price Maintenance? ................................................... The Policy Conundrum ........................................................................ An International Perspective ............................................................... [14.100] United States ...................................................................... [14.130] European Union .................................................................. [14.140] Canada ............................................................................... [14.150] Other countries ................................................................... [14.160] The Australian Prohibition ................................................................... [14.170] Who is a Supplier? ............................................................. [14.180] To Whom? ........................................................................... [14.190] What Does Specifying a Price Involve? ............................. [14.280] Agreeing Not to Sell ............................................................ [14.300] Inducing .............................................................................. [14.350] Making it Known ................................................................. [14.360] Removing Sales Support .................................................................... [14.390] Withholding Supply ............................................................................. [14.450] The Role of Intent ................................................................................ [14.460] Recommended Prices ......................................................................... [14.470] Immunity .............................................................................................. [14.490] Digest of Cases ...................................................................................
312 313 314 316 316 318 318 318 319 319 319 320 323 323 325 325 326 328 328 328 329
[14.10] Resale price maintenance takes many forms, so it is important, first, to explain the conduct discussed in this chapter. When used in this chapter the term refers to a supplier unilaterally specifying the price, or the minimum price, at which its products or services may be resold by someone it supplies. A manufacturer may set the maximum resale price1 or may recommend a re-sale price,2 but may not set a minimum re-sale price. The term “resale price maintenance” can include arrangements to set prices between suppliers or dealers, or both, but that is not how the term is used in this chapter. Conduct of those types was traditionally seen as a reason for imposing a per se prohibition on unilateral resale price maintenance but that conduct constitutes cartel behaviour, which is dealt with in Chapter 11. The policy objective of this prohibition is to ensure that competition is not fettered by price restraints imposed by suppliers on re-suppliers of products or services. The
1.
As long as it is a genuine maximum price. Competition and Consumer Act 2010, s 96 refers to a “a price less than a price specified”. Maximum process were originally regarded as problematic in the USA but now are not: see State Oil Co v Khan 522 US 3 (1997) overturning Albrecht v Herald Co 390 US 145 (1968).
2. As long as it is a genuine recommended price: see Competition and Consumer Act 2010, s 97. © 2018 THOMSON REUTERS
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policy intent was to establish conditions in which consumers could benefit from traders competing with each other with respect to prices.3
Development of Australian Resale Price Maintenance Law [14.20] The resale price maintenance prohibition is the longest standing provision in modern Australian competition law. Originally introduced in 1971, it pre-dates the current Competition and Consumer Act 2010.4 Although part of the original 1962 Barwick proposal, a prohibition on resale price maintenance had been dropped by the time the legislation reached the Parliament, only to be revived in heated political circumstances in 1971. In the United States, resale price maintenance had come before the Supreme Court in 1911 and was declared, by majority, to be in breach of the Sherman Act.5 In the United Kingdom, enactment of the Resale Price Act 1964 had rendered void any provision in a contract for the sale of goods that purported to establish a minimum resale price.6 However, in Australia in the early 1960s the commonly held view was that manufacturers should be free from government interference in the way in which they chose to sell their products. As a consequence, manufacturers issued a list price for their products and that was the price regardless of the retailer making the sale. Any retailer who discounted was regarded as undermining the product and refused supply. As we saw in Chapter 2, the debate in Australia over resale price maintenance continued7 until 1971 when, by an unusual turn of events the matter was brought to a head by the then president of the Australian Council of Trade Unions, Bob Hawke. The ACTU had recently invested in a department store in Melbourne, Bourke’s, and Hawke used it to force the position publicly with manufacturers who refused to supply the store because it discounted their products.8 The government responded amending the 1965 Act to include provisions based on the United Kingdom legislation.9 As a consequence the Trade Practices Act 1971 prohibited resale price maintenance. That prohibition was carried over into, and was expanded in its scope in, the Trade Practices Act 1974 and now forms part, unchanged, of the Competition and Consumer Act 2010. [14.30] The 1971 Act entitled suppliers to seek an exemption from the Trade Practices Tribunal if they could establish that their practice of resale price maintenance was in the public interest. The first exemption application to reach the
3.
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,895– 17,896. 4. Resale price maintenance was first prohibited in Australia by the Trade Practices Act 1971. 5. Dr Miles Medical Company v John D Park & Sons Co 220 US 373 (1911). See also Albrecht v Herald Co 390 US 145 (1968). Albrecht was overturned by the Supreme Court in State Oil Co v Khan 522 US 3 (1997). 6. See Richardson, Introduction to the Australian Trade Practices Act (Hicks Smith, 1967), p 38. 7. See JG Collinge, “Resale Price Maintenance in Australia” in JP Nieuwenhuysen, Australian Trade Practices Readings (Cheshire, 1970). 8. D’Alpuget, Hawke (Reed, 1994), pp 184–187. 9. Cabinet approved work being done on an amendment to this effect on 19 March 1971.
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Tribunal after the 1971 Act came into force was Re Books.10 Justice Eggleston set the scene for rigorous application of the resale price maintenance prohibition by deciding that the application should be refused, concluding that while there may be some adverse effects, refusal of the application would lead to a reduction in the prices of books in general and substantial reductions in the prices of books sold to school children, schools and libraries.11 The constitutional validity of the resale price maintenance provisions in the Trade Practices Act 1971 were unsuccessfully challenged in Mikasa.12 Mikasa, a manufacturer of fine china products, had, prior to the resale price maintenance provisions coming into force, refused to supply discount houses, of which Festival was one, and it continued that refusal after the provision came into effect in August 1971. Mikasa’s failed challenge removed the final Impediment to the effective prohibition on resale price maintenance, and the opportunity, taken up in 1974, to prohibit the practice outright.
What is Resale Price Maintenance? [14.40] Experience has shown that there are many ways in which firms can control the price at which their products or services are resold by others in the supply chain. Consequently, the Act goes to significant lengths to define resale price maintenance. It does so by setting out a catalogue of specific prohibited practices.13 They are: • attempting to induce a person not to sell the supplier’s products or services at less than a price specified by the supplier; • making it known to a person that the supplier will not supply products or services to the person unless that person agrees not to sell those products or services below the supplier’s specified price; • entering an agreement for the supply of products or services containing a provision that the purchaser will not sell the products or services at a price below the supplier’s specified price; • withholding supply of products or services because: ° the purchaser has not agreed not to sell them below the supplier’s specified price; or the ° purchaser has sold them at a price less than the supplier’s specified price; or a ° purchaser from the persons supplied by the supplier has either: • not agreed not to sell below the supplier’s specified price; or • has sold the supplier’s products or services at a price less than the supplier’s specified price; or • using, in relation to the supply of products or services, a statement as to price which is likely to be understood by the purchaser as a minimum sale price.
10. (1972) 20 FLR 256. In deciding against the publishers the Tribunal had come to the opposite conclusion to that reached in the UK. See Re Net Book Agreement (No 1) [1962] 1 WLR 1347; [1962] 3 All ER 751. 11. (1972) 20 FLR 256 at 258. 12. Mikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617; 47 ALJR 14; [1972– 73] ALR 921. 13. Competition and Consumer Act 2010, ss 4, 96, 96A. © 2018 THOMSON REUTERS
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As already noted, the resale price maintenance prohibition only applies where the price specified is a price below which the products or services are to be resold. The prohibition does not apply to genuine maximum resale price.14 Although some of the prohibited practices require proof that the person supplied, or to be supplied, has agreed not to sell below the specified price, many are unilateral. That is, there is no need for the reseller to agree for the resale price maintenance provision to be contravened. All that is required is for the supplier to attempt to induce the dealer not to sell below the price specified. Where agreement is a necessary ingredient there is no need for more than acquiesce in, or submission to, the supplier’s demands.15
The Policy Conundrum [14.50] The Australian prohibition on resale price maintenance is absolute. No assessment of the purpose or likely effect of the conduct on competition is considered. When the prohibition was introduced, the range of available products was limited, manufacturers controlled the prices at which their products could be resold, tariff barriers severely restricted imports, as did the complexities and delays inherent in the transport logistics. In short, rigidities precluded competitive behaviour at all levels in the Australian economy. Today, Australia has an open economy, with little or no import barriers, significantly improved transport logistics, and a broader variety of products competing in the market. In the environment that existed in the early 1970s a per se prohibition on resale price maintenance was no doubt appropriate, but the environment is quite difference today, so it is appropriate to consider whether the per se prohibition is still in the public interest. Many would argue that it is not. [14.60] There is little doubt that resale price maintenance can facilitate collusion between suppliers, or between downstream traders, but the cartel or misuse of market power prohibitions should be adequate to deal with those types of abuse. Inter-brand competition is strong throughout the Australian economy and, with the rise of online retailers, becoming even stronger. In the current Australian context the effect of a manufacturer setting the resale price for its products or services is unlikely to adversely affect the competitive process and in some instances can be a beneficial contributor to competition. Taking a simplified example, consider the nature of the relationship between manufacturers and retailers. The role of the retailer is to provide the opportunity for the manufacturer to display its products in retail locations across the country, efficiently managing the sale of those products. In short, the retailer is the “middle man” providing services to manufacturers and to consumers. Manufacturers could set up their own retail networks to sell their products and some do, but most “pay” retailers to do so on their behalf. Real estate and travel agents are mostly remunerated by commission on their sales of the client or airline’s property or product. But for independent retailers, their “pay” is the difference between the wholesale price at which they buy the products and the retail price at which they resell them. From 14. The position in the United States was that maximum resale price maintenance was per se illegal: Albrecht v Herald Co 390 US 145 (1968). However, Albrecht was overturned by the Supreme Court in State Oil Co v Khan 522 US 3 (1997). 15. ACCC v Dermalogica Pty Ltd [2005] FCA 152; (2005) ATPR 42-046.
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a policy perspective that is an efficient and beneficial system. It provides ready market access to a wider range of products and services, cost-effective access for new products, lower entry barriers of entry into retailing markets and an efficient spreading or both risk and reward. One argument for prohibiting resale price maintenance is that allowing independent retailers to set their own “pay” by determining the resale price best suited to their business is good for competition at the retail level. But it also means that, while some manufacturers — those with the capital to set up their own retail networks — can control marketing and sale of their products, including the price, most cannot. [14.70] Why would a manufacturer want to control the price of its products — or to put it another way, the amount it “pays” retailers to support, promote and sell its products? The traditional view was that, as long as the manufacturer is paid the wholesale price it sets for its products, why should the manufacturer want to control the minimum price that retailer re-sell their products?16 But, as Elzinga and Mills17 point out, in many commercial transactions involving branded products, RPM can be an efficient pricing practice that benefits consumers. Why is that so? Elzinga and Mills provide the following explanations: • resale price maintenance enhances inter-brand competition both within and between retailers because, when consumers substitute a different brand of the same product, that is a significant check on the exploitation of intra-brand market power;18 • resale price maintenance supports improved retail service thereby increasing consumer demand, other things equal. This results in consumers being better off, even if improved service is accompanied by a price increase;19 • resale price maintenance does not always result in increased prices. “If the effect of RPM-induced retail service is an isoelastic increase in demand for the product, and if the cost of retail service is fixed rather than variable in the long run, then the retail price the manufacturer would seek to impose is the same as without RPM and enhanced retail service.”20 • even where higher prices result from resale price maintenance, consumers can be better off when increased retail service increases demand;21 • manufacturers of a differentiated consumer products may use resale price maintenance to protect the margins of reputable retailers who support the manufacturer in building and maintaining its reputation; and 16. See Taussig, “Price Maintenance” (1916) 6 The American Economic Review Supplement 170. 17. KG Elzinga and DE Mills, “Leegin and Procompetitive Resale Price Maintenance” 55 The Antitrust Bulletin. For a review of the pros and cons of a per se prohibition on unilateral resale price maintenance see E Gippini-Fournier, “Resale Price Maintenance in the EU: in Statu Quo Ante Bellum?”, International Antitrust Law & Policy: Fordham Competition Law (2009), Ch 20. 18. Quoting the US Supreme Court in Continental TV Inc v GTE Sylvania Inc 433 US 36 (1977), fn 19. 19. Elzinga and Mills describe improved retail service as including matters such as longer store opening hours, more pleasing product displays, helpful and better trained sales personnel and flexible return policies. There are many examples of products for which training on how to use the product is important, as is after-sales service. 20. KG Elzinga and DE Mills, “Leegin and Procompetitive Resale Price Maintenance” 55 The Antitrust Bulletin fn 16, citing HP Marvel S McCafferty, “The Welfare Effects of Resale Price Maintenance” (1985) 28 Journal of Law and Economics 363 at 370. 21. Elzinga and Mills’ paper provides a detailed justification of this conclusion. © 2018 THOMSON REUTERS
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• a resale price maintenance policy can remedy market failure resulting from free-riding by discounters whose price cannot be matched by full-service retailers, who are then forced to cut back on levels of service. [14.80] Of course, that does not mean that resale price maintenance always contributes to consumer welfare or total welfare. Nor does it mean that we should return to the price rigidities of the past. But it does suggest that, like third line forcing, we should no longer regard resale price maintenance as presumptively anticompetitive. It should only be proscribed where it has a demonstrated anticompetitive purpose or likely effect.22 As Posner has succinctly put it:23 The per se rule against resale price maintenance remains. It is a mistake. There is neither theoretical basis, nor empirical support, for thinking the practice generally anticompetitive.’
[14.90] But that is not where we are in Australia. The Harper Panel considered whether the per se prohibition on resale price maintenance should continue and surprisingly, the Panel did not recommend any change. The Panel recognised that resale price maintenance may be beneficial to competition and consumers in competitive markets and that there can be consumer benefits in enabling manufacturers to control their product’s branding and marketing positions, especially for premium products. Nevertheless, the Panel concluded that:24 On balance, and having regard to the potential for RPM to become more commonplace in the online economy, the Panel considers it prudent to retain the per se prohibition for the time being. Policymakers should monitor this type of conduct since per se prohibition may become unnecessary in future.
Consequently, the Australian position remains that resale price maintenance is absolutely prohibited, unless the subject of an Authorisation or Notification, discussed below.
An International Perspective United States [14.100] There is no specific legislative prohibition on unilateral resale price maintenance in the United States. It has been the courts, interpreting the Sherman Act that have determined the position. Between 1911 and 2007, resale price maintenance was regarded by the courts as a per se contravention of the Sherman Act. The Supreme Court in Dr Miles,25 had decided that was the position in a case involving a manufacturer of patented medicines who had agreed minimum resale prices with its resellers. With the odd exception,26 that remained the position until 22. As long ago as 1985 questions about application of a rigid per se standard in relation to resale price maintenance were being raised by the Bureau of Economics at the US Federal Trade Commission: see TR Overstreet Jr, “Resale Price Maintenance: Economic Theories and Empirical Evidence”, Bureau of Economics Staff Report to the Federal Trade Commission (1983), . 23. RA Posner, Antitrust Law (Chicago University Press, 2nd ed, 2001), p 189. 24. Harper Report, pp 377–78. 25. Dr Miles Medical Co v John D Park & Sons Co 220 US 373 (1911). 26. For example, US v Colgate & Co 250 US 300 (1919); US v General Electric Co 272 US 476 (1926).
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An International Perspective
the Supreme Court was called on to reconsider in Leegin27 in 2007. Leegin was a relatively simple resale price maintenance case. The manufacturer of a popular brand of women’s wear instituted a policy of only supplying retailers who followed its suggested retail prices. Leegin designed, manufactured and distributed women’s fashion leather goods and accessories which it sold in over 5,000 independent, small boutiques across the United States. Leegin’s argument was that, for its products, small retailers treated customers better, provided more customer service and made customers’ shopping experience more satisfactory than larger retailers. The company had engaged in a strategy to ensure that consumers got a different experience in terms of support and service than they would get in discount stores. It adopted a retail pricing and promotion policy and following the introduction of that policy refused to sell to retailers that discounted its products below its suggested retail prices. [14.110] Deciding to overturn the per se rule in relation to resale price maintenance, the court noted that “economics literature is replete with procompetitive justifications for a manufacturer’s use of resale price maintenance”.28 In addition to the points made by Elzinga and Mills, the court noted that:29 • resale price maintenance, in addition, can increase inter-brand competition by facilitating market entry for new firms and brands;and • resale price maintenance can also increase inter-brand competition by encouraging retailer services that would not be provided even absent free riding; but • resale price maintenance can also be abused by a powerful manufacturer or retailer and may also have other anticompetitive effects by facilitating manufacturer cartels or retailer cartels. [14.120] In Australia, the US Supreme Court’s criticism of a per se prohibition was echoed in Jurilique,30 a case involving resale price maintenance in relation to cosmetic products. The presiding judge made it clear that he thought the per se prohibition was outdated. Although His Honour was bound to decide that Jurilique had contravened the Act, he left little doubt about his view concerning the per se nature of the prohibition: There is a respectable view among economists, particularly those belonging to the socalled “Chicago School of Economics”, that vertical price restraints such as retail price maintenance are not anti-competitive. Such economists would argue that there is absolutely no basis on which such practices should be illegal per se, even if there is room for the view that they should be subject to a ‘rule of reason’. … The Chicago School of academics supports vertical price restraints such as resale price maintenance, presuming them to be pro-competitive and producing significant economic benefits, by facilitating the distribution of products to consumers … The effective use of mechanisms such as retail price maintenance by manufacturers and suppliers, particularly in the higher end of the market, and the utility of restraining manufacturers from employing such policies in relation to prices, will no doubt continue to be the subject of serious and genuine debate.
27. 28. 29. 30.
Leegin Creative Leather Products Inc v PSKS Inc 551 US 877 (2007); [2007–1] Trade Cases 75,753. 551 US 877 (2007), at p 889. 551 US 877 (2007), at pp 891–893. ACCC v Jurilique International Pty Ltd [2007] FCA 79; (2007) ATPR 42-146.
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European Union [14.130] The position in the EU with resale price maintenance is rather complicated. The practice is not separately legislated, but it is regarded as a vertical restraint to which Art 101 potentially applies. That Article prohibits any agreement or concerted practice that has the object or effect of restricting or distorting competition, including by fixing selling prices, unless the agreement or concerted practice contributes to certain improved outcomes.31 However, the European Commission was entitled to issue “block exemptions” creating “safe-harbours” for the categories of agreements they cover. Block exemptions were replaced with a regulation on vertical restraints32 that includes the EU position on resale rice maintenance. The regulation provides that restrictions on buyer’s ability to determine their sale price is not exempt from the operation of Art 101 except where the supplier imposes a maximum sale price or recommends a sale price.33 The result is that, if the setting of a resale price by a manufacturer restricts or distorts competition, it will contravene EU law unless the manufacturer establishes that the anticompetitive effect is outweighed by one of the benefits listed above.
Canada [14.140] In Canada, until 2009 it was an offence for a supplier to engage in resale price maintenance by threat, promise or like means attempting “to influence upward or to discourage the reduction of” prices.34 However, that prohibition was repealed in 2009 and replaced with provision entitling the Commissioner to seek orders from the Competition Tribunal where resale rice maintenance conduct has, or is likely to have, an adverse effect on competition.35
Other countries [14.150] The approach in New Zealand is the same as in Australia. Resale price maintenance is prohibited per se, but genuine recommended prices and maximum process are permissible.36 Singapore’s competition law mirrors the EU position.37 The prohibition is expressed in the same terms. Consequently, the setting of a resale price by a manufacturer will only contravene the Act if it restricts or distorts competition and the manufacturer cannot establish that the anticompetitive effect is outweighed by efficiency and public benefits such as improving production or distribution
31. They are ‘improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question’: Treaty on the Functioning of the European Union Art 101(3). 32. European Commission, Regulation No 330/2010, 20 April 2010. 33. European Commission, Regulation No 330/2010, 20 April 2010, Art 4(a). 34. Former s 61(1) of the Competition Act 1985 (Canada).For a summary of Canadian RPM cases, see Wakil, The 2009 Annotated Competition Act (Thomson Carswell, 2009), pp 146–150. 35. Competition Act 1985 (Canada), s 79(1). 36. Commerce Act 1986 (NZ), ss 37, 39. 37. Competition Act 2004 (Singapore), s 34.
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or promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit. In Japan resale price maintenance is regarded as an unfair trade practice, which includes “causing the party to maintain the selling price of the goods that one has determined, or otherwise restricting the party’s free decision on selling price of the goods”.38 Firms that engage in that practice may be issued with a “cease and desist order” and fined by the Japan Fair Trade Commission.39 In South Korea, the position is similar to Japan. With some exceptions, there is a prohibition on engaging in resale price maintenance but “justifiable” maximum price maintenance is explicitly permitted.40 Where a firm engages in resale price maintenance the Fair Trade Commission may intervene by issuing “cease and desist orders”, imposing “surcharges” and/or where the conduct “is likely to cause serious injury to the interests of consumers”, order modifications to the trading arrangements.41
The Australian Prohibition [14.160] The balance of this chapter describes the Australian prohibition on resale price maintenance. It considers how the courts have dealt with each element of the prohibition, covering: • to whom the prohibition applies — who a “supplier” is; • what specifying a price involves; and • in what circumstances a firm will be regarded as “selling”. In addition this chapter explains when a firm will be taken to have induced a reseller to not sell below a specified price, the position with refusals to supply and, finally, the position in relation to recommended prices.
Who is a Supplier? [14.170] The prohibition on resale price maintenance only apply to the actions of a “supplier”. A supplier is, of course, a person who supplies products or services. The term “supply” is defined quire broadly and that substantially expands the scope of the resale price maintenance prohibition. The term “supply” includes, in relation to goods, supply by way of sale, exchange, lease, hire or hire-purchase. In the case of services, it includes providing the service, granting the service or conferring the service.42 The term “supply” also includes agreeing to supply goods or services, supplying goods together with other property or services or both, and supplying services together with property or other services, or both.43
To Whom? [14.180] Each of the practices proscribed as resale price maintenance involve a supplier’s conduct in relation to a “second person”. That “second person” is the person supplied with products or services by the supplier for resale. 38. 39. 40. 41. 42. 43.
Antimonopoly Act 1947 (Japan), Art 2(9)(iv)(a). Antimonopoly Act 1947 (Japan), Arts 20(1); 20–2. The Act refers to “surcharges” rather than fines. Monopoly Regulation and Fair Trade Act 1990 (Republic of Korea), Art 29. Monopoly Regulation and Fair Trade Act 1990 (Republic of Korea), Arts 30, 31, 31–2. Competition and Consumer Act 2010, s 4(2). Competition and Consumer Act 2010, s 4C.
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The Harper Panel noted that there was no exemption for resale price maintenance between a manufacturer and retailers that are subsidiaries of the manufacturer.44 The Act was amended to exclude conduct between related bodies corporate.45
What Does Specifying a Price Involve? [14.190] A supplier will not be taken to have contravened the resale price maintenance prohibition unless the supplier has specified a price below which the relevant products or services are not to be sold. The position is quite clear where the supplier states a specific price below which its products are not to be re-old. In Hugo Boss,46 the maker of a prominent brand of men’s suits admitted engaging in resale price maintenance when it entered into agreements with retailers to supply suits on the basis that they would not sell the suits at a price less than that specified by Hugo Boss from time-to-time. But a supplier’s actions do not have to be as direct as that to infringe the provision. The prohibition will equally apply where a supplier publishes a recommended retail price list, but by its actions, makes it clear that re-sellers should not sell at below the recommended price. This is quite common in resale price maintenance cases. For example, in Oobi Baby,47 a small business that designed and imported clothing and toys for babies and young children, became concerned when some retailers sold its products, including through internet auction sites, at less than Oobi Baby regarded as an appropriate price. In a series of emails, the firm told retailer that it would not continue to supply them unless they agreed not to sell at a price less than the recommended retail price. That was sufficient to specify a price. [14.200] Publishing a recommended resale price is not a problem, as long as it is genuinely a recommended price.48 However, the fact that the price is couched in terms of a recommended price will not necessarily prevent the price being a specified price. It will all depend on the circumstances.49 For instance, in Westminster,50 a case involving a specialty store franchise, the franchisor included in its documentation with its franchisees a provision that stated: “the franchisee is required to adhere to the recommended retail price (RRP) set by the franchisor”. That was clearly sufficient. [14.210] A price will also be regarded as specified even if no specific figure is mentioned. An element of approximation can be sufficient.51 This is because, while the Act describes circumstances in which a price may be regarded as having been 44. Harper Report, pp 378–379. 45. Competition and Consumer Act 2010, s 96(8). 46. ACCC v Hugo Boss Australia Pty Ltd (1996) ATPR 41-536. 47. ACCC v Oobi Baby Pty Ltd [2008] FCA 1488. See also ACCC v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413; ACCC v Westminster Retail Pty Ltd [2005] FCA 1299; (2005) ATPR 42-084; ACCC v Hobie Cat Australasia Pty Ltd [2008] FCA 402; (2008) ATPR 42-225. 48. Section 97 makes it clear that a supplier is not to be taken to have attempted to induce a person to resell at a specified price merely because the supplier has issued a recommended price, as long as the notices required by this section are included when the price is recommended. 49. Festival Stores v Mikasa (NSW) Pty Ltd; (1971) 18 FLR 260; Upheld on appeal: Mikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617; Trade Practices Commission v Bata Shoe Co of Australia Pty Ltd (No 1) [1979] FCA 60; (1979) 44 FLR 145; (1980) ATPR 40-161. 50. ACCC v Westminster Retail Pty Ltd [2005] FCA 1299 at [12]; (2005) ATPR 42-084. 51. Trade Practices Commission v Bata Shoe Co of Australia Pty Ltd (No 1) [1979] FCA 60; (1979) 44 FLR 145; (1980) ATPR 40-161. Peter Williamson Pty Ltd v Capitol Motors Pty Ltd [1982] FCA 79; (1982) 61 FLR 257; 41 ALR 613; (1982) ATPR 40-291.
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specified, in does not contain an exhaustive definition.52 Heating Centre53 is an example. That case involved a claim that the Australian distributor of a particular brand of slow combustion heaters had engaged in resale price maintenance when an executive told a dealer, “If you entertain the idea of discounting the product, I would find a million and one ways of stopping supply.” The court considered this statement in the context of the evidence as a whole, including the fact that the respondent had issued a recommended retail price list, and found the statement sufficient to convey an understanding that the conversation was referring to that price list. [14.220] In Pye Industries,54 the representative of a manufacturer of colour television sets complained that a retailer was causing “a heck of a lot of trouble” by selling Pye televisions at too low a price. Its representative wrote the “go price” on a list discussed with the retailer. That price was understood to be the price at which other retailers were selling the televisions with the implication that the retailer should sell at about that price. This was found to be sufficient to amount to a specified price below which the retailer should not sell the product. [14.230] However, in Penfolds,55 the Commission failed to prove that Penfolds had specified a price for resale of its wine. A major wholesaler had a practice of buying in large stocks of Penfolds wines whenever a price rise was imminent and then continuing to sell the stock to its retailers at prices below the Penfolds price. A Penfolds executive, in a conversation with an executive of the wholesaler offered the wholesaler promotional allowances if the wholesaler’s price came into line with that of Penfolds – to narrow the price gap. The court concluded that the evidence was not sufficient to conclude that Penfolds had specified a price. [14.240] There are other circumstances in which a price will be regarded as having been specified. They are:56 • where a price is specified by another person on behalf of the supplier; • where the supplier makes it known that the price below which its products are not to be sold is a price specified by another person, or in respect of products of a like description; • where a formula is specified by or on behalf of the supplier and a price may be ascertained by calculation from, or by reference to, that formula; and • where the supplier makes it known that the price below which its products are not to be sold is a price ascertained by calculation from, or by reference to, a formula specified by another person in respect of those products or products of a like description.
52. Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 157; 65 ALR 429; (1986) ATPR 40-674. 53. Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 157; 65 ALR 429; (1986) ATPR 40-674. 54. Trade Practices Commission v Pye Industries Sales Pty Ltd (1978) ATPR 40-088. Upheld on appeal: Pye Industries Sales Pty Ltd v Trade Practices Commission (1979) ATPR 40-124. 55. Trade Practices Commission v Penfolds Wines Pty Ltd [1991] FCA 631; 104 ALR 601; (1992) ATPR 41-163. 56. Competition and Consumer Act 2010, s 96(4). © 2018 THOMSON REUTERS
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[14.250] For example, in Bata Shoe,57 a prominent footwear manufacturer who sold its products to retailers through wholesale agents, was held liable for the actions of its New South Wales wholesale agent who had specified a price below which the retailers should not sell Bata shoes, even though the agent may not have acted within the scope of its authority. In BP Australia,58 the company was found to have engaged in resale price maintenance as a result of statements made by one of its managers. In Mayo59 the supplier was found to have engaged in resale price maintenance when it sought to have a franchising company with which it dealt persuade its franchisees not to discount the respondent’s hair care products. [14.260] A supplier also engages in resale price maintenance if, instead of specifying the price itself or through an intermediary, it “makes it known” that it will not supply goods or services except on certain conditions relating to the resale price. It is not necessary for the supplier to have communicated directly with the retailer. All that is required is a causal connection between the supplier specifying the price and the retailer understanding what it is required to do. In Mayo, the court observed:60 “\In my view the communications in question are not required to be had with the reseller, so long as that person is in fact induced by the relevant conduct, or it can be shown that the supplier, in any event, attempted to bring that result about. Many means may be employed in such a process. The use of an intermediary is perhaps a more obvious one particularly where the resellers are part of a group such as franchisees.
[14.270] Suppliers can also make a specified price known in other indirect ways. For instance, they can do so by either the supplier, or someone on the supplier’s behalf, making the price at which its products or services are not to be re-sold known by reference to products or services of like description. They can also make it known implicitly, without direct contact. For instance, a statement, whether by being woven in, impressed on, worked into or annexed or affixed or otherwise may amount to a specified price. So may a statement applied to a covering, label, reel or thing in or with which products are supplied, and statements used in signs, advertisements, invoices, catalogues, business letters, business papers, price lists or other documents or otherwise in a manner likely to lead to the belief that it refers to the products.61 There are not many examples of the application of these broader methods of specifying a price, but there are a few advertising examples. In Telwater62 a manufacturer of aluminium boats and accessories issued its dealers with recommended retail prices for its boats. There was no evidence that Telwater had specified the price of the boats as such, but it did have its sales managers contact dealers who advertised boats at less than the recommended retail price to ask them to stop doing so. Commodore63 is an earlier advertising example. An importer of well-known personal computers included in its dealership agreements a provision providing that its dealers should not advertise its computers other than at the recommended retail price. The 57. Trade Practices Commission v Bata Shoe Co of Australia Pty Ltd (No 1) [1979] FCA 60; (1979) 44 FLR 145; (1980) ATPR 40-161. 58. Trade Practices Commission v BP Australia Ltd [1985] FCA 391; (1985) 7 FCR 499. 59. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41-653. 60. (1998) 85 FCR 327 at p 329. 61. Competition and Consumer Act 2010, s 99(1). 62. ACCC v Telwater Pty Ltd [2009] FCA 263; (2009) ATPR 42-276. 63. Trade Practices Commission v Commodore Business Machines Pty Ltd (1989) ATPR 40-976. On appeal [1990] FCA 77.
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company’s lawyers had incorrectly advised that the provision did not infringe the resale price maintenance prohibition.
Agreeing Not to Sell [14.280] Some, but not all of the instances of resale price maintenance require the person supplied, or who is refused supply, to have either agreed not to re-sell the products or services at less than the specified price, or to have not so agreed.64 Whether or not the dealer has agreed, or not agreed, is a question of fact. There is a difference between a threat to discontinue supply if a person sells at less than the specified price and a threat to discontinue supply unless the person agrees not to sell at less than that price. Heating Centre65 involved conduct by the distributor of slow combustion heaters in relation to a number of dealers. In one instance, the supplier urged the dealer to maintain the “suggested retail price” and told the dealer, by phone, that if discounting did not stop “he would find another dealer, or they would have their supply cut off”. The dealer’s response was that he “would try to sell at the recommended retail price”. The Full Court held that, although cryptic, “the whole context of the conversation” was sufficient to conclude that the dealer had agreed. [14.290] Although the Act speaks of a person agreeing not to sell, in fact the scope of the provision is broader. It includes agreeing not to advertise goods for sale, display goods for sale and not to offer goods for sale. 66 Furthermore, goods will be taken to have been offered for sale if the re-seller makes it known that it will accept applications, offers or proposals for purchase of the goods.67 So a refusal to supply a re-seller who has not agreed not to advertise the supplier’s products at a price lower than the specified price is sufficient. Telewater and Commodore, discussed above, are two advertising examples. Another is Eternal Beauty.68 That case involved the Australian distributor of two beauty products sold through online retailers. It admitted engaging in resale price maintenance when, through phone calls and emails, it asked two retailers to increase the price at which they were advertising its products.
Inducing [14.300] A supplier also engages in resale price maintenance if it “induces”, or attempts to induce, a person not to resell goods or services except at a price specified by the supplier.69 Inducing refers to actions that are effective, although they may not have comprised actual coercion or pressure or the offer of an advantage.70 A person will not be induced unless there is evidence of an affirmative or positive act or course of conduct directed to the person who is said to be the object of the conduct.
64. Competition and Consumer Act 2010, s 96(3)(a), (c), (d)(i). 65. Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674. 66. Competition and Consumer Act 2010, s 96(7). 67. Competition and Consumer Act 2010, s 4(2)(d). 68. ACCC v Eternal Beauty Products Pty Ltd [2012] FCA 1124. 69. Competition and Consumer Act 2010, s 96(3)(b). 70. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41-653. © 2018 THOMSON REUTERS
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Negative encouragement and the absence of any reference to the consequences that might follow is insufficient.71 As was said in Heating Centre:72 It is true that the word [induce] ordinarily refers to some proffered advantage or disadvantage, promised or threatened, to follow from following or failing to follow a stipulated course of action. There is no reason, however, to read into para (b) a necessity to find that anything is offered in exchange, so to speak, for not discounting; mere persuasion, with no promise or threat, may well be an attempt to induce.
[14.310] While a mere request to maintain prices may not amount to an attempt to induce, a request may be framed in such a way as to be persuasive and to be taken to have been so intended.73 There are examples in which the court has been prepared to find that suppliers had induced retailers, or attempted to do so, where the relevant conversations went no further than what might be thought to be a request rather than a threat or any other form of coercion. Sharp,74 one of the first cases, involved attempts to induce a retailer by sending a letter to a retailer stating: “would you please note that all future advertisements for Sharp electronic calculators should show our uniform retail price”. A case more closely aligned with what might be thought to be an attempt to induce is Simpson.75 In that case, the supplier of whitegoods was found to have attempted to induce a retailer not to sell below its specified price when Simpson’s State sales manager advised the retailer that he may lose some advertising allowances if he did not adhere to the Simpson’s minimum advertised price policy. [14.320] Skins Compression,76 is a recent example of allegations of a supplier inducing a retailer to remove an advertising board that advertised the supplier’s products at 20% off. The firm supplied compression sports performance garments to retailers via an agent. The retailer had a long-standing practice, known to the agent, of advertised sports goods for sale on an A-frame sign on the footpath immediately outside its store. The agent asked the retailer “as a personal favour” to take the sign away for about four weeks because the manufacturer was launching a television promotion for its products. The retailer complied. The supplier admitted that this conduct amounted to resale price maintenance, but whether the conduct amounted to inducing or an attempt to induce is questionable. However, there was more. The A-frame sign was outside the store when the agent visited again. He asked the retailer to take the sign in and the retailer refused and did not remove the sign. The supplier admitted that this amounted to an attempt to induce the retailer not to advertise the supplier’s products for sale at less than the supplier’s specified price.
71. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41653. 72. Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 164; 65 ALR 429; (1986) ATPR 40-674. See also ACCC v SIP Australia Pty Ltd [2002] FCA 824; (2002) ATPR 41-877; at [112]; Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 164; 65 ALR 429 at 439; (1986) ATPR 40-674 at 47,434. 73. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41-653. 74. Trade Practices Commission v Sharp Corporation of Australia Pty Ltd (1975) 8 ALR 255; (1975) ATPR 40-010. 75. Trade Practices Commission v Simpson Pope Ltd (1980) 47 FLR 334 (note); 30 ALR 544; (1980) ATPR 40-169. 76. ACCC v Skins Compression Garments Pty Ltd [2009] FCA 710. See also ACCC v Eternal Beauty Products Pty Ltd [2012] FCA 1124; ATPR 41-969.
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Removing Sales Support
[14.330] In Heating Centre,77 discussed above, the question, in relation to one dealer, was whether or not the supplier had attempted to induce a dealer to sell at the supplier’s recommended retail price. They had urged the dealer to maintain the “suggested retail price” and told the dealer, by phone, that if discounting did not stop “he would find another dealer or they would have their supply cut off”. As already noted, the court decided that, although cryptic, “the whole context of the conversation” was sufficient to amount to the supplier making it known that it would not supply products unless the dealer agreed not to resell them at less than the recommended retail price. [14.340] Conduct involving inducements will not amount to resale price maintenance unless the inducement is directed to the reseller, although the conversations evidencing the inducement does not have to be with the reseller. All that is required is a causal connection between the supplier’s conduct and a reseller’s maintenance of the specified price.78 Mayo79 involved a manufacturer of hair care products and its dealings with the franchisor of a chain of hairdressing salons that carried Mayo’s products. Concerned about discounting by franchisees, Mayo re-introduced a discount for the franchisor with the intention that franchisees, who were thought to be subject to the franchisor’s influence, if not direction, would cease discounting Mayo products. That was found to be sufficient.
Making it Known [14.350] A supplier also engages in resale price maintenance if it uses, in relation to products or services supplied, or to be supplied to “a second person” a statement of a price likely to be understood by that person as the price below which the products or services are not to be re-sold.80 The person to whom the statement is made must be the re-seller and not some third person. 81
Removing Sales Support [14.360] A number of cases have considered the circumstances in which a supplier has removed sales support from retailers who discount the supplier’s product, or offered sales support to those who did not discount. A distinction has been drawn between two situations.82 First, where a supplier is aware that the retailer does not depend on price support payments it provides and the supplier intends nothing more than that the retailer take or refuse the promotional payment and run its business accordingly, that will not amount to resale price maintenance. However, where the supplier may be aware that the retailer could not absorb the financial impact of 77. Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674. 78. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41653. 79. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41653. 80. Competition and Consumer Act 2010, s 96(3)(f). 81. ACCC v Mayo International Pty Ltd (No 1) [1998] FCA 808; (1998) 85 FCR 327; (1998) ATPR 41653. 82. These examples are drawn from Kadkhudayan v WD & HO Wills (Aust) Ltd [2002] FCAFC 110; (2002) ATPR 41-874 at [34]. © 2018 THOMSON REUTERS
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withdrawal of sales support and can be taken to have relied on that knowledge in acting as it did, intending that the retailer alter its position and sell at the price specified by the supplier, that will amount to resale price maintenance. [14.370] Wills83 involved a major cigarette manufacturer removed a promotional payment it generally made to retailers. In response to a question from the retailer as to why the payment had been removed, the retailer was told that it was because the retailer had been selling under the wholesale price. Removal of the promotional payment was found to amount to resale price maintenance, although the appellant’s claim for damages failed because no loss was established. Mayo,84 discussed above, involved re-introduction of a discount with the intention that franchisees, who were thought to be subject to the franchisor’s influence, if not direction, would cease discounting its products. [14.380] Malleys85 involved a whitegoods manufacturer responding to discounting that was eroding profit margins for its retailers. Malleys introduced a scheme to provide incentives to retailers who advertised and sold at the Malleys recommended retail price. The incentives were designed to maximise retailers’ profits. The Malleys compliance officer, realising the implications of the scheme, took steps to cancel it shortly after it was introduced, approached the Commission and admitted breaching the Act. Malleys did not withhold goods from retailers or threaten to do so. Malleys admitted a contravention.
Withholding Supply [14.390] Although refusals to supply do not, of themselves, amount to resale price maintenance,86 a supplier will be regarded as engaging in resale price maintenance if it withholds supply for any one of the following reasons: • the person seeking supply has not agreed not to sell at less than the supplier’s specified price; • the person seeking supply has sold or is likely to sell the supplier’s goods obtained by that person from a third person at a price less than the supplier’s specified price; or • a third person supplied by the person seeking supply has not agreed not to sell below the supplier’s specified price or has sold or is likely to sell at below that price. [14.400] In drafting the resale price maintenance provisions the drafter chose the term “reason” rather than “purpose”. The term “reason” means the fact or group of facts that motivated the supplier to withhold supply — why the supplier did so.87 The reason for withholding supply need not be the sole reason, but it must be a substantial reason,88 or, as the High Court has suggested, an operative reason.89 83. 84. 85. 86. 87.
Kadkhudayan v WD & HO Wills (Aust) Ltd [2002] FCAFC 110; (2002) ATPR 41-874 at [34]. Kadkhudayan v WD & HO Wills (Aust) Ltd [2002] FCAFC 110; (2002) ATPR 41-874 at [34]. Trade Practices Commission v Malleys Ltd (1979) 25 ALR 250; (1979) ATPR 40-118. Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,894. Peter Williamson Pty Ltd v Capitol Motors Ltd [1982] FCA 79; (1982) 61 FLR 257 at 263; 41 ALR 613; (1982) ATPR 40-291. 88. Competition and Consumer Act 2010, s 4F(1)(b). 89. Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 at 635; 47 ALJR 14; [1972–73] ALR 921.
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[14.410] In Williamson,90 the applicant’s BMW dealership had been cancelled. It claimed that there was no commercial reason or justification for the cancellation other than that it had sold BMWs at less than the recommended retail prices. This was disputed and a number of commercial considerations, including that the applicant had not fulfilled its contractual obligations, were put forward. There was no evidence of requests or threats made to the applicant to adhere to recommended retail prices and the evidence established that discounts were regularly provided by dealers. The applicant failed to establish that discounting was a reason for the cancellation. [14.420] The term used in the Act is “withholding supply” rather than “refusing to supply”. The circumstances in which a supplier will be deemed to be withholding supply are, in addition to where the supplier refuses to supply products or services, where the supplier:91 • fails to do so as requested; • refuses supply except on disadvantageous terms; or • supplies the products or services but discriminates against the persons supplied in relation to method, time or place of delivery or otherwise. It will also amount to withholding supply if the supplier, instead of doing so itself, causes someone else (usually a wholesale agent) to do so.92 [14.430] There are also circumstances in which, if a supplier refuses to continue to supply someone whom it has previously supplied, the refusal will be taken to amount to resale price maintenance unless the supplier proves to the contrary. The circumstances are if, within six months prior to refusing supply, the supplier became aware that the customer had not agreed not to sell below the supplier’s specified price, or that a buyer from that customer had not agreed not to do so.93 The presumption does not apply94, however, where the refusal to supply is a refusal except on terms disadvantageous to the re-seller (or on less favourable terms) and those disadvantageous terms were as to: • the time at which payment was to be made; • the form in which payment was to be made; or • the provision of security to secure payment. [14.440] A supplier may also withhold supply from a re-seller who, within the preceding year, has sold goods obtained, directly or indirectly, from the supplier at less than their cost to the re-seller as a loss-leader or otherwise for the purpose of promoting the re-seller’s business. 95 However, that exception does not apply where the sale is a genuine seasonal or clearance sale or the supplier consented to the sale.96 Loss leader sales are sales at a low price to attract buyers who may then buy other products. They are said to be damaging to the manufacturer because they can devalue
90. Peter Williamson Pty Ltd v Capitol Motors Pty Ltd [1982] FCA 79; (1982) 61 FLR 257 at 263; 41 ALR 613; (1982) ATPR 40-291. 91. Competition and Consumer Act 2010, s 98(1). 92. Competition and Consumer Act 2010, s 98(1)(d). 93. Competition and Consumer Act 2010, s 100. 94. Competition and Consumer Act 2010, s 100(2). 95. Competition and Consumer Act 2010, s 98(2). 96. Competition and Consumer Act 2010, s 98(3). © 2018 THOMSON REUTERS
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the goods and detract from any quality reputation the manufacturer may have and harm sales in the longer run.97 In the context of the Act, the meaning of the expression “loss” is a selling price that is below the landed or delivered cost to the retailer.98
The Role of Intent [14.450] Intent is only relevant in resale price maintenance cases in one circumstance. It is not relevant where the supplier has made it known, induced, withheld supply or entered or offered to enter an agreement with a re-seller not to sell at below the supplier’s specified price. However, where the allegation is that there was an attempt to induce, it is necessary to prove intent on the part of the supplier.99
Recommended Prices [14.460] A supplier is not to be taken to induce, or attempt to induce, a dealer not to sell goods or services supplied by the supplier at less than the price specified by the supplier merely because the supplier recommends a resale price.100 In order to qualify as a recommended resale price the price must be clearly stated to be recommended by including the words “recommended price” on the label, or by including on the price list words to the following effect: The price set out or referred to herein is a recommended price only and there is no obligation to comply with the recommendation.
Whether or not a supplier is merely recommending a price, or is using the opportunity to present a price as recommended as a guise for attempting to induce the customer to charge a specified price, is a question of fact. As noted earlier, it does not follow that, because a statement about the price of goods or services is couched in terms of a recommendation, the price will not be a specified price and therefore in breach of the section.101 Whether or not the recommendation of a price followed by a refusal to deal, where the buyer has sold below the recommended price, can convert the recommended price into a specified price below which goods are not to be sold will also depend on all of the circumstances, as we saw above in relation to Williamson.102
Immunity [14.470] Although there has been provision for resale price maintenance conduct to be authorised since 1995, applications had rarely been made. The first successful
97. See FM Scherer, Industrial Market Structure and Economic Performance (Rand McNally, 1970), p 514. 98. Trade Practices Commission v Orlane Australia Pty Ltd (1984) 1 FCR 157 at 162–166; 51 ALR 767; (1984) ATPR 45,014 (40-437). 99. Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168 at 183–184; 55 ALR 527; (1984) ATPR 45,516 (40-482). 100. Competition and Consumer Act 2010, s 97. 101. Festival Industries Pty Ltd v Mikasa (NSW) Pty Ltd (1971) 18 FLR 260. 102. Peter Williamson Pty Ltd v Capitol Motors Ltd [1982] FCA 79; (1982) 61 FLR 257 at 261; 41 ALR 613; (1982) ATPR 40-291.
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authorisation application, Tooltechnic,103 was not made until 2014. In that case, the ACCC granted conditional authorisation for the applicant to include in its dealer agreements a requirement that dealers not sell its high quality power tool products below nominated minimum prices. The ACCC accepted that the conduct would address market failure through free riding if discounting were to occur, given that: [the products] are highly differentiated in terms of their attributes and quality, and the provision of services to customers is important … These services include pre-sale explanations, demonstrations and “try-before-you-buy” of Festool products and post-sales services such as repairs, loan tools and training in use of a product. Full-service retailers are well placed to effectively and efficiently explain and demonstrate these attributes to potential customers, and to provide after-sales services to existing customers.
As this was the first RPM application for authorisation and the ACCC found it difficult to weigh benefits and detriments, the authorisation was limited to four years. In addition, the ACCC imposed an annual reporting obligation on the applicant so that it could monitor the impact. [14.480] The Harper Panel recommended that a Notification procedure should also be available in relation to resale price maintenance and that recommendation was adopted.104
Digest of Cases [14.490] Appendix 6 contains a digest of cases decided in relation to the prohibition against resale price maintenance, illustrating how the courts have dealt with claims in practice.
FURTHER READING Author Bork
Brebner Collinge
Title “The Rule of Reason and the Per Se Concept: Price Fixing and Market Division” Resale Price Maintenance — the Need for Further Reform” “Resale Price Maintenance in Australia”
Heydon
Trade Practices Law Ch 7
Landrigan
“Vertical Price and Non-Price Restraints in Australia and the US: A Comparative Analysis”
Citation (1966) 75 The Yale Law Journal 373. (2001) 9(1) Trade Practices Law Journal 19 Australian Trade Practices Readings (Cheshire, 1970). Thomson Reuters, subscription service. (1997) 25 Australian Business Law Review 312
103. Re Tooltechnic Systems (Aust) Pty Ltd (A91433; 5 December 2014). 104. Competition and Consumer Act 2010, s 93(1)(b). © 2018 THOMSON REUTERS
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Author
Title
Citation
Meese
“Property Rights and Intrabrand Restraints” Miller’s Australian Competition and Consumer Law Annotated [1.48] Resale Price Maintenance
(2003–2004) 89 Cornell Law Review 553 Thomson Reuters, 2018
Miller
Schreiber, Taylor & Donald Telser “Why Should Manufacturers Want Fair Trade” Wang and “Resale Price Maintenance: Is Davison the Per Se Prohibition Justified?”
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MERGERS AND ACQUISITIONS [15.20] [15.80]
[15.150] [15.220] [15.250] [15.270]
[15.690] [15.700]
[15.780] [15.800] [15.810]
15
Development of Australian Merger Law .............................................. An International Perspective ............................................................... [15.90] What is the Standard? ........................................................ [15.130] International Competition Network Guidance .................... Current Merger Test ............................................................................ [15.180] Acquisition of Shares or Assets .......................................... Likely Effect on Competition ................................................................ Markets and Market Power .................................................................. Assessing the Impact of a Merger ...................................................... [15.290] Market Identification ........................................................... [15.320] The State Competition in the Market .................................. [15.330] Availability of Substitutes .................................................... [15.380] Level of Concentration in the Market ................................. [15.410] Degree of Countervailing Power in the Market .................. [15.440] Barriers to Entry .................................................................. [15.480] Import Competition ............................................................. [15.510] Removal of a Vigorous and Effective Competitor .............. [15.540] Failing Firm ......................................................................... [15.570] Vertical Integration .............................................................. [15.600] Dynamic Characteristics of the Market .............................. [15.640] Significant and Sustainable Increase in Prices or Profit Margins .................................................. [15.660] Efficiencies ......................................................................... Scope of Merger Provisions ................................................................ Merger Safe Harbours ......................................................................... [15.720] United States and European Union .................................... [15.740] Other Countries .................................................................. Creeping Acquisitions ......................................................................... The Assessment Process ................................................................... Overseas Mergers Affecting a Market in Australia .............................
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[15.10] Mergers can be socially beneficial because they have an important part to play in allowing firms to achieve greater efficiencies, whether in scale or scope, to improve productivity, to utilise complementary resources more effectively, to spread risk or to release capital for more efficient investment and to compete more effectively.1 As the International Competition Network has commented:2 Most mergers do not harm competition. Many mergers enable the merged firm to reduce costs and become more efficient, leading to lower prices, higher quality products, or increased investments in innovation.
1. See, for example, FM Sherer, Industrial Market Structure and Economic Performance (Rand McNally, 1970), pp 470–471. 2.
International Competition Network, Recommended Practices for Merger Analysis (2017), p 1. Originally adopted in 2008, .
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However, competition policy needs to ensure that the concentration of economic power in a single firm, or a small group of firms, when combined with high entry barriers, does not provide an opportunity to exercise market power. As the International Competition Network has also observed:3 Some mergers, however, may harm competition by creating or enhancing the merged firm’s ability or incentives to exercise market power — either unilaterally or through coordination with rivals — resulting in price increases above competitive levels for a significant period of time, reductions in quality or a slowing of innovation. From the viewpoint of economic analysis, as the diagram at [6.80] illustrates, if through merger, a firm secures a sufficiently significant share of a market in which there are high entry barriers, the result is a reduction in consumer welfare and in total welfare.
Development of Australian Merger Law [15.20] The impact of mergers and acquisitions has long been recognised as a method of aggregating market power. As Scherer notes:4 Around the turn of the century (ie 1900) … a merger wave of massive proportions contributed dramatically to the concentration of American manufacturing industry. Scores of firms controlling more than half the production capacity of their home industries were created through the amalgamation of numerous formerly independent entities.
However, it was not until the 1974 Act that Australian competition laws dealt with mergers. In February 1971 the then Attorney-General, Tom Hughes QC, raised, in a submission to Cabinet,5 the possibility that the Act might include some form of legislative control over mergers, but suggested that the matter be left for the time being. The Cabinet agreed,6 but the matter nevertheless remained open7. Ultimately, the Cabinet made a decision to proceed with a proposed Monopolies Commission that would also have jurisdiction over mergers where the value of net assets exceeded $5 million.8 However, the government changed in December 1972 before the decision could be implemented. The matter was left to the incoming Whitlam Labor Government. [15.30] In a submission to Cabinet in February 1973, the Attorney-General, Lionel Murphy QC, proposed that work be undertaken on new trade practices legislation, including control over anticompetitive mergers.9 Cabinet agreed.10 The merger provision of the Trade Practices Act 1974 was the result.
3. 4. 5. 6. 7.
International Competition Network, Recommended Practices for Merger Analysis (2017), p 1. PM Sherer, Industrial Market Structure and Economic Performance (Rand McNally, 1970), p 469. Cabinet Submission No 693 (22 February 1971), para 18. Cabinet Decision No 29 (19 March 1971). Cabinet Submission No 465 by Attorney-General Greenwood (7 December 1971), Appendix 3, para 8 (“Controlling mergers is a complex matter. UK experience shows that it is a time-consuming matter”); Cabinet Submission No 569 (29 February 1972), para 4 (“Should the Act be amended to allow particular mergers to be referred to the Tribunal? Solicitor-General has advised that the Commonwealth can legislate in relation to mergers”). 8. Cabinet Decision No 943 (8 May 1972), referring to Cabinet Submission No 647 (5 May 1972). 9. Cabinet Submission No 137 (16 February 1973). 10. Cabinet Decision No 248 (6 March 1973).
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Development of Australian Merger Law
As we have seen in earlier Chapters, the merger provision went through a few incarnations before arriving at the form it takes today. In the first incarnation the provision prohibited acquisitions, directly or indirectly, of shares in the capital, or assets of, a body corporate, where the acquisition was likely to have the effect of substantially lessening competition in a market for products or services.11 [15.40] The merger provision was considered by the Swanson Committee, appointed to review the Act when the government changed in 1975. Submissions were mixed. Some thought the merger provision should be repealed; indeed some thought the whole Act should be repealed. Swanson did not agree.12 The committee proposed an annual turnover threshold of $3 million, other than for creeping acquisitions, before the merger provision applied so that the Act would not apply to smaller mergers unlikely to have any impact on competition.13 A failing company defence was also proposed.14 Both recommendations were taken up in an exposure draft of the Trade Practices Amendment Bill 1977, but neither ended up in the legislation finally enacted. Instead, the Act was amended to change the merger test to a “control or dominate” test, picking up the language of the then monopolisation provision. Under that test, an acquisition, directly or indirectly, of any shares in the capital, or any assets, of a target was prohibited if either as a result of the acquisition, the acquiring corporation would be likely to be in a position to control or dominate a market, or, where the corporation was already in a position to control or dominate a market, the target was likely to be a competitor of the corporation and the acquisition would be likely to substantially strengthen the power of the corporation to control or dominate that market. [15.50] At that time, before Professor Michael Porter’s work15 started to have an impact, the prevailing view was that Australian industry needed to achieve better economies of scale, especially if it were to successfully compete internationally, so merger control should be quite limited.16 Another reason may have been small and medium business concerns that the merger test should not be overly intrusive and impose unnecessary administrative cost. Small business lobbies were certainly quite active at the time. Swanson had recommended repeal of the prohibition on price discrimination,17 a prohibition the economic benefit of which was in doubt, and the government had initially accepted that recommendation.18 The first exposure draft of the Bill reflected that. However, the government changed its mind and decided to retain the provision “in the interests of assisting the competitive position of small business”.19
11. Original Trade Practices Act 1974, s 50. 12. Swanson Report, paras 8.5-8.7. 13. Swanson Report, paras 8.25, 8.31, 8.34. 14. Swanson Report, para 8.22. 15. Porter, Competitiveness of Nations (Macmillan, 1990). 16. Minister’s Second Reading Speech, Hansard, 3 May 1977, p 1478. 17. Swanson Report, para 7.21. The committee thought the section operated to limit price flexibility. 18. Attachment A to Cabinet Decision No 1873 (18 November 1976), para 15. 19. Minister’s Second Reading Speech, Hansard, 3 May 1977, p 1478. © 2018 THOMSON REUTERS
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[15.60] Returning to mergers, the government’s stated intention was that the mergers likely to be subject to the prohibition should be quite limited20 and that appears to have been the result. In its 1977–1978 Annual Report the Commission noted that merger activity had increased since the test was changed and observed that”21 This may well have led in some cases to rationalisation of production or distribution by restructuring with better use of resources, but mergers can proceed whether or not that is so and whether or not they lessen competition, provided only they do not involve the acquisition or extension of control or dominance of substantial markets.
A proposal to revert to the substantial lessening of competition test in 198422 was not proceeded with. Instead, the “control or dominate” test was changed to a “dominate” test,23 the courts having made it clear that “control” was redundant because it meant something more than “dominate”.24 Fred Brenchley refers to the 1980s as an era of corporate excess in which a wave of mergers occurred, including big mergers that the ACCC would be unlikely to allow today but which were allowed to go through under the dominance test.25 [15.70] Parliamentary committees in 1989 and 1992 considered whether or not to recommend a change. The Griffiths Committee, reporting in 1989,26 recommended retention of the dominance test because it found insufficient evidence to support a change. Three years later the Cooney Committee27 reconsidered the matter. That committee recommended that the change occur and the government accepted the recommendation, amending the Act the following year. The dominance test was replaced in 1992 and the “substantial lessening of competition” test that the Act had first contained in 1974 was substituted. The core merger provision has remained in that form since 1994. It now states: A corporation must not directly or indirectly: (a) acquire shares in the capital of a body corporate; or (b) acquire any assets of a person; if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market.
Amendments to assist with addressing creeping acquisitions were added and administrative arrangements for merger clearance and for Authorisations have changed considerably, as we discuss below, but the merger test has remained essentially the same.
20. 21. 22. 23. 24.
Second Reading speech on the Bill, Hansard, 3 May 1977, p 1478. Trade Practices Commission, Annual Report (1977–78), para 1.16. The Trade Practices Act Proposals for Change (1984). Act No 17 of 1986. Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd [1978] FCA 21; (1978) 32 FLR 305. 25. Brenchley, Allan Fels: A Portrait of Power (Wiley, 2003), pp 36–37. 26. House of Representatives Standing Committee on Legal and Constitutional Affairs (Griffiths Committee), Mergers, Takeovers and Monopolies: Profiting from Competition (AGPS, 1989). 27. Senate Standing Committee on Legal and Constitutional Affairs (Cooney Committee), Mergers, Monopolies and Acquisitions: Adequacy of Existing Legislative Controls (AGPS, 1991).
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An International Perspective
An International Perspective [15.80] The International Competition Network has recommended that the purpose of competition law merger analysis should be to identify and prevent or remedy only those mergers that are likely to harm competition significantly. As the ICN has said:28 The goal should be to assess whether a merger is likely to harm competition significantly by creating or enhancing the merged firm’s ability or incentives to exercise market power, either unilaterally or in coordination with rivals. … Agencies should only intervene to prohibit or remedy a merger when it is necessary to prevent anticompetitive effects that may be caused by that merger. The appropriate goal of agency intervention to prohibit or remedy a merger is to restore or maintain competition affected by the merger, not to enhance pre-merger competition.
There is a high degree of commonality in the standard used to assess mergers internationally, although administrative arrangements for merger notification and review vary significantly.
What is the Standard? [15.90] Internationally, competition laws use one of two standards for the purposes of merger control on competition grounds — the dominance test and the substantial lessening of competition (SLC) test.29 As we have seen, at various time Australia has used each, although since 1992 the relevant Australian standard has been the SLC test. [15.100] In the United States the relevant standard has, since 1914, been “substantial lessen competition or ‘tend to create a monopoly”30, with the addition of an “unfair method of competition” test.31 In the EU and member States of the European Economic Area,32 the standard is expressed as follows:33 any concentration which would significantly impede effective competition, in the common market or in a substantial part of it, should be declared incompatible with the common market.
[15.110] In Canada, the standard is expressed in slightly different terms, but to the same effect as the SLC standard. The Canadian standard is: “lessens, or is likely to prevent or lessen, competition substantially”.34 In our region, the
28. International Competition Network, Recommended Practices for Merger Analysis (2017). Originally adopted in 2008, . 29. For helpful summaries of the position in a large range of jurisdictions see K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015) and Davies, Merger Control The International Regulation of Mergers and Joint Ventures in 74 Jurisdictions Worldwide (Law Business Research, 2016). 30. Clayton Act 1914 (US), s 7; 15 USC § 18. 31. Federal Trade Commission Act 1914, s 5; 15 USC §45. For the development of the use of this in a merger context, see PC Carstensen and NH Questal, “Use of Section 5 of the Federal Trade Commission Act to Attack Large Conglomerate Mergers” (1978) 63 Cornell Law Review 841. 32. EU Member States plus Iceland, Liechtenstein and Norway. 33. EC Merger Regulation (2004); European Council Regulation No 139/2004, 20 January 2004. 34. Competition Act 1985 (Canada), s 92. © 2018 THOMSON REUTERS
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standard is the SLC test in India,35 Japan,36 New Zealand,37 Singapore,38 and South Korea.39 The most recent jurisdictions in our region to adopt competition laws are Hong Kong, Malaysia and the Philippines. In Malaysia, merger assessment does not form part of its competition law.40 In Hong Kong, the law does address mergers, using the substantial lessening of competition standard, but it only applies at present to mergers in the telecommunications sector.41 In the Philippines, the standard is the SLC standard.42 [15.120] Although, from a policy perspective, the SLC standard is the legislated standard, there are significant variations between jurisdictions in relation to administrative procedures and practices, including pre-merger notification. There are also significant differences in approach in assessing whether or not a merger is likely to substantially lessen competition. This has presented real challenges for global and multi-jurisdictional mergers.
International Competition Network Guidance [15.130] The ICN points out that:43 merger analysis should not be a mechanical application of a legal standard based on rigid presumptions, structural criteria, or formulaic concentration numbers. An agency should apply its merger analysis reasonably and flexibly on a case-by-case basis, recognizing the broad range of possible factual contexts and the specific competitive effects that may arise in different transactions.
The ICN has proposed a framework for merger analysis that includes the following principles: • Markets: ° The competitive effects of a merger should be assessed within economically meaningful markets. ° Market shares and measures of market concentration play an important role in merger analysis but are not determinative.
35. Competition Act 2002 (India), s 6. The relevant standard is “cause an appreciable adverse effect on competition”. 36. Antimonopoly Act 1947 (Japan), Ch 4. The Japanese law applies where a merger or other combination “creates a business combination that may be substantially to restrain competition in any particular field of trade, or where a business combination is created through an unfair trade practice”. See Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination, 31 May 2004, revised 14 June 2011. 37. Commerce Act 1986 (NZ), s 47. 38. Competition Act 2007 (Singapore), s 54. 39. Monopoly Regulation and Fair Trade Act 1980 (Republic of Korea), Art 7 ”substantially restricts competition”. 40. Competition Act 2010 (Malaysia). 41. Competition Ordinance 2012 (HK), Sch 7. 42. Competition Act 2014 (Philippines), s 20. 43. International Competition Network, Recommended Practices for Merger Analysis (2017). Originally adopted in 2008, p 4, .
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An International Perspective
° The
“hypothetical monopolist” or “SSNIP” test44 is an appropriate test to determine the relevant market(s) in which to analyse the competitive effects of a merger. • Competitive entry: The assessment of firm entry and/or expansion by existing competitors should be an integral part of the analysis of whether a merger is likely to harm competition significantly. • Efficiencies: The assessment of potential efficiencies should be part of a competition agency’s overall analytical framework for merger review. • Failing firms: ° A merger is not likely to create or enhance market power if one of the merging parties is likely to fail and its assets are likely to exit the market in the imminent future. Where the parties assert that a merger is unlikely to harm competition because one ° of the merging firms is failing, agencies should carefully assess the appropriate counterfactual in which to analyse the competitive effects of the merger. Market definition & shares: As the ICN has pointed out, the purpose of market definition in merger analysis is to identify an appropriate frame of reference to assess whether the merger may create or enhance market power, thereby resulting in significant, rather than insignificant or transient, harm to competition.45 Market shares are used in some jurisdictions either as “safe harbours”, as was recommended in Australia originally by the Swanson Committee, or as proxies for determining dominance. Neither is the case in Australia. The ICN suggests that enforcement decisions should not be made solely on the basis of market shares and concentration, adding:46 Thus, agencies should not automatically reach a final conclusion that a merger is likely to be anticompetitive because the merger increases concentration above a certain level or reduces the number of remaining firms below a certain level.
Competitive entry: The ICN points out47 that meaningful entry, or the threat of meaningful entry from potential competitors or from customers turning to inhouse supply, can be an important competitive constraint on the conduct of merged firms. In those circumstances, a merger is unlikely to have an anticompetitive effect. Assessments of competitive entry should consider the likelihood of entry, its timeliness and whether it is sufficient in nature, scale and scope. Efficiencies: In relation to efficiencies, the ICN has stated48 that, in assessing the likely competitive effect of a merger, agencies should take into account efficiencies that are substantiated, likely, and merger-specific. Agencies should not challenge a proposed merger if it is likely that the demonstrated efficiencies would counteract anticompetitive effects in the relevant market and would be passed through to consumers.
44. See [6.130]. 45. See fn 43. 46. International Competition Network, Recommended Practices for Merger Analysis (2017). Originally adopted in 2008, fn 43 p 15. 47. International Competition Network, Recommended Practices for Merger Analysis (2017), fn 43 p 28. 48. International Competition Network, Recommended Practices for Merger Analysis (2017), fn 43 p 30. © 2018 THOMSON REUTERS
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Failing firms: In assessing claims that a merger will not harm competition because one of the merging parties is failing, the ICN recommends that49 agencies should consider whether or not there is a reasonable, less anticompetitive, alternative than the merger, taking into consideration factors such as whether or not: • the firm’s financial failure is imminent; • there is a serious prospect that the business will be reorganised; and • absent the merger, the firm and its assets would exit the market in the imminent future. [15.140] The ICN’s recommended practice also provides guidance on analysis of competitive effects in horizontal mergers, with particular emphasis on both unilateral effects and coordinated effects. As the ICN notes,50 unilateral effects arise when, postmerger, the firm is likely to be able to exercise market power to a materially increased degree, without coordination with its competitors. Coordinated effects refers to the situation where, post-merger, tacit coordination between the firm and its competitors is likely, or strengthened, thereby giving the merged firm increased market power.
Current Merger Test [15.150] The Australian prohibition states:51 A corporation must not directly or indirectly: (a) acquire shares in the capital of a body corporate; or (b) acquire any assets of a person; if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market.
That prohibition draws heavily on the United States Clayton Act 1914, which states:52 No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person … shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where … effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.
[15.160] The following must be established for there to be a contravention of the Australian merger law:53 • a firm has to acquire, either directly or indirectly, shares in a body corporate or assets from any person, whether incorporated or not; • the acquisition must be shown to have either the effect or the likely effect of substantially lessening competition; and • that effect, or likely effect, must be in a market in Australia, a State or Territory, or a region of Australia. Other prohibitions, such as the prohibition on misuse of market power and the prohibition on anticompetitive arrangements, also apply if the conduct has an 49. International Competition Network, Recommended Practices for Merger Analysis (2017), fn 43 pp 34, 36. 50. International Competition Network, Recommended Practices for Merger Analysis (2017), fn 43 p 17–27. See also JF Rilland JM Taladay, “Coordinated Effects Analysis Under International Merger Regimes”, International Competition Network, (2004), . 51. Competition and Consumer Act 2010, s 50(1). 52. 15 US Code § 18, s 7. 53. Competition and Consumer Act 2010, s 50(1) and (6).
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anticompetitive purpose, but not the merger provision. There can be no contravention unless the likely effect is to substantially lessen competition. [15.170] The prohibition does not only apply if a majority of the issued shares are acquired. Any share acquisition that has the likely effect of substantially lessening competition will be sufficient. The prohibition applies whether the acquisition takes place in or outside Australia, as long as the likely effect is to substantially lessen competition in a market in Australia. As the court said in Australian Iron & Steel: 54 The relevant territorial nexus with Australia is derived from the statutory requirement that the corporation which is the subject of the prohibition imposed by s 50(1) must be incorporated or carrying on business within Australia (s 5(1)) and that the conduct must affect a market in Australia in the manner mentioned in s 50(1).
Unlike the position in many other jurisdictions, there are no legislated safe harbours in the Australian law. This is considered further below. There is, however, an opportunity to apply to have the acquisition cleared or authorised by the ACCC or the Australian Competition Tribunal.55
Acquisition of Shares or Assets [15.180] There must be an acquisition of shares or assets before the prohibition can apply. Acquisition, in this sense, means nothing more than obtaining ownership of any legal or equitable interest in the target or in assets the subject of the acquisition.56 A “direct” acquisition requires no explanation, but what is an “indirect” acquisition? One possible example is where a nominee, or interposed associated firm or whollyowned subsidiary makes the acquisition, but that has not been resolved. There are two decisions, each quite old and each with very different facts, that explain the situation. [15.190] The first is AMH.57 The owner of abattoirs in North Queensland acquired all of the shares in another company that also owned abattoirs in North Queensland. Question arose as to whether there had been an indirect acquisition of the abattoir assets the target company owned, thereby triggering a right to order divestiture of the abattoirs. The court rejected the submission, but it did say: Section 50 should be given a wide operation for it is intended to deal with cases of domination58 in the market place. The words “acquire, directly or indirectly” should be read as encompassing all forms of acquisition and may encompass the situation where assets are acquired in an indirect way, as through the interposition of a wholly owned subsidiary.
54. Trade Practices Commission v Australian Iron & Steel Pty Ltd [1990] FCA 23; (1990) 22 FCR 305 at 319–320; 92 ALR 395; (1990) ATPR 41-001. 55. Competition and Consumer Act 2010, s 50(1). There is, however, an exemption in relation to primary products. Section 173 provides that, in deciding whether a person or corporation has contravened s 50, the vesting of ownership of primary products in the person or corporation by legislation is to be taken, for the purposes of s 51(1)(a)(i), to be specified in, and specifically authorised by, that section. 56. Trade Practices Commission v Australian Iron & Steel Pty Ltd [1990] FCA 23; (1990) 22 FCR 305; 92 ALR 395; (1990) ATPR 41-001. 57. Australia Meat Holdings Pty Ltd v Trade Practices Commission [1989] FCA 43; (1989) ATPR 40-932. 58. At the relevant time the statutory question was whether or not the acquisition would result in domination of the market. © 2018 THOMSON REUTERS
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[15.200] The second is Australian Iron & Steel,59 decided 12 months after the AMH decision. This was a complicated takeover case in a number of respects. The Commission was seeking a divestiture order in relation to the takeover of a steel company in New Zealand, where the takeover had been completed after approved by the NZ Commerce Commission. The Commission alleged that Australian Iron & Steel Pty Ltd, a BHP company, and associated companies, had used a New Zealand company as a vehicle to enable BHP to gain control of the target, thereby strengthening BHP’s dominance of the steel market in Australia. The takeover had been achieved by Australian Iron & Steel Pty Ltd acquiring 31% of the NZ company which then acquired 100% of the target. Another BHP company then acquired a further 25% of the NZ acquirer. The court decided that there had not been any “indirect acquisition” by Australian Iron & Steel Pty Ltd in the NZ target company. The view that an acquisition by a subsidiary could be an indirect acquisition was specifically rejected because legal or beneficial ownership of the relevant shares or assets is what the court thought was required. If that view were correct, it is only when a subsidiary acts as agent, nominee or otherwise on behalf of a corporation that it could be said that the corporation acquired the shares or assets in question “indirectly”, a narrower view of the operation of the prohibition;60 narrower than the approach taken in the United States.61 [15.210] There is another aspect of the matter that needs to be considered. As the word “acquire” means obtaining a legal or equitable interest in the relevant asset, when a corporation enters into an unconditional agreement to purchase the shares it may acquire an equitable interest prior to completion and that may amount to an acquisition to which s 50 could apply. However, the courts have come to the sensible conclusion that, where an acquisition of the legal interest in the shares has not been completed and the purchaser has no rights as a shareholder in the target company, a contravention of s 50 is unlikely to have occurred because it could not be said that the acquisition substantially lessens competition.62
Likely Effect on Competition [15.220] An acquisition will only be prohibited by the Competition and Consumer Act 2010 if the likely effect is to substantially lessen competition in a substantial market for goods or services in a State or Territory or region of Australia. In Chapter 8 we considered the meaning of the complex phrase “substantially lessen competition” and the term “likely”. In Chapter 7 we considered the term “market”. It is sufficient for current purposes to note that whether or not competition is lessened is to be determined in the context of a relevant market and that, while it is not entirely appropriate to substitute other phrases for the phrase “substantially lessen competition”, its meaning cannot be accurately discerned by interpreting each of the words used literally. The concept sought to be conveyed by it, at least from a policy perspective, is more akin to the concept of adversely affecting the competitive process. [15.230] Whether or not an outcome is likely, in a merger context, is not an easy matter to determine. Analysis of mergers involves a before and after merger analysis. 59. Competition and Consumer Act 2010, s 4(4). See also Trade Practices Commission v Arnotts Ltd [1990] FCA 473; (1990) 97 ALR 555; (1990) ATPR 41-062. 60. See comment in Trade Practices Commission v The Gillette Company (No 1) [1993] FCA 495; (1993) ATPR 41-267. 61. See, for example, Jim Walter Corporation v Federal Trade Commission 625 F 2d 676 (1980). 62. Australian Gas Light Co v ACCC (No 3) [2003] FCA 1525; 137 FCR 317; (2003) ATPR 41-966.
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The decision-maker is required to assess, based on facts and expert economic evidence, what competition in the relevant markets would be likely to look like if the merger proceeds. That assessment is not a theoretical exercise. It must be based on a commercially practical assessment that the result of the merger will adversely affect the competitive process or situation in the markets relevant to the merger. [15.240] Does “likely” in this circumstance mean “real change”? As was said in AGL.63 from a policy perspective: [We] must not set the bar so high as effectively to expose acquiring corporations to a finding of contravention simply on the basis of possibilities, however plausible they may seem, generated by economic theory alone. On the other hand it must not set the bar so low as effectively to allow all acquisitions to proceed save those with the most obvious, direct and dramatic effects upon competition.
The standard for assessing that likelihood is not settled. Various judges have said that it is a “significant finite probability” and others that it is a “more probable than not” standard.64
Markets and Market Power [15.250] The fundamental question in merger analysis is whether or not a merger is likely to increase market concentration and market power. As the High Court observed in QWI:65 In identifying the relevant market, it must be borne in mind that the objective is to discover the degree of the defendant’s market power.
Identifying the relevant market is an important starting point in the analysis and Chapter 7 sets out the court’s approach to doing so. In a merger context the Act originally stated that a relevant market, had to be a “substantial market in Australia or a State or Territory” for the prohibition to apply.66 However, in an attempt to broaden the prohibition to deal with creeping acquisitions, the requirement was amended to:67 market means a market for goods or services in: (a) Australia; or (b) a State; or (c) a Territory; or (d) a region of Australia.
Whether this change has made any significant difference remains to be seen. [15.260] In making an assessment of the post-merger effect on competition in relevant markets, the provision specifies a shopping list of matters that must be taken into account.68 They are: • the actual and potential level of import competition in the market; • barriers to entry;
63. Australian Gas Light Co v ACCC (No 3) [2003] FCA 1525; (2003) 137 FCR 317; (2003) ATPR 41966. 64. See Australian Gas Light Co v ACCC (No 3) [2003] FCA 1525; 137 FCR 317; (2003) ATPR 41-966 and ACCC v Metcash Trading Ltd [2011] FCAFC 151; (2011) ATPR 42-380. 65. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 187–188; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 66. Originally the section contained no such prescription, but this was added in 1977 and remained the requirement until 2001. 67. Competition and Consumer Act 2010, s 50(6). 68. Competition and Consumer Act 2010, s 50(3). © 2018 THOMSON REUTERS
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• the level of concentration in the market; the degree of countervailing power in the market; • the likelihood that significant and sustainable higher prices or profit margins would result; • the extent to which substitutes are, or are likely to be, available; • the “dynamic characteristics” of the market, including growth, innovation and product differentiation; • the likelihood that a “vigorous and effective” competitor would be removed from the market; and • the nature and extent of vertical integration in the market. This shopping list of factors was inserted in 1986 as a non-exhaustive list of well understood economic factors to guide the courts in determining when a merger is likely to substantially lessen competition. The court had previously set out what were through to be relevant factors that might be taken into account in identifying post-merger market power, and hence the effect of the merger on competition. That list was:69 • the ability of a merged firm to raise prices above the supply cost (the minimum costs an efficient firm would incur in producing the produce) without rivals taking away customers in due time; • the extent to which the merged firm’s conduct in the market is constrained by that of competitors or potential competitors; • the market share of the merged firm, although this alone is not generally determinative of market power; • the existence of vertical integration, although this alone is not generally determinative of market power; and the extent to which it is rational or possible for new entrants to enter the market – the extent of barriers to entry.
Assessing the Impact of a Merger [15.270] Very few merger competition cases are decided by Australian courts.70 This is because the practice is to seek an informal clearance from the ACCC. When the ACCC refuses to clear a merger there is little opportunity to challenge the decision in court. Aside from the practical problems delay present, that is because, being an informal process, the only opportunity is an administrative law challenge based on errors of law. There is also an opportunity, seldom used, to seek declarations under a separate provision of the Act,71 but that has only been used once in the past 20 years. [15.280] Each competition agency around the world issues guidelines setting out how they propose to assess mergers and the ACCC is no exception. The ICN guidance 69. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165 based primarily on Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925; Arnotts Ltd v Trade Practices Commission [1990] FCA 473; (1990) 24 FCR 313; 97 ALR 555; (1990) ATPR 41-061. See also Australian Gas Light Co v ACCC (No 3) [2003] FCA 1525; 137 FCR 317. 70. The exceptions are Australian Gas Light Company v ACCC [2003] FCA 1525; (2003) 137 FCR 317; ACCC v Metcash Trading Ltd [2011] FCAFC 151; (2011) ATPR 42-380. 71. Competition and Consumer Act 2010, s 163A.
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discussed at [15.130] is designed to provide agencies with consistent principles for their respective analysis of mergers, either for clearance purposes or for the purposes of challenges in courts and tribunals. The current ACCC Merger Guidelines, issued in 2008, set out the analytical framework against which the ACCC assesses mergers. As has already been noted, unlike the position in some other countries, neither the Australian law nor the ACCC Merger Guidelines contain safe harbours — levels below which mergers can proceed without the risk of being investigated. Instead, the Merger Guidelines set out a market share notification threshold as guidance to merging parties on when the ACCC would expect to receive notification of the proposed merger. This is discussed at [15.710].
Market Identification [15.290] As the ICN principles state, the competitive effects of a merger should be assessed within economically meaningful markets. The Merger Guidelines state that the ACCC starts by identifying the products and geographic regions actually or potentially supplied by the merger parties. It then identifies markets in areas of activity where competitive harm could occur. Generally, the ACCC, says, it will focus on “overlaps between the products or geographic regions supplied by the merger parties, or some other meaningful economic relationship — such as an actual or potential vertical relationship or where the products supplied by the merger parties are complementary in nature”.72 [15.300] The Merger Guidelines use the hypothetical monopolist test to identify relevant markets by determining the smallest area in product and geographic space within which a hypothetical current and future profit-maximising monopolist could effectively exercise market power, utilising a SSNIP (hypothetical monopolist) test.73 That test, the small but significant non-transitory increase in price, is applied by the ACCC considering whether the proposed merger would be likely to result in an increase of at least 5% above the price level that would prevail without the merger.74 The Merger Guidelines set out a filter that the ACCC has stated that it applies as a preliminary indicator of the likelihood that the merger will raise competition concerns requiring more extensive analysis. That filter is the Herfindahl-Hirschman Index (HHI). It is explained in Chapter 6 at [6.150]. [15.310] The Merger Guidelines state that the ACCC will “generally be less likely to identify horizontal competition concerns” when the post-merger HHI is less than 2000, or greater than 2000 with a delta less than 100.75
The State Competition in the Market [15.320] Assessing the state of competition in relevant market, before and after the merger, is the starting point once markets have been identified. Of course, if current and post-merger concentration is low, there is little cause for concern on competition grounds, but the more significant informal merger clearance cases 72. ACCC, Merger Guidelines 2008, para 4.10. 73. Explained at [6.130]. 74. ACCC, Merger Guidelines 2008, paras 4.19–4.22. 75. ACCC, Merger Guidelines 2008, para 7.14. © 2018 THOMSON REUTERS
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usually involve concentrated markets. Nevertheless, the ICN advises (and the ACCC recognises) that:76 High market concentration and significant increases in market shares brought about by a merger are useful, but generally are not conclusive indicators that a merger is likely to harm competition significantly.
In the following paragraphs, we consider briefly the factors the ACCC considers in determining whether or not to clear a merger or acquisition. The ACCC’s approach takes account of the ICN principles ([15.130]) but goes much further in the factors it considers in deciding whether or not a transaction is likely to substantially lessen competition.
Availability of Substitutes [15.330] A fundamental question in any merger is the extent to which substitutes are available in the market or are likely to be available in the relevant markets.77 The availability of readily substitutable products in a market provides consumers with viable alternatives if the merged firm seeks to raise its prices, but the extent to which substitutes constrain market power of the merged firm depends on how substitutable the other products are. Product differentiation, brand differentiation and availability all play a part in this assessment, as does price. [15.340] It is useful to take a few examples to illustrate how the ACCC takes this into account in practice. Metcash/Home Timber 78 involved the acquisition by a large wholesale distribution and marketing company that included wholesale hardware supply to two retail banner brands it owned, of a competitor wholesaler of hardware and home improvement products. The target was the closest competitor to Metcash for retailers that relied on third-party distributors. The ACCC concluded that, although there were high entry barriers, there were a number of constraints on the merged firm raising prices, including that competition from Bunnings, the largest hardware and home-improvement retailer in Australia, would limit Metcash’s ability to profitably increase wholesale prices. [15.350] TPG/iiNet79 involved the merger of the second and fifth largest retail broadband provides in Australia. A factor in the ACCC clearing the merger was that large national telecommunications firms were in a better position to bundle fixed broadband services with other services and that would be capable of constraining the merged firm’s pricing. Woolworths/Cellarmaster80 involved an acquisition by Woolworths, Australia’s largest grocery and retail liquor retailer, of a direct retailer of home-delivered wines that held only 3% of the retail wine market. The ACCC concluded that the acquisition was unlikely to lead to a substantial lessening of competition because only a minimal increase in concentration would result and there were multiple existing competitors
76. International Competition Network, Recommended Practices for Merger Analysis (2017), p 14. Originally adopted in 2008, ; ACCC, Merger Guidelines 2008, para 7.7. 77. Competition and Consumer Act 2010, s 50(3)(f); ACCC, Merger Guidelines 2008, para 7.38. 78. ACCC Competition Assessment, Metcash/Home Timber & Hardware, 26 August 2016. 79. ACCC Competition Assessment, TPG/iiNet, 22 December 2015. 80. ACCC Competition Assessment, Woolworths/Cellarmaster, 27 May 2011.
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who would likely constrain Woolworths exercising, market power, if any, likely to result from the acquisition. [15.360] On occasion, the ACCC has conditioned merger clearance on the establishment of a viable alternative through divestiture. For example, in ABC Learning/Hutchison,81 ABC, a major provider of child care centres nationally, sought clearance to acquire Hutchison, a firm that operated 86 centres around Australia. In most locations the merger did not cause competition concerns because there were other centres with vacant places, but in some locations that was not the case. The ACCC decided not to oppose the merger after ABC provided a court-enforceable undertaking to divest seven long-day care centres in five regional areas, mainly in Queensland. [15.370] More recently, in Iron Mountain/Recall,82 two listed global information and document management companies sought clearance in various countries, including Australia, to effect a global merger. The ACCC’s view was that the proposed merger would be likely to lead to a substantial lessening of competition in the national market for document storage services because there was a limited number of firms competing for customers that required national or multi-regional services. The ACCC decided to clear the merger when Iron Mountain provided a court enforceable undertaking to divest almost all of its Australian business to a purchaser approved by the ACCC.
Level of Concentration in the Market [15.380] When assessing the likely impact of concentration in concentrated markets it is unilateral effects and coordinated effects that are of particular concern. With unilateral effects the matter to be considered is whether the merged firm is likely to be able to exercise market power to a materially increased degree, without coordination with its competitors. With coordinated effects, the question is whether, post-merger, tacit coordination between the firm and its competitors is likely, or strengthened, thereby giving the merged firm increased market power. The ACCC’s Merger Guidelines recognise both effects, stating in relation to unilateral effects:83 Mergers have unilateral effects when they remove or weaken competitive constraints in such a way that the merged firm’s unilateral market power is increased. That is, as a result of the merger the merged firm finds it profitable to raise prices, reduce output or otherwise exercise market power it has gained, and can do so, even given the expected response of other market participants to the resulting change in market conditions.
In relation to coordinated effects, the ACCC’s Merger Guidelines state:84 Mergers have coordinated effects when they assist firms in the market in implicitly or explicitly coordinating their pricing, output or related commercial decisions. A merger may do so simply by reducing the number of firms among which to coordinate, by removing or weakening competitive constraints or by altering certain market conditions that make coordination more likely.
81. ACCC Competition Assessment, ABC Learning/Hutchison, 10 October 2006. 82. ACCC Competition Assessment, Iron Mountain/Recall, 19 April 2016. 83. ACCC, Merger Guidelines 2008, para 5.1. 84. ACCC, Merger Guidelines 2008, para 6. © 2018 THOMSON REUTERS
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[15.390] Unilateral effects need little explanation, but examples of cases involving coordinated effects assist in understanding the circumstances in which that is likely to be an issue. The following examples illustrate the position. PMP/IPMG 85 the ACCC decided not to oppose a merger of the two largest heatset web offset printers in Australia. In considering the likelihood of coordinated effects the ACCC concluded that the merger would not substantially increase the risk of coordination. It acknowledged that fewer major printers could make it easier to engage in tacit coordination, but thought that coordination would likely be unsustainable because it would create incentives for entry and expansion by others. [15.400] Virgin/Tiger86 involved the acquisition by Virgin, a major Australian passenger airline, of interests in Tiger, a low-cost airline also operating in Australia. The relevant market, the national market for Australian domestic air passenger transport services, was quite concentrated, with Virgin and Qantas the only two major participants. The ACCC cleared the acquisition, but it expressed concerns about the increased likelihood of airlines coordinating their pricing, capacity or related commercial decisions, given that the merger would reduce the number of airline groups in Australia from three to two. Caltex/Mobil87 is an example of a merger the ACCC opposed. Caltex, a major petroleum retailer, proposed to acquire the Mobil petrol stations when Mobil issued a tender for the sale of the assets. In refusing clearance, the ACCC concluded that the acquisition would substantially lessen competition by creating a greater risk of more stable and more effective coordinated pricing behaviour. The fact that the major petrol refiner-marketers, including Caltex, participated in a sophisticated information sharing scheme added to the ACCC’s concerns.
Degree of Countervailing Power in the Market [15.410] Countervailing power exists where counterparties to a transaction — customers — have sufficient power to act independently of the merging parties: either because of their own market power, or because the counterparties could respond effectively to an attempt by the merging parties to exert market power through some other means such as imports or vertical integration. Groceries provide a good example. If a merger were to occur between the two largest suppliers of bread, one question would be whether the supermarkets had sufficient countervailing power to be able to resist the merged entity charging supra-competitive prices. In other words, given the countervailing power of the supermarkets and other factors, such as ease of entry or expansion by new or other bread manufacturers, would the market power of the merged entity be constrained. As the ACCC observes in the Merger Guidelines:88 Countervailing power … exists when the specific characteristics of a buyer–such as its size, its commercial significance to suppliers or the manner in which it purchases from suppliers–provide the buyer with additional negotiating leverage. In some cases, a buyer may have countervailing power because they have market power.
85. ACCC Competition Assessment, PMP/IPMG, 28 March 2017. 86. ACCC Competition Assessment, Virgin/Tiger, 31 July 2013. 87. ACCC Competition Assessment, Caltex/Mobil, 9 February 2010. 88. ACCC, Merger Guidelines 2008, para 7.49.
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The availability of effective alternatives to the merged firm provides all buyers with a means of bypassing the merged firm. In relation to countervailing power, the ACCC decided that, while some large customers had a degree of bargaining power when negotiating with suppliers, customers were unlikely to exert countervailing power. [15.420] Taking a few examples to illustrate how the ACCC takes into account countervailing power in practice, PMP/IPMG,89 referred to earlier, is an example of the ACCC concluding that, while some large customers had a degree of bargaining power when negotiating with suppliers customers were unlikely to exert countervailing pressure on the merger firm. Metcash/Home Timber,90 also discussed above, is another example. The ACCC concluded that, although there were high entry barriers, constraints on the merged firm raising prices included that hardware retailers (especially those with multiple stores) may be able to establish a wholesaling operation, even if only on a smaller scale. [15.430] Hexion/Orica91 involved Hexion acquiring Orica’s formaldehyde resins business. One of the relevant markets was the market for amino resins. The acquisition would reduce the number of manufacturers in the relevant regional market from three to two. However, the ACCC concluded that there would not be a substantial lessening of competition in that market because, taking account of their size and demand both within and outside the relevant geographic region, customers would be likely to continue to have bargaining power post acquisition.
Barriers to Entry [15.440] As the ICN points out, a merger is unlikely to have an anticompetitive effect where there is the likelihood of meaningful competitive entry, or the threat of meaningful competitive entry. Competitive entry may result from a new entrant, either from Australia or overseas, or from an existing firm increasing outputs. A barrier to entry is a cost that must be borne by a firm seeking to enter an industry but is not borne by firms already in the industry.92 Barriers may be structural — they may be based on market characteristics or the result of the incumbent firm’s strategic behaviour to deter market entry.93 They may arise in a variety of ways, including, for instance, through intellectual property rights, customer loyalty, availability of skilled labour, raw materials, plant and equipment, availability of suitable sites, the level of capital investment required.94 They may also exist due to import quotas, restrictions or tariffs, technological factors or from legislation which gives a statutory monopoly.
89. 90. 91. 92.
ACCC Competition Assessment, PMP/IPMG, 28 March 2017. ACCC Competition Assessment, Metcash/Home Timber & Hardware, 26 August 2016. ACCC Competition Assessment, Hexion/Orica, 10 January 2007. This definition was proposed by Nobel Laureate, Professor George Stigler in 1968: see Stigler, The Organization of Industry (University of Chicago Press, 1983). For this and other definitions see H Demsetz, “Barriers to Entry” (1982) 72 The American Economic Review 47. In considering barriers to entry for merger purposes, the ACCC takes into account a broader range of potential constraints: legal or regulatory barriers, structural or technological barriers and strategic barriers (such as the risk of retaliation): see ACCC, Merger Guidelines 2008, paras 7.29–7.32 reproduced in Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018), p 2109. 93. Re Chime Communications Pty Ltd (No 2) [2009] ACompT 2; (2009) 234 FLR 210. 94. Drawn from ACCC v Boral Ltd [1999] FCA 1318; (1999) 166 ALR 410; (1999) ATPR 41-715. © 2018 THOMSON REUTERS
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[15.450] Of course, in order to counterbalance market power that a merger may provide the merging parties, entry or expansion must be timely and sufficient in scope and nature to be effective. As the ACC’s Merger Guidelines state, this requires:95 an assessment of the height of barriers to entry taking into account whether actual or threatened entry post-merger is both possible and likely in response to an attempted exercise of market power by the merged firm—this will generally depend on the profitability of entering the market.
There may be other practical entry barriers, including legal and regulatory barriers such as licensing requirements, planning or environmental controls and other legal or regulatory barriers, structural or technological barriers, industry standards, scarce resources (whether physical such as raw materials or of an intellectual property nature), strategic barriers such as risk of retaliation, brand proliferation and brand loyalty or the creation of excess capacity.96 [15.460] Taking a few examples to illustrate how the ACCC takes into account entry barriers in practice, TPG/iiNet97 involved the merger of the fifth largest and the second largest firms supplying retail fixed broadband services (by subscriber numbers). The ACCC concluded that, the barriers to entry or expansion limited the prospect of large-scale new entry or expansion sufficient to constrain the merger firm. The factors the ACCC took into account included that: there had not been new large scale entry or significant organic growth for some years; the industry was consolidating; and economies of scale, economies of scope and the power established brands were significant.98 It nevertheless cleared the merger, having concluded that, the merged entity would remain constrained by other competitors, including Telstra, and Optus. CSR/Boral99 involved a proposed joint venture between two competitors to combine their businesses manufacturing, marketing and supplying clay bricks, effectively creating a duopoly of major brick suppliers in Queensland and NSW. Significant barriers to entry and expansion, and structural decline in the industry, led the ACCC to conclude that it was unlikely there would be new entry or expansion on a sufficient scale. The ACCC nevertheless cleared the joint venture because it concluded that, Boral was likely to exit and its clay brick manufacturing assets sold off if the proposed joint venture did not eventuate. [15.470] There are also examples of mergers for which clearance was denied because barriers to entry were too high to constrain the merging parties. Thomson Reuters/Ernst & Young100 involved acquisition of the accounting firm’s tax compliance software products by the Australian subsidiary of a global provider of technology and integrated information management and publishing solutions. The ACCC refused to clear the transaction. If the acquisition had been cleared there would have only been one other competitor in relevant markets. Barriers to entry were found to be significant because of the time and cost involved in developing
95. ACCC, Merger Guidelines 2008, para 7.19. 96. ACCC, Merger Guidelines 2008, paras 7.29–7.32. 97. ACCC Competition Assessment, TPG/iiNet, 22 December 2015. 98. ACCC Competition Assessment, TPG/iiNet, 22 December 2015, para 80. 99. ACCC Competition Assessment, CSR/Boral, 22 December 2015. 100. ACCC Competition Assessment, Thomson Reuters/Ernst & Young, 19 November 2009.
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competing software products, difficulties in attracting a critical mass of customers given the established brand, switching costs and the maturity of the market. Concerns about entry barriers were also evident in two cases: Scandinavian Tobacco/ Swedish Match,101 discussed below, and Caltex/Mobil,102 discussed above.
Import Competition [15.480] Australia is a relatively open economy with little or no import tariffs so actual and potential import competition is important in considering whether a merger is likely to give the merged entity increased market power. Of course, import tariffs and quotas are not the only barriers to import competition. There are also potentially non-tariff barriers such as availability of supply, intellectual property or other licensing requirements, transportation costs, transportation difficulties, and local standards that inhibit the potential impact of imports and therefore the opportunity for imports to provide an effective constraint on the merged firm. As the ACCC has pointed out, in some markets “buy Australian” policies may reserve a significant percentage of sales for domestic suppliers. In others, imports may be sporadic to overcome shortages in domestic supply but would be considered a poor substitute for domestic supply on a regular basis. In some markets there is limited importing by wholesalers or retailers, but expansion may require significant investment in distribution facilities.103 [15.490] Taking a few examples to illustrate how the ACCC takes into account import competition in practice, in Onesteel/Moly-Cop,104 the target held a significant shareholding in the only competitor to Onesteel in Australia in grinding media used in the mining industry. The ACCC concluded that imports did not provide effective competition due to quality issues and ordering lead times. The ACCC cleared the merger on an undertaking to divest the interest in the competitor. Pacific Brands/Joyce105 involved a merger of firms supplying flexible slabstock polyurethane foam products in Australia. The ACCC concluded that the merger would be likely to have the effect of substantially lessening competition. One reason was that there were minimal imports of foam due to the low value and high volume of the product. Although some imports of finished products were entering Australia, they had not constrained the parties and were not likely to constrain the merged entity. [15.500] Scandanavian Tobacco/Swedish Match,106 an international merger, involved two major suppliers of cigars, pipe tobacco and smokeless tobacco products. The ACCC decided that there were high barriers to import competition in relation to the market for cigars for a number of reasons including regulatory restrictions on advertising, brand loyalty and the required lead time entry. The ACCC accepted divestiture undertakings to resolve its competition concerns and cleared the merger.
101. ACCC Competition Assessment, Scandinavian Tobacco/Swedish Match, 25 October 2010. 102. ACCC Competition Assessment, Caltex/Mobil, 9 February 2010. 103. ACCC, Merger Guidelines 2008, para 5.109. 104. ACCC Competition Assessment, Onesteel/Moly-Cop, 28 January 2011. 105. ACCC Competition Assessment, Pacific Brands/Joyce, 22 March 2005. 106. ACCC Competition Assessment, Scandanavian Tobacco/Swedish Match, 25 October 2010. © 2018 THOMSON REUTERS
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PMP/McPherson’s107 was a proposed merger of book printing businesses. Although there was import competition, only a small proportion of Australian publishers had books in the 5,000+ copies range printed overseas because of a rule under the Copyright Act 1968, that provided protection from parallel imports for books published in Australia within 30 days of being published overseas. Other factors included management and inventory risk and timeliness for time-sensitive fiction works. Import competition was not regarded as a significant restraint if the merger proceeded.
Removal of a Vigorous and Effective Competitor [15.510] The likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor is another factor to be taken into account.108 If a merger removes a vigorous and effective competitor, even one with a small market share, this can have a significant impact on the level of competition in the market. [15.520] Taking a few examples to illustrate how the ACCC takes into account the presence of absence of vigorous competitors in practice, Healthscope/Brunswick109 involved the acquisition of a private hospital, Brunswick Private Hospital, by Healthscope, an ASX-listed company that owned and operated 44 private hospitals nationally. Brunswick Private Hospital was a 128 bed private hospital located in Brunswick, a suburb of Melbourne. Healthscope’s hospital portfolio included 4 private hospitals and 3 rehabilitation centres in Melbourne. Although there were a number of large private hospitals in Melbourne, in addition to Brunswick and those owned by Healthscope, the ACCC concluded that the acquisition should not be cleared. This was because, having made a substantial investment to expand its rehabilitation services to attract more patient referrals from private acute hospitals, Brunswick was a vigorous and effective competitor. It was Healthscope’s closest competitor for those services to patients in northern Melbourne. [15.530] Cargill/Goodman110 involved the acquisition by Cargill of the vegetable fats business of Goodman Fielder. Cargill was the largest supplier of crude vegetable oils, the only significant domestic supplier of some crude vegetable oils and the third largest supplier of refined edible fats and oils in Australia. Goodman Fielder was the largest refiner and supplier of edible fats and oils products to Australian and New Zealand food manufacturers and wholesalers. In refusing clearance the ACCC concluded that the merger would substantially lessen competition in a number of markets. One of the reasons was that it would remove a vigorous and effective competitor, which would result in reduced competitive tension in relevant markets, although the Assessment did not provide the factual basis for that view.
Failing Firm [15.540] Competition agencies are often met with the argument that a merger will not have an anticompetitive effect because, if it does not proceed, the target firm will exit the market. The ICN recommends111 that, in assessing such claims, agencies 107. ACCC Competition Assessment, PMP/McPherson’s, 27 August 2007. 108. Competition and Consumer Act 2010, s 50(3)(h); ACCC, Merger Guidelines 2008, para 7.56. 109. ACCC Competition Assessment, Healthscope/Brunswick, 27 August 2014. 110. ACCC Competition Assessment, Cargill/Goodman Fielder, 11 May 2010. 111. See [15.130].
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should consider whether or not there is a reasonable, less anticompetitive, alternative than the merger. This includes taking into consideration factors such as whether or not failure is imminent, serious prospects that the business will be reorganised and whether, absent the merger, the firm and its assets would exit the market imminently. As the ICN has commented:112 Agencies should carefully consider the implications of an allegedly failing firm in the context of the counterfactual analysis. In this regard, agencies should be mindful that there might be more than one relevant counterfactual scenario (eg, the failing firm’s assets exit the market or are bought by a less competitively significant incumbent or a potential new entrant).
[15.550] The ACCC assesses claims that the target firm will fail as part of its assessment of whether or not the merger will remove a vigorous competitor. As the ICN has suggested, claims that a firm will fail or exit if the merger does not proceed are rigorously assessed. The ACCC Merger Guidelines state:113 Mere speculation that the target firm will exit in the near future or evidence of a recent decline in profitability is insufficient to establish that an absence of competition between the merger parties is the counterfactual. In general, to demonstrate that a merger will not substantially lessen competition due to the prospective failure of one of the merger parties, it is necessary to show that: • the relevant firm is in imminent danger of failure and is unlikely to be successfully restructured without the merger • in the absence of the merger, the assets associated with the relevant firm, including its brands, will leave the industry • the likely state of competition with the merger would not be substantially less than the likely state of competition after the target has exited and the target’s customers have moved their business to alternative sources of supply.
[15.560] Taking a few examples to illustrate how the ACCC takes into account claims that a firm will fail or withdraw in practice, Qantas/Impulse114 involved the acquisition by Australia’s largest airline of another domestic passenger airline. The ACCC independently evaluated and accepted claims that Impulse would fail if the acquisition did not proceed. It concluded that, although the acquisition would lessen competition, undertakings to provide access to slots as constrained airports and certain price undertakings would be a better competitive outcome. Virgin/Tiger115 was also an airline merger. Virgin sought clearance to acquire 60% of Tiger from its overseas parent. The ACCC concluded that, if the acquisition was not cleared, it was likely Tiger would leave the market and its aircraft would be sent overseas for its parent’s operations in Singapore, the Philippines and/or Indonesia. iSentia/AAP116 involved iSentia acquiring AAP’s media monitoring business; a merger that the ACCC concluded would substantially lessen competition in the national market for media monitoring services. However, AAP informed the Commission, which accepted that, if the merger did not proceed, AAP would cease 112. International Competition Network, Recommended Practices for Merger Analysis (2017), p33, /. 113. ACCC, Merger Guidelines 2008, para 3.23. 114. . 115. ACCC Competition Assessment, Virgin/Tiger, 31 July 2013. 116. ACCC Competition Assessment, iSentia/AAP, 16 April 2014. © 2018 THOMSON REUTERS
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to offer a media monitoring service in Australia. That conclusion was said to be the critical factor in the ACCC’s decision. In coming to that conclusion the ACCC considered the sustained losses incurred by AAP’s media monitoring business and its detrimental impact on AAP’s financial performance, AAP’s attempts made to restructure the business, and the absence of an alternative credible purchaser.
Vertical Integration [15.570] The nature and extent of vertical integration in the market is a further factor the Act requires the ACCC to consider.117 Vertical integration may exclude or reduce the opportunity for competition at one or more levels in the supply chain. As the High Court said in QWI:118 vertical integration may help a monopolist distinguish between customers whose demand is less and more elastic. Where consumers are able to trade amongst themselves, the monopolist cannot discriminate. By integrating vertically it may be possible for a monopolist to prevent this inter-trading. For example, power companies usually own distribution systems. This enables them to discriminate in pricing between residential and commercial users. Therefore, although vertical integration does not by itself mean that a firm has a substantial degree of market power, it may well be the means by which the firm capitalises on that market power.
[15.580] For instance, in Toll/Patrick,119 one of Australia’s largest providers of transport and logistics made a hostile takeover bid for another large Australian transport and logistics provider. The two corporations each owned 50% of National Rail, Australia’s largest rail freight corporation. The ACCC was concerned that the merged firm could, as an integrated entity, give preference to its own freight forwarding business for east-west rail over competing forwarders and shippers. The ACCC accepted a binding undertaking by Toll to divest 50% of National Rail. [15.590] AAT/RoRo120 involved the acquisition of a long-term lease of a new automotive roll-on roll-off terminal at Victoria Quay at Fremantle by Australian Amalgamated Terminals Pty Ltd. The acquirer was a joint venture whose owners had automotive stevedoring and motor vehicle pre-delivery inspection services at Fremantle port. One of the issues was whether or not the lease would provide AAT with the ability and incentive to exercise market power to foreclose entry and expansion by third party stevedores or pre-delivery inspection services firms by setting higher prices, frustrate or restrict access to the terminal or access to commercially sensitive competitor information to the benefit of associated entities. The ACCC did not think those concerns could be address by a Part IIIA open access regime. However, the parties were able to provide binding undertakings to provide open access and ringfence information, that satisfied the ACCC that clearance was appropriate.
Dynamic Characteristics of the Market [15.600] The ACCC is required to also consider the dynamic characteristics of the market.121 Markets that are growing rapidly are more likely to see new entry and the 117. Competition and Consumer Act 2010, s 50(3)(i); ACCC, Merger Guidelines 2008, para 7.58. 118. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177 at 190; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925. 119. ACCC Competition Assessment, Toll/Patrick, 5 May 2006. 120. ACCC Competition Assessment, AMT/RoRo, 14 October 2015. 121. Competition and Consumer Act 2010, s 50(3)(g); ACCC, Merger Guidelines 2008, para 7.52.
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erosion of market shares over time, thereby eroding market power, whereas markets that are stagnant or reducing may increase the market power of the merged firm. Product innovation may see market leaders rapidly replaced, with new technology increasing supply-side substitution, facilitating improved or different distribution methodologies or facilitating new small scale market entry. On the other hand, with highly differentiated products, brand loyalty can inhibit change. Regulatory or technological changes can change market boundaries or lower barriers to imports or new entry in the foreseeable future. [15.610] Taking a few examples to illustrate how the ACCC takes into account market dynamics in practice, Iron Mountain/Recall122 involved, as we have seen, the merger of two global document management companies. The ACCC’s Statement of Issues123 canvassed a number of market dynamics, including slower growth in demand for physical storage as a result of recent growth of digitisation, firms transitioning to “paper-light” operations with the consequent requirement to only store digital records, legislative requirements that records, such as tax records and health records, for a specified period of time. [15.620] Nestlé/Pfizer124 involved the acquisition of Pfizer Nutrition by Nestlé, a global food and beverage manufacturer, including infant nutrition products. Pfizer Nutrition was the leading global paediatric nutrition company. Although there were other manufacturers of infant formula in the Australian market, the ACCC, concerned about the high degree of brand loyalty and stringent regulatory requirements in Australia, considered that the merger would be likely to result in the merged firm being entrenched as the dominant firm. The ACCC nevertheless cleared the merger following an enforceable undertaking by Nestlé to license Pfizer Nutrition’s brand portfolio to a licensee to be approved by the ACCC. [15.630] Coca-Cola Amatil/Berri125 involved Australia’s largest manufacturer of carbonated and non-carbonated soft drinks (including some fruit drinks) seeking clearance to acquire Berri, a prominent manufacturer of fruit juice and fruit drinks. The ACCC decided that the relevant market was a market for the manufacture and wholesale supply of chilled and ambient fruit juice and fruit drink. Observing that markets that are growing rapidly are more likely to see new entry and the erosion of market shares over time, the ACCC concluded that there had been minimal volume growth in the relevant market over the previous few years and a significant degree of consolidation. At the time, the three leading firms accounted for over 70% of total sales. Although there was evidence of small or regional entry occurring to some extent, very few new entrants had captured meaningful market shares. The ACCC also concluded that structural and strategic barriers to entry would be raised if the merger proceeded. The merger was therefore not cleared.
Significant and Sustainable Increase in Prices or Profit Margins [15.640] A fundamental concern with mergers is whether or not the result will be to allow the merged firm to significantly and sustainably increase prices or profit margins. This is the most obvious and visible manifestation of market power. 122. ACCC Competition Assessment, Iron Mountain/Recall, 19 April 2016. 123. ACCC Statement of Issues, Iron Mountain/Recall, 5 November 2015. 124. ACCC Statement of Issues, Nestlé/Pfizer, 3 May 2013. 125. ACCC Competition Assessment, Coca-Cola Amatil/Berri, 8 October 2003. © 2018 THOMSON REUTERS
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Although it is listed as one of the factors to be taken into account,126 in reality it is a conclusion to be arrived at having regard to the factors already discussed. The ACCC Merger Guidelines state that the ACCC will consider matters such as recent and current pricing levels, the use of discounts and rebates and competitive constraints likely to prevent the merged firm increasing its prices or pressuring suppliers to it to reduce their prices.127 If a merger facilitates sustained increases in prices or profit margins above competitive levels, this will be indicative of an increase in market power and a reduction in competition, even if the merged firm does not exercise that power by increasing prices. [15.650] Taking a few examples to illustrate how the ACCC takes into account these issues in practice, Expedia/Wotif 128 involved the acquisition by global online travel agency, Expedia, of Australian online hotel booking agency, Wotif. The ACCC concluded that removal of Wotif could lead to Expedia and the main competitor, Booking.com, increasing commission rates above current levels, but decided to clear the merger. It did so because, if Expedia and Booking.com raised commission rates post-acquisition, the ACCC accepted that any such increase would be likely to encourage entry or expansion by other online travel agents, cause hotels to reduce the proportion of their inventory made available through the site, and accelerate development of new products and business models reducing reliance on the merged firm and its competitors. PMP/McPherson’s,129 the book publishing merger referred to above, is an example of the ACCC opposing a merger for reasons including that the merged firm would have the ability and incentive to significantly increase prices and/or profit margins on longer print runs and time sensitive printing. Suncorp Metway/Promina130 is an example of the ACCC deciding that, post-merger, there would be sufficient price and product development competition to constrain attempts by the merged firm to raise its prices above the competitive level. That merger related to relatively concentrated State and Territory markets for motor vehicle insurance.
Efficiencies [15.660] The ICN principles131 include that, in assessing the likely competitive effect of a merger, agencies should take into account efficiencies that are substantiated, likely, and merger-specific. The ICN advises that agencies should not challenge a proposed merger if it is likely that the demonstrated efficiencies would counteract anticompetitive effects in the relevant market and would be passed through to consumers.
126. Competition and Consumer Act 2010, s 50(3)(e); ACCC, Merger Guidelines 2008, para 7.60. 127. ACCC, Merger Guidelines 2008, para 7.61. 128. ACCC Competition Assessment, Expedia/Wotif, 13 January 2015 129. ACCC Competition Assessment, PMP/McPherson’s, 27 August 2007. 130. ACCC Competition Assessment, Suncorp Metway/Promina, 12 January 2007. 131. See International Competition Network, Recommended Practices for Merger Analysis (2017), .
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[15.670] Australia’s two process system creates an apparent issue in efficiencies being considered in clearance applications. Australia’s merger control processes differ from those in other countries in that there are two distinctly separate process in Australia. The first, clearance, assesses mergers only for their likely effect on competition — whether or not the merger is likely to contravene the statutory test. The other is Authorisation — a formal process to obtain immunity even if the merger is likely to adversely affect competition where that is outweighed by public benefits derived from the merger, of which efficiencies is potentially one. However, as the ACCC acknowledges, if efficiencies are likely to result in lower prices, increased output or higher quality products, the merger may not substantially lessen competition. But, it cautions that it: only considers merger-related efficiencies to be relevant to s 50 merger analysis when it involves a significant reduction in the marginal production cost of the merged firm and there is clear and compelling evidence that the resulting efficiencies directly affect the level of competition in a market and these efficiencies will not be dissipated postmerger.
[15.680] As the ICN has explained, likely anticompetitive effects may be counteracted by efficiencies resulting from a merger, some benefits of which may be passed on to consumers in lower prices or gains in innovation leading to new or improved products. However, the ICN also comments that:132 To counteract likely anticompetitive harm, efficiencies need to increase rivalry by enhancing the ability and economic incentive of the merged firm to compete. Efficiencies can have such impact if they lower costs or increase output, innovation, or quality and there is sufficient competitive pressure remaining such that the merger is unlikely to harm consumers in the relevant market(s).
Scope of Merger Provisions [15.690] The Australian merger provisions apply to acquisitions of shares in the capital of any type of body corporate.133 In addition they apply to acquisitions of assets of a “person”, including bodies corporate, bodies politic and individuals.134 Prior to the High Court decision in Baxter Healthcare,135 acquisitions from or by governments would have been regarded as exempt. However, the position based on the reasoning in Baxter Healthcare is that acquisitions from government are subject to the merger provisions, and acquisitions by governments are subject to the provisions if the acquisition is made in the course of carrying on a business. Baxter Healthcare was not a merger case. It involved a challenge by the ACCC to bundling and tying of pharmaceutical products supplied to public hospitals. Before Baxter Healthcare, the view was that agreements with governments and their utilities were not covered by the Act, but the High Court decided otherwise. 132. International Competition Network, Recommended Practices for Merger Analysis (2017), p 30. 133. Trade Practices Commission v Australian Iron & Steel Pty Ltd [1990] FCA 23; (1990) 22 FCR 305; 92 ALR 395; (1990) ATPR 41-001; R v Australian Industrial Court; Ex parte CLM Holdings Pty Ltd (1977) 136 CLR 235; 51 ALJR 362; 13 ALR 273; (1977) ATPR 40-017; Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169; 56 ALJR 366; 40 ALR 609; (1982) ATPR 40-285. 134. Acts Interpretation Act 1901, s 22(1)(a). That section applies unless the contrary intention appears. 135. ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; (2007) 81 ALJR 1622. © 2018 THOMSON REUTERS
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Merger Safe Harbours [15.700] Many jurisdictions have safe harbours — either policy thresholds below which the competition agency does not consider mergers likely to be anticompetitive, or the competition law does not apply to mergers. Many have pre-merger notification requirements. Australia considered introducing pre-merger notification requirements some years ago but that did not eventuate, essentially because the informal clearance process has worked well and is seen as a flexible, efficient method of clearing mergers. Consequently, Australia does not have a compulsory pre-merger notification regime (although it does in relation to some foreign takeovers).136 [15.710] The ACCC Merger Guidelines do, however, provide an indication of when the ACCC will regard a merger or acquisition as one that should be notified to it. The guidelines state that the ACCC’s expectation is that parties will inform it of a proposed merger where the products involved are either substitutes or complements and the merged firm will have a post-merger market share of greater than 20% in relevant markets.137 The Merger Guidelines also contain the following warning:138 As market shares are an imprecise indicator of likely competition effects, a merger that does not meet the notification threshold may still raise competition concerns. The ACCC may therefore investigate such mergers, even if they have not been notified to it.
United States and European Union [15.720] The United States has a pre-merger notification requirement.139 If either the acquirer or the target in engaged in US commerce or any activity affecting US commerce the merger must be pre-notified to the US Department of Justice if either: • the transaction values is greater than or equal to US$323 million; or • the transaction value is greater than or equal toUS$80.8 million and less than US$323 million, and either party has global revenues or global assets greater than or equal to US$161.5 million, and the other party has global revenues or global assets greater than or equal to US$16.2 million. [15.730] In the European Union, there are EU filing thresholds as well as filing thresholds in individual EU Member States. At the EU-wide level, pre-merger filing is required if the combined global revenue of the merging parties is greater than €2.5 billion, and other revenue thresholds designed to deal only with mergers that have a multi-Member State dimension are met.140 Each EU Member State has a lower threshold that applies where the merger does not have a multi-Member State dimension. For instance, in the UK, where filing is voluntary, the turnover threshold is where the target’s turnover in the UK is greater than £70 million.141 Germany also has a turnover threshold, with mandatory requirements 136. Foreign Acquisitions and Takeovers Act 1975. See J A Rowley and D I Baker, International Mergers - The Antitrust Process (Sweet & Maxwell, looseleaf), Ch 3. 137. ACCC, Merger Guidelines 2008, para 2.9. 138. ACCC, Merger Guidelines 2008, para 2.8. 139. Hart-Scott-Rodino Antitrust Improvement Act 1976. 140. European Council, Regulation No 139, 2004. 141. J Davies, Getting the Deal Done — Merger Control (Law Business Research Ltd, 2016), p 422.
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to file where the combined world-wide turnover of the merging parties is greater than €500 million, one of the merging parties has turnover in Germany of greater than €25 million and the other party has a turnover in Germany greater than €5 million.142
Other Countries [15.740] In Japan, pre-merger notification is required where total domestic sales greater than ¥20 billion (A$250 million), the target’s total domestic sales greater than ¥5 billion (A$62.5 million) and certain post-merger levels of voting shares in the target are acquired.143 [15.750] Singapore does not have any safe harbours and pre-merger filing is voluntary. However, the Competition Commission has stated that, as a general rule, it is unlikely to investigate a merger involving firms whose turnover in Singapore in the preceding financial year is less than S$5 million (US$4.6 million) and the combined worldwide turnover in the preceding financial year of the merging parties is less than S$50 million (A$46 million).144 [15.760] South Korea has a pre-merger notification requirement triggered where the transaction meets a size-of-transaction test and a size-of-parties test. The sizeof-parties test will be satisfied if either party has worldwide assets or sales greater than or equal to KRW200 billion (A$221 billion) and the other party has worldwide assets or sales greater than or equal toKRW20 billion (A$21 billion).145 [15.770] Very few other countries have a statutory safe harbour for mergers, but South Africa is one example. Their competition legislation entitled the Minister, in consultation with the Competition Commission, to determine an assets and annual turnover threshold below which notification is not required.146 Those thresholds are post-merger turnover or assets greater than R560 million (A$52.8 million) and annual turnover or assets of the target firm greater than R80 million (A$7.5 million).147
Creeping Acquisitions [15.780] Prior to the 2007 federal election, the Labor Party announced that it would amend the Act to give the ACCC power to intervene is creeping acquisitions. A creeping acquisition was described at the time in the following terms:148 The term ‘creeping acquisition’ is generally used to describe conduct that comprises the accumulated effect of a number of small individual transactions which, when considered in isolation at the time that each transaction occurred, would not breach section 50. That is, while each transaction considered at the time it occurred may have a limited impact on competition, and would therefore not fall within the scope of section 50, over a longer
142. J Davies, Getting the Deal Done — Merger Control (Law Business Research Ltd, 2016), p 167. 143. K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), p 398. 144. CCS Guidelines on Merger Procedures 2012, para 3.5. 145. K Groshinski and C Davies, Competition Law in the Asia Pacific (Wolters Kluwer, 2015), p 683. 146. Competition Act 1998 (South Africa), ss 11(1), 13. 147. . 148. Treasury, Discussion paper — Creeping Acquisitions (1 September 2008), para 17, . © 2018 THOMSON REUTERS
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period a series of such transactions may have the cumulative effect of substantially lessening competition in a market.
Subsequent reviews considered the position and a range of changes suggested, but the only change to eventuate was the amendment in 2011 to apply the merger provision to mergers in any market, rather than in substantial markets. The Harper Panel stated that, on balance, in the absence of harmful acquisitions proceeding because of a gap in the law as it relates to creeping acquisitions, no further change was warranted.149 [15.790] Since the 2011 amendment, the ACCC has considered clearance applications in smaller markets that might be considered as creeping acquisitions. Although most acquisitions have been cleared, in 2013 the ACCC opposed a proposed acquisition by Woolworths of a supermarket site at Glenmore Park, a Western Sydney suburb, because Woolworths already had a supermarket in Glenmore Park and the only other supermarket in the suburb was one that Aldi was about to open.150
The Assessment Process [15.800] The factors taken into account by the ACCC in deciding whether or not a proposed merger is likely to have an anticompetitive effect have been discussed, but how does the ACCC approach its assessment task? The test to be applied is the “future-with-and-without test”. That is, having regard primarily to the factors discussed above, the ACCC compare the position which would, or would be likely to, exist in the future based on a “real chance” assessment if the merger proceeded with the future position if the merger did not proceed.151 As was said in Metcash:152 [The case] must be approached recognising the essentially uncertain foundation for the conclusions which the Court was asked to adopt, and the source of uncertainty. The first source of uncertainty was what would actually happen if the acquisition did not proceed. The second source of uncertainty was what would be the “likely” effect on competition if the acquisition did not proceed — i.e. by comparison with the assumptions made if it did proceed.
Overseas Mergers Affecting a Market in Australia [15.810] The Act deals specifically with acquisitions that occur outside Australia, but which have an effect on a market for goods or services in Australia.153 If an acquisition of a controlling interest in a body corporate occurs outside Australia and it is likely to substantially lessen competition in a market in Australia, the Treasurer, the ACCC or any other person may make an application in relation to the merger to the Australian Competition Tribunal. The application must be made to the Tribunal 149. Harper Report, p 323. 150. ACCC Competition Assessment, Woolworths/Glenmore Ridge, 25 October 2013. 151. Australian Gas Light Company v ACCC [2003] FCA 1525; (2003) 137 FCR 317 at [352]. 152. ACCC v Metcash Trading Ltd [2011] FCAFC 151; (2011) ATPR 42-380. 153. Competition and Consumer Act 2010, s 50A.
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within 12 months of the acquisition. If the Tribunal is satisfied that the acquisition is likely to substantially lessen competition in a market in Australia and that it is not counterbalanced by other public benefits, the Tribunal may make a declaration accordingly. Where a declaration is made, the parties have six months, or such further time as the Tribunal may permit (not exceeding a further six months), to remedy the situation. If it is not remedied the parties are not permitted to continue to carry on the business in Australia. An acquisition of a controlling interest occurs for the purposes of this provision if a corporation becomes, directly or indirectly, a subsidiary of the acquirer.154 A corporation will be a subsidiary if another body corporate controls the composition of its board of directors, is in a position to cast more than 50% of the maximum number of votes that can be cast at a general meeting, or holds more than 50% of the issued share capital (excluding limited participation shares).155 [15.820] A declaration may be revoked by the Tribunal on the application of the Treasurer, the ACCC or any other person or by the Tribunal of its own motion.156 The Act gives no indication as to the basis on which a declaration may be revoked. No applications have to date been made for declarations under this provision. As noted earlier, the main activity with mergers has been in seeking informal clearance from the ACCC. That has been the case with both domestic Australian mergers and with international mergers having a likely impact on competition in a market in Australia.157
FURTHER READING Author Rowley and Baker Banks Brunt, Prof Maureen Clarke
Coleman, Pleatsikas and Teece
Title International Mergers — the Antitrust Process “Collective Dominance — A Comparative Study” “Market Definition Issues in Australian and New Zealand Trade Practices Litigation” “Multi-jurisdictional Merger Review Processes — A Better Way” “The Merger Guidelines in the United States, Australia and New Zealand”
Citation 3rd ed, Sweet & Maxwell, 2001 (subscription service) (1999) 7 Trade Practices Law Journal 88 (1990) 18 Australian Business Law Review 86 (2006) 14 Trade Practices Law Journal 90 (1998) 6 Trade Practices Law Journal 153
154. Competition and Consumer Act 2010, s 50A(8). 155. Competition and Consumer Act 2010, s 4A. 156. Competition and Consumer Act 2010, s 50A(4). 157. See, for example, ACCC Competition Assessment, Møller-Mærsk/P&O Nedlloyd, 6 September 2005; ACCC Competition Assessment, Linde AG/BOC Group plc, 21 September 2006. © 2018 THOMSON REUTERS
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Author
Title
Citation
Copp
“The Economic Effects of a Decade of Merger Policy in Australia: Suggestions for Reform” “Section 50 of the Trade Practices Act and Pecuniary Penalties” “Threshold Tests for the Control of Mergers: The Australian Experience” “Takeover Control Under the Trade Practices Act” “The Present Application of Section 50 and Section 50A of the Trade Practices Act 1974” “Davids Holdings Case: Lessons in the Interpretation of Australian Merger Law” “Mergers and Competition: An Analysis of Section 50 of the Trade Practices Act” “Mergers: The Use and Utility of Undertakings” “Australis Foxtel Merger” Merger Analysis, Industrial Organisation Theory and Merger Guidelines “Aspects of the Extraterritorial Application of Sections 50 and 50A of the Trade Practices Act”
(1995) 3 Trade Practices Law Journal J 108
Ducret
Johns
Mayanja McLaughlin
Pengilley
Stewart
Tonking and Castle Veljanovski Willig
Wright
360
(1997) 5 Trade Practices Law Journal 224 (1994) 9 Review of Industrial Organisation 649 (1998) 6 Trade Practices Law Journal 33 (1995) 3 Trade Practices Law Journal 18 (1995) 3 Trade Practices Law Journal 34 (2000) 74 Australian Law Journal 533 (1993) 1 Trade Practices Law Journal 37 (2000) 28(3) ABLR 166 Brookings Papers, Microeconomics, 1991 (1992) 20 Australian Business Law Review 152
Miller’s Australian Competition Law and Policy
COMPETITOR BOYCOTTS, SECONDARY BOYCOTTS AND COLLECTIVE BARGAINING [16.20] [16.80]
[16.300] [16.320] [16.330] [16.390]
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16
Development of a Competitor Boycott Law ......................................... Cartels and Competitor Boycotts ........................................................ [16.90] What Conduct? ................................................................... [16.110] Parties Must Be Competitors .............................................. [16.170] Purpose .............................................................................. [16.240] Preventing, Restricting or Limiting ...................................... [16.250] Identifying the Subject of the Exclusionary Provision ............................................................................. Joint Ventures ...................................................................................... Employee Boycotts — “Secondary Boycotts” ..................................... Development of a Secondary Boycott Law ......................................... What is a Secondary Boycott? ............................................................ [16.420] Legitimate Purpose ............................................................. [16.450] Engaging in Conduct .......................................................... [16.460] Hindering or Preventing ...................................................... [16.470] Purpose of Substantially Causing Loss or Damage ........... [16.490] Likely Effect of Substantially Causing Loss or Damage ..... Secondary Boycotts — Actions Against Unions ................................. Secondary Boycotts — Firms ............................................................. Collective Bargaining .......................................................................... [16.550] Initial Requirements ............................................................ [16.560] Effect of Notification ........................................................... [16.600] Boycotts .............................................................................. [16.630] Duration ..............................................................................
362 364 365 366 368 371 372 373 374 375 377 378 379 380 380 381 382 382 383 384 384 385 386
[16.10] This chapter considers three areas covered by the Australian competition law — exclusionary conduct by competitors, secondary boycotts and collective bargaining. In relation to the first topic, it expands on the review of cartels generally in Chapter 11, by dealing with the previous “exclusionary provisions” law as well as the current cartel law. The prohibition on exclusionary conduct by competitors — called “exclusionary provisions” — was a separate prohibition but it now forms part of the cartel provisions.1 As discussed in Chapter 11, the cartel provisions apply to exclusionary conduct to the extent that they are a consequence of arrangements made between competitors with the purpose of preventing, restricting or limiting production, capacity or supply of goods or services. Where that specific prohibition does not apply, exclusionary conduct that has the purpose or likely effect of substantially lessening competition is covered by a separate provision, as discussed in Chapter 10.
1. Formerly Competition and Consumer Act 2010, s 4D; now s 45AD(3).
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A prohibition on secondary boycotts — labour boycotts for purposes other than to improve worker remuneration or conditions — has come, gone and returned to the Act at various times over the past 40 years. This chapter also discusses the history of the prohibition and its current application. Finally, the chapter considers specific provisions permitting collective bargaining, a relatively recent feature of the Act. Unlike the two other types of conduct discussed in this chapter, the provisions relating to collective bargaining are permissive. They permit independent small businesses to obtain an immunity from the cartel provisions to bargain collectively.
Development of a Competitor Boycott Law [16.20] Trade associations provided much of the impetus for the introduction of competition law in Australia in the 1960s. The concern about trade association activity at that time can be stated quite briefly. It was very common for trade associations to only deal with manufacturers and wholesalers if the manufacturer or wholesaler agreed to only supply members of the trade association, or to give preferential prices and trading terms only to members of the association. his meant that those who were not members of the association either could not get supply or could not compete because the supply price was uncompetitive. The Barwick list of practices with possible detriment to the public, tabled in 1962, included:2 The carrying out of agreements between a trade association of the principal manufacturers of a product and the trade association of the principal resellers or users of that product (each of the trade associations having restrictions on admission to membership that: (a) members of the manufacturers’ trade association will supply, or will grant preferential discount, only to members of the trade association of resellers or users; (b) members of the trade association of resellers or users will buy only from members of the manufacturers’ trade association.
The result was that, in order to carry on business, it was necessary to be a member of the trade association. But membership was, in many instances, quite restricted. For instance, geographic restrictions meant that a new member would not be admitted if there was an existing member within the immediate vicinity. Non-members were effectively boycotted by suppliers to trade association members and non-members of supplier associations were effectively boycotted by buyer trade associations. [16.30] The policy of the 1965 Act was to deal with these restraints on competition by requiring exclusive dealing agreements entered by trade associations to be registered and then open to scrutiny by the Commissioner for Trade Practices. The Commissioner was empowered to bring proceedings in the Trade Practices Tribunal to declare agreements illegal if the public benefits did not outweigh their anticompetitive effect. Many of the public interest exemption cases in the United Kingdom involved restrictive agreements by trade associations. For example, in National Sulphuric
2. House of Representatives, Hansard, 6 December 1962. See Appendix 1.
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Acid Association,3 a sulphur pooling agreement by all manufacturers of sulphuric acid was found to be in the public interest. On the other hand, in Locked Coil Ropemakers’ Association,4 recommended common selling prices were declared not in the public interest. In Net Book,5 an association of 360 book publishers sought approval to continue an agreement by which books were not to be sold to the public at less than their net prices. In 1962, the UK court had upheld the agreement, deciding that it was in the public interest. A similar case in Australia 10 years later6 produced the opposite result. The exemption was refused. [16.40] When the Labor government introduced the Trade Practices Act 1974, there was no specific provision dealing with boycotts, although the prohibition on contracts, arrangements and understandings in restraint of trade was regarded as covering them, if they resulted in a restraint of trade. As we saw in Chapter 2, the Swanson Committee, established in April 1976 to make recommendations to simplify and clarify the broad terms of the 1974 Act, recommended that the Act be amended to include a specific prohibition against primary boycotts if they had a substantial adverse effect on competition.7 The committee reported that: We consider that a collective boycott, ie, an agreement that has the purpose of or the effect of or is likely to have the effect of restricting the persons or classes of persons who may be dealt with, or the circumstances in which, or the conditions subject to which, persons or classes of persons may be dealt with by the parties to the agreement, or any of them, or by persons under their control, should be prohibited if it has a substantial adverse effect on competition between the parties to the agreement or any of them or competition between those parties or any of them and other persons.
[16.50] The policy response was not to proceed quite as Swanson had recommended. The fundamental difference was that the prohibition was per se, rather than dependent on the effect of the conduct on competition. The original reason for this is obscure. Other than stating that “boycotting the commercial activities of particular persons is generally undesirable conduct” nothing was said about the matter when the relevant provisions were introduced in 1977. When the Dawson Committee came to consider the matter in 2002 the committee received a large number of submissions criticising the per se aspects of the prohibition because it was “capable of applying to a wide range of cooperative arrangements, such as joint ventures, that are not anticompetitive and may even be pro-competitive”. Second, the prohibition was narrower than Swanson had recommended, applying to boycotts of “particular persons” only. A third difference is that Swanson had recommended that the prohibition apply where the purpose or effect was restrictive, but the policy decision was to only apply the prohibition where the purpose was a restrictive purpose. 3. Re National Sulphuric Acid Association Ltd’s Agreement (No 1) (1963) LR 2 RP 169; [1963] 1 WLR 848; [1963] 3 All ER 73. See also Re Linoleum Manufacturers Association’s Agreement (No 2) (1963) LR 4 RP 157; [1963] 1 WLR 897; [1963] 3 All ER 221 (agreement to levy sales and contribute to a common pool determined to be a registrable agreement). 4. Re Locked Coil Ropemakers’ Association’s Agreement [1965] 1 All ER 382; [1965] 1 WLR 121; (1964) LP 5 RP 146. 5. Re Net Book Agreement 1957 [1962] LR 3 RP 246. 6. Re Books (1972) 20 FLR 256. 7. Swanson Report, paras 4.116–4.117. © 2018 THOMSON REUTERS
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[16.60] The result was that, between 1977 and 2017, the Act contained a specific prohibition on competitor boycotts, referred to in the Act as “exclusionary provisions”. In basic terms, an exclusionary provision was a provision of a contract arrangement or understanding8 between two or more competitors, or likely competitors, that boycotted some other person or class of persons, in whole or in part, or that, in some other exclusionary manner, foreclosed the opportunity for a third party to compete with the parties to the boycott or some of them. To be more precise, an exclusionary provision was a provision of a contract, arrangement or understanding that satisfied the following requirements: • the contract, arrangement or understanding must have been made between persons, any two or more of whom are competitors or potential competitors (but not all the participants have to be in competition with each other); and • the purpose of the provision must have been to prevent, restrict or limit the supply of services to, or the acquisition of services from, particular persons or classes of persons whether generally or in particular circumstances or particular conditions, by any of the parties to the contract, arrangement or understanding (or any of their related bodies corporate).9 The prohibition covered a wide range of exclusionary practices between competitors or potential competitors, where the practices were directed at particular persons or classes of persons. [16.70] In 2009, the Act was amended to insert complex provisions directed at cartels, described in Chapter 11. At the same time the specific per se provision dealing with price-fixing was repealed, but not the per se prohibition on exclusionary provisions. When the Harper Panel came to consider simplification of our competition law in 2014–15, it noted that there was overlap between the cartel provisions and the definition of exclusionary provisions, but also some gaps. It recommended the repeal of the specific prohibition on exclusionary provisions and that changes should be made to the cartel provisions to cover the gaps.10 The recommendation was accepted and the Act amended accordingly. 11
Cartels and Competitor Boycotts [16.80] What was an “exclusionary provision” and how do the cartel provisions deal with competitor boycotts? In answering that question it is necessary to consider: • the types of conduct prohibited; • the participants in that conduct; • against whom the conduct is or was directed; and • the purpose of the conduct.
8. 9. 10. 11.
I will hereafter use the word “arrangement”. Former Competition and Consumer Act 2010, s 4D(1). Harper Report, p 361. Competition and Consumer Amendment (Competition Policy Review) Act 2017 No 114, 2017.
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What Conduct? [16.90] Taking first the conduct to which prohibition on exclusionary provisions potentially applied, it was expressed in broad terms. It applied to provisions in contracts, arrangements or understandings preventing, restricting or limiting:12 • the supply of products or services to particular persons or classes of persons, or particular persons or classes of persons in particular circumstances or on particular conditions; and • the acquisition of products or services from particular persons or classes of persons, or particular persons or classes of persons in particular circumstances or on particular conditions. To illustrate the point by reference to two court decisions, in News,13 an agreement to reduce the number of clubs in the rugby league competition, which ultimately resulted in the South Sydney Rugby League club being excluded, was an agreement, a provision of which prevented South Sydney participating in the league competition, although the club failed to establish other elements of the conduct required for an exclusionary provision. Dunn14 is an earlier, again unsuccessful, example. It involved a challenge to the by-laws of a professional association that regulated with whom association members could enter into partnership. In effect, it limited the class of persons from whom services could be obtained, or to whom they could be supplied. Again, the case failed on other grounds. Those examples of the type of conduct covered are relatively clear, but the scope was much broader. It included all manner of arrangements to divide up markets. Examples are arrangements to limit those who were to bid thereby dividing up tenders for fire protection services,15 dividing up markets by seeking to agree with a competitor for the collection of recyclable waste paper and cardboard that the competitor would not collect those products from the firm’s customers,16 and rostering taxi services in a regional centre thereby limiting the taxis available at relevant times.17 [16.100] The cartel prohibition applies in the same circumstances, but the conduct to which it potentially applies is expressed in the minutest detail, considered in more detail in Chapter 11. The policy intent is to express the scope of the prohibition extremely broadly, utilising terms such as “directly or indirectly” and “likely” to achieve that policy outcome. The relevant conduct is making or giving effect to a contract, arrangement or understanding (but not a concerted practice) that:18 • prevents, restricts or limits: ° production, or likely production, of products by any or all of the parties; ° the capacity, or likely capacity, of any or all of the parties to supply services; or
12. Competition and Consumer Act 2010, s 4D(1)(b). 13. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563 at 574; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 14. Dunn v Australian Society of CPAs [1996] FCA 1213; (1996) ATPR 41-461. 15. ACCC v FFE Building Services Ltd [2003] FCA 1542; (2003) ATPR 41-969. 16. ACCC v Visy Paper Pty Ltd [2001] FCA 1075; (2001) 112 FCR 37. 17. ACCC v White Top Taxis Ltd [2009] FCA 88; (2009) ATPR 42-273. 18. Competition and Consumer Act 2010, s 45AD(3). © 2018 THOMSON REUTERS
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° supply, or likely supply, of products or services to persons or classes of persons
by any or all of the parties; acquisition, or likely acquisition, of products or services from persons or classes ° of persons by any or all of the parties; or • allocating between any or all of the parties: ° those who have acquired, or who are likely to acquire, products or services from any or all of the parties; those who have supplied, or who are likely to supply, products or services to any ° or all of the parties; ° the geographical areas in which products or services are supplied, or likely to be supplied, by any or all of the parties; the geographical areas in which products or services are acquired, or likely to ° be acquired, by any or all of the parties; or ° ensuring that, in the event of a request for bids in relation to the supply or acquisition of products or services: one or more parties bid, but one or more do not; or ° two or more parties bid, but at least two of them do so on the basis that one of ° those bids is more likely to be successful than the others; or ° two or more parties bid, but not all of those parties proceed with their bids until the suspension or finalisation of the request for bids process; or two or more parties bid and proceed with their bids, but at least two of them ° proceed with their bids on the basis that one of those bids is more likely to be successful than the others; or two or more parties bid, but a material component of at least one of those bids ° is worked out in accordance with the contract, arrangement or understanding.
Parties Must Be Competitors [16.110] None of the above conduct would have amounted to an exclusionary provision, nor will it amount to cartel conduct, unless at least two of the parties to the contract, arrangement or understanding were, at the time it was entered, in competition with each other or were then likely to be in competition.19 Parties are deemed to be in competition with each other if and only if, in relation to the supply or acquisition of all or any of the relevant products or services, either: • they or related bodies corporate are, or are likely to be, in competition with each other; or • they or related bodies corporate would be, or would be likely to be, in competition with each other but for the contract arrangement or understanding.20 This means that a provision in an arrangement would not have been an exclusionary provision just because some of the parties were in competition with each other in some field of endeavour. Nor would it now be cartel conduct. The only area of competition relevant for this purpose is competition for supply or acquisition of the products or services to which the restriction relates.
19. Formerly Competition and Consumer Act 2010, s 4D(1)(a); now s 45AD(1)(b) 20. Formerly Competition and Consumer Act 2010, s 4D(2); now ss 45AD(4), 45AC.
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[16.120] Eastern Express21 is an example. That case involved a dispute between real estate agents and a prominent Sydney newspaper group over real estate advertising. A number of agents formed their own newspaper publisher. The constitution of the company required each member agent to place advertisements in each edition of their paper and included a quota requirement. This was said to be exclusionary because it meant that less advertising was placed in the group’s newspapers. However, in order to make out its case, the group had to establish that the agents competed with each other for the acquisition of real estate advertising services, because they were to services to which the allegedly exclusionary conduct related. The claimed failed because, while the agents were in competition with each other for real estate listings and sales, they could not be said to have been in competition for the acquisition of real estate advertising services. 22 [16.130] SPAR,23 on the other hand, is an example of the instance where relevant parties were not in competition with each other. SPAR supplied dry groceries and related services to independent retail grocery outlets, primarily in Queensland and northern New South Wales, usually under a franchise arrangement. The respondent’s grocery store was a SPAR-branded store. When the respondent decided to move to another supplier, SPAR brought proceedings alleging, among other things, that the respondent’s agreement with the other supplier amounted to an “exclusionary provision” because it involved the respondent no longer acquiring products from SPAR. The claim was rejected because the respondent and its new supplier were not competitors. The new supplier did not operate a retail grocery store in competition with the respondent. [16.140] The likelihood of parties being in competition with one another is a question of fact. Although the term “likely” is ambiguous, for the purposes of the cartel prohibitions it has been defined to mean a possibility that is not remote, in order to clarify the position.24 Earlier cases on other prohibitions seem to have concluded that it meant “a real chance or possibility”.25 One thing is certain and that is that the court has not accepted that parties are not likely to be in competition with one another simply because they choose not to compete. In McPhee,26 an express freight carrier was alleged to have reached an understanding with another express freight carrier that it would submit a quote to two of the appellant’s customers that was not less than the appellant’s quote – generally known as a “cover quote”. McPhee argued that there could not have been an 21. Eastern Express Pty Ltd v General Newspapers Pty Ltd [1991] FCA 321; (1991) 30 FCR 385; 103 ALR 41; (1991) ATPR 41-128. 22. In this example, although there was no exclusionary provision, there was an agreement that had an anticompetitive purpose or likely effect to which s 45 may applied. 23. SPAR Licensing Pty Ltd v MIS QLD Pty Ltd (No 2) [2012] FCA 1116. 24. Competition and Consumer Act 2010, s 45AB; Explanatory Memorandum to the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill (2009), para 51. 25. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529; (2003) ATPR 41-947 (where the court was prepared to assume this to be the test “for the purpose of argument”); Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; (1996) ATPR 41-521; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607; (1998) ATPR 41-657; Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138. 26. J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41-758. © 2018 THOMSON REUTERS
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understanding containing an exclusionary provision because, as the two companies had a practice of not tendering against one another, they were not relevantly in competition with each other. The argument was rejected. [16.150] The cartel provisions mirror the former position. They provide explicitly that the competition element is satisfied if either: • the parties to a contract, arrangement or understanding are likely to be in competition with one another; or • they would be likely to be in competition with one another but for the contract, arrangement or understanding.27 [16.160] In Norcast,28 a controversial case arising from arrangements in relation to bids to acquire a Canadian company, there was conflicting evidence on whether a bid by the respondent would have been accepted because of animosity between the two businesses involved. Nevertheless, the respondent and the private equity firm with which it made the arrangement to bid were found to be likely competitors, were it not for the bidding arrangement. The Harper Panel thought that, if followed, Norcast set a very low threshold for determining when parties are likely to be competitors. The Panel recommended that likelihood should assessed on the balance of probabilities (that is, more likely that not).29 However, no change was made in that regard.
Purpose [16.170] Although other provisions of the Act may be contravened if either the purpose or likely effect of the relevant conduct is anticompetitive, that is not the position with either the former exclusionary provisions prohibition or the cartel prohibition as it relates to boycotts. They only apply if the arrangement was arrived at for a proscribed purpose.30 In relation to exclusionary provisions the relevant question was: “what is the purpose of the exclusionary provision of the contract, arrangement or understanding?”31 The same applies in relation to cartels. It is the purpose of the cartel provision in a contract, arrangement or understanding that is relevant.32 As explained at [10.530], it is artificial to say that a provision of a contract, arrangement or understanding might have a purpose because a purpose can only exist in the mind. It cannot exist anywhere else.33 The task is to “attribute a purpose to an artificial or notional mind that is deemed responsible for the relevant act or omission”.34 [16.180] Purpose, in this context, refers to what the provision was directed to achieve — the practical or legal effect sought by the parties in including the provision in the relevant arrangement, even if it is unlikely that the provision would achieve 27. Competition and Consumer Act 2010, s 45AD(4). 28. Norcast S.ár.L v Bradken Ltd (No 2) [2013] FCA 235. The case is discussed in more detail at [11.500]. 29. Harper Report, p 591. 30. Competition and Consumer Act 2010, s 45AD(3); former s 4D(1)(b). 31. Previously Competition and Consumer Act 2010, s 45AD(3); former s 4D(1). 32. Competition and Consumer Act 2010, s 45AD(3); South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 486, 518; 181 ALR 188; (2001) ATPR 41-824; [2001] FCA 862 at [144], [245]. 33. Chandler v DPP [1964] AC 763; [1962] 3 All ER 142; [1962] 3 WLR 694 at 804–805 (AC). 34. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [40].
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that effect. Although there are good policy reasons for taking the view that purpose should be determined objectively,35 that is not the position. It is the subjectively determined end in view of the parties that is the determining factor. 36 The actual effect of the provision is irrelevant.37 Furthermore, the focus is on the purpose of a provision — not of the contract, arrangement or understanding as a whole. It follows that, if a provision of an arrangement meets the test, the fact that the entire arrangement may have a legitimate commercial purpose will be irrelevant.38 [16.190] A practical, rather than literal, interpretation is required. In News,39 following a decision to reduce the number of clubs in the national rugby league competition, the football club that had been excluded, South Sydney, sought to overturn its exclusion on the basis that the agreement to exclude the club was an exclusionary provision. The literal result may have been to prevent South Sydney from further participation in the competition, but the High Court decided that, while a limitation on the number of clubs in the competition could be said to have the effect of excluding South Sydney, its exclusion was not the purpose. The end in view of News and the ARL was to create a 14 team competition. In that case Chief Justice Gleeson gave the following example:40 Suppose two firms conduct, in competition with each other, restaurant businesses, and each restaurant can accommodate fifty customers. Suppose they agree to close down their existing businesses, and, in partnership, open a new restaurant that can accommodate sixty customers. The effect will be to reduce their combined capacity from 100 to 60. Agreeing on the size of the new restaurant would be a necessary aspect of defining the scope of their new business venture. On the bare facts stated, it could not be predicated that the purpose of limiting the size of the new restaurant to one that would cater for 60 customers related to reducing the facilities to be made available to any particular persons or classes of persons, although it would clearly have the effect of reducing the accommodation for diners generally.
In other words, the effect of the combination of the two restaurants may have been to reduce capacity but that was not the purpose. The purpose was to merge the two businesses. The parties may have had different motives for merging their restaurants, but their purpose is to operate one restaurant in partnership.
35. In News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [41] Justice McHugh J expressed the view that, had interpretation of s 4D been considered for the first time he would have preferred purpose to be determined objectively, without regard to the mental state of the parties. Earlier, in Trade Practices Commission v TNT Management Pty Ltd & Others [1985] FCA 23; ATPR 40-512, the judge had noted that it is always difficult to decide whether the term is used subjectively or objectively but concluded that, in the exclusionary provision prohibition it is used objectively. 36. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [40]. 37. Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883. 38. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824 at [158]. 39. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563 at 574; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 40. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; 215 CLR 563 at 574; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943 at [20]. © 2018 THOMSON REUTERS
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[16.200] Another apt example was provided by Justice Heerey when News41 was considered by a Full Federal Court: Assume a surgeon is about to perform a major operation which historically has had a fatal outcome in ten per cent of cases. The surgeon knows and accepts this, but believes the operation is essential and the risk acceptable (as does the properly informed patient). If the operation is not performed the patient is likely to die anyway. The operation is performed but the risk materialises and the patient dies. It would surely be a misuse of language to say that the purpose (or a purpose) of the surgeon in performing the operation was to cause the patient’s death.
[16.210] Although purpose is a subjective question,42 it will usually be inferred from the nature of the arrangement, the circumstances in which it was made and its likely effect.43 While the best evidence of purpose might be the statements made by the person in the witness box, such statements must be tested closely and received with the greatest caution.44 We may therefore regard the question of purpose in this context as providing an opportunity for the courts to ask: what is really going on here? What, based on all of the evidence was the end the parties are to be taken to have had in view? [16.220] It is not necessary for an exclusionary purpose to be the only purpose for there to be cartel conduct. All that is required is that it be a “substantial” purpose.45 In addition, the Act contains the following “guidance” on identification of the relevant purpose, although how helpful this will be in practice is yet to be determined. • First, the Act provides that a provision of a contract, arrangement or understanding is not to be taken not to have, and not to not have, an exclusionary purpose only due to its form, the form of the contract, arrangement or understanding in which it appears, or any description given by the parties to it or to the contract, arrangement or understanding.46 • Second, a provision is taken to have an exclusionary purpose if it, when considered together with any or all of the other provisions of the contract, arrangement or understanding, or with the provisions of another contract, arrangement or understanding to which at least one of the parties to the first contract, arrangement or understanding is a party, taken together they have that purpose.47 The reason for descending to this level of detail rather than leaving the matter to the courts to decide the matter in a practical manner is unclear. The Harper Panel 41. South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 493–494; 181 ALR 188; (2001) ATPR 41-824 at 43,122. 42. At [10.530] I question whether a better policy outcome might have resulted if purpose were not seen as a subjective matter. 43. Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165. 44. Pascoe v Commissioner of Taxation (Cth) (1956) 30 ALJR 402; 11 ATD 108; 30 ALJ 402 at 403; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460 at 482–483; 97 ALR 513; (1991) ATPR 41-069. 45. Competition and Consumer Act 2010, s 4F. The term “substantial” is itself ambiguous. For comment on this see [10.720]. 46. Competition and Consumer Act 2010, s 45AD(11), (10). 47. Competition and Consumer Act 2010, s 45AD(8), (9).
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suggested a much simpler way of expressing the concept that provisions should be considered in aggregate,48 but that was not taken up. [16.230] As far as the former prohibition on exclusionary provisions was concerned, the relevant time for determining whether there was an exclusionary provision was when the arrangement is made. If all of the requirements for establishing an exclusionary provision — including relevantly, purpose — were not present when the arrangement was entered, then it would not have contained an exclusionary provision even if a missing requirement was subsequently fulfilled.49 This was said to arise from the plain words of the provision. Is the position different under the cartel provisions? Notwithstanding the detailed drafting of the relevant section, this question was not explicitly addressed. However, having regard to the plain words of the provision and the interpretative section that accompanies it,50 and the way in which this issue has been addressed in cases involving the purpose of contracts, arrangements and understandings elsewhere in the Act,51 the position would appear to be the same as with the former prohibition on exclusionary provisions.
Preventing, Restricting or Limiting [16.240] The former prohibition on exclusionary provisions did not apply unless supply or acquisition of products or services was prevented, restricted or limited. 52 In News, the arrangement to exclude South Sydney prevented the supply of services to the club or the acquisition of services from the club, but it did not restrict or limit supply or acquisition of services. As was said when the case was first determined:53 ... there was to be no restriction or limitation (in the sense of partial supply or acquisition) of services to the 1997 clubs. Some would be fully supplied, and would fully supply NRL, and others not at all.
What is the position under the cartel provisions? As noted at [16.100] the range has been significantly expanded, but in the context of boycotts, the prohibition only applies where the purpose is to prevent, restrict or limit acquisition or supply of products or services and to the “likely acquisition or supply” of products or services.54 Likely supply and likely acquisition in this context includes possibilities that are not remote.55
48. Harper Report, pp 505–506. 49. Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883; South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456 at 477; 181 ALR 188; (2001) ATPR 41-824; Stokely-Van Camp Inc v New Generation Beverages Pty Ltd (1998) 44 NSWLR 607; (1998) ATPR 41-657 at 41,297. 50. Competition and Consumer Act 2010, s 4F(1)(a). 51. See Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883 at [97]; Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; (1992) ATPR 41-165 at [107]. 52. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; (2001) ATPR 41-824. 53. South Sydney District Rugby League Football Club Ltd v News Ltd [1999] FCA 1710; 169 ALR 120 at [61]. Quoted with approvalon appeal [2001] FCA 862; (2001) ATPR 41-824 at [101]. 54. Competition and Consumer Act 2010, s 45AD(3)(a)(iii), (iv). 55. Competition and Consumer Act 2010, s 45AB. © 2018 THOMSON REUTERS
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Identifying the Subject of the Exclusionary Provision [16.250] Both the former exclusionary provisions prohibition and now the cartel prohibition apply where the boycott involves the likely acquisition or supply of products or services to “persons or classes of persons”. One difference between the two is that, while the exclusionary provisions prohibition applied in relation to acquisition to, or supply by, “particular persons or classes of persons” the cartel boycott prohibition does not include the word “particular”. That limitation has been removed. Interpreting the requirement in the exclusionary provisions prohibition in Rural Press, Chief Justice Gleeson and Justice Callinan said:56 Parliament did not delete the word ‘particular’ and substitute the word ‘any’. Nor did it remove all reference to persons as objects of the proscribed purpose. … Ordinary principles of construction require that the references to particular persons or classes of persons be given work to do; they are not mere drafting verbosity. A court construing a provision in an Act ‘must strive to give meaning to every word of the provision’. A court will seek to avoid a construction of a statute that renders some of its language otiose. Here, that consideration is powerfully reinforced by the legislative history, which shows that the reference to particular persons was originally an essential feature of s 4D, and that the addition of reference to classes was intended to expand it, not make it superfluous.
[16.260] In Bullock,57 a case involving a dispute between the union and carpet suppliers over a contract the union wanted to impose, the primary judge decided that the term required the exclusion to be directed to persons whose identity could be ascertained, rather than to the entirety of a body of persons. However, on appeal58 the court stated that it did not necessarily accept that view and regarded it as arguable that particular persons could be identified by general description. In News,59 Justice Gummow noted that it had been accepted in that case, correctly in his opinion, that there may be a “particular class” notwithstanding that at any one time the identity of all of those in the class is not readily ascertainable. In Pont Data,60 the court held that “particular persons” may be identified by the fact that they were precluded from access to the relevant information unless they accepted the restraints imposed by the agreement under consideration in that case. Although the High Court, in Rural Press, commented on this approach the majority neither approved nor rejected it. [16.270] As we have seen, originally the Act did not contain primary boycotts by competitors. This came with the 1977 amendments. In its 1977 form the definition of “exclusionary provision” only applied when the purpose was to prohibit, limit, or restrict supply to, or acquisition from, particular persons.61 This tentative first step in the per se prohibition of primary competitor boycotts had been recommended by the Swanson Committee. The policy response was not to proceed quite as Swanson 56. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53 at 62; 78 ALJR 274; (2003) ATPR 41-965 at [8]. 57. Bullock v Federated Furnishing Trades Society of Australasia [1984] FCA 364; (1985) 5 FCR 476; 58 ALR 373; (1985) ATPR 40-505. 58. Bullock v Federated Furnishing Trades Society of Australasia (No 1) [1985] FCA 19; (1985) 5 FCR 464; 60 ALR 235; (1985) ATPR 40-577. 59. News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563; 77 ALJR 1515; 200 ALR 157; (2003) ATPR 41-943. 60. ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) [1990] FCA 515; (1990) 27 FCR 460 at 487–488; 97 ALR 513; (1991) ATPR 41-069. 61. See Miller, Annotated Trade Practices Act 1974 (Law Book Co, 1st ed, 1979), p 502.18.
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Joint Ventures
had recommended. The fundamental difference was that the prohibition was to be per se, rather than dependent on the effect of the conduct on competition. Secondly, the prohibition was narrower than Swanson had recommended, applying to boycotts of “particular persons” only.62 At the time there was a case before the courts that probably focused the government’s attention on the need for this prohibition. Tradestock63 involved a new entrant that aimed to establish a business brokering freight transport. It immediately ran into difficulty with the National Freight Forwarders Association, an association of the major freight companies in Australia at that time. Each member refused to deal with or accept freight business offered to them through brokers or agents, including Tradestock. At the time the policy response to Swanson were being considered, Tradestock unsuccessfully attempted to enlist the court’s support, but was unable to do so when the freight companies successfully obtained an order for security for costs which Tradestock could not meet.64 [16.280] In 1986, the Act was amended to add “class or classes of persons” following an equivocal view by the court on whether self-employed carpet layers, a large group who were the subject of a union attempt to put them out of business, met the “particular person” requirement.65 The High Court considered what constituted a “particular class of persons” in Rural Press,66 a case involving rival country newspaper publishers in adjacent rural communities in South Australia who came to an arrangement not to compete with each other. The court did not reach a conclusive view, but three members of the court said that the trial judge had adequately defined the class as advertisers in the particular geographic areas, even though the identity of all of the members may not have been readily ascertainable. [16.290] Whether or not the omission of the word “particular” in the cartel prohibition has any significance given the views expressed in Rural Press is debatable, but at the least it should mean that arguments over how precisely the relevant class needs to be identified will be avoided.
Joint Ventures [16.300] How are joint ventures treated given that the exclusionary provisions prohibition and boycotting cartels are both per se contraventions? When the Dawson Committee came to consider the matter in 2002 the committee received a large number of submissions criticising the per se aspects of the prohibition because it 62. A third difference is that Swanson had recommended that the prohibition apply where the purpose or effect was restrictive, but the policy decision was to only apply the prohibition where the purpose was a restrictive purpose. 63. Tradestock Pty Ltd v TNT (Management) Pty Ltd (No 1) [1977] FCA 1; (1977) 30 FLR 343 (2 May 1977). On 22 January 1978, the court lifted the order after reviewing Tradestock’s evidence and concluding that it had good prospects. However, Tradestock’s financial position did not permit it to proceed. It asked the Commission to take over the matter: Trade Practices Commission, Fourth Annual Report, 19 September 1978, para 3.37. 64. The Trade Practices Commission’s case failed, reinforcing the need for the per se prohibition on competitor boycotts that had in the meantime been enacted: Trade Practices Commission v TNT Management Pty Ltd & Others [1985] FCA 23; ATPR 40-512 (12 February 1985). 65. Bullock v Federated Furnishing Trade Society of Australasia [1985] FCA 19; (1985) ATPR 40-577. 66. Rural Press Ltd v ACCC [2003] HCA 75; 216 CLR 53 at 89; 78 ALJR 274; (2003) ATPR 41-965 at [87]. © 2018 THOMSON REUTERS
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was “capable of applying to a wide range of cooperative arrangements, such as joint ventures, that are not anticompetitive and may even be pro-competitive”.67 Dawson recommended that the Act be amended to provide a defence if it could be established that an exclusionary provision did not have the purpose, effect or likely effect of substantially lessening competition.68 That recommendation was not accepted other than in relation to joint ventures. The Act was amended to include a defence, the effect of which was that, an exclusionary provision would not contravene the Act if the provision was for the purpose of a joint venture and it was not likely to have the effect of substantially lessening competition in any market for products or services.69 The defense applies to all joint ventures, not just production or supply joint ventures. The suitability of this defense was never tested. It has now been repealed along with the exclusionary provision prohibition. [16.310] When the cartel prohibitions were introduced in 2009, the Act stated explicitly that the cartel provisions, including the boycott prohibition, did not apply if the cartel was for the purpose of a joint venture. But the exclusion for joint ventures was limited to those carried on jointly by the parties that were for the production and/or supply of products or services.70 The Harper Panel received submissions, which it accepted, that the 2009 carve-out was limiting legitimate commercial transactions. Harper recommended a broader exemption for joint ventures71 and that recommendation was accepted by the government. The result is that the Act now provides that the cartel prohibition does not apply, including in relation to boycott cartels, where the relevant provision is for the purposes of a joint venture, reasonably necessary for undertaking the joint venture, and the joint venture is not carried on for the purpose of substantially lessening competition.72 Of course, this does not mean that join ventures are entirely exempt. If they have the purpose, or likely effect of substantially lessening competition, the Act will still apply to them.
Employee Boycotts — “Secondary Boycotts” [16.320] Boycotts by employees in support of improved wages and working conditions, whether at the behest of their union or otherwise, are a legitimate part of every democratic system. Competition law has no part to play in relation to them, even though the direct consequence of a boycott will be to deprive the boycotted firm of the opportunity to compete while the boycott is in place. Nevertheless, it was recognised early after the Trade Practices Act 1974 came into force that there were competition policy implications where workers or their unions imposed boycotts either to achieve purposes other than improvement in working conditions, or to bring pressure to bear indirectly on firms thereby affecting their ability to compete. These types of boycotts are referred to in the Competition and Consumer Act 2010 as “secondary boycotts”.
67. Report of the Review of the Competition Provisions of the Trade Practices Act (Dawson Report) (January 2003), p 125. 68. Dawson Report, p 131. 69. Former Competition and Consumer Act 2010, s 76C. 70. Former Competition and Consumer Act 2010, ss 44ZZRO, 44ZZRP. 71. Harper Report, p 367. 72. Competition and Consumer Act 2010, ss 45AO, 45AP.
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Development of a Secondary Boycott Law [16.330] The secondary boycott provisions of the Act have had a chequered history. As we saw in Chapter 3, the Act in its original 1974 form did not deal with secondary boycotts. However, the Act contained a specific exception for anything done by employees, or an organisation of employees, in relation to the remuneration, conditions of employment, hours of work or working conditions of employees. That exception did not apply, however, if the act was done “in the course of carrying on for a business of the employer of those employees’ or of a business of the union.73 That confusing carve-out was never tested and it disappeared in 1977 when the exemption was changed to its current form, which is: any act done in relation to, or to the making of a contract or arrangement or the entering into of an understanding, or to any provision of a contract, arrangement or understanding, to the extent that the contract, arrangement or understanding, or the provision, relates to, the remuneration, conditions of employment, hours of work or working conditions of employees.
[16.340] However, even in its original form, that did not necessarily mean that unions had immunity from the competition provisions of the Act. One of the first cases, Ausfield,74 tested the position. Ausfield concerned a motor parts distributorship. The Federated Storemen and Packers Union of Australia had placed a ban on Leyland, which it agreed to lift if Leyland did not supply automotive parts and accessories to Ausfield. Leyland agreed. Its ban on Ausfield related to attempts to increase the remuneration of the union’s members employed by that company. Ausfield sought an injunction claiming that the arrangement was in restraint of trade. The court could have decided that the exception applied because it was clear that the indirect objective of the union was to put pressure on Ausfield to improve employment conditions for members of the union Ausfield employed. Instead, the court took a narrow view of the exception and Leyland was restrained from giving effect to its arrangement with the union to not supply automotive parts and accessories to Ausfield. [16.350] The Swanson Committee’s terms of reference included inquiring into the application of the Act to anticompetitive conduct by employees and employee and employer organisations. The committee’s response was that employer organisations were already covered by the Act and the committee saw no reason why this should change. When it came to employees and unions the committee recommended that: “the Act should leave in no doubt that it applies to restrictive conduct of organisations of employees which is carried out by agreement, arrangement or understanding with another person engaged in trade or commerce.” Secondary boycotts — where employees of one employer place a boycott on dealings of that employer with another firm — were singled out by the committee as the area of greatest concern. The Minister for Business and Consumer Affairs obtained Cabinet approval for amendments to the Act that included inserting provisions to “enable a person whose trade or commerce is affected by a secondary boycott to have recourse through access to an independent deliberative body”. The Bill, when released for public
73. Trade Practices Act 1974, s 51(1)(a). 74. Ausfield Pty Ltd v Leyland Motor Corporation of Australia Ltd [1977] FCA 6; (1977) 31 FLR 477 (22 July 1977). © 2018 THOMSON REUTERS
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comment contained a secondary boycott provision. That Bill75 introduced the first version of what has come to be known simply as “section 45D”. [16.360] The Trade Practices Commission was cautious about using this new power, so the first cases were all private actions, although the Minister for business and Consumer Affairs, who then had an independent right to bring proceedings, also did so,76 wanting to avoid getting involved in industrial disputes except where competition was affected. In its fourth Annual Report in 1978 the Commission said:77 The Commission would propose to limit court proceedings it might bring to cases affecting competition because it is probably more appropriate that the right of private action or the Minister’s right to bring proceedings should be exercised in cases not affecting competition. The Commission is a competition authority and it would seem desirable to avoid, where competition is not affected, getting involved in industrial disputes where the ultimate decisions as to continuing or settling cases may need to be taken by companies on commercial grounds or by the Government on political grounds.
In other words, the Commission was very reluctant to enter what it saw as being the industrial field unless it had no choice. The fact was that many of the early cases were about bans that affected the ability of the banned firm to carry on business, and therefore to compete.78 [16.370] Following the imposition of a black ban on Amoco supplying petrol to an independent haulage contractor in 1980, the contractor obtained an interlocutory injunction under the then secondary boycott provision.79 However, the government thought the Act needed strengthening, so a new provision was inserted to prohibit suppliers of goods or services making arrangements with unions where the arrangement hindered the supplier supplying its usual customers. At the same time the secondary boycott provision was strengthened.80 Thereafter, the secondary boycott provisions came and went from the Act. The election of the Hawke Labor Government in March 1983 brought a different view of the way unions should be treated under the Act. A Bill to repeal the secondary boycott provisions was introduced in September 1984, but it was defeated in the Senate. The provisions remained on the statute books but the Commission continued to leave the field to private litigants rather than institute proceedings to enforce the provisions. [16.380] The next attempt to change the secondary boycott provisions was more successful. First, in 1988, there was an incremental change when the Industrial Relations Act 1988 was amended to confer parallel jurisdiction on the Industrial 75. Act No 81, 1977. 76. Utah Development Co v Seaman’s Union (1977) 17 ALR 9; (1977) ATPR 40-049 (22 December 1977). See also Ascot Cartage Contractors Pty Ltd v Transport Workers Union [1978] FCA 12; (1978) 32 FLR 148. Wribass Pty Ltd v Swallow [1979] FCA 3; (1979) 38 FLR 92. 77. Trade Practices Commission, Fourth Annual Report (1978), para 1.24. See also Trade Practices Commission, Third Annual Report (1977), paras 1.62, 1.63. 78. See, for example, Barneys Blu-Crete Pty Ltd v Australian Workers Union [1979] FCA 89; (1979) 43 FLR 463; (1979) ATPR 40-139 (ban on concrete firm); Ascot Cartage Contractors Pty Ltd v Transport Workers Union [1978] FCA 12; (1978) 32 FLR 148 (ban on petroleum cartage contractor); Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees Union [1979] FCA 85; (1979) 42 FLR 331; (1978) ATPR 40-099 (ban on slaughtering meat for the firm’s butcheries). 79. Leon Laidley Pty Ltd v Transport Workers Union (1980) ATPR 40-147. 80. Trade Practices Act 1974, s 45E.
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Relations Commission whenever proceedings for an injunction in relation to secondary boycott conduct were brought under the Trade Practices Act 1974. Then, in 1993, as part of a package of industrial relations amendments, the Parliament passed legislation replacing all of the secondary boycott provisions of the Trade Practices Act 1974 with new provisions that exempted from their operation any boycott conduct covered by the conciliation powers of the Industrial Relations Commission.81 This effectively emasculated the secondary boycott provisions. However this was short-lived. With the change of government in 1996, the Trade Practices Act 1974 was again amended to, in effect, return and strengthen the old secondary boycott provisions. When the Harper Panel came to consider these provisions in 2015, no change was recommended, but the Panel recommended that: ACCC pursue secondary boycott cases with increased vigour, comparable to that which it applies in pursuing other contraventions of the competition law. It should also publish in its annual report the number of complaints made to it in respect of different parts of the CCA, including secondary boycott conduct and the number of such matters investigated and resolved each year.
The Panel also noted that firms that contravened the secondary boycott provisions were liable for civil penalties not exceeding $750,000 — much lower than the $10 million penalties for contravention of other competition law provisions. The government agreed and the Act was amended accordingly.82
What is a Secondary Boycott? [16.390] The Act contains a number of provisions concerned with secondary boycotts. First, the provisions apply to conduct engaged in for the purpose, or that has the likely effect, of causing substantial loss or damage to a firm; by hindering or preventing another firm either supplying products or services to that firm or acquiring products or services from that firm.83 The secondary nature of this prohibition arises because the firm hindered or prevented cannot be the employer of those engaged in the conduct. This means that, where employees take industrial action that hinder or prevents their employer obtaining or supplying products or services the prohibition does not apply. From a policy perspective, that conduct is the province of industrial relations law; not competition law. [16.400] What is an example? In Silvestri,84 two union officials, through threats, verbal intimidation and physical interference, engaged in conduct that prevented the applicant, a demolition and excavation contractor, from providing excavation services at a site in Wollongong. Silvestri was a family company that carried on business as a demolition and excavation contractor on construction sites. The union had a policy, which it actively pursued, of requiring builders and subcontractors on building sites to only employ union labour. When a builder engaged Silvestri to replace an existing subcontractor who had been sacked, union officials effectively closed down the site and the result was that the builder terminated Silvestri’s services. In terms of the 81. 82. 83. 84.
See Miller’s Annotated Trade Practices Act 1974 (Law Book Co, 15th ed, 1994), p 120. Competition and Consumer Act 2010, s 76(1A)(a). Competition and Consumer Act 2010, s 45D. A & L Silvestri Pty Ltd v Construction, Forestry, Mining and Energy Union [2007] FCA 1047; (2007) 165 IR 94. Damages decision [2008] FCA 466.
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prohibition, union officials, not being employees of the builder, prevented Silvestri providing (and the builder acquiring) demolition services. Silvestri was awarded damages. For constitutional reasons, the prohibition only applies if the person who is the object of the boycott, or the person hindered or prevented, is a corporation.85 [16.410] Second, the Act prohibits secondary boycotts if they are engaged in for the purpose of causing substantial lessening of competition in any market.86 Third, the Act prohibits two or more persons engaging in conduct for the purpose of preventing or substantially hindering someone (other than their employer) importing or exporting goods, if the conduct is also likely to have that effect.87 MUA88 is an example of the latter. The Maritime Union of Australia had a policy that, when a ship was in port for loading or unloading, cleaning of the cargo holds was to be by shore-based labour. There were three instances of the union seeking to enforce that policy. One, the Jang Qiang, was a bulk carrier, was chartered to ship grain from Adelaide to the United States. The ship’s holds were to be cleaned by the ship’s crew at sea. Just prior to the vessel departing a picket line was formed at the main gate leading to the berth at which it was then moored. The picket line was manned by members of the MUA and members of the mooring gang employed to release the lines to the vessel were also MUA members. The MUA admitted engaging in conduct for the purpose, and having the effect, of substantially hindering the operators of the ship (and two others also picketed in similar circumstances) from engaging in trade or commerce involving the movement of goods between Australia and places outside Australia.
Legitimate Purpose [16.420] Not all secondary boycotts will contravene the Act. Where the dominant purpose for the boycott is substantially related to the remuneration, conditions of employment, hours of work or working conditions of the persons engaged in the conduct, or of others employed by the same employer, the secondary boycott prohibition does not apply.89 [16.430] Secondly, if the dominant purpose for the boycott is substantially related to environmental protection or consumer protection, and the boycott is not industrial action, the secondary boycott prohibition will not apply to it.90 In that context the term “industrial action” is defined quite widely in order to include the various types of practices employed in industrial disputes, including strikes, slow-downs and work bans. Specifically, the term is defined91 as covering: • a change in work practices resulting in a restriction on, or a delay in, performance of work, either in connection with an industrial dispute or contrary to terms
85. 86. 87. 88.
Competition and Consumer Act 2010, s 45D(3) and (4). Competition and Consumer Act 2010, s 45DA. Competition and Consumer Act 2010, s 45DB. ACCC v Maritime Union of Australia [2001] FCA 1549; (2001) 114 FCR 472; 187 ALR 487; 50 AILR 4-521; (2002) ATPR 41-849. For penalties see ACCC v Maritime Union of Australia [2001] FCA 1807; (2002) ATPR 41-857. 89. Competition and Consumer Act 2010, s 45DD(1), (2). 90. Competition and Consumer Act 2010, s 45DD(3). 91. Competition and Consumer Act 2010, s 45DD(4).
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and conditions of work prescribed by an industrial instrument or an order of an industrial body; or • a ban, limitation or restriction on the performance of work, or on acceptance of or offering for work, contrary to the terms and conditions prescribed by an industrial instrument or by an order of an industrial body; or • a ban, limitation or restriction on the performance of work, or on acceptance of or offering for work, pursuant to an industrial dispute; or • a failure or refusal to attend for work or a failure or refusal to perform work at all by persons who attend for work. [16.440] Rural Export 92 provides an example in relation to the environmental protection or consumer protection defence. An activist entered a live sheep pen and fed the sheep material designed to ensure that they would not be suitable for live export, seeking to protect them from the conditions they would experience on board a ship from Australia to the Middle East. That did not qualify as having as its dominant purpose of protecting the environment, even though the activist claimed that the purpose of protection of the sheep in the environment of the paddock. The court decided that the expression “environmental protection” referred to a particular location, thing or habitat, in which a particular individual instance or aggregation of flora or fauna or artifice exists, and to the preservation of the existence and or characteristics of that environment.
Engaging in Conduct [16.450] When will two or more people be regarded as engaging in conduct necessary to trigger the operation of the secondary boycott prohibition? The term “engage in conduct” means simply doing or refusing to do something, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or giving effect to a provision of, an understanding.93 This means, in effect, that almost any involvement in a secondary boycott will be sufficient. The requirement that two or more persons must engage in the prohibited conduct has a second element. That is, they must act together, or, in the words of the legislation, act “in concert”. Acting in concert involves knowing conduct which results from communication between those concerned and not simply simultaneous actions occurring spontaneously. It also involves “contemporaneity and community of purpose”.94 Acts that constitute the relevant conduct do not, however, need to coincide precisely in time in order to be “in concert”. All that is required is a temporal relationship sufficiently close to be able to be said to be in concert. For example, in Tillmanns Butcheries,95 a case involving a union ban on slaughtering meat for the applicant’s butcheries, the evidence of the parties acting in concert was that a union official had told Tillmanns that their shops would be “declared black” and that the respondents were present at a meeting at the abattoir where a resolution
92. Rural Export & Trading (WA) Pty Ltd v Hahnheuser [2008] FCAFC 156; (2008) 169 FCR 583; 249 ALR 445. 93. Competition and Consumer Act 2010, s 4(2). 94. J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) [1992] FCA 436. 95. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138. © 2018 THOMSON REUTERS
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to that effect was passed. On the other hand, in AMIEU,96 mere advocacy by union officials in favour of a strike was not sufficient to result in the union acting in concert with those members of the union who actually took strike action.
Hindering or Preventing [16.460] When will two or more persons, acting together, be engaged in conduct that hinders or prevents supply within the meaning of the secondary boycott provisions? To state the obvious, to “prevent” involves total cessation and to “hinder” involves making something more difficult97 — to affect to usual dealings to an appreciable extent.98 Conduct hindering or preventing the supply or acquisition of products or services can involve conduct engaged in by threat and verbal intimidation as well as by physical interference. Whether or not actions hinder supply will be a question to be determined having regard to all of the circumstances, as two examples show. In the first, a union ban on the movement of goods through wharves at Brisbane was found to have hindered the applicant, notwithstanding that it was open to the applicant to import its goods through other Australian ports.99 On the other hand, a boycott on the supply of milk to a retailer in New South Wales because the retailer imported milk from Victoria, did not hinder the retailer because it was able to source all of its requirements from Victoria.100 Conduct will not amount to a secondary boycott unless it hinders or prevents the supply of goods or services. The term “supply” is a word of wide import. It is defined in the Macquarie Dictionary as follows: 1. to furnish (a person, establishment, place, etc) with what is lacking or requisite; 2. to furnish or provide (something wanting or requisite); 3. to make up (a deficiency); make up for (a loss, lack, absence, etc); satisfy (a need, demand, etc) … This normal meaning is expanded because the Act provides that references to the supply of goods include agreeing to supply goods and supplying goods with services or other property, or both; and references to the supply of services include agreeing to supply services and supplying services with property or other services, or both.101
Purpose of Substantially Causing Loss or Damage [16.470] Secondary boycotts will contravene the Act if they are engaged in for the purpose of substantially causing loss or damage to a business, interrupting imports or exports or substantially lessening competition in a relevant market, as the case may be. The relevant issue is not whether those involved combined for a particular purpose but whether their conduct was engaged in for a relevant purpose.
96. Australasian Meat Industry Employees’ Union v Meat & Allied Trades Federation of Australia [1991] FCA 524; (1991) 32 FCR 318; 104 ALR 199; (1991) ATPR 41-151. 97. Australian Wool Innovation Ltd v Newkirk [2005] FCA290; (2005) ATPR 42-053 at [34]. 98. Devenish v Jewel Food Stores Pty Ltd [1991] HCA 7; (1991) 172 CLR 32; (1991) ATPR 41-098. 99. Industrial Enterprises Pty Ltd v Federated Storemen and Packers Union of Australia (1979) ATPR 40-100. 100. Devenish v Jewel Food Stores Pty Ltd [1991] HCA 7; (1991) 172 CLR 32; 65 ALJR 262; 99 ALR 275; (1991) ATPR 41-098. 101. Competition and Consumer Act 2010, s 4C.
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Purpose is of central relevance to many of the Act’s prohibitions and the meaning of the term is explored elsewhere in this book.102 Stated briefly here, purpose in this context refers to the operative subjective purpose of those engaging in the relevant conduct. The question whether conduct has been engaged in for a particular purpose is to be determined by identifying the real reasons for the conduct in question and to what the object in the minds of those engaging in the conduct was, rather than by determining their motive — whether they appreciated the effect of the conduct. 103 As the court said in Jewel,104 a case in which the court had to determine whether a ban by milk vendors on the supply of milk to the applicant’s supermarkets in New South Wales because it brought milk in from Victoria, came within s 45D, the court observed: Conduct falling within the opening words of s 45D will rarely be adopted out of disinterested malice. Ordinarily, the purpose of inflicting damage upon the business of a person is to cause that person to modify its behaviour in some way for the advantage of the person occasioning the damage, or its members. In other words, the damage is a means to an end. Consequently, although a primary purpose of the milk vendors was to protect their own businesses, another purpose which they had was to damage or injure the appellant’s business. That was the means by which they intended to achieve their primary purpose. Upon the view of s 45D(1) long accepted in this court, that is enough.
As the above quote from Jewel confirms, a purpose of causing substantial loss or damage, etc need not be the only purpose of a secondary boycott for the prohibition to apply. A person is taken to engage in conduct for a purpose if the conduct was engaged in for purposes that include that purpose, as long as the purpose of causing substantial loss or damage, etc was a substantial purpose.105 A purpose will be a substantial purpose, in this context, if it is real or of substance and not insubstantial or nominal. [16.480] How has the issue of purpose been handled in practice? In Jewel, a submission that the purpose of the milk vendors in imposing the ban was to protect their own businesses rather than to damage the applicant’s business was rejected, as we have seen, because, while the primary motivation may have been to protect their own businesses, all the applicant had to show was that damage to its business was a substantial purpose. On the other hand, in Simplicity Funerals,106 a union placed a ban on the applicant preventing it from using crematoria run by members of the respondent. As a consequence, crematoria declined to accept bookings from the applicant. The court declined to accept that the crematoria had the requisite purpose of damaging the applicant.
Likely Effect of Substantially Causing Loss or Damage [16.490] An alternative basis on which a secondary boycott may infringe the Act is if, regardless of purpose, it would have or be likely to have a proscribed effect. 102. See [10.490]. 103. Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367; (1979) ATPR 40-138. 104. Jewel Food Stores Pty Ltd v Amalgamated Milk Vendors Assn Inc [1989] FCA 479; (1989) 24 FCR 127; 91 ALR 397; (1990) ATPR 40-997. 105. Competition and Consumer Act 2010, ss 45D(2), 4F(1)(b). 106. Keith Russell Simplicity Funerals Pty Ltd v Cremation Society of Australia (ACT) Ltd [1982] FCA 27; (1982) 57 FLR 472; 40 ALR 125; (1982) ATPR 40-273. © 2018 THOMSON REUTERS
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This permits the court to look not only at what has been established on the facts, but also to infer, from those facts, what was likely to be the consequences of the conduct, looking at the position at or about the time the conduct was engaged in. The term “likely” has, as was pointed out in Tillmanns Butcheries,107 various shades of meaning: It may mean ‘probable’ in the sense of ‘more probable than not’ — ‘more than a fifty per cent chance’. It may mean ‘material risk’ as seen by a reasonable man ‘such as might happen’. It may mean ‘some possibility’ — more than a remote or bare chance. Or, it may mean that the conduct engaged in is inherently of such a character that it would ordinarily cause the relevant effect.
As with the term “purpose” the term “likely” is of central relevance to many of the Act’s prohibitions and the meaning of the term is explored elsewhere in this book.108 Suffice it to say that, in this context, it means “a real chance or possibility”.
Secondary Boycotts — Actions Against Unions [16.500] The Act provides for proceedings to be taken directly against unions involved in secondary boycotts.109 Although this has always been the case, the Act was strengthened in 1996 to include a rebuttable presumption that a union is engaging in conduct if two or more of the participants in the conduct under consideration are members or officers of the union. If a union is unable to rebut the presumption, then any loss or damage resulting from the conduct of its members or officers is taken to have been caused by the union. The Act also provides special recovery rights in relation to unions, whether incorporated or not.110
Secondary Boycotts — Firms [16.510] Although the focus of the secondary boycott provisions considered so far has been primarily on union activity, the Act also contains two prohibitions on firms whose conduct may result in others contravening the other secondary boycott provisions of the Act. In the first, suppliers are prohibited from entering or giving effect to arrangements with unions if the purpose is to hinder or prevent the supplier supplying products or services to a customer who the supplier is under an obligation to, or is accustomed to supply.111 A typical situation covered by this provision is where industrial action is threatened against a supplier unless that supplier agrees not to supply a customer who is the real target of the union threatening the industrial action. In the second, where a person who customarily acquires products or services from a supplier enters an arrangement, or gives effect to an arrangement, with a union for the purpose of hindering or preventing that person continuing to deal with the supplier,
107. Tillmans Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union [1979] FCA 85; (1979) 42 FLR 331; 27 ALR 367. 108. See [10.710]. 109. Competition and Consumer Act 2010, s 45DC. 110. Competition and Consumer Act 2010, s 45DC(5). 111. Competition and Consumer Act 2010, ss 45E(2), 45EA.
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that also amounts to a contravention.112 IPM113 is an example. In proceedings brought by the ACCC against IPM, the firm admitted entering an agreement with a union not to employ electrical contractors at Loy Yang B power station unless the contractors entered a certified agreement with the union.
Collective Bargaining [16.520] When firms join together to engage in collective bargaining that does not, of course, necessarily involve a boycott. But it may fall within the terms of the prohibition on boycott cartels if the negotiating parties are unable to agree and the firms involved in the collective bargaining decide not to deal with the firms with which they have failed to reach agreement. As the Harper Panel observed:114 Collective bargaining will usually contravene the cartel prohibitions because the underlying arrangement will usually lead to the competing businesses … agreeing not to deal with a particular supplier or business customer.
In a concession to small business, the Act also entitles corporations to apply to the ACCC for immunity if they have made or propose to make or give effect to a contract that involved an exclusionary provision or boycott cartel. The policy reason for this was explained by the Dawson Committee in 2003.115 Small firms lack bargaining power individually so, in some industries, they need the countervailing bargaining power that collective bargaining provides in order to achieve a fair deal in their dealings with big business. [16.530] Motor Traders116 is an early example. In NSW at the time there was over 2,000 panel beaters. They were small businesses with one or two proprietors and employed few staff. Over 65% of their income came from five motor insurers, of which GIO and the NRMA were the majors. The Motor Traders Association of NSW sought and obtained an authorisation to negotiate collectively for panel beaters for panel beating rates and conditions with the insurers. However the application, which was strongly contested by the insurers, did not seek authorisation to boycott the insurers or withhold services if negotiations were unsuccessful for the pragmatic reason that, at that time, the Commission would not have accepted that there was a public benefit in authorising such conduct. [16.540] When the Dawson Committee came to consider the matter, although it saw merit in the authorisation system, which it thought should be retained for collective bargaining by small business, it noted that the process was lengthy and expensive. Furthermore, it noted that decisions to allow collective bargaining were an “exception to the basic thrust of the Act”.117 Although the committee rejected submissions that collective bargaining by small business should be exempted, it did
112. Competition and Consumer Act 2010, ss 45E(3), 45EA. 113. ACCC v IPM Operation & Maintenance Loy Yang Pty Ltd [2006] FCA 1777; (2006) 157 FCR 162; (2007) ATPR (Digest) 46-271. 114. Harper Report, p 399. 115. Dawson Report, p 115. 116. (1983) ARPR (Com) 50-063. 117. Dawson Report, p 117. © 2018 THOMSON REUTERS
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recommend that a specific notification process be introduced.118 The government agreed, and the Act was amended accordingly in 2006.119 Collective bargaining was also an issue considered by the Harper Panel in 2015. The Panel recommended introduction of greater flexibility in the notification process.120 The reason was that the Panel saw the process as being of significant benefit to small business but was not widely used.
Initial Requirements [16.550] When first introduced, the collective bargaining notification process could only be accessed if a number of pre-conditions were met, including one designed to ensure that only small business took advantage of the procedure: the acquisition or supply arrangements to which the collective bargaining related could not exceed $3 million in any 12-month period. In addition, trade unions or anyone acting on the direction of a trade union could not access the procedure.121 With the exception of the specific caps next referred to, that remains the position today. The Act provided for the financial cap to be changed by regulation and that is what occurred in 2007 when separate caps were introduced for different types of transactions. Those caps are currently $5 million for primary producer products, $10 million for farm machinery, $15 million for motor fuel for resale, and $20 million for motor vehicles for retail sales.122
Effect of Notification [16.560] If a valid notification is lodged for collective bargaining, the cartel boycott prohibition does apply to conduct within the scope of the notification unless the ACCC decides to issue an objection notice.123 Nor did the recently repealed exclusionary provisions prohibition. The ACCC may issue such a notice if it is satisfied that public benefits likely to result from the conduct would not outweigh the detriment to the public likely to result from the conduct. [16.570] The Commission has recognised124 that collective bargaining can have benefits and detriments. It can promote more efficient contracts and market outcomes by addressing potential market failures associated with high transactions costs, incomplete information and market power. Those benefits can include: • reduced transaction costs by streamlining the negotiation process; • reduced information asymmetries between negotiating parties by facilitating input into terms and conditions from all members of the bargaining group; and • enhanced bargaining power of the members of the group which — in certain circumstances — can alter their incentives to undertake efficiency enhancing investments that may not otherwise be made. 118. Dawson Report, p 121. 119. Competition and Consumer Act 2010, s 93AB. 120. Harper Report, p 402. 121. Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 28th ed, 2008), p 1075. 122. Competition and Consumer Regulations 2010, regs 71A-71D. 123. Competition and Consumer Act 2010, s 93AC. 124. Re Australian Wagering Council Ltd, Collective Bargaining Notification No CB00284 (13 February 2014).
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[16.580] However, collective bargaining can also impose costs which may offset some or all efficiency gains, including: • increased potential for coordination and information sharing between members of the bargaining group beyond that necessary to improve the efficiency of contracting; • enhanced bargaining power of the group to such an extent that efficiency and the size of the available surplus are reduced; • collectively negotiated outcomes may shield inefficient members and distort investment decisions; and • efficient third parties may be adversely affected, for example by increasing barriers to entry. [16.590] When considering collective bargaining conduct, the ACCC generally considered that the anti-competitive effects of collective arrangements are likely to be limited if the notified conduct does not include collective boycotts and if the following factors are present: • low current levels of competition between members of the group in their dealings with the target, such that the difference between the level of competition with or without collective bargaining may also be low; • the agreement does not restrict the parties’ ability to compete in other ways, such as on quality or service; • participation is voluntary; and • there are appropriate restrictions on the coverage, composition and representation of the bargaining group.
Boycotts [16.600] While the ACCC did not completely rule out collective bargaining that included collective boycotts, it made the valid point that the of absence proposals to collective boycott were likely to significantly lower the anti-competitive detriments with the consequence that the ACCC was more likely to grant authorisations for collective bargaining where that was not a factor.125 Although the test for objection notices is differently weighted, inclusion of an opportunity for a collective boycott in a collective bargaining notifications could be said to also be significant in the weighing process. [16.610] Australian Wagering Council126 filed a collective bargaining notification on behalf of most of Australia’s large corporate bookmakers to collectively negotiate with the National Rugby League Ltd. It withdrew the notification for when the ACCC took the view that it was unlikely that collective negotiation would produce transaction efficiencies and coverage for a collective boycott, if required, was not likely to result in a public benefit. However, the ACCC did recognise that there may be circumstances where notifications that include an opportunity for a collective boycott may be allowed to stand. As the ACCC explained:127
125. ACCC, Streamlined Collective Bargaining for Small Business (2 May 2011). 126. Re Australian Wagering Council Ltd, Collective Bargaining Notification No CB00284 (13 February 2014). 127. Re Australian Wagering Council Ltd, Collective Bargaining Notification No CB00284 (13 February 2014), 47–48. © 2018 THOMSON REUTERS
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47 The ACCC has, under certain circumstances, recognised benefits that may arise from collective boycotts. This may be the case if collective bargaining alone is not sufficient to address market failures and improve the efficiency of contracting and associated market outcomes. The threat of collective boycott may be an efficient negotiating tool that facilitates the collective negotiation of more efficient contracts and better market outcomes. 48. In particular, it is possible that information asymmetries remain even after the negotiating parties have exchanged available information. If a vital piece of information is withheld by a party (such as the state of demand), collective bargaining may fail to achieve more efficient contracts and market outcomes. In this situation, the credible threat of a collective boycott may strengthen the bargaining position of the otherwise weaker bargaining party and create an incentive for the counterparty to reveal the necessary information, thus enabling a more efficient negotiated outcome to be achieved than would otherwise be the case.
[16.620] Responding to the Harper Panel in 2015, the ACCC stated that it had received very few collective bargaining notifications that included collective boycotts, even when it may be efficiency-enhancing. The ACCC stated that “there may be a perception among small business and their advisers that a collective bargaining arrangement that includes the prospect of a collective boycott would not be approved”.128 That perception was clearly borne out by a review of the few notifications that had been lodged by the time the Harper Panel issued its report.129 The 2017 amendments provide specifically for collective boycotts. The Act now provides that, if a collective bargaining notification includes provision for a collective boycott and the ACCC believes that there are grounds for issuing an objection notice because of that factor, it may nevertheless not do this and instead imposes conditions on the use of a collective boycott.130 The Act also empowers the ACCC to issue stop orders in relation to collective boycotts otherwise covered by a notification, where there has been a material change of circumstances and the ACCC concludes that a collective boycott has caused serious public detriment or is in imminent danger of doing so.131
Duration [16.630] A collective bargaining notice that includes provision for a collective boycott is does not provide immunity until 60 days after it is lodged with the ACCC, unless an objection notice is issued in the meantime by the ACCC.132 Collective bargaining notification in relation to which no objection notice has been issued by the ACCC originally had a three-year sunset, but now the ACCC can allow the notification to stand for up to 10 years if it is satisfied that three years is not appropriate.133
128. Harper Report, p 401. 129. Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 871–872. 130. Competition and Consumer Act 2010, s 93ACA(1). 131. Competition and Consumer Act 2010, s 93AG. 132. Competition and Consumer Act 2010, s 93AD(1)(a)(i). 133. Competition and Consumer Act 2010, ss 93AD(3)(c), (5).
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ACCESS TO ESSENTIAL FACILITIES [17.20] [17.90] [17.140] [17.170] [17.200] [17.220] [17.290]
[17.490] [17.520] [17.580] [17.590]
17
Development of US Essential Facilities Doctrine ................................ Development of a European Approach ............................................... Development of the Australian Approach ........................................... Hilmer Recommendations ................................................................... Competition Principles Agreement ...................................................... Australia’s Policy Objectives ............................................................... Australia’s National Access Regime ................................................... [17.300] The Scheme Overview ....................................................... [17.310] What is an ‘Essential Facility’? ........................................... [17.360] Declaring a Service ............................................................ [17.470] When a Declaration Cannot Be Made ................................ State and Territory Regimes ............................................................... National Energy Access Regimes ....................................................... Telecommunications, Broadband and Broadcast Towers ................... Airport Access .....................................................................................
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[17.10] If competition policy is to be fully effective, it has to deal with situations in which a firm can, by controlling some part of the supply chain, reduce or eliminate competition at some other level. If, for example, a major city airport were owned by an airline and that airline were to allow its own planes to have preferential rights at the airport, such as through reduced landing charges or the best landing slots, this would affect the opportunity for other airlines serving that city to compete. This chapter explains how competition policy addresses that issue.
Development of US Essential Facilities Doctrine [17.20] United States courts dealt with the essential facilities issue by developing, at least at courts below the Supreme court level, doctrines based on the Sherman Act prohibition on monopolisation. The US Supreme Court, in an obscurely worded judgment in Terminal Railway,1 started judicial development of a basis on which courts could order access by competitors to facilities determined to be essential to competition. Terminal Railway involved privately owned railway companies that had combined to acquire rail terminals at St Louis, the only point at which railways carrying freight from east to west could cross the Mississippi River. The owners of the terminals then put in place arrangements that effectively denied their competitor railways access to the terminals. In a decision that the court described as based on its own special facts, the US Supreme Court held that competitors were to be given access to the terminals on competitive terms to allow them to compete in the eastwest freight market.
1.
US v Terminal Railway Association of St Louis 224 US 383 (1912).
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[17.30] Notwithstanding the caution the US Supreme Court had issued concerning the special facts of the case, Terminal Railway was the foundation on which lower United States courts developed what became known as the “essential facilities” doctrine. This allowed the court, in appropriate circumstances, to order that, where access to a facility is essential to competition in some other market, those denied access to that facility should be able to gain access on competitive terms. This doctrine is best described in the US Court of Appeals decision in Caribbean Broadcasting2 as follows: A monopolist has no general duty to share his essential facility, although there are certain circumstances in which he must do so … In the special circumstances where there may be such an obligation, the elements of an antitrust claim for denial of access to an essential facility are (1) a monopolist who competes with the plaintiff controls an essential facility, (2) the plaintiff cannot duplicate that facility, (3) the monopolist denied the plaintiff’s use of the facility, and (4) the monopolist could feasibly have granted the plaintiff use of the facility …
[17.40] After a tentative beginning in Terminal Railway, the essential facilities doctrine developed gradually. It is not surprising that development would be slow given the very slender foundation the Sherman Act provided. Section 2 simply states: Every person who shall monopolise or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanour …
The nexus between essential facilities doctrine and s 2 of the Sherman Act is that courts regarded use of monopoly power to destroy threatened competition in a downstream market as an attempt to monopolise.3 The doctrine had taken a firm footing in United States jurisprudence until the Supreme Court took a different view in Trinko4 as we will see. [17.50] What facilities have been regarded as “essential” for the purposes of the United States doctrine? In Alaska Airlines,5 the United States Court of Appeals decided that: “A facility that is controlled by a single firm will be considered ‘essential’ only if control of the facility carries with it the power to eliminate competition in the downstream market.” The power to eliminate must not be momentary: it must at least be relatively permanent. [17.60] Whether or not a particular facility is an essential facility is a question of fact, to be decided case-by-case. Until Trinko, the essential facilities doctrine had been used extensively to seek access to facilities in a wide range of circumstances, sometimes successfully and sometimes not. Many of those circumstances would not be regarded as appropriate for access declarations under Australian competition law, but the court decisions nevertheless illustrate the extent to which the essential facilities doctrine had been developed in the United States. It has been used, for instance, to seek
2. Caribbean Broadcasting System Ltd v Cable & Wireless PLC 148 F 3rd 1080 at 1088 (1998). As our Federal Court observed in Queensland Wire Industries Pty Ltd v BHP Co Ltd (1988) ATPR 40-841, it is “a gloss upon the succinct terms of the Sherman Act”. 3.
Otter Tail Power Co v US 410 US 366 (1973); Lorain Journal Co v United States, 343 US 143 at 154 (1951).
4.
Verizon Communications Inc v Law Offices of Curtis V Trinko LLP 540 US 682 (2004).
5.
Alaska Airlines Inc v United Airlines Inc [1991] 2 Trade Cases 69,624 at 66,792.
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Development of US Essential Facilities Doctrine
access to computer software source codes,6 property title data,7 telecommunications facilities,8 facilities providing real time golf scores,9 water treatment plants,10 county land for development of a landfill,11 apartment rental advertising,12 a flour mill,13 railway lines,14 convention centres15 and sports stadiums.16 Natural gas distribution systems and gas pipelines and telecommunications infrastructure have become the more recent battle ground over the essential facilities doctrine in the USA, with mixed results. In PG&E,17 a refusal by a utility to allow the plaintiff to connect to its natural gas lines so that the plaintiff could compete with the utility with alternative technology for gas-powered motor vehicles amounted to denial of access to an essential facility. In Panhandle,18 the owner of a gas pipeline from the Gulf of Mexico to Michigan that supplied all of the gas for 37 counties in central Illinois was found 6. Gordon v Microsoft Corporation [2002–2] Trade Cases P 73,730. Dismissal of Microsoft’s summary judgment application because its applications programming source code could be an essential facility. 7. Inter-County Title Co v First American Title Co of Nevada [2003–1] Trade Cases P 74,032. Title insurance companies that denied access to a private collection of property title data were not withholding access to an essential facility. 8. MCI Communications Corp v American Telephone and Telegraph Co [1982–3] Trade Cases P 65,137. A telephone company’s switched network, required in order to connect with local distribution facilities and offer competing services was found to be an essential facility. 9. Morris Communications Corp v PGA Tour Inc [2003–1] Trade Cases P 73,972. A news publisher was not denied access to an essential facility when the promoter of professional golf tournaments denied access to its proprietary real time golf score system. See also [2000–2] Trade Cases P 73,117. 10. Pittsburg County Rural Water District No 7 v City of McAlester [2003–2] Trade Cases P 74,183. A water utility that refused to sell water to the plaintiff was not denying access to an essential facility because the utility was not a monopolist, given that there were proximate alternative suppliers. 11. Blue Ribbon Properties Inc v Hardin County [2002–2] Trade Cases P 73,773. A county’s refusal to grant a permit to the plaintiff to open a landfill for waste disposal purposes did not deny access to an essential facility because exclusion from the county did not exclude the plaintiff from the relevant market. The plaintiff could access land in an adjacent county. 12. Apartment Source of Pennsylvania LP v Philadelphia Newspapers Inc [1999–1] Trade Cases P 72,502. A newspaper that had a policy of refusing advertising from a competitor had denied access to an essential facility in refusing to accept advertising for the plaintiff’s apartment locator service, which competed with a service operated by the newspaper; the newspaper was an essential facility for this purpose because its locator service had an 87% share of leads for apartments in the relevant geographic area. 13. Helix Milling Co v Terminal Flour Mills Co [1975–2] Trade Cases P 60,554. The court accepted that the only way for a competitor in the flour and mill feed market in a region of the USA to continue to compete after its mill burned down, was to have access to another mill in the region as that was the only economically feasible method of entry to the market. 14. Laurel Sand & Gravel Inc v CSX Transportation Inc [1991–1] Trade Cases P 69,312. A rail line between two points in the USA required by the applicant in order to compete in the market for supply of sand and gravel was not economic to duplicate, but the court declined to declare it an essential facility because alternative means of transport were available. 15. Hart Productions Inc v Greater Cincinnati Convention and Visitors Bureau [1990–2] Trade Cases P 69,233. 16. Hecht v Pro-Football Inc [1977–2] Trade Cases P 61,773. 17. Tate v Pacific Gas & Electric Co [2002–2] Trade Cases P 73,873. See also Paladin Associates Inc v Montana Power Co [2003–1] Trade Cases P 74,029. 18. State of Illinois; Ex rel Burris v Panhandle Eastern Pipe Line Co [1991–1] Trade Cases P 69,455. See also Midwest Gas Services Inc v Indiana Gas Co Inc [2003–1] Trade Cases P 73,935. (A natural gas utility’s denial of interconnection to its distribution network to the operator of a gas storage facility because the operator was already connected to an alternative, more expensive, distribution network.) © 2018 THOMSON REUTERS
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not to control an essential facility because it was economically feasible to duplicate the pipeline. On the other hand, in Williams Natural Gas Co,19 a natural gas pipeline was conceded to be an essential facility because competitive gas producers could not access certain cities without using the pipeline. [17.70] In Otter Tail,20 the Supreme Court upheld a monopolisation claim against a power company that controlled electricity distribution infrastructure in 465 towns in Minnesota, North Dakota and South Dakota. Although the court did not mention the essential facility doctrine this was taken to be an endorsement of it. [17.80] Academic opinion that the doctrine was an inappropriate application of the Sherman Act grew. Hovenkamp refers to it as “the most troublesome, incoherent and unmanageable of bases for Sherman clause 2 liability”.21 Areeda and Hovenkamp said it should be abandoned having earlier called it an epithet in need of limiting principles.22 Ultimately, the US Supreme Court effectively disavowed the essential facilities doctrine. In Trinko,23 a case in which the claim was that a telecommunications company had exercised market power by discriminating against rival local exchange carriers in relation to the provision of interconnection services. The US Supreme Court took the opportunity to express doubt about whether the essential facilities doctrine is good law. The court said: We conclude that Verizon’s alleged insufficient assistance in the provision of service to rivals is not a recognized antitrust claim under this court’s existing refusal-to-deal precedents. This conclusion would be unchanged even if we considered to be established law the ‘essential facilities’ doctrine crafted by some lower courts … We have never recognized such a doctrine … and we find no need either to recognize it or repudiate it here.
After Trinko, claims based on the essential facilities doctrine understandably receded. In American Channel,24 for instance, on a motion to dismiss the claim, a US District Court made it clear that an essential facilities claim is not available where there is a regulatory regime under which access can be ordered. That case involved a refusal by Time-Warner and another pay television network to carry the American Channel. In Clarke Memorials,25 an independent dealer in cemetery monuments was unsuccessful in a claim that a cemetery that banned independent dealers was an essential facility.
19. City of Chanute, Kansas v Williams Natural Gas Co [1990–1] 1 Trade Cases P 68,967. 20. Otter Tail Power Co v US 410 US 366 (1973). 21. H Hovenkamp, “Federal Antitrust Policy”, The Law of Competition and its Practice (3rd ed, Thomson, 1999), para 7.7. See also AB Lipski JG Sidak, “Essential Facilities” (1999) 51 Stanford Law Review 1187, “no coherent rationale for the doctrine”; PM Areeda and H Hovenkamp, Antitrust Law (2002) “should be abandoned”. 22. PM Areeda and H Hovenkamp, Antitrust Law (2002); PM Areeda, “Essential Facilities: An Epithet in Need of Limiting Principles” (1990) 58 Antitrust LJ 841. See also KN Hylton, “Economic Rents and Essential Facilities” (1991) BYU Law Review 1243. 23. Verizon Communications Inc v Law Offices of Curtis V Trinko LLP 540 US 682 (2004). 24. The American Channel v Time-Warner Cable Inc [2007–1] Trade Cases 75,559. 25. Clarke Memorials of Alabama Inc v SCI Alabama Funeral Services [2014–1] Trade Cases 78,662.
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Development of a European Approach
Development of a European Approach [17.90] An essential facilities doctrine developed more recently in Europe, through decisions of the European Commission. As in the United States, the doctrine was developed on the basis of a prohibition on monopolisation. Art 86 of the Treaty of Rome,26 which provided that basis, is in similar terms to s 2 of the US Sherman Act. It provides: Any abuse of a dominant position within the Common Market or a substantial part of it shall be prohibited as incompatible with the Common Market in so far as it may affect trade between Member States …
[17.100] The doctrine was first expressed in two decisions concerning the port of Holyhead — Sealink27 and Sea Containers28 — in the early 1990s. In Sea Containers, the Commission concluded that owner of the port had abused its dominant position in the market for port services by refusing access to the port of Holyhead on reasonable and non-discriminatory terms to a potential competitor in the market for ferry services. The Commission said:29 The owner of an essential facility which uses its power in one market in order to protect or strengthen its position in another related market, in particular, by refusing to grant access to a competitor, or by granting access on less favourable terms than those of its own services, and thus imposing a competitive disadvantage on its competitor, infringes Article 86.
There have, however, been few essential facilities decisions in Europe. Although there has been explicit recognition of the doctrine, the tendency has been to significantly limit its application. In Bronner 30 and IMS Health,31 the European Court of Justice made it clear that access would only be ordered where the facility is indispensable. [17.110] When will a facility be regarded as indispensable? In IMS Health, a dispute over access to a pharmaceutical tracking system, the court said: It is clear from … that in order to determine whether a product or service is indispensable for enabling an undertaking to carry on business in a particular market, it must be determined whether there are products or services which constitute alternative solutions, even if they are less advantageous, and whether there are technical, legal or economic obstacles capable of making it impossible or at least unreasonably difficult for any undertaking seeking to operate in the market to create, possibly in cooperation with other operators, the alternative products or services.
[17.120] The decision in Bronner is an example. That case involved an unsuccessful attempt to use the essential facilities doctrine to gain access to a newspaper distribution system. Bronner was the publisher of an Austrian daily newspaper, Der Standard, that had a small share of the daily newspaper market in that country. Mediaprint also published daily newspapers in Austria and its papers had a market
26. Now Art 102 of the Treaty on the Functioning of the European Union (Lisbon Treaty). 27. B&I Line plc v Sealink Harbours Ltd [1992] 5 CMLR 255. 28. Sea Containers v Stena Sealink EU Commission, Decision No 94/19/EC (21 December 1993). 29. Sea Containers v Stena Sealink EU Commission, Decision No 94/19/EC (21 December 1993), at [66]. 30. Oscar Bronner GmbH & Co v Mediaprint Zeitungs- und Zeitschriftenverlag GmbH & Co [1998] ECR I-7791; [1998] EUECJ C-7/97. 31. IMS Health GmbH & Co v NDC Health GmbH & Co [2004] All ER (EC) 813; [2004] ECDR 23; [2004] EUECJ C-418/01, Case C-418/01; [2004] 4 CMLR 28; [2004] ECR I-5039. © 2018 THOMSON REUTERS
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share over 40%. Mediaprint had established a nationwide home-delivery system that delivered its newspapers directly to subscribers in the early hours of the morning. Bronner used the postal service with deliveries later in the day. Bronner had sought an order requiring Mediaprint to included Der Standard in its home-delivery service on payment of reasonable remuneration, claiming that failure to do so would amount to an abuse of Mediaprint’s dominant position. The court decided that access was not indispensable because there appeared to be no technical, legal or economic obstacles to Bronner to establish its own nationwide home-delivery system, either alone or in cooperation with other publishers. [17.130] Other European examples are limited, but the doctrine has been used, or sought to be used, in relation to television guides, port services, railway lines, and a distribution network for diamonds.32 In Magill,33 a publisher wanted to publish a comprehensive TV guide for Northern Ireland. Television stations that published a television guide covering their own programs exclusively claimed copyright protection for program listings in order to prevent their reproduction by third parties. The European Court of Justice decided that refusal to license their programs concerned a product the supply of which was indispensable for carrying on the business of publishing a general television guide and that such refusal unjustifiably prevented the appearance of a new product for which there was a potential consumer demand. In Porto di Genova SpA,34 the court decided that the port of Genoa, Italy was an essential facility because it was one of the most important ports in the Community and the most important in Italy. In European Night Services,35 the court rejected a finding by the European Commission that a railway joint venture was in possession of infrastructure, products or services access to which was indispensable in the circumstances of the case.
Development of the Australian Approach [17.140] Although the original Trade Practices Act 1974 drew heavily on United States jurisprudence and the 1977 amendments sought to codify many of the competition principles developed by United States courts, no attempt was made to introduce a statutory essential facilities doctrine in Australia. Australian courts were presented with an opportunity to develop their own essential facilities doctrine, based on the Australian monopolisation provision,36 when the dispute over access to a steel fencing product reached the courts in 1988 in QWI.37 32. Commission of the European Communities v Alrosa Company Ltd [2009] EUECJ C-441/07_O. 33. Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission of the European Communities European Commission, Case Nos 241/91 P and C-242/91 P (6 April 1995) (the Magill Case). 34. Merci Convenzionali Porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR 5889. See also B&I Line plc v Sealink Harbours Ltd [1992] 5 CMLR 255; Coe Clerici Logistics SpA v Commission of the European Communities [2003] EUECJ T-52/00. 35. European Night Services Ltd (ENS) v Commission of the European Communities, European Commission, Case Nos T-374/94, T-375/94, T-384/94 and T-388/94 (15 September 1998). 36. Trade Practices Act 1974, s 46. By then reframed as a misuse of market power provision. 37. Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1987] FCA 496; (1987) 17 FCR 211; (1988) ATPR 40-841 (Federal Court); [1989] HCA 6; (1989) 167 CLR 177; 63 ALJR 181; 83 ALR 577; (1989) ATPR 40-925 (High Court).
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That case concerned whether, by refusing to supply a competitor with a unique product only manufactured by BHP, the company was using its market power to damage that competitor. BHP and QWI competed in the market for supply of rural fencing but BHP had the advantage of access to Y-bar (a steel fence picket), a product widely used in Australia in rural fencing. BHP had never sold Y-bar to any competitor, preferring to distribute the product itself. As it could not get access to supplies of Y-bar, QWI was not able to offer the full range of fencing supplies the market required and this put it at a competitive disadvantage against BHP. The High Court held that BHP had used its power in a manner prohibited by the Act. [17.150] The High Court did not consider the United States essential facilities doctrine. However, when the case had been before the Full Federal Court,38 QWI had sought to use United States essential facilities authorities to support its case, arguing that Y-bar was an essential facility. The Full Court declined to accept that the doctrine applied under Australian law, stating:39 ‘One mitigation of or qualification to the requirement of intent by monopolists who refuse to deal may have been in the development of the so called “essential facilities” doctrine… This is important for the present case because QWI relied upon these authorities for the proposition that whilst as a general rule a monopolist may deal or refuse to deal with whom he pleases, this is not so where he controls an ‘essential facility’. If he does control such a facility he is, QWI submitted, under a duty to give access to that facility to competitors and BHP’s control of Y-bar is to be likened to control of an essential facility. We do not accept this submission.
The court gave a number of reasons for rejecting the submission and deciding that, while of assistance, the US authorities did not provide any compelling guidance on the construction of Australia’s then monopolisation provision. [17.160] Noting that the essential facilities doctrine was a “gloss” on the US statute, the first and most compelling reason was that the terms of the section did not readily accommodate the doctrine. The court also thought, as academic commentators in the US had, that it was difficult to see where the limits of the concept might be if the doctrine were applied other than to monopolies in electric power, transport, communications or some other essential service. The court also thought that, if there were such a doctrine, there were particular concerns if the courts were called on to order a respondent to accept a customer. The Federal Court’s rejection of an essential facilities doctrine provided a catalyst for interest in the possibility of a statutory essential facilities doctrine in Australia, particularly in the context of access to natural monopolies such as rail lines, telecommunications facilities, electricity and water infrastructure.
Hilmer Recommendations [17.170] In Chapter 4 we considered the policy drivers that resulted in the establishment of the Hilmer Committee. The Committee’s comprehensive review of competition policy presented an opportunity to consider whether or not an essential facilities doctrine was appropriate for Australia. The challenge, as Hilmer saw it, was to deal with a lack of structural reform by providing a mechanism that would 38. [1987] FCA 496; (1987) 17 FCR 211; (1988) ATPR 40-841. 39. [1987] FCA 496; (1987) 17 FCR 211; (1988) ATPR 40-841 at [36] [3-7]. © 2018 THOMSON REUTERS
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support competitive market outcomes by protecting the interests of potential new entrants while also ensuring owners natural monopoly infrastructure are not unduly disadvantaged.40 Hilmer came to the view that it was, based on two considerations. First:41 In some markets the introduction of effective competition requires competitors to have access to facilities which exhibit natural monopoly characteristics, and hence cannot be duplicated economically. For example, effective competition in electricity generation and telecommunications services requires access to transmission grids and local telephone exchange networks respectively.’
The second issue Hilmer thought relevant related to access pricing. The committee expressed the following view:42 Where the owner of the “essential facility” is vertically-integrated with potentially competitive activities in upstream or downstream markets — as is commonly the case with traditional public monopolies such as telecommunications, electricity and rail — the potential to charge monopoly prices may be combined with an incentive to inhibit competitors’ access to the facility.
[17.180] Hilmer made a series of detailed recommendations to deal with these issues. The effect of the recommendations was that there should be a general legal regime for access to essential facilities under which a designated Commonwealth, State or Territory Minister, on the recommendation of the National Competition Council, should create access rights by declaration. Declaration should only be made, according to the Hilmer recommendations, if the following conditions were met. 1. Access to the facility in question is essential to permit effective competition in a downstream or upstream activity.43 2. Such a declaration is in the public interest having regard to: • the significance of the industry to the national economy; and • the expected impact of effective competition in that industry on national competitiveness. 3. The legitimate interests of the owner of the facility are protected by the imposition of an access fee and other terms and conditions that are fair and reasonable. [17.190] The statutory regime proposed by Hilmer was not welcomed by everyone. Academic and former Commission member, Dr Warren Pengilley, for instance, said at the time:44 One view may well be that access to “essential facilities” is better determined politically than by leaving the matter to the courts. The author’s view … is that this is neither the best nor the most appropriate choice. Indeed, Hilmer in all other aspects of trade practices administration himself extols the benefits of a court based process of law enforcement. There is much to be said for court based enforcement in the area of “essential facilities”.
40. 41. 42. 43. 44.
Hilmer Report, p 242. Hilmer Report, p 239. Hilmer Report, p 241. The United States doctrine was concerned only with competition in downstream markets. Pengilley, “Hilmer and Essential Facilities” (1994) 17 UNSW Law Journal 1 at 4.
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However, in view of the Australian court decisions to date, it may be argued that the courts need some statutory guidance.
That was not, however, the outcome. All governments — Federal, State and Territory — accepted the Hilmer recommendations and the result was the statutory regime we have today.
Competition Principles Agreement [17.200] The Competition Principles Agreement45 responded to the Hilmer recommendations on essential facilities by providing for the Commonwealth to legislate to establish an access regime and set out the circumstances in which such a regime would operate. This commitment was fulfilled by the introduction of Pt IIIA of the Trade Practices Act in 1995. The Agreement also envisaged that States and Territories might introduce access regimes of their own. It provided that the Commonwealth regime was not intended to apply to essential facilities in a State or Territory where the State or Territory has in place a conforming access regime, unless either the National Competition Council determined that the State or Territory regime was ineffective having regard to the influence of the facility beyond the jurisdiction of the State or Territory, or difficulties arise from the facility being in more than one jurisdiction. The agreement provided for the Commonwealth to establish the Council to oversee reform and advise the Treasurer on special payments to be made to those States and Territories that signed on and implemented reforms recommended by Hilmer. [17.210] The Agreement sets out 16 indicia46 of a State or Territory access regimes that would be regarded as conforming to the Hilmer principles. The principal indicia were: • an independent body to determine access disputes; • emphasis on parties negotiating an enforceable access agreement rather than resorting to arbitration in the first instance; • an arbitration process that takes into account: ° the legitimate business interests of the owner of the facility; ° the cost to the owner of providing access and the economic value to the owner of any additional investment the access seeker has agreed to make; ° firm and binding contractual obligations of those already using the facility; ° operational and technical requirements for the safe operation of the facility; ° the economically efficient operation of the facility; and ° the benefit to the public from having competitive markets; • separate accounting arrangements for the elements of the business covered by the access arrangements; • prohibition on the owner or user of the facility engaging in conduct for the purpose of hindering access by others; and • where the service is covered by more than one State or Territory access regime, consistency between the regimes.
45. Competition Principles Agreement, cl 6. See Appendix 2. 46. Competition Principles Agreement, cl 6(4). © 2018 THOMSON REUTERS
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Australia’s Policy Objectives [17.220] In its original form, Part IIIA did not contain any statement of policy for the regulation of essential facilities. The Productivity Commission undertook a review of the statutory regime in 2001. It noted that the merits of access regulation were a matter of debate and observed that this is not surprising given the implications for owners, users and investors.47 As the Productivity Commission noted, the rationale for regulating essential facilities is that, as they are natural monopolies, denial of access to competitors in related markets, either directly or through the imposition of unreasonable terms, has adverse effects on efficiency, as will monopoly pricing of services where access is provided.48 On the other hand, statutory intervention to regulate access to essential facilities can “entail significant attenuation of private property rights”. The Productivity Commission pointed out that this may give rise to a range of costs, which could outweigh the benefits, particularly if access regulation is poorly expressed, resulting in uncertainty for owners and investors about the extent to which there may be statutorily based intervention in private property rights.49 [17.230] The Productivity Commission supported the retention of the regime, but recommended improvements the regime’s operation, including clarifying the regime’s objectives and scope, encouraging efficient investment in new infrastructure, strengthen incentives for commercial negotiation and improving the certainty and transparency of regulatory processes. In 2006, in response to the Productivity Commission’s report, the Act was amended, adding the following specific objectives:50 (a) promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and (b) provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.
[17.240] The Productivity Commission undertook a further review in 2012–13 prompted by COAG’s national reform agenda. That agenda included providing a simpler and more consistent national system of economic regulation for nationally significant infrastructure. The Productivity Commission again recommended that the regime be retained,51 noting that: access regulation can address an enduring lack of effective competition, due to natural monopoly, in markets for infrastructure services where access is required for third parties to compete effectively in dependent markets.
But the Productivity Commission advised that this is the only economic problem access regulation should address and that the scope of the regime should be confined to ensure that it is only available in exceptional cases — instances where
47. 48. 49. 50. 51.
Productivity Commission, Review of the National Access Regime, Report No 17 (2001), p 35. Productivity Commission, Review of the National Access Regime, Report No 17 (2001), p 45. Productivity Commission, Review of the National Access Regime, Report No 17 (2001), p 59. Competition and Consumer Act 2010, s 44AA. Productivity Commission, National Access Regime Inquiry Report, Report No 66 (2013).
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benefits from increased competition outweigh the costs imposed by the regulatory scheme. [17.250] Undoubtedly, given that at the time the essential facilities regime was added to the Act government monopolies were a significant feature of Australia’s economy, the regime was unquestionably required. But today, privatisation of much of that infrastructure — airports and ports, telecommunications, electricity supply and transmission, the main natural gas pipeline and above-rail assets — has significantly changed the economic and competitive landscape. Partial privatisation of electricity generation has occurred. It is reasonable to conclude that the first of the Hilmer reasons for proposing the regime — the lack of structural reform — has been addressed. [17.260] Competition policy has moved well beyond where it was in 1993. It is now mainstream, universally accepted as an important driver for economic growth. Government business activities — Federal, State and local — are now explicitly covered by the Competition and Consumer Act 2010. Old arguments about extension of competition principles to non-traded sectors have been replaced by an emphasis on how to make our competition laws even more effective, removing remaining impediments to competitive activity and efficient investment. In the light of those changes, and of experience with the regime in operation, it could not be argued that the regime is likely to produce business certainty. Furthermore, it has resulted in significant cost and delay. Whether or not it now provides an appropriate balance between promoting vigorous competition and encouraging efficient infrastructure investment, on the one hand, and constraining monopolistic practices on the other, is a debatable question. [17.270] Arguments in favour of repeal of Part IIIA based on the proposition that it has done its job — that intrusive economic regulation of infrastructure assets is no longer in the public interest, would seem well-founded. The Productivity Commission’s 2013 review52 concluded that there was merit in retaining the scheme, but recommended that the regime should be limited to the exceptional cases where the benefits arising from increased competition in dependent markets are likely to outweigh the costs of regulated third-party access. It also recommended a further review in 10 years.53 [17.280] The essential facilities scheme was again reviewed by the Harper Panel as part of its broader review of competition policy and law. The Panel agreed54 with the Productivity Commission that the National Access Regime is likely to generate net benefits to the community, “as a back-stop to current industry-specific regimes”, but had reservations. The Panel concluded that, in its application to privately developed infrastructure, an access regime is “more likely to produce inefficiency than efficiency, impeding the competitiveness of Australian industry”. The Panel therefore also supported the Productivity Commission view that its scope should be limited.
52. Productivity Commission, National Access Regime Inquiry Report, No 66, (2013), p 10. 53. Productivity Commission, National Access Regime Inquiry Report, No 66, (2013), p 339. 54. Harper Report, p 431. © 2018 THOMSON REUTERS
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Australia’s National Access Regime [17.290] The Australian access regime provides a statutory two-step process, applicable to unless a particular facility has been exempted. The process, which closely follows the Hilmer recommendations, first involves determining whether or not a service is “essential” and the second provides for arbitrated access in relation to declared services where the parties are unable to agree on access arrangements or pricing. As the Minister explained when introducing the legislation:55 The notion underlying the regime is that access to certain facilities with natural monopoly characteristics, such as electricity grids or gas pipelines, is needed to encourage competition in related markets, such as electricity generation or gas production. Access to such facilities can be achieved if a person seeking access is successful in having the service “declared” and then negotiates access with the service provider.
The Scheme Overview [17.300] The first step in the statutory access process is to determine whether or not the facility is “essential”, and the second is for there to be an arbitrated access procedure if the parties are unable to agree on access arrangements or pricing. The following diagram illustrates the first step in the statutory process. Although discussion to date has been about essential facilities, the drafting approach taken in Australia has been to refer to services. The focus in the first step is on facilities of national significance access to which, on reasonable terms and conditions, would promote a material increase in competition in another market, whether upstream or downstream.
What is an “Essential Facility”? [17.310] Although Pt IIIA derives from the United States essential facilities doctrine, the term “essential” does not appear in the Act and the term “facility” only appears consequentially. The scheme is that a person may seek declaration of a particular service.56 A “service” is nothing more than a right or benefit provided, granted or conferred in relation to a facility.57 A service is something separate and distinct from a facility although the service may consist of merely using a facility.58 It can, for instance, include the use of infrastructure, handling or transporting people or things or communications services. The term has been held to include the services at a major airport for the use of runways, taxiways, parking aprons and other associated facilities,59 and the use of a rail track network.60 [17.320] The position before the 2017 amendments was that a service could not be declared unless access to the service would promote a material increase in competition in another market, it would be uneconomical for anyone to develop another facility to 55. Senate, Hansard, (1995), Vol S107, p 2434. 56. Competition and Consumer Act 2010, s 44F. 57. Competition and Consumer Act 2010, s 44B. 58. BHP Billiton Iron Ore Pty Ltd v NCC [2008] HCA 45 at [31]-[35]; 236 CLR 145. See also Rail Access Corp v NSW Minerals Council Ltd [1998] FCA 1266; (1998) 87 FCR 517; 158 ALR 323; (1998) ATPR 41-663. 59. Re Virgin Blue Airlines Pty Ltd [2005] ACompT 5; (2005) 195 FLR 242; (2006) ATPR 42-092; Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. 60. Re Specialised Container Transport (1997) ATPR (NCC) 70-004.
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DESIGNATED MINISTER (Federal Treasurer or responsible State or Territory Minister)
ANY OTHER PERSON
Application for Declaration
Application for declaration National Competition Council
Notify Service Provider
Decision to recommend or not
Designated Minister
Decision to declare or not
Declared
Publish decision with reasons
Not declared
Application for review (21 days)
Application for review (21 days)
Yes
Yes
No
Australian Competition Tribunal
No
Service Declared
Decision (with reasons)
Service not Declared
provide the service, the facility to which access is required is of national significance, access to the facility can be provided without undue risk to human health or safety, there is not an existing effective access regime in relation to the service and access would not be contrary to the national interest.61 However, the criteria have been tightened in line with the Productivity Commission and Harper Panel recommendations.62 [17.330] The term “facility” is not a defined term, but the Tribunal has said that it means a physical asset, or set of physical assets, essential for service provision which also exhibits the features of a natural monopoly.63 Although not defined in the Act, the definition of the term “service” provides a measure of guidance. It refers to “an infrastructure facility such as a road or railway line”. In BHP Billiton,64 the facility was a rail line. 61. Competition and Consumer Act 2010, s 44G. 62. Competition and Consumer Act 2010, ss 44CA, 44G. 63. Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. 64. BHP Billiton Iron Ore Pty Ltd v NCC [2008] HCA 45; (2008) 236 CLR 145. © 2018 THOMSON REUTERS
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In Sydney Airport,65 the Tribunal concluded that the relevant facility was the whole of the airport because it comprised the minimum set of physical assets necessary for international aircraft to land, unload and load passengers and freight and depart in a safe and commercially sustainable manner. [17.340] The term “service” does not include use of a production process, use of intellectual property or the supply of goods, except to the extent that those services are an integral but subsidiary part of a relevant service provided by means of a facility.66 The “use of a production process” involves “the systematic integrated sequence of operations used by the operator leading to the production or transformation of something”.67 As Justice Greenwood explained in the Federal Court appeal decision in BHP Billiton:68 Since a production process is normally deployed for the purpose of producing something capable of supply in a market, the notion that the end point of the process of production or transformation might result in a marketable commodity might well be a matter that warrants analysis in any given case. However, a production process might comprise a sequence of steps that, for example, include drilling and blasting operations; the extraction of ore and waste material from the mine site; the removal of waste; the collection and haulage of ore; crushing and screening; beneficiation, stockpiling (mining operations). Those steps might commence with extraction and conclude with ore in a changed state yet not a marketable commodity. Nevertheless, the sequence of steps might represent a systematic sequence of integrated operations which logically give rise to a factual conclusion that they comprise a production process.
[17.350] BHP Billiton involved a dispute over access to a rail line dedicated to BHP Billiton’s iron ore extraction, processing and shipping operations in Western Australia. Another mining company, Fortescue, had sought access to BHP Billiton’s rail line in order to ship its iron ore to the export port at Port Hedland in Western Australia. BHP Billiton challenged the declaration of the rail service on the basis that it was an integral part of its operations from mine to ship and therefore part of a production process. The High Court held that, while BHP Billiton may have used the rail line to which access was sought as an integrated part of its operations, that does not mean that use of the rail lines by another access seeker would be excluded from the definition of a service because it was “use of a production process”.69
Declaring a Service [17.360] Access to a service cannot be declared unless all the declaration criteria are met.70 Those criteria are:71 • access, or increased access, on reasonable terms and conditions, would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service; 65. 66. 67. 68. 69. 70. 71.
Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. Competition and Consumer Act 2010, s 44B. BHP Billiton Iron Ore Pty Ltd v NCC [2008] HCA 45; 236 CLR 145 at [37]. BHP Billiton Iron Ore Pty Ltd v NCC [2007] FCAFC 157; (2007) ATPR 42-190 at [163]. BHP Billiton Iron Ore v NCC [2008] HCA 45 at [39]; (2008) 236 CLR 145. Competition and Consumer Act 2010, s 44G. Competition and Consumer Act 2010, s 44CA.
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• the facility that is used (or will be used) to provide the service could meet the total foreseeable demand in the market: ° over the period for which the service would be declared; and ° at the least cost compared to any two or more facilities (which could include the first facility); • the facility is of national significance, having regard to its size and importance to interstate and/or overseas trade or commerce or the importance of the facility to the national economy; and • access (or increased access) on reasonable terms and conditions, as a result of a declaration of the service would promote the public interest. Prior to the 2017 amendments the criteria were that: • access to the facility would promote a material increase in competition in a market, in Australia or overseas, other than the market for the service; • it would be uneconomical for anyone to develop an alternative facility to provide the service; • the relevant facility is of “national significance” having regard to the size of the facility, its importance to interstate or overseas trade or commerce or its importance to the national economy; • the service is not already the subject of an effective access regime; and • access is actually in the national interest.72 [17.370] Promoting competition criterion. A service cannot be declared unless it promotes a material increase in competition in at least one upstream or downstream market. The first step in applying this criterion is to identify a relevant upstream or downstream market.73 In Sydney International Airport,74 an application for declaration of airport services, the Tribunal had to determine whether or not, when ramp handlers compete for the business of handling aircraft that is a distinct field or rivalry and therefore a separate market from the market in which the airport provided services. It concluded that there was a separate market for ground-handling services. Once a relevant market has been identified questions of the effect of access to the service on competition in that market arise. The question is whether or not a material increase in competition will be promoted. Competition will be promoted if access creates the conditions or environment for improving competition from what it would be otherwise. If the opportunities and environment for competition will be better if the service is declared than without declaration, then competition is promoted.75 This is a lower requirement than if the applicant were required to establish that access would actually produce a material increase in competition because it only requires a conclusion that access would promote the required increase; not that it would result in the required increase.76 But the likely increase must be material.
72. Former Competition and Consumer Act 2010, ss 44G(2)(a), 44H(4)(a). See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 242–243. 73. Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. 74. Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10 at 68; (2000) ATPR 41-754 at [204]. 75. Re Sydney International Airport [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. 76. See Re Fortescue Metals Group Ltd [2010] ACompT 2 at [567]. © 2018 THOMSON REUTERS
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As an example, although under the pre-2017 form of the criteria, in the most recent decision, the Tribunal decided that access to the Port of Newcastle would promote a material increase in competition in the market for the export of coal from the Hunter Valley.77 [17.380] Meeting demand criterion. This criterion, in its pre-2017 form, proved to be the most contentious criterion. Until that change the criterion was satisfied if it would be uneconomical for anyone to develop an alternative facility to provide the service. However, what that meant has been a matter of controversy, with different possible tests producing different conclusions. In Sydney International Airport, the Tribunal had taken the view that a net social benefit test was appropriate. That test was explained by the Productivity Commission as follows:78 It would be uneconomical to develop another facility if “for a likely range of reasonably foreseeable demand for the services provided by means of the facility, it would be more efficient, in terms of costs and benefits to the community as a whole, for one facility to provide those services rather than more than one”.
In Duke Eastern Gas Pipeline,79 the Tribunal applied a natural monopoly test, taking the view that if a single piece of infrastructure is able to meet market demand at less cost than two or more pieces of infrastructure, after taking into account productive allocative and dynamic effects, it would be “uneconomic” to duplicate the infrastructure. That test was explained by the Productivity Commission as follows:80 It would be uneconomical to develop another facility if the facility in question can provide society’s reasonably foreseeable demand for the relevant service at a lower total cost than if it were to be met by providing two or more facilities.
[17.390] The High Court settled the matter in Pilbara,81 deciding that the term meant that it would not be profitable for anyone to develop a second or competing facility (a “privately profitable” test). [17.400] The Productivity Commission reviewed each of the tests and advised that the criterion should be applied differently in future. It said that this criterion should be based on a natural monopoly test, which, the Commission explained:82 should be satisfied where total foreseeable market demand for the infrastructure service over the declaration period could be met at least cost by the facility. That is, criterion (b) should be satisfied where the costs from the facility meeting total foreseeable market demand over the declaration period are lower than the costs that would be incurred under the least costly alternative scenario.
77. Re Glencore Coal Pty Ltd [2016] ACompT 6. An application for review of the decision on administrative law grounds was unsuccessful: Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124. 78. Productivity Commission, National Access Regime Inquiry Report, No 66 (2013), p 152. That test was also applied in Re Services Sydney Pty Ltd [2005] ACompT 7. 79. Re Duke Eastern Gas Pipeline Pty Ltd [2001] ACompT 2; (2001) 162 FLR 1; (2000) ATPR 41-821. 80. Productivity Commission, National Access Regime Inquiry Report, No 66 (2013), p 152. 81. The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; (2012) ATPR 41-418. 82. Productivity Commission, National Access Regime Inquiry Report, No 66 (2013), p 167.
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[17.410] The result is that the 2017 amendments completely recast this criterion. The criterion is now:83 that the facility that is used (or will be used) to provide the service could meet the total foreseeable demand in the market: (i) over the period for which the service would be declared; and (ii) at the least cost compared to any 2 or more facilities (which could include the first-mentioned facility).
The Act contains guidance on how the criterion is to be interpreted. It states that, if the facility is currently at capacity, and it is reasonably possible to expand that capacity, the decision-maker is to have regard to the facility as if it had that expanded capacity. It also provides that, the costs to be taken into account in determining whether or not the ‘least cost’ test is satisfied includes all costs associated with having multiple users of the facility (including multiple user costs that would be incurred if the service is declared).84 [17.420] National significance criterion. A service cannot be declared unless the facility by which the service is to be provided is of “national significance” having regard to the size of the facility, its importance to interstate or overseas trade or commerce or its importance to the national economy.85 This requirement was included to avoid some of the instances in which facilities in the United States, such as convention centres and sports stadiums86 were earlier declared essential facilities. The Tribunal has decided that the freight handling facilities at both Sydney and Melbourne international airports87 and various sections of rail track and associated infrastructure were of national significance,88 but that a government computer system used to provide AUSTUDY was not.89 [17.430] Promoting the national interest criterion. Originally, a service could only be declared if to do so would not be contrary to the national interest.90 The 2017 amendments tightened this criterion. Now the criterion requires it to be established that access, or increased access, on reasonable terms, would promote the public interest.91 The public interest criterion is all-encompassing. The question is whether there are any other matters that lead to the conclusion that access would be in the public interest. Although economic efficiency is an important element of public interest, there is more to the concept. In considering whether access would be in the public interest, the factors to be taken into account include ecologically sustainable development, social welfare and equity considerations, transitional issues created 83. Competition and Consumer Act 2010, s 44CA(1)(b). 84. Competition and Consumer Act 2010, s 44CA(2). 85. Competition and Consumer Act 2010, s 44CA(1)(c). 86. See Hart Productions Inc v Greater Cincinnati Convention and Visitors Bureau [1990–2] Trade Cases P 69,233; Hecht v Pro-Football, Inc [1977] Trade Cases P 61,773. 87. Re Australian Cargo Terminal Operations Pty Ltd (1997) ATPR (NCC) 70-000. The Tribunal confirmed this view with respect to Sydney International Airport: see Re Sydney Airports Corporation Ltd [2000] ACompT 1; (2000) 156 FLR 10; (2000) ATPR 41-754. 88. Re Specialised Container Transport (1997) ATPR (NCC) 70-004; Re NSW Minerals Council Ltd (1997) ATPR (NCC) 70-005; Re Specialised Container Transport No 2 (1997) ATPR (NCC) 70006. 89. Re Australian Union of Students (1997) 140 FLR 167; 147 ALR 458; (1997) ATPR 43,953 (41-573). 90. Former Competition and Consumer Act, ss 44G(2)(a), 44H(4)(a). See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 250–252. 91. Competition and Consumer Act 2010, s 44CA(1)(d). © 2018 THOMSON REUTERS
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by reform programs, policies concerning occupational health and safety and industrial relations, economic and regional development, including employment and investment growth, the interests of consumers generally, or a class of consumers and the competitiveness of Australian businesses.92 [17.440] In Australian Cargo Terminal,93 it was suggested that oother relevant issues might include whether declaration would undermine the investment environment necessary for significant competition, the effect on Australia’s international obligations and security issues. The Act now specifically states that the effect that declaring the service would have on investment in infrastructure services and in markets that depend on access to the service are to be taken into account.94 A further factor to be taken into account under this criterion is the administrative and compliance costs that would be incurred by the access provider if the service were declared.95 Of course, public interest is not confined to the factors listed above. The decision whether or not to declare a service may be affected by a wide range of commercial, economic or other considerations. Those additional matters may also be taken into account as long as they are not irrelevant having regard to the purposes of the Act.96 [17.450] The criteria originally included that access could be provided without undue risk to human health and safety.97 Although that is no longer a specific criterion, it remains a factor to be taken into account in assessing where public interest lies. In Australian Cargo Terminal Operations,98 the NCC had no difficulty in concluding that the access to cargo handling facilities and to aprons at Sydney and Melbourne international airports could be provided without undue risk to human health and safety. The Tribunal took the same view with respect to Sydney International Airport.99 The NCC has also concluded that access to rail track could be provided without undue risk to human health and safety.100 [17.460] There has been no decisions on the public interest criterion since it was tightened, but in Virgin Blue,101 the Tribunal decided that it would not be contrary to the public interest to declare airside services at Sydney airport to be in the national interest because increased access to those services would promote competition and any costs of regulation arising from declaration were not of such weight that increased access to the service would be contrary to the public interest. On the other hand, in Australian Union of Students,102 the Tribunal decided that access to the services of a government computer system used to provide AUSTUDY would be 92. 93. 94. 95. 96.
Re Fortescue Metals Group Ltd [2010] ACompT 2 at [1168]. Re Australian Cargo Terminal Operations Pty Ltd (1997) ATPR (NCC) 70-000. Competition and Consumer Act 2010, s 44CA(3)(a). Competition and Consumer Act 2010, s 44CA(3)(b). Sydney Airport Corp Ltd v Australian Competition Tribunal [2006] FCAFC 146; (2006) 155 FCR 124. 97. Former Competition and Consumer Act, ss 44G(2)(d), 44H(4)(d). See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 30th ed, 2009), p 214. 98. (1997) ATPR (NCC) 70-000. 99. Re Sydney International Airport (2000) 156 FLR 10; [2000] ACompT 1; (2000) ATPR 41-754. 100. Re Specialised Container Transport (1997) ATPR (NCC) 70-004. See also Re NSW Minerals Council Ltd (1997) ATPR (NCC) 70-005. 101. Re Virgin Blue Airlines Pty Ltd (2005) 195 FLR 242; [2005] ACompT 5; (2006) ATPR 42-092. 102. (1997) 140 FLR 167; 147 ALR 458; (1997) ATPR 41-573.
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contrary to the national interest because “what the applicant seeks is improperly to use, in furtherance of its own objectives, the coercive powers of the Commonwealth to gain access to the AUSTUDY database”.
When a Declaration Cannot Be Made [17.470] An access declaration cannot be in a number of circumstances. First, it cannot be made in relation to a facility if there is already an effective access regime in place in relation to that facility or the service is subject of an approved access undertaking.103 The main purpose of this provision is to permit State and Territory governments to develop access regimes compliant with the Competition Principles Agreement which can then be accepted by the Federal Treasurer as being an effective access regime. For example, in Dalrymple Bay Coal Terminal,104 the Council recommended, and the Commonwealth Minister subsequently accepted, that an access regime submitted by the Queensland Government for certification of the Dalrymple Bay Coal Terminal should be certified as an effective access regime for 10 years. On the other hand, in NSW Minerals Council105 the National Competition Council decided that the New South Wales Rail Access Regime, established by the New South Wales government in response to the Competition Principles Agreement, was not an effective regime. [17.480] Second, a declaration cannot be made in relation to services to be provided by an exempted proposed facility.106 This exception resulted from concern that investment in significant infrastructure may be inhibited if there were not an opportunity for developers to seek an exemption for new infrastructure. The Act provides for a process by which developers of new infrastructure in relation to which an access application might be made, make a case to the National Competition Council for an exemption and the Council to make a recommendation to that effect to the Treasurer in appropriate circumstances. A service may be exempted (declared ineligible) for declaration for 20 years or more. Third, a service cannot be declared if it is provided by a government-owned facility the construction and operation of which is the subject of a tender process approved by the ACCC.107 Fourth, a service provided by a gas pipeline cannot be declared if either a decision has been made under the National Gas Law108 that the pipeline is not to be covered by the Gas Code for 15 years, or the pipeline has been exempted under that law from price regulation.109
103. Competition and Consumer Act 2010, s 44F(1)(a), (b). 104. Re Dalrymple Bay Coal Terminal, National Competition Council Recommendation, (10 May 2011), . 105. Re NSW Minerals Council Ltd (1997) ATPR (NCC) 70-005 106. Competition and Consumer Act 2010, Pt III Div 2AA. 107. Competition and Consumer Act 2010, Pt IIIA Division 2B 108. See National Gas (South Australia) Act 2008. 109. Competition and Consumer Act 2010, s 44F(1). © 2018 THOMSON REUTERS
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State and Territory Regimes [17.490] States and Territories are entitled to proclaim their own access regimes for essential facilities if they wish to do so.110 The practical consequence of a State or Territory regime being regarded as an effective regime is that the National Competition Council cannot make a recommendation that a service be declared under Pt IIIA if that service is already the subject of an effective regime.111 The Council advises the Federal Treasurer whether or not, in its opinion, a State or Territory regime is an effective regime. In determining whether or not that is the case, the Council applies the principles set out in the Competition Principles Agreement, having regard to the objects of Part IIIA.112 A determination of the effectiveness or otherwise of an access regime does not affect its legality in the State or Territory that introduced it. All that a declaration of effectiveness does is immunise the services covered by the regime from an access application under the Competition and Consumer Act 2010. [17.500] If a State or Territory ceases to be a party to the Competition Principles Agreement, then all declarations that a regime in that State or Territory is an effective regime expire automatically and access applications can be made under Pt IIIA. States and Territories have introduced special access regime legislation in relation to rail and ports and sought determinations from the National Competition Council that access regimes developed by them under that legislation are effective regimes for this purpose. A number of rail regimes have been certified. 113 In NSW, a rail access regime was introduced under the Transport Administration Act 1988 (NSW), but the provisions were repealed when NSW leased its interstate rail track to Australian Rail Track Corporation Ltd, a federal government owned corporation responsible for rail track, which then lodged an access undertaking with the ACCC. In May 2007, rail tracks and associated infrastructure on segments of the Tasmanian railway network were declared for 10 years. [17.510] Recently, the Minister certified a number of State and Territory access regimes in relation, for instance, to water infrastructure,114 port infrastructure,115 and rail infrastructure.116
110. Competition and Consumer Act 2010, s 44M. 111. Competition and Consumer Act 2010, s 44F(1)(a). 112. Competition and Consumer Act 2010, s 44M(4). 113. Queensland Rail Network (19 January 2011); Western Australian Rail Access Regime (11 February 2011); Tasmanian Rail Network (2 October 2007). See also Rail Corporations Act 1996 (Vic), Pt 2A; Australasia Railway (Third Party Access) Act (NT); Australasia Railway (Third Party Access) Act 1999 (SA). 114. Re South Australian Water Infrastructure (22 May 2017), . 115. Re South Australian Ports Access Regime (9 May 2011), . 116. Re South Australian Rail Access Regime (26 July 2011) ; Re Queensland Rail Network (19 January 2011), .
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National Energy Access Regimes
National Energy Access Regimes [17.520] In July 1991, the Commonwealth, New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory established a National Grid Management Council to implement a competitive electricity supply industry in eastern and southern Australia. At the Council of Australian Governments meeting in June 1993, Ministers announced a firm commitment to have the necessary structural changes in place for a competitive electricity market from 1 July 1995. They also confirmed their commitment to establishing an interstate transmission network, separate from generation and distribution interests, noting that the achievement of this would require the settling of important and sensitive issues, including: • market trading, grid pricing and regulatory arrangements; • the budgetary impact on the States; • the resolution of tax compensation issues; and • resolution of reform arrangements for the Snowy Mountains Scheme.117 [17.530] The consequence was that South Australia, New South Wales, Victoria, Queensland and the Australian Capital Territory introduced a National Electricity Law in 1997118 that provided, subject to certain derogations, for the establishment and operation of a national electricity market in those jurisdictions. The objective of that law, and the code established under it, is to:119 promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to— (a) price, quality, safety, reliability and security of supply of electricity; and (b) the reliability, safety and security of the national electricity system.
The National Electricity Code was initially administered by a jointly-owned company, the National Electricity Code Administrator (NECA). The Code was authorised by the ACCC as an industry code.120 However, the arrangements proved unsatisfactory, especially as every decision to amend the Code needed to be approved by both NECA and the ACCC. [17.540] In 1994 the Council of Australian Governments agreed to implement complementary legislation to establish a uniform national framework for access to natural gas transmission pipelines both between and within Australian States and Territories. The result was the National Gas Pipelines Agreement, entered into in November 1997. That agreement provided for South Australia to enact a gas pipelines access law, to be adopted legislatively by all States and the Australian Capital Territory.121 The objective was to establish a uniform national framework for third party access to natural gas pipelines that facilitated the development and operation of a national market for natural gas, prevented abuse of monopoly power,
117. COAG communiqué, 8-9 June 1993. 118. National Electricity (South Australia) Act 1996 (SA), National Electricity (Victoria) Act 1997 (Vic), National Electricity (NSW) Act 1997 (NSW), Electricity (National Scheme) Act 1997 (ACT); Electricity – National Scheme (Queensland) Act 1997 (Qld). Tasmania subsequently joined the scheme when Basslink was under construction: see Electricity – National Scheme (Tasmania) Act 1999 (Tas). 119. National Electricity (South Australia) Act 1996, s 7. 120. Competition and Consumer Act, s 44ZZAA. 121. National Gas Pipelines Access Agreement, cl 5. © 2018 THOMSON REUTERS
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promoted a competitive market for natural gas, and provided rights of access to natural gas pipelines on fair and reasonable conditions. [17.550] In June 2001, the Council of Australian Governments agreed to an independent review of energy market directions “in light of strategic issues affecting Australia’s future energy requirements and the need to respond to likely future challenges and international developments, so that further Australian energy market development can be focused on areas likely to generate the most significant benefits”.122 The review was prompted in part by the view that the then administrative arrangements in relation to the Electricity Code were not optimal. The review, chaired by the Hon Warwick Parer, reported on 20 December 2002.123 The review’s recommendations included that: • a national energy regulator be established to assume the energy regulation roles of the ACCC, the State regulators and NECA; • the Ministerial Council on Energy be the sole ministerial level decisionmaking body; and • a new Gas Advisory and Code Change Committee be established to manage gas pipeline access Code changes and advise Ministers on gas policy matters. [17.560] On 30 June 2004, all governments signed the Australian Energy Market Agreement. That agreement included a commitment to establish an Australian Energy Regulator as the body responsible for economic regulation and compliance with the Codes of the electricity and natural gas industries at a national level.124 In relation to electricity, the National Electricity Code Administrator was replaced by two bodies; the Australian Energy Market Commission and the Australian Energy Regulator. [17.570] The Australian Energy Market Commission was established in 2004 by an Act of South Australia.125 The Commission is the body responsible for rulemaking and energy market development at a national level in respect of the National Electricity Rules,126 previously the National Electricity Code.127 The Australian Energy Regulator, a separate body established under the Competition and Consumer Act128 is administered by the ACCC. It is responsible for the economic regulation of the electricity transmission and distribution networks in the national electricity market and of gas transmission and distribution networks. The functions of the Regulator in relation to electricity include:129 • economic regulation of services provided by a regulated transmission system operator by means of, or in connection with, a transmission system; • monitoring compliance with the National Electricity Law by market participants and other persons; and • investigating and prosecuting breaches of the Law.
122. COAG communiqué, 8 June 2001. 123. Towards a Truly National and Efficient Energy Market Final Report (20 December 2002). 124. Australian Energy Market Agreement, cl 5.1(b). 125. Australian Energy Market Commission Establishment Act 2004. 126. See . 127. Formally called the National Third Party Access Code for Natural Gas Pipeline Systems. 128. Part IIIAA. 129. National Electricity Law, s 15.
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Airport Access
Its functions under the National Gas Law include:130 • approving access arrangements submitted by service providers; • monitoring and enforcing reference tariffs, ring-fencing, incentive regulation and other access arrangements; • arbitrating disputes relating to access terms and conditions; and • overseeing competitive tendering processes for new transmission pipelines.
Telecommunications, Broadband and Broadcast Towers [17.580] Part IIIA does not apply to access to telecommunications services. Access to those services is dealt with in Pt XIC of the Australian Competition and Consumer Act 2010.131 That Part sets out a special access regime to promote the long-term interests of users of telephone services by promoting competition through connectivity of any user to any other user no matter whose infrastructure is used. This is achieved by empowering the ACCC to declare telecommunications services, with the consequence that the provider of the declared service must provide access on agreed terms, or if no agreement can be reached, terms arbitrated by the ACCC. Where a service is declared the ACCC determines pricing principles relating to that service, to which the ACCC must have regard when arbitrating an access dispute.
Airport Access [17.590] When the Federal Government privatised the 17 major airports in Australia in the late 1990s, measures were introduced under the Airports Act 1996 to provide for access management plans for each airport to allow the Minister, by legislative instrument, to formulate schemes for the management of handling aircraft movements at the airports.132 In addition, to allow all parties to adjust to the new operating environment for airports, price regulation comprising a CPI-X annual cap on prices for aeronautical services at 11 of the largest privatised airports was introduced for five years. However, access to airport facilities is now a matter covered by Pt IIIA. As noted earlier, a successful application was made for declaration of airside services at Sydney (Kingsford Smith) Airport under Pt IIIA.133 An application by the Board of Airline Representatives, a body representing scheduled airlines, for declaration of jet fuel infrastructure at Sydney airport was rejected.134
130. See . 131. See Miller’s Australian Competition & Consumer Law Annotated (39th ed, Thomson Reuters, 2017), p 1186. 132. Airports Act 1996, s 201. 133. Re Australian Cargo Terminal Operations Pty Ltd (1997) ATPR (NCC) 70-000; Re Virgin Blue Airlines Pty Ltd [2005] ACompT 5; (2005) 195 FLR 242; (2006) ATPR 42-092; Sydney Airport Corp Ltd v Australian Competition Tribunal [2006] FCAFC 146; (2006) 155 FCR 124. 134. Re Jet Fuel Supply at Sydney Airport (10 May 2012), . © 2018 THOMSON REUTERS
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FURTHER READING Author Abadee
Title “The Essential Facilities Doctrine and the National Access Regime: A Residual Role for S46 of the Trade Practices Act?” Areeda “Essential Facilities: An Epithet in Need of Limiting Principles” Clough Economic Duplication and Access to Essential Facilities in Australia Lipski and Sidak “Essential Facilities” Harper Competition Policy Review Final Report Chapter 24 Hilmer National competition Policy Chapter 11 Hylton “Economic Rents and Essential Facilities” Miller “The Essential Facilities Conundrum” Productivity Review of the National Access Commission Regime Productivity Commission
Review of the Gas Access Regime
Productivity Commission Pengilley
National Access Regime Inquiry Report “Hilmer and Essential Facilities
Quinn and Healy “Part IIIA — the Current State of Play”
410
Publisher/Citation (1997) 5 Trade Practices Law Journal 27
(1990) 58 Anti-Trust Law Journal 841 (2000) 28 ABLR 325
51 Stan LR 1187 (1999) The Treasury, March 2015 AGPS, August 1993 1991 BYU Law Review 1243 (2015) 23 AJCCL 120 Report No 17, 28 September 2001 Report No 34, 11 June 2004 Report No 66, 25 October 2013 (1994) 17 UNSW Law Journal 1 (2014) 22 Australian Journal of Competition and Consumer Law 244
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EXCLUSIONS AND IMMUNITIES [18.30] [18.60] [18.90] [18.140] [18.150] [18.180] [18.220] [18.250] [18.270] [18.280] [18.290] [18.320]
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General Exemptions ............................................................................ Crown Immunity .................................................................................. Matters Authorised by Federal, State or Territory Legislation ............ Consumer Action Groups .................................................................... Covenants on Sale .............................................................................. Employment Conditions ...................................................................... Unincorporated Partnerships .............................................................. Patents, Trademarks, Registered Designs, Copyright and Rights in Circuit Layouts ...................................................................... Quality Standards ................................................................................ Export Contracts ................................................................................. Overseas Cargo Shipping ................................................................... Case Specific Immunity Applications .................................................. [18.330] Authorisation ....................................................................... [18.450] Notifications ........................................................................ [18.490] Class Exemptions ............................................................... [18.550] Merger Clearance ...............................................................
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[18.10] The object of the Competition and Consumer Act 2010 is to enhance the welfare of Australians through the promotion of competition.1 In other words, competition is a means to an end rather than an end in itself. As we have seen, the first modern attempt at competition regulation in Australia, the Trade Practices Act 1965, assumed that practices that might be anticompetitive were nevertheless in the public interest. As a consequence anticompetitive arrangements and practices were, with few exceptions, regarded as legal unless it could be established that they were actually contrary to the public interest. [18.20] The Competition and Consumer Act 2010 is based on the reverse premise. Arrangements and conduct covered by its provisions are presumed to be contrary to the public interest unless proven to have overriding public benefits. The Act recognises that there are some circumstances in which public interest considerations militate against the full rigour of competition law applying. In those circumstances a decision was made to provide explicit exemptions. But aside from those specific exemptions, the balancing on public benefits and anticompetitive effects is not left to the courts in Australia. If immunity on public benefit grounds is to be obtained, it must be applied for, on a case-by-case basis, through an administrative procedure explained in this chapter.
1.
Competition and Consumer Act 2010, s 2.
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General Exemptions [18.30] First, the Act contains a number of general exemptions and limited exemptions that apply in relation to its competition provisions. In summary, the generally applicable exemptions apply to: • anything specified in and specifically authorised by federal legislation, other than legislation relating to patents, trademarks, designs or copyrights;2 and • things done in any State or Territory specified in and specifically authorised by State or Territory legislation, as long as the State or Territory is a party to the Conduct Code Agreement and the Competition Principles Agreement.3 [18.40] The following are also exempted, except in relation to the secondary boycotts and resale price maintenance provisions:4 • conduct to the extent that it relates to remuneration, conditions of employment, hours of work and working conditions of employees; • restrictive provisions in employment contracts restricting non-corporate employees in relation to the work which the employee may engage in either during or after the termination of the employment contract (similar provision is made in relation to contracts for services); • provisions requiring a person to comply with standards of dimension, design, quality or performance laid down by the Standards Australia or any other prescribed body; • arrangements between non-corporate partners and former partners in relation to: º the terms of the partnership; º the conduct of the partnership business; º competition between the partnership and the partner; • arrangements for the protection of a purchaser in respect of the goodwill of the business purchased by the purchaser; and • arrangements relating exclusively to the export of goods from Australia or the supply of services outside Australia provided certain notification requirements are met. There is also an exemption, except for the purposes of the resale price maintenance provisions, in relation to acts done otherwise than in trade or commerce against suppliers of goods and services by ultimate users or consumers.5 [18.50] As far as trademarks, certification marks, patents, registered designs, copyrights and rights in circuit layouts are concerned, the Act provides that contravention of the competition provisions, other than the monopolisation and resale price maintenance provisions, will not be regarded as having been committed by imposing or giving effect to what might be broadly described as licensing conditions for the protection of the rights conferred.6
2. 3. 4. 5. 6.
Competition and Consumer Act 2010, s 51(1)(a). Competition and Consumer Act 2010, s 51(1)(b)-(e). 51(1C)(e). Competition and Consumer Act 2010, s 51(2). Competition and Consumer Act 2010, s 51(2A). Competition and Consumer Act 2010, s 51(3).
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Crown Immunity
Crown Immunity [18.60] Where a government, statutory authority or government-owned corporation is concerned with or involved in the activity, whether or not the Act applies will depend on the terms of the statute. The general principle is that no statute binds the Crown unless the Crown is expressly named in it or unless there is a necessary implication that the Crown is to be bound.7 There are express provisions to the effect that the Act binds the Crown, in the right of the Commonwealth, the States and Territories, but only to the extent that the Crown carries on a business.8 Consequently, the Act does not bind the Crown where it is not carrying on a business. However, there is an explicit exception, where the Act would potentially apply to the Commonwealth, a State or Territory or their authorities. If they are party to an anticompetitive concerted practice they will not breach the Act if they are the only participants in that practice.9 That exception relates to the application of certain provisions of the New Zealand Commerce Act 1986, both within and outside Australia.10 [18.70] As we saw in Chapter 9, where the Crown has immunity, that immunity was thought to run to any contract, arrangement or understanding entered into by the Crown, thereby also providing immunity to third party participants in the relevant contract, arrangement or understanding. That was the view initially taken by the High Court.11 However, in Baxter Healthcare the High Court reached a different conclusion. The ACCC took action alleging breaches of the competition provisions of the Act in relation to contracts for which Baxter had successfully tendered to the New South Wales Government. Regarding itself bound by Bradken, the Full Federal Court12 reluctantly decided that Crown immunity applied. The court was therefore constrained to find that Baxter had not misused market power or engaged in exclusive dealing in tendering to State and Territory health authorities to supply a range of therapeutic products at a bundled price that was lower if the hospitals took the entire bundle. However, the Federal Court made its concern about the outcome clear, stating: The amount involved in the combined purchases of goods and services by the executive governments of the States and State instrumentalities is massive and, as this case illustrates, in many fields would dominate demand. It is one thing to exempt the executive government from legislative prohibition as to conduct, particularly where the dominant position of the executive government in many markets would complicate procurement. It is another to have a substantial area of commerce in which restrictive practices can
7. 8.
9. 10. 11. 12.
Province of Bombay v Municipal Corporation of the City of Bombay [1947] AC 58; Bropho v Western Australia [1990] HCA 24; (1990) 171 CLR 1; 64 ALJR 374. The Harper Panel recommended that the Act should be broadened in this respect to apply insofar as the relevant government or its authorities undertakes activities in trade or commerce: Harper Report, pp 56, 278–282. The Treasurer announced on 24 November 2015 that the government supported the recommendation, but that amendment has not been enacted. Competition and Consumer Act 2010, s 45(8AA). Competition and Consumer Act 2010, s 46B. Bradken Consolidated Ltd v BHP Co Ltd [1979] HCA 15; (1979) 145 CLR 107; 53 ALJR 452; 24 ALR 9; (1979) ATPR 40-106. ACCC v Baxter Healthcare Pty Ltd [2006] FCAFC 128; (2006) 153 FCR 574; 232 ALR 627; (2006) ATPR 42-128.
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be carried on by all those dealing with a government, perhaps to the disadvantage of the public purchasing authority, but also to the detriment of other suppliers and consumers.13
[18.80] When the matter came before the High Court, the court held that the Act applies to parties contracting with government. If, in the course of conduct in relation to dealings with government, a corporation engages in conduct that would be a contravention of the Act, the Act will apply.14 While the government may be entitled to immunity others involved will not. Whether or not the Act applies to the government depends on whether or not the challengeable conduct was in the course of carrying on a business.15
Matters Authorised by Federal, State or Territory Legislation [18.90] In determining whether or not a contravention of most of the competition provisions has occurred, any act or thing specifically authorised by federal legislation (other than legislation relating to patents, trade marks, designs or copyright) or by State or Territory legislation is to be ignored.16 However, State legislation cannot provide an exemption from the merger provisions.17 Legislation for this purpose includes Acts, ordinances and regulations. It also includes licenses or other instruments pursuant to Acts, ordinances or regulations. However, where the exemption is by license or other instrument, the law under which it is made must, in addition to meeting other requirements set out below, specify the attributes of the conduct that persons are authorised to engage in and the instrument must specify the person authorised to engage in the conduct and/or the place where the conduct is to occur.18 [18.100] There are a number of pre-conditions before State or Territory legislation will be regarded as coming within the exemption. The exempting legislation must, in addition to specifically authorising the arrangement or conduct, expressly refer to the Act.19 Where the exemption is by regulation the exempting regulations have a two-year sunset, after which the regulation ceases to apply and cannot be re-enacted.20 There is a further condition that relates to the status of the State or Territory as a participating jurisdiction.21 At the time of the alleged contravention occurs one of two circumstances must exist. The relevant State or Territory must be a party
13. 14. 15. 16.
17. 18. 19. 20. 21.
[2006] FCAFC 128; (2006) 153 FCR 574; 232 ALR 627; (2006) ATPR 42-128 at [102]. ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; (2007) 81 ALJR 1622. For a discussion of what that entails see [9.170]-[9.320]. For an example of the type of provision to which s 51(1)(a) applies see the Wheat Marketing Act 1989 (Cth), Act No 58 of 1989, s 57(6) (repealed). See also Neat Domestic Trading Pty Ltd v AWB Ltd [2001] FCA 1178; (2001) 114 FCR 1; (2001) ATPR 41-836. Competition and Consumer Act 2010, s 51(1C)(b). Competition and Consumer Act 2010, s 51(1A). Competition and Consumer Act 2010, s 51(1C)(a). Competition and Consumer Act 2010, s 51(1C)(c) and (d). A participating jurisdiction is one that is a party to the Competition Principles Agreement, has adopted the Competition Code as the law of the jurisdiction and which maintains that law in force: see Competition and Consumer Act 2010, Pt XIA.
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Matters Authorised By Federal, State Or Territory Legislation
to the Competition Principles Agreement and a fully-participating jurisdiction.22 Alternatively, if the State or Territory has ceased to be a fully-participating jurisdiction it must have withdrawn less than 12 months prior to the contravention, the exempting legislation must have been in force before it withdrew and the breach must relate to a contract made before it withdrew. [18.110] State or Territory exempting legislation will not be regarded as specifically authorising anything unless two conditions are met. First, the legislation must identify an “act or thing” to be authorised. There needs to be some action on to which the relevant legislation may attach.23 The legislation must then manifest an explicit legislative intention that the identified act or thing, if done or existing, is not to be a link in the chain of proof of a liability under the Act.24 Ku-ring-gai25 concerned a regulation requiring the rules of registered building societies to set out whether insurance was required to be effected with a nominated insurer. That constituted legislative approval or authorization of the inclusion in the rules of such a provision, but fell short of a specific authorisation or approval. [18.120] Air New Zealand 26 was concerned with an alleged inconsistency between the Air Navigation Act and the Competition and Consumer Act 2010. The ACCC had brought a price-fixing case against the airline in relation to the imposition of fuel surcharges on cargo shipments by it and a number of other airlines. The airline argued that the fixing of the surcharges had been authorised under the Air Navigation Act 1920, which, it was argued, provided for relevant airlines to establish tariffs in accordance with the rate-fixing machinery of the International Air Transport Association. The argument failed because the relevant provision was in an Air Services Agreement made under the Air Navigation Act 1920; not in the Act or regulations made under it. Subsequent appeals on the basis of inconsistency also failed.27 [18.130] Earlier cases that considered the matter before the exemption was tightened include Paul Dainty,28 where the Federal Court held that legislation passed in Victoria approving and authorising agreements for the management of the Tennis Trust took those agreements outside the operation of the Act. In Legion Cabs,29 the Federal Court considered whether provisions of the Co-operation Act 1923 (NSW) were sufficient to exempt from the Act Legion Cabs’ exclusive dealing arrangements in relation to petrol. The court held that they were not.
22. This is described in Chapter 4. 23. ACCC v Air New Zealand Ltd [2014] FCA 1157. 24. Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 36 FLR 134; 22 ALR 621; (1978) ATPR 40-094. These requirements are made clear by s 51(1C). 25. Ibid. 26. ACCC v Air New Zealand Ltd [2014] FCA 1157. 27. Air New Zealand Ltd v ACCC [2017] HCA 21; (2017) 91 ALJR 648. 28. Paul Dainty Corp Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495; 94 ALR 225; (1990) ATPR 51,442 (41-029). 29. Trade Practices Commission v Legion Cabs (Trading) Co-operative Society Ltd ([1978] FCA 47; 1978) 35 FLR 372; (1978) ATPR 40-092. © 2018 THOMSON REUTERS
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Consumer Action Groups [18.140] In determining whether or not a breach of the competition provisions has occurred, regard is not to be had to conduct by consumers against suppliers, unless that conduct is in the course of trade or commerce or involves resale price maintenance.30 This exemption provides protection for lobby groups and other groups of consumers taking collective action against suppliers, such as boycotting particular products or suppliers, as long as the reasons for doing so are unrelated to commercial gain by the consumers involved. Although any consumers or ultimate users of goods or services may not be liable, a corporation that is a party to any such act will not be immune.31
Covenants on Sale [18.150] In determining whether or not a breach of the competition provisions has occurred, other than the resale price maintenance and secondary boycott provisions, regard is not to be had to provisions in any contract for sale of a business or of the shares in a body corporate carrying on a business solely for the protection of the purchaser in relation to goodwill.32 This reflects the position at common law in relation to restraints of trade. [18.160] The common law test to determine the validity of a restraint of trade, and which applies in Australia,33 was enunciated in Nordenfelt34 as follows: All interference with individual liberty of action in trading, and all restraints of trade themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by special circumstances of a particular case.
The Nordenfelt test requires all contracts in restraint of trade to be justified as reasonable in the interests of both the parties. It does so by applying the test of reasonableness according to the situation the parties occupy, thus recognising the different considerations that affect vendor and purchaser of the goodwill of a business.35 For example, in Petersville,36 the court found a 15-year restraint to be far broader than necessary to protect the goodwill acquired by the recipient of the restraint. The Act specifically provides that the law relating to restraints of trade continue to operate to the extent that it is capable of operating concurrently with the Competition and Consumer Act 2010.37 30. 31. 32. 33. 34. 35. 36.
37.
Competition and Consumer Act 2010, s 51(2A). ACCC v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1; (2007) 81 ALJR 1622. Competition and Consumer Act 2010, s 51(2)(e). Buckley v Tutty (1971) 125 CLR 353; 46 ALJR 23; (1972) ALR 370; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288; 1 ALR 385; (1973) ATPR 40-001. Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 at 565. Peters American Delicacy Co Ltd v Patricia’s Chocolates and Candies Pty Ltd (1947) 77 CLR 574 at 590; 21 ALJ 281. Petersville Ltd v Peters (WA) Ltd [1999] FCA 5; (1999) 160 ALR 359; (1999) ATPR 41-674; Upheld on appeal: see Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126; 75 ALJR 1385; (2001) ATPR 41-830. Competition and Consumer Act 2010, s 4M.
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Employment Conditions
[18.170] Returning to the specific exemption for covenants protecting goodwill, the exemption preserves, for the purposes of the Competition and Consumer Act 2010, those parts of any such covenant that would otherwise be valid. That means that, where there is other legislation touching on the subject matter that may impact on the common law position, it is to be applied before considering this exemption.38
Employment Conditions [18.180] There is an exemption, other than for secondary boycotts and resale price maintenance, in relation to the remuneration, conditions of employment, hours of work or working conditions of employees.39 The provision does not provide a blanket exemption for everything that might be agreed between employer and employee. It only applies “to the extent that” the relevant provision or concerted practice “relates to” remuneration, etc. It applies in the following circumstances:40 • where the making of a contract arrangement or an understanding (or a provision of any of them) or a concerted practice that is otherwise challengeable under the Act, relates to remuneration, etc of employees; and • where the act done or concerted practice that is otherwise challengeable relates to remuneration, etc of employees. The drafting of the exemption was simplified in the 2017 amendments following the Harper Report, but without changing the scope or meaning of the exemption. Whether or not the relevant subject matter “relates to” remuneration, etc, is not an easy question to answer. It is said that there is no expression more general or farreaching41 and has been suggested that, in determining whether or not something “relates to” something else, the court should not adopt a “precious”, “over-technical” or “hypercritical” approach.42 [18.190] However, in Adamson,43 a claim that the exemption applied was rejected. That case involved a challenge by a number of professional football players to the League’s rules on player transfers. The League argued that the then Trade Practices Act 1974 did not apply because the challenged rules related to employment. The court rejected that argument, concluding that the transfer rules did not relate to employment conditions. The rules were directed to the circumstances under which clubs could recruit players and said nothing about their remuneration, etc once recruited.
38. IRAF Pty Ltd v Graham [1982] 1 NSWLR 419; (1982) 59 FLR 115; 41 ALR 209; (1982) ATPR 40281. For instance, the Restraints of Trade Act 1976 (NSW) operates to sever provisions in restraint of trade into provisions that are contrary to public policy and therefore void and provisions that are not and which are therefore valid. 39. Competition and Consumer Act 2010, s 51(2)(a). 40. See Adamson v New South Wales Rugby League Ltd [1991] FCA 9; 100 ALR 479; 27 FCR 535; (1991) ATPR 41-084. The views expressed were not challenged upset on appeal. 41. Commissioners of Inland Revenue v Maple & Co (Paris) Ltd [1908] AC 22. The phrase considered there was ”relating to”. 42. Singapore Airlines Ltd v ACCC [2009] FCAFC 136; (2009) 260 ALR 244; (2009) ATPR 42-297. See also Seven Network Ltd v ACCC [2004] FCAFC 267; (2004) 140 FCR 170; (2004) ATPR 42035. Both cases were concerned with the phrase “relating to” in s 155. 43. Adamson v New South Wales Rugby League Ltd [1991] FCA 425; (1991) 27 FCR 535; 100 ALR 479; (1991) ATPR 41-141. © 2018 THOMSON REUTERS
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[18.200] The exemption only applies to arrangements with employees. It does not apply to arrangements with contractors — persons employed under contracts for services, as opposed to contracts of service. In Adamson,44 there was no dispute that the players were employees rather than independent contractors. [18.210] Restrictive covenants and restraints in employment contracts operating post-employment are not covered by this exemption. At common law they will only be enforceable if the following tests are met. First, the restraint must be directed at serving the legitimate interests of the employer. Second, those interests are limited to protecting the employer against the employee using confidential business information of the employer or the connection with customers and clients that the employee might acquire by reason of the employment.45
Unincorporated Partnerships [18.220] In determining whether or not a breach of the competition provisions has occurred, other than in relation to resale price maintenance and secondary boycotts, regard is not to be had to certain arrangements between partners in partnership in which none of the members is an incorporated body.46 This exemption only applies to a provision of a contract, arrangement or understanding or to a concerted practice, to the extent that it relates to the terms of the partnership, the conduct of the partnership business, or restrictive covenants on partners while they are members of the partnership or after they cease to be a partner. [18.230] A partnership is defined in the uniform Partnership Acts to mean “carrying on business jointly with a view to profit”. Where two or more people carry on business separately, sharing premises, equipment or staff, the exemption will not apply unless they have formed a partnership. The exemption will also not apply to joint ventures or to investment and other syndicates unless they can be regarded as carrying on a business in partnership. [18.240] When the Act came into force this exemption would have applied to a very large number of professional partnerships, particularly in the legal and accounting professions. However, to the extent that partnerships are now entitled to include incorporated partners, if a corporate partner is admitted to the partnership, the exemption will not apply. The exemption will also not apply to limited partnerships in which the general partner is incorporated.
Patents, Trademarks, Registered Designs, Copyright and Rights in Circuit Layouts [18.250] The Act recognises that conflict can arise between the protection and enjoyment of proprietary rights in intellectual property and the competition provisions of the Competition and Consumer Act 2010. Consequently certain provisions in licences and assignments of trademarks, patents, registered designs, copyright or protected rights in circuit layout are exempted from the competition 44. Adamson v New South Wales Rugby League Ltd [1991] FCA 425; (1991) 27 FCR 535; 100 ALR 479; (1991) ATPR 41-141. 45. Lindner v Murdock’s Garage [1950] HCA 48; (1950) 83 CLR 628 at 653–654. See also Synavant Australia Pty Ltd v Harris [2001] FCA 1517; Rentokil Pty Ltd v Lee (1995) 66 SASR 301; (1996) ATPR 41-451. 46. Competition and Consumer Act 2010, s 51(2)(d).
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provisions, other than misuse of market power and resale price maintenance.47 The exemption is not absolute. It only applies in relation to: • conditions in licenses and assignments to the extent that the conditions that would otherwise contravene the Act relate to the relevant patented invention, goods to which the registered design is to be applied, the subject matter of the copyright or the protected circuit layout; • inclusion in contracts, arrangements or understandings authorising the use of certification trademarks, in accordance with Pt XI of the Trade Marks Act 1995; and • provisions in contracts, arrangements and understandings in relation to other trademarks (not certification trade marks) between registered proprietors of the trademark or registered users under Pt IX of the Trade Marks Act 1995, to the extent that they relate to the kinds, qualities or standards of goods bearing the mark that may be produced or supplied. [18.260] This exemption has been reviewed on numerous occasions. Its repeal has been recommended by the Harper Panel,48 the Australian Law Reform Commission49 and by the House of Representatives Standing Committee on Infrastructure and Communications.50 The government decided to ask the Productivity Commission to undertake an overarching review of intellectual property and await the outcome of that enquiry. The Productivity Commission issued its report on 20 December 2016, supporting repeal.51
Quality Standards [18.270] In determining whether or not a contravention of the competition provisions, other than in relation to resale price maintenance and secondary boycotts, has occurred, regard is not to be had to provisions obliging a person to comply with or apply standards approved or prepared by Standards Australia or by any prescribed association or body.52 To date, no association or body has been prescribed. In order to come within the exemption the relevant standard must be a standard of dimension, design, quality or performance. Standards Australia is a non-government, not-for-profit organisation, accredited by the Australian Government. It develops and adopts standards in Australia and facilitates Australian participation in international standards development through technical committees.53 As the Harper Panel noted,54 there are more than 6,800 Australian standards, the large majority of which are voluntary. In addition to this exemption, there are a number of industry codes provided for in regulations under the Act.55 47. Competition and Consumer Act 2010, s 51(3). 48. Harper Report, p 131. 49. ALRC, Copyright and the Digital Economy, Final Report (2014). 50. Standing Committee on Infrastructure and Communications, At What Cost? (2013). 51. Productivity Commission, Intellectual Property Arrangements, No 78 (2016). 52. Competition and Consumer Act 2010, s 51(2)(c). 53. . 54. Harper Report, p 136. 55. See Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017), pp 561–574. © 2018 THOMSON REUTERS
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Export Contracts [18.280] In determining whether or not a contravention of the competition provisions, other than in relation to resale price maintenance and secondary boycotts, has occurred, regard is not to be had to provisions of contracts, arrangements or understandings or to concerted practices, to the extent that they relate exclusively to the export of products or supply of services outside Australia, provided full and accurate particulars are submitted to the ACCC within 14 days of the date on which the contract, arrangement or understanding or concerted practice is entered into. Those particulars do not need to include particulars of prices but must include particulars of any method of fixing, controlling or maintaining prices.56 The ACCC’s register of these arrangements is not public. Where the relevant details of an export contract have been provided to the ACCC within time, any party to the contract, arrangement or understanding may seek a certificate stating the particulars supplied and the date on which they were furnished to the ACCC.57
Overseas Cargo Shipping [18.290] Although there is no specific exemption for overseas cargo shipping, the provisions of Pt X of the Competition and Consumer Act 2010 contain a comprehensive regime for regulating international liner cargo shipping services. The Act provides for the parties to a conference agreement relating to international liner cargo shipping services to apply to the ACCC for the registration of the agreement. If the conference agreement is registered, the parties are given partial and conditional exemptions from the anticompetitive agreement and exclusive dealing provisions of the Act. [18.300] Part X has a number of objects. They include, to ensure that Australian exporters have continued access to reliable outwards liner cargo shipping services at internationally competitive freight rates, and to promote conditions in the international liner cargo shipping industry that encourage stable access to export markets for exporters in all States and Territories. The objectives are to be achieved by permitting continued conference operations while enhancing the competitive environment for international liner cargo shipping services through the provision of adequate and appropriate safeguards against abuse of conference power.58 [18.310] The Harper Panel recommended59 repeal of Part X. The Panel also recommended that: • a block exemption granted by the ACCC should be available for liner shipping agreements that meet a minimum standard of pro-competitive features. The minimum standard of pro-competitive features to qualify for the block exemption should be determined by the ACCC in consultation with shippers, their representative bodies and the liner shipping industry;
56. 57. 58. 59.
Competition and Consumer Act 2010, s 51(2AA). Competition and Consumer Act 2010, s 166. Competition and Consumer Act 2010, s 10.01. Harper Report, p 40.
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• other agreements that risk contravening the competition provisions of the Act should be subject to individual authorisation, as needed, by the ACCC; and • as repeal of Part X would mean that existing agreements are no longer exempt, transitional arrangements are warranted. A transitional period of two years should allow for the necessary authorisations to be sought and to identify agreements that qualify for the proposed block exemption. The government announced that it supported measures to ensure that liner shipping arrangements are competitive and efficient, but stopping short of accepting that Pt X should be repealed.60
Case Specific Immunity Applications [18.320] There are four administrative processes by which immunity from some of the competition provisions can be obtained in specific circumstances. In each case immunity is granted, on application by the person seeking the immunity, by the ACCC or the Australian Competition Tribunal, following a public process.
Authorisation [18.330] The first is the Authorisation process. The Act empowers the ACCC, or on review, the Australian Competition Tribunal, to grant authorisations on a caseby-case basis to enter or give effect to arrangements even if they are anticompetitive, if they have overriding public benefits.61 An Authorisation application may relate to any conduct that may otherwise be a contravention of the Act. This can include cartels, collective bargaining, exclusive dealing, mergers, resale price maintenance and other potentially anticompetitive arrangements. The process is a public process (with appropriate protections for sensitive confidential information), commenced by an application by those seeking the Authorisation. [18.340] An Authorisation can only be granted if the following tests are satisfied: • the conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition; or • the conduct would result, or be likely to result, in a benefit to the public and that benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct.62 [18.350] While an Authorisation remains in force, no party to the contract, arrangement, understanding or conduct will be in breach of the relevant competition provision of the Act by entering or giving effect to the contract, arrangement, understanding or conduct to which the authorisation relates.63 Any merger concluded while an Authorisation is in force will not be able to be challenged. Authorisation may be granted to cover those who subsequently become parties to the contract, arrangement or understanding, in addition to current parties,
60. 61. 62. 63.
Australian Government Response to the Competition Policy Review, p 6. Competition and Consumer Act 2010, ss 88. Competition and Consumer Act 2010, s 90(7). Competition and Consumer Act 2010, s 88(2).
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as long as that is its expressed effect and the other parties are identifiable with sufficient certainty.64 Immunity can be withdrawn by the ACCC if the Authorisation was obtained as a result of false or misleading information, if conditions imposed have not been complied with, or if there has been a material change in circumstances.65 [18.360] Originally the Act contained a Clearance procedure, in which the Commission could “clear” contracts, arrangements, understandings or conduct that was unlikely to have an anticompetitive effect. However, the Commission was overrun with Clearance applications and the Act was amended in 1977 to remove the procedure. The ACCC re-introduced an informal clearance process in relation to mergers in 2004, but the Act was never amended to provide statutory support for that process. Although a separate Clearance process has not been reintroduced, the Act was amended in 2017, following the Harper Report, to give effect to a recommendation that there should be a single authorisation procedure under which the ACCC could grant exemptions, including if the conduct would not be likely to substantially lessen competition.66 The result is that the ACCC can now grant an Authorisation if it concludes that conduct would not have the effect, or would not be likely to have the effect, of substantially lessening competition.67 [18.370] What is a public benefit? Stated simply, anything of benefit to the community generally will be a public benefit.68 As the Tribunal explained:69 Public benefit has been, and is, given a wide ambit by the Tribunal as, in the language of QCMA …, “anything of value to the community generally, any contribution to the aims pursued by society including as one of its principal elements … the achievement of the economic goals of efficiency and progress”. Plainly the assessment of efficiency and progress must be from the perspective of society as a whole: the best use of society’s resources. We bear in mind that (in the language of economics today) efficiency is a concept that is usually taken to encompass “progress”: and that commonly efficiency is said to encompass allocative efficiency, production efficiency and dynamic efficiency.
[18.380] The following is a list of benefits that could constitute public benefits, but the list is not exhaustive:70 • economic development, such as encouragement of research and capital investment; • fostering business efficiency, particularly where it results in improved international competitiveness; • industrial rationalisation, resulting in more efficient allocation of resources and in lower or contained unit production costs;
64. Competition and Consumer Act 2010, s 88(2). 65. Competition and Consumer Act 2010, s 91B. 66. Harper Report, p 399. 67. Competition and Consumer Act 2010, s 90(7)(a). 68. Queensland Co-op Milling Assn Ltd, Re (1976) 25 FLR 169; 8 ALR 481; (1976) ATPR 40-012; Re Travel Industries Automated Systems Pty Ltd (1993) ATPR (Com) 50-131; Re 7-Eleven Stores Pty Ltd (1994) ATPR 41-357. 69. Re 7-Eleven Stores Pty Ltd (1994) ATPR 41-357. 70. The list is drawn from the Commission decision in Re ACI Operations Pty Ltd (1991) ATPR (Com) 50-108.
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• expansion of employment or prevention of unemployment in efficient industries; • employment growth in particular regions; • industrial harmony; • assistance to efficient small business, such as guidance on costing and pricing or marketing initiatives which promote competitiveness; • improvement in the quality and safety of goods and services and expansion of consumer choice; • supply of better information to consumers and businesses to permit informed choices in their dealings; • promotion of equitable dealings in the market; • promotion of industry cost savings, resulting in contained or lower prices at all levels in the supply chain; • development of import replacements; • growth in export markets; and • steps to protect the environment. [18.390] However, the ACCC’s has said that, in its experience most public benefits accepted by it can be attributed to improvements in economic efficiency by addressing a source of market failure or market imperfection.71 It lists the following which it describes as more common public benefits resulting from efficiency improvements: • reducing transaction costs; • addressing an externality such as an environmental or social concern; • reducing information asymmetry; • achieving economies of scale, scope and/or density; • facilitating the provision of public goods; • addressing the principal/agent problem; • providing incentives for long-term investment; and • reducing search and switching costs. [18.400] When considering whether efficiencies should be taken into account as public benefits, it is the total welfare standard that is appropriate, rather than the more limited consumer welfare standard.72 These standards are described in Chapter 3, but briefly, under the total welfare standard cost savings achieved by a firm in supplying products or services to the public are a public benefit to be taken into account where they result in pass-through that reduces prices to final consumers, or in other benefits (ie dividends to a range of shareholders or return to the firm for future investment). However, the weight to be given to cost savings may vary depending upon who takes advantage of them and the time period over which the benefits are received. Public benefits are difficult to measure in precise quantitative terms so there is no requirement for them to be quantified precisely. Nevertheless, general statements about possible or likely benefits will not be given much weight unless supported by factual material.73 Furthermore, there must a real chance that claimed public benefits 71. ACCC, Authorisation Guidelines (2013), para 6.14. 72. Re Qantas Airways Ltd [2004] ACompT 9; (2004) ATPR 42-027; (2005) ATPR 42-065 at [91]. 73. Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385; (1977) ATPR 40-023. © 2018 THOMSON REUTERS
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will eventuate, rather than the prospects of that occurring being merely possible or even more probably than not.74 [18.410] When weighing public benefits against anticompetitive detriments the approach is a “future-with-and-without test”. That is to say, the task is to compare the position which would, or would be likely to, exist in the future based on a “real chance” if an Authorisation were granted, with the position if an Authorisation were not granted.75 All of the circumstances relating to public benefit must be considered, including how the proposed arrangement is likely to operate in practice so as to give rise to the claimed public benefits. The “future with or without test” is not a consideration of a hypothetical future. It requires is a comparison of a future in which the conduct, the subject of the application, occurs, with a future in which that conduct does not occur. This is not the same as comparing a future with Authorisation to a future without it. A decision not to grant an Authorisation sis not equated with an assumption that the conduct the subject of the application, would not occur.76 [18.420] The Act contains an important limitation on the power to grant authorisations. An Authorisation cannot be granted to enter an arrangement that has already been entered.77 However, arrangements may be entered with a condition precedent that Authorisation is required before the arrangement comes into effect, as long as the application is made within 14 days.78 No such concession applies in relation to exclusive dealing arrangements but there is a similar provision in relation to mergers. Although authorisations cannot be granted for arrangements that have already been entered, they can be granted to allow parties to give effect to the arrangement in the future, although any such authorisation does not confer retrospective protection. [18.430] Authorisations may be granted subject to conditions,79 and often are, where conditions are required to ameliorate anticompetitive effects that would otherwise tip the balance in favour of not granting the Authorisation. The Act specifically authorises the ACCC to grant a merger authorisation on the condition that includes an enforceable undertaking.80 This is a recent addition to the Act but the ACCC has been accepting enforceable undertakings for many years in informal merger clearance cases without challenge. [18.440] Authorisations may be granted for a limited time period.81 Authorisations were originally intended to be a right only able to be rescinded in changed circumstances or where obtained due to misleading conduct. Although 74. Re Jools [2006] ACompT 5; (2006) 233 ALR 115; (2006) ATPR 42-122; Re VFF Chicken Meat Growers’ Boycott Authorisation [2006] ACompT 2; (2006) ATPR 42-120. 75. Re Queensland Independent Wholesalers Ltd (1995) 132 ALR 225; (1995) ATPR 41-438; Re Qantas Airways Ltd [2004] ACompT 9; Re VFF Chicken Meat Growers Boycott Authorisation [2006] ACompT 2; (2006) ATPR 42-120; Re Medicines Australia Inc [2007] ACompT 4; Re Macquarie Generation and AGL Energy Ltd [2014] ACompT 1. 76. Re Medicines Australia Inc [2007] ACompT 4; Re Macquarie Generation and AGL Energy Ltd [2014] ACompT 1. 77. Competition and Consumer Act 2010, s 88(6). 78. Competition and Consumer Act 2010, s 45(9). 79. Competition and Consumer Act 2010, s 88(3). 80. Competition and Consumer Act 2010, s 88(4). Enforceable undertakings are provided for in s 87B. 81. Competition and Consumer Act 2010, s 91(1).
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originally this power was used sparingly, the practice now is to place limits on the duration of Authorisations by approving them for a number of years. Whether or not an Authorisation is granted for a time-limited period, the ACCC may unilaterally revoke it, after consultation with the party, if a condition has not been complied with, there has been a material change in circumstances or if it was granted on the basis of materially false or misleading information.82 Authorisations have been granted in a wide variety of instances, each of which depends on its own facts. Examples are in Appendix 7.83
Notifications [18.450] The Act also provides for a different type of immunity, called a Notification. It is available for exclusive dealing conduct, including third line forcing, for resale price maintenance and for collective bargaining. Where a notification is in force, the parties covered by it are entitled to give effect to the notified conduct without contravening those provisions of the Act.84 [18.460] The difference between Notification and Authorisation is that notification is a simpler process. Where the notified conduct is exclusive dealing (including third line forcing), immunity is obtained as soon as a valid Notification form has been lodged with the ACCC. The firm’s conduct is deemed not to have an anticompetitive purpose or effect.85 That immunity can only be removed if the ACCC is satisfied of two conditions: • the conduct has the purpose or likely effect of substantially lessening competition; and • in all the circumstances either no public benefit has resulted or is likely to result from the conduct or any public benefit likely to result would not outweigh the detriment to the public constituted by the lessening of competition.86 [18.470] However, before withdrawing the immunity the ACCC is required to conduct an inquiry and to comply with a predetermination hearing procedure.87 Where the ACCC decides to withdraw the protection, the protection ceases 30 days after the ACCC notifies the corporation of its decision, but the ACCC has power to extend that period.88 [18.480] The position with collective bargaining and resale price maintenance is slightly different. When a Notification form is lodged in relation to collective bargaining, statutory immunity only comes into effect 14 days after lodgement, or if the ACCC decides there is no public detriment within that period, on the date the ACCC gives notice to that effect.89 With Notifications of resale price maintenance
82. Competition and Consumer Act 2010, s 91B(3). 83. For a more comprehensive review of authorisations and of merger clearances see Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters, 40th ed, 2018). 84. Competition and Consumer Act 2010, ss 45AR(2)(b)(iii), 47(10A), 48(2). 85. Competition and Consumer Act 2010, s 93(7). 86. Competition and Consumer Act 2010, s 93(3). 87. Competition and Consumer Act 2010, ss 93(4), 93A. 88. Competition and Consumer Act 2010, s 93(7). 89. Competition and Consumer Act 2010, s 93AD(1). © 2018 THOMSON REUTERS
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conduct, the period is 60 days or, if the ACCC requires a conference to decide, once it completes its deliberations and decides to allow the Notification to stand.90 The procedure for withdrawing immunity in relation to collective bargaining and resale price maintenance is, in effect, the same as for exclusive dealing Notifications, but the relevant test is not. Immunity can be withdrawn only if the ACCC is satisfied that the likely benefit to the public from the conduct will not outweigh the likely detriment.91
Class Exemptions [18.490] Broadly based exemptions have been a feature of European competition administration and in other jurisdictions, but were never introduced in Australia. Australian policy had been to provide for case-by-case Authorisations, issued by the ACCC after a public process, where the circumstances were appropriate. [18.500] The United States does not have a block exemption system. In the EU92 block exemptions from competition laws may be obtained for conduct that contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which do not impose on the firms concerned restrictions that are not indispensable to the attainment of these objectives or afford firms the possibility of eliminating competition. Although many of the block exemptions originally granted have been repealed, some remain. For instance, a block exemption is in place for liner shipping consortia93 and another in relation to categories of vertical agreements and concerted practices.94 [18.510] In the United Kingdom, the Secretary of State may make block exemption orders on the recommendation of the Competition and Markets Authority,95 but block exemptions are not common. Only one block exemption has been adopted. It exempts public transport ticketing agreements to allow public transport operators to enter into agreements to offer passengers tickets that they can use on the services of two or more operators, in order to increase mobility of passengers and makes travel more flexible.96 [18.520] The legislation in some countries closer to Australia provides for block exemptions. In Singapore, the Minister for Trade and Industry is entitled to issue block exemptions following a recommendation of Competition Commission.97 The criteria are the same as in the EU. There is only one block exemption in Singapore and it is for liner shipping agreements.98 In Hong Kong, the Competition Commission has authority to issue a block exemption orders, either of its own volition or on 90. 91. 92. 93. 94.
Competition and Consumer Act 2010, s 93(7A). Competition and Consumer Act 2010, ss 93(3A), 93AC(1). Treaty on the Functioning of the European Union, Art 101(3) (the Lisbon Treaty). EU Commission Regulation No 697/2014 (24 June 2014), amending Regulation (EC) No 906/2009. EU Commission Regulation No 330/2010 (20 April 2010), on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices. 95. UK Competition Act 1998, s 6. The Act also provides for the UK to issue parallel exemptions, paralleling block exemptions issued by the European Union: see Competition Act 1998, s 10. 96. UK CMA, Public Transport Ticketing Schemes Block Exemption Review (10 December 2015). 97. Singapore Competition Act 2004 (Singapore), s 36. 98. Competition (Block Exemption for Liner Shipping Agreements) Order (2006).
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application, if it is satisfied that a particular category of agreement meets public benefit tests similar to those that apply in the EU.99 As with Singapore, there is only one block exemption and that relates to shipping consortia.100 In Japan, the Japan Fair Trade Commission has authority to grant exemptions101 but has been phasing them out. As the Commission has recently noted:102 The system of exemption from the [Antimonopoly Act] is an exceptional system in the market economy, and should be limited to the minimum extent necessary.
[18.530] A block exemption system, called “class exemptions”, was introduced in Australia in 2017.103 This followed a recommendation by the Harper Panel104 that a block exemption power “may be an efficient way to deal with certain types of business conduct that are unlikely to raise competition concerns.” Harper’s view was that a block exemption power would be helpful for business in reducing compliance costs and providing certainty. [18.540] The ACCC may, by a determination, specify that one or more competition provisions do not apply to a kind of conduct specified in the determination. However, before doing so, the ACCC has to be satisfied of the same matters as it would in an Authorisation application. That is, it has to be satisfied that, in all the circumstances, either: • conduct of the kind specified in the determination would not have the effect, or would not be likely to have the effect, of substantially lessening competition; or • the conduct would result, or be likely to result, in a benefit to the public and that benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct.105 The ACCC makes the determination itself. It is not made by a Minister on the ACCC’s recommendation. This is the first time the ACCC has had a general authority to issue class exemptions, but it has exercised a class exemption power in relation to the telecommunications matters for some time.106
Merger Clearance [18.550] Although there is no obligation to do so, merging parties may apply to the ACCC for an Authorisation on the basis that the merger would not have the effect, or would not be likely to have the effect, of substantially lessening competition.107 Previously, the Act contained separate processes for formal merger clearance and Authorisation, vesting the authority to grant clearances in the ACCC 99. Competition Ordinance (Hong Kong), s 15 Sch 1(1). 100. Competition (Block Exemption For Vessel Sharing Agreements) Order (2017). 101. Antimonopoly Act 1947 (Japan), Art 23. 102. JFTC, Review of the System for Exemption from the Antimonopoly Act for International Ocean Shipping, 4 February 2016, para 4. 103. Competition and Consumer Amendment (Competition Policy Review) Act 2017, No 114, 2017. 104. Harper Report, p 403. 105. Competition and Consumer Act 2010, s 95AA(1). 106. See Competition and Consumer Act 2010, s 152ASA. 107. An application can also be made on the basis that there are overriding public benefits. © 2018 THOMSON REUTERS
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and Authorisation in the Australian Competition Tribunal.108 The Harper Panel had recommended simplification of the processes by combining, in effect, clearance and authorisation into one process.109 Authorisation decisions of the ACCC, including in relation to the new “formal clearance” process, may be reviewed by the Australian Competition Tribunal.110 However, to date parties have preferred to proceed by way of informal clearance, a process encouraged by the ACCC but which involves no right of re-hearing by the Tribunal nor any statutory protection even if cleared by the ACCC.
108. See former Competition and Consumer Act 2010, ss 95AC, 95AT in Miller’s Australian Competition and Consumer Act Annotated (Thomson Reuters, 39th ed, 2017). 109. Harper Report, p 333. 110. Competition and Consumer Act 2010, s 102(1).
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CONSEQUENCES [19.20]
19
Who Is Liable? ..................................................................................... [19.30] Principals ............................................................................ [19.50] Aiding and Abetting ............................................................ [19.60] Inducing .............................................................................. [19.70] Party to a Contravention ..................................................... [19.80] Knowingly Concerned ........................................................ [19.90] Criminal Penalties ............................................................................... [19.140] Pecuniary Penalties ............................................................................. [19.160] Standard of Proof ............................................................... [19.170] Assessing Penalty .............................................................. [19.280] Deterrence .......................................................................... [19.290] Reputational Damage ......................................................... [19.300] Legal Advice ....................................................................... [19.310] Multiple Penalties ............................................................... [19.320] Total Penalties .................................................................... [19.330] Optimal Penalties ............................................................... [19.340] Immunity and Leniency ....................................................................... [19.390] Private Rights of Action ....................................................................... [19.410] Seeking Compensation ....................................................................... [19.420] Causation ............................................................................ [19.430] Types of Compensable Loss .............................................. [19.440] Assessing Compensation ................................................... [19.460] Limitation Period ................................................................. [19.480] Standard of Proof ............................................................... [19.500] Remedial Orders ................................................................................. [19.520] Injunctions ........................................................................................... [19.570] Disqualification Orders ........................................................................ [19.600] Punitive Publication Orders ................................................................. [19.610] Non-Punitive Orders ............................................................................ [19.620] Corrective Advertising ........................................................ [19.630] Compliance Programs ........................................................ [19.640] Probation Orders ................................................................ [19.650] Community Service Orders ................................................ [19.660] Enforceable Undertakings ................................................................... [19.680] Divestiture ............................................................................................
430 430 431 431 432 432 433 435 436 436 440 441 441 441 442 442 443 445 446 446 447 448 449 450 451 452 455 456 456 456 457 458 459 459 460
[19.10] There is a multitude of consequences of a contravention of the competition provisions of the Act. First there are, naturally, penalties — in some case criminal and in others civil. But the Act also provides for a full range of other consequences including compensation, injunctions, divestiture (in merger cases) adverse publicity orders and disqualification of managers and directors. Each is considered in this chapter.
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Who Is Liable? [19.20] Liability for a contravention of the Competition and Consumer Act 2010 is not limited to those directly responsible for the contravention.1 Liability may extend to anyone who was involved in the contravention. To be more precise, the Act extends liability for a contravention to any person who has aided, abetted, counselled or procured a contravention, has induced, whether by threats or promises or otherwise, a contravention, has been in any way, directly or indirectly, knowingly concerned in, or party to, a contravention, or has conspired with others to effect a contravention.2 Each of these concepts is well established in criminal law but it is appropriate to consider how they have been applied in the context of the Competition and Consumer Act 2010.
Principals [19.30] Principals — those directly responsible for the contravention whether due to their own individual actions or those acting on their behalf — will, of course, be primarily liable. But a parent company will not be liable as a principal merely because it is the ultimate parent and controlling entity of a subsidiary that contravenes the Act.3 [19.40] Principals will not only be liable if they actually contravene the Act. They will also be liable if they attempt to do so.4 What must be established for an attempt? An attempt must involve taking some step towards a contravention and that step must not be merely remotely connected or preparatory to the contravention.5 It must also involve an intention to bring about the required result.6 However, intent in this context means a decision to bring about a situation. It is concerned with conduct, not the mental element that may accompany conduct.7 A statement relied on to allege an attempt must contain, within its terms, the potential for a contravention. The types of conduct alleged to constitute an attempt will be relevant, but not determinative. It has been said that, a statement of intention or to refrain from doing something, made quite unilaterally, with no express or implied suggestion that others might act in the same way, is hard to visualise as an attempt to make an arrangement or arrive at an understanding,8 but it will rarely be the case
1. Since the introduction of Part XIA and complementary State and Territory legislation following the Hilmer report (see Chapter 4) any person, whether a corporation or a natural person, who contravenes the substantive competition provisions of the Act (replicated in the Competition Code, Sch 1) is liable. 2. Competition and Consumer Act 2010, ss 76, 75B. 3. ACCC v Hillside (Australia New Media) Pty Ltd (t/as Bet365) [2015] FCA 1007. Compare Ackers v Austcorp International Ltd [2009] FCA 432. 4. Competition and Consumer Act 2010, s 76(1)(b). 5. Trade Practices Commission v Parkfield Operations Pty Ltd [1985] FCA 403; (1985) 7 FCR 534; 62 ALR 267; (1985) ATPR 40-639. 6. Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 238; (1984) 3 FCR 168; ACCC v Visy Paper Pty Ltd [2000] FCA 1640. 7. Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 238; (1984) 3 FCR 168; 55 ALR 527; (1984) ATPR 40-482. 8. Trade Practices Commission v Tubemakers of Australia Ltd (No 2) [1983] FCA 93; (1983) 76 FLR 455; 47 ALR 719; (1983) ATPR 40-358.
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that there are no other facts that impact on whether, in all the circumstances, the conduct in question amounts to an attempt. Mere persuasion, with no promise or threat, may well amount to an attempt to induce a contravention, when considered in all of the circumstances.9 An attempt can take a number of forms.
Aiding and Abetting [19.50] A person will only have aided, abetted, counselled or procured a contravention if the person was aware, or should have been aware, of the facts that give rise to the contravention and intentionally participated in the contravention.10 But it is not necessary to prove that the person knew that his or her participation was a breach of the Act. All that is required is actual knowledge of the essential elements of the contravention and intentional participation in it.11 Knowledge in this context means actual, not constructive knowledge, but where there is a combination of suspicious circumstances and a failure to make inquiry it may be possible to infer knowledge.12 However, it is not sufficient that the person could, had they inquired, have found that the relevant conduct amounted to a contravention, but did not do so.13 While aiding and abetting a contravention is itself a contravention, aiding and abetting an attempt to contravene the Act is not.14
Inducing [19.60] A person will only have induced a contravention if the person has taken an affirmative or positive action or course of conduct directed to another person who is the object of the inducement. It involves actions that are effective, although they may not involve actual coercion or pressure, or the offer of an advantage.15 As the Federal Court said in Yorke16: Inducing a contravention … connotes … some act of compulsion by force or threat of force or some act of persuasion or stimulation aimed at ensuring that an act is committed which constitutes a contravention.
9. 10. 11.
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13. 14. 15.
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The Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674. Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 666–669; 59 ALJR 776; 61 ALR 307; (1985) ATPR 40-622; Quinlivan v ACCC [2004] FCAFC 175; (2004) ATPR 42-010. Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 666–669; Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883; ACCC v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161; (1999) 95 FCR 302 at 346; 166 ALR 74; (1999) ATPR 41-718. King v GIO Australia Holdings Ltd [2001] FCA 308; (2001) 184 ALR 98 at [7]; Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1 at 4-5; Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 1535; (1996) ATPR (Digest) 46-162; Butt v Tingey [1993] FCA 369; (1993) ATPR (Digest) 46-110; Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; 59 ALJR 461; Pereiera v DPP (1988) 63 ALJR 1; 82 ALR 217. Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539; 91 ALR 273; (1990) ATPR 41-000. ACCC v J McPhee & Son (Aust) Pty Ltd [1997] FCA 469; (1997) ATPR 41-570. ACCC v SIP Australia Pty Ltd [2002] FCA 824; (2002) ATPR 41-877; ACCC v Mayo International Pty Ltd [1998] FCA 808; (1998) ATPR 41-653; The Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153; 65 ALR 429; (1986) ATPR 40-674 . Yorke v Lucas [1983] FCA 230; (1983) 80 FLR 143 at 152; 49 ALR 672; (1983) ATPR 40-401.
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Unlike the position with aiding and abetting, attempting to induce a contravention is also a contravention of the Act.17 An inducement may occur even though no threat or promise is involved. Mere persuasion, with no promise or threat, can amount to an attempt to induce.18 Although inducing a contravention does not to involve intent, an attempt to induce a contravention cannot be established without proof of intent.19
Party to a Contravention [19.70] A person will only be a party to a contravention if the person participates in, or assents to, a contravention by someone else. This means, for instance, that an employee or agent whose actions give rise to the liability of the person’s employer can be a party to the contravention by the employer because the individual’s conduct is distinct from the conduct which constitutes the contravention.20 To be regarded as participating, a person must have knowledge of the essential elements constituting the contravention.21 As with aiding and abetting, knowledge in this context means actual, not constructive, knowledge, but where there is a combination of suspicious circumstances and a failure to make inquiry it may be possible to infer knowledge.22 However, it is not sufficient that the person could, had they inquired, have found that the relevant conduct amounted to a contravention, but did not do so.23
Knowingly Concerned [19.80] A person will only be knowingly concerned in a contravention if the person has knowledge of the essential facts constituting the contravention and is an intentional participant. The person will be regarded as an intentional participant if the person has knowledge of the essential elements of the contravention.24 If an employer is found responsible as a result of the actions of one of its employees, that does not necessarily mean that the employee will be knowingly concerned in 17. Competition and Consumer Act 2010, s 76(1)(d); ACCC v J McPhee & Son (Aust) Pty Ltd [1997] FCA 469; (1997) ATPR 41-570. 18. ACCC v SIP Australia Pty Ltd [2002] FCA 824; (2002) ATPR 41-877 at [112]; Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 164; 65 ALR 429 at 439; (1986) ATPR 40-674 at 47,434. See also Yorke v Lucas [1983] FCA 230; (1983) 80 FLR 143 at 152; 49 ALR 672 at 681-682; 1983 ATPR 40-401. 19. Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 238; (1984) 3 FCR 168; 55 ALR 527; (1984) ATPR 40-482 at 183 (FCR); ACCC v J McPhee & Son (Aust) Pty Ltd [1997] FCA 469; (1997) ATPR 41-570. 20. Wheeler Grace & Pierucci Pty Ltd v Wright [1989] FCA 127; (1989) ATPR 40-940 applying Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; 63 ALJR 80; 82 ALR 626; (1988) ATPR 40-923. 21. Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670; 59 ALJR 776; 61 ALR 307; (1985) ATPR 40-622; Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883; ACCC v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161; (1999) 95 FCR 302 at 346; 166 ALR 74; (1999) ATPR 41-718. 22. King v GIO Australia Holdings Ltd [2001] FCA 308; (2001) 184 ALR 98 at [7]; Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1 at 4-5; Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; 59 ALJR 461; 58 ALR 641; Pereira v DPP [1988] HCA 57; (1989) 63 ALJR 1; 82 ALR 217. 23. Crocodile Marketing Ltd v Griffith Vintners Pty Ltd (1989) 28 NSWLR 539; 91 ALR 273; (1990) ATPR 41-000. 24. Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670; (1985) 59 ALJR 776; 61 ALR 307; (1985) ATPR 40-622.
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the contravention. The ACCC bears the onus of proving that the person had the requisite knowledge.25 For a person to have the requisite knowledge it is not necessary to know that facts are capable of characterisation as a contravention.26 Although differing judicial views have been expressed, all that should be required is knowledge of each of the elements of the conduct that constitutes the contravention.27
Criminal Penalties [19.90] It a criminal offence to enter into or give effect to a contract, arrangement or understanding containing a cartel provision.28 The Australian Criminal Code Act 1995 (Cth) requires that, in relation to every offence, there must be both a fault element and a physical element, unless the legislation creating the offence specifically excludes the fault element. The fault element remains part of the cartel offence. It is expressed to be either knowledge or belief.29 Therefore, a cartel offence is committed only if the person accused either knew or believed that they were entering into or giving effect to a contract, arrangement or understanding and that the contract, arrangement or understanding contains a cartel provision. Knowledge in this context means that the accused person must be proven to be aware that the relevant circumstance exist or will exist in the ordinary course of events. A corporation will be deemed to have the requisite knowledge or belief if a director, employee or agent of the corporation, engaging in the relevant conduct within the scope of his or her actual or apparent authority, had the requisite knowledge or belief.30 A person can be criminally responsible for a cartel offence even if, at the time the conduct constituting the offence takes place, the person is mistaken about, or ignorant of, the fact that by engaging in the conduct they are committing an offence.31 [19.100] Turning to those knowingly concerned in the commission of an offence by a corporation or other person, executives and other individuals who are involved in a contravention are also guilty of an offence.32 The maximum penalty for corporations guilty of a cartel offence is the greater of $10 million or three times the benefit reasonably attributed to the cartel or, where gain cannot be readily ascertained, 10% of the annual turnover of the body corporate in the first 12 months of the cartel.33 At the time of writing there had only been one concluded criminal prosecution in a cartel case. In NYKK,34 the defendant, a shipping line, was convicted of intentionally giving effect, in Japan and elsewhere, 25. ACCC v Michigan Group Pty Ltd [2002] FCA 1439. 26. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965. 27. Medical Benefits Fund of Australia Ltd v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1; 205 ALR 402; (2003) ATPR 41-971; Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199. Note comment in ACCC v Kaye [2004] FCA 1363 at [182]. 28. Competition and Consumer Act 2010, ss 45AF, 45AG. 29. Competition and Consumer Act 2010, ss 45AF(2), 45AG(2). 30. Competition and Consumer Act 2010, s 84(1). 31. Criminal Code, cl 9.3. 32. Competition and Consumer Act 2010, s 79(1). 33. Competition and Consumer Act 2010, ss 45AF(3), 45AG(3). 34. Commonwealth DPP v Nippon Yusen Kabushiki Kaisha [2017] FCA 876. © 2018 THOMSON REUTERS
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to a cartel in relation to “roll-on, roll-off” cargo on international routes including to and from Australia, The fine imposed was $25 million. [19.110] The position with executives and other individuals is different. They can be sentenced to up to ten years jail and ordered to pay a fine of up to $360,000.35 Although a jail sentence of up to 10 years may be imposed, none have yet been imposed in Australia. Based on US experience jail terms are not likely to be of that duration. In the United States in the period 2010–14 there were 29 executives jailed for cartel offences, with an average prison sentence of 25 months.36 The longest jail sentence imposed for a single cartel offence is five years. The person jailed was the former president of US-based sea freight firm, Sea Star Line LLC, who was jailed for his participation in a conspiracy to fix rates and surcharges for sea freight between the continental United States and Puerto Rico.37 In the United Kingdom, the experience with criminal prosecutions, a recent feature of the UK competition law, has not been particularly positive. In the latest case, a bid rigging case in the market for supply of galvanized water tanks, one executive pleaded guilty and\, a jury acquitted two others.38 [19.120] Directors and executives found guilty of a cartel offence cannot be indemnified for their defence costs or any penalty by either their employer or an insurer. In addition, they may be disqualified from managing corporations.39 Other limitations generally applicable to those found guilty of a crime, such as visa restrictions, may also apply. For instance, US immigration law bans persons who have been found guilty of certain offences, including a cartel offence, from entering the United States even for short business trips. Where the cartel operated across national borders, there is the possibility of extradition to face trial in another country in which the cartel operated. [19.130] When it comes to imposing penalties on executives in Australia, the court will, no doubt, take account of what it said in ABB:40 Generally the corporate agent is a top executive, who has an unblemished reputation, and in all other respects is a pillar of the community. These people often do not see antitrust violations as law breaking, and certainly not conduct that involves moral turpitude, an attitude that is prevalent in relation to many so-called white collar crimes. There are, however, important matters of which the sentencing judge should not lose sight…. [T]here is a great danger of allowing too great an emphasis to be placed on the ‘respectability’ of the offender and insufficient attention being given to the character of the offence. It is easy to forget that these individuals have a clear option whether or not to engage in unlawful activity, and have made their choice to do so… [T]here are limits on how far one can take the ‘good citizen’ plea in mitigation. [T]he character of the offence, rather than that of the offender [is] the central determinant in the sentencing decision… The court must be vigilant to ensure that there is absolutely no justification for the view, which often finds expression in the popular press, that there is one law for the rich and another for the poor.” 35. Competition and Consumer Act 2010, s 79(1). The amount of the fine is indexed every three years from 1 July 2018; Crimes Act 1914, s 4AA. 36. https://www.justice.gov/atr/division-update/2015/criminal-program-update. 37. https://www.justice.gov/opa/pr/former-sea-star-line-president-sentenced-serve-five-years-prisonrole-price-fixing-conspiracy. 38. https://www.gov.uk/government/news/cma-statement-following-completion-of-criminal-cartelprosecution. 39. Competition and Consumer Act 2010, s 86E. 40. ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169; (2002) ATPR 41-872 at [28].
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Finally, the court also has power, at the completion of a trial, to grant injunctions, order community service, make a disqualification or publication order, or make other compensatory remedial orders.41
Pecuniary Penalties [19.140] The Act provides for the Federal Court to impose pecuniary penalties on any person who has breached the competition provisions of the Act. With the exception of cartel conduct, which can attract both criminal penalties and civil penalties, contraventions of the competition provisions attract only civil penalties. Civil penalties, called pecuniary penalties, were a novel concept introduced in 1974 with the Trade Practices Act 1974, but they have since become quite common. Pecuniary penalties are “a hybrid between the criminal and the civil law”. The basic difference between a criminal penalties and pecuniary penalty are in the procedure by which each is administered by the courts, particularly the burden of proof. A criminal prosecution is an accusatorial proceeding in which the Crown bears the burden of establishing guilt beyond reasonable doubt. Civil penalty proceedings are also adversarial, but they are governed by the issues and the scope of relief framed by the parties as they choose. The burden of proof is the civil burden — the balance of probabilities. A criminal prosecution seeks to secure a criminal conviction whereas civil penalty proceedings involve no question of criminality. With criminal penalties, notions of retribution and rehabilitation and deterrence are relevant. With civil penalties the considerations are different. Civil penalties are primarily, if not wholly, protective — essentially deterrent or compensatory — in promoting the public interest in compliance with the law. [19.150] The maximum pecuniary penalty for corporations, other than in relation to secondary boycotts, is the greater of $10 million or three times the gain from the contravention or, where gain cannot be readily ascertained, 10% of the turnover of the body corporate and all of its interconnected bodies corporate (if any). The annual turnover is the sum of the values of all the supplies that the body corporate, and any related corporate bodies, have made, or are likely to make, other than from in-house transactions, supplies that are not connected with Australia, supplies that are not made in connection with an enterprise that the body corporate carries on, supplies that are input taxed and supplies that are not for consideration.42 Where the contravention relates to a secondary boycott the maximum penalty is $750,000.43 The maximum pecuniary penalty for an individual implicated in a contravention is $500,000.44 The court may also order that the individual not be a director of a corporation or involved in its management.45 Corporations are prohibited from indemnifying, directly or indirectly, officers, employees or agents against a pecuniary penalty imposed on any of them.46
41. Competition and Consumer Act 2010, s 45AI. 42. Competition and Consumer Act 2010, ss 76(1A)(b), 76(5). 43. Competition and Consumer Act 2010, s 76(1A)(a). 44. Competition and Consumer Act 2010, s 76(1B). 45. Competition and Consumer Act 2010, s 86E. 46. Competition and Consumer Act 2010, s 77A. © 2018 THOMSON REUTERS
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Actions for recovery of pecuniary penalties for breach of the competition provisions can be brought within six years of the contravention.47
Standard of Proof [19.160] As noted above, the standard of proof for breaches of the competition provisions is the civil standard; namely the balance of probabilities. However, the court will have regard to the gravity of the matters in issue and the size of the civil penalties which can be imposed as a result of a breach. The graver the allegation, the stronger the required evidence.48 But the difference between the criminal standard of proof and the civil standard of proof is no mere matter of words: it is a matter of critical substance. No matter how grave the facts required to be proven in a civil case, the court is only required to be reasonably satisfied in relation to any matter in issue. The degree of certainty required to support a conviction on a criminal charge is not required.49 Nevertheless, a conventional perception is that members of society do not ordinarily engage in fraudulent or criminal conduct and courts should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.50 So the effect of all this is that the ACCC has to establish that the circumstances give rise to a reasonable and definite inference, not merely to conflicting inferences of equal degrees of probability.51
Assessing Penalty [19.170] Contraventions of the competition provisions, whether by individuals or corporations, are, of course, treated as a serious matter. As Justice Finkelstein said in ABB:52 free competition is essential for the welfare of the state. Conduct that affects the public, such as the anticompetitive behaviour that is outlawed by the Trade Practices Act, can never really be considered as anything other than serious.
Consequently, the effect of the conduct on the functioning of markets, and other economic effects, will generally be among the most significant matters to be considered as relevant to the assessment of penalty.53 47. Competition and Consumer Act 2010, s 77. 48. Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 347, 353, 362; 12 ALJR 100; see also Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 2) [1979] FCA 51; (1979) 40 FLR 83; 26 ALR 609; (1979) ATPR 40-141; Peter Williamson Pty Ltd v Capitol Motors Ltd (1982) 61 FLR 257 at 264; 41 ALR 613; (1982) ATPR 40-291; Heating Centre Pty Ltd v Trade Practices Commission [1986] FCA 73; (1986) 9 FCR 153 at 159-160; 65 ALR 429; (1986) ATPR 40-674. 49. Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517 applied in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v ACCC (2007) FCAFC 132. 50. Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170; 110 ALR 449 applied in a cartel case in ACCC v Yazaki Corp (No 2) [2015] FCA 1304. 51. Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v ACCC (2007) FCAFC 132; Watson v Foxman (2000) 49 NSWLR 315; ACCC v Dateline Imports Pty Ltd [2014] FCA 791. 52. ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169; (2002) ATPR 41-872 at [13]. 53. NW Frozen Foods Pty Ltd v ACCC [1996] FCA 1134; (1996) 71 FCR 285; 141 ALR 640; (1997) ATPR 41-546; Trade Practices Commission v Prestige Motors Pty Ltd [1994] FCA 1495; (1994) ATPR 41-359.
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[19.180] The primary objective of penalties is deterrence. Penalties are directed at deterring persons and corporations from repetition of breaches of the Act.54 As Justice Toohey put the matter in Mobil:55 The penalty should be such as to deter not only the particular offender but others who may be disposed to engage in prohibited conduct of a similar kind … Clearly much depends on the deliberateness of the offender’s conduct, the extent to which [the offending conduct] has been carried on and the damage caused to anyone by that conduct. At the same time one must not lose sight of the fact that s 76 of the Act is not directly concerned with compensation; that is the role of s 82. There is the wider public interest in ensuring that the provisions of the Act are observed. The seriousness of a contravention may also be measured by the degree to which it was initiated or acquiesced in by the senior management.
[19.190] When assessing an appropriate penalty,56 the court will have regard to the nature and extent of the contravening conduct, the amount of loss or damage caused,57 the circumstances in which the conduct took place,58 the size of the contravening company,59 the gain made60, the degree of power it has — as evidenced by its market share and ease of entry into the market, the deliberateness of the contravention and the period over which it extended,61 and whether the contravention arose out of the conduct of senior management or at a lower level.62 The assessment will also have regard to whether, in the case of a corporation, it has a corporate culture conducive to compliance with the Act, as evidenced by compliance programs and corrective measures in response to an acknowledged contravention63 and whether the company has shown a disposition to cooperate with the authorities responsible
54. Schneider Electric (Australia) Pty Ltd v ACCC [2003] FCAFC 2; (2003) 127 FCR 170; ACCC v SIP Australia Pty Ltd [2003] FCA 336; (2003) ATPR 41-937; Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076. 55. Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 363; (1985) 4 FCR 296 at 298; (1985) ATPR 40-503. 56. Conveniently summarised by Justice French in Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152. 57. Trade Practices Commission v ICI Australia Operations Pty Ltd [1991] FCA 527; (1991) 105 ALR 115; (1991) ATPR 41-153; ACCC v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192; (2002) ATPR 41-862. 58. Trade Practices Commission v Culley (1983) ATPR 40-399; Trade Practices Commission v CookOn Gas Products Pty Ltd (1985) ATPR 40-560; ACCC v SIP Australia Pty Ltd (1999) ATPR 41702; [1999] FCA 858. 59. ACCC v ABB Power Transmission Pty Ltd (2004) ATPR 42-011; [2004] FCA 819. But note Schneider Electric (Australia) Pty Ltd v ACCC (2003) 127 FCR 170; 196 ALR 611; (2003) ATPR 41-957; [2003] FCAFC 2; ACCC v Fila Sport Oceania Pty Ltd (2004) ATPR 41-983; [2004] FCA 376. 60. ACCC v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640; ACCC v Roche Vitamins Australia Pty Ltd [2001] FCA 150; (2001) ATPR 41-809. 61. J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41758; Trade Practices Commission v TNT Australia Pty Ltd [1995] FCA 1046; (1995) ATPR 41-375. 62. ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169; (2002) ATPR 41-872. 63. ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562; ACCC v Target Australia Pty Ltd [2001] FCA 1326; (2001) ATPR 41-840; ACCC v Rural Press Ltd [2001] FCA 1065; (2001) ATPR 41-833; ACCC v George Weston Foods Ltd [2000] FCA 690; (2000) ATPR 41-763. © 2018 THOMSON REUTERS
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for the enforcement of the Act in relation to the contravention.64 The court will also have regard to similar conduct in the past, the financial position of the respondents and the deterrent effect of the proposed penalty.65 [19.200] Extent of damage: Absence of evidence of loss will not normally militate against the court imposing a penalty, especially where the ACCC’s intervention caused the respondent to discontinue the conduct alleged to be in breach of the Act and it can be inferred that the conduct would have continued but for the ACCC’s intervention.66 In ICI,67 a resale price maintenance case, the court stated that the absence of loss or damage was not a mitigating factor, but the case involved an attempt to induce a reseller to engage in resale price maintenance and loss or damage is rare in attempt cases. [19.210] Circumstances: Where the parties genuinely did not believe at the time of the contravention that they had done anything wrong and their conduct was merely motivated by a desire to achieve a reasonable level of profitability without causing harm to the public, the penalty imposed is likely to be at the lower end of the scale.68 While it is no excuse that a firm entered an arrangement in breach of the Act because it justifiably feared that it would be forced out of business if it did not, this is a matter to be taken into consideration in assessing penalty.69 [19.220] Size: The size of the firm has been taken into account as a general consideration in assessing the appropriate penalty.70 However, where the directors decide to strip the firm of assets and carry on business through other companies, that will not result in a reduced penalty.71 Furthermore, the possibility of insolvency will also not affect penalty because otherwise the important object of general deterrence will be undermined.72 Whether the fact that a firm is part of a larger corporate group is relevant to assessing penalty has not been finally determined. There are decisions suggesting that it may not be relevant except where there is evidence that the parent company had some responsibility for the conduct of the respondent or where it is relevant to the respondent’s capacity to meet a substantial pecuniary penalty.73 64. ACCC v SIP Australia Pty Ltd [1999] FCA 858; (1999) ATPR 41-702; ACCC v Tyco Australia Pty Ltd [1999] FCA 1799; (2000) ATPR 41-760. 65. Added to by Justice Heerey in ACCC v NW Frozen Foods Pty Ltd [1996] FCA 1680; (1996) ATPR 41-515. 66. ACCC v Universal Music Australia Pty Ltd (No 2) [2002] FCA 192; (2002) ATPR 41-862. See also Trade Practices Commission v ICI Australia Operations Pty Ltd (1991) 105 ALR 115; (1991) ATPR 41-153. 67. Trade Practices Commission v ICI Aust Operations Pty Ltd (1991) 105 ALR 115; (1991) ATPR 41153. 68. Trade Practices Commission v Cook-On Gas Products Pty Ltd (1985) ATPR 46,506 (40-560); Trade Practices Commission v Culley (1983) ATPR 40-399. 69. ACCC v SIP Australia Pty Ltd [1999] FCA 858; (1999) ATPR 41-702. 70. ACCC v ABB Power Transmission Pty Ltd [2004] FCA 819; (2004) ATPR 42-011. 71. ACCC v McMahon Services Pty Ltd [2004] FCA 1425; (2004) ATPR 42-031. 72. ACCC v High Adventure Pty Ltd [2005] FCAFC 247; (2006) ATPR 42-091. 73. Schneider Electric (Australia) Pty Ltd v ACCC [2003] FCAFC 2; (2003) 127 FCR 170; 196 ALR 611; (2003) ATPR 41-957; ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; (2004) ATPR 41983.
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Pecuniary Penalties
[19.230] Gain: The policy is that those engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention. Penalties must be fixed with a view to ensuring that it is not regarded as an acceptable cost of doing business. Deterrence warrants, in such cases, a penalty that would upset any calculations of profitability.74 For example, in Mitsubishi,75 a resale price maintenance case, the court took into account the turnover test before accepting the penalty proposed by the ACCC and the respondent. The respondent was an Australian subsidiary of Mitsubishi Electric Corporation of Japan, a corporation with consolidated revenue of about $36 billion per annum. The court accepted that the maximum penalty under the turnover test would have been in the range of $25 to $30 million, based on the turnover of the respondent in Australia. The penalties imposed were $2.2 million. [19.240] Senior management: The court will take into account the level at which the contravention occurred because this goes to the question of corporate culture. [19.250] Compliance culture: A properly designed and managed compliance program will have an impact on penalty. The court will look at a compliance program in two respects. First, it will ask whether there is a substantial compliance program in place and whether it was actively implemented. Second, the court will ask whether the implementation of the compliance program was successful. In part, this involves consideration of whether the contravention was an isolated instance.76 The court will take into account the existence of a compliance program even if, in the particular instance, it has proven ineffective in the particular instance.77 However, compliance programs that are not effective will be of little avail.78 [19.260] Cooperation: The court will take into account that the defendant had cooperated fully with the ACCC’s investigation79, but cooperation in the conduct of a trial will not be taken into account, other than in relation to costs orders.80 When the firm admits the contravention instead of forcing the ACCC to engage in long and expensive litigation, taking every technical point to avoid liability, the court
74. ACCC v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640; 88 ALJR 176; 304 ALR 186, adopting statements from Singtel Optus Pty Ltd v ACCC [2012] FCAFC 20; (2012) ATPR 42-387; (2012) 287 ALR 249. See also J McPhee & Son (Aust) Pty Ltd v ACCC [2000] FCA 365; (2000) 172 ALR 532; (2000) ATPR 41-758; ACCC v Roche Vitamins Australia Pty Ltd [2001] FCA 150; (2001) ATPR 41-809. 75. ACCC v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413. 76. ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562. 77. ACCC v Target Australia Pty Ltd [2001] FCA 1326; (2001) ATPR 41-840; ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562; ACCC v Rural Press Ltd [2001] FCA 1065; (2001) ATPR 41-833. 78. ACCC v George Weston Foods Ltd [2000] FCA 690; (2000) ATPR 41-763; Trade Practices Commission v ICI Australia Operations Pty Ltd (1992) 38 FCR 248 at 258; 110 ALR 47; (1992) ATPR 41-185 at 40,526. 79. ACCC v SIP Australia Pty Ltd [1999] FCA 858; (1999) ATPR 41-702; Trade Practices Commission v General Corp Japan (Aust) Pty Ltd [1988] FCA 390; (1989) ATPR 40-922; ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; (2004) ATPR 41-983. 80. Rural Press Ltd v ACCC [2002] FCAFC 213; (2002) 118 FCR 236; 193 ALR 399; (2002) ATPR 41-883. © 2018 THOMSON REUTERS
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will take that into account.81 Conversely, defense of proceedings should not result in any additional penalty beyond what would otherwise be the case.82 If it can be demonstrated that the defences advanced were entirely unmeritorious in the sense that, upon examination of the evidence, there was really no proper basis on which the claims could have been resisted, that is a different matter. [19.270] The penalty should constitute a real punishment proportionate to the deliberation with which the firm contravened the Act. It should be sufficiently high to have a deterrent quality, bearing in mind that the Act operates in a commercial environment where deterrence is not likely to be achieved by penalties which are not realistic. The penalty should reflect Parliament’s intention that commercial standards laid down by the Act must be observed, but the penalty should not be so high as to be oppressive.83 Although assistance can be gained from considering the facts and penalties in other cases, ultimately the determination of an appropriate penalty involves considering the objective circumstances surrounding the contravention and then having regard to the subjective factors of each defendant.84 Drawing analogies with other cases is fraught with difficulty. The myriad distinctions which will arise when comparing the actions of a company in one field of economic activity with the activities of a differently structured company in another field of economic activity are such as to render the drawing of an analogy virtually useless. Ultimately, the court must decide what penalty is appropriate on the facts of the case.85 However, this does not mean that similar contraventions should not attract similar penalties.86
Deterrence [19.280] Deterrence, particularly general deterrence, is the primary principle in the imposition of pecuniary penalties. As the court observed in McMahon,87 penalties, especially in cartel cases, need to be substantial and significant. This is reflected in the size of the maximum penalty set by Parliament. However, it also follows from 81. Trade Practices Commission v Carlton & United Breweries Ltd [1990] FCA 248; (1990) 24 FCR 532; (1990) ATPR 41-037; Trade Practices Commission v TNT Australia Pty Ltd [1995] FCA 1046; (1995) ATPR 41-375; Trade Practices Commission v Palmer Corp Ltd (1990) ATPR 40-995; Trade Practices Commission v CC (NSW) Pty Ltd (No 3) (1995) ATPR 41-415; ACCC v Tyco Australia Pty Ltd [1999] FCA 1799; (2000) ATPR 41-760. 82. ACCC v Westminster Retail Pty Ltd [2005] FCA 1299; ACCC v Cement Australia Pty Ltd [2016] FCA 453. 83. Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd [1978] TPRS 305.14; (1978) ATPR 40-091. 84. Trade Practices Commission v Caravella (1994) ATPR 41-293. 85. Trade Practices Commission v Prestige Motors Pty Ltd [1994] FCA 1495; (1994) ATPR 41-359. For instance, in ACCC v Midland Brick Co Pty Ltd [2004] FCA 693; (2004) 207 ALR 329; (2004) ATPR 42-008. Justice Lee considered the penalties imposed in other cases before deciding that the penalty proposed against the corporate respondent was appropriate but that the penalty against an executive was too high. 86. ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562; NW Frozen Foods Pty Ltd v ACCC [1996] FCA 1134; (1996) 71 FCR 285; 141 ALR 640; (1997) ATPR 41-546; Trade Practices Commission v Annand & Thompson (1987) ATPR 40-772. 87. ACCC v McMahon Services Pty Ltd [2004] FCA 1425; (2004) ATPR 42-031. See also ACCC v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; (2005) 215 ALR 281; ATPR 42-051; ACCC v Qantas Airways Ltd [2008] FCA 1976; (2008) 253 ALR 89; ATPR 42-266.
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the fact that contraventions are difficult to detect and public enforcement often only occurs as a result of a whistle-blower. Given these difficulties and the potential for large profits, there is a chance that those in the marketplace might be prepared to factor in the risk of a low penalty as a business cost. That, the court has consistently said, would be inimical to the statutory purpose of ensuring that cartel conduct does not occur. The penalty must be sufficiently high, so that a business, acting rationally and in its own best interest, will not be prepared to treat the risk of such a penalty as a business cost. As deterrence is the primary purpose of a penalty there will inevitably be cases where the penalty to be imposed will be higher than would otherwise be imposed on a particular offender if regard were only had to the offender’s circumstances. As noted above, in some cases the penalty may be so high that the offender will become insolvent. That possibility will not prevent the court from imposing an appropriately high penalty.88 The fact that a corporate respondent is insolvent should not affect the court’s assessment and imposition of a penalty, even though the penalty may never be paid.89
Reputational Damage [19.290] Reputational damage is an obvious potential outcome form any adverse finding in a competition case, even if the only consequence is a declaration that the firm has contravened the Act. Reputational damage is not a factor to be taken into account in assessing penalty, at least where there is no evidence that the reputational damage had, or would have, any effect on profitability.90 However, it may be taken into account in assessing general deterrence.91
Legal Advice [19.300] The fact that legal advice was obtained by one of the parties is of little consequence. Legal advice is obtained for the benefit of the firm and only for its benefit. It is not a discounting factor when it comes to assessing penalty. If legal advice is wrong, that is a matter between the firm and its legal adviser.92 It follows that, in cases of legal uncertainty, if a firm “takes the odds”, it must expect serious consequences if it miscalculates.93
Multiple Penalties [19.310] Although proceedings may be instituted against a person for breaches of more than one of the competition provisions, the court cannot impose more than one penalty in respect of the same conduct.94 However, different acts, each of which is 88. ACCC v High Adventure Pty Ltd [2005] FCAFC 247. 89. ACCC v Vales Wine Co Pty Ltd (1996) ATPR 41-528 at 42,776; ACCC v GIA Pty Ltd [2002] FCA 1298; (2002) ATPR 41-902; [2003] ASAL 55-093; ACCC v SIP Australia Pty Ltd [2003] FCA 336; (2003) ATPR 41-937; ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; (2004) ATPR 41-983. 90. ACCC v AirAsia Berhad Company [2012] FCA 1413, applied in ACCC v Multimedia International Services Pty Ltd [2016] FCA 439. 91. ACCC v Multimedia International Services Pty Ltd [2016] FCA 439. 92. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529, 57; Visy Paper Pty Ltd v ACCC [2005] FCAFC 236. 93. Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529. 94. Competition and Consumer Act 2010, s 76(3). ACCC v George Weston Foods Ltd [2000] FCA 690; (2000) ATPR 41-763. It would appear that the onus proving that s 76(3) applies rests with the defendant: Ducret v Colourshot Pty Ltd (1981) 35 ALR 503; (1981) ATPR 40-196. © 2018 THOMSON REUTERS
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a contravention, which take place at different times and in relation to different third parties, are not to be regarded as “the same conduct”.95 Where a penalty is being imposed for a number of contraventions, the court will ensure that the penalties in aggregate are just and appropriate.96 This is known as the parity principle. Other things being equal, those concerned in the same contravention should receive the same punishment; and where other things are not equal, a due allowances for the differences should be made. This is because consistency in penalty is an attribute of a rational and fair system of justice. Inconsistency would erode the public confidence in the administration of justice.97 However, the parity principle only applies in cases where the respondents’ circumstances are comparable.98 Where it does apply, the parity principle does not require the imposition of similar penalties for similar contraventions. All it requires is that there should not be such inequality in the penalties as to suggest that there has not been even-handed treatment of the offenders.99
Total Penalties [19.320] The sum of the penalties imposed for several contraventions should not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. This is known as the totality principle.100 That does not mean that a court will commence by determining an overall penalty and then dividing it among the various contraventions. It involves a final overall consideration of the sum of the penalties determined.101
Optimal Penalties [19.330] The policy position is that penalties should be set at a level that fully reflects the cost to society of the illegal activity, for otherwise society would bear the cost of the harm. This is known as the optimal penalty theory. According to the theory, the penalty should be the sum of the illegal gains from the unlawful conduct, the cost of detecting the offence multiplied by a factor which represents the probability that the violation will escape detection, and the cost of prosecuting the
95. Trade Practices Commission v Simpson Pope Ltd (1980) 47 FLR 334 at 336 (note); 30 ALR 544; (1980) ATPR 40-169. 96. Mill v The Queen (1988) 166 CLR 59 at 63; Trade Practices Commission v TNT Australia Pty Ltd [1995] FCA 1046; (1995) ATPR 41-375 at 40,169; ACCC v Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; (1997) ATPR 41-562 at 43,817; ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559 at [39]; (2002) 190 ALR 169; (2002) ATPR 41-872. 97. ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559 at [40]; (2002) 190 ALR 169; (2002) ATPR 41-872; R v Tiddy [1969] SASR 575 at 577; Postiglione v The Queen [1997] HCA 26; (1997) 189 CLR 295 at 335; (1997) 145 ALR 408; (1997) 71 ALJR 875. 98. Lowe v The Queen [1984] HCA 46; (1984) 154 CLR 606. 99. NW Frozen Foods Pty Ltd v ACCC [1996] FCA 1134; (1996) 71 FCR 285; 141 ALR 650; (1997) ATPR 41-546; Quinlivan v ACCC [2004] FCAFC 175; (2004) ATPR 42-010; Schneider Electric (Australia) Pty Ltd v ACCC [2003] FCAFC 2; (2003) 127 FCR 170; ACCC v SIP Australia Pty Ltd [2003] FCA 336; (2003) ATPR 41-937. 100. McDonald v The Queen [1994] FCA 956; (1994) 48 FCR 555. 101. ACCC v Australian Safeway Stores Pty Ltd [1997] FCA 450; (1997) 75 FCR 238; 145 ALR 36; (1997) ATPR 41-562.
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Immunity and Leniency
offence.102 The optimal penalty theory is not one that has been adopted in relation to competition contraventions in Australia.103 Nevertheless, the inclusion of a value to the firm and a turnover component to the range of penalties a court can impose, suggests that the Australian legislative position reflects the principle to some extent. For example, in Mitsubishi,104 a resale price maintenance case, discussed earlier is an example of the court considering the respondent’s turnover in assessing penalty.
Immunity and Leniency [19.340] It is possible to seek corporate and individual immunity for whistleblowing on cartels. Over 50 competition agencies around the world, including the ACCC, have immunity policies for that purpose. The ACCC’s immunity policy105 applies in relation to civil proceedings for cartel conduct brought by the ACCC, but it also applies, by arrangement with the Director of Public Prosecutions, in relation to cartel prosecutions. Civil immunity is granted by the ACCC and criminal immunity by the Commonwealth DPP, but all applications for immunity are handled by the ACCC. Immunity is only available to the first corporation to seek it that meets the following requirements: • the corporation was a party to the cartel, in whatever capacity. Previously, immunity was only available if the party seeking it was not the clear leader of the cartel; • the corporation did not coerce others to participate in the cartel; • the corporation admits that its conduct may constitute a contravention or contraventions of the cartel provisions; • the corporation makes full and frank disclosure, providing the ACCC with all evidence and information available to it relating to the suspected cartel and cooperates fully, on a continuous and expeditious basis, throughout the ACCC’s investigation and any ensuing court proceedings; • the admissions and cooperation are a truly corporate act (as opposed to isolated confessions of individual representatives); and • the corporation ceases its involvement in the suspected cartel or indicates to the ACCC that it will cease its involvement in the cartel. Nevertheless, immunity is not available if, at the time the application was made, the ACCC was aware of the cartel and had received written legal advice that it has reasonable grounds to institute proceedings in relation to at least one contravention of the Act arising from the cartel conduct.
102. See Becker, “Crime and Punishment: An Economic Approach” (1968) 76 J Pol Econ 169; Posner, “Optimal Sentences for White-Collar Criminals” 17 American Criminal Law Review 409. 103. ACCC v ABB Transmission & Distribution Ltd (No 2) [2002] FCA 559; (2002) 190 ALR 169; (2002) ATPR 41-872 at [19]-[25]. 104. ACCC v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413. 105. ACCC, Immunity and Cooperation Policy for Cartel Conduct (2014), . © 2018 THOMSON REUTERS
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Where an applicant corporation meets the requirements, the ACCC will grant it provisional immunity from ACCC initiated civil proceedings and the DPP from criminal proceedings. [19.350] In order to maintain conditional immunity, once granted, the corporation must continue to cooperate fully with the ACCC and/or DPP. It must “provide full, frank and truthful disclosure and cooperate fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing court proceedings”. If the corporation meets the conditions for final immunity, conditional civil immunity will become final immunity after proceedings against other cartel participants are concluded. Final immunity is only available if the corporation continues to meet the eligibility criteria, provides full, frank and truthful disclosure, cooperates fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing civil or criminal proceedings, and maintains confidentiality regarding its status as an immunity applicant, details of the investigation and any proceedings unless otherwise required by law or with the written consent of the ACCC. [19.360] If a corporation qualifies for immunity, each current and former director, officer and employee of the corporation who admits involvement in the cartel as part of the corporate admission may also receive conditional immunity, but only if the person meets the same criteria as the corporation. In addition, conditional immunity is available to individual whistle-blowers as long as the person: • was a party to the cartel, in whatever capacity, but did not coerce others to participate; • makes full and frank disclosure, providing the ACCC with all evidence and information available to the person relating to the suspected cartel and cooperates fully, on a continuous and expeditious basis, throughout the ACCC’s investigation and any ensuing court proceedings; and • either ceases their involvement in the cartel, or indicates to the ACCC that they will cease their involvement. Nevertheless, immunity is not available if, at the time the application was made, the ACCC was aware of the cartel and had received written legal advice that it has reasonable grounds to institute proceedings in relation to at least one contravention of the Act arising from the cartel conduct. Where an applicant meets the requirements, the ACCC will grant provisional immunity from ACCC initiated civil proceedings and the DPP from criminal proceedings. In order to maintain conditional immunity, once granted, the person must comply with the same requirements as a corporate immunity applicant. In particular they must continue to cooperate fully with the ACCC and/or the DPP on a continuing basis throughout the investigation and any ensuing court proceedings. [19.370] If the person meets the conditions for final immunity, conditional civil immunity will become final immunity after proceedings against other cartel participants are concluded. Final immunity is only available for individuals who are granted conditional immunity if the person: • continues to meet the eligibility criteria, • provides full, frank and truthful disclosure and cooperates fully and expeditiously on a continuing basis throughout the ACCC’s investigation and any ensuing civil or criminal proceedings; and 444
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Private Rights of Action
• maintains confidentiality regarding their status as an immunity applicant and details of the investigation and any proceedings unless otherwise required by law or with the written consent of the ACCC. [19.380] The ACCC also has a cooperation policy. It applies in relation to other contraventions of the competition prohibitions and to others who cooperate in cartel investigations but who are not the immunity applicant. The policy means, in effect, that, if parties cooperate the ACCC will take the nature and extent of that cooperation into account in reaching agreement on submissions to the court on the penalties that might be imposed. There has long been a practice, interrupted for a short period, of the ACCC and the parties submitting a pecuniary penalty figure to the court for its consideration. This is where the leniency policy has its effect. The High Court confirmed recently that the ACCC and the parties may propose an agreed civil penalty to the court, for its consideration. There is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and the practice of the court in receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcomes for regulators and wrongdoers.106 Although it is a criminal cartel case, NYKK107 provides an example. The company pleaded guilty. In imposing a fine of $25 million the court noted that it incorporated a discount of 50% for NYKK’s early guilty plea and for assistance and cooperation thereafter. In criminal cases, while the prosecutor may provide a range of possible fines the prosecutor cannot propose an agreed penalty.108
Private Rights of Action [19.390] The Trade Practices Act 1974 introduced, for the first time, an opportunity for anyone who wished to do so to bring proceedings for an injunction to restrain anticompetitive conduct, including consumers, competitors, customers and suppliers. This was the most revolutionary of the 1974 reforms as far as consequences were concerned. It permitted any person who had suffered loss or damage as a consequence of anticompetitive conduct to obtain compensation. It also entitled private litigants to seek injunctions. [19.400] In the United States, a separate right to bring private proceedings for injunctions and/or damages for contravention of antitrust laws had been an entitlement since 1914,109 but the United States was the exception. Most jurisdictions did not allow private rights of action, leaving it to the competition authority to enforce the law. This changed over time, but an International Competition Network survey in 2006 noted that, of the 13 jurisdictions surveyed, in four a decision by the competent authority or court establishing that an infringement had occurred was a pre-condition to private damages claims.110 For instance, in the United Kingdom, the Competition Appeals Tribunal was empowered to determine private damages claims when it was established in 2002, but only as follow-on actions resulting from 106. Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46. 107. Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha [2017] FCA 876. 108. Commonwealth v Director, Fair Wrok Building Industry Inspectorate [2015] HCA 46. 109. Clayton Act 1914 (United States), ss 4, 16. 110. ICN, Interaction of Public and Private Enforcement in Cartel Cases (Presentation to Sixth Annual Conference, Moscow, Russia, 2007), p 36. © 2018 THOMSON REUTERS
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an infringement decision.111 It was not until 2015 that the Tribunal’s jurisdiction was enlarged to also allow it to determine stand-alone damages claims. There are, as we have noted in Chapter 1, constitutional limits to the application of the Competition and Consumer Act 2010. So, in 1995 coverage of the Act’s competition provisions was extended through cooperative State and Territory legislation.112 As a result the consequences of a contravention of the competition provisions of the Competition and Consumer Act 2010 apply, either directly or indirectly, to both corporations and natural persons who contravene the Act, or attempt to do so, as well as all those who are knowingly concerned in a contravention.
Seeking Compensation [19.410] Any person who suffers loss or damage as a consequence of a contravention of the competition provisions is entitled to seek compensatory damages.113 Exemplary damages are not available under the Act.114 Equally, nominal damages cannot be awarded because the suffering of actual loss or damage is an essential element of the application of the section.115 Only a person who has actually suffered loss or damage can seek compensatory damages. Risk of loss is not, of itself, a category of loss or damage.116 A person who suffers loss or damage by contravening conduct can, however, recover damages not only from the person who contravened the Act, but also from any person involved in the contravention. It does not matter whether such persons acted intentionally or carelessly or with or without intention to harm.117
Causation [19.420] In order to recover damages, the applicant must prove that loss or damage suffered was “by” conduct in breach of the Act. In Wardley Australia,118 Mason CJ pointed out that: ‘By’ is a curious word to use. One might have expected “by means of”, “by reason of”, “in consequence of” or “as a result of”. But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking 111. Gotts, The Private Competition Enforcement Review (Law Business Research, 5th ed, 2012), p 89. 112. See Competition and Consumer Act 2010, Pt XIA and Sch 1. 113. Competition and Consumer Act 2010, s 82. See also Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665 (Justice Gummow); I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 at 126; 76 ALJR 1461; 192 ALR 1 at [50]. 114. See Musca v Astle Corp Pty Ltd 1988] FCA 4; (1988) 80 ALR 251; (1988) ATPR 40-855; Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1989) 58 FCR 274; 84 ALR 700; (1989) ATPR 40-926; Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665; Nixon v Philip Morris (Australia) Ltd [1999] FCA 1107; (1999) 95 FCR 453; 165 ALR 515; (1999) ATPR 41-707. 115. JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237; (1993) ATPR 41-257. 116. Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388; 78 ALJR 324; 204 ALR 26; (2004) ATPR 41-973; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189. 117. I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 at 124 and 125; 76 ALJR 1461; 192 ALR 1; (2002) ATPR 41-894 at [42], [43] and [45]. 118. Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189.
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Seeking Compensation
up the common law practical or common-sense concept of causation … except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so.
The reference to the practical, common-sense concept of causation was a reference to the High Court’s decision in March.119 The High Court had pointed out that causation is essentially a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter. Causation raises questions of remoteness — whether or not the loss or damage was not reasonably foreseeable even in a general way by the contravenor.120 As to how close the connection between the conduct and the loss or damage there must be in order to sustain a claim, the law looks at what influences the actions of the parties rather than considering cause and effect in mathematical or in philosophical terms. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to one or more of those considerations, provided it has some substantial rather than negligible effect.121 Causation does not have to be established by direct evidence of the part the relevant representation played. It is open to the court to determine the effect which the representation is to be taken to have had.122
Types of Compensable Loss [19.430] There are no limits on the kinds of loss or damage that may be recovered. The wide language of the Act is compatible with a legislative desire to broaden the scope of recovery; not to keep it within the bounds of some comparison with the common law.123 Both economic loss and financial loss are clearly included,124 and will be the main type of loss suffered in competition cases. Mental stress is also compensable,125 as is consequential loss.126 Damages are also available for 119. March E v MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506; 65 ALJR 335; 99 ALR 423. 120. Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; 75 ALJR 1410 at 1434; 182 ALR 37; (2001) ATPR 41-841 at [136] . 121. Como Investments Pty Ltd (In liq) v Yenald Nominees Pty Ltd [1997] FCA 12; (1997) ATPR 41-550 at 43,619; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; 76 ALJR 1461; 192 ALR 1; (2002) ATPR 41-894. 122. Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) ATPR 41-687. 123. Competition and Consumer Act 2010, s 4K. See Murphy v Overton Investments Pty Ltd [2004] HCA 3, (2004) 216 CLR 388; 78 ALJR 324; 204 ALR 26; (2004) ATPR 41-973; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640; 79 ALJR 190; 211 ALR 79; (2004) ATPR 42-030; Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 153 ALR 333; (1998) ATPR 41-665; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189; Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1; 60 ALJR 239; 63 ALR 600; (1986) ATPR 40-666. 124. Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189; Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332; (1994) 120 ALR 16; (1994) 68 ALJR 313; (1994) ATPR 41-301. 125. Mental stress cases to date have been in relation to consumer protection breaches rather than competition breaches, but the principles are the same. See Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40-490; Zoneff v Elcom Credit Union Ltd (1990) ATPR 41-009; (1990) 94 ALR 445; Argy v Blunts and Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; 94 ALR 719; (1990) ATPR 41-015. 126. Firth v Mineral Springs Pty Ltd (1983) 65 FLR 213; (1983) ATPR 40-339. © 2018 THOMSON REUTERS
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deprivation of a commercial opportunity,127 but a person will not be taken to have suffered injury simply because a hoped for advantage did not materialise.128 Where a claim for damages is made in relation to industrial action, the court is required to take into account any action the applicant took, or could have taken, before the Australian Industrial Relations Commission or a State industrial relations authority.129
Assessing Compensation [19.440] Assessing damages is not an exact science. It sometimes involves guesswork rather than estimation.130 But nevertheless, mere difficulty in estimating damages does not relieve the court from estimating the damages as best it can.131 As was said in Enzed Holdings:132 The principle is clear. If the court finds that damage has occurred it must do its best to quantify the loss even if a degree of speculation and guesswork is involved … We emphasise, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant.
[19.450] When it comes to assessing damages rigid common law distinctions between the measures of damages do not apply. The following principles emerge from decisions of the courts:133 • the Act requires examination of whether a person has suffered loss or damage by the conduct of another person. Once the causal connection is established, nothing suggests that the amount that may be recovered is to be limited by drawing on analogies with either the law of contract or the law of tort; • damages may be awarded in a wide variety of cases having regard to the types of contraventions contemplated by the competition provisions of the Act; • the Act contains no stated limitation on the kinds of loss or damage that may be recovered. This is compatible with a legislative policy of broadening the scope of recovery, not to keep it within the bounds of some comparison with the common law;
127. Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332; 68 ALJR 313; 120 ALR 16; (1994) ATPR 41-301. 128. Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665 at [53]. 129. Competition and Consumer Act 2010, s 87AA. 130. Jones v Schiffmann [1971] HCA 52; (1971) 124 CLR 303 at 308; 45 ALJR 653; Government Insurance Office (NSW) v Cox (1976) 50 ALJR 559 at 561; 9 ALR 194. 131. Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; 66 ALJR 123; 104 ALR 1. 132. Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 4 FCR 450; (1984) 57 ALR 167 at 183; (1985) ATPR 40-507. 133. Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 204 ALR 26; 78 ALJR 324; (2004) ATPR 41-973; HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640; 79 ALJR 190; 211 ALR 79; (2004) ATPR 42-030; Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665; Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189; Gates v City Mutual Life Assurance Soc Ltd [1986] HCA 3; (1986) 160 CLR 1; 60 ALJR 239; 63 ALR 600; (1986) ATPR 40-666.
448
Miller’s Australian Competition Law and Policy
[19.470]
Seeking Compensation
• the Act contains no express indication that some kinds of loss or damage are too remote to be recovered. Loss is not limited to economic loss economic loss will often be the loss suffered in competition cases; • economic loss can take a variety of forms but central to all of those forms is that the applicant has sustained a prejudice or disadvantage as a result of altering its position; • assistance can be gained from the common law in deciding what damages should be awarded, but that does not mean, for instance, that the only damages that can be awarded are limited to damages that would be awarded in an action for deceit; and • comparison must be made between the position in which the person who suffered loss or damage is in and the position that person would have been in had there been no contravention, but this may not be an exclusive test.
Limitation Period [19.460] Damages proceedings must be commenced within six years of the date on which the cause of action accrues. The court has no discretion to extend the time limit.134 As such, a cause of action has two elements — contravention of a competition provision of the Act and loss or damage caused by that contravention — a cause of action accrues, not when a contravention occurs, but when loss or damage is suffered as a result.135 A potentiality of loss is not sufficient: the statutory cause of action arises only when loss or damage occurs. Where the loss is a contingent loss or liability, the time of accrual of the cause of action is when payment is required to be made, recoupment becomes impossible or the loss otherwise actually crystalises. [19.470] When loss or damage is suffered is a question of fact to be determined in all of the circumstances of the case.136 This can be quite problematic as Energex137 illustrates. Energex, a Queensland electricity utility, instituted damages proceedings following proceedings for collusive tendering brought against the respondents by the ACCC. The damages claim was for the additional price it paid for large industrial electricity transformers over what it would have paid had the cartel not operated. An application was made to strike out the claim on the basis that it was brought out of time. The central question was when Energex suffered loss. Energex claimed that this occurred when the market rigging was discovered because until then its loss was not ascertainable. There was, it said, no possibility of establishing a 134. Competition and Consumer Act 2010, s 82(2); Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1988] FCA 60; (1988) ATPR 40-853 at 49,196. See also Calmao Pty Ltd v Stradbroke Waters Co-owners Co-operative Society Ltd [1989] FCA 407; (1989) 21 FCR 28; 89 ALR 507; (1989) ATPR 40-984. 135. Arcadi v Colonial Mutual Life Assurance Society Ltd [1984] FCA 184; (1984) ATPR 40-473; Fenech v Sterling [1983] FCA 256; (1983) 79 FLR 244; 51 ALR 205; (1983) ATPR 40-413; James v ANZ Banking Group Ltd (1986) 64 ALR 347; (1986) ATPR (Digest) 46-005; Coleman v Gordon M Jenkins & Associates Pty Ltd [1988] FCA 393; (1989) ATPR 40-960. 136. Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189; Karedis Enterprises Pty Ltd v Antoniou [1995] FCA 1356; (1995) 59 FCR 35; 137 ALR 544; (1995) ATPR 41-427; Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182; (2001) ATPR 41-189; Energex Ltd v Alstom Australia Ltd [2005] FCAFC 215; (2005) ATPR 42-086. 137. Energex Ltd v Alstrom Australia Ltd [2005] FCAFC 215; (2005) ATPR 42-086. © 2018 THOMSON REUTERS
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[19.480]
true value for the transformers until “the false market problem was corrected”. In refusing to summarily dismiss the claim, but without deciding the commencement date for limitation purposes, the court noted the difficulty in pinpointing when loss or damage had occurred. It observed that loss or damage resulting from anticompetitive behavior requires the loss analysis to be undertaken in the light of the conduct’s effect in the relevant market. That analysis, the court suggested, may involve a number of considerations:138 Where market prices are elevated by collusive tendering or price fixing, it may be arguable that there is not a “true market price” defining “true value” and somehow underlying the “false market price” generated by the anti-competitive conduct. It may be that the true and lesser price of goods or services in the market and the true value of assets acquired in that market crystallises only upon discovery of the anti-competitive conduct in question. So like the latent defect which affects the market value of a building when it becomes known and not before, the concealed defect in the market affects value only when it has been ascertained. In so saying the difficulty of loss analysis involving ageing assets acquired originally in a market with falsely elevated prices, is not to be underestimated.
In other words, proving when loss or damage occurs in cases of anticompetitive conduct is exceedingly challenging.
Standard of Proof [19.480] The applicant must prove that it has suffered loss or damage on the balance of probabilities. However, when it comes to proving the extent of the applicant’s loss or damage for the purposes of awarding damages, reference to the balance of probabilities is not the standard that applies. While the amount for damages must be proven with certainty139, precision is not required.140 There will always be assumptions — a degree of speculation and guesswork141 — to some degree in quantifying damages. Two cases illustrate this. Simpson142 involved a whitegoods manufacturer that had engaged in resale price maintenance including by withholding supply from six stores owned by the respondent, Hubbards. Its loss was calculated by applying to an estimate of sales that would have been made, a figure derived from calculating the estimated average gross selling price of the relevant classes of whitegoods over a 12 month period and taking 10% as Hubbards’ profit margin, making deductions for other costs such as bank charges and taxes. On appeal the court approved the approach taken by the trial judge, but increased the award by the amount the trial judge had deducted for taxes. O’Neill,143 a consumer protection case, provides the second illustration. O’Neill had been induced to change employers by a misrepresentation. When it came to establishing his loss, the basis on which damages should be assessed was unclear. Some evidence was presented of O’Neill’s salary package win his former 138. Energex Ltd v Alstrom Australia Ltd [2005] FCAFC 215; (2005) ATPR 42-086 at [60]. 139. Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332; 68 ALJR 313; 120 ALR 16; (1994) ATPR 41-301. 140. O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455; (2002) ATPR 41-882. 141. Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 4 FCR 450; (1984) 57 ALR 167 at 183; (1985) ATPR 40-507. 142. Simpson Ltd v Hubbards Pty Ltd [1982] FCA 210; (1982) 69 FLR 392; (1982) ATPR 40-319. 143. O’Neill v Medical Benefits Fund of Australia Ltd [2002] FCAFC 188; (2002) 122 FCR 455; (2002) ATPR 41-882.
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Miller’s Australian Competition Law and Policy
[19.510]
Remedial Orders
employment. The respondent argued that, as O’Neill’s counsel had not called precise evidence of his prior income there could be no assessment of damages. The court decided that, while the amount had to be proven, that only meant that there needed to be as much certainty as is reasonable in the circumstances. In O’Neill’s case that requirement had been met. However, this was a case brought in a magistrate’s court so the reference to circumstances may well have reflected that. [19.490] Reported decisions on damages claims for contravention of the compensation provisions of the Act are rare as most cases settle.144 Energex, discussed above, illustrates the difficulty in quantifying the loss in cartel cases. In resale price maintenance cases the task is still complex, but somewhat easier as Simpson illustrates.
Remedial Orders [19.500] In addition to the right to seek damages, the Act confers a wide power on the court to make remedial orders in favour of private litigants in appropriate cases relating to contraventions of the competition provisions.145 A prerequisite for relief is that the person has suffered, or is likely to suffer, loss or damage. Originally, an application could only be made as an ancillary claim in proceedings for compensatory damages146 but the Act147 now authorises the making of an application to the court independent of any other proceedings. The types of orders that may be made include:148 declaring the whole or part of a contract void; varying contracts or arrangements; refusing to enforce a contract; directing the person who engaged in the contravening conduct to refund money or return property; payment of compensation; undertaking repairs or supplying parts; providing specified services at the supplier’s own expense,; and terminating leases and mortgages or requiring land to be transferred. Such orders are compensatory only. They must compensate the person who suffered loss or damage in whole or in part for that loss or damage, or prevent or reduce future loss or damage.149 [19.510] The wide power conferred is not fettered by principles controlling the discretion to grant the equitable remedy of rescission or other general law analogues.150 One of the orders that can be made is an order for the payment of compensation. This overlaps to some extent with the compensatory damages provision. The 144. See, for example, Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) [2006] FCA 1388; (2006) 236 ALR 322, (2007) ATPR 42-134. 145. Competition and Consumer Act 2010, s 87. 146. Sent v Jet Corp Australia Pty Ltd [1986] HCA 35; (1986) 160 CLR 540; 60 ALJR 503; 66 ALR 73; (1986) ATPR 40-704. 147. Competition and Consumer Act 2010, s 87(1C). 148. Competition and Consumer Act 2010, s 87(2). 149. Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; 76 ALJR 1461; 192 ALR 1; (2002) ATPR 41-894. See also Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1; 287 ALR 437. 150. Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494; 73 ALJR 12; 158 ALR 333; (1998) ATPR 41-665; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; 75 ALJR 1410; 182 ALR 37; (2001) ATPR 40-841; Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 204 ALR 26; 78 ALJR 324; (2004) ATPR 41-973. © 2018 THOMSON REUTERS
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[19.520]
significant difference between the two provisions is that, for the compensatory damages provision, a cause of action only arises when actual loss or damage has been suffered, whereas under the remedial orders provision a cause of action may be brought is anticipation of loss or damage — when it is likely to be suffered.151 The ACCC can also take action under the section on behalf of those who have suffered, or are likely to suffer, loss or damage as a result of contravention and the Director of Public Prosecutions has that right in relation to cartels.
Injunctions [19.520] The Federal Court may grant injunctions, including interim injunctions, to restrain breaches or attempted breaches of the competition provisions of the Act.152 This empowers the court to issue an injunction in many instances where none would have been available in equity.153 The ACCC and any other person may seek an injunction.154 This means that the right to apply for relief is not limited to consumers155 or those who have proprietary interests affected by the conduct or have suffered any damage.156 The most common group to take private action is competitors. They have included, for instance, a private power station seeking the right to distribute its electricity over a statutory authority’s distribution network157, a retailer seeking to overturn a decision by a street directory publisher to no longer supply directories,158 a competing stock information provider seeking access to stock exchange data,159 and a supplier of accountancy training materials to stop the Institute of Chartered Accountants bundling training materials with its courses.160 As the purpose of injunctions is to restrain breaches or attempted breaches of the competition provisions of the Act, the equitable rule that delay in bringing proceedings is a bar does not apply. Although it is a relevant factor in the court deciding whether or not to exercise its discretion, it is not an absolute bar.161 151. Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; 66 ALJR 839; 109 ALR 247; (1992) ATPR 41-189. 152. Competition and Consumer Act 2010, s 80. 153. Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380. 154. Except in relation to mergers: Competition and Consumer Act 2010, s 80(1A). 155. R v Federal Court of Australia; Ex parte Pilkington ACI (Operations) Pty Ltd [1978] HCA 60; (1978) 142 CLR 113 at 131; 53 ALJR 238; 23 ALR 69. 156. World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186; (1977) ATPR 40-040. 157. See, for example, NT Power Generation Pty Ltd v Power & Water Authority [2004] HCA 48; (2004) 219 CLR 90; 79 ALJR 1; 210 ALR 312; (2004) ATPR 42-021; Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879. 158. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805. 159. Pont Data Australia Pty Ltd v ASX Operations Pty Ltd [1990] FCA 30; (1990) 21 FCR 385; 93 ALR 523; (1990) ATPR 41-007. 160. Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110; (2002) ATPR 41-879. 161. World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 at 186; (1977) ATPR 40-040; Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd [1987] FCA 412; (1987) 16 FCR 351.
452
Miller’s Australian Competition Law and Policy
[19.540]
Injunctions
[19.530] Although the entitlement to grant injunctions in competition cases departs substantially from the traditional basis for the grant of injunctions in equity they do not suggest legislative nihilism.162 The injunctive remedy is designed to ensure that, once the condition precedent to its exercise is satisfied, the court has the widest possible powers to grant injunctions on such terms as it determines to be appropriate. But the court must have regard to the scope and purpose of the Act.163 Consequently, the appropriate terms of an injunction are not, as they are under general law, limited to the conduct the respondent has actually engaged or is proposing to engage in. If a contravention is established the court has the wide injunctive powers, to be exercised judicially and sensibly.164 As was said in ICI Australia Operations:165 Injunctions are traditionally employed to restrain repetition of conduct. A statutory provision that enables an injunction to be granted to prevent the commission of conduct that has never been done before and is not likely to be done is a statutory enlargement of traditional equitable principles. But this is because traditional doctrine surrounding the grant of injunctive relief was developed primarily for the protection of private proprietary rights. Public interest injunctions are different … This does not mean that the traditional equitable doctrines are irrelevant. For example, it must be relevant to consider questions of repetition of conduct or whether it has ever occurred before or whether imminent substantial damage is likely: but the absence of any one or more of these elements is not fatal.
[19.540] The Act specifically permits an injunction to be granted whether or not there is a likelihood of future contravention,166 but the likelihood of future contravention is a relevant factor.167 So, for instance, in Cool,168 a case involving breaches of a number of competition provisions in relation to the supply of vehicle windscreens, it was argued that injunctions should not be granted because the applicant had subsequently sold its business, and it was unlikely that the conduct would occur again. The court nevertheless granted an injunction. On the other hand, in Cadbury Schweppes,169 the prospect of the offending conduct occurring again was regarded as extremely unlikely and the court decided it should refuse to grant an injunction. In SMS Global,170 a case of false claims of government endorsement and membership of a relevant industry association by young internet entrepreneur’s web hosting business, 162. ACCC v Dataline.Net.Au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513. 163. OD Transport Pty Ltd v WA Government Railways Commission [1987] FCA 76; (1987) 13 FCR 270; 71 ALR 190; (1987) ATPR 40-761. 164. Foster v ACCC [2006] FCAFC 21; (2006) 149 FCR 135; (2006) ATPR 42-105; ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 at 267; 110 ALR 47; (1992) ATPR 41-185 at 40,533. See also Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270; 74 ALJR 991. 165. ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 at 256-257; 110 ALR 47; (1992) ATPR 41-185. 166. Competition and Consumer Act 2010, ss 80(4), 80(5). 167. ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 at 255; (1992) ATPR 41-185. 168. Cool & Sons Pty Ltd v O’Brien Glass Industries Ltd (No 2) (1981) 40 ALR 88. 169. ACCC v Cadbury Schweppes Pty Ltd [2004] FCA 516; (2004) ATPR 42-001. 170. ACCC v SMS Global Pty Ltd [2011] FCA 855. © 2018 THOMSON REUTERS
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[19.550]
the court declined to grant injunctions proposed by the ACCC because they were unnecessary, lacking in utility or there was no public interest to be served in granting them. [19.550] There are, nevertheless, some limits. There must be a sufficient nexus between the contravention and the injunction — injunctions must be related to the case or controversy before the court. In Rural Press,171 the High Court made it clear that injunctions expressed in general terms, without any guidance on what the respondent is required to do or avoid doing, are a bad precedent and should not be agreed to, even if consented to by the parties. Injunctions should indicate the conduct that is enjoined in such a way as to enable the party enjoined to know what, as a matter of fact, is expected.172 They should be expressed in clear and unambiguous terms, leaving no room for confusion because contempt proceedings are not appropriate for the determination of questions of construction of an injunction.173 For this reason, the court will not grant an injunction simply ordering a respondent not to breach the Act,174 nor if the injunction is not framed with sufficient specificity, even in consented to.175 The purpose of granting an injunction to restrain conduct already prohibited can only be to add conduct a possible finding of contempt of court for not complying with the injunction. In each case, it is a question whether the conduct concerned warrants the application of those more stringent consequences.176 Many contraventions simply will not justify an injunction. As was stated in Dermalogica:177 In determining whether to grant an injunction proscribing future conduct, the court should consider whether all the circumstances of the case … call for the contravener being subject to the more onerous burdens, such as contempt of court, in relation to their future conduct. This consideration is required even though the power of the Court to grant an injunction … is not limited by the requirement of a threat of future contravening conduct.
[19.560] Injunctions may be granted in merger cases, but may only be applied for by the ACCC.178 In Rank,179 in relation to the takeover of a major independent grocery wholesaler, the court granted a two-month injunction to restrain one 171. Rural Press Ltd v ACCC [2003] HCA 75; (2003) 216 CLR 53; 78 ALJR 274; 203 ALR 217; (2003) ATPR 41-965. 172. Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13; (2001) 205 CLR 1; 75 ALJR 600; 178 ALR 253; (2001) ATPR 41-805. 173. ACCC v Dataline.Net.Au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513 applying Commodore Business Machines Pty Ltd v Trade Practices Commission [1990] FCA 77; (1990) 92 ALR 563; MacLean v Shell Chemical (Australia) Pty Ltd [1984] FCA 157; (1984) 2 FCR 593 at 599; ICI Australia Operations Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 at 255. 174. Trade Practices Commission v Walplan Pty Ltd [1985] FCA 389; (1985) 7 FCR 495; (1985) ATPR 40-637; ACCC v Albert [2005] FCA 1311. 175. In ACCC v Francis [2004] FCA 487; (2004) 142 FCR 1; for instance, the court refused to grant injunctions consented to by the respondent, because the terms of the injunction were not sufficiently specific. 176. BMW Australia Ltd v ACCC [2004] FCAFC 167; (2004) 207 ALR 452; (2004) ATPR 42-012. 177. ACCC v Dermalogica Pty Ltd [2005] FCA 152 at [110]. See also ACCC v Dataline.Net.Au Pty Ltd (in liq) [2007] FCAFC 146; (2007) 161 FCR 513. 178. Competition and Consumer Act 2010, s 80(1A). 179. Trade Practices Commission v Rank Commercial Ltd (1994) 53 FCR 303; 123 ALR 551; (1994) ATPR 41-331; (1994) ATPR 41-343.
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[19.580]
Disqualification Orders
respondent from lodging a Part A Statement takeover and subsequently restrained another respondent from lodging a Part A Statement. But the court observed that: A court cannot hold the underlying commercial situation in a state of status quo during the lengthy period which preparation for trial might ordinarily be expected to take. In this period the facts, including share values, will change.
For that reason interlocutory injunction applications in merger cases prove to be particularly difficult. The aim of an interlocutory injunction is to preserve the status quo, yet in merger cases this can rarely be achieved. It may therefore be that alternative remedies will become more important in these cases. Divestiture is a powerful remedy. Perhaps the courts should be more ready to refuse interlocutory relief except in cases where divestiture may not be an adequate remedy.
Disqualification Orders [19.570] Executive found by the court to have either contravened any of the competition provisions of the Act, attempted to do so, or has been in any other way involved in a contravention the ACCC may apply to the court for a disqualification order.180 This provision was inserted in response to a recommendation of the Dawson Committee, which had recommended that the court should be given the option of ordering that a person implicated in a contravention of the Act be disqualified from being a director or involved in the management of a corporation.181 If the court is satisfied that a contravention, or attempted contravention, has occurred, and that disqualification is justified, it may disqualify the executive from managing corporations for such period as the court thinks appropriate. [19.580] The provision is modelled on a provision in the Corporations Act 2001.182 The following relevant principles have been developed by the courts in relation to that provision:183 • disqualification orders are designed to protect the public by seeking to safeguard the public interest in the transparency and accountability of companies and in the suitability of directors to hold office; • protection of the public also envisages protection of individuals that deal with companies, including consumers, creditors, shareholders and investors; • disqualification orders are: • protective against present and future misuse of the corporate structure; • directed to general deterrence and to personal deterrence, but may also be punitive; • longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty. In assessing an appropriate length of prohibition, consideration should be given to the degree of seriousness of the contraventions, the propensity that the person 180. Competition and Consumer Act 2010, s 86E. 181. Dawson Report, p 165. 182. Corporations Act 2001, s 206C. See ACCC v Halkalia Pty Ltd (No 2) [2012] FCA 535. 183. ASIC v Adler [2002] NSWSC 483 modified by the High Court in Rich v ASIC [2004] HCA 42; (2004) 220 CLR 129. © 2018 THOMSON REUTERS
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[19.590]
may engage in similar conduct in the future and the likely harm that may be caused to the public; • it is necessary to balance the personal hardship to the executive against the public interest and the need for protection of the public from any repeat of the conduct; and • a mitigating factor in considering a period of disqualification is the likelihood of the executive reforming. [19.590] In determining whether or not to make a disqualification order, the following matters have been seen as relevant (although not exclusively) in consumer protection cases: the character of the executive; the nature of the contravention; the structure of the companies and the nature of their business; the interests of shareholders, creditors and employees; the risk to others from the executive continuing as a company director; the honesty and competence of the executive; hardship to the defendant and their personal and family business interests; and the executive’s appreciation that future breaches could result in fresh proceedings.184 A disqualification order may, in appropriate circumstances, be made in relation to all corporations, not just the corporation involved in the relevant contravention.185
Punitive Publication Orders [19.600] The court is entitled, in appropriate cases, to make punitive adverse publicity orders, but only if it is proven that the person or corporation has contravened one of the competition prohibitions.186 The orders the ACCC is entitled to seek are orders that requires the person to either publish an advertisement in terms ordered, at the person’s own expense; or disclose information in such manner as may be specified in the order.
Non-Punitive Orders [19.610] In addition to the other remedies provided for in the Act, the court may, on application by the ACCC, require a person found to have breached the competition provisions of the Act, on a non-punitive basis, to:187 • undertake community service; • disclose information, in the way and to the persons specified in the order; • publish advertisements in specified terms; • attend trade practices awareness training; or • implement a trade practices compliance program.
Corrective Advertising [19.620] Publication orders have to date mainly been used for corrective advertising in relation to misleading conduct, but they are available as a remedy for competition breaches in appropriate circumstances, in order to protect the public 184. ACCC v Renegade Gas Pty Ltd [2014] FCA 1135 applying Commissioner for Corporate Affairs (WA) v Ekamper (1987) 12 ACLR 519. 185. Director of Consumer Affairs Victoria v Dimmeys Stores Pty Ltd [2013] FCA 1371; (2013) 308 ALR 296; (2013) ATPR 42-457. 186. Competition and Consumer Act 2010, s 86D. 187. Competition and Consumer Act 2010, s 86C.
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Miller’s Australian Competition Law and Policy
[19.630]
Non-Punitive Orders
interest. Such orders are aimed at dispelling incorrect impressions, raising public awareness of the type of conduct that may contravene the Act and raising public awareness in relation to a contravention.188 A further purpose is to redress the actual contravention. As it is intended to be a non-punitive order, corrective publication orders are not for the purpose of punishing the respondent.189 In Real Estate Institute,190 the question of publication orders arose in proceedings against the Institute for fixing prices with competitors in relation to training courses. The court said: It is important that such advertisements are seen to do more than merely announce a “win” for the ACCC and the contrition of the respondent. Such advertisements in cases involving contraventions of Part IV are within the power conferred … if they are directed to informing the relevant markets of the outcome of the litigation so that those in the market have at least a broad understanding of the ways in which the contravenors have had to change their conduct … In so saying, it is not intended to assert any exhaustive principle upon which the making of such orders under… can be justified.
Corrective advertising orders may be made even though there had been few complaints about the conduct, where the proscribed conduct continued over a considerable period of time,191 but it is a matter of discretion to be exercised having regard to the utility of making such an order.192
Compliance Programs [19.630] The court is entitled to order that a party found to have contravened the Act implement a compliance program, also as a non-punitive measure. It is quite usual for the ACCC to seek an order to that effect in such cases and also to insist that s 87B undertakings193 contain an obligation to implement or upgrade compliance training. However, there are some limits on what a court will order. First, a court will be reluctant to order that a respondent undertake a compliance program where there is no clear benefit that might be delivered in terms of future behaviour because this would amount to a punitive order.194 Second, the scope of any compliance program must be relevant to the contravention — there must be a sufficient nexus between the conduct and the proposed order. The court will not order broad-ranging compliance programs which go beyond the scope of the contravention.195 Compliance program orders should be expressed with 188. ACCC v On Clinic Australia Pty Ltd [1996] FCA 1705; (1996) ATPR 41-517; ACCC v Real Estate Institute of WA Inc [1999] FCA 1387; (1999) 95 FCR 114; (1999) ATPR 41-719. 189. Hospital Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (t/a Health Australia) (1988) ATPR 40-834. See also St Lukes Health Insurance v MBF of Australia Ltd [1995] FCA 1314; (1995) ATPR 41-428; ACCC v On Clinic Australia Pty Ltd [1996] FCA 1705; (1996) ATPR 41-517. 190. ACCC v Real Estate Institute of WA Inc [1999] FCA 18; (1999) 161 ALR 79; (1999) ATPR 41-719 at 43,351 at [48]. The case pre-dated s 86C but the principles are relevant. 191. ACCC v Dell Computers Pty Ltd [2002] FCA 847 (2002) ATPR 41-878. 192. ACCC v Kaye [2004] FCA 1363; ACCC v On Clinic Australia Pty Ltd [1996] FCA 1705; (1996) ATPR 41-517; ACCC v CG Berbatis Holdings Pty Ltd [2000] FCA 1893; (2001) ATPR 41-802. 193. See [19.660]. 194. ACCC v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491; (2003) ATPR (Digest) 46-239. 195. ACCC v Z-Tek Computer Pty Ltd [1997] FCA 871; (1997) 78 FCR 197; (1997) ATPR 41-580. © 2018 THOMSON REUTERS
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sufficient precision to enable a breach of the order to be readily ascertained and effectively punished196 although minute detail is not required.197 Third, the court will not order the implementation of an entirely new compliance program where the respondent already has a program in place. It will usually order an upgrade of the program, if necessary.198 Fourth, the court will not order that a compliance program must comply with the Australian Standard without a best or reasonable endeavours qualification because, although the Standard may be a valuable guide to those charged with framing and implementing compliance programs, it is aspirational and recommendatory and therefore not appropriate for adoption as part of an order of the court.199 Fifth, the court will not allow the ACCC a complete veto over the choice of independent expert who is to design and conduct a compliance program.200 Finally, the court will be reluctant to order that individuals implement a compliance program, and the power to order attendance at such a program seems questionable. Section 86C does not refer to orders that persons attend compliance training and it is doubtful whether the wide injunction power is sufficient to permit a court to do so. Even if it were sufficient, it has been said that it is not a proper use of the court’s power to require the physical attendance of a person for the purpose of reeducation.201 Nevertheless, such orders have been made, by consent, in relation to a manager of a business that had engaged in cartel conduct.202
Probation Orders [19.640] The court is entitled, in appropriate circumstances, to make non-punitive probation orders for up to three years. The following factors have been found by the court to be relevant in exercising that discretion:203 • whether a probation order is necessary given the particular circumstances of the contravention, other relief proposed to be granted, and in particular in light of any existing compliance program and steps taken since the contravention occurred;204 • whether a clear benefit will be delivered, in relation to the respondent’s future conduct.205 For instance, where there is evidence of a compliance program or training in place but there has been prolonged and deliberate violation of
196. ACCC v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548. 197. ACCC v Construction, Forestry, Mining and Energy Union [2006] FCA 1730; (2007) ATPR 42140. 198. ACCC v George Weston Foods Ltd [2004] FCA 1093; (2004) 210 ALR 486. 199. ACCC v Econovite Pty Ltd [2003] FCA 964; (2003) ATPR 41-959. See also ACCC v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548; ACCC v Hobie Cat Australasia Pty Ltd [2008] FCA 402; (2008) ATPR 42-225. 200. ACCC v Econovite Pty Ltd [2003] FCA 964; (2003) ATPR 41-959. 201. ACCC v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665; (2007) ATPR 42-138. 202. ACCC v Renegade Gas Pty Ltd [2014] FCA 1135. 203. The factors were summarised in ACCC v Renegade Gas Pty Ltd [2014] FCA 1135. 204. ACCC v Wizard Mortgage Corp Ltd [2002] FCA 1317; [2008] FCA 1792. 205. ACCC v 4WD Systems Pty Ltd [2003] FCA 850.
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competition laws, such an order may be entirely appropriate to safeguard against future violations;206 • whether the scope of the proposed order is appropriately focused on the particular contravening conduct.207 The scope of the order should be adequately defined to enable it to be easily ascertained whether the order has not been complied with.208
Community Service Orders [19.650] The court is entitled, in appropriate cases, to make community service orders. A community service order is an order that a person who has engaged in conduct in contravention of the Act perform a service for the benefit of the community (or a section of it); being a service that relates to the offending conduct.
Enforceable Undertakings [19.660] Although for constitutional reasons the ACCC cannot impose penalties the Act permits it to accept formal administrative undertakings209 in a wide variety of circumstances, including to settle or avoid proceedings for alleged contravention of the Act, and for the purpose of obtaining an informal or formal merger clearance, or obtaining an authorisation. In a merger context, these undertakings, including divestiture undertakings, have become a regular feature in resolving ACCC competition concerns. Undertakings must be “in connection with a matter”. That means that there needs to be a substantial relationship, in a practical sense, between the conduct complained of and the undertaking accepted.210 Decisions whether or not to accept an undertaking, and in what form, are matters for the ACCC. It is an independent statutory body which may have good reason for not accepting an undertaking and deciding to pursue litigation instead. As the ACCC’s decisions are made under an enactment, applications for review under the Administrative Decisions (Judicial Review) Act 1977 are available. But the ACCC is an independent statutory body that may, in any particular case, have good reason for not accepting an undertaking and deciding to pursue litigation instead. The court will be reluctant to intervene in that decision.211 [19.670] Undertakings are binding agreements given statutory force and effect. They are statutory instruments212 that have a public purpose. Members of the public, including competitors, are entitled to rely on the fact that undertakings have been
206. ACCC v Pepe’s Ducks Ltd [2013] FCA 570. 207. ACCC v Z-Tek Computer Pty Ltd [1997] FCA 871; (1997) 78 FCR 197; 148 ALR 339; (1997) ATPR 41-580. 208. ACCC v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548. 209. Competition and Consumer Act 2010, s 87B. 210. ACCC v Woolworths (SA) Pty Ltd [2003] FCA 530; (2003) 198 ALR 417; (2003) ATPR 41-941, applying Berry v Federal Commissioner of Taxation [1953] HCA 70; (1953) 89 CLR 653 at 658–659. 211. ACCC v Signature Security Group Pty Ltd [2003] FCA 3; (2003) 52 ATR 1; (2003) ATPR 41-908. 212. Australian Petroleum Pty Ltd v ACCC [1997] FCA 175; (1997) 73 FCR 75; 143 ALR 381; (1997) ATPR 41-555.
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given, and upon their terms.213 It is arguable that an undertaking may confer private rights and a breach of an undertaking regarded as an unlawful act for the purposes of claims based on the tort of conspiracy by unlawful means.214 The court will give effect to and reinforce undertakings where there has been noncompliance.215 If an undertaking is not complied with the Federal Court may make enforcement and compensation orders. The test for non-compliance is objective. The ACCC is not required to show that the breach was intentional, nor is the lack of intent a defense. An undertaking may be withdrawn by the party giving it at any time with the consent of the ACCC.216 A decision by the ACCC to refuse consent to variation of an undertaking is a decision under an enactment, open to review by the court under the Administrative Decisions (Judicial Review) Act 1977.217
Divestiture [19.680] It is arguable whether divestiture is a remedy available other than in relation to mergers,218 but the Act contains an explicit provision empowering the Federal Court, in appropriate cases, to declare mergers that breach the Act void and to order divestiture.219 The entitlement to order divestiture has been described as an integral element in the scheme of the Act to prohibit anti-competitive mergers and acquisitions, by enabling the court to order the re-establishment of competition that existed before the market was distorted by the acquisition.220 The statutory entitlement to do so is in the nature of a mandatory injunction aimed at unravelling contravening conduct, but the power has rarely been used, essentially because, although divestiture is an easy concept in theory, practical application is difficult. There has only been one divestiture case decided by the courts, although, as was noted in Chapter 15, voluntary divestiture by Undertakings is not an uncommon remedy to resolve ACCC concerns about mergers that may substantially lessen competition. The court decision, Australia Meat Holdings,221 involved the acquisition of an English company with interests in the meat industry in Australia by an Australian company in the same industry. The court decided to order divestiture of the acquired shares, but only if the acquiring party did not dispose of abattoirs identified by the trial judge as necessary to remove the anticompetitive nature of the acquisition. Divestiture proceedings may be brought within three years of the merger. 213. Toll Holdings Ltd v ACCC [2009] FCA 462; (2009) 256 ALR 631; (2009) ATPR 42-303; ACCC v Coles Group Ltd [2014] FCA 363; (2014) ATPR 42-467. 214. Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169; (2004) ATPR 42-013. 215. Competition and Consumer Act 2010, s 87B(4). 216. Competition and Consumer Act 2010, s 87B(2). 217. Australian Petroleum Pty Ltd v ACCC [1997] FCA 175; (1997) 73 FCR 75; 143 ALR 381; (1997) ATPR 41-555. 218. Competition and Consumer Act 2010, s 87 entitles to court to make orders declaring contracts void ab initio and orders varying contracts, but whether such orders are able to be used to effectively produce divestiture has not been tested. 219. Competition and Consumer Act 2010, s 81. 220. WSGAL Pty Ltd v Trade Practices Commission (1994) 51 FCR 115; 122 ALR 673; (1994) ATPR 41-314. 221. Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299; (1988) ATPR 40-876. On appeal (1989) ATPR 40-932.
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FURTHER READING Author Alegi (editor) Beaton-Wells & Fisse Gotts (editor) Wright
Title The Public Competition Enforcement Review Australian Cartel Regulation The Private Competition Enforcement Review Remedies Under the Trade Practices Act
© 2018 THOMSON REUTERS
Publisher/Citation Law Business Research, 5th ed, 2013 Cambridge University Press, 2011 Law Business Research, 7th ed, 2014 Oxford 2006
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COMPETITIVE NEUTRALITY [20.20] [20.80] [20.90] [20.100] [20.110] [20.120] [20.130]
20
Origins of Competitive Neutrality ........................................................ Taxation Neutrality .............................................................................. Debt Neutrality ..................................................................................... Rates of Return ................................................................................... Cost Allocation and Pricing ................................................................. Competitive Tendering and Contracting .............................................. Competitive Neutrality Complaints ...................................................... [20.160] Making a Complaint ............................................................ [20.180] Types of Cases ...................................................................
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[20.10] Competitive neutrality is a subject that was very relevant for about 10 years from the mid-1990s as the Australian economy transitioned from State-owned business enterprises to private sector ownership through privatisation. Until the mid-2000s. this provided neutrality principles — especially in relation to borrowing rates, rates of return and taxation — as well as a mechanism to deal with Stateowned business enterprises competing unfairly with the private sector through cross-subsidisation or non-commercial pricing. Although the mechanism for dealing with State-owned business enterprises competing unfairly remains relevant today because some States still own and operate government business enterprises, its relevance has significantly reduced.
Origins of Competitive Neutrality [20.20] Although Australia’s competition law and policy had reached a level of maturity by the mid-1990s, there remained large sectors of the economy not open to competition. The Commonwealth had applied the Trade Practices Act 1974 to its own business activities and those of its authorities, but the States had not. Consequently, the greatest impediment to enhanced competition in many sectors of the economy at that time was government ownership, particularly ownership of providers of utility services in sectors such as water, electricity, gas and rail.1 According to reports at the time, government businesses accounted for 10% of Australia’s gross domestic product, with rail, electricity, gas and water utilities accounting for nearly 50% of that figure.2 To recap on Chapter 4, by the late 1980s, in terms of per capita incomes Australia had slipped from 12th to 16th internationally. As the Chair of the Productivity Commission, Professor Gary Banks, explained, Australian economy was:3
1.
Hilmer Report, p 184.
2. EPAC, Productivity Growth of Government Business Enterprises and the Private Sector (21 July 1993); Industry Commission, Rail Transport (1991); Energy Generation & Distribution (1991); Water Resources & Waste Water Disposal (1992). 3. G Banks, Structural Reform Australian-Style: Lessons for Others?, Presentation to the IMF and World Bank (Washington DC, 26–27 May 2005) and OECD (Paris, 31 May 2005). © 2018 THOMSON REUTERS
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highly regulated, anti-competitive and redistributive: captured nicely by the expression “protection all round” — a policy that for much of the last century had bi-partisan support and wide community acceptance.
When it came to the economic performance of government-owned businesses Professor Banks said that they carried on business by and large on the basis that their “fair” prices incorporated the cost of poor management and labour practices.4 While it was acknowledged that external developments contributed to Australia’s deteriorating performance, high trade barriers and restrictions on competition were seen as leading to significant inefficiencies across the Australian economy.5 The Productivity Commission observed, of that time, that there was “a business culture that focused on securing government preferment rather than on achieving a competitive edge through cost control, innovation and responsiveness to customer needs”. The Federal Government accepted that major reform was necessary, but had to convince the States that reform was required and demonstrate how it could be achieved. [20.30] As we saw in Chapter 4, the Hilmer Committee recognised that opening up traditional government monopolies to competition would not be sufficient to foster effective competition from the private sector.6 Structural reform was required. This meant that a totally new approach to provision of traditional government services would be required if competition was to be introduced into those sectors. Hilmer recommended a comprehensive package of reforms that included legislative reform to remove regulation-making powers from government monopoly utilities, wholesale embracing of corporatisation for those utilities and competitive neutrality principles designed to ensure that competition between government-owned enterprises and the private sector was fair. The changes Hilmer proposed were revolutionary. They required State and Territory governments to change fundamentally the way they had delivered traditional government services. As a consequence, getting agreement to make the proposed changes was not a simple task. Many disagreed that the Hilmer changes were required. The sensitive nature of the negotiations that followed the Hilmer Report is reflected in the way in which the Competition Principles Agreement7 was expressed. The Agreement was expressed to be “neutral with respect to the nature and form of ownership of business enterprises”.8 Each government was to be “free to determine its own agenda for the implementation of competitive neutrality principles”9 and “free to determine its own agenda for the reform of public monopolies”.10 [20.40] The Competition Principles Agreement set out the steps they would take before introducing competition to a sector traditionally supplied by a public 4. The Industry Commission (now the Productivity Commission) undertook major studies of rail transport (1991), energy generation and distribution (1991) and water resources (1992), concluding that, in those industries alone efficiencies could increase gross domestic product by $8 billion per annum: Hilmer Report, p 129. 5. Productivity Commission, Review of National Competition Policy Reforms, Report No 33 (2005), p xiii. 6. Hilmer Report, p 185. 7. See Appendix 2. 8. Competition Principles Agreement, cl 1(5). 9. Competition Principles Agreement, cl 3(2). 10. Competition Principles Agreement, cl 4(1).
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monopoly, if they decided to do so.11 The Agreement also set out a framework for transitioning to competition in markets traditionally supplied by a public monopoly by providing that, before privatising a government monopoly, governments would undertake a thorough review. Commonwealth grants were then made available if and when these steps were completed and the National Competition Council was established to advise the Federal Treasurer whether or not the States and Territories were making sufficient progress to warrant payment. The reviews were intended to set appropriate commercial objectives for the enterprise when it was privatised. They were also aimed at assisting in separating potentially competitive elements of the enterprise’s activities from natural monopoly elements, identifying the most effective means of separating out regulatory functions, determining appropriate price and service regulations to apply, and setting appropriate rate of return targets, dividends and capital structure.12 The overriding principle was, as has already been noted, that government businesses competing with the private sector should not enjoy any net competitive advantage simply as a result of their public sector ownership — the competitive neutrality principle. The objective was the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities. [20.50] The Treaty of Rome, creating what ultimately became the European Union, contained a prohibition on State aid because it was recognised that government interventions through the provision of subsidies to State-owned enterprises should not be permitted to distort competition and intra-community trade.13 Although a similar philosophy motivated Australian governments in concluding the Competition Principles Agreement, the Agreement went much further, addressing all types of competitive advantage a government business enterprise might enjoy. [20.60] The major policy shift was that, in relation to significant government business enterprises,14 the governments would adopt a corporatised model.15 This meant turning traditional statutory bodies that provided services for the State into corporations incorporated under the Corporations Act 2001, and having them provide services on a purchaser pays model. This effectively meant that they would be covered by the Trade Practices Act 1974 in the same manner as any other business. 11. Competition Principles Agreement, cl 4. 12. Competition Principles Agreement, cl 4. 13. Article 87 of the Treaty of Rome provided: “Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market. 14. The Commonwealth’s Competitive Neutrality Policy Statement, issued in June 1996, identified all Commonwealth GBEs as significant, along with all non-GBE share limited companies and all Commonwealth business units. It also identified non-GBE activities and other business activities as significant if the commercial receipts from the activities exceeded $10 million. However, the NCC took a different approach. In Competitive Neutrality Reform – Issues in Implementing Clause 3 of the Competition Principles Agreement (AGPS, January 1997) it expressed the view that: “[i]dentifying significant government businesses according to size alone carries a danger that businesses which are significant in their particular markets, but nevertheless below some arbitrary threshold size, will be excluded from consideration of pro-competitive reform. Accordingly, the Council sees value in a broader test of significance, involving consideration of the impact of an activity on its relevant market.” 15. Competition Principles Agreement, cl 3(4)(a). © 2018 THOMSON REUTERS
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This had a profound effect on the way in which governments did business. In each State and Territory, electricity utilities were corporatised and then many were privatised. Water utilities were corporatised, as were hospitals and in the case of the latter, management of some public hospitals was contracted out to the private sector. Rail utilities were corporatised and those involved in rail freight operations mostly privatised. Public bus and ferry services were corporatised and some privatised. However, corporatisation and contracting out would not have been sufficient to encourage competition from the private sector if the corporatised utilities continued to enjoy the benefits of government ownership. Even under the closely regulated Australian domestic airline policy16 that allowed one private sector competitor, Ansett, to compete with the Australian National Airways Commission’s TransAustralia Airways, Ansett constantly complained that TAA always had an advantage because it could borrow capital at a cheaper rate than Ansett due to its government ownership, and that TAA received more government business.17 [20.70] If the policy of introducing competition to the utilities sector of the Australian economy was to succeed, governments would need to impose on their government business enterprises full taxation, or taxation equivalents, and debt guarantee fees to offset the advantage provided by government ownership. They would also need to impose on their business enterprises the same regulation as private sector operators in the relevant industry were subject to.18 Furthermore, prices charged by significant government business enterprises would need to reflect full cost attribution, taking account of the matters already referred to.19
Taxation Neutrality [20.80] The first requirement was to remove taxation advantages enjoyed as a consequence of government ownership.20 Exemption of government business enterprises from taxation was a major source of competitive imbalance. Under the policy, taxation neutrality was achieved either by removing taxation exemptions that applied to government business enterprises or by establishing taxation equivalent regimes. This included all taxation, including income tax, indirect Commonwealth taxes and State taxes such as payroll tax and stamp duty. State and Territory governments introduced taxation equivalent regimes under which their government business enterprises are assessed for federal tax on the same basis as their private sector competitors, but instead of paying tax to the Australian Taxation Office, the equivalent amount is paid to the State or Territory Treasury.
16. Between 1958 and the early 1980s Australia had a two airline policy. Only Ansett and TAA were permitted to operate domestic regular passenger airline services between States and Territories. The airlines were closely regulated, with identical fleets and virtually identical schedules. 17. See generally Brogden, Australia’s Two Airline Policy (MUP, 1968), pp 190–191. 18. Competition Principles Agreement, cl 3(4)(b). 19. Competition Principles Agreement, cl 3(5). 20. Competition Principles Agreement, cl 3(4)(b)(i).
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Cost Allocation and Pricing
Debt Neutrality [20.90] The second requirement was to remove the advantages government business enterprises enjoyed as a consequence of having access to government capital and borrowings.21 Debt neutrality is another important requirement, as the Ansett example above demonstrated. Explicit government guarantees and implicit government support through ownership of their business enterprises meant that government entities enjoyed borrowing cost advantages. The objective of debt neutrality was to subject government business enterprises to borrowing costs similar to those faced by their private sector competitors. Government business enterprises competing with the private sector were required to pay a rate of interest to their government equivalent to what would be paid if the borrowing occurred in the financial markets without a government guarantee.
Rates of Return [20.100] Another aspect of the competitive advantage government business enterprises enjoyed was that they were not required to earn a rate of return equivalent to that expected of their private sector competitors. The competitive neutrality principles meant that government business enterprises were required by their governments to earn commercial returns at least sufficient to justify the long-term retention of assets in the business, and to pay dividends equivalent to the average for their industry to their government owner.22 This had a direct impact on the way in which government business enterprises compete with the private sector on price. On average over time prices charged by government business enterprises were expected to at least fully cover costs. Over time, the position improved in relation to this metric, but improvement was slow. By 2004–2005 only 47% of the 86 government trading enterprises monitored by the Productivity Commission earned nominal pre-tax returns on assets above the 10-year bond rate 23
Cost Allocation and Pricing [20.110] Cost allocation was an issue in relation to those government enterprises that undertook significant business activities as an adjunct to other operations. Resource allocation distortions occur because prices charged do not reflect resource costs. The key method of ensuring that this did not continue was to require 21. Competition Principles Agreement, cl 3(4)(b)(ii). 22. For instance, the principles in calculating an appropriate rate of return target, set out in the report of the Steering Committee on National Performance Monitoring of Government Trading Enterprises stated: “A target ROR should be set to equal the overall cost of capital for an organisation, ie the average cost of debt (usually interest) and equity capital (eg dividends) weighted by usage. This is the Weighted Average Cost of Capital (WACC). The ROR target = WACC = Re (E/V) + Rd (D/V) where: Re is the required rate of return on equity (including any risk premiums); Rd is the required rate of return on debt (including any debt neutrality charges); V is the market value of total assets (ie debt plus equity); D is the market value of equity; and E is the market value of debt”: An Economic Framework for Assessing the Performance of Government Trading Enterprises (AusInfo, 1996). 23. Productivity Commission, Financial Performance of Government Trading Enterprises 2000–01 to 2004–05. © 2018 THOMSON REUTERS
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governments to ensure that their enterprises segregated business activities from other activities of the enterprise and fully attribute to the business activities the costs associated with them.24
Competitive Tendering and Contracting [20.120] In-house tendering was a particularly contentious issue in terms of competitive neutrality. Competitive neutrality principles required in-house bids to earn a commercial pre-tax rate of return on assets employed, in order to place them on a neutral footing with private sector bids. In addition, cross-subsidisation in calculating costs for in-house bids had to be addressed. The approach was to require in-house bids to include costs to make them equivalent to private sector bids. The amounts included were equivalent to: the excises, customs duties, etc, the unit would have to pay if it were not exempt; an amount equivalent to stamp duty; payroll tax, it would have to pay if it were not exempt; and public liability insurance premiums, and all costs (including shared and joint costs) associated with providing the tendered service.25
Competitive Neutrality Complaints [20.130] Hilmer recognised that there would need to be some mechanism for ensuring that competitive neutrality principles were upheld. To summarise, the competitive neutrality principles are:26 • For significant government business enterprises, to the extent that the benefits to be realised from implementation outweigh the costs governments will impose on their government business enterprises: ° full Commonwealth, State and Territory taxes or tax equivalent systems; ° debt guarantee fees directed towards offsetting the competitive advantages provided by government guarantees; and ° those regulations to which private sector businesses are normally subject (such as those relating to the protection of the environment, and planning and approval processes) on an equivalent basis to private sector competitors. • Where an agency undertakes significant business activities as part of a broader range of functions, governments will, with respect to the business activities of the agency, to the extent that the benefits to be realised from implementation outweigh the costs, either: ° impose the same obligations on them as apply to their government business enterprises or ° ensure that prices charged for products and services will take account of those regulations to which private sector businesses are normally subject (such as those relating to the protection of the environment, and planning and approval processes, on an equivalent basis to private sector competitors) and reflect full cost attribution for those activities. 24. Competition Principles Agreement, cl 3(5)(b). 25. See, for example, Commonwealth Competitive Neutrality Guidelines for Managers 1998. A guideline, Competitive Tendering and Contracting: Guidance for Managers, was published by the Department of Finance and Administration in May 1997. 26. Competition Principles Agreement, cl 3.
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Competitive Neutrality Complaints
• This does not require the removal of regulation that applies to a government business enterprise or agency (but which does not apply to the private sector) where the government responsible for the regulation considers the regulation to be appropriate. [20.140] It was not thought appropriate to provide a legislative cause of action and leave it to the courts to enforce competitive neutrality. Some more subtle arrangement was required. Hilmer therefore recommended that the functions of the ACCC should include reporting on allegations of non-compliance.27 However, that recommendation was not accepted. Instead each government established a competitive neutrality complaints procedure28 and an independent body to consider and determine competitive neutrality complaints. The following table lists the relevant bodies.
State/Territory
Competitive Neutrality Authority
Commonwealth
Commonwealth Competitive Neutrality Complaints Office (part of the Productivity Commission)
South Australia Tasmania
Competition Commissioner Tasmanian Economic Regulator (formerly the Government Prices Oversight Commission) Commissioner for Better Regulation
Australian Capital Territory
Independent Competition and Regulatory Commission
New South Wales
Independent Pricing and Regulatory Tribunal
Victoria
Northern Territory
Northern Territory Treasury
Western Australia Regulatory Reform Unit of the Treasury
Queensland
Queensland Productivity Commission
27. Hilmer Report, p 309. 28. Competition Principles Agreement, cl 3(8). © 2018 THOMSON REUTERS
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[20.150] Private sector competitors of government business enterprises who thought that the enterprise was not complying with the neutrality principles and that, as a result, was enjoying an advantage not available to its private sector competitor, could lodge a complaint with the relevant authority. The complaint would be independently investigated and a report provided to the responsible Commonwealth, State or Territory Minister. If the complaint were upheld, the report would include a recommendation on remedial action, although it would be up to the Minister to decide whether action would be taken to remedy the situation or not. Compensation would be payable to the party making the complaint. The only remedy would be rectification of the matter if the Minister so decided.
Making a Complaint [20.160] The legislative processes for making a complaint are set out as follows: State/ Territory
Competitive Neutrality Authority
Commonwealth
Productivity Commission Act 1998, s 21.
South Australia
Australian Capital Territory
Independent Competition and Regulatory Commission Act 1997, s 19B.
Tasmania
New South Wales
Independent Pricing and Regulatory Tribunal Act 1992, ss 24GB-24GE.
Queensland Queensland Productivity Commission Act 2015, ss 31–42.
Government Business Enterprises (Competition) Act 1996, ss 16–19. Economic Regulator Act 2009, ss 48–62.
In Western Australia, competitive neutrality complains are not handled by an independent authority. They are handled by an office in the Treasury in accordance with the Western Australian Government’s Policy Statement29. The same position applies in the Northern Territory30 and in Victoria.31 [20.170] The procedures for making, assessing and deciding on a complaint vary between States and Territories, although they each have common elements. To take one as an example, the following summarises the Queensland process. • A person may make a complaint to the Queensland Competition Authority against a government agency carrying on a significant business activity on the ground the agency, in carrying on the activity, does not comply with the principle of competitive neutrality. However, a complaint may only be made
29. . 30. . 31. .
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by a person who is, or may be, adversely affected by the competitive advantage alleged by the person to be enjoyed by the government agency. 32 • A complaint may only be made after the complainant has made a genuine, but unsuccessful, attempt to resolve the issue with the government agency.33 • Complaints are made in writing, containing details of the alleged noncompliance by the government agency and sufficient details to show how the complainant is, or may be, adversely affected by it the alleged non-compliance.34 • The Commission must investigate the complaint unless it concludes that it is frivolous or vexatious, or it reasonably believes that the complainant is not, or could not be, in competition with the government agency. The Authority may seek further information from the complainant and may decide not to proceed if the information is not forthcoming.35 • If it proceeds with an investigation the Commission must notify the agency and the Minister responsible for it.36 • If the Commission decides to investigate it must prepare a written report about the investigation, including the results of the investigation, and give the report to the Treasurer.37 The Treasurer then makes a decision and the reasons for that decision are published.38
Types of Cases [20.180] Queensland: Complaints have covered a wide spectrum of government services. In Queensland complaints have related to electricity distribution, rail services, electrical contracting, and road-making. The most recent case was in February 2017.39 InfoTrack Pty Ltd, an information broker, complained that the Centre for Information Technology and Communications (CITEC), a commercialised business unit of the Department of Science, Information Technology and Innovation had access to, and provision of, exclusive services in breach of the the principle of competitive neutrality. InfoTrack provided company, property, corporate and personal searches of Federal and several State government databases including ASIC, and eFiling of court documents. CITEC was a provider of electronic search and retrieval facilities for more than 40 Federal, State and local government organisations and also provided commercial information sources and electronic filing services of court documents for a number of Australian jurisdictions. The Commission concluded that CITEC had not acted, or been treated by the government, in a manner inconsistent with the competitive neutrality principles.
32. 33. 34. 35. 36. 37. 38. 39.
Queensland Productivity Commission Act 2015, s 34(1). Queensland Productivity Commission Act 2015, s 34(2)(d). Queensland Productivity Commission Act 2015, s 34(2)(a) and (b). Queensland Productivity Commission Act 2015, s 37. Queensland Productivity Commission Act 2015, s 38. Queensland Productivity Commission Act 2015, s 39. Queensland Productivity Commission Act 2015, ss 41, 42. Re Centre for Information Technology and Communications (2017), .
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[20.190] New South Wales: There has only been one published competitive neutrality report, published in October 2004.40 Three private valuation firms complained that the State Valuation Office (SVO) had not complied with competitive neutrality principles in tendering for specific contracts to provide land valuation services for the NSW Valuer General and a Victorian Council. The methodology used by the SVO to price each of the tenders was found to be consistent with NSW competitive neutrality principles. However, in two tenders, the SVO underestimated the resources required, but the Tribunal made no finding that this was deliberate. [20.200] South Australia: Complaints have related to bus charters, plant nurseries, tourism services, stationery supply and venue ticketing. The most recent case was in September 2005.41 A private sector ticketing agency complained that the Adelaide Festival Centre Trust’s ticketing service did not apply cost-reflective pricing principles to its business activities and that ticketing for major events organised by government agencies was automatically given to the Trust. The Commissioner concluded that the Trust was setting prices for its ticketing service within the requirements of competitive neutrality principles. The Commissioner also found that hirers of the Trust’s venues were required to use its ticketing services, but that this was not contrary to competitive neutrality principles. [20.210] Tasmania: Complaints have related to off-street parking, property valuation, non-emergency ambulance services, waste disposal, and health services. [20.220] Victoria: Complaints have related to property waste management services, childcare, cattle sale yards, food safety training services, road construction, health care mobility equipment, aquatic centres, driver education, marine paint and water trading services. The most recent case was in January 2015.42 A complaint was made that, by not applying a fully cost-reflective pricing to its long-day child care service the Council was not complying with competitive neutrality principles. The Commission43 found that the centre in question had operated at a loss exceeding $1 million and concluded that its pricing of its long-day child care service was not fully cost reflective and therefore did not comply with the Competitive Neutrality Policy. [20.230] Western Australia: In Western Australia, complaints have related to prison industries, radiation oncology services and plant nurseries. [20.240] Commonwealth: Complaints about Commonwealth activities have included housing construction, postal services, property valuation, document imaging services, airports, meteorological services, road transport, television production, rail freight, swimming schools, telecommunications and protective services. The most recent case was in March 2012.44 A complaint was made that PETNET Australia Pty Ltd, a wholly owned subsidiary of the Australian Nuclear Science and Technology Organisation, was charging prices for radiopharmaceutical
40. Re State Valuation Office (2004), . 41. Re Adelaide Festival Centre Trust (2005), . 42. Re Hobsons Bay City Council (2015), . 43. This was a decision of the Victorian Competition and Efficiency Commission whose functions were subsequently transferred to the Commissioner for Better Regulation. 44. Re PETNET Australia (2012), .
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products that did not fully reflect its costs and generate commercially acceptable profits and that, as a consequence, it had won a tender to supply products to the New South Wales public hospital sector. The allegation was that ANSTO was not charging prices that reflected true production costs, did not apply commercial rates of interest on borrowings and could not achieve commercially acceptable profits over a 10-year payback period. The Commission decided that for ANSTO to comply with competitive neutrality policy, it would need to adjust PETNET’s business model to achieve a commercial rate of return reflective of its risk profile and the full investment in PETNET.
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APPENDIX 1 Sir Garfield Barwick’s Statement 6 December 1962 Mr FREETH (Forrest) (Acting Attorney General) . — by leave — Before leaving recently to go overseas, the Attorney General (Sir Garfield Barwick) had drafted a statement about proposals for legislation on restrictive trade practices and monopolies, and it is this statement which I am about to read to the House. Before I do so, I would like to say that the Government and the Parliament are greatly indebted to the Attorney-General for the painstaking research and investigation which he undertook as a necessary preliminary to the preparation of this document. He operated virtually as a commission of one to inquire into some of the most difficult and complex aspects of the commercial life of Australia to-day and their effect on the community. The paper which I have before me represents his own and the Government’s conclusions, arising out of the really monumental amount of work that he did. I am sorry only that the Attorney-General is not here to present the result of his work to the House, and I count myself fortunate to be able to do this for him. As the House is aware, I have been engaged for some time in considering the need for legislation to control monopoly and restrictive practices in the business community of Australia and in devising a scheme of legislation which would protect free enterprise against such of these practices as were harmful to it. As part of this undertaking, I have been in consultation with the Attorneys-General of the States in an endeavour to induce their concurrence in that scheme of legislation and their willingness to propose to their governments legislation to complement that of the Commonwealth, so as to make the desired control effective over the whole range of Australian business activity. I do not propose to detain the House to describe the extent and complexity of the task or to recount the nature of the large volume of information which has been gathered as to the existence and operation of a wide variety of business practices in Australia, many of which can fairly be said to be restrictive. Nor do I need to pause to discuss the close examination which has been made of the legislation of other Western countries and the manner in which such laws operate. In addition, the distribution and limitations of constitutional power in Australia have had to be both explored and respected in the consideration given to a possible scheme of legislation. The Government, having been furnished with the results of my efforts in this connexion, has concluded, and I think few, if any, will deny, that there are practices current in the community which by reason of their restrictive nature are harmful to the public interest — that interest being in the maintenance of free enterprise under which citizens are at liberty to participate in the production and distribution of the nation’s wealth, thus ensuring competitive conditions which tend to initiative, resourcefulness, productive efficiency, high output and fair and reasonable prices to the consumer.
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Accordingly, the Government has decided that legislation should be introduced to enable such harmful practices to be prevented. However, the drafting of such legislation, towards which much work has already been done, is necessarily a highly complicated technical process which, particularly having regard to current demands on our drafting resources, cannot be immediately brought to completion. Also, in devising legislation of this kind, itself a matter of grave and heavy responsibility, the views of interested parties and of members of the public generally ought to be known before final decisions are taken as to its ultimate form and content. Consequently, as was foreshadowed in His Excellency’s Speech at the opening of this session of the Parliament, it has been decided that I should make this statement disclosing the basic outlines of what is in mind in such form as will enable public discussion, and individual or group representation to be made. … Before outlining the scheme of legislation which the Government has in contemplation, I ought to indicate broadly the philosophy which underlies it. In opening the second session of the twenty-third Parliament, the Governor-General indicated that the Government desired to protect and strengthen free enterprise against tendencies to monopoly and restrictive practices in commerce and industry. I have already referred to the place competition has in the maintenance of free enterprise. The Government believes that practices which reduce competition may endanger those benefits which we properly expect and mostly enjoy from a free-enterprise society. But the Government is also conscious of the fact that the lessening of competition may, in some aspects of the economy, be unavoidable, and, indeed, may be not only consistent with, but a proper ingredient of, a truly free enterprise system. This is more likely to be so in such a state of growth as we are experiencing, and particularly when we are gearing ourselves more and more for the export of secondary goods. In short, the Government does not subscribe to the view that there are no circumstances in which public interest can justify a reduction in competition, but on the contrary believes that there may well be some practices, restrictive in nature, which are in the public interest. … The criterion or test which accords with the Government’s philosophy and its understanding of the needs of the economy as a whole is that a practice which in its operation substantially restricts competition, either in a particular area or areas of business activity or generally, and which cannot be shown to be justified as either conferring a public benefit or as having no public detriment, is harmful. Expressed in legislative form, the justification may be said to be that the practice is not contrary to the public interest. No doubt expressions such as “ against the public interest “, or “ contrary to the public interest “, lack complete precision and inevitably leave some room for policy-making in the individual or body which has to apply them to particular facts. But they are words which have much tradition behind them, and I think they are as precisely expressive of what is presently in mind as any words which could be found. In any case, I would propose that the words would be accompanied by explanatory provisions indicating at least the main elements which the Parliament desired should be considered in this connexion. It will be seen from these remarks that the Government has not favoured the philosophy of the American legislation, which leaves little room to justify any reduction in competition. I ought, also, to say in passing that many seem to see in the mere size of a business undertaking an occasion for censure and a challenge to dismemberment. Indeed, one suspects that behind the original American legislation was the fear that industry, if it obtained sufficient dimension, would be a threat to government and likely to
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overawe and control the legislature. Whilst any such tendency cannot be ignored, nor its possibility excluded from mind, the Government has not to any extent based its approach to the proposed legislation upon any such view. The emphasis is placed by the Government on what an organization or business undertaking does in harming free enterprise, rather than upon its dimension. … I mentioned, Mr. Deputy Speaker, the heavy responsibility involved in the introduction of legislation to deal with restrictive practices. Whilst the experience of Western countries is available to us - all the principal of them have already ventured into this field - that very experience underlines the difficulties which beset the legislature and the administration in this connexion, and, perhaps more significantly, throws into relief the risk of doing more harm than good by adopting ill-considered and too widely sweeping legislation. None of the legislation existing elsewhere is, in my view, appropriate for enactment en bloc here. … The primary prerequisite of such a scheme is machinery that can be effectively used to halt practices which deprive, or tend to deprive, the community of the benefits of free enterprise and the individual trader of business opportunities that ought fairly to be open to him. Secondly, there must be certainty for businessmen as to what they may or may not do. This, to my mind, is important in relation to any economy, but it is imperative in our case. We are in a stage of development which calls for courage and initiative on the part of our businessmen. Our growth and the prosperity of all of us can only suffer, and suffer grievously, from uncertainty and resultant timidity on their part. Thirdly, there should be a minimum use of the criminal law. Whilst I have said that the ultimate touchstone of invalidity of a practice is its antipathy to the public interest, I do not think every breach of legislation in this field should brand the businessman a criminal. No doubt there are some events in which there must be a criminal penalty for breach of the law, but this should not be the general consequence. Fourthly, the application of the criterion or test by which the separation of the harmful from the justifiable practice is made should be by a tribunal which has a minimum of legalism, both in its attitude and approach and in its procedures, and a maximum of business and economic knowledge and understanding. But its independence both of business and of government should be complete. … Now may I describe the scheme which is in mind, and which has been discussed in the broad and to a great extent in detail with the Attorneys-General of the States, for the purposes I have indicated. May I say that, as a result of these discussions, I have reason to believe that at least a clear majority of the State Attorneys would recommend to their governments the introduction of complementary State legislation to implement the scheme of legislation I describe. There is one category in list A to which I must direct the attention of the Housenamely, mergers and take-overs. It will be obvious enough, and, indeed, experience abroad has demonstrated, that where two or more may not lawfully agree to engage in restrictive practices, they may, by merger so as to become one entity, do the very thing that was forbidden to be done by agreement. Part of this consequence is guarded against in this scheme by legislating against harmful acts done unilaterally as well as those resulting from agreement between two or more. To this aspect I have already adverted. But it would, in many instances, be preferable to intercept an intended aggregation, whether of assets or of proprietorship, where it was but a substitute for an agreement to carry out a restrictive practice or where it was itself
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a mechanism to reduce competition or to take a step towards ultimate monopoly whether of supply or of demand. The scheme I propose would seek to deal with the situation by providing an opportunity for intervention by the commission, established under the act, through the registrar, before the merger took place. In the uniform companies legislation, we have gone a considerable distance in requiring companies contemplating merger or takeover to furnish to the respective shareholders a great deal of information about the companies concerned, and about the merger or take-over proposals. This scheme would require like information to be given to the registrar together with certain further information pertinent to the question of the purpose and effect of the merger or takeover. …
Practices Potentially Contrary to the Public Interest The following was tabled by Sir Garfield Barwick as examples of practices that were thought to be potentially contrary to the public interest:
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Competition from manufacturers outside the agreement, and the opportunity for new manufacturers to commence or to build up businesses, is reduced by the tying up of the normal reseller outlets. In tying up the normal reseller outlets so that those outlets cannot buy from overseas manufacturers, the manufacturers within the agreement are giving themselves the benefit, in effect, of a self- assessed customs duty. The possibility of price competition is excluded—both as between the manufacturers and as between the resellers of their product. The agreed price may be fixed by reference to the costs of the least efficient manufacturer. The exclusion of the possibility of price competition removes the incentive for the manufacturer or reseller to pass on to the consumer the benefit of economies achieved in the manufacturing or reselling process. Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs of production are increased. The operation of the system of graduated discounts, being in the uncontrolled discretion of the manufacturers or of the favoured resellers, may be used to protect the resellers who receive the more favourable discounts from competition from resellers in the tower discount categories, and to prevent the latter from building up their businesses. Some would-be resellers may even be prevented from starting in business,
1. The carrying out of agreements between the principal manufacturers of a product that—
(a) they will supply only those resellers whose stocks of that product are manufactured exclusively or pre- dominantly by parties to the agreement, (b) they will fix an agreed price for their product, and will fix different discounts for different classes of resellers and users of the product (“‘A’ class resellers”, “‘B’ class resellers”, “retailers”, “Government Departments”, “builders”, &c.), (c) the class to which a particular reseller should be allocated, and the discount he should be allowed, will be related to his turnover—but final decision as to the class to which he is to be allocated will remain in the discretion of the manufacturers, or in the discretion of a trade association of the favoured resellers, and (d) they will refuse to supply, or will supply only at reduced discount, any reseller who cuts the manufacturers’ fixed retail price in an effort to improve turnover.
Possible detriment to the public interest
Practice
TABLE I: PRACTICES WHICH HAVE COME DIRECTLY UNDER THE NOTICE OF THE ATTORNEY-GENERAL
Practices Potentially Contrary to the Public Interest
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Competition from manufacturers outside the agreement, and the opportunity for new manufacturers to commence or to build up businesses, is reduced by the tying up of the principal reseller and user outlets. In tying up the principal reseller and user outlets so that those outlets cannot buy from overseas manufacturers, the manufacturers within the agreement arc giving themselves the benefit, in effect, of a self-assessed customs duty. Competition from resellers and users outside the agreement, and the opportunity for new resellers and users to commence or to build up businesses, is reduced by the tying up of the principal sources of supply. The possibility of price competition between resellers of a manufacturer’s product is excluded. The manufacturer’s fixed retail price may be fixed by reference to the costs of the least efficient reseller. The exclusion of the possibility of price competition between resellers removes the incentive for a reseller to pass on to the consumer the benefit of economies achieved in the reselling process. Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs of production are increased. Competition from suppliers outside the agreement, and the opportunity for new suppliers to commence or to build up businesses, is reduced by the tying up of the majority of users, who feel that they cannot afford to put themselves in a position of not being able to deal with the principal suppliers.
2. The carrying out of agreements between a trade association of the principal manufacturers of a product and a trade association of the principal resellers or users of that product (each of the trade associations having restrictions on admission to membership) That—
3. The carrying out of agreements between the principal suppliers of a particular service that they will supply only persons who observe a policy of dealing exclusively with those suppliers.
(a) members of the manufacturers’ trade association will supply, or will grant preferential discount, only to members of the trade association of resellers or users, (b) members of the trade association of resellers or users will buy only from members of the manufacturers’ trade association, and (c) members of the manufacturers’ trade association will not sell, or will sell only at reduced discount, to members of the trade association of resellers who cut the manufacturers’ fixed retail price in an effort to improve turnover.
Possible detriment to the public interest
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6. The supplying of a product by manufacturers at a fixed y agreement between the manufacturers.
5. The carrying out of agreements between manufacturers to refrain from supplying the customers of each other (i.e. to divide the market),
The incentive to improve the quality of the product is destroyed.
4. The carrying out of agreements between manufacturers of a product to limit the life, or the quality, of their product.
The possibility of price competition between the manufacturers is excluded. The agreed price may be fixed by reference to the costs of the least efficient manufacturer. The exclusion of the possibility of price competition removes the incentive for the manufacturer to pass on to the consumer the benefit of economies achieved in the manufacturing process. Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs of production are increased.
Customers are denied the benefit of choice of brands, and the benefit of price competition.
Competition in any form between the parties to the agreement is excluded.
The incentive to improve the quality of the product is reduced.
An agreement of this kind, like any other agreement to eliminate competition between the parties, enables the parties to reap higher financial returns, over a period, than they would have reaped in the absence of the restrictive agreement. These higher financial returns, however, would be at the expense of the consuming public.
Possible detriment to the public interest
Practice
Practices Potentially Contrary to the Public Interest
481
482
The possibility of price competition between the resellers is excluded.
7. The reselling of a product at a price fixed by agreement between the resellers.
As for 7, above. As for 7, above.
Where tenders are based on an agreement as to price, there is no competition in that respect. If an agreement is more than a mere standing agreement as to price, and goes so far as to involve collusion, then there is, in effect, a fraud committed on the person to whom the tender is submitted.
8. The reselling of a product at a price fixed by agreement between the resellers and the manufacturer of the product.
9. A concerted refusal by resellers of a product to buy from a manufacturer unless he withholds supplies from a reseller who is offering competitive prices or terms to the consumer,
10. Tenders submitted to public authorities and showing evidence either of price agreement between the tenderers or of agreement to divide up between the tenderers the successive contracts in respect of which tenders have been invited. Tenders of this kind have been consistently submitted to public authorities, both Commonwealth and State, in respect of a very wide range of commodities.
The exclusion of the possibility of price competition between resellers removes the incentive for a reseller to pass on to the consumer the benefit of economies achieved in the reselling process. Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs or production are increased.
The agreed price may be fixed by reference to the costs of the least efficient reseller.
Possible detriment to the public interest
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12. The observance by all resellers of a product throughout Australia of the resale price fixed by the manufacturer of the product.
By tying up the only source, or the major sources, of supply of the product, the resellers in the trade association suppress competition from resellers outside the agreement, limit the opportunity for new resellers to commence or to build up businesses and reduce the freedom of choice of the consumer.
11. The carrying out of agreements between resellers of a product (usually the members of a resellers’ trade association having restrictions on admission to membership) to require the manufacturer (or manufacturers) from whom they buy that product to observe a policy of selling only to them, or of giving preferential discounts only to them. Restrictions on admission to membership of the association often take the form of requiring the reseller seeking admission to the association to have a certain minimum (but substantial) turnover.
The possibility of price competition between resellers of a manufacturer’s product is excluded.
Where there are only a few manufacturers of the product, and each, in fixing his resale prices, follows the prices of the other, there is a likelihood of price uniformity for all brands of that product, at all levels of distribution throughout Australia.
Where membership of a reseller’s trade association depends on having a certain minimum turnover, and supplies are available only to members of the association, a non-member of the association is prevented from getting any turnover, and thus from qualifying for membership. In these circumstances the restrictive practice may be self-perpetuating.
A reseller outside the trade association may be forced either to go out of the business of reselling that product (or be prevented from entering the business) or may seek to import from outside Australia supplies which could have been manufactured in Australia.
Possible detriment to the public interest
Practice
Practices Potentially Contrary to the Public Interest
483
484
13. The supply by the manufacturer of a product on the condition that the reseller handles no one else’s brand of that product, or that the reseller handles no other Australian brand of that product.
Practice
Resellers who are afraid” of putting themselves in a position of not being able to deal with the [urge manufacturer may be prevented from buying from the cheapest supplier, or may be prevented, in times when the large manufacturer is unable to meet the demand for the product, from buying supplies in Australia, even though other Australian manufacturers may be ready, willing and able to supply.
Resellers are forced to carry only the one brand, and thus limit the selection they can offer then customers.
Competing manufacturers, if able to set up their own distribution outlets, may be involved in expenditure representing a wastage of national assets.
A powerful manufacturer can suppress competition from less powerful manufacturers, and reduce the opportunity for new manufacturers to commence or to build up businesses, by tying up the principal reseller outlets.
The exclusion of the possibility of price competition between resellers removes the incentive for a reseller to pass on to the consumer the benefit of economies achieved in the reselling process. Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs of production are increased.
The manufacturer’s fixed resale price may be fixed by reference to the costs of the least efficient reseller.
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In so far as resellers are inhibited from getting their supplies from other manufacturers—As in 13, above,
In so far as resellers are inhibited from getting their supplies from other manufacturers—As in 13, above. Agreements under which a reseller is required to buy supplies he does not want in order to get supplies he does want tend to distort the market by creating an artificial demand. Weaker resellers are forced out of business by the unfair use of the buying power of the powerful reseller. This practice, if carried on for a sufficient time, could drive the competing seller out of business.
15. The supply by the manufacturer of a product on the condition that the reseller takes other products of that manufacturer— sometimes the manufacturer’s “full line” of products— whether the reseller wants the other products or not; or the supply by the manufacturer on the condition that the reseller buys other products from other designated manufacturers.
16. The exacting of disproportionate discounts from manufacturers by a powerful reseller.
17. The combining of powerful sellers to undercut a competing seller in the locality where the competing seller operates, or in the line of business upon which the competing-seller depends.
Where the exclusive dealing requirement excludes overseas, as well as Australian manufacturers, the powerful manufacturer, in tying up the principal reseller outlets so that those outlets cannot buy from overseas manufacturers, is giving himself the benefit, in effect, of a self-assessed customs duty.
Possible detriment to the public interest
14. The supply by the manufacturer of a product on the condition that the reseller takes all his requirements of that product from that manufacturer, or on the condition that the reseller purchases a minimum quantity of that product from that manufacturer.
Practice
Practices Potentially Contrary to the Public Interest
485
486
All domestic competition is excluded, and the incentive to develop new methods and resources, and to pass on to the consumer the benefit of economies achieved in production, is weakened.
18. The taking over or the buying out of all the existing businesses in an industry, sometimes after the adoption of exclusionary tactics, e.g., the tying up of the available reseller outlets for the product concerned.
See 1 and 2 above.
19. A Report on certain aspects of the Timber Industry by Mr. Justice Richards, of the Industrial Commission of New South Wales (1st July, 1955) indicated that a number of trade associations had been formed or reorganized with a view to dividing the timber industry into three main types of operator—
(a) the timber importer, (b) the timber merchant, and (c) the box and case manufacturer.
Possible detriment to the public interest
Practice
TABLE II: PRACTICES REPORTED BY THE TARIFF BOARD AND OTHER OFFICIAL BODIES OF INQUIRY
Where the consumer, himself, is a manufacturer who requires the product for the manufacture of another product, the costs of production are increased.
Possible detriment to the public interest
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20. An Honorary Royal Commission on Restrictive Trade Practices and Legislation reported to the Parliament of Western Australia, in 1958, that there were 111 known trade associations
The Report states that the four principal associations were welded by a joint agreement into one huge combination under the direction of a joint committee.
In the case of some associations, quotas were fixed of timber products to be sold or manufactured by members, thus eliminating competition as to market shares as well as price. Strict compliance with the rules or internal agreements and decisions of the respective associations was enforced by stringent penal provisions. Members of associations sold at a higher price to non-members than to members.
Trade associations, representing each type of operator, by agreements that the members of one association would deal only with members of the other association, and by price fixing agreements, secured control over the supply and price of all imported timber.
Practice
Possible detriment to the public interest
Practices Potentially Contrary to the Public Interest
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488
(i) ensuring or endeavouring to ensure that only those persons within the association are eligible to distribute certain commodities combined with severe restrictions of membership of the association, and (ii) refusal to supply unless there is a certainty of price maintenance which is enforced by ‘ stop orders’, penalties or investigations........
“Channelling of distribution as undertaken through trade associations could, perhaps, come under two headings—
As to (b), the Report states—
(a) Mutual self help to members. (b) Channelling of distribution through its members. (c) Collective agreement as to price fixation and the enforcement thereof. (d) Lcvel or collusive tendering “,
“Evidence clearly showed that there exists, in Western Australia, an increasing tendency to form trade associations tor the purpose of—
in Western Australia, the majority of which carried on restrictive practices of one kind or another, The Commission’s Report states (at page 13)—
Practice
See 2 and 11 above.
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“Evidence also disclosed where manufacturers had supplied non-association members but when representations were made to them by the association concerned, the manufacturer then ceased to supply the non-association members. This is borne out by reference to minute books...........”
And at page 13— “Evidence disclosed that members of an association agreed to impose economic sanctions against one firm in an endeavour to force that firm to become a member of an association, because its prices were far below those of its competitors. The association’s members further agreed: ‘ That should the firm join the association, the first action necessary would be to achieve uniformity in prices’”.
As to (c), the Report states (at page 14)— “Evidence tendered and extracts from minute books show clearly that many associations have made strenuous efforts to enforce prices agreed upon by members. It was revealed that in some trades suspected offending members were subject to examination of their books by tribunals and in quite a number of instances the offender had to either submit to a fine or make a donation to the association funds ranging from £25 to £100 or pay into the association funds the profits of the transaction”.
Practice
See 9, above.
See 6 and 7, above.
Sec 9, above.
Possible detriment to the public interest
Practices Potentially Contrary to the Public Interest
489
490
21. The Tariff Board Report on Electrical Filament Lamps (10th September, 1958) indicated that manufacturers of filament lamps agreed on prices for their lamps.
“Whenever it was possible to do so, disciplinary action was taken by some associations against any member who committed a breach of prices in respect of tendering. The Commission became aware of a number of instances where a member who tendered a price below that agreed to by the association was required to pay the profit of the transaction into the association’s funds “.
(Forty-six separate items arc listed)
“The following list provided by Mr. G. W. Fruin, Comptroller of Stores, Western Australian Government Railways, indicates a number of articles which are noncompetitive as to price whenever tenders are called: -
“We came across several instances of what is usually known, we understand, as level or collusive tendering
As to (d) the Report states (at page 5)—
Practice
See 6, above
See 10, above.
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Mr. Justice Cook concluded that “wool pies” were a negation of the basic principles of a free auction system, that their inherent purpose was to enable wool to be bought somewhat more cheaply than otherwise, that they resulted in some portion of the wool clip being sold for less than would otherwise be paid for it, and that, overall, the disadvantages of the pie system were not offset by the advantages. It follows from these conclusions that our overseas balances with the countries to which our wool is exported could be adversely affected. See 2, 6, 7 and 15, above,
23. Collusive bidding at Australian wool auctions (“wool pies”) was found to exist by Mr. Justice Cook, of the Industrial Commission of New South Wales, in his Report concerning the Trade in Wool (18th November. 1959).
24. The Tariff Board, in its Report on Timber (20th December, 1960) stated that price stabilization schemes existed in the Australian timber industry, under which, amongst other things—
(a) wholesale prices were fixed by a timber millers’ association, (b) retail prices were fixed by a timber merchants’ association, and (c) members of the millers’ association dealt only with members pf the merchants’ association.
See 6, above,
22. The Tariff Board Report on Products of Copper and Other Products (20th November, 1959) indicated that very little price competition existed between local manufacturers of semifinished copper and copper alloy products and cables and wires.
The Tariff Board suggested, in its Timber Report, that the price fixing operated by the plywood manufacturers imposed unnecessary costs on large users by preventing them from negotiating more favourable prices.
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See 6, above.
See 2 and 8, above.
26. The Tariff Board, in its Report on Ceramic Tiles and Tile Blanks (27th October, 1961) criticized arrangements in the Australian tile industry whereby practically all tiles, both local and imported, were distributed through State tile merchants’ associations. Prices For tiles were fixed by agreement between the merchants and the manufacturers. For a certain kind of imported tiles, these prices represented a profit margin of 122 per cent, on landed cost.
Possible detriment to the public interest
25. The Tariff Board Report on Refined Petroleum Products (23rd June, 1961) indicated that the oil companies maintain a common pricing policy.
References to practices to this industry were also made by the Tariff Board in its annual Report for 1960-61.
The Board considered that the plywood industry had attempted to solve its problems by restrictive trading practices.
The Board also reported that a body consisting of manufacturers of plywood employed recognized distribution outlets, restricting the right of these distributors to handle imported products, and forcing them to take a certain percentage of second grade qualities when first grade quality was required and yicc versa, and fixed prices, discounts and conditions of sale for the members’ product.
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The company fixed the price at which the product was to be sold by wholesalers, and refused to supply other than “established distributors”.
29. The Tariff Board Report on Nitrogenous Fertilizers (6th March, 1962) indicated that a company called Nitrogen Fertilizers Pty. Ltd. acted as sole distributor for the three manufacturers of sulphate of ammonia.
28. The Tariff Board, in its Annual Report for 1961–62, referred to claims that manufacturers were requiring merchants to discontinue the handling of imported goods. The Report also referred to evidence of the existence of uniform price lists under which Australian and imported goods were retailed at the same price, irrespective of into-store cost. The Board said that under some of these arrangements, distributors, wholesalers and retailers operated fixed discount margins bearing little relationship to the cost of distribution and selling.
The Board said there was a tendency for competition in the industry to be limited to high “trade-in” allowances; and distribution margins.
See 8, above.
27. The Tariff Board, in its Report on Vacuum Cleaners and Floor Polishers (27th October, 1961) pointed out that the retail price of some Australian vacuum cleaners represented a profit of 113 per cent, on the cost of manufacture.
See 1 and 2, above.
Manufacturers, by requiring merchants to deal exclusively with them, at the expense of the imported article, were, in effect, giving themselves the benefit of a customs duty. The Tariff Board considered that the practices referred to in its Report tended to inflate retail prices, reduce incentive for efficiency and deny consumers the opportunity of purchasing goods at competitive prices.
See 1 and 8, above.
The Tariff Board considered that the high retail prices of vacuum cleaners were harmful not only to consumers but also to manufacturers, in that they had the effect of restricting sales volume.
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32. The precise number of trade associations existing in Australia would be difficult to ascertain, but investigations such as those conducted by the Western Australian Royal Commission whose report is referred to above, and by some of the writers whose publications are listed in the bibliography hereunder, indicate that there are between 500 and 600. The indications are that, of these, the members of a majority have agreements to eliminate or reduce competition in some form—usually competition between the parties as to price or as to markets—or agreements whereby the distribution of a product is confined to association members.
31. The Tariff Board Report on Conveyor and Transmission Belts and Belting (28th June, 1962) stated that Australian belting manufacturers acknowledged that local prices of these goods were based on a common list with discounts to distributors and users according to an agreed schedule.
See 6. above.
30. The Tariff Board Report on Pneumatic Rubber Tyres and Tubes (30th March, 1962) stated that Australian industry representatives gave evidence of a common pricing policy established by the manufacturers. References to practices in this industry had been made by the Tariff Board in a previous Report dated 7th December, 1955.
The possible detriment of particular practices engaged in by trade associations has been mentioned above. The increasing number of these associations, is a pointer to the increasing tendency for these practices to be engaged in in Australia.
Electricity authorities told the Board that, as a result of level tendering by belting manufacturers, under which they were being asked a price which would be profitable to the least efficient producer, they had directed more of their purchasing abroad than would otherwise have been the case.
See 1, above.
The Tariff Board found that some of the increased imports in recent years have been partly a result of Australian distributors adhering to price policies, which encouraged the purchase of imported tyres and tubes by organizations using fleets of motor vehicles.
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APPENDIX 2 Conduct Code Agreement Conduct Code Agreement WHEREAS the Council of Australian Governments at its meeting in Hobart on 25 February 1994 agreed to the principles of competition policy articulated in the report of the National Competition Policy Review; AND WHEREAS the Parties intend to achieve and maintain consistent and complementary competition laws and policies which will apply to all businesses in Australia regardless of ownership; THE COMMONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF QUEENSLAND THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASMANIA THE AUSTRALIAN CAPITAL TERRITORY, and THE NORTHERN TERRITORY OF AUSTRALIA agree as follows: 1. Interpretation (1) In this Agreement, unless the context indicates otherwise: Commission means the Australian Competition and Consumer Commission established by the Trade Practices Act; Commonwealth Minister means the Commonwealth Minister responsible for competition policy; Competition Code means the text in: (a) the Schedule version of Part IV of the Trade Practices Act; (b) the remaining provisions of that Act (except sections 2A, 5, 6 and 172), so far as they would relate to the Schedule version if the Schedule version were substituted for Part IV; and (c) the regulations under that Act, so far as they relate to any provision covered by paragraph (a) or (b) applying as a law of a participating jurisdiction; Competition Laws means: (a) Part IV of the Trade Practices Act and the remaining provisions of that Act, so far as they relate to that Part; and (b) the Competition Code of the participating jurisdictions;
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Council means the National Competition Council established by the Trade Practices Act; fully-participating jurisdiction means: (a) until the end of twelve months after the day on which the Competition Policy Reform Act 1995 receives the Royal Assent — a State or Territory that is a Party to this Agreement; and (b) after that date — has the meaning given by section 4 of the Trade Practices Act; jurisdiction means the Commonwealth, a State, the Australian Capital Territory or the Northern Territory of Australia; legislation includes Acts, enactments, Ordinances and regulations; modifications has the meaning given by section 150A of the Trade Practices Act; participating jurisdiction has the meaning given by section 150A of the Trade Practices Act; Party means a jurisdiction that has executed, and has not withdrawn from, this Agreement; Trade Practices Act means the Trade Practices Act 1974. (2) Where this Agreement refers to a provision in legislation which has not been enacted at the date of commencement of this Agreement, or to an entity which has not been established at the date of commencement of this Agreement, this Agreement will apply in respect of the provision or entity from the date when the provision or entity commences operation. 2. Exceptions from the Competition Laws (1) Where legislation, or a provision in legislation, is enacted or made in reliance upon section 51 of the Competition Laws, the Party responsible for the legislation will send written notice of the legislation to the Commission within 30 days of the legislation being enacted or made. (2) After four months from when a Party sends written notice to the Commission pursuant to subclause (1), the Commonwealth Minister will not table in the Commonwealth Parliament regulations made for the purposes of paragraph 51(1B)(f) of the Trade Practices Act in respect of the legislation referred to in the notice, unless the Commonwealth Minister tables in the Parliament at the same time a report by the Council on: (a) whether the benefits to the community from the legislation referred to in the notice, including the benefits from transitional arrangements, outweigh the costs; (b) whether the objectives achieved by restricting competition by means of the legislation referred to in the notice can only be achieved by means of the legislation; and (c) whether the Commonwealth should make regulations for the purposes of paragraph 51(1B)(f) of the Trade Practices Act. 1
1.
The references in this section of the Conduct Code Agreement to paragraph 51(1B)(f) of the Trade Practices Act are typographical errors. The correct reference is section 51(1C)(f).
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(3) Each Party will, within three years of the date on which the Competition Policy Reform Act 1995 receives the Royal Assent, send written notice to the Commission of legislation for which that Party is responsible, which: (a) existed at the date of commencement of this Agreement; (b) was enacted or made in reliance upon section 51 of the Trade Practices Act (as in force at the date of commencement of this Agreement); and (c) will continue to accept conduct pursuant to section 51 of the Trade Practices Act after three years from the date on which the Competition Policy Reform Act 1995 receives the Royal Assent. 3. Funding of the Commission The Commonwealth will be responsible for funding the Commission. 4. Appointments to the Commission (1) When the Commonwealth proposes that a vacancy in the office of Chairperson, Deputy Chairperson, member or associate member of the Commission be filled, it will send written notice to the Parties that are fully-participating jurisdictions inviting suggestions as to suitable persons to fill the vacancy. The Commonwealth will allow those parties a period of thirty five days from the date on which the notice was sent to make suggestions before sending a notice of the type referred to in subclause (2) or (3). (2) The Commonwealth will send to the Parties that are fully-participating jurisdictions written notice of persons whom it desires to put forward to the Governor-General for appointment as Chairperson, Deputy Chairperson or member of the Commission. (3) The Commonwealth will send to the Parties that are fully-participating jurisdictions written notice of persons whom it desires to put forward to the Commonwealth Minister for appointment as associate members of the Commission. (4) Within thirty-five days from the date on which the Commonwealth sends a notice of the type referred to in subclause (2) or (3), the Party to whom the Commonwealth sends a notice will notify the Commonwealth Minister in writing as to whether the Party supports the proposed appointment. If the Party does not notify the Commonwealth Minister in writing within that period, the Party will be taken to support the proposed appointment. (5) The Commonwealth will not put forward to the Governor-General a person for appointment as a Chairperson, Deputy Chairperson or member of the Commission unless a majority of the fully-participating jurisdictions support, or pursuant to this clause, are taken to support, the appointment. (6) The Commonwealth will not put forward to the Commonwealth Minister a person for appointment as an associate member of the Commission unless a majority of the fully-participating jurisdictions support, or pursuant to this clause, are taken to support the appointment.
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5. The Competition Code (1) The Parties agree that the Competition Code text should apply by way of application legislation to all persons within the legislative competence of each State and Territory. (2) Each State and Territory that is a Party will put forward for the consideration by their legislatures legislation which implements the principle set out in subclause (1). (3) If the Commonwealth Minister is satisfied that the laws of a participating jurisdiction have made significant modifications to the Competition Code text in its application to persons within the legislative competence of the participating jurisdiction, the Commonwealth Minister may publish a notice in the Commonwealth of Australia Gazette stating that the Commonwealth Minister is so satisfied. Any such notice is to be published before the expiry of two months from the date on which the Commonwealth received written notice pursuant to subclause 6(8). (4) If the Commonwealth Minister has published a notice of the type specified in subclause (3), the Commonwealth Minister may revoke that notice by publishing a further notice in the Commonwealth of Australia Gazette. 6. Modifications to the Competition Laws (1) It is the intention of the Parties that where modifications are made to provisions of either Part IV of the Trade Practices Act or of the Schedule version of Part IV of that Trade Practices Act, similar modifications will be made to corresponding provisions of the other. (2) The Commonwealth will consult with fully-participating jurisdictions before it puts forward for parliamentary consideration any modification to Part IV of the Trade Practices Act or to the Competition Code text. (3) At the conclusion of the Commonwealth’s consultation with the fullyparticipating jurisdictions in relation to proposed amendments to the Competition Code text, the Commonwealth will call a vote on the proposed amendments by sending written notice to each fully-participating jurisdiction. (4) For the purposes of voting: (a) the Commonwealth will have 2 votes; (b) each fully-participating jurisdiction will have 1 vote; and (c) the Commonwealth will have a casting vote. (5) If a fully-participating jurisdiction does not vote in respect of a proposed amendment within thirty-five days of the Commonwealth sending notice under subclause 6(3), that jurisdiction will be taken to have voted in favour of the amendment. (6) The Commonwealth will not put forward for parliamentary consideration an amendment to the Competition Code text unless a majority of the votes of the Commonwealth and the fully-participating jurisdictions support the amendment. (7) The Commonwealth will not be obliged to put forward for parliamentary consideration any amendment with which it does concur.
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(8) Each Party will send written notice to all other Parties setting out modifications to the Competition Laws that have been made by the legislature of that Party, or by any person. 7. Consultation Where clause 6 requires consultation between the Parties or some of them, the Party initiating the consultation will: (a) send to the Parties that must be consulted a written notice setting out the matters on which consultation is to occur; (b) allow those Parties a period of three months from the date on which the notice was sent to respond to the matters set out in the notice; and (c) where requested by one or more of those Parties, convene a meeting between it and those Parties to discuss the matters set out in the notice and the responses, if any, of those Parties. 8. New Parties and withdrawal of Parties (1) A jurisdiction that is not a Party at the date this Agreement commences operation may become a Party by sending written notice to all the Parties. (2) A Party may withdraw from this Agreement by sending written notice to all other Parties. The withdrawal will become effective six months after the notice was sent. (3) If a Party withdraws from this Agreement, this Agreement will continue in force with respect to the remaining Parties. 9. Sending of notices A notice is sent to a Party by sending it to the Minister responsible for the competition legislation of that Party. 10. Review of this Agreement Once this Agreement has operated for five years, the Parties will review its operation and terms. 11. Commencement of this Agreement This Agreement commences once the Commonwealth and at least three other jurisdictions have executed it. Signed for and on behalf of the Parties by: The Honourable Paul John Keating, Prime Minister of the Commonwealth of Australia, on the 11th day of April 1995; The Honourable Robert John Carr, Premier of the State of New South Wales, on the 11th day of April 1995; The Honourable Jeffrey Gibb Kennett, Premier of the State of Victoria, on the 11th day of April 1995; The Honourable Wayne Keith Goss, Premier of the State of Queensland, on the 11th day of April 1995; The Honourable Richard Fairfax Court, Premier of the State of Western Australia, on the 11th day of April 1995; The Honourable Dean Craig Brown, Premier of the State of South Australia, on the 11th day of April 1995;
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The Honourable Raymond John Groom, Premier of the State of Tasmania, on the 11th day of April 1995; Kate Carnell, Chief Minister of the Australian Capital Territory, on the 11th day of April 1995; and The Honourable Marshall Bruce Perron, Chief Minister of the Northern Territory of Australia, on the 11th day of April 1995.
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COMPETITION PRINCIPLES AGREEMENT Competition Principles Agreement WHEREAS the Council of Australian Governments at its meeting in Hobart on 25 February 1994 agreed to the principles of competition policy articulated in the report of the National Competition Policy Review; AND WHEREAS the Parties intend to achieve and maintain consistent and complementary competition laws and policies which will apply to all businesses in Australia regardless of ownership; THE COMMONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF QUEENSLAND THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASMANIA THE AUSTRALIAN CAPITAL TERRITORY, AND THE NORTHERN TERRITORY OF AUSTRALIA agree as follows: 1. Interpretation (1) In this Agreement, unless the context indicates otherwise: Commission means the Australian Competition and Consumer Commission established by the Trade Practices Act; Commonwealth Minister means the Commonwealth Minister responsible for competition policy; constitutional trade or commerce means: (a) trade or commerce among the States; (b) trade or commerce between a State and a Territory or between two Territories; or (c) trade or commerce between Australia and a place outside Australia; Council means the National Competition Council established by the Trade Practices Act; jurisdiction means the Commonwealth, a State, the Australian Capital Territory or the Northern Territory of Australia; Party means a jurisdiction that has executed, and has not withdrawn from, this Agreement; Trade Practices Act means the Trade Practices Act 1974. (2) Where this Agreement refers to a provision in legislation which has not been enacted at the date of commencement of this Agreement, or to an entity which has not been established at the date of commencement of this Agreement, this Agreement will apply in respect of the provision or entity from the date when the provision or entity commences operation. (3) Without limiting the matters that may be taken into account, where this Agreement calls:
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(a) for the benefits of a particular policy or course of action to be balanced against the costs of the policy or course of action; or (b) for the merits or appropriateness of a particular policy or course of action to be determined; or (c) for an assessment of the most effective means of achieving a policy objective; the following matters shall, where relevant, be taken into account: (d) government legislation and policies relating to ecologically sustainable development; (e) social welfare and equity considerations, including community service obligations; (f) government legislation and policies relating to matters such as occupational health and safety, industrial relations and access and equity; (g) economic and regional development, including employment and investment growth; (h) the interests of consumers generally or of a class of consumers; (i) the competitiveness of Australian businesses; and (j) the efficient allocation of resources. (4) It is not intended that the matters set out in subclause (3) should affect the interpretation of “public benefit” for purposes of authorisations or notifications under the Trade Practices Act. (5) This Agreement is neutral with respect to the nature and form of ownership of business enterprises. It is not intended to promote public or private ownership. Pursue interest See generally National Competition Council, Considering the Public Interest Under the National Competition Policy (November 1996). 2. Prices oversight of government business enterprises (1) Prices oversight of State and Territory Government business enterprises is primarily the responsibility of the State or Territory that owns the enterprise. (2) The Parties will work cooperatively to examine issues associated with prices oversight of Government business enterprises and may seek assistance in this regard from the Council. The Council may provide such assistance in accordance with the Council’s work program. (3) In accordance with these principles, State and Territory Parties will consider establishing independent sources of price oversight advice where these do not exist. (4) An independent source of price oversight advice should have the following characteristics: (a) it should be independent from the Government business enterprise whose prices are being assessed;
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(b) its prime objective should be one of efficient resource allocation but with regard to any explicitly identified and defined community service obligations imposed on a business enterprise by the Government or legislature of the jurisdiction that owns the enterprise; (c) it should apply to all significant Government business enterprises that are monopoly, or near monopoly, suppliers of goods or services (or both); (d) it should permit submissions by interested persons; and (e) its pricing recommendations, and the reasons for them, should be published. (5) A Party may generally or on a case-by-case basis: (a) with the agreement of the Commonwealth, subject its Government business enterprises to a prices oversight mechanism administered by the Commission; or (b) with the agreement of another jurisdiction, subject its Government business enterprises to the pricing oversight process of that jurisdiction. (6) In the absence of the consent of the Party that owns the enterprise, a State or Territory Government business enterprise will only be subject to a prices oversight mechanism administered by the Commission if: (a) the enterprise is not already subject to a source of price oversight advice which is independent in terms of the principles set out in subclause (4) Conduct Code Agreement; (b) a jurisdiction which considers that it is adversely affected by the lack of price oversight (an “affected jurisdiction”) has consulted the Party that owns the enterprise; and the matter is not resolved to the satisfaction of the affected jurisdiction; (c) the affected jurisdiction has then brought the matter to the attention of the Council and the Council has decided: (i) that the condition in paragraph (a) exists; and (ii) that the pricing of the enterprise has a significant direct or indirect impact on constitutional trade or commerce; (d) the Council has recommended that the Commonwealth Minister declare the enterprise for price surveillance by the Commission; and (e) the Commonwealth Minister has consulted the Party that owns the enterprise. 3. Competitive neutrality policy and principles (1) The objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities: Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. These principles only apply to the business activities of publicly owned entities, not to the non-business, non-profit activities of these entities.
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(2) Each Party is free to determine its own agenda for the implementation of competitive neutrality principles. (3) A Party may seek assistance with the implementation of competitive neutrality principles from the Council. The Council may provide such assistance in accordance with the Council’s work program. (4) Subject to subclause (6), for significant Government business enterprises which are classified as “Public Trading Enterprises” and “Public Financial Enterprises” under the Government Financial Statistics Classification: (a) the Parties will, where appropriate, adopt a corporatisation model for these Government business enterprises (noting that a possible approach to corporatisation is the model developed by the inter-governmental committee responsible for GTE National Performance Monitoring); and (b) the Parties will impose on the Government business enterprise: (i) full Commonwealth, State and Territory taxes or tax equivalent systems; (ii) debt guarantee fees directed towards offsetting the competitive advantages provided by government guarantees; and (iii) those regulations to which private sector businesses are normally subject, such as those relating to the protection of the environment, and planning and approval processes, on an equivalent basis to private sector competitors. (5) Subject to subclause (6), where an agency (other than an agency covered by subclause (4)) undertakes significant business activities as part of a broader range of functions, the Parties will, in respect of the business activities: (a) where appropriate, implement the principles outlined in subclause (4); or (b) ensure that the prices charged for goods and services will take account, where appropriate, of the items listed in paragraph 4(b), and reflect full cost attribution for these activities. (6) Subclauses (4) and (5) only require the Parties to implement the principles specified in those subclauses to the extent that the benefits to be realised from implementation outweigh the costs. (7) Subparagraph (4)(b)(iii) shall not be interpreted to require the removal of regulation which applies to a Government business enterprise or agency (but which does not apply to the private sector) where the Party responsible for the regulation considers the regulation to be appropriate. (8) Each Party will publish a policy statement on competitive neutrality by June 1996. The policy statement will include an implementation timetable and a complaints mechanism. (9) Where a State or Territory becomes a Party at a date later than December 1995, that Party will publish its policy statement within six months of becoming a Party. (10) Each Party will publish an annual report on the implementation of the principles set out in subclauses (1), (4) and (5), including allegations of noncompliance.
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4. Structural reform of public monopolies (1) Each Party is free to determine its own agenda for the reform of public monopolies. (2) Before a Party introduces competition to a sector traditionally supplied by a public monopoly, it will remove from the public monopoly any responsibilities for industry regulation. The Party will re-locate industry regulation functions so as to prevent the former monopolist enjoying a regulatory advantage over its (existing and potential) rivals. (3) Before a Party introduces competition to a market traditionally supplied by a public monopoly, and before a Party privatises a public monopoly, it will undertake a review into: (a) the appropriate commercial objectives for the public monopoly; (b) the merits of separating any natural monopoly elements from potentially competitive elements of the public monopoly; (c) the merits of separating potentially competitive elements of the public monopoly; (d) the most effective means of separating regulatory functions from commercial functions of the public monopoly; (e) the most effective means of implementing the competitive neutrality principles set out in this Agreement; (f) the merits of any community service obligations undertaken by the public monopoly and the best means of funding and delivering any mandated community service obligations; (g) the price and service regulations to be applied to the industry; and (h) the appropriate financial relationships between the owner of the public monopoly and the public monopoly, including the rate of return targets, dividends and capital structure. (4) A Party may seek assistance with such a review from the Council. The Council may provide such assistance in accordance with the Council’s work program. 5. Legislation review (1) The guiding principle is that legislation (including Acts, enactments, Ordinances or regulations) should not restrict competition unless it can be demonstrated that: (a) the benefits of the restriction to the community as a whole outweigh the costs; and (b) the objectives of the legislation can only be achieved by restricting competition. (2) Subject to subclause (3), each Party is free to determine its own agenda for the reform of legislation that restricts competition. (3) Subject to subclause (4) each Party will develop a timetable by June 1996 for the review, and where appropriate, reform of all existing legislation that restricts competition by the year 2000. (4) Where a State or Territory becomes a Party at a date later than December 1995, that Party will develop its timetable within six months of becoming a Party.
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(5) Each Party will require proposals for new legislation that restricts competition to be accompanied by evidence that the legislation is consistent with the principle set out in subclause (1). (6) Once a Party has reviewed legislation that restricts competition under the principles set out in subclauses (3) and (5), the Party will systematically review the legislation at least once every ten years. (7) Where a review issue has a national dimension or effect on competition (or both), the Party responsible for the review will consider whether the review should be a national review. If the Party determines a national review is appropriate, before determining the terms of reference for, and the appropriate body to conduct the national review, it will consult Parties that may have an interest in those matters. (8) Where a Party determines a review should be a national review, the Party may request the Council to undertake the review. The Council may undertake the review in accordance with the Council’s work program. (9) Without limiting the terms of reference of a review, a review should: (a) clarify the objectives of the legislation; (b) identify the nature of the restriction on competition; (c) analyse the likely effect of the restriction on competition and on the economy generally; (d) assess and balance the costs and benefits of the restriction; and (e) consider alternative means for achieving the same result including non-legislative approaches. (10) Each Party will publish an annual report on its progress towards achieving the objective set out in subclause (3). The Council will publish an annual report consolidating the reports of each Party. NOTE: The Council of Australian Governments at its meeting on 3 November 2000 agreed to the following amendment to this Agreement to provide further guidance to the Council on how to assess whether jurisdictions have met their legislative review commitments: In assessing whether the threshold requirement of clause 5 has been achieved, the Council should consider whether the conclusion reached in the report is within a range of outcomes that could reasonably be reached based on the information available to a properly constituted review process. Within the range of outcomes that could reasonably be reached, it is a matter for Government to determine what policy is in the public interest. 6. Access to services provided by means of significant infrastructure facilities (1) Subject to subclause (2), the Commonwealth will put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities where: (a) it would not be economically feasible to duplicate the facility; (b) access to the service is necessary in order to permit effective competition in a downstream or upstream market; (c) the facility is of national significance having regard to the size of the facility, its importance to constitutional trade or commerce or its importance to the national economy; and 506
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(d) the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist. (2) The regime to be established by Commonwealth legislation is not intended to cover a service provided by means of a facility where the State or Territory Party in whose jurisdiction the facility is situated has in place an access regime which covers the facility and conforms to the principles set out in this clause unless: (a) the Council determines that the regime is ineffective having regard to the influence of the facility beyond the jurisdictional boundary of the State or Territory; or (b) substantial difficulties arise from the facility being situated in more than one jurisdiction. (3) For a State or Territory access regime to conform to the principles set out in this clause, it should: (a) apply to services provided by means of significant infrastructure facilities where: (i) it would not be economically feasible to duplicate the facility; (ii) access to the service is necessary in order to permit effective competition in a downstream or upstream market; and (iii) the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist; and (b) reasonably incorporate each of the principles referred to in subclause (4) and (except for an access regime for: electricity or gas that is developed in accordance with the Australian Energy Market Agreement; or the Tarcoola to Darwin railway) subclause (5). There may be a range of approaches available to a State or Territory Party to incorporate each principle. Provided the approach adopted in a State or Territory access regime represents a reasonable approach to the incorporation of a principle in subclause (4) or (5), the regime can be taken to have reasonably incorporated that principle for the purposes of paragraph (b). (3A) In assessing whether a State or Territory access regime is an effective access regime under the Trade Practices Act 1974, the assessing body: (a) should, as required by the Trade Practices Act 1974, and subject to section 44DA, not consider any matters other than the relevant principles in this Agreement. Matters which should not be considered include the outcome of any arbitration, or any decision, made under the access regime; and (b) should recognise that, as provided by subsection 44DA(2) of the Trade Practices Act 1974, an access regime may contain other matters that are not inconsistent with the relevant principles in this Agreement. © 2018 THOMSON REUTERS
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(4) A State or Territory access regime should incorporate the following principles: (a) Wherever possible third party access to a service provided by means of a facility should be on the basis of terms and conditions agreed between the owner of the facility and the person seeking access. (b) Where such agreement cannot be reached, Governments should establish a right for persons to negotiate access to a service provided by means of a facility. (c) Any right to negotiate access should provide for an enforcement process. (d) Any right to negotiate access should include a date after which the right would lapse unless reviewed and subsequently extended; however, existing contractual rights and obligations should not be automatically revoked. (e) The owner of a facility that is used to provide a service should use all reasonable endeavours to accommodate the requirements of persons seeking access. (f) Access to a service for persons seeking access need not be on exactly the same terms and conditions. (g) Where the owner and a person seeking access cannot agree on terms and conditions for access to the service, they should be required to appoint and fund an independent body to resolve the dispute, if they have not already done so. (h) The decisions of the dispute resolution body should bind the parties; however, rights of appeal under existing legislative provisions should be preserved. (i) In deciding on the terms and conditions for access, the dispute resolution body should take into account: (i) the owner’s legitimate business interests and investment in the facility; (ii) the costs to the owner of providing access, including any costs of extending the facility but not costs associated with losses arising from increased competition in upstream or downstream markets; (iii) the economic value to the owner of any additional investment that the person seeking access or the owner has agreed to undertake; (iv) the interests of all persons holding contracts for use of the facility; (v) firm and binding contractual obligations of the owner or other persons (or both) already using the facility; (vi) the operational and technical requirements necessary for the safe and reliable operation of the facility; (vii) the economically efficient operation of the facility; and (viii) the benefit to the public from having competitive markets. (j) The owner may be required to extend, or to permit extension of, the facility that is used to provide a service if necessary but this would be subject to:
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(i) such extension being technically and economically feasible and consistent with the safe and reliable operation of the facility; (ii) the owner’s legitimate business interests in the facility being protected; and (iii) the terms of access for the third party taking into account the costs borne by the parties for the extension and the economic benefits to the parties resulting from the extension. (k) If there has been a material change in circumstances, the parties should be able to apply for a revocation or modification of the access arrangement which was made at the conclusion of the dispute resolution process. (l) The dispute resolution body should only impede the existing right of a person to use a facility where the dispute resolution body has considered whether there is a case for compensation of that person and, if appropriate, determined such compensation. (m) The owner or user of a service shall not engage in conduct for the purpose of hindering access to that service by another person. (n) Separate accounting arrangements should be required for the elements of a business which are covered by the access regime. (o) The dispute resolution body, or relevant authority where provided for under specific legislation, should have access to financial statements and other accounting information pertaining to a service. (p) Where more than one State or Territory access regime applies to a service, those regimes should be consistent and, by means of vested jurisdiction or other cooperative legislative scheme, provide for a single process for persons to seek access to the service, a single body to resolve disputes about any aspect of access and a single forum for enforcement of access arrangements. (5) A State, Territory or Commonwealth access regime (except for an access regime for: electricity or gas that is developed in accordance with the Australian Energy Market Agreement; or the Tarcoola to Darwin railway) should incorporate the following principles: (a) Objects clauses that promote the economically efficient use of, operation and investment in, significant infrastructure thereby promoting effective competition in upstream or downstream markets. (b) Regulated access prices should be set so as to: (i) generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to the regulated service or services and include a return on investment commensurate with the regulatory and commercial risks involved;
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(ii)
allow multi-part pricing and price discrimination when it aids efficiency; (iii) not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and (iv) provide incentives to reduce costs or otherwise improve productivity. (c) Where merits review of decisions is provided, the review will be limited to the information submitted to the original decisionmaker except that the review body: (i) may request new information where it considers that it would be assisted by the introduction of such information; (ii) may allow new information where it considers that it could not have reasonably been made available to the original decision-maker; and (iii) should have regard to the policies and guidelines of the original decision-maker (if any) that are relevant to the decision under review. 7. Application of the principles to local government (1) The principles set out in this Agreement will apply to local government, even though local governments are not Parties to this Agreement. Each State and Territory Party is responsible for applying those principles to local government. (2) Subject to subclause (3), where clauses 3, 4 and 5 Conduct Code Agreement permit each Party to determine its own agenda for the implementation of the principles set out in those clauses, each State and Territory Party will publish a statement by June 1996: (a) which is prepared in consultation with local government; and (b) which specifies the application of the principles to particular local government activities and functions. (3) Where a State or Territory becomes a Party at a date later than December 1995, that Party will publish its statement within six months of becoming a Party. 8. Funding of the Council The Commonwealth will be responsible for funding the Council. 9. Appointments to the Council (1) When the Commonwealth proposes that a vacancy in the office of Council President or Councillor of the Council be filled, it will send written notice to the States and Territories that are Parties inviting suggestions as to suitable persons to fill the vacancy. The Commonwealth will allow those Parties a period of thirty five days from the date on which the notice was sent to make suggestions before sending a notice of the type referred to in subclause (2).
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(2) The Commonwealth will send to the States and Territories that are Parties written notice of persons whom it desires to put forward to the GovernorGeneral for appointment as Council President or Councillor of the Council. (3) Within thirty five days from the date on which the Commonwealth sends a notice of the type referred to in subclause (2), the Party to whom the Commonwealth sends a notice will notify the Commonwealth Minister in writing as to whether the Party supports the proposed appointment. If the Party does not notify the Commonwealth Minister in writing within that period, the Party will be taken to support the proposed appointment. (4) The Commonwealth will not put forward to the Governor-General a person for appointment as a Council President or Councillor of the Council unless a majority of the States and Territories that are Parties support, or pursuant to this clause are taken to support, the appointment. 10. Work program of the Council, and referral of matters to the Council (1) The work of the Council (other than work relating to a function under Part IIIA of the Trade Practices Act or under the Prices Surveillance Act 1983) will be the subject of a work program which is determined by the Parties. (2) Each Party will refer proposals for the Council to undertake work (other than work relating to a function under Part IIIA of the Trade Practices Act or under the Prices Surveillance Act 1983) to the Parties for possible inclusion in the work program. (3) A Party will not put forward legislation conferring additional functions on the Council unless the Parties have determined that the Council should undertake those functions as part of its work program. (4) Questions as to whether a matter should be included in the work program will be determined by the agreement of a majority of the Parties. In the event that the Parties are evenly divided on a question of agreeing to the inclusion of a matter in the work program, the Commonwealth shall determine the outcome. (5) The Commonwealth Minister will only refer matters to the Council pursuant to subsection 29B(1) of the Trade Practices Act in accordance with the work program. (6) The work program of the Council shall be taken to include a request by the Commonwealth for the Council to examine and report on the matters specified in subclause 2(2) of the Conduct Code Agreement. 11. Review of the Council The Parties will review the need for, and the operation of, the Council after it has been in existence for five years. 12. Consultation Where this Agreement requires consultation between the Parties or some of them, the Party initiating the consultation will: (a) send to the Parties that must be consulted a written notice setting out the matters on which consultation is to occur;
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(b) allow those Parties a period of three months from the date on which the notice was sent to respond to the matters set out in the notice; and (c) where requested by one or more of those Parties, convene a meeting between it and those Parties to discuss the matters set out in the notice and the responses, if any, of those Parties. 13. New parties and withdrawal of parties (1) A jurisdiction that is not a Party at the date this Agreement commences operation may become a Party by sending written notice to all the Parties. (2) A Party may withdraw from this Agreement by sending written notice to all other Parties. The withdrawal will become effective six months after the notice was sent. (3) If a Party withdraws from this Agreement, this Agreement will continue in force with respect to the remaining Parties. 14. Sending of notices A notice is sent to a Party by sending it to the Minister responsible for the competition legislation of that Party. 15. Review of this Agreement Once this Agreement has operated for five years, the Parties will review its operation and terms. 16. Commencement of this Agreement This Agreement commences once the Commonwealth and at least three other jurisdictions have executed it. Signed for and on behalf of the Parties by: The Honourable Paul John Keating, Prime Minister of the Commonwealth of Australia, on the 11th day of April 1995; The Honourable Robert John Carr, Premier of the State of New South Wales, on the 11th day of April 1995; The Honourable Jeffrey Gibb Kennett, Premier of the State of Victoria, on the 11th day of April 1995; The Honourable Wayne Keith Goss, Premier of the State of Queensland, on the 11th day of April 1995; The Honourable Richard Fairfax Court, Premier of the State of Western Australia, on the 11th day of April 1995; The Honourable Dean Craig Brown, Premier of the State of South Australia, on the 11th day of April 1995; The Honourable Raymond John Groom, Premier of the State of Tasmania, on the 11th day of April 1995; Kate Carnell, Chief Minister of the Australian Capital Territory, on the 11th day of April 1995; and The Honourable Marshall Bruce Perron, Chief Minister of the Northern Territory of Australia, on the 11th day of April 1995.
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AGREEMENT TO IMPLEMENT THE NATIONAL COMPETITION POLICY AND RELATED REFORMS WHEREAS the Council of Australian Governments at its meeting in Canberra on 11 April 1995 agreed to a program for the implementation of the National Competition Policy and related reforms; AND WHEREAS the Commonwealth and the States have agreed to financial arrangements in relation to the implementation of the National Competition Policy (NCP) and related reforms; THE COMMONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF QUEENSLAND THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASMANIA THE AUSTRALIAN CAPITAL TERRITORY, AND THE NORTHERN TERRITORY OF AUSTRALIA agree as follows: The provision of financial assistance by the Commonwealth is conditional on the States making satisfactory progress with the implementation of NCP and related reforms (as set out below). The Commonwealth’s commitment is on the basis that the financial arrangements will need to be reviewed if Australia experiences a major deterioration in its economic circumstances. The Commonwealth will maintain the real per capita guarantee of the FAGs pool on a rolling three year basis. • This will involve the Commonwealth extending the guarantee to 1997-98 now. • The per capita element will have an estimated annual cost to the Commonwealth of $2.4 billion by 2005-06 (see attached table). • Local government will benefit from the link between the State and Local government FAGs pools. There will also be three tranches of general purpose payments in the form of a series of Competition Payments. • The first tranche of Competition Payments will commence in July 1997 and will be made quarterly thereafter. • The annual payment from 1997-98 under the first tranche will be $200 million in 1994-95 prices. • It will be indexed annually to maintain its real value over time. • Commencement of the first tranche of the Competition Payments and the per capita guarantee is subject to the States meeting the conditions set out below. • The second and third tranches of the Competition Payments will commence in 1999-2000 and 2001-02. The annual Competition Payments will be $400 million, in 1994-95 prices, from 1999-2000 and $600 million, in 199495 prices, from 2001-2002. These payments will be indexed in real terms. © 2018 THOMSON REUTERS
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The Competition Payments to be made to the States in relation to the implementation of National Competition Policy (NCP) and related reforms will form a pool separate from the FAGs pool and be distributed to the States on a per capita basis. These Competition Payments will be quarantined from assessments by the Commonwealth Grants Commission. • If a State has not undertaken the required action within the specified time, its share of the per capita component of the FAGs pool and of the Competition Payments pool will be retained by the Commonwealth. Prior to 1 July 1997, 1 July 1999, and 1 July 2001 the National Competition Council will assess whether the conditions for payments to the States to commence on those dates have been met. 1. Conditions for payments to States The first payments will be made in 1997-98 to each participating State as at the date of the payment and depending upon: (i) that State giving effect to the Competition Policy Intergovernmental Agreements and, in particular, meeting the deadlines prescribed therein, in relation to the review of regulations and competitive neutrality; (ii) effective implementation of all COAG agreements on: –– electricity arrangements through the National Grid Management Council; and –– the national framework for free and fair trade in gas; and (iii) effective observance of road transport reforms. Payments under the second tranche of the Competition Payments will commence in 1999-2000 and be made to each participating State as at the date of the payment and depending upon: (i) that State continuing to give effect to the Competition Policy Intergovernmental Agreements including meeting all deadlines; (ii) effective implementation of all COAG agreements on: –– the establishment of a competitive national electricity market; –– the national framework for free and fair trade in gas; and –– the strategic framework for the efficient and sustainable reform of the Australian water industry; and (iii) effective observance of road transport reforms. Payments under the third tranche will commence in 2001-02 and be made to each participating State as at the date of the payment and depending on the State: –– having given full effect to, and continues to observe fully, the Competition Policy Intergovernmental Agreements; and –– having fully implemented, and continues to observe fully, all COAG agreements with regard to electricity, gas, water and road transport. Full details of the conditions are set out in the [following] attachment.
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National Competition Policy Payments
Per Capita
(b) State
Per Capita (b)
Per Capita
Per Capita
Local (b) Total (b) Total Govt (c)
Competition Payment
State and Local Government
Total Payments
1994–95 1994–95 Prices Prices Year $m $m $m $m $m $m 1997-1998 194 14 209 186 219 * 200 1998-1999 392 29 420 365 226 200 1999-2000 604 44 647 546 465 * 400 2000-2001 829 60 890 729 479 400 2001-2002 1 070 78 1 148 914 739 * 600 2002-2003 1 327 97 1 423 1 101 761 600 2003-2004 1 600 117 1 716 1 290 783 600 2004-2005 1 890 138 2 028 1 481 806 600 2005-2006 2 198 160 2 359 1 675 829 600 Total 10 104 736 10 840 8 286 5 307 4 200 * indicates year in which each additional payment is made (a) Estimates. (b) Population growth is assumed to be about 1.1% from 1997-98 onwards. (c) Reflecting the existing link between the respective pools.
1994–95 Prices $m $m 428 386 646 565 1 113 946 1 369 1 129 1 888 1 514 2 184 1 701 2 499 1 890 2 833 2 081 3 188 2 275 16 147 12 486
Agreement to implement the National Competition Policy and Related Reforms Conditions for payments to the States 1A. Per capita guarantee and first tranche of the competition payments Payment under the extension of the per capita guarantee and the first tranche will start in 1997-98 to each State and Territory that: • has signed the Competition Principles Agreement and the Conduct Code Agreement at the COAG meeting in April 1995; • in accordance with the Conduct Code Agreement, passed the required application legislation so that the Conduct Code applied within that State or Territory jurisdiction by 12 months after the Commonwealth’s Competition Policy Reform Bill received the Royal Assent; • is a fully participating jurisdiction under the Competition Policy Reform Bill and a party to the Competition Principles Agreement at the time at which the payment is made (States and Territories must apply the Conduct Code as a law of the State without making significant modifications to the Code in its application to persons within their legislative competence and must remain a party to both Competition Policy Intergovernmental Agreements);
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• is meeting all its obligations under the Competition Principles Agreement, which include, but are not limited to: –– when undertaking significant business activities or when corporatising their government business enterprises, having imposed on these activities or enterprises full government taxes or tax equivalent systems, debt guarantee fees directed towards offsetting the competitive advantages provided by government guarantees and those regulations to which private sector businesses are normally subject on an equivalent basis to the enterprises’ private sector competitors; –– having published a policy statement on competitive neutrality by June 1996 and published the required annual reports on the implementation of the competitive neutrality principles; –– having developed a timetable by June 1996 for the review and, where appropriate, reform of all existing legislation which restricts competition by the year 2000; –– having published by June 1996 a statement specifying the application of the principles in the Competition Principles Agreement to local government activities and functions (this statement to be prepared in consultation with local government); and • (for relevant jurisdictions) has taken all measures necessary to implement an interim competitive National Electricity Market, as agreed at the July 1991 special Premiers’ Conference, and subsequent COAG agreements, from 1 July 1995 or on such other date as agreed by the parties, including signing any necessary Heads of Agreement and agreeing to subscribe to the National Electricity Management Company and National Electricity Code Administrator; • (for relevant jurisdictions) has implemented any arrangements agreed between the parties as necessary to introduce free and fair trading in gas between and within the States by 1 July 1996 or such other date as agreed between the parties, in keeping with the February 1994 COAG agreement; and • effective observance of the agreed package of road transport reforms. 1B. Second tranche of the competition payments Payments under the second tranche will commence in 1999-2000, and be made each year thereafter to the States and Territories that have undertaken the following specified reforms by July 1999 in so far as they apply to them: • (for relevant jurisdictions) completion of the transition to a fully competitive National Electricity Market by 1 July 1999; • (for relevant jurisdictions) full implementation of free and fair trading in gas between and within the States including the phasing out of transitional arrangements in accordance with the schedule to be agreed between the parties; • implementation of the strategic framework for the efficient and sustainable reform of the Australian water industry and the future processes as endorsed at the
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February 1994 COAG meeting and embodied in the Report of the Expert Group on Asset Valuation Methods and Cost-Recovery Definitions, February 1995; • continuing to be a fully participating jurisdiction under the Competition Policy Reform Bill and a party to the Competition Principles Agreement at the time at which the payment is made; • continued effective observance of the agreed package of road transport reforms; and • meeting all obligations under the Competition Policy Intergovernmental Agreements. 1C. Third tranche of competition payments Payment under the third tranche will commence in 2001-02 and be made each year thereafter to the States and Territories on the basis of each State’s or Territory’s progress on the implementation of the following reforms: • the extent to which each State and Territory has actually complied with the competition policy principles in the Competition Principles Agreement, including the progress made in reviewing, and where appropriate, reforming legislation that restricts competition; • whether the State and Territory has remained a fully participating jurisdiction as defined in the Competition Policy Reform Bill; • the setting of national standards in accordance with the Principles and Guidelines for National Standard Setting and Regulatory Action and advice from the Office of Regulation Review on compliance with these principles and guidelines; and • continued effective observance of reforms in electricity, gas, water and road transport.
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CHANGES TO NATIONAL COMPETITION POLICY ARRANGEMENTS (ATTACHMENT B OF THE COUNCIL OF AUSTRALIAN GOVERNMENTS (COAG) 3 NOVEMBER 2000 COMMUNIQUÉ) 1. Transparency • In meeting the requirements of sub-clauses 1(3)(a), (b) and (c) of the CPA, which relate to the application of the public interest test, Governments should document the public interest reasons supporting a decision or assessment and make them available to interested parties and the public. • When examining those matters identified under clause 1(3) of the CPA, Governments should give consideration to explicitly identifying the likely impact of reform measures on specific industry sectors and communities, including expected costs in adjusting to change. • COAG to undertake an enhanced role in guiding the NCC in relation to its role in explaining and promoting NCP policy to the community. 2. NCC work program • The NCC will determine its forward work program in consultation with COAG Senior Officials. • The NCC will provide a six monthly report to Senior Officials detailing its draft forward work program and current activities, including its communications and future assessment activities. • Senior Officials will continue to provide guidance to the NCC to clarify COAG’s requirements in relation to the interpretation of reform commitments under the NCP and related reform agreements, including appropriate assessment benchmarks, as required. 3. Future assessment processes • The NCC’s assessment as to whether jurisdictions have met their commitments under clause 5(1) of the CPA will be guided by the following amendment to the CPA. In assessing whether the threshold requirement of Clause 5 has been achieved, the NCC should consider whether the conclusion reached in the report is within a range of outcomes that could reasonably be reached based on the information available to a properly constituted review process. Within the range of outcomes that could reasonably be reached, it is a matter for Government to determine what policy is in the public interest. • Following the third tranche assessment to be conducted before 1 July 2001, the NCC will undertake an annual assessment of each party’s performance in meeting its reform obligations, as specified in the Agreement to Implement the National Competition Policy and Related Reforms or as subsequently advised by COAG, and provide a recommendation on the level of competition payments to be received by each State and Territory.
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Changes to National Competition Policy Arrangements (attachment B of The Council of Australian Governments (coag) 3 November 2000 Communiqué)
• In making a recommendation that a penalty be applied to a particular State or Territory, the NCC is to have regard to the following statement: When assessing the nature and level of any financial penalty or suspension, the NCC must take into account: –– the extent of overall commitment to the implementation of NCP by the relevant jurisdiction; –– the effect of one jurisdiction’s reform efforts on other jurisdictions; and –– the impact of failure to undertake a particular reform. • Where the NCC recommends a penalty, a statement of reasons identifying the basis for this penalty is to be published in the NCC’s annual assessment. • Commencing in 2001, the assessments should be provided to the Commonwealth Treasurer and each State and Territory at the same time, but will remain confidential until a decision has been made by the Commonwealth on the level of competition payments. • Where an assessment recommends a penalty be applied to a State or Territory, the Commonwealth will provide a period of one month following receipt of the assessment before making a decision on the level of competition payments to be received by that jurisdiction. This will allow the relevant jurisdiction to respond to the Commonwealth on the recommendation made by the NCC. • The timing of the imposition of any penalty will be discussed on a bilateral basis between the Commonwealth and the affected jurisdiction. 4. Legislation review schedule • The deadline for legislation reviews conducted under clause 5(3) of the CPA is extended so that all jurisdictions must complete all legislation reviews and implement appropriate reforms by 30 June 2002. • Satisfactory implementation of reforms may include, where justified by a public interest assessment, having in place a firm transitional arrangement that may extend beyond the revised deadline. • The revision to the deadline does not alter the schedule of competition payments. 5. Competitive neutrality – assessment The assessment of a party’s compliance with the competitive neutrality requirements under clause 3 of the CPA should have regard to: • the adoption of a “best endeavours” approach to assessment, in those circumstances where a government business is not subject to the executive control of a party. This would require parties, at a minimum, to provide a transparent statement of CN obligations to the entity in question; • the term “full cost attribution” accommodating a range of costing methodologies, including fully distributed cost, marginal cost, avoidable cost etc, as appropriate in each particular case;
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• there being no requirement for parties to undertake a competitive process for the delivery of Community Service Obligations (CSO); and • parties being free to determine who should receive a CSO payment or subsidy, which should be transparent, appropriately costed and directly funded by government. This position refers directly to the implementation of CN requirements under the CPA, and is not intended to impact on consideration of CSO matters arising in the context of the related reform agreements. 6. Review • The terms and operation of the Conduct Code Agreement, the Competition Principles Agreement and the Agreement to Implement the National Competition Policy and Related Reforms, and the NCC’s assessment role, will be reviewed before September 2005. • The Commonwealth and States give early consideration to the best means of ensuring NCP commitments arising from the CCA continue to be met in light of the High Court case re: Hughes. 7. Proposed amendments to the Conduct Code Agreement • The reference in clause 2(2) of the CCA to paragraph 51(1B)(f) of the Trade Practices Act 1974 should be changed to paragraph 51(1C)(f), to correct a previous drafting error. • References in clause 7 of the CCA to “the Parties” should be replaced with “fully participating jurisdictions”; the words “the Party initiating the consultation” should be replaced with “the Commonwealth”; and the words “or some of them” should be deleted. 8. Proposed amendments to the Agreement to Implement the National Competition Policy and Related Reforms • References to the per capita Financial Assistance Grants (FAGs) component of the NCP payments to be removed, and “States” to be replaced with “States and Territories”; • The payments table attached to the Agreement to be deleted.
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APPENDIX 3 Anticompetitive Arrangements Examples Note: There is overlap between the examples in this appendix and those in Appendix 4. For a full summary of cases see Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters 40th ed 2018) Headline
Summary
Cooperative arrangements Taxi rosters A taxi company established a roster system that set out shifts for the 21 taxis on its network. Each taxi operator agreed to operate their taxi during the allotted shifts and, with exceptions, not to operate at other times. The purpose of the roster was to ensure the availability of taxis in the town during times of low demand and to distribute the burden of working at those times evenly. The purpose of the roster was also to restrict the number of taxis available during times when there would be average and not high demand, in an attempt to share the work available at those times evenly between operators. The arrangement was anticompetitive. Trade The applicant failed to prove that, by association setting up its own stationery wholesaler wholesaling and encouraged newsagents to buy through that wholesaler the association had entered anticompetitive arrangements with its members. The applicant failed because it was unable to prove that the arrangement had the purpose or likely effect of substantially lessening competition.
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Citation ACCC v White Top Taxis Ltd [2009] FCA 88; (2009) 253 ALR 449; [2009] ATPR 42-273.
Stationers Supply Pty Ltd v Victorian Authorised Newsagents Assn Ltd (1993) 44 FCR 35; [1993] ATPR 41-255.
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Headline
Summary
Citation
Exclusionary arrangements Association A rodeo rider succeeded in obtaining an membership interlocutory injunction against an association of which he was a member. The injunction prevented the association from giving effect to a rule that precluded members from participating in rodeos not affiliated with the association. Cattle yard The owners of certain cattle sales yards, who access refused access to an auctioneer, did not enter an anticompetitive arrangement because their sole purpose was to ensure that their cattle yards were not shared with others, and their conduct was unlikely to have the effect of substantially lessening competition in the relevant market. Football club The club succeeded in establishing that transfers agreements News had entered into with the ARL to reduce the number of clubs in the national competition (consequently excluding the appellant from the competition) was an anticompetitive agreement.
Information exchanges Electricity The only two manufacturers of electricity meter price meters in Australia exchanged price lists for lists their meters but on the facts this was found not to contravene the Act.
Industrial product price increases
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NSK supplied ball and roller bearings and associated components. It admitted making arrangements or understandings with competitors that they would provide each other with information about proposed price increases and that the arrangements or understandings had the purpose and likely effect of controlling or maintaining the price for the relevant products.
McCarthy v Australian Rough Riders Assn Inc [1988] ATPR 40-836.
Dowling v Dalgety Australia Ltd [1992] FCA 35; (1992) 34 FCR 109; 106 ALR 75; [1992] ATPR 41-165. South Sydney District Rugby League Football Club Ltd v News Ltd [2001] FCA 862; (2001) 111 FCR 456; 181 ALR 188; [2001] ATPR 41-824. TPC v Email Ltd [1980] FCA 86; (1980) 43 FLR 383; 31 ALR 53; [1980] ATPR 40-172. ACCC v NSK Australia Pty Ltd [2014] FCA 453.
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Headline
Summary
Joint ventures Port Two large corporations that provided terminal automotive terminal services at the ports of joint venture Brisbane, Sydney and Melbourne agreed to provide access to each other’s terminals and form a joint venture for the shared conduct of those facilities. For about 14 months the parties took steps to give effect to their plans including jointly lodging a successful tender to lease land on behalf of the proposed joint venture for the purpose of operating an automotive terminal in Sydney. They admitted, for the purpose of the proceedings, that the conduct they engaged in had the likely effect of substantially lessening competition in automotive terminal services markets in Brisbane, Sydney and Melbourne. Non-compete arrangements Doctors and The AMA had not entered an hospitals anticompetitive arrangement or understanding when it entered agreements with the developer of a hospital containing the terms and conditions for doctors engaged at the hospital.
Introducing Colgate admitted entering into and giving new consumer effect to an understanding with competing product manufacturers of laundry detergent and specified retailers to limit the supply to of ultra-concentrated laundry detergents until an agreed date and standard-concentrated laundry detergents from that date. Scrap metal Ten small scrap metal merchants agreed tenders among themselves who would bid at scrap metal auctions. After the auction, they would reconvene, usually a local hotel or club, to allocate the scrap metal purchased at the auction among themselves.
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Citation ACCC v PRK Corp Pty Ltd [2009] FCA 715; [2009] ATPR 42-295.
ACCC v Australian Medical Assn Western Australia Branch Inc [2003] FCA 686; (2003) 199 ALR 423; [2003] ATPR 41-945. ACCC v ColgatePalmolive Pty Ltd [2016] FCA 528.
ACCC v DM Faulkner Pty Ltd [2004] FCA 1666.
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Headline
Summary
Citation
Pricing Air cargo surcharges
Singapore Airlines admitted that it had arrived at and given effect to understandings in relation to fuel surcharges, security charges and customs fees in relation to the carriage of air cargo from Indonesia to Australia, and had attempted to make an arrangement with another airline in relation to charges for transportation of meat from Australia to the Middle East. Bread pricing The ACCC succeeded in proving that the grocery chain had attempted to enter an arrangement or understanding with a bread manufacturer to eliminate or control discounting of bread at a competing market.
Motor dealer discounts
The WA distributor of Toyota vehicles and all but one of the dealers in Perth admitted giving effect to an arrangement to fix the maximum amount of discount they would allow customers who did not have a trade-in. Restricted Woolworths admitted agreeing with other liquor liquor retailers in a small community not to advertising advertise certain liquor products at discount prices. The remedy was that Woolworths gave undertakings to donate an amount to a community group for alcohol abuse education. Refusing supply Access to ASX Operations supplied information stock market on transactions on its stock exchanges data to processors of that data. Pont, one of the processors of that data, provided a service competing with ASX Operations’ services. Pont unsuccessfully challenged the supply terms, claiming they had the purpose or effect, of substantially lessening competition. Pont succeeded, however, on a claim based on the existence of an exclusionary provision.
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ACCC v Singapore Airlines Cargo Pte Ltd [2012] FCA 1395.
ACCC v Australian Safeway Stores Pty Ltd [2003] FCAFC 149; (2003) 129 FCR 339; 198 ALR 657; [2003] ATPR 41-935. TPC v Prestige Motors Pty Ltd [1994] ATPR 41-359. ACCC v Woolworths (SA) Pty Ltd [2003] FCA 530; (2003) 198 ALR 417; [2003] ATPR 41-941. Pont Data Australia Pty Ltd v ASX Operations Pty Ltd (1990) 21 FCR 385; 93 ALR 523; [1990] ATPR 41-007.
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Headline
Summary
Waste paper pricing
Amcor withdrew an offer to purchase waste paper from a supplier to one of its competitors. Amcor’s competitor had been told of the Amcor offer and became agitated by it and there had been telephone calls from the competitor to Amcor allegedly about pricing, but that was not established. The ACCC did not prove that Amcor had entered an anticompetitive arrangement or understanding. Requirements contracts Off-take Cement Australia entered anticompetitive foreclosure agreements when it contracted to exclusively acquire flyash from electricity generators in South East Queensland to prevent a rival gaining access to unprocessed flyash and to prevent that rival from entering the South East Queensland concrete grade flyash market. Sharing markets Alarm system Four suppliers of fire alarm equipment and a tenders number of their executives admitted making anticompetitive arrangements about who would tender the best price for a number of major building tenders. Fibreboard A major supplier of corrugated fibreboard – dividing packaging products admitted that, for market a period of almost five years, it had an arrangement with its major competitor to maintain their respective market shares and not deal with each other’s customers. Their arrangement covered agreeing on annual price increases and agreeing on prices to be charged to particular customers. Where a customer changed from one company to the other that company would provide other customers in exchange. Industrial gas Renegade admitted engaging in a deliberate, non-compete largely covert, long-standing understanding with another supplier to not compete in the market for supply of industrial gas used in forklifts.
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Citation ACCC v Amcor Printing Papers Group Ltd [2000] FCA 17; (2000) 169 ALR 344; [2000] ATPR 41-749.
ACCC v Cement Australia Pty Ltd [2013] FCA 909; (2013) 310 ALR 165; [2014] FCA 148.
ACCC v FFE Building Services Ltd [2003] FCA 1542; [2003] ATPR 41-969. ACCC v Visy Industries Holdings Pty Ltd [2007] FCA 1617; (2007) 244 ALR 673; [2007] ATPR 42-185.
ACCC v Renegade Gas Pty Ltd [2014] FCA 1135.
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Headline Industrial equipment – dividing market Vehicle dealers – dividing market Tenders Air conditioning supply
Construction tendering
Demolition services
Port towage
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Summary
Citation
Two Australian distributors of compressors manufactured by the same Italian company decided to divide up the market and also agreed on certain pricing principles in selling the compressors. Two truck dealers admitted that their employees had entered into an arrangement not to compete for sales to customers in each other’s primary area.
ACCC v SIP Australia Pty Ltd [1999] FCA 858; [1999] ATPR 41-702. ACCC v Vanderfield Pty Ltd [2009] FCA 1535.
Eleven companies and 18 individuals admitted that they had been involved in a bid-rigging cartel in Western Australia between 1991 and June 2003, in relation to tendering for commercial air conditioning and mechanical services projects. Building company members of the Australian Federation of Construction Contractors (AFCC) met with an officer of the AFCC and agreed, in relation to a government tender, that the successful tenderer would pay fees to the AFCC and the unsuccessful tenderers. The parties accepted that their arrangement contravened the Act. McMahon entered into and gave effect to an arrangement or understanding with another tenderer to fix the price of demolition services in a tender to the Department of Defence.
ACCC v Admiral Mechanical Services Pty Ltd [2007] FCA 1085. TPC v CC (NSW) Pty Ltd [1995] ATPR 41-406.
ACCC v McMahon Services Pty Ltd [2004] FCA 1425; [2004] ATPR 42-031. Sterling failed in its challenge to a tender for Stirling Harbour the provision of towage services at the port Services Pty Ltd of Bunbury. It had sought to establish that, v Bunbury Port by tendering for an exclusive supplier of Authority [2000] towage services under a licence that set caps FCA 38; [2000] on prices, the Port Authority was proposing ATPR 41-752. to enter a contract the effect of which would be to fix the price of towage services at the port.
Miller’s Australian Competition Law and Policy
APPENDIX 4 Cartels Examples Note: There is overlap between the examples in this appendix and those in Appendix 3. This appendix first uses examples of the application of the cartel provisions inserted in 2009. It then includes some price-fixing examples brought under the anticompetitive arrangements prohibition. For a full summary of cases see Miller’s Australian Competition and Consumer Law Annotated (Thomson Reuters 40th ed 2018) Headline Pricing Association discussion
Bank benchmark rates
Electrical cables
Summary The ACCC failed to establish that an association, its managing director and a number of egg producers had engaged in cartel conduct when dealing with the oversupply of eggs and its effect on price. The ACCC failed to establish that the parties had come to an arrangement or understanding. However, one of the respondents agreed with the ACCC that he had attempted to encourage egg producers to enter into a contravening arrangement understanding to limit production or supply of eggs. Two banks admitted that, on a number of occasions during 2011, traders employed by them in their Singapore offices engaged in discussions with traders at other banks in attempts to manipulate the setting of the Malaysian ringgit benchmark rate, thereby attempting to indirectly fix the price for Malaysian ringgit forward contracts. The banks were in competition with each other in the market for Malaysian ringgit forward contracts. Penalties totalling $9 million and $6 million imposed on the respective banks. The ACCC failed to establish, on the evidence, that the respondents had entered into an arrangement between cable manufacturers and wholesale distributors that had the purpose or a substantial purpose and/or likely effect of fixing, controlling or maintaining the price of cutting services or the price of cut electrical cable.
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Citation ACCC v Australian Egg Corp Ltd [2016] FCA 69; ATPR 42–519.
ACCC v Australia and New Zealand Banking Group Ltd [2016] FCA 1516.
ACCC v Olex Australia Pty Ltd [2017] FCA 222.
527
Appendix 4
Headline
Summary
Citation
Market sharing Industrial gas The respondents admitted to engaging in non-compete a deliberate, largely covert, long-standing understanding with another supplier to not compete in the market for supply of industrial gas used in forklifts. Penalties totaling $8.3 million were imposed on the companies and three managers. Bids Business sale A claim that the ultimate buyer of a business tender and a private equity firm had entering into a cartel arrangement by which the private equity firm agreed to bid for a business that was being sold, and the ultimate buyer did not bid, was found to contravene the cartel prohibition, even though there was ambiguity over whether the ultimate buyer would have been permitted to bid given its history with the seller. The matter was resolved on appeal by the orders made being set aside by consent. Cable supply The ACCC failed to establish that two of tenders the respondents had entered a contract, arrangement or understanding in relation to bids for supply of cable in response to a request for bids from Caltex.
ACCC v Renegade Gas Pty Ltd [2014] FCA 1135.
Norcast S.ár.L v Bradken Ltd (No 2) [2013] FCA 235; (2013) 219 FCR 14. Bradken Ltd v Norcast S.ár.L [2013] FCAFC 123. ACCC v Olex Australia Pty Ltd [2017] FCA 222.
Pre Cartel Prohibition Examples Headline
Summary
Citation
Pricing Airline cargo An international airline was found to surcharges have engaged in price fixing in relation to arrangements between airlines to impose fuel surcharges in relation to air freight services from Hong Kong, Singapore and Indonesia to Australia. [This is one example of a large number of cases brought in Australia and other countries against airlines for participation in this conduct.]
528
ACCC v PT Garuda Indonesia Ltd [2016] FCAFC 42.
Miller’s Australian Competition Law and Policy
Cartels
Headline
Summary
Citation
Bank commissions
The ACCC failed to establish that a bank had entered a price-fixing agreement with independent brokers appointed, on a nonexclusive basis, in relation to the bank’s home loans. The agreement included a prohibition on brokers offering commission rebates. The agreement did not contravene the Act because the bank and the brokers supplied different services and were therefore not in competition with each other. Firms that provided education consultancy services in Perth to Korean students, admitted entering into an arrangement to cease discounting the fee for their services.
ACCC v Australia and New Zealand Banking Group Ltd [2015] FCAFC 103.
Education services
Electrical cable price fixing and market sharing
Paper price fixing
Seafood prices
An international firm was found to have entered and given effect to a market sharing and price fixing arrangement in relation to the supply of high voltage and extra high voltage land-based electrical cables and accessories in Australia as part of a cartel to co-operate with one another supplier worldwide. By consent, the court accepted that between December 2000 and January 2004, a paper supplier had entered into arrangements or understandings with its competitors at meetings (referred to as “AAA Club” meetings) of companies involved in the manufacture and supply of uncoated woodfree folio and cut size paper, including to customers in Australia. At the AAA Club meetings, which took place at various locations in South-East Asia, arrangements or understandings were arrived at with other participants as to the average price per metric tonne at which they would supply folio and cut-size paper to their customers in Australia. Those arrangements were given effect in the respondents’ pricing for the supply of paper to customers in Australia. Abalone fishermen concerned about the low returns they were getting and believing that abalone processors were keeping prices down, decided to enter a marketing arrangement to only sell their catch through a marketing company that sought to maximise their return.
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ACCC v Kokos International Pty Ltd (No 2) [2008] FCA 5. ACCC v Prysmian Cavi E Sistemi SRL (No 12) [2016] FCA 822.
ACCC v April International Marketing Services Aust Pty Ltd (No 5) [2010] FCA 17.
ACCC v Australian Abalone Pty Ltd [2007] FCA 1834.
529
Appendix 4
Headline
Summary
Citation
Collusive tenders Air Eleven companies and 18 individuals agreed conditioning that they had been involved in a bid-rigging cartel in Western Australia between 1991 and June 2003 in relation to tendering for commercial air conditioning and mechanical services projects. Building The respondents breached the Act by engaging tenders in the practice of cover pricing in tenders for state and local government construction contracts. Cover pricing involved a builder who wished to be seen to tender for a particular project but either did not wish to win the tender or did not have the time or resources to prepare a tender, seeking a price from another builder who was tendering and lodging a tender at a higher price. The respondents were found to have contravened s 45A. Penalties totalling $1.38 million imposed. Motor International manufacturer of wire harnesses vehicle for motor vehicles were found to have components entered and given effect to an arrangement or understanding that, when a request for tender was issued to them by a motor vehicle manufacturer for the supply of wire harnesses for a particular model of motor vehicle they would meet and agree on the allocation between them of the products to be supplied by each of them in each of the countries in which the particular model of motor vehicle was manufactured, including by exchanging and agreeing on the prices. Market sharing Fibreboard A major supplier of corrugated fibreboard supply packaging products in Australia admitted that for a period of almost five years, it had an arrangement with its major competitor to maintain their respective market shares and not deal with each other’s customers. The two companies held between them over 90% of that market. Their arrangement covered agreeing on annual price increases and agreeing on prices to be charged to particular customers. Where a customer changed from one company to the other that company would provide other customers in exchange.
530
ACCC v Admiral Mechanical Services Pty Ltd [2007] FCA 1085. ACCC v TF Woollam & Son Pty Ltd [2011] FCA 973; (2011) 196 FCR 212; [2011] ATPR 42-367.
ACCC v Yazaki Corp (No 2) [2015] FCA 1304.
ACCC v Visy Industries Holdings Pty Ltd (No 3) [2007] FCA 1617; (2007) 244 ALR 673; [2007] ATPR 42-185.
Miller’s Australian Competition Law and Policy
Cartels
Headline
Summary
Citation
Industrial equipment
Two Australian distributors of compressors manufactured by the same Italian company decided to divide up the market and also agreed on certain pricing principles in selling the compressors. One of the distributors admitted breaching the Act and this decision dealt only with that distributor.
ACCC v SIP Australia Pty Ltd [1999] FCA 858; [1999] ATPR 41-702.
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531
APPENDIX 5 Vertical Restraints Examples Headline Credit cards Currency conversion services
Payment terminals
Education services Training materials
Summary
Citation
Visa admitted engaging in exclusive dealing in relation to participation in the Visa payment card network when it imposed a condition on the supply of those services that the financial institutions not acquire, except to a limited extent, currency conversion services from providers that supplied those in competition to Visa. A firm that provided merchants with an electronic payment facility required the merchants to acquire a computer terminal from another firm. The service supplier was found to have engaged in third line forcing.
ACCC v Visa Inc [2015] FCA 1020.
The Institute of Chartered Accountants changed its training requirements to include, at no additional cost, training materials which were previously charged separately. A competing supplier of training materials challenged the conduct alleging that it amounted to the ICA supplying examination and assessment services on condition that students also acquire course materials from the ICA and not from third parties. The claim was rejected because noting in the ICA’s conduct precluded students acquiring other course materials if they wished.
Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia [2002] FCAFC 197; (2002) 122 FCR 110;[2002] ATPR 41-879.
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ACCC v Bill Express Ltd [2009] FCA 1022; (2009) 180 FCR 105; 259 ALR 483.
533
Appendix 5
Headline
Summary
Citation
Franchises & distributors Agricultural tractor A major distributor of agricultural franchise tractors admitted having engaged in exclusive dealing in relation to certain of its dealers in an attempt to introduce one brand dealerships throughout Australia. Bathroom franchise A major supplier of commercial washroom products terminated the distributorship of one of its largest distributors. That distributor had dealt in competitive products. The distributor failed to establish a claim of exclusive dealing because it could not prove that the franchise had been terminated for the purpose of substantially lessening competition in any relevant market or that the termination had that effect. Recorded music Distributors of music compact disks instituted policies of reviewing the terms on which they traded with stores that stocked parallel import compact discs in order to discourage those stores from parallel importation of compact discs. This amounted to exclusive dealing. Outboard motor A manufacturer of outboard marine franchise engines cancelled a franchise because the dealer had acquired outboard motors from a competitor. The manufacturer was found not to have engaged in exclusive dealing because, on the evidence, the cancellation did not have a substantial effect on competition in the relevant market. Sports clothing A supplier of Australian Rules apparel, which it manufactured under licence, adopted a policy of not supplying the apparel to retailers who stocked rival products. The policy was found to constitute exclusive dealing.
534
TPC v Massey Ferguson (Aust) Ltd (1983) 67 FLR 364; [1983] ATPR 40-369. John S Hayes & Assocs Pty Ltd v Kimberley-Clark Australia Pty Ltd [1994] ATPR 41-318.
Universal Music Australia Pty Ltd v ACCC [2003] FCAFC 193; (2003) 131 FCR 529;[2003] ATPR 41-947. Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982) 64 FLR 238; 2 TPR 246; 44 ALR 173; [1982] ATPR 40-315 ACCC v Fila Sport Oceania Pty Ltd [2004] FCA 376; [2004] ATPR 41-983.
Miller’s Australian Competition Law and Policy
Vertical Restraints
Headline
Summary
Rebate schemes & bundling Pharmaceutical An international drug company, products facing the imminent end of its patent on its atorvastatin product, Lipitor, introduced a “rebate” scheme designed to ensure that, once the patent expired, pharmacies took substantial quantities of its generic atorvastatin rather than the products of generic manufacturers. The firm admitted that its conduct had amounted to a supply “on condition” but the court accepted that the conduct had not been engaged in for the purpose of substantially lessening competition. Bundling In responding to health authority pharmaceutical tenders for supply of fluids to public products hospitals, one drug company tendered a price for a bundle of products, for some of which it was the only supplier. The ACCC alleged that the effect of this was to engage in exclusive dealing because the conduct involved offering to supply the products at a particular price on the condition that the health authorities would not, or would only to a limited extent, acquire products from a competitor. The conduct did not have the effect of substantially lessening competition in relevant markets, nor did it have that likely effect, because the market remained unchanged given the firm’s market power. Third line forcing Taxi services A taxi network company admitted engaging in third line forcing when it entered an agreement to use the Cabcharge taxi payment system and then made it a condition of the offers to taxi operators to provide network services and taxi licence services that the operators use Cabcharge.
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Citation ACCC v Pfizer Australia Pty Ltd [2015] FCA 113.
ACCC v Baxter Healthcare Pty Ltd (No 2) [2008] FCAFC 141; (2008) 170 FCR 16; 249 ALR 674.
ACCC v Black & White Cabs Pty Ltd [2010] FCA 1399.
535
Appendix 5
Headline
Summary
Citation
Telecommunications A telecommunications provider equipment ties informed customers that, in order to obtain telephone credits, they were obliged to acquire equipment financed by one of two nominated companies. The conduct amounted to third line forcing. Tied lending A loan was made on the basis that the borrower was to use a company associated with the lender for its freight forwarding needs. When the loan fell due, a guarantor of the debt contended that the guarantee was void because the arrangement constituted third line forcing and the court so concluded.
536
Technology Leasing Ltd v Lennmar Pty Ltd [2012] FCA 709.
SST Consulting Services Pty Ltd v Rieson [2006] HCA 31; (2006) 225 CLR 516; 80 ALJR 1190; 228 ALR 417.
Miller’s Australian Competition Law and Policy
APPENDIX 6 Resale Price Maintenance Examples Headline Air conditioning
Beauty products
Bicycles
Boats
Summary A manufacturer of air conditioners admitted attempting, through a number of discussions with the retailer and action to change its terms of supply, to induce a retailer not to sell the respondent’s air conditioners at below the recommended retail price. The sole Australian distributor of two beauty products sold through online retailers, admitted that it had engaged in resale price maintenance when, through phone calls and emails, it asked two retailers to increase the price at which they were advertising products. A bicycle wholesaler, received complaints from a number of retailers that one particular retailer was selling a popular brand of bicycle over the internet at prices below the recommended retail price. The wholesaler sent a letter to each retailer expressing disapproval of selling the particular brand of bicycles on the internet and stating that the relevant bikes “listed on Dealer websites should be listed at no-less than the recommended retail price as set out on our Dealer Price List. Dealers that list Scott Bikes at below recommended retail prices run the risk of not being included as a Dealer for the following season.” A manufacturer of boats was found to have engaged in resale price maintenance when it provided dealers with a recommended retail price for its boats but also a document that stated that dealers were expected to advertise the boats at that price, and made it known that it would not provide advertising support to dealers who advertised at a lower price.
© 2018 THOMSON REUTERS
Citation ACCC v Mitsubishi Electric Australia Pty Ltd [2013] FCA 1413. ACCC v Eternal Beauty Products Pty Ltd [2012] FCA 1124. ACCC v Netti Atom Pty Ltd [2007] FCA 1945; [2007] ATPR 42-204.
ACCC v Telwater Pty Ltd [2009] FCA 263; [2009] ATPR 42-276.
537
Appendix 6
Headline
Summary
Citation
Clothing
A small business designing and importing children’s clothing and toys, sold through retailers, was found to have engaged in 19 separate acts of resale price maintenance in relation to 15 retailers by stating that it would not supply retailers who sold the products at less than the recommended retail price. A manufacturer of a leading brand of electronic products admitted that it had engaged in resale price maintenance in making it known to a retailer that it would not supply the retailer with TEAC electronic goods unless the retailer agreed “not to advertise for sale” TEAC electronic goods at a retail price less than the “go price” specified by the manufacturer, and induced the retailer not to advertise for sale TEAC electronic goods at a retail price less than the “go price”. A motor dealer successfully restrained the distributor of Mazda motor vehicles from cancelling its dealership notwithstanding that the distributor had good business reasons for doing so. However, there was more than one reason for doing so and the other reason was that the dealer had discounted the price of Mazda vehicles to reduce stock levels and threatened to terminate the dealership if that continued. The manufacturer of marine equipment and in-car navigational products engaged in resale price maintenance in the supply of those products for more than three years, involving more than 35 individual acts of resale price maintenance, including price lists it sent to its dealers containing statements discouraging the dealers from discounting their prices below those set out in the price lists; statements to dealers discouraging them from discounting products below specified prices; and threats to terminate, and subsequent termination of two dealerships for discounting.
ACCC v Oobi Baby Pty Ltd [2008] FCA 1488.
Electronic products
Motor vehicles
Navigation products
538
ACCC v TEAC Australia Pty Ltd [2007] FCA 1859; [2007] ATPR 42-201.
Ron Hodgson (Holdings) Pty Ltd v Westco Motors (Distributors) Pty Ltd (1980) 29 ALR 307; [1980] ATPR 40-143. ACCC v Navman Australia Pty Ltd [2007] FCA 2061; [2007] ATPR 42-208.
Miller’s Australian Competition Law and Policy
Resale Price Maintenance
Headline
Summary
Citation
Supermarkets
The ACCC failed to establish that a supermarket chain had attempted to induce a bread manufacturer to engage in resale price maintenance in relation to other nearby shops when it adopted a policy of not stocking bread from manufacturers who gave other retailers a better price than they gave the supermarket.
Wearing apparel
The exclusive distributor of a well-known brand of sunglasses sought to stop discounting by making it known to certain retailers that it would not supply them unless they agreed not to discount.
ACCC v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; (2001) 119 FCR 1; [2002] ATPR (Digest) 46-215. ACCC v Sundaze Australia Pty Ltd [1999] FCA 1642; [2000] ATPR 41-736.
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539
APPENDIX 7 Authorisations Examples Headline Accreditation systems Electricity contractors
Admission rules Medical schools
Banking ATM fees
© 2018 THOMSON REUTERS
Summary
Citation
Authorisation was granted to the Victorian electricity distribution network owners and operators to require all civil contractors undertaking network electricity infrastructure works to meet accreditation standards set by the applicants. An authorisation was granted for an accreditation scheme requiring those involved in transporting, handling and storing agricultural and veterinary chemicals to be accredited.
Re Powercor Australia Ltd (A91393, 9 April 2014).
An authorisation was granted for 10 universities to apply a policy to streamline admission to medical schools under which applicants submit a single online application listing up to a maximum of six medical schools in preferential order and receive no more than one offer for an interview for admission.
Re Australian National University (A91433; 19 November 2014).
Authorisation was granted for Suncorp-Metway and Bendigo and Adelaide Bank to agree not to direct charge each other’s cardholders for ATM transactions.
Re SuncorpMetway Ltd (A91508; 1 October 2015).
Re Agsafe Ltd [2002] ATPR (Com) 50-290.
541
Appendix 7
Headline
Summary
Citation
Card signature protocols
Visa and MasterCard were granted an authorisation to allow them, along with American Express and participating financial institutions, to coordinate in relation to the removal of signatures as a method of authentication for most credit card transactions.
Re VISA Worldwide Pte Ltd (A91379; 18 December 2013).
An authorisation was granted for the members of a buying group of independent furniture retailers, to collectively negotiate with suppliers of furniture, bedding and related stock, advertising and marketing services.
Re Homemakers South Ltd (A91284; 12 April 2012).
Authorisation was denied to a buying group of electrical retailers that wanted to amend its code of conduct to provide that members must abide by any minimum advertising price set by NARTA from time to time. Re-authorisation was granted for the Mortgage & Finance Association of Australia to continue to implement its disciplinary rules.
Re NARTA International Pty Ltd (A91335; 11 April 2013).
Buying groups Furniture
Codes of conduct Advertising prices
Disciplinary rules
Prescription medicines
Solar systems
Collective bargaining Hotels
542
Authorisation was granted, subject to conditions, for the Medicines Australia voluntary industry code of conduct for the prescription medicines industry in Australia. Authorisation was granted for a voluntary code of conduct for the marketing and sale of solar PV systems, intended to ensure that retailers maintain a standard of benefit consumers and the industry. An authorisation was granted for current and future members, to collectively bargain, predominantly through the use of standard contracts and direct negotiation, with various suppliers of goods and services supplied to its hotel members across Australia.
Re Mortgage & Finance Assn of Australia (A91396; 21 May 2014). Re Medicines Australia Ltd (A91436 24 April 2015). Clean Energy Council (A91495, 23 September).
Re Australian Hotels Association (A91513, 19 February 2016).
Miller’s Australian Competition Law and Policy
Authorisations
Headline
Summary
Citation
Lottery services
An authorisation was granted for the association to collectively bargain on behalf of member newsagents with Tattersalls and Intralot in relation to their sales agency conditions and arrangements. An authorisation was granted to the AMA and six state medical associations to continue to negotiate with relevant state and territory health departments on the terms of contracts for rural general practitioners providing services as Visiting Medical Officers in public hospitals and health facilities in rural and remote areas of Australia (except for NSW and the ACT). An authorisation was granted for 180 Telstra licensed shop members of the association to collectively bargain with third party suppliers of products and services including mobile phones, mobile phone accessories, cordless home phones, computer products; and general business services such as insurance, shop fit-out, computer software and consulting services. Terminal operators were granted an authorisation negotiate collectively with the Gladstone Ports Corporation Ltd in relation to terms and conditions, including price, for coal handling and port services for their coal export terminals. An authorisation was granted for current and future chicken grower members to collectively bargain with their respective processors on the terms and conditions of grower contracts An authorisation was granted for present and future vegetable grower members of the association to collectively negotiate the terms and conditions of growing contracts with McCain Foods (Aust) Pty Ltd and Simplot Australia Pty Ltd, and any future vegetable processor in Tasmania.
Re Victorian Association of Newsagents Ltd (A91399; 21 May 2014).
Medical services
Mobile phone retailers
Port services
Primary production
Primary production
© 2018 THOMSON REUTERS
Re Australian Medical Association (A91392; 19 March 2014).
Re TLS Association Pty Ltd (A91250; 24 February 2011).
Re RG Tanna Coal Export Terminal Producers (A91405; 16 April 2014). Re WA Broiler Grower Assn Inc (A91527, 31 May 2016). Re Tasmanian Farmers and Graziers Assn (A91467 4 March 2015).
543
Appendix 7
Headline
Summary
Citation
Transport
An authorisation was granted for owner-driver members contracted to Toll Transport Pty Ltd to bargain collectively with Toll, with the assistance of the TWU, to establish new contractual arrangements for the supply of freight courier services. An authorisation was granted for current and future members of the Australian Directors Guild to collectively negotiate and give effect to a model agreement for use by members when contracting with producers of television for television series and serials.
Re Transport Workers Union of Australia SA/NT Branch (A91514, 4 February 2016).
An authorisation was granted to make contracts, arrangements or understandings with the State of Queensland to re allocate port terminal services, coal handling services and coal storage facilities that the port authority supplies to Wesfarmers from the Barney Point Coal Terminal to the proposed Wiggins Island Terminal, and re allocate from the Barney Point Coal Terminal to either the RG Tanna Coal Terminal or the proposed Wiggins Island Coal Terminal the portion of capacity that GPC supplied to the Dawson Joint Venture.
Re Gladstone Ports Corp Ltd (A91209; 21 April 2010).
An authorisation was granted for a South Australian government authority to contract with Investec Bank (Australia) Ltd for the sale, purchase and residential development of land on condition that Investec would construct apartments, 40% of which would be classified as “affordable housing”.
Re Urban Renewal Authority (A91416; 28 February 2014).
Television production
Infrastructure Port services
Municipal services Affordable housing
544
Re Australian Directors Guild Ltd (A91499 13 August 2015).
Miller’s Australian Competition Law and Policy
Authorisations
Headline
Summary
Citation
Electricity
An authorisation was granted for 14 organisations, including four local councils, two tertiary education institutions and two banks, to establish a joint electricity purchasing group, to pool their electricity demand and place a single tender calling for proposals for an electricity supply agreement under which an energy retailer would enter into green-electricity agreements with each applicant to collectively support the development of a new “utility-scale” renewable-energy system connected to the National Electricity Market. An authorisation granted councils in Western Australia to conduct a joint tendering process for the disposal of their materials recovery facility to a private sector operator and agreement on consistent terms for the long term supply of recyclable waste to the operator of the facility. An authorisation was granted for the Georges River Council and Rockdale City Council to tender and contract jointly for the provision of waste and recycling collection services.
Re Melbourne City Council (A91532, 21 July 2016).
A conditional authorisation was granted for the applicant to include in its dealer agreements a requirement that they not sell its high quality power tool products below nominated minimum prices. An authorisation was granted for two or more dentists and/or dental specialists who practise in shared practices to agree on fees to be charged for dental services provided in the practices.
Re Tooltechnic Systems (Aust) Pty Ltd (A91433; 5 December 2014). Re Australian Dental Assn (A91340; 29 October 2013).
Outsourcing
Waste management
Prices Power tools
Professional fees
© 2018 THOMSON REUTERS
Re Southern Metropolitan Regional Council (A91518, 23 March 2016).
Re Georges River Council (A91530, 14 September 2016).
545
Appendix 7
Headline
Summary
Citation
Professional services
An authorisation was granted to discuss and, if relevant, agree and implement fees to be charged to patients for ophthalmology services supplied at Vision Group branded clinics.
Re Vision Group Holdings Ltd (A91217; 8 September 2010).
An authorisation was granted the airline and Lufthansa to coordinate their operations between Germany, Austria, Belgium and Switzerland and Singapore, Australia, Indonesia and Malaysia, pursuant to a Joint Venture Framework Agreement. An authorisation was granted to the association to give effect to arrangements between members limiting importation of HCFCs on a proportional basis and imposing a voluntary ban on importation and manufacturer of certain disposable containers. A conditional authorisation was granted to give effect to a liquor accord agreement with owners of licensed premises in local areas setting out strategies to reduce the abuse and misuse of alcohol. An authorisation granted for 35 years for an agreement with SingTel Optus Pty Ltd and other Optus entities to migrate Optus’ hybrid fibre-coaxial cable subscribers to the national broadband network. An authorisation was granted for a pilot program to test and refine proposed changes to the current magazine distribution model, including ceasing distribution of magazines with nil sales and limiting the number of copies of each magazine title to an agreed percentage above the number of the title generally sold.
Re Singapore Airlines Ltd (A91542, 18 November 2016).
Rationalisation Airlines
Flurocarbons
Liquor
Telecommunications
Magazines
546
Re Assn of Fluorocarbon Consumers & Manufacturers Inc [1998] ATPR (Com) 50-266. Re The State of Queensland Office of Liquor and Gaming (A91224; 7 October 2010). Re NBN Co Ltd (A91479 28 August 2015).
Re Association of Magazine Publishers of Australia Inc (A91472 25 June 2015).
Miller’s Australian Competition Law and Policy
Authorisations
Headline
Summary
Standard documentation Construction An authorisation was granted to develop and publish standard form contracts for use by members with certain contractors for Victorian government authorities or private principals and individually contracted owner drivers, subject to the association engaging an independent consultant to review the owner drivers’ contract within 12 months and responding to any recommendations made by the review. Stock exchanges The six Australian stock exchanges applied for authorisation of their rules. Authorisation was granted in relation to the listing rules, the rules relating to dealing, the sponsorship rules relating to listing and certain of the ethical rules relating to the professional behaviour of members but denied in relation to uniform brokerage rules, the rules on advertising and promotional activities and the rules on admission to membership and partnership restrictions. Transportation An authorisation was granted for the association’s standard conditions of carriage for livestock transporters but on the basis that members were to be free to choose whether or not to use the standard form. Tenders Library services An authorisation was granted to the National Library to collectively tender for the use of certain electronic databases on behalf of the Australian library community, including for standard agreements which any library may enter into with suppliers of the databases. Waste management An authorisation was granted for 19 years for two councils to jointly tender for waste and recycling collection services involving the kerbside, multi-dwelling bulk bin, and public and community spaces collection of domestic waste, recyclables and green waste within their local government areas. © 2018 THOMSON REUTERS
Citation Re Construction Material Producers Assn Inc (A91047; 29 August 2007).
Re Australian Associated Stock Exchanges [1982] ATPR (Com) 50-049.
Re Livestock Transporters’ Assn of Queensland Inc [1986] ATPR (Com) 50-117. Re National Library of Australia (A91012; 17 January 2007).
Re Brisbane City Council (A91500 8 October 2015).
547
Appendix 7
Headline Work allocation Transportation
548
Summary
Citation
An authorisation was granted for an equal opportunity allocation system to allocate concrete delivery jobs to trucks under which all trucks in the Holcim fleet (whether owned and operated by Holcim or contracted to independent concrete truck drivers) would have their workloads determined by the allocation system.
Re Holcim (Australia) Pty Ltd (A91377, 18 December 2013).
Miller’s Australian Competition Law and Policy
INDEX A Access regimes national access regime,������� [17.290]–[17.510] declaration of access to service,��������������� [17.360] –[17.460] circumstances that doesn’t support,������� [17.470]–[17.480] essential facility,�����[17.310] –[17.350] meeting demand criterion,����������������� [17.380]–[17.410] national significance criterion,����������� [17.420] promoting competition criterion, ����������������������������������������� [17.370] promoting national interest criterion, �������������������������� [17.430]–[17.460] scheme overview,������������������� [17.300] state and territory regimes,���������������� [17.490]–[17.510] national energy access regimes,��������������������� [17.520]–[17.570] Accreditation systems authorisations examples, [Appendix 7] Acquisitions — see also Mergers and acquisitions direct acquisition,������������������������������[13.290] indirect acquisition,���������������������������[13.290] restrictions exclusive dealing,������������������������� [13.160] of shares or assets,�������������� [15.180]–[15.210] Admission rules authorisations examples, [Appendix 7] Aiding a contravention exclusive dealing,�������������������������������[13.500] Air cargo international focus on cartels,����������� [11.130] Airport access essential facilities,����������������������������� [17.590] Allocative efficiency economics and competition policy,�������[6.40] Anti-cartel laws development in Australia,����������������������[11.50]–[11.80] in United Kingdom,����������������������� [11.40] in United States,���������������������������� [11.30] Anticompetitive arrangements and concerted practices, ���������������������������������[10.10]–[10.60] anticompetitive purpose concerted practices purpose,�������[10.640] provisions,���������������������[10.510]–[10.520] purpose,������������������������[10.530]–[10.630] task,���������������������������������������������� [10.490] © 2018 THOMSON REUTERS
applicability otherwise than to corporations, ��������������������������������������������������� [10.1030] arrangements,������������������������[10.80]–[10.90], [10.110] cartels — see Cartels circumstantial evidence,�����[10.180]–[10.240] concerted practices,��������������������������� [10.250] Australian guidance,����[10.350]–[10.370] China,�������������������������������������������[10.340] European law,�������������� [10.260]–[10.280] Explanatory Memorandum,��������������������� [10.360]–[10.370] Hong Kong,����������������������������������[10.340] Singapore,������������������������������������[10.340] South Africa,�������������������������������[10.340] United Kingdom,�������������������������[10.340] US law,��������������������������[10.290]–[10.330] contracts,���������������������������������������������� [10.70] courts’ approach,������������������������������� [10.140] determining purpose,�������� [10.660]–[10.680] purpose,��������������������������������������� [10.690] digest of cases,��������������������������������� [10.1050] early cases,�������������������������� [10.150]–[10.160] examples, [Appendix 3] exchanging information,��� [10.800]–[10.930] Australian approach,����[10.890]–[10.930] criteria,����������������������������������������� [10.820] international approaches,������������������������� [10.830]–[10.880] exclusions,���������������������������������������� [10.1040] independent parallel conduct,������������������������ [10.380]–[10.480] EU experience,��������������[10.420]–[10.460] US experience,��������������[10.470]–[10.480] likely anticompetitive effect,������������� [10.700] likely,���������������������������� [10.710]–[10.750] most favoured customer arrangements, ����������������������������������[10.1000]–[10.1020] petrol cases,��������������������������������������� [10.170] policy conundrum,����������������������������� [10.130] price signalling,������������������[10.940]–[10.970] attempts,������������������������[10.980]–[10.990] substantial purpose,��������������������������� [10.650] substantially lessening competition,�������������� [10.760]–[10.790] understandings,������������������� [10.100], [10.120] Anticompetitive purpose concerted practices purpose,�������������[10.640] provisions,���������������������������[10.510]–[10.520] purpose,������������������������������[10.530]–[10.630] task,���������������������������������������������������� [10.490] vertical constraints,������������ [13.410]–[13.430] Arrangements, [10.80]–[10.90], [10.110] — see also Anticompetitive arrangements and concerted practices cartels,������������������������������������������������ [11.520]
549
A
Index
Assessing pecuniary penalties, �������������[19.170] circumstances,����������������������������������� [19.210] compliance culture,��������������������������� [19.250] cooperation,������������������������[19.260]–[19.270] extent of damage,�������������������������������[19.200] gain,��������������������������������������������������� [19.230] senior management,��������������������������� [19.240] size,���������������������������������������������������� [19.220] Australian Competition and Consumer Commission (ACCC), ��������������� [5.20]–[5.30] changes to,��������������������������������� [5.80]–[5.90] investigation of complaints,����������������[4.280] origins of,������������������������������������[5.40]–[5.70] price surveillance,������������������������������� [5.130] today,���������������������������������������[5.100]–[5.130] vacancies, filling,��������������������������������� [4.170] Australian competition laws applicability,������������������������������������������[9.20] bodies corporate,��������������������������������� [9.130] Commonwealth and its authorities,����� [9.170] carrying on a business,���� [9.200]–[9.320] Crown in the right of the Commonwealth,���������� [9.180]–[9.190] corporations dealing with government, derivative immunity,���������[9.420]–[9.430] financial corporations,��������������� [9.80]–[9.90] original objective,������������� [9.100]–[9.110] generally,������������������������������������������������ [9.10] holding companies,������������������������������ [9.120] individuals,����������������������������� [9.140]–[9.160] local government,������������������ [9.370]–[9.380] origins of constitutional conundrum,����������������������� [2.190]–[2.240] first steps,�����������������������������[2.30]–[2.60] generally,������������������������������ [2.10]–[2.20] new approach, work on,���[2.250]–[2.260] new policy direction,���������������������[2.270] Remedial Act 1971,���������[2.250]–[2.260] resale price maintenance,������������������������� [2.160]–[2.180] Restrictive Trade Practices Act 1965 (Cth),�������������������������� [2.120]–[2.150] reviving interest,�����������������[2.70]–[2.110] states and territories and their statutory authorities,����������������������� [9.330]–[9.360] trade or commerce, activities in,�������������������� [9.390]–[9.410] trading corporations,������������������[9.30]–[9.70] Australian competition policy — see also Competition policy developing an Australian objective,��������������� [1.20]–[1.50] development during 1972-1992, [3.10]–[3.20] Blunt Committee,������������[3.240]–[3.280] monopolisation,�����������������������[3.270] price discrimination,���������������[3.260] result,���������������������������������������[3.280] small business report,��������������[3.250] Cooney Committee,�����������������������[3.400] mergers,�����������������������������������[3.420] misuse of market power,���������� [3.410] result,���������������������������������������[3.430]
550
Green Paper,����������������������������������[3.290] mergers,�����������������������������������[3.330] monopolisation,����������������������� [3.310] price discrimination,�������������[3.300]– result,���������������������������������������[3.350] unions,��������������������������������������[3.340] Griffiths Committee,���������������������[3.360] mergers,�����������������������������������[3.380] misuse of market power,����������[3.370] result,���������������������������������������[3.390] new approach,���������������������[3.30]–[3.110] Swanson Committee,������� [3.120]–[3.220] commonwealth businesses,����� [3.180] mergers,�����������������������������������[3.200] monopolisation,����������������������� [3.210] price discrimination,��������������� [3.170] result,���������������������������������������[3.220] unions,�������������������������������������� [3.190] development during 1992-2017,��������������������� [4.10]–[4.30] aftermath of Boral,�����������[4.410]–[4.420] creeping acquisitions,��������������������[4.560] Dawson Committee,����������������������[4.330] collective bargaining,�������������� [4.370] criminalisation of cartel conduct, �������������������������������������������[4.390] mergers,�����������������������������������[4.360] misuse of market power,����������[4.340] penalties,����������������������������������[4.400] price discrimination,���������������[4.350] tying,����������������������������������������[4.380] enacted recommendations,����������[4.490]– [4.500] government change,�����������������������[4.250] additional parliamentary committees, �������������������������������������������[4.280] Baird Report,��������������[4.290]–[4.310] productivity commission,��������[4.260] senate review,���������������������������[4.270] grocery markets,�������������� [4.540]–[4.550] Harper Committee,������������������������ [4.610] boycotts,����������������������������������� [4.700] cartels,��������������������������������������[4.460] creeping acquisitions,��������������[4.650] essential facilities,������������������� [4.710] misuse of market power,��������������������� [4.630]–[4.640] price discrimination,���������������[4.620] price signalling,����������������������� [4.670] resale price maintenance,��������[4.690] result,������������������������������������� [4.4720] tying,����������������������������������������[4.680] Hilmer Committee,��������������������������[4.40] essential facilities,������������������� [4.130] mergers,�������������������������������������[4.90] misuse of market power,������������ [4.70] policy objectives,����������� [4.50]–[4.60] price discrimination,�����������������[4.80] public monopolies,������������������������������ [4.140]–[4.150] resale price maintenance,�������� [4.110] scope of coverage,������������������� [4.120] tying and vertical restrictions,�� [4.100] Miller’s Australian Competition Law and Policy
B
Index Australian competition policy — see also Competition policy — cont National Competition Council,�����[4.320] policy becoming a reality,������������� [4.160] competition principles agreement, ����������������������������� [4.180]–[4.200] conduct code agreement,��������� [4.170] implementation agreement,����� [4.210] predatory pricing, refocus on,�������[4.570] price signalling concerns prompt legislation,������������������ [4.590]–[4.600] reconsidering arrangements and understandings,������������������������[4.580] reform legislation,������������ [4.220]–[4.240] Rudd Labor Government,�������������� [4.510] cartels,��������������������������������������[4.530] misuse of market power,����������[4.520] senate,�������������������������������������������� [4.430] collective bargaining,��������������[4.460] creeping acquisitions,�������������� [4.470] misuse of market power,��������������������� [4.440]–[4.450] remedies,����������������������������������[4.480] welfare of Australians,��������������������������[1.80] Australian Competition Tribunal, �������� [5.180] origins of,��������������������������������������������� [5.190] today,����������������������������������������������������[5.200] Australian Energy Regulator, [5.20], [5.80], [17.560], [17.570] Australian merger law — see also Mergers and acquisitions development of,�����������������������[15.20]–[15.70] Australian misuse law, �������������������������[12.330] buyer power,���������������������������������������[12.440] competition,������������������������[12.610]–[12.650] competitors,������������������������[12.610]–[12.650] conduct,������������������������������ [12.450]–[12.500] degree of market power,�����[12.380]–[12.410] identifying the market,�������[12.510]–[12.520] market power,�����[12.340]–[12.370], [12.600] market power requirements, other jurisdictions,��������������������������������[12.420] markets,���������������������������������������������[12.660] purpose,���������������������������� [12.450]–[12.500], ������������������������������������� [12.530]–[12.590] Australian prohibition,���������[14.160]–[14.350] agreeing not to sell,������������[14.280]–[14.290] inducing,���������������������������� [14.300]–[14.340] making it known,������������������������������� [14.350] second person,����������������������������������� [14.180] specification of price,��������� [14.190]–[14.270] supplier,�����������������������������������������������[14.170] Australian unilateral conduct laws Australian misuse law,����������������������[12.330] buyer power,���������������������������������[12.440] competition,������������������[12.610]–[12.650] competitors,������������������[12.610]–[12.650] conduct,������������������������ [12.450]–[12.500] degree of market power,��������������������������� [12.380]–[12.410] identifying the market,�[12.510]–[12.520] market power,������������� [12.340]–[12.370], [12.600] © 2018 THOMSON REUTERS
market power requirements, other jurisdictions,��������������������������[12.420] markets,���������������������������������������[12.660] purpose,���������������������� [12.450]–[12.500], [12.530]–[12.590] development,���������������������� [12.190]–[12.240] controlling a market,�������������������������������� [12.250]–[12.300] fundamental problems,����������������[12.320] other changes,������������������������������ [12.310] digest of cases,�����������������������������������[12.900] early development,��������������[12.150]–[12.180] new laws,�������������������������������������������� [12.670] old laws,��������������������������������������������� [12.670] predatory pricing,������������������������������[12.680] business reason,������������[12.740]–[12.750] prohibition,������������������ [12.690]–[12.700] recoupment,��������������������������������� [12.710] relevant cost,�������������������������������� [12.720] sustained period,�������������������������� [12.730] refusals to supply,������������������������������ [12.760] standardization,���������������������������������[12.830] consumer harm test,��������������������[12.890] disproportionality test,����������������[12.850] effects-balancing test,������������������[12.840] equally efficient competitor test,�������������� [12.880] no-economic-sense test,��������������[12.860] profit sacrificing test,�������������������[12.870] unanswered questions,������� [12.770]–[12.820] Authorisations case specific immunity applications, ��������������������������������������[18.330]–[18.440] examples, [Appendix 7] matters authorised by federal, state or territory legislation,��������[18.90]–[18.130]
B Baird Report Australian competition policy,����������������������� [4.290]–[4.310] Banking authorisations examples, [Appendix 7] Barwick, Sir Garfield statement 6 December 1962, [Appendix 1] Benchmarks choice competition,������������������������������� [8.20]–[8.30] Bid rigging cartels,��������������������������������� [11.460]–[11.510] Bids examples, [Appendix 4] Blunt Committee, ����������������������[3.240]–[3.280] monopolisation,�����������������������������������[3.270] price discrimination,���������������������������[3.260] result,���������������������������������������������������[3.280] small business report,��������������������������[3.250] Bodies corporate Australian competition laws,��������������� [9.130] Boral Besser Masonry Case decision aftermath of,���������������������������[4.410]–[4.420]
551
C
Index
Boycotts collective bargaining,�������� [16.600]–[16.620] competitor boycotts,���������������[16.20]–[16.70] cartels and,��������������������� [16.80]–[16.290] conduct,���������������������[16.90]–[16.100] identifying the subject of the exclusionary provision,����������������� [16.250]–[16.290] parties as competitors,������������������������ [16.110]–[16.160] preventing, restricting or limiting, �����������������������������������������[16.240] purpose,������������������ [16.170]–[16.230] joint ventures,���������������[16.300]–[16.310] employee boycotts,���������������������������� [16.320] examples, [Appendix 3] primary boycotts,������[3.160], [3.190], [16.40], [16.270] secondary boycotts,�������������������������� [16.320], [16.390]–[16.490] actions against unions,����������������[16.500] development of,�������������[16.330]–[16.380] engaging in conduct,�������������������� [16.450] firms,�������������������������������������������� [16.510] hindering/preventing,������������������[16.460] legitimate purpose,������ [16.420]–[16.440] likely effect of substantially causing loss or damage,����������������������������� [16.490] purpose of substantially causing loss or damage,�������������������[16.470]–[16.480] Broadband essential facilities,����������������������������� [17.580] Broadcast towers essential facilities,����������������������������� [17.580] Bundled products and services vertical constraints,����������� [13.250]–[13.280] Buyer power Australian misuse law,����������������������[12.440] Buying groups authorisations examples, [Appendix 7]
C Canada competition policy objectives,������������� [1.100] criminalisation of cartel conduct,����� [11.190] resale price maintenance,������������������ [14.140] vertical constraints,�����������������������������[13.50] Cartels anti-cartel laws, development of Australia,��������������������������[11.50]–[11.80] United Kingdom,��������������������������� [11.40] United States,��������������������������������� [11.30] arrangement,�������������������������������������� [11.520] under Australian law,���������� [11.200]–[11.210] bid rigging,�������������������������� [11.460]–[11.510] circumstances not regarded as cartel conduct,������������������������� [11.620]–[11.760] accessing a carve-out,������������������ [11.760]
552
cooperative buying and selling,���������������� [11.650]–[11.680] joint ventures,��������������� [11.690]–[11.740] other carve-outs,���������������������������[11.750] recommended prices,����[11.630]–[11.640] collective boycotts,�������������[11.440]–[11.450] competing place,���������������������������������[11.610] competitor boycotts and,����� [16.80]–[16.290] conduct,���������������������������[16.90]–[16.100] limiting,���������������������������������������[16.240] parties as competitors,�� [16.110]–[16.160] preventing,�����������������������������������[16.240] purpose,������������������������ [16.170]–[16.230] restricting,������������������������������������[16.240] subject of the exclusionary provision, ������������������������������� [16.250]–[16.290] contract,��������������������������������������������� [11.520] criminal liability,�����������������[11.770]–[11.780] criminalising cartel conduct,�������������[11.140] Australia,�����������������������[11.150]–[11.160] Canada,���������������������������������������� [11.190] United Kingdom,��������������������������[11.180] United States,��������������������������������[11.170] Dawson Committee criminalisation of cartel conduct,�[4.390] definition of,����������������������������������������� [11.20] digest of cases,����������������������������������� [11.820] examples, [Appendix 4] exchanging information and price signalling, ��������������������������������������[11.590]–[11.600] generally,�����������������������������������������������[11.10] immunity policy,����������������� [11.790]–[11.810] international focus on,������������������������� [11.90] air cargo,�������������������������������������� [11.130] construction,�������������������������������� [11.120] marine hose,����������������������������������[11.110] vitamins,�������������������������������������� [11.100] market allocation cartels,��� [11.410]–[11.430] parties must be in competition with each other,����������������������������� [11.550]–[11.580] price-controlling,������������������������������� [11.320] price-fixing definition of,������������������[11.220]–[11.290] essence of,�������������������� [11.300]–[11.310], [11.340]–[11.370] price-maintaining,����������������������������� [11.330] prohibited output restrictions,������������������������ [11.380]–[11.400] purpose of,��������������������������[11.530]–[11.540] understanding,����������������������������������� [11.520] Causation compensation seeking,���������������������� [19.420] China anticompetitive arrangements and concerted practices,��������������������������������������[10.340] Circumstances not regarded as cartel conduct,����������������������� [11.620]–[11.760] accessing a carve-out,������������������ [11.760] cooperative buying and selling,���������������� [11.650]–[11.680]
Miller’s Australian Competition Law and Policy
Index Circumstances — cont joint ventures,��������������� [11.690]–[11.740] other carve-outs,���������������������������[11.750] recommended prices,����[11.630]–[11.640] pecuniary penalties assessment,������� [19.210] that doesn’t support declaration of access to service,�������������������������� [17.470]–[17.480] Circumstantial evidence anticompetitive arrangements and concerted practices,�����������������������[10.180]–[10.240] Class exemptions case specific immunity applications, ������������������������������������� [18.490]–[18.540] Codes of conduct authorisations examples, [Appendix 7] Collective bargaining, �����������[16.520]–[16.630] authorisations examples, [Appendix 7] boycotts,����������������������������� [16.600]–[16.620] Dawson Committee,���������������������������� [4.370] duration,��������������������������������������������� [16.630] effect of notification,��������� [16.560]–[16.590] initial requirements,�������������������������� [16.550] Senate,��������������������������������������������������[4.460] Collective boycotts cartels,���������������������������������[11.440]–[11.450] Collusion economics and competition policy,���������������� [6.90]–[6.100] Collusive tenders pre cartel prohibition examples, [Appendix 4] Commerce Australian competition laws,��[9.390]–[9.410] Commonwealth carrying on a business,���������� [9.200]–[9.320] Crown in the right of the Commonwealth, ������������������������������������������ [9.180]–[9.190] and its authorities,������������������� [9.170]–[9.190] Community service orders non-punitive orders,��������������������������� [19.650] Compensable loss types of,��������������������������������������������� [19.430] Compensation seeking competition provisions,������ [19.410]–[19.490] assessing compensation,��������������������������� [19.440]–[19.450] causation,������������������������������������� [19.420] limitation period,����������[19.460]–[19.470] standard of proof,���������[19.480]–[19.490] types of compensable loss,���������� [19.430] Competing place,� [11.610] — see also Markets Competition Australian misuse law,�������[12.610]–[12.650] concept of,������������������������������ [7.230]–[7.260] and mergers and acquisitions,������������������������ [15.220]–[15.260] market power,�������������� [15.250]–[15.260] markets,����������������������� [15.250]–[15.260] substantial effect on,������������������������������ [8.10]
© 2018 THOMSON REUTERS
C
Australian development,������ [8.40]–[8.90] benchmarks choice,������������� [8.20]–[8.30] substantially lessen competition (SLC) horizontal and vertical conduct,��������� [8.100]–[8.120] mergers,����������������������[8.130]–[8.150] misuse of market power,��������������������� [8.160]–[8.180] Competition agencies and institutions Australian Competition and Consumer Commission (ACCC),���������� [5.20]–[5.30] changes to,��������������������������� [5.80]–[5.90] origins of,������������������������������[5.40]–[5.70] today,���������������������������������[5.100]–[5.130] Australian Competition Tribunal,������������������ [5.180] origins of,��������������������������������������� [5.190] today,����������������������������������������������[5.200] National Competition Council,����������� [5.140] origins of,�������������������������� [5.150]–[5.160] today,���������������������������������������������� [5.170] state and territory regulators,�������������� [5.210] Competition policy — see also Australian competition policy objectives of,������������������������������������������ [1.10] Canada,������������������������������������������ [1.100] Hong Kong,������������������������������������ [1.100] importance of,�����������������������[1.60]–[1.70] other views,�������������������������[1.130]–[1.50] Singapore,�������������������������������������� [1.100] South Africa,����������������������������������� [1.90] United Kingdom,��������������������������� [1.100] Competition principles agreement Australian competition policy,����������������������� [4.180]–[4.200] essential facilities,�������������� [17.200]–[17.210] Competitive contracting, ����������������������[20.120] Competitive neutrality competitive tendering and contracting, �����������������������������������������������������[20.120] complaints,������������������������� [20.130]–[20.240] making,�������������������������[20.160]–[20.170] types of cases,�������������� [20.180]–[20.240] cost allocation and pricing,��������������� [20.110] debt neutrality,�������������������������������������[20.90] origins of,������������������������������� [20.20]–[20.70] rates of return,�����������������������������������[20.100] taxation neutrality,�������������������������������[20.80] Competitive tendering, �������������������������[20.120] Competitors Australian misuse law,�������[12.610]–[12.650] boycotts,����������������������������������[16.20]–[16.70] cartels and,��������������������� [16.80]–[16.290] conduct,���������������������[16.90]–[16.100] identifying the subject of the exclusionary provision,����������������� [16.250]–[16.290] parties as competitors,������������������������ [16.110]–[16.160] preventing, restricting or limiting, �����������������������������������������[16.240]
553
C
Index
Competitors — cont purpose,������������������ [16.170]–[16.230] joint ventures,���������������[16.300]–[16.310] Complaints competitive neutrality,������� [20.130]–[20.240] making,�������������������������[20.160]–[20.170] types of cases,�������������� [20.180]–[20.240] Compliance culture pecuniary penalties assessment,������� [19.250] Compliance programs non-punitive orders,��������������������������� [19.630] Compulsion vertical constraints,����������� [13.330]–[13.400] Concerted practices of anticompetitive arrangements and concerted practices,��������������������� [10.250] Australian guidance,����[10.350]–[10.370] China,�������������������������������������������[10.340] European law,�������������� [10.260]–[10.280] Explanatory Memorandum,��������������������� [10.360]–[10.370] Hong Kong,����������������������������������[10.340] Singapore,������������������������������������[10.340] South Africa,�������������������������������[10.340] United Kingdom,�������������������������[10.340] US law,��������������������������[10.290]–[10.330] Conduct — see also Australian unilateral conduct laws; Unilateral conduct laws Australian misuse law,������ [12.450]–[12.500] boycotts competitor boycotts,�������[16.90]–[16.100] secondary boycotts,��������������������� [16.450] and cartels — see Cartels European unilateral conduct laws,����������������� [12.130]–[12.140] Exclusive dealing exempt conduct,��������������������������� [13.490] horizontal and vertical conduct substantially lessen competition (SLC), ����������������������������������� [8.100]–[8.120] independent parallel conduct,������������������������ [10.380]–[10.480] EU experience,��������������[10.420]–[10.460] US experience,��������������[10.470]–[10.480] UK unilateral conduct laws,�������������� [12.120] US unilateral conduct laws,������[12.90]–[12.110] Conduct code agreement Australian competition policy,������������ [4.170] Construction international focus on cartels,����������� [11.120] Consumer action groups exclusions and immunities, [18.140]–[18.170] covenants on sale,��������� [18.150]–[18.170] Consumer harm test,���������������������������� [12.890] Contracts anticompetitive arrangements and concerted practices,���������������������������������������� [10.70] cartels,������������������������������������������������ [11.520] competitive contracting,��������������������[20.120] exclusions and immunities export contracts,��������������������������[18.280] requirements contracts
554
examples, [Appendix 3] Contravention of competition provisions criminal penalties,���������������� [19.90]–[19.130] disqualification orders,�������[19.570]–[19.590] divestiture,����������������������������������������� [19.680] enforceable undertakings,��[19.660]–[19.670] immunity and leniency,������[19.340]–[19.380] injunctions,�������������������������[19.520]–[19.560] liability,�����������������������������������[19.20]–[19.80] aiding and abetting,����������������������� [19.50] inducing,���������������������������������������� [19.60] knowingly concerned,������������������� [19.80] party,���������������������������������������������� [19.70] principals,�������������������������[19.30]–[19.40] non-punitive orders,������������ [19.610]–[19.650] community service orders,���������� [19.650] compliance programs,����������������� [19.630] corrective advertising,����������������� [19.620] probation orders,�������������������������� [19.640] pecuniary penalties,������������ [19.140]–[19.330] assessing,��������������������������������������[19.170] circumstances,����������������������� [19.210] compliance culture,��������������� [19.250] cooperation,������������[19.260]–[19.270] extent of damage,�������������������[19.200] gain,��������������������������������������� [19.230] senior management,��������������� [19.240] size,���������������������������������������� [19.220] deterrence,����������������������������������� [19.280] legal advice,��������������������������������� [19.300] multiple penalties,�������������������������[19.310] optimal penalties,������������������������ [19.330] reputational damage,������������������� [19.290] standard of proof,������������������������ [19.160] total penalties,������������������������������ [19.320] private rights of action,�������[19.390]–[19.400] punitive publication orders,��������������� [19.600] remedial orders,������������������ [19.500]–[19.510] seeking compensation,������� [19.410]–[19.490] assessing compensation,��������������������������� [19.440]–[19.450] causation,������������������������������������� [19.420] limitation period,����������[19.460]–[19.470] standard of proof,���������[19.480]–[19.490] types of compensable loss,���������� [19.430] Cooney Committee,�������������������������������� [3.400] mergers,�����������������������������������������������[3.420] misuse of market power,���������������������� [3.410] result,���������������������������������������������������[3.430] Cooperation examples, [Appendix 3] pecuniary penalties assessment,�������������������� [19.260]–[19.270] Cooperative buying and selling cartel conduct,�������������������� [11.650]–[11.680] Copyright exclusions,�������������������������� [18.250]–[18.260] Corporations dealing with government,�������[9.420]–[9.430] financial corporations,��������������� [9.80]–[9.90] original objective,������������� [9.100]–[9.110] trading corporations,������������������[9.30]–[9.70]
Miller’s Australian Competition Law and Policy
E
Index Corrective advertising non-punitive orders,��������������������������� [19.620] Cost allocation and pricing competitive neutrality,����������������������� [20.110] Courts approach to anticompetitive arrangements and concerted practices,�������������� [10.140] view on market,������������������������������������� [7.70] Covenants on sale, ����������������� [18.150]–[18.170] Credit cards vertical restraints examples, [Appendix 5] Creeping acquisitions, ����������� [15.780]–[15.790] Australian competition policy,������������[4.560] Harper Committee,������������������������������[4.650] mergers and acquisitions creeping acquisitions,��� [15.780]–[15.790] Senate,�������������������������������������������������� [4.470] Criminal liability cartels,����������������������������������[11.770]–[11.780] Criminal penalties competition provisions,�������� [19.90]–[19.130] Criminalisation of cartel conduct in Australia,�������������������������[11.150]–[11.160] in Canada,������������������������������������������ [11.190] Dawson Committee,����������������������������[4.390] generally,���������������������������������������������[11.140] in United Kingdom,����������������������������[11.180] in United States,���������������������������������[11.170] Crown immunity, �����������������������[18.60]–[18.80] Crown in the right of the Commonwealth, �������������������������������������������������� [9.180]–[9.190] Current merger test mergers and acquisitions,������������������������������� [15.150]–[15.170]
D Dawson Committee, ��������������������������������[4.330] collective bargaining,�������������������������� [4.370] criminalisation of cartel conduct,�������[4.390] mergers,�����������������������������������������������[4.360] misuse of market power,����������������������[4.340] penalties,����������������������������������������������[4.400] price discrimination,���������������������������[4.350] tying,����������������������������������������������������[4.380] Debt neutrality competitive neutrality,�������������������������[20.90] Derivative immunity Australian competition laws,��[9.420]–[9.430] Determining purpose anticompetitive arrangements and concerted practices,���������������������� [10.660]–[10.690] Deterrence pecuniary penalties,��������������������������� [19.280] Digest of cases anticompetitive arrangements and concerted practices,������������������������������������ [10.1050] Australian unilateral conduct laws,���[12.900] cartels,������������������������������������������������ [11.820]
© 2018 THOMSON REUTERS
exclusive dealing,������������������������������� [13.510] resale price maintenance,������������������ [14.490] Digest of cases vertical constraints,��������������������������� [13.510] Direct acquisition vertical constraints,���������������������������[13.290] Disproportionality test, ������������������������[12.850] Disqualification orders competition provisions,������[19.570]–[19.590] Divestiture competition provisions,��������������������� [19.680] Dynamic efficiency economics and competition policy,�������[6.50]
E Economic efficiencies, ������������������������������[6.30] allocative efficiency,������������������������������[6.40] dynamic efficiency,��������������������������������[6.50] productive efficiency,����������������� [6.60]–[6.70] Economic theory, �����������[3.420], [6.10], [6.100], [11.30] and legal reasoning,������������������������������[8.40], �������������������������������������������������������[8.100] Economics and competition policy collusion,���������������������������������� [6.90]–[6.100] economic efficiencies,���������������������������[6.30] allocative efficiency,������������������������[6.40] dynamic efficiency,��������������������������[6.50] productive efficiency,����������� [6.60]–[6.70] entry, barriers to,�����������������������������������[6.80] generally,������������������������������������ [6.10]–[6.20] Herfindahl-Hirschman Index,������������� [6.150] hypothetical monopolist test,������������������������� [6.130]–[6.140] illustration,������������������������������[6.110]–[6.120] welfare standards,�������������������������������� [6.160] Education services vertical restraints examples,�����������������������������[Appendix 5] Effects-balancing test, ��������������������������[12.840] Employee boycotts, ������������������������������� [16.320] Employment conditions exclusions and immunities, [18.180]–[18.210] Enforceable undertakings competition provisions,������[19.660]–[19.670] Equally efficient competitor test, ��������[12.880] Essential facilities, access to airport access,������������������������������������ [17.590] Australian approach, development of, ���������������������������������������[17.140]–[17.160] Australia’s national access regime,���������������� [17.290]–[17.510] declaration of access to service,�� [17.360] –[17.460] circumstances that doesn’t support, �������������������������� [17.470]–[17.480] meeting demand criterion,����������������� [17.380]–[17.410]
555
F
Index
Essential facilities, access to — cont national significance criterion,����������� [17.420] promoting competition criterion,������� [17.370] promoting national interest criterion, [17.430]–[17.460] essential facility,�����������[17.310] –[17.350] scheme overview,������������������������� [17.300] state and territory regimes,���������������������� [17.490]–[17.510] Australia’s policy objectives,�������������������������� [17.220]–[17.280] Competition Principles Agreement,��������������� [17.200]–[17.210] European approach, development of,������������� [17.90]–[17.130] Hilmer recommendations,���[17.170]–[17.190] national energy access regimes,��������������������� [17.520]–[17.570] telecommunications, broadband and broadcast towers,������������������������� [17.580] US essential facilities doctrine, development of,�������������������������������������� [17.20]–[17.80] Europe anticompetitive arrangements and concerted practices,���������������������� [10.260]–[10.280] essential facilities, development of,��������������� [17.90]–[17.130] independent parallel conduct,������������������������ [10.420]–[10.460] mergers and acquisitions,��� [15.720]–[15.730] resale price maintenance,������������������ [14.130] unilateral conduct laws,������[12.130]–[12.140] vertical constraints,�����������������������������[13.50] Exchanging information anticompetitive arrangements and concerted practices,���������������������� [10.800]–[10.930] Australian approach,����[10.890]–[10.930] criteria,����������������������������������������� [10.820] international approaches,������������������������� [10.830]–[10.880] and cartels,��������������������������[11.590]–[11.600] Exclusionary provisions — see Boycotts Exclusions and immunities anticompetitive arrangements and concerted practices,������������������������������������ [10.1040] case specific immunity applications, ��������������������������������������[18.320]–[18.550] authorisation,����������������[18.330]–[18.440] class exemptions,��������� [18.490]–[18.540] merger clearance,������������������������� [18.550] notifications,�����������������[18.450]–[18.480] consumer action groups,����� [18.140]–[18.170] covenants on sale,��������� [18.150]–[18.170] Crown immunity,��������������������[18.60]–[18.80] employment conditions,������ [18.180]–[18.210] export contracts,��������������������������������[18.280] general exemptions,����������������[18.30]–[18.50] matters authorised by federal, state or territory legislation,��������[18.90]–[18.130] overseas cargo shipping,�����[18.290]–[18.310]
556
patents, trademarks, registered designs, copyright and rights in circuit layouts, ������������������������������������� [18.250]–[18.260] quality standards,������������������������������ [18.270] unincorporated partnerships,������������������������� [18.220]–[18.240] Exclusive dealing acquisition restrictions,��������������������� [13.160] aiding a contravention,����������������������[13.500] exempt conduct,��������������������������������� [13.490] full line forcing,������������������ [13.170]–[13.180] land transactions,������������������������������� [13.480] practices,���������������������������������������������� [13.70] supply restrictions,����������������[13.80]–[13.150] third line forcing,����������������[13.190]–[13.240] Exempt conduct exclusive dealing,������������������������������� [13.490] Explanatory Memorandum anticompetitive arrangements and concerted practices,�����������������������[10.360]–[10.370] Export contracts exclusions and immunities,���������������[18.280] Extent of damage pecuniary penalties assessment,�������[19.200]
F Failing firm mergers and acquisitions,������������������ [15.130] state competition in markets,������������������������� [15.540]–[15.560] Fair Trade Commission, ���������������������� [14.150] Financial corporations Australian competition laws,�������������������������� [9.80]–[9.90] original objective,������������������� [9.100]–[9.110] Franchises and distributors vertical restraints examples, [Appendix 5] Full line forcing exclusive dealing,���������������� [13.170]–[13.180] Functional dimension of market,�������������������������������� [7.150]–[7.170]
G Geographic dimension of market,�������������������������������� [7.180]–[7.190] Government change Australian competition policy,������������[4.250] additional parliamentary committees, �������������������������������������������������[4.280] Baird Report,��������������������[4.290]–[4.310] productivity commission,��������������[4.260] senate review,���������������������������������[4.270] Green Paper, ��������������������������������������������[3.290] mergers,�����������������������������������������������[3.330] monopolisation,����������������������������������� [3.310] price discrimination,�������������������������[3.300]– result,���������������������������������������������������[3.350] unions,��������������������������������������������������[3.340]
Miller’s Australian Competition Law and Policy
L
Index Griffiths Committee, ������������������������������[3.360] mergers,�����������������������������������������������[3.380] misuse of market power,����������������������[3.370] result,���������������������������������������������������[3.390] Grocery markets Australian competition policy,����������������������� [4.540]–[4.550]
H Harper Committee, �������������������������������� [4.610] boycotts,����������������������������������������������� [4.700] cartels,��������������������������������������������������[4.460] creeping acquisitions,��������������������������[4.650] essential facilities,������������������������������� [4.710] misuse of market power,�������� [4.630]–[4.640] price discrimination,���������������������������[4.620] price signalling,����������������������������������� [4.670] resale price maintenance,��������������������[4.690] result,������������������������������������������������� [4.4720] tying,����������������������������������������������������[4.680] Hawke, Robert resale price maintenance and,������������������������ [2.180], [14.20] Herfindahl-Hirschman Index economics and competition policy,����� [6.150] Hilmer Committee, �����������������������������������[4.40] essential facilities,������������������������������� [4.130] mergers,�������������������������������������������������[4.90] misuse of market power,������������������������ [4.70] policy objectives,����������������������� [4.50]–[4.60] price discrimination,�����������������������������[4.80] public monopolies,������������������[4.140]–[4.150] resale price maintenance,�������������������� [4.110] scope of coverage,������������������������������� [4.120] tying and vertical restrictions,������������� [4.100] Hilmer recommendations essential facilities,���������������[17.170]–[17.190] Holding companies Australian competition laws,��������������� [9.120] Homogeny lack of, and market,����������������������������� [7.120] Hong Kong anticompetitive arrangements and concerted practices,��������������������������������������[10.340] competition policy objectives,������������� [1.100] Howard, John Swanson Committee, establishment, 1.30 Hypothetical monopolist test economics and competition policy,���������������� [6.130]–[6.140]
I Illustration economics and competition policy,���������������� [6.110]–[6.120] Immunities — see also Exclusions and immunities cartels,��������������������������������� [11.790]–[11.810]
© 2018 THOMSON REUTERS
competition provisions,������[19.340]–[19.380] resale price maintenance,������������������������������� [14.470]–[14.480] Implementation agreement Australian competition policy,������������ [4.210] Import competition state competition in markets,������������������������� [15.480]–[15.500] Independent parallel conduct, ������������������������� [10.380]–[10.480] EU experience,��������������������[10.420]–[10.460] US experience,��������������������[10.470]–[10.480] Indirect acquisition vertical constraints,���������������������������[13.290] Individuals Australian competition laws,�������������������������� [9.140]–[9.160] Information exchange,����������������������������[11.590]–[11.600] Information exchange examples, [Appendix 3] Infrastructure authorisations examples, [Appendix 7] Injunctions competition provisions,������[19.520]–[19.560] International perspective mergers and acquisitions,�����[15.80]–[15.140] International Competition Network guidance,����������������� [15.130]–[15.140] competitive entry,������������������ [15.130] efficiencies,���������������������������� [15.130] failing firms,�������������������������� [15.130] market definition & shares,��� [15.130] standard,�������������������������[15.90]–[15.120] resale price maintenance,��� [14.100]–[14.150] Canada,���������������������������������������� [14.140] European Union,�������������������������� [14.130] Japan,������������������������������������������� [14.150] New Zealand,������������������������������� [14.150] South Korea,�������������������������������� [14.150] United States,���������������� [14.100]–[14.120]
J Japan mergers and acquisitions,������������������ [15.740] resale price maintenance,������������������ [14.150] Joint ventures cartel conduct,�������������������� [11.690]–[11.740] competitor boycotts,�����������[16.300]–[16.310] examples, [Appendix 3]
L Land transactions exclusive dealing,������������������������������� [13.480] Legal advice pecuniary penalties,��������������������������� [19.300]
557
M
Index
Leniency competition provisions,������[19.340]–[19.380] Liability competition provisions,����������[19.20]–[19.80] abetting,����������������������������������������� [19.50] aiding,�������������������������������������������� [19.50] inducing,���������������������������������������� [19.60] knowingly concerned,������������������� [19.80] party,���������������������������������������������� [19.70] principals,�������������������������[19.30]–[19.40] Likely anticompetitive effect anticompetitive arrangements and concerted practices,����������������������� [10.700]–[10.750] Limitation period compensation seeking,�������[19.460]–[19.470] Local government Australian competition laws,�������������������������� [9.370]–[9.380]
M Marine hose international focus on cartels,������������[11.110] Market power Australian misuse law,����� [12.340]–[12.370], [12.600] degree of market power,��������������������������� [12.380]–[12.410] misuse Cooney Committee,����������������������� [3.410] Dawson Committee,����������������������[4.340] Griffiths Committee,���������������������[3.370] Harper Committee,���������� [4.630]–[4.640] Hilmer Committee,�������������������������� [4.70] mergers and acquisitions,������������������������� [15.250]–[15.260] Rudd Labor Government,��������������[4.520] senate,������������������������������ [4.440]–[4.450] substantially lessen competition (SLC), ������������������������������������[8.160]–[8.180] requirements, other jurisdictions,�����[12.420] Markets acts related to,����������������������������������������[7.50] Australian misuse law,����������������������[12.660] concept of,���������������������������������� [7.20]–[7.30] controlling, Australian unilateral conduct laws,����������������������������� [12.250]–[12.300] court’s view,������������������������������������������� [7.70] focusing process,��������������������������������� [7.100] functional dimension,������������� [7.150]–[7.170] geographic dimension,����������� [7.180]–[7.190] identification of markets,��������[7.210]–[7.220] identifying Australian misuse law,����������������������������� [12.510]–[12.520] lack of homogeny,�������������������������������� [7.120] long run substitution,����������������������������[7.110] market allocation cartels,��� [11.410]–[11.430] practical approach required,������������������ [7.90] product dimension,����������������� [7.130]–[7.140] role of substitution,��������������������������������[7.40]
558
sharing examples anticompetitive arrangements, [Appendix 3] cartels, [Appendix 4] state competition in,�����������[15.320]–[15.680] availability of substitutes,������������������������� [15.330]–[15.370] concentration level in the market, ������������������������������� [15.380]–[15.400] degree of countervailing power in the market,�������������������� [15.410]–[15.470] barriers to entry,��������������������������������� [15.440]–[15.470] dynamic characteristics of the market, ������������������������������� [15.600]–[15.630] efficiencies,������������������ [15.660]–[15.680] failing firm,������������������ [15.540]–[15.560] import competition,����� [15.480]–[15.500] removal of a vigorous and effective competitor,��������������[15.510]–[15.530] significant and sustainable increase in prices or profit margins,��������������������� [15.640]–[15.650] vertical integration,������[15.570]–[15.590] substitution revisited,�����������������������������[7.80] time dimension,�����������������������������������[7.200] Trade Practices Tribunal’s interpretation, ���������������������������������������������������������[7.60] Mergers and acquisitions acquisition of shares or assets,����������������������� [15.180]–[15.210] assessment of impact of merger,�������������������� [15.270]–[15.310] market identification,�������������������������������� [15.290]–[15.310] assessment process,���������������������������[15.800] creeping acquisitions,��������� [15.780]–[15.790] current merger test,������������� [15.150]–[15.170] development of Australian merger law, ������������������������������������������[15.20]–[15.70] Europe,�������������������������������� [15.720]–[15.730] international perspective,�����[15.80]–[15.140] International Competition Network guidance,����������������� [15.130]–[15.140] competitive entry,������������������ [15.130] efficiencies,���������������������������� [15.130] failing firms,�������������������������� [15.130] market definition & shares,���������������� [15.130] standard,�������������������������[15.90]–[15.120] Japan,������������������������������������������������� [15.740] likely effect on competition,��������������������������� [15.220]–[15.260] markets and market power,���������������������� [15.250]–[15.260] merger clearance case specific immunity applications, ����������������������������������������������� [18.550] merger safe harbours,��������� [15.700]–[15.710] overseas mergers affecting a market in Australia,����������������������[15.810]–[15.820]
Miller’s Australian Competition Law and Policy
P
Index Mergers and acquisitions — cont scope of merger provisions,��������������� [15.690] Singapore,������������������������������������������ [15.750] South Africa,������������������������������������� [15.770] South Korea,�������������������������������������� [15.760] state competition in market,��������������������������� [15.320]–[15.680] availability of substitutes,������������������������� [15.330]–[15.370] degree of countervailing power in the market,�������������������� [15.410]–[15.470] barriers to entry,�����[15.440]–[15.470] dynamic characteristics of the market, ������������������������������� [15.600]–[15.630] efficiencies,������������������ [15.660]–[15.680] failing firm,������������������ [15.540]–[15.560] import competition,����� [15.480]–[15.500] level of concentration in the market, ������������������������������� [15.380]–[15.400] removal of a vigorous and effective competitor,��������������[15.510]–[15.530] significant and sustainable increase in prices or profit margins,��������������������� [15.640]–[15.650] vertical integration,������[15.570]–[15.590] substantially lessen competition (SLC), ������������������������������������������[8.130]–[8.150] United States,���������������������� [15.720]–[15.730] United States and European Union,��������������� [15.720]–[15.730] Monopolisation Blunt Committee,��������������������������������[3.270] Green Paper,���������������������������������������� [3.310] hypothetical monopolist test,������������������������� [6.130]–[6.140] Swanson Committee,��������������������������� [3.210] Most favoured customer arrangements anticompetitive arrangements and concerted practices,�������������������[10.1000]–[10.1020] Multiple penalties pecuniary penalties,����������������������������[19.310] Municipal services authorisations examples, [Appendix 7]
N National access regime, Australia’s, ���������������� [17.290]–[17.510] declaration of access to service,�������� [17.360] –[17.460] circumstances that doesn’t support, �������������������������������� [17.470]–[17.480] meeting demand criterion,����������������������� [17.380]–[17.410] national significance criterion,����������������� [17.420] promoting competition criterion,������������� [17.370] promoting national interest criterion,������ [17.430]–[17.460]
© 2018 THOMSON REUTERS
essential facility,�����������������[17.310] –[17.350] scheme overview,������������������������������� [17.300] state and territory regimes,�[17.490]–[17.510] National Competition Council, ������������������������ [4.320], [5.140] origins of,�������������������������������� [5.150]–[5.160] today,���������������������������������������������������� [5.170] National energy access regimes essential facilities,�������������� [17.520]–[17.570] New Zealand Crown activities in trade and commerce, ������������������������������������������[9.340]–[9.410] resale price maintenance,������������������ [14.150] New Zealand Commerce Commission, ����������� [5.20], [5.80], [9.400] No-economic-sense test, �����������������������[12.860] Non-compete arrangements examples, [Appendix 3] Non-punitive orders competition provisions,������ [19.610]–[19.650] community service orders,���������� [19.650] compliance programs,����������������� [19.630] corrective advertising,����������������� [19.620] probation orders,�������������������������� [19.640] Notifications case specific immunity applications, ��������������������������������������[18.450]–[18.480]
O Optimal penalties pecuniary penalties,��������������������������� [19.330] Overseas cargo shipping exclusions and immunities,���������������������������� [18.290]–[18.310] Overseas mergers affecting a market in Australia,��������������������� [15.810]–[15.820]
P Parties as competitors,������������������� [11.550]–[11.580], [16.110]–[16.160] Patents exclusions,�������������������������� [18.250]–[18.260] Pecuniary penalties competition provisions,������ [19.140]–[19.330] assessing,��������������������������������������[19.170] circumstances,����������������������� [19.210] compliance culture,��������������� [19.250] cooperation,������������[19.260]–[19.270] extent of damage,�������������������[19.200] gain,��������������������������������������� [19.230] senior management,��������������� [19.240] size,���������������������������������������� [19.220] deterrence,����������������������������������� [19.280] legal advice,��������������������������������� [19.300] multiple penalties,�������������������������[19.310] optimal penalties,������������������������ [19.330] reputational damage,������������������� [19.290]
559
Q
Index
Pecuniary penalties — cont standard of proof,������������������������ [19.160] total penalties,������������������������������ [19.320] Petrol cases anticompetitive arrangements and concerted practices,�������������������������������������� [10.170] Policy conundrum anticompetitive arrangements and concerted practices,�������������������������������������� [10.130] resale price maintenance,�������[14.50]–[14.90] Policy objectives, Australia’s essential facilities,�������������� [17.220]–[17.280] Pre cartel prohibition collusive tenders examples, [Appendix 4] examples pricing, [Appendix 4] Predatory pricing, ��������������������������������[12.680] Australian competition policy,������������[4.570] business reason,������������������[12.740]–[12.750] prohibition,������������������������ [12.690]–[12.700] recoupment,��������������������������������������� [12.710] relevant cost,�������������������������������������� [12.720] sustained period,�������������������������������� [12.730] Prices/Pricing authorisations examples, [Appendix 7] cartels examples, [Appendix 4] controlling,����������������������������������������� [11.320] example, [Appendix 3] fixing definition of,������������������[11.220]–[11.290] essence of,�������������������� [11.300]–[11.310], [11.340]–[11.370] maintaining,��������������������������������������� [11.330] pre cartel prohibition examples, [Appendix 4] predatory pricing,������������������������������[12.680] business reason,������������[12.740]–[12.750] prohibition,������������������ [12.690]–[12.700] recoupment,��������������������������������� [12.710] relevant cost,�������������������������������� [12.720] sustained period,�������������������������� [12.730] price signalling anticompetitive arrangements and concerted practices,���������������������������� [10.940]–[10.970] attempts,������������������[10.980]–[10.990] Australian competition policy,����������������� [4.590]–[4.600] recommended prices cartel conduct,��������������[11.630]–[11.640] signalling, exchange,����������[11.590]–[11.600] Private rights of action competition provisions,���������������������������������� [19.390]–[19.400] Probation orders non-punitive orders,��������������������������� [19.640] Product dimension of market,�������������������������������� [7.130]–[7.140]
560
Productive efficiency economics and competition policy,���������������� [6.60]–[6.70] Profit sacrificing test, ���������������������������[12.870] Prohibited output restrictions cartels,���������������������������������[11.380]–[11.400] Punitive publication orders competition provisions,��������������������� [19.600]
Q Quality standards exclusions and immunities,��������������� [18.270]
R Rates of return competitive neutrality,�����������������������[20.100] Rationalisation authorisations examples, [Appendix 7] Rebate schemes and bundling vertical restraints examples, [Appendix 5] Recommended prices cartel conduct,��������������������[11.630]–[11.640] Reform legislation Australian competition policy,����������������������� [4.220]–[4.240] Refusing supply examples, [Appendix 3] Registered designs exclusions,�������������������������� [18.250]–[18.260] Remedial Act 1971, �������������������[2.250]–[2.260] Remedial orders competition provisions,������[19.500]–[19.510] Reputational damage pecuniary penalties,��������������������������� [19.290] Requirements contracts examples, [Appendix 3] Resale price maintenance, ��������[2.160]–[2.180] Australian prohibition,������� [14.160]–[14.350] agreeing not to sell,������[14.280]–[14.290] inducing,���������������������� [14.300]–[14.340] making it known,������������������������� [14.350] second person,����������������������������� [14.180] specification of price,��� [14.190]–[14.270] supplier,�����������������������������������������[14.170] development of Australian resale price, ������������������������������������������[14.20]–[14.30] digest of cases,����������������������������������� [14.490] examples, [Appendix 6] generally,���������������������������������������������� [14.40] immunity,����������������������������[14.470]–[14.480] international perspective,������������������������������� [14.100]–[14.150] Canada,���������������������������������������� [14.140] European Union,�������������������������� [14.130] Japan,������������������������������������������� [14.150] New Zealand,������������������������������� [14.150]
Miller’s Australian Competition Law and Policy
Index Resale price maintenance — cont South Korea,�������������������������������� [14.150] United States,���������������� [14.100]–[14.120] policy conundrum,������������������[14.50]–[14.90] recommended prices,������������������������� [14.460] removing sales support,������[14.360]–[14.380] role of intent,�������������������������������������� [14.450] withholding supply,������������[14.390]–[14.440] Restrictive Trade Practices Act 1965 (Cth), ������������������������������������������������� [2.120]–[2.150] challenges,����������������������������� [2.190]–[2.240] Rights in circuit layouts exclusions,�������������������������� [18.250]–[18.260] Role of intent recommended prices,������������������������� [14.460] resale price maintenance,������������������ [14.450] Rudd Labor Government, ��������������������� [4.510] cartels,��������������������������������������������������[4.530] misuse of market power,����������������������[4.520]
S Sales support removal of,��������������������������[14.360]–[14.380] Secondary boycotts, ����������������������������� [16.320], [16.390]–[16.490] actions against unions,����������������������[16.500] development of,�������������������[16.330]–[16.380] engaging in conduct,�������������������������� [16.450] firms,�������������������������������������������������� [16.510] hindering/preventing,������������������������[16.460] legitimate purpose,������������ [16.420]–[16.440] likely effect of substantially causing loss or damage,���������������������������������������� [16.490] purpose of substantially causing loss or damage,�������������������������[16.470]–[16.480] Senate, ������������������������������������������������������ [4.430] collective bargaining,��������������������������[4.460] creeping acquisitions,�������������������������� [4.470] misuse of market power,�������� [4.440]–[4.450] remedies,����������������������������������������������[4.480] Senior management pecuniary penalties assessment,������� [19.240] Singapore anticompetitive arrangements and concerted practices,��������������������������������������[10.340] competition policy objectives,������������� [1.100] mergers and acquisitions,������������������ [15.750] resale price maintenance,�������������������� [4.150] vertical constraints,�����������������������������[13.50] South Africa anticompetitive arrangements and concerted practices,��������������������������������������[10.340] competition policy objectives,��������������� [1.90] mergers and acquisitions,������������������ [15.770] South Korea mergers and acquisitions,������������������ [15.760] resale price maintenance,������������������ [14.150] Standard documentation authorisations examples, [Appendix 7]
© 2018 THOMSON REUTERS
S
Standard of proof compensation seeking,����������������������������������� [19.480]–[19.490] pecuniary penalties,��������������������������� [19.160] Standardization Australian unilateral conduct laws,���[12.830] consumer harm test,��������������������[12.890] disproportionality test,����������������[12.850] effects-balancing test,������������������[12.840] equally efficient competitor test,�������������� [12.880] no-economic-sense test,��������������[12.860] profit sacrificing test,�������������������[12.870] State and territory regulators, �������������� [5.210] State competition in market,����������������������������[15.320]–[15.680] availability of substitutes,������������������������� [15.330]–[15.370] degree of countervailing power in the market,�������������������� [15.410]–[15.470] barriers to entry,��������������������������������� [15.440]–[15.470] dynamic characteristics of the market, ������������������������������� [15.600]–[15.630] efficiencies,������������������ [15.660]–[15.680] failing firm,������������������ [15.540]–[15.560] import competition,���������������������������������� [15.480]–[15.500] level of concentration in the market, ������������������������������� [15.380]–[15.400] removal of a vigorous and effective competitor,��������������[15.510]–[15.530] significant and sustainable increase in prices or profit margins,��������������������� [15.640]–[15.650] vertical integration,������[15.570]–[15.590] States Australian competition laws,�������������������������� [9.330]–[9.360] Substantial purpose anticompetitive arrangements and concerted practices,�������������������������������������� [10.650] Substantially lessen competition (SLC) horizontal and vertical conduct,��������������������� [8.100]–[8.120] mergers,����������������������������������[8.130]–[8.150] misuse of market power,���������[8.160]–[8.180] Substantially lessening competition anticompetitive arrangements and concerted practices,����������������������� [10.760]–[10.790] Substitution long run substitution,����������������������������[7.110] role in market,�����������������������������[7.40], [7.80] Supply restrictions exclusive dealing,������������������[13.80]–[13.150] Supplying products and services vertical constraints,����������� [13.300]–[13.320] goods and services,���������������������� [13.320] supply,������������������������������������������ [13.310] Swanson Committee, ���������������� [3.120]–[3.220] commonwealth businesses,����������������� [3.180]
561
T
Index
Swanson Committee — cont mergers,�����������������������������������������������[3.200] monopolisation,����������������������������������� [3.210] price discrimination,��������������������������� [3.170] result,���������������������������������������������������[3.220] unions,�������������������������������������������������� [3.190]
T Taxation neutrality competitive neutrality,�������������������������[20.80] Telecommunications essential facilities,����������������������������� [17.580] Tenders authorisations examples, [Appendix 7] Territories Australian competition laws,�������������������������� [9.330]–[9.360] Third line forcing exclusive dealing,����������������[13.190]–[13.240] examples, [Appendix 5] Time dimension of market,���������������������������������������������[7.200] Total penalties pecuniary penalties,��������������������������� [19.320] Trade Australian competition laws,�������������������������� [9.390]–[9.410] Trade Practices Tribunal interpretation of market,������������������������[7.60] Trade unions actions against secondary boycotts,��������������� [16.500] Green Paper,����������������������������������������[3.340] Swanson Committee,��������������������������� [3.190] Trademarks exclusions,�������������������������� [18.250]–[18.260] Trading corporations Australian competition laws,������[9.30]–[9.70] Tying arrangements Dawson Committee,����������������������������[4.380] Harper Committee,������������������������������[4.680] Hilmer Committee,������������������������������ [4.100]
U Understandings, ��������������������� [10.100], [10.120] cartels,������������������������������������������������ [11.520] Unilateral conduct laws Australia — see Australian unilateral conduct laws Australian policy objective,��������������������������� [12.70]–[12.80] differences in policy objective,���������������������� [12.30]–[12.60] European Union,�����������������[12.130]–[12.140] generally,�������������������������������� [12.10]–[12.20] United Kingdom,������������������������������� [12.120] United States,������������������������[12.90]–[12.110]
562
Unincorporated partnerships exclusions and immunities,[18.220]–[18.240] Unions — see Trade unions United Kingdom anti-cartel laws,����������������������������������� [11.40] anticompetitive arrangements and concerted practices,���������������������[10.340] competition policy objectives,������������� [1.100] criminalisation of cartel conduct,������[11.180] unilateral conduct laws,��������������������� [12.120] United States anti-cartel laws,����������������������������������� [11.30] anticompetitive arrangements and concerted practices,�����������������������[10.290]–[10.330] criminalisation of cartel conduct,������������������ [11.170] essential facilities doctrine, development of, ������������������������������������������ [17.20]–[17.80] independent parallel conduct,������������������������ [10.470]–[10.480] mergers and acquisitions,������������������������������� [15.720]–[15.730] resale price maintenance,������������������������������� [14.100]–[14.120] unilateral conduct laws,��������[12.90]–[12.110] vertical constraints,�����������������������������[13.50]
V Vertical constraints anticompetitive purpose,�������������������������������� [13.410]–[13.430] Australian policy position,������������������ [13.60] bundled products or services,������������������������� [13.250]–[13.280] Canadian policy,����������������������������������[13.50] compulsion,������������������������ [13.330]–[13.400] digest of cases,����������������������������������� [13.510] direct or indirect acquisition,������������[13.290] European policy,����������������������������������[13.50] examples, [Appendix 5] exclusive dealing acquisition restrictions,��������������� [13.160] aiding a contravention,����������������[13.500] exempt conduct,��������������������������� [13.490] full line forcing,������������ [13.170]–[13.180] land transactions,������������������������� [13.480] practices,���������������������������������������� [13.70] supply restrictions,����������[13.80]–[13.150] third line forcing,����������[13.190]–[13.240] international perspective,��������������������[13.50] likely effect on competition in a market, ��������������������������������������[13.440]–[13.470] Singaporean policy,�����������������������������[13.50] supplying products or services,���������������������� [13.300]–[13.320] goods and services,���������������������� [13.320] supply,������������������������������������������ [13.310] US policy,���������������������������������������������[13.50]
Miller’s Australian Competition Law and Policy
W
Index Vertical constraints — cont vertical restrictions prohibition, development of,���������������� [13.20]–[13.40] Vertical integration mergers and acquisitions state competition in market,��������������������� [15.570]–[15.590] Vertical restraints examples, [Appendix 5] Vitamins international focus on cartels,����������� [11.100]
© 2018 THOMSON REUTERS
W Welfare of Australians competition policy,��������������������������������[1.80] Welfare standards economics and competition policy,����� [6.160] Withholding supply, ��������������[14.390]–[14.440] Work allocation authorisations examples, [Appendix 7]
563