Medicines Australia (previously Australian Pharmaceutical Manufacturers' Association Inc) sought authorisation for a revised Code of Conduct from the ACCC. The ACCC granted authorisation for three years subject to a condition requiring members to report on events sponsored by them for healthcare professionals.

Medicines Australia appealed to the Tribunal challenging both the three year authorisation (arguing it should be five years) and the condition imposed on authorisation.

Note: The Competition and Consumer Act 2010 was named the Trade Practices Act (TPA) at the time of this application.

Briefly

The Tribunal held that the public benefit from implementation of the Code was likely to outweigh any anti-competitive detriment. However, in exercising its discretion to authorise conduct, the Tribunal concluded that a condition should be imposed requiring reporting and public disclosure of certain hospitality benefits, which would 'increase the likelihood that the public benefit claimed for the Code is realised ...' (para 8). The Tribunal granted authorisation for five years.

The authorisation process

[105] The provisions of the TPA relating to authorisation allow that certain classes of possibly anti-competitive conduct may be exempted from the prohibitions of the TPA if the public benefit deriving from the proposed conduct outweighs its anti-competitive detriment or, in the case of exclusive dealing, is sufficiently great that the proposed conduct or arrangement should be allowed to proceed. The legislative scheme recognises that the benefits of competition may themselves be in competition with benefits flowing from anticompetitive conduct. It provides an administrative process to remove the risk that proposed beneficial conduct may contravene competition laws.

[106] The power conferred on the ACCC to authorise conduct is discretionary. ... The requirement that the exercise of the discretion be 'subject to this Part' means that necessary conditions prescribed by s 90 must be met. But they are necessary conditions only. Their satisfaction does not require that the ACCC grant authorisation. There is a discretion to refuse authorisation even where the relevant public benefit test is satisfied. That follows, not only from the discretionary language of s 88, but also from the way in which s 90 is framed beginning, as it does, with the words 'The Commission shall not make a determination granting an authorisation … unless it is satisfied …' (emphasis added). ...

The public benefit test

[107] The words 'public benefit' which lie at the heart of the authorisation process encompass '… the widest possible conception of public benefit… anything of value to the community generally, any contribution to the aims pursued by the society, including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress': Re Queensland Co-operative Milling Association Ltd; Re Defiance Holdings Ltd (1976) 8 ALR 481 at 510; 25 FLR 169 at 182-183 (Re QCMA). The term 'public' refers to the Australian public: Re Howard Smith Industries Pty Ltd (1977) 28 FLR 385; Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244. The range of public benefits which may be considered is limited, in the context of authorisation, by the requirement that the benefit be the result or the likely result of the conduct which is the subject of authorisation: Re QCMA 8 ALR 481; 25 FLR 169. Thus the public benefit which may be considered under s 90 is confined to the extent that it must be related to classes of conduct amenable to authorisation and causally related to the conduct authorised. Subject to those constraints the range of matters that may be brought to account as benefits is not limited. While economic efficiency will loom large in many authorisation applications, the Act and its objects do not limit it to such matters.

[108] Sections 90(6) and 90(7) of the TPA require consideration of the risk of “detriment to the public”, a concept extending to “… any impairment to the community generally, any harm or damage to the aims pursued by the society including as one of its principal elements the achievement of the goal of economic efficiency…”: Re 7-Eleven Stores Pty Ltd (1994) 16 ATPR 41-357 at 42,683. Although 'detriment' covers a wider field than anti-competitive effects in many cases the important detriments will have that character. The relevant detriment will flow from the anti-competitive effect of the conduct to which authorisation is sought: Re QCMA 8 ALR 481; 25 FLR at 184. This does not exclude consideration of other detriments which may be incidental to and therefore detract from, a claimed public benefit. To that extent such detriment will be relevant in weighing the benefit: Re Southern Cross Beverages Pty Ltd (1981) 50 FLR 176

[109] The test in s 90 requires assessment of 'likelihoods' in relation to apprehended detriments and benefits. In Qantas Airways Ltd [2004] ACompT 9, the Tribunal said (at [156]):

… for a benefit or detriment to be taken into account, we must be satisfied that there is a real chance, and not a mere possibility, of the benefit or detriment eventuating. It is not enough that the benefit or detriment is speculative or a theoretical possibility. There must be a commercial likelihood that the applicants will, following the implementation of the relevant agreements, act in a manner that delivers or brings about the public benefit or the lessening of competition giving rise to the public detriment. We must be satisfied that the benefit or detriment is such that it will, in a tangible and commercially practical way, be a consequence of the relevant agreements if carried into effect and must be sufficiently capable of exposition (but not necessarily quantitatively so) rather than “ephemeral or illusory”, to use the words of the Tribunal in Re Rural Traders Co-operative (WA) Ltd at 263.

In a passage in Re VFF Chicken Meat Growers Boycott Authorisation (2006) ATPR 42-120 which was adopted by the Tribunal in Application by Michael Jools (2006) 233 ALR 115, the Tribunal said of benefits and detriments to be considered (at [83]):

there must be a real chance that [they] will eventuate, rather than merely being 'possible' or even 'more probable than not'.

[110] The ACCC and therefore the Tribunal must have regard to 'all the circumstances' in applying the authorisation test prescribed by the Act. In Re QIW Ltd (1995) 132 ALR 225, the Tribunal said (at 234):

The examination of 'all the circumstances' must in our view involve the tribunal in an examination of matters of detriment, including anti-competitive detriment, in order to conclude whether in all the circumstances there is such a degree of benefit to the public that the acquisition should be allowed to proceed…

[111] In weighing anti-competitive detriment against public benefit there is not always a quantitative basis for comparison. The Tribunal said in Qantas Airways Ltd [2004] ACompT 9 (at [208]):

All other things being equal, detailed quantification is the best option. However, quantification at all costs is not required by the Act, and has never been sought by the Tribunal. There are diminishing returns to the quantification exercise. Benefits should be quantified only to the extent that the exercise enlightens the Tribunal more than the alternative of qualitative explanation.

[112] The test in relation to per se prohibitions, such as that applicable to exclusionary provisions or third line forcing, is simply whether the public benefit is such that the conduct 'should be allowed'. This flows from the unqualified nature of the statutory prohibition that would otherwise apply to such conduct. There have been two views expressed in the Tribunal about the nature of this test. As noted in Qantas Airways Ltd [2004] ACompT 9, it has expressed the view in a number of previous decisions that the test for authorisation is the same whether or not the provisions under consideration constitute a contract, arrangement or understanding governed by s 90(6) or s 90(7) or an exclusionary provision or arrangement governed by s 90(8) or (9): ...

[113] In Re Australian Competition and Consumer Commission by Australian Association of Pathology Practices Inc (2004) 206 ALR 271, the Tribunal said at [93]:

Re Rural Traders and subsequent cases have proceeded upon the basis that where the phrase 'such a benefit to the public' is used in s 90, the reference is to a net benefit even though the subsection does not specifically designate a weighing of benefit and detriment. We agree with that view. But it does not follow, with respect, that the two tests are precisely the same. That is because s 90(6) limits the consideration of detriment to 'the detriment to the public constituted by any lessening of competition' resulting from the relevant conduct, whereas no such limitation is to be found in s 90(8).

The Tribunal held in that case that alleged detriment, arising other than by lessening of competition, and flowing from the arrangements or conduct to which authorisation was sought, should be taken into account in determining whether there was such a benefit to the public as is required by s 90(8). The Tribunal noted that the earlier cases in which it had effectively equated the two authorisation tests, were cases in which the relevant detriment was constituted by lessening of competition. It rejected the submission then put by the ACCC that the tests posed by ss 90(6) and (8) are the same.

[114] As the Tribunal observed in Qantas Airways Ltd [2004] ACompT 9, the correctness of the broader approach to detriment under s 90(8) and (9) was raised in Re EFTPOS Interchange Fees Agreement (2004) 26 ATPR 41-999 at [25] but not finally determined. In the Qantas proceedings no detriment other than detriment arising from a lessening of competition was in issue. The Tribunal there said (at [148]):

Accordingly, for present purposes, the practical application of the two tests is the same, although we reserve for further consideration in future proceedings the question of whether the two tests have differing applications.

[115] The difference in the public benefit test applicable in s 90(6) on the one hand and under s 90(8) on the other, reflects the difference in language of the prohibitions in respect of which immunity is proposed. Section 90(6) is concerned with conduct prohibited subject to a substantial lessening of competition. Section 90(8) is concerned with per se prohibitions. The relevant prohibition in the latter class of case being effectively absolute, it does not carry within it any implied qualification which would confine the character of the detriment to be assessed in determining whether there is 'such a public benefit' as to warrant authorisation. Similarly, the Tribunal found in VFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120 at [71] that:

The distinction is rational. With [substantial lessening of competition] SLC provisions there is reason to look at the actual detriment caused by the lessening of competition in the instant case because that is the only kind of detriment which makes the conduct unlawful in the first place. Exclusionary provisions, however, are unlawful per se. No assessment of effect on competition is called for. Accordingly, the test is one of public benefit (or net public benefit) not confined to competition issues.

In our opinion the tests are different in the sense that a wider range of detriments than the lessening of competition can be considered in determining the sufficiency of the public benefit associated with proposed exclusionary conduct. [emphasis added]

[116] In Application by Michael Jools 233 ALR 115 the Tribunal treated as 'not self-evidently correct' the ACCC’s approach that any net public benefit is sufficient to meet the public benefit requirement of s 90(8). It said (at 120-121) :

It must be remembered that … an authorisation may be granted in respect of conduct which if engaged in in the absence of authorisation will result in the commission of a per se offence, that is an offence which parliament has assumed will by its very nature have an anti-competitive effect. One should also not forget the very high penalties that can be imposed in respect of a contravention of provisions for which an authorisation may be granted. These factors at least suggest that something more than a negligible benefit is required before the power to grant authorisation can be exercised. Even if the power to grant an authorisation were [triggered], these factors at the least indicate that if particular conduct will give rise to only a negligible benefit perhaps the conduct should not be authorised.

With and without test

[117] In assessing relevant detriments and public benefits associated with a proposal the subject of an authorisation application, the Tribunal looks to hypothetical futures with and without the proposed conduct. As explained in Re QIW Ltd 132 ALR at 276 and repeated by the Tribunal in Qantas Airways Ltd [2004] ACompT 9 (at [151]):

The test is not to compare the present situation with the future situation, were the acquisition to take place: a ‘before and after’ test. Rather the test is to appraise the future, were the acquisition to take place, in light of the alternative outcome, were the acquisition not to take place: the ‘future with and- without test’.

[118] The necessary condition for authorisation under s 90(6) requires consideration and comparison of the anti-competitive detriment and the public benefit likely to result if the proposal were to be put into effect. In the case of s 90(8) in its application to exclusionary provisions or third line forcing it is the public benefit likely to result if the proposal proceeds that must be considered (subject to discount for incidental or consequential detriment). The words “likely to result” in each case require consideration of a hypothetical future in which the subject proposal is in effect. Consideration of that future allows assessment of the nature and scale of relevant benefits and detriments and the likelihood of their occurrence.

[119] Consideration of a future without the proposal in effect assists the public benefit and anti-competitive detriment assessment in at least three ways:

(i) If the claimed public benefits are unlikely to exist without the proposal they can be described as benefits flowing from the proposal.

(ii) If the claimed public benefits exist, in part, in a future without the proposal the weight accorded to them may be reduced appropriately.

(iii) If, in a future without the proposal, there are public detriments which are removed or mitigated in the future with the proposal that may be considered as an element of the claimed public benefit flowing from the proposal.

...

[120] The so called 'future with or without test' is not a comparison of a hypothetical future in which the proposal the subject of the application is authorised against a hypothetical future in which it is not authorised. What the test requires is comparison of a future in which the conduct, the subject of the authorisation 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 authorisation. That is, a decision by the ACCC or, on review, the Tribunal, not to grant authorisation should not be equated with an assumption that the conduct the subject of the authorisation application would not occur. [emphasis added]

Discretion to authorise

[122] Where a proposed contract, arrangement or understanding or proposed conduct satisfies the relevant public benefit test under s 90, the decision whether to authorise remains discretionary. Given the wide evaluative considerations which may inform the assessment of public benefit, it is not a straightforward matter to ascertain the classes of consideration relevant to the discretion. ... [emphasis added]

...

[126] The discretion conferred on the ACCC and on the Tribunal by s 88(1) is enlivened upon satisfaction of the necessary conditions as to public benefit set out in s 90. It is not in terms limited other than by the subject matter, scope and purpose of the [Act] and the statutory context in which it appears: ... The discretion is not narrowly confined given the enormous variety of circumstances to which it may have to be applied. It is neither necessary nor desirable to try to define its outer limits. It is sufficient to say that considerations relevant to the objectives of the Act may play a part in the exercise of the discretion even where the public benefit test has been satisfied. ... [emphasis added]

[127] Where there is a likelihood of a substantial anti-competitive detriment flowing from the relevant conduct which is outweighed by a likelihood of more substantial public benefit it may be open to the ACCC to say that, notwithstanding the high level of public benefit, the anti-competitive detriment is unacceptable. Proposed conduct which involves marginal or almost non-existent anti-competitive or other relevant detriment might satisfy the necessary conditions for authorisation with a weak public benefit case. The ACCC in that event might come to the view that it did not wish to give its sanction to conduct giving rise to a sufficient but nevertheless weak public benefit result. There is a difficulty so construing the discretion when an application for authorisation of an exclusionary provision or exclusive dealing yields a finding that its likely benefit is such that the proposed conduct 'should be allowed'. Such a conclusion might be thought to pre-empt or subsume the exercise of the discretion. Nevertheless the public benefit condition prescribed by s 90(8) must be read consistently with the existence of the discretion. Absent any countervailing considerations, the discretion in such a case is most likely to be exercised in favour of authorisation. It may be, however, that there is some other factor which justifies the exercise of a discretion to refuse authorisation. This approach enables the test in s 90(8) to be applied in a way which is consistent with the way in which the language of s 90(6) requires the test prescribed in that section be applied and consistent with the existence of the discretionary term 'may' in s 88.

[128] Where there is a low to non existent anti-competitive or other detriment the ACCC may be entitled to look closely at what it is being asked to authorise. Authorisation is a public and official act of some seriousness. It is not to be invoked for trivial cause. To grant authorisation in such cases may risk like applications with wastage of resources as well as the risk that the authority of the ACCC itself may be diminished. Similarly, where the anticompetitive detriment is low to non-existent the ACCC may be entitled to say, as a matter of discretion, that it would only authorise the conduct if the public benefit to be derived from it, beyond that necessary to outweigh the anti-competitive detriment, or satisfy the per se conduct test is substantial. That is to say that the ACCC can require, in the proper exercise of its discretion, that the conduct yields some substantial measure of public benefit if it is to attract the ACCC’s official sanction. The Tribunal is in a similar position. Subject to the discussion which follows, the ACCC may impose a condition on its authorisation which effectively requires that the relevant contract, arrangement, understanding or conduct yield a more substantial public benefit than is required to get over the threshold of the necessary conditions comprising s 90. Alternatively, it may impose a condition requiring that the public benefit identified be enhanced in terms of the likelihood of its realisation.

Conditions upon authorisation

[129] Section 91 of the TPA provides that an authorisation may be expressed to be subject to such conditions as are specified in it. There is no express limit upon the kinds of conditions that may be imposed. That does not mean that there is an unconfined discretion to impose whatever conditions the ACCC or the Tribunal on review, considers appropriate. The power to impose conditions is constrained, like the discretion discussed above, by the subject matter, scope and purpose of the statute.

...

[133] A condition may be imposed upon authorisation for reasons which include the following:

1. In a case in which there is no or insufficient public benefit in the proposed contract, arrangement, understanding or conduct satisfying the ACCC for the purposes of s 90(6) or 90(8) that authorisation can be granted, a condition may be imposed requiring a variation of the proposal which would yield the requisite public benefit. Such a condition may:

(i) reduce the anti-competitive detriment of the proposal for the purposes of s 90(6);

(ii) reduce the public detriment which would otherwise cause the claimed public benefit to be discounted;

(iii) increase the public benefit to a level assessed by the ACCC to be sufficient for the purposes of the applicable statutory test.

2. In a case in which a theoretically sufficient public benefit has been identified a condition may be imposed to vary the proposal so that the likelihood of the benefit resulting is raised to a sufficient level.

3. In a case in which the proposal has satisfied the relevant public benefit test under s 90(6) or 90(8) as the case may be, a condition may be imposed without which the ACCC would not be prepared to exercise its discretion in favour of authorisation. The range of permissible conditions under this head is necessarily limited by the range of considerations relevant to the exercise of the discretion. While not in terms mandated by the conditioning power, it would be appropriate in exercising that power that the ACCC (or the Tribunal) have regard to any burdens it may impose upon the party seeking authorisation.

[134] The Tribunal accepts that where a proposed contract, arrangement or understanding, covenant or conduct is an industry code of ethics which creates a system of self-regulation in the public interest, it is not for the ACCC or the Tribunal to use the conditioning power and its discretion in order to construct and impose its ideal or preferred system of self-regulation. The imposition of a condition designed to enhance or increase the likelihood of benefits said to flow from a voluntary code is a far cry from redrafting the Code. [emphasis added]

The function of the Tribunal on review

[135] The function of the Tribunal on review is to undertake a complete rehearing of the authorisation application: ... It must make its own findings of fact and reach its own decision as to whether authorisation should be granted or not and, if so, any conditions to which it is to be subject ...

[138] The Tribunal in undertaking a review of an authorisation determination is not concerned to ascertain whether the ACCC was right or wrong in the conclusion it reached or whether it could have better formulated its determination. It is for the Tribunal to assess the applications for authorisation on their merits and by reference to the information and evidence given to the ACCC and any material that the parties wish to put before the Tribunal ...

[139] ... However the Tribunal may, in reviewing the determination, have regard to the ACCC condition and any alternative conditions proposed by Medicines Australia and may decide whether either of them is necessary or appropriate. It may conclude that no condition is necessary or appropriate. It may conclude that some condition other than those proposed by either the ACCC or Medicines Australia should be imposed. That is not to say that it would be appropriate to impose, without prior notice, a condition whose content and practical implications had not been debated before the Tribunal.

Re Medicines Australia Inc [2007] ACompT 4 (27 June 2007) (AustLII)