The case arose out of claims that in the late 1990s and early 2000s, News Ltd, Fox Sports and others had acquired AFL and NRL rights in order to put C7 out of business so that Fox Sports could 'dominate the market for supplying sports channels to pay television suppliers [and] dominate the market for the supply of pay television services to subscribers' (see Summary of Full Federal Court judgment)

Justice Sackville at trial dismissed Seven's case. An appeal to the full Federal Court failed.

More details forthcoming.

Click here for the judgment of Justice Sackville at AustLII

Click here for the judgment of the Full Federal Court at AustLII

Dowsett and Lander JJ:

Use of the SSNIP test

[668] The respondents seem to suggest that notwithstanding the limitations upon the applicability of the SSNIP test for present purposes, one might draw the inference that a small, but significant, non-transient increase in price, variation in quality or other change in terms of supply would not have caused Fox Sports to lose custom to C7 simply because subscribers to Foxtel were loyal to the NRL. Further, they imply that such inference should be treated as virtually conclusive evidence that the two entities were not in close competition. They imply that to the extent that evidence of conduct by, and views of, market participants is inconsistent with that inference, it should be discounted. We doubt whether it is permissible to draw such a largely intuitive inference, or to accord such significance to it. The exercise should rather involve an examination of all of the evidence to determine whether C7 (carrying AFL matches and wanting to carry NRL matches) in fact imposed a close constraint upon Fox Sports’ conduct as a supplier of sports channels (carrying NRL matches and wanting to carry AFL matches).

[669] In Re Queensland Co-operative Milling Association Ltd 25 FLR 169, the Tribunal said, at 190, that in determining the outer boundaries of a market, the question is whether, if a firm were to "give less and charge more", there would be "much of a reaction". It may be important to keep in mind the fact that a change in what is offered may be as significant as a change in price. Further, on the supply side, a supplier may respond to a competitor’s conduct by changing its own product and terms of supply. Thus, C7 may have responded to a price rise by Fox Sports by seeking more actively to acquire the NRL rights. As the Tribunal also pointed out, competition may manifest itself as innovation in the product and/or in the way in which it is supplied.

[670] We do not treat the SSNIP test as being irrelevant to the question of market identification. However a qualitative application of the test requires identification of its purpose. As we understand it, the test looks to the actual or likely effect of competitive conduct, or potential competitive conduct, upon price and other conditions of supply, including quality of the product. However competitive conduct may not have an immediate and obvious effect upon those matters. Particularly in a relatively new industry, competitors may be looking for longer term, rather than shorter term, advantages. The "richness" of the concept of competition referred to in Re Queensland Co-operative Milling Association Ltd 25 FLR 169 means that competition may take many forms. Its effects may be immediate or delayed. The SSNIP test addresses the effects of competition, but it does not define the way in which it occurs.

[671] News suggested that the appellants’ emphasis upon aspects of the evidence as disclosing close competition was in some way inconsistent with the way the trial was conducted. We have referred to the appellants’ submissions at trial and, of course, we have referred to his Honour’s reasons. In our view the case was conducted at trial upon the basis that in order to assess the extent to which C7 constrained Fox Sports’ conduct as a supplier of sports channels with a Marquee Sport, all of the evidence had to be examined using the SSNIP test as an aid to such assessment. We take this to mean that all of the evidence must be examined in order to determine whether one should infer that C7 constrained Fox Sports’ conduct in connection with prices, other conditions of supply and quality.

Proceedings commenced in 2002 and trial judgment was delivered in 2007.  The trial lasted 120 days (one of the longest in Australian history), produced 85,654 documents comprising 589,392 pages (only 12849 of which were admitted into evidence), produced 1,028 pages of pleadings, 1,613 statements from lay witnesses, 2,041 pages of expert reports (plus appendices), 2,368 pages of written closing submissions by Seven and 2,594 pages of written closing submission from the Respondents (naturally supplemented by outlines, notes and summaries), a trial transcript running to 9,530 pages and resulted in a 1,200+ page judgment at a cost of more than $200m in legal fees (about the same amount as the claimed damages).  This was all described by Justice Sackville as “extraordinarily wasteful” and “bordering on the scandalous” and led him to caution against appealing the decision (see summary of trial costs judgment). This warning did not deter Seven, who appealed and lost, producing a further judgment running to 359 pages.

See item in Sydney Morning Herald, describing an exchange occurring on day 104 of the trial. The transcript reads, in part:

Noel Hutley for News: "The worse thing that can happen in this case is that the timetable breaks down."

His Honour: "The worst thing that can happen is that the judge breaks down."

Hutley: "Your Honour looks in glowing good health. We check every morning."

His Honour: "On January 1, 2006, Mr Hutley, when the temperature was 45 degrees, I climbed up on a ladder in order to clear the garage of our holiday home from leaves."

Hutley: "You should have told us, your Honour, we would have done it."