Rural Press Limited v ACCC

This case was decided before the 2008 legislative changes to s 46 and subsequent amendments to s 46 in 2017 that removed the 'taking advantage' element discussed at length in this case.

Rural Press, through a subsidiary (Bridge), published a regional newspaper (the Murray Valley Standard). The Standard was circulated in Mannum and around Murray Bridge in South Australia. In this region Rural Press was a near monopolist. 

Waikerie Printing published and circulated a regional paper (River News) up the river around the town of Waikerie; they also sold a few copies in Mannum.

Waikerie subsequently began circulating the River News in Mannum where they competed with the Murray River Standard for customers and advertising.  In response Rural Press threatened to establish a rival newspaper in River News' prime circulation area unless Waikerie withdrew from Mannum.

ACCC alleged this constituted a contravention of s 45 (that Rural Press had given effect to an exclusionary provision) and s 46 (misuse of market power).

At trial the ACCC succeeded in demonstrating Rural Press had given effect to an exclusionary provision and that it had contravened s 46 by misusing its market power.

On the issue of exclusionary provisions the trial judge held that the ‘arrangement’ between the parties (for River News to withdraw from Mannum in exchange for RP not publishing in the Riverland) had the subjective purpose "of preventing or restricting or limiting the supply of services to the particular class or classes of persons, being those in the Mannum area … who could otherwise receive the information and news in the River News or who could otherwise advertise in the River News or take advantage of advertising in the River News." The relevant ‘class of persons’ were readers and advertisers. 

Click here for the decision at first instance: ACCC v Rural Press Ltd (Includes Corrigendum dated 8 August 2001) [2001] FCA 1065 (7 August 2001)

Appeal upheld, both in relation to exclusionary provisions and misuse of market power.

In relation to exclusionary provisions the Full Court disagreed with the TJ because it considered that the ‘relevant class must be "the intended object of the discrimination envisaged by the section"’ and this was not the case here – nothing suggested parties were ‘targeting’ the readers and advertisers.  Rather the purpose of parties was to preserve their market power in the relevant areas.  The full Federal Court stated: "It is hardly surprising that there is no finding that the arrangement was aimed at the class of persons defined by his Honour, or that they were specifically targeted by any of the parties to the arrangement.  For the parties to act in this way would make no sense.  The class of persons identified by the primary judge simply consisted of customers or potential customers of the [River News].  They were not direct or indirect competitors of either party to the arrangement.  There is no reason to suppose that either party should have had any purpose to injure or disadvantage those persons."

In relation to s 46 the Full Federal Court held that "although Rural Press had the necessary market power and the necessary purpose, they had not taken advantage of their power in the Murray Bridge regional newspaper market but rather had taken advantage of their access to a printing press in Murray Bridge and to the necessary administrative and professional structure to publish a competing newspaper.  Rural Press and Bridge could have credibly threatened to enter the Riverland market, and could have actually entered it, regardless of whether they had a substantial degree of power in the MurrayBridge regional newspaper market.  "Had there been a perfectly competitive market in the MurrayBridge newspaper market, they may have lacked the motivation to make the threat, but they could have acted in precisely the same way."  The Full Federal Court said that the Commission, having chosen to plead and prove a very narrow market, with consequential advantages in terms of establishing market power and substantially anti-competitive purpose and effect, could not put that aside by treating the resources of Rural Press and Bridge, "which have no relevant relationship with that narrow market, as resources of or attributable to that market."" [from para 49 HC decision]

Click here for the decision of the Full Federal Court: Rural Press Ltd v Australian Competition & Consumer Commission [2002] FCAFC 213 (16 July 2002)

Allowed appeal in relation to exclusionary provisions and agreed with the joint reasons given in this respect.  The judges noted that the ‘particularity of the persons or classes of persons who are the objects of the purpose as defined and proscribed is essential to the concept of an exclusionary provision.  …’  There was, their Honours held, ‘sufficient particularity in the present case’ but there will be cases in which it will be absent despite all other elements being satisfied.

Their Honours noted the change in 4D from particular persons to particular persons or classes of persons, but noted that, while intending to widen the provision, were not intended to alter it’s character, and that the ‘proscribed purpose must still be one that is directed toward particular persons or classes of persons.  Parliament did not delete the word "particular" and substitute the word "any".’

Noted that s 4D did not require an object to injure the object(s) of exclusion as the full Court had suggested.

Noted that TJ had found a market in the Murray Bridge region ‘for the supply of regional newspapers such as the Standard, which provide the services of providing information news and advertising to persons within that area.’

ACCC claimed Bridge and Rural Press committed themselves not to introduce a new newspaper in competition with the existing paper.

Rural Press claimed the ACCC’s case was ‘based on reciprocity of commitment’ and that there was in fact no evidence that ‘in consideration for the River News being withdrawn from Mannum, the Rural Press parties would not publish a newspaper in Waikerie rivalling the River News’.  Instead, they claimed, Waikerie Printing had ‘decided to withdraw unilaterally' in the face of a perceived commercial threat without any arrangement having been reached."’  As a result, there was no ‘arrangement’ so that a necessary element for establishing an exclusionary provision was absent.

Their Honours disagreed. Their Honours accepted that Rural Press meant no direct harm to readers and advertisers.  But, they noted, that does not mean s 4D does not operate.  They accepted that the relevant purpose was the end sought to be accomplished by the conduct – here it was ‘preventing, restricting or limiting the supply of newspaper services by Waikerie Printing to readers and advertisers in the Mannum area.’  Rural Press ‘willingly contemplate[d] harm to the readers and advertisers in the sense that they did not want them to enjoy the freedom of being able to acquire the relevant services from the River News.’

Their Honours considered the full Federal Court focussed too much on the purpose of preventing the selling of papers or space to readers/advertisers and not enough on the correlative purpose of preventing readers/advertisers buying papers/advertising space. They considered that ‘… when the Full Federal Court accepted the trial judge's finding that the purpose of Rural Press and Bridge was to maintain their market power in Murray Bridge by preserving absence of competition in that market, it was accepting that their purpose was to maintain their market power in Murray Bridge by ensuring that the Standard would be the only paper and that readers and advertisers would not enjoy the services of the River News.  The purpose of maintaining market power was indistinguishable from the purpose of preventing supply of certain services to, and acquisition of those services by, readers and advertisers.  … It was not possible for the Rural Press parties consistently to say both that they had a purpose of preventing the River News from supplying services to readers and advertisers and also that they did not have a purpose of preventing readers and advertisers from acquiring services from the River News.  "You could not have one without the other, however much you protested that you did not really want the other."’

Their Honours then noted that there was no requirement, in s 4D of "aiming at" or "targeting".  There need not be a goal of infliction of harm or damage to the target. Here readers and advertisers constituted a class of persons and there was a purpose of restricting supply/acquisition to/from them.

TPA should not be narrowly interpreted. In relation to s 4D ‘purpose’ means ‘subjective’ purpose (he would have preferred an objective classification but precedent now established that the subjective purpose applied).  Regardless of whether a subjective or objective test was applied, the purpose element was satisfied here; on the issue of exclusionary provisions Kirby P agreed with the analysis in the majority joint reasons.

[50] ... The Commission argued that the relevant conduct was "the making of conditional threats" that unless Waikerie Printing withdrew the River News from the Mannum area, Rural Press and Bridge would introduce a rival newspaper in the Riverland market.  This condition provided a causal connection to the Murray Bridge regional newspaper market in which Rural Press and Bridge [Printing] had substantial market power.  The conditional threats would not have been made if Rural Press and Bridge had not had that market power.  The market power also facilitated the conduct by giving the threat a significance it would not otherwise have had.  The Commission submitted one relevant question was:  "Would [Rural Press] be likely to engage in the same conduct in the absence of market power, that is to say, in a competitive market?"  A second was:  "Why is the conduct being engaged in?"  The Commission answered the first question "No", because the purpose of Rural Press and Bridge was merely to protect their monopoly position in the Murray Bridge regional newspaper market.  The Commission answered the second question:  "To protect the monopoly position of Rural Press and Bridge in the Murray Bridge regional newspaper market."  The Commission submitted that the trial judge had answered the first question correctly by concluding that but for their market power, Rural Press and Bridge "would not have acted in the way in which they did" but that the Full Federal Court instead made an erroneous inquiry into how they could have acted.  Their conduct would not have been rational but for their market power and their desire to protect it.

Their Honours concluded that the words "take advantage" do not encompass conduct which, while having the purpose of protecting market power, have no other connection with that power - "To reason that Rural Press and Bridge took advantage of market power because they would have been unlikely to have engaged in the conduct without the "commercial rationale" – the purpose – of protecting their market power is to confound purpose and taking advantage.  If a firm with market power has a purpose of protecting it, and a choice of methods by which to do so, one of which involves power distinct from the market power and one of which does not, choice of the method distinct from the market power will prevent a contravention of s 46(1) from occurring even if choice of the other method will entail it."

The ACCC " failed to show that the conduct of Rural Press and Bridge was materially facilitated by the market power in giving the threats a significance they would not have had without it.  What gave those threats significance was something distinct from market power, namely their material and organisational assets. ... Rural Press and Bridge were in the same position as if they had been new entrants to the Murray Bridge market, lacking market power in it but possessing under-utilised facilities and expertise."

Agreed with the reasons of Gummow, Hayne and Heydon JJ on this issue.

Criticised what he considered the narrow interpretation the majority gave to s 46. "The Act should not be given a narrow interpretation that defeats its effectiveness". 

His Honour considered that there was an "unreality" in the conclusion adopted by the majority.

"The evidence and commercial realism:Here was Waikerie, with its modest regional newspaper the River News,keen to take advantage of potentially new market opportunities arising from the formation of a new and larger local government authority.  Waikerie hoped to expand its distribution and to give Rural Press' and Bridge's Standard some competition.  Doing so would be for the benefit of readers and advertisers within the given market.  Here, on the other hand, was Rural Press, with its numerous subsidiary companies, with net assets of $410 million in 2000, large numbers of regional newspapers and magazines in Australia and overseas and an annual pre-tax profit in 2000 of $99 million, engaged in the threatening conduct found by the primary judge.  Mr McAuliffe and Mr Law were well aware of the financial strength of Rural Press.  They were clearly conscious of its significant physical and capital resources and profitability, and of the capacity of the Rural Press parties to weather a battle with Waikerie to "persuade" (or bully) the latter out of the notion of competition – an idea which fondly, for a short time, Waikerie had embraced."

"This Court now holds that the Full Court was correct to reverse the primary judge's decision and to conclude that the conditional threat by Rural Press and Bridge to Waikerie, which caused the latter's competitive dreams to collapse so quickly, happened without Rural Press and Bridge "taking advantage" of their "market power".  In the end, this conclusion appears to be explained, in a comparatively short passage of reasoning, essentially by reference to the use by the Full Court of the word "could" and the concurrence of that word with the language employed by the majority of this Court in a cited passage in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd." 

"... it takes a great leap of legal imagination, in my view, to dispose of the Commission's appeal in this case upon such a narrow, formalistic and substantially verbal ground."

"If, for a moment, this Court turns from the words in judicial reasons to the reality of the pressure brought to bear by Rural Press and Bridge upon Waikerie, illustrated in the evidence adduced before and read by the primary judge in his extended hearing, realism suggests that the effect of that pressure, the speed of its impact and the success of its application to the starry-eyed officers of Waikerie involved "taking advantage" of the market power of Rural Press and Bridge.  For a blissful moment Waikerie had conceived itself as entitled to pursue a policy of competition with Rural Press and Bridge.  The suggestion that the application by Rural Press and Bridge of their "market power" was causally irrelevant to the swift retreat of Waikerie seems, with every respect, to border on the fanciful. ..."

"The conditional threat from Rural Press and Bridge extinguished any chance of competition.  It adversely affected consumers and the competitive process in terms of availability of choice, as it forced the withdrawal of a competitor and its product from the market.  Rural Press and Bridge did not, as they were entitled to do, compete in the market on the basis of the price or quality of their product.  Rather, they threatened to retaliate in a way that was a clear contravention of s 46.  With respect, the result of the analysis in the joint reasons in this Court does not protect or promote competition or the competitive process.  It stifles it."

His Honour concluded:

"A trilogy and the doctrine of innocent coincidence: This is the third recent decision of this Court (Melway and Boral Besser Masonry Ltd ... being the other two) in which a majority has adopted an unduly narrow view of s 46 of the Act.  In effect, it has held, in each case, that the established large degree of market power enjoyed by the impugned corporation was merely incidental or coincidental to the anti-competitive consequences found to have occurred.  Notwithstanding the proof of market power, the Court has held that the impugned corporations did not directly or indirectly "take advantage" of that power to the disadvantage of competition in the market." 

"In my view, the approach taken by the majority is insufficiently attentive to the object of the Act to protect and uphold market competition.  It is unduly protective of the depredations of the corporations concerned.  It is unrealistic, bordering on ethereal, when the corporate conduct is viewed in its commercial and practical setting.  The outcome cripples the effectiveness of s 46 of the Act.  It undermines this Court's earlier and more realistic decision in Queensland Wire.  The victims are Australian consumers and the competitors who seek to engage in competitive conduct in a naive faith in the protection of the Act.  Section 46 might just as well not have been enacted for cases like these where its operation is sorely needed to achieve the purposes of the Act.  Judicial lightning strikes thrice.  A novel doctrine of innocent coincidence prevails.  Effective anti-competitive threats can be made without the redress which s 46 appears to promise.  Once again I dissent."

Click here for full case at AustLII

Rhonda L Smith and David K Round, 'Do deep pockets have a place in competition analysis' (2012) 40 ABLR 348
Discusses s 46 with particular reference to the Boral and Rural Press cases.

Joshua S Gans, Rajat Sood and Philip L Williams, 'The Decision of the High Court in Rural Press: How the literature on credible threats may have materially facilitated a better decision' (25 March 2004, Revised 23 June 2004)

Nicholas Twomey, 'Rural Press: A game of collusion' (2015) 43 ABLR 489