The ACCC alleged (inter alia) that Visy had attempted to breach s 45(2)(a)(i) of the TPA by proffering to one of its competitors, Northern Pacific Paper (NPP), an agreement which contained a ‘non-competition clause’. Specifically, the clause would have prevented NPP collecting waste products from, and supplying waste collection services to, any of Visy’s customers or potential customers.

There was an attempt to breach s 45(2)(a)(i) (in other words, the non-competition clause would have constituted an exclusionary provision) but that this did not contravene the TPA because section 45(6) applied. This provision provides that a contract, arrangement or understanding will not breach s 45 if it would, but for the operation of s 47(10), constitute a contravention of section 47. Essentially this means that if the relevant provision would constitute exclusive dealing, but for the fact that it does not substantially lessen competition, then it can not breach section 45. Visy argued (successfully at first instance) that the provision involved did constitute exclusive dealing, but was not unlawful because it did not substantially lessen competition as required by s 47(10). Consequently s 45(6) operated to prevent the provision contravening section 45. The ACCC appealed.

Click here for the decision at trial: Australian Competition and Consumer Commission v Visy Paper Pty Ltd (2000) 186 ALR 731

The Full Court, by a two-to-one majority, upheld the appeal. The majority considered that the non-competition clause contained two prohibitions: a prohibition on NCC supplying waste removal services and a prohibition on purchasing waste from persons (for large customers NCC would actually pay for the paper waste because the large volume made it worth the cost of collection, whereas smaller customers paid to have the paper waste removed.)

The Court was prepared to find that the clause had these two distinct roles and considered the clause involved effectively had these two roles despite the fact that the clause itself simply prevented NCC from collecting waste from Visy’s customers. Thus, the Court focused on the substance, rather than the form, of the provision.

This finding enabled the Court to hold that, because only the prohibition on ‘supplying’ waste removal services constituted exclusive dealing (s 47(4)), it was still possible for the prohibition on ‘acquiring’ waste from persons to be captured by s 45(2)(a)(i). This was despite the fact that the same clause was involved. Their Honours reasoned that had the clause been broken up into two separate clauses - one prohibiting supply of services and one prohibiting purchasing of waste products, it would be clear that the latter would not enjoy the protection of s 45(6) and consequently would breach s 45(2)(i). Their Honours held that a different result should not follow simply because both exclusions were wrapped up in the same clause:

"There would be little doubt if each of the drafts had contained separate clauses or subclauses, one of which operated to prohibit NPP from supplying waste removal services to persons and the other of which operated to prohibit NPP from purchasing waste from persons, the making of the contract would fall to be tested within s 45(2)(a)(i) so far as it dealt with the purchase of waste, but would fall to be tested within s 47 so far as it dealt with the supply of waste removal services. Why should a different result accrue merely because the contract used the word “collect” which, in the sense used in the industry, would cover both such prohibitions, rather than set out each prohibition in a separate clause or subclause?"

Click here for decision of the Full Federal Court: Australian Competition & Consumer Commission v Visy Paper Pty Ltd [2001] FCA 1075 (10 August 2001)

An appeal by Visy to the High Court was unsuccessful. The majority judgment (Gleeson CJ, McHugh, Gummow and Hayne JJ) noted, as the Full Court had, the different characterisation that could apply to the provision:

[para 34] In the present case, the admittedly dual significance of the non-competition stipulations is important. The parties intended both to restrict NPP’s freedom to supply services to others, and to restrict its freedom to acquire goods from them. Making a contract with non-competition provisions to that effect would have constituted a contravention of s 45(2). But for the operation of s 47(10) the former provision would have contravened s 47(1). It would have been conduct of the kind described in s 47(4). The latter provision would not have contravened s 47.

[para 35] It follows that s 45(6) was engaged in respect of the former but not the latter provision. The limited effect of s 45(6) in the present case was as follows. The making of the contract would not have constituted a contravention of s 45 by reason that the contract contained the former provision. However, the making of the contract would have constituted a contravention of s 45 for other reasons, specifically because it contained the latter provision, the giving effect to which would not have contravened s 47. In respect of the latter provision, the criterion for engaging the qualification in s 45(6) to the prohibition imposed by s 45(2) was not met. In those circumstances, s 45(6) provides to Visy Paper no answer to the case made against it by the ACCC.

Justice Kirby agreed that the appeal should be dismissed but applied different reasoning to that of the majority. Justice Callinan dissented, preferring the views of the trial judge.

Click here for full case at AustLII