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Australian competition law cases: High Court

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2017

Air New Zealand v ACCC; PT Garuda Indonesia v ACCC

Citation

Air New Zealand Ltd v ACCC; PT Garuda Indonesia Ltd v ACCC [2017] HCA 21 (14 June 2017)

Key issue

Meaning of market 'in Australia'

Contravention alleged

Price fixing

Summary

Air NZ and PT Garuda were found by the trial judge to have engaged in price fixing in relation to certain fuel charges. However, the prohibition required (at the time) that the conduct occur in a market 'in Australia'. As the trial judge determined the conduct did not occur in a market 'in Australia' (the relevant switching of carriers having taken place outside Australia) no contravention was held to have taken place.

The Full Federal Court (by majority) upheld an appeal by the ACCC; on further appeal by the airlines, the High Court unanimously determined that there was a market in Australia, notwithstanding that the relevant transactions might have taken place in another jurisdiction.

Appeal from

ACCC v P T Garuda Indonesia Ltd [2016] FCAFC 42 (21 March 2016) (Full Federal Court)

ACCC v Air New Zealand Limited [2014] FCA 1157 (Federal Court)

Judges

Chief Justice Kiefel CJ, Bell, Keane, Nettle, Gordon JJ

Chief Justice Kiefel
Source: High Court website Justice Bell
Source: High Court website Justice Keane
Source: High Court website Justice Nettle
Source: High Court website Justice Gordon
Source: High Court website

Finding (unanimous)

Conduct in this case took place in a market in Australia, notwithstanding 'switching' decision may have been made in other jurisdictions

Relevant provisions

Trade Practices Act 1974, ss 4, 4E, 45(2), 45(3), 45A.
(s 45A now repealed but principles equally applicable to new cartel laws)

Catchwords
(from decision)

Trade practices – Restrictive trade practices – Price fixing – Market identification – Location of market – Meaning of market "in Australia" – Where airlines competed to supply unidirectional air cargo services from ports of origin outside Australia to destination ports within Australia – Where airlines arrived at understanding to impose various surcharges and fees for supply of air cargo services – Whether market for air cargo services "in Australia" for purposes of Trade Practices Act 1974 (Cth).

Trade practices – Restrictive trade practices – Price fixing – Foreign state compulsion – Where airlines contravened s 45 of Trade Practices Act 1974 (Cth) – Whether conduct compelled by foreign law or foreign regulator's administrative practices.

Statutory interpretation – Inconsistency – Where s 13(b) of Air Navigation Act 1920 (Cth) required airlines to comply with "agreement or arrangement" – Where Australia-Indonesia Air Services Agreement "agreement or arrangement" within meaning of ss 12(2) and 13(b) of Air Navigation Act – Where Australia-Indonesia Air Services Agreement required agreement between international airlines on minimum tariffs – Where ss 45 and 45A of Trade Practices Act 1974 (Cth) prohibited arriving at understandings concerning prices with competitors – Whether ss 12 and 13 of Air Navigation Act inconsistent with ss 45 and 45A of Trade Practices Act such that latter did not apply to contravening conduct.

Words and phrases – "competition", "foreign state compulsion", "market identification", "market in Australia", "otherwise competitive with", "practically and operatively inconsistent", "price fixing", "rivalrous behaviour", "substitutability", "supply and demand".

 

2016

ACCC v Flight Centre

Citation

ACCC v Flight Centre Travel Group Limited [2016] HCA 49 (14 December 2016)

Key issue

Were Flight Centre (agent) and the airlines 'in competition' in a relevant market?

Contravention alleged

Price fixing

Summary

The ACCC alleged that Flight Centre attempted to induce three airlines (Singapore Airlines, Malaysia Airlines and Emirates) to enter into a contract, arrangement or understanding to fix, control or maintain prices for air travel in contravention of the Act.

The issue in dispute was whether or not Flight Centre, who acted as agent for the airlines, were 'in competition' with those airlines. The High Court by majority (French CJ dissenting) held that they were. The market in which both airlines and Flight Centre competed was found to be in a market for the supply of contractual rights to international air carriage via the sale of tickets.

Importantly, the Court determined that it was possible for an agent and principal to be found to be in competition with each other in appropriate circumstances.

Appeal from

Flight Centre Limited v ACCC [2015] FCAFC 104 (Full Federal Court)

ACCC v Flight Centre Limited (No 2) [2013] FCA 1313 (6 December 2013) (Federal Court

Judges

Chief Justice French (dissenting), Justices Kiefel, Gageler, Nettle and Gordon

Chief Justice French
Source: High Court website Justice Kiefel
Source: High Court website Justice Gageler
Source: High Court website Justice Nettle
Source: High Court website Justice Gordon
Source: High Court website

Finding (majority)

Justices Kiefel and Gageler: observed that under the agency agreement Flight Centre had authority to determine whether to sell and also had authority to set the prices for those tickets. As a result, it was 'free in law to act in its own interests' when selling the tickets (para 90). The market was a 'market for international airline tickets' and both the airlines and Flight Centre competed in that market.

Their Honours further observed that it was not inconsistent with the Act for agent and principle to both supply contractual rights against the principal and for them to do so in competition with each other (para 82); consequently any legal agency that existed did not preclude a finding that the parties competed with each other.

Justice Nettle: agreed parties were in competition for the sale of airline tickets and that Flight Centre had attempted to fix prices in that market.

Justice Gordon: agreed parties were in competition for the sale of airline tickets. Rejected any suggestion that the existence of an agency agreement precluded a finding that parties were in competition with each other. On the facts of this case her Honour considered that describing Flight Centre as a legal 'agent' was factually wrong (para's 152-153); in any event her Honour considered the characterisation as agent irrelevant for purposes of the price fixing provision.

Although a finding of actual effect on competition was not necessary (price fixing being per se prohibited), her Honour also considered that Flight Centre's proposal to the airlines that they increase their prices was 'necessarily to propose a lessening of downward competitive pressure on prices and, consequently, a reduction in the level of competition between Flight Centre and the airlines for the sale of airline tickets.' (para 132)

Dissenting view

French CJ dissented, observing that Flight Centre had no proprietary right to the air tickets and couldn't modify or vary terms; it could only determine the price at which the tickets were sold. His Honour was uncomfortable with the suggestion that agents could be found to be in competition with their principals, observing that the ‘proposition that an agent and a principal, both selling the services of the principal, compete with each other in a market for the sale of those services does not command ready assent’ (para 15).

His Honour concluded that Flight Centre's act in selling air tickets ‘was properly regarded as an action of the airline itself’ and that there was no market ‘for the supply of the tickets of a particular carrier’ (para 21). It followed that Flight Centre was 'not in competition, in any relevant market, with the airlines for which it sold tickets' (para 24).

Relevant provisions

Trade Practices Act 1974, s 4E, s 45, s 45A
(s 45A now repealed but principles equally applicable to new cartel laws)

Catchwords
(from decision)

Trade practices – Restrictive trade practices – Substantially lessening competition – Price fixing – Where travel agent sold international airline tickets on behalf of airlines – Where travel agent attempted to induce airlines to agree not to discount price at which international airline tickets offered directly to customers – Whether travel agent acting as agent for airlines – Whether travel agent and airlines "in competition" notwithstanding travel agent supplied as agent for airlines – Trade Practices Act 1974 (Cth), ss 45(2)(a)(ii), 45(3), 45A.

Trade practices – Restrictive trade practices – Market definition – Relevance of "functional approach" to market definition.

Words and phrases – "agency agreement", "agent", "competition", "functional approach to market definition", "international air carriage", "market", "price fixing", "substantially lessening competition".

 

2015

Cth of Australia v Director, Fair Work; CFMEU v Director, Fair Work

Citation

External linkCommonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 (2015) ALR 476 (9 December 2015)

Key issue

Was it permissible for administrative agencies and the parties to make joint submissions on penalty?

Justice Gageler observed that the 'only issue agitated [on appeal] was whether what was [said by the plurality in Barbaro] in the context of a criminal proceeding was transferable to the context of a civil penalty proceeding.'

Contravention alleged

N/A

Summary

This case was not a competition law case; however it related to the common practice of parties agreeing with regulators (including the ACCC) on appropriate penalties to present to the Court. The Full Federal Court had held that it was precluded from receiving agreed submissions on pecuniary penalties (this followed a decision in a criminal matter (Barbaro) that precluded such joint submissions).

The High Court concluded that "in civil penalty proceedings, courts are not precluded from considering and, if appropriate, imposing penalties that are agreed between the parties" (quote taken from judgment summary).

The decision in this case restored the common practice that had been halted as a result of the Full Federal Court's decision which precluded joint penalty submissions.

Appeal from

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (Dowsett, Greenwood and Wigney JJ) 

Judges

French CJ, Kiefel, Bell, Gageler, Keane, Nettle and Gordon JJ

Chief Justice French
Source: High Court website

Justice Kiefel
Source: High Court website Justice Bell
Source: High Court website Justice Gageler
Source: High Court website Justice Keane
Source: High Court website Justice Nettle
Source: High Court website Justice Gordon
Source: High Court website

Decision (unanimous)

French CJ, Kiefel, Bell, Nettle and Gordon JJ: The 'decision in Barbaro does not apply to civil penalty proceedings and a court is not precluded from receiving and, if appropriate, accepting an agreed or other civil penalty submission' (para 1)

Gageler J: Agreed with joint reasons that the reasoning in Barbaro has no application to civil penalties.

Keane J: Agreed with joint reasons and added some observations on the nature of proceedings for civil penalties.

Catchwords
(from decision)

Practice and procedure – Civil penalties – Whether submissions as to agreed penalty permissible – Whether Barbaro v The Queen [2014] HCA 2; (2014) 253 CLR 58 applies to civil penalty proceedings.

Words and phrases – "agreed penalty", "appropriate penalty", "civil penalty".

 

2012

Pilbara v Australian Competition Tribunal

Citation

Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36

Key issue

Access regime

Key issue was whether or not 'it would be uneconomical for anyone to develop another facility to provide the service' (an essential criterion for declaration under s 44H). Fortescue argued that uneconomical should be taken to mean 'inefficient'; BHP and Rio argued it should mean whether it was profitable to build another line.

Contravention alleged

No contravention alleged; related to claim for access.

Summary

The case involved four applications for access to essential facilities under Part IIIA of the Act. Fortescue Metals Group Ltd, a mining company operating in the Pilbara, sought to have four heavy haulage railways (designed to transport iron ore) declared under the access regime to enable it to run its own trains on the lines. Two of the railways were operated by BHP Billiton and two by Rio Tinto Iron Ore. The railways were: The Mt Newman line, the Goldworthy line, the Hamersley Line and the Robe line.

The NCC had recommended declaration of the lines and the Minister subsequently made declarations in relation to all by the Mt Newman Line.

BHP and Rio Tinto applied to the Tribunal for review of the decisions. Fortescue also applied for a decision not to declare the Mt Newman Line. The Tribunal affirmed the decision of the Treasurer not to declare the Mt Newman line, varied the decision in relation to the Robe line, set aside the decision to declare the Hamersley line and affirmed the decision to declare the Goldsworthy line. In relation to criterion (b) the Tribunal held that the test of whether it would be uneconomical to develop another line was 'whether a facility has natural monopoly characteristics'. It rejected the 'net social benefit' test previously applied.

On appeal, the Full Federal Court (Chief Justice Keane and Justices Mansfield and Middleton) denied an appeal by Fortescue to obtain access to Rio Tinto's Hamersley rail line in the Pilbara. In addition, Rio Tinto succeeded in its appeal to overturn the Tribunal's decision to declare the Robe River line.

The High Court agreed with the Full Federal Court that Criterion (b) should be determined by reference to a 'private profitability' test (asking whether anyone else could profitably develop another facility to provide the service) and not a 'social benefit' or 'natural monopoly' test. It remitted the matter back to the Tribunal for determination. 

On remission the Tribunal (on 8 February 2013) handed down its decision, finding that there was insufficient evidence to support declaration; it therefore revoked the Minister's declarations.

Appeal from

Full Federal Court: Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2011] FCAFC 58 (4 May 2011)

Tribunal: Fortescue Metals Group Limited; In the Matter of [2010] ACompT 2

Judges

French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ

Chief Justice French
Source: High Court website Justice Gummow
Source: High Court website Justice Hayne
Source: High Court website Justice Heydon
Source: High Court website Justice Crennan
Source: High Court website Justice Kiefel
Source: High Court website Justice Bell
Source: High Court website

Finding (unanimous)

French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ: Appeal allowed

Heydon J: Separate judgment allowing appeal.

Relevant provisions

Trade Practices Act 1974 (Cth), Pt IIIA, ss 44B, 44F, 44H, 44K, 163A.

Catchwords
(from decision)

Trade practices – Access to services – Minister's decision whether to declare services relating to railway lines in Pilbara pursuant to s 44F of Trade Practices Act 1974 (Cth) – Section 44H(4) required Minister to be satisfied of certain matters – Whether criterion for declaration of service in s 44H(4)(b) imposes test of private profitability – Whether public interest criterion in s 44H(4)(f) requires or permits inquiry into likely net balance of social costs and benefits – Whether any residual discretion.

Administrative law – Application to Australian Competition Tribunal ("Tribunal") under s 44K for review of Minister's decision to declare pursuant to s 44F – Review by Tribunal is re-consideration of the matter – Nature of review to be undertaken by Tribunal – Whether Tribunal could consider any material parties considered relevant.

Words and phrases – "public interest", "re-consideration of the matter", "re-hearing of the matter", "uneconomical for anyone to develop another facility to provide the service".

 

2006

SST Consulting v Rieson

Citation

SST Consulting Services Pty Limited v Rieson [2006] HCA 31; (2006) 225 CLR 516

Key Issue

Severance - was a contract void because it contained an exclusive dealing provision? Does s 4L permit or require severance?

Contravention alleged

Exclusive dealing

Summary

Facts: 'The appellant lent money to AFS Freight Management (USA) Inc ("AFS USA"), a company of which the respondents were directors. The respondents guaranteed repayment of the loan. The loan agreement obliged AFS USA to direct all work of packing and unpacking shipping containers at certain ports "to the corporations that the lender shall direct". The appellant, by lending or agreeing to lend money on that condition, engaged in the practice of exclusive dealing, contrary to s 47(1) of the Trade Practices Act. AFS USA repaid some but not all of the money lent.' (majority reasoning, para 2)

Claim: The respondents sought a declaration under s 87 of the Act that the guarantee was void or unenforceable. This required consideration of whether the exclusive dealing provision was severable (section 4L).

Federal Court: At first instance Justice Emmett had held that the offending provision could be severed, so that the remainder of the contract could be enforced. On appeal the Full Court had held that it was not possible to sever the offending provision with the result that the whole contract was illegal and void.

High Court: The High Court, by majority allowed the appeal; Kirby J dissented. The majority held not only that the exclusive dealing provision could be severed, but that s 4L required that it be severed from the remainder of the contract.

Appeal from

Rieson v SST Consulting Services Pty Ltd (2005) 142 FCR 482 (Justices Wilcox, Sackville and Finn)

SST Consulting Services Pty Ltd v Rieson (2004) ATPR ¶42-016 (Justice Emmett)

Judges

Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ

Chief Justice Gleeson
Source: High Court website

Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Heydon
Source: High Court website Justice Crennan
Source: High Court website

Finding (majority)

Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ: The appellant had engaged in exclusive dealing. However, their Honours concluded s 4L required (rather than merely permitted) severance of the offending condition from the contract.

Dissent

Justice Kirby: Justice Kirby agreed that the conduct constituted exclusive dealing in contravention of the Act. His Honour also agreed that the issue of severance was to be approached by looking to s 4L and not the common law. However, his Honour disagreed that s 4L required severance, considering that such an approach disregarded the purpose of the statute (para 107). His Honour concluded that the offending provision should not be severed in this case (agreeing with the conclusion of the Full Court).

Relevant provisions

Trade Practices Act 1974 (Cth), ss 4L, 47, 87

Catchwords
(from decision)

Trade Practices – Restrictive trade practices – Exclusive dealing – Trade Practices Act 1974 (Cth) ("TPA"), s 47(1) – Loan agreement obliged borrower to acquire services of a particular kind from third persons specified by the lender – Lender thereby engaged in "exclusive dealing" in breach of s 47(1) of the TPA – Guarantors of loan sought to avoid enforcement of guarantee on basis that contract was void and unenforceable for illegality – Whether contract void or unenforceable for illegality – Relevance of other forms of relief available under ss 87 and 87A – Whether severance an exceptional form of relief – Whether TPA, s 4L permitted or required severance of the prohibited provision.

Statutes – Interpretation – Structure and meaning of s 4L – Whether s 4L engaged common law "rules" of severance – Whether identifiable "rules" of severance existed at common law – Relevance of rules of severance devised and applied in other contexts.

Statutes – Interpretation – Statutory context of s 4L – Objects and purpose of the TPA – Relevance of legislative history of s 4L – Relevance of report of committee (Swanson Committee) appointed to review legislation prior to introduction of s 4L.

Words and phrases – "exclusive dealing", "illegality", "in so far as", "making of a contract", "severance", "subject to", "third line forcing".

 

2004

NT Power v PAWA

Citation

NT Power Generation v Power and Water Authority [2004] HCA 48; 219 CLR 90 (6 October 2004)

Key Issue

Did PAWA take advantage of market power in refusing access to transmission and distribution infrastructure

Contravention alleged

Misuse of market power

Summary

Facts and claim: NT Power generated electricity.  It wanted to sell this to consumers in NT but to do so needed access to existing infrastructure owned by PAWA.  PAWA was a body corporate (created by legislation) subject to directions of NT Minister for Essential Services and both generated electricity or purchased it from others and then on-sold to customers.  PAWA rejected a request for access despite ‘no safety, technical or other problem’ preventing them providing access.  NT Power brought action claiming breach of s 46.

Held: NT Power successfully sued Power and Water Authority (PAWA) and Gasgo for refusing it access to its transmission and distribution infrastructure to sell electricity.  The Court held that ‘PAWA denied access to its infrastructure, not because of a lack of capacity or technical difficulty or safety, but simply to protect its electricity sales revenue’ and that this contravened s 46.

Note: the decision pre-dated the operation fo the access regime under Part IIIA

Appeal from

NT Power Generation v Power & Water Authority [2002] FCAFC 302; (2002) 122 FCR 399

NT Power Generation Pty Ltd v Power & Water Authority [2001] FCA 334; (2001) 184 ALR 481

Judges

Justice McHugh ACJ, Gummow, Kirby, Callinan and Heydon JJ

Acting Chief Justice McHugh
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court websiteJustice Callinan
Source: High Court websiteJustice Heydon
Source: High Court website

Finding (majority)

Justice McHugh ACJ, Gummow, Callinan and Heydon JJ: There was a contravention of s 46.

'Consideration of PAWA's arguments has led to the conclusions, despite the fact that PAWA did not supply access to its infrastructure to others, that there were transmission/distribution markets and that PAWA had a substantial degree of power in them; that the Minister did not give any s 16 direction to refuse NT Power access on 26 August 1998; that even if he had, that does not prevent a finding that PAWA took advantage of its market power for proscribed purposes; that the trial judge did not err in applying s 46 to the facts he found; and that any adverse consequences caused by the application of s 46 to PAWA are not reasons for adopting a narrower construction of the section.'

Dissent

Justice Kirby: No misuse of market power. Section 46 'does not give the would-be competitor the right to demand and use, as its own, the property of another corporation. It merely prevents that other corporation from misuse of its power to prevent the entry of the other into the market'

Relevant provisions

Trade Practices Act 1974 (Cth): ss 2B, 2C, 4, 46, Schedule (cl 46)

Competition Policy Reform Act 1995 (Cth) s 89

ompetition Policy Reform (Northern Territory) Act (NT), ss 14, 15.

Power and Water Authority Act (NT), s 16

Catchwords
(from decision)

Trade practices - Market definition - Substantial degree of market power - Where statutory authority had a monopoly in the markets for electricity transmission and distribution services and for electricity supply - Where authority owned the transmission and distribution infrastructure - Where no transactions occurred in the transmission and distribution services market - Whether authority's control of the infrastructure gave it market power in both markets - Trade Practices Act 1974 (Cth), ss 46(1), 46(4)(c).

Trade practices - Misuse of market power - Taking advantage of market power - Proscribed purpose - Whether statutory authority's refusal of access to its infrastructure involved taking advantage of its market power or only of its proprietary rights - Whether refusal was due to a "direction" from the Minister - whether Minister's purpose in giving direction meant authority's refusal was not for a proscribed purpose - Whether authority's regulatory role meant refusal was not for a proscribed purpose - Trade Practices Act 1974 (Cth), s 46(1) - Power and Water Authority Act (NT), s 16.

Crown - Immunity - Crown in right of the Northern Territory - Carrying on a business under the Trade Practices Act 1974 (Cth) - Exceptions - Where statutory authority had a monopoly in the markets for electricity transmission and distribution services and for electricity supply - Where authority owned the transmission and distribution infrastructure - Whether authority's exclusive use of the infrastructure was part of carrying on a business - Whether refusal of access to infrastructure was merely refusal of a "licence" and thus not part of carrying on a business - Trade Practices Act 1974 (Cth), ss 2B, 2C(1)(b).

Crown - Immunity - Crown in right of the Northern Territory - "Emanation of the Crown" - Where statutory authority established by the Territory Government was the sole beneficial owner of a trading corporation - Where corporation incorporated under general enactment for the incorporation of companies rather than specific statute - Where corporation acquired for specific Government purpose - Whether corporation was an "emanation of the Crown".

Crown - Immunity - Crown in right of the Northern Territory - "Derivative Crown immunity" - Where statutory authority established by the Territory Government was the sole beneficial owner of a trading corporation - Where corporation entered into contracts with third parties - Where financial interests of the Government potentially prejudiced by preventing enforcement of those contracts under the Trade Practices Act 1974 (Cth) - Where no legal or proprietary interests of the Government affected - Whether corporation could claim "derivative Crown immunity".

Practice and procedure - Pleadings - Where points made in original pleadings but not relied on and no evidence called at trial - Whether points can be taken on appeal.

Words and phrases - "carries on a business", "market power", "take advantage of", "derivative Crown immunity", "emanation of the Crown", "direction", "licence".

 

2003

Boral Besser Masonry v ACCC

Citation

Boral Besser Masonry Limited (now Boral Masonry Ltd) v ACCC
[2003] HCA 5; 215 CLR 374 (7 February 2003)

Issue

Whether Boral (BBM) had substantial market power (SMP) and if so whether it was taken advantage of for a prohibited purpose

Contravention alleged

Misuse of market power (predatory pricing)

Summary

The ACCC alleged Boral Besser Masonry (BBM) and its parent company, Boral, had contravened s 46 of the TPA (misuse of market power) by pricing below avoidable cost in order to drive out a competitor (C&M Brick). The ACCC alleged BBM had a substantial degree of power in the market for concrete masonry products (CMP) in metropolitan Melbourne.

Appeal from

Australian Competition & Consumer Commission v Boral Ltd (Includes Corrigendum dated 29 March 2001) [2001] FCA 30 (27 February 2001) (Full Federal Court) (Justices Beaumont, Merkel and Finkelstein)

Australian Competition & Consumer Commission v Boral Ltd [1999] FCA 1318 (22 September 1999) (Federal Court) (Justice Heerey)

Judges

Gleeson CJ, Gaudron J, McHugh J, Gummow J, Kirby J (dissenting), Hayne J, Callinan J

Chief Justice Gleeson
Source: High Court website Justice Gaudron
Source: High Court website Justice McHugh
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court websiteJustice Hayne
Source: High Court website Justice Callinan
Source: High Court website

Finding (majority)

There was no substantial market power and, even if BBM did have substantial market power they had not taken advantage of that power.

Chief Justice Gleeson and Justice Callinan: Concluded BBM did not have substantial market power in the relevant market.

Held that essence of market power is absence of constraint (para 121). Noted it was dangerous in pricing cases to 'proceed too quickly from a finding about purpose to a conclusion about taking advantage of market power' (para 123). Held financial strength 'is not market power' (para 138) and that 'financial ability to survive a price war is not market power' if 'when the price war is over, the market is still highly competitive' (para 138). Noted 'the ability to cut prices is not market power. The power lies in the ability to target an outsider without fear of competitive reprisals from an established firm, and to raise prices again later.' (para 139)

Noted there is nothing in s 46 requiring a distinction to be drawn between pricing below or above variable or avoidable costs (para 128) and such a distinction is unsatisfactory and, in this case, of limited utility. Further, while the possibility of recoupment is not 'legally essential' in order to find a contravention of s 46 'it may be of factual importance' (para 130). In this case, had it been found that BBM would be able to rcoup its losses following the price war this 'may have assisted a conclusion that it had a substantial degree of market power' - but that was not the case here (para 130).

Justices Gaudron, Gummow and Hayne: Agreed appeal shoudl be allowed - no SMP. Noted in course of judgment: '... the object of s 46 is not the protection of the economic well-being of competitors; if the behaviour which excludes or damages rivals is low pricing, it is customers who stand to benefit' (para 186)

Justice McHugh: BBM did not have substantial market power in the relevant market (sale of CMP) because it could not raise prices to supra-competitive levels without rivals taking custom. Held that a firm does not possess SMP 'if it does not have the power to recoup all or a substantial part of the losses caused by price price-cutting by later charging supra-competitive prices. …' (para 278)

Further held that a firm does not take advantage of any SMP it may have if 'it has no intention of recouping its losses. …' (para 279)

Dissent

Justice Kirby: Considered primary judged erred in not considering vertical integration as an important determinant of market power; in this case integration of BBM with the Boral group enabled it to sustain prolonged losses and maintain below cost prices for longer than its competitors (para 365)

Concluded BBM had SMP and that it had taken advantage of that SMP for a prohibited purpose:

[447] When all the peripheral facts and sophisticated legal and economic analysis in this appeal are stripped away, what is the outcome that now follows from the approach of the majority of this Court?

[448] The conclusion unanimously reached by three appellate judges in the Full Court of the Federal Court is set aside. The impugned "big" player, as its own records disclosed and the primary judge found, had the express purpose of deterring entry and eliminating certain competitors from the market, in part as a response to their earlier price-undercutting that had endangered a relatively placid market. By inference, the corporation was concerned that more such uncongenial competition would otherwise ensue. Its conduct reduced the number of market players effectively to three. The corporation's purpose was fulfilled to that extent. With the number of rivals reduced and the appellant's market share correspondingly increased, its market power was further consolidated. Short-term pricing sacrifices were made for long-term economic rewards. Inevitably, these would come at a probable cost to consumers. This is precisely the type of market conduct that s 46 of the Act forbids. Despite that, the corporation is now absolved because, it is said, it did not possess, and take advantage of, the requisite degree of power in the relevant market. Respectfully, I regard that conclusion as contrary to the reasonable inferences arising from the evidence. No error on the part of the Full Court is shown. I therefore dissent.

Relevant provisions

Trade Practices Act 1974 (Cth) s 46

Catchwords
(from decision)

Trade practices - Restrictive trade practices - Misuse of market power - Predatory pricing - Market definition - Concrete masonry products market - Close substitutability - Whether appellant had substantial degree of market power - Recoupment of losses - Analysis of market structure - Market share - Barriers to entry - Whether barriers to entry created by practices and policies of incumbent firms - Pricing behaviour - Increase in supply capacity - Whether taking advantage of a substantial degree of market power for a proscribed purpose - Legislative purpose of Trade Practices Act 1974 (Cth) - Relevance of market economic conditions - Relevance of purpose of damaging a competitor - Trade Practices Act 1974 (Cth), s 46(1), (3).

Words and phrases - "market power", "predatory pricing", "barriers to entry".

News v Sth Sydney

Citation

News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45; (2003) 215 CLR 563 (13 August 2003)

Issue

Did the agreement between ARL and News Ltd to form the NRL and reduce the number of teams in the competion (ultimately leading the exclusion of South Sydney from the national rugby competition in 2000) constitute an exclusionary provision in contravention of s 45 of the Act?

Contravention alleged

Exclusionary provision (boycott)

Summary

This case arose following the establishment of the Super League rugby body which was the subject of separate litigation between the Australian Rugby League and News Ltd. As part of a compromise, a new rugby competition, the National Rugby League (NRL) was formed in 1998. Part of the agreement between ARL and News for the formation of the NRL was that the number of teams would be reduced from 17 to 14 by 1998. This was to be done through a selection process which would rank teams in order of their suitability for the competition. In this ranking, the South Sydney Football Club was ranked 15th and was therefore excluded from the competition. South Sydney challenged the term, claiming it constituted an unlawful exclusionary provision.

Appeal from

South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 (3 November 2000) (Justice Finn)
Held there was no exclusionary provision

South Sydney District Rugby League Football Club Ltd v News Ltd 
(2001) 111 FCR 456; [2001] FCA 862 (6 July 2001)
(Justice Heerey (dissenting) and Justices Moore and Merkel)
Held (by majority) there was an exclusionary provision)

Judges

Chief Justice Gleeson and Justices McHugh, Gummow, Kirby and Callinan

Chief Justice Gleeson
Source: High Court website

Justice McHugh
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Callinan
Source: High Court website

Finding (majority)

There was no exclusionary provision; News Ltd did not have a purpose of excluding any particular club.

Four separate majority judgments were delivered. All considered the 'subjective purpose' test was to by applied to s 4D and that in this case News Ltd did not have a subjective purpose of excluding Sth Sydney.

Dissent

Justice Kirby considered that an objective test should be applied to the purpose test in s 4D. His Honour noted that professional sport is a business that should be treated in the same way as any other business for purposes of the Act.

It is the immediate purpose that is relevant and in this case the purpose of the 'provision' was exclusionary.

Relevant provisions

Trade Practices Act 1974 (Cth), s 4D, s 4F, s 45

Catchwords
(from decision)

Trade practices - Exclusionary provisions - Merger of competing sporting competitions - Provision that no more than a certain number of teams participate in new competition - Whether provision included for purpose of preventing, restricting or limiting supply of goods or services to, or acquisition of goods or services from, particular persons or classes of persons - Test for determining purpose - Trade Practices Act 1974 (Cth), ss 4D, 45(2)(a)(i), 45(2)(b)(i).

Practice and procedure - Interveners - Whether intervener may advance on appeal argument not adopted by parties to appeal.

Words and phrases - "purpose", "particular persons or classes of persons", "preventing, restricting or limiting".

Visy v ACCC

Citation

Visy Paper Pty Ltd v ACCC [2003] HCA 59; 216 CLR 1 (8 October 2013)

Key issue

Did the anti-overlap provision in s 45(6) apply to prevent Visy's conduct contravening the Act?

Contravention alleged

Exclusionary provision (boycott)

Summary

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.

Visy argued that the conduct involved was in fact a form of lawful exclusive dealing (that is, it met the definition of exclusive dealing but was not prohibited because it did not have the purpose or effect of substantially lessening competition) and that as a result the anti-overlap provision in s 45(6) prevented it being prohibited as an exclusionary provision.

At first instance this argument succeeded. However, it was overturned on appeal to the Full Federal Court; a further appeal by Visy to the High Court was dismissed.

Briefly, although part of the conduct constituted exclusive dealing and the anti-overlap provision prevented that conduct from constituting exclusive dealing, the part of the conduct that was not exclusive dealing could still be captured.

[Note, the distinction was important because exclusionary provisions (primary boycotts) were prohibited per se, whereas exclusive dealing was only prohibited where it had the purpose or effect of substantially lessening competition; as the ACCC had not argued that the conduct had such purpose or effect, if Visy succeeded in demonstrating that the conduct was in fact a form of exclusive dealing then it would not have been in contravention of the Act]

Appeal from

Australian Competition and Consumer Commission v Visy Paper Pty Ltd (2000) 186 ALR 731 (Justice Sackville)

Australian Competition & Consumer Commission v Visy Paper Pty Ltd [2001] FCA 1075 (10 August 2001) (Justices Hill, North and Conti (dissenting))

Judges

Gleeson CJ, McHugh, Gummow, Kirby, Hayne and Callinan JJ

Chief Justice Gleeson
Source: High Court website Justice McHugh
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Callinan
Source: High Court website

Finding (majority)

Gleeson CJ, McHugh, Gummow and Hayne JJ: The provision in question (the non-compete clause) exhibited dual characteristics - it restricted NPP's freedom to supply services to others and it restricted its freedom to acquire goods from them.

The former (restriction on supplying services) was a form of exclusive dealing that would have been prohibited if it substantially lessened competition; as a result the anti-overlap provision applied and it did not constitute an exclusionary provision.

The latter (acquisition restriction) was not a form of exclusive dealing. As a result the anti-overlap provision did not apply and it was prohibited by s 45 as an exclusionary provision.

It did not matter that the two restrictions were contained within the same clause; the substance of the provision was that it contained two distinct restraints.

Kirby J: Justice Kirby agreed that the appeal should be dismissed but for different reasons.

Dissent

Justice Callinan: Justice Callinan preferred the view of the trial judge and would have allowed the appeal. In particular, agreed with Justice Sackville that 'there is no warrant for notionally breaking up the alleged exclusoinary provision into ... 'discrete legal obligations'.' (para 84, citing para 118 of the trial judgment)

Relevant provisions

Trade Practices Act 1974 (Cth), s 4, s 4D, s 45, s 47

Catchwords
(from decision)

Trade practices - Restrictive trade practices - Exclusionary provisions - Exclusive dealing - Arrangements for waste paper collection - Where non-competition provisions have dual and composite character - Non-competition provisions preventing both the acquisition of goods from, and the supply of services to, particular persons - Both aspects of the non-competition provisions contravened s 45(2)(a)(i) of the Trade Practices Act 1974 (Cth) and one of those aspects would, but for s 47(10), have contravened s 47 - Whether s 45(6) precluded the application of s 45(2)(a)(i) to both aspects of the non-competition provisions or only that aspect covered by s 47.

Words and phrases - "provision", "by reason that", "give effect to", "condition".

Rural Press

Citation

Rural Press Limited v Australian Competition and Consumer Commission [2003] HCA 75 (11 December 2003)

Key issue

Did Rural Press's conduct in threatening to establish a rival newspaper in River News' prime circulation area unless Waikerie withdrew from the Mannum area constitute an exclusionary provision or misuse of market power?

Contravention alleged

Misuse of market power
Exclusionary provision (boycott)

Summary

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).

The Court held that there was a contravention of s 45 (Rural Press had given effect to an exclusionary provision) but there was no misuse of market power.

Appeal from

Rural Press Ltd v ACCC [2002] FCAFC 213 (16 July 2002) (Justices Whitlam, Sackville & Gyles)
(Upheld appeal; did not contravene either provision)

ACCC v Rural Press Ltd [2001] FCA 1065 (Justice Mansfield)
(Held contravention of both ss 45 and 46)

Judges

Chief Justice Gleeson and Justices Gummow, Kirby, Hayne, Callinan and Heydon

Chief Justice Gleeson
Source: High Court website

Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Callinan
Source: High Court website Justice Heydon
Source: High Court website

Finding (majority)

Gleeson CJ and Callinan J: Allowed appeal in relation to exclusionary provisions; there was sufficient particularity in the persons or classes of persons to be excluded to meet the requirements of the provision. In relation to misuse of market power. On s 46 agreed with reasons of Gummow, Hayne and Heydon JJ.

Gummow, Hayne and Heydon JJ: Allowed appeal in relation to exclusionary provisions; it did not matter that Rural Press did not mean to harm readers and advertisers - no goal of inflicting harm is required by the Act. There was a contravention because the conduct prevented, restricted or limited the supply of newspaper services by Waikerie Printing to readers and advertisers in Mannum.

In relation to s 46 there was no 'taking advantage' of market power; it is not sufficient that Rural Press had the purpose of protecting market power - the method they adopted to do so did not require the use of any market power - in particular, the conduct was not 'materially faciliated by the market power'.

 

Dissent

Kirby J: Would have upheld appeal and found contravention of both provisions.

In relation to exclusionary provisions, purpose element established - agreed with analysis of majority in this respect.

In relation to misuse of market power, was highly critical of majority judgment; considered there was an 'unreality' associated with the finding that there was no connection between the market power and the withdrawal of Waikerie from the Mannum area. Considered majority judgment adopted an 'unduly narrow view of s 46 that was 'insufficiently attentive to the object of the Act'. Concluded: 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."

Relevant provisions

Trade Practices Act 1974 (Cth), s 4D, s 45, s 46, s 75B s 76, s 80

Catchwords
(from decision)

Trade practices - Exclusionary provisions - Arrangement between regional newspaper publishers providing that one would withdraw newspaper services from the prime circulation area of the other - Whether provision had purpose of preventing, restricting or limiting supply of services to, or acquisition of services from, particular persons or classes of persons - Trade Practices Act 1974 (Cth), ss 4D, 45(2)(a)(i), 45(2)(b)(i).

Trade practices - Where regional newspaper publisher threatened to circulate new newspaper in prime circulation area of a second regional newspaper publisher, unless second publisher ceased circulation of its own newspaper in first publisher's prime circulation area - Where second publisher subsequently ceased circulation of newspaper in first publisher's prime circulation area - Whether an "arrangement" - Whether arrangement had purpose or effect of substantially lessening competition - Trade Practices Act 1974 (Cth), ss 45(2)(a)(ii), 45(2)(b)(ii).

Trade practices - Accessorial liability - Whether officers of newspaper publisher were "involved in" publisher's contraventions - Whether officers participated in or assented to contraventions with actual knowledge of essential elements constituting the contraventions - Trade Practices Act 1974 (Cth), ss 75B(1), 76(1), 80(1).

Trade practices - Misuse of market power - Whether publisher took advantage of market power in its prime circulation area in threatening to enter prime circulation area of second publisher - Trade Practices Act 1974 (Cth), s 46(1).

Practice and procedure - Orders - Form of declarations.

Words and phrases - "arrangement", "involved in", "take advantage of", "purpose", "particular persons or classes of persons".

 

2002

Daniels Corporation v ACCC

Citation

External linkDaniels Corporation International Pty Ltd v ACCC [2002] HCA 49; 213 CLR 543; 192 ALR 561; 77 ALJR 40

Judges

Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ

Chief Justice Gleeson
Source: High Court website Justice Gaudron
Source: High Court website Justice McHugh
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Callinan
Source: High Court website

Issue

Legal Professional Privilege

The ACCC had issued a notice to the appellants to produce documents; question was whether or not documents to be produced included those for which legal professional privilege was claimed

Finding

Appeal allowed; s 155 did not abrogate legal professional privilege. This finding was unanimous but four separate reasons for judgment were produced.

Reasons

Gleeson CJ, Gaudron Gummow and Hayne JJ: allowed the appeal. Legislation could not be construed as having impliedly aborgated legal professional privilege (para 35)

McHugh J: allowed the appeal in separate judgment. Noted that 'Australian courts have classified legal professional privilege as a fundamental right or immunity' and that ' legislature will be taken to have abolished the privilege only when the legislative provision has done so expressly or by necessary implication' (para 44). Section 155 did not expressly abolish the right to claim legal professional privilege, nor did it do so by necessary implication.

Kirby J: allowed the appeal in separate judgment. Noted that it was 'necessary to have a single, clear rule to govern cases in which there is propounded an unstated but implied legislative abolition' and the 'rule in Australia is, and should be, that the privilege is not lost by statutory words of generality. If it is to be taken away, this must be done clearly.' (para 111) That was not the case here.

Callinan J: allowed the appeal in separate judgment.

Relevant provisions

Section 155 (then Trade Practices Act 1974)

Catchwords
(from decision)

Evidence - Legal professional privilege - Statutory notice to produce documents - Whether statute abrogated legal professional privilege.

Trade practices - Notice to produce documents to Australian Competition and Consumer Commission - Commission investigating whether Trade Practices Act 1974 (Cth) contravened - Whether documents to be produced included those for which legal professional privilege claimed.

 

2001

Maggbury v Hafele

Citation

External linkMaggbury Pty Ltd v Hafele Australia Pty Ltd
[2001] HCA 70; (2001) 201 CLR 181; 185 ALR 152; 76 ALJR 246 (13 December 2001)

Key issue

Whether confidentiality agreement constituted an unreasonable restraint of trade

Appeal from

Maggbury Pty Ltd & Anor v Hafele Australia Pty Ltd & Anor [2000] QCA 172
Supreme Court of Queensland - Court of Appeal (Appeal allowed)

Judges

Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ

Chief Justice Gleeson
Source: High Court website Justice Gummow
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Callinan
Source: High Court website

Finding (majority)

In a joint judgment Chief Justice Gleeson and Justices Gummow and Hayne dismissed the appeal, holding that the confidentialiry agreement (which in this case required certain information to be treated as confidential forever) constituted an unreasonable restraint of trade). At para 56:

'The fact that the restraint can be said to have freely been bargained for by the parties to the contract provides no sufficient reason for concluding that the doctrine should not apply. All contractual restraints can be said to be of that character.'

Dissent

Justices Kirby and Callinan would have allowed the appeal; this was a commercial arrangement - should give primacy to the commercial bargain, freely entered into.

Justice Kirby observed that (at 69):

[69] 'The common law is vigilant against contractual promises that hamper freedom of labour, skill or talent contrary to the interests of the community. This is especially so where the restraint imposed is "more than that which is required (in the judgment of the court) to protect the interests of the parties". However, there was nothing in the confidentiality agreements executed by it that hampered Hafele's economic freedom in such an impermissible or unreasonable way. This is because the definition of the prohibited acts, contained in the agreements, was quite narrow. ...' (footnotes omitted)

[71] 'The restraint of trade doctrine, being an invention of the common law, must be applied to the facts "with a broad and flexible rule of reason". In the present case, the promises sought by Maggbury and given by Hafele tend, in my view, to advance the efficient operation of the market rather than to restrict it.' (footnote omitted)

Relevant provisions

Common law

Catchwords
(from decision)

Contract - Confidential information - Contractual restraint upon use of "Information" - Restraint expressed to be perpetual - Information disclosed in patent application - Proper construction of contract - Whether restraint to apply once information disclosed to public - Whether contract in restraint of trade.

Restraint of trade - Contractual restraint upon use of information concerning invention - Whether confidentiality agreement constitutes an unenforceable contractual restriction on trade - Whether the restraint imposed is more than that required to protect the interests of the parties.

Injunction - Confidentiality agreement between inventor and potential marketer - Substantial copying of invention found contrary to agreement - Whether injunction granted unacceptably wide - Whether injunction would involve excessive supervision by court - Permissible scope and duration of injunctive relief.

Words and phrases - "quality of confidence".

Melway v Robert Hicks

Citation

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [2001] HCA 13

Key issue

Did refusal to supply in this case constitute a misuse of market power?

Contravention alleged

Misuse of market power (section 46)

Summary

Melway terminated the distributorship of Auto Fashions following a split between the partners of that entity. One of the partners, Nagel, left Auto Fashions, and started his own business. Melway then terminated Auto Fashions’ distributorship and appointed Nagel as its sole distributor in that market segment. Auto Fashions then placed an order for between 30,000 and 50,000 copies of the Melway directory.  Melway refused to supply and Auto Fashions commenced proceedings alleging a breach of s 46.

Appeal from

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd [1999] FCA 664 (20 May 1999) (Justices Sunberg and Finkelstein; Heerey J dissenting)
Majority upheld trial judge's decision - did not accept Melway's business justification argument

Robert Hicks Pty Ltd (trading as Auto Fashions Australia) v Melway Publishing Pty Ltd [1998] FCA 1379 (30 October 1998) (Justice Merkel)
Held there was a misuse of market power - a firm in a competitive market would not have refused the order

Judges

Gleeson CJ, Kirby J (dissenting), Hayne J and Callinan J

Chief Justice Gleeson
Source: High Court website Justice Kirby
Source: High Court website Justice Hayne
Source: High Court website Justice Callinan
Source: High Court website

Finding (majority)

The majority, in a joint judgment, endorsed the judgement of Heerey J. The majority noted the longevity of Melway’s system of distribution and its vigilance in protecting it against other threats. Relying on American authority, the majority found that limiting intra-brand competition could actually help rather than harm competition. Unlike the situation with Y-bar posts in Queensland Wire, Melway was not trying to foreclose the market for Melbourne street directories, nor could it do so. The respondent remained free to seek supply of and sell rival directoriesWhat Melway had done was to prevent the respondent dealing with its own directory, something it could have done without market power. 

The majority considered that Melway’s refusal should be characterised as a legitimate termination of a distributorship agreement. It may have been a taking advantage of market power if the refusal would have denied Melway extra sales. As this was not the case a legitimate business purpose for the refusal was to be preferred to one that found the refusal was for a purpose proscribed under s46.

Dissent

Justice Kirby dissented - on the key 'take advantage' element his Honour stated:

[85] "The contention that the appellant adhered to its system of distribution because it had found it specially useful and profitable in marketing the kind of product it sold was not supported by the evidence when regard was had to what happened after the launch by the appellant of a Sydney equivalent to the Melbourne directory.  [Evidence relating to the Sydney market] given at a time when the appellant's sales of its Sydney directories constituted only 10% of the market, suggests an understandable willingness to embrace a different distribution system where the appellant's product did not dominate the relevant market.  It tends to confirm the impression to which the primary judge and the majority in the Full Court gave effect.  In insisting on its closed distribution system in Melbourne, the appellant was not pursuing some universal philosophy of efficient market distribution, found to have worked for a product with unique or particular needs.  It was simply engaging, as monopolists commonly seek to do, in a market strategy designed to "take advantage" of its dominant market position.  It was doing so to the disadvantage of competitors, of healthy competition and, ultimately, of the interests of consumers. …" (emphasis added)

Relevant provisions

Trade Practices Act 1974 (Cth), section 46

Catchwords
(from decision)

Trade practices - Restrictive trade practices - Misuse of market power - Wholesale distribution systems - Manufacturer appoints exclusive distributor to a sector of retail market and refuses to supply another potential distributor - Whether manufacturer took advantage of market power for purpose of deterring or preventing person from engaging in competitive conduct.

Words and phrases - "take advantage of" - "market power".

 

1989

Queensland Wire v BHP

Citation

Queensland Wire Industries v BHP (1989) 167 CLR 177 (High Court)

Key issue

Did BHP misuse its market power in refusing to supply Y-Bar to Qld Wire?

Contravention alleged

Misuse of market power (refusal to supply)

Summary

There were two relevant markets: (1) steel products including Y-bar; (2) downstream market for rural fencing (including star picket fence posts).  The Court held that BHP had substantial market power in the first of these markets and ‘leveraged’ it into the second market.  By (constructively) refusing to supply Y-bar to QWI, BHP was able to prevent QWI making star picket fences with the consequence that it was unable to compete with QWI's subsidiary for the major fencing customers.

Appeal from

External linkRe Queensland Wire Industries Pty Limited v the Broken Hill Proprietary Co Limited and Australian Wire Industries Proprietary Limited [1987] FCA 496
(Chief Justice Bowen and Justices Morling and Gummow)

External linkRe Queensland Wire Industries Pty Ltd v the Broken Hill Proprietary Company Limited; Australian Wire Industries Proprietary Limited [1987] FCA 294
(Justice Pincus)

Judges

Chief Justice Mason, Justices Wilson, Deane, Dawson and Toohey

Contravention alleged

Chief Justice Mason
Source: High Court website Justice Wilson
Source: High Court website Justice Deane
Source: High Court website Justice Dawson
Source: High Court website Justice Toohey
Source: High Court website

Issue

Misuse of market power - leveraging market power

Finding (unanimous)

Mason CJ and Wilson J

The take advantage element does not require moral reprehensibility:

[24]  ... the object of s.46 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 the inevitable consequence of the competition s.46 is designed to foster. In fact, the purpose provisions in s.46(1) are cast in such a way as to prohibit conduct designed to threaten that competition - for example, s.46(1)(c) prohibits a firm with a substantial degree of market power from using that power to deter or prevent a rival from competing in a market. The question is simply whether a firm with a substantial degree of market power has used that power for a purpose proscribed in the section, thereby undermining competition, and the addition of a hostile intent inquiry would be superfluous and confusing. 

[28] ‘In effectively refusing to supply Y-bar to the appellant, BHP is taking advantage of its substantial market power.  It is only by virtue of its control of the market and the absence of other suppliers that BHP can afford, in a commercial sense, to withhold Y-bar from the appellant.  If BHP lacked that market power … if it were operating in a competitive market – it is highly unlikely that it would standby, without any effort to compete, and allow the appellant to secure its supply of Y-bar from a competitor.’

Justices Deane, Dawson and Toohey all delivered separate reasons for judgment finding that BHP had taken advantage of its misuse of market power for a prohibited purpose in contravention of s 46.

Relevant provisions

Trade Practices Act 1974 (Cth), section 46

Catchwords
(from decision)

Trade Practices - Monopolization - Substantial control - Substantial degree of market power - Misuse of market power - Refusal to supply - Market definition - Taking advantage of market power - Whether hostile intent required

 

1986

Castlemaine Tooheys v Williams and Hodgson

Citation

Castlemaine Tooheys Ltd v Williams & Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 (2 December 1986)

Key issue

Was Castlemaine Toohey's requirement that retailers who wanted beer delivered use their carrier unlawful exclusive dealing?

Contravention alleged

Exclusive dealing - third line forcing

Summary

The Appellant, Castlemaine Tooheys brewed beer in Brisbane.

In North Queensland the appellant maintains regional depots at Rockhampton, Mackay, Townsville and Cairns. Retailers in the North Qld area had (subject to minor exceptions) a choice of two methods for acquiring CT's beer:

  • take delivery from one of the regional depots; or
  • arrange for beer to be delivered to their premises from the brewery. If this method was chosen CT would engage the carrier and arrange transportation (this was arranged through CT's 'preferred carrier' (at the time, Queensland Railfast Express (QRX)). The buyer would be invoiced for a total price, although the invoice would list freight separately.

Subject to limited exceptions North Qld retailers were not permitted to take delivery directly from the brewery at Brisbane.

The respondent (Williams) was a carrier who wished to carry CT's beer to North Qld. They alleged that CT's arrangements constituted exclusive dealing, contrary to s 47.

Appeal from

External linkCastlemaine Tooheys Ltd v. Williams & Hodgson Transport Pty Ltd [1985] FCA 621; 7 FCR 509 (Full Federal Court; Fox J (dissenting), Sweeney J and Lockhart J)
[By majority, decision of Justice Wilcox upheld]

External linkWilliams & Hodgson Transport Pty Ltd v Castlemaine Tooheys Limited [1985] FCA 395; 64 ALR 521 (Federal Court: Justice Wilcox)
[Held that CT's arrangements constituted exclusive dealing]

Judges

Chief Justice Gibbs; Justices Wilson, Brennan, Deane and Dawson

Chief Justice Gibbs
Source: High Court website Justice Wilson
Source: High Court website Justice Brennan
Source: High Court website Justice Deane
Source: High Court website Justice Dawson
Source: High Court website

Finding (unanimous)

All judges delivered separate judgments; Justice Deane agreed with the reasons of Justice Brennan; Justice Dawson agreed with the reasons of Gibbs CJ and Wilson J (Justice Wilson had agreed with Gibbs CJ and added additional observations).

Focus was whether there was a single bundled product or two separate transactions; only the latter would constitute exclusive dealing.

Justice Brennan:

[para 4] The sale of beer by the brewer to the licensees is a supply by way of sale. The supply by way of sale occurs at a licensee's premises when the beer is delivered. There is no supply by the brewer to a licensee at the brewery door in Milton. When QRX picks up the beer at the brewery door, there is no sale; no appropriation of beer to an agreement for sale; no transfer of property in the beer. QRX takes possession of the beer under its contract with the brewer; the brewer is the bailor, the carrier its bailee.

[para 5] Once it is appreciated that the beer transported by QRX is supplied by the brewer to a licensee only at the licensee's premises, it is impossible to suppose that the transport services rendered by QRX are acquired by the licensee. The beer supplied at the licensed premises may be described as "delivered beer" to distinguish it from beer at the brewery door, but the delivery services supplied by QRX are acquired by the brewery, not by the licensee. The licensee acquires only delivered beer. ...

[para 6] Section 47(6) applies only when there are two contracts or arrangements: the first, between the corporation which supplies and the person who acquires goods or services; the second, which may be made directly or indirectly, between the person who acquires those goods or services and a third person. Here there is no contract or arrangement, whether direct or indirect, between a licensee who acquires delivered beer from the brewer and QRX pursuant to which the licensee acquires delivery services from QRX. From start to finish QRX's contract or arrangement is with the brewer alone. In so far as the licensee derives a benefit from the delivery of beer to his premises, he acquires that benefit from the brewer and not from QRX. It is submitted that a person may acquire services simply by accepting them, and that a licensee accepts delivery services by QRX. But a licensee does not accept any services from QRX; the licensee accepts the delivered beer supplied to him by the brewer. If it were legitimate (and it is not) to distinguish between the beer supplied and the delivery services, nevertheless the licensee would accept both the beer and the delivery services from the brewer under the contract of sale of the beer. The brewer does not seek to force licensees to accept the services of a carrier nominated by the brewer. The brewer simply asserts its right to choose the carrier to deliver its beer to the point of sale at the licensee's premises in discharge of its obligation to the licensee to deliver the beer there. The position is no different from what it would be if the brewer's own employees delivered the beer.

Relevant provisions

Trade Practices Act 1974 (Cth), sections 4, 4C, 47(1),(6),(7)

Catchwords
(from decision)

Trade Practices - Exclusive dealing - Brewer selling beer to retailers on delivered basis - Requirement of delivery by particular carrier - Contract between carrier and brewer - Whether retailer "acquires" carrier's services - Contract for supply of goods and services - Goods - Services - Whether third line forcing

 

1972

Mikasa v Festival Stores

Citation

External linkMikasa (NSW) Pty Ltd v Festival Stores [1972] HCA 69; (1972) 127 CLR 617

Issue

Resale price maintenance (recommended prices)

Separate issue arose as to constitutional validiy of the legislation.

Summary

Festival Stores sold goods in discount houses. Festival Stores alleged the appellant importer/wholesaler had engaged in RPM by withholding the supply of goods to them because they had sold or were likely to sell at less than a price specified by Mikasa.

See useful case note: External linkP A McNamara, 'Mikasa (NSW) Pty Ltd v Festival Stores' 6 Federal Law Review 194 (AustLII)

Judges

Chief Justice Barwick, Justices McTiernan, Menzies, Walsh, Gibbs and Stephen

Chief Justice Barwick
Source: High Court website

Justice McTiernan
Source: High Court website Justice Menzies
Source: High Court website Justice Walsh
Source: High Court website Justice Gibbs
Source: High Court website Justice Stephen
Source: High Court website

Finding (unanimous)

Appeal dismissed: noted, importantly, that the words 'for the reason that' do not requrie the reason be the sole reason for the withholding and that a 'price specified' can be a a price specified ina recommended price catalogue.

Barwick CJ:

[18] ... It seems to me that a law preventing entirely or sub modo such a practice as resale price maintenance is no more than a law accommodating the liberty of the vendor to trade to the liberty of the purchaser to trade, each under the law to be free, in the proper sense of that word, to trade in the goods. Part VIA of the Act is, in my opinion, relevantly, in its nature, a regulatory law. 

[25] The appellant's case before the Industrial Court and in correspondence with the respondent was and had been that the possibility of price cutting by the respondent was not in the appellant's mind when refusing to supply "Mikasa" dinnerware. Rather than that, the reason why the appellant refused the supply was the respondent's manner of merchandising the wares which it did sell, the appellant claiming that that method of merchandising and of display or the lack of it would endanger what was said to be the image which the appellant had with some expenditure of money and energy built up for "Mikasa" dinnerware. However, the Court refused to accept the evidence of the appellant that the likelihood that the respondent would sell "Mikasa" dinnerware if supplied to it at less than the catalogued prices formed no part of the considerations which led the appellant to refuse supply of those goods. (at p633)

[26] No doubt this refusal to believe the appellant's assertions in this respect stemmed in part from the observation of those who gave the evidence as well as from the high improbability that it could be true. The Court concluded on the evidence and the correspondence passing between the parties that the sole reason why the appellant refused the respondent the supply of the "Mikasa" dinnerware was that the respondent was likely to sell that dinnerware if supplied to it at prices less than the prices recommended in the new catalogue. The Court further held that that recommended price was in the circumstances and in relation to the refusal by the appellant to supply the goods the specification of a price below which the goods were not to be sold within the meaning of s. 66B (2) (d) (ii). (at p633)

[27] ... I am fully satisfied that there was evidence on which the Industrial Court could reach all the conclusions of fact to which I have referred....

[28] There are, however, conclusions of law involved ...

[30] It was then submitted that the expression "for the reason that" meant for the reason only that or for the sole reason that. ... In my opinion it is not correct to so emphasize the participle in the phrase "for the reason that" as to interpret the paragraph as requiring the withholding of the supply to be for one reason only. In my opinion, if the likelihood that the would-be purchaser would sell at less than the specified price is an operative reason for withholding that supply, the supplier engages in the practice of resale price maintenance, however many other reasons the supplier may in fact have for not supplying the goods to the would-be purchaser. The likelihood of price cutting is not required, in my opinion, to be the predominant reason; it is enough if it is an operative reason, that is to say, a substantial reason in the totality of reasons for the withholding of the supply. There was abundant evidence on which this lesser conclusion of fact could have been drawn in this case. ...

[31] The last matter of law which was raised by the appellant's counsel was that the price recommended in the new catalogue could not be regarded as "the price below which the goods are not to be sold" within the meaning of s. 66B (2) (d). The essential matter to bear in mind, in my opinion, when construing and applying par. (d) is that it is dealing with a situation in which a sale has not taken place. It is not possible, therefore, to regard the expression "below which the goods are not to be sold" as being referable to an agreement of sale or to a contractual or other obligation arising out of or connected with a sale. If it be rightly concluded that an operative reason for the withholding of the supply by the appellant was that the respondent was likely to sell the goods, at some price which did not have the approval of the appellant, it seems to me to follow that the appellant in this case has refused to supply the respondent because the respondent was likely to sell at less than that approved price which in this case was the price recommended in the new catalogue. There can be little question, in my opinion, that the recommended price was a specified price and that it was specified by the appellant. It also seems to me to follow that that price is the price below which, so far as the appellant is concerned, the goods are not to be sold. In relation to a refusal to supply because the intending purchaser is likely to sell below that specified price ...

Justice McTiernen agreed with the reasons of Barwick CJ.

Justice Menzies also dismissed the appeal, observing in relation to price specificity that the 'appellant had a poligy of specifying prices by recommendation'.

Justice Walsh also dismissed the appeal, further observing that [para 28] "In my opinion, prices may be "specified" by the supplier within the meaning of par. (d) (ii), although at the time when supplies are sought the details of those prices are not actually stated by one party to the other"

Justice Gibbs agreed with Justice Menzies.

Justice Stephen also dismissed the appeal.

Relevant provisions

Trade Practices Act 1965-1971 (Cth), ss 66B(2), 90AA.

Catchwords
(from decision)

Constitutional Law (Cth) - Powers of Commonwealth Parliament - Restrictive trade practices - Retail price maintenance - Judicial power of Commonwealth - Power to grant injunction restraining persons from engaging in retail price maintenance practice invested in Commonwealth Industrial Court - Whether within judicial power of the Commonwealth - Freedom of inter-State trade and commerce - Prohibition of retail price maintenance - Whether permissible regulation

Restraint of Trade - Restrictive practices - Retail price maintenance - Withholding of supply of goods to retailer - Withholding "for the reason that" retailer likely to sell below recommended price - Reason for withholding - Price specified as price below &which the goods not to be sold - Whether a recommended price a "specified" price - Power of Industrial Court to make restraining order

 

1971

Buckley v Tutty

Citation

Buckley v Tutty (1971) 125 CLR 353; [1971] HCA 71

Appeal from

Supreme Court of New South Wales

Judges

Barwick CJ McTiernan J Windeyer J Owen J Gibbs J

Chief Justice Barwick
Source: High Court website Justice McTiernan
Source: High Court website Justice Windeyer
Source: High Court website Justice Owen
Source: High Court website Justice Gibbs
Source: High Court website

Contravention alleged

Restraint of trade

Issue

Tutty was a professional footballer. He was a member of the Balmain Club which played matches organised by the NSWRL. Buckley was the president of the League. Both the League and Club were unincorporated so that Trade Practices Act did not apply. The League rules (a) required players to be registered before they could play, (b) contained provisions relating to the transfer of players between club and (c) prevented a player from playing for another club without the permission of the club with whom he was registered.

Tutty claimed the rules constituted an unreasonable restraint of trade.

Finding (unanimous)

Restraint of trade found (joint judgment)

There was no need for the relationship to be contractual - the ROT doctrine applies to restraints ‘howsoever imposed, and whether voluntary or involuntary’. The rules in this case were in ROT. ‘Trade’ extends ‘to the exercise of a man’s profession or calling’ – including part time sport. The rules (1) Prevent professional players making the most out of their skills and (2) Prevent a member of one club playing for another (without approval) even if not contractually bound to play for the former.

The Court held the restraints were "plainly a fetter on the right of a player to seek and engage in employment.  It is not to the point to say that the player may resign from the League.  If he does resign he may perhaps obtain employment as a labourer or as a cricketer but he will not be able to obtain employment as a professional Rugby League footballer, either in New South Wales or in a number of other places."

Relevant provisions

Common law restraint of trade

Catchwords
(from decision)

Restraint of trade - Employment - Trade - Professional football player - Rules of football association - Retention and transfer of players - Retained player disabled from playing with other clubs - No maximum period for retention - Transfer fees - Player disabled from transferring to other club unless fee paid by new club - Whether restraint of trade - Whether reasonable - Declaration and injunction.

 

1950

Lindner v Murdock's Garage

Citation

External linkLindner v Murdock's Garage (1950) 83 CLR 628

Contravention alleged

Restraint of trade

Issue

Was the restraint of trade 'unreasonable'?

Summary

Murdock operated a garage business in two towns - Crystal Brook and Wirrabara - which were 30 miles apart. Lindner was a mechanic employed by Murdoch. The employment contract specified that LInder would not, for a year after terminating employment, work in a garage business within Murdoch's sales territory. After four years Lindner left Murdock's Garage and went to work for another garage in Crystal Brook. Crystal Brook is where Lindner had worked when employed by Murdock.

Murdock sought an injunction to prevent Lindner working in Crystal Brook and Lindner claimed the relevant clause was void as being in restraint of trade.

Appeal from

Supreme Court of South Australia

Judges

Latham CJ, McTiernan, Webb, Fullagar and Kitto JJ

Chief Justice John Latham
Source: High Court website Justice Edward McTiernan
Source: High Court website Justice William Webb
Source: High Court website Justice Wilfred Fullagar
Source: High Court website Justice Frank Kitto

Finding (majority)

Appeal allowed (by majority) (unreasonable restraint of trade found)

All members of the Court delivered separate reasons for judgment. Justice Kitto observed that it was Murdock Garage's onus to prove that :

[13] ‘… it was reasonable for the parties, when framing the restrictive clause of the agreement, to expect that the appellant, if working in one area, would be likely to come into contact with customers of the respondents' business in the other area, and no such evidence was given.  The probabilities, I should have thought were all against such an expectation; in the ordinary course of events, persons whose vehicles require mechanical attention would be likely to take them to the nearer of the two towns.  …’

To be valid, his Honour observed, it should

[15] ‘... have been so limited in respect of each area as not to operate therein unless the appellant should be employed by the respondents in their business in that area within some specified reasonable period preceding the termination of his service.  Not being so limited, the clause, even if free from objection in any other respect, appears to me to exceed what was reasonably required in order to obviate the danger from which the respondents were entitled to obtain protection.’

Dissent

Chief Justice Latham and Justice Fullagar dissented

In his dissent Latham CJ observed:

[6] ‘... the covenant in restraint of trade is not a covenant against mere competition but is a covenant directed to securing a reasonable protection of the business interest of the employer, and in the circumstances is not unjust to the employee.  The interest which can validly be protected is the trade connection, the goodwill of the business of the employer.’

[10] ‘Where an employee is in a position which brings him into close and personal contact with the customers of a business in such a way that he may establish personal relations with them of such a character that if he leaves his employment he may be able to take away from his former employer some of his customers and thereby substantially affect the proprietary interest of that employer in the goodwill of his business, a covenant preventing him from accepting employment in a position in which he would be able to use to his own advantage and to the disadvantage of his former employer the knowledge of and intimacy with the customers which he obtained in the course of his employment should, in the absence of some other element which makes it invalid, be held to be valid. ...’

In response to claims that the clause was too wide because it covered both Crystal Brook and Wirrabara, Latham CJ observed that the validity of the restraint is determined at the time of contracting, at which point it was not known which town or towns Lindner would be working in.

Relevant provisions

Common law restraint of trade

Catchwords
(from decision)

Restraint of trade - Agreement between employer and employee - Area covenant - Reasonableness

 

 

1913 (Privy Council)

AG v Adelaide Steamship (The Vend)

Citation

Attorney-General v The Adelaide Steamship Co Ltd (1913) 18 CLR 30

Appeal from

High Court of Australia: Adelaide Steamship Co Ltd v R [1912] HCA 58; (1912) 15 CLR 65 (Griffith CJ, Barton J and O'Connor J)

Chief Justice Samuel Griffith
Source: High Court website Justice Edmond Barton
Source: High Court website Justice Edward O'Connor
Source: High Court website

Judges

Viscount Haldane LC, Lord Shaw, Lord Moulton, Lord Parker of Waddington

Contravention alleged

Price fixing and market allocation

Issue

Whether or not there was an injury to the public (legislation at the time required that there be an intent to injure the public)

Finding (majority)

As a result of 'disastrously low' prices resulting from years of 'cut-throat' competition, it was not sufficient to 'rely on the mere intention to raise prices as proving an intention to injure the public'; it was necessary to demonstrate that there was also an 'intention to charge excessive or unreasonable prices'. This could not be demonstrated in this case (page 48).

Relevant provisions

Australian Industries Preservation Act 1906 (now repealed), ss 4, 7, 9, 10

 

 

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