Application by Sea Swift Pty Limited - [2016] ACompT 9

AUSTRALIAN COMPETITION TRIBUNAL
Application by Sea Swift Pty Limited [2016] ACompT 9

File number: ACT 2 of 2016

Tribunal: FARRELL J, DEPUTY PRESIDENT
MR R C DAVEY, MEMBER
PROFESSOR D K ROUND, MEMBER

Interveners: Toll Holdings Limited
Maritime Union of Australia

Date of Reasons for Determination: 28 July 2016

Catchwords:
AUTHORISATION – Competition and Consumer Act 2010 (Cth) – application under s 95AU for a grant of authorisation under s 95AT – acquisition of shares in, and assets of, applicant’s major competitor in the supply of scheduled marine freight services to remote communities in Far North Queensland and the Northern Territory – whether s 95AZH(3) applied to prevent the grant of authorisation – whether there are net public benefits

COMPETITIVE DETRIMENT – consideration of the future “with” and “without” the proposed acquisition – where “with” or “without” the proposed acquisition the applicant’s major competitor will exit the market in the short term – where “with” or “without” the proposed acquisition applicant likely to acquire its major competitors leased facilities at Gove – where future “with” the proposed acquisition includes a s 87B undertaking offered by applicant as a condition of authorisation addressing potential competitive detriment

BENEFITS – where condition of authorisation preventing applicant from enforcing clauses in contracts novated to it by its major competitor relating to exclusivity, minimum volumes and rights of first refusal allows other service providers to compete for the contracts during their term – where conditions of authorisation mandate minimum frequency of services to specified remote disadvantaged communities and maximum prices that applicant may charge uncontracted customers in the communities – where condition of authorisation mandates applicant’s leased facilities at Gove be subject to a s 87B undertaking providing for better prices and access than its major competitor’s existing s 87B undertaking in relation to those facilities – where Tribunal satisfied that public benefits justify authorisation

Legislation:
Competition and Consumer Act 2010 (Cth) ss 4, 42, 50, 90 Pt VII Div 3

Trade Practices Act 1974 (Cth) s 90(9) (repealed)

Cases cited:
Application by Medicines Australia Inc [2007] ACompT 4

Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1

Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525

Hospital Benefit Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369; (1997) 157 ALR 105; (1997) ATPR 41-569

Re Australian Association of Pathology Practices Incorporated (2004) 206 ALR 271; (2004) ATPR 41-985; [2004] ACompT 4

Re Qantas Airways Limited [2004] ACompT 9

Re VFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120; [2006] AComptT 2

Date of hearing: 6-10, 14-17 June 2016

Date of last submissions: 30 June 2016

Category: Catchwords

Number of paragraphs: 347

Counsel for the Applicant: Mr N Young QC and Ms R Orr QC with Mr A d’Arville

Solicitor for the Applicant: Gilbert + Tobin

Counsel for the Australian Competition and Consumer Commission: Mr J…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] ACompT 9
Decision Date: 28 July 2016

CaseChat Overview and Summary

In the case of Sea Swift Pty Limited, the Australian Competition and Consumer Commission sought authorisation under the Competition and Consumer Act 2010 to allow Sea Swift to acquire shares in and assets of its major competitor in the supply of scheduled marine freight services to remote communities in Far North Queensland and the Northern Territory. The central issue before the court was whether the authorisation could be granted despite the potential competitive detriment and whether there would be net public benefits. The primary focus was on the implications of the proposed acquisition on the market and the communities served.

The court considered the counterfactual scenarios, both with and without the proposed acquisition. It determined that regardless of the acquisition, the major competitor would exit the market in the short term, and Sea Swift was likely to acquire the competitor's leased facilities at Gove. The court further examined the conditions of authorisation, including a section 87B undertaking offered by Sea Swift to address potential competitive detriment at Gove. The court found that the authorisation would allow other service providers to compete for contracts during their term, mandate minimum service frequencies and maximum prices in remote communities, and improve access and prices at Sea Swift's leased facilities at Gove. The court was satisfied that these conditions would yield public benefits.

After careful consideration, the court concluded that the authorisation of the proposed acquisition was justified. The decision was based on the short-term exit of the major competitor, the pro-competitive effects of the authorisation conditions, the preservation of price and other terms of transferred contracts, the assurance of continued service to remote communities, and the benefits of the Gove Lease Undertaking. The court found that these factors outweighed any competitive detriment, leading to a net public benefit.

The court's final orders reflected its findings, granting the authorisation for the proposed acquisition under the specified conditions. These conditions included the Transferred Contracts Condition, Remote Communities Service Condition, Remote Communities Price Condition, and the Gove Lease Undertaking. These conditions were designed to ensure that competition remained viable and that the public benefits identified by the court were realised.

Orders

Orders of the court

The Tribunal was satisfied that authorisation of the Proposed Acquisition was justified having regard to the particular facts of this matter and an aggregation of circumstances including:

(1) the counterfactual of TML’s exit from the NT and FNQ in a short timeframe and the Tribunal’s view that Sea Swift would become the provider to base load customers in the short term so that its competitors were unlikely to compete effectively for those customers in that timeframe. Accordingly, save for competitive detriment addressed by the Gove Lease Undertaking, there is no competitive detriment with the Proposed Acquisition which would not exist without it;

(2) the public benefit being the pro-competitive effect of the Transferred Contracts Condition by ensuring that those contracts remain contestable by Sea Swift’s competitors during their term. It also addresses the entrenchment of Sea Swift as the provider to TML’s Largest Customers in the counterfactual so that in the long term, competition is enhanced;

(3) the public benefit of preservation of price and other terms of the Transferred Contracts which service providers to remote communities consider to be highly desirable because they will flow through to communities which are subject to substantial social and economic disadvantage;

(4) the public benefit of assurance to the remote communities that, for a period of five years, they will continue to receive a regular scheduled service and there will be a cap on prices charged for the most common items carried for uncontracted customers provided by the Remote Communities Service Condition and the Remote Communities Price Condition; and

(5) the public benefit of the maintenance of the Gove Lease Undertaking with provision for lower prices than those currently charged by TML and extension of the undertaking to the roll-on/roll-off ramp, the facility most useful to scheduled service operators at Gove.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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File number:	ACT 2 of 2016
Tribunal:	FARRELL J, DEPUTY PRESIDENT MR R C DAVEY, MEMBER PROFESSOR D K ROUND, MEMBER
Interveners:	Toll Holdings Limited Maritime Union of Australia
Date of Reasons for Determination:	28 July 2016
Catchwords:	AUTHORISATION – Competition and Consumer Act 2010 (Cth) – application under s 95AU for a grant of authorisation under s 95AT – acquisition of shares in, and assets of, applicant’s major competitor in the supply of scheduled marine freight services to remote communities in Far North Queensland and the Northern Territory – whether s 95AZH(3) applied to prevent the grant of authorisation – whether there are net public benefits COMPETITIVE DETRIMENT – consideration of the future “with” and “without” the proposed acquisition – where “with” or “without” the proposed acquisition the applicant’s major competitor will exit the market in the short term – where “with” or “without” the proposed acquisition applicant likely to acquire its major competitors leased facilities at Gove – where future “with” the proposed acquisition includes a s 87B undertaking offered by applicant as a condition of authorisation addressing potential competitive detriment BENEFITS – where condition of authorisation preventing applicant from enforcing clauses in contracts novated to it by its major competitor relating to exclusivity, minimum volumes and rights of first refusal allows other service providers to compete for the contracts during their term – where conditions of authorisation mandate minimum frequency of services to specified remote disadvantaged communities and maximum prices that applicant may charge uncontracted customers in the communities – where condition of authorisation mandates applicant’s leased facilities at Gove be subject to a s 87B undertaking providing for better prices and access than its major competitor’s existing s 87B undertaking in relation to those facilities – where Tribunal satisfied that public benefits justify authorisation
Legislation:	Competition and Consumer Act 2010 (Cth) ss 4, 42, 50, 90 Pt VII Div 3 Trade Practices Act 1974 (Cth) s 90(9) (repealed)
Cases cited:	Application by Medicines Australia Inc [2007] ACompT 4 Application for Authorisation of Acquisition of Macquarie Generation by AGL Energy Limited [2014] ACompT 1 Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317; [2003] FCA 1525 Hospital Benefit Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369; (1997) 157 ALR 105; (1997) ATPR 41-569 Re Australian Association of Pathology Practices Incorporated (2004) 206 ALR 271; (2004) ATPR 41-985; [2004] ACompT 4 Re Qantas Airways Limited [2004] ACompT 9 Re VFF Chicken Meat Growers’ Boycott Authorisation (2006) ATPR 42-120; [2006] AComptT 2
Date of hearing:	6-10, 14-17 June 2016
Date of last submissions:	30 June 2016
Category:	Catchwords
Number of paragraphs:	347
Counsel for the Applicant:	Mr N Young QC and Ms R Orr QC with Mr A d’Arville
Solicitor for the Applicant:	Gilbert + Tobin
Counsel for the Australian Competition and Consumer Commission:	Mr J…